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Analysis means establishing a meaningful relationship between various items

of the two financial statements with each other in such a way that a conclusion is being drawn. By financial statements by means of two statements  Profit and loss account or Income Statement  Balance Sheet or Position Statement These are prepared at the end of a given period of time. They are the indicators of profitability and financial soundness of the business concern. The term financial analysis is also known as analysis and interpretation of financial statements. It refers to the establishing meaningful relationship between various items of the two financial statements i.e. Income statement and Position statement. It determines financial strength and weakness of the firm. Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. Thus, the analysis and interpretation of financial statements is very essential to measure the efficiency, profitability, financial soundness and future prospects of the business units. Financial analysis serves the following purposes. Measuring the Profitability The main objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. It also helps in knowing the capacity to pay the interest.

Value of assets and liabilities can be compared and the future prospects of the business can be envisaged. sales. . whether funds required for the purchase of the new machines and equipments are provided from internal sources of the business or not if yes. Such comparison also helps the management to study the position of their firm in respect of sales expenses. gross profits and net profit etc can be ascertained. Assessing the growth potential of the business The trend and other analysis of the business provide information indicating the growth potential of the business. Analysis also helps in taking decisions. how much? And also to assess how much funds have been received from external sources. profitability and utilising capital. purchases.Indicating the trend of achievements Financial statements of the previous years can be compared and the trend regarding various expenses. Comparative position in relation to other firms The purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms. Assess overall financial strength The purpose of financial analysis is to assess the financial strength of the business. engaged in similar businesses. etc.

. To assess the performance of Reddy’s on the basis of earnings and also to evaluate the solvency position of the company through ratio analysis.  To understand the funds movement at Dr.reddy’s Laboratories using funds flow statement.OBJECTIVES OF THE STUDY:   To understand the theoretical framework of financial statement analysis and its tools.

citizen satisfaction etc. . the productivity of men and material would be good. • Moreover the study of non-economic and qualitative performance.NEED AND IMPORTANCE OF STUDY • Financial performance of an enterprise will affect other types of performance and also the productivity of finances is good. which studies the non economic factors like customer satisfaction.

2. Comparative statement. The methodology used in the study for the completion of the project and the fulfillment of the project objectives. classified and tabulated for analysis. The analytical tools used in this study are: ANALYTICAL TOOLS APPLIED: The study employs the following analytical tools: 1. For this purpose performance data of DR. Secondary data: Study has been taken from secondary sources i. classifying and tabulation of the financial data.e. 3. analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. 4.REDDY’S LABORATORIES for the years 2007-2008 to 2009-2010 has been used. Ratio Analysis. Methods of data analysis The data collected were edited. is as follows: Collection of Data: 1. Trend Percentage. .RESEARCH & METHODOLOGY: Research design or research methodology is the procedure of collecting. Secondary data. Cash Flow Statement. published annual reports of the company editing.

• • • The scope is limited to the operations of the Reddy’s. The study is based on the profit and loss a/c.SCOPE OF STUDY: The scope and period of the study is being restricted to the following. The information is obtained from the secondary data was limited to the Reddy’s. the balance sheets of the last four years. .

. 3. The duration of the study was limited to period of 45 days. Not all tools of financial statement analysis are used. So that the extensive and deep study could not be possible.LIMITATIONS OF STUDY: 1. The study is confined to a period of last 4 years. 2.


quality and range of medicines manufactured.e. Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. medicines ready for consumption by patients and about 350 bulk drugs. It ranks very high in the third world. The Industry today is in the front rank of India’s science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology.INDUSTRY PROFLE THE INDIAN PHARMACEUTICAL INDUSTRY The Indian pharmaceutical sector has come a long way. chemicals having therapeutic value and used for production of pharmaceutical formulations.. in terms of technology. being almost non-existent before1970 to a prominent provider of healthcare products. almost every type of medicine is now made indigenously. From simple headache pills to sophisticated antibiotics and complex cardiac compounds. It has expanded drastically in the last two decades. meeting almost 95 per cent of the country’s pharmaceuticals needs. Playing a key role in promoting and sustaining development in the vital field of medicines. .. International companies associated with this sector have stimulated. There are about 250 large units that control 70 per cent of the market with market leader holding nearly 7 per cent of the market share and about 8000 Small Scale Units together which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). i. assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. These units produce the complete range of pharmaceutical formulations.000 registered units with severe price competition and government price control. i. The Indian Pharmaceutical sector is highly fragmented with more than 20.e.

According to Department of Pharmaceuticals. However. economic liberalization in 90s by the former Prime Minister P.[2] According to PricewaterhouseCoopers (PWC) in 2010. strength of national laboratories and an increasing balance of trade.04 billion.V. The Pharmaceutical industry in India is the world's third-largest in terms of volume and stands 14th in terms of value. This patent act removed composition patents from food and drugs.26 billion. and though it kept process patents.25%. industrial licensing for most of the drugs and pharmaceutical products has been done away with. Sale of all types of medicines in the country is expected to reach around US$19. The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s.23 billion in 2006-07 to US$8. Technologically strong and totally self-reliant. . and with the Patents Act in 1970.22 billion by 2012. Exports of pharmaceuticals products from India increased from US$6. Manufacturers are free to produce any drug duly approved by the Drug Control Authority.7 billion in 2008-09 a combined annual growth rate of 21.Following the de-licensing of the pharmaceutical industry. innovative scientific manpower. Manmohan Singh enabled the industry to become what it is today. India joined among the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion. Narasimha Rao and the then Finance Minister. Ministry of Chemicals and Fertilizers. Dr. the pharmaceutical industry in India has low costs of production. low R&D costs. the total turnover of India's pharmaceuticals industry between 2008 and September 2009 was US$21. these were shortened to a period of five to seven years.[2] While the domestic market was worth US$12.

The ranking in value terms may also be a reflection of the low prices at which medicines are sold in the country. In world rankings.000 manufacturing units. Industry Trends A highly fragmented industry. technology base and the wide range of products manufactured. The industry has seen tremendous progress in terms of infrastructure development. . the domestic industry stands fourth in terms of volume and 13th in value terms. Bulk drugs of all major therapeutic groups. the Indian pharmaceutical industry is estimated to have over 10. as given by the Organization of Pharmaceutical Producers of India. while a huge 95% is in the unorganized sector. The organized sector accounts for just 5% of the industry with around 300 players.INTRODUCTION TO PHARMACEUTICAL INDUSTRY The Indian Pharmaceutical industry has been witnessing phenomenal growth in recent years. growing at an annual rate of 9%. Demand from the exports market has been growing rapidly due to the capability of Indian players to produce cost-effective drugs with world class manufacturing facilities. driven by rising consumption levels in the country and strong demand from export markets. requiring complicated manufacturing processes are now being produced in India. The pharmaceutical industry in India is estimated to be worth about US$ 10 bn. Pharma companies have developed Good Manufacturing Practices (GMP) compliant facilities for the production of different dosage forms. A large number of players in the unorganized segment are small and medium enterprises and this segment contributes 35% of the industry’s turnover.

The Indian bulk drug industry has lately been gaining signify cant presence in the global market as foreign and multinational companies are looking to sourcing APIs and intermediates from Indian manufacturers. duty free zones have been set up and several manufacturers of bulk drugs have been shifting their facilities to these areas. which recognized only process patent. . with focus shifting more towards R&D.Bulk drug The Bulk Drug Manufacturers Association (India) was formed in 1991 with Hyderabad as its Head Quarters. As part of government’s support to increase exports. Key Drivers for the Pharmaceutical Industry Growing orientation towards Research and Development (R&D) The introduction of product patent in India has brought some fundamental changes in strategies of Indian pharmaceutical companies. state of. particularly regulated markets. The Association works for the consolidation of gains of the industry and serves as a catalyst between the government and the industry on the various issues for the growth of the industry Bulk drug manufacturing is largely concentrated in Andhra Pradesh. which accounts for more than one-third of the country’s total bulk drug production. gave Indian companies the opportunity to produce products under patent in overseas markets.theart manufacturing facilities.The original Indian patent law. low cost and the advantage of the English language. This is an all India body representing all the Bulk Drug Manufacturers of India. Factors favoring the industry are a vast resource of technical people. the diverse spread has now started getting consolidated and concentrated in certain regions across the country. As a result. followed by Gujarat.

As a result. APIs and intermediates to more than 200 countries across the world. Nigeria and India’s neighboring countries like Sri Lanka. On the other hand. Regulated markets. though difficult to penetrate due to stringent regulations. Germany. this discouraged multinational companies from launching their new products in India. Most of these markets are not highly regulated and are considered to be low-value markets. India has shown better regulatory awareness and superior technical skills. Traditionally. MNCs’ market share declined from 70% prior to 1972 to 20% at present. companies were in advantageous position to produce drugs through reverse engineering at relatively very low cost that helped the domestic industry to grow faster during the initial stages of adopting new processes. are known to give better value and margin to exporters . Expanding presence in regulated market Over the years. fearing duplication of their new drug discovery through reverse engineering. which has enabled Indian companies to penetrate the high-value markets like the US and EU. and the Middle East were the major markets for Indian pharmaceutical exports. Exports of pharmaceutical products (finished products as classified under heading 30 of ITC-HS code) to the US grew by an impressive 33% to Rs 23 bn and by a whopping 62% to Rs 35 bn to the EU during FY04-FY06. Growing exports Exports have been the major growth enabler of the Indian pharmaceutical industry in recent years. India exports pharmaceutical products. Nepal. Consequently. Russia.

aerosols that are applied on the skin Parenteral – Intravenous. each of which has associated advantages and disadvantages. All the routes of drug administration need to be understood in terms of their implications for the effectiveness of the drug therapy and the patient’s experience of drug treatment. liquids. Topical: ointments. creams. Routes of administration There are various routes of administration available. intramuscular. pessaries. Routes of administration     Oral: Tablets. and whether they suffer any adverse effect from their medicines. powders are taken internally. surgical dressings etc.Formulations The administration of a medicine is a common but important clinical procedure. subcutaneous Others: such as eye-drops. It is the manner in which a medicine is administered that will determine to some extent whether or not the patient gains any clinical benefit. . capsules.

Reddy's Laboratories also makes generic biotech products. regardless of geographic and socio-economic barriers. Dr. Dr. anti-infective and inflammation. which includes New Chemical Entities (NCEs). Its custom pharmaceutical services unit provides contract discovery. . Reddy's Laboratories develops and manufactures branded and unbranded generic drugs and bulk pharmaceutical ingredients. US. cardiovascular indications. antidepressants (generic version of Eli Lilly's Prozac). Our products are marketed globally. One of India's top drug makers. Dr. Global Generics. As a fully integrated pharmaceutical company. and Generic Biopharmaceuticals. Our strong portfolio of businesses. antibiotics. and manufacturing services to other drug makers. and cardiovascular drugs. and Proprietary Products. diabetes treatments. development. The firm sells its products in more than 100 countries through direct sales entities and third-party distribution partners. Differentiated Formulations. our purpose is to provide affordable and innovative medicines through our three core businesses: Pharmaceutical Services and Active Ingredients (PSAI). pain relievers. Dr. Reddy's conducts NCE research in the areas of metabolic disorders. which includes branded and unbranded generics. Its stable of products includes ulcer medicines (branded product Omez is a leading seller). comprising our Active Pharmaceuticals and Custom Pharmaceuticals businesses.COMPANY PROFILE: Established in 1984. with a focus on India. Reddy's Laboratories (NYSE: RDY) is an emerging global pharmaceutical company. geographies and products gives us an edge in an increasingly competitive global market and allows us to provide affordable medication to people across the world. Europe and Russia.

Dr. India Best Workplace in Pharma & Biotech . headquartered in India. Reddy's is committed to the manufacture of premium quality products in compliance with all regulatory requirements and customer expectations. All our manufacturing facilities are successfully inspected for several products by the USFDA and various other Agencies. Ranked 7th in the retail segment in Russia. . Reddy’s is an integrated global pharmaceutical company with strong brand presence established through 28 years of history.7 billion and products marketed in more than 10 countries. Reddy’s is listed on the New York Stock Exchange. with annual sales of $1.Great Place to Work 2008 and 2009 The fastest path to USD 1 billion in revenues amongst Indian Pharma companies Dr. We operate in accordance with cGMP requirements and the USFDA and ICH guidelines & regulations. Dr. the largest player from India Among the Top Ten generic companies in India Among the Top 3 Active Pharmaceutical players globally Top 3 Abbreviated New Drug Application (ANDA) and Drug Master File (DMF) pipeline in the USA     Among the largest players in the Custom Pharmaceutical Services (CPS) segment 4th on Environment & Social Governance Index.We are:      Among the leading global pharmaceutical companies from India 5th largest branded generic player in Germany .

Omkar Goswami. Independent & Non Whole Time Director JP Moreau. Vice Chairman and Managing Director Saumen Chakraborty. Independent & Non Whole Time Director Anupam Puri. Independent & Non Whole Time Director Dr. Kalpana Morparia. Independent & Non Whole Time Director . Independent & Non Whole Time Director Ravi Bhoothalingam.BOARD OF DIRECTORS GV Prasad. Bruce LA Carter. Independent & Non Whole Time Director Ms. Chairman and Chief Executive Officer Satish Reddy. Managing Director & COO Dr.

UNIT 3 – Bollaram. Hyderabad. Hyderabad. Hyderabad.CTO BUSINESS . [-750 km from Hyderabad] CTO BU-HEAD MARKETING SUPPLY CHAIN MANAGEMENT GLOBAL REGULATORY AFFAIRS AND COMPLIA FINANCE HRM MANUFACTURING . UNIT 2 – Bollaram. Hyderabad. UNIT 4 – Jeedimetla.MANUFACTURING FACILITIES UNIT 1 – Bollaram. UNIT 5 – Peddadevulapalli [-150 km from Hyderabad] UNIT 6 – pydibeemavaram.


cardiovascular. Our market penetration through nearly 3000 sales force who connect to more than 3. Reddy’s . diabetes. Omez and Ketorol.00. Eight of our brands feature in the top-300 brands in India that include drugs like Stamlo. oncology.Market Dr. etc. pain management.India today is more than a 200 million dollar venture with presence in almost all major therapeutic areas. Our finished dosage business in India started in 1986 with launch of Norilet (norfloxacin).000 doctors on a regular basis has yielded us reaching all corners of the country and providing affordable and innovative medicines in all major therapeutic areas like gastrointestinal. TOP BRANDS AND PRODUCTS Top Brands & Products GERMANY INDIA RUSSIA NORTH AMERICA (Products) Sumatriptan AG Fexofenadine Glimepiride Oxaprozin Ondansetron Meprobamate SIMVAS ALENDR OMEPRA OXYCOD TRAMAD RAMHCT NISE OMEZ STAMLO STAMLO BETA ATOCOR OMEZ-D OMEZ CIPROLET NISE ENAM KETOROL EXIFINE . dermatology. Reditux.

SCM 11. 1. Liaison 14.R&D 8. Unit – 5 has 14 departments viz. SHE 9. Warehouse 10. Quality control 6.IBUPRO GABAPE RAMIPR BISOPR RAZO ENAM MINTOP CLAMP CETRINE Divalproex Spr. Quality assurance 7. Famotidine 4. TSD . RA 13. Capsules Simvastatin Finasteride Ciprofloxacin Tizanadine The Bulk Activities Division. Ranitidine 2. HRD 12. Naproxen 3. Maintenance 5. Documentation .

Industry. Stand by scrubbers are provided for the alternate arrangement to the incinerator. Infrastructure and other potential areas.  Constantly striving to reduce the manufacturing cost of the products by reducing the solvent losses and upgrading the systems. “To be a top 20 global pharmaceutical company by 2020” MISSION To be the leading Engineering Enterprise providing Quality products System and services in the field of Energy. .  Having well equipped power charging.  Environmental care is being taken by using the incineration and scrubbing systems arresting the liberated gases in to the atmosphere. innovation.  Automation system is provided so that when the incinerator is stopped the feeding stops automatically. weighing and filling systems to reduce man handling in the final stages. MISSION AND OBJECTIVE VISION A world class. Transportation.ABOUT PLANT  Having well equipped solvent recovery plant and recovery solvents are being used there by reducing the inventory. COMPANY VISION. Competitive and profitable Engineering Enterprise Providing total business Solutions.

REDDY’S LABORATORIES. performance and superior customer services. capacity utilization and productivity and generate adequate internal resources to finance the company growth. OBJECTIVES GROWTH: To ensure a steady growth by enhancing the competitive edge of DR.VALUES       Meeting commitments made to External and internal customers.REDDY’S LABORATORIES in exiting business. new areas and international operation so as to fulfil national expectations from DR. Respect for Dignity and potential of individuals. PROFITABILITY: To provide a reasonable and adequate return on capital employed. Creativity and Speed of response. Faster learning. primarily through improvements in operational efficiency. quality. Loyalty and Pride in the Company Zeal to Excel Integrity and fairness in all matters. . Confidence in providing increased value for this money through international standards of product.

2. customers and the country at large have from DR. Good working atmosphere 4.REDDY’S LABORATORIES. 5. Excellent state of art facilities. weakness. IMAGE: To fulfil the expectation which stock holders like government as own employees. SWOT ANALYSIS OF DR.REDDY’S LABORATORIES The strength. Product manufactured international quality 6. Vast pool of trained man power. Low labour cost and low manufacturing cost.TECHNOLOGY: To achieve technology excellence in operations by development of indigenous technologies to and efficient absorption and adaptation of imported technologies to suit business needs and priorities and provide a competitive advantage of the company. Rapport between management and union. opportunities and threats which are being experienced by DR. . 3.  STRENGTH’S 1.REDDY’S LABORATORIES as a growing concern have been summarized up in the following lines.

4. Dominant player in domestic market. Inadequate compensation package to employees.  OPPORTUNITIES 1. . Liberalization has opened up the market 3. Growing power sector machinery 2.  THREATS 1. Slippage in delivery commitments 3. System implementation adequate 4. 3. 2. Liberalization–entry of MNC’S or private sector-more competition. WEAKNESS 1. Poor infrastructure. Excess man power 2. Government taxation policy-against manufacturing sector. No financial package 5. MNC’S taking away good employees with attractive packages.

Respect for the Individual We uphold the self esteem and diginity of each other by creating an open culture conductive for expression of views and ideas irrespective of the hierarchy. every time. Innovation & Continuous Learning We create an environment of innovation and learning that fosters. internal & external. These awards are in the following categories: . in each one of us. Reddy’s scale new heights during the year from across the organization. Collaboration & Teamwork We seek opportunities to build relationships and leverages knowledge. a desire to excel and willingness to experiment. expertise and resource to create greater valve functions.Quality We are dedicated to achieving the highest levels of the quality in everything we do to delight customers. business and locations. Harmony & Social Responsibility We take care to protect our natural environment and serve the communities in which we live and work AWARDS AND RECOGNITION During the company’s Annual Celebrations the Chairman announces a set of awards to honour extraordinary individual and team initiatives that helped Dr.

  Best Quality Driving Team Award Best Innovation Team Award Best Managed Team Award – Operations Best Managed Team Award – Non-Operations Best Business Development Deal Award Best Team Awards for Execution Excellence    Best Team Awards for Customer Delight   Best Team Award for External Customer Delight Best Team Award for Internal Customer Delight  Best Safety & Health improvement Initiative Award Best Team Awards for Sustainability   Best Environmental Initiative Award Best Corporate Social Responsibility Initiative Award .


as no unique body knowledge of its own. And there are still certain areas where controversies exist for which no unanimous solutions have been reached as yet. Though it was a branch of economic till 1890 as a separate activity or discipline it is of recent origin. some provide services to customers.REVIEW OF LITERATURE: INTRODUCTION TO FINANCE: Financial statement is that managerial activity which is concerned with the planning and controlling of the firm financial resources. and draws heavily on economics for its theoretical concepts even today. Still. SCOPE: Firms create manufacturing capacities for production of good. Thus the three most important activities of a business firm are:  PRODUCTION  MARKETING  FINANCE . The subject of financial management is of immense interest both academicians and practising manager. Practicing manager are interested in this subject because among the most crucial decision of the firm are those which relate to finance and an understanding of the theory of financial management provides them with conceptual and analytical insight to make those decision skilfully. It is of great interest to academicians because the subject is still developing. They fund to acquire manufacturing and other facilities. They sell their goods or services to earn profit.

inverting them in assets and distributing returns earned from assets to shareholder respectively. The function of raising funds. Yet the function themselves can be readily identified. ACCORDING TO Mr.FUNCTION: The finance function form production. INDEPTH ANALYSIS OF FINANCIAL ANALYSIS: (A)DEFINITIONS: The term “financial analysis” is also known as “analysis and interpretation of financial statements”. profit and loss account and other operative data. The finance functions are:  Investment or long term asset mix decision  Financing or capital mix decision  Dividend or profit allocation decision  Liquidity or short term asset mix decision.” . marketing and other functions. HARRY GUTTMANN: “The first and most important functions of financial statements are of course to those who control and direct the business to the end of security the profits and maintaining sound financial conditions. It refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationships between the items of the balance sheet.

These statements are useful to management. (C)CONVENTIONS: According to the American institute of certified public accounts. “a combination of recorded facts accounts conventions and personal judgements and the judgements and the conventions applied affect them materially”.(B)NATURE OF FINANCIAL STATEMENTS: The term “financial statements” refers to the balance sheet reflection the financial position of the assets. creditors. this implies that the exhibited in the financial statements are affected by recorded facts. accounting conventions personal judgements. government and public at large. financial statements reflect. (D) USES AND IMPORTANCE OF FINANCIAL STATEMENTS: The financial statements are mirrors which reflect the financial position and operating strength’s or weaknesses of the concern. bankers. It is meant that within the limits of accepted accounting principles and the very human abilities of the persons preparing them they have to rely on judgements and estimated divorced of prejudice. liabilities a capital of a particular company during a certain period and profit and loss account showing the operational results of the company during a certain period. workers. George O May points of the following measure used of financial statements:  As a basis for taxation.  As a basis for price or rate regulation  As a guide to the value of investment already made  As a basis for granting credit. . investors. Financial statements are plain statements of informed opinion uncompromising in their truthfulness.

 Due to these limitations it is said that financial statements don’t show the financial conditions of the business rather they show. the position of financial accounting for a business.  They tend to give an appearance if finality and accuracy. Any value to the amounts presented in the statement depends on the value standards of the person dealing with them. which have a hearing on financial conditions and operating results because they cannot be stated in terms of money and are qualitative in nature. hence.  They do not give effort to many factors.  The balance sheet loses its functions as an index of current economic realities due to the fact the financial statements are compiled on the basis of historical costs while there is a market decline in the value of the monitoring unit and the resultant rise in prices. the public in general evinces interest in the financial statements.(E)LIMITATIONS OF FINANCIAL STATEMENTS:  Financial statements are essentially interim reports and hence cannot be final because the actual gain or loss of a business can be determined only efface it has put down its shutters. (F)PARTIES INTERESTED IN FINANCIAL STATEMENTS: Now days the ownership of capital of many public companies has become truly board based due to dispersal of shareholding. The problem has become more important especially during the war and the post war period. As already mentioned. such persons and bodies include: . because they are expressed in exact money amount. Apart from the shareholders there are other persons and bodies who are also interested in financial results disclosed by the annual reports of the companies. Such factors are reputation and prestige of the business with the public its credit rating the efficiency and loyalty of its employees and integrity of the management.

Debenture holders 4. The analysis of and interpretation of financial statements represents the lost of the four measure steps of accounting viz. Potential investors 2. Members. debt and maturities (current and long term) and profitability of a sound dividend policy. Economic and investment analysis 7. (G)ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: Analysis and interpretation of financial statements are and attempt to determine the significance and meaning of the financial statement data as so that a forecast can be made of the prospects for future earnings ability to pay interest. 3. potential suppliers or other doing business with the company. Credit institutions like bankers. Employee customers who wish to make along standing contact with the company. Creditors. 6.1. . 5. Financial analysis main function is pinpointing of the strength’s and weaknesses of a business concerns by regrouping and analysis of figure contained in financial statements by making comparisons of various component and by examine their content. The financial manager uses this as the basis to plan future financial requirements by means of forecasting and budgeting procedures.

One can achieve this by comparisons made between related items in the statements series of years. the data is more maintain full and it is placed in better perspective when it is provision and by means of measurement. it’s relationship with others is established in terms of if relative significance and it is ranked in terms of its relative significance. (H)TYPES OF FINANCIAL STATEMENTS: Financial statements primarily comprise two basic statements: 1. The income statements or the profit and loss account. Those. The analysis must group that represents sound and unsound relationships reflected by the financial statements. The position statements of the balance sheet.  Analysis and interpretation of financial statements results in the presentation of information that assets business managers.  Preparation of financial statements.  Recording of the information in the journals. This requires a clear understanding of monitoring item of the items. creditors and investors. Summarization in largest and preparation of work sheet. Analysis of each transaction to determine the accounts to debited and credited and the measurements and the valuation of each transactions to determine the amounts involved. 2. Accounting principles specify that a complete set of financial statements must include: .

The right hand shows properties and assets and the left hand shows liabilities. STATEMENT OF CHANGES IN OWNERS EQUITY: The term owner’s equity refers in the claims of the owners of the business against the assets of the firm. A balance sheet 2. Retained earnings/reserves and surplus representing undistributed profits. INCOME STATEMENT OR PROFIT AND LOSS ACCOUNT: Income statement is prepared to determine the operation position of the concern.e. 4. Paid up share capital i. A statement of changes in financial position. It shows the properties that are owned on one hand and on the other hand the sources of the assets owned by the concern and all the liabilities and claims it owes to owners and outsiders. An income statement 3. A statement of change in owners accounts. BALANCE SHEET: The balance sheet is one of the important statements depicting the financial strength of concern. The balance sheet is prepared on a particular date. 1. in the form of profit and loss account to determine net profit or net loss. 2. The income statement may be prepared in the form of manufacturing account to find out the cost of the production in the form of trading accounts to determine gross profit or loss. the initial amount of funds invested by the shareholders. It is a statement of revenues. It consists of two elements. .1.

But there are many transactions that do not operate through profit and loss account. Those for a better understanding another statement of changes in financial position has to be prepared to show the changes in assets and liabilities from the end of another point of time. in most cases the owners equity account changes significantly in retain earnings and hence the statement of changes in owners equity becomes merely a statement of retained earnings. the elements of financial positions are then in a comparative form to give idea of financial position of two or more periods. the balance sheet and profit and loss account and income statement of a business reveals the net effect of various transactions on the operational position of the company.e. The statement of changes in financial position may take any of the two forms. STATEMENT OF CHANGES IN FINANCIAL POSITION: The basic financial statement i. However. They are:   Funds statements Cash flow statements TOOLS OF FINANCIAL ANALYSIS USED IN THE STUDY: MEANING OF COMPARATIVE STATEMENT: The comparative financial statements are the statements of the financial position of different periods. and its ending balance.The statement of changes in owners equity simply shows the beginning balance of each owners equity account. the reasons of increases and decreases in each. The comparative statement may show:  Absolute figures .

It represents all assets owned by the business at a particular movement of time and the claims of the owners and outsiders against those assets at the time. The comparative income statement gives an idea of the program of a business over a period of time. The increase or decrease in sales should be compared with the increase or decrease in cost of goods sold. COMPARATIVE INCOME STATEMENT: The comparative income statement gives the results of the operation of a business.e. The important distinction between an income statement and balance sheet is that the income statement is for a period where as balance sheet is on a particular date. An increase in sales will not always mean an . Increase or decrease in terms of percentage. COMPARATIVE BALACE SHEET: It is a statement of financial position of a business at a specific movement of time. increase or decrease in absolute figures. GUIDELINES FOR INTERPRETATION OF INCOME STATEMENT: The analysis and interpretation of income statement will involve the following steps: 1. Absolute data in terms of percentage.   Changes in absolute figures i. It is a way they shape the financial condition of the business at that time. The changes in absolute data in money values and percentages can be determined to analyze the profitability of the business.

An opinion should be formed about profitability of the concern and it should be given at the end. Selling and distribution expenses should be deducted from gross profit to find out operating profit which will result from the increase in sales position and control of operating expenses. total liabilities and total sales. COMMON SIZE STATEMENTS: The common size statement. The increase or decrease in net profit give an idea about overall profitability of the concern. writing off to deferred expenses or deducted from operational profit we get the figure of operating profit. The figures are shown as percentages of total assets. balance sheet and income statement are shown in analytical percentages. 2. loss from sale of assets. The second step of analysis should be the study of operation profit. The profitability will improve if increase in sales promotion and the control of operating expenses. non-operating expenses such as interest paid. This should be mentioned whether the overall profitability is good or not. The operating expenses such as office and administrative expenses. 3. . The total assets are taken as of and different assets are expressed as a percentage of the total.increase in profit. 4.

Common size balance sheet: A statement in which balance sheet items are expressed as the ration of each asset to total assets and the ratio of each liability is expressed as a ratio of total liabilities is called common sized balance sheet. The increase in sales will certainly increase selling expenses and not administrative are financial expenses.1. TREND ANALYSIS: Trend percentages: The method of trend percentages in useful analytical device for the management since y substitution of percentage for large amounts. The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. Common size income statement: The items in income statement can be shown as percentage of sales to show the relation of each item to sales. A significant relationship can be established between item of income statement and value of the sales. Trend percentages are immensely helpful in making comparative study of the final statements for several years. . Each item of the base year is taken as 100 and on the basis the percentage for each of the item of each year is calculated. the clarity and readability are achieved. 2. The earliest year may be taken as base year.

REDDY’S LABORATORIES for the period of 2007-2010. but they show the relationship between two items in a more meaningful way.REDDY’S LABORATORIES for the above period. we have to calculate the trend values for these periods. RATIO ANALYSIS: A ratio is a simple mathematical expression. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT: An attempt has been made to analyze and interpret the financial statements of DR.Least Square Method: This method is widely used in practised. Ratios do not add to any information that is already available. expressing the quantitative relationship between the two. It is a number expressed in terms of another number. Ratio analysis is a very important tool of financial analysis. It is the process of establishing a significant relationship between the items of financial statements to . Based on this value we can easily forecast the values of the future period. It is a mathematical method and with the help of a trend line fitted to the data in such a manner by using the actual figures of the study period. The method of least square may be used either to fit a straight line trend or a parabolic trend. These statements were prepared on the basis of the data in the balance sheets and profit and loss accounts of the DR. The straight line is represented by the equation Y(C) =A+B(X). ratio analysis is the technique of interpretation of financial statements with the help of various meaningful ratios.

It is current assets that yield funds in the short period. In a short period of a firm should be able to meet all its short-term obligation i. Comparison of one firm with the industry as a whole.  LIQUIDITY RATIOS: it measures the short-term solvency of the firm. 4. They help us to draw certain conclusions. 1. 2. current liabilities and provisions. Comparison of one firm with another firm in the industry. 3. 5.provide a meaningful understanding of the performance and financial position of the firm. TYPES OF RATIOS  Liquidity ratio  Capital structure/leverage ratio  Profitability ratio  Activity ratio. Ratios may be used for comparison in any of the following ways. Current assets should not only yield sufficient funds to meet . which the firm can convert it into cash within one year or short run. Current assets are those. Comparison of a firm with its own performance in the past. Comparison of an achieved performance with pre-determined standards. 6.e. Comparison with related facts is the basis of ratio analysis. Comparison of one firm with its own performance in the past. Comparison of one department of a concern with other departments.

outstanding incomes. provision for taxation. Cash ratio 4. assured incomes and short term or temporary investments. bank overdrafts. bills receivable. The following are the important liquidity ratios: 1. They include bills payable. CURRENT RATIO= CURRENT ASSETS/ CURRENT LIABILITIES Generally 2 : 1 ratio is considered ideal for the company. Acid test/quick ratio. Current ratio 2. net sundry debtors. finished goods and working in progress. prepaid expenses. Current assets are the assets that are expected to be realized in cash or sold or consumed during the normal operating cycle of the business or within one year. proposed dividend. stock of raw materials. sundry creditors. Quick assets . unclaimed dividends and short term loans and advanced repayable within one year. they include cash in hand and bank. 2. Current ratio: Current ratio is the ratio of current assets to current liabilities. ACID TEST/QUICK RATIO: the acid test ratio is the ratio between quick current assets and current liabilities and calculated by dividing the quick assets by current liabilities. Any instalment of long-term liability payable within the next 12 months is also current liability. whichever is longer. Current liabilities are the liabilities that are to be repaid within a period of one year. 3.current liabilities as they fall due but also to enable the firm to carry on its day-today activities. income receivable in advance. Net working capital ratio 1. outstanding expenses.

. Generally 1: 1 ratio is considered to be ideal for the company. it is calculated dividing cash and bank balance by current liabilities.mean those which can be converted into cash immediately by exclusion of inventory and prepaid expenses from current assets. Net Working Capital Ratio = net working capital/capital employed. Acid test Ratio=Quick assets/Current liabilities. CASH RATIO= Cash and Bank balances/Current liabilities.  CAPITAL STRUCTURE/LEVERAGE RATIO: These ratios indicate the relative interests of owners and creditors in a business by showing long term financial solvency and measure the enterprise’s ability to pay the interest regularly and to repay the principal on maturity or in pre-determined instalments at due dates. CASH RATIO: The cash ratio is the ratio of cash and bank balance. 3. 4. To satisfy contingencies and uncertainties. Generally higher ratio is considered ideal for a company. NET WORKING CAPITAL RATIO: Working capital ratio refers to comparing current assets to current liabilities and serve as the liquidity reserve avail. It is calculated by dividing net working capital by capital employed. Generally 1: 2 ratios are considered to be ideal for a company.

The significant leverage ratios are: 1. Fixed assets Ratio 5. Debt Equity Ratio 2. Proprietary Ratio 3. Debt Equity Ratio=long term liabilities/share holders funds. Interest coverage Ratio 6. A high proprietary ratio is indicative of strong financial position of business. 1.Debt Equity Ratio : It reflects the relative claim of creditors and shareholders against the assets of the business. Equity includes equity and preference share capital and reserves. Ideal debt equity ratio is 2 : 1 2. . Dividend Coverage Ratio 7. Capital Gearing Ratio. 4. Debt Service coverage Ratio.Propreitary ratio: It expresses the relationship between the net worth and total assets. Debt usually refers to long-term liability. Proprietary ratio = Net worth/ Total Assets Net worth = Equity share capital + fictitious Assets Total assets= fixed assets + Current Assets Generally higher the ratio the ideal it is.

67 : 1 is considered ideal for a company.Fixed Assets Ratio: This ratio indicates the mode of financial the fixed assets. whereas a lowly geared company would find it attractive to raise funds by way of term loans and debentures. share capital. Capital . . Equity share holder funds=Equity share capital +reserves-fictitious funds. It is calculated as Interest coverage ratio=PBIT/Fixed interest charges PBIT=Profit before interest and taxes=PAT + Interest + Tax Generally a ratio of around 6 is normally considered as ideal for a company. Capital Gearing Ratio: A company is said to be highly geared if it has a high capital gearing ratio and lowly geared if the capital gearing ratio is low. Generally a ratio of 0.3. 4. The extent of gearing determined the future financial structure of the business. . It is calculated as Fixed assets Ratio= Fixed assets/capital employed Capital employed= equity share capital + preference share capital +reserves + long term Liabilities – Fictitious Assets. A company that is highly geared will have to raise funds by issuing fresh equity shares. 5. Gearing Ratio = funds bearing fixed interest and fixed dividend/equity share holder’s funds Funds bearing fixed interest and capital=Debentures + term loans +preference . This ratio indicates whether a business is earning sufficient profits to pay the interest charges.Interest Coverage Ratio: This ratio is called as “debt service ratio”.

In other words.Debt service coverage Ratio: It indicates whether the business is earning sufficient profits to pay not only the interest charges. Generally they are calculated either in relation to sales or in relation to investments.6. .Rate of income Tax) Generally greater the ratio. it indicates to us the profitability of the business.Dividend coverage ratio: It indicates the ability of a business to pay and maintain the fixed preference dividend to preference shareholders. Dividend coverage ratio=PAT/Fixed preference dividend. (A) GENERAL PROFITABILITY RATIO’S: 1. It is calculated as Gross Profit Ratio=(Gross Profit/Net sales)*100 Gross Profit=net sales-cost of goods sold. the better is the servicing ability of company.Gross Profit Ratio: Gross profit is one of the most commonly used ratios. but also the instalments due to the principal amount.  PROFITABILITY RATIO: Profitability ratios measure the profitability of a company. It reveals the result of trading operations of the business. PAT= Profit After Taxes 7. It is calculated as Debt service Coverage Ratio =(PBIT/Interest + Periodic Loan Installation)/(1. The various profitability ratios are discussed under the following heads.

the more profitable to the company. It is calculated as Operating Ratio=cost of goods sold + Office and Administrative expenses + selling and distribution Expenses. EXPENSES RATIO: Expenses ratios are the ratios that supplement the information given by the operating ratio.NET PROFIT RATIO: It indicates the results of overall operations of the firm. 3. 5.OPERATING RATIO: It expresses the relationship between expenses incurred for running the business. and the resultant net sales. the better it is to the company. OPERATING PROFIT RATIO: It establishes the relationship between operating profit and sales. Generally the higher the ratio. Generally lower the ratio.Sales Returns Cost of Goods Sold=Opening Stock + Purchases + Manufacturing expenses-closing Stock. 2. It is called as Net Profit Ratio=(Net Profit after Tax/Net Sales)*100 Generally higher the ratio. Net profit ratio tells us about overall profitability. Each of the expense rations highlights the relationship given by the particular . It is calculated as Operating Profit Ratio=(Operating Profit/Net Sales)*100 Generally higher the ratio. the better will be the performance of the company. While the gross profit ratio indicates the extent of profitability of core operations. 4. the better it is to the company.Net Sales=Total Sales.

Generally higher the ratio.expense and net sales. the ratio is also known as return on invested capital ROCE= (Profit before interest and taxes/capital employed) *100 2. RETURN ON NET WORTH(RONW): It indicates the return. All such ratios fall under the broad head of expenses ratios. which the shareholders are earning on their resources invested in the business. . It is calculated as RETURN ON EQUITY= PAT.RETURN ON CAPITAL EMPLOYED RATIO(ROCE) OR RETURN ON INVESTMENT RATIO(ROD): This ratio reveals the earning capacity of the capital employed in the business. capital employed is permanent capital invested in the business. 3. the better it is to the company. the better it is to the shareholders. It is also called capital and hence. In other words. after adjusting for debt and preference capital. For example. (B) OVERALL PROFITABILITY RATIOS: 1.Preference dividend/equity shareholders funds. factory expenses ratio is of factory expenses to net sales any expenditure can be shown as a ratio to sales. It is calculated as RONW=(Profit after Tax/Net Worth)*100 Generally higher the ratio. RETURN ON EQUITY CAPITAL: It expresses the return earned by the owners of the business.

the better it is to the shareholders. 6. . Generally the ratio. the happier the investor. It is calculated as Dividend Pay Out Ratio=DPS/EPS 8. It is calculated as DPS=Dividend on equity share capital/number of equity shares Generally from investors point of view. RETURN ON ASSETS RATIO(ROA): Return on assets reflects the return earned by the firm for the company for the shareholders of the business on the investment of all the financial resources committed to the business. It is calculated as EPS= PAT-Preference dividend/number of equity shares. It is calculated as ROA=PAT/TOTAL SALES Generally higher the ratio. the higher the ratio. EARNINGS PER SHARE (EPS): It is the earning accruing to the equity shareholders on every share held by them. 5. DIVIDEND PAY OUT RATIO: It is the ratio of dividend per share to earning per share. the better is the performance of the company. PRICE EARNING RATIO(P/E Ratio): It expresses the relationship between market price of one share of a company and earnings per share of that company. 7.4. Dividends per share (DPS): It is the amount of dividend payable to the holder of one equity share. P/E Ratio=Market Price of Equity share/EPS There is no ideal P/E ratio.

Generally higher the book value of the share. without accounting for any capital appreciation. get converted into sales. INVENTORY TURN OVER RATIO OR STOCK TURN OVER RATIO: Stock turnover ratio indicates the number of items the stock has turned over into sales in a year. Average Stock=(Opening Stock + Closing Stock)/2 Generally 8 is considered ideal ratio of the company. BOK VALUE: It is the fraction of the net worth of the business as depicted in the balance sheet. DIVIDEND YIELD RATIO: It expresses the relationship between dividend earned per share and the market price per share. in which funds are blocked up.  ACTIVITY RATIO: Activity ratios measures the efficiency or effectiveness with which a firm managers its resources or assets. The significant activity or turnover ratios are 1.9. In other words. the more strong the business is assumed to be. They calculate the speed with which various assets. It indicates to us the extent of stock required to be held in order to achieve a desired level of sales.Dividend per share/Market price of share. it expresses the return on investment by purchasing a share in the stock market. it is calculated as BOOK VALUE=Equity share holders funds/number of equity shares. which is attributable to one equity share of the business. . Inventory Turn Over Ratio = Cost of Goods Sold/Average Stock Cost of Goods Sold=Sales-Gross Profit. It is calculated as DIVIDEND YIELD RATIO. 10.

the greater is the ability of the firm to utilize the investments in the business. Generally the ratio between 10-12 an ideal value for the company. WORKING CAPITAL TURNS OVER RATIO: This ratio is defined as Working Capital Turn over Ratio= Cost of Goods Sold/Working Capital Working Capital=Current Assets.Current Liabilities. Generally higher the ratio. 6.2. Fixed Assets Turn Over Ratio: It is defined as ratio of Net Sales to the Fixed Assets. Generally the ratio 12 is an ideal for the company. . CREDITORS TURN OVER RATIO: Creditors turnover ratio expresses the relationship between creditors and net credit purchases. 5. It is calculated as Debtors Turn Over ratio= Net Credit Sales/Average Debtors. It is calculated as Creditors Turn Over Ratio= Net Credit Purchases/Average Creditors. TOTAL ASSETS TURN OVER RATIO: It is defined as ratio of Net Sales to the Total Sales. 4. 3.DEBTORS TURN OVER RATIO: Debtors Turn over Ratio expresses the relationship between debtors and net credit sales. Generally higher ratio indicates efficient utilization of firm’s funds. Generally the ratio of around 5 is considered ideal for the company.


201002 03 04 05 06 07 08 09 10 11 Current asset liabilities ratio Current Asset Current asset liabilities ratio Current Liability Current Asset Liability Ratio Interpretation –The ideal ratio for the concern is 2:1 i. current assets doubled for the current liabilities considered to be satisfactory.Thus it has to maintain its efficient current assets.2007.2004.83 1.2005.27 1.Current Asset Liability Ratio year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 current assets 155792 166669 155652 192697 235062 276062 310002 453597 580804 771519 current liability Ratios 73129 74427 84990 116644 143200 208869 243220 376332 397574 502024 2.23 1.2003.REDDY’S LABORATORIES is less than! .32 1.13 2.2006.2 1.46 1. .2009.54 800000 700000 600000 500000 400000 300000 200000 100000 0 2001.65 1.2002.e.64 1.2008. The current ratio of DR.

00371 0. thus the management of DR.2007. The company is maintaining the ratio above the standard norm.REDDY’S LABORATORIES is label to meet its current obligations.2004.2003.2008.017 0.032 0.00003986 0.00003 0.002818 600000 500000 400000 300000 200000 100000 0 2001.2002.00005 0.2006.018 0.Acid Test Ratio Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Liquid assets Liquid liabilities 898 73129 1281 74427 472 84990 2094 116644 4643 143200 12 208869 14 243220 15 376332 1475 397574 1415 502024 Ratio 0.201002 03 04 05 06 07 08 09 10 11 Liquid Assets Liquid Liabilities Ratios Acid Test Ratio – Current Assets – Inventory / Current Liabilities The ideal quick ratio is 1:1 which is considered satisfactory for the concern.2005.2009.012 0. .005 0.

8931 0.89 0. .2008.894 0.201002 03 04 05 06 07 08 09 10 11 Net working capital Capital employed Ratios NET WORKING CAPITAL = NET WORKING CAPITAL / CAPITAL EMPLOYED A higher networking capital ratio indicates efficient utilization of working capital.2005.2003.2009.2004.89 0.2006.797 0.2002.84 0.9131 0.Net working capital Net working year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 capital 82663 92242 70662 76053 91862 67193 96410 77265 183230 269495 Capital employed 90522 99337 79114 85026 102462 79459 107986 96894 207051 305907 Ratios 0.884 0.881 350000 300000 250000 200000 150000 100000 50000 0 2001.2007.93 0. Therefore the company should concentrate more on working capital management.

15 0.62 0.789 0.17 0.11 0.32 0.18 0.Debt equity ratio: year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total debt 497 573 386 513 1053 607 587 2566 2034 2265 Equity 3252 3252 3252 3252 3252 3252 3252 3252 3252 3252 Ratios 0.62 for the financial year 2009-10 .70 3500 3000 2500 2000 1500 1000 500 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total debt Equity Ratios Debt Equity Ratio: The debt equity ratio has been increasing over the years and it has been maintained at a level of .15 0.18 0.

10 350000 300000 250000 200000 150000 100000 50000 0 2001.11 0.11 .2006.08 0.2007.REDDY’S LABORATORIES is much less at 0.Fixed assets ratio Capital year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Fixed Assets 7859 7095 8360 8896 10600 12347 9909 17699 22595 31830 employed 90522 99337 79114 85026 102462 79459 107986 96894 207051 305907 Ratios 0.2009.2008. the fixed assets ratio should never be more than!. Therefore.2004.15 0.2002.07 0.1 0.2003.1 0.09 0.2005.18 0. The results for DR.07 0.67 is considered ideal.201002 03 04 05 06 07 08 09 10 11 ` Fixed assets Capital employed Ratios Fixed Assets Ratio = Fixed Assets / Capital Employed Generally financially well managed company will have its fixed assets financed by long term funds.A ratio of .

24 27.6 29.03 12.51 11.17.REDDY’S LABORATORIES is not constant.= PBIT/INTREST Interest coverage ratio of DR.97 89.01 329.200707 08 200809 200910 201011 PBIT Interest Ratio Interest Coverage Ratio. from 2008-09 the ratio is10 as in 2009 -10 the ratio is 12.74 10.18 140000 120000 100000 80000 60000 40000 20000 0 200102 200203 200304 200405 200506 2006.17 15. There is a random fluctuation in the ratio .Interest coverage ratio year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 PBIT 13500 13420 15821 33122 60867 63290 68916 68478 86438 130330 Interest 3054 258 48 1105 682 2300 5870 6826 7101 8583 Ratios 4.42 52.

the better for the performance of the concern .088 0.2006.196 700000 600000 500000 400000 300000 200000 100000 0 2001.2005. the company has started to increase from the year on year which is a very good sign for the company.In DR. .REDDY’S LABORATORIES .227 0.172 0.2009.Gross profit year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Gross profit 13500 13420 15821 33122 60867 63290 68916 68478 86483 130330 Net sales 153205 137838 174490 174668 267217 289241 310235 414816 500342 665323 Ratios 0.189 0.07 0.2224 0.201002 03 04 05 06 07 08 09 10 11 Gross profit Net sales Ratio Gross Profit = Gross /net sales Generally the higher gross profit ratio.2003.2007.2004.218 0.165 0.2008.097 0.2002.

76 0.8 0.79 700000 600000 500000 400000 300000 200000 100000 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Operating cost Net sales Ratios Operating Ratio: Operating Cost / Net Sales Generally the lower the Operating Cost.81 0. The ratio should be below1 which is satisfactory for the concern. the better for the concern.75 0.85 0.Operating ratio year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Operating cost Net sales 131006 116708 149823 136630 201962 221227 234677 338382 404647 524531 153205 137838 174490 174668 267217 289491 310235 414816 500342 665323 Ratios 0. .76 0.78 0.85 0.84 0.

the better for the concern.201002 03 04 05 06 07 08 09 10 11 PBIT Capital employed Ratios Return on Capital Employed = PBIT/Capital Employed The higher the ROCE ratio.638 0.2006.2007.389 0.706 0.2009.2002. The company has been keeping up the good performance is increasing at the rapid phase which in turn is a good sign for the company.796 0.417 0.2008. .199 0.594 0.135 0.426 350000 300000 250000 200000 150000 100000 50000 0 2001.2003.2004.Return on capital employed Capital year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 PBIT 13500 13420 15821 33122 60867 63290 68916 68478 86438 130330 employed 90522 99337 79114 85026 102462 79459 107986 96894 207051 305907 Ratios 0.149 0.2005.

201002 03 04 05 06 07 08 09 10 11 Net credit sales Average debtors Ratio Debtors Turnover Ratio = Net Credit Sales / Average Debtors The DR.2007.53 1.2004.2006.44 1.44 1. the increasing trend Implies the efficient management of Debtor and credit sales .97 1.2009.2005.44 to 1.1 1.8 1.2002.Debtors turnover ratio Average year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Net credit sales debtors 153205 137838 174490 174668 267217 289491 310235 414816 500342 665323 85001 81237 82829 112238 135322 177301 215291 287414 328201 537364 Ratios 1.2008.Its has bee increasing since 2008-09 from 1.63 1.55 1.69 2.53 in 2009-10.24 700000 600000 500000 400000 300000 200000 100000 0 2001.REDDY’S LABORATORIES `s debtor turnover ratio was below 2 .2003.

2005.79 0.2003.2006.2008.4664 58078 0. .54926 88228 103305 0.49 0.4 0.Creditors turnover ratio Net credit year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 purchases 12060 16646 16350 16727 19656 21772 25459 31900 60293 65700 Average creditors 29738 27610 20467 24225 39495 46452 54586 Ratios 0.6 0.2002.2004.2009. The management should try to reduce this by adopting proper payment policies.REDDY’S LABORATORIES `s creditors Turn Over Ratio is at 0.68 0.68 .2007. it has been on the increasing trend since past two financial years.48 0.81 0.64 120000 100000 80000 60000 40000 20000 0 2001.201002 03 04 05 06 07 08 09 10 11 Net credit purchases Average creditors Ratio Creditors Turnover Ratio: Net Credit Purchases /Average Creditors Interpretation: The DR.

87 19.2 23.49 19.In DR. = Net Sales / Fixed Assets At high fixed assets turnover ratio indicates better utilization of the firms fixed assets.14 20.63 31.42 20.This is a very good sign for the company.3 23. .63 25.Fixed asset turnover ratio year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Net sales 153205 137838 174490 174668 267217 289491 310235 414816 500342 665323 Fixed assets 7859 7095 8360 8896 10600 12247 9909 17699 22595 31830 Ratios 19.REDDY’S LABORATORIES it is more than 22.90 700000 600000 500000 400000 300000 200000 100000 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Net sales Fixed assets Ratio Fixed Assets Turnover Ratio.43 22. A ratio around 5 is considered ideal for the concern .

78 0.17 0. This shows greater ability of the firm to utilize the investment in the business .18 0.62 0.Total asset turnover ratio year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total debt 497 573 386 513 1054 607 587 2566 2034 2265 Equity 3252 3252 3252 3252 3252 3252 3252 3252 3252 3252 Ratios 0.18 0.15 0.32 0.70 3500 3000 2500 2000 1500 1000 500 0 200102 200203 200304 200405 200506 200607 200708 200809 200910 201011 Total debt Equity Ratio Total Assets Turnover Ratio: Net Sales / Total Assets The Total Assets turnover ratio of the DR.11 0.15 0.REDDY’S LABORATORIES is below 1 .

Comparative income statement 2009-2010 and 2010-11 DESCRIPTION 2009-10 2010-11 increase/decrease increase/decrease TURNOVER.89% 0.REDDY’S 1106 LABORATORIES .04% -15.58% 42.20% 33.97% -151.19% 32.83% .DR.NONDR.43% 97.04% -3.00% 18.REDDY’S LABORATORIES TOTAL TURNOVER CHANGES IN WIP CHANGES IN FG EXPORT INCENTIVES GROSS TURNOVER EXCISE DUTY GTO LESS ED DIRECT MATERIALS SUB-CONTRACT PAYMENT POWER AND FUEL TRANSFER IN SERVICE TOTAL OF `C' VALUE ADDED 500342 49447 -9622 690 540857 16859 523998 340315 1356 1746 806 344223 179775 499236 664923 165687 665323 164981 -25439 -74886 -9622 669 -422 640553 99696 33288 16429 607265 83267 342167 1852 1682 378 1693 -53 681 -125 346223 2000 261042 81267 -21.44% 15.544% 24.45% 400 -706 -63.51% 0.

INCOME TOTAL OF `E' GROSS MARGIN (PBIDT) DEPRECIATION DRE ON VRS GROSS PROFIT (PBIT) INTEREST PROFIT BEFORE TAX GTO LESS ED 62236 3902 69941 7795 5861 2059 12.57% -226 894 11522 88686 91089 4606 38565 -1523 23356 11834 125481 36795 135561 44472 5231 625 0 86483 -7101 93584 523998 130330 43847 -2905 -10006 133235 39651 607265 83267 0 50.REDDY’S LABORATORIES PROVISIONS PROV.82% 13.71% 41.22% % % 102.37% 15.90% OPERATING COST 404647 524531 119884 .76% 7101 8583 1482 20.REDDY’S LABORATORIES OTHER EXPENSES .87% 26301 27410 1109 4. LESS:MISC.PERSONNEL PAYMENTS INDIRECT MATERIALS OTHER EXPENSES DR.70% -140.EXCH.38% 52.NON DR.91% 42.VAR.49% 48.

98% 378 38.58% 20.61% 6.16% 30.78% -40.86% % -37.95% 25.41% 2009-10 Increase/Decrease Increase/Decrease% 779 1106 327 41.DR.29% 28.REDDY’S LABORATORIES TOTAL TURNOVER CHANGES IN WIP CHANGES IN FG EXPORT INCENTIVES GROSS TURNOVER EXCISE DUTY GTO LESS ED DIRECT MATERIALS SUB-CONTRACT PAYMENT POWER AND FUEL TRANSFER IN SERVICE TOTAL OF `C' VALUE ADDED PERSONNEL PAYMENTS 414816 10637 4938 1112 431503 24537 406966 259592 978 1925 1347 263842 143124 58365 414037 499236 85199 500342 85526 49447 38810 -9622 690 -422 540857 109354 16859 -7678 523998 117032 340315 86723 1356 20.NONDR.76% 33.62% 364.46% 25.63% 1746 -169 806 -541 344223 80381 179775 36651 62236 3871 .REDDY’S LABORATORIES .34% -31.Comparative income statement 2008-09 & 2009-10 DESCRIPTION 2008-09 TURNOVER.65% -8.

LESS:MISC.33% 15402 26301 10899 70.REDDY’S LABORATORIES OTHER EXPENSES .INCOME TOTAL OF `E' GROSS MARGIN (PBIDT) DEPRECIATION DRE ON VRS GROSS PROFIT (PBIT) INTEREST PROFIT BEFORE TAX GTO LESS ED 4560 3902 -658 -14.EXCH.79% 68478 -6826 75304 406966 86483 18005 -7101 93584 18280 523998 117032 0 26.18% 25.VAR.INDIRECT MATERIALS OTHER EXPENSES DR.27% 28.76% OPERATING COST 338382 404647 66265 .72% 15.50% 25.43% 6436 7101 665 10.NON DR.REDDY’S LABORATORIES PROVISIONS PROV.76% 142 -324 13913 70668 72456 3978 -226 894 11522 -2391 88686 18018 91089 18633 4606 628 0 -17.29% 24.

NONDR.28% 41.48% 1925 85 1347 -47 263842 75973 143124 23339 .Comparative income statement 2007-2008 and 2008-09 comparative income statement DESCRIPTION 200708 TURNOVER.93% 40.85% -9.74% 33.56% -51.DR.62% -11.20% 2008-09 Increase / Decrease Increase / decrease % 667 779 112 16.REDDY’S LABORATORIES TOTAL TURNOVER CHANGES IN WIP CHANGES IN FG EXPORT INCENTIVES GROSS TURNOVER EXCISE DUTY GTO LESS ED DIRECT MATERIALS SUB-CONTRACT PAYMENT POWER AND FUEL TRANSFER IN SERVICE TOTAL OF `C' VALUE ADDED 310235 17781 4591 2283 334890 27236 307654 183845 790 1840 1394 187869 119785 309568 414037 104469 414816 104581 10637 -7108 4938 347 1112 -1171 431503 96613 24537 -2699 406966 99312 259592 75747 978 33.44% 19.71% -39.91% 32.97% 7.REDDY’S LABORATORIES .79% 188 23.80% 4.29% 28.


36001 4039

58365 22364 4560 521

62.12% 12.90%


6436 311 5.08%


15402 2554 19.88% -92.13% % 18.96% 48.63% 0.303% 19.78%

1805 -1524 11746 47548 72237 3321

142 -1663 -324 13913 2227 70668 23120 72456 219 3978 657 0

68916 -5870 74786 307654

68478 -438 -6826 75304 518 406966 99312 0

-0.64% % 0.69% 32.28%



338382 103705


1. The net working capital was Rs 91021 lac’s in 2000-2001. This decreased to Rs 82663 lac’s in the year 2001-2002. In the year 2006-2007 the net working capital is Rs 67193 lac’s. 2. The current ratio of DR.REDDY’S LABORATORIES was 2.41 in the year 2000-2001. There was decrease in the ratio up to the year 2007-2008. The ratio is decreasing year by year. But the DR.REDDY’S LABORATORIES is maintaining current ratio more than the standard norms of 2. 3. The organization is able to maintain both current ratio and quick ratio above the standard norms. i.e. the ideal current ratio for the concern is 2:1 and the quick ratio is 1:1 but the cash ratio is fluctuating. 4. The quick ratio of the organization is in decreasing trend year by year. 5. Investment in current assets has been increasing from Rs 155302 lacs in 2000-2001 to Rs 310002 in 2007-2008. 6. The inventory turnover ratio of DR.REDDY’S LABORATORIES is fluctuating i.e., showing decreasing trend during the years 2000-2001 to 2003-2004. But there onwards it has slowly increased till the financial year. 7. The debtors turnover ratio has decreased from the year 2001-2002 to 2002-2003. It was 2.10 in the year 2003-2004. There was decrease in debtors turnover ratio till the financial year.

It is beneficial to investors who are interested to know the profits earned by the company. The decreasing ratio shows the inefficient management. The return on investment ratio of the DR. For the Company it is difficult to manage the accounts receivables. The debtors constitute nearly 50% of the Total Current Assets. 7. 2. The company should collect debts as quickly as possible.REDDY’S LABORATORIES is using the moving average method in valuation of stock. It has increased when compared to previous year’s ratios. It is always in the ideal ratio for every organization. 3.10. The DR. They should concentrate more on the collection of the debts.41 and during the year 2008-2009 it has gone down to 1. The Net Working Capital of DR. The ratio has increased than previous years except for 2003-2004.REDDY’S LABORATORIES is 59.2 later in the next financial year 2009-2010 it has gone up to 1.REDDY’S LABORATORIES is decreasing year by year. The debtors’ turnover ratio in 2005-2006 is 1. In the year 2000-2001 it was 2. The company has to exercise cost of control and cost of reduction techniques to increase its profitability. 6. which had 2.97.46.CONCLUSIONS AND SUGGESTIONS: 1. The current ratio of DR.REDDY’S LABORATORIES is good for almost in range for each and every year. 4.40 in 20052006. so the company should concentrate effectively on the management of Current Assets and Current Liabilities. . 5.

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

 Accounting for Managers-Jelsy Joseph  http://www.p hp   Financial Management –I M Pandey.Dr.Gokul  http://www.studyfinance.  Financial statement analysis .Reddy’s Laboratories hyderabad.antiessays.htm  http://en. .BIBILOGRAPHY:  http://www.bizsearchpapers.Reddy’s Laboratories’sLaboratoriescom/financialinformation/  www.