Financial Ratio analysis
Glaxosmithkline Ltd.
Sun Pharmaceuticals Ltd.
Dr. Reddy’s Laboratory.
Submitted By,
Swarupa Ray ----- 10202143
Neha Rai
----- 10202144
Pralina Jena
----- 10202145
Neha Paul
----- 10202146
Samikshya Panda -- 10202147
OBJECTIVE
To analyze financial performance of firms: Using ratio
analysis(5 ratios)
To determine the financial performance of each firm.
To conduct the comparative analysis.
METHODOLOGY
 Ratio Analysis
Ratios…..
Net profit margin: show how successful management is in
creating profit from a given quantity of sales,
Fixed asset turnover ratio:this is a measure of a firm’s
efficiency in utilising its fixed assets.
Debt equity ratio:it measures the relationship between
capital provided by the creditors to the amount provided by
the shareholders,it measures the long term solvency
position of the company
Contd…
Return on equity : it measures the efficiency with which
the shareholders’ funds are employed
Inventory turnover ratio : this ratio shows the number
of times a company’s inventory is turned into sales.high
inventory turnover ratio is a sign of efficient inventory
management.
Ratio analysis of Glaxosmithkline
NET PROFIT MARGIN
FIXED ASSET TURNOVER RATIO
DEBT EQUITY RATIO
RETURN ON EQUITY
INVENTORY TURNOVER RATIO
2004
22.34
15.21
0.00
36%
6.58
2005
31.50
15.65
0.01
53%
7.04
2006
31.89
17.55
0.00
46%
7.55
2007
30.52
18.36
0.00
40%
7.78
2008
32.10
17.38
0.00
37%
7.93
2009
26.00
16.81
0.00
29%
8.70
Net Profit Margin: Increased in 2004-2005 : 6.9% increase in sales (2004-2005);
50.75% increase in PAT (decrease in cost of production)
Decline in year 2009 :-9.69% increase in sales & Decrease in PAT by 11.15%
(increase in cost of production)
Fixed Asset Turnover Ratio :Increased in 2004-2007—(18.14% increase in sales
Where as Fixed Assets decreased by 2.16%); Decline from 2007-2009
(11.86% increase in sales & 22.16% increase in Fixed Assets)
Debt-Equity-ratio: Financial leverage is very low.
Return On Equity :Increase in 2004-2005 (50.73% rise in PAT compared to 2.63%
Increase in Net Worth) ; Decline in 2005-2009 (Minor Fluctuation in PAT compared to
Steady increase in Net worth.
Inventory Turnover Ratio: Steady increase from 2004-2009(32.16%increase in sales &
11.71% increase in inventory.
35.00
30.00
25.00
20.00
NET PROFIT MARGIN RATIO
FIXED ASSET TURNOVER RATIO
DEBT EQUITY RATIO
RETURN ON EQUITY
15.00
INVENTORY TURNOVER RATIO
10.00
5.00
0.00
2004
2005
2006
2007
2008
2009
Analysis of Dr. Reddy’s Lab
NET PROFIT MARGIN
FIXED ASSET TURNOVER
RATIO
DEBT EQUITY RATIO
RETURN ON EQUITY
INVENTORY TURNOVER RATIO
2005 2006 2007 2008 2009 2010
4.00 9.80 28.04 13.15 12.38 17.47
2.63
0.14
3%
5.39
3.19
0.41
9%
7.09
4.36
0.08
27%
13.81
2.93
0.10
10%
11.90
2.79
0.12
11%
14.92
2.35
0.10
14%
15.94
Net Profit Margin: Increase in 2006-2007(94.81% increase in sales ;457.44% increase
in PAT ).Decline in year 2007-2008(13.85% decrease in sales & Decrease in PAT by
59.61% ) increase in 2008-2010(33.92% increase in sales and 78.01% increase in PAT)
Fixed Asset Turnover Ratio :Increased in 2006-2007—(94.81% increase in sales
Whereas Fixed Assets increased by 42.66%); Decline from 2007-2010
(15.37% increase in sales & 114.1% increase in Fixed Assets)
Debt-Equity-ratio: Financial leverage is very low(D/E<1)
Return On Equity :Increase in 2006-2007 (457.44% rise in PAT compared to 93.32%
Increase in Net Worth) ; Decline in 2007-2008 (59.61% decrease in PAT compared to
10.02% Increase in Net Worth)
Inventory Turnover Ratio: Maximum in year 2010.
30.00
25.00
NET PROFIT MARGIN
RATIO
FIXED ASSET
TURNOVER RATIO
DEBT EQUITY RATIO
20.00
15.00
RETURN ON EQUITY
10.00
INVENTORY
TURNOVER RATIO
5.00
0.00
2005
2006
2007
2008 2009
2010
Analysis of SunPharma
NET PROFIT MARGIN
FIXED ASSET TURNOVER RATIO
DEBT EQUITY RATIO
RETURN ON EQUITY
INVENTORY TURNOVER RATIO
2005 2006
29.34 34.09
2.14
2.39
1.64
1.19
28%
31%
5.60
7.25
2007
36.52
2.77
0.44
26%
9.23
2008
41.78
3.66
0.02
24%
13.01
2009 2010
44.65 47.52
3.66
2.27
0.00
0.01
25%
16%
15.18
10.13
Net Profit Margin: Increase in 2005-2010(81.08% increase in sales ;193.23% increase in
PAT
Fixed Asset Turnover Ratio :Increased in 2005-2008—(132% increase in sales
Where as Fixed Assets increase by 36.21%); Decline from 2010(22% decrease in sales &
25.5% increase in Fixed Assets)
Debt-Equity-ratio: Decline from 2006-2010 (company paid off the borrowings)
Return On Equity :Increase in 2005-2006 (50.52% rise in PAT compared to 32.52%
Increase in Net Worth) ; Decline in 2005-2010 (Increase in both PAT & Net worth,
but More Increase in Net Worth.)
Inventory Turnover Ratio: Highest in 2009.
50
45
40
35
30
NET PROFIT MARGIN RATIO
FIXED ASSET TURNOVER RATIO
25
DEBT EQUITY RATIO
RETURN ON EQUITY
INVENTORY TURNOVER RATIO
20
15
10
5
0
2005
2006
2007
2008
2009
2010
Comparison of 3 Firms
The Sheet
NET PROFIT MARGIN
2005 2006 2007 2008 2009
Sun Pharmaceutical Inds. Ltd.
29.34 34.09 36.52 41.78 44.65
Dr. Reddy'S Laboratories Ltd.
Glaxosmithkline
Pharmaceuticals Ltd
4.00
9.80 28.04 13.15 12.38
31.50 31.89 30.52 32.10 26.00
50
45
40
35
30
Sun Pharmaceutical
Inds. Ltd.
25
20
Dr. Reddy'S
Laboratories Ltd.
15
Glaxosmithkline
Pharmaceuticals Ltd
10
5
0
2005
2006
2007
2008
2009
Sun is doing well then other do
companies as its net profit ratio
is increasing constantly,
FIXED ASSET TURNOVER RATIO
2005
2006
2007
2008
2009
Sun Pharmaceutical Inds. Ltd.
2.14
2.39
2.77
3.66
3.66
Dr. Reddy'S Laboratories Ltd.
Glaxosmithkline
Pharmaceuticals Ltd
2.63
3.19
4.36
2.93
2.79
15.65 17.55 18.36 17.38 16.81
20
18
16
14
Sun Pharmaceutical Inds.
Ltd.
12
10
Dr. Reddy'S Laboratories
Ltd.
8
Glaxosmithkline
Pharmaceuticals Ltd
6
4
2
0
2005
2006
2007
2008
2009
Glaxosmith is much ahead of
sun pharmaceutical and
Dr. reddy lab. Which shows
that it is able to use its fixed
asset very efficiently
DEBT EQUITY RATIO
2005
2006
2007
2008
2009
Sun Pharmaceutical Inds. Ltd.
1.64
1.19
0.44
0.02
0.00
Dr. Reddy'S Laboratories Ltd.
Glaxosmithkline
Pharmaceuticals Ltd
0.14
0.41
0.08
0.10
0.12
0.01
0.00
0.00
0.00
0.00
1.8
1.6
1.4
1.2
Sun Pharmaceutical Inds.
Ltd.
1
Dr. Reddy'S Laboratories
Ltd.
0.8
0.6
Glaxosmithkline
Pharmaceuticals Ltd
0.4
0.2
0
2005
2006
2007
2008
2009
Sun pharma is relying on debt
in the first 3 yrs but in the last 2
years all the three companies
are making minimal use of debt
RETURN ON EQUITY
2005
2006
2007
2008
2009
Sun Pharmaceutical Inds. Ltd.
28%
31%
26%
24%
25%
Dr. Reddy'S Laboratories Ltd.
Glaxosmithkline
Pharmaceuticals Ltd
3%
9%
27%
10%
11%
53%
46%
40%
37%
29%
60%
50%
40%
Sun Pharmaceutical Inds.
Ltd.
30%
Dr. Reddy'S Laboratories
Ltd.
Glaxosmithkline
Pharmaceuticals Ltd
20%
10%
0%
2005
2006
2007
2008
2009
Though the return on equity of
Glaxosmith is decreasing but it is
still better than the other two
companies in employing its
equity shareholders’ fund
INVENTORY TURNOVER RATIO
2005 2006 2007 2008 2009
Sun Pharmaceutical Inds. Ltd.
5.60
7.25
9.23 13.01 15.18
Dr. Reddy'S Laboratories Ltd.
Glaxosmithkline
Pharmaceuticals Ltd
5.39
7.09 13.81 11.90 14.92
7.04
7.55
7.78
7.93
8.70
16.00
14.00
12.00
Sun Pharmaceutical
Inds. Ltd.
10.00
8.00
Dr. Reddy'S
Laboratories Ltd.
6.00
Glaxosmithkline
Pharmaceuticals Ltd
4.00
2.00
0.00
2005 2006 2007 2008 2009
The inventory turnover ratio of both
the sun pharma and dr.reddy is
increasing but the increase of sun
pharma is consistent while that of
dr.reddy is a bit fluctuating.
Inventory turnover ratio of
glaxosmith is almost constant over the
5 yeras
Thank you