Financial Statment Analysis - Project

7/28/2019 Financial Statment Analysis - Project

1/74

A PROJECT REPORT ON

FINANCIAL STATEMENT ANALYSIS

Submitted in partial fulfilment of the requirements

For the award of Master Degree

In

BUSINESS ADMINISTRATION

By

SWATHI.V

(11141E0005)

Carried out

At

DR.REDDYS LABORATORIES PVT LIMITED

Under the esteemed guidance of

Mr.N.Vardha raju sir M.com

Department of Management Studies,

S.R.T.I.S.T, Nalgonda.

DEPARTMENT OF MANAGEMENT STUDIES

SWAMI RAMANANDA TIRTHA INSTITUTE OF SCIENCE & TECHNOLOGY

(Affiliated to J.N.T.U, Hyderabad)

Ramananda Nagar,Post.SLBC,

Nalgonda.


2/74

CONTENTS

CHAPTER 1

INTRODUCTION

OBJECTIVE OF THE STUDY

NEED AND IMPORTANCE OF STUDY

SOURCE OF THE DATA

METHODOLOGY

SCOPE OF THE STUDY

LIMITATIONS OF THE STUDY

CHAPTER 2

COMPANY PROFILE

CHAPTER 3

THEORETICAL FRAMEWORK OF

FINANCIAL STATEMENT ANALYSIS

CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

CHAPTER 5

FINDINGS

CONCLUSION AND SUGGESTIONS

BIBILOGRAPHY


3/74

INTRODUCTION

Analysis means establishing a meaningful relationship between various items

of the two financial statements with each other in such a way that a conclusion is being drawn.

By financial statements by means of two statements

Profit and loss account or Income Statement Balance Sheet or Position Statement

These are prepared at the end of a given period of time. They are the indicators of

profitability and financial soundness of the business concern. The term financial analysis is also

known as analysis and interpretation of financial statements. It refers to the establishing

meaningful relationship between various items of the two financial statements i.e. Income

statement and Position statement. It determines financial strength and weakness of the firm.

Analysis of financial statements is an attempt to assess the efficiency and performance of an

enterprise. Thus, the analysis and interpretation of financial statements is very essential to

measure the efficiency, profitability, financial soundness and future prospects of the business

units. Financial analysis serves the following purposes.

Measuring the Profitability

The main objective of a business is to earn a satisfactory return on the funds

invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned

on the capital invested in the business or not. It also helps in knowing the capacity to pay the

interest.


4/74

Indicating the trend of achievements

Financial statements of the previous years can be compared and the trend regarding

various expenses, purchases, sales, gross profits and net profit etc can be ascertained. Value of

assets and liabilities can be compared and the future prospects of the business can be envisaged.

Assessing the growth potential of the business

The trend and other analysis of the business provide information indicating the

growth potential of the business.

Comparative position in relation to other firms

The purpose of financial statements analysis is to help the management to make a

comparative study of the profitability of various firms, engaged in similar businesses. Such

comparison also helps the management to study the position of their firm in respect of sales

expenses, profitability and utilising capital, etc.

Assess overall financial strength

The purpose of financial analysis is to assess the financial strength of the business.

Analysis also helps in taking decisions, whether funds required for the purchase of the new

machines and equipments are provided from internal sources of the business or not if yes, how

much? And also to assess how much funds have been received from external sources.


5/74

OBJECTIVES OF THE STUDY:

To understand the theoretical framework of financial statement analysis and its tools. To assess the performance of Reddys on the basis of earnings and also to evaluate the

solvency position of the company through ratio analysis.

To understand the financial movement at Dr.Reddys Laboratories using funds flowstatement.


6/74

NEED AND IMPORTANCE OF STUDY

Financial performance of an enterprise will affect other types of performance and also theproductivity of finances is good, the productivity of men and material would be good.

Moreover the study of non-economic and qualitative performance, which studies thenon economic factors like customer satisfaction, citizen satisfaction etc.


7/74

SOURCE OF DATA

The data is collected from the following sources.

Three year annual report of Reddys from 2007-2010 Interaction with the related finance department.

METHODOLOGY

The study carried with the cooperation of the management who permitted to carry on the

study and provided the requisite data collected from the following sources.

Primary data Secondary data

PRIMARY DATA

The information collected directly without any reference is primary data. In the study

it is mainly through conversation with concerned officers or staff members either individually or

collectively. The data includes:

1. Conducting personal interview with the officers of the company.2. Individual observation and inferences.3. From the people who are directly involved with the transaction of the firm.

Secondary data

Study has been taken from secondary sources i.e. published annual reports of the

company editing, classifying and tabulation of the financial data. For this purpose performance

data ofDR.REDDYS LABORATORIES for the years 2007-2008 to 2009-2010 has been used.


8/74

SCOPE OF STUDY:

The scope and period of the study is being restricted to the following.

The scope is limited to the operations of the Reddys. The information is obtained from the primary and secondary data was limited to the

Reddys.

The study is based on the profit and loss a/c, the balance sheets of the last four years.


9/74

LIMITATIONS OF STUDY:

1. The study is confined to a period of last 4 years.

2. Not all tools of financial statement analysis are used.3. The duration of the study was limited to period of two months so that the extensive and

deep study could not be possible.


10/74

INDUSTRY PROFLE

THE INDIAN PHARMACEUTICAL INDUSTRY

The Indian pharmaceutical sector has come a long way, being almost non-existent

before1970 to a prominent provider of healthcare products, meeting almost 95 per cent of the

countrys pharmaceuticals needs.

The Industry today is in the front rank of Indias science-based industries with wide

ranging capabilities in the complex field of drug manufacture and technology. It ranks very high

in the third world, in terms of technology, quality and range of medicines manufactured. From

simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every

type of medicine is now made indigenously. Playing a key role in promoting and sustaining

development in the vital field of medicines, Indian Pharma Industryboasts of quality producers

and many units approved by regulatory authorities in USA and UK. International companies

associated with this sector have stimulated, assisted and spearheaded this dynamic development

in the past 53 years and helped to put India on the pharmaceutical map of the world. The Indian

Pharmaceutical sector is highly fragmented with more than 20,000 registered units with severe

price competition and government price control. It has expanded drastically in the last two

decades. There are about 250 large units that control 70 per cent of the market with market leader

holding nearly 7 per cent of the market share and about 8000 Small Scale Units together which

form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units).

These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for

consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and

used for production of pharmaceutical formulations.


11/74

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of

the drugs and pharmaceutical products has been done away with. Manufacturers are free to

produce any drug duly approved by the Drug Control Authority. Technologically strong and

totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D

costs, innovative scientific manpower, strength of national laboratories and an increasing balance

of trade.

The Pharmaceutical industryinIndia is the world's third-largest in terms of volume and

stands 14th in terms of value. According to Department of Pharmaceuticals, Ministry of

Chemicals and Fertilizers, the total turnover of India's pharmaceuticals industry between 2008

and September 2009 was US$21.04 billion.[2]While the domestic market was worth US$12.26

billion. Sale of all types of medicines in the country is expected to reach around US$19.22

billion by 2012. Exports of pharmaceuticals products from India increased from US$6.23 billion

in 2006-07 to US$8.7 billion in 2008-09 a combined annual growth rate of 21.25%.[2]According

to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global

pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion.

The government started to encourage the growth of drug manufacturing by Indian

companies in the early 1960s, and with the Patents Act in 1970. However, economic

liberalization in 90s by the former Prime Minister P.V. Narasimha Rao and the then Finance

Minister, Dr. Manmohan Singh enabled the industry to become what it is today. This patent act

removed composition patents from food and drugs, and though it kept process patents, these

were shortened to a period of five to seven years.
http://en.wikipedia.org/wiki/Pharmaceutical_industryhttp://en.wikipedia.org/wiki/Pharmaceutical_industryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_%28India%29http://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_%28India%29http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/PricewaterhouseCoopershttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/P.V._Narasimha_Raohttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Minister_%28government%29http://en.wikipedia.org/wiki/Dr._Manmohan_Singhhttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Dr._Manmohan_Singhhttp://en.wikipedia.org/wiki/Minister_%28government%29http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/P.V._Narasimha_Raohttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/PricewaterhouseCoopershttp://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#cite_note-cci-1http://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_%28India%29http://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_%28India%29http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Pharmaceutical_industry


12/74

INTRODUCTION TO PHARMACEUTICAL INDUSTRY

The Indian Pharmaceutical industry has been witnessing phenomenal growth in recent

years, driven by rising consumption levels in the country and strong demand from export

markets. The pharmaceutical industry in India is estimated to be worth about US$ 10 bn,

growing at an annual rate of 9%. In world rankings, the domestic industry stands fourth in terms

of volume and 13th in value terms. The ranking in value terms may also be a reflection of the

low prices at which medicines are sold in the country.

The industry has seen tremendous progress in terms of infrastructure development,

technology base and the wide range of products manufactured. Demand from the exports market

has been growing rapidly due to the capability of Indian players to produce cost-effective drugs

with world class manufacturing facilities. Bulk drugs of all major therapeutic groups, requiring

complicated manufacturing processes are now being produced in India. Pharma companies have

developed Good Manufacturing Practices (GMP) compliant facilities for the production of

different dosage forms.

Industry Trends

A highly fragmented industry, the Indian pharmaceutical industry is estimated to have

over 10,000 manufacturing units, as given by the Organization of Pharmaceutical Producers of

India. The organized sector accounts for just 5% of the industry with around 300 players, while a

huge 95% is in the unorganized sector. A large number of players in the unorganized segment

are small and medium enterprises and this segment contributes 35% of the industrys turnover.


13/74


14/74

by adopting new processes. Consequently, companies were in advantageous position to produce

drugs through reverse engineering at relatively very low cost that helped the domestic industry to

grow faster during the initial stages of development. On the other hand, this discouraged

multinational companies from launching their new products in India, fearing duplication of their

new drug discovery through reverse engineering. As a result, MNCs market share declined from

70% prior to 1972 to 20% at present.

Growing exports

Exports have been the major growth enabler of the Indian pharmaceutical industry in

recent years. India exports pharmaceutical products, APIs and intermediates to more than 200

countries across the world. Traditionally, Russia, Germany, Nigeria and Indias neighboring

countries like Sri Lanka, Nepal, and the Middle East were the major markets for Indian

pharmaceutical exports. Most of these markets are not highly regulated and are considered to be

low-value markets.

Expanding presence in regulated market

Over the years, India has shown better regulatory awareness and superior technical skills,which has enabled Indian companies to penetrate the high-value markets like the US and EU.

Exports of pharmaceutical products (finished products as classified under heading 30 of ITC-HS

code) to the US grew by an impressive 33% to Rs 23 bn and by a whopping 62% to Rs 35 bn to

the EU during FY04-FY06. Regulated markets, though difficult to penetrate due to stringent

regulations, are known to give better value and margin to exporters


15/74

Formulations

The administration of a medicine is a common but important clinical procedure. It is the

manner in which a medicine is administered that will determine to some extent whether or not

the patient gains any clinical benefit, and whether they suffer any adverse effect from their

medicines.

Routes of administrationThere are various routes of administration available, each of which has associated

advantages and disadvantages. All the routes of drug administration need to be understood in

terms of their implications for the effectiveness of the drug therapy and the patients experience

of drug treatment.

Routes of administration

Oral: Tablets, capsules, powders are taken internally. Topical: ointments, creams, liquids, aerosols that are applied on the skin ParenteralIntravenous, intramuscular, subcutaneous Others: such as eye-drops, pessaries, surgical dressings etc.


16/74

COMPANY PROFILE:

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is an emerging global

pharmaceutical company. As a fully integrated pharmaceutical company, our purpose is to

provide affordable and innovative medicines through our three core businesses: Pharmaceutical

Services and Active Ingredients (PSAI), comprising our Active Pharmaceuticals and Custom

Pharmaceuticals businesses;

One of India's top drug makers, Dr. Reddy's Laboratories develops and manufactures

branded and unbranded generic drugs and bulk pharmaceutical ingredients. Its stable of products

includes ulcer medicines (branded product Omez is a leading seller), antibiotics, antidepressants

(generic version of Eli Lilly's Prozac), pain relievers, diabetes treatments, and cardiovascular

drugs. Dr. Reddy's Laboratories also makes generic biotech products. Its custom pharmaceutical

services unit provides contract discovery, development, and manufacturing services to other drug

makers. The firm sells its products in more than 100 countries through direct sales entities and

third-party distribution partners.

Global Generics, which includes branded and unbranded generics; and Proprietary

Products, which includes New Chemical Entities (NCEs), Differentiated Formulations, and

Generic Biopharmaceuticals. Our strong portfolio of businesses, geographies and products gives

us an edge in an increasingly competitive global market and allows us to provide affordable

medication to people across the world, regardless of geographic and socio-economic barriers.

Our products are marketed globally, with a focus on India, US, Europe and Russia. Dr.

Reddy's conducts NCE research in the areas of metabolic disorders, cardiovascular indications,

anti-infective and inflammation.


17/74


18/74

BOARD OF DIRECTORS

Dr. Anji Reddy,

Chairman

GV Prasad,

Executive Vice Chairman & CEO

Satish Reddy,

Managing Director & COO

Dr. Omkar Goswami,

I ndependent & Non Whole Time Director

Ravi Bhoothalingam,


Dr. Bruce LA Carter,


Anupam Puri,

I ndependent & Non Whole Time Dir ector

Ms. Kalpana Morparia,


JP Moreau,



19/74


20/74


21/74

Market

Dr. Reddys - India today is more than a 200 million dollar venture with presence in almost all

major therapeutic areas. Our finished dosage business in India started in 1986 with launch of

Norilet (norfloxacin). Our market penetration through nearly 3000 sales force who connect to

more than 3,00,000 doctors on a regular basis has yielded us reaching all corners of the country

and providing affordable and innovative medicines in all major therapeutic areas like gastro-

intestinal, oncology, pain management, cardiovascular, dermatology, diabetes, etc. Eight of our

brands feature in the top-300 brands in India that include drugs like Stamlo, Reditux, Omez and

Ketorol.

TOP BRANDS AND PRODUCTS

Top Brands & Products

GERMANY INDIA RUSSIANORTH AMERICA

(Products)

SIMVAS NISE OMEZ Sumatriptan AG

ALENDR OMEZ CIPROLET Fexofenadine

OMEPRA STAMLO NISE Glimepiride

OXYCOD STAMLO BETA ENAM Oxaprozin

TRAMAD ATOCOR KETOROL Ondansetron

RAMHCT OMEZ-D EXIFINE Meprobamate


22/74


23/74

ABOUT PLANT

Having well equipped solvent recovery plant and recovery solvents are being used thereby reducing the inventory.

Environmental care is being taken by using the incineration and scrubbing systemsarresting the liberated gases in to the atmosphere.

Automation system is provided so that when the incinerator is stopped the feeding stopsautomatically. Stand by scrubbers are provided for the alternate arrangement to the

incinerator.

Having well equipped power charging, weighing and filling systems to reduce manhandling in the final stages.

Constantly striving to reduce the manufacturing cost of the products by reducing thesolvent losses and upgrading the systems.

COMPANY VISION, MISSION AND OBJECTIVE

VISION

A world class, innovation, Competitive and profitable Engineering Enterprise Providing total

business Solutions. To be a top 20 global pharmaceutical company by 2020

MISSION

To be the leading Engineering Enterprise providing Quality products System and services in

the field of Energy, Transportation, Industry, Infrastructure and other potential areas.


24/74

VALUES

Meeting commitments made to External and internal customers. Faster learning, Creativity and Speed of response. Respect for Dignity and potential of individuals. Loyalty and Pride in the Company Zeal to Excel Integrity and fairness in all matters.

OBJECTIVES

GROWTH:

To ensure a steady growth by enhancing the competitive edge of DR.REDDYS

LABORATORIES in exiting business, new areas and international operation so as to fulfil

national expectations from DR.REDDYS LABORATORIES.

PROFITABILITY:

To provide a reasonable and adequate return on capital employed, primarily through

improvements in operational efficiency, capacity utilization and productivity and generate

adequate internal resources to finance the company growth. Confidence in providing increased

value for this money through international standards of product, quality, performance and

superior customer services.


25/74


26/74


27/74


28/74

Best Team Awards for

Execution Excellence

Best Quality Driving Team Award Best Innovation Team Award Best Managed Team AwardOperations Best Managed Team AwardNon-Operations Best Business Development Deal Award


Customer Delight

Best Team Award for External Customer Delight Best Team Award for Internal Customer Delight


Sustainability

Best Safety & Health improvement InitiativeAward

Best Environmental Initiative Award Best Corporate Social Responsibility Initiative

Award

INTRODUCTION TO FINANCE:

Financial statement is that managerial activity which is concerned with the

planning and controlling of the firm financial resources. Though it was a branch of economic till

1890 as a separate activity or discipline it is of recent origin. Still, as no unique body knowledge

of its own, and draws heavily on economics for its theoretical concepts even today.

The subject of financial management is of immense interest both academicians and

practising manager. It is of great interest to academicians because the subject is still developing.

And there are still certain areas where controversies exist for which no unanimous solutions have


29/74


30/74

Dividend or profit allocation decision Liquidity or short term asset mix decision.

INDEPTH ANALYSIS OF FINANCIAL ANALYSIS:

(A)DEFINITIONS:

The term financial analysis is also known as analysis and interpretation

of financial statements. It refers to the process of determining financial strengths and

weaknesses of the firm by establishing strategic relationships between the items of the balance

sheet, profit and loss account and other operative data.

ACCORDING TO Mr. HARRY GUTTMANN:

The first and most important functions of financial statements are of course

to those who control and direct the business to the end of security the profits and maintaining

sound financial conditions.

(B)NATURE OF FINANCIAL STATEMENTS:

The term financial statements refers to the balance sheet reflection the

financial position of the assets, liabilities a capital of a particular company during a certain

period and profit and loss account showing the operational results of the company during a

certain period. Financial statements are plain statements of informed opinion uncompromising in

their truthfulness. It is meant that within the limits of accepted accounting principles and the very

human abilities of the persons preparing them they have to rely on judgements and estimated

divorced of prejudice.


31/74

(C)CONVENTIONS:

According to the American institute of certified public accounts, financial

statements reflect, a combination of recorded facts accounts conventions and personal

judgements and the judgements and the conventions applied affect them materially, this implies

that the exhibited in the financial statements are affected by recorded facts, accounting

conventions personal judgements.

(D) USES AND IMPORTANCE OF FINANCIAL STATEMENTS:

The financial statements are mirrors which reflect the financial position and operating

strengths or weaknesses of the concern. These statements are useful to management, investo rs,

creditors, bankers, workers, government and public at large. George O May points of the

following measure used of financial statements:

As a basis for taxation. As a basis for price or rate regulation As a guide to the value of investment already made As a basis for granting credit.

(E)LIMITATIONS OF FINANCIAL STATEMENTS:

Financial statements are essentially interim reports and hence cannot be finalbecause the actual gain or loss of a business can be determined only efface it

has put down its shutters.


32/74


33/74


34/74


35/74


36/74


37/74


38/74


39/74


40/74


41/74


42/74


43/74


44/74


45/74


46/74


47/74


48/74


49/74


50/74

9. DIVIDEND YIELD RATIO: It expresses the relationship between dividend earned per share

and the market price per share. In other words, it expresses the return on investment by

purchasing a share in the stock market, without accounting for any capital appreciation. It is

calculated as

DIVIDEND YIELD RATIO- Dividend per share/Market price of share.

10. BOK VALUE: It is the fraction of the net worth of the business as depicted in the balance

sheet, which is attributable to one equity share of the business. it is calculated as

BOOK VALUE=Equity share holders funds/number of equity shares.

Generally higher the book value of the share, the more strong the business is assumed to be.

ACTIVITY RATIO: Activity ratios measures the efficiency or effectiveness with whicha firm managers its resources or assets. They calculate the speed with which various

assets, in which funds are blocked up, get converted into sales. The significant activity or

turnover ratios are

1. INVENTORY TURN OVER RATIO OR STOCK TURN OVER RATIO: Stock turnover

ratio indicates the number of items the stock has turned over into sales in a year. It indicates to us

the extent of stock required to be held in order to achieve a desired level of sales.

Inventory Turn Over Ratio = Cost of Goods Sold/Average Stock

Cost of Goods Sold=Sales-Gross Profit.

Average Stock=(Opening Stock + Closing Stock)/2

Generally 8 is considered ideal ratio of the company.


51/74

2.DEBTORS TURN OVER RATIO: Debtors Turn over Ratio expresses the relationship

between debtors and net credit sales. It is calculated as

Debtors Turn Over ratio= Net Credit Sales/Average Debtors.

Generally the ratio between 10-12 an ideal value for the company.

3. CREDITORS TURN OVER RATIO: Creditors turnover ratio expresses the relationship

between creditors and net credit purchases. It is calculated as

Creditors Turn Over Ratio= Net Credit Purchases/Average Creditors.

Generally the ratio 12 is an ideal for the company.

4. WORKING CAPITAL TURNS OVER RATIO: This ratio is defined as Working Capital

Turn over Ratio= Cost of Goods Sold/Working Capital

Working Capital=Current Assets- Current Liabilities.

Generally higher ratio indicates efficient utilization of firms funds.

5. Fixed Assets Turn Over Ratio: It is defined as ratio of Net Sales to the Fixed Assets.

Generally the ratio of around 5 is considered ideal for the company.

6. TOTAL ASSETS TURN OVER RATIO: It is defined as ratio of Net Sales to the Total

Sales.

Generally higher the ratio, the greater is the ability of the firm to utilize the investments in the

business.

Current Asset Liability Ratio

year current assets current liability Ratios

2001-02 155792 73129 2.13

2002-03 166669 74427 2.23


52/74


53/74

2003-04 472 84990 0.005

2004-05 2094 116644 0.018

2005-06 4643 143200 0.032

2006-07 12 208869 0.00005

2007-08 14 243220 0.00003

2008-09 15 376332 0.00003986

2009-10 1475 397574 0.00371

2010-11 1415 502024 0.002818

Acid Test RatioCurrent AssetsInventory / Current Liabilities

The ideal quick ratio is 1:1 which is considered satisfactory for the concern. The company is

maintaining the ratio above the standard norm, thus the management of DR.REDDYS

LABORATORIES is label to meet its current obligations.

Net working capital

year

Net working

capital

Capital

employed Ratios

0

100000

200000

300000

400000

500000

600000

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

Liquid Assets

Liquid Liabilities

Ratios


54/74


55/74


56/74


57/74

year PBIT Interest Ratios

2001-02 13500 3054 4.42

2002-03 13420 258 52.01

2003-04 15821 48 329.6

2004-05 33122 1105 29.97

2005-06 60867 682 89.24

2006-07 63290 2300 27.51

2007-08 68916 5870 11.74

2008-09 68478 6826 10.03

2009-10 86438 7101 12.17

2010-11 130330 8583 15.18

Interest Coverage Ratio.= PBIT/INTREST

Interest coverage ratio of DR.REDDYS LABORATORIES is not constant, from 2008-09 the

ratio is10 as in 2009 -10 the ratio is 12.17, There is a random fluctuation in the ratio

Gross profit

0

20000

40000

60000

80000

100000

120000

140000

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

PBIT

Interest

Ratio


58/74


59/74


60/74


61/74

Debtors turnover ratio

year Net credit sales

Average

debtors Ratios

2001-02 153205 85001 1.8

2002-03 137838 81237 1.69

2003-04 174490 82829 2.1

2004-05 174668 112238 1.55

2005-06 267217 135322 1.97

2006-07 289491 177301 1.63

2007-08 310235 215291 1.44

2008-09 414816 287414 1.44

2009-10 500342 328201 1.53

2010-11 665323 537364 1.24

Debtors Turnover Ratio = Net Credit Sales / Average Debtors

The DR.REDDYS LABORATORIES `s debtor turnover ratio was below 2 .Its has bee

increasing since 2008-09 from 1.44 to 1.53 in 2009-10, the increasing trend Implies the efficient

management of Debtor and credit sales

0

100000

200000

300000

400000

500000

600000

700000

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

Net credit sales

Average debtors

Ratio


62/74


63/74


64/74

Total asset turnover ratio

year Total debt Equity Ratios

2001-02 497 3252 0.15

2002-03 573 3252 0.17

2003-04 386 3252 0.11

2004-05 513 3252 0.15

2005-06 1054 3252 0.32

2006-07 607 3252 0.18

2007-08 587 3252 0.18

2008-09 2566 3252 0.78

2009-10 2034 3252 0.62

2010-11 2265 3252 0.70

Total Assets Turnover Ratio: Net Sales / Total Assets

The Total Assets turnover ratio of the DR.REDDYS LABORATORIES is below

1 . This shows greater ability of the firm to utilize the investment in the business

0

500

1000

1500

2000

2500

3000

3500

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

Total debt

Equity

Ratio


65/74


66/74

PERSONNEL PAYMENTS 62236 69941 7795 12.38%

INDIRECT MATERIALS 3902 5861 2059 52.76%

OTHER EXPENSES -

DR.REDDYS

LABORATORIES

7101 8583

1482 20.87%

OTHER EXPENSES - NON

DR.REDDYS

LABORATORIES

26301 27410

1109 4.22%

PROVISIONS -226 38565 %

PROV.EXCH.VAR. 894 -1523 %

LESS:MISC.INCOME 11522 23356 11834 102.71%

TOTAL OF `E' 88686 125481 36795 41.49%

GROSS MARGIN (PBIDT) 91089 135561 44472 48.82%

DEPRECIATION 4606 5231 625 13.57%

DRE ON VRS 0

GROSS PROFIT (PBIT) 86483 130330 43847 50.70%

INTEREST -7101 -2905 -10006 -140.91%

PROFIT BEFORE TAX 93584 133235 39651 42.37%

GTO LESS ED 523998 607265 83267 15.90%

0

OPERATING COST 404647 524531 119884


67/74


68/74


69/74

Comparative income statement 2007-2008 and 2008-09

comparative income statement

DESCRIPTION

2007-

082008-09

Increase /

Decrease

Increase /

decrease %

TURNOVER- DR.REDDYS

LABORATORIES667 779

112 16.79%

- NON-

DR.REDDYS

LABORATORIES

309568 414037

104469 33.74%

TOTAL TURNOVER 310235 414816 104581 33.71%

CHANGES IN WIP 17781 10637 -7108 -39.97%

CHANGES IN FG 4591 4938 347 7.56%

EXPORT INCENTIVES 2283 1112 -1171 -51.29%

GROSS TURNOVER 334890 431503 96613 28.85%

EXCISE DUTY 27236 24537 -2699 -9.91%

GTO LESS ED 307654 406966 99312 32.28%

DIRECT MATERIALS 183845 259592 75747 41.20%

SUB-CONTRACT

PAYMENT790 978

188 23.80%

POWER AND FUEL 1840 1925 85 4.62%TRANSFER IN SERVICE 1394 1347 -47 -11.93%

TOTAL OF `C' 187869 263842 75973 40.44%

VALUE ADDED 119785 143124 23339 19.48%

PERSONNEL PAYMENTS 36001 58365 22364 62.12%


70/74


71/74

FINDINGS

1. The net working capital was Rs 91021 lacs in 2000-2001. This decreased to Rs 82663lacs in the year 2001-2002. In the year 2006-2007 the net working capital is Rs 67193

lacs.

2. The current ratio ofDR.REDDYS LABORATORIES was 2.41 in the year 2000-2001.There was decrease in the ratio up to the year 2007-2008. The ratio is decreasing year by

year. But the DR.REDDYS LABORATORIES is maintaining current ratio more than

the standard norms of 2.

3. The organization is able to maintain both current ratio and quick ratio above the standardnorms. i.e. the ideal current ratio for the concern is 2:1 and the quick ratio is 1:1 but the

cash ratio is fluctuating.

4. The quick ratio of the organization is in decreasing trend year by year.5. Investment in current assets has been increasing from Rs 155302 lacs in 2000-2001 to Rs

310002 in 2007-2008.

6. The inventory turnover ratio of DR.REDDYS LABORATORIES is fluctuating i.e.,showing decreasing trend during the years 2000-2001 to 2003-2004. But there onwards it

has slowly increased till the financial year.

7. The debtors turnover ratio has decreased from the year 2001-2002 to 2002-2003. It was2.10 in the year 2003-2004. There was decrease in debtors turnover ratio till the financial

year.


72/74


73/74

8. The investment in loans and advances should be minimized to possible extent.9. Effective internal control system should be established. So that it can have control over

all aspects of the company.


74/74

Financial Statment Analysis - Project

Documents

Transcript of Financial Statment Analysis - Project