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RATIO ANALYSIS
INTRODUCTION
The Ratio Analysis is one of the most powerful tools of financial analysis. It
is used as a device to analyze and interpret the financial health of enterprise. With the
help of ratios that the financial statements can be analyzed more clearly and decisions
made from such analysis. Financial analysis is the process of identifying the financial
strengths and weakness of the firm y properly establishing relationship between the
items of balance sheet and the profit and loss account. There are various methods or
techniques used in analyzing financial statements. By the use of ratio analysis one
can measure the financial conditions of a firm and can point out whether the
conditions is strong, good, questionable or poor.
Meaning of Ratio:
According to Accountants handbook by WIXON, KELL and BEDFORD, “A

ratio is an expression of quantitative relationship between two numbers.”
A ratio is a sample arithmetical expression of relationship of one number to

another. It may be defined as the indicated quotient of two mathematical expressions.
Ratio provides clues to the financial position of a concern. One can draw
conclusions about the exact financial position of a concern with the help of ratios.
Ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various ratios for helping
in making certain decisions.
Uses:
 Financial statements are prepared primarily for decision-making. Ratio

analysis helps in making decision from the information provided in financial
statements.
 Ratio analysis helps in forecasting and planning. Meaningful conclusions can
be drawn for future from these ratios.
 Financial strengths and weakness of a firm are communicated in an easier
manner by using ratios. Ratios help in communication and enhancing the
values of the financial statements.
S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 1

RATIO ANALYSIS
 Ratios even help in coordination, which is of almost importance in effective

business management.
 It also helps in making effective control of the business. Standard ratios can
be based upon preformed financial statements and variances or deviations, if
any can be found by comparing the actual with the standards so as to take a
corrective action at the right time.
 Ratios are of immense importance in the analysis and interpretation of
financial statements as they bring out the strength or weakness of a firm.
Inter-firm comparison:
Ratios of one firm can also be compared with the ratios of some other selected firms
in the same industry at the same point of time. This kind of comparison helps in
evaluating relative financial position and performance of the firm.
Intra-firm comparison:
Ratios of various departments in the firm or organization were compared in intra firm
comparison
Limitations of ratio analysis:
The ratio analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand they suffer form some
serious of limitations.
 Limited use of a single ratio: -
A single ratio usually does not convey much of a sense. To make a

better interpretation a number of ratios have to be calculated which is likely
to confuse the analyst than help him in making any meaningful conclusion.
 Lack of adequate standards: -
There are no well-accepted standards or rules of thumb for all ratios which as
norms. It renders interpretation of ratios difficult.

RATIO ANALYSIS
 Internet limitations of accounting: -
Like financial statement, ratios also suffer from the inherent weakness of
accounting records such as their historical nature. Ratios of the past are not
necessarily true indicators of the future.
Change of accounting procedure: -
Change in accounting procedure by a firm often makes ratio analysis

misleading.
E.g.:- A change in the valuation of methods of inventories from FIFO to

LIFO increase the cost sales and reduces considerably the value of closing stocks
which makes stock turnover ratio to be lucrative and an unfavourable gross profit
ratio.
Personal Basic: -
Ratios are only means of financial analysis and not an end in itself. Ratios
have to be interpreted and different people may interpret the same ratio in
different ways.
Un-comparable: -
Not only industries differ in their nature but also the firms of the similar
business widely differ in their size and accounting procedures etc., it makes
comparison of ratios difficult and misleading more ever, comparisons are
made difficult due to differences on definitions of various financial terms used in the
ratio analysis.
Price level changes: -
While making ratios analysis no consideration is made to the changes in price

levels and this makes the interpretation of ratios invalid.
Ratios no substitutes: -
Ratio analysis is merely a tool of financial statements. Hence ratios become

useless if separated from the statements from which they were computed.

RATIO ANALYSIS
History of the pharmaceutical industry
The earliest drugstores date back to the middle Ages. The first known drugstore was
opened by Arabian pharmacists in Baghdad in 755 A.D., and many more soon began
operating throughout the medieval Islamic world and eventually medieval Europe.
By the 19th century, many of the drug stores in Europe and North America had
eventually developed into larger pharmaceutical companies. Most of today's major
pharmaceutical companies were founded in the late 19th and early 20th centuries.
Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass-
manufactured and distributed. Switzerland, Germany and Italy had particularly strong
industries, with the UK, US, Belgium and the Netherlands following suit. Cancer
drugs were a feature of the 1970s. From 1978, India took over as the primary centre
of pharmaceutical production without patent protection
The pharmaceutical industry entered the 1980s pressured by economics and a

host of new regulations, both safety and environmental, but also transformed by new
DNA chemistries and new technologies for analysis and computation. Drugs for
heart disease and for AIDS were a feature of the 1980s, involving challenges to
regulatory bodies and a faster approval process.
The Core of Pharmaceutical Business

RATIO ANALYSIS
THE INDIAN PHARMACEUTICAL INDUSTRY:
“The Indian pharmaceutical industry is a success story providing employment for

millions and ensuring that essential drugs at affordable prices are available to the vast
population of this sub-continent.”
The pharmaceutical industry plays a crucial role in building a country’s human
capital. In India, it is among the top science based industries with a wide range of
capabilities in the complex field of Drug Technology and Manufacture.
A highly organized sector, the Indian Pharmacy Industry is estimated to be worth $
4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third
world, in terms of technology, quality and range of medicines manufactured. From
simple headache pills to sophisticated antibiotics and complex cardiac compounds,
almost every type of medicine is now made indigenously.
The Indian Pharmaceutical sector is highly fragmented with more than 20,000
registered units. It has expanded drastically in the last two decades. The leading 250
pharmaceutical companies control 70% of the market with market leader holding
nearly 7% of the market share. It is an extremely fragmented market with severe
price competition and government price control.
The “organized” sector of India's pharmaceutical industry consists of 250 to 300
companies, which account for 70 percent of products on the market, with the top 10
firms representing 30 percent. However, the total sector is estimated at nearly 20,000
businesses, some of which are extremely small approximately 75 percent of India's
demand for medicines is met by local manufacturing.
In 2008, India's top 10 pharmaceutical companies were Ranbaxy, Dr. Reddy's

Laboratories, Cipla, Sun Pharma Industries, Lupin Labs, Aurobindo Pharma,
GlaxoSmithKline Pharma, Cadila Healthcare, Aventis Pharma and Ipca Laboratories
Indian-owned firms currently account for 70 percent of the domestic market, up from
less than 20 percent in1970. In 2008, nine of the top 10 companies in India were
domestically owned, compared with just four in 1994.

RATIO ANALYSIS
Top 10 Indian Pharmaceuticals Companies, 2018-19
Rank Company Revenue 2018-19 (Rs crore)
1 Ranbaxy Laboratories Rs.4198.96
2 Dr. Reddy's Laboratories Rs. 5000.6
3 Cipla Rs. 3,763.72
4 Sun Pharma Industries Rs. 2,463.59
5 Lupin Labs Rs. 2,215.52
6 Aurobindo Pharma Rs. 2,080.19
7 GlaxoSmithKline Pharma Rs. 1,773.41
8 Cadila Healthcare Rs. 1,613.00
9 Aventis Pharma Rs. 983.80
10 Ipca Laboratories Rs. 980.44

RATIO ANALYSIS
India's potential to further boost its already-leading role in global generics

production, as well as an offshore location of choice for multinational drug
manufacturers seeking to curb the increasing costs of their manufacturing, R&D and
other support services, presents an opportunity worth an estimated $48 billion in
India's potential to further boost its already-leading role in global generics

production, as well as an offshore location of choice for multinational drug
manufacturers seeking to curb the increasing costs of their manufacturing, R&D and
other support services, presents an opportunity worth an estimated $48 billion in
2007.
India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent
per year. It is one of the largest and most advanced among the developing countries.
Over 20,000 registered pharmaceutical manufacturers exist in the country.
Indian Pharmaceutical Evolution

RATIO ANALYSIS
Over-the-Counter Medicines:
The Indian market for over-the-counter medicines (OTCs) is worth about $940
million and is growing 20 percent a year, or double the rate for prescription
medicines. The government is keen to widen the availability of OTCs to outlets other
than pharmacies, and the Organization of Pharmaceutical Producers of India (OPPI)
has called for them to be sold in post offices. Developing an innovative new drug,
from discovery to worldwide marketing, now involves investments of around $1
billion, and the global industry's profitability is under constant attack as costs
continue to rise and prices come under pressure.
Pharmaceutical production costs are almost 50 percent lower in India than in

Western nations, while overall R&D costs are about one-eighth and clinical trial
expenses around one-tenth of Western levels. “India's largest-selling drug products
are antibiotics, but the fastest growing are Diabetes, cardiovascular and central
nervous system treatments”.
The industry's exports were worth more than $3.75 billion in 2005-06 and they have
been growing at a compound annual rate of 22.7 percent over the last few years,
according to the government's draft National Pharmaceuticals Policy for 2007,
published in January 2007. The Policy estimates that, by the year 2010, the industry
has the potential to achieve $22.40 billion in formulations, with bulk drug production going
up from $1.79 billion to $5.60 billion: “India's rich human capital is believed to be the
strongest asset for this knowledge-led industry. Various studies show that the scientific
talent pool of 4 million Indians is the second-largest English-speaking group worldwide,
after the USA.”
VAT:
In April 2005, the government introduced value-added tax for the first time and
abolished all other taxes derived from sales of goods. So far, 22 states have
implemented VAT, which is set at 4 percent for medicines. This led to

RATIO ANALYSIS
pharmaceutical wholesalers and retailers cutting their stocks dramatically, which

severely affected drug manufacturers' sales for several months.
Opportunities: The main opportunities for the Indian pharmaceutical industry are
in the areas of:
Generics (including biotechnology generics)

 Biotechnology
 Outsource and R&D (outsourcing).
 racing (including contract manufacturing, information technology (IT)
DIVI’S LABORATORIES LIMITED, HYDERABAD.

Established in the year 1990 by Dr. Divi, with Research & Development as its prime
fundamental, Divis Laboratories focused on developing new processes for the
production of Active Pharma Ingredients (APIs) & Intermediates. The company in a
matter of short time expanded its breadth of operations to provide complete turnkey
solutions to the domestic Indian pharmaceutical industry.
With five years of experience, expertise and a proven track-record of helping

many companies with its turn-key and consulting strengths, Divis Laboratories
established its first manufacturing facility in 1995.
Built on a 300 acre site at Hyderabad The plant comprises of 13 multi-

purpose production blocks and has space for further growth and expansion.

RATIO ANALYSIS
Complete cGMP guidelines are complied with in both the plants. Our at
Hyderabad was successfully inspected by the US FDA during September 2000, in
April 2004 and in February 2008.
VISION & MISSION:
A Vision to Excel:
To maintain leadership in custom synthesis of APIs and Intermediates for health care
and life sciences industry and to be one of the top companies world-wide in the
domain. To develop generic APIs for the late life cycle needs of the Industry.
A Mission to Serve:
To be a good corporate citizen and not only add value in our core competency areas
of Pharma but also serve the community at large through social, educational and
environmental initiatives that would establish strong foundations for a better
tomorrow.
Strength:
Research & Development was the first focus of Divis when it was started as Divis
Research Center. The manufacturing facilities started five years later. But the spirit
of R & D is evident in every initiative of Divis. It is with great involvement and
planning that the management undertakes any activity. This has remained the
cornerstone of Divis growth.
R&D:
The main aim of the Divis R&D Centers is to design, develop and optimize
commercially viable synthetic processes for APIs and Intermediates of Generics and
customer’s discovery products.
Divis has four Research & Development facilities. The main R&D
Center is at Hyderabad, working round the clock which was originally started as
Divis Research Center (DRC) in Hyderabad and has a team of high caliber scientists.

RATIO ANALYSIS
Autoclaves and hydrogenators are available for conducting high temperature

and high-pressure experimental reactions. The Centers have state-of-the-art
instruments, an analytical laboratory and a library with 24 hours internet access.
Divis R&D has evaluated more than 500 product opportunities and developed
processes for more than 200 products, out of which 80 are already at commercial
scale.
Apart from the above, each plant has its own R&D center.
Besides the required infrastructure, the Hyderabad plant’s R&D center has a Pilot
Plant for scale-up studies, various materials of construction comprising 44 reactors of
from 100 to 2000 Lt. capacity various materials of construction. All Four Research
facilities are inspected and certified as per ISO – 9000 standards.
CUSTOM MANUFACTURING:
Custom Synthesis:
Divis undertakes custom manufacture of APIs and production of

advanced offering a competitive advantage to its clients over the entire life cycle of
theproducts.
It is a very common practice to find several MNC clients audit our facilities regularly
in course of the custom manufacture of their products. This transparency in operation
has resulted in increased confidence, trust and business between Divis and its clients.
With four R&D Centers, two Pilot Plants, two large scale manufacturing units
including a cGMP / ISO / FDA accredited facility, Divis is an ideal partner for
custom synthesis, process development and mass manufacturing of customer’s own
discovery product.
Divis undertakes complete and acceptable validation of processes.

Divis also offers it’s analytical and process expertise for generating reliable data for
regulatory agencies [e.g. stability studies such as ICH] and its documentation
expertise for preparing draft DMFs, CoS etc. for regulatory submissions.

RATIO ANALYSIS
FTE / Contract Research:
Divis clients enjoy a great benefit from the foundations on which the entire
company was built – the Divis Research Center.
With years of experience, experimentation and application, the scientists at Divis

Research Center (DRC) are the right people to be tapped for contract research
projects.
Over the years many an innovator company has leveraged the strength of
DRC on a Full Time Equivalent (FTE) basis.
The Research team is specialized in process design for new drug candidates,
development up to gram/kilo scale, structural elucidation, impurity profile studies,
process validation, process justification, process optimization, analytical methods
development and validation, environment impact analysis, safety studies and time
cycle studies etc.
An engagement with DRC gives our clients the advantage to concentrate on
actual invention and also gives them a team that has the capacity to re-evaluate and
give a second opinion on the primary invention or discovery itself.
Manufacturing in Hyd.:
Starting as a Research Center has proved as a blessing in disguise for Divis.

The years spent as a research center went a long way in choosing the right areas to
enter for manufacturing, establishing processes that were mature and ensuring that
the guidelines expected for manufacturing quality products were complied with.
It is with rich experience and deliberation that Divis started its manufacturing
activities. Today the company has two manufacturing facilities Developed on a 300
acre site the Divis Hyderabad manufacturing facility comprises of 13 production
buildings and a Pilot Plant. The plant consists of around 307 reactors totalling a
capacity of 1293 m3.

RATIO ANALYSIS
The production buildings have clearly defined finished product areas

for APIs with clean air, purified water systems that operate under full cGMP as per
US-FDA guidelines.
The facility was successfully inspected by US-FDA in April, 2004 (which itself was
a second inspection; the first was in Sept 2000).
The Hyderabad facility has been certified for the following management systems
ISO 9001 certified for its Quality systems.

 ISO 14001 certified for its Environment Management.
 OHSAS-18001 certification for its Occupational Health and Safety systems.
There are special production blocks to handle Corrosive, Cyanation, Hydrogenation,
Bromination, Nitration reactions and high vacuum distillations. The plant also has
services that include cooling with nitrogen, brine, cool water, heating with thermal
oil or steam, 100% standby power, warehouses & bulk solvent storage tank farms.
An R&D Center is supported with well equipped Quality Control laboratories

and an elaborate Quality Assurance and training centre. A Modernized Effluent
Treatment Plant (ETP) with latest equipment like aerators, clarifiers, air blowers &
solar evaporation, forced evaporation etc., handle liquid effluents and treats them
chemically and biologically (aerobic & anaerobic) to the specified standards. Incineration is
the process employed to treat solids, liquids and gases.
BUSINESSES:
Generics:
Divis manufacture API's for the Generics. As a company Divis
understand that sustained development is not possible without respecting to IPR.
Divis takes great care to ensure that its product or processes do not infringe valid
patents.

RATIO ANALYSIS
Divis is actively involved in developing alternate, patent non-infringing processes for

APIs, for the inventors to manage late life cycle and leading generic drug
manufacturers.
Intermediates
Divis supplies advanced intermediates for generic APIs that are already out of
patent, as also for APIs which are about to enter generic status shortly. Here again,
Divis has tie-ups with both original inventors and generic API manufacturers.
Protected Amino Acids
Divis has built up a strong base in the manufacture of BOC, FMOC and CBZ
protected amino acids, the protecting reagents themselves, peptide condensing
agents, totally synthetic, natural and novel unnatural amino-acids and oligopeptides.
Divis has invested heavily in knowledge, equipment and man-power to

expand in this technology area which is sophisticated, challenging and of course
rewarding. Currently, Divis is a major manufacturer of protected amino-acids.
Chiral Synthesis
Divis has an established and proven expertise in stereo selective synthesis using
Chiral ligands, high yield resolutions using chirally active resolving agents, recovery
of resolving agents and ligands, recycling of undesirable isomers, resolutions
involving enzymes and manufacture of novel ligands like binol, binap and so on.
Carotenoids (Synthetic) and Nutraceuticals:
Divis has succeeded in developing multistep total synthesis of important Carotenoids

like Beta carotene, Lycopene, Astaxanthin, and Canthaxanthin
Generic API’s:
Divis manufacture API's for the Generics. As a company Divis

understand that sustained development is not possible without respecting to IPR.
Divis takes great care to ensure that its product or processes do not infringe valid
patents.

RATIO ANALYSIS
Divis is actively involved in developing alternate, patent

non-infringing processes for APIs, for the inventors to manage late life cycle and
leading generic drug manufacturers.
Product Name Structure
BUPROPION HCl
CAS No : 31677-93-7
CAPECITABINE
CAS No : 154361-50-9
CARBIDOPA
CAS No : 28860-95-9
DESLORATADINE
CAS No: 100643-71-8
DEXTROMETHORPHA
N HBr
CAS No [6700-34-1]
(monohydrate)
FOSPHENYTOIN
SODIUM
CAS No 92134-98-0

RATIO ANALYSIS
GABAPENTIN
CAS No [60142-96-3]
IOPAMIDOL
CAS No [60166-93-0]
LEVETIRACETAM
CAS No : 102767-28-2
LEVODOPA
CAS No : 59-92-7
NABUMETONE
CAS No [42924-53-8]
NAPROXEN
CAS No [22204-53-1]
NAPROXEN SODIUM
CAS No [26159-34-2]
NATEGLINIDE
CAS No : 105816-04-4

RATIO ANALYSIS
NIACIN
CAS No : 59-67-6
PHENYLEPHRINE HCl
CAS No [61-76-7]
PROGUANIL HCL
QUETIAPINE
FUMARATE
CAS No [111974-72-2]
RISEDRONATE
SODIUM
CAS No [115436-72-1]
SERTRALINE HCL
CAS No [79559-97-0]
SIBUTRAMINE HCL
CAS No [125494-59-9]
TAMSULOSIN HCl
CAS No [106463-17-6]

RATIO ANALYSIS
TELMISARTAN
CAS No [144701-48-4]
TOPIRAMATE
CAS No [97240-79-4]
TRIPOLIDINE HCl
CAS No [6138-79-0]
VENLAFAXINE HCL
CAS No [99300-78-4]
VIGABATRIN
CAS No [60643-86-9]
ZOLPIDEM TARTRATE
CAS No [99294-93-6]
Disclaimer:
Products covered by valid patents are not offered for commercial use. It is the buyer’s
responsibility to ensure the transactions do not infringe any patent rights applicable

RATIO ANALYSIS
PRODUCT LIFE CYCLE
PHASE-I PHASE-II PHASE-III
API PROCESS DEVELOPMENT/FDA FILING OF SOURCES REGISTRATION LOCK IN
FDA approval Patent Late

and Protection Life Generic
Launch Cycle
Approved suppliers will have assured Business

RATIO ANALYSIS
MILESTONES IN THE HISTORY OF DIVIS LABORATORIES
US-FDA inspects Divis Laboratories successfully SGS-Yarsley of

U.K awards Divis the ISO 9001 Certification SGS International AG
2000 :
of Switzerland awards Divis the ISO-14001 Certification (for its
efficient Environment Management Systems).
BVQI of London awards Divis the OHSAS-18001 Certification (for
2001 :
its Occupational Health and Safety Management Systems).
Divis commences the setting up of its 2nd Manufacturing Facility
2002 :
(Unit-2) at Chippada near Visakhapatnam.
Divis opens a new research center christened ‘DRC-Vizag’ for
2003 :
fundamental research in selected niche business core segments.
2003 : Went for IPO and listed on stock exchanges BSE, NSE and HSE.
2004 : US-FDA inspects the Choutuppal (Unit-1) for a second time. No 483.
2006 : US-FDA inspects the Visakhapatnam (Unit-2) for the first time.
2008 : Third US-FDA inspection for Choutuppal (Unit-1).

RATIO ANALYSIS
AWARDS
The awards won by the company from 2000 on wards are:
Year Nature of Award Instituted by
Appreciation certificate for

“Best Cleaner Production
Practices and Waste A.P.Pollution Control
2008
Minimization Techniques” on Board, Hyderabad.
the Occasion of t
he World Environment
Golden Peacock
2008 FINALIST CERTIFICATE Environment Management
Award.
SHRESHTHA SURAKSHA National Safety Council
2008
PURASKAR for the year 2006 NSCI Safety Awards.
Govt. of India, Ministry of
RUNNER-UP Under Scheme
Labour and Employment
2007 No 1 of the National Safety
National Safety Awards
Awards 2006
(N.S.A).
I.C.C Award for Excellence in
Indian Chemical Council
2007 Management of Health / Safety
(I.C.C) Mumbai.
/ Environment.
National Award for Excellence Confederation of Indian
2005
Water Management 2005 Industry (CII)
Department of Labour,
May Day Award for Best
2005 Government of Andhra
Management
Pradesh
2004 Vishwakarma Rashtriya Government of India ,

RATIO ANALYSIS
Puraskar (VRP) and National

Ministry of Labour
Safety Awards (NSA) – 2003
Good Practice in Cleaner
A.P. Pollution Control
2004 Production and Pollution
Board, Hyderabad.
Control
Certificate of Appreciation for National Safety Council -
2004
achieving OHSAS 18001 A.P. Chapter
National Safety Council of
2003 Shreshtha Suraksha Puraskar
India for year 2002
Silver award for Quality Indian Drug Manufacturers'
2002
Excellence Association
Department of Labour,
May Day Award for Best
2002 Government of Andhra
Management
Pradesh
Occupational Health and Safety
Bureau Veritas Quality
2001 Management System (OHSAS-
International
18001)
Silver award for Quality Indian Drug Manufacturers'
2001
Excellence Association
Silver award for Quality Indian Drug
2000
Excellence Manufacturers’ Association
ISO 14001:1996 Environment SGS International
2000
Management system Certification Services AG
SGS Yarsley International,
2000 ISO-9002 Quality Systems
UK
Commissioner of
1999- Industries, Government of
Best Exporter award
2000 Andhra Pradesh,
Hyderabad

RATIO ANALYSIS
Introduction:
Research methodology can be defined as methodical, unbiased and complete

investigation of subject matter to establish principles. Investigation of problem to
discuss pertinent information to help solve it. The term methodical refers to carefully
planned procedures.
Research extends knowledge of human beings in social life and environment.

Scientists and researchers build up the wealth of knowledge through there research
findings. The research answer for various types of questions: what, when, where,
how and why of various phenomenon’s and enlighten us. The bodies of knowledge
have been developed by research in general and pure or fundamental research in
particular.
Objectives of research:
The purpose of research is to discover answers to questions through the

application of scientific procedure. The main aim of research is to find out the truth
which is hidden and which has not been discovered as yet. Though each research
study has its own specific purpose, we may think of research objectives as falling
into a number of following broad groupings.
 To gain familiarity with a phenomenon or to achieve new insights into it.

 To portray accurately the characteristics of a particular individual, situation or
a group.
 To determine the frequency with which some thing occurs or with which it is
associated with some thing else.
 To test a hypothesis of a casual relationship between variables
Need for the Study:
Ratio analysis is a powerful tool of financial analysis. Financial analysis is a

process of identifying the strengths and weaknesses of the company by establishing
relationships between the items of balance sheet and the profit and loss account,
hence their is a need to find out the financial performance of the company.

RATIO ANALYSIS
Objective of the study:
 To find out the liquidity position of the company

 To see the solvency position of the organization
 To Analyse the utilization of resources in the organization
 To prove in to the profitability position of the company
Significance of the study:
Management is an art of getting things done with the use of men, material,
machinery methods and money in and effective and efficient manner. The functional
are, which deals with money, is termed as financial management and this department
of finance is treated as the key area in the organization because it includes crucial
decisions regarding the flow and utilization of funds.
The optimum decision of financial activities is with the help of relative

analysis of the financial statements prepared for time to time by the company namely
income statement and balance sheet.
The theoretical knowledge no doubt will bestow the aspirant to improve

attitude skills and knowledge but the practical exposure will add a special flavour to
excel into the world with high zeal and enthusiasm for the purpose of financial
statements will enhance my knowledge in the area of financial decision-making.
Scope:
The scope of study is limited to collecting financial data published in annual reports
of the company with reference to the objectives stated above and an analysis of data
with a view to understand the solutions by applying various ratios relating to balance
sheets.
The analysis is an evaluation of both a firm’s financial performance and its prospects
for future year.
 Typically it involves analysis of financial statements of Divi’s Laboratories Ltd.,

RATIO ANALYSIS
Limitations
As adequate data was not able to pool because of the secrecy maintained by the firm,
proper justification for the project was not done.
The study is limited to the financial analysis of Divi’s Laboratories Ltd.,

The study is confined to the figures available on paper and files and no physical
verification has been done.

RATIO ANALYSIS
Current Ratio
Introduction:
The current ratio is a measure of the firm’s short-term solvency. It indicates the
availability of current assets in rupees for every one rupee of current liability. Current
assets include cash and those assets that can be converted into cash within a year,
such as inventories, debtors, marketable securities and prepaid expenses also.
Current Assets
Current Ratio =
Current Liabilities
The higher the current ratio, the larger the amount of rupees available
pre rupee of y, the more the firms ability to meet current obligations and greater the
safety of funds of short-term creditors. The current ratio, in a way, is a measure of
margin of safety to the creditors.
Although there is no hard and fast rule, conventionally, a current ratios of 2:1
i.e. for every one rupee of current liabilities, there should be two rupees of current
assets, is considered satisfactory.
Current Assets Current Liabilities Ratio

F.Y
2014-15 2212.5 886.69 2.50
2015-16 2519.59 635.47 3.96
2016-17 2568.47 765.43 3.36
2017-18 2795.48 785.02 3.56
2018-19 3507.87 961.27 3.65

RATIO ANALYSIS
Quick Ratio
Introduction:
It is used as a measure of the company’s ability to meet its current obligations. This
ratio is calculated as a supplement to the current ratio in analyzing the liquidity of the
firm.
Current assets - inventories

Quick Ratio =
Current liabilities
Liquid assets are those assets, which are readily converted into cash.
The standard norm of quick ratio 1:1 is acceptable. A very high or very low ratio is
not desirable.
Quick Assets Current Liabilities Ratio

F.Y
2014-15 1097.15 886.69 1.24

RATIO ANALYSIS
2015-16 1356.7 635.47 2.13
2016-17 1312.71 765.43 1.71
2017-18 1514.09 785.02 1.93
2018-19 1844.69 961.27 1.92
Cash Ratio
Introduction:
Absolute cash ratio is also be calculated together with current ratio and acid test
ratios as to exclude even receivables from the current assets and find out the absolute
liquid assets.
Cash in hand & Bank
Cash Ratio =

RATIO ANALYSIS
Current liabilities
Cash & Bank Current Liabilities Ratio

F.Y
2014-15 56.66 886.69 0.06
2015-16 57.67 635.47 0.09
2016-17 66.47 765.43 0.09
2017-18 91.48 785.02 0.12
2018-19 105.20 961.27 0.11
Debtors Turn Over Ratio

Introduction:
It indicates the number of times debtor’s turnover each year. If it is high that
indicates the effectiveness of management in collecting debts. Generally, the higher
the value of debtor’s turnover, the more efficient is the management of credit.
Sales
Debtors turnover ratio =
Average debtors

RATIO ANALYSIS
Opening debtors + closing debtors

Average debtors =
2
Net Sales Avg. Debtors Ratio

F.Y
2014-15 3084.00 807.34 3.82
2015-16 3721.33 894.58 4.16
2016-17 4023.85 984.51 4.09
2017-18 3815.94 1057.50 3.61
2018-19 4879.66 1197.18 4.08
Debtors Collection Period

Introduction:

RATIO ANALYSIS
Average collection period indicates the speed of the collection of debts by the firm. If
the firm is collecting the debts in time then that will good for the firm. The shorter
collection period is the better quality of debtors.
Of days in a year (360 Days)

Average Collection Period =
Debtor Turn over Ratio
360 Days Debtor Turn Over Ratio No. of days

F.Y
2014-15 360 3.82 94.24
2015-16 360 4.16 86.54
2016-17 360 4.09 88.02
2017-18 360 3.61 99.72
2018-19 360 4.08 88.24

RATIO ANALYSIS
Gross Profit Ratio

Introduction:
It measures the gross margin on total net sales of company. This ratio measures the
efficiency of company’s operations and can be higher the gross profit ratio, better is
for the company.
Gross Profit
Gross Profit Ratio = X 100
Net Sales
Gross Profit Net Sales Ratio

F.Y
2014-15 1642.74 3084.00 53.27%
2015-16 1982.67 3721.33 53.28%
2016-17 2216.18 4023.85 55.08%
2017-18 2010.98 3815.94 52.70%
2018-19 2712.96 4879.66 55.60%

RATIO ANALYSIS
Inventory Turnover Ratio
Introduction:
This ratio indicates how fast inventory is sold. A high ratio is good from
the viewpoint of liquidity and vice versa. A how ratio would signify that inventory
does not sell fast and stays on the shelf or in the warehouse for a long time.
Cost of goods sold

Inventory turnover ratio = -----------------------
Average inventory
Cost of goods sold Avg. Inventory Ratio

F.Y
2014-15 1441.26 1004.09 1.44

RATIO ANALYSIS
2015-16 1738.66 1138.90 1.53
2016-17 1807.67 1209.33 1.49
2017-18 1804.96 1268.58 1.42
2018-19 2166.7 1472.29 1.47
Inventory Holding Period

Introduction:
It indicates the firm’s efficiency in converting the inventory into sales. Lower the
ratio that will be beneficial for the firm.
No. Of days in a year (360 Days)

Inventory holding period = ------------------------------------
Inventory turnover ratio
Table No: 4.8 - Inventory holding period
360 Days Inv. TOR Days

F.Y
2014-15 360 1.44 250.00
2015-16 360 1.53 235.29

RATIO ANALYSIS
2016-17 360 1.49 241.61
2017-18 360 1.42 253.52
2018-19 360 1.47 244.90
Net Profit Ratio

Introduction:
This is used for the proprietors and prospective investors because it reveals the
overall profitability of the concern. Higher the ratio is preferable because it gives
idea of improved efficiency of the concern.
Net profit after tax

Net profit ratio = ------------------------ x 100
Net sales
Net Profit Net Sale Ratio

F.Y
2014-15 847.06 3084.00 27.47%
2015-16 1107.69 3721.33 29.77%
2016-17 1053.27 4023.85 26.18%

RATIO ANALYSIS
2017-18 869.58 3815.94 22.79%
2018-19 1332.65 4879.66 27.31%
Operating Profit Ratio
Introduction:
This ratio establishes the relationship between operating profit and sales
Operating Profit
Operating Profit Ratio = X 100
Net Sales
Operating Profit Net Sales Ratio

F.Y
2014-15 1162.04 3084.00 37.68%

RATIO ANALYSIS
2015-16 1397.87 3721.33 37.56%
2016-17 1437.80 4023.85 35.73%
2017-18 1250.63 3815.94 32.77%
2018-19 1848.96 4879.66 37.89%

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RATIO ANALYSIS

According to Accountants handbook by WIXON, KELL and BEDFORD, “A

A ratio is a sample arithmetical expression of relationship of one number to

Ratio analysis is a technique of analysis and interpretation of financial

 Financial statements are prepared primarily for decision-making. Ratio

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 1

 Ratios even help in coordination, which is of almost importance in effective

Limitations of ratio analysis:

 Limited use of a single ratio: -

A single ratio usually does not convey much of a sense. To make a

 Lack of adequate standards: -

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 2

 Internet limitations of accounting: -

Change of accounting procedure: -

Change in accounting procedure by a firm often makes ratio analysis

E.g.:- A change in the valuation of methods of inventories from FIFO to

Price level changes: -

While making ratios analysis no consideration is made to the changes in price

Ratio analysis is merely a tool of financial statements. Hence ratios become

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 3

History of the pharmaceutical industry

The pharmaceutical industry entered the 1980s pressured by economics and a

The Core of Pharmaceutical Business

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 4

THE INDIAN PHARMACEUTICAL INDUSTRY:

“The Indian pharmaceutical industry is a success story providing employment for

In 2008, India's top 10 pharmaceutical companies were Ranbaxy, Dr. Reddy's

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 5

Top 10 Indian Pharmaceuticals Companies, 2018-19

Rank Company Revenue 2018-19 (Rs crore)

1 Ranbaxy Laboratories Rs.4198.96

2 Dr. Reddy's Laboratories Rs. 5000.6

3 Cipla Rs. 3,763.72

4 Sun Pharma Industries Rs. 2,463.59

5 Lupin Labs Rs. 2,215.52

6 Aurobindo Pharma Rs. 2,080.19

7 GlaxoSmithKline Pharma Rs. 1,773.41

8 Cadila Healthcare Rs. 1,613.00

9 Aventis Pharma Rs. 983.80

10 Ipca Laboratories Rs. 980.44

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 6

India's potential to further boost its already-leading role in global generics

India's potential to further boost its already-leading role in global generics

Indian Pharmaceutical Evolution

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 7

Pharmaceutical production costs are almost 50 percent lower in India than in

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 8

pharmaceutical wholesalers and retailers cutting their stocks dramatically, which

Generics (including biotechnology generics)

DIVI’S LABORATORIES LIMITED, HYDERABAD.

With five years of experience, expertise and a proven track-record of helping

Built on a 300 acre site at Hyderabad The plant comprises of 13 multi-

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 9

VISION & MISSION:

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 10

Autoclaves and hydrogenators are available for conducting high temperature

Divis undertakes custom manufacture of APIs and production of

Divis undertakes complete and acceptable validation of processes.

S.V.DEGREE COLLEGE :: KADAPA PAGE NO: 11

FTE / Contract Research:

With years of experience, experimentation and application, the scientists at Divis

Starting as a Research Center has proved as a blessing in disguise for Divis.