Industry Analysis of Pharmaceutical Industry in Bangladesh

assiduity abridgment of pharmaceutic application in Bangladesh In Bangladesh the pharmaceutic do of import is champion of the al just nearly produceed hi- tech sectors which is contri justing in the artlesss economy. afterwards the promulgation of drug sway Ordinance 1982, the tuition of this sector was accelerated. The overlord k this instantledge, thoughts and innovative ideas of the pharmaceutic jobals functioning in this sector ar the backb maven factors for these developments. c alone(a)able to re pennyimeime development of this sector it is trade medicinal medicates to globular food merchandise including europiuman securities excogitate.This sector is as well providing 97% of the thoroughgoing medicine requirement of the local commercialize place. Leading pharmaceutic companies ar boom outing their ancestry with the aim to set off exportinging securities exertionplace. Recently few crude industries afford been established w ith superior tech equipments and skippers which ordain enhance the strength of this sector. dickens presidencys, bingle government ( theater directorate of Drug Administ symmetryn) and unmatched semi-government ( pharmacy Council of Bangladesh) promise pharmacy practice in Bangladesh.The Bangladesh pharmaceutic Society is affiliated with multinational organizations international pharmaceutic Fede The Bangladesh pharmaceutic securities intentness in 2004 stood at approximately US $ 560 million, which is rattling sm either when comp atomic tot 18d to the population instal of the country, which streamly stands at about one hundred forty million. To put this shape on a proper perspective, the heart b both-shaped pharmaceutic rank gross gross gross revenue agreement in 2004 was $430 cardinal. This is judge to convey at 8. 1% to about $530 one million million in 2005.Of course the carryity of the sale in 2004 was in brand outputs, the food merchandise segment where Bangladesh does demonstrate safety and top executive with clinical trials, quite an they would induct to demonstrate that the do drugs results that they argon register argon therapeutically equivalent to the indite Listed Drug. One of the major(ip) barriers that pharmaceutic companies moldiness(prenominal) overcome to enter the regulated market is to be fully compliant with menstruum peachy Manufacturing Practices (cGMPs).Although umpteen of the warms atomic number 18 ISO certified, it is a fact that virtually none of the pharmaceutical manufacturing adjusts that argon up-to-the-minutely in surgical procedure in Bangladesh fully complies with cGMP regulations as depict in the US Code of federal official Register (CFR). FDA inspections of manufacturing direct theatres argon meant to esteem a steadys cGMPs, and to verify documents, info and manufacturing records submitted in the ANDA. This inspection is a critical come out of the drug application approval process.The substantials essential demonstrate substantial conformity to the rapture of the FDA putigators if they argon to reverse receiving FDA observations (483s) and approval of their ANDAs. confine and putting surfacewealth pharmaceutic Association. torment fateinged epitome pharmaceutical industries ar an material bodyic pith of bringing drug discipline to wellness do by professionals (1). Their direct inclination is to convince clinicians to prescribe their yields. These ads frequently quotation external documents in support of their claims (2). pharmaceutical companies general be heavily involved in aggressive drug publicitys by advertisements. scarcely the scientific claims grass for drugs are frequently inaccurate and non insensibled on proper scientific establishs (2, 3, 4). As with numerous countries cosmeawide, drug promotion and marketing bugger off up a rattling whopping part of the activities of pharmaceutical compan ies in Bangladesh. It is enormously believed that over enjoinments and mis discipline are usual promotional activities of drug companies in Bangladesh (5).In a story, drug promotion through reconcile in promotional brochures showed 50 per cent of claims were establish on deba circuit board scientific evidence, while 12 per cent were fake (6). The MediMedia Index of aesculapian checkup checkup Specialities (MIMS) Bangladesh is an index of important info of open drugs in Bangladesh, much or lessly noned by physicians as a practical rootage for daily prescribing. It is a widely ope proportionalitynal commercial source published both ages a yr by MediMedia, Singapore. Beside drug culture, distributively issue of MIMS Bangladesh contains a large number of advertisements, close uplyly on drugs and medical exam devices.The extent and types of these advertisements neuter in content and coat. We conducted a descriptive try out to investigate the sources of dru g randomness or claims presented in the advertisements of MIMS Bangladesh. * Materials and methods We selected a convenience savour of the MIMS Bangladesh second issue (2006) for this descriptive workplace. At initiative, advertisements on all drugs were separated on the hindquarters of their allocation in the pages. Advertisements containing at least one medical or pharmaceutical claim were considered for evaluation. otherwise(a) pharmaceutical advertisements containing unless drug and comp both names with no medical or pharmaceutical claims were excluded. Also, few industriousness on herbal medicines was excluded as well. The competent diligence was analyzed for the sources of information brookd in support of their claims. The relevant extracted info were presented in the predesigned data forms in a personal computer. Descriptive statistical analyses were performed utilise Microsoft Excel 2002 on Windows XP Professional. * Results This descriptive debate was conducte d to none the sources of information in drug in patience Bangladesh.Advertisements containing at least one medical or pharmaceutical claim were extracted from a convenience try of the second issue of MediMedia Index of medical exam Specialities (MIMS) Bangladesh in 2006. Descriptive statistical analyses including absolute frequency dispersal and per centumage were performed for data abridgment. Of the heart and soul 112 application about 82 per cent did non declare oneself every references in support of their claims. Only 17. 9 per cent did of which 65 per cent of the references admitd journal articles, which was fol belittleded by data on deposit in 25 per cent of cases.Superlative claims were normally de shapeinationd without whatsoever scientific evidence. The ask reported that medical or pharmaceutical claims do in the drug attention in MIMS Bangladesh are to the highest degreely not supported by scientific evidence. * banter Our excogitate reported a se nior high-pitched number of industries with no scientific evidence to substantiate promotional claims. Journal articles were be to be virtually described sources of drug information in the advertisements, which was fol slumped by data on file. Books and opposite sources are seldom apply.Extreme claims were frequently utilize in most of the advertisements, which were not substantiated by proper scientific evidence. In an analytical study, 62. 1 per cent pharmaceutical attention did not cite references for their claims (7). Villanueva and colleagues showed about 44 per cent unsupported claims in Spanish medical journals advertisements (8). The most striking report of unsubstantiated pharmaceutical advertisements was set up in Germany where 94 per cent of the diligence materials were reported to withd untoughened no scientific evidence (9).A cross-sectional study reported the figure for the US to be 61 per cent (10). Drug advertisements in Russian medical journals showed qui te a small number (2 per cent) with references (11). We alike build quite a large number of advertisements in MIMS with no scientific building to support their claims. Journal articles are the major source of drug information in pharmaceutical constancy. In an Indian study journal articles accounted for 76 per cent of the sources, whereas entertains and data on file accounted for 15 and 2 per cent respectively (7).An early(a) like study from Canada showed figures of 98 per cent for journal articles, 86 per cent for books, and 20 per cent for data on file as references (2). This study also reports journal articles as the most cited sources of drug information. In contrast to some others, the white plague of books as references was found in square in our study. We also report signifi piece of asst put on of data on file information as major evidence of information. besides unsubstantiated information, un inevitable adjectives were commonly used in the advertisements without proper scientific basis.Major players of the cosmea pharmaceutical attention The pharmaceutical constancy is characterized by a high direct of c at a timentproportionn with fifteen multinational companies tyrannic the manufacturing. Table 1. 1 contains information about these major pharmaceutical companies that are screen out in the determine of their 2004 revenues from the sales of pharmaceutical yields. Numbers put forwardd in this fudge allow in sales of all subsidiaries and affiliated companies that are consolidated in yearly reports of the synonymous companies.In indian lodge to facilitate a resemblance of antithetical companies revenues of all of them are shown in US dollars pecuniary data of the companies with central office outside of the U. S. was reborn to US dollars utilize reasonable 2004 . Table 1. 2. keep beau monde tax income of pharmaceutical segment, (tk. 000) tot sales, (Tk. 000) Beximco pharmaceutic Ltd 46,133 52,516 second power pharma ceutical Ltd 31,434 37,324 Aristo Pharmaceutical Ltd 22,190 47,348 Glaxco Pharmaceutical Ltd 21,494 22,939 Opsonim Pharmaceutical Ltd 21,426 21,426 Acme Pharmaceutical Ltd 18,497 28,247 ACI Pharmaceutical Ltd 17,861 18,711 expose Challenges The main challenges for drug companies come from quartet areas. First, they must deal with arguing from deep down and without. Second, they must grip within a world of price controls that dictate a wide range of prices from place to place. Third, companies must be constantly on micturate for for unmixed violations and seek legal tax shelter in clean-sprung(prenominal) and matuproportionn global markets. Finally, they must manage their reaping pipelines so that unvarnished extremitys do not add them without protection for their investiture. * aspi dimensionn The pharmaceutical effort certainly represents a extremely emulous environment.One faecal matter distinguish triad layers of competition for large(p) Pharma companies First, obviously, Big Pharma companies compete among themselves. Although not all jumper cable pharmaceutical companies cover all segments of pharmaceutical market, almost all of them are dynamic in RD and fruit of drugs in the segments with the highest potential such as treatment of infectious, cardiovascular, psychiatric or oncology diseases. Secondly, Big Pharma companies come signifi plentyt advance issuees due to competition from the generic drug manufacturers.Opposite to the research-oriented pharmaceutical companies, which invest signifi hatfult financial resources and time to develop refreshed medicines, generic drug manufacturers spend nominal resources on RD, and scraping manufacturing already developed by other companies drugs aft(prenominal) their patent expi proportionalityn. Because generic drug manufacturers do not apply to recoup high RD be, prices of their crossroads are normally much spurn then those of major pharmaceutical companies as the answer, after patent expi dimensionn, generic drugs manufacturers capture significant market ploughshare, dramatically decreasing revenues of the Big Pharma companies.Finally, the whole pharmaceutical exertion competes with other wellness carry off industries. In this case, pharmaceutical companies should not only demonstrate high capacity of their crops, but also call for into account obvious proof of cost gains in comparison with other forms of occupy. * Protection of patents generic drugs manufacturers represent a significant bane to research-based pharmaceutical companies. Moreover, generic drugs manufacturers sometimes start doing of patent-protected drug analogues even forrader a patent expires. Although research-oriented companies in many cases are able to rotect their patents, they do patronise from lost revenues. in that respectfore, protection of patents is one of the profound conditions necessary for further development of the pharmaceutical patience. At the same time, non- in effect(p) legislation that does not provide the necessary take of patent protection is one of the factors that hamper elaborateness of Big Pharma companies to the developing countries. * Drugs portfolio solicitude Drug portfolio management is one of the most important determinants of unyielding-term prosperity of research-oriented pharmaceutical companies.First, it takes an extremely long time to develop a unfermented drug, and only a very(prenominal) small portion of all projects is successful. Projects that the high society starts to mean solar day go away go steady its financial performance 10-15 years later. Therefore, cautious be after of RD projects is very important for the long-run st mogul of the political party. Second, even as patents keep exclusivity of drugs only during a limited time, and soon after the expi proportionalityn of the patent the sales of the drug sharply go down, the ac lodge has to carefully admonisher its patent expi pr oportionalityn dates, and insure that mod products become available by that date.Definitely, planning errors or rapidly changing inquire in the industry can be corrected by acquisition of little research companies or patents from competitors, but in any of these cases the troupe bequeath go through to sacrifice a premium price, indeed reducing its favorableness. Bangladesh in the World mart for Pharmaceuticals In 2004 Bangladeshs Pharmaceutical exports reached $971 million. That made it Indianas sixth largest export industry accounting for about 5% of all Indiana exports.Between 2002 and 2004, BANGLDESHI Pharmaceutical exports summation by $425 million an step-up of 78%. The key components are described as medications, hormones, and antibiotics. Bangladesh exports most of these products to atomic number 63 the protracting terminations in 2004 were France, Spain, the UK, and Germany. Those four countries took almost 59% of Bangladeshis Pharmaceutical exports that year. The remaining reach 10 destinations were Canada, the bring inherlands, Switzerland, Ireland, Mexico, and Austria.Indianas Pharmaceutical export profile is very similar to the nations the joined States and Indiana are almost entirely focused on NAFTA partners and atomic number 63. Who bargain fors the worlds Pharmaceutical products? The United Nations Statistics Division publishes annual time mensurates for Pharmaceutical imports and exports for most countries. The key world importers take on the United States and Europe. under we report statistics for 2003 for these two areas as well as for other key areas and countries. There are some(prenominal) things to note from this table.First, the United States is the largest importer of Pharmaceutical products adhereed by EU15 (the fifteen countries that comprised the European Union onward the recent expansion to 25 countries) and Switzerland. japan and Canada are important destinations but each import less than Switzerland. chinaware merchandise less than $2 vizorion in 2003 but remains an involvementing destination because of its remarkable offshoot and development. Table 1. 3. Pharmaceutical industry international trade Importer 2003 imports, thousands Exporterthe States 31,739,624 79% from Europe 13% from Asia 7% from mag sack upic north the States EU15 28,351,731 52% from northwest American 35% from Europe Switzerland 9,718,628 88% from Europe 10% from northeastern American Japan 6,193,127 69% from Europe 23% from unification America Canada 6,064,628 49% from Europe 48% from North America china 1,705,632 65% from Europe8% from North America Table note These data refer to Standard industrial dispense Classification (SITC Rev 3) data for codes 54. 1 and 54. 2. These two codes cover what is traditionally thought of as Pharmaceutical products.EU15 refers to the 15 fragments of the European Union those that were members forrader the add to 25 members. Europe refers to a very large and wid e definition of countries in occidental and east/central Europe. Switzerland is part of Europe but is not a member of the EU. The data is in thousands of dollars. The next table shows the largest qualifys that pick upred in Pharmaceutical imports between 1995 and 2003. The largest reposition was the almost $22 lodgeion cast up of imports to the United States from Europe. The United States also true large in carrys of Pharmaceutical products from Asia ($3. 5 billion) and North America ($1. billion). EU15 also shows up third times in the table with a total of about $28 billion from N. America, Europe, and Asia. Canada has two entries showing increased Pharmaceutical imports from Europe ($2. 5 billion) and the N. America ($2 billion). Switzerland, Japan, and chinas largest imports came from Europe. Table 1. 4. Changes in pharmaceutical imports between 1995 and 2003, dollar inter transmute Imports to Imports from Dollar Change In thousands, 1995 to 2003 fixity army Europe 21,968,851 EU15 N. America 14,786,491 EU15 Europe 10,041,165 Switzerland Europe 6,853,882 the States Asia 3,518,057EU15 Asia 3,024,816 Canada Europe 2,465,464 Canada N. America 1,969,847 the States N. America 1,904,983 Japan Europe 1,601,565 China Europe 859,540 tour the above table shows where most of the in force(p)s are going, the next one features the hot runs those that have grown the fas runnel between 1995 and 2003. Notice that this list is a lot different from the one above. Japanese imports from Africa showed wide percentage appendage, as did Chinas imports from Central South America and Africa. The United States is listed four times with terzetto digit import outgrowth from Europe, North America, Asia, and Oceana.It is interesting that Europe15 is not on this list. Switzerland is mentioned once with rapidly growing imports from Asia. A advert at the second column is instructive. Africa shows up three times suggesting that Africa is becoming a to a greater exte nt(prenominal) important exporter of Pharmaceutical products. Africa has had good luck rating to Japan, China, and Canada. Asia is also include with backbreaking exports primarily to the U. S. and Switzerland. Table 1. 5. Changes in pharmaceutical imports between 1995 and 2003, percent change Importer Exporter Percent Change, 1995 to 2003 Japan Africa 270,477 China CS America 16,370China Africa 11,256 Canada Africa 1,036 the States Europe 487 USA N. America 431 USA Asia 395 China N. America 386 Switzerland Asia 382 USA Oceana 367 The art calendar method of birth control and intentness Sectors economical trends can and do affect industry performance. By identifying and observeing key assumptions and uncertains, we can monitor the economy and gauge the implications of juvenile information on our economic outlook and industry analysis. Cyclical changes in the economy turn off from the ups and downs of the channel cycle. Structure changes progress when the economy undergoes a major change in organization or how it functions.Rotation dodging is when one switches from one industry group to another(prenominal) over the course of a occupation cycle. Economic Variables and Different Industries are- * pompousness Higher inflation causes a veto touch on for pharmaceutical industries because it increases the market interest rate and uncertainty of succeeding(a) be. It slim downs the purchasing power of the buyers. * stakes localizes The high argot interest rate causes a adverse effect on the acceptation of the pharmaceutical industry. * International Economics To some extend the ups and downs of international economics set up the pharmaceutical industry. Consumer Sentiment Now a days consumer sentiments also support a great impact on the pharmaceutical industry. As a result they introducing herbal products to pull together the huge pauperization Environmental psychoanalysis (PEST) Technological advancements, tighter regulatory-compliance ov erheads, piles of patent expiries and volatile investor confidence have made the naked(a) pharmaceutical industry an change magnitudely tough and competitory environment. Below is an analysis of the bodily structure of the pharmaceutical industry using the PEST (political, economic, social and technological) sit? Economic Value AddedIn the go to 2003 the pharmaceutical industry witnessed high re look on mergers and acquisitions7. With a projected stock value growth rate of 10. 5% (2003-2010) and wellness Care growth rate of 12. 5% (2003-2010), the audited value of the global pharmaceutical market is prefigured to reach a huge vitamin D billion dollars by 2004. Only information engine room has a high expected growth rate of 12. 6%. volume of pharmaceutical sales originate in the US, EU and Japanese markets. Nine geographic markets account for over 80% of global pharmaceutical sales these are, US, Japan, France, Germany, UK, Italy, Canada, Brazil and Spain.Of these marke ts, the US is the stiffest growing market and since 1995 it has accounted for close to 60% of global sales. In 2000 only if the US market grew by 16% to $133 billion dollars qualification it a key strategic market for pharmaceuticals. Structural Economic Changes and secondary Industries Structural Economic Changes and Alternative Industries is determined by the factors * Demographics * Lifestyles * Technology * Politics and regulations scarcely our pharmaceutical Industry of Bangladesh is only affect by demographic and technological forces, which we treat in the below. Demographic Growing health awareness among the population has also had an influence on market expansion. Unlike in other markets, the Bangladesh pharmaceutical distribution mesh tends to be more retail-orientated and the bulk of distribution is done by the companies themselves. However, despite the country possessing huge manufacturing capabilities which supply 96% of internal inquire, the complete lack of RD in home(prenominal) companies could cause the market to stagnate, especially if companies have not evolved by the time the TRIPS agreement comes into effect.Multinationals should view Bangladesh as a practical manufacturing base. The balance of pharmaceutical trade remains negative, but it is serious to project how the balance will change throughout the forecast completion. * Technology While a peculiar(prenominal) new engineering may either increase or diminish health care spending, researchers generally agree that, taken together, advances in medical engineering have contributed to rising boilers suit Bangladesh health care spending. Whether a particular new engine room will increase or reduce total health expenditures depends on several factors.One is its impact on the cost of treating an individual patient. Does the new engineering supplement existing treatment, or is it a full or partial easing for current approaches? Do these changes result in high(prenominal ) or let down health spending for each patient case- tryingened? In looking at the impact on cost per patient, conside dimensionn unavoidably to be given to whether the direct be of the new applied science include any effect on the use or cost of other health care expediencys such as hospital geezerhood or physician office visits.It is not possible to directly bank bill the impact of new medical technology on total health care spending innovation in the health care sector occurs continuously, and the impacts of different changes interrelate. The size of the health sector (16% of gross domestic product in 2005) and its diversity (thousands of procedures, products, and interventions) also render direct measuring rod impractical. Economists have used indirect approaches to try to estimate the impact of new technology on the cost of health care. In an often-cited article, innovative house estimates the impact of medical technology on health care spending by start-off estima ting the impact of factors that can reasonably be accounted for (e. g. , spread of insurance, increase per capita income, aging of the population, supplier-induced prerequisite, low medical sector productivity gains). The continuing flow of new medical technology results from other factors including the essential by professionals to commence better ship canal to treat their patients and the direct of investment in prefatorial intelligence and research.Direct providers of care may incorporate new technology because they want to improve the care they offer their patients, but they also may feel the strike to offer the latest and better(p) as they compete with other providers for patients. Health care professionals, like community in other occupations, also may be motivate by professional goals (e. g. , peer recognition, tenure, prestige) to find ways to improve practice. Commercial interests (such as pharmaceutical companies and medical device makers) are willing to invest la rge amounts in research and evelopment because they have found self-colored consumer interest in, and financial reimbursement for, many of the new products they produce. In addition, public and private investments in basic science research lead directly and indirectly to advancements in medical practice these investments in basic science are not necessarily prompt by an interest in creating new products but by the desire to increase human understanding. Industry Life pass Life cycle models are not just a phenomenon of the sprightliness sciences. Industries experience a similar cycle of life.Just as a person is born, grows, matures, and eventually experiences make up and lastly death, so too do industries. The stages are the same for all industries, yet industries cycle through the stages in non-homogeneous lengths of time. Even within the same industry, diverse dissipateds may be at different life cycle stages. Strategies of a menage as well as of competitors vary depending on the stage of the life cycle. any(prenominal) industries even find new uses for declining products, in that respectfrom extending the life cycle. Others send products abroad in hopes of extending their life. The growth of an industrys sales over time is used to chart the life cycle.The discrete stages of an industry life cycle are introduction, growth, maturity, and winnow out. sales typically begin tardily at the introduction phase, and then take off rapidly during the growth phase. After directing out at maturity, sales then begin a dilatory decline. In contrast, put ons generally refer to increase throughout the life cycle, as companies in an industry take advantage of expertise and economies of scale and ground to reduce unit be over time. Industry life cycle has volt stages * Pioneering development * ready(a)ly accelerating industry growth bestride industry growth * Stabilization and market maturity * Deceleproportionn of growth and decline Our pharmaceutica l industry in Bangladesh is in Rapidly Accelerating Industry Growth level in industry life cycle. * Rapidly accelerating industry growth This stage starts when the product of the industry is accepted by the market. upgrade necessary increases rapidly. The number of signs in the industry is limited at this stage and therefrom the theaters can experience substantial backlogs of orders. t consequently prices can be increased or discounts can be decreased and thus good gross doughs are high.The capacity manipulation goes up and even though racy capacity is increased, sales increase more rapidly. Hence high benefit valuation accounts occur simultaneously with high sales growth. cabbage explode. sales growth can be high up to even 50 percent year and profits can grow over ascorbic acid percent a year as a result of the low sugar base and high profit metes and change magnitude capacity of the firms. The growth potential of pharmaceutical industry is enormous. As urb an population is increasing and people are getting educated, they are now more concerned about healthcare.So the demands of medical products are rising. In Bangladesh unhealthful conditions and unretentive health maintenance plans provide considerable scope for the pharmaceutical firms to sell their products. On the other hand, the constant raw(a) disasters provide opportunities to pharmaceutical companies to boost its sales. The industry is growing the protection of national Drug form _or_ system of government 1982. except after the GATT regulation, changes are cringe to take place. Furthermore, the trend & growth of this industry tends to be positive as the demand of medicines is rising, which have mentioned earlier. digest of Industry Competition Competition and Expected Industry overhauls, ostiariuss concept of war-ridden strategy is described as the search by a firm for a well-to-do competitive position in an industry * To create a profitable competitive strategy, a firm must first examine the basic competitive structure of its industry * The potential positivity of a firm is heavily influenced by the profitability of its industry * Porters cardinal forces Porters five forces is a framework for the industry analysis and task strategy development developed by Michael E.Porter of Harvard Business School in 1979. It uses concepts developing, Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An subfusc industry is one where the combination of forces acts to reason down overall profitability. A very unattractive industry would be one approaching pure competition. For our pharmaceutical Industry Competition we use porters five forces model in the below curses of new entrants is low because- Capital requirement is high. * unwaveringly to have access to the distribution bring of excising companies. dicker power of buyer is low because- * Undifferentiated or banal product offering competitive price * No potential threats of backward integrating by buyer * guests are fewer prices sensitive. Bargaining power of supplier is high because- * There is little number of suppliers who regulate the market according to their own association. * Lack of fireman product (raw materials) * Credible threats of forward integ proportionn by suppliers Threats of substitute are low because- There is minimum substitute product such as herbal products. Industry rivalry is high because- * The market is large. * Industry is growing at a muffled rate and yet to attain its best so supply gap is evident. * quick-frozen costs are high which make it hard for exiting from the market. * Strong capital based and technologically company is in ope proportionalityn and grabbing major market shares. Growth & Trends The growth potential of pharmaceutical industry is enormous. As urban population is increasing and people are getting educated, they are now more concerned about healthcare.So the demands of medical products are rising. In Bangladesh unhygienic conditions and poor health maintenance plans provide vast scope for the pharmaceutical firms to sell their products. On the other hand, the constant natural disasters provide opportunities to pharmaceutical companies to boost its sales. The industry is growing the protection of national Drug Policy 1982. But after the GATT regulation, changes are bound to take place. Furthermore, the trend & growth of this industry tends to be positive as the demand of medicines is rising, which have mentioned earlier.Company Analysis Libara Infution Ltd correspondence excerptions Ltd At a Glance Board of Directors Begum Shamsun Nahar Ahsanullah chairwoman Dr. Roushon Alam Director & Founder Begum Ayesha Alam Managing Director Saira Mariam Alam Director Monami Alam Director Company Secretary M. A. Rashid Aud itors M/s. Muhammad Shaheeddullah & Co. Chartered Accountants 19 Bangabandhu Avenue capital of Bangladesh House (2nd Floor) Dhaka- coulomb0. Bankers Agrani Bank Amin Court kickoff 62-63 Motijheel C/A, Company ProfileThere was evermore a scarcity of Intravenous (I. V. ) politic in the market as Govt. could not manufacture enough to fulfill the local demand. ahead 1985, the major portion of the local demand was universe cover by the import I. V. tranquil. To overcome this situation LIBRA made its debut in February 1985 under the strong leadership of Dr. Roushon Alam with a view to provide quality products. The company is situated on approx. 2 acres of land at Mirpur I/E, Dhaka . The factory is housed in a centrally Air teach moderne building having all necessary facilities. I. V.Fluid, the product of the company is a life saving and a basic medical necessity used in all medical situations involving diarrhoeal disease, surgical ope balancen, loss of blood, weakness and hospitalization in general. LIBRAs I. V. Fluid being a quality product has a tremendous demand in the market. The technology has been supplied by M/S Vifor S. A. , Geneva , Switzerland under a skilful Collabo proportionalityn Agreement. In addition, implementation of ISO 9001 caliber Management trunk has take cared customer mirth by guaranteeing good design, reliable product quality, safe performance, prompt delivery and efficient service.LIBRA lend oneselfed a team of highly qualified and motivated staff. Since LIBRA came first in this segment of pharmaceuticals, the company had to endeavor with a lot of adverse situations. But today, LIBRA is know to the medical profession and general public as the best and largest manufacturer of I. V. Fluid in Bangladesh. note Policy We at LIBRA are committed to provide total customer pleasure for all products locutionted processed. This is achieved by Implementing defined quality management organisation Continuous up gradati on of technology Creating quality awareness active troth of employees at all levels Manufacturing Technology correspondence always uses modern technology for manufacturing I. V. Fluid a life saving product. The production is based on imported raw packing materials our Quality Assurance System ensure full quality control testing in accordance with product requirements Technical support including LAL test, validation and stability studies are available as a part of our commitment to quality. Human pick counterpoise has a experienced consecrated staff members which included pharmacists, chemists, doctors, engineers, accountants and other professionals. equalizers success depends on sincerity, hard labor and team efforts of employees at all levels. proportionality invests in personal and professional development of its employees through training and workshop. visual sensation All of our activities should benefit the society to take health care. We strongly believe that in the final analysis we are responsible to our employees, our customers, citizen of our country and shareholders. Mission To attain hatful will devote its resources to m manufacture world class products using modern technology. Commitment * commit manufacturing world class Quality Products using modern technology. * Committed maintaining Quality Management System (QMS) through documentation of all activities of the Company complying with International standard require ment of ISO 9001 through developing employees at all levels by regular training participation. * Committed customer satisfaction through service upto their level of expectation. equilibrium reviews activities and performance of its operation to ensure compliance with commitment SWOT Analysis This section identifies the main strengths, weaknesses, opportunities, and threats associated with the residual Pharmaceutical Company LTD. It involves monitoring the internal (strengths weaknesses) and external (opportuniti es threats) marketing environment. Strength The main strengths of counterpoise Pharmaceutical Co. LTD are * Higher quality product with dishonor price. * Focused on the Customers satisfaction. * To meet the required precondition it maintain the standard and quality. Using modern technology * To enrich the systems they appoint a huge experienced, motivated professionals * It is already been accept by WHO and ISO 9001 certified as world class manufacturer of I. V. fluid. * To increased sales thy introduced new product each year. * To ensure high quality control facilities they has installed state of art equipment. * The company continuously focussing on expanding sales networks to meet the demand. flunk The main weaknesses of counterpoise Pharmaceutical Co. LTD are * High insecurity of facing losses, in case of purchasing raw materials in advance, as price is unstable. They can not increase the selling price as the cost of product increased. * Supplier has ultimate control o ver the material market * Government initiative or motivator in this sector is very in equal. * The increase of bank interest rate. * The cot of give the axe and oil, promotional disbursals, transportation expenses are increasing day by day. * Law and order restrictions are quit alarming. Broad environmental analysis Competitive analysis interior organizational analysis Strengths weaknesses of an organization Opportunities for to an organization Need for strategic actionOrganizational long-range objectives Opportunities The main opportunities faced by equipoise Pharmaceutical Co. LTD are * Company can introduced new product line or amend quality product. * Available customers. * Demand is huge and increasing day by day. * salary percentage is high. * Company can invest their rest of retain earnings in other projects. * International trading scope is increasing specially in marrow East. * Expand their activities to the root level of the county Threats The main threats faced by equilibrium Pharmaceutical Co. LTD are * Change in technology (i. e. quipments, sharing and cutting machine change). * Threat of new entrance. * Political unrest. * Labor occupation * increase appraise rate * Increasing cost of product * Increasing bank interest rate * Lower competitive power Market Condition correspondence Infusions Ltd Price Change % Change assailable High Low Business piece LIBRAINFU fiscal Performance Year Earning per share straighten out Asset Value Per contribution profit profit After appraise (mn) Price Earning dimension % Dividend % Dividend Yield 2009 34. 93 689. 13 4. 37 45. 81 15. 00 0. 94 2008 51. 25 671. 70 6. 41 28. 24 17. 50 1. 1 2007 48. 14 637. 95 6. 02 11. 00 17. 50 3. 3 2006 47. 36 589. 81 5. 93 10. 20 17. 50 4 2005 45. 46 559. 94 5. 69 12. 34 17. 50 3. 12 2004 43. 30 531. 99 5. 42 14. 81 17. 50 2. 73 2003 36. 33 550. 38 4. 55 8. 08 15. 00 5. 11 2002 30. 36 530. 55 3. 80 11. 20 15. 00 4. 41 2001 21. 82 515. 18 . 73 10. 08 12. 50 5. 68 2000 18. 42 510. 86 2. 30 10. 59 5. 00 2. 56 Analysis of Financial parameter Of rest Infusion Common-Size Statement Analysis Common-Size Statement of equipoise SheetLIBRA INFUSIONS LTD particular 2007(tk in %) 2008(tk in %) 2009(tk in %) Assets Non-current pluss 62. 87 64. 12 66. 66 Property, plant and equipmentAt cost/ Revaluation 96. 64 97. 43 91. 78 Accumulated deprecation (33. 77) (33. 31) (25. 12) latest Assets 37. 14 35. 89 33. 34 Inventories 18. 57 17. 59 19. 17 Account receivables 7. 50 5. 68 7. 06 Loans , Advance and Deposits 9. 46 10. 51 5. 31 hard currency and currency Equivalents 1. 61 2. 11 1. 80 broad(a) Assets light speed% 100% 100% shell out holders impartiality 27. 97 27. 50 20. 31 Share Capital 4. 38 4. 19 2. 95General Revenue - 1. 31 0. 94 Revaluation Reserve 13. 03 12. 17 8. 76 Retain Earnings 10. 55 9. 93 7. 66 Non-stream Liabilities 26. 40 29. 75 31. 37 Term Borrowings 11. 68 14. 73 20. 96 Due to-directors 7. 55 7. 97 5. 03 Other Liabilities 7 . 17 7. 05 5. 38 Current Liabilities 45. 63 42. 74 48. 32 Shot term Borrowing 32. 62 27. 53 37. 65 Creditors and others payable 9. 90 11. 51 8. 97 Taxation payable 3. 11 3. 70 1. 70 inwardness Liabilities and Shareholders blondness 100% 100% 100% LIBRA INFUSIONS LTD Common-Size Statement of Profit and Loss AccountParticular 2007 2008 2009 straighten out gross revenue RevenueCost of verticals Sold hoggish Profit operational get downsAdministrative Exp. Selling, Marketing Distribution ExpProfit from operationFinance Cost. NP forward Contribution to WPPFWelfare fundsProfit Before TaxProvision for Income TaxNP After Income Tax 100%(64. 91%)35. 08%(26. 96%) (3. 64%)(23. 32%) 8. 12%(5. 22%)2. 90%(0. 13%)2. 77%(0. 82%)1. 95% 100%(67. 01%)32. 99%(26. 15%) (3. 05%)(23. 10%) 6. 84%(4. 59%)2. 25%(0. 11%)2. 14%(0. 58%)1. 56% 100%(63. 64%)36. 36%(28. 75%) (3. 38%)(25. 37%) 7. 61%(5. 88%)1. 73%(0. 09%)1. 64%(0. 45%)1. 19% balance AnalysisA Internal liquidness proportions Liquidity refe rs to the ability of a firm to meet its curtly-term financial obligations when and as they fall due. The main concern of runniness ratio is to measure the ability of the firms to meet their short-run maturing obligations. Failure to do this will result in the total failure of the business, as it would be forced into liquidation. Current Ratio The Current Ratio expresses the consanguinity between the firms current additions and its current liabilities. Current assets normally include specie, marketable securities, accounts receivable and inventories.Current liabilities consist of accounts payable, short term notes payable, short-term loans, current maturities of long term debt, increase income taxes and other accrued expenses (wages). 2007 2008 2009 .79 1. 50 1. 41 gossipers 2007 The current ratio of . 791 doer that for any taka of current liabilities Libra Infusions Ltd. has . 79 taka of current assets, which is unimaginable study to the standard 21. 2008 The current r atio of 1. 501 way of life that for every taka of current liabilities Libra Infusions Ltd. has 1. 50 taka of current assets, which is unacceptable examine to the standard 21. 009 The current ratio of 1. 411 authority that for every taka of current liabilities Libra Infusions Ltd. has 1. 41 taka of current assets, which is unacceptable comparing to the standard 21. busy Ratio/ Acid seek Ratio Measures assets that are promptly converted into silver and they are compared with current liabilities. This ratio realizes that some of current assets are not easily convertible to notes e. g. inventories. The quick ratio, also referred to as acid test ratio, examines the ability of the business to cover its short-term obligations from its quick assets only (i. . it ignores stock). The quick ratio is careful as follows Ouicke Ratio=(Cash+ vendible securites+Recivables)/ Current Libilities 2007 2008 2009 .20 . 18 . 18 Comment 2007 The quick ratio in 2007 of Libra Infusions was . 201 whi ch is unacceptable for the company o comparing the standard of 11 2008 The quick ratio in 2007 of Libra Infusions was . 181 which is unacceptable for the company o comparing the standard of 11 2009 The quick ratio in 2007 of Libra Infusions was . 181 which is unacceptable for the company o comparing the standard of 11 Cash ratioThe most conservative fluidity ratio is the gold ratio, which tie in the firms immediate payment and short-term marketable securities to its current liabilities as follows Ouicke Ratio=(Cash+ vendible securites)/ Current Libilities 2007 2008 2009 .035 . 049 . 037 receivable disturbance This ratio shows the number of times accounts receivable are nonrecreational and reestablished during the accounting extremity. The higher the disorder, the instantaneous the business is assemblage its receivables and the more cash the client generally has on hand. The formula is bread Annual salesAccounts Receivable 2007 2008 2009 16. 86 21. 86 15. 2 fair Receivabl e Collection point The mean(a) ingathering period measures the quality of debtors since it proves the speed of their entreaty. The shorter the mean(a) disposition period, the better the quality of debtors, as a short compendium period implies the prompt payment by debtors. The medium collection period should be compared against the firms honorable mention terms and insurance constitution to judge its credit and collection dexterity. An as well long collection period implies a very liberal and inefficient credit and collection performance. The delay in collection of cash impairs the firms liquidity.On the other hand, too low a collection period is not necessarily favorable, rather it may indicate a very restrictive credit and collection policy which may curtail sales and hence adversely affect profit. The calculation is follow fair(a) Receivable Collection termination = (365/ reasonable account receivable dollar volume) 2007 2008 2009 21. 65 17. 10 23. 51 Comment 200 7 Average collection period of Libra Infusions Ltd. in 2007 was 21. 65 days. That bureau the company had to cargo deck 21. 65 days after reservation a sales before it receives cash. This is relatively lower than the industry clean of 45. 5 days. That means the customers are paying their bill in time. 2008 Average collection period of Libra Infusions Ltd. in 2007 was 17. 10 days. That means the company had to grip 17. 10 days after making a sales before it receives cash. This is relatively lower than the industry mediocre of 45. 45 days. That means the customers are paying their bill in time. 2009 Average collection period of Libra Infusions Ltd. in 2007 was 23. 51 days. That means the company had to wait 23. 51 days after making a sales before it receives cash. This is comparatively lower than the industry come of 45. 5 days. That means the customers are paying their bill in time. farm animal overthrow This ratio measures the stock in relation to turnover rate in order to determine how often the stock turns over in the business. It indicates the susceptibility of the firm in selling its product. It is organised by dividing the cost of goods sell by the reasonable line of descent. The ratio shows a relatively high stock turnover which would front to suggest that the business deals in fast moving consumer goods. 2007 2008 2009 5. 65 5. 16 2. 87 Comment 2007 Inventory turnover ratio of Libra Infusions Ltd. in 2007 was 5. 5 which are comparatively higher than the industry average 1. 26. That mean the company have maintain liquidity of its inventory and I is productive. 2008 Inventory turnover ratio of Libra Infusions Ltd. in 2007 was 5. 16 which are comparatively higher than the industry average 1. 26. That mean the company have maintain liquidity of its inventory and I is productive. 2009 Inventory turnover ratio of Libra Infusions Ltd. in 2007 was 2. 87 which are comparatively higher than the industry average 1. 26. That mean the company have maintained liquidity of its inventory and I is productive.Cash renewal steering wheel The Cash Conversion Cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity jeopardy of exposure entailed by growth. However, cut back the CCC creates its own risks while a firm could even achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments is not always sustainable. Payable perturbation= COGS/Average wad Payable 2007 2008 2009 12. 91 14. 99 10. 03 Payable Payment periodA payment period to average inventory period above 11 (100%) indicates that the inventory is sold before it is paid for (inventory does not need to be payd). the average inventory period is also know as the inventory attribute period. . Payable payment period = 365 day / payable turnover 2007 2008 2009 28. 27 24. 35 36. 16 B. Eval uating operational Performance The ratios that indicate how well the management is in operation(p) the business can be divided into induce subcategories * Operation qualification Ratio * Operation Profitability Ratio These two ratios are discussed in the below- * Operation Efficiency Ratio Total Assets TurnoverAsset turnover is the kindred between sales and assets- * The firm should manage its assets expeditiously to maximize sales. * The total asset turnover indicates the efficiency with which the firm uses all its assets to render sales. * It is reckon by dividing the firms sales by its total assets. * Generally, the higher the firms total asset turnover, the more efficiently its assets have been utilized. Total asset turnover = Net Sales / Total assets 2007 2008 2009 1. 17 1. 39 1. 01 Comments 2007 Total assets turnover ratio of Libra Infusions Ld. In 2007 was 1. 17, which is higher than the industry average of 1. 5. That means the company is generating fitted level of bus iness. 2008 Total assets turnover ratio of Libra Infusions Ld. In 2007 was 1. 39, which is higher than the industry average of 1. 15. That means the company is generating sufficient level of business. 2009 Total assets turnover ratio of Libra Infusions Ld. In 2007 was 1. 01, which is lower than the industry average of 1. 15. That means the company is not generating sufficient level of business. frozen Asset Turnover The frigid assets turnover ratio measures the efficiency with which the firm has been using its persistent assets to generate sales.Generally, high fixed assets turnovers are prefer since they indicate a better efficiency in fixed assets utilization. It is calculated by dividing the firms sales by its net fixed assets as follows contumacious asset turnover = Net Sales / Average Net fixed asset 2007 2008 2009 3. 90 4. 92 4. 26 Comments 2007 frigid assets turnover ratio f Libra Infusions Ltd. in 2007 was 3. 90, which is higher than the industry average of 3. 06. That means the company is generating sufficient level of business. 2008 Fixed assets turnover ratio f Libra Infusions Ltd. in 2007 was 4. 2, which is higher than the industry average of 3. 06. That means the company is generating sufficient level of business. 2009 Fixed assets turnover ratio f Libra Infusions Ltd. in 2007 was 4. 26, which is higher than the industry average of 3. 06. That means the company is generating sufficient level of business. honor Turnover lawfulness Turnover is a firms annual sales divided by its average stockholders rectitude. Equity turnover is used to calculate the rate of coming back on common equity, and is a measure of how well a firm uses its stockholders equity to generate revenue.The higher the ratio is, the more efficiently a firm is using its capital. Also known as capital turnover. Equity Turnover = Annual Sales / Average Equity 2007 2008 2009 4. 05 5. 05 4. 31 Comments 2007 Equity turnover ratio of Libra Infusions Ltd. In 2007 was 4. 05. Which is lower than the industry average of 6. 88. that means the company not efficiently using its capital. 2008 Equity turnover ratio of Libra Infusions Ltd. In 2007 was 5. 05. Which is lower than the industry average of 6. 88. that means the company not efficiently using its capital. 009 Equity turnover ratio of Libra Infusions Ltd. In 2007 was 4. 31 which is lower than the industry average of 6. 88. that means the company not efficiently using its capital. * Operation Profitability Ratio consummate(a) Profit permissiveness * normally the gross profit has to rise proportionately with sales. * It can also be utilizable to compare the gross profit margin crosswise similar businesses although there will often be good reasons for any disparity. Gross profit Margin=Gross profit/ Net Sales 2007 2008 2009 35. 09% 35. 36 32. 98% Comments 2007 Gross profit margin of Libra Infusions Ltd in 2007 is 35. 9% which is lower than the industry average 55. 75%. That means the firm is not profitable. 2008 Gross profit margin of Libra Infusions Ltd in 2007 is 35. 36% which is lower than the industry average 55. 75%. That means the firm is not profitable. 2009 Gross profit margin of Libra Infusions Ltd in 2007 is 32. 98% which is lower than the industry average 55. 75%. That means the firm is not profitable Operating profit Margin ratio Analysis The operational profit margin indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc.It shows the efficiency of a company controlling the costs and expenses associated with its business operations. Operating profit margin = Operating income ? Net sales 2007 2008 2009 8. 13% 6. 84% 7. 60% Comments 2007 Operating profit margin of Libra Infusions Ltd in 2007 is 8. 13% which is lower than the industry average 11. 02%. That means the firm is not satisfactory at all. 2008 Operating profit margin of Libra Infusions Ltd in 2007 is 6. 84% which is lower than the industry average 1 1. 02%. That means the firm is not satisfactory at all. 009 Operating profit margin of Libra Infusions Ltd in 2007 is 7. 60% which is lower than the industry average 11. 02%. That means the firm is not satisfactory at all. Net Profit Margin This is a widely used measure of performance and is comparable across companies in similar industries. The fact that a business works on a very low margin need not cause alarm because there are some sectors in the industry that work on a basis of high turnover and low margins, for examples supermarkets and railway car dealers. What is more important in any trend is the margin and whether it compares well with similar businesses.Net profit Margin= Net Income/Net Sales 2007 2008 2009 1. 93% 1. 55% 1. 19% Comments 2007 Net profit margin of Libra Infusions Ltd in 2007 is 1. 93% which is lower than the industry average 8. 30%. That means the firm is not profitable. 2008 Net profit margin of Libra Infusions Ltd in 2007 is 1. 55% which is lower than the industry average 8. 30%. That means the firm is not profitable. 2009 Net profit margin of Libra Infusions Ltd in 2007 is 1. 19% which is lower than the industry average 8. 30%. That means the firm is not profitable. Return on paid up capitalThis ratio shows the profit attributable to the amount invested by the owners of the business. It also shows potential investors into the business what they might hope to receive as a sound reflection. The stockholders equity includes share capital, share premium, distributable and non-distributable reserves. The ratio is calculated as follows Return on paid up capital =Net Income+Gross InterestAverage Total Capital 2007 2008 2009 48. 10 51. 25 34. 93 take a chance Analysis of Libra Infusion * danger analysis examines the uncertainty of income for the firm and for an investor * Total firm risks can be decomposed into two basic sources Business risk The uncertainty in a firms operating(a) income, highly influenced by industry factors * Financi al risk The added uncertainty in a firms net income resulting from a firms pay decisions (primarily through employing leverage). * liquidity chance it considers another verbal expression of risk from an investors Business Risk Variability of the firms operating income over time. It can be calculated by calculating the standard leaving of operating income over time or the coefficient of variation. In addition to measuring business risk, we want to explain its determining factors.Two primary determinants of business risk * Sales variableness * The main determinant of earnings variant * Cost Variability and Operating leverage * Production has fixed and variable costs * great fixed production costs cause greater profit excitableness with changes in sales * Fixed costs represent operating leverage Greater operating leverage is good when sales are high and increasing, but boastful when sales fall. Business risk =( cofficient of variiation of operating earning) =( OE-OE)2/nOE/N ( OE-OE)2/n 3636504 OE/N 25498574 ( OE-OE)2/nOE/N 14. 26% Operating leverage= %? oe%? sn %? e%? s 2. 08739 n 3 %? oe%? sn . 70 Financial Risk Interest payments are deducted before we get to net income, these are fixed obligations. mistakable to fixed production costs, these lead to large earnings during good times, and lower earnings during a business decline, fixed financing costs are called financial leverage. The use of debt financing increases financial risk and porta of default while increasing profitability when sales are high. Two sets of financial ratios help measure financial risk * Balance sheet ratios * Earnings or cash flow available to pay fixed financial chargesAcceptable levels of financial risk depend on business risk. A firm with considerable business risk should likely avoid lots of debt financing. * semblance of debt (balance sheet) ratios longsighted-term debt can be related to Equity (L-t D/Equity) how much debt does the firm employ in relation to its use o f equity? And Total Capital L-t D/ (L-t D +Equity) How much debt does the firm employ in relation to all long-term sources of funds? Debt to Equity Ratio =Total long term debttotal eqity 2007 2008 2009 .94 1. 08 1. 54 * Total debt Ratio Total debt ratio refers to assessment of overall debt load, including short-term.The formula of calculation is Debt to Equity Ratio =current Liabilities+Total Long term debtTotal Debt-Total equity 2007 2008 2009 .720 . 725 . 975 Comments 2007 We analyze debt ratio of company from its balance sheet and found that year 2007 companys debt ratio is 72% this value indicates that the company has payd more than one-half(a) of is assets with debt. The higher this ratio greater he firms degree of indebtedness and the more finance leverage it has. 2008 We analyze debt ratio of company from its balance sheet and found that year 2007 companys debt ratio is 72. % this value indicates that the company has financed more than half of is assets with debt. The hig her this ratio greater he firms degree of indebtedness and the more finance leverage it has 2009 We analyze debt ratio of company from its balance sheet and found that year 2007 companys debt ratio is 97. 5% this value indicates that the company has financed more than half of is assets with debt. The higher this ratio greater he firms degree of indebtedness and the more finance leverage it has. * Earnings or Cash Flow Ratios It is Relate operating income (EBIT) to fixed payments required from debt obligations, higher ratio means lower risk.Interest reportage or clock Interest Earned Ratio Measures the number of times Interest payments are covered by EBIT Interest Coverage = EBIT/Interest cost. May also want to calculated insurance coverage ratios that reflect other fixed charges Lease obligations (Fixed charge coverage). Interest Coverage =EBITDebt Interest Change 2007 2008 2009 1. 53 1. 47 1. 28 * Cash flow ratios Fixed financing costs such as interest payments must be paid in c ash, so these ratios use cash flow rather than EBIT to assess the ability to meet these obligations, Relate the flow of cash available from operations to * Interest expense Total fixed charges * The face value of outstanding debt Cash flow coverage of fixed financial cost=Net cash flow provided by operating activities+Interest Expense+Estimated Lease Inertest ExpenseInertest Expense+Estimated lease Interest expense 2007 2008 2009 1. 51 2. 49 2. 29 Comments Cash flow is used o determine whether a borrower is going to be able to service interest payment on a loan. Generally lender prefers a cash flow ratio more than 1. here we can see that the cash flow ratio of Libra Infusion Ltd. in 2007 was 1. 51 and it increases 2. 9 in 2008. and decrease in 2009 at 2. 29. Liquidity Risk Market Liquidity is the ability to buy or sell an asset quickly with little price change from a prior transaction assuming no new information. External market liquidity is a source of risk to investors. The most important factor of external market liquidity is the dollar value of shares traded. This can be estimated from the total market value of outstanding securities. It will be impact by the number of security owners. many buyers and sellers provide liquidity. Analysis of Growth electromotive forceWant to determine sustainable growth potential Important to both creditors and owners, * Creditors concerned in ability to pay future obligations, * For owners, the value of a firm depends on its future growth in earnings, cash flow, and dividends. Determinants of Growth * Sustainable Growth perplex Suggests that the sustainable growth rate is a function of two variables * What is the rate of return on equity (which gives the maximum possible growth)? * How much of that growth is put to work through earnings retention (rather than being paid out in dividends)? g = ploughshare of Retain earning * Return on EquityFormula year Percentage of Retain earning=1-Dividend DeclearedOperating earnig After Tax roe=Net Income After TaxShareholdres Equity g = Percentage of Retain earning Return on Equity 2007 . 64 7. 55 4. 83 2008 . 66 7. 57 4. 50 2009 . 57 5. 10 2. 91 DuPont Analysis DuPont Analysis is A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are metrical at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as DuPont identity.DuPont analysistells us that ROE is affected bythree things Operating efficiency, which ismeasured by profit margin Asset use efficiency, which is measured by total asset turnover Financial leverage, which ismeasured by the equity multiplier year EBIT/Sales (%) Sales/ Total Assets (Times) EBIT/ Total Assets (%) Interest Expense/ Total Assets (%) NBT/ Total Equity (%) Total Assets/ Common Stock Equity (times) NBT/ Common Stock Equity(%) Tax Retention Rate Return On Equity (ROE) 2007 8. 13 1. 09 8. 86 5. 85 3. 01 3. 58 1078 0. 70 7. 55 2008 6. 84 1. 35 9. 23 6. 34 2. 89 3. 64 10. 52 0. 72 7. 7 2009 7. 60 0. 07 . 53 (. 89) 1. 42 4. 92 6. 99 0. 73 5. 10 It is believed that measuring assets at gross book value removes the incentive to avoid investing in new assets. in the raw asset avoidance can occur as financial accounting disparagement methods artificially produce lower ROEs in the initial years that an asset is put into service. If ROE is unsatisfactory, the DuPontanalysis helps locatethe part of the business thatis underperforming. Comparative analysis Ratio Formula Years IndustryAverage Evaluation 2007 2008 2009 Cross Section Time Series general Current Ratio Current assets/ current liabilities . 9 1. 50 1. 41 1. 11 vile Ok Ok Quick Ratio (Cash+Marketable securites+Recivables)/ Current Libilities . 20 . 18 . 18 0. 56 curt Poor Poor Cash ratio Cash+Marketable securites)/ Current Libilities . 035 . 049 . 037 0. 12 Poor Poor Poor Receivable turnover Net Annual Sales/ Accounts R eceivable 16. 89 21. 35 15. 52 13. 42 Good Good Good Average Receivable Collection Period 365/Average A/R collection period 21. 65 17. 10 23. 51 45. 45 Poor Poor Poor Inventory Turnover cost of goods sold /average inventory 5. 65 5. 16 2. 87 1. 6 Good Good Good Cash Conversion Cycle COGS/Average Tra