RATIO ANALYSIS:-

Ratio Analysis involves establishing relevant financial relationship between

components of financial statements. Two companies may have earned the
same amount of profit in a year, but unless the profit is related to sales or
total assets, it is not possible to conclude which of them is more profitable.
Ratio Analysis helps in identifying significant relationships between financial
statement items for further investigation.

FINANCIAL RATIO:-

Financial ratios are used to evaluate profitability, liquidity, solvency, and

capital market strength.

LIQUIDITY RATIOS:- Liquidity is the ability of a business to meet its short term
obligations when they fall due. For evaluating RANBAXY LABORATORIES
LTD. liquidity, we examine the following four ratios:-

•CURRENT RATIO :- This is the ratio of current assets to current liabilities. It

is a widely used indicator of a company's ability to pay its debts in the
short term.
 YEAR CURRENT CURRENT CURRENT RATIO
ASSETS LIABILITIES
2000 12,460.89 4925.94
2001 13,320.25 5865.77
2002 17,605.89 8041.54
2003 24,431.10 11,018.21
2004 23,082.20 13,615.38
2005 22,653.68 11,422.72
2006 25,089.94 12,459.98
2007 44,759.77 21,327.31
2008 66,921.96 47,438.41
2009 60,085.96 41,112.36
a

•QUICK RATIO:- All current assets are not equally liquid. Therefore the quick
ratio or acid test ratio is computed as a suppliment to the current ratio.
 YEAR QUICK CURRENT
ASSESTS LIABILITIES
2000 7863 4925.94
2001 8724 5865.77
2002 11,493 8041.54
2003 17,480.59 11,018.21
2004 14,118.82 13,615.38
2005 19,704.76 11,422.72
2006 24,988.57 12,459.98
2007 28,351.17 21,327.31
2008 47,278.82 47,438.41
2009 41,678.97 41,112.36

*all the figures are in million

•DEBTORS TURNOVER RATIO:- The ability of a company to collect credit

from its customers in a prompt manner enhances its liquidity. It
measures the efficacy of a firm's credit and collection policy and shows
the number of times each year the debtors turn into cash.
YEA SALES AVERA DEBTOR
R GE TURNOVER
DEBTO RATIO
RS
200 17,366.6 5149.2
0 6
200 20,545.4 6340.7
1 4
200 28,197.9 7340.7
2 4
200 35,334.9 5929.4
3 5
200 36,143.4 6338.1
4 7
200 35,366.5 7956.5
5 4
200 40,587.1 9101.8
6 2
200 41,844.9 9483.2
7 6
200 43,093.6 9537.2
8 1
200 45,211.8 12,795.
9 92
*all the figures are in million
 • AVERAGE DEBT COLLECTION PERIOD RATIO :- The term Debtor Collection
Period indicates the average time taken to collect trade debts. In other
words, a reducing period of time is an indicator of increasing efficiency. It
enables the enterprise to compare the real collection period with the
granted/theoretical credit period.

• Debtor Collection Period = (Average Debtors / Credit Sales) x 365 ( = No.

of days) (average debtors = debtors at the beginning of the year + debtors at
the end of the year, divided by 2)

Credit Sales are all sales made on credit (i.e. excluding cash sales) A long debtors
collection period is an indication of slow or late payments by debtors.

The multiplier may be changed to 12 (for months) or 52 (for weeks) if appropriate.

YE AVERA SALES
AR GE
DEBTO
RS
200 5149.26 17,366
0
200 6340.74 20,545.
1 4
200 7340.74 28,197.
2 9
200 5929.45 35,334.
3 9
200 6338.17 36,143.
4 4
 200 7956.54 35,336.
5 5
200 9101.82 40,587.
6 1
200 9483.26 41,844
7 .9
200 9537.21 43,083.
8 6
200 12,795.9 45,211.
9 2 8
*all the figures are in million

INVENTORY TURNOVER RATIO:-

It is computed by dividing the cost of goods sold by the average inventory. Thus,

Inventory turnover ratio= Cost of goods sold/Average inventory

The cost of goods sold means sales minus gross profit. The average inventory refers
to the simple average of the opening and closing inventory. The ratio indicates how
fast inventory is sold. A high ratio is good from the viewpoint of liquidity and vice
versa.

YE COST OF INVENTO RATIO

AR GOODS RY
SOLD AVERAG
E
200 10,859.29 6214.37
0
200 12,424.37 7366.45
 1
200 15,395.22 8190.09
2
200 17,874.07 9280.48
3
200 19,039.67 12,154.69
4
200 22,212.71 13,987.48
5
200 23,733.09 14,869.77
6
200 27,216.78 16,262.06
7
200 33,334.79 18,025.87
8
200 32,079.98 19,025.07
9

SOLVENCY RATIO:-

• DEBT EQUITY RATIO :- The relationship between borrowed funds and

owner’s capital is popular measure of the long term financial
solvency of the firm. This ratio reflects the relative claims of
 creditors and shareholders against the assets of the firm.

YE LOANS SHAREHOLD
AR (SECURE ER’S
D+
UNSECUR
EQUITY
ED)

200 1826.2 15,826.5

0 2
200 1936.6 16,069.7
1 5
200 1749.8 18,828.1
2
200 2731.7 23,217.7
3 4
200 4310.8 25,095.1
4 5
200 3477.4 23,773
5
200 3998.8 23,500.1
6 5
200 3584.3 25,384
7 5
200 3925.3 37,167.7
8 9
200 4235.3 41,346.05
9 2
*all the figures are in million
RETURN ON ASSETS:- The ROA may also be called the profit to asset ratio. It
measures the profitability of the total funds /investments of a firm. It
however throws no light on the profitability of the different sources of funds
which finance the total assets.

YE NET AVERAGE RETURN

AR PROFIT TOTAL ON
AFTER ASSETS ASSETS
TAXES
200 1824.4
0
200 2519.6 13320.25
1
200 6235.8 17605.84
2
200 7947.8 24431.10
3
200 5284.7 23082.20
4
200 2237 22653.68
5
200 3805.4 25089.94
6
200 6177.2 44759.77
7
 200 10448 66421.96
8
200 5719.8 60085.96
9
*all figures are in million rs

PRICE EARNING(P/E) RATIO:- It is closely related to the earning yield/earning

price ratio. This ratio is computed dividing the market price of the shares by
the eps.

It reflects the price being currently paid by the market for each rupee of the
currently reported EPS. This ratio is popularly used by the analyst to assess a
firm’s performance as expected by the investor’s.

YE MARKET EPS P/E RATIO

AR PRICE
OF THE
SHARE
200 136.56 15.74
0
200 138.66 21.86
1
200 101.52 28.86
2
200 125.13 42.61
3
 200 135 28.26
4
200 63.84 5.68
5
200 63.05 9.87
6
200 68.04 11.31
7
200 88.42 -27.29
8
200 98.35 10.74
9
*ALL THE FIGURES ARE IN RS.

PROFITABILITY RATIO:-

• GROSS PROFIT MARGIN:-

YE Gross sales Gross profit

AR profit Margin
200 3177.1 17,366.
0 6
200 3924.1 20,545.
1 4
200 7304.8 28,197.
2 9
200 10061.4 35,334.
3 9
200 7211.7 36,143.
4 4
200 3178.8 35,336.
5 5
200 6081.7 40,587.
6 1
200 9865.6 41,844.
7 9
200 5713 43,083.
8 6
200 11002.7 45,211.
9 8