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Financial
Management
Ratio Analysis
of
Ranbaxy Laboratories India Ltd.
&
Glaxo Smithkline PHARMACEUTICALS
Ltd.
Submitted To:
Ms. Mishu Agarwal (Lecturer)
Submitted By:
Faraaz Zaidi|Navneet Kumar | Supraneet Arya
PGDM I – Year (Trimester II)

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Ajay Kumar Garg Institute of Management,

Ghaziabad.

ACKNOWLEDGEMENT
We would like to acknowledge and extend our heartfelt
gratitude to Ms. Mishu Agarwal, lecturer, who always gave
valuable suggestions and guidance for the completion of this
project.

She helped us to understand and remember important details of

the project that we would have otherwise lost. Our project has
been a success only because of her guidance.

Most especially to AKGIM family, without whom, the

completion of this report wouldn’t have been feasible.

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Introduction and details of the project

Title of the project:
Ratio analysis of financial statements of Ranbaxy
India Ltd. & Glaxo Smithkline Ltd.

Name of the students: Faraaz Zaidi

Navneet Kumar
Supraneet Arya

Roll numbers of students: PGDM/09/07

PGDM/09/18
PGDM/09/31

Objectives of the project:

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Comparison of both the companies by interpreting

the financial statements of both the companies,
using Ratio analysis

Ranbaxy Laboratories Limited, India

Company Profile
Ranbaxy Laboratories Limited, India’s largest pharmaceutical company,
is an integrated, research based, international pharmaceutical company,
producing a wide range of quality, affordable generic medicines, trusted
by healthcare professionals and patients across geographies.
Ranbaxy is ranked 8th amongst the global generic pharmaceutical
companies, Ranbaxy today has a presence in 23 of the top 25
pharmaceutical markets of the world. The company has a global
footprint in 48 countries, world-class manufacturing facilities in 10
countries and serves customers in over 125 countries.

In June 2008, Ranbaxy entered into an alliance with one of the largest
Japanese innovator companies, Daiichi Sankyo Company Ltd., to create
an innovator and generic pharmaceutical powerhouse. The combined
entity now ranks among the top 15 pharmaceutical companies, globally.
The transformational deal will place Ranbaxy in a higher growth
trajectory and it will emerge stronger in terms of its global reach and in
its capabilities in drug development and manufacturing.

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Vision & Aspirations

Ranbaxy is driven by its vision to achieve significant business in

proprietary prescription products by 2012 with a strong presence in
developed markets. The Company aspires to be amongst the Top 5
global generic players and aims at achieving global sales of US $5 Bn
by 2012.

Financials

Ranbaxy was incorporated in 1961 and went public in 1973. For the
year 2008, the Company recorded Global Sales of US $ 1,682 Mn,
reflecting a growth of 4%.

The Company has a balanced mix of revenues from emerging and

developed markets that contribute 54% and 39% respectively.

In 2008, North America, the Company's largest market contributed sales

of US $ 449 Mn, followed by Europe garnering US $ 330 Mn. Business
in Asia has been going strong with India clocking sales of around US $
300 Mn with market leadership in several business segments, backed by
strong brand-building skills.

Strategy

Ranbaxy is focused on increasing the momentum in the generics

business in its key markets through organic and inorganic growth routes.
The Company continues to evaluate acquisition opportunities in India,
emerging and developed markets to strengthen its business and
competitiveness. Growth is well spread across geographies with focus
on emerging markets. Ranbaxy has forayed into new specialty
therapeutic segments like Bio-similars, Oncology, Peptides and
Limuses. These new growth areas will add significant depth to the
existing product pipeline.

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People

The Company’s business philosophy based on delivering value to its

stakeholders constantly inspires its people to innovate, achieve
excellence and set new global benchmarks. Driven by the passion of its
over 12,000 strong multicultural workforce comprising 50 nationalities,
Ranbaxy continues to aggressively pursue its mission to become a
Research-based International Pharmaceutical Company and attain a true
global leadership position.

Ratio Analysis of Ranbaxy Laboratories

Ltd.
An analysis of financial statements with the help of ratios may be
termed as ratio analysis. It implies the process of computing ,
determining and presenting the relationship of items and group of items

in the statement .
1. Liquidity ratios:
Liquidity means the ability of the firm to meet its current liabilities as they
become due and current assets which presumably provides the source from
which these obligations will be met. Since these ratios are used to assess the
short term financial position of business enterprise, therefore they are also
called as short term solvency ratios.

A. Current Ratio or Working Capital Ratio:

Current ratio shows the relationship between current assets and current
liabilities.

Formula: Current Ratio = Current Assets/Current Liabilities

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We know,

Current Assets = Inventories +Sundry Debtors +Cash + Other current

Assets

= 11,985.19 + 102, 45.35 +193, 49.39 + 1,345.53

= Rs. 42,925.46 Millions

Current Liability =Rs. 35, 414.02 Millions

Therefore,

Current Ratio = 42,925.46/35,414.02

= 1.21

B. Liquid Ratio or Quick Ratio or Acid Test Ratio:

This ratio shows whether the firm is able to meet its current liabilities within
a month or immediately.

Formula: Liquid Assets/Current Liabilities

We Know,

Liquid Assets = Sundry Debtors + Cash + Other Current Assets

= 10,245.35+19,349.39+1345.53

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=Rs. 32,680.11 Millions

Current Liability = Rs. 35,414.02 Millions

Therefore,

Liquid Ratio = 32,680.11/35,414.02

= 0.92

2. Solvency Ratios:

These ratios are computed to judge the ability of firm to meet its long term
liabilities.

It shows the proportion of the fund which is provided by the outsider creditors
in comparison to owners.

A. Debt Equity Ratios:

This ratio indicates the relationship between long term debts and the
equity.

Formula: Debt Equity ratio = Debt/Equity(Net worth)

= Long Term Loans/Shareholder’s Fund + Reserves

We know,

Long term loans = Secured Loans + Unsecured Loans

= Rs. (1,620.72+35632.99)

= Rs. 37,253.71 Millions

Shareholder’s fund + Reserves = Rs. (2,101.85 + 33,309.22)

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= Rs. 35,411.27 Millions

Therefore,

Debt equity ratio = 37,253.71/35,411.27

= 1.05

B. Proprietary Ratio:

The relationship between owner’s or proprietor’s funds with total assets.

Formula:

Proprietary Ratio = Shareholder’s Funds/Total Assets*100

We know,

Shareholder’s Funds = Share Capital + Reserves and Surplus

=Rs. (2,101.85+33,309.22)

=Rs. 35,411.07 Millions

Therefore,

Total Assets = Fixed Assets + Investments + Current Assets – Current

Liabilities

= Rs. (14,566.78 + 36,180.28 + 42,925.46 – 35,414.02)

= Rs. 58,258.5 Millions

Proprietary Ratio = 35,411.07/58,258.5*100

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= 60%

GlaxoSmithkline Pharmaceuticals India

Limited

Company Profile
Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals
Ltd. (GSK Rx India) is one of the oldest pharmaceuticals company and
employs over 3500 people. Globally, it is a US $45 billion, leading,
research-based healthcare and pharmaceutical company.
In India, it is one of the market leaders with a turnover of Rs. 1,880
crore and a share of 5.7 per cent*.
At GSK, their mission is to improve the quality of life by enabling
people to do more, feel better and live longer. This mission drives us to

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make a real difference to the lives of millions of people with our

commitment to effective healthcare solutions.
The GSK India product portfolio includes prescription medicines and
vaccines. Our prescription medicines range across therapeutic areas such
as anti-infectives, dermatology, gynaecology, diabetes, oncology,
cardiovascular disease and respiratory diseases.
The company is the market leader in most of the therapeutic categories
in which it operates. GSK also offers a range of vaccines, for the
prevention of hepatitis A, hepatitis B, invasive disease caused by H,
influenzae, chickenpox, diphtheria, pertussis, tetanus, rotavirus, cervical
cancer and others.
With opportunities in India opening up, GSK India is aligning itself with
the parent company in areas such as clinical trials, clinical data
management, global pack management, sourcing raw material and
support for business processes including analytics.
GSK’s best-in-class field force, backed by a nation-wide network of
stockists, ensures that the Company’s products are readily available
across the nation.
GSK has two manufacturing units in India, located at Nasik and Thane
as well as a clinical development centre in Bangalore. The state of art
plant at Nasik makes formulations while bulk drugs and the active
pharmaceutical ingredients are manufactured at Thane.
Being a leader brings responsibility towards the communities in which
they operate. At GSK it has a Corporate Social Responsibility program,
that works towards fulfilling basic healthcare, education and other
developmental needs of 55 tribal villages near Nasik. They work with
underprivileged children from the slums of Mumbai, taking care of their
developmental and health needs. GSK also runs an HIV/AIDS helpline -
considered to be a pioneering effort in India that supports those in
distress and despair.

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GSK is committed to developing new and effective healthcare solutions.

The values on which the group was founded have always inspired
growth and will continue to do so in times to come.

Ratio Analysis of GlaxoSmithkline

Pharmaceuticals Ltd.
An analysis of financial statements with the help of ratios may be
termed as ratio analysis. It implies the process of computing,
determining and presenting the relationship of items and group of items
in the statement.
1. Liquidity Ratios:
Liquidity means the ability of the firm to meet its current liabilities as they
become due and current assets which presumably provides the source from
which these obligations will be met. Since these ratios are used to assess the
short term financial position of business enterprise, therefore they are also
called as short term solvency ratios.

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A. Current Ratio or Working Capital Ratio:

Current ratio shows the relationship between current assets and current
liabilities.

Formula: Current Ratio = Current Assets/Current Liabilities

We know,

Current Assets = Inventories +Sundry Debtors +Cash + Other Assets

= Rs. (19,560.70 + 8,192.55 + 14,055.97 + 519.95)

= Rs. 42329.17 Lacs.

Current Liability = Rs. 20,383.15 Lacs.

Therefore,

Current Ratio = 42,329.17/20,383.15

= 2.07

B. Liquid Ratio or Quick Ratio or Acid Test Ratio:

This ratio shows whether the firm is able to meet its current liabilities within
a month or immediately.

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Formula: Liquid Ratio = Liquid Assets/Current Liabilities

We know,

Liquid Assets = Sundry Debtors + Cash + Other Current Assets

= Rs. (8192.55 + 14055.97 + 519.95)

= Rs. 22,768.47 Lacs.

Current liability = Rs. 20,383.15 Lacs.

Therefore,

Liquid ratio = 22,768.47/20,383.15

= 1.11

2. Solvency Ratios:
These ratios are computed to judge the ability of firm to meet its long term
liabilities. It shows the proportion of the fund which is provided by the
outsider creditors in comparison to owners.

A. Debt Equity ratios:

This ratio indicates the relationship between long term debts and the
equity.

Formula: Debt Equity ratio = Long Term Loan/ Shareholder’s Fund

We know,

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Long Term Loans = Secured + Unsecured

= Rs. (0 + 1,98.38)

= Rs. 1,98.38 Lacs.

Shareholder’s Fund = Share Capital + Reserves and Surplus

= Rs. (74,47.50 + 504,79.96)

= Rs. 579,27.46 Lacs.

Therefore,

Debt Equity Ratio = 1,98.38/579,27.46

= 3.42

B. Proprietary Ratio:

This ratio shows the relationship between owner’s Funds and total assets
of the enterprise.

Formula: Proprietary Ratio = Shareholder’s Funds/Total Assets*100

We Know,

Shareholder’s Fund = Share Capital + Reserves and Surplus

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= Rs. (74,47.50 + 504,79.96)

= Rs. 579,27.46 Lacs.

Total Assets = (Fixed Assets + Investment + Current Assets – Current

Liabilities)

= Rs. (110,24.75 + 162,00.09 + 42,329.17-203,83.15)

= Rs. 89,937.16 Lacs.

Therefore,

Proprietary Ratio = 57927.46/89937.16*100

= 64%

Comparison
Here are some of the calculated ratios of both
Ranbaxy Laboratories Ltd. & GlaxoSmithkline
Pharmaceuticals Ltd.

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S. No Ratios Ranbaxy GlaxoSmithkline

Laboratories Pharmaceuticals
1. Liquidity Ratio:
 Current Ratio 1.21 2.07
 Quick Ratio 0.92 1.11

2. Solvency ratio:
 Debt Equity Ratio 1.05 3.42
 Proprietary Ratio 0.60 0.64

GSK is having current ratio and quick ratio more than that of Ranbaxy.
The higher the ratio, the more liquid the company is. It shows that the
GlaxoSmithkline is having a good short term financial strength.

Now if we consider solvency ratios, then it can be seen that both

GlaxoSmithkline and Ranbaxy got its assets financed with debt,

As we know that a ratio under 1 means a majority of assets are financed

through equity, above 1 means they are financed more by debt.

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If we compare the proprietary ratio, GSK contributes 64% of proprietors

fund for having its assets while Ranbaxy contributes only 60% of it.

Both companies are recording good profits and competing each other in
the market.

References
• www.google.com

• Financial Management, M Y Khan. P K

Jain

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