Bangladesh University of Professionals

Term Paper:
Ratio Analysis on Financial Statements of Renata Limited (2019-2021)

Submitted To
Maliha Rabeta
Lecturer, Department of Business Administration in Finance and Banking
Faculty of Business Studies
Bangladesh University of Professionals

Submitted By
Group 10
Section B

Course
Principles of Accounting (ALD1103)

Date of Submission
23 October 2022
Members of Group-10:

Name ID Section Department

Fuad Rahman Chowdhury 2222151018

Department of
Farhan Haque Meem 2222151092
Business
Tahmeed Alam 2222151106 B Administration
in Finance and
Safwan Abedin 2222151138
Banking
Tanjim Faiyaz 2222151162

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TRANSMITTAL LETTER

October 23, 2022

Maliha Rabeta
Lecturer
Department of Business Administration in Finance and Banking
Faculty of Business Studies
Bangladesh University of Professionals
Mirpur Cantonment, Dhaka-1216

Subject: Submission of term paper on ratio analysis of Renata Limited

Madam,
We would like to draw your kind attention to the fact that we are now
submitting the final term paper after assessing the analysis of the financial
statements of Renata Limited from 2019 to 2021.

We used the appropriate formulas to analyze the financial statements.We hope

that you will appreciate our approach to the assigned task. In case of any
queries or further clarification about the report, we are happy to answer it.

Sincerely,
Members of Group- 10

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Contents
1. Executive Summary .........................................................................5
2. Report Preliminaries ........................................................................5
2.1 Objective: ......................................................................................6
2.2 Scope: ............................................................................................6
2.3 Methodology: ................................................................................6
2.4 Limitations: ...................................................................................7
3. Company Overview .........................................................................7
4. Ratio Analysis ..................................................................................8
4.1 Liquidity Ratio ............................................................................12
4.2 Solvency Ratio ............................................................................14
4.3 Profitability Ratio ........................................................................16
4.4 Overview of the Ratio Analysis ..................................................20
5. Conclusion .....................................................................................21

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 1. Executive Summary
In this term paper, we aim to enlighten readers about the financial position of Renata
Limited. The core businesses of Renata Limited are human pharmaceuticals and animal
products. In the competitive market of pharmaceuticals, Renata Limited has made a
tremendous contribution to the economy. The pharmaceuticals industry is booming, and
Renata Limited is an example of that. Their goal is to provide value to their customers and
communities they live and work in.

We have prepared the following paper on the basis of financial statements of Renata
Limited from 2019 to 2021. Here, we made calculations on their liquidity, profitability and
solvency ratios. The reason we choose ratio analysis is because it is a useful management
tool that will improve our understanding of financial results and trends over time, and
provide key indicators of organizational performance.

2. Report Preliminaries
Origin: As first-semester students BBA in Finance and Banking at BUP, we must take a
fundamental business course called Principles of Accounting, which requires us to perform
a ratio analysis on any Bangladeshi market behemoth.

Mrs. Maliha Rabeta (Lecturer) from FBS instructed us to write a term paper on Renata
Limited. As a result, we're investigating Renata Limited for our final term paper.

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 2.1 Objective:

The broad objectives of this study are to analyze the ratios of the Renata Limited. The
specific objectives of this study are shown below:

1. To identify the Liquidity ratio.

2. To identify the Solvency ratio.

3. To identify the Profitability ratio.

Especially, the above objectives of the study are to figure out how we can make the best
financial decisions.

2.2 Scope:

The report is primarily descriptive. No attempt is to perform detailed analysis effectiveness of

the department. The analysis is based only on the information given by the relevant persons.
The emphasis is on presenting the facts as they have been discovered.

2.3 Methodology:

To learn about the secret factors that make Renata Limited one of Bangladesh's most
successful pharmaceutical companies, we use a few methods that allow us to learn more
deeply and thoroughly about them. Data collecting methods we use to get information on
the Renta Limited: We gathered relevant information from the following sources in order to
complete the report:

1. Renata Limited’s Annual Report.

2. A synopsis of Renata Limited's personnel.

3. A link to Renata Limited’s website.

4. A list of the company's documents.

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 2.4 Limitations:

This term paper has certain limitations. It is a procedural program. Various factors, such as
time, cost, and information, are all involved. As a result, we'll have to deal with various
difficulties while working on this project. We have mostly encountered a few issues, all of
which are critical to our studies. The officers of the firm are not given enough current
information, such as information on the company's current market share, industry needs, and
competition sales volume. After that, we have certain personal restrictions such as financial
difficulty, a time problem, a lack of prior study materials due to a lack of information about
the research topics, and so on. In this study, we tried to resolve these limitations.

3. Company Overview
Renata Limited (formerly Pfizer Limited) is one of the leading and fastest growing
pharmaceutical and animal health product companies in Bangladesh. The company started its
operations in 1972 as Pfizer (Bangladesh) Limited. In 1993, Pfizer transferred the ownership
of its Bangladesh operations to local shareholders and the name of the company was changed
to Renata Limited.
The core businesses of Renata Limited are human pharmaceuticals and animal health
products. In Bangladesh it is the 4th largest pharmaceutical company and the market leader in
animal health products. In addition, Renata products are exported to Afghanistan, Belize,
Cambodia, Ethiopia, Guyana, Honduras, Hong Kong, Kenya, Malaysia, Myanmar, Nepal,
Philippines, Sri Lanka, Thailand, United Kingdom, and Vietnam. The Company is listed on
the Dhaka Stock Exchange with a market capitalization of over USD $1 billion.
The Company has ten manufacturing facilities spread over three manufacturing sites.
Distribution of products is carried out by 19 depots across the country. Renata employs
almost 9000 people.

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4. Ratio Analysis

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 4.1 Liquidity Ratio
A liquidity ratio is a financial measurement that is used to assess a company's capacity to
meet its short-term loan obligations. The liquidity Ratio includes two ratios. They are given
below:

Current Ratio: Current Assets / Current Liabilities

Year Result
2021 2.29
2020 2.53
2019 2.67
2018 2.22

The current ratio is a liquidity ratio by which RENATA can determine its capacity to pay
shortterm or one-year obligations. By analyzing the current ratio RENATA can explain to
investors and analysts how they might use current assets on its balance sheet to compensate
current debt and other obligations. The analyzing shows that the liquidity ratio of RENATA
was growing over three consecutive years and was at its peak in the year of 2020.

The analysis shows that the current ratio of RENATA was fluctuating throughout the
surveyed years and peaked in 2019.

Quick Ratio: (Cash + Short-term Investments + Net Receivables) / Current Liabilities

Year Result
2021 1.34
2020 1.31
2019 1.46
2018 1.47

By doing quick (acid-test) ratio analysis RENATA can measure its capacity to satisfy short-
term obligations with its most liquid assets and is indicative of its short-term liquidity
position. In comparison among them we will consider the highest one as the best quick ratio
of RENATA. So in the year of 2018 RENATA had the highest quick ratio and the ratio
gradually decreased in the next 3 years.

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Receivables Turnover Ratio: Net Credit Sales / Average Net Receivables

Year Result
2021 1.13
2020 1.02
2019 0.96
2018 0.90

By doing this analysis, RENATA can measure the number of times on average it collects
receivables during a period. The analysis shows that RENATA improved over the years and
peaked in 2021.

Inventory Turnover Ratio: Cost of goods sold / Average Inventory

Year Result
2021 3.22
2020 2.66
2019 2.33
2018 1.95

Inventory turnover measures the number of times, on average, the inventory is sold during the
period. The analysis shows that the ratio increased gradually over the years and peaked in
2021.

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 4.2 Solvency Ratio
A solvency ratio is a crucial metric that can be used by the RENATA group to assess its
capacity to satisfy long-term debt obligations. By solvency ratio the company can measure its
financial health that determines if its cash flow is sufficient to cover its long-term liabilities.
An unfavorable ratio can indicate some likelihood that RENATA will default on its debt
obligations.

Debt to Assets Ratio: Total Liabilities / Total Assets (%)

Year Result
2021 25.98
2020 26.02
2019 24.45
2018 27.31

By doing debt to assets ratio analysis the company can measure indebtedness in terms of total
debt to total assets. As the analysis shows us that the ratio declined in the years of 2019 and
2021 resulting an overall decrease.

Debt to Equity Ratio: Total Liabilities / Common Stock Equity (%)

Year Result
2021 35.10
2020 34.84
2019 32.36
2018 37.58

RENATA computed debt to equity ratio is computed by dividing a company's total liabilities
by its shareholder equity to determine its financial leverage. As we can watch, the debt to
equity ratio was highest in 2018, fell much in 2019 and went up the next 2 years.

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Times Interest Earned: Income before Income Taxes and Interest Expense / Interest
Expense

Year Result
2021 31.39
2020 14.70
2019 14.70
2018 20.96

This ratio can provide an indication of RENATA’s ability to meet interest payments as they
come due. The analysis shows that there was an initial fall in 2019. After staying the same in
2020, it increased and reached its peak in 2021.

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 4.3 Profitability Ratio
Profitability ratios are a group of financial indicators that RENATA can use to evaluate its
ability to create earnings over time in relation to its revenue, operational costs, balance sheet
assets, or shareholders' equity, utilizing data from a certain period. The company also can
assess how successfully it uses its assets internally to generate income, which can be
contrasted to profitability ratios.

Gross Profit Margin: (Sales- Cost of Goods Sold) / Sales

Year Result
2021 47.69
2020 47.72
2019 50.20
2018 50.24

RENATA must have to use gross profit margin to measure its financial health by estimating
the number of funds left over after deducting the cost of goods sold from product sales
(COGS). Gross profit margin is usually considered as a percentage of sales and is sometimes
referred to as the gross margin ratio. The analysis shows that the gross profit margin of
RENATA declined throughout the years reaching the lowest in 2021.

Net Profit Margin: Earning Available For Common Stock / Sales (%)

Year Result
2021 17.31
2020 16.98
2019 17.20
2018 17.20

Here the analysis shows that though the profit was same in 2018 and 2019 but in 2020 the
Net Profit Margin fell and the company recovered the fall getting the best profit margin in
2021.

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Asset Turnover: Net Sales / Average Assets

Year Result
2021 0.19
2020 0.15
2019 0.14
2018 0.12

By operating profit margin ratio, the company can assess its profitability or performance ratio
that indicates the percentage of profit generated by its operations before taxes and interest
charges are deducted. RENATA’s asset turnover increased gradually and reached its peak in
2021.

Earnings per Share: (Net Income - Preferred Dividends) / Weighted Avg. Common Shares

Year Result
2021 51.67
2020 42.38
2019 39.23
2018 32.81

The profit of RENATA is divided by the number of outstanding shares of its common stock
to compute earnings per share (EPS). The resulting figure is used to determine the company’s
profitability. As it shows us, Earnings per Share rose almost by 57.48% throughout the years
and peaked in 2021.

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Return On Total Assets: Net Income / Average Total Assets (%)

Year Result
2021 18.71
2020 15.16
2019 14.13
2018 11.83

This ratio is an overall measure of profitability. From the analysis, we can see that RENATA
became more profitable throughout the surveyed years and peaked in 2021 with almost 3%
more than that of 2020.

Return on Common Stockholders’ Equity: Net Income Available To Common

Stockholders / Average Common Stockholders’ Equity

Year Result
2021 0.22
2020 0.21
2019 0.23
2018 0.23

The return on common stockholders’ equity is a measurement that compares RENATA’s

current share price to its earnings per share. RENATA’s return on equity gradually decreased
and peaked in 2018, 2019.

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Price-Earnings Ratio: Market Price per Share / Earning’s Per Share

Year Result
2021 25.54
2020 24.22
2019 30.54
2018 39.52

The price to earnings ratio is a calculation ratio that compares RENATA’s current share price
to its earnings per share (EPS). The analysis shows that RENATA’s performance dropped
throughout the years and reached the lowest in 2021.

Payout Ratio: Cash Dividends / Net Income

Year Result
2021 0.30
2020 0.33
2019 0.28
2018 0.33

Payout ratio measures the percentage of earnings distribute in form of cash dividends. The
analysis shows that the ratio was almost same throughout the four years and peaked twice, in
2018 and 2020.

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 4.4 Overview of the Ratio Analysis

Categories of

Financial Ratio Analysis 2021 2020 2019 2018

Ratios

Current Ratio 2.29 2.53 2.67 2.22

Liquidity Quick Ratio 1.34 1.31 1.46 1.47

Ratios Receivables Turnover 1.13 1.02 0.96 0.90

Inventory Turnover 3.22 2.66 2.33 1.95

Debt to Assets 25.98 26.02 24.45 27.31

Solvency
Debt to Equity 35.10 34.84 32.36 37.58
Ratios
Times Interest Earned 31.39 14.70 14.70 20.96

Gross Profit Margin 47.69 47.72 50.20 50.24

Net Profit Margin 17.31 16.98 17.20 17.20

Asset Turnover 0.19 0.15 0.14 0.12

Earnings per Share 51.67 42.38 39.23 32.81

Profitability
Return on Total Assets 18.71 15.16 14.13 11.83
Ratios
Return on Common
0.22 0.21 0.23 0.23
Stockholders’ Equity

Price-Earnings Ratio 25.54 24.22 30.54 39.52

Payout Ratio 0.30 0.33 0.28 0.33

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 5. Conclusion
After applying all the ratios we get an idea that Renata Limited is a profitable firm. Because
throughout the analysis of four years, we found that the company is getting profitable return
on short term and long term investment, their profit margin has been increasing and they are
in the position to pay their debts within their resources.

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