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PROJECT REPORT Submitted for the Degree of B.Com Honours in Accounting & Finnce under the !ni"ersit# of C$cutt
Rtio An$#sis
Submitted Submitt ed B#% B#% AASHDEEP CHARABORT' C.!. Registrtion (o. ) C.!. Ro$$ (o. ) (me of the Co$$ege) Prfu$$ Chndr Co$$ege
Su*er"ised Su*er"i sed B#% B#% Prof. A. Ro#
2015-16
CONTENTS SL NO.
TOPICS
1. 1 .1 1 .2 1 .3 1 .4 1 .# 1 .%
Annexure I Annexure II Introduction Background Review of Literature Objectives of the study Database !ethodo"ogy Li$itations of the study &ha'ter '"anning
2.
Conce oncept ptu ual Fram ramewor wor!E !Ele lem ment" nt" o# o# Fin Finan anccial Stat Statem emen ent" t"
2 .1 2 .2 2 .3 2 .4 $. $.A 3.(.1 3.(.2 $.) 3.B.1 3.B.2 3.& *. 4 .1 4 .2 ,.
Ratio (na"ysis )$'ortance of *inancia" +tate$ent (na"ysis *eatures of *inancia" +tate$ent (na"ysis *inancia" +tate$ent *unctions %ata Anal&"i" ' Interpretation" Sun P(armaceutical" Indu"trie" Limited &o$'any ,rofi"e Data (na"ysis Cipla P( P(armaceutical" In Indu"trie" Li Limited &o$'any ,rofi"e Data (na"ysis Data &o$'arisons )nter'retations Conclu"ion" ' +ecommendation" &onc"usions Reco$$endations )i-liorap(&
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Annexure ! 1/ Super0i"or" Certi#icate -his is to certify that !r. ((+/D00, &/(R(BOR- a student of B. &o$. /onours in (ccounting *inance of ,R(*LL( &/(DR( &OLL00 under the niversity of &a"cutta has 're'ared a ,roject Re'ort with the tit"e 5Ratio (na"ysis6. !y &ontribution however7 was $ain"y in the for$ of genera" guidance and discussion.
,"ace8
+ignature8
Date8
a$e8
Designation8
a$e of the &o""ege8
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Annexure 2 / Student" declaration ) hereby dec"are that the ,roject 9ork with the tit"e 5R(-)O (L+)+6 sub$itted by $e for the 'artia" fu"fi""$ent of the degree of B. &o$. /onours in (ccounting *inance under the niversity of &a"cutta is $y origina" work and has not been sub$itted ear"ier to any other niversity or )nstitution for the fu"fi""$ent of the re:uire$ent for any course of study. ) a"so dec"are that no cha'ter of this $anuscri't in who"e or in 'art has been incor'orated in this re'ort fro$ any ear"ier work done by others or by $e. /owever7 e;tracts of any "iterature which has been used for this re'ort has been du"y acknow"edged 'roviding detai"s of such "iterature in the references.
,"ace8
o"kata
+ignature8
a$e8 ((+/D00, &/(R(BOR- Date8 (ddress8
&. . Registration o.8
&. . Ro"" o.8
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1. Introduction 1.1 )acround o# t(e "tud&/ (bstracted re'ort is based on the study of annua" re'orts of &i'"a Li$ited and +un ,har$aceutica" )ndustries Li$ited for the five years fro$ 2<<3=2<<4 to 2<<>= 2<A. +un ,har$aceutica"s is a !u$bai based $u"tinationa" co$'any e$'"oying over ?7<<< 'eo'"e and $anufacturing faci"ities in 1 countries. )t s'ecia"i@es in chronic ai"$ent drugs and has been consistent"y strengthening $arket share in )ndia. -he recent ac:uisitions of &araco ,har$ has he"'ed +un to increase its g"oba" 'resence. &i'"a and +un ,har$aceutica"s are co$'arab"e co$'anies in ter$s of revenues and 'rofits which $akes it easier to co$'are the two co$'anies and understand the conce'ts of *inancia" +tate$ent (na"ysis.
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1.2 +e0iew o# Literature/ Literature o# Glo-al Context Review of Literature refers to the co""ection of the resu"ts of the various researches re"ating to the 'resent study. )t takes into consideration the research of the 'revious researchers which are re"ated to the 'resent research in any way. /ere are the reviews of the 'revious researches re"ated with the 'resent study8
)ollen 314445 &onducted a study on Ratio Cariab"es on which he found three different uses of ratio variab"es in aggregate data ana"ysis8 1E as $easures of theoretica" conce'ts7 2E as a $eansto contro" an e;traneous factor7 and 3E as a correction for heteroscedasticity. )n the use of ratios as indices of conce'ts7 a 'rob"e$ can arise if it is regressed on other indices or variab"es that contain a co$$on co$'onent. *or e;a$'"e7 the re"ationshi' between two 'er ca'ita $easures $ay be confounded with the co$$on 'o'u"ation co$'onent in each variab"e. Regarding the second use of ratios7 on"y under e;ce'tiona" conditions wi"" ratio variab"es be a suitab"e $eans of contro""ing an e;traneous factor. *ina""y7 the use of ratios to correct for heteroscedasticity is a"so oft en $isused. On"y under s'ecia" conditions wi"" the co$$on for$ forgers soon with ratio variab"es correct for heteroscedasticity. ("ternatives to ratios for each of these cases are discussed and eva"uated.
Cooper 326665 &onducted a study on *inancia" )nter$ediation on which he observed that the :uantitative behavior of business=cyc"e $ode"s in which the inter$ediation 'rocess acts either as a source of f"uctuations or as a 'ro'agator of rea" shocks. )n neither case do we find convincing evidence that the inter $ediation 'rocess is an i$'ortant e"e$ent of aggregate f"uctuations. *or an econ o$y dri ven by inter $ediation shocks 7 c onsu$'tion is not s $oother th an out'ut7 invest$ent is negative"y corre"ated with out'ut7 variations in the ca'ita" stock are :uite "arge7 and interest rates are 'rocyc"ica". -he $ode" econo$y thus fai"s to $atch unconditiona" $o$ents for th e .+ . ec on o$y .
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7aria 8ain 3 26695 )n this artic"es he discuss about the return on assets is an i$'ortant 'ercentage that shows the co$'anyFs abi"ity to use its assets to generate inco$e. /e said that a high 'ercentage indicates that co$'anyFs is doing a good uti"i@ing the co$'anyFs assets to generate inco$e. /e notices that the fo""owing for$u"a is one $ethod of ca"cu"ating the return on assets 'ercentage. Return on (ssets G et ,rofitH-ota" (ssets. -he net 'rofit figure that shou"d be used is the a$ount of inco$e after a"" e;'enses7 inc"uding ta;es. /e enounce that the "ow 'ercentage cou"d $ean that the co$'any $ay have difficu"ties $eeting its debt ob"igations. /e a"so short e;'"ains about the 'rofit $argin ratio I O'erating ,erfor$ance ./e 'ronounces that the 'rofit $argin ratio is e;'ressed as a 'ercentage that shows the re"ationshi' between sa"es and 'rofits. )t is so$eti$es ca""ed the o'erating 'erfor$ance ratio because itFs a good indication of o'erating efficiencies. -he fo""owing is the for$u"a for ca"cu"ating the 'rofit $argin. ,rofit !argin G et ,rofitHet +a"es.
:ame" Clau"en 326645 )n this artic"e he barf"y e;'ress about the "i:uidity ratio. /e ,ronounce that it is ana"ysis of the financia" state$ents is used to $easure co$'any 'erfor$ance. )t a"so ana"yses of the inco$e state$ent and ba"ance sheet. )nvestors and "ending institutions wi"" often use ratio ana"yses of the financia" state$ents to deter$ine a 11 co$'anyFs 'rofitabi"ity and "i:uidity. )f the ratios indicate 'oor 'erfor$ance7 investors $ay be re"uctant to invest. -herefore7 the current ratio or working ca'ita" ratio7 $easures current assets against current "iabi"ities. -he current ratio $easures the co$'anyFs abi"ity to 'ay back its short=ter$ debt ob"igations with its current assets. /e thinks a higher ratio indicates the co$'any is better e:ui''ed to 'ay off short=ter$ debt with current assets. 9herefore7 the acid test ratio or :uick ratio7 $easures :uick assets against current "iabi"ities. Juick assets are considered assets that can be :uick"y converted into cash. enera""y they are current assets "ess inventory.
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Gopinat(an T(ac(appill& 326645; )n this artic"es he discuss about the *inancia" Ratio (na"ysis for ,erfor$ance eva"uation. )t ana"ysis is ty'ica""y done to $ake sense of the $assive a$ount of nu$bers 'resented in co$'any financia" state$ents. )t he"'s eva"uate the 'erfor$ance of a co$'any7 so that investors can decide whether to invest in that co$'any. /ere we are "ooking at the different ratio categories in se'arate artic"es on different as'ects of 'erfor$ance such as 'rofitabi"ity ratios7 "i:uidity ratios7 debt ratios7 'erfor$ance ratios7 invest$ent eva"uation ratios.
Literature on Indian Context +ammo(an+ao' et.al 314<,5 )n this study howfar the ca'ita" $arkets in )ndia were co$'etitive. -heir study e;a$ined the decisions about interna" and e;terna" finance as interre"ated and conse:uent u'on a choice of the structure of current and fi;ed assets. +econd"y7 they ana"y@ed the earnings 'attern of different ty'es of funds to see if the co$'etitiveness hy'othesis can sustain. -hey conc"uded that a fir$Fs abi"ity to borrow was constrained by the rise associated with the 'ro'ortion of debt in the ca'ita" structure. )f the ratio was high then interna" funds i$'roved the fir$Fs abi"ity to borrow. +i$i"ar"y if the financia" "everage Debt or e:uity ratioE was "ower than the institutiona""y deter$ined "everage. -he borrowing was faci"itated. But if the "everage was the institutiona""y deter$ined $a;i$u$ then borrowing was inhibited.
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=a"ant(amani 314925 )n her study 5-he *inancia" ,erfor$ance of Laksh$i !achine 9orks Li$ited6. -he objective of the study was to ana"y@e the financia" 'erfor$ance of Laksh$i $achine work with a view to ana"y@e the future of 'erfor$ance 'otentia"s. -he study covered the 'eriod fro$ 1>?=1?2. -he "i:uidity 'osition of the co$'any showed that the co$'any was ab"e to $eet the creditors out of its own current assets. -he :uick ratio a"so revea"ed that the :uick "iabi"ities were $et at of :uick assets without any difficu"ty.
+a>e"war& 314465 )n her study entit"ed 5 *inancia" ,erfor$ance of ,recot !i""s Li$ited6 has conc"uded that the financia" 'osition and o'erating efficiency of the co$'any was satisfactory where as the $argin or safe"y was not stab"e so"vency 'osition was not satisfactory and the earning ca'acity was $ini$u$.
Par0at(i 314465 )n her 5*inancia" ,erfor$ance (na"ysis /industan ,hotos *i"$s Ooty6 for the year 1<=1%7 conc"uded that the gross 'rofit has shown as increasing trends7 "ong ter$ so"vency of the co$'any7 debt e:uity ratio was not satisfactory .
Sanar.T.L' et.al 3144,5 )n their study entit"ed7 5*inancia" ,erfor$ance of +tate Leve" ,ub"ic 0nter'rises6 suffers fro$ staggering invest$ent7 'oor 'rofitabi"ity7 unnecessary invest$ent7 'oor 'roject '"anning and inade:uate financia" contro".
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1.$ O->ecti0e o# t(e "tud&/
-he s'ecific objectives of the study are as fo""ows8 -o understand the conce't of financia" state$ent ana"ysis. -o understand the theoritica" as'ect of "i:uidity and 'rofitibi"ity. -o ana"y@e the "i:uidity of the $edica" co$'anies. -o ana"y@e the 'rofitibi"ity of the $edica" co$'anies. -o disc"ose to the e;tent 'ossib"e other infor$ation re"ated to the financia"
state$ents users A""e""ment o# Pa"t Per#ormance
,ast ,erfor$ance is a good indicator of future 'erfor$ance. )nvestors or &reditors are interested in the trend of 'ast sa"es7 cost of good so"d7 o'erating e;'enses7 net inco$e7 cash f"ows and return on invest$ent. -hese trends offer a $eans for judging $anage$entKs 'ast 'erfor$ance and are 'ossib"e indicators of future 'erfor$ance ,ast 'erfor$ance is a good indicator of future 'erfor$ance for )nvestors or creditors. A""e""ment o# current po"ition
*inancia" state$ent ana"ysis shows the current 'osition of the fir$ in ter$s of the ty'es of assets owned by a business fir$ and the different "iabi"ities due against the enter'rise. Prediction o# pro#ita-ilit& and rowt( pro"pect"
*inancia" state$ent ana"ysis he"'s in assessing and 'redicting the earning 'ros'ects and growth rates in earning which are used by investors whi"e co$'aring invest$ent a"ternatives and other users in judging earning 'otentia" of business enter'rise. Prediction o# -anruptc& and #ailure
*inancia" state$ent ana"ysis is an i$'ortant too" in assessing and 'redicting bankru'tcy and 'robabi"ity of business fai"ure.
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A""e""ment o# t(e operational e##icienc&
*inancia" state$ent ana"ysis he"'s to assess the o'erationa" efficiency of the $anage$ent of a co$'any. -he actua" 'erfor$ance of the fir$ which are revea"ed in the financia" state$ents can be co$'ared with so$e standards set ear"ier and the deviation of any between standards and actua" 'erfor$ance can be used as the indicator of efficiency of the $anage$ent. -herefore7 the $ain 'ur'ose of financia" state$ent ana"ysis is to uti"i@e infor$ation about the 'ast 'erfor$ance of the co$'any in order to 'redict how it wi"" fare in the future. (nother i$'ortant 'ur'ose of the ana"ysis of financia" state$ents is to identify 'otentia" 'rob"e$ areas and troub"eshoot those.
1.* %ata-a"e and 7et(odolo&/ %ata-a"e/
-he entire study is based on secondary Database which is co""ected fro$ the 9ebsites of the res'ective $edica" co$'any. Period o# t(e "tud&/
-he study 'eriod is started fro$ 1 st ('ri" 2<12 and ended on 31 st$arch.)t consists of 3 of and financia" year. Sample Companie"/
-his study has been conducted based on fo""owing two $edica" co$'anies of ,har$aceutica" )ndustry. -hese are = 1E +un ,har$aceutica" &o. 2E &i'"a ,har$aceutica" &o.
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7et(odolo& -he research $ethodo"ogy for the secondary research undertaken has been 'rovided as using :ua"itative as we"" as :uantitative a''roaches. -he ana"ysis and findings se"ection high"ights the resu"t of the secondary study whi"e a discussion and the conc"usion section 'rovides a co$'rehensive ana"ysis of the "iterature review for the 'ur'ose of the 'roject. &onc"usive"y the reco$$endation for 'ro'er deve"o'$ent in the ,har$aceutica" )ndustry had been 'rovided a"ong with the "i$itation of the current research can be undertaken to the research $ode co$'rehensive. /ere we use the annua" re'orts of the ,har$aceutica" )ndustry for the co""ection7 c"assification and co$'arison of re"evant data. On this study7 different chart7 ratio ana"ysis are 'erfor$ed .)t is to be noted that !icrosoft Office 2<<> is used to co$'"ete the entire database.
1., Limitation" o# t(e "tud&/ -he study conducted and done is ana"ytica" subject to the fo""owing "i$itations8 -he study is $ain"y carried out based on the secondary data 'rovidedin
the financia" state$ents. -his study is based on the historica" data and infor$ation 'rovided in the annua" re'orts therefore it $ay not be a future indicator. -here $ay be so$e fractiona" difference in the ca"cu"ated ratio. (s the study was for shorts s'an of ? weeks and due to "ack of ti$e other areas cou"d not be we"" focused. ("though ana"ysis of financia" state$ent is essentia" to obtain re"evant infor$ation for $aking severa" decisions and for$u"ating cor'orate '"ans and 'o"icies7 it shou"d be carefu""y 'erfor$ed as it suffers fro$ a nu$ber of the fo""owing "i$itations. 7i"lead t(e u"er
-he accuracy of financia" infor$ation "arge"y de'ends on how accurate"y financia" state$ents are 're'ared. )f their 're'aration is wrong7 the infor$ation obtained fro$ their ana"ysis wi"" a"so be wrong which $ay $is"ead the user in $aking decisions.
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Not u"e#ul #or plannin
+ince financia" state$ents are 're'ared by using historica" financia" data7 therefore7 the infor$ation derived fro$ such state$ents $ay not be effective in cor'orate '"anning7 if the 'revious situation does not 'revai".
?ualitati0e a"pect"
-hen financia" state$ent ana"ysis 'rovides on"y :uantitative infor$ation about the co$'anyKs financia" affairs. /owever7 it fai"s to 'rovide :ua"itative infor$ation such as $anage$ent "abor re"ation7 custo$erKs satisfaction7 and $anage$entFs ski""s and so on which are a"so e:ua""y i$'ortant for decision $aking. Compari"on not po""i-le
-he financia" state$ents are based on historica" data. -herefore co$'arative ana"ysis of financia" state$ents of different years cannot be done as inf"ation distorts the view 'resented by the state$ents of different years. @ron >udment
-he ski""s used in the ana"ysis without ade:uate know"edge of the subject $atter $ay "ead to negative direction. +i$i"ar"y7 biased attitude of the ana"yst $ay a"so "ead to wrong judg$ent and conc"usion.
+., Ch*ter P$nning)
1. Introduction 2. Conceptual Framework 3. ata !nal"#i# and Findin$# 4. Conclu#ion and %ecommendation 5. &i'lio$rap("
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2. Conceptual Framewor!Element" o# Financial Statement" 2.1 Rtio An$#sis ! ratio anal"#i# i# a )uantitati*e anal"#i# o+ in+ormation contained in a compan",# nancial #tatement#. %atio anal"#i# i# 'a#ed on line item# in nancial #tatement# like t(e 'alance #(eet income #tatement and ca#( /ow #tatement t(e ratio# o+ one item or a com'ination o+ item# - to anot(er item or com'ination are t(en calculated. %atio anal"#i# i# u#ed to e*aluate *ariou# a#pect# o+ a compan",# operatin$ and nancial per+ormance #uc( a# it# ecienc" li)uidit" prota'ilit" and #ol*enc". (e trend o+ t(e#e ratio# o*er time i# #tudied to c(eck w(et(er t(e" are impro*in$ or deterioratin$. %atio# are al#o compared acro## dierent companie# in t(e #ame #ector to #ee (ow t(e" #tack up and to $et an idea o+ comparati*e *aluation#. %atio anal"#i# i# a corner#tone o+ +undamental anal"#i#.
-m*ortnce of Rtio An$#sis
It (elp# t(e mana$ement to $aue t(e ecienc" o+ per+ormance and a##e## t(e nancial (ealt( o+ t(e 'u#ine##.
It i# an e##ential tool +or c(eckin$ t(e ecienc" wit( w(ic( t(e workin$ capital i# 'ein$ u#ed and mana$ed.
(ere ratio are 'a#ed on anal"#i# and #crutin" o+ pa#t re#ult# t(e a##i#t t(e mana$ement to +ormulate polic" to arri*e at correct deci#ion# to prepare 'ud$et# and to plan +or +uture .
imilarl" comparati*e ratio anal"#i# inect# trend anal"#i# t(e impro*ement or deterioration o+ a 'u#ine## i# clearl" di#clo#ed '" ratio anal"#i#.
It (elp# to make inter rm compari#on# t(at i# to know t(e relati*e po#ition# o+ a rm *i#--*i# it# competitor# . 14
(e
a'ilit" o+ a rm to pa" it# #(ort de't# denote# it# li)uidit" po#ition#. %atio anal"#i# (elp# to draw correct conclu#ion# re$ardin$ li)uidit" po#ition o+ a rm.
%atio# are meanin$+ull" u#ed to indicate t(e relati*e per+ormance o+ dierent indu#trie#. (e#e (elp t(e $o*ernment to take #uita'le plan# and policie# accordin$l".
%atio# (elp to make u#e+ul communication wit( out#ider# '" pro*idin$ pertinent piece o+ in+ormation.
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2.2 Importance o# #inancial "tatement anal&"i"/ *inancia" state$ent ana"ysis 'rovides i$'ortant infor$ation about a co$'anyKs financia" hea"th. -o $eet their financia" re'orting ob"igations and to assist in strategic decision= $aking7 fir$s 're'are financia" state$ents. /owever7 5the infor$ation 'rovided in the financia" state$ents is not an end in itse"f as no $eaningfu" conc"usions can be drawn fro$ these state$ents a"one.6 *ir$s e$'"oy financia" ana"ysts to read7 co$'are and inter'ret the data as necessary for :uantitative ana"ysis and decision= $aking.
i/uidit# -he ba"ance sheet 'rovides "i:uidity rations that show how $uch $onetary worth the co$'any has on a given day7 which he"'s deter$ine if the fir$s financia" re"iabi"ity. -he current ratio shows 5the Kworking ca'ita"K re"ationshi' of current assets avai"ab"e to $eet the co$'anyKs current ob"igations76 re'orts &redit uru. -he :uick ratio is si$i"ar7 ca"cu"ating those assets easi"y convertib"e into cash7 deter$ining the i$$ediate working ca'ita" re"ationshi'. -he debt to e:uity ratio estab"ishes who owns $ore of the co$'any7 creditors or shareho"ders.
E0cienc# 0fficiency ratios $easure how efficient"y the co$'any turns inventory into revenue. -he day sa"es outstanding ratio focuses on the ti$e re:uired to turn inventory into cash and the age of your accounts receivab"e. -he inventory turnover ratio 5indicated the ra'idity with which the co$'any is ab"e to $ove its $erchandise76 re'orts &redit uru. (ccounts 'ayab"e to sa"es shows the 'ercentage of sa"es funded with su''"ierKs $oney.
Pro1tbi$it# ,rofitabi"ity ratios revea" a fir$Ks success at generating 'rofits. 5-he 'rofit $argin of a co$'any deter$ines its abi"ity to withstand co$'etition and adverse conditions76 re'orts &redit uru. Return on assets7 revea"s the 'rofits earned for each do""ar of assets and $easures the co$'anyKs efficiency at creating 'rofit returns on assets. et worth focuses on financia" returns generated by the ownerKs invested ca'ita".
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Limit" )t is i$'ortant to know that financia" state$ent ana"ysis has "i$its si$'"y $ani'u"ating nu$bers hides the actua" state of the co$'any. Different accounting $ethods wi"" "ook different on 'a'er7 and the $ethod a 'articu"ar fir$ uses can change the visib"e hea"th and 'rofit "eve"s for either better or worse. Juantitative financia" ana"ysis is an art7 and different ana"ysts $ay get s"ight"y different resu"ts fro$ the sa$e infor$ation7 or $ay return different data about the sa$e business .
2.$ Feature" o# Financial Statement Anal&"i"/ *inancia" state$ents are those which revea" the financia" 'osition of the co$'any at a 'articu"ar 'oint of ti$e. *inancia" state$ents inc"ude ba"ance sheet7 'rofit and "oss account and cash f"ow state$ents. iven be"ow are so$e of the features or characteristics of financia" state$ents I
*inancia" state$ents are those state$ents which 'resent historica" data7 which i$'"ies that financia" state$ents revea" what has a"ready ha''ened and they do not te"" anything about the future.
*inancia" state$ents are e;'ressed in $onetary ter$s7 so 'rofit and "oss state$ents show the 'rofitabi"ity of the business7 ba"ance sheet revea" the financia" 'osition of the co$'any and cash f"ow state$ent revea" the cash 'osition or "i:uidity which is there with the co$'any.
*inancia" state$ents do not revea" the e$'"oyee satisfaction "eve"s7 or effort 'ut by the owner of the co$'any and a"" other such :ua"itative factors are e;c"uded fro$ financia" state$ents.
*inancia" state$ents shou"d revea" a"" things and shou"d not "eave out anything which $ateria""y affects the decision of the 'erson who is reading that financia" state$ents and then taking decision regarding the co$'any. *or e;a$'"e 'ros'ective shareho"ders wi"" "ook financia" state$ents before investing into the co$'any.
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2.* Financial Statement Function"/ ( financia" state$ent su$$ari@es key infor$ation about the financia" hea"th7 success7 and 'rofitabi"ity about a 'articu"ar co$'any. -he financia" figures in a financia" state$ent a"so 'rovide a $easure of the success or fai"ure of its current $anage$ent and business strategies. *inancia" state$ents are genera""y divided into four distinct 'arts8 a ba"ance sheet7 inco$e state$ent7 state$ent of stockho"der e:uity7 and state$ent of cash f"ows.
T(e )alance S(eet -he ba"ance sheet is a sna'shot of the financia" hea"th of a co$'any at a given 'oint in ti$e. De'ending on how a co$'any tracks financia" records7 a ba"ance sheet is co$$on"y created every three $onths7 or at the end every :uarter. ( ty'ica" ba"ance sheet genera""y su$$ari@es three financia" co$'onents8 assets7 "iabi"ities7 and ownerKs or stockho"derKsE e:uity. *ro$ the ba"ance sheet you can deter$ine if a co$'any is $aking $oney by subtracting "iabi"ities fro$ assets. -his difference is the net worth of the co$'any.
T(e Income Statement -he inco$e state$ent7 a"so ca""ed an earnings state$ent7 $easures whether co$'any o'erations were 'rofitab"e. -he $easure$ent of 'rofitabi"ity is deter$ined by revenue7 e;'enses7 net 'rofit or "oss7 and the net 'rofit or "oss 'er share of ownershi'. By $easuring how revenue is used in co$'any o'erations7 you can deter$ine if the co$'any is $aking $oney. )n addition7 the inco$e state$ent re'resents an entire accounting 'eriod of ti$e whereas the ba"ance sheet is on"y a s'ecific 'oint in ti$e.
Statement o# Stoc(older Euit& ( state$ent of stockho"der e:uity reconci"es beginning and ending ba"ances of both stockho"der e:uity and the retained earnings accounts. ( ty'ica" state$ent of stockho"der e:uity co$$on"y inc"udes severa" years of data to ref"ect ba"ance changes fro$ year to year. +tockho"der e:uity and retained earnings are a"so co$'onents of the ba"ance sheet7 which eases reconci"iation in the state$ent of stockho"der e:uity.
18
$. %ata Anal&"i" and Interpretation" A. Sun P(armaceutical Indu"trie" Limited $.A.1 Compan& Pro#ile/ +un ,har$aceutica" )ndustries Li$ited is an )ndia=based generic and 'har$aceutica" co$'any. -he &o$'anyKs business seg$ents inc"ude + Business7 which inc"udes 9estern 0uro'e7 &anada7 (ustra"ia7 ew Mea"and and Other !arkets )ndian Branded enerics Business7 inc"uding "oba" &onsu$er /ea"thcare Business7 and 0$erging !arkets7 which inc"ude (ctive ,har$aceutica" )ngredients (,)sE. -he &o$'anyKs $anufacturing o'erations are focused on 'roducing generics7 branded generics7 s'ecia"ty 'roducts7 over=the=counter 'roducts7 anti=retrovira" and active 'har$aceutica" ingredients (,)sE. -he &o$'any caters various thera'y areas7 such as der$ato"ogy7 'sychiatry7 neuro"ogy7 cardio"ogy7 ne'hro"ogy7 gastroentero"ogy7 ortho'edics and o'htha"$o"ogy. )t a"so 'roduces a range of dosage for$s7 inc"uding tab"ets7 ca'su"es7 injectab"e7 oint$ents7 crea$s and "i:uids. -he &o$'any a"so $anufactures various s'ecia"ty (,)s7 inc"uding contro""ed substances7 steroids7 'e'tides and anti=cancer 'roducts.
+un ,har$aceutica" )ndustries began with just # 'roducts to treat 'sychiatry ai"$ents in 1?3. +a"es were initia""y "i$ited to 2 states I 9est Benga" and Bihar. +a"es were ro""ed out nationa""y in 1?#. ,roducts that are used in cardio"ogy were introduced in 1?>7 and !onotrate7 one of the first 'roducts "aunched at that ti$e has since beco$e one of our "argest se""ing 'roducts. )$'ortant 'roducts in &ardio"ogy were then added severa" of these were introduced for the first ti$e in )ndia. +un ,har$a was "isted on the $ain stock e;changes in )ndia in 14. )t is an internationa" s'ecia"ity'har$a co$'any7 with a 'resence in 3< $arkets. )t a"so $ake active 'har$aceutica" ingredients. )n branded $arkets7 its 'roducts are 'rescribed in chronic thera'y areas "ike cardio"ogy7 'sychiatry7 neuro"ogy7 gastroentero"ogy7 diabeto"ogy and res'iratory. Rea"i@ing the fact that research is a critica" growth driver7 they estab"ished their research center +,(R& in 13 and this created a base of strong 'roduct and 'rocess deve"o'$ent ski""s. )n )ndia7 it has reached "eadershi' in each of the thera'y areas that we o'erate in7 and are rated a$ong the "eading co$'anies by key custo$ers. +trengthening $arket share and kee'ing this custo$er focus re$ains a high 'riority area for the co$'any. 19
(nother (,) '"ant7 its (h$ednagar '"ant7 was ac:uired fro$ the $u"tinationa" no"" ,har$aceutica"s in 1%7 and u'graded for a''rova"s fro$ regu"ated $arkets7 with substantia" ca'acity addition over the years.
$.A.2 %ata Anal&"i"/
Operatin Pro#it +atio/ -he 'rofit earned fro$ a fir$Fs nor$a" core business o'erations. -his va"ue does not inc"ude any 'rofit earned fro$ the fir$Fs invest$ents such as earnings fro$ fir$s in which the co$'any has 'artria" interestE and the effects of interest and ta;es.
O'erating ,rofit RatioG O'erating et ,rofitHet +a"esE ; 1<< ($ount in Rs. !i""ionsE
,articu"ars
31st !arch 2<13
31st !arch 2<14
31st !arch 2<1#
O'erating ,rofit
#7?4.%<
2>7#>E
7>#3.?
et +a"es
27%?3.1<
3<7<%#.#<
?272?>.><
O'erating ,rofit Ratio
1.?%
=1.>2
=11.?#
Gro"" Pro#it +atio/ ross 'rofit is a co$'anyFs residua" 'rofit after se""ing a ,roduct or service and deducting the cost associated with its 'roduction and +a"e.
ross ,rofit RatioG ross ,rofitHet +a"esE ;1<< ($ount in Rs. !i""ionsE
,articu"ars
31st !arch 2<13
31st !arch 2<14
31st !arch 2<1#
ross ,rofit
%7%3<.3<
>4#.1
1#7#?.>E 20
et +a"es
27%?3.1<
3<7<%#.#<
?272?>.><
22.33
2.4?
1?.4E
ross ,rofit Ratio
Net Pro#it/ et ,rofit ratio is a 'o'u"ar 'rofitabi"ity ratio that shows re"ationshi' between net 'rofit after ta; and net sa"es. )t is co$'uted by dividing the net 'rofit after ta;E by net sa"es.
et ,rofit Ratio G et ,rofitH+a"esE ; 1<< ,articu"ars
31st !arch 2<13
31 st !arch 2<14
31 st !arch 2<1#
et ,rofit
#71%#.#
2?72?#.2E
147>41.3E
et +a"es
27%?3.1<
3<7<%#.#<
?272?>.><
et ,rofit 1>.4<
4.<>E
1>.1E
Ratio
21
%e-t Euit& +atio/ )t is the ratio between "ong ter$ debt and shareho"ders fund. Long ter$ debt inc"ude debentures7 "oan fro$ financia" institutions etc. shareho"ders fund inc"ude e:uity and 'reference share ca'ita" N reserve and sur'"us=fictitious asset debit ba"ance of 'rofit and "oss account or discount on issue of sharesE
Debt 0:uity RatioG DebtH+hareho"der *und ,articu"ars
31st !arch 2<13
31 st !arch 2<14
31 st !arch 2<1#
Debt
4%.4
4%.4
117><3.2
+hareho"der *und
17<3#.%
27<>1.2
27<>1.2
Debt=0:uity 4.4?
2.24
#%#.<4
Ratio
22
