PRESENTED BY:-YASHICA JAIN(A008)SHAGUN AGRAWAL(A001)

FINANCIAL ANALYSIS OF

NOVARTIS PHARMACEUTICALS

.

Discover, develop and successfully market

innovative products to prevent and cure diseases, to ease suffering and to enhance

the quality of life.

NOVARTIS

COMPANY PROFILE and HISTORY

Novartis was created in 1996 through the merger of Ciba-Geigy and Sandoz, two companies with a rich and diverse corporate history. Headquartered in Basel, Switzerland

Novartis has been in India since 1947. The Group operates in India through four entities namely Novartis India Limited, Novartis Healthcare Private Limited, Sandoz Private Limited and Chiron-Behring Vaccine Private Limited.

In India Novartis have a presence in pharmaceuticals, generics Vaccines, OTC (over-the-counter medicines), eye care and Animal Health.

Novartis is among top 20 best performing companies worldwide in carbon emissions from 2005 to 2012 out of 100 companies analyzed, Novartis ranked 18th across all industries, 4th in the healthcare sector and 1st in Switzerland.

Continued…

PRODUCT PROFILE

Novartis is the only company with leading positions in each of these key areas:- 1) Pharmaceuticals: innovative patent-protected

medicines2) Alcon: global leader in eye care with surgical,

ophthalmology and consumer products3) Sandoz: affordable, high-quality generic

medicines and biosimilars4) Consumer Health: self-medication products

and treatments for animals5) Vaccines and Diagnostics: vaccines and

diagnostic tools to protect against life-threatening diseases

 

SWOT Analysis 

SWOT Analysis

Strength

1.Has a global reach in over 140 countries

2.Core businesses in pharmaceuticals, vaccines, consumer health, generics  and animal health

Weakness

1. Controversies regarding their advertising of certain products affected brand image

Opportunity

1. Broad-based medical innovation, in technologies and businesses   across the spectrum of health care

2. Venture into health needs in under-developed and poor countries

Threats 1. Competition from peers

Financial and Ratio Analysis

Financial Analysis is the process of determining the operating & financial characteristics of a firm from accounting data & financial statement. The goal of such analysis is to determine efficiency & performance of the firm management.

Financial analysis is undertaken to fulfil the following objectives.:- such as, To estimate the earning capacity To know the financial position and financial

performance of the firm To determine the long terms liquidity of the

funds as well as solvency To decide about the future prospective of the

firm

Financial Ratio analysis:-

A ratio may be defined as a fixed relationship in degree or number between two numbers.

The ratio analysis is one of the most powerful tools of financial analysis. It is use as a device to analysis and interprets the financial health of enterprise.

Ratio analysis is very helpful in financial forecasting. Ratio relating to the past sales, profits & financial position from the basis for setting future trends.

Types of Financial Ratios:-Liquidity Ratio

Current ratio Liquid ratio

Leverage Ratio

Debt equity Total Assets Proprietary Capital Interest

Ratio to Debt Ratio Gearing Coverage

Turnover Ratio

Stock Debtors Creditors Fixed assets working capital

Turnover turnover turnover turnover turnover

Profitability Ratio

Gross Operating Net profit

Profits Ratio Ratio

Profitability Ratio based on investment

Return on Return on Return on equity Earning Per

Capital Shareholder fund shareholder fund Share

Employed

Total Share Capital 15.98 15.98Equity Share Capital 15.98 15.98Share Application Money 0 0Preference Share Capital 0 0Reserves 801.89 687.01Revaluation Reserves 0 0Networth 817.87 702.99Secured Loans 0 0Unsecured Loans 0.14 0.2Total Debt 0.14 0.2Total Liabilities 818.01 703.19

Mar '12 Mar '11

12 mths 12 mths

Application Of FundsGross Block 23.37 24.15Less: Accum. Depreciation 13.26 16.2Net Block 10.11 7.95Capital Work in Progress 0.1 0.73Investments 0.03 0.04Inventories 79.01 53.61Sundry Debtors 69.95 60.38Cash and Bank Balance 5.22 6.15Total Current Assets 154.18 120.14Loans and Advances 1,551.62 672.89Fixed Deposits 80.06 82.31Total CA, Loans & Advances 1,785.86 875.34Deffered Credit 0 0Current Liabilities 142.9 114.46Provisions 835.19 66.43Total CL & Provisions 978.09 180.89Net Current Assets 807.77 694.45Miscellaneous Expenses 0 0Total Assets 818.01 703.17

Profit and Loss Account of Novartis india:-

31 march 2013 31 march 2012 Revenue:- Revenue from Operations (Gross) 9,065.0 8,468.0 Less: Excise Duty 31.4 25.1 Revenue from Operations (Net) 9,033.6 8,442.9 Other Income 831.9 840.1 Total Revenue 9,865.5 9,283.0

Expenses:- Cost of Materials Consumed 403.6 313.9 Purchases of Stock-in-Trade 3,579.3 3,023.8 Changes in Inventories of Finished Goods and Stock-in-Trade (266.4) (222.9) Employee Benefits Expense 1,623.0 1,376.8 Finance Costs 2.2 5.4 Depreciation Expense 35.9 26.7 Other Expenses 2,793.7 2,512.4 Total Expenses 8,171.3 7,036.1 Profit before Tax 1,694.2 2,246.9

Tax Expense For the year Current Tax 570.0 745.0 Deferred Tax 10.5 (15.0) 580.5 730.0 For earlier years Current Tax (Net) (73.7) (3.3) Fringe Benefits Tax (9.9) — 496.9 726.7 Profit for the year 1,197.3 1,520.2

Liquidity Ratio

Liquidity ratios are generally based on the relationship between current assets and current liabilities . Liquidity ratio refers to the ability of the firm to meet its short term obligations.

1.Current ratio:-this is used to evaluate short term financial position of the business concern.It compares the current assets and current liabilities of the firm.

Current ratio = current assets Current liabilities

2012 2011

1785.86/978.09=1.9

i. e. 1.9:1

875.34/180.89=4.8

i.e. 4.8:1

Interpretation:- Ideal current ratio should be 2:1. So, we can say that the company’s financial position is satisfactory in year 2011 and not satisfactory in year 2012

Liquid Ratio: -It is very useful in measuring liquidity position of a firm. It measures the firm’s capacity to pay off current obligations. It is used as complimentary ratio to the current ratio. Quick ratio = liquid assets Current liabilities.  2012 2011

1706.85/978.09=1.8

i. e. 1.8:1

821.73/180.89=4.5

i. e. 4.5:1

Interpretation:-Liquid ratio of 1:1 is considered satisfactory. If quick assets are equal to current liabilities, then the concern may be able to meet its short term obligations. Here in both the years liquid asset is greater than the current liabilities, hence the company is much liquid in meeting its short term obligations during both the years.

Leverage ratios

Leverage ratios analyze the long term solvency that help us judge the ability of a firm to pay the interest regularly1.Debt equity ratio: shows a relationship between long term debt and shareholder’s fund. This ratio indicates the relation between outsider’s fund and shareholder’s fund. Also called external internal equity ratio  Debt equity ratio= debt or long term debt Equity shareholder’s fund.

2012 2011

0.14/817.87=0.00017

0.2/702.99=0.00028

Interpretation:-A ratio of 1:1 is usually considered to be satisfactory. This ratio is calculated to know about the organization’s repayment capacity of long term debts. Here the ratio obtained for both the years is satisfactory.

2.Proprietary ratio: this establishes the relationship between shareholder’s funds to assets of the firm. It is important for determining long term solvency of the firm. Also known as equity ratio or net worth to total assets ratio.

Proprietary ratio= Equity

Total assets

2012 2011

817.87/818.01=0.99 702.99/703.17=0.99

Interpretation:Higher the ratio, dependency on external sources and loans for working capital will be less and financial condition of the organization will be sound.Here in both the years the ratio is same i. e. o.99 or 99% and very much sound as it is much higher.

Turnover ratios

They indicate the rapidity with which the resources available to the concern are being used to produce sales. In other words, they measure the efficiency and rapidity of resources of the company

1. Stock turnover Ratio:- inventory ratio. This ratio indicates relationship between cost of goods sold during the year and average stock kept during that year.

Stock turnover ratio= cost of goods sold Average stock

2012 2011

843.61/66.31=12.72

742.71/52.49=14.14

Interpretation:-This ratio indicates whether stock has been efficiently used or not,the number of times the stock is turned into sales during the year. The higher the ratio, the better it is, since it indicates that stock is selling quickly. STR is much higher in year 2011 compared to 2012, hence in 2011 the company's stock has been turned into sales efficiently.

2. Fixed assets turnover ratio: This ratio indicates relationship between costs of goods sold and fixed assets during a year.

Fixed assets turnover ratio= cost of goods sold Net fixed assets.

2012 2011

845.61/154.18=5.47 742.71/120.14=6.18

Interpretation:-This ratio reveals how efficiently the fixed assets are being utilized. If there is increase in ratio, it indicates that there is better utilization of fixed assets , here in year 2011 the fixed assets have been utilized efficiently compared to year 2012.

3. Working capital turnover ratio: This ratio indicates relationship between sales and working capital.

Working capital turnover ratio = cost of goods sold or sales Working capital

2012 2011

845.61/807.77=1.04 742.71/694.45=1.06

Interpretation:-This ratio reveals how efficiently working capital has been utilized in making sales. A high working turnover ratio shows efficient use of working capital. Here we find that working capital of Novartis pharmaceuticals in year 2011 was efficiently utilized to make sales.

CONCLUSION

After the overall financial ratio analysis of Novartis pharmaceuticals , it is found

that the financial performance and management of company was sound and

efficient enough in year 2011 as compared to 2012,as the company was very much liquid during 2011 , current

ratio was satisfactory , stock and working capital was efficiently used.

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