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CONTENTS
CHAPTER-I
INTRODUCTION
OBJECTIVES OF THE STUDY
NEED FOR THE STUDY
METHODOLOGY
LIMITATIONS OF THE STUDY
CHAPTER-II
INDUSTRY PROFILE
CHAPTER-III
COMPANY PROFILE
CHAPTER-IV
THEORETICAL FRAME WORK OF FINANCIAL PERFORMANCE
CHAPTER-V
DATA ANALYSIS & INTREPRETATION
CHAPTER-VI
FINDINGS, SUGGESTIONS & CONCLUSION
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BIBILOGRAPHY
CHAPTER-I
INTRODUCTION
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INTRODUCTION
A Financial Statement is a collection of data organized according logical and consistent
accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business firm. It may show a position at a moment in time, as in the case of an income statement
generally refers to the two statements these are.
Income statement (or) profit and loss.
Account. Position statement (or) Balance sheet.
These statements are used to convey to management and other outsiders the profitability
and financial position of the firm. Financial statements are the outcome of summarizing process
of accounting. In the words of john Nhei the financial statements provide a summary of the
accounts of the accounts of a business enterprise. The balance sheet reflecting the asset,
liabilities and capital on a certain date and income statement showing the results of operation
during a certain period.
Financial statements are also called financial reports. In the words of Anthony, financial
statements, essentially, are interim reports, presented annually and reflect a division of the life of
the life of an enterprise onto more or less arbitrary accounting period more frequently a year.
Meaning Of Financial Analysis:
The term financial analysis also known as analysis and interpretation of financial
statement, refers to the process of determine financial strength and weakness of the firm by
establishing strategic relationship between the items of the balance sheet, profit and loss account
and other operative data.
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In the words of Myers financial factors in a business as disclosed by a single set of
statements and study of the trend of these factors as shown in a series of statements.
Meaning Of Financing Statements:
Statements are the sources of information on basis of which conclusion are drawn about
the profitability and financial position of a concern, they are the major means employed by firms
to present their financial situation of owner, creditors and the general public, the primary
objective of financial statements is to assist in decision making,. The accounting principles board
of America( APB) sates the following objectives of financial statements.
The provide reliable financial information about economic resources and obligations of a
business firm.
To provide other need information about changes in such economic resources and
obligation.
To provide reliable information about changes in resources (resources less obligations)
arising out of business activities.
To provide financial information that assists in estimating the earning potentials of
business. To disclose, to the extent possible, other information related to the financial
statements that is relevant to the needs of the users of these statements.
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Types of Financial Statements:
Financial statement primary comprise two basic statements; (1)the position statement or
the balance sheet and (2)the income statement or the profit and loss account. However,
(Generally Accepted Accounting Principle(GAAP) specifies that a complete set of financial
statements must include:
1. A Balance Sheet.
2. An income statement (profit and loss accounting.)
1. Balance Sheet:
The American institute of certified public defines balance sheet as. A tabular statement of
summary of balance(debits and credits) carried forward after an actual and constructive closing
of books of account and kept according to principles of accounting. The purpose of the balance
sheet is to show the resources that the company has, i.e. its assets, from where those resources
come from I.e. its liabilities and investment by owners and outsides.
The balance sheet is one of the important statements depicting strength of the concern. It
shows on the one hand the properties that is utilizes and on other hand the sources of these
properties. The balance sheet shows all the assets owned by the concern and all the liabilities and
claims it owners and outsiders. The balance sheet is prepared on a particular date. Right hand
side shows properties and assets and left hand side shows liability normally there is no sequences
for showing various assets and liability. The companies act, 1956 has prescribed a particular
form for showing assets and liability in the balance sheet for companies registered under this act.
These companies are also required to give figure for the previous year along with the current
years figures.
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2. Income statement (or) profit and loss Account:
Income statement is prepared to determine the operational position of the concern. It is a
statement of revenues earned and the expenses incurred for earning that revenue, if there is
excess of revenues over expenditures it will show a profit and if the expenditures are more than
the income then will be a loss. The income statement is prepared for a particular period,
generally a year. When income statement is prepared for the year ending, then all revenues and
expenditures falling due in that year will be taken into account irrespective of their receipt or
payment.
The income statements may be prepared in the form of a manufacturing account to find
out the cost of production, in the form of trading account to determine gross profit or loss. In the
form of a profit and loss account determine net profit or net loss, a statement of retained earnings
may also be repaired to show the distribution of profit.
Limitations of Financial Statement:
The financial statement are relevant and useful for the concern, still they do not present a
final picture of the concern. The utility of these statement is dependent upon a number of
factors. The analysis and interpretation of these statement should be done very carefully
otherwise misleading conclusions may be drawn; the financial statements suffer from the
following limitations:
Only interim reports
Do not give exact position
Historical costs
Impact of non-monetary reports ignored.
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Comparative statements.
Trend analysis.
Common sized statement.
Funds flow statement.
Cost-volume-analysis.
Ratio Analysis:
One of the techniques of analysis of financial statements is to calculate ratio. Ratio is the
numerical or an arithmetical relationship between two figures. It is expressed when one figure is
divided by another. If 4000 is divided by 10,000 the ration can be expressed as 4 or 2:5or 40%.
Absolute figures are valuable but they standing alone convey no meaning unless
compared with another. Accounting ration interrelationship. Which exist among various
accounting date? When relationship among various accounting data supplied by financial
statement are worked out, they are known as accounting ratios.
Classifications of Ratios:
Ratio may be classified in a number of ways keeping in view the particular purpose.
Ratio indicating profitability are calculate on the basis of the profit and loss account, those
indicating financial position are compared on the basis of the balance sheet and those which
operating efficiency or productivity or effective use of resources are calculate on the basis of
figures in the profit and loss account and the balance sheet. This classification is rather crude and
unsuitable to determine the profitability and financial position of the business. To achiever this
purpose effectively ratio may be classified as:
Profitability Ratios.
Turnover Ratios.
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Financial Ratios.
Leverage Ratios.
Profitability Ratios:
Profitability ratios are of outmost importance for a concern; these ratios are calculated to
enlighten the end results of business activities. Which is the sole criterion of the overall
efficiency of a business concern.
Turnover (Performance or Activity) Ratios:
These ratios are very importance for a concern to judge how well facilities at the disposal
of the concern are being used or to ratios are usually calculated on the basis of sales or cost of
sales and are expressed in integers rather than as percentage. Such ratios should be calculated
separately for each type of asset. Higher the turnover ratio, the profitability and use of capital or
resources will be. The following are the import turnover ratios usually calculated by a concern.
Financial Ratios:
These ratios are calculated to judge the financial position of the concern from long-term
as well as short-term solvency point of view. The following are the ratios, which are calculated
in the respect.
Leverage Ratio:
Leverage ratio to an increased means of accomplishing some purpose. In financial
management it refers to employment of funds to accelerate to owners. It may be favorable of or
unfavorable. An unfavorable leverage exists if the rate of return remains to however. It can be
used as a tool of financial planning by the finance manager.
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Financial Statements Analysis Of Limited
Introduction:
The basis for financial planning analysis and decision-making is the financial
information. Financial information is need to predict, compared decision-making-investment and
financial decision-making. The financial information of an enterprise is contained in the financial
statements or accounting reports.
Meaning and Concept of Financial Analysis:
The term financial analysis also known as analysis interpretation of financial
statements, refers to the process of determine financial strengths and weakness of the firm by
establishing strategic relationship between the items of the balance sheet, profit and loss account
and oilier operative data. Analysis financial statements, according to Metcalf and titard. Is a
process of evaluating the relationship between component parts of financial statement to obtain a
better understanding of firms position and performance?In the words of Myers, Financial
statement analysis is largely a study of relationship among the various financial factors in a
business as disclosed by a single set-of statement,and study of the trend of these (actors as
shown in a series of statement).
The purpose of financial analysis is to diagnose the information contained in financial
statement so as to judge the profitability and financial soundness of the firm, just like a doctor
examines ill patient by recording his body temperature, blood treatment, a financial analyst the
statement with various tools of analysis and interpretation financial statement is essential is to
bring out the mystery behind the figures in financial statements. Financial analysis is an
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attempt to determine the significance ad meaning of the financial statement date so that forecast
may be made of the future earnings, ability to pay interest and debt maturities (both current and
long-term) and profitability of a sound dividend policy.
Financial Statements:
Balance Sheet
Balance sheet is the most significant financial statement. It indicates the financial condition
or the state of affairs of a business at a particular moment of time. More specifically , balance
sheet contains information about resources and obligations of a business entity and about its
owners interest in the business at a particular point of time .Thus, the balance sheet of a form
prepared on March 31,2007 reveals the forms financial position on this specific data. In the
language of accounting balance sheet communicates information about assets, liabilities and
owners equity for the business firm as on a specific date. It provides a snapshot of the financial
position of the firm at the close of the firms accounting period.
Assets are valuable economic resources owned by the firm. The embody future benefits
and are measured in monetary terms. Assets represent:(a) stored purchasing powder(e.g., cash)
(b)money claims(e.g., receivable, stock)and (c)tangible and intangible items that can be sold or
used in business to generate earnings. Tangible items include land , building, plant, equipment or
stocks of materials and finished goods and all such other items which have physical substance.
Intangible items do not have any physical existence, but they have value to firm. They include
patents, copyrights, trade name or goodwill.
Firms obligations are called represent debts payable in the future by the firm to its
lenders and creditors. They represent economic obligations to pay cash or to provide goods or
services in some future period. Generally borrowing money or purchasing goods or services on
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credit creates liabilities .Example of liabilities are creditors, bills payable, wages and salaries
payable, interest payable, taxes payable bonds.
Financial Analysis:
The focus of financial analysis is on key in the financial statement and the significant
relationship that exists between them. The analysis of financial statement is a process of
evaluating the relationship between component parts of financial statement to obtain a better
understanding of the firm position and performance. The first task of the financial analyst is to
select the information relevant to the decision under consideration from the total information
contained in the financial statement. The second step is to arrange the information in away to
highlight significant relationship. The financial step interpretation and drawing of inference and
conclusions in brief financial analysis is the process of selection, relation and evolution.
Tools of financial analysis:
Fund flow statement
Trend analysis
Ratio analysis
Comparative statement
Common size statement analysis
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OBJECTIVES OF THE STUDY
The following are the objectives of study.
The primary objective of the study is to estimate the financial soundness of the
NATCO PHARMA LTD company.
The identify the relationship between various financial figures in the financial
statement of NATCO PHARMA LTD company.
To understand the present and future earning capacity of the company.
The possible of development in the future by making forecasts and preparing
budgets.
To derive the working experience of producing budgetary statements.
To offer limited directions cash management group to steer the organization to a
cash surplus company
Analyzing the budgetary estimations of the organization.
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IMPORTANCE OF THE STUDY
Studies of this type are useful to management, owner, investors, government, employees,
suppliers and society.
Studies of this type are useful to the research scholars who conduct in depth research.
Studies of this type are useful to the similar organization in assessing their financial
performance.
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METHODOLOGY
The study carried with the co-operation of the management who permitted to carry on the
study and provided the requisite date. The data is collected from the following sources.
Sources of Data
Primary Data
Secondary Data
Primary data:
Interviewing a few financial department heads. Officers and management bodies and staff
member of the company form of primary data.
Secondary data:
The information collected from
Annual report.
Executive and staff of financial accounting department.
Execution of other departments.
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LIMITATIONS OF THE STUDY
Every study will have its own limitations the present study is also carriers out with the
following limitations.
Analysis of the financial health is a conducted with the help of financial statements only.
Time and cost factor one another limitation.
The 7 weeks period is one of the constraints to make project much more qualitatively
Findings of the study are purely based on information provided by the company more
other non-financial factors were not considered for analysis
It depends upon support of top management
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CHAPTER-II
INDUSTRY PROFILE
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INDUSTRY PROFILE
A Global Pharmaceutical Industry Report:
The global pharmaceutical industry is a multinational industry that is a highly regulated,
capital intensive, and which is driven by large research and development expenditures. The
industry is primarily privately owned and is technologically sophisticated. The global
pharmaceutical market is forecasted to grow to US$ 842 billion in 2009, an equivalent CAGR of
6.9% over the next five years. The strong growth in the ten European market that joined the
European Union in 2004 will help to boost European sales over the next five years. Of the
leading product classes in 2005, cytostatics and angiogenesis-II inhibitors generated the greatest
year on year growth. There were sixteen blockbuster drugs in 2005, generating combined sales of
US$ 18.1 billion. The total pharmaceutical sales from the top ten companies accounted for more
than 40% of the total market.
Despite a growth rate of 7% down sliding from 2004 and the lowest since 1998, in 2005
the total global pharmaceutical sales reached US$602. Among the ten leading international
markets combined, which account for 81% of world wide sales, audited growth was just 5.7%,
down from 7.2% in 2004. Emerging markets such as China, South Korea, Brazil, Russia and
Turkey experienced double-digit growth signaling an important shift occurring in the
pharmaceutical industry. As growth in the mature markets flatten, industry attention is shifting to
smaller, developing markets that are doing exceptionally well. Many of these developing nations
are experiencing significant gross domestic product growth which helps finance the healthcare
systems, increase patient access and fuels the double digit growth. Pharmaceutical measures are
gearing up to the challenges of meeting the unmet needs of these markets.
Growth in the global pharmaceutical industry is expected to slow in 2007, marked by
slowing growth in the United States and other major markets. At the same time, pharmaceutical
industry growth in emerging markets is expected to reach double-digits, although these markets
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still represent a small percentage of global pharmaceutical sales. And 2007 will see continued
growth in both generic and specialty drugs.
The global pharmaceutical market is projected to increase between 5 and 6% in 2007 to
reach $735745 billion, according to IMS Health (Norwalk, CT). This pace is down from growth
of 67% in 2006. In the US and the five largest European markets, sales growth in 2007 is
projected at 45%, marking a historic low for the US market, according to IMS.
In several respects, 2007 marks an important inflection point for the global
pharmaceutical market, says Murray Aitkin, senior vice-president of Healthcare Insights at IMS
Health, in a company release. For the first time, the seven largest markets will contribute just
half of overall pharmaceutical growth, while seven emerging markets will contribute nearly 25%
of growth worldwide. These seven emerging markets (Brazil, China, India, Mexico, Russia,
South Korea, and Turkey) are expected to grow 1213% next year to $8590 billion, according
to IMS.
Indian Pharmaceutical Industry
Global pharmaceuticals market is of US$500bn growing at about 9% a year with North
America as the largest market accounting for almost half the total global sales. Europe and
Japan follows next. USA is also the largest generics market in the world estimated at around
US$17bn and growing at about 14%. India currently accounts for less Than 8% of the world's
pharmaceutical consumption and is the fifth largest producer of pharmaceutical products in the
world.
Pharmaceutical industry in India is highly fragmented with about 24,000 players around
330 in the organized sector and remaining in the unorganized sector. The industry comprises
large, medium and small-scale operators out of which some 330 companies' together account
for nearly 90 per cent of the domestic market, while the rest is accounted for by a large number
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of small companies. The top ten companies make up for more than a third of the market. The
revenues generated by the industry are approximately US$ 7 bn and have grown at an average
rate of 10% over last five years. The Indian Parma industry accounts for about 1 % of the
world's Parma industry in value terms and 8% in volume terms. The largest formulation players
occupies market share of less than 6%. The industry manufactures about 400 bulk drugs and
almost the entire range of formulations. About a third of India's production - close to US $ 3.5
billion - is exported and exports are growing at 25% per annum. Half a billion dollars worth of
exports is to the US alone, while Germany, Russia, the UK, Canada, Italy and Japan are among
others. .
The signing of the Trade Related Intellectual Property Rights (TRIPS) agreement in
1995, which committed India to honor the WTO mandated product patent regime from 2005,
marked the beginning of a fresh chapter in the industry's evolution and India has finally
transited into product patent regime from process patent.
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The Top 10 Indian companies in terms of Turnover are
S.No Company Name Turn Over
(Rs core)
Turn Over
(US Mill)
1 Ranbaxy Laboratories Ltd. 4243.00 987.00
2 Cipla Ltd. 2055.00 478.00
3 Dr. Reddys Laboratories
Ltd.1839.00 428.00
4 Nicholas Piramal India Ltd. 1440.00 335.00
5 Aurobindo Pharma Ltd. 1341.00 312.00
6 GlaxoSmithKline
Pharmaceuticals Ltd.1242.00
289.00
7 Lupin Ltd. 1233.00 287.00
8 Cadila Healthcare Ltd 1172.00 273.00
9 Sun Pharmaceutical Indus.
Ltd.936.00 218.00
10Wockhardt Ltd. 767.00
178.0
0
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MAJOR PLAYERS
Cipla Limited
The Chemical, Industrial & Pharmaceutical Laboratories which came to be popularly known as
Cipla was founded by Dr K.A. Hamied in 1935. A Mumbai-based company currently Cipla is a
leading domestic Indian pharmaceutical company with a market share of about 5.85% and
crossed Rs20bn mark in revenues during FY04
Cipla's businesses are broadly divided into the following segments:
Formulations
Bulk drugs & Intermediates
Technology services
Ranbaxy Laboratories
Established in 1961, Ranbaxy Laboratories is India's largest pharmaceutical and ranks
9th worldwide as a generics drug manufacturer. The company went public in 1973 and began
the first of its several strategic alliances through a joint venture in Nigeria in 1977. The Ranbaxy
research foundation was initiated in 1985 and several more production facilities were in place by
1987. Its plant in Toansa, Punjab, which is the largest manufacturer of antibiotics, got US FDA
approval in 1988. By 2005, Ranbaxy had opened its third state-of-the-art R&D facility in India
and also entered the Canadian market. The company has strong growth rates with an expanding
international presence in the USA, UK, France, Germany, India, China, Brazil etc. Ranbaxy
leverages its Indian competitiveness to launch quality products into global markets.
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Ranbaxy Laboratories Limited has managed to lead the industry and strengthen its global
presence by successfully implementing the following Market Busine moves
Radically improve the productivity
Capitalize on second-order effects of shifts in constraint
Glen mark Pharmaceutical
Glen mark Pharmaceuticals Limited (Glen mark) was established in 1977 in Mumbai
(India) and was listed on the Indian bourses in 1999.The company is actively engaged in New
Drug Discovery Research, the major areas of research being inflammation and metabolic
disorders. Glen mark is a key player in the development, manufacturing and marketing of
Branded Generic and Generic Drug Formulations and API (active pharmaceutical ingredient). It
has presence in over ten therapeutic segments with a strong product portfolio in dermatology,
pediatrics, gynecological, anti-diabetes, and cardiovascular. Its API Manufacturing facilities are
located at Ankles war, Kurkumbh and Soapier and its generic formulation is located at Goa,
Baddi and Nasik.The Success factors of Glenmark include Leveraging strategic partnerships
and Product development with the API advantage.
GlaxoSmithKline (GSK)
It is the number one prescription generator in India. It is ranked first
by general/consulting physicians and general surgeons. With an overall
market share of 6.5 per cent, the company has held a leading position in
the Indian market for over last two decades. It enjoys the highest sales
force among global MNCs in India. GSK's coverage spans over 9 segments,with top ranking in 8 out of 12 doctor segments. It is the leader in anti-
infective, anti-inflammatory, analgesic, gastroenterological, ant allergic and
dermatological (corticosteroids) segments.
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Cadila Healthcare Limited
Cadila Healthcare Ltd., the flagship company of the Ahmedabad based Zydus Group, is
one of the top five pharmaceutical companies in the domestic formulations market, with a
market share of 3.85%. It is also a leading producer of bulk drugs. The company headed by Mr.
Pankaj Patel, Chairman& MD, comprises of nine subsidiaries and two IV companies namely
Zydus Atlanta and Sarabhai Zydus. While Zydus Atlanta manufactures intermediates of
Pantoprazole and conducts clinical research on new molecules, Sarabhai Zydus is the leading
animal health care company in India.
The Company's activities comprises of:
Manufacturing and marketing of domestic formulations.
Manufacturing bulk drugs and API
Contract manufacturing services
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CHAPTER-III
COMPANY PROFILE
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COMPANY PROFILE
NATCO Pharma Limited is an Indian enterprise molded by global aspirations. This hasalways demanded a preparedness and long- term organizational vision that can encompass the
turbulences and paradoxes of shifting terms and terrain's of business.
Beginning:
NATCO PHARMA was promoted by Mr. V.C. Nannapaneni in the year 1981 as a
Private Limited Company to be in the business of Research, Developing, Manufacturing and
Marketing of Pharmaceutical Substances and Finished Dosage forms for Indian and International
markets. NATCO PHARMA began operations in 1984 in Andhra Pradesh, India.
The Journey:
NATCO PHARMA was ranked 82nd in sales among Indian Pharmaceutical companies in
1994. NATCO also has the credit of being one of the largest contract manufacturers in India.
Some of the well-known companies like Ranbaxy, Dr. Reddy's Laboratories, and John Wyeth
etc. get their products manufactured.
Today:
NATCO PHARMA LIMITED, which began its operations as a single unit with 20
employees, today has four manufacturing facilities and employs around 1500 people. It has an
on-line data for analysis and decision making. Consistently ranked among the fastest growing
pharmaceutical companies in the country, Natco is utilizing its collective experience to kick start
its future plans as a global company. Respected for Quality, Performance, Care, Responsibility
and for creation and maximization of wealth for its Shareholders NATCO Pharma Limited, the
post-merger organization represents a strategic stage in NATCOs constant evolution as the
Complete Pharma Company.
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MISSION:
An Indian pharmaceutical industry, with significant international presence. Today it is
more innovative and active than ever across the entire spectrum in pharmaceuticals - from basic
research, bulk actives & intermediates to finished dosage forms and clinical trials. In the
emerging industry patterns of the twenty-first century, based on new technologies, NATCO
recognizes that innovative product development has to be complemented with cost effective
therapeutic solutions to address a better informed and a more demanding fraternity. To achieve
this, the company has harnessed all its strengths compact productive teams, modern facilities.
It commands over chemical technologies and economies of scale - into a synergistic organic
entity, continuously creating and nurturing high quality products and technologies. NATCO
believes that in the new order of symbiotic drug industry, it will emerge a powerful player with
specialized skills to address encompassing opportunities in pharmaceuticals. Attracting industry
leaders with the constancy of its purpose. NATCO's emergence from a major business re-
engineering exercise further fuels its ambition to be among the select top leaders in the industry
with the power to turn shared DREAMS into REALITY.
VISION
NATCO will be the global organization most respected for quality, service and social
commitment in health care and other areas of business.
NATCO is a group of companies associated with
1. NATCO PHARMA LIMITED
2. NATCO PHARMA DIVISION
3. NATCO CHEMICAL DIVISION
4. TIME CAP PHARMA LABS PVT.LTD
5. K.N. BIOTECH PVT.LTD
6. NATCO CHEMICAL AND R&D DIVISION
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MANUFACTURING FACILITIES
FORMULATION
PARENTERALS
BULK DRUGS
R&D
MANUFACTURING LOCATIONS:
KOTHUR:
The company has one manufacturing factory at Kothur, situated in 52, 80 sq. m site.
This factory has attained the ISO-9002, 14002 certification and it is engaged in the
manufacturing of tablets, capsules, liquids and drug syrups.
The biotechnology unit of NATCO is located at Kothur. This factory is one of the few
factories available in India, which manufactures fungal diastase for digestive image. It is
equipped with one of the finest equipments and technology.
MEKAGUDA:
This factory is a chemical division located at Mekaguda spread over 100 acres; this
factory incorporates the latest technology and immense capacities. It is one of the latest synthetic
bulk activities manufacturing units in India. This factory also possesses an effluent treatment
plant which adds miles in the direction of being environmentally friendly.
NAGARJUNA SAGAR:
This factory is a parental division located at Nagarjuna Sagar, which is around 180km
from Hyderabad. This factory is one of the biggest single unit manufactures for the
manufacturing of small and large volume parentarals.
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SANATH NAGAR:
This is chemical and R&D division located at Sanath nagar, Hyderabad. It is the only
manufacturing factory in India that manufactures the worlds best known anti depressant
fluoxetine, HCL. It also manufactures other bulk drugs including isosorbides etc.
INFRASTRUCTURE:
30,000 sq. ft of Laboratory Space.
30,000 sq. ft space available for further expansion.
7 Laboratories for synthesis
4 Laboratories for analytical method development and analytical instrumentation.
A Laboratory for natural actives and Biotech oriented research.
Centralized library housing over 3000 books, journals, periodicals etc.
Computer Database for on line literature search and patent scan.
RESEARCH AND DEVELOPMENT:
NATCO`s research and development effort is multi disciplinary. With the help of NATCO
research centre, centralized support, networking and integration of group requirements is
facilitated. The center has a core team of dedicated scientists backed by advanced facilities and
equipments.
Currently R&D is involved in the development of new controlled release drug delivery
system which include specialized gels, micro/nano sponges and liposomes technologies. The
company conducts research in peptide synthesis through fermentation process, microbiological
and through stain improvement techniques are also undertaken.
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NATCO has been sanctioned an assistance of Rs.130 lakhs under the SPONSERED
RESEARCH AND DEVELOPMENT PROGRAMME(SPREAD) by industrial credit and
investment corporation of India for carrying research projects in association with leading
National Research Labs.
NATCO conducts research in peptide synthesis along with Center for Cellular and
Molecular Biology, Hyderabad. NATCO works in close collaboration with Central Leather
Research Institute, Madras for the development or oral vaccines.
NATCO has entered in strategic alliance with Hyderabad Central University and Birla
Institute of Technology and Science, Pilani to conduct research in the field of Synthetic
chemistry.
NATCO out sources selective research and development project to Nizam`s Institute of
Medical Sciences, Hyderabad.
OPERATIONAL REVIEW & FUTURE OUTLOOK
NATCO is the current leader in Oncology segment. Generic formulations from NATCO
are launched in USA, Canada and few countries in EU.
FINISHED DOSAGE FORMULATION DIVISION
The finished dosage formulation unit has turned out exceptionally good
performance, basically driving by the oncology segment. The company continues to make in
road into the segment and now starts as number one in terms of revenues, from amongst the
Indian companies operating in the segment. Revenues from this segment have crossed Rs. 6
crores per month and are likely to grow further. During the year 2005-07 revenue from the
oncology segment alone grew to rupees 56 crores from rupees 33 crores during 2005. Revenues
from the formulation division grew to rupees 102 crores. The year 2006 witnessed the launch of
number of products both in oncology and non-oncology segments.
Some of the significant launches include BANDRONE (injection and tablets) and
BORTENNTS & PAMNAT injections in the oncology segments and anorest tablets in non-
oncology segments.
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The company has also launched TARANA, world class oral contraceptives for
women, with fewer side effects. It is a combination of drospironene 3mg and ethinyl estradlol
0.03mg. it is first international brand.
Finished Dosage Facility:
1. US FDA
2. UK, MHRA
3. TGA,AUSTRALIA
4. HEALTH CANADA
5. GERMAN HEALTH AUTHORITY
6. DANISH HEALTH MINISTRY
7. INFARMED PORTUGAL
8. GREECE HEALTH AUTHORITY
9. BYELORUSSIAN HEALTH MINISTRY
Bulk Activities Facility:
1. US FDA
2. GERMAN HEALTH AUTHORITY
3. TGA, AUSTRALIA
EXPANSION, GLOBALIZATION AND DIVERSIFICATION:
NATCO as a part of globalization plant finalized an investment proposal for setting up a
formulation unit in New Jersey, USA at an estimate cost of US $ 6 Million. The EXIM Bank of
India is likely to fund team loan finance equivalent to US $ 4.08 Million and the company will
invest the balance. The proposed US project is expected to be highly beneficial to the company
both financially and technologically, besides earning foreign exchange to our country.
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INTERNATIONAL BUSINESS:
NATCO pharma services markets are across the globe. Some of the countries where its
presence is felt are USA , UK, Canada, Columbia, Brazil, Spain, Denmark, Ireland, Greece,
Bangladesh, China , Hong Kong, Belgium, Russia, Cyprus, Pakistan, Italy, South Africa, Egypt,
Poland, Australia etc.
NATCO pharma is one of the first Indian companies to set up a unit in USA: NATCO
PHAMALLIC (New Jersey)
The exports have shown a study increase in previous years. NATCO pharma production
facility has received the World Health Organization (WHO) Certificate for maintaining good
manufacturing practice (GMP).
NATCO pharma has a distinction of launching the formulations of Samaritan the first Anti
Migraine for the first time in Asia. NATCO pharma is one of the first Indian Companies to have
achieved ISO 9002 certification for its quality standards.
NATCO pharma has pioneered and developed the concept of time-release dosage
preparation for which it has earned enormous goodwill in India. The company today is specially
recognized with time release preparation.
NEW PROJECTS
Future-Focused Organizations understand core competencies not to mean repetitive
activities that have meant past profits ;but the ability to concentrate in undisputed streams
towards new frontiers , the collective experience of a radical past.
To connect to respond to galvanize accumulated momentum on to terrain that unleashesits full potential. This is what the credo of NATCO demands. Into its second decade NATCO`s
new projects display tenacity whose fruitfulness thus far guarantees a rewarding future.
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Organizational Structure of NATCO Ltd.
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CHAPTER-IV
THEORETICAL FRAME
WORK
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THEORETICAL FRAMEWORK
Ratio Analysis:
A Ratio is the numerical or Quantitative relationship between two variables which are
compared RATIO ANALYSIS is essentially concerned with the calculation of relationships
which after proper identification and interpretation may provide information about the operations
and state of affairs of a business enterprise.
Financial ratio analysis is th e calculation and comparison of ratios which are derived
from the information in a companys financial statements.
Ratio analysis is the process of determining and interpreting numerical relationship based
on financial statements. A ratio is a statistical yard stick that provides a measure of the
relationship between variables of figures. This relationship can be expressed as a percentage on
as quotient. Ratio analysis is a powerful tool of financial analysis. In finance analysis ratio is
used as a bench mark of a firm.
The absolute accounting figures reported in the financial statements do provide a
meaning full understanding of the performance and financial position of the firm. Ratio help to
summarize large quantities of financial data and to make qualitative judgment about the firms
financial performances.
Ratio analysis is the systematic use of ratio to interpret the financial statements so that
strength and weakness of firm as well as its historical performance and current position can be
determined.
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Definition Of Ratio:
According to Prof. Spring field, Prof. Mass & Merriam defined formally as the indicted
quotient of two mathematical expression and as the relationship between tow o more
variables.
How To Select Ratio:
The utility of ratio is based on its selection. The ratio selected should match with the
purpose. It is better to use the standard ratio to avoid misinterpretation.
Interpretation:
It refers to evaluating the ratio in terms of laid out standards or norms. Identify the
possible needs of improvement o to arrest the decline in the performance of the company.
Financial ratio analysis groups the ratios into categories which tell us about different
facets of companys finances and operations. LIQUIDITY RATIOS which give a picture of a
companys short term financial situation or solvency.
Although financial ratio analysis i8s well-developed and the actual ratios are well-known,
practicing financial analysts often develop their own measures for particular industries and even
individual companies. Analysts will often differ drastically in their conclusions from the same
ratio analysis.
Ratio analysis is one of the most important powerful tools of financial analysis. It is the
process of establishing and interpreting various ratios.
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Financial ratios allow for comparisons
Between Companies
Between Industries
Between Different Time Periods For One Company
Between A Single Company And Its Industry Average
The ratios of firms in different industries, which face different risks , capital
requirements, and competition, are not usually comparable. The analysis is used to provide
indicators of past performance in terms of critical success factors of a business. This assistance
in decision-making reduces reliance on guesswork and intuition and establishes a basis for sound
judgment.
Significance Of Ratio Analysis:
Ratio analysis is of great help of commercial bankers, trade creditors and institutional
lenders. They judge the ability of borrowing enterprises buy observing various ratios like the
current ratio, acid test ratio turnover of receivables, Inventory turnover coverage of interest by
the level of earnings.
Ration analysis also helps long term creditors in knowing the ability of borrowing
enterprises to pay interest principle in case earning decline they find valuable ratios of total debt
to equity and total debt to total assets.
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Ratio analysis is of great use of the management in firms. Management of the firms are
interested in eve aspects of ratio as it is their overall responsibility to see that the resources of the
firm are used most effectively and efficiently.
Ratio analysis is effective tool of financial analysis available to a financial analyst. Ratio
analysis is one of the techniques of financial analysis. The other tools of financial analysis are:
1. Comparative Financial Statement Analysis .
2. Common Size Statement Analysis.
3. Trade Analysis.
4. Ratio Analysis.
5. Fund Flow Analysis.
6. Cash Flow Analysis.
Advantages Of Ratio Analysis:
Ratio analysis facilitates understanding of financial statements. It narrates
the whole story of changes in financial condition of the business.
It facilitates inter firm comparison to highlight the relative performers of
the organizations in different areas.
It helps in planning the operation of the organization during the period of
existence of the organization to develop certain norms or an changes in the norms passes
on the right message for the course of action to be followed.
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It facilitates management to concentrate at the area where its intervention
for better utilization of time and other resources.
Classification Of Ratios:
Ratio as tools of measuring liquidity, profitability, efficiency and financial position of a
company can be classified into different categories as follows.
Ratios Can Be Classified On The Basis Of Data Available As Follows:
Income or profit and loss statement ratios
Balance sheet ratios
Inter-Statement ratios
Classification On The Basis Of Purpose:
On the basis of purpose, ratios may be classified as under:
Profitability Ratios:
Profitability ratio is defined as a ratio which explains the profitability of a company
during a specific period of time. It explains how profitable a company is. These ratios can be
compared during different financial years to see the overall performance of a company. Some of
the profitability ratios are:
Gross Profit Ratio
Net Profit Ratio and Operating Net Profit Ratio
Expenses Ratio
Operating Ratio
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Net Profit to Networth Ratio
Net Profit to Fixed Assets Ratio
Return on Investment or Capital Employed
Return on Equity Capital
Earning per share
Activity Or Performance Or Turnover Ratios:
Accounting ratios that measure a firms ability to convert different accounts within their
balance sheets into cash or sales. Companies will typically try to turn their production into cash
or sales as fast as possible because this will generally lead to higher revenues. Some of the
turnover ratios are:
Stock or Inventory Turnover Ratio
Total Capital Turnover Ratio
Fixed Assets Turnover Ratio
Working Capital Turnover Ratio
Debtors Turnover Ratio
Creditors Turnover Ratio
Financial Ratios:
Liquidity ratios or short term financial solvency ratios:
Liquidity Ratio can be defined as a ratio that indicates what proportion of a companys
assets can be readily converted into cash in the short term. Some of the liquidity ratios are:
Current Ratio
Liquidity Ratio
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Solvency Ratios Or Long Term Financial Ratios
Debt-equity Ratio
Total Debt Ratio
Interest Coverage or Debt Service Ratio
Fixed Asset Ratio
Proprietary Ratio
Solvency Ratio or Debt to Total Funds Ratio
Capital Gearing Ratio
The following are some of the ratios that have been used in this for analyzing the
financial performance of the company with particular reference to NATCO PHARMA LTD
1. CURRENT RATIO:
This ratio indicates the firms commitment to meet short liabilities. The ideal current
ratio is 2:1 but a very high current ratio also not preferable. Current assets means assets that
with either be used up used or converted into cash with in a year time at normal operating
cycle. Current ratio is calculated by using below formula.
CURRENT ASSETS
CURRENT RATIO = ------------------------------------
CURRENT LIABILITIES
2. QUICK RATIO:-
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Another important ratio which determines the financial solvency positions of the
company is quick asset ratio. Which is also called acid test ratio or liquid ratio
This ratio is ascertained by comparing liquidity assets with current liabilities.
Liquid assets are those current assets other than stock and prepaid expenses. This
ratio is calculated as follows-
QUICK ASSETS
QUICK RATIO = ------------------------------------
CURRENT LIABILITIES
3. ABSOLUTE LIQUID RATIO:
It measures the short term debt paying ability. This ratio is obtained by dividing cash
and trade investment or marketable securities by current liabilities.
Cash in hand +cash at bank + marketable securities ABSOLUTE
LIQUID RATIO = ----------------------------------------------------------
Current liabilities
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4. GROSS PROFIT RATIO:
The gross profit is also known as gross margin ratio, trading margin ration etc. it is
expressed as a percent ratio. The difference between net sales and cost of goods sold is
known as gross profit. The ratio expresses the relationship between gross profit and net
sales.
Gross profit
GROSS PROFIT RATIO = ------------------ * 100
Net sales
5. NET PROFIT RATIO:
This ratio indicates relationship net profit and net sales. This ratio indicates net
margin earned on sales of Rs 100. this ratio helps in determining the efficiency with which
affairs of the business are being managed. This ratio is thus an effective measure to check
the profitability of business. This ratio is calculated as follows.
(Net profit or net loss)
NET PROFIT RATIO = ----------------------------- * 100
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Net sales
6. OPERATING EXPENSES RATIO:
The Operating Expenses Ratio is a yardstick of operating efficiency. This ratio is
computed by dividing operating expenses with sales. Operating Expenses include cost of
goods sold plus selling expenses, general expenses and administration expenses. The
operating ratio indicates the average aggregate variations in expenses where some of the
expenses may be in increased level while others may be failing. Operating expenses ratio is
effected to by a number of factors such as internal factors of the employee, managerial
efficiency and external factors.
Operating expenses
OPERATING EXPENSES RATIO: = ------------------------- * 100
Net sales
7. WORKING CAPITAL TURNOVER RATIO:
This is also known as working capital leverage ratio. This ratio indicates whether or
not working capital has been effectively utilized in making sales. In case a company can
achieve higher volume sales with relatively small amount of working capital, it is an
indication for the operating efficiency of the company. The ratio is calculated as follows
Cost of goods sold
WORKING CAPITAL TURNOVER RATIO = -------------------------------
net working capital
8. FIXED ASSETS TURNOVER RATIO:
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Fixed Assets Turnover Ratio is the relationship between sales or cost of goods sold
and fixed assets employed in a business. This is calculated by using the formula as follows
Net sales
FIXED ASSETS TURNOVER RATIO = -------------------
Fixed assets
9. INVENTORY TURNOVER RATIO:
Every firm ha to maintain a certain level of inventory of finished goods so as to be
able to meet the requirements of the business but the level of inventory should neither be too
high nor too low it is harmful to hold more inventory. The following is the formula used to
decide how much of inventory has to be maintained
Net sales
INVENTORY TURNOVER RATIO = -------------------
Inventory
10. TOTAL ASSETS TRUNOVER RATIO:
The ability of the firms to produce a large amount of sales for a given amount of
assets is the most important aspect of its pertaining performance. Unutilized and under
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utilized assets increase the firms need for financing as well as expenses for maintenance
and for further developments within the firms.
Sales
TOTAL ASSETS TRUNOVER RATIO = -------------------
Total assets
11. SOLVENCY RATIO:
It tells about the solvency position of the organization. How this ratio is effective
that much the organization is effective.
Outside Liability
SOLVENCY RATIO = ------------------------
Net Total Assets
12. PROPRIETARY RATIO:
It measures the conservation of capital structure and shows the extent of the share
holders funds in the total assets employed in the business. Where the total share holder
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funds is calculated by summing up the Equity Share Capital, Preference Share Capital
and Reserves and Surplus.
Total Share Holder Funds
PROPRIETARY RATIO = --------------------------------
Net Total Assets
13. FIXED ASSETS TO NETWORTH RATIO:
This ratio indicates the proportion of fixed assets financed by the owner. In other
worlds it indicates as to what extent the owners have invested funds on the fixed assets
which constitute the main structure of the business. This was find out by using the
formula
Fixed Assets
FIXED ASSETS TO NETWORTH RATIO = -------------------
Net worth
14. CURRENT ASSETS TO NETWORTH RATIO:
This ratio indicates the contribution of current assets to net sales. There is no
standard or ideal current assets turnover ratio. Yet the inference is that a high current
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assets turnover ratio is an indication of a better utilization of current assets on the other
hand, a low current assets turnover ratio suggests that the current assets have not been
utilized effectively. This is calculated by using the below formula
Current Assets
CURRENT ASSETS TO NETWORTH RATIO = -------------------
Net worth
15. CURRENT LIABILITIES TO NETWORTH RATIO:
This ratio provides the information about the long term creditors. This helps to
know the adequate coverage of long term creditors.
Current Liabilities
CURRENT LIABILITIES TO NETWORTH RATIO = ----------------------
Net worth
TREND ANALYSIS
This analysis is an important tool of horizontal financial analysis. This method is
immensely helpful in making a comparative study of the financial statement to several years.
Under this method trend percentage are calculated for each item of the financial statement taking
the figure of base years as 100. The starting year is usually taken as the base year. The trend
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percentage shows the relationship of each item with its preceding years percentage. This
percentage can also be presented in the form of index numbers showing relative change in the
financial date of certain period.
CHAPTER-V
DATA ANALYSIS & INTERPRETATION
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DATA ANALYSIS AND INTERPRETATION
1. CURRENT RATIO:
CURRENT ASSETS
CURRENT RATIO = -------------------------------
CURRENT LIABILITIES
CURRENT RATIO TABLE.
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Current Ratio Chart
Year Current assets Current liabilities Current ratio
2008-2009 10559941.4 3015885.75 3.50
2009-2010 11873060.8 2894194.65 4.10
2010-2011 8132150.86 3563115.73 2.28
2011-2012 7694390.22 4246346.79 1.81
2012-2013 6265800.79 3651369.29 1.71
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3.54.1
2.28 1.81 1.71
0
1
2
3
4
5
2008-20092009-2010-2010-20112010-20112011-20122012-2013
Interpretation of Current Ratio:
From the above table it is understood that current ratio has the highest as 4.1 in the
year 2009 2010 but in year 2011-2012 to 2012 2013 it decreased to 1.81 and 1.71. it is not
satisfactory to any organization. It is low when compared with current liabilities. Normally the
current ratio 2:1 is satisfactory to any organization. Is shows decreasing trend in current ratio.
2. QUICK RATIO:
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QUICK ASSETS
QUICK RATIO = ---------------------------------
CURRENT LIABILITIES
QUICK RATIO TABLE
Year Quick assets Current liabilities Quick ratio
2008-2009 10518356.4 3015885.75 3.48
2009-2010 11796674.9 2894194.65 4.08
2010-2011 8080191.86 3563115.73 2.26
2011-2012 7638733.22 4246346.79 1.79
2012-2013 6173567.64 3651369.29 1.69
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QUICK RATIO CHART
3.48
4.07
2.261.79 1.69
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interpretation of quick ratio:
From the above we can see that in the year 2008 2009 quick ratio is 3.48 and next year
it is 4.07 which has been increase and which further decreased in next three year to 2.26 ,
1.79 and 1.69. it is a satisfactory state. The normal quick ratio which is satisfactory to
any organization is 1:1. Here it shows decreasing trend quick ratio.
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3. ABSOLUTE LIQUID RATIO:
Cash in hand +cash at bank + marketable securities
ABSOLUTE LIQUID RATIO = -------------------------------------------------------------
Current liabilities
Absolute liquid ratio table
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ABSOLUTE LIQUID RATIO CHART
Year
Cash in hand cash
at bank
Marketable
securities
Current
liabilities
Absolute liquid
ratio
2008-2009 3697929.51 3015885.75 1.22
2009-2010 3257976.39 2894194.65 1.12
2010-2011 641360.83 3563115.73 0.18
2011-2012 509561.61 4246346.79 0.12
2012-2013 339748.38 3651369.29 0.09
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1.221.12
0.180.12
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2008-2009 2009-2010 2010-2011 2011-2012
Interpretation of Absolute Liquid Ratio:
From the above it can be seen that the Absolute Liquid Ratio is decreasing from year to
year that is from 1.22 in year 2008 2009 to 0.09 in year 2009 2010. This shows the company
is able to repay its short term liabilities from year to year.
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4. GROSS PROFIT:
Gross profit
GROSS PROFIT RATIO = ------------------ * 100
Net sales
GROSS PROFIT TABLE:
Year Gross profit Net sales Gross profit ratio
2008-2009 2068323.01 32455669.3 6.37
2009-2010 2409115.31 25629192.5 9.39
2010-2011 3104152.6 22620341.2 13.72
2011-2012 4436319.59 27301171.4 16.25
2012-2013 5075056.44 29417718.8 17.25
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GROSS PRIFIT CHART
6.379.39
13.7216.25 17.25
0
2
4
6
8
10
12
14
16
18
20
2009 2009-2010 2010-2011 2011-2012 2012-2013
Interpretation of Gross Profit Ratio:
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The gross profit ratio in year 2008 - 2009 is 6.37. 2007 2013 it increased to 9.39,
13.72, 16.25, 17.25. To improve gross profit the company should decrease its costs and increase
it sales.
5. OPERATING EXPENSES:
Operating expenses
OPERATING EXPENSES RATIO: = ------------------------- * 100
Net sales
OPERATING EXPENSES RATIO TABLE
Year Operating cost Net Sales Operating ratio
2008-2009 4636372.03 32455669.3 0.14
2009-2010 47414085.71 25629192.5 1.85
2010-2011 4163461.98 22620341.2 0.18
2011-2012 4741982.29 27301171.4 0.17
2012-2013 4322485.52 29417718.8 0.14
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OPERATING EXPENSES RATIO CHART
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0.14
1.85
0.18 0.17 0.140
0.5
1
1.5
2
2008-20092009-20102010-20112011-20122012-2013
Interpretation of operating expenses ratio:
The operating expenses ratio is 0.14 in 2008-2009 and 2009-2010 increases the ratio
very high is 1.85 and operating ratio are 0.18, 0.17, 0.14 in respect of 2010-2011, 2011-
2012, 2012-2013.
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6. WORKING CAPITAL TURNOVER RATIO :
Cost of goods sold
WORKING CAPITAL TURNOVER RATIO = -------------------------------
net working capital
WORKING CAPITAL TURNOVER RATIO TABLE
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YearCost of goods
sold
Net working
capital
Working capital
turnover ratio
2008-2009 30387345.3
7544056.7
4.03
2009-2010 23220067.2 8978865.2 2.59
2010-2011 19516189.6 4569034.13 4.28
2011-2012 22864851.9 3448044.43 6.63
2012-2013 24342661.4 2614431.5 9.31
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WORKING CAPITAL TURNOVER RATIO CHART
4.032.59
4.286.63
9.31
0
2
4
6
8
10
2008-
2009
2009-
2010
2010-
2011
2011-
2012
2012-
2013
Interpretation of working capital turnover ratio:
The working capital turnover ratio of NATCO PHARMA LTD is showing increasing
trend from 2009 -2010 to 2012 2013 that are 2.59, 4.28, 6.63 and 9.31 respectively.
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7. SOLVENCY RATIO:
Outstanding Liability
SOLVENCY RATIO = ------------------------
Net Total Assets
SOLVENCY RATIO TABLE
Year Outstanding Liabilities Net Total Assets Solvency Ratio
2008-2009 3015885.75 13069084.9 0.23
2009-2010 2894194.65 13738148.2 0.21
2010-2011 3563115.73 7670118.9 0.46
2011-2012 4246346.79 6007236.8 0.71
2012-2013 3651369.29 16512877 0.22
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SOLVENCY RATIO CHART:
0.23 0.210.46
0.71
0.220
0.10.2
0.30.40.50.60.70.8
2008-
2009
2009-
2010
2010-
2011
2011-
2012
2012-
2013
Interpretation of Solvency Ratio:
From the above the solvency ratio is 0.23 in the year 2008-2009 and decreased 2009-
2010 the ratio is 0.21 and increase to 0.46 to 0.71 in year 2010-2011, 2011-2012 and 2012-2013
is 0.22. it very low value of the compare all previous years
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9. INVENTROY TO WORKING CAPITAL:
Inventory
INVENTORY TO WORKING CAPITAL = ---------------------
Working capital
INVENTROY TO WORKING CAPITAL TABLE
Year inventory working capitalInventory to working
capital
2008-2009 41584 7544056.7 0.005
2009-2010 76385.9 8978865.2 0.008
2010-2011 51959 4569034.13 0.011
2011-2012 55657 3448044.43 0.016
2012-2013 9223.15 2614431.5 0.035
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INVENTROY TO WORKING CAPITAL CHART
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780.47
335.52435.35 490.52
318.95
0
100
200
300
400
500
600
700
800
900
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interpretation of inventory working capital ratio:
The inventory working capital ratio are increased to 0.005, 0.008, 0.011, 0.016, 0.035 in
2008 -2009, 2009-2010, 2010-2011,2011-2012,2012-2013.
10. CURRENT ASSETS TO FIXED ASSETS:
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Current assets
CURRENT ASSETS TO FIXED ASSETS = ----------------------------
Fixed assets
CURRENT ASSETS TO FIXED ASSETS TABLE
Year Current assets Fixed assets Current assets to fixed
assets
2008-2009 10559941.4 3076985.1 3.43
2009-2010 11873060.8 3235512.1 3.67
2010-2011 8132150.86 3311142.1 2.46
2011-2012 7694390.22 3321828.1 2.32
2012-2013 6265800.79 9313620.1 0.67
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CURRENT ASSETS TO FIXED ASSETS CHART
3.43 3.67
2.46 2.32
0.67
0
0.5
1
1.5
2
2.5
3
3.54
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interpretation of current assets to fixed asset
The current asset to fixed assets ratio is 3.43 in year 2006 -2007 and increase ratio is 3.67
in year of 2009-2010 and 2010 -2011, 2011-2012,2012-2013 are 2.46, 2.32, 0.67 it low value
compare the previous years.
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11 FIXED ASSETS TURNOVER RATIO:
Net sales
FIXED ASSETS TURNOVER RATIO = -------------------
Fixed assets
FIXED ASSETS TURNOVER RATIO TABLE
Year Net Sales Fixed Assets Fixed Assets Turnover Ratio
2008-2009 32455669.3 3076985.1 10.55
2009-2010 25629192.5 3235512.1 7.92
2010-2011 22620341.2 3311142.1 6.83
2011-2012 27301171.4 3321828.1 8.22
2012-2013 29417718.8 9313620.1 3.16
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FIXED ASSETS TURNOVER RATIO CHART
10.557.92 6.83
8.22
3.160
2
4
6
8
10
12
2008-20092009-2010 2010-2011 2011-20122012-2013
Interpretation of Fixed Asset Turnover Ratio:
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From the above we can see that fixed assets turnover ratio started reducing from the
year 2008 2009 to 2009 2010 as 10.55, 6.83. and next year slowly increased 8.22 in 2011
2012 and 2012 2013 reduced the fixed assets least of from above years it is 3.16.
12. INVENTORY TURNOVER RATIO:
Net sales
INVENTORY TURNOVER RATIO = -------------------
Inventory
INVENTORY TURNOVER RATIO TABLE
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INVENTORY TURNOVER RATIO CHART
Year Net Sales InventoryInventory Turnover
Ratio
2008-2009 32455669.3 41584.23 780.47
2009-2010 25629192.5 76385.9 335.52
2010-2011 22620341.2 51959.5 435.35
2011-2012 27301171.4 55657.65 490.52
2012-2013 29417718.8 9223.15 318.95
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780.47
335.52435.35 490.52
318.95
0
100
200
300
400
500
600
700
800
900
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interpretation of inventory turnover ratio:
In the year 2008 2009 the inventory turnover ratio is 780.47 which has been reduced to
335.52 in year 2009 -2010 and increased to 435.35 and 490.52 in years 2010 -2011 and 2011 -
2012 again decreased to 318.95 in year 2012 2013. So the company should maintain certain
level of inventory of finished goods so as to be able to meet the requirement s of the business.
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13. TOTAL ASSETS TURNOVER RATIO:
Sales
TOTAL ASSETS TRUNOVER RATIO = -------------------
Total assets
TOTAL ASSETS TURNOVER RATIO TABLE
Year Sales Total Assets
Total Assets Turnover
Ratio
2008-2009 3245576.3 1524620.3 2.13
2009-2010 2562919.5 1670287.7 1.53
2010-2011 2262036.2 1303750.8 1.74
2011-2012 2730117.4 1261261.6 2.16
2012-2013 2941778.8 1716854.2 1.71
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TOTAL ASSETS TURNOVER RATIO
2.13
1.53
1.742.16
1.71
0
0.5
1
1.5
2
2.5
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interpretation of Total Assets Turnover Ratio:
From the above the Total Assets Turnover Ratio decreased from the year 2008 2009 to
2009 -2010 from 2.13 to 1.53 and increased to 1.74 to 2.16 in year 2010 -2011 to 2011 -2012 and
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again reduced to 1.71 in year 2012 2013. This should not be decreased further; this has to be
strictly controlled.
TREND ANALYSIS:
In financial analysis the direction of changes over a period of year is of crucial importance.
Time series or trend analysis of ratio indicates the direction of change. This kind of analysis is
particularly applicable to the items of profit and loss account.
For trend analysis, the use of index number in generally advocated. Procedure followed is to
assign the number 100 to items of the base year and to calculate percentage changes in each item
of other years is relation to the base year. This procedure may be called as Trend-percentage
Method.
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Trend analysis of NATCO PHARMA LTD as on 2008-2009to 2009-2010
2008-2009 % 2009-2010 %
Shareholders funds:
Share capital 12,50,000 100 1250000 100
Reserve & surplus 1,96,91,358 100 30066602 152.6
Loan funds
Secured loan 1,20,35,339 100 9998319 83.07
Un secured loan 3,38,887 100 822089 242.2
Current liabilities
Current liabilities 3,89,71,451 100 35239150 90.42
provisions 33,887 100 304402
Other liabilities
Differed tax liabilities 4,69,940 100 738616 157.17
Total funds 73095862 100 78419178 107.28
Application of funds
Net fixed assets 2672721 100 2992948 111.9
Investment 3217235 100 3398232 105.6Current Assets,loan&
Advances
Inventories 65210526 100 65455962 100.3
Sundry debtors 1073219 100 1129316 105.2
Cash &bank Balance 270534 100 278359 102.8
Other current assets
Loan &Advances 6516275 100 6164361 94.5
Total assets 73095826 100 78419178 107.28
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Trend analysis of NATCO PHARMA LTD as on 2009-2010to 2010-2011
2009-2010 % 2010-2011 %
Shareholders funds:
Share capital 1250000 100 1250000 100
Reserve & surplus 30066602 100 18201314 600.5
Loan funds
Secured loan 9998319 100 9899074 99.0
Un secured loan 822089 100 728393 88.6
Current liabilities
Current liabilities 35239150 100 42318514 120.08
provisions 304402 100 270400 88.8
Other liabilities
Differed tax liabilities 738616 100 888223 120.2
Total funds 78419178 100 79805228 101.7
Application of funds
Net fixed assets 2992948 100 2782349 92.9
Investment 3398232 100 3408235 100.2
Current Assets,loan&
Advances
Inventories 65455962 100 63432772 96.9
Sundry debtors 1129316 100 1491194 132.0
Cash &bank Balance 278359 100 258381 92.8
Other current assets
Loan &Advances 6164361 100 6231391 101.08
Total assets 78419178 100 76680573 97.7
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Trend analysis of NATCO PHARMA LTD as on 2010-2011to 2011-2012
2010-2011 % 2011-2012 %
Shareholders funds:
Share capital 1250000 100 1250000 100
Reserve & surplus 18201314 100 16323525 89.6
Loan funds
Secured loan 13023729 100 10024658 76.9
Un secured loan 728393 100 554366 76.1
Current liabilities
Current liabilities 42318514 100 42335567 100.04
provisions 270400 100 224605 83.06
Other liabilities
Differed tax liabilities 888223 100 514858 57.9
Total funds 76680573 100 71227579 92.8
Application of funds
Net fixed assets 2782349 100 2723496 97.8
Investment 3408235 100 3097352 105.1
Current Assets,loan&Advances
Inventories 63432772 100 57553467 90.7
Sundry debtors 1491194 100 1270217 123.4
Cash &bank Balance 258381 100 267431 103.5
Other current assets
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Loan &Advances 6231391 100 6315616 101.3
Total assets 76680573 100 71227579 92.8
Trend analysis of NATCO PHARMA LTD as on 2011-2012to 2012-2013
2011-2012 % 2012-2013 %
Shareholders funds:
Share capital 1250000 100 1250000 100
Reserve & surplus 16323525 100 22145728 135.6
Loan funds
Secured loan 10024658 100 9827415 98.03
Un secured loan 554366 100 341384 61.5
Current liabilities
Current liabilities 42335567 100 36737552 86.7
provisions 224605 100 341384 151.9
Other liabilities
Differed tax liabilities 514858 100 405868 78.83
Total funds 71227579 100 71043728 99.7
Application of funds
Net fixed assets 2723496 100 2532624 92.9
Investment 3097352 100 3113379 100.5
Current Assets,loan&Advances
Inventories 57553467 100 63260320 109.9
Sundry debtors 1270217 100 1231792 96.9
Cash &bank Balance 267431 100 263447
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Other current assets
Loan &Advances 6315616 100 641769 101.6
Total assets 71227579 100 71043728 99.7
Interpretation:
The share capital is same from 2009 to 2013. The trend has not changed. The secured loans
have been decreased in the year 2009 to2013.the current liabilities and provisions have been
fluctuating in all the years. The total funds and net fixed assets fluctuating all the years. The
current assets, loans and advances have been increasing all the years. The deferred tax liability
have been fluctuating in all years.
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CHAPTER-VI
FINDINGS, SUGGESTIONS & CONCLUSIONS
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FINDINGS
The company in spite of its expansion programs has not been concentrating on the sales
figure, which has been reflected in each and every aspect of the management.
The capital structure of the company seems to be unleveled.
The company has been maintaining huge amounts in the form of liquid its assets.
The inventory turnover ratio is very high during the year 2008-2009 is 780.47.
The working capital turnover ratio is 9.31 in year 2012 -2013 which is high compared
to previous years.
The cash position ratio during the year 2012 2013 is 0.09 which has been decreased
as compared to previous year ratio 0.12.
The company is going in losses from year to year it has not taken any measures to
overcome its losses.
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SUGGESTIONS
From the personal observations and the above analysis various subjective
recommendations which can be given to the company as follows:
It is the right time to cut down the employees force, by giving them voluntary
retirement or by any other method and give chance to new guns.
Use better &high tech methods of advertising, so that more &more subscriber attract
towards NATCO PHARMA LTD.
Should try to decrease expenditure especially in the employees remuneration benefit
area.
Should increase the services quality as well as better customer care services
Provide better customer care service and provide them maximum satisfaction.
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CONCLUSION
From the above finding and analysis various inferences can be drawn out which are as
follows:
NATCO PHARMA LTD is having highest current ratio which represents that NATCO
PHARMA LTD is having very good liquidity position and can pay off their short term
liability very easily as they are maintaining huge cash reserves.
From Earning per Share as the companys earning potential have been increased
irrespective of the increase in competition in the Indian telecom market.
NATCO PHARMA LTD are facing the capital problem because of which financial
Position of NATCO PHARMA LTD are affected.
NATCO PHARMA LTD is paying more taxes. Because of paying more taxes, financial
Position of NATCO PHARMA LTD is affected.
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Bibliography
Books:
Title of book Author
Financial management - Shashi K.
Gupta
Financial management - Prasanna chandra
Financial management - I.M.Pandey
Advanced accountancy - S.N.Maheswari
http://www.tutorsonnet.com/