cadila

Cadila Healthcare Limited

CADILA

HEALTHCARE

LIMITED

There are no such things as

limits to growth, because there are

no limits on the human capacity for

intelligence, imagination & wonder.

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CADILA HEALTHCARE LIMITED

ZRC aims to be the most admired pharmaceutical

research center for innovation in life science dedicated to

alleviating human sufferings.

"Research is the key to success of any pharmaceutical organization. It brings excitement to scientists, offers value to the company and does service to humanity".

- Pankaj R. Patel CMD,Zydus Group

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Financial analysis of


A project report submitted to

Miss Vaibhavi Bhatt

Faculty member,

NSVKMS- MBA College

(Affiliated with Hem. North Gujarat university)

on

30/11/2005

in partial fulfillment of the requirements for Managerial Accounting – I course in the Master of Business Administration Program

Submitted by

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1. VADAKEKKARA GINCY V. M. MATHAI 572. VISHAL MODI 26

3. JINAL DOSHI 9

Executive summary:This project report is prepared on financial analysis of CADILA HEALTH

CARE LTD . This report containing mainly two parts – General information

and main theme of the report is financial analysis.

The initial part of this report is the general information of the CADILA

HEALTH CARE LTD.. General information containing the introduction of

the CADILA and its facilities, its organizational structure, its managing

body and its product profile.

The second part of this report containing financial analysis of CADILA. The

financial analysis part containing Comparative (Horizontal) analysis,

Vertical analysis,Trend analysis, Average analysis, Ratio analysis and their

interpretations, Du Pont analysis and Cash flow analysis.

First part is Comparative (Horizontal) analysis. This part containing

comparative Profit & Loss account and comparative Balance sheet of three

financial years 2003-04 & 2004-05. This part also containing various graphs

of growth and fall. Some of the graphs are based on Profit & Loss A/C and

some are on Balance Sheet.

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The Common Size(Vertical) analysis part of this report containing common-

size profit & Loss A/C and common-size Balance Sheet of three years. This

part also containing two graphs based on Balance Sheet. They are-

Composition of shareholders fund & liabilities in different years

Composition of assets in different years

Another part of analysis is Trend analysis. This part containing trend

analysis of various components of Profit & Loss A/C and Balance Sheet of

three years. There are two graphs of trend analysis as under:-

Trends of sales, expenditure and profit/loss

Trends of funds, liabilities & assets.

Ratio analysis comprising mainly five types of ratio analysis as under:-

Liquidity Ratio

Profitability Ratio

Asset turnover Ratio

Finance Structure Ratio

Valuation Ratio

There are total twelve different ratios calculations and their analysis and

interpretations. These ratios are calculated for two years.

Du Pont analysis containing Du Pont chart applied to CADILA

HEALTHCARE Ltd for the year 2004-2005.

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PREFACE:

THIS report of Cadila Healthcare

Limited is to inform briefly about

company’s origin its growth certain

findings & also regarding its financial

growth through well explanation of ratio

analysis. All the contents of this report is

based upon both secondary as well as the

primary data collected by our members.

This report includes all true aspects no

grapevine nor any guess work is made

hereby. Each point has a linking proof.

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Acknowledgement:

The preparation of the whole report was a great opportunity for us

to explore ourselves to the practical field. All the financial analysis done by

us could make us all confident enough & prove ourselves. We could come

out of the bookish knowledge.

Preparation of such type of report calls for intellectual nourishment,

professional help and encouragement. During the preparation of this report

many people had helped us and we very much thankful to them all.

Firstly, we would like to express our gratitude to Miss Vaibhavi Bhatt

(professor), who permitted us to do project report on CADILA

HEALTHCARE LTD. She is very good and very intelligent person and she

helped us lot in the preparation of this report.

We would like to thank the librarian of our college for providing us

various books that helps us in preparation of this report finally. We also like

to thank to Mr. Kalpesh patel,who helped us for make good report.

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We would like to give special thanks to our friends Mr. P.C.

MATHEW(LIC. Manager) and Mr. Neel Oza(C.S), who guided us for

preparing this report nicely. We express our gratitude toward all the person

who directly and indirectly supported us for preparing the report.

Table of contents:

No. CHAPTER

Pg No

TABLE OF CONTENTS

CHAPTER NO PARTICULARS PAGE NO.ch. 1 Introduction 1-a Company profile

ch. 2 Historych. 3 Research & devolopment.ch. 4 Statement Analysis 4-1 Analysis of comparitive statement

4-2 Analysis of commonsize statement

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4-3 Trend Analysis

ch. 5 Average analysisch. 6 Ratio Analysis 6-a Liquidity Ratio

6-b Profitability Ratio

6-c Asset Turn over Ratio

6-d Finance Structure Ratio

6-e Valuation Ratio

ch. 7 Cash flow Statementch. 8 Dupont chart

List of tables

LIST OF TABLES

PARTICULAR Pgno1) COMPARATIVE STATEMENT

2) COMMANSIZE STATEMENT

3) TREND ANALYSIS

4) AVERAGE ANALYSIS

5) CASHFLOW STATEMENT

LIST OF GRAPHSCURRENT RATIO

QUICK RATIO

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DEBT EQUITY RATIO

ACTIVITY RATIO

1) FIXED ASSET TURNOVER RATIO

2) WORKING CAPITAL TURNOVER RATIO

3) DEBTORS TURNOVER RATIO

4) CREDITORS TURNOVER RATIO

PROFITIBILITY RATIO

1) GROSS PROFIT RATIO

2) NET PROFIT RATIO

3) C0MPERATING RATIO

RETURN ON SHAREHOLDER RATIO

RETURN ON EQUITY SHARE HOLDER RATIO

EARNING PER SHARE

PRICE EARNING RATIO

DIVIDED YIELD RATIO

INTEREST COVERAGE RATIO

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Chapter-1

Introduction

Cadila Healthcare Limited, the flagship company of the zydus

group is one of the leading integrated healthcare companies. Over the past

decades, it has transformed itself from a strong player in the Indian pharma

industry to a global pharmaceutical provider. Blazing ahead with several

initiatives & leveraging its strengths, the company has globalizing its

business. By actively exploring emerging opportunities, the company aims

to fulfill its aspirations of becoming top ten global generics company by the

end of this decade & an innovations- driven company by 2020. Company is

on its way to make brisk progress with its efforts in this sphere.

Our focus in the coming year will be on the globalization of

operations. This is both a challenging & inevitable process. It’s a

tremendous growth opportunity that these market represents several

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blockbuster multi-billion dollar drugs going of patent over the next few

years.

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1- a

Company profile:

NAME OF THE COMPANY:-


ADDRESS OF THE COMPANY:-

Registered and corporate office

zydus tower satellite cross- road sarkhej Gandhinangar highway Ahmedabad-380015

Registered and share transfer agents

m/s Pinnacle share registry pvt. Ltd near Asoka mills Naroda road Ahmedabad-380025

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NAME OF THE DIRECTORS:-

Chairman & MD :- Pankaj .R. Patel

Directors :- Mukesh . M. Patel Pranlal Bhogilal Sharvil . P. Patel H . K. Bilpodiwala H . Dhanrajgir A . S . Diwanji COMPANY SECRETRY:- Upen . H . Shah

BANKERS:-

Bank of Baroda ICICI Bank Ltd Corporation Bank State Bank of India Citi Bank IDBI Bank

AUDITORS:-

R. R. Patel & co. Mukesh . M . S [C.A]

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Chapter -2

History:

Healthcare at this time was the sole domain of a few pharmaceutical giants. Coupled to this was the enormous task fighting the myth and malady by cutting across the barriers of communication so as to reach out to people and to ensure the most effective cure in the shortest possible time. Under such circumstances, with tenacity of purpose and unfailing zeal to achieve perfection in quality, Cadila was founded in 1952

At the time of India's independence in 1947 our Late Founder, Mr. Ramanbhai B. Patel was completing his graduation at the Baroda Science college. After completing his studies in pharmaceutical sciences, he went on to join L. M. College of Pharamcy, one of the oldest pharmacy colleges in India as a Lecturer. With the entire nation gearing up to make India self reliant, Mr. Ramanbhai B. Patel turned an Livirubra was a combination of intrinsic factor lipotropic factor, iron, folic acid and vitamin B12 used for treatment of Pernicious anemia. Neuroxin-12 was also a unique first-of-its-kind derivative where incompatible neurotropics B1, B6 and B12 were made compatible in a vial. Isopar was also a new product launched for the first time in the market. It was derivative of INH used in the treatment of tuberculosis. He thus set a trend for innovative healthcare solutions.

By the early 1990s, Cadila was ranked the third largest pharmaceutical company in India.(ORG -December 1991, 1992, 1993). The decade also marked the beginning of a new economic framework and a shift in government policies. To thrive in this evolving environment, it became imperative for Cadila to restructure and streamline its business operations. Thus in 1995, Cadila Laboratories emerged as Cadila Healthcare under the aegis of the Zydus group

The dawn of 50's ushered in an era of awakening. Having broken

free from the bondage of dormant history, a need arose for the country to be self-sufficient in all spheres.

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Moving beyond pharmaceuticals, the concept of total healthcare now forms the commercial heart of the group's operations and activities.

Spearheading the combined activities of the group as a whole new identity, 'Zydus'. A phonetically powerful word, the name combines the ethos of the Greco-Roman God Zeus and the dawn of a new era. Zydus like Zeus also symbolises the group's aspirations to contribute to the welfare of the people and to society at large.

Zydus Research Center would strive to bring New Molecular Entities for clinical evaluation every year in each therapeutic area of its interest.

Develop new drug delivery platform technology and contribute to novel formulation development.

Develop new biologicals for commercialization. Identify new therapeutic targets The dawn of 50's ushered in an era of

awakening. Having broken free from the bondage of dormant history,

a need arose for the country to be self-sufficient in all spheres.

OUR FOCUS:

. At Zydus Research Center, our focus is on finding innovative therapies for diseases affecting mankind through continuous research and development. The major area of research includes

New Molecular Entities

Novel Drug Delivery Systems Therapeutic proteins and Vaccine by r-DNA technology

About ZRC:

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Zydus Research Center (ZRC) is the research and development wing of Zydus Cadila, established on January 24, 2000.

This state-of-the-art research center, spread over an area of 2,60,000 sq.ft., is located at Ahmedabad, in the western part of India. A team of 230 research scientists are actively engaged in research in various disciplines of Medicinal Chemistry, Biotechnology, Cell Biology, Bioinformatics, Genomics, Molecular Biology, Pharmacology, Toxicology, Microbiology, Analytical Research, Clinical Research, Novel Process Research and Novel Drug Delivery Research.

ZRC has a modern library facility and has access to various databases. The research center has its own auditorium, pilot plant and power generation facilities. Our concern for the environment is evident from the center's own effluent treatment plant, incinerator and a beautiful green garden all around, creating a pleasant and eco-friendly atmosphere at work.

At ZRC, research is mainly focussed on

NME research

Metabolic Disorders o Diabetes o Obesity o Dyslipidemia

Inflammation and Pain o Rheumatoid arthritis o Pain

Bacterial Infections

Biotechnology Research:

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Development of Biogeneric therapeutic proteins Development of Antibodies Development of Vaccines Development of Diagnostic kits Search for Novel Targets Validation of Targets

Chemical Manufacturing & Control:

Development of Novel processes for NME's from Medicinal Chemistry department

Chiral synthesis of drug and drug intermediates Resolution of racemates Studies in polymorphism of drug candidates Development of novel process of peptide drugs

Novel Drug Delivery Research

Development of Novel platform technology for slow/extended release of drug from matrix

Development of Novel formulation for filing ANDA

Research in delivery of proteins and peptides.

Chapter -3

R&D Organization

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We are committed to Scientific Excellence. Towards the promotion of scientific activities, we conduct regular symposium in our state-of-the-art auditorium, which is equipped with complete audio-visual arrangements including LCD, overhead, paper and slide projectors.ZRC also provides opportunities to university students to undergo training and carry out advanced research in various areas as a part of their curriculum. Towards this end ZRC provides qualified students to take research programs leading to PhD degree in various disciplines. We also encourage scientific interactions between ZRC scientists and university faculties on a regular basis and publish their research findings.

ZRC Seminar Series

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ZRC Seminar Series is a program facilitating interaction with leading researchers both from academia, government laboratories and industries. Under this program we regularly invite renowned scientists from reputed institutions both from India and abroad to deliver lectures on latest developments in scientific fields

Medicinal & Synthetic Chemistry

Our major focus in this department is to design New Molecular Entities (NME's) based on defined targets. The major therapeutic areas of interest are metabolic disorders, including dyslipidemia, hypercholesteremia, cardiovascular disorder, diabetes and obesity. Research is also directed in the areas of inflammation (arthritis), pain and bacterial infections.

Department vice R&D

In this department, NMEs are screened in various therapeutic areas using various in-vitro, ex-vivo and in-vivo models. The selected candidates are profiled for efficacy and safety. The department is well equipped with several robotic instruments to carry out high throughput screening of different biochemical parameters as well as various other equipments for the evaluation of systemic & safety pharmacology.

Department of Toxicology

ZRC has capabilities to carry out acute, sub-acute, sub-chronic toxicity & to xicokinetic studies, genotoxicity, cytotoxicity, reproductive toxicity, hypersensitivity testing, skin and mucus membrane irritation tests, acute abnormal toxicity studies etc as per ICH/OECD guidelines

Department of Drug Metabolism & Pharmacokinetics

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The department routinely studies pharmacokinetics of the drug candidate in various animal models and the selected drug candidates are evaluated for their detailed ADME (Adsorption, Distribution, Metabolism and Elimination) profile. Enzyme (CYP-450) induction and inhibition studies are also carried out using liver microsomes. Various physicochemical parameters of the drug are also determined.

Department of Cell Biology & Biochemistry

In order to study the mechanism of action of the drugs, the scientists carry out interdisciplinary research with Department of Pharmacology, Medicinal Chemistry and Molecular Biology. Drugs are also screened using cell-based assays. Cytotoxicity and mutagenicity studies using bacterial and human cell lines for the selected drug candidates are performed. Department also screens NMEs against Gram +ve and Gram -ve bacteria

Department of Biotechnology & Molecular Biology

We have excellent capabilities to carry out cloning, fermentation and purification of recombinant proteins, vaccines or antibodies. We have developed a bacterial vaccine, diagnostic kits and a few therapeutic proteins. The department has also developed an animal feed supplement, which has been commercialized by Zydus Sarabhai Animal Healthcare, a subsidiary of Cadila Healthcare Ltd. The department is fully equipped with modern equipments such as oligosynthesizer, DNA sequencer, protein sequencer, RTPCR, PCR, AKTA and various capacity bioreactors

Department of Bioinformatics and Molecular Modeling

We use computational chemistry, bioinformatics and various simulation techniques to support our drug discovery research. We design NCEs in silico and evaluate them against targets of interest by molecular modeling and docking studies

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Departments of Process Research :

Scientists are engaged in discovering new, safe and economical routes leading to the synthesis of drug candidates. Much of this research is directed towards the process development of NMEs. The laboratory is fully equipped for kilogram scale preparation of drugs and drug intermediates. The department has set up a modern pilot plant facility to manufacture multi-kilogram of drug and intermediates under cGMP conditions. Apart from small chemical entities, several short peptide drugs are made by solution phase synthesis on multigram level intermediates. The department has set up a modern pilot plant facility to manufacture multi-kilogram of drug and intermediates under cGMP conditions. Apart from small chemical entities, several short peptide drugs are made by solution phase synthesis on multigram level.

Human Resource and Administration

The department recruits qualified personals in various disciplines and provides administrative support for efficient and smooth functioning of R & D centre. In pursuance of our belief that 'People are our strength', we conduct regular training programs, workshops, seminars and symposiums for their career development. In order to build a healthy organization, we constantly strive to create innovative and scientifically thriving environment, which is conducive for 'rejuvenation' of our employees. We try to achieve this by having various brainstorming discussions on science and culture, providing various sport facilities, regular employee health check-up and healthy balanced food. As a part of our cultural activities several events are organized during the year in order to integrate family feeling among the Zydans. ZRC Foundation Day is a memorable event for all Zydans.

Promotion of Scientific Activities

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We are committed to Scientific Excellence. Towards the promotion of scientific activities, we conduct regular symposium in our state-of-the-art auditorium, which is equipped with complete audio-visual arrangements including LCD, overhead, paper and slide projectors.ZRC also provides opportunities to university students to undergo training and carry out advanced research in various areas as a part of their curriculum. Towards this end ZRC provides qualified students to take research programs leading to PhD degree in various disciplines. We also encourage scientific interactions between ZRC scientists and university faculties on a regular basis and publish their research findings.

ZRC Seminar Series

ZRC Seminar Series is a program facilitating interaction with leading researchers both from academia, government laboratories and industries. Under this program we regularly invite renowned scientists from reputed institutions both from India and abroad to deliver lectures on latest developments in scientific fields.

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FINANCIAL

ANALYSIS.

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StatementAnalysis

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Chapter – 4 – (1)

Comparative statement: (Balance sheet)

Particulars 2005 2004 Difference %Share holders funds Capital 374 314 0 0 Reserves 5830 5081 749 14.74

10871 10426 445 4.27Loan funds

Secured loans 2874 3437 (563) 16.38Unsecured loan 841 620 221 35.65

Differed tax liability 1012 974 38 3.90

Application of funds1) fixed assets

Net block 6784 6476 308 4.78Capital WIP 396 408 (12) 2.94

Project expensive 4 8 (4) 50

2) Investment 1368 1381 (13) 0.943) Current assets, loans and advances

Inventories 1939 1603 336 20.96Sundry debtors 1088 1659 (571) 34.42

Cash & bank balance 264 372 (108) 29.03Loans & advances 1372 701 671 95.72

Less current liability

(1844) (1819) (25) (1.37)

575 57 64 12.52

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PROFIT & LOSS A/C

PARTICULARS 2005 2004 DIFF %

Net sales 10634 10912 -278 2.55Other income 785 719 66 9.18TOTAL 11419 11631 -212 1.82ExpenditureConsumption of materials 4311 4712 -401 8.51General exp 4003 3719 284 7.64Research exp 710 632 78 12.3Interest & financial

202 232 -30 12.9

Depreciation 565 531 34Profit before extra exp& tax 1628 1725 -97 5.62 LESS: extra exp 124 125 -1 0.8Profit before tax 1504 1634 -130 7.96 LESS: prov.tax 190 205 -15 7.32Profit available for appropriation Dividend 430 425 5 1.18 Transfer to g/n 458 265 193 72.8 Bal.C/f to B/S 1490 1064 426 40.04

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COMMON SIZE STATEMENT

0F BALANCE SHEET :-

PARTICULAR 2005-2004 2004-2003AMOUNT AMOUNT % AMOUNT AMOUNT %

SOURCE OF FUND1.SHARE HOLDER FUND CAPITAL 314 5.11 314 5.82 RESARVES 5830 6144 94.89 5081 5395 94.182.LOAN FUND SECURED LOANS 2874 77.36 3437 84.72 UNSECURED LOANS 841 3715 22.64 620 4057 15.28

9859 100 9452 100APPLICATION OF FUND1.FIXED ASSETS 16289 165.21 14936 158.02 GROSS BLOCK (9505) (96.50) (8460) (89.50) LESS DEPRITIATION NET BLOCK 6784 68.81 6476 68.52 CAPITAL WIP 396 4.02 408 4.32 PROSPECTIVE & PROJECT EXPENDING ALLOCATION

4 7184 0.04 8 6892 0.08

2.INVESTMENT 1368 1368 13.88 1381 1381 14.613.CURRENT ASSETS LOANS & ADVANCE INVENTORIES 1939 19.67 1603 16.96 SUNDRY DEBTORS 1088 11.04 1659 17.55 CASH & BANK BALANCE

264 2.68 372 3.93

LOAN & ADVANCES 1372 13.92 701 7.42

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4663 47.3 4335 45.86(LOSS) CURRENT LIABILITIES & PROVISION LIABILITIES 1844 18.70 1819 19.24 PROVISION 575 5.83 511 5.41

(2419) (24.53) (2330) (24.65) NET CURRENT ASSETS 2244 22.77 2005 21.21 DEFERRED LIABILITIES (1012) (1012) 10.26 (974) (974) (10.30)4.MISSILANIOUS XPENCE 75 75 0.76 148 148 1.56

9859 100 9452 100

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COMMONSIZE STATEMENT:-

Profit & LossPARTICULAR AMOUNT AMOUNT % AMOUNT AMOUNT %1)Income 10634 10634 100 10912 10912 100Miscellaneous income

785 785 6.87 719 719 6.18

11419 106.87 11631 106.182)ExpenditureConsumption 4311 40.54 4792 43.91General EXP 4003 37.64 37.19 34.08Research EXP 710 6.68 632 5.79Amt & financial charges

202 1.90 232 2.13

Depreciation 565 5.31 531(9791) (92.07) (9906) (90.78)

3)Profit before Extra ordinary item of tax

1628 1725

Extra ordinary (124) (91)Profit before tax 1504 1634Provision for tax (190) (205)Profit after tax 1314 1429Balance forward 1064 567Goodwill ------ (92)Profit available for appropriation

2378 1904

Transfers to Debenture

0 150

Dividend 430 425Transfer to G.R. 458 265

888 840Net Profit 1490 14.01 1064 9.75C/F to Balance sheet

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TREND ANALYSIS

OF PROFIT & LOSS

Item 2003 2004 2005Income 100 120.82 98.18Expenditure 100 149.74 98.83Profit before extra ordinary item

100 149.74 94.38

Profit before Tax 100 155.18 92.04Loss Prov for Tax 100 71.43 92.68Profit after Tax 100 174.20 124.90Balance C/F to Balance sheet

100 187.65 140.04

Balance sheet :-

SOURCE OF FUNDS 2003 2004 20051)Share holder fund 100 116.98 113.882)Loan funds 100 91.60 91.573)Deferred tax 100 113.65 103.90APPLICATION OF FUNDS1)Fixed Assets 100 100.92 104.242)Investment 100 164.40 99.063)Current Assets 100 107.30 107.574)Current Liability &prov

100 114.61 103.82

Net current Assets 100 99.90 111.925)Miscellaneous EXP 100 66.67 50.68

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Chapter – 5

AVERAGE ANALYSIS:-

OF BALANCE SHEET

PARTICULAR 2004 2005 AVERAGESOURCE OF FUNDS1)Share holder fundCapital 314 314 314Reserves &Surplus 5830 5081 5455.52)Loan Funds Secured loan 2874 3437 3155.5Unsecured loan 841 620 730.5Deferred TAX 7184 6892 7038APPLICATION OF FUNDS1)Fixed Assets 7184 6892 70382)Investment 1368 1381 2058.53)Current Assets 4663 4335 44994)Current Liability &prov

2419 2330 2374.5

Net current Assets 2244 2005 2124.55)Miscellaneous EXP 75 148 111.5

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RATIO ANLYSIS

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Chapter – 6

Ratio analysis:

1) Liquidity ratio :

It consists of two type of sub ratio. 1) Current working ratio2) Acid test ratio/ Quick ratio

1) Current working ratio Meaning: -

This Ratio is also known as working capital ratio which is the measure of capability of company to pay off the debts. This ratio shows the subtraction Of current assets to current liabilities. Current ratio measures the capability of the company to pay off the debts are due to within 12 months.

Formula:-

= Current Assets ------------------------ Current liability

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Year 2004:- 4335 2330 = 1.86 %

Year 2005:- 4663 2419 = 1.93 %

Graph:-

Year 2003-04 2004-05Current ratio 1.86 % 1.93 %

Interpretation:-

The ideal current ratio is 2:1 but chore commission recommended a satisfactory current ratio is 1.33:1. Thus higher the ratio represent higher current assets as compared to its current liability. Thus here it is very clear that in the year 2005 the current ratio is higher than the previous year 2004.

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Current ratio

1.82%

1.84%

1.86%

1.88%1.90%

1.92%

1.94%

2003-04 2004-05

Current ratio


2) Acid test/ quick ratio:-

Meaning:-

A variant of current ratio is the quick ratio which is designed to show the amount of cash available to meet immediate payments. In other words company’s ability to cope with quick liabilities. This ratio considers quick assets & quick liability which are receivable as payable within a week. Normally it consists of cash items in current assets and the same figure of the liquid liability. The ideal ratio is 0.5:1.

Formula:-

= Quick assets ----------------------- Quick liability Year 2004:- = 2732 2330 = 1.173 %

Year 2005:-

= 2724 2419 = 1.126 %

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Graph:-

Year 2003-04 2004-05Quick ratio 1.173 % 1.126 %

Interpretation:-

Higher the ratio of the particular year higher will be the company’s efficiency to pay off its quick liability. Thus here it is very clear that in the year 2004 the ratio was 1.173% later it reduced to 1.126 % thus we can interpret that in the year 2005 the firm is unable to pay off its quick liabilities.

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3) Debt equity ratio

Meaning:-

This ratio measured the amount of that is in proportion to the equity. Normally higher the debt represents non-sound financial position of the company. The company should have lower debt equity as possible. So that one can assume that the company is interested and is ready to finance in new project of its own. It also shows the relationship between borrowed funds & owner’s fund, its also a popular measure of long term financial solvency of a firm.

Formula:-

Outsider fund = ---------------------- Share holder’s fund

Outsider fund = All Current liability + Loans & Advances

Share holder’s fund = Equity +Preference + Reserves &Surplus – Ficticious assets.

Year 2004 Outsider fund =1819 +701 = 2520 Share holder’s fund = 314+5081 = 5395

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Debt equity ratio = 2520 5395 = 0.467 %

Year 2005

Outsider fund =1844+1372 =3216 Share holder’s fund = 314+5830 =6144 Debt equity ratio = 3216 6144 = 0.523%

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Graph:-Year 2003-04 2004-05Debt equity ratio 0.467 % 0.523 %

Interpretation:- In the year 2004 the debt equity ratio is 0.467 which in the year 2005 went up to 0.523. Higher the debt equity ratio higher will be the firms debt . The firm will more rely upon debt. But the firms position is satisfactory because the company is not depending upon outsider’s fund its depending upon equity. Company utilizes funds from its own sources.

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4) PROPRIETARY RATIO :-

Meaning :-

This ratio measure the sales of the company as compare to its total assets. If the more sales compare tom fix assets there is more efficiency.If the sales is less compare to payment in assets so fix are not fully utilized in business.

If the ratio is low the investment in fix assets is more than necessary and it must be reduce if ratio higher that means assets are use more to earn profit.

Formula :-

Share holder’s fund = -------------------------------- Total Assets

Share holder’s fund = 5395 Total Assets = All Assets +Good will Fictious Asset = 12608+0+0

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Year 2004 = 5395 12608

= 0.428Year 2005

= 6144 13250

= 0.464

Graph:-

Year 2003-04 2004-05proprietary ratio 0.428 % 0.464 %

Interpretation:-

Higher the ratio higher will be the firm financially strong. This shows that the company has fixed asset of Rs 100 than the proprietories fund invested in it is 0.428 & 0.464 repectively.

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5) Activity Ratio /Turnover Ratio :-

4-a) Inventory Turn over Ratio = COGS ------------------ Avg Stock

COGS = Sales - Gross Profit

Avg. Stock = Closing stock + opening stock ---------------------------------------------- 2

Year 2004

COGS = 11723-567 = 11156 Avg Stock = (1756+1603)/2 = 1679.5

Inventory Turn over Ratio = 11156 1679.5

= 6.64 %

Year 2005

COGS = 11723-1064 = 10189 Avg Stock = (1939 +1603)/2 = 1771

Inventory Turn over Ratio = 10189 1771 = 5.75%

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Graph:-

Year 2003-04 2004-05Inventory turnover ratio

6.65 % 5.75 %

Interpretation:- The normal inventory turnover ratio is 9-12 % but here cadila is having low inventory turnover ratio. As in the year 2004 it is 6.64 & in the year 2005 it is 5.75 both of them are lower than the recommended inventory turn over ratio.

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5-b) Fixed Assets Turn Over Ratio :-

Meaning :- This ratio measures the sales of the company as compare to its total assets. If the more sales compare to fix assets there is more efficiency. If the sales is less compared to payment in assets so fix assets are not fully utilized in business.

Formula :-

= Net Sales Fix Assets

Year 2004

= 10912 6892

= 1.58%

Year 2005

= 10634 7184

= 1.48 %

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Graph:-

Year 2003-04 2004-05Fixed assets turnover ratio

1.58 % 1.48 %

Interpretation:-

If the net sales is less than the fixed assets the we can interpret that the firm is not efficiently using its fixed assets so is in the year 2005. But if the sales is more than its assets then the firm is efficiently utilizing its assets so is in the year 2004.

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5-c) Working Capital Turn Over Ratio :-

Formula :-

Net Sales ------------------- Working Capital

Net Sales = 10912

Working Capital = Current Assets – Current Liability

Year 2004

Working Capital = 4335-2330

= 2005

Working Capital Turn Over Ratio = 10912 2005

= 5.44 %

Year 2005

Working Capital Turn Over Ratio = 10912 2244 = 4.74 %

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Graph:-

Year 2003-04 2004-05Working capital turnover ratio

5.44 % 4.74 %

4.00%

4.50%

5.00%

5.50%

2003-04 2004-05

Working capital turnover ratio

Working capitalturnover ratio

Interpretation:-

If the net sales is less than the fixed assets then we can interpret that the firm is not efficiently using its fixed assets so is in the year 2005. But if the sales is more than its assets then the firm is efficiently utilizing its assets so is in the year 2004.

5-d) Debtors Turn over Ratio :-

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Meaning:-

This ratio is a measure of assessing the ability of the company to promote sales with minimum investments in uncollected debtors. It indicates timely quick collection or premature collections through cash discount incentives, bill discounting or factoring the book debts.

Formula:-

= Net credit sale Average A/c receivable

Year 2004 = 10912 1513.5 = 7.21 Times

Year 2005

= 10634 1373.5 = 7.74 Times

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Graph:-

Year 2003-04 2004-05Debtors turnover ratio 7.22 times 7.74 times

Interpretation:-

As this ratio indicates the timely repay ability of the firms debts thus we can interpret that higher the ratio higher will be the capital block with the debtors & vice-versa.

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5-e) Creditors turnover ratio:-

Meaning:-

This ratio measure the repay capacity of the company. This ratio is exactly opposite to the debtors turnover ratio. It measures how quick can a firm pay off its creditors and therby reduce its liability.

Formula :-

= Net credit purchase Avg. A/c Payable

Year 2004 = 4792 1401.5 = 3.42 Times

Year 2005 = 4311 1508 = 2.90 Times

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Graph:-

Year 2003-04 2004-05creditors turnover ratio 3.42 times 2.90 times

Interpretation:-

This ratio measures the firm capacity of paying off its debts. Here in the yr 2004 the ratio was 3.42 whereas in the yr 2005 firms ratio was 2.90 which compared to the previous year is less thus firm has improved in quick payment of its debts.

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6) Profitability Ratio :-

6-a) Gross Profit Ratio = Gross Profit *100 Net Sales

Meaning:-

This ratio is useful to measure the overall performance of the business & shows the efficiency of the company to earn amt. of profit earned on net sales. Gross profit means the profit after deducting trading exp.

Year 2004 = 561*100 10912 = 5.20 %

Year 2005

= 1064 *100 10634 = 10.09 %

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Graph:-

Year 2003-04 2004-05Gross profit ratio 5.20 % 10.09 %

Interpretation:-

In the year 2004 the ratio of company is 5.20 % & in the yr 2005 the ratio of the company is 10.09%It measures that the G.P. ratio is increased in comparison of first year i.e. 2004. company is growing year by year.

6-b) Net Profit Ratio :-

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Meaning:-

This ratio is useful to measure the overall performance of the business & shows the efficiency of the company to earn amt. of profit earned on net sales. Net profit means the profit after deducting trading & Profit & Loss exp.Net profit ratio measure the earning capacity of the firm after tax as compare to its total sales.

Formula :- = Net Ratio *100 Net Sales

Year 2004 = 1064*100 10912 = 9.75 %

Year 2005 = 1490*100 1063 = 14.01 %

Graph:-

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Year 2003-04 2004-05Net profit Ratio 9.75 % 14.01 %

Interpretation:-

In the year 2004 the ratio of company is 9.75 % & in the yr 2005 the ratio of the company is 14.01%It measures that the N.P. ratio is increased in comparison of first year i.e. 2004. company is growing year by year. The net profit ratio indicates higher the net profit ratio the better will be the profitability of the company.

6-c) Operating Ratio:-

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Meaning:- This ratio shows the relationship between the COGS + Exp. & Net sales.

Formula :- Sales - Profit after tax *100 = ---------------------------------- Net sales

Year 2004 = 11723 – 1929 *100 10912

= 94.33 %

Year 2005 = 11253 -1314 *100 10634 = 93.46 %

Graph:-

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Year 2003-04 2004-05Operating ratio 94.33 % 93.46 %

Interpretation:-

Higher the ratio higher the firm’s inefficiency so it indicates that if the ratio is lower it is better for the company in the year 2005 the firm’s ratio is decreased thus we can assume that its becoming efficient.

7) Return on Share Holder Fund:-

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Meaning :-

This ratio indicate the company’s Profit that is available to share holder the distribution of dividend. Higher the ratio represent sound financial position and ability on its share holder.

Formula :-

= Net Profit after tax & Int *100 Share holders fund

Year 2004 = 1904 *100 5395 =35.29%

Year 2005 = 2378 *100 6144 =38.70%

Graph:-

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Year 2003-04 2004-05Return on Share Holder Fund :-

35.29% 38.70%

Interpretation:-

This ratio shows the profitability of the firm. In the year 2004 the ratio is 35.29 % & in the year 2005 the ratio is 38.70 % thus we can interpret that in 2005 the ratio has increased & the firm is in its sound financial position.

8) RETURN TO EQUITY SHARE HOLDER FUND :-

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Meaning :-

This ratio indicate the company’s profit that is available to share holder the distribution of dividend. Higher the ratio represent sound financial position & ability on its share holder.

Formula :-

= Net profit after tax –pref.divid.* 100 Share holders fund

Year 2004 = 1429 –0 * 100 5355 = 26.49%

Year 2005 = 1314 *100

6144 = 21.9%

Graph:-

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Year 2003-04 2004-05RETURN TO EQUITY SHARE HOLDER FUND :-

26.49% 21.9 %

0

10

20

30

2003-04 2004-05

Return On Equity share

Return On Equityshare

Interpretation:-

This ratio shows the profitability of the firm. In the year 2004 the ratio is 26.49 % & in the year 2005 the ratio is 21.9% thus we can interpret that in 2005 the ratio has decreased & the firm is not in its sound financial position Here there is no need for the company to pay the pref. Dividend as the firm is not collecting any fund through issue of pref.

9) EARNING PER SHARE :-

Meaning:-

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This ratio gets in the assessment of the profitability from the point of equity share holders. This measures the profit available to equity holder per share

FORMULA:

Net profit after tax No of equity share

YEAR 2004 1429 62806854

Nominal value of equity share = 5 = RS.22.75

YEAR 2005 1314 62806854

Nominal value of equity share = 5 = Rs.20.93

Graph:-

Year 2003-04 2004-05Earning per share ratio 22.75 20.93

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20

21

22

23

2003-04 2004-05

Earning per share ratio

Earning per share ratio

Interpretation:-

The earning per share help in determining the market price of equity share of the company. The comparison of the EPS of the company with other company’s share will also help in deciding whether equity capital is being effectively used or not. Higher the EPS shows higher profitability of the company due to which it is beneficial for the share holders & company can attract more shareholders with less liability of payment of dividend(no preference share.

10) PRICE EARNING RATIO :-

Meaning:-

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It express the relationship between the Market price of the share & the EPS. in other words it indicates the number of time the EPS is covered by its market price.

FORMULA : Market price per eqation Earning per share

YEAR, 2004 = 5 22.75

=0.20%

YEAR, 2005 = 5 20.93

= 0.23%

Graph:-

Year 2003-04 2004-05Price earning ratio 0.20% 0.23%

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0.18%

0.20%

0.22%

0.24%

2003-04 2004-05

Price earning ratio

Price earning ratio

Interpretation:-

The price earning ratio helps the investor in deciding whether to buy or not the share of the company at particular market price. As a rule higher the price earning ratio the better it is for equity share holders.

11) DIVIDEND YILD RATIO :-

Meaning:-

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Its useful for the investors who are interested only in the dividend income.

FORMULA : Dividend per share * 100 Avg Market Price

Year 2004:-

= 6.003 * 100 (513+115.15)/2

= 1.91%

Year 2005:-

= 6.003 *100 (632.15+390.55)/2 = 1.17%

Graph:-

Year 2003-04 2004-05

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Dividend yield ratio 1.91% 1.17%

0.00%

0.50%

1.00%

1.50%

2.00%

2003-04 2004-05

Dividend yield ratio

Dividend yield ratio

Interpretation:

Higher the ratio will be beneficial to the company as well as the shareholders for they will be more attracted to invest in the firm. The trend of this ratio if is on its way to increase then the firm can easily attract them but here in 2005 the ratio is decreasing i.e. from 1.91% to 1.17%

12) DIVIDEND PAYOUT RATIO :-

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Meaning:-

This ratio indicates the split of EPS between cash dividends and reinvestments of profits. If the company has profitable projects then it will prefer to keep D/P ratio lower i.e. it will reinvest higher portion of profits in the business.

FORMULA : Dividend per equity Earning per share

YEAR, 2004

Dividend per equity = 377 62806854 = 6.003 Dividend payout ratio = 6.003 22.75 = 0.263YEAR, 2005 Dividend per equity = 377 62806854 = 6.003 Dividend payout ratio = 6.003 20.93 = 0.286

Graph:-

Year 2003-04 2004-05Dividend pay out ratio 0.263 0.287

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0.25

0.26

0.27

0.28

0.29

2003-04 2004-05

Dividend pay out ratio

Dividend pay outratio

Interpretation:

Higher the ratio will be beneficial to the company as well as the shareholders for they will be more attracted to invest in the firm. The trend of this ratio if is on its way to increase then the firm can easily attract them but here in 2005 the ratio is decreasing i.e. from

13) INTEREST COVERAGE RATIO

Meaning:-

This ratio shows the relation in times of firms income with that of the expense incurred as fixed tax.

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Formula:-

Debt service ratio = EBTT Fixed int.

Year 2004

= 1628 202 = 8.06 times

Year 2005

= 1725 232 = 7.44 times

Graph:-

Year 2003-04 2004-05Interest coverage ratio 8.06 7.44

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7

7.5

8

8.5

2003-04 2004-05

Interest coverage ratio

Interest coverage ratio

Interpretation:-

EBIT is 8.06 times in the year 2004 of int. to be paid & in the year 2005 EBIT is 7.44 times of int. payable Here clearly we can see that the ratio of income(EBIT) increase much more compared to the Exp.(interest) thus it is beneficial to the company.

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CONCLUSION

If we conclude all the ratio I we can see that the profitability ratio means net profit ratio is satisfactory in the year 2005. it is only 0.00% the operating ratio is which show the efficiency of the company.

The liquidity position of the company is very good. The company having much more liquid assets than liability. At the same time current position of the company is very good and it is able to pay its debt within time period, it is also pay its quick liability within a given period.

If we see the point of view of the proprietary fund invested the company is more depend on the own capital and not more dependent on outsiders funds.

So we say that company is financially strong but company is able to make its net profit.

Cadila Healthcare Limited is one of the leading pharmaceutical company in India. Cadila Healthcare Limited has a many subsidiaries company in foreign company. Cadila Healthcare Limited also provides also many other services. Cadila Healthcare Limited works with internationally reputed customers.

Cadila Healthcare Limited is totally profit making company it is also specs a huge amount in research and development.

By a report it is concluded that the year 2003-04 and 2004-05 is best for the company makes a good profit in this years.

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