Working Capital

Working Capital

It is a financial metric which represents operating liquidity available to a business, organization

or other entity, including governmental entity. Along with fixed assets such as plant and

equipment, working capital is considered a part of operating capital.

Working capital refers to the investment in current assets such as investment in raw materials,

stock of finished goods, etc. Cash, Bank loans and advances are given to the employees in the

form of festival, scooter, advances, house building loans, etc. Working capital is used to meet the

day-to-day requirements of a business. Current assets are required for effective and efficient use

of fixed assets. For the investment in procurement of raw materials, funds are locked up in

debtors, cash and banks, prepaid expenditure, etc. is recognized as working capital.

Working capital is defined as difference between current assets and current liabilities.

Current assets are value of all assets that are reasonably expected to be converted into cash

within one year in the normal course of business. Current assets include cash, accounts

receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be

readily converted to cash.

Current liabilities are the company's debts or obligations that are due within one year. Current

liabilities appear on the company's balance sheet and include short term debt, accounts payable,

accrued liabilities and other debts.

Types of Working Capital

Working capital is classified into different types and the classification is based on the following

views:

1. Balance Sheet View

2. Operating Cycle View

On the basis of Balance Sheet View, types of working capital are described below:

Gross Working Capital (GWC): Gross working capital is the sum of all of a company's

current assets. Gross working capital includes assets such as cash, checking and savings

account balances, accounts receivable, short-term investments, inventory and marketable

securities.

Net Working Capital (NWC): There are two ways to understand net working capital. First

one says it is simply the difference of current assets and the current liabilities in the balance

sheet of a business. The other understanding discloses little deeper or hidden meaning of the

term. As per that, NWC is that part of current assets which are indirectly financed by long

term assets. Compared to gross working capital, net working capital is considered more

relevant for effective working capital financing and management. It is obtained by deducting

current liabilities from gross working capital.

On the basis of Operating Cycle View, types of working capital are as below:

Permanent / Fixed Working Capital: Dealing with current asset and fixed assets is totally

different. Determining the financing requirement in case of fixed assets is simply the cost of

the asset. Same is not true for current assets because value of current assets is constantly

changing and it is difficult to accurately forecast that value at any point of time. To simplify

the complexity to some extent, on the basis of past trend and experience, we can find a level

below which current asset has never gone. The current assets below this level are called

permanent or fixed working capital.

Regular Working Capital: It is the permanent working capital which is normally required

in the normal course of business for the working capital cycle to flow smoothly.

Reserve Working Capital: It is the working capital available over and above regular

working capital. It is kept for contingencies which may arise due to unexpected

situations.

Temporary / Variable WC: Temporary working capital is easy to understand after getting

hold over permanent working capital. In simple terms, it is the difference between net

working capital and permanent working capital. The main characteristic which can be made

out from the example is “fluctuation”. The temporary working capital therefore cannot be

forecasted. In the interest of measurability, this can be further bifurcated as below which can

create at least some base to forecast.

Seasonal Working Capital: Seasonal working capital is that temporary increase in

working capital which is caused due to some relevant season for the business. It is

applicable to businesses having impact of seasons for example, manufacturer of sweaters

for whom relevant season is the winters. Normally, their working capital requirement

would increase in that season due to higher sales in that period and then go down as

collection from debtors is more than sales.

Special Working Capital: Special working capital is that rise in temporary working

capital which occurs due to a special event which otherwise normally does not take place.

It has no basis to forecast and has rare occurrence normally. For example, country where

Olympic Games are held, all the business require extra working capital due to sudden rise

in business activity.

It was all about the types of working capital. It needs to be managed with several working capital

techniques so as to have the effective working capital management.

Need for Working Capital

Working capital is the life blood and nerve center of business. Working capital is very essential

to maintain smooth running of a business. No business can run successfully without an adequate

amount of working capital. The main advantages or importance of working capital are as

follows:

Strengthen the Solvency

Working capital helps to operate the business smoothly without any financial problem for

making the payment of short-term liabilities. Purchase of raw materials and payment of

salary, wages and overhead can be made without any delay. Adequate working capital

helps in maintaining solvency of the business by providing uninterrupted flow of

production.

Enhance Goodwill

Sufficient working capital enables a business concern to make prompt payments and

hence helps in creating and maintaining goodwill. Goodwill is enhanced because all

current liabilities and operating expenses are paid on time.

Easy Obtaining Loan

A firm having adequate working capital, high solvency and good credit rating can arrange

loans from banks and financial institutions in easy and favorable terms.

Regular Supply of Raw Material

Quick payment of credit purchase of raw materials ensures the regular supply of raw

materials from suppliers. Suppliers are satisfied by the payment on time. It ensures

regular supply of raw materials and continuous production.

Smooth Business Operation

Working capital is really a life blood of any business organization which maintains the

firm in well condition. Any day to day financial requirement can be met without any

shortage of fund. All expenses and current liabilities are paid on time.

Ability to Face Crisis

Adequate working capital enables a firm to face business crisis in emergencies such as

depression.

Ways to build working capital:

The most preferred way to build working capital is to create earnings. Outlined below are some

things to consider as you look to grow and maintain working capital during volatile times.

Minimize capital spending. Ask yourself, “Are the purchases necessary to maintain the

productivity of my operation or are they done to avoid paying takes?” Avoiding taxes

may not be the best strategy during volatile times. According to Dr. Kohl, “Many

businesses go broke attempting to minimize taxes.” If you do make capital purchases,

consider financing them instead of using cash at least until you determine your short-term

cash operating needs.

Minimize interest rate risk. Look for ways to lock in the interest rate for the term of the

loan or at least for a number of years to remove some the volatility.

Be careful about pre-paying intermediate and long-term debt. If you have excess

cash and want to reduce debt, you may want to consider using Midsouth’s “Funds Held”

product, which enables you to place up to two annual payments (additional restrictions

apply on fixed rate loans with prepayment limitations) on each loan in to a Funds Held

account to be used for future loan payments. You will receive interest on the account

balance at the same rate being charged on the loan. You will not be able to withdraw the

funds, but they will be classed as current assets when calculating working capital.

Reinvest intermediate or long-term assets into liquid assets. Take a critical look at

your balance sheet for assets that aren’t working for you. Do you have what Dr. Kohl

often refers to as “Killer Toys” or “Ego Purchases?” Can you re-invest the money you

spent on these into more liquid assets? Sometimes it’s a hard decision, but eliminating

non-essential, unproductive items can help your business in the long run.

Manage risk of production loss. Develop a comprehensive risk management plan. This

should include life insurance, property/casualty insurance, crop insurance, etc.

Unfortunately, unforeseen events can and do happen often without notice and at a time

when stakes are high. Being caught without the right risk protection in all facets of your

operation is similar to losing a leg on your three-legged stool. You stand a good chance

of collapsing, and even if you are able to remain seated, it won’t be comfortable.

Additional ways to build working capital, which may be less desirable:

Restructure your balance sheet. Depending on the amount of equity you have in your

assets, you may be able to restructure debt from the current portion of your balance sheet

to intermediate-term or long-term notes. While this will build working capital, if

corrective actions to maintain working capital are not taken and/or profitability is not

improved, it will only be a short time before the operation is back in the same situation

and your future choices become even more limited.

Look for equity partners. Look for cash infusions through equity partners. However,

this comes at a cost, most often as a loss of control or having to answer for your decisions

to a new business partner.

Sell term assets. This goes beyond the liquidation of nonessential assets and moves

toward downsizing your operations. Doing this may limit your ability to take advantages

of future opportunities and/or impede future growth.

There are many ways to think about working capital: it’s the rainy day fund; it allows you to

farm another day; it helps you absorb the shocks or ride out the turbulence. The bottom line is

it’s important to think about working capital. In today’s environment, adequate working capital

will be needed for long-term success and can help take the stress off you and your operation.

Adequacy of working capital

A firm must have adequate working capital. It should neither be excessive nor inadequate.

Excessive working capital is a situation where in the firm invests excessive funds in working

capital. These excessive or idle funds earn no profit for the firm.

Dangers of Excess Working Capital

It may result in unnecessary accumulation of inventory which may lead to increase in

wastage due to mishandling, theft etc.

It is an indication of defective credit policy. There is the possibility of higher incidence

of bad debts.

It may lead to complacency in managing day-to-day expenses of the firm.

Executives may be tempted to spend more.

Inadequate working capital is a situation where in the firm does not have sufficient funds to meet

day to day running expenses. This ultimately results in interruption in the production process.

Dangers of inadequate working capital

Operating inefficiencies creep in when it becomes difficult of meet day-to-day

commitments.

It becomes difficult to implement operating plans and achieve firm’s targets.

It directly affects firm’s liquidity position and the firm may find it difficult to honour

short-term obligations.

WC, Risk and Return

Higher level of WC decreases the risk as well as profitability. Lower level of WC increases the

risk as well as the possibility of profitability.

Determinants of Working Capital

Nature of Industry

Seasonality of Operations

Production Policy

Market Conditions

Conditions of supply

Size of Business

Volume of Sales

Terms of Purchase and Sales

Business Cycle

Growth and Expansion of the firm

Fluctuations in the supply of Raw material

Price Level Changes

Operating Efficiency of the firm

Profit Appropriation

Capital Structure of the firm

12 Main Factors Affecting Working Capital

Main factors affecting the working capital are as follows:

(1) Nature of Business:

The requirement of working capital depends on the nature of business. The nature of business is

usually of two types: Manufacturing Business and Trading Business. In the case of

manufacturing business it takes a lot of time in converting raw material into finished goods.

Therefore, capital remains invested for a long time in raw material, semi-finished goods and the

stocking of the finished goods.

Consequently, more working capital is required. On the contrary, in case of trading business the

goods are sold immediately after purchasing or sometimes the sale is affected even before the

purchase itself. Therefore, very little working capital is required. Moreover, in case of service

businesses, the working capital is almost nil since there is nothing in stock.

(2) Scale of Operations:

There is a direct link between the working capital and the scale of operations. In other words,

more working capital is required in case of big organizations while less working capital is

needed in case of small organizations.

(3) Business Cycle:

The need for the working capital is affected by various stages of the business cycle. During the

boom period, the demand of a product increases and sales also increase. Therefore, more

working capital is needed. On the contrary, during the period of depression, the demand declines

and it affects both the production and sales of goods. Therefore, in such a situation less working

capital is required.

(4) Seasonal Factors:

Some goods are demanded throughout the year while others have seasonal demand. Goods which

have uniform demand the whole year their production and sale are continuous. Consequently,

such enterprises need little working capital.

On the other hand, some goods have seasonal demand but the same are produced almost the

whole year so that their supply is available readily when demanded.

Such enterprises have to maintain large stocks of raw material and finished products and so they

need large amount of working capital for this purpose. Woolen mills are a good example of it.

(5) Production Cycle:

Production cycle means the time involved in converting raw material into finished product. The

longer this period, the more will be the time for which the capital remains blocked in raw

material and semi-manufactured products.

Thus, more working capital will be needed. On the contrary, where period of production cycle is

little, less working capital will be needed.

(6) Credit Allowed:

Those enterprises which sell goods on cash payment basis need little working capital but those

who provide credit facilities to the customers need more working capital.

(7) Credit Availed:

If raw material and other inputs are easily available on credit, less working capital is needed. On

the contrary, if these things are not available on credit then to make cash payment quickly large

amount of working capital will be needed.

(8) Operating Efficiency:

Operating efficiency means efficiently completing the various business operations. Operating

efficiency of every organization happens to be different.

Some such examples are: (i) converting raw material into finished goods at the earliest, (ii)

selling the finished goods quickly, and (iii) quickly getting payments from the debtors. A

company which has a better operating efficiency has to invest less in stock and the debtors.

Therefore, it requires less working capital, while the case is different in respect of companies

with less operating efficiency.

(9) Availability of Raw Material:

Availability of raw material also influences the amount of working capital. If the enterprise

makes use of such raw material which is available easily throughout the year, then less working

capital will be required, because there will be no need to stock it in large quantity.

On the contrary, if the enterprise makes use of such raw material which is available only in some

particular months of the year whereas for continuous production it is needed all the year round,

then large quantity of it will be stocked. Under the circumstances, more working capital will be

required.

(10) Growth Prospects:

Growth means the development of the scale of business operations (production, sales, etc.). The

organizations which have sufficient possibilities of growth require more working capital, while

the case is different in respect of companies with less growth prospects.

(11) Level of Competition:

High level of competition increases the need for more working capital. In order to face

competition, more stock is required for quick delivery and credit facility for a long period has to

be made available.

(12) Inflation:

Inflation means rise in prices. In such a situation more capital is required than before in order to

maintain the previous scale of production and sales. Therefore, with the increasing rate of

inflation, there is a corresponding increase in the working capital.

Working Capital:

The working capital ratio indicates whether a company has enough short term assets to cover its

short term debt. Anything below 1 indicates negative working capital. While anything over 2

means that the company is not investing excess assets. Most believe that a ratio between 1.2 and

2.0 is sufficient.

The formula to calculate the working capital is,

Current Assets – Current Liabilities

CompanyAmount in Crore Rupees

2013 2012 2011 2010

Glenmark 371.23 343.51 257.08 1326.06

Sun Pharma 1829.63 2147.66 2134.90 978.44

Piramal 2129.65 441.50 4156.91 949.34

Dr. Reddy's 4449.30 2676.80 2071.90 1936.70

Table 1.1: Working Capital

20132012201120100.00

500.001,000.001,500.002,000.002,500.003,000.003,500.004,000.004,500.005,000.00

Working Capital

GlenmarkSun PharmaPiramalDr. Reddy's

Rupe

es in

Cro

res

Figure 1.1: Working Capital

As can be seen in the above graph, there is a sudden increase in the working capital of Piramal

Healthcare Limited in the year 2011 from 949.34 crores to 4156.91 crores. This is due to an

increase in cash and bank balances and loans and advances of the company from the year 2010 to

2011, from 15.64 crores to 1754.03 crores and 890.03 crores to 2827.50 crores respectively.

Also, the current liabilities have increase from 515.14 crores to 863.91 crores.

In the year 2012, the working capital of the same company dropped from 4156.91 crores to

441.50 crores. The cash and bank balances dropped again to 13.24 crores from 1754.03 crores

from the previous year. The loans and advances have dropped drastically too from 2827.5 crores

in 2011 to 942.14 crores in 2012. However, the current liabilities have increased from 863.91

crores to 1023.07 crores from the previous year.

In 2013, the working capital of Piramal Healthcare Limited has increased again from 441.50

crores to 2129.65 crores, mainly due to loans and advances, which have increase from 942.14

crores to 2645.08 crores.

The working capital of Glenmark Pharmaceuticals Limited decreased in the year 2011 from

1326.06 crores to 257.08 crores, and has been increasing steadily. The decrese was due to a drop

in the amount of loans and advances from 1051.11 crores to 105.08 crores, while the current

liabilities remained stable.

The working capital of Dr. Reddy’s Laboratories has been increasing steadily over the years,

with a sudden increase in the rate in the year 2013, where it has increased from 2676.8 crores to

4449.3 crores. The increase is mainly due to the loans and advances which have almost doubled

from 597.5 crores to 1019.2 crores.

The working capital of Sun Pharmaceutical Industries Limited has been steady over the yeard of

study.

Return on Working Capital:

Return on Working Capital shows the profitability of the working capital employed in the

organization. It is a method of increasing enterprise value by maximizing efficiency of working

capital. Maximum return on working capital is a key lever to increasing enterprise value.

The formula to calculate the return on capital is,

Profit Before Interest and Tax *100

Working Capital

Company 2013 2012 2011 2010

Glenmark 1.20 1.06 1.39 0.18

Sun Pharma 0.40 0.83 0.71 1.04

Piramal 0.11 0.90 4.01 0.76

Dr. Reddy's 0.47 0.60 0.63 0.68

Table 1.1: Return on Working Capital

20132012201120100

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Return on Working Capital

GlenmarkSun PharmaPiramalDr. Reddy'sAxis Title

Figure 1.1: Return on Working Capital

As can be seen in the above figure and graph, the return on working capital of Piramal

Healthcare Limited has gone up from 0.76 times in 2010 to 4.01 times in 2011. This is due to the

increase in working capital of the company, resulting from the increase in laons and advances,

and cash and bank balances of the company.

In 2012, the return on working capital of Piramal Healthcare Limited fell from 4.01 times to 0.90

times, owing to the decrease in the loans and advances, and cash and bank balances during that

period.

In 2013, despite the increase in working capital, the return on working capital of Piramal

Healthcare Limited has decreased to 0.11 times. This decrease is due to the losses suffered by the

company during that year of 247.88 crores.

The returns on working capital of Glenmark Pharmaceuticals Limited for the year 2011 has

increased, even though working capital has decreased during that year. This is due to the increase

in the profit before tax from 120.99 crores in 2010 to 250.79 crores in 2011.

The returns on working capital of Sun Pharmaceutical Industries Limited and Dr. Reddy’s

Laboratories have been steady over the years of study.

Current Ratio:

Current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations.

The ratio is mainly used to give an idea of the company's ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher

the current ratio, the more capable the company is of paying its obligations.

The formula to calculate the current ratio is,

Current Assets

Current Liabilities

Company 2013 2012 2011 2010

Glenmark 1.55 1.87 2.14 7.29

Sun Pharma 2.63 3.19 3.90 2.61

Piramal 3.03 1.43 5.81 2.84

Dr. Reddy's 3.24 2.31 2.31 2.14


20132012201120100

1

2

3

4

5

6

7

8

Current Ratio



As can be seen in the above graph and figure, the current ratio of Glenmark Pharmaceuticals

Limited dropped drastically in the year 2011 from 7.29 to 2.14. The main reason for the decrease

was due to a drop in the amount of loans and advances from 1051.11 crores to 105.08 crores,

while the current liabilities remained stable. The current ratio has been declining gradually since

then.

The current ratio of Piramal Healthcare Limited has been fluctuating over the period of study. In

2011, it increased from 2.84 to 5.81. In 2012, it falls to 1.43, and then in 2013, it increases again

to 3.03. the fluctuations are due to the increase and decrease in the loans and advances, and cash

and bank balances of the company. The current liabilities have been increasing progressively

over the period if study.

Sun Pharmaceutical Industries’ current ratio increased slightly in the year 2011, and has been

decreasing gradually since. The rise in the current ratio was due to the increase in both the

current assets, as well as current liabilities; with current assets increasing more than current

liabilities.

The current ratio of Dr. Reddy’s Laboratories has been even over the years of study.

Acid Test Ratio:

Acid Test Ratio, also known as Quick Assets or Liquid Assets, is an indicator of a company’s

short-term liquidity. It measures a company’s ability to meet its short-term obligations with its

most liquid assets. For this reason, the ratio excludes inventories from current assets

The formula to calculate the acid test ratio is,

Current Assets – Inventories

Current Liabilities

Company 2013 2012 2011 2010

Glenmark 1.27 1.42 1.44 6.58

Sun Pharma 1.86 2.54 3.06 1.67

Piramal 2.78 1.17 5.54 2.28

Dr. Reddy's 3.14 1.97 1.98 1.88


20132012201120100

1

2

3

4

5

6

7

Quick Ratio



As can be seen in the above table and graph, the quick ratio of Glenmark Pharmaceuticals

Limited has dropped to 1.44 times in 2011 from 6.58 times in 2012. This is because of the

decrease on the amount of loans and advances for that period. The quick ratio has been

decreasing gradually since.

The quick ratio of Piramal Healthcare Limited has been fluctuating over the period of study. The

fluctuations are due to the increase and decrease in the loans and advances, and cash and bank

balances of the company. The current liabilities have been increasing progressively over the

period if study.

Sun Pharmaceutical Industries’ quick ratio increased slightly in the year 2011, and has been

decreasing gradually since. The rise in the quick ratio was due to the increase in both the current

assets, as well as current liabilities; with current assets increasing more than current liabilities.

The quick ratio of Dr. Reddy’s Laboratories has been even over the years of study.

Cash Ratio:

The cash ratio is most commonly used as a measure of company liquidity. It can therefore

determine if, and how quickly, the company can repay its short-term debt. A strong cash ratio is

useful to creditors when deciding how much debt, if any, they would be willing to extend to the

asking party.

The formula to calculate the cash ratio is,

Cash

Current Liabilities

Company 2013 2012 2011 2010

Glenmark 0.25 0.12 0.13 0.02

Sun Pharma 0.38 1.35 1.69 0.14

Piramal 0.02 0.01 2.03 0.03

Dr. Reddy's 0.46 0.41 0.04 0.21


20132012201120100

0.5

1

1.5

2

2.5

Cash Ratio



Current Assets Turnover:

The formula to calculate the current assets turnover ratio is,

Sales

Current Assets

Company 2013 2012 2011 2010

Glenmark 1.94 2.20 2.50 0.66

Sun Pharma 0.82 1.28 1.08 1.56

Piramal 0.44 0.78 0.16 1.81

Dr. Reddy's 1.31 1.42 1.43 1.24


20132012201120100

0.5

1

1.5

2

2.5

3

Current Assets Turnover Ratio



Working Capital Turnover:

The formula to calculate the working capital turnover is,

Sales

Working Capital

Company 2013 2012 2011 2010

Glenmark 4.40 4.71 4.70 0.77

Sun Pharma 1.32 1.86 1.45 2.54

Piramal 0.65 2.61 0.19 2.79

Dr. Reddy's 1.89 2.51 2.53 2.32


20132012201120100

0.51

1.52

2.53

3.54

4.55

Working Capital Turnover

GlenmarkSun PharmaPiramalDr. Reddy's

Tim

es


Working capital to Cost of Sales:

The formula to calculate the working capital to cost of sales is,

Working Capital

Cost of Goods Sold

Company 2013 2012 2011 2010

Glenmark 0.44 0.49 0.55 2.80

Sun Pharma 1.32 1.18 1.87 0.92

Piramal 2.42 0.58 6.49 0.73

Dr. Reddy's 1.23 0.91 0.95 0.95


20132012201120100

1

2

3

4

5

6

7

Working Capital to Cost of Sales



Debtors Turnover Ratio:

The formula to calculate the debtors turnover ratio is,

Sales

Debtors

Company 2013 2012 2011 2010

Glenmark 4.80 5.91 4.66 2.76

Sun Pharma 3.35 6.39 5.67 4.03

Piramal 5.78 5.10 3.37 8.35

Dr. Reddy's 3.43 3.62 3.70 3.63


20132012201120100

1

2

3

4

5

6

7

8

9

Accounts Receivable Turnover



Average Collection Period:

The formula to calculate the average collection period is,

365

Debtors Turnover

Company 2013 2012 2011 2010

Glenmark 76.03 61.74 78.29 132.11

Sun Pharma 108.87 57.08 64.36 90.55

Piramal 63.14 71.44 108.04 43.71

Dr. Reddy's 106.18 100.56 98.54 100.31


20132012201120100

20

40

60

80

100

120

140

Receivable Days



Creditors Turnover Ratio:

The formula to calculate the creditors turnover ratio is,

Purchases

Creditors

Company 2013 2012 2011 2010

Glenmark 1.18 1.65 1.62 1.37

Sun Pharma 1.86 2.94 3.11 2.02

Piramal 1.06 0.96 0.88 3.26

Dr. Reddy's 1.63 1.35 1.21 1.07


20132012201120100

0.5

1

1.5

2

2.5

3

3.5

Accounts Payable Turnover



Credit Payment Period:

The formula to calculate the

Company 2013 2012 2011 2010

Glenmark 307.87 220.11 224.95 265.82

Sun Pharma 195.46 124.07 117.26 180.38

Piramal 344.22 378.76 412.87 111.74

Dr. Reddy's 223.73 269.33 301.39 338.65


20132012201120100

50

100

150

200

250

300

350

400

450

Days Payable

GlenmarkSun PharmaPiramalDr. Reddy'sDa

ys


Inventory Turnover Ratio:

The formula to calculate the inventory turnover ratio is,

Cost of Goods Sold

Closing Stock

Company 2013 2012 2011 2010

Glenmark 4.51 4.15 2.99 3.36

Sun Pharma 1.82 2.88 1.91 1.99

Piramal 3.32 3.05 2.48 4.51

Dr. Reddy's 2.51 2.45 2.22 2.48


20132012201120100

0.51

1.52

2.53

3.54

4.55

Inventory Turnover



Inventory Days:

The formula to calculate the inventory days is,

365

Inventory Turnover

Company 2013 2012 2011 2010

Glenmark 80.85 87.90 121.86 108.42

Sun Pharma 200.09 126.40 190.16 183.12

Piramal 109.92 119.44 146.94 80.89

Dr. Reddy's 145.10 148.77 164.22 147.17


20132012201120100

0.51

1.52

2.53

3.54

4.55

Inventory Turnover



Current Assets Turnover Ratio:

The formula to calculate the current assets turnover ratio is,

Sales

Current Assets

Company 2013 2012 2011 2010

Glenmark 1.94 2.20 2.50 0.66

Sun Pharma 0.82 1.28 1.08 1.56

Piramal 0.44 0.78 0.16 1.81

Dr. Reddy's 1.31 1.42 1.43 1.24


20132012201120100

0.5

1

1.5

2

2.5

3

Current Assets Turnover Ratio



Current Assets to Total Assets Ratio:


Company 2013 2012 2011 2010

Glenmark 0.32 0.26 0.15 0.60

Sun Pharma 0.36 0.38 0.42 0.27

Piramal 0.20 0.11 0.41 0.67

Dr. Reddy's 0.64 0.56 0.48 0.55


20132012201120100

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Current Assets to Total Assets



Cash to Current Assets:


Company 2013 2012 2011 2010

Glenmark 0.16 0.06 0.06 0.00

Sun Pharma 0.14 0.42 0.43 0.05

Piramal 0.01 0.01 0.34 0.01

Dr. Reddy's 0.14 0.17 0.01 0.10


20132012201120100

0.050.1

0.150.2

0.250.3

0.350.4

0.450.5

Cash to Current Assets



Inventories to Current Assets:


Company 2013 2012 2011 2010

Glenmark 0.18 0.23 0.32 0.09

Sun Pharma 0.29 0.20 0.21 0.35

Piramal 0.08 0.18 0.04 0.19

Dr. Reddy's 0.23 0.28 0.29 0.24


20132012201120100

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Inventories to Current Assets



Current Liabilities to Total Liabilities:


Company 2013 2012 2011 2010

Glenmark 0.18 0.11 0.06 0.07

Sun Pharma 0.14 0.12 0.10 0.10

Piramal 0.04 0.05 0.05 0.16

Dr. Reddy's 0.15 0.20 0.17 0.22


20132012201120100

0.05

0.1

0.15

0.2

0.25

Current Liabilities to Total Liabilities



Loans and Advances to Current Assets:


Company 2013 2012 2011 2010

Glenmark 0.18 0.29 0.21 0.68

Sun Pharma 0.30 0.14 0.15 0.23

Piramal 0.83 0.64 0.56 0.60

Dr. Reddy's 0.15 0.12 0.20 0.35


20132012201120100

0.05

0.1

0.15

0.2

0.25

Current Liabilities to Total Liabilities



Working Capital

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