A Project Report On Ratio Analysis

Lupin Limited

Report submitted to
prof Mahesh Bendigeri

GENS GLOBAL BUSINESS SCHOOL, HUBLI By

Monica Thakur MBA1300 0!"
Dec -2013

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)1)*%T&2) '%MMAR3 Financial ratio analysis as the name suggests, is the evaluation procedure of the performance of the company. The evaluation is based on financial data and the data in the financial statements is used for the financial performance analysis. Financial ratio analysis is the process of evaluating the relationship between component parts of financial statement to obtain a better understanding of the company s position and performance. The financial statements e!tremely useful information to the e!tent the balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners e"uity, etc and the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the costs incurred during the year. The first tas# in the financial analysis is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step involved in this is to arrange the information in a way to establish the relationship The final step is interpretation and drawing of inferences and conclusions. $n short it is the process of selection, relation and evaluation. Financial ratio analysis is an important tool. The other tools include the comparative analysis %i.e., inter& firm comparison'. Time series analysis of ratios, common si(e statement analysis, inde!ed statement analysis, )u&point analysis.

Financial statements provide summari(ed view of the financial position and operation of the company. Therefore, now a day it is necessary to all companies to #now as well as to show the financial soundness i.e. position and operation of company to their sta#eholders. $t is also necessary to company to #now their financial position and operation of the company. $n this report $ made an effort to #now the financial position of $ndusind *an#, by using the Annual Reports of the firm.

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The Financial analysis of this report will show the +trength and wea#ness of the $ndusind *an#. Financial analysis will help the firm to ta#e decision. Thus, we can say that, Financial Analysis is a starting point for ma#ing plans before using any sophisticated forecasting and planning.

T&TL) $4 T+) 5R$6)*T A 'T%73 $( 4&(A(*&AL RAT&$ A(AL3'&' L%5&( LT78 'TAT)M)(T $4 5R$BL)M' ,anagement problem As ratios provide a benchmar# for company s against their own performance in industry. The company wants to study the ratio s and compare its performance of past with the present performance with the help of ratio analysis, various items of financial statement that ensure their e!istence as well as their future progress.

Research ProblemTo #now the Financial Position of the company and its .i"uidity Performance through comparing three years financial performance by applying different financial Ratios

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L&M&TAT&$(' $4 T+) 'T%739 ())7 4$R T+) 'T%73 The need for the study is to #now the overall financial performance of the company since / years. The financial plan represents a blueprint of what the company proposes to do in the future. The study reveals the use of various accounting ratios to e!plain the profitability position. $B6)*T&2)' $4 'T%73 To #now the .0P$1 .T) financial performance based on ratios. To find out the company efficiency based on past and present profitability ratios To study the li"uidity position of the ban# To improve its future performance by analy(ing its financial statement

The most important limitation of the study is that the study slowly depends on the published data and documents such as balance sheet and income statement. $t was difficult to obtain confidential data from the concern department with a view point of secrecy that the company would li#e to observe.

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The project information is collected from secondary data. 'econdary 7ata9 The various sources that were used for the collection of secondary data are

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2arious te!t boo#s were used to understand the concepts of financial analysis. 3ebsites

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Pharmaceuticals is a #nowledge&based, technology&intensive industry that is uni"uely placed to develop and commercialise the outcomes of Australia s long term investment in medical research. The Australian pharmaceuticals industry comprises bio&medical research, biotechnology firms, originator and generic medicines companies and service related segments including wholesaling and distribution. The industry employed over 45,555 people %one third in manufacturing' in 6557&58 and turned over appro!imately 966 billion in 655:&;5. $t spent 9;.56 billion on research and development in 6558&5: and e!ported 94.;6 billion in the 655:& ;5 financial year. There are over ;<5 separate firms listed as suppliers to the Pharmaceuticals *enefits +cheme %P*+'.
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The Australian mar#et for pharmaceuticals is small in the conte!t of global demand. 3hile the P*+ allows for universal access to prescription products, the si(e of the population means that sales are small. Australia=s population represents around 5./ per cent of the world yet consumes around one per cent of total global pharmaceuticals sales. Thus in 655: Australia was the ;6th largest pharmaceuticals mar#et by sales, while being ran#ed <<th on population. The e!penditure on the P*+ by >overnment has more than doubled over the last ten years, from 9/.6 billion in ;:::&6555 to 98./ billion %e!cluding patient contributions' in 655:&;5. $n 655:&;5, the largest firm by P*+ sales was Pfi(er. $ts sales represent ;4.4 per cent of the value of total sales made to the P*+. The top ;5 suppliers by sales contributed more than ?7 per cent of the value of total sales made to the P*+. Alphapharm is the largest firm by number of prescriptions on the P*+ %accounting for ;4./ per cent of all prescriptions dispensed under the P*+'. The top ;5 firms by the number of prescriptions account for a total of just over 75 per cent of total prescriptions written. These data suggest that the Australian mar#et is serviced by a variety of suppliers which is consistent with the global industry structure. Australian industry developments have gained worldwide recognition. They include

@+.=s development of a +wine Flu %1;A;' vaccine )evelopments in discovering the >ardasil vaccine for Auman Papilloma 2irus through a partnership between ,erc# +harp and )ohme and @+. Australian biotechnology company @ytopia=s 9674 million deal with 1ovartis to develop orally active, small molecule therapeutics targeting BAC/ #inase for the prevention of transplant rejection and the treatment of multiple indications in autoimmune diseases such as rheumatoid arthritis The development by *iota Aoldings of the flu drug Relen(a. Acru!=s 0+9//< million deal %plus royalties' with Dli .illy to mar#et Acru!=s 0+ F)A approved A!ironE. The )epartment encourages the development of an internationally competitive pharmaceuticals industry with policies which enhance the operating environment for the industry by-

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Providing policy advice to the ,inister for $nnovation, $ndustry, +cience and Research %$nnovation' on developments in the global pharmaceuticals industry and how they might impact on the Australian operating environment Providing +ecretariat support to the joint industry and ,inisterial Pharmaceutical $ndustry 3or#ing >roup Assisting in implementing the recommendations of the Pharmaceuticals $ndustry +trategy >roup, in relation to increasing pharmaceuticals RF), clinical trials and manufacturing in Australia @ontributing to the Pharmaceutical *enefits Pricing Authority s %P*PA' wor# on the pricing of pharmaceuticals for the P*+ 3or#ing with #ey industry sta#eholders including the Pharmaceuticals $ndustry @ouncil.

The pharmaceuticals industry spans a spectrum of activity from the technology intensive RF) segment associated with innovative drugs through to the production of generic and over&the&counter medicines. The industry is dominated by hori(ontally and vertically integrated multinational entities and is more research intensive than most other industries. 3orldwide industry sales are projected to grow strongly at 7.< per cent per annum over the ne!t five years. Dspicom *usiness $ntelligence estimate that the annual sales of pharmaceuticals will reach 0+98<6 billion in 655: and project it will reach 0+9;,;<8.< billion in 65;4. The mar#ets driving this change will be

@entralGDastern Durope, with :.7 per cent growth per annum The Americas, with 7./ per cent growth per annum ,iddle Dast and Africa, with 8.? per cent growth per annum AsiaGPacific, with 4.: per cent growth per annum 3estern Durope, with ?.8 per cent growth per annum. These data show that the global mar#et for drugs is large and growing, that pharmaceuticals industry sales are concentrated in developed countries, that half of all sales are made by the top ;5 global companies, but that there is still a reasonable degree of international competition at an industry level. &ndustry R:7 acti;ity

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)eveloping a new drug is e!pensive. @urrent estimates of the full cost of bringing a new chemical or biological entity to mar#et are around 0+9;./ billion. .onger development and approval times, larger and more comple! clinical trials, increased e!penditures on new technologies, and shifts in product portfolios towards ris#ier, more e!pensive therapeutic categories have contributed to a real increase in the development costs. Pharmaceuticals RF) e!penditure is rising. Over the past two decades, the percentage of sales allocated to RF) has increased from ;;.: per cent in ;:85 to an estimated ;8 per cent in 655? %for American owned firms'. The number of products in development and the number of firms doing RF) are both risingH however RF) productivity continues to fall. The industry spent 9;.56 billion on RF) in Australia in 6558&655:. 3ith 5./ per cent of the world s population, Australia produces three per cent of global medical research and has a proud history of seven 1obel laureates in medicine

Aoward Florey %;:4<- development of penicillin' Fran# ,acfarlane *urnet %;:?5- research on organ transplantation' Bohn Dccles %;:?/- research on the transmission of nerve impulses' Peter )oherty %;::?- discoveries concerning the specificity of the cell mediated immune defence' *arry ,arshall and B. Robin 3arren %655<- discovery of the bacterium Helicobacter pylori and its role in gastritis and peptic ulcer disease'. Dli(abeth *lac#burn %655:- research on telomeres, structures at the end of chromosomes that protect the chromosome'. A feature of the Australian innovation system is the relatively high proportion of government e!penditure on RF). $n the health and medical area, this funding is allocated through a variety of RF) providers and there is considerable interaction between these entities. The bul# of the funding is provided through-

The 1ational Aealth and ,edical Research @ouncil %1A,R@' +pecialised research institutes, eg. *a#er, >arvan, Iueensland $nstitute of ,edical Research 0niversities The @ommonwealth +cientific and $ndustrial Research Organisation %@+$RO' Aospitals
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@ooperative Research @entres %@R@s'.

*ompany 5rofile
.upin .imited is an innovation led transnational pharmaceutical company producing a wide range of "uality, affordable generic and branded formulations and AP$s for the developed and developing mar#ets of the world. The formation of .upin in the year ;:?8 led to the vision and dream to fight life threatening infectious diseases and manufacture drugs of highest national priority. .upin is one of the fastest growing
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>eneric players globally. The company was named after the [Link] flower because of the inherent "ualities of the flower and what it personifies and stands for.

.upin first gained recognition when it became one of the world s largest manufacturers of Tuberculosis drugs. Over the years, the @ompany has moved up the value chain and has not only mastered the business of intermediates and AP$s, but has also leveraged its strengths to build a formidable formulations business globally.

Today, the @ompany has established global leadership position for its AP$s and holds a firm grip in the @ephalosporins, @ardiovascular and Anti&T* space.

.upin first gained recognition when it became one of the world s largest manufacturers of Tuberculosis drugs. Over the years, the @ompany has moved up the value chain and has not only mastered the business of intermediates and AP$s, but has also leveraged its strengths to build a formidable formulations business globally.

Today, the @ompany has established global leadership position for its AP$s and holds a firm grip in the @ephalosporins, @ardiovascular and Anti&T* space. .upin continues to enjoy global mar#et leadership in Rifampicin, Pyra(inamide and Dthambutol, as well as in @ephalosporins such as @ephale!in, @efaclor and their $ntermediates. $n FL 65;5, the @ompany continued to record significant growth in the 7&A)@A and 7&A@@A family of products.

.upin .td. is a #ey supplier of anti&T* formulations to the >lobal )rug Facility %>)F' F maintained its premier position in the Anti&T* space during the current fiscal.
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The @ompany has moved up the value chain since inception in terms of its products and geographies. @urrently, it commands a formulation business of over Rs ;/,<56 mn spread across the globe. .upin has created a strong foothold in the Advanced ,ar#ets of 0+A, Durope, Bapan, Australia and Dmerging mar#ets of $ndia and some of the other Rest of 3orld countries. $t has onshore and offshore presence of its products in 75 countries. Today, .upin is the <th largest and fastest growing generics player in the 0+ %by prescriptions', the only Asian company to achieve that distinction. The company is also the fastest growing top ;5 pharmaceutical player in $ndia, Bapan F +outh Africa. $ts manufacturing units are located in >oa, Tarapur, An#leshwar, Bammu, ,andideep, $ndore, Aurangabad and Cyowa in Bapan. *enchmar#ed to $nternational standards, these facilities are approved by international regulatory agencies li#e 0+ F)A, 0C ,ARA, Bapan s ,A.3, T>A Australia, 3AO, and ,@@ +outh Africa *usiness $n formulations it offers wide range of products for treatment of @ephalosporins, @2+, @1+, Anti&Asthma, Anti&T*, )iabetology, )ermatology, >$, and many more. $t constitutes 84M of .upin s business. $t has presence in 0+A, Durope, Bapan, Australia and emerging mar#ets of $ndia and some of the other rest of world countries. Formulations ma#e up 8;M of our overall revenue composition. $n AP$s segment it has a bas#et of product offerings for treatment of T*, @ardiovasculars, @ephalosporins and many more.

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A financial statement is a organi(ed collection of data according to logical and consistent accounting procedures. $ts purpose is to convey understanding of some financial
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aspects of business firm. $t may show a position at a moment in time as in the case of bGs or may reveal a series of activities over a given period of time as in case of income statement. Financial statement are prepared for the management to deal with, a. b. +tatus of investments. Results achieved during a given period under review a financial statement generally

refers to the followingH ;' $ncome +tatement- The income statement also termed as %profit or loss account' is

generally considered to be the most useful of all financial statements. $t e!plains what has happened to a business as a result of operations between two balance sheet dates. $t discloses the revenue reali(ed from the sale of goods and the costs incurred in the process of producing the scheme. $t tells the story of Progress or decline over given period and why and how an indicated result was achieved. 6' *alance +heet- it is statement of financial position of a business at particular moment

of time and the claims of the owners and outside against those assets at that time. /' +tatement of Retained Darnings- the term retained earnings means the accumulated

e!cess of earnings over losses and dividends. The balance shown income statement is transferred to the balance through this statement. After ma#ing necessary appropriations. $t is thus a connecting lin# between the *Gs and income statement. This statement is also termed as project and loss appropriation account in case of companies. 4' +tatement of @hanges in Financial Position- the balance sheet shows the financial

condition of the business at a particulars moment of time while the income statement discloses the result of operations of business over a period of time. Aowever for a better understanding of the affairs of the business, it is essential to identify the movement of wor#ing capital or cash in and out of the business. This information is available in the statement of changes in financial position of the business.

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Ratio analysis is a study of figures appearing in financial statements %*alance sheet and Profit and .oss statement'. +uch figures have accounting significance and related to each other in a manner that ma#es them mutually relevant. This aspect of the relativity is the central theme of ratio analysis. This stems from the fact that absolute numbers do not mean much unless compared one with another. The financial ratios therefore are used to e!press significant relationship which e!ists between accounting numbers obtaining on a financial statement. Ratios recogni(e the interrelationship which e!ists. The study of financial ratios is an invaluable guide to the management in analy(ing the operations and the financial state of affairs of a business unit. Those who are concerned with the performance of a unit are interested in being informed about its profitability, li"uidity and solvency. The ratio analysis is an attempt to obtain reliable indications in this respect. Thus viewed the ratio analysis, as a tool of financial statement analysis, has to be purposive and user oriented. Over the years the techni"ue of ratio analysis has ac"uired more and more usefulness and has found, accordingly, more and more users. $t is widely recogni(ed that ratio analysis is an immensely valuable tool to highlight sensitive financial characteristics such as capital structure debt service, profitability, solvency, fund and cash flows etc. The e!ercise of ratio analysis has other important uses in the areas of audit, ta! assessments, management control and budgeting and forecasting. ())7 4$R *A%T&$( &( &(T)R5R)TAT&$( $4 RAT&$' ,ost of the ratios at best only give indications of a situation and as such they do not always lead to precise evaluations. The analysis of ratios only acts as a pointer to a possible disproportion. $n order to avoid the possibilities of reaching unwarranted inferences it is essential;. 6. To select a proper ratio 1ot to study a ratio in isolation i.e. indications from two or more ratios can be studied

in conjunction. /. To subject the financial variables to further investigation where acute disproportion is

indicated by a ratio.

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4. <.

To call for further information relating to a financial data to verify its validity. To be aware of the fact that it is not possible to state as to what constitutes, as a

general rule, normal or ideal positions.

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As in case of any financial number, ratio does not convey much meaning unless it is compared with a similar ratio relating to a past period or to any other firm. Thus if a firm had an operating profit ratio of ;5M to its sales in ;::: this information by itself does not convey much. *ut it would become more meaningful if it was compared with the similar ratio in the year ;::8 when it was ;6M to its sales. One can then observe that the operating profit ratio has dwindled in ;::: as compared to ;::8. Therefore ratios relating to a firm can be studied in comparison with similar ratios;' 6' /' 4' <' of the same firm relating to earlier periods of another firm representing industrial averages projected in the budgets set as targets

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i'The financial ratio analysis serves as an invaluable aid to the management in analy(ing the operations and state of affairs of a business enterprise,

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ii'The financial ratio analysis being an important tool of financial statement analysis, various groups of people interested in financial aspects an iii'enterprise %such as investors, lenders, employees, government, stoc# e!change authorities etc.,' use this with advantage for the purposes relevant to them, iv'This techni"ue of financial statement analysis can be used with good effect in preparing budgets, forecasting and planning, projecting wor#ing capital re"uirements etc., v'$t helps to analy(e and reliably indicate financial health of a company by focusing on its profitability, li"uidity and solvency, debt&servicing, utili(ation of resources etc., vi'Proper evaluation of performance and position is possible by comparing financial ratios of a firm with those of another firm or by comparing ratios of a firm for a period with those for another period. vii'$t becomes easier to assign responsibilities to functional heads in a management team, viii'$t helps in presenting plethora of accounting data in a systematic and more comprehensible manner.

4inancial data of lupin ltd Balance sheet

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+ources Of Funds Total +hare @apital D"uity +hare @apital +hare Application ,oney Preference +hare @apital Reserves Revaluation Reserves 1etworth +ecured .oans 0nsecured .oans Total )ebt Total .iabilities ,a =55

//.<4 //.<4 5 5 /6.?< 5 ??.;: <;.67 67.88 7:.;< ;4<./4 ,ar

;4.8/ 6.8/ /7./; ;6 /58.?8 5 /?5.86 <5?.<4 ;;5.< ?;7.54 :77.8? ,ar =5;

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45.;4 45.;4

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8:.64 8:.64

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5 5 5 5 5 5 5 7 5 5 5 5 5 5 6:6./ /46.6 457.8 4?5./ /,5?/.4 /,?4<.5 4,7<7.6 ; / : ? 6 8 5 5 5 5 5 5 5 5 //:.4 /86./ 448.5 /,;<6.? /,7/4.4 4,84?.7 < 7 / <55.< ? ; ; <54.< 487.8 68?.< /85.? ; < < / ?/7.4? <85.86 4;;./ ;6/.4 ? ::.?4 :5.<? ?5.5; /46 4;;.8/ ;4/.:: ?67.: <87.4 /77.; 445.? 7 : ; 4 :7:.4? ::6.?< <<<.6: :?7.4 :?:.8 86<.; :4;.; 4,;/6.; 4,767.5 <,456.5 6 ? 4 4 6 ? 5 ,ar ,ar ,ar ,ar =56 =5/ =54 =5< ,ar =;; ,ar =;6 ,ar =;/

Application Of Funds >ross *loc# .ess- Accum. )epreciation 1et *loc# @apital 3or# in Progress $nvestments $nventories +undry )ebtors ;;;./6 /5 8;./6 <./6 5.8: ;/.44 /<.<8 444.48 48./ /:?.;8 45.:7 ;;.:6 ;4?./7 6::.?8 <;;./ : 75.84 445.< < 6;.6; ;5.4 ;4/.6 8 /6<.7 4 <85.: :<.6< 48<.? < ;5.76 8.<; ;4;.8 ? //8.7 8 ?45.4 ; ;6/.6 <;7.6 ; ;7.;7 8.:; 6;<./ 6;<.8 / 7;4.8 < ;<<.: ; <<8.: 4 ?:.8; :./7 648.5 8 6/<./ : ;,8?:.5 : <;4.4? ;,/<4.? / 446.5: ?85.88 84;.;; ;,6/4.6 8 6,//<.4 ; ?67.:/ ;,757.4 8 /<7.// ?87.6: ;,;6/.< ? ;,4:5.8 5 6,7?6.: ; 74:.6? 6,5;/.? < 645.;6 ?88.54 ;,//5.8 / ;,874.6 7

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@ash and *an# *alance Total @urrent Assets .oans and Advances Fi!ed )eposits Total @A, .oans F Advances )effered @redit @urrent .iabilities Provisions Total @. F Provisions 1et @urrent Assets ,iscellaneous D!penses Total Assets <ey 4inancial Ratios

;.<: <5.?; 64.8< 5.:6 7?./8 5 ;4.5; <.87 ;:.88 <?.< ;./; ;4<./4

?.88 4<6.:/ 6//.58 8.46 ?:4.4/ 5 ;47.5: ;8.<< ;?<.?4 <68.7: 5 :77.8?

;/.5/ 486.5 < 6<;.: 4 ?.? 745.< : 5 6//.4 8 ;;.8< 64<./ / 4:<.6 ? 5 :?7.4 6

7.:: 488.? / /55.8 4 ?.8 7:?.6 7 5 67/.7 6 <7.<7 //;.6 : 4?4.: 8 5 :?:.8 ?

4.8/ 4/<.: ? 65;.; 4 ;5.6; ?47./ ; 5 6:?.6 ; ?:.6< /?<.4 ? 68;.8 < 5 86<.; 4

;/.// 4:?.8 ;74.8 ; 4.4< ?7?.5 ? 5 ///.5 ? /:.:8 /7/.5 4 /5/.5 6 5 :4;.; 4

/7.4? 6,;;6.8 < ?6;./6 5 6,7/4.; 7 5 885.6: ;::./? ;,57:.? < ;,?<4.< 6 5 4,;/6.; 6

;:.6 6,?//.< ? 77/.5< 5 /,45?.? ; 5 ;,;:/.8 ; 6/7.84 ;,4/;.? < ;,:74.: ? 5 4,767.5 ?

65.;6 /,66<.6 6 878.7 5 4,;5/.: 6 5 ;,//6.? 7 /;;.5? ;,?4/.7 / 6,4?5.; : 5 <,456.5 5

,ar =55 $nvestment 2aluation Ratios Face 2alue )ividend Per +hare Operating Profit Per +hare %Rs' 1et Operating Profit Per +hare %Rs' Free Reserves Per +hare %Rs' *onus in D"uity @apital Profitability Ratios Operating Profit ,argin%M' Profit *efore $nterest And Ta! ,argin%M' >ross Profit ,argin%M' @ash Profit ,argin%M' Adjusted @ash ,argin%M' 1et Profit ,argin%M' Adjusted 1et Profit

,ar =5;

,ar =56

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,ar =54

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;5 ; <./< ;7./4 <.88 && /5.84 6/.46 ;<./8 :.8/ ;;.;8 /.4? /.;7

;5 /.< </4.<< 6,:<8.< ? <85 && ;8.5? ;<.8; ;;.;4 :./< ;5.;? 7.;< 7.7:

;5 < 47.57 666.8 ? 45.; && 6;.;6 ;8.4: ;4./; ;5.?/ ;;./6 8.5< 8.7/

;5 < 4?.4/ 6<?.< ? <7.?< && ;8.5: ;<.?/ ;6.6: :.< ;5.58 7.58 7.?<

;5 ?.< ?8.;/ 6:/.6 < 86./< && 6/.6/ 65.?7 ;:.6 ;4.8 ;4.?: ;6./4 ;6.64

;5 ?.< /4.?6 68:.< :?.6: && ;;.:< :.5; ;5.44 ;5.56 ;5.5/ 7.;: 7.6

6 / 6;.48 ;55.74 && 44.:: 6;./6 ;8.:/ ;: 65.6< 65.6< ;7.:< ;7.:<

6 /.6 6/.5< ;65.<? && 44.:4 ;:.;; ;?.?< ;?.?? ;4.:; ;4.:; ;4.:6 ;4.:6

6 4 46.; ;<:.;< && 44.8< 6?.4< 64.6? 64./4 ;:.7/ ;:.7/ ;7.?/ ;7.?/

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,argin%M' Return On @apital Dmployed%M' Return On 1et 3orth%M' Adjusted Return on 1et 3orth%M' Return on Assets D!cluding Revaluations Return on Assets $ncluding Revaluations Return on .ong Term Funds%M' .i"uidity And +olvency Ratios @urrent Ratio Iuic# Ratio )ebt D"uity Ratio .ong Term )ebt D"uity Ratio )ebt @overage Ratios $nterest @over Total )ebt to Owners Fund Financial @harges @overage Ratio Financial @harges @overage Ratio Post Ta! ,anagement Dfficiency Ratios $nventory Turnover Ratio )ebtors Turnover Ratio $nvestments Turnover Ratio Fi!ed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw ,aterial Aolding Average Finished >oods Aeld 1umber of )ays $n 3or#ing @apital Profit F .oss Account Ratios

;5.46 /.;< 6.:4 ;:./4 ;:./4 ;;.?6 ;.</ /.;? ;.6 5.:7 ;.4; ;.6 ;.7; ;.<: 4.48 ;.;8 <.47 5.?? 5.4 5./8 4/.:; ;<.88 6//.5/

;/.?/ ;?.?4 65.? ;,;55.7 5 ;,;55.7 5 ;7.<< ;./6 /./; 6.56 ;.44 6.6/ 6.56 6.44 6.67 <.7/ 4.:: ?.<; /.6 5.8? ;.4: 4?.8< 6<.:4 667./?

;7.6: 6;.6? 6/.6; 86.86 86.86 6;./ ;.64 6.4/ ;.:; ;./? 6.?: ;.:; 6.:4 6.47 ?.6< 6.8? 7.5/ ;.:: 5.:6 5.:6 /4.6? 6:.7< ;::./

;?.86 ;:.;; 65.<6 :<.6? :<.6? 65.?4 ;.;< ;.:7 ;.<4 ;.57 6.?? ;.<4 6.:< 6.<4 7.67 /.; 8./4 6.;< ;.5? ;.5? /5.5< 6/.;8 ;?6.< 4

/5.64 /6.<8 /6./ ;;;.? ; ;;;.? ; /:.66 5.87 ;.;8 5.84 5.46 4.8< 5.84 <.58 4.;: <.4: 4.64 ?.6/ 6.68 ;.4/ ;./; 4<.7? 68./4 8?.6

;6./8 ;?.8? ;?.87 ;64.? : ;64.? : ;7.48 5.7/ ;.;4 5.88 5.// 4.67 5.88 4.8 4.77 4.7/ <.;< <.4? 6.5; ;.64 ;./6 75.<4 /6.?; :/.87

6;.57 6<.?: 6<.?7 75.?? 75.?? 6<.8 ;.; ;.7< 5./; 5.57 /;.<8 5./; /<./7 /4.;? <./4 4.;8 <./4 6.46 ;.5: ;.;: && && ;/:./6

;:.5< 6;.</ ;7.:: 8/.?; 8/.?; 6/.68 ;.;: ;.<: 5.67 5.54 /;.4; 5.67 /?.5; //.?< 4.7: /.:< 4.7: 6./6 ;.;4 ;.66 && && ;/8.<<

/6.<6 6? 6? ;58./ ;58./ /?.5/ ;.<: ;.?: 5.;; 5.5; <6.8 5.;; <7./; 4/./8 <./< 4.6/ <./< 6.<: ;./6 ;.4; && && ;6?.57

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,aterial @ost @omposition $mported @omposition of Raw ,aterials @onsumed +elling )istribution @ost @omposition D!penses as @omposition of Total +ales @ash Flow $ndicator Ratios )ividend Payout Ratio 1et Profit )ividend Payout Ratio @ash Profit Darning Retention Ratio @ash Darning Retention Ratio Adjusted@ash Flow Times

4?.44 66.6/ 5.:: 6;.5<

<;.// 4;.6: ;5.6/ 67.7

48.<< 4;.8/ ;5.74 /4.??

</.57 46.7; 7.?/ 45.6/

<5./7 <7.7? :./: 48.:?

<;.7? <6.: :.6? 4:

46.74 46.<8 && <:.5<

44.;< /8.8? && ?5.6<

4;.5< /8./< && ?6.86

;:?.46 <:.6< &;;4.;8 /:.6/ ;;.7<

6?.8; 65.5/ 7<.4< 8;.6? 7.6/

6:.8< 66.<; 76.<; 78.8? ?.;:

/;.6 6/.;: 7;.;? 78.;4 <.?<

65.;? ;?.8; 7:.?7 8/.57 6.;7

/<./4 6<./? ?4.7; 74.?7 /.74

;:.6; ;7.56 85.78 86.:8 ;.57

65.?< ;7.74 7<.68 7:./4 ;.6/

;?.?; ;4.84 8/./: 8<.;? 5./:

Darnings Per +hare *oo# 2alue

5.?6 ;:.7/

657.7; ;,;55.7 5

;7.7; 86.86

;8.58 :<.6?

/?./7 ;;;.? ;

6;.56 ;64.? :

;8.;< 75.??

;8.5; 8/.?;

68.;? ;58./

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4&(A(*&AL RAT&$' $R T35)' $4 4&(A(*&AL RAT&$'

Financial ratios "uantify many aspects of a business and are an integral part of financial statements analysis. Financial ratios are categori(ed according to the financial aspect of the business which the ratio measures, financial ratio can be divided for convenience into following different basic categories. ;. 6. /. 4. <. .i"uidity Ratios .everage Ratios Activity Ratios Profitability Ratios Other Ratios

L&=%&7&T3 RAT&$' .i"uidity Ratios refers to the firm s ability to satisfy its short term obligations or current liabilities as they become due, liability will be usually of one year. $t reflects the financial strengthGsolvency of a firm. A firm should ensure that it does not suffer from lac# of li"uidity and also that it does not have e!cess li"uidity. A failure of company to meet its obligation due to lac# of sufficient li"uidity, will result in poor credit worthiness. A very high degree of li"uidity is also bad because, idle asset earn nothing. The firm funds will be unnecessary tide up in current assets.
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Therefore, it is in necessary to stri#e a proper balance between high li"uidity and lac# of li"[Link] ratios which indicate the li"uidity of a firm are i. @urrent Ratio, ii. Iuic# Ratio, iii. $nterval Ratio, iv 1et 3or#ing @apital Ratio, v. Absolute .i"uidity Ratio.

*urrent ratio9
,easures the ability of an entity to pay its near&term obligations usually as within one year. Though the ideal current ratio depends to some e!tent on the type of business, a general rule of thumb is that it should be at least 6-;. A lower current ratio means that the company may not be able to pay its bills on time, while a higher ratio means that the company has money in cash or safe investments that could be put to better use in the business. The current ratio is the ratio of the current assets and current liabilities. $t is calculated by dividing current assets by current liabilities. @urrent RatioN @urrent assets @urrent liabilities Lear 65;; 65;6 65;/ @urrent assets ;4<./4 :77.8? :?7.46 @urrent liabilty ;4<./4 :77.8? :?7.46 Total 6:5.?8 ;:<<.76 ;:/4.84

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L)2)RA#) $R *A5&TAL 'TR%*T%R) RAT&$'9 .everage ratios loo# at the e!tent that a company has depended upon borrowing to finance its operations. As a result, these ratios are reviewed closely by ban#ers and investors. ,ost leverage ratios compare assets or net worth with liabilities. A high leverage ratio may increase a company=s e!posure to ris# and business downturns, but along with this higher ris# also comes the potential for higher returns. +ome of the major measurements of leverage include-

7e>t-)?uity Ratio9
This ratio shows the relationship between the borrowed capital and owner s capital. This ratio shows relative claim of the creditors and shareholders against the assets of the company. )ebt D"uity Ratio [Link] Term )ebt +hareholders D"uity

3ear 65;; 65;6 65;/

7e>t )?uity Ratio ;.6 6.56 ;.:;

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7e>t Ratio9
)ebt RatioN Total )ebt Total Assets

3ear 65;; 65;6 65;/

7e>t Ratio ;.6 6.56 ;.:;

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5roprietary Ratio9 Proprietary RatioN Proprietor s Funds Total Assets Lear 65;; 65;6 65;/ Proprietary ratio 8??.5? ;5<?.7: ;/4:.6; Total ;8488.<8 66568.? 64??8.<4

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5R$4&TAB&L&T3 RAT&$'
There are many measures of profitability. As group, these measures enable the analyst to evaluate the firm s profits with respect to a given level of sales, a certain level of assets, or the owner s investment. Owners, creditors and management pay close attention to boosting profits. The management of the firm is naturally eager to measures its operating efficiency. +imilarly the owners invest their funds in the e!pectation of reasonable returns. Profitability ratio measures the firm s use of its assets and control of its e!penses in order to generate an acceptable rate of return. Following are the ratio designed to provide answers to "uestions such as, i. ii. iii. iv. v. vi. $s the profit earned by the firm ade"uateO 3hat rate of return does it representsO 3hat is the rate of profit for various divisions and segment of firm 3hat is the amount paid in dividendsO 3hat is the earning per shareO 3hat is the rate of return to e"uity shareholders and so on.

Profitability ratios can be determined on the basis of either sales or investment. The profitability ratios in relation to sales are

i8 #ross 5rofit Margin

>ross profit is the difference between sales and the manufacturing cost of goods sold. The gross profit margin reflects the efficiency with which management produces each unit of
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product. This ratio indicates the average spread between the cost of goods sold and the sales revenue. A high gross profit margin ratio is a sign of good management. +ales P @ost of >oods +old &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& +ales

>ross Profit ,argin N

>ross Profit N +ales P @ost Of >oods +old. 3ear 65;; 65;6 65;/ #ross profit 6;./6 ;:.;; 6?.4<

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ii8

$perating 5rofit Margin

The operating profit margin measures the percentage of each sales rupee remaining after all costs and e!penses other than interest, ta!es and preferred stoc# dividends are deducted. $t shows the pure profit earned on each sales rupee. A high operating profit margin is preferred.

$perating 5rofit Margin @

$perating profit ---------------------------'ales

3ear 65;; 65;6 65;/

$perating 5rofit Margin

iii8 (et 5rofit Margin The net profit margin measures the percentage of each sales rupee remaining after all cost and e!penses, including ta!es and preferred stoc# dividend, have been deducted, the higher the firm s net profit margin, the better.

Profit After Ta! 1et Profit ,argin N &&&&&&&&&&&&&&&&&&&&&&&&& +ales

year 65;; 65;6 65;/

1et Profit ,argin ;7.:< ;4.:6 ;7.?/

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i;8 $perating )Apenses Operating e!penses ratio e!plains the changes in the profit margin %D*$T to sales' ratio. A higher operating e!penses ratio is unfavorable since it will leave a small amount of income to meet interest, dividends, etc. the operating e!penses ratio is a yardstic# of operating efficiency, but it should be used cautiously. $t is affected by number of factors such as e!ternal uncontrollable factor, internal factor, employee and managerial efficiency all of which are difficult to analy(e.

$perating )Apenses Ratio @ 3ear 65;; 65;6 65;/

$perating )Apenses ------------------------------'ales

$perating )Apenses Ratio 6;.48 6/.5< 46.;

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Profitability in relation to investments is measured by following ratios.

;8 Return on &n;estment B Return on Total Assets The term investment may be refer to total assets or net assets, the funds employed in net assets is #nown as capital employed which is e"ual to net worth Q total debt. RO$ N ROTA %Rate on Total Assets' RO1A %Rate on 1et Assets' )B&T R$& @ R$TA @ ---------------------------*apital )mployed 3ear 65;; 65;6 65;/ R$& 75.?? 8/.?; ;58./

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;i8

R$) CReturn on )?uityD

The return on common e"uity measures the return earned on the common stoc#holders investment in the firm. >enerally, higher the return, the better. ROD N 3ear 65;; 65;6 65;/ PAT &&&&&&&&&&&&&&&&& 1et 3orth ROD 6;.57 ;:.5< /6.<6

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Return on Total Assets9 This measures the profitability in terms of relationship between net profit and the total assets. Return on Total Assets N 3ear 65;; 65;6 65;/ Profit after Ta! ! ;55 Average Total Assets Return on Total Assets 75.?? 8/.?; ;58./

Return on )?uity$n this ratio profitability is measures by dividing the net profit after ta!es by the average shareholders G e"uity. The average shareholders e"uity includes e"uity, reserves and surplus e!cluding miscellaneous e!penditure. Return on D"uity N1et Profit after Ta!es ! ;55 Average 1et 3orth Return on D"uity 6<.?7 ;7.:: 6?

3ear 65;; 65;6 65;/

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7)BT T$ T$TAL *A5&TAL&EAT&$( RAT&$9

This ratio determines the proportion of total capitali(ation, which is the firm s permanent financing, that long term represents. >enerally, firms with lower debt& total capitali(ation ratios are considered better credit ris#s because a larger e"uity cushion e!ists to protect creditors. )ebt To Total @apitali(ation Ratio N .ong Term )ebt .ong Term )ebtQ +toc#holders D"uity 3ear 65;; 65;6 65;/ )ebt To Total @apitali(ation Ratio 65.6< ;4.:; ;:.7/

&(T)R5R)TAT&$( The graph indicates that there is no more fluctuation in ratio i.e 5.?48, 5.?4: and 5.?48 and it is same for the year 65;; and65;/

7i;idend per 'hare9

This ratio shows how much dividend is paid per share to the ordinary shareholders. )ividend per +hare NActual )ividend Paid To the D"uity +hareholders 1umber of Ordinary D"uity +hares 3ear 65;; 65;6 65;/ )ividend per +hare / /.6 4

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This shows how much is retained in the business and how much is distributed amongst he shareholder

)arnings per 'hare C)858'8D9

Darnings per share gives the profitability from the point of view of the ordinary shareholders. $t measures the profit available to the e"uity shareholders on per share basis. $t is calculated by dividing the profits available to the e"uity shareholders by the total number of shares Darnings per +hare N 1et Profit Available To the D"uity +hareholders 1umber of Ordinary D"uity +hares 3ear 65;; 65;6 65;/ Darnings per +hare ;8.;< ;8.5; 68.;?

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7i;idend 5ayout Ratios9 $t measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them. This is calculated by dividing the actual dividend paid by the net profit available to them. Alternatively, it can be found out by dividing the dividend per share by the earnings per share. )ividend Payout Ratio N Actual )ividend Paid to the D"uity +hareholders 1et profit available to the e"uity shares holder 3ear )ividend Payout Ratio 65;; ;:.6; 65;6 65.?< 65;/ ;?.?;

*ost of deposits ratio @ost of deposits ratio N 3ear 65;; 65;6 65;/ $nterest paid on deposits Average deposits @ost of deposits ratio 46.<8 /8.8? /8./<

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Suggestion

.upin ltd must thoroughly study the accounts of the company where there is a chance

of manipulation.

The current assets to total assets is increased which means the company is paying more attention to its current assets. They should improve the utili(ation of current assets as it will be re"uired for day to day business.
.upin ltd should have the schemes to entertain the demand for financial assistance

from the businesses which are in need of small amount of loan facilities. $ncrease manpower %with credit and recovery s#ills' at the sector. $t must follow some rules to improve it financial strength Accoriding return on total assets ratio the company is utili(ing its total assets at optimum level to get higher profitability so it is advised to carry in same level.

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*$(*L%'&$(
$t has been an e!cellent opportunity for me to carry out the study on Ratio Analysis at
.upin ltd. $t has helped to a great e!tent to have an insight into the practical realities of the

subject. The project carried out .upin ltd has provided me with an in depth #nowledge insight into it also provided me an opportunity to study and analy(e the various ratios. Though thisr has coin to coin competition t tis is providing a satisfied service to their customers and with the latest technology as well as the new strategies, it is coming up with new products #eeping in mind about customers as a lay man and providing service to them , it is growing rapidly Findings and suggestions made in the report, if ta#en care of, will result in better performances of .upin ltd.

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B&BL&$#RA5+3
Annual report of the company
Financial ,anagement Financial ,anagement ,.L Chan F P. C Bain *attacharaya

www.>[Link]

[Link]

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