Summer Training Report of Win Medicare Pvt. Limited (Ratio Analysis)

SUMMER TRAINING REPORT

ON

RATIO ANALYSIS

SUBMITTED BY

NIDHI MEHTA

MBA Batch 2009-2011

In Partial Fulfillment of the Requirements of the Degree of Master of Business Administration

SUBMITTED BY: SUBMITTED TO

NIDHI MEHTA

MBA PART-II

JECRC BUSINESS SCHOOL

PREFACE

Theories are being developed, designed and stated on the groundwork of their practical implementation

and usage. Work experience seems to e the most effective and indispensable factor of making an

individual an adept. This is because one can not do without being exposed to varying circumstances and

possible consequences. Training not only develops individual skills and abilities but also provides

proficiency in work performance.

This report served as a means to share my personal experiences while working on this project which

provided me platform where I was face to face with practical aspects of theoretical knowledge gained so

far.

This training projectt report has been prepared during the summer training of 45 working days in an

organization. It is an integral part of MBA curriculum. The summer training was challenging, gainful

and interesting and it gave real insight of corporate world.

ACKNOWLEDGMENT

I express my sincere thanks to my project mentor Mrs.Rashmi Sharma ,Lecturer,Deptt.MBA for

guiding me right from the inception till the successful completion of the project. I sincerely

acknowledge him for extending their valuable guidance, support for literature, critical reviews of project

and the report and above all the moral support he had provided to me with all stages of this project.

I would also like to thank the supporting staff Himanshu Vijay and K .K Varshney ,Finance

Department for their help and cooperation throughout our project.

NIDHI MEHTA

CERTIFICATE

TO WHOM SO EVER IT MAY CONCERN

This is to certify that MS NIDHI MEHTA, student of MBA from JECRC BUSINESS

SCHOOL, JAIPUR has undergone EIGHT Weeks summer training in the Accounts department of

our organization for the period from 17 JUNE , 2010 to 1 AUGUST, 2010 on the project titled “

Financial performance through Ratio Analysis “

HIS behavior and character is good and we wish all success for her future endeavors

For Win- Medicare Pvt. Limited

K.K.Varshney

Dy G.M - Accounts

Dated 3rd

AUGUST , 2010

place :- new delhi

DECLARATION

Herewith I declare that all information (textual contents) furnished in the undertaken project by the

assignee, are original and valid as per the facts and figures known to me. Further, the project has not

been submitted/published elsewhere, nor it has been sent for publication and austerely embodies the

live-project work undertaken by the undersigned at JECRC School of management, JAIPUR.

CONTENTS

S.No PARTICULARS Pg.No.

1. Preface 2

2. Acknowledgement 3

3. Introduction Of Industry 7

4. Introduction to Organization 17

5. Research methodology 23

6. Analysis & Interpretation 36

7. Facts & findings 60

8. SWOT Analysis 61

9. Conclusion 66

10. Recommendation & Suggestion 67

11. Bibliography 69

INTRODUCTION TO THE INDUSTRY

It is said that behind every successful business is a person who once made a courageous decision. In the

case of the Modi Group of companies, one of the largest conglomerates in India, the man who took the

big decision was Gujarmal Modi.

From humble beginnings in 1932 with only Rs.400/- in his pocket, Rai Bahadur Gujarmal Modi, the

founder of the Modi Group left the security of his home and family to create his own business. His belief

in himself and the concept of self-entrepreneurship was strong and he worked hard to create an empire.

Today the Modi Group is among the top Industrial Conglomerates in India. The Group has large number

of joint ventures with world leaders such as Philip Morris, Estee Lauder, Olivetti, Acatel, Revlon, Rank

Xerox and Walt Disney.

This is the story of Rai Bahadur Gujarmal Modi who founded the Group in year 1933. From then

on there was the Sugarcane Development Cooperative Society was set up in 1938-39.

Vanaspati factory, using cotton seed oil was set up in June 1939.

The washing soap factory utilizing the waste sludge was established in 1940.

The toilet soap factory emerged in the year 1941. Soaps were manufactured under the brand

names, Modi No.1 and Perfect soap.

The Modi Tin Factory was established in 1941 to fulfill the demand of the Vanaspati unit for tin

containers.

Modi Food Products was born on 28th

May 1941 this factory was separated from the sugar and

converted into a public limited company on 18th

December 1941.

Sometime later a new company, Modi Supplies Corporation Ltd. Was set up to process dry fruits

into cakes and tablets for the use of the armed forces.

A Biscuit manufacturing factory and a confectionary factory plant wads also set up in 1943.

NOTE ABOUT THE CHAIRMAN

UMESH K. MODI,CHAIRMAN,PRESIDENT&CEO

The youngest son of Rai Bahadur Gujar Mal Modi, Umesh K Modi, Chairman,President and CEO of

Modi Group Of Industries, is a name to reckon with in Indian industries firmament. A gold medalist in

chemical engineering, his futuristic vision and youthful dynamism have changed the complexion of the

domestic industrial scenario. Particularly creditworthy is his insistence and perseverance in introducing

innovative technologies, thereby aiding the countrys industrial development. In fitting gesture. The

Ministry of Industries honoured him with the “Man of the Year” award for 1984.

He has also held the prestigious chairmanship of various organizations such as the Steel furnance

Association of India, Western U.P Sugar Mills Association, Steel Wire Manufacturers Association of

India, Sponge Iron Association of India as well as the Presidentship of the Institute of Economic Studies.

He continues to be an active member and office-bearer of many international organizations such as the

Young Presodent organization, industrial Council Development, etc. Starting with the singular

inheritance of Modi Sugar Mills, his Group has chartered an unprecedented growth course driven by the

imaginative and practical dynamism of Umesh K. Modi.

With an annual turnover of 7.5 billion(US$155 million), and a highly motivated workforce of 3000 plus

employees, Umesh K. Modihas been a multifaceted portfolio of activities. The principal being with

sugar, consumer goods, pharmaceuticals,cosmetics, sponge iron and steel , engineering and power.

Umesh K. Modi has been instrumental in bringing the internationally renowned collaborations to India

and the group continuously monitors,markets and applies this proven blend of business acumen and

Entrepreneurial spirit to encash relevant opportunities.

GROUP OF COMPANIES

Modi Sugar Mills

SBEC Sugar Limited

Win-Medicare Pvt.Ltd

Modi Mundipharma Pvt. Limited

Win Healthcare

Modi Revlon Pvt. Ltd

Modi Distillery

Si-al SBEC Bioenergy Limited

Modi Senator (India) Pvt. Limited

Bihar Sponge Iron Limited

Morgardshammar India Limited

SBEC Systems (India) Limited

Technicast Engineers Limited

Modiline Travel Service Pvt. Limited

Barcode

MM Printers

H M Tubes Pvt. Limited

WIN-MEDICARE LIMITED

“Medicine is the most distinguished of all arts.” Hippo Crates

What began as a vision of healthcare business in early 1980s, Win-Medicare today is amongst the fastest

growing pharmaceutical companies in India and is considered the undisputed leader in select segment.

In a country with a highly fragmented Parma market, Win-Medicare enjoys a respectable share.

Sourcing technologies, pharmaceutical and healthcare products as well as the latest in research and

development from USA, Germany and Switzerland, Win-Medicare has grown from strength to strength

while pursuing its mission of fulfilling the healthcare needs of the country.

Win-Medicare began its business with a number of pioneering concepts and products from Sterling Drug

Inc., USA and concertedly worked towards making them established contemporary medical practice.

In the mid-eighties, Win-Medicare took a quantum leap and tied up with Mundipharma Group of

Companies, a pharmaceutical giant from Switzerland, Mundipharma AG, Switzerland and its R&D and

manufacturing affiliates, Knapp Pharmaceutical Group, UK and the Purdue Fredrick Co., USA are

renowned for their novel formulation expertise, state-of-the –art production and Quality Assurance

facilities. The biggest gain from this venture is the topical microbicide Beta dines. In 75 countries, Beta

dine is trusted for its uncompromising antiseptic efficacy.

Amongst the recent growth and expansion bids, Win-Medicare has established licencing arrangement

with Merz & Co. GmbH, Germany for marketing their hepatotherapeutic and other pharmaceutical

products and IBSA, Switzerland for bolstering it‟s gynecological portfolio. The company is well

represented through an efficient Marketing and Distribution network in the Domestic, South Asian,

African and Middle East markets. Currently the company offers options for infection control, pain relief,

management of infertility and many other specialized areas.

MODI MUNDIPHARMA LIMITED

“Wherever the art of Medicine is loved, there also is love of humanity.” Hippo Crates

Encouraged by the success of Win-Medicare, another landmark joint venture was formed to serve the

health needs of the country. Christened Modi-Mundipharma Ltd., the tie up with the Mundipharma

Group of Switzerland has further strengthened the Group‟s positioned in the pharmaceutical segment.

Napp Pharmaceutical, UK (Mundipharma Group)

A rapidly growing Pharma company, Modi-Mundipharma draws its primary strength from sound

Research and Development as well as existing and effective formulations of the Mundiphama Group

companies‟ worldwide, Medical fraternity, across the length and breadth of India, perceives Modi-

Mundipharma to be a Parma company that offers long acting formulations in specialized

therapeutic segments. Modi-Mundipharma has reached this position with consistent exposure of the

benefits of revolutionary Continues technology at large and subsequent discussions of the brand benefits

derived from controlled drug delivery.

The focus of Modi-Mundipharma is to offer state-of-the-art and

latest high-tech pharmaceutical solutions through introduction of

differentiated products in the field of Asthma, Pain and Heart

diseases. The company is effectively represented in the Domestic and South Asian markets.

MODI REVLON LIMITED

The Dream Merchant

It started with one single product…nail enamel,

which was like nothing else anyone had ever seen. Then

followed the subsequent fashion breakthroughs, which

turned Revlon into an undisputed leader in the

cosmetic world. The images evoked by its very

mention are of the world‟s most beautiful women –

those with glorious hair, perfect nails, flattering make-

up and a glowing skin.

Modi-Revlon is the formidable alliance between the Modi Group and the world famous Revlon of

USA. Modi-Revlon has entered the Indian market and has redefined the concept of beauty care in India.

It brings to the Indian women an exciting range international cosmetics, toiletries and fragrances – all

adapted to suit the local conditions and preferences. Modi-Revlon draws on the expertise on Revlon‟s

premier Research Center bin Edison, New Jersey (USA), to harmonies its international product

offerings with the needs and preferences of the Indian women.

Mr. Jerry Lewin (Revlon); Mr. Umesh K. Modi and Mr.

Paul Block the company „thinks Global, but acts Local‟. The

manufacturing standards of Modi-Revlon are as exciting as

elsewhere in the world. The toughest QC standards in line with the

global norms are as followed. The products‟ advertising

features international celebrities and super models. Modi-

Revlon product portfolio currently consists of Lipsticks,

Nail Enamels, Eye and Face Make-up, Flex Shampoos,

Flex Conditioners, Charlie Cologne, Body Sprays, Talc and Fire and Ice cologne.

We

represent

Modi-Mundipharma Private Limited, a 50:50 JV between the privately held Mundipharma group

(known as Purdue Pharma in the US, Napp Laboratories in the UK and Mundipharma in Europe)

and Mr. Umesh K. Modi of the Modi Group of Industries, a leading business conglomerate in India.

Companies managed and controlled by Mr. Umesh K. Modi, span a wide range of businesses:

Pharmaceuticals: Modi Mundipharma, Win-Medicare and Win-Healthcare (Market leaders in several

formulations) alliances with Mundipharma group (Switzerland), Merz Pharma (Germany), Tillots

(Switzerland), Orion (Finland), HRA Pharma (France), IBSA (Switzerland), and LEO Pharma

(Denmark).

Cosmetics: Modi-Revlon: It was set-up in 1995, as collaboration between the Modi Mundipharma

(74%) and Revlon, Inc. USA (26%). Modi-Revlon was the first company in India to introduce the

concept of Beauty advisors in stores. Today, Modi Revlon has a distribution reach in more than 25,000

stores and includes more than 1500 beauty advisors. Modi Revlon is consistently growing since its

inception.

Other businesses, which our group has diversified into, include:

Modi Sugar, Modi Distillery, Iron & Steel, Writing Instruments, Bio-Energy, Entertainment and Modi

Motors

Details on our Pharmaceutical Business (Modi-Mundipharma and Win-Medicare)

Our two pharmaceutical companies coexist independently in terms of product portfolio, sale and

marketing networks (Modi Mundipharma has a field force in excess of 500 people, while Win

Medicare has its dedicated field force numbering 600 people) as well as distribution chain.

While Modi Mundipharma Private Limited focuses on products using the proprietary „Continus‟

time release technology of the Mundipharma group, Win Medicare private limited focuses on

products licensed from international partners such as Merz Pharma of Germany (HepaMerz,

Contractubex/ Mederma), Tillots of Switzerland (Asacol), IBSA of Switzerland

(Gonadotrophins), Orion Pharma of Finland (Divigel and other HRT products), HRA Pharma of

France (Norlevo – Emergency Contraceptive),and LEO Pharma of Denmark (DAIVONEX®

) for

their dermatology portfolio

OTC Division – Win Healthcare

Win Healthcare, today has pan-India presence in the top 50 metros towns with direct retail

coverage in almost 4000 outlets. The distribution comprises of a mix of Retail pharmacies,

Health & beauty outlets and departmental stores.

The market is being serviced using the Carrying and Forwarding agent model. Currently CFA‟s

are servicing the market using a network of Distributors and Sales Representatives.

The distribution cover will be extended to over 7500 outlets by end‟2008

Product range includes:

Mederma (Merz Pharma, Germany)- Under active promotion

Revlon Touch & Glow – OTC market launch commenced in April‟07

Absolute Whitening (Revlon, USA)

Nutritional Supplements – Locally sourced product to be launched in May‟08

Our business philosophy involves working with international pharmaceutical companies.

Some of our success stories are:

Betadine, has grown to be the undisputed leader in the Antiseptic Disinfectant market in India,

with a market share of 75% (more than 3 times the sale of its nearest competitor) inspite of

being about 30% premium priced to its competition, with over 30 competitive brands in the

Indian market.

Depending on the commercial viability and the partner‟s comfort we either import finished

products, or import bulk products with repackaging in India or manufacture the products locally

under license from the licensing partner.

Within India, we have offices in all the major cities and towns. We have a reach to over 200,000

drugstores across the country. We have four manufacturing plants and one of them is our new

production facility for exports, which is UKMHRA approved. In addition to our domestic

presence, we have our own sales and marketing teams in Sri Lanka, Bangladesh & Nepal while

we operate through distributors in South East Asia, East Africa and Eastern Europe.

We are looking for strategic alliances with companies such as yours, which have leading global

brands.

Future Plans:

a) Foreign Exchange Advisory Services

Foreign Exchange Treasury Products

International Trade Finance

Advisory Services

Corporate Foreign Exchange Exposure Management

b) Project Advisory Services

Identification of Project

Assistance in Letter of Intent, Foreign Collaboration Approval, etc.

Providing total and customized solutions in financial services, MLCS is synonym with

collective business acumen and strategy.

INTRODUCTION TO THE ORGANIZATION

As my project in Win Medicare Pvt. Ltd., I worked on the analysis of the financial position of the

company. For this main tool, which is used, is Ratio Analysis. Financial Analysis is the process of

identifying the financial strengths and weaknesses of the firm by properly establishing relationship

between the items of the balance sheet and profit and loss account.

“The science of financial analysis”, says Navin Chandra Joshi, “is assuming art increasingly important

role for appraising the real worth of a going concern.”

An analysis of several financial tools provides all-important basis for valuing securities and appraising

managerial programs. Financial analysis is a vital apparatus for the interpretation of financial statement.

Financial statements of a company include Trading and Profit and Loss Account, Profit and Loss

Appropriation and Balance Sheet.

These statements may be fruitfully used if they (statements) are analyzed and interpreted to have an

insight into the strengths and weaknesses of the firm.

UTILITY OF FINANCIAL ANALYSIS:

Financial analysis seeks to spotlight the significant facts and relationships concerning managerial

performance, corporate efficiency, financial strengths and weakness and credit worthiness of the

company.

Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz.

owners, creditors, investors and others to form firm. In other word it can be said that financial statements

are of much interest to a number of different groups like:

1. OWNERS

Owners can evaluate the efficiency of the firm to know about how efficient business is going on and

knowing the liquidity and financial position of the firm.

2. SHAREHOLDERS

Shareholders can evaluate the efficiency of the management and determine whether to buy, sell and hold

the shares.

3. CREDITORS

Creditors can find out the financial strength and capacity o a borrower, the value of a floating share on

the assets held as security and the value of unquoted shares.

4. MANAGEMENT

The top management can measure the success or otherwise of a company‟s operations, determine the

relative efficiency of various departments, processes and products appraise the individual performance

and evaluate the system of internal control.

5. LABOR UNION

The labor union assesses whether the company presently affords a wage increase.

6. ECONOMISTS

The economists analyze the financial statement with a view to studying the prevailing business and

economic condition

QUALITY OBJECTIVE

Products and service shall consistently satisfy customer needs.

To increase market share in organized sector.

Establish effective cost system to achieve consistent quality.

To improve all types of wastage perpetual.

To improve customer satisfaction through improvement in quality.

To reduce working capital for better utilization of resources.

GLOBAL PREFERENCE

Maintaining a lead in the domestic market is easy but what really counts is the rapport with international

customers. For any manufacturing unit the most important sector is the exports.

Win Medicare Company maintaining a lead in exporting products to countries likes Uganda, Dubai and

Pakistan.

WIN MEDICARE SPECIALIZE IN

The high quality products of Win Medicare Company are spun out daily on the machines ad technology.

All believes here specialized product has to be made specialized technologies and quality efforts are

required.

Win Medicare Company specializes in making all types of medicines.

VISION OF WIN MEDICARE

To be the leader in the medicare market in India, providing services that enhance productivity.

MISSION OF WIN MEDICARE

To generate adequate surplus.

To stimulate and accelerate all technical, administrational and financial efforts.

To develop manufacture market service and finance a complete range of welding processing

product and service so as to help over customer and make their officers more production.

STRATEGIC INTENT

To be number 1 company, to achieve this Win Medicare Co., Company has a mission, which is to

achieve environment and culture of quality.

CORPORATE GOAL

To grow profit and increase market share at a faster rate than competition in the market.

BUSINESS GOAL

1. CUSTOMER SATISFACTION:

To be in the no.1 customer satisfaction for all products, achieving significant progress towards the goal

of 100% satisfied customer and improvement in the percentage of vert satisfied customers.

2. EMPLOYEE MOTIVATION AND SATISFACTION:

To continue to drive significant year on year improvement in employee motivation and satisfaction to

achieve national leadership status.

3. MARKET SHARE:

To grow a customer base improve our productivity and manage a coverage in order to built continuous

improvement in market share in all strategic business thus consolidating “The Best Company Image”.

4. RETURN ON INVESTMENT:

To drive substantial growth as a means of operating income margins and assets utilizing, thus achieving

a premium return on assets in access of the corporate goal.

RESEARCH AND DEVELOPMENT

A well-equipped and staffed R & D Center has always played a vital role in offering suitable electrodes

to the welding industry. Continuous efforts of scientists and technicians have kept WIN MEDICARE,

in the forefront of welding technology. Department of Scientific & Industrial Research, Ministry of

Science & Technology Government of India have granted recognition to the R & D Center of the

Company.

ROLE OF FINANCE IN WIN MEDICARE PVT LTD.

The role of finance and accounts department of Win Medicare is not limited to the preparation of

accounts, presentation of accounts and publishing of annual reports but apart from this it has numerous

functions such as to:

Make a proper coordination with other department.

Establish and maintain adequate market.

To maintain adequate resources.

To provide insurance coverage.

To appraise economic and social forces and access their effect upon business.

To formulate and implement policies which are beneficial for the companies.

Through every department has its own importance in today‟s increasing business of Win Medicare but

finance/accounts serves the key role for the success of WIN MEDICARE.

FUNCTION OF FINANCE AND ACCOUNTS GROUP

1. FINANCE:

Arranging funds through centralized cash credit a/c being operated by corporate a/c for day-to-day

requirement. This is being managed by not keeping funds idle and also taking due care that all funds

requirement are met timely.

Financial advises on all matters involving out go of money. This is also liaison and interaction with

users. Indenting department, to fully understand and translate the same into monetary term.

2. PRE AUDIT:

Admitting personal claims of the individuals and arranging payments. Drawing regular personal claims

(pay, allowances and incentives etc) and arranging disbursement on due dates. Pre auditing of all

outsiders claims (suppliers, contractors etc).

3. MANAGEMENT ACCOUNTING:

Participation in tender committee and negotiation etc is a part of decision making process. Transfer

pricing in respect of research and development. Coordination control and maintenance of accounting in

respect of expenditure incurred for work.

RESEARCH METHODOLOGY

RESEARCH DESIGN

It is the arrangement of the conditions for collection and analysis of data in a manner that aims to

combine relevance to the research purpose with economy in procedure.

The research is explanatory in the beginning as the secondary data is collected mostly from the higher

management and some from middle management. This information is able to give knowledge about the

company and its share in the market.

SOURCES OF DATA

Both primary and secondary data were collected to meet the objective; the data is collected for the last

three years from the annual reports of the WIN MEDICARE LIMITED,. Due to non-availability of the

accounts of separation units, I measure the performance on the base of all aggregate units.

Data is taken as per the requirements of the study of the RATIO ANALYSIS. Secondary data is used for

it. Primary data is collected for the purpose of the theoretical part.

OBJECTIVES

To assess the significance of the financial ratios. By selecting a few parameters such as

liquidity, turnover and profitability.

To make the ratio as simple as for the every part of the aspect and find out those facts

which are directly used.

To study the financial position for the WIN MEDICARE CO., MODINAGAR.

Give suggestion towards the company factors to increase the efficiency‟s.

TOOLS OF ANALYSIS

Trading and profit and loss account, balance sheet and various schedules prepared at the end of the year

do not always convey to the reader the real significance of operating results financial health of the

business. And rarely can satisfactory diagnosis be reached on the basis of such information alone.

The analysis of the facts and related data was considered to be important and a number of techniques are

given below:

1. RATIO ANALYSIS:

An analysis of financial statements on the basis of ratio is known as ratio analysis. A ratio is a

mathematical relationship between two or more related items taken from financial statements. Ratio

analysis is very helpful to outsiders as well as to the management.

2. COMPARITIVE STATEMENT:

These statement are those which summaries and present related accounting data for a number of years

incorporating therein the changes in individual items of financial statements. Comparative statements

can be prepared for income statement well as position statement or balance sheet.

3. TREND ANALYSIS:

Trend analysis is carried out by calculating trend ratio (percentages) and/or plotting the accounting data

on the graph paper or chart. Trend analysis of business facts is very significant from the point of view of

forecasting or budgeting. It discloses the changes in the financial and operating data between specific

periods.

RATIO ANALYSIS

An analysis of the financial statements with the help of ratio may be termed as “Ratio Analysis”. It

involves the process of computing, determine and presenting the relationship of items of financial

statements and comparison and interpretation of these ratios and uses them for future projections.

MEANING OF RATIO:

A ratio is a mathematical relationship between two related items expressed in quantitative firm. This

quantitative relationship may be expressed in either of the following ways:

a) In proportion: In this form the amounts if two items are being expressed in a common

denomination.

b) In rate or times or co-efficient: when ratio is expressed in this.

c) Form, it is called as turn over and is written in times.

d) In Percentage: a special type of rate, which expressed the relation in hundredth.

OBJECTIVE:

The objective of ratio analysis is to help management in analyzing and interpreting the financial

statement, to get adequate information useful for the performance of various functions like planning

coordination, control, communication and forecasting etc. Some general utility of ratio analysis is given

below:

a) Trends in cost, sales, profit and other facts are related by the past ratios and the future events can

be forecasted on the basis of such trends.

b) Ideal ratios may be constructed and the relation found between strategic ratios may be used or

achieving „desired coordination‟.

c) Ratios may be used as instrument of management control particularly in the areas of sales and

costs.

d) Ratios are also facilitating the function of communication.

e) Ratio also may be used as a measure of efficiency.

f) It helps to make profitable investments.

NEEDS FOR RATIO ANALYSIS:

The need or significance of ratio analysis arises due to the following facts:

a) Business facts shown in financial statement do carry any importance individually. Their

importance lies in the fact that they are interrelated and any correct or accurate conclusion is to be drawn

by their uses.

b) Ratio analysis as a tool for their interpretation of financial statements is also significant because

ratios help the analysis to have a deep peep into the data given in statements. Ratios provide power to

speak.

The uses of ratio analysis have increased have increased considerably. It is now being used as a device

to diagnose the financial health of a concern. Ratio analysis may highlight upon the few phases of the

business operation in which the outsiders are most interested. In financial analysis, a ratio is used as a

benchmark for evaluating the financial position and performance of the firm.

Thus ratio analysis is a powerful tool for both external and internal analysis.

STAGES FOR RATIO ANALYSIS:

The following procedure is generally followed, while analyzing the financial statements through ratio

analysis:

STEP I: Selection of the relevant data from the financial statements depending upon the objective of the

analysis.

STEP II: Calculation of appropriate ratios from the above data.

STEP III: Comparison of the calculated ratio with the ratios of the same from in the past, or there ratios

developed from projected financial statements or in the ratio‟s of some other, firm or the comparison

with the ratio of the industry to which the firm belongs.

STEP IV: Interpretation of ratios.

a) Balance sheet ratio: i.e., ratios calculated on the basis of tile figures of the balance sheet

only.

b) Profit and loss account ratios: i.e., ratios calculated on the basis of the figures of profit

and loss account only.

c) Combined ratio: i.e., ratios based on the figure of profit and loss account as well as

balance sheet.

STANDARD OF COMPARISON:

The ratio involved comparison for a useful interpretation of the financial statements. A single ratio in

itself does not indicate favorable or unfavorable condition. It should be compared with some standard.

Standards of comparison may consist of:

a) Past ratios, i.e., ratios calculated from the past financial statement of the same firm;

b) Competitors ratios, i.e., ratios of some selected firms, especially the most progressive and

successful competitor, at the same point in time;

c) Industry ratios, i.e., ratios of the industry to which the firm belongs;

ADVANTAGES OF RATIO ANALYSIS:

a) The detailed ideas of he working of a concern are found out.

b) The efficiency of a concern becomes evident when analysis is based on accounting ratios.

c) Comparison can be made on the basis of the ratio over a number of years to measure

profitability.

d) Accounting ratios reveal the financial position of a company than in turn make lending and

investment decision earlier.

e) If the accounting ratios are prepared for a number of years, then a trend is established which

helps in preparations of plans for the future.

f) Weakness in financial structure on account of incorrect policies in the past or present is revealed

through these accounting ratios.

g) Comparison can also be made between one department of a firm and another department of the

same firm to find out the performance of the various departments in the firm.

LIMITATIONS OF RATIO ANALYSIS:

a) False results:

Ratios are based upon the financial statements. In case financial statements are combined or the data

upon which the ratios are based is in combined, ratios calculated will be also be false and defective.

b) Limited comparability:

The ratio of the one firm cannot always be compared with the performance of other firm, if they do not

adopt uniform accounting policies.

c) Absence of standard university accepted technology.

d) Price level changes affect ratios:

e) Changes in price level often make comparison of figure for various years difficult.

f) Ignore qualitative factors:

Ratio analysis is the qualitative measurement of the performance of the business. It ignores the

qualitative aspect of the firm, how so ever important it may be. It shows that ratio is only one-sided

approach to measure the efficiency of the business.

g) No single standard ratio:

There is not a single word standard ratio, which can indicate the true performance of the business at all

time and in all circumstances. Every firm has to work in different situations and circumstances: so a

particular ratio can be not been supposed to be standard for every one.

h) Ratios may be worked out for significant and unrelated figures:

Accounting ratios may be worked out for any two figures even if they are not significantly related.

CARE IN USE OF RATIOS:

Ratio analysis is useful for financial analysis but to get better result ratio analysis is required to

done with care as several factors affect the efficiency of ratios. These factors are discussed

below:

a) Type of business under consideration affects the ratios and conclusions drawn from them.

b) Seasonal character of the business affects the ratio for a particular type of industry or

business enterprise.

c) Quality of assets also affects the ratio analysis and gives different interpretation to

different business enterprises.

d) Adequacy of data is another considers ratio for comparison of particular factors with each

other.

e) Modification of ratios reflects only the past performance and must be modified by future

trends of business.

f) Interpretation of ratios should not be relied upon is isolated and should be considered

with accounting document for interpretation.

g) Non-financial data ratios based on financial data of firm should be considered with non-

financial data to supplement the financial ratios and give better interpretation.

TYPES OF RATIO

Ratio can be classified for the purpose of exposition into four broad groups:

Liquidity ratio

Leverage ratio

Profitability ratio

Activity ratio

LIQUIDITY RATIO:

Liquidity ratios measure the short-term solvency or the short-term financial soundness of the business. It

is extremely essential for a firm to be able to meet its obligations they become due.

Liquidity ratio‟s measure the ratio ability of the firm to meet his current obligation, this ratio is also an

effective source to ascertain whether the working capital has been effectively utilizes.

Liquidity in the ratio means ability to repays loans. In fact analysis of liquidity needs the preparation of

cash budget and cash and fund flow statements but liquidity ratio by establishing a relationship between

cash and other current assets to current obligation provide a quick measure of liquidity.

The failure of company to meet its obligation, due to lack sufficient liquidity, will result in bad credit

image; loss of creditor‟s confidence, or even in lawsuits resulting in the closure of the company.

A very high degree of liquidity is also bad. Idle assets earn nothing. The firm‟s funds will be

unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance between

liquidity and lack of liquidity.

The ratios calculated for Win Medicare. which indicates the extent of liquidity are:

CURRENT RATIO

QUICK RATIO

CASH RATIO

NET WORKING CAPITAL RATIO

LEVERAGE RATIOS:

A firm should have a short-term as well as long-term financial position, to judge the long-term financial

leverage or capital structure. In other word, it can be said that this financial ratio‟s through light on the

long-term solvency of a firm as reflected in its ability to assure the long-term creditors with regard to:

a) Periodic payment of interest during the period of the loan.

b) Repayment of principal on maturity.

As a general rule, there should be an appropriate mix of debt and owner‟s equity in financing the firm‟s

assets, the manner in which assets are financed has the number of implications.

The process of magnifying the shareholder‟s return through the employment of debt is called “financial

leverage” or “trades on equity”.

If the cost of debt is higher than the firms overall rate of return, the earning of shareholder‟s will be

reduced on addition there is a threat of insolvency of the firm is actually liquidated for non-payment of

debt holder‟s dues the worst sufferers will be shareholders the residual owners.

OBJECTIVES OF LIQUIDITY RATIOS

Solvency refers to the financial capability of the enterprises in honoring their long term commitments

(obligations) these ratios serve our following purposes:

a) Ascertaining capability to honor long term obligation, such as repayment of loan and interest;

there on.

b) Ensuring long-term financial stability of the business.

c) Measuring relationship between internal and external equity.

d) Leverage ratios may be calculated to determine the proportion of debt in total financing.

Those calculated for these studies are:

DEBT-EQUITY RATIO

TOTAL DEBT RATIO

INTEREST COVERAGE RATIO

FIXED ASSETS RATIO

DEBT TO TOATAL FUNDS

RESERVE TO CAPIAL RATIO

CAPITAL GEARING RATIO

PROPRIETORY RATIO

TURNOVER RATIOS:

Turnover means “sales”, so turnover ratio is related to sales. It is an accepted fact that sales have direct

relationship with the performance which really means of the business. Higher sales mean better

performance which really means of the business. Fund is invested in various assets in business to make

sales and to earn profit. The efficiency with which assets are managed directly affects the volume of

sales.

The better the management of assets, the larger is the amount of sales and profits.

This ratio indicates the speed with which assets are converted or turned over into sales.

Depending upon the purpose, a number of turnover ratios can be calculated.

Activity ratios involve a relationship between sales and assets. A proper balance between sales and

assets generally reflects that assets are managed well. Several activity ratios can be calculated to judge

the effectiveness of assets utilization.

Those calculations for this study are:

TOTAL CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO

DEBTOR‟S TURNOVER RATIO

CREDITOR‟S TURNOVER RATIO

PROFITABILITY RATIOS:

It is fact that sufficient profit must be earned to sustain the operations of the business to be able to obtain

funds from investor‟s for expansion and growth and to contribute towards the social overheads for the

welfare of the society.

Profit is the difference between revenue and expenses over period of times.

Profit is the ultimate output of the company; it will have no, future if it fails to make sufficient profit.

Therefore the profit ability ratios are calculated to measure the operating efficiency of the company.

Generally, the major types of profitability ratios are:

Profitability in relation to sales.

Profitability in relation to investment.

A company should be able to produce adequate profit on each rupee of sales. The profitability of the

company should also be evaluated in term of firm‟s investment in assets and in term of capital

contribution between creditor‟s and owners.

If the company profit has to be examined from the point of view of all investors, his appropriate measure

of profit is operating profit.

Operating profit is equivalent of earning before interest and tax when the firm does not have non-

operating in company. This measure of profit shows earning arising directly from the commercial

operation of the business without the effect of financing.

Those calculations for this study are:

GROSS PROFIT RATIO

NET PROFIT RATIO

EXPENSE RATIO

- SELLING AND DISTRIBUTION EXPENSES RATIO

- OFFICE EXPENSES RATIO

- RATIO OF MATERIAL CONSUMED

- RATIO OF DIRECT LABOR

- RATIO OF FACTORY EXPENSES

-

OPERATING EXPENSES RATIO

RETURN ON INVESTMENT RATIO\

LIQUIDITY RATIOS

CURRENT RATIO:

Current ratio may be defined as the relationship between current assets and current liabilities.

The ratio indicates the short-term financial soundness of the company. It judge whether the current

assets are sufficient to meet obligation out of the current assets.

The ratio known as working capital ratio is a measure of general liquidity and is most widely used make

the analysis of short-term financial position or liquidity of a firm. It s calculated by dividing the total

current assets by the total of current liabilities.

Current assets are those assets, which are converted into cash within one year, and current liabilities are

those liabilities, which are to be paid within a year.

ANALYSIS & INTERPRETATION

OBJECTIVE AND SIGNIFICANCE:

This ratio is an indicator of the firm‟s ability to promptly meet its short-term liability. It is used

to assets the short-term financial position.

This ratio is calculated as follow:

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

Where,

Year 2007 2008 2009

<--------Value - Rs in Millions-------

A) Current assets:

Inventories 313.76 331.89 385.29

Sundry Debtor 280.68 420.24 405.78

Cash in hand and Bank 171.03 135.07 149.68

Loans & Advances 871.09 713.47 787.01

Total (A) 1636.58 1600.69 1727.78

B) Current Liabilities:

Sundry Creditor‟s 442.47 557.85 614.32

Provision 449.79 94.86 119.64

Total (B) 892.27 651.93 733.97

Then the ratio is: 1.83 2.45 2.36

Remarks:

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current

obligation in time as when they become due, vise versa. As a convention the minimum two to one ratio

e.g. 2:1 is referred as a banks rule of thumb.

QUICK RATIO:

Quick ratio establishes a relationship between quick assets or liquid assets and current liabilities.

An asset is a liquid if it can be converted into cash immediately or reasonably soon without a loss of

value.

Cash is considered most liquid assets.


This ratio is also an indicator of short term solvency of the firm. It is used to test the short-term liquidity

of the firm in its correct form.

This is calculated as by dividing of liquid assets by current liabilities.

CURRENT ASSETS – INVENTORIES

QUICK RATIO =

CURRENT LIABILITIES

Where,

Year 2007 2008 2009


A) Current assets:

Inventories 313.76 331.89 385.29

Sundry Debtor 280.68 420.24 405.78

Cash in hand and Bank 171.03 135.07 149.68

Loans & Advances 871.09 713.47 787.01

Total (A) 1636.58 1600.69 1727.78



Provision 449.79 94.86 119.64

Total (B) 892.27 651.93 733.97


Remarks:

Usually high quick ratio is an indication that the firm is liquid and has the ability to meet its current

liabilities in time. As a rule of thumb or as a convention quick ratio of one to one ratio e.g. 1:1 is

considerably satisfactory.

CASH RATIO:

Since cash is the most liquid assets are examined cash ratio and its equivalent to current liabilities.

Trade investment or marketable securities are equivalent of cash; therefore, they may be included in the

computation of cash ratio.

CASH + MARKETABLE SECURITIES

CASH RATIO =

CURRENT LIABILITIES

Year 2007 2008 2009


A) Cash 546.36 639.58 539,14

Add. Marketable Securities -------- -------- --------

546.36 639.58 539.14


Year 2007 2008 2009



Provision 449.79 94.86 119.64

Total (B) 892.27 651.93 733.97

Then ratio is: 0.61 0.98 0.73

Remarks:

The acceptable norms for this ratio are 50% or 0.5:1 or 1:2

NET WORKING CAPITAL RATIO:

The difference between current assets and liabilities is called Net Working Capital Ratio.

Net Working Capital used as a measure of a firm‟s liquidity. It is considered as that‟s between two

firm‟s the one having the larger Net Working Capital has the greater ability to meet its current

obligation.

Net Working Capital measures the firm‟s potential reservoir of funds. It can be related to net assets or

capital employed.

NET WORKING CAPITAL

NET WORKING CAPITAL =

NET ASSETS

Net Working Capital:

Year 2007 2008 2009


Current Assets 1636.58 1600.69 1727.78

Less: current liabilities 892.27 651.93 733.97

744.31 948.75 993.81

NET ASSETS:

Year 2007 2008 2009


FIXED ASSETS (LESS

DEPRICATION) 119.34 135.43 176.45

ADD. NET CURRENT ASSETS

(CA-CL) 744.31 948.75 993.81

863.65 1048.18 1170.26


Remarks:

Higher the ratio higher the liquidity.

Table 1

LIQUIDITY RATIO‟S

YEAR

2007

2008

2009

CURRENT RATIO

1.83

2.45

2.36

QUICK RATIO

1.48

1.95

1.83

CASH RATIO

0.61

0.98

0.73

WORKING CAPITAL RATIO

0.80

0.91

0.85

COMMENT:

In the above calculation of liquidity ratio, the entire ratios are good but above the standard ratio limit

of the liquidity except the cash ratio.

In the current ratio of the company in year the 2007, 2008, 2009 the ratio is 1.83, 2.45, and 2.36

respectively.

These ratios of liquidity indicate the over capitalization of current assets.

In quick ratio, the ratio shows the company enjoys the high liquidity position; it is good forever too

much liquidity is not beneficial for the company future and the quick ratios are also more than the

standard ratio.

The cash ratio of the company, the ratio is well; it means that the company keeps sufficient cash.

Working capital ratio shows the liquidity position of the company is good.

So overall liquidity position of the company is satisfactory and the Current Ratio and Quick Ratio shows

over the standard ratio.

LEVERAGE RATIO:

Win Medicare is one of the units of the Modi Industries Ltd.

So it is hard to calculate the Leverage Ratio as a separately because its shares are jointly issued and in-

group the debts are taken.

So calculation is separately not possible because separate data‟s are not available.

ACTIVITY RATIO

A) CAPITAL TURNOVER RATIO:

Turnover here indicates the speed or rate with which capital employed is rotated in the process of doing

business. Efficient rotation of capital would to higher profitability. The resulted raw would show the

number of times and capital has been in the process of during business.


Capital turnover ratio establishes the relationship between sales and capital employed.

The objective of working out this ratio is to determine how efficiently the capital employed is being

used and this in turn shows the promises of profitability and efficiency of management.

It is calculated as Capital Turnover Ratio.

NET SALES

CAPITAL TURNOVER RATIO =

CAPITAL EMPLOYED

CAPITAL EMPLOYED:

Year 2007 2008 2009


FIXED ASSETS 119.34 135.43 176.45

Add. WORKING CAPITAL 744.31 948.75 993.81

TOTAL 863.65 1084.19 1170.25

Net Working Capital:

Year 2007 2008 2009


Current Assets 1636.58 1600.69 1727.78


744.31 948.75 993.81

SALES 2007 2008 2009

2787.52 3176.52 3517.66

Then ratio is: 3.22 2.92 3.01

Remarks:

Higher the ratio the better it is. However too high a ratio may indicate over trading resulting in paucity

of funds.

WORKING CAPITAL TURNOVER RATIO:

Working capital of a concern is directly related to sales „the current assets like debtors, bill receivable,

cash, and stock etc. change with the increase or decrease of sales. The working capital is taken as:

Working capital = Current Assets – Current Liabilities

Working capital turnover ratio indicates the velocity of the Utilization of net working capital. This ratio

indicates the number of times the working capital is turn over in the course of a year.

This ratio can be calculated as under:

SALES

WORKING CAPITAL TURNOVER =

WORKING CAPITAL

Where,

Year 2007 2008 2009


Sales 2787.52 3176.52 3517.66

Working Capital

Current Assets 1636.58 1600.69 1727.78


TOTAL 744.31 948.75 993.81


Remarks:

A higher the ratio indicates efficient utilization of working capital.

FIXED ASSETS TURNOVER RATIO:

Fixed assets are used in the business for producing goods to be sold.

The effective utilization of fixed assets will result in increased production and reduced cost.

It also ensures whether investment in the assets have been judicious or not.


Fixed assets turnover ratio indicates how efficiently or other wise the fixed assets are used.

The following formula is used for measurement of the ratio:

NET SALES

FIXED ASSETS TURNOVER =

FIXED ASSETS

Where,

Year 2007 2008 2009


Sales 2787.51 3176.52 3517.52

Net FIXED ASSETS 119.34 135.43 176.44

Then the ratio is: 23.35 23.45 19.93

Remarks:

Higher the ratio is it better of the business. An increasing trend shows the financial assets are utilized

efficiently to achieve higher sales.

DEBTOR‟S TURNOVER RATIO:

This ratio establishes the relationship between net credit sales and averages of debtor‟s of the year.


This ratio indicates the efficiency with which debts are collected. It will be in the interest of business. If

the ratio is higher which will indicate the debts are collected quickly.

This ratio is calculated as by the following formula:

TOTAL SALES

DEBTOR‟S TURNOVER RATIO =

ACCOUNT RECEIVABLE

Year 2007 2008 2009


TOTAL SALES 2787.52 3176.52 3517.66

TOTAL DEBTOR 280.68 420.24 405.78


Remarks:

Higher the ratio indicates economy and efficiency in the collection of amount due. It shows that

collection performance of Win Medicare is improving year by year. Credit period has been reduced to 3

months to 2 months in 2008.

CREDITOR‟S TURNOVER RATIO:

Creditor‟s turnover ratio indicates the velocity with which the payment for credit purchase is made to

creditors.


Creditor‟s turnover ratio is the debt payment enjoyed with indicates whether the firm is enjoying

actually the credit premised by suppliers.

This ratio of Modi Arc Electrode Ltd. is calculated as follows:

TOTAL PURCHASE

CREDITOR‟S TURNOVER RATIO =

ACCOUNT PAYABLE

Year 2007 2008 2009


TOTAL PURCHASES 1227.10 1394.95 1605.58

TOTAL PAYABLE 114.31 239.83

Then the ratio is: 11.95 16.98 11.09

Remarks:

Higher creditor‟s turnover ratio indicates that company is increasing trend prompt in paying its creditor

which enhance its creditworthiness but it also signify that company is taking full advantages of credit

facilities provide by creditor‟s period is beneficial for the company

Table 2)

ACTIVITY RATIOS

YEAR

2007

2008

2009

TOTAL CAPITAL TURNOVER

3.22

2.92

3.01

WORKING CAPITAL TURNOVER

3.75

3.34

3.53

FIXED ASSETS TURNOVER

23.35

23.45

19.93

DEBTORS TURNOVER

9.93

7.55

8.66

CREDITORS TURNOVER

11.95

16.98

11.09

COMMENT:

In the above calculation of turnover ratio of the company, the ratio of these shows that the performance

of business is better and all the available resources are well utilized.

The total capital turnover shows good sign of increasing trend, which indicate the efficient use of the

employed capital in sales.

The working capital turnover ratio, it shows the better utilization of the working capital incurred in the

operation.

The above fixed assets turnover ratio shows a good sign and indicates that company utilized its fixed

assets in good manner in conversion of its net assets to the sales.

The debtor‟s turnover ratio shows of increases trend year by year that means the company provide its

credit payment period to its customers, which indicate the liberal debt collection policy of the company.

The calculated creditor‟s turnover ratio indicates the company enjoys good credit payment period from

its creditor‟s.

So, overall the turnover ratio of the company is good except the debtor‟s turnover ratio, which shows the

liberal collection policy, and more credit collection period given to its customers which is not beneficial

of company growth.

PROFITABILITY RATIOS

A) GROSS PROFIT RATIO:

Gross profit equal the difference between net sales revenue and the cost of goods sold.

The gross profit margin reflects the efficiency with which management produces the each unit of

product.

This ratio indicates the average speed between the cost of goods sold and the sales revenue.

It is calculated by dividing gross profit by sales.


Gross profit ratio is a reliable guide to the adequacy of selling prices and efficiency of stock control.

The help of following formula calculates it:

GROSS PROFIT

GROSS PROFIT RATIO = X 100

NET SALES

OR

Sales – Cost of goods sold

X 100

Net sales

Where,

Year 2007 2008 2009


GROSS PROFIT 294.11 334.21 125.22

NET SALES 2787.52 3176.52 3517.66

Then the ratio is: 10.5% 10.52% 3.55%

Remarks:

Higher the ratio better is the result.

B) NET PROFIT RATIO:

A commonly used measure is return on sales after termed net profit margin.

This ratio establishes a relationship between net profit and sales and indicates management efficiency in

manufacturing, administrating, and selling the product.

This ratio is the overall measure of the firm‟s ability to turn each rupee sales into net profit.

If the net margin is inadequate firm will fail to achieve the satisfactory return on owner‟s equity.


Net profit ratio helps in determining the efficiency of the business.

Objective of working net profit ratio is to determine whether operating cost is with in the desired

parameters or not.

This ratio of Win Medicare Pvt Ltd is calculated from the following formula:

NET PROFIT

NET PROFIT RATIO = X 100

NET SALES

Year 2007 2008 2009


Net profit 175.84 201.56 83.47

Net sales 2787.52 3176.52 3517.66

Then the ratio is: 6.3% 6.34% 2.37%

Remarks:

Higher the ratio is better is the profitable.

C) EXPENSES RATIO:

Expense ratios are calculated to ascertain the relationship that exists between operating expenses and

volume of sales.

These ratios are calculated by dividing the sales into each individual operating expense.

It indicates the portion of sales, which is consumed by the various operating expenses.


These ratios are valuable in comparing various firms in the same industry of operating data from year to

year for the same firm.

The expenses ratios are calculated as by the following formula:

a)

MATERIAL COST

RAW-MATERIAL USED = X 100

NET SALES

Year 2007 2008 2009


RAW -MATERIAL 1227.10 1394.61 1605.58

NET SALES 2787.52 3176.52 3517.66

Then the ratio is: 44.02% 43.9% 45.64%

b)

DIRECT LABOUR COST

RATIO OF DIRECT LABOUR = X 100

NET SALES

Year 2007 2008 2009


DIRECT LABOUR 28.56 28.29 30.08

NET SALES 2787.52 3176.52 3517.66

Then the ratio is: 1.02% 0.89% 0.85%

c)

FACTORY EXPENSES

RATIO OF FACTORY EXPENSES = X 100

NET SALES

Year 2007 2008 2009


FACTORY EXPENSES 382.95 409.65 488.04

NET SALES 2787.52 3176.52 3517.66

Then the ratio is: 13.73% 12.89% 13.87%

e) SELLING AND DISTRIBUTION EXPENSES RATIO =

SELLING AND DISTRIBUTION EXPENSES

X 100

NET SALES

Year 2005 2006 2007


SELLING AND

DISTRIBUTION EXPENSES 840.05 982.98 1272.00

NET SALES 2787.52 3176.52 3517.66

Then the ratio is: 30.13% 30.94% 36.16%

D) OPERATING EXPENSES RATIO:

This ratio measures the extent of cost incurred for making the sales. This ratio matches cost of goods

sold plus other operating expenses on the one hand with net sales on other hand.


Operating profit is the test of the operational efficiency of the business. It shows the percentage of sales

that are absorbed by the cost of sales and operating expenses.

This ratio of Win Medicare Ltd. as calculated as follows:

OPERATING EXPENSES RATIO =

COST OF GOODS SOLD + OTHER OPERATING EXPENSES X 100

NET SALES

Year 2007 2008 2009


COST OF GOODS SOLD 2105.33 2520.44 3206.48

Add. OPERATING EXPENSES 523.97 620.65 679.57

TOTAL 2629.20 3141.09 3886.05

Then the ratio is: 74% 70% 73%

Remarks:

Lower the ratio of the net operating expenses is beneficial for the company.

RETURN ON INVESTMENT:

The term investment may refer to total assets or net assets. The funds employed in the net assets are

known as capital employed.

The conventional approach of calculating return on investment (ROI) is to divide profit after tax by

investment.

Investment represents tool of funds supplied by shareholders and lenders, while profit after tax

represents residue income of shareholder, therefore, it is conceptually unsound to use profit after tax in

the calculation of ROI. It is calculated as under:

EBIT

RETURN ON INVESTMENT = X 100

NET ASSETS

Where,

Year 2007 2008 2009


EBIT 294.11 334.21 125.22

NET ASSETS 894.56 1114.33 1216.78

Then the ratio is: 32.87% 30% 10.29%

Remarks:

Higher the ratio better is the results and vice versa because return on investment is decreasing every year

which is not good for the company.

Table 3)

PROFITABILITY RATIOS

YEAR

2007 (%)

2008 (%)

2009 (%)

GROSS PROFIT RATIO

10.5

10.52

3.55

NET PROFIT RATIO

6.3

6.34

2.37

MATERIAL COST

44.02

43.9

45.64

LABOUR COST

1.02

0.89

0.85

FACTORY EXPENSES

13.73

12.89

13.87

SELLING EXPENSES

30.13

30.94

36.16

OPERATING

EXPENSES

74

70

73

RETURN ON

INVESTMENT

32.87

30

10.29

COMMENT:

In the above-calculated ratio of the profitability ratio of the company, the entire ratio shows a good sign

of except the increases in the expense ratio.

The gross profit ratio indicates the good sign but not satisfactory in the year 2007, 2008 and 2009 the

ratio is 10.5%, 10.52% and 3.55% respectively.

The net profit ratio shows good and increasing trend sign, which indicate the operation expenses, is in

desired parameters.

The factory expenses ratio, administration ratio, selling and distribution ratio indicates in under

controlled.

Material and labor cost shows slightly increase; it is due to increase in sale and high cost of raw

material.

The operating ratio of this year is too much high in comparison to other years.

Return on investment ratio is good and satisfactory in the performance of the company.

So, over all profitability position of the company is good except the increasing percentages in the

operating expense and expenses ratio.

SWOT ANALYSIS

SWOT is an acronym for the internal Strength and Weaknesses of a firm and environmental

Opportunities and Threats facing that firm.

Table : SWOT ANALYSIS

Strengths

1) Most powerful player

2) Experience

3) Distribution infrastructure

4) Rural reach

Weakness

1) Government’s control

2) Large size

3) People’s perception

4) Retail market share

5) Unexplored areas

Opportunities

1) More revenue

2) Modernization

3) Extensifying infrastructure

Threats

1) Tastes of competitors

2) Price wars

3) Better-equipped competitors

Source: www.winmedicare.com

STRENGHTS

1) Most Powerful Player

Win-Medicare began its business with a number of pioneering concepts and products from Sterling

Drug Inc., USA and concertedly worked towards making them established contemporary medical

practice. The company is well represented through an efficient Marketing and Distribution network

in the Domestic, South Asian, African and Middle East markets. Currently the company offers

options for infection control, pain relief, management of infertility and many other specialized areas.

2) Experience

Win-Medicare has been in the pharma sector from the past 41 years. During the years it has gathered

a lot of valuable expertise and learned the trick of the trade the tougher way. It has enjoyed unlimited

protection and nurturing from the government, which helped it grow and gain a substantial hold of

the market. This experience will be valued more as and when it will face competition with the

upcoming firms in the sector.

3) Distribution Infrastructure

The Company operates the largest marketing network of 220 sale points, in the country. It has 5026

captive consumer outlets and 52 jubilee retail outlets. This has facilitated uninterrupted supply of

products throughout the year. Such an extensive distribution network is nothing but the muscles of

the organization making it stronger and tougher to compete with. The focus of Modi-Mundipharma

is to offer state-of-the-art and latest high-tech pharmaceutical solutions through introduction of

differentiated products in the field of Asthma, Pain and Heart diseases. The company is effectively

represented in the Domestic and South Asian markets.

4) Rural Reach

In rural areas Win-Medicare has 231 multipurpose distribution centers. Win-Medicare is well

represented through an efficient Marketing and Distribution network in the Domestic, South Asian,

African and Middle East markets. Currently the company offers options for infection control, pain

relief, management of infertility and many other specialized areas.

WEAKNESSES

1) Government‟s Control

The functioning of Win-Medicare is greatly influenced by the government policy and regulations.

The government has 62% stake in the company, thus, enjoying the control of the company. There

is always a risk of its proposal being rejected as there is uncertain political environment

prevailing often in the country.

2) Large Size

Win-Medicare is a huge organization having its head office at New Delhi. It employs 1200

employees in various levels of organizational hierarchy. Numerous departmental layers could

lead to slowing down of processes and inefficient performance. This hinders the fast growth of

the organization within and overall.

3) People‟s Perception

In our country, the perception of the corporate and consumers towards government organizations

and offices is not favorable, hence though Win-Medicare has performed excellently it is still

viewed as an inefficient company, not getting the due importance it deserves.

4) Retail Market Share

Even though Win-Medicare controls most of the retail outlets it has the market share of only

33.8% in Parma and 39.6% Cosmetics share in respectively over the last year. This is

comparatively too small compared to its size, reach and production. This is because of the fact

that its retail outlets are concentrated more in semi-urban areas and rural areas.

5) Unexplored Areas

The Company has very little presence in the central and southern parts of the country. Neither do

they have any refineries in these regions.

OPPORTUNITIES

1) More Revenue

With the dismantling of Administered Pricing Mechanism (APM) in the year 2002, Win-

Medicare has been able to fix the prices of its products without government intervention resulting

in an upsurge in revenue earning. Firstly, since the new players will use the infrastructure

facilities provided by Win-Medicare and pay for the services rendered. For example, Win-

Medicare has signed the marketing rights agreement for 10 years with HUL. Secondly, by

reducing the existing prices to the permissible extent and providing better facilities will help them

capture more market share.

2) Modernization

The liberalization of the economy has attracted many foreign players to invest in our country,

more and more MNC‟s are trying to enter the Pharma sector. They will bring with them the latest

technology and high amount of funds to invest. Win-Medicare can utilize their services by means

of joint ventures, collaborations and tie-ups, for modernization and capacity augmentation of its

plants and refineries increasing the quality as well as the quantity of its products.

3) Intensifying Infrastructure

The competitors entering the sector are still not fully operational. While they are building up there

infrastructure Win-Medicare should grab the opportunity to extend and strengthen itself in deficit

areas. It can modernize its plants and augment capacity, extend pipelines to middle and southern

regions facilitating cheaper transport in those areas. Also more jubilee retail outlets, which are

state-of-the-art, should be commissioned in different parts of the country for greater customer

satisfaction.

THREATS

1) Tastes of Competitors

In the recent past there has been active private participation in the sector. With the government

opening the upstream sector and taking away the sole right of distribution from PSU‟s, private

players see a lot of scope for business. Various national and multinational companies have been

lured into this field. For example Lakme has already entered the field and has started production

and Hindustan Unilever are following suit. Win-Medicare shift from a monopoly in a protected

environment to a free market will not be easy.

2) Price Wars

In this free market era, where all the firms have the full liberty to control the prices of their

products, a price war is sure to happen in the near future since, this will be a major factor of

determining their market share. MNC‟s may be able to make this war harsher by cutting down

prices even below the permissible level, initially to capture market share.

3) Better-Equipped Competitors

The new players will give tough competition, as they will have latest technology and more

advanced research and development resources, skills and expertise. They will have better and

more efficient machines capable of producing more and better. They will have easy access to

foreign markets due to their global presence and standards.

LIMITATION

The study is limited to three years only.

Price level changes are not considered.

Time is short for deep research.

Separate records of the all units are not available.

No comparison made with other firm‟s ratio while during the study period and making

conclusion time.

The readjusted and regroup figure slightly affects the ratio figures.

Study is limited with the one unit of Modi Group company.

The data is used in the project have been taken from annual report only. Hence, grouping and sub

grouping and animalization of data may slightly affect the results.

SUGGESTION

Although WIN MEDICARE PVT LTD, NEW DELHI has satisfied the ratios. The following are the

suggestion being made out by me as observed during study of the performance through ratio analysis:

Company should increase its sales of all the production units with increase in the sales of the

company that can be able to increase its financial position.

Company should decrease the operating expenses to increase its operating profit.

Maximize the production capacity.

Maintain the amount of current sales level and try to increase it.

Maximize the utilization of fixed assets and working capital.

All other management, personal and administrative suggestion to be incorporated.

To follow the strict credit collection policy.

Reduce the current assets and quick assets ratio to maintain the standard ratio.

Cash ratio performance is poor. So make policies to improve it.

Return on investment is in satisfactory position and then try to maintain it in future.

Try to start those companies, which are closed due to non-availability of funds.

Try to best utilization of the available resources.

Try to maintain the standard ratio in the financial ratios.

CONCLUSION

If these ratios are properly followed the capital investment in the current assets is above the standard

ratio and the cash position of the company would substantially improve.

The Turn Over Ratio give good sign of the success but in the debtor‟s turnover ratio shows that

company provided more credit period of payment to its customer which is not beneficial for it.

The Profitability Ratio all indicate good sign but increase in the operating and financial expenses of the

company, which is not good sign for the company future.

Return on Investment Ratio is satisfactory, it indicate the overall performance of the company is good

and they enjoy a good position of profitability.

BIBLIOGRAPHY

BOOKS-

KHAN & JAIN: “Accounting”

M.R.AGRAWAL: “Mamagement accounting”

Websites:

www.google.co.in

www.winmedicare.com

http://www.google.co.in/

http://www.winmedicare.com/

Summer Training Report of Win Medicare Pvt. Limited (Ratio Analysis)

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Transcript of Summer Training Report of Win Medicare Pvt. Limited (Ratio Analysis)