WORKING CAPITAL MANAGEMENT OF PHARMACEUTICAL COMPANIES

PRESENTED TO:- PRESENTED BY:-PROF. MEENA SHARMA CHHAVI

VATSALAARUJ

DINESHMANISH

OBJECTIVE

The main objective of a company is to examine the working capital and profitability of 5 pharmaceutical companies namely:-

CIPLA

RANBAXY LABORATORIES

LUPIN

GLENMARK

DR. Reddy’s

For this purpose, we have calculated the different financial ratios and then observe the trend for different companies.The different financial ratios we have calculated are:-

• Inventory Turnover Ratio• Total Asset Turnover Ratio• Debtors Turnover Ratio• Fixed Asset Turnover Ratio

RATIO FORMULAS

INTERPRETATION OF RATIOS

• Inventory Turnover Ratio- It is one of the efficiency ratios and measures the number of times, on average, the inventory is sold and replaced during the fiscal year.

•  Inventory Turnover Ratio measures company's efficiency in turning its inventory into sales. Its purpose is to measure the liquidity of the inventory.

Cont…

• Total Asset Turnover Ratio- The total asset turnover ratio measures the ability of a company to use its assets efficiently to generate sales.

• The lower the total asset turnover ratio the more sluggish the firm's sales.

Cont

• Fixed Asset Turnover Ratio-  The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment. 

• A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.

Cont..

• Debtor Turnover Ratio- Debtor turnover ratio is the relationship between net sales and average debtors. It is also called account receivable turnover ratio because we debtor and bill receivables' 

• Higher debtor turnover ratio is good because more higher debtor turnover ratio means, more fastly, we are collecting money.  Lower debtor turnover ratio is not good because it tells us that we have not manage debtors better ways. Money from debtors are not collected fastly. 

1. RANBAXY LABORATORIESYear Mar '14 Dec '12 Dec '11 Dec '10 Dec '09

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Sundry Debtors 2,069.90 2,036.78 3,005.31 1,605.25 1,839.95

Cash and Bank Balance 1,549.67 4,600.45 3,063.67 356.72 346.16

Loans and Advances 2,153.77 1,802.00 1,884.93 1,670.70 1,576.94

Total Current Assets 6,380.25 9,368.58 8,679.69 4,154.58 4,026.81

Net Current Assets 4,327.80 3,724.85 1,827.58 4,576.11 2,371.94

Current Liabilities 3,780.18 4,172.81 5,660.17 3,203.54 3,267.14

Current Ratio          

Current Liabilities 3,780.18 4,172.81 5,660.17 3,203.54 3,267.14

Net working capital 547.62 -447.96 -3,832.59 1,372.57 -895.20

CL to net worth ratio          

Liquid Asset 547.62 -447.96 -3,832.59 1,372.57 -895.20

Current Liabilities 3,780.18 4,172.81 5,660.17 3,203.54 3,267.14

quick ratio 0.14 -0.11 -0.68 0.43 -0.27

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Net working Capital -3,232.56 -4,620.77 -9,492.76 -1,830.97 -4,162.34Inventory Management Ratio -0.85402 -0.5911 -0.27502 -1.19751 -0.44222721

Sales Turnover 6864.94 6303.54 7799.06 5687.33 4,797.49

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Inventories Turnover Ratio 2.486684 2.30785 2.98733 2.593863 2.60633998

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Net Current Assets 4,327.80 3,724.85 1,827.58 4,576.11 2,371.94

Inventory to CA Ratio 0.637895 0.73328 1.42851 0.479143 0.77603143

Cash Turnover Ratio 4.429937 1.3702 2.54566 15.9434 13.8591692

2.                    LUPINYear 2013-2014 2012-2013 2011-2012 2011-2010 2009-2010

Inventories 1,372.24 1,330.83 1,123.56 841.11 713.7

Sundry Debtors 2,859.92 1,874.27 1,490.80 1,234.28 916.59

Cash and Bank Balance 146.28 20.12 19.2 37.46 36.53

Total Current Assets 4,378.44 3,225.22 2,633.56 2,112.85 1,666.82

Loans and Advances 810.35 878.7 773.05 621.32 665.79

Net Current Assets 3,508.27 2,460.19 1,974.96 1,654.52 1,381.07

Current Liabilities 1,367.80 1,332.67 1,193.81 880.29 785.62

Current Ratio 2.81 1.59 1.19 1.1 0.96

Current Liabilities 1,367.80 1,332.67 1,193.81 880.29 785.62

Net working capital 2,140.47 1,127.52 781.15 774.23 595.45

CL to net worth ratio 0.63901853 1.18194799 1.52827242 1.13698772 1.3193719

Liquid Asset -3,568.09 -2,346.52 -1,860.51 -1,491.53 -1,001.03

Current Liabilities 1,367.80 1,332.67 1,193.81 880.29 785.62

Quick Ratio 2.27 1.69 1.59 1.75 1.68

Inventories 1,372.24 1,330.83 1,123.56 841.11 713.7

Net Working Capital 2,140.47 1,127.52 781.15 774.23 595.45Inventory Management Ratio 0.64109284 1.18031609 1.43834091 1.0863826 1.1985893

Sales Turnover 8,939.38 7,122.51 5,384.83 4,494.88 3,723.96

Cash and Bank Balance 146.28 20.12 19.2 37.46 36.53

cash turnover ratio 61.1114301 354.001491 280.459896 119.991458 101.942513

3.               DR. REDDYYear 2013-2014 2012-2013 2011-2012 2011-2010 2009-2010

Inventories 1,592.10 1,526.50 1,326.70 1,063.20 897.4

Sundry Debtors 4,561.50 2,963.90 1,943.50 1,770.50 1,060.50Cash and Bank Balance 665.1 919.1 93.1 66.2 47.9Total Current Assets 6,818.70 5,409.50 3,363.30 2,899.90 2,005.80Loans and Advances 1,558.50 1,390.20 1,291.40 1,663.80 1,321.40

Net Current Assets 6,818.70 5,409.50 3,363.30 2,899.90 2,005.80

Current Liabilities 2,001.60 2,165.40 1,534.30 1,565.20 1,543.80

Current Ratio 1.92 1.95 3.18 2.59 2.17

Current Liabilities 2,001.60 2,165.40 1,534.30 1,565.20 1,543.80

Net working capital 4,817.10 3,244.10 1,829.00 1,334.70 462.00CL to net worth ratio 0.41552 0.667489 0.838874 1.172698 3.341558

Liquid Asset 6,153.60 4,490.40 3,270.20 2,833.70 1,957.90

Current Liabilities 2,001.60 2,165.40 1,534.30 1,565.20 1,543.80

quick ratio 1.5 1.68 1.95 2.06 1.57

Inventories 1,592.10 1,526.50 1,326.70 1,063.20 897.4

Net Working Capital 4,817.10 3,244.10 1,829.00 1,334.70 462.00Inventory Management Ratio 0.33051 0.470547 0.725369 0.796584 1.942424

Sales Turnover 9,728.00 8,434.00 6,780.20 5,285.80 4,469.60

Cash and Bank Balance 665.1 919.1 93.1 66.2 47.9

cash turnover ratio 14.62637 9.176368 72.82707 79.84592 93.31106

Inventories 1,592.10 1,526.50 1,326.70 1,063.20 897.4

Net Current Assets 6,818.70 5,409.50 3,363.30 2,899.90 2,005.80

Inventories to net current assets 0.23349 0.28219 0.39446 0.36663 0.4474

4. CIPLAYear Mar '14 Dec '12 Dec '11 Dec '10 Dec '09

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Sundry Debtors 2,069.90 2,036.78 3,005.31 1,605.25 1,839.95

Cash and Bank Balance 1,549.67 4,600.45 3,063.67 356.72 346.16

Loans and Advances 2,153.77 1,802.00 1,884.93 1,670.70 1,576.94

Total Current Assets 6,380.25 9,368.58 8,679.69 4,154.58 4,026.81

Net Current Assets 4,327.80 3,724.85 1,827.58 4,576.11 2,371.94

Current Liabilities 3,780.18 4,172.81 5,660.17 3,203.54 3,267.14

Current Ratio          

Current Liabilities 3,780.18 4,172.81 5,660.17 3,203.54 3,267.14

Net working capital 547.62 -447.96 -3,832.59 1,372.57 -895.20

CL to net worth ratio          

Liquid Asset 547.62 -447.96 -3,832.59 1,372.57 -895.20

Current Liabilities 3,780.18 4,172.81 5,660.17 3,203.54 3,267.14

quick ratio 0.14 -0.11 -0.68 0.43 -0.27

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Net working Capital -3,232.56 -4,620.77 -9,492.76 -1,830.97 -4,162.34

Inventory Management Ratio -0.854022818 -0.591102782 -0.275021174 -1.197512794 -0.442227209

Sales Turnover  6864.94 6303.54 7799.06 5687.33 4,797.49

Inventories 2,760.68 2,731.35 2,610.71 2,192.61 1,840.70

Inventories Turnover Ratio 2.48668444 2.307847768 2.987332948 2.593863022 2.606339979

Sales Turnover  6864.94 6303.54 7799.06 5687.33 4,797.49

Cash and Bank Balance 1,549.67 4,600.45 3,063.67 356.72 346.16

Cash Turnover Ratio 4.429936696 1.370200741 2.545659291 15.94340099 13.85916917

5. GLENMARKYear Mar '14 Dec '12 Dec '11 Dec '10 Dec '09

Inventories 210.43 190.15 175.93 157.01 150.4

Sundry Debtors 1136.04 485.1 358.74 189.34 330.09

Cash and Bank Balance 108.46 167.79 11.86 27.52 3.59

Loans and Advances 833.6 1300.1 1195.13 1702.02 1057.84

Total Current Assets 14542.93 843.04 546.53 373.87 484.08

Net Current Assets 14434.47 675.25 534.67 346.35 480.49

Current Liabilities 874.61 982.44 436.56 241.67 228.41

Current Ratio 16.50 0.69 1.22 1.43 2.10

Current Liabilities 874.61 982.44 436.56 241.67 228.41

Net working capital 13559.86 -307.19 98.11 104.68 252.08

CL to net worth ratio 0.06 -3.20 4.45 2.31 0.91

Liquid Asset -874.55 -985.64 -432.11 -239.36 -227.50

Current Liabilities 874.61 982.44 436.54 241.67 228.41

quick ratio -1.00 -1.00 -0.99 -0.99 -1.00

Inventories 210.43 190.15 175.93 157.01 150.4

Net working Capital -1749.1555 -1968.078151 -868.6503007 -481.0313451 -455.914

Inventory Management Ratio -0.12 -0.10 -0.20 -0.33 -0.33

Sales Turnover  2300.9 1949.3 1633.37 1221.68 1037.15

Inventories 210.43 190.15 175.93 157.01 150.4

Inventories Turnover Ratio 10.93 10.25 9.28 7.78 6.90

Sales Turnover  2300.9 1949.3 1633.37 1221.68 1037.15

Cash and Bank Balance 108.46 167.79 11.86 27.52 3.59

Cash Turnover Ratio 21.21 11.62 137.72 44.39 288.90

CONCLUSION

Year 2013-2014 2012-2013 2011-2012 2011-2010 2009-2010

Ranbaxy 4.05 3.64 4.71 3.95 4.05

Glenmark 10.93 10.25 11.36 9.43 7.78

Cipla 3.74 3.5 3.82 3.36 4.18

Dr. Reddy Labs 6.11 5.53 5.54 5.36 5.39

Lupin 6.51 5.35 4.79 5.34 5.7

INVENTORY TURNOVER RATIO

2013-2014 2012-2013 2011-2012 2011-2010 2009-20100

2

4

6

8

10

12

Inventory Turnover Ratio

RanbaxyGlenmarkCiplaDr. Reddy LabsLupin

DEBTORS TURNOVER RATIO

Year 2013-2014 2012-2013 2011-2012 2011-2010 2009-2010

Ranbaxy 5.14 2.46 3.14 3.99 3.74

Glenmark 2.84 4.62 5.91 4.68 2.78

Cipla 5.56 5.18 4.63 4.15 3.31

Dr. Reddy Labs 2.59 3.44 3.6 3.67 3.54

Lupin 3.78 4.23 3.95 4.18 4.54

2013-2014 2012-2013 2011-2012 2011-2010 2009-20100

1

2

3

4

5

6

7

Debtors Turnover ratio

RanbaxyGlenmarkCiplaDr. Reddy LabsLupin

TOTAL ASSET TURNOVER RATIO

Year 2013-2014 2012-2013 2011-2012 2011-2010 2009-2010

Ranbaxy 0.98 0.95 1.36 0.61 0.66

Glenmark 0.71 0.69 0.61 0.4 0.42

Cipla 0.86 0.83 0.92 0.9 0.95

Dr. Reddy Labs 0.81 0.9 0.82 0.7 0.69

Lupin 1.26 1.32 1.14 1.09 1.08

2013-2014 2012-2013 2011-2012 2011-2010 2009-20100

0.20.40.60.81

1.21.41.6

Total Asset Turnover Ratio

RanbaxyGlenmarkCiplaDr. Reddy LabsLupin

FIXED ASSET TURNOVER RATIO

Year 2013-2014 2012-2013 2011-2012 2011-2010 2009-2010

Ranbaxy 2.1 2.06 2.78 2.13 2

Glenmark 3.88 4.92 4.96 3.91 4

Cipla 1.74 1.65 1.62 1.61 1.94

Dr. Reddy Labs 2.05 2.07 1.94 1.75 1.86

Lupin 2.93 2.59 2.32 2.42 2.29

2013-2014 2012-2013 2011-2012 2011-2010 2009-20100

1

2

3

4

5

6

Fixed Asset Turnover Ratio

RanbaxyGlenmarkCiplaDr. Reddy LabsLupin

•Inventory turnover ratio is highest for GLENMARK which is avg 9.95 and lowest for CIPLA which is avg 3.72

•Debtor turnover ratio is highest for CIPLA which is avg 4.57 and lowest for DR. REDDY which is avg 3.37

•Total asset turnover ratio is highest for LUPIN which is avg 1.18 and lowest for GLENMARK which is avg 0.57

•Fixed asset turnover ratio is highest for GLENMARK which is avg 4.33 and lowest for  CIPLA which is avg 1.71

FINAL RESULTS