QUESTIONS AND HYPOTHESES

HYPOTHESES BASED ON ALTMAN Z-SCORING MODEL WITH RELATIONSHIP TO

RETURN ON EQUTY(ROE)
Ha(1) There is significant relationship between Working Capital to Total Assets and Zscore and ROE.
H0: There is no significant relationship between Working Capital to Total Assets and Zscore and ROE
Ha (2): There is significant relationship between Retained Earnings to Total Assets Zscore
and ROE.
H0: There is no significant relationship between Retained Earnings to Total Assets Zscore
and ROE.
Ha (3): There is significant relationship between EBIT to Total Assets and Z-score and ROE.
H0: There is no significant relationship between EBIT to Total Assets and Z-score and ROE.
Ha (4): There is significant relationship between Market Value of Equity to Total Liabilities
and Z-score and ROE
H0: There is no significant relationship between Market Value of Equity to Total Liabilities
and Z-score and ROE
Ha (5): There is significant relationship between Sales to Total Assets and Z-score and ROE.
H0: There is no significant relationship between Sales to Total Assets and Z-score and ROE.

REASEARCH DESIGN
REASERCH QUESTION DESIGNED BASED ON THE STUDY
The research question has been designed based on formal study as the variables
are already known and the questions have been designed based on the variables.
As the report is based on quantitative data because of the Z score model that has
been used to calculate the ratios used by the Z score model .At the same time
liquidity and profitability ratios have been used to do financial analysis and
performance and profitability. Considering the Z score model it is known the
independent variables are X1,X2,X3,X4 AND X5 and the z score value is
dependent variables. The ratios for profitability are considered too dependent
variables which are Gross Profit Ratio, Operating Profit Ratio, Net Profit Ratio,
Return on Net Worth Ratio and Return on Capital Investment Ratio the items
that are used to calculate these ratios are considered to be independent which
includes gross profit, revenue, operating income, net income ,share capital
,retained earnings, dividend, total capital as they affects the increase or
decrease in value of the ratios and in case of liquidity ratio the dependent
variables are Current Ratio, Quick Ratio, Inventory Turnover Ratio, Debtors
Turnover Ratio, Fixed Assets Turnover Ratio and the independent variables are
Current Assets, Current Liabilities, Inventory, Cost of goods sold, Accounting
receivables and Net fixed assets as like profitability ratios there is increase and
decrease in value of the liquidity ratios.

RELATIOSHIP BETWEEN Z SCORE WITH X1,X2, X3,X4 AND X5

INDEPENDENT VARIABLE
X1
X2
X3
X4
X5
DEPENDENT VARIABLE
Z SCORE

EFFECT IN THE VARIABLES UNDER THE STUDY

As the report is based on the financial analysis and profitability measurement in the
pharmaceutical companies in Bangladesh using Altman z score model were the
value of z score value depends on these factors which includes X1,X2,X3,X4 and
X5 for the calculation of the z score of Altman z score model and for financial
analysis and profitability which is based on the calculation of liquidity ratios and

profitability ratios so therefore the study is based on casual studies under the ex
post factu due to the availability of the annual reports of the six companies that are
already available in the Dhaka stock exchange market and can be found through
the websites of the company. The annual reports of the companies and what are
items should be taken does not change but only the values for the particular year
changes. To do calculations for the last five years for doing profitability, liquidity
ratios and z score model but the values taken are the same for each and every year.
THETIME DIMENSION
The time dimension is longitudinal because the same items from the balance sheet
and income statement are used to calculate the value of Z score of the Altman ZScoring Model and for doing financial analysis which includes calculation of
profitability and liquidity ratios. The same items from the balance sheet and
income are used to calculate the Z score model, profitability and liquidity ratios
only the values change for a particular year.
METHOD OF DATA COLLECTION
The method of data collection is based on secondary data as annual reports of the
six companies that are being studied for this particular research are available in the
Dhaka Stock Exchange(DSE) and available at the website of the respected
companies. The income statement and the balance sheet of the annual reports for
the respective companies are being used to do calculations for Altman Z-Scoring
Model, profitability and liquidity ratios to do analysis of each company for the last
five years of the six chosen companies.

TOPICAL SCOPE
As the research report is based on the financial analysis and profitability
measurement using Altman Z-Scoring Model, the study is based on statistical
breath study because of the calculations that are mentioned are being done on six
individual companies of the pharmaceutical industry.
ERROR

Measurer error has occurred due to change in the figures of the market value of
equity for the respective companies which includes square pharmaceuticals limited
and active fine chemicals limited as the market price per share for each five years it
is not available in the annual reports that has been collected and also it was not
available in the Dhaka stock exchange website. So the current market price of
each share of these companies mentioned above were used to calculate market
value of equity for the last years of this two company.