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Assignment on

“Working Capital Management”

Course Code-FIN 4139

Submitted to:

Khairul Alom, ( Faculty)

School of Business Studies, Southeast University.

Submitted by:

Name: ID no.

Md. Mohiuddin Tipu 2010210000081 (26th), FIN-B

Date of Submission- 11/01/2014

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Acknowledgement

First of all I would like to express my satisfaction to the almighty Allah for rendering me ability

and knowledge to prepare this assignment.

I would like to offer my earnest thanks and gratitude to my respectable teacher Mr. Khairil Alom

(Faculty) who has been my instructor for this work.

I firmly believe that the work on this study help me to better understand and increase my

knowledge on overall aspect of working capital management, and other financial tools

particularly of “Square Pharmaceuticals Ltd”. Hopefully all of this above work which is done

through this assignment will be helpful for my future career.

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Executive Summary

Square Pharmaceutical Limited Bangladesh is one of the leading pharmaceuticals in Bangladesh.

Its journey to the growth and prosperity has been no bed of roses. From the inception in 1958, it

has today burgeoned into one of the top line conglomerates in Bangladesh. Square

Pharmaceuticals Ltd., the flagship company, is holding the strong leadership position in the

pharmaceutical industry.

In this report, we have tried to focus on the financial performance of the company during the

fiscal year of 2009-2012. We have used financial ratios to determine its performance in short

term and long term period. We also discuss the performance of working capital management of

Square. Working capital management is critical to a firm so that it has a huge impact on the

overall performance of the company. We also discuss the effect of working capital management

on the profitability of the company and its overall operation

Since the firm is efficient in terms of short-term liquidity although we clarify the company can

improve its working capital management. Even though pharmaceuticals sector is one of the

leading business sector in Bangladesh but square have faced some challenges throughout their

operation. These industry challenges faced by Square also discussed in this assignment. In one

word based on our analysis this firm can be an example in certain financial segment for other

company.

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Square Pharmaceuticals Ltd. was established as a partnership firm in 1958. In 1991 it was

converted into a public limited company. Square Pharmaceuticals Limited is the largest

pharmaceutical company in Bangladesh and it has been continuously in the 1st position among all

national and multinational companies since 1985. Since 1987 Square has taken aggressive

measures to explore new countries as potential export market.

Vision – Square’s view business as a means to the material and social wellbeing of the investors,

employees and the society at large, leading to accretion of wealth through financial and moral

gains as a part of the process of the human civilization.

Mission –Square’s Mission is to produce and provide quality &innovative healthcare relief for

people, maintain stringently ethical standard in business operation also ensuring benefit to the

shareholders, stakeholders and the society at large.

Objective- Square’s objectives are to conduct transparent business operation based on market

mechanism within the legal & social frame work with aims to attain the mission reflected by our

vision.

Subsidiary Company:

Square Cephalosporin Ltd

Square Biotech’s Ltd.

Square Multi fabrics Ltd

Associate Company:

Square Textiles Ltd.

Square Knit Fabrics Ltd.

Square Fashions Ltd.

Square Hospitals Ltd.

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Products of Square Pharmaceuticals Ltd. :

SQUARE has latest technologies for production of a wide varieties of dosage forms including

Tablet, Sustained Release formulation, Capsule, Metered Dose Inhaler (MDI), Injectable, Syrup

(liquid and dry), Suspension (liquid and dry), Pediatric Drops, Nasal & Ophthalmic formulations,

Topical Gel/Ointment/Cream, and oral care formulations.

Current product mix of Square Pharmaceuticals Ltd. comprised of products from the following

types of Drug Delivery Systems:

=>Tablets:

Non-coated (Vaginal, Dispersible, Chewable, Plain)

Coated (Sugar coated, Film coated, Enteric coated)

Sustained released (coated/non-coated)

=>Capsules

=>Injectables:

Vials containing dry powder for injections

Small volume parenterals

=>Liquids

Oral (suspension, syrup, drops, and stomatologicals)

Topical solutions

Nasal drops

=>Dry powders

Oral (for reconstitution to make suspension, syrup and drops)

Topical

=>Semisolids (creams, ointments and gels)

=>Solid suppository formulations

=>Metered Dose Inhalers (MDIs)

=>Dry Powder Inhalers (DPIs)

=>Sterile Ophthalmic Formulations (drops)

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Financial performances analysis of Square Pharmaceuticals: Financial performance analysis

means a subjective measure of how well a firm can use assets from its primary mode of business

and generate revenues. This term is also used as a general measure of a firm's overall financial

health over a given period of time, and can be used to compare similar firms across the same

industry or to compare industries or sectors in aggregation. There are many different ways to

measure financial performance, but all measures should be taken in aggregation. Here we look at

the ratio analysis to measure the financial condition of the Square pharmaceuticals.

Liquidity ratio:

1. Current ratio =

Year 2011-12 =

= 1.59times

Year 2010-11 =

= 1.50 times

Year 2009-10 =

= 2.05 times

Year 2008-09 =

= 1.45 times

Interpretation: The current ratio is one of the most commonly cited financial ratio. It measures

the firm’s ability to meet its short term liabilities. A current ratio of 2.0 is occasionally cited as

acceptable. Here we see that, the current ratios are fluctuating in last few years. From 2008-

09,2009-2010, 2010-11, 2011-2012) it was in ups and down. It may not a good sign for square

pharmaceutical. But only in 2009-2010 the current ratio was 2.05 which were acceptable if the

square pharmaceutical company maintain that ratio it may good for further investment.

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2. Quick ratio:

Year2011-12 =

= 0.95 times

Year2010-11 =

= 0.96 times

Year2009-10 =

= 1.06 times

Year2008-09 =

= 0.65 times

Interpretation: We calculate quick ratio to see the real picture of liquid asset. Quick ratio is

always less than current ratio. Quick ratio is more stringent than current ratio. In 2011-12 ratio

was .95 that means the company has not more liquidate money, because it was less 1.

3. Cash ratio:

Year 2011-12=

= 0.30 times

Year 2010-11=

= 0.19 times

Year 2009-10 =

= 0.29 times

Year 2008-09 =

= 0.15 times

Interpretation: The Cash ratio is an indicator of a company’s liquidity that further refines both

the current ratio and the quick ratio by measuring the amount of cash. Cash cover the current

liabilities. In 2010-11 it is slightly below, but in 2011-12 cash ratio was commendable.

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4. Account Receivable Turnover:

Year 2011-12 =

= 19.86 times

Year 2010-11 =

= 17.44 times

Year 2009-10 =

= 22.55 times

Year 2008-09 =

= 20.56 times

Average collection period:

Year 2011-12 =

= 19 days

Year 2010-11 =

= 21 days

Year 2009-10 =

= 16 days

Year 2008-09 =

= 18 days

Interpretation: In 2008-10 the company’s credit system is so tight but in 2010-12 it’s credit

system is slightly flexible. Avg. collection period indicate how much time required to collect the

credit

5. Account payable turnover:

Year 2011-12 =

= 10.47 times

Year 2010-11 =

= 10.50 times

Year 2009-10 =

= 16.62 times

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Year 2008-09 =

= 45.66 times

Average payment period:

Year 2011-12 =

= 35 days

Year 2010-11 =

= 35 days

Year 2009-10 =

= 22 days

Year 2008-09 =

= 8 days

Interpretation: Average payment period indicates that how much time required to payment. If the

time period is long it is better for company but if it is continued then it may be harmful for the

company. Here we see that company’s payment system is moderate position.

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6. Inventory turnover:

Year 2011-12 =

= 3.41 times

Year 2010-11 =

= 3.03 times

Year 2009-10 =

= 2.97 times

Year 2008-09 =

= 2.70 times

Average processing period:

Year 2011-12 =

= 107 days

Year 2010-11 =

= 120 days

10

Year 20009-10 =

= 123 days

Year 2008-09 =

= 135 days

Interpretation: In 2011-2012 the company’s average processing period was 107 days which is

less than previous year. As a manufacturing industry it’s a very good sign. If inventory

processing period is high, it’s indicating the processing is slow and more capital is required to

process. The average processing period may vary industry to industry.

Financial risk ratio:

7. Debt Equity Ratio:

Year 2011-2012 =

= 0.031 times

Year 2010-2011 =

= 0.047 times

Year 2009-2010 =

= 0.088 times

Year 2008-2009 =

= 0.045 times

Interpretation: If debt Equity Ratio is high the cost of capital is low but it has risk of bankruptcy.

If the ratio is low the cost of capital is high but bankruptcy risk is low. In 2011-12 the company

debt equity ratio is low there less risk of bankruptcy.

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8. Financial leverage ratio:

Year 2011-2012 =

= 1.32 times

Year 2010-2011 =

= 1.41 times

Year 2009-2010 =

= 1.30 times

Year 2008-2009 =

= 1.33 times

Interpretation: If financial leverage ratio is low it is good for the company, if it is high it is not

good for a company. In 2011-12 FLR is high then previous year, it is being a good sign.

9. Times interest earned:

Year 2011-2012 =

= 10.23 times

Year 2010-2011 =

= 7.71 times

Year 2009-2010 =

= 5.96 times

Year 2008-2009 =

= 4.86 times

Interpretation: The times interest earned ratio sometimes called the interest coverage ratio,

measures the firm’s ability to make contractual interest payments. The higher the

value of this ratio, better able the firm is able to fulfill its interest obligation. Here we can see

that in 2011-2012 the ratio was 10.23. That is a good sign for the company.

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Operating Performance Ratios:

Operating efficiency-

10. Total asset turnover:

Year 2011-2012 =

= 0.75 times

Year 2010-2011 =

= 0.69 times

Year 2009-2010 =

= 0.75 times

Year 2008-2009 =

= 0.74 times

Interpretation: The asset turnover ratio simply compares the turnover with the assets that the

business has used to generate that turnover. Here we see that, in 2011-2012 it washigher than

previous years that refer the company able to proper utilize its assets.

11. Fixed asset turnover:

Year 2011-2012 =

= 1.83 times

Year 2010-2011 =

= 1.93 times

Year 2009-2010 =

= 2.04 times

Year 2008-2009 =

= 2.00 times

Interpretation: In 2011-2012 it was lower than previous years that refer the company may fall to

utilize its fixed assets.

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Operating Profitability:

12. Gross Profit Margin =

* 100

Year 2011-2012 =

* 100

= 42.90 %

Year 2010-2011 =

* 100

= 42.81 %

Year2009-2010 =

* 100

= 42.76 %

Year2008-2009 =

* 100

= 42.24 %

Interpretation: Gross profit margin indicates that how efficient the management is in using its

labor & raw materials in the process of production. In 2011-2012 it was

higher compare to the year of 2008-09, 2009-10, 2010-11.

13. Operating Profit Margin:

* 100

Year 2011-2012 =

* 100

= 20.69 %

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Year 2010-2011 =

* 100

= 20.43 %

Year2009-2010 =

* 100

= 20.77 %

Year2008-2009 =

* 100

= 24.12 %

Interpretation: The operating profit margin indicates that how efficiently the managers of a firm

are doing business operation to gain profit. In 2011-2012 it was a bit of higher compare with the

year of 2010-2011.

14. Net Profit Margin:

* 100

Year 2011-2012 =

* 100

= 18.05 %

Year 2010-2011 =

* 100

= 18.80 %

Year2009-2010 =

* 100

= 18.21 %

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Year2008-2009 =

* 100

= 19.25 %

Interpretation: Net profit margin measures the percentage of each operating income\revenue

(TK) remaining after all costs and expenses. The higher the firms net profit margin, the better

position a company are. Here we can see that, in year 2011-12 the ratio was 18.05% which was

less compare to the year2010-11.

15. Return on Equity (ROE):

Year 2011-2012 =

= 17.81 %

Year 2010-2011=

= 18.32 %

Year2009-2010 =

= 17.81 %

Year2008-2009 =

= 19 %

Interpretation: The return on equity (ROE) is a measure of the rate of return flowing to the banks

stockholders. It approximates the net benefit that the stockholders have received from investing

their capital in the bank. Generally higher this return, the better of this owner.

16. Return on Asset (ROE):

Year 2011-2012 =

= 13.51 %

Year 2010-2011=

= 13.02 %

Year 2009-2010 =

= 13.74 %

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Year2008-2009 =

= 14.26%

Interpretation: The Return on asset is primarily an indicator of managerial efficiency. Here we

can see that ROE of Year 2011-12 is comparatively higher than the year2010-11.

17. Earnings Per Share:

Year 2010-11 =Tk.129.07

Year2009-10 = Tk. 106.43

Year2008-09 =Tk. 125.25

Year2007-08 = Tk. 154.53

Interpretation: Since earnings per of Square increases in 2011 while it decreased gradually from

2008 to 2010.

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Performance of working capital management

Working capital management: Working capital management involves management of the

current assets and the current liabilities of a firm. A firm’s value cannot be maximized in the

long run unless it survives the short run. Thus, sound working capital management is a requisite

for a firm’s survival. Working capital policy refers to the firm’s basic policies regarding target

levels for each category of current assets and how current assets will be financed.

The four main dimensions of Working Capital Management are:

1. Cash Management

2. Management of Accounts Receivables

3. Management of Inventory and

4. Management of Accounts Payables.

Performance of working capital management of Square pharmaceuticals: (all in BDT)

Net Working Capital (NWC):

NWC= Current asset – Current liabilities

NWC_2012 = 6,718,544,893 - 4,252,934,845 = 2,465,610,048

Cash and Cash Equivalents (2012): Tk. 586,920,267 - 26,962,115=559,958,152

NWC_2011 = 7,022,213,840 - 4,668,189,426 = 2,354,024,414

SQUARE PHARMACEUTICALS has its Net Working Capital Surplus of 2,465 Million Tk. in

2012 and 2,354 Million Tk. in 2011 which indicate the firm has the efficiency in its short-term

financial health. The firm is able to pay off its short-term liabilities with the current asset easily

which could be a good sign for short-term & long-term creditors for the firm.

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Net Trade Cycle (NTC):

NTC= Inventory Conversion Period + A/R Conversion Period - A/P Conversion Period

Inventory Conversion Period=

A/R Conversion Period =

A/P Conversion Period =

NTC_2012:

Inventory Conversion Period=

= 105.55 days

A/R Conversion Period =

= 18.13 days

A/P Conversion Period =

= 37.11 days

Purchase = COGS – Beginning Inventory + Ending Inventory – Depreciation

= 9,167,253,620 - 2,541,688,329 + 2,687,818,472 - 820,532,316 = 8,492,851,447

So, NTC_2012 = 105.55 + 18.13 - 37.11 = 87 Days

NTC_2011:

Inventory Conversion Period=

= 118.78 days

A/R Conversion Period =

= 20.64 days

A/P Conversion Period =

= 35.80 days

Purchase = COGS – Beginning Inventory + Ending Inventory – Depreciation

= 7,703,661,010 - 2,207,078,082 + 2,541,688,329 - 662,949,732 = 7,375,321,525

So, NTC_2011 = 118.78 + 20.64 – 35.80 = 104 Days

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SQUARE PHARMACEUTICALS LIMITED

Common-Size Analysis (Current Asset Segment)

Particulars

2012

%

2011

%

Inventories

2,687,818,472

39.85

2,541,688,329

36.19

Trade Debtors

808,311,714

11.98

772,421,345

11.01

Advances,

deposits and

Prepayments

577,156,445

8.56

523,991,079

7.56

Short Term Loan

2,085,300,110

30.91

2,813,811,332

40.07

Cash and Cash

Equivalents

586,920,267

8.70

370,301,755

5.27

Total Current

Assets

6,745,507,008

100%

7,022,213,840

100%

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Cash based Ratio Analysis:

Cash to Current Assert Ratio:

Cash Ratio_2012 = 586,920,267 / 6,745,507,008

= 8.70 %

Cash Ratio_2011 = 370,301,755 / 7,022,213,840

= 5.27 %

SQUARE has the increasing drift of Cash Ratio resulting 5.27% in 2011 and 8.70% in 2012

which reflecting the firm is improving its amount of most liquid asset in its current asset segment

which indicates the firms liquidity strength is increasing. This position of the firm will be able to

attract potential credit relationship with other parties.

Cash to Current Liability Ratio:

Cash to Current Liability Ratio_2012 = 586,920,267 / 4,252,934,845

= 13.80 %

Cash to Current Liability Ratio_2011 = 370,301,755 / 4,668,189,426

= 7.93 %

SQUARE is improving itself in terms of the Cash Availability to pay its current obligations

which reflected in liquidity measure of cash to current liability ratio. SQUARE has 7.93% in

2011 and 13.80% in 2012 indicating the flexibility of payment of its bills and payables. With the

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help of this information SQUARE will be able to build some goodwill to their existing and

potential creditors.

Operating Activity of Accounts Receivables:

Accounts Receivables Turnover Ratio _2012 =

= 16,054,425,243 / 790,366,530

= 20.31 Times

Average Receivable = (808,311,714 + 772,421,345) / 2 = 790,366,530

Accounts Receivables Turnover Ratio _2011 = 13,471,424,469 / 640, 335, 26 = 21.04 Times

Average Receivable = (772,421,345 + 508,249,174) / 2 = 640,335,260

SQUARE has efficient rate of A/R Turnover which reflects the firm can receive cash from its

credit sales proficiently. The firm has 21.04 times in 2011 and 20.31 times in 2012 which

indicate the firm’s comfortable position in its liquidity of collecting cash form receivables and

they have a decent credit policy.

Accounts Receivable Collection Period:

Accounts Receivable Collection Period_2012 = 360 / 20.31 = 18 Days

Accounts Receivable Collection Period_2011 = 360 / 21.04 = 17 Days

SQUARE has very efficient rate of A/R Collection which reflects the firm can receive cash from

its credit sales within very short period of time. The firm has only 17 days in 2011 and 18 days in

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2012. Though one day has been increased but still it’s a very comfortable position for a big-time

firm like SQUARE reflects its speed of collecting cash form receivables.

Operating Activity of Inventory:

Inventory Turnover Ratio (ITO) =

ITO_2012 = 9,167,253,620 / 2,614,753,401= 3.51 Times

Average Inventory = (2,687,818,472 +2,541,688,329) / 2 = 2,614,753,401

ITO_2011 = 7,703,661,010 / 2,374,383,206 = 3.24 Times

Average Inventory = (2,541,688,329 + 2,207,078,082) / 2 = 2,374,383,206

The average rate of speed of inventory is very efficient for SQUARE also it has the upward trend

having 3.24 times in 2011 and 3.51 times in 2012. The high rate of turnover of inventory shows

the inventory is high moving, high sales volume and high demand for the product. SQUARE has

the high quality inventory turnover to dominate in the market.

Days to Sell Inventory =

Days to Sell Inventory_2012 = 360 / 3.51 = 103 Days

Days to Sell Inventory_2011 = 360 / 3.24 = 111 Days

The liquidity of Average Inventory is moderate or good for SQUARE PHARMA. The firm takes

111 days in 2011 and 103 days in 2012 to sell its average inventory. The trend is downward and

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number of days is lower than other big firms which may reflect it has the moderate or good

liquidity in selling average inventory. But industry average is needed to explain more clearly.

Operating Activity of Accounts Payable:

Accounts Payable Turnover=

A/P TO_2012 = 8,492,851,447 / 804,400,387 = 10.56 Times

Purchase = COGS – Beginning Inventory + Ending Inventory – Depreciation

= 9,167,253,620 - 2,541,688,329 + 2,687,818,472 - 820,532,316 = 8,492,851,447

Average Payable = (875,431,555 + 733,369,218) / 2 = 804,400,387

A/P TO_2011 = 7,375,321,525 / 564,042,567 = 13.08 Times

Purchase = COGS – Beginning Inventory + Ending Inventory – Depreciation

= 7,703,661,010 - 2,207,078,082 + 2,541,688,329 - 662,949,732 = 7,375,321,525

Average Payable = (733,369,218 + 394,715,915) / 2 = 564,042,567

The pay-off rate of A/P Turnover is decreasing for SQUARE which reflects the firm is taking

longer time to pay its payables. The firm has 13.08 times in 2011 and 10.56 times in 2012. This

scenario can be good for the firm, because if the firm can delay its payments, the amount of

money can be invested in short-term marketable securities and can earn profit which will be

reflected in the bottom line.

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Operating Cycle:

Operating Cycle = Average collection + days sales to inventory

Operating Cycle_2012 = 18 + 103 = 121 days

Operating Cycle_2011 = 17 + 111 = 128 days

The speed of inventory converted into cash is moderate or good for SQUARE PHARMA. The

firm takes 128 days in 2011 and 121 days in 2012 to convert its inventories into cash. The

decreased days from year 2011 to 2012 indicates the firm is improving its ability but we need

industry average to make more concrete comment.

Here Quality & Liquidity of Inventory is moderate or good for the firm and lawful. So we can

interpret that Inventory’s liquidity measure is good for SQUARE PHARMACEUTICALS.

Liquidity Index 2012

Particulars

Amount

Day’s Away From Cash

$ x Days

Cash and Cash

Equivalents

586,920,267

_

_

Inventories

2,687,818, 472 121 325226035112

Trade Debtors

808311714 18 14549610852

TOT AL

339775645964

So, Liquidity Index_2012 = 339775645964 / 6,745,507,008

= 50 Days

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Working capital management is important part in firm financial management decision. The ability

of the firm to operate continuously for longer period depends on how they deal with working capital.

The optimal level of working capital management is could be achieve by firm that manage the

tradeoff between profitability and liquidity.

By considering all of the key factors and analysis, I like to say that the SQUARE

PHARMACEUTICALS is efficient in terms of short-term liquidity and the firm has the

opportunity of huge growth in the future. But to make more concrete comment analysis of more

sections is needed and industry average data is required.

Impact of Working capital management on overall performance of the company

Working capital management is the functional area of finance that covers all the current accounts

of the firm. Working capital management also involves the relationship between a firm's short-

term assets and its short-term liabilities. So, the goal of working capital management is to ensure

that a firm is able to continue its operations and that it has sufficient ability to satisfy both

maturing short-term debt and upcoming operational expenses.

The management of working capital involves managing inventories, accounts receivable,

accounts payable and cash. In the present day context of rising capital cost and scarce funds, the

importance of working capital needs special emphasis. It has been widely accepted that the

profitability of a business concern likely depends upon the manner in which its working capital is

managed.

The inefficient management of working capital not only reduces profitability of the company but

ultimately may also lead a concern to financial crisis. On the other hand, proper management of

working capital leads to a material savings and ensures financial returns at the optimum level

even on the minimum level of capital employed.

Both excessive and inadequate working capital is harmful for the firm. Excessive working capital

leads to un-remunerative use of scarce funds. On the other hand inadequate working capital

usually interrupts the normal operations of firm and impairs profitability. There are many-

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instances of the company failure for inadequate working capital. Further, working capital has to

play a vital role to keep pace with the scientific and technological developments that are taking

place in the concerned area of pharmaceutical industry.

If new ideas, methods and techniques are not injected or brought into practice for want of

working capital, the concern will certainly not be able to face competition and survive. In this

context, working capital management has a special relevance and a thorough investigation

regarding working capital practice in the Square Pharmaceuticals Ltd. is of utmost importance.

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How the company can improve its working capital management

Manage working capital actively throughout the organization: It’s not the responsibility of

the finance department alone. Companies should implement a cash-focused management system,

which advises on working-capital issues. The way to make sure that cash-focused management

happens is to use key performance indicators (KPIs) on working capital all the way down the

business to operational level. Ensure that the KPIs are aligned with individual managers’

responsibilities. Cash management should be an active process, linked to improvements in

working processes.

Manage stock actively: Holding unnecessary levels of the wrong stock can be one of the biggest

drags on working capital. Stock problems often result from a lack of communication among

different departments. Regular (monthly or quarterly) stock checks are part of the answer. But

the information emerging from these checks needs to be reviewed and acted upon.

Pay supplier on time: Now there’s a counterintuitive way of improving your working capital.

But Clive Adolph, a partner with PBA Accountants, argues that companies that pay on time

develop better relationships with suppliers and are in a position to negotiate better deals. If the

company doesn’t have a good relationship with its suppliers, the company could end up not

receiving goods when it needs them. And, if the company can’t fulfill its commitments, that’s not

good for the company’s cash flow either.

Manage the payment process more effectively: Customers will give all sorts of excuses to pay

late. One of the most common is an inaccurate invoice, so make accurate invoices a key

performance measure for receivables billing. Bad debts, a particular drag on working capital in

tough times, can often be reduced by making more rigorous credit checks on new customers and

managing credit limits more carefully

Make expenses visible: Even expenses claims with small excess amounts can have a

cumulatively negative impact on working capital. The key is to set clear rules in areas such as

travel and accommodation – and then to ensure that these are followed.

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Consider alternatives funding: the banks’ unwillingness to lend, especially to SMEs, has put a

strain on the working capital of many businesses. But bank loans and overdrafts aren’t the only

source of working capital. Firms are turning to asset-based finance such as invoice discounting,

while others are harnessing the power of the web to raise finance.

Major industry challenges faced by the company

Pharmaceutical companies face complex issues that grow more challenging by the day.

Healthcare reform and changes in technology, government policy and consumer expectations are

revolutionizing relationships with key stakeholders and impacting operations in unforeseen

ways. Most experts believe that companies who succeed in the face of such challenges will do so

by placing a renewed emphasis on innovation. Moreover, they will adapt effectively in the face

of change and uncertainty and will position themselves as a vital partner in the healthcare

delivery chain.

Square pharmaceutical have faced the following Challenges-

Rising customer expectations: The commercial environment is getting harsher, as healthcare

payers impose new cost constraints on healthcare providers and scrutinise the value medicines

offer much more carefully. They want new therapies that are clinically and economically better

than the existing alternatives, together with hard, real-world outcomes data to back any claims

about a medicine’s superiority.

Poor scientific productivity: Pharma’s output has remained at a stable level for the past decade.

Using the same discovering and developing processes, there’s little reason to think its

productivity will suddenly soar.

Cultural sclerosis: The prevailing management culture, mental models and strategies on which

the industry relies are the same ones it’s traditionally relied on, even though they’ve been

eclipsed by new ways of doing business.

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Government regulation: One of the major challenges that Square Pharmaceuticals have faced is

the government regulation of sales practices. Two organizations, one governmental, The

Directorate General of Drug Administration (DGDA), DGDA is the drug regulatory authority of

Bangladesh, which is under the Ministry of Health and Family Welfare. DGDA regulates all

activities related to import and export of raw materials, packaging materials, production, sales,

pricing, license, registration etc. and one semi-government, the Pharmacy Council of Bangladesh

(PCB). PCB was established under the Pharmacy Ordinance in 1976.PCB regulates the practice

of Pharmacy throughout Bangladesh.

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Conclusion: Pharmaceutical Industry in our country is a profitable sector. It is due to the reason

that the firms in the industry are very competitive and has gained efficiency in managing its

resources competently. The impact of overall working capital policy on profitability in this

industry is proved to be significant and the ratios related to working capital can explain the

differences between the firms.

“Square Pharmaceuticals” running in a nice way in Bangladesh. It is developing our national

growth throughout increasing national income, reducing unemployment rate, enhancing the

technological sectors through inspiration and demand, again it’s helping the government by

providing them with a huge tax. Growth rate of their business is very encouraging for the young

entrepreneur to come forward. The nicest thing about Square’s business is its total

accountability. Still government should be more cautious about the company’s flexibility and

transparency.

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Recommendation: The proposed suggestions may help the pharmaceutical industries to reduce

the problems in different areas. These are as follows:

1. The company should produce their product in a hygienic environment and maintain the highest

standard.

2. Square pharmaceutical should produce quality product by using the updated equipment and raw

materials, which can help them to acquire the market share.

3. Square pharmaceutical should produce world class medicine which may increase the demand for

Bangladeshi drug in the world market.

4. Company should make the people aware of the local products and with that they should ensure the

quality medicine to earn confidence.

5. Square pharmaceutical should produce their product in a hygienic environment and maintain the

highest standard.

6. Government should take measures or formulate some clear–cut rules to restrict the foreign

pharmaceutical organizations to practice the concept of dumping in this country.

7. The pharmaceutical companies should not violate the law imposed by the government, which can

hamper the trust of the people of the country.

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References

Book:

Modern Working Capital Management- by Fredrick C.Scherr – international

edition

Corporate Finance- by Stephen A.Ross, Randolph W.Westerfield, Jeffery Jaffe-9th

edition

Internet:

www.squarepharma.com.bd

www.wikipedia.com

www.google.com/finance

www.financial-dictionary.com

www. investopedia.com