final game - edited

7/28/2019 Final Game - Edited

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RECTANGLE PHARMACEUTICALS LTD.

Act 330

Group Assignment 3

June 26TH, 2011

Prepared By

Zeeshan Rahman 0930194530

Mohiuddin Miraz 0930424530

A.K.M Sharfuddin Chowdhury 0930250530

Taslima Chowdhury Mumu 0710719030

Prepared For

RKB

Section 1

Lecturer

Department: School of Business


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1. Company Name

- Rectangle Pharmaceuticals Limited

2. Industry

-Pharmaceuticals Industry

3. Company Location

-Plant (Gazipur)

-Headquarter (Uttara Sector 3, House 22)

4. Products

The name Rectangle Pharmaceuticals assures you of many things: outstanding product quality,

leading-edge technology, advanced new products, and a commitment to serve the medical

community.

Our products come in a wide range of dosage forms including tablets, capsules, dry syrup,

powder for suspension, cream, ointment, suppositories, metered dose nasal sprays, large volume

intravenous fluids, metered dose inhalers etc. ensuring the global standard of quality.

5. Company Background

A) .No. of employees125 (Plant and Office)

B) .No. of departments and their functions in brief


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Research and Development:

The Research and Development department determines and identifies drug candidates. In R&D

department, there are three functional areas. They are discovery research, animal sciences and

bioinformatics.

Operations:

The Operations department produces a saleable amount of a drug. Once a drug has passed the

clinical trials, the manufacturing and production department manufacture the final product, along

with the packaging and labeling. Also housed under the operations umbrella is the environmental

health and safety function, which assesses the environmental impact of a potential product.

Quality:

There are various rules and safety regulations laid down by the FDA for pharmaceuticals and

biotech firms. If found guilty for drug contamination then the FDA may close the manufacturing

plant of the firm. The Quality department of the pharmaceutical firm also ensures that the firm is

adhering to government regulations. There are different groups which concentrate on functions

like assurance, quality control as well as validation. These groups ensure that the drugs

manufactured are accurate, and of a reliable standard of quality.

Finance and Administration:

The Finance and Administration department comprises different functional areas including

finance, administration, legal and information systems. Responsibilities include managing

activities related to finance management, handling legal relations with employees, investors,

creditors as well as government regulators.

Marketing

The marketing department recognizes potential fresh coalition partners and also handles previous

alliances. They are responsible for market research, recognizing potential customers and


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preparing the promotion and pricing strategy. They also handle the distribution of the finished

products.

Project Management:

Most of the pharmaceutical companies have a separate project management department. This

department is responsible for coordinating the functions of all departments and also ensures

smooth and efficient functioning. The Project management department also monitors particular

projects.

6. Company Financial Policy:

The company will BAS , and IAS in recording the day to day transactions and financial

statements

The company will follow straight line depreciation methods to depreciate its assets and

has no salvage value.

The company will make appropriate investments (machinery and large scale production)

that maximize future cash flows and facilitate efficient operations.

The CEO and CFO is responsible for taking decision about taking loan from the bank

The CEO , CFO and the Financial executive can take decisions for further

investments(leasing and purchase of assets) and the all cheques must be signed by the

CEO , CFO and Financial executive

The CFO and Financial executive will develop the budget of the company and the CEO

will approve. But at first the budget must be checked by the auditor

Some common reserve funds are 'rainy day', sinking funds , legal liability, research and

development, equipment and software acquisition, building maintenance or acquisition(In

the coming future )

At the end of every year a financial audit procedure must be performed

Financial Statement will be prepared at the end of each financial year


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Accounts Receivables Policy

The following is the practice used to collect general accounts receivable:

1. CURRENT ACCOUNTS: At the end of each month statements are mailed to each owner with

an outstanding balance.

2. 30 DAYS PAST DUE: If the account is not paid in full in 30 days a collection letter requiring

payment in full is sent to the owner along with a new statement of account.

3. 60 DAYS PAST DUE: If the account is not paid in full in 60 days, a final collection letterstating that they will be turned over to our attorney for legal proceedings is sent with a copy of

the current statement of account.

4. 90 DAYS PAST DUE: If the account is not paid in 90 days the administrative staff attempts to

contact the member by telephone. At that point a decision is made as to whether the account

should be turned over to the attorney for collection proceedings and whether or not a lien should

be filed against the member.

Bad Debt Policy

Authority to Write-off

The Board of Directors has sole authority to write off uncollectible debts unless the amount is

more than BDT100, 000.

Written off amounts of more than BDT100,00 will be referred to AGM for approval.

Considered factors for write-off debts

1. Debt has been inactive for 6 or more years and all avenues have been exhausted by

management to collect the outstanding debt.

2. Debtor has passed away.

3. The corporation has shut down.


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Top Level Management

CEO (Mohiuddin Miraz)

CFO(Zeeshan Rahman)

Financial Executive(Taslima Chowdhury)

Director(AKM Sharfuddin)

Middle Level Management

Operation Manager

HR Manager

FinanceManager

Marketing Manager

Distribution Manager

Front Line (Supervisory Level) Management

Factory Manager

Sr. Factory Supervisor

Other Production Departmental Supervisors


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Bond Adjustments

Account Name Debit(BDT) Credit(BDT)

1. April 1 , 2005

Cash

(2400 interest + Book value of bond

=102,335

104,735

Discount on bonds payable 17665

Bonds payable 120,000

Bonds interest expense (120,000 x 8 %= 9600 ; 9600/2= 4800 Tk semi annually so for 3 months, 4800/6 x 3 =

2400Tk

2,400

2. June 30 , 2005

Bonds interest expense (carrying value of April 1 ,

2005 = 104,735 x 12% / 2)

6140

Bonds interest payable 4,800

Discount on bonds payable 1,340

3. July 12005

Bonds interest payable 4800

Cash

(interest on bonds paid on July 1 )

4800


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Schedule of Bonds discount amortization

Effective interest rate method

5 years , 8% bonds sold to yield 12

%

Date cash paid Int exp Discount

amortization

carrying value of

bonds(BDT )

1/4/2005 102,335

1/7/2005 4800 6140.1 1340.1 103,675.1

1/1/2006 4800 6220.50 1420.50 105095.60

1/7/2006 4800 6305.74 1505.74 106601.35

1/1/2007 4800 6396.08 1596.08 108197.43

1/7/2007 4800 6491.85 1691.85 109889.281/1/2008 4800 6593.36 1793.36 111682.64

1/7/2008 4800 6700.96 1901 113583.64

1/1/2009 4800 6815.02 2015.02 115598.66

1/7/2009 4800 6936 2136 117734.66

1/1/2010 4800 7064.08 2265.34 120000

Leasing: Capital Leasing Method

Account Name Debit(BDT) Credit(BDT)

Oct 1 , 2005

Leased Asset(Office Floor) 300,000

Lease Liability 300,000

Lease Payment 45,000

Executory Cost 5,000

Cash 50,000


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Rectangle Pharmaceutical LTD has taken a office floor lease for 5 year period and the terms

and provisions of the lease agreement, and other pertinent data, are as follows. The term of the lease is five years and the lease payment rate is 12% per year. The

lease agreement is non-cancelable, requiring equal rental payments of BDT 50,000

at the middle of each year (annuity due basis). The office floor has a fair value at the inception of the lease of BDT300,000 Rectangle Pharma. pays all of the executary cost of BDT5,000

. Lease Amortizing Schedule:

The term of the lease is five years. The lease agreement is noncancelable,

requiring equal rental payments of $ 50000 at the beginning of each year

(annuity due).

Fair value of the lease is $300000

Estimated economic life of five years, and no residual value. The executor cost is $ 5000 per year.

The lease contains no renewal options.

The interest rate is 12%.

Lease Amortization Schedule(Annuity- Due Basis)

Date AnnualLease

Payments

Executorycost

Interest(12%) on

liability

Reductionof lease

liability

LeaseLiability

1/1/05 - - - - $181680.75

1/1/05 50000 5000 -0- $ 45000 136680.75

1/1/06 50000 5000 16401.69 28598.31 108082.44

1/1/07 50000 5000 12969.89 32030.11 76052.33

1/1/08 50000 5000 9126.27 35873.73 40178.6

1/1/09 50000 5000 4821.432 40178.6 -0-

250000 25000 43319.28 181680.75


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Depreciation: (Straight Line Method)

Fixed Asset Worth Depreciation

Expense for

(2005)

Net Book

Value for

(2005)

Depreciation

Expense for

(2006)

Net Book

Value for

(2006)

Plant

Premises

3,000,000 300,000 2,700,000 300,000 2,400,000

Machinery 3,000,000 300,000 2,700,000 300,000 2,400,000

Fixture and

Fittings

500,000 50,000 450,000 50,000 400,000

Motor Vehicle 2,000,000 200,000 1,800,000 200,000 1,600,000

Computer

System

200,000 20,000 180,000 20,000 160,000

Rectangle Pharmaceutical LTD. depreciation policy are as follows:

The company uses straight line method to depreciate their assets.

The companys all fixed assets estimated useful life is 10years.

They dont have any estimated salvage value for their fixed assets.


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Income Statement For the year ended 2005 and 2006

Details: Year-2005 Year- 2006

Sales 1,439,850 2,159,775

Less: COGS 941,180 969,415

Gross Profit 498,670 1,190,360

Operating Expenses:

Salaries 900,000 1,000,000

Utilities 400,000 350,000

Telephone charges 130,000 100,000

Advertising 400,000 500,000

Lease Payment 45,000 45,000

Executory Cost 5000 5000

Insurance Expense 100,000 100,000

Depreciation 870,000 870,000

Sales & Marketing 150,000 100,000

R & D 150,000 200,000

Finance Dept 50,000 100,000

Total Operating

Expense

3,200,000 3,270,000

EBIT (2,701330) (2,079,640)

Bond Interest expense (6140) (12,526)

Taxation -

Net Income (2,707,470) (2,092,166)

***Loss Decreased by BDT 615304 in the year 2006

***Expecting to reach break even in the 4th year of operation


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Balance Sheet as at 2005 and 2006

Asset 2005 2006Current Assets:

Inventory 58,640 89,225

Accounts Receivable 300,000 500,000

Cash in Hand 1,473,890 1,082,139

Prepaid Insurance 100,000 0

Total Current Asset 1,917,885 1,671,364

Fixed Assets:

Machinery 3,000,000 2,700,000

Plant Premises 3,000,000 2,700,000

Motor Vehicles 2,000,000 1,800,000

Leased Asset 300,000 250,000Fixtures and Furniture 500,000 450,000

Computer 200,000 180,000

Total Fixed Assets 9,000,000 8,080,000

Less: Accumulated Depreciation (870,000) (870,000)

Net Fixed Assets 8,130,000 7,210,000

Total Assets 10,062,530 8,881,364

Current Liability:

Accounts Payable 700,000 1,100,000Total Current Liabilities 700,000 1,100,000

Long Term Liability

Bond Payable 120,000 120,000

Lease Liability 300,000 250,000

Total Liabilities 1,120,000 1,470,000

Owner's Equity

Share Capital(50000 Issued) 1,500,000 2,010,000

Capital 10,000,000 10,000,000

Premium on Shares 150,000 201,000Retained Earnings

Net Loss (2,707,470) (2,092,166)

Last years loss(2,707,470)

Total Owner's Equity and liabilities 10,062,530 8,881,364


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Statement of Cash Flow for the yearended 2005 and 2006

2005 2006

Cash Flow from operating activities

Net Income (2,707,470) (2,142,166)

Adjustment to reconcile net income to net cash provided

by operating activities:

(+)Depreciation Expense 870,000 920,000

Account Receivable (300,000) (200,000)

Inventories (58,640) (10,00,000)

Prepaid Insurance (100,000) 100,000

Accounts Payable 700,000 (100,000)

Net cash used by operating activities (1,596,110) (2,422,166)

Cash flow from Investing Activities

Purchase of Machinery (3,000,000) -

Purchase of Plant Premises (3,000,000) -

Purchase of Fixture (500,000)

Purchase of Motor Vehicle (2,000,000)

Purchase of Computer (200,000)

Net Cash used by investing activities (8,700,000)

Cash flow from Financing Activities:

Common Stock 1,650,000 561,000

Bond Issued 120,000 -

Capital 10,000,000 -

Net Cash Provided by Financing Activities 11,770,000

Net Increase in Cash in 2005 1,473,890

Net Decrease in Cash in 2006 (1,861,166)

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