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FINANCIAL STATEMENTANALYSIS WITH RATIO
ANALYSIS
on
Glenmark Pharmaceutical Limited
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Company Profile
Glenmark Pharmaceuticals Ltd. (GPL) is a research-driven, global,integrated pharmaceutical company headquartered at Mumbai,
India.
It is a leading player in the discovery of new molecules both NCEs
(new chemical entity) and NBEs (new biological entity).
The company has a significant presence in branded generics
markets across emerging economies including India.
GPL along with its subsidiary has twelve manufacturing facilities
in four countries and has five R&D centres.
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PROFITABILITY RATIOS
Profitability reflects the final result of business operations. Types of ratios----
Profit Margin Ratios
i. Gross Profit Margin
ii. Operating Profit Margin / EBITDA Margin
iii. Net Profit Margin
Rate Of Return Ratios
i. Operating profit to operating assets
ii. Net income to total assets
iii. Return On Equity
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Profitability Ratios
Efficiency
Total Asset Turnover
Operating Asset Turnover
Working Capital Turnover
Shareholder Equity Turnover
Return Per Share Equity Earning per Share
Dividend per share
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Gross Profit Margin Gross profit is obtained by subtracting cost of Goods
sold from the net sales.
Gross Profit Margin (Gross Profit/ Net Sales)* 100
Gross Profit margin is generally used to analyze
efficiency of a company to use its raw materials labor
and manufacturing related fixed assets to generate
profits.
A higher margin is a favorable profit indicator.
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The company has shown a good gross profit in the year 2009 as comapred
to the industry standards. The gross profits dropped drastically in the year 2010
In 2011 there was a marginal increase in gross profits.
Year 2009 2010 2011
GlenMark
31.03 13.92 22.62
Pharma Industry
23.79 74.89 65.05
020
40
60
80
2009 2010 2011
Glenmark
Pharma . Indus
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Operating Profit Margin
Operating Expenses are mostly fixed cost of operations such asgeneral, marketing and administrative expenses
Operating Profit Margin= (Operating Profit/ Net Sales)* 100
Operating Profit margin is generally used to analyze efficiency of
a company to use its Operations to generate profits.
Management has much more control over its Operating expenses.
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Year 2009 2010 2011
Glenmark 42.12 23.67 29.76
Pharma Industry26.2 76.72 68.2
0
20
40
60
80
100
2009 2010 2011
Glenmark
Pharma Industry
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Profit Before Tax Margin
Profit Before tax is the profit left after deductingthe interest from the operating profit
Profit before Tax Margin=(Operating Profit/ NetSales)*100
A Company has access to variety of taxmanagement techniques to manipulate the timingand magnitude of the taxable income.
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Year 2009 2010 2011
GlenmarkPharma 28.79 11.84 20.88
Pharma.
Industry 20.01 71.24 61.3
0
2040
60
80
2009 2010 2011
Glenmark Pharma
Pharma Industry
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Net Profit Margin
Net Profit is the earnings left for the shareholders after deduction of tax
from PBT.
This ratio shows the earnings left for shareholders (equity & preference)
as a % of net sales.
Gross profit & net profit ratios provide a valuable understanding of the
cost & profit structure of the firm & enables us to identify sources of biz
efficiency/ inefficiency.
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Year 2009 2010 2011Glenmark
Pharma
25.5 12.57 17.66
Pharma
Industry 15.95 56.91 48.43
0
10
20
30
40
50
60
2009 2010 2011
Glenmark
industry
NET INCOME TO TOTAL ASSETS
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Return on Equity
Return On Equity=Net Income/ Average shareholdersEquity
This ratio indicates how profitable a company is by
comparing its net income to its average shareholders'equity.
The return on equity ratio (ROE) measures how much
the shareholders earned for their investment in thecompany.
The higher the ratio percentage, the more efficient
management is in utilizing its equity base and the better
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RETURN ON EQUITYYEAR 2009 2010 2011
GLENMARK 0.1312009 0.0773371 0.1277392
0
0.02
0.04
0.06
0.08
0.10.12
0.14
2009 2010 2011
GLENMARK
GLENMARK
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Return on total Asset
This ratio indicates how profitable a company is relative to itstotal assets. The return on assets (ROA) ratio illustrates howwell management is employing the company's total assets tomake a profit.
Return on Total Assets = Net Income/ Avg. Total Assets.
As a rule of thumb, investment professionals like to see acompany's ROA come in at no less than 5%. Of course, thereare exceptions to this rule. An important one would apply tobanks, which strive to record an ROA of 1.5% or above.
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RETURN ON TOTAL ASSETSYEAR 2009 2010 2011
GLENMARK 0.0947654 0.0509954 0.0678857
0
0.02
0.04
0.06
0.08
0.1
2009 2010 2011
GLENMARK
GLENMARK
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Total asset turnover
This ratio measures sales per rupee ofinvestment in total assets. It also measures the
efficiency with which total assets are employed.
Total Asset Turnover= Net Sales/ Total Assets
Higher total asset turnover ratio shows that the
company has been more effective in using the
investment in the total asset to generate revenue.
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TOTAL ASSETS TURNOVERYEAR 2009 2010 2011
GLENMARK 0.3222712 0.3854538 0.4530524
0
0.05
0.10.15
0.2
0.25
0.3
0.350.4
0.45
0.5
2009 2010 2011
GLENMARK
GLENMARK
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WORKING CAPITAL
TURNOVER A measurement comparing the depletion of
working capital to the generation of sales over a
given period. This provides some useful
information as to how effectively a company is
using its working capital to generate sales.
Working Capital Turnover=Net Sales/ Working
Capital
Higher the working capital turnover, the better
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WORKING CAPITAL TURNOVER
YEAR 2009 2010 2011
GLENMARK 0.5071262 0.6065503 0.7129236
0
0.1
0.2
0.3
0.4
0.5
0.60.7
0.8
2009 2010 2011
GLENMARK
GLENMARK
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Earning per share
The portion of a company's profit allocated toeach outstanding share of common stock.Earnings per share serves as an indicator of acompany's profitability.
Earning Per Share=Profit After Tax/Number ofOrdinary Shares
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EARNING PER SHARE
YEAR 2009 2010 2011
GLENMARK 8.71 4.75 7.85
0
1
2
34
5
6
7
8
910
2009 2010 2011
GLENMARK
GLENMARK
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Dividend per share
The sum of declared dividends for everyordinary share issued. Dividend per share (DPS)is the total dividends paid out over an entire year(including interim dividends but not includingspecial dividends) divided by the number ofoutstanding ordinary shares issued.
Dividend per share= Dividend/ no of ordinaryshares
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DIVIDEND PER SHAREYEAR 2009 2010 2011
GLENMARK 0.4 0.39 0.39
0.385
0.390.395
0.4
0.405
0.41
0.415
0.420.425
0.43
0.435
2009 2010 2011
GLENMARK
GLENMARK
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Solvency Ratios
Short Term Solvency
Current Ratio
Quick Ratio
Inventory Turnover Ratio
Accounts Receivable Turnover Ratio
Long Term Solvency
Debt Equity Ratio Interest Cover Ratio
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Current Ratio
Current ratio is a popular ratio used to ascertain whether acompany's short-term assets are readily available to pay offits short-term liabilities.
Current Ratio=Current Assets/ Current Liabilities.
A high current ratio is a sign of financial strength, co hasmore money than it can efficiently use.
a high current ratio is not necessarily good, and a low currentratio is not necessarily bad (see chart below).
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CURRENT RATIOYEAR 2009 2010 2011
GLENMARK 1.85 2.47 2.52
0
0.5
1
1.5
2
2.5
3
2009 2010 2011
GLENMARK
GLENMARK
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Quick Ratio
The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the
current ratio by measuring the amount of the most liquid
current assets there are to cover current liabilities.
Quick Ratio = (Current AssetsInventories)/ Current
Liabilities .
An indicator of a company's short-term liquidity. Thequick ratio measures a company's ability to meet its
short-term obligations with its most liquid assets.
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QUICK RATIO
YEAR 2009 2010 2011
GLENMARK 1.263587 1.5913493 1.5071685
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2009 2010 2011
GLENMARK
GLENMARK
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Accounts Receivable Turnover
Debtors turnover ratio indicates therelationship between Net Credit Sales and
Average Accounts Receivable
Debtors Turnover =Net Credit Sales/Avg.
Accounts Receivable
The higher the ratio, the greater the
efficiency of credit management.
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ACCOUNTS RECIEVABLE TURNOVER
YEAR 2009 2010 2011GLENMARK 2.8 3.3 3.9
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2009 2010 2011
GLENMARK
GLENMARK
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INVENTORY TURNOVER
Inventory Turnover Ratio = Net Sales/Inventory
This ratio shows how many times a companysinventory is sold & replaced over a period
However it may be also calculated as Cost of goodssold/ Average Inventory.
It reflects the efficiency of inventory management.The higher the ratio the more efficient theinventory management & vice versa.
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INVENTORY TURNOVERYEAR 2009 2010 2011
GLENMARK 4.29 7.34 7.89
0
1
23
4
5
6
78
9
2009 2010 2011
GLENMARK
GLENMARK
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Debt equity ratio
The debt equity ratio compares a company's totalliabilities to its total shareholders equity.
Debt Equity Ratio= Total Liabilities/ Shareholders
Equity.If ratio >1=> assets are mainly financed with debt
Unfavorable for the company
If Ratio more money comes out from equity
Favorable for the company
If ratio = 1; there is no liability
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Year 2009 2010 2011
GlENMARK 0.71 0.61 0.51
INDUSTRY 0.34 0.26 0.25
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2009 2010 2011
GLENMARK
INDUSRTY
DEBT EQUITY RATIO
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Interest Cover Ratio
Ratio used to determine how easily the companycan pay interest on outstanding debts
Interest Coverage Ratio= Earnings Beforeinterest & Taxes/ Interest Expenses.
The lower ratio, the more the company is
burdened by debt expenses
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Year 2009 2010 2011
GLENMARK 3.6 2.2 3.9INDUSTRY 6.42 7.31 41.81
0
5
10
15
20
25
30
35
40
45
2009 2010 2011
GLENMARK
INDUSTRY
INTREST COVER RATIO
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Directors Report
Value patent expiration
Increased Costs of Drug Development
Scope for Expansion
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Auditors Report
Regular Payment of Interest
No amount Overdue
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Notes to Account
SIGNIFICANT ACCOUNTING POLICIES:
i) Basis of Accountings
ii) Fixed Assets (including Intangibles),
Depreciation and Amortizationiii) Borrowing Costs
iv) Impairment of Assets
v) Foreign Currency Transactions
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ByGroup 8
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