INTERPRETATION OF RATIO ANALYSIS OF NOVARTIS PHARMACEUTICALS

LIQUIDITY ANALYSIS
CURRENT RATIO
This ratio is related to the liquidity analysis of the company we can find it by dividing current assets with current liabilities. We can get the values of both the items from balance sheet normally share holders and the lenders are interested in this ratio when the value of current ratio is higher then it considered to be good and vice versa the benchmark for this in its industry is 1:2 and the value of this ratio is 2.22 so it shows a very good liquidity position of the company in its sector.

ACID TEST RATIO

This ratio is related to the liquidity analysis of the company we can find it by dividing Cash, cash equivalents and receivables with current liabilities. We can get the values of both the items from balance sheet normally share holders and the lenders are interested in this ratio when the value of acid test ratio is higher then it considered to be good and vice versa the benchmark for this in its industry is 1:1.5 and the value of this ratio is 1.75 so it again shows a very good liquidity position of the company in its sector to pay the liabilities.

CASH RATIO
This ratio is related to the liquidity analysis of the company it tells the ready cash available to the company to pay its obligations. We can find it by dividing cash and cash equivalents with current

liabilities and we can get the values of both the items from balance sheet normally share holders and the lenders are interested in this ratio when the value of cash ratio is higher then it considered to be good and vice versa the benchmark for this in its industry is 1:0.5 and the value of this ratio is 0.54 so it shows a very good liquidity position of the company.

CASH TO CURRENT ASSETS

This ratio is related to the liquidity analysis of the company it tells the proportion of cash in the current assets. We can find it by dividing cash and cash equivalents with current assets and we can get the values of both the items from balance sheet normally share holders and the lenders are interested in this ratio when the value of cash to current assets is higher then it considered to be good and vice versa the benchmark for this in its industry is 0.2 and the value of this ratio is 0.25 so it shows a very good liquidity position of the company.

CASH TO CURRENT LIABILITIES

This ratio is related to the liquidity analysis of the company it tells about the net cash available to pay the current liabilities. We can find it by dividing current assets with current liabilities and we can get the values of both the items from balance sheet normally share holders and the lenders are interested in this ratio when the value of cash to current liabilities is higher then it considered to be good and vice versa the benchmark for this in its industry is 0.5 and the value of this ratio is 0.55 so it again shows a very good liquidity position.

ACCOUNT RECEIVABLE TURNOVER

This ratio is related to the liquidity analysis of the company it tells about the number of times our cash is circulated. We can find it by dividing annual credit sales with average accounts receivable and we can get the value of Annual sales from the profit and loss account and the value of average accounts receivable from balance sheet normally share holders and the creditors are interested in this ratio

when the value of accounts receivable turnover is high then it considered to be good and vice versa the benchmark for this in its industry is 7 and the value of this ratio is 8.18 so it again shows a very good position.

DAYS SALES IN RECEIVABLE

This ratio is related to the liquidity analysis of the company it tells about the days needed to receive the cash from debtors. We can find it by dividing accounts receivable withy credit sales over days in a year and we can get the value of Annual sales from the profit and loss account and the value of average accounts receivable from balance sheet normally share holders and managers are interested in this ratio when the value of days sales in receivable is low then it considered to be good and vice versa the benchmark for this in its industry is 51 and the value of this ratio is 45 so it again shows a very good working of the management.

INVENTORY TURNOVER
This ratio tells us about the times that inventory is turned into finished goods then again raw material conversion into finished goods this ratio shows about the efficiency of management that how efficient the management is we can get the value by dividing cost of goods sold with average inventory during period we can get the value of cost of goods sold from profit and loss account and the value of inventory from the balance sheet. This ratio is important for management and some how with the creditors. If the value of this ratio increases then it is good and vice versa. The average rate of this ratio in the industry is 1.5 and the value for this ratio in our company is 1.92 which is very good.

DAYS TO SELL INVENTORY

This ratio tells us about the days that is needed to sell the inventory this ratio shows about the efficiency of management that how efficient the management in selling the company medicines we can get the value by dividing ending inventory with cost of goods sold over 365 we can get the value of cost of goods sold from profit and loss account and the value of inventory from the balance sheet. This ratio is important for management and some how with the creditors. If the value of this ratio increases then it is good and vice versa. The average rate of this ratio in the industry is 200 and the value for this ratio in our company is 196 which is very good.

PAYABLE TURNOVER
This ratio is related to the liquidity analysis of the company it tells about the number of times we have to pay cash to suppliers. We can find it by dividing annual purchases with average accounts payable and we can get the value of Annual purchases from the cost of goods sold statement and the value of average accounts payable from balance sheet normally creditors and the managers are interested in this ratio. The value of accounts payable turnover should be higher then the receivable turn over on then it is considered to be good and vice versa. The benchmark for this in its industry is 7 and the value of this ratio is 8.18 so it again shows a very good position.

DURATION OF PAYABLE/ OPERATING CYCLE

This ratio is related to the liquidity analysis of the company it tells about the days needed to pay cash to creditors. We can find it by dividing accounts payable with purchases over 360 and we can get the value of Annual purchases from the cost of goods sold and the value of average accounts payable from balance sheet normally creditors and financial managers are interested in this ratio when the value of days sales in receivable is low then it considered to be good and vice versa the benchmark for this in its industry is 51 and the value of this ratio is 45 so it again shows a very good working of the management.

CASH FLOW ANALYSIS

CASH FLOW TO TOTAL LIABILITIES
This ratio is related to cash flow analysis of the company it tells us about the cash flow according to its total liabilities that in how much time company will be able to meet its total obligations. We can find it by dividing earning before interest tax depreciation and amortization with the total liabilities. We can get the value of earning before interest tax depreciation and amortization from the profit and loss and the value of total liabilities from the balance sheet. This ratio is important for lenders and financial managers of the company. When its value is high it is good for the company and vice versa. The bench mark for this in the industry is 0.30 and the company has got the value of 0.38 which is again higher the industry average.

CASH FLOW TO LONG TERM LIABILITIES

This ratio is related to cash flow analysis of the company it tells us about the cash flow according to its long term liabilities that in how much time company will be able to meet its long term obligations. We can find it by dividing earning before interest tax depreciation and amortization with the long term liabilities. We can get the value of earning before interest tax depreciation and amortization from the profit and loss and the value of long term liabilities from the balance sheet. This ratio is important for lenders and financial managers of the company. When its value is high it is good for the company and vice versa. The bench mark for this in the industry is 0.80 and the company has got the value of 0.83 which is again higher the industry average showing better performance than the industry.

CASH FLOW TO CURRENT LIABILITIES

This ratio is related to cash flow analysis of the company it tells us about the cash flow according to its current liabilities that in how much time company will be able to meet its current obligations. We can find it by dividing earning before interest tax depreciation and amortization with the current liabilities. We can get the value of earning before interest tax depreciation and amortization from the profit and loss and the value of current liabilities from the balance sheet. This ratio is important for lenders and financial managers of the company. When its value is high it is good for the company and vice versa. The bench mark for this in the industry is 0.70 and the company has got the value of 0.71 which is near to the industry average. The company can also take this ratio high by reducing the current liabilities or by transferring some of the current liabilities to long term liabilities.

INVESTMENT TO CASH FLOW

This ratio is related to cash flow analysis of the company it tells us about the investment to cash flow relation that how much times investment is of the earnings. We can find it by dividing total investment with the earning before interest tax depreciation and amortization. We can get the value of total investment from the balance sheet and the value of earning before interest tax depreciation and amortization from the profit and loss. This ratio is important for investors and financial managers of the company. When its value is low it is good for the company and vice versa. The bench mark for this in the industry is 7 and the company has got the value of 6.91 which is favorable and it also shows that within six to seven years the company can generate the total investment.

CASH FLOW TO TOTAL INVESTMENT

This ratio is related to cash flow analysis of the company it tells us about the cash flow according to its total investment. We can find it by dividing earning before interest tax depreciation and amortization

with the total investment. We can get the value of earning before interest tax depreciation and amortization from the profit and loss and the value of total investment from the balance sheet. This ratio is important for investors and financial managers of the company. When its value is high it is good for the company and vice versa. The bench mark for this in the industry is 0.12 and the company has got the value of 0.14 which is a bit higher than industry average.

LEVERAGE ANALYSIS
TOTAL DEBT TO EQUITY
This ratio is related to the leverage analysis of the company it tells us about the amount of debt according to equity. We can find it by dividing total debt with the equity. We can get the value of total debt and total equity from the balance sheet. This ratio is important for investors and financial managers of the company and it is also important for the bankers some times. When its value is high it is good for the companys owner and when its value is lower it is good for the lenders and vice versa. The bench mark for this in the industry is 0.60 and the company has got the value of 0.608 which is near to the industry average.

TOTAL DEBT TO TOTAL CAPITAL

This ratio is related to the leverage analysis of the company it tells us about the amount of debt according to total capital. We can find it by dividing total debt with total capital. We can get the value of total debt and total capital from the balance sheet. This ratio is important for investors and financial managers of the company and it is also important for the bankers some times. When its value is high it is good for the companys owner and when its value is lower it is good for the lenders and vice versa. The bench mark for this in the industry is 0.40 and the company has got the value of 0.38 which is lower than the industry average means there is some space for leverage in the company still now.

LONG TERM DEBT TO EQUITY CAPITAL

This ratio is related to the leverage analysis of the company it tells us about the amount of long term debt according to equity capital. We can find it by dividing long term debt with equity capital. We can get the value of long term debt and equity capital from the balance sheet. This ratio is important for investors and financial managers of the company and it is also important for the bankers. When its value is high it is good for the companys owner and when its value is lower it is good for the lenders and vice versa. The bench mark for this in the industry is 0.30 and the company has got the value of 0.28 which is a bit lower than the industry average means there is some space for leverage in the company still now at this position.

LONG TERM DEBT TO TOTAL CAPITALIZATION

This ratio is related to the leverage analysis of the company it tells us about the amount of long term debt according to total capital. We can find it by dividing long term debt with total capital. We can get the value of long term debt and total capital from the balance sheet. This ratio is important for investors and financial managers of the company and it is also important for the bankers some times. When its value is high it is good for the companys owner and when its value is lower it is good for the lenders and vice versa. The bench mark for this in the industry is 0.20 and the company has got the value of 0.17 which is lower than the industry.

TOTAL INVESTMENT TO TOTAL DEBT

This ratio is related to the leverage analysis of the company it tells us about the amount of debt according to total investment. We can find it by dividing equity and total debt with total debt. We can get the value of total investment and total debt from the balance sheet. This ratio is important for investors and financial managers of the company and it is also important for the bankers as well. When its value is low it is good for the companys owner and when its value is high it is good for the lenders

and vice versa. The bench mark for this in the industry is 2.5 and the company has got the value of 2.6 which is higher than the industry average.

FIXED ASSETS TO EQUITY

This ratio is related to the leverage analysis of the company it tells us about assets financed by the owners capital. We can find it by dividing fixed assets by equity. We can get the value of fixed assets and equity from the balance sheet. This ratio is important for investors and financial managers of the company. When its value is low it is good for the companys owner and when its value is higher it is good for the lenders and vice versa. The bench mark for this in the industry is 0.30 and the company has got the value of 0.25 which is lower than the industry average means more the assets are financed by the long term debts and not from the equity.

SHORT TERM LIABILITIES TO TOTAL DEBT

This ratio is related to the leverage analysis of the company it tells us about the amount of short term debts according to total debt and shows the long term solvency. We can find it by dividing short term liabilities with total liabilities. We can get the value of short term liabilities and total liabilities from the balance sheet. This ratio is important for financial managers of the company and it is also important for the bankers some times. When the short term liabilities are less then it is good because it shows no current obligation on the company and vice versa. The bench mark for this in the industry is 0.50 and the company has got the value of 0.54 which is higher than the industry average means there are less sudden obligations on the company.

TIME INTEREST EARNED RATIO

This ratio is related to the leverage analysis of the company and it shows the interest covering position of the company that how much times of the interest company earn this ratio is dependent on the

capital structure and the interest rate. We can get this ratio by dividing earning before interest and tax by the amount of interest. We can get the values of both the things from income statement. This ratio is very important for lenders and for the management as well. If the value of this ratio is high it is good for every one and vice versa. The industry average is 20 where as the value of our company time interest earned ratio is 26.30 which is higher than the industry showing high earnings and very high interest covering of the company.

PRE TAX EARNING TO INTEREST

This ratio is related to the leverage analysis of the company and it shows the interest covering position of the company after paying the interest that how much times of the interest company earn even after paying the interest this ratio is dependent on the capital structure and the interest rate. We can get this ratio by dividing earning before tax by the amount of interest. We can get the values of both the things from income statement. This ratio is very important for lenders and for the management as well. If the value of this ratio is high it is good for every one and vice versa. The industry average is 18 where as the value of our company time interest earned ratio is 25.3 which is higher than the industry showing high earnings and very high interest covering even after paying interest the company has twenty five times of the interest.

AFTER TAX EARNING TO INTEREST

This ratio is related to the leverage analysis of the company and it shows the interest covering position of the company after paying the interest and tax that how much times of the interest company earn even after paying the interest and tax this ratio is dependent on the capital structure and the interest rate. We can get this ratio by dividing net earnings by the amount of interest. We can get the values of both the things from income statement. This ratio is very important for lenders and for the management as well. If the value of this ratio is high it is good for every one and vice versa. The industry average is 15 where as the value of our company time interest earned ratio is 21.18 which is

higher than the industry showing high earnings and very high interest covering even after paying interest the company has twenty five times of the interest.

FINANCIAL LEVERAGE
This ratio is related to the leverage analysis of the company and it shows the financial leverage of the company. We can get this ratio by dividing total assets by the amount of equity. We can get the values of both the things from balance sheet. If the value of this ratio is high it is good for bankers and other lenders and if lower than good for investor and vice versa. The industry average is 2 where as the value of our company time interest earned ratio is 1.6 which is lower than the industry showing that there is still some place for leverage.

RETURN ON EQUITY
This ratio is related to the leverage analysis of the company and it shows the return of share holders if the company has high leverage then the return on equity will be higher and vice versa. We can get the value of return on equity by dividing net income with the equity. This ratio is particularly important for the share holders. If its value is high it is good and vice versa. The average of the industry is 17 where as the value of the company is 17.07 almost the same as of the industry it shows the very good working of the company as it is comparatively less levered but still it is paying same to the share holders.

RETURN ON TOTAL ASSETS

This ratio is related to the leverage analysis of the company and it shows the return on total assets if the company is utilizing its assets very good then the return on assets will be higher and vice versa. We can get the value of return on assets by dividing net income with the total assets. This ratio is particularly important for the share holders and also the management because they have to utilize the

resources of the company. If its value is high it is good and vice versa. The average of the industry is 8% where as the value of the company is 10.61 which is higher than the industry average which shows the effective management of the resources.

FINANCIAL LEVERAGE INDEX

This ratio is related to the leverage analysis of the company and it shows the return on total assets in comparison with the return of equity holders. We can find this ratio by dividing return on common equity with return on total assets. We can get the value of return on assets and return on equity from the previous ratios. This ratio is particularly important for the share holders and also the management of the company. The average of the industry is 60% where as the value of the company is 62.16 which is higher than the industry average and shows that due to effective management the share holders are getting very good return.

ANALYSIS OF RETURN ON INVESTMENT

RETURN ON EQUITY CAPITAL
This ratio is related to the return on investment and it shows the return of share holders if the company has high leverage then the return on equity will be higher and vice versa. We can get the value of return on equity by dividing net income with the equity. This ratio is particularly important for the share holders. If its value is high it is good and vice versa. The average of the industry is 17 where as the value of the company is 17.12 a bit higher than the industry it shows the very good working of the company as it is comparatively less levered but still it is paying same to the share holders.

RETURN ON COMMON EQUITY

This ratio is related to the return on investment analysis of the company and it shows the return of share holders the main difference between this ratio and the previous ratio is this that it exclude the preference equity which is already not present in the equity so it is the same as of the previous ratio. If the company has high leverage then the return on equity will be higher and vice versa. We can get the value of return on equity by dividing net income with the equity. This ratio is particularly important for

the share holders. If its value is high it is good and vice versa. The average of the industry is 17% where as the value of the company is 17.12% almost the same as of the industry it shows the very good working of the company as it is comparatively less levered but still it is paying same to the share holders.

RETURN ON TOTAL ASSETS

This ratio is related to the return on investment analysis of the company and it shows the return on total assets if the company is utilizing its assets very good then the return on assets will be higher and vice versa. We can get the value of return on assets by dividing (net income plus interest into one minus tax rate) with the total assets. This ratio is particularly important for the share holders and also the management because they have to utilize the resources of the company. If its value is high it is good and vice versa. The average of the industry is 8% where as the value of the company is 11.04% which is higher than the industry average which shows the effective management of the resources.

RETURN ON LONG TERM LIABILITIES PLUS EQUITY CAPITAL

This ratio is related to the return on investment analysis of the company and it shows the return of share holders and the debtors. We can get the value of return on long term liabilities plus equity by dividing (net income plus interest into one minus tax rate) with the long term liabilities and equity. This ratio is particularly important for the share holders and the debt holders. If its value is high it is good for both and vice versa. The average of the industry is 12 where as the value of the company is 13.90 which is higher than the industry it shows good working of the company.

EQUITY GROWTH RATE

This ratio is related to the return on investment analysis of the company it tells about the growth rate of the company that how much is the growth in the wealth of the owners we can get the value of equity growth by dividing the net income available to share holders with the number of shares that the company is holding. Investors are very much interested in this ratio because they want to know about the growth of their investment. If this ratio is higher it is good and vice versa. The average of the industry is 8% whereas our company is growing at the rate of 9.97% which shows a very tremendous growth rate and this is also the reason of its less leverage.

ASSET TURN OVER

This ratio is related to the return on investment analysis of the company and it shows the sales on total assets if the company is utilizing its assets very good then the turnover will be higher and vice versa. We can get the value of assets turnover by dividing sales with total assets. This ratio is particularly important for the share holders, lenders and also the management because they have to utilize the resources of the company. If its value is high it is good and vice versa. The average of the industry is 40% where as the value of the company is 51.86% which is higher than the industry average which shows the effective management of the resources by the management of the company.

NET PROFIT RATE OF RETURN

This ratio is related to the return on investment analysis of the company and it shows the net profit before interest and tax on total assets if the company is utilizing its assets very good then the turnover will be higher and vice versa. We can get the value of net profit rate of return by dividing earning before interest and tax with total assets. This ratio is particularly important for the share holders, lenders and also the management because they have to utilize the resources of the company. If its value is high it is good and vice versa. The average of the industry is 10% where as the value of the company is 13% which is higher than the industry average which shows the effective management of the resources by the management of the company.

EQUITY MULTIPLIER
This ratio is related to the return on investment analysis of the company and it shows the return of share holders in an indirect way because when ever the equity multiplier will increase return of share holders will also increase. We can fins this ratio simply by adding 1 into the debt equity ratio or by adding 1 from the result of total liabilities divided by common share holders equity. If this ratio is higher it is good and vice versa. The average of the industry is 1.50 where as the value of the company is 1.61 which is higher than the industry average which shows the effective management of the company.

COMMON STAKE HOLDERS LEVERAGE

This ratio is related to the investment analysis of the company and it shows the financial leverage of the company. We can get this ratio by dividing total assets by the amount of equity. We can get the values of both the things from balance sheet. If the value of this ratio is high it is good for bankers and other lenders and if lower than good for investor and vice versa. The industry average is 2 where as the value of our company time interest earned ratio is 1.61 which is lower than the industry.

DU PONT ANALYSIS
This ratio is related to the return on investment analysis of the company and it shows the return of share holders the main difference between this ratio and the return on equity is this that it include sales and investment to get a better understanding. We can get the value of Du Pont Analysis by division of net income with sales multiplying it with division of sales with by total assets multiplying it with division of investment with equity. This ratio is particularly important for the share holders. If its

value is high it is good and vice versa. The average of the industry is 0.17 where as the value of the company is 0.1712 almost the same as of the industry it shows the very good working of the company.

ANALYSIS OF OPERATING PERFORMANCE

GROSS PROFIT MARGINS
This ratio is related to the analysis of operating performance of the company and shows the gross profit margins in the sales which helps company to check should they invest to increase the sales or not. We can get the value of gross profit margins by dividing gross profit with sales. We can get both the values from income statement. Normally all the stake holders are interested in this ratio and the tax authorities specially. If this ratio is high it is good for the company and vice versa. The average of the industry is 65% where as the value of the company is 76.55 which is very high than the industry and it shows very good working of the companys management.

OPERATING INCOME TO SALES

This ratio is related to the analysis of operating performance of the company and shows the operating profit margins in the sales which help company to check should they decrease the expenses if they are high and if there is a drastic difference between the gross and operating profit. We can get the value of operating profit margins by dividing operating profit with sales. We can get both the values from income statement. Normally all the stake holders are interested in this ratio and the tax authorities specially to check the truth of accounts. If this ratio is high it is good for the company and vice versa. The average of the industry is 20% where as the value of the company is 23.15% which is very high than the industry and it shows very good working of the companys management and shows that the company has a sound check on its operating cost.

PRE TAX INCOME TO SALES

This ratio is related to the analysis of operating performance of the company and shows the pre tax profit margins in the sales. We can get the value of pre tax profit margins by dividing pre tax profit with sales. We can get both the values from income statement. Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 18% where as the value of the company is 24.46% which is very high than the industry and it shows very good working of the companys management and shows that the company is earning from its financial assets more that the cost o0f financial resources that are borrowed.

NET INCOME MARGINS

This ratio is related to the analysis of operating performance of the company and shows the net profit margins in the sales. We can get the value of net profit margins by dividing pre tax profit with sales. We can get both the values from income statement. Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 18% where as the value of the company is 24.46% which is very high than the industry and it shows very good

working of the companys management and shows that the company is earning from its financial assets more that the cost o0f financial resources that are borrowed.

ASSETS UTILIZATION ANALYSIS

SALES TO CASH
This ratio is related to the assets utilization analysis of the company and shows the relation ship between sales and cash and tells how much sales are generated by the available cash. We can get the value of sales to cash by dividing sales with cash. We can get the value of sales from profit and loss account and the value of cash from balance sheet. Normally management is interested in this ratio. If this ratio is high it is good for the company which shows that more cash is generated from the available cash and vice versa. The average of the industry is 4.0 where as the value of the company is

4.64 which is higher than the industry and it shows very good working of the companys management and shows that sales are more that 4 times of the available cash.

SALES TO ACCOUNT RECEIVABLE

This ratio is related to the assets utilization analysis of the company and shows the relation ship between sales and accounts receivable. We can get the value of sales to account receivable by dividing sales with accounts receivable. We can get the value of sales from profit and loss account and the value of accounts receivable from balance sheet. Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 5.0 where as the value of the company is 5.82 which is higher than the industry and it shows very good working of the companys management and shows that sales are more that 5 times of the accounts receivable so the company is collecting its revenues in time.

SALES TO INVENTORY
This ratio is related to the assets utilization analysis of the company and shows the relation ship between sales and inventory and tells how much sales are generated by the inventory. We can get the value of sales to inventory by dividing sales with cash. We can get the value of sales from profit and loss account and the value of cash from balance sheet. Normally management is interested in this ratio. If this ratio is high it is good for the company which shows that more cash is generated from the inventory and vice versa. The average of the industry is 7.0 where as the value of the company is 7.94 which is higher than the industry and it shows very good working of the companys management and shows that sales are more that 7 times of the inventory hence company keeps only the needed inventory not the extra inventory.

CAPITALIZATION TURNS OVER

SALES TO WORKING CAPITAL
This ratio is related to the assets capitalization turn over of the company and shows the relation ship between sales and working capital and tells how much sales are generated by the working capital utilized. We can get the value of sales to working capital by dividing sales with working capital. We can get the value of sales from profit and loss account and the value of working capital from balance sheet.

Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 2.0 where as the value of the company is 2.09 which is a bit higher than the industry and it shows good working of the companys management.

SALES TO FIXED ASSETS

This ratio is related to the assets capitalization turn over of the company and shows the relation ship between sales and fixed assets and tells how much sales are generated by the utilization of fixed assets. We can get the value of sales to fixed assets by dividing sales with fixed assets. We can get the value of sales from profit and loss account and the value of fixed assets from balance sheet. Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 3.0 where as the value of the company is 3.2 which is a higher than the industry and it shows good working of the companys management.

SALES TO TOTAL ASSETS

This ratio is related to the assets capitalization turn over of the company and shows the relation ship between sales and total assets and tells how much sales are generated by the utilization of total assets. We can get the value of sales to total assets by dividing sales with total assets. We can get the value of sales from profit and loss account and the value of total assets from balance sheet. Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 0.50 where as the value of the company is 0.52 which is a bit higher than the industry and it shows good working of the companys management that they are using the assets at a very higher level.

SALES TO SHORT TERM LIABILITIES

This ratio is related to the assets capitalization turn over of the company and shows the relation ship between sales and short term liabilities normally short term liabilities are created because of the working capital needed for production and other expenses. We can get the value of sales to short term liabilities by dividing sales with short term liabilities. We can get the value of sales from profit and loss account and the value of short term liabilities from balance sheet. Normally management is interested in this ratio. If this ratio is high it is good for the company and vice versa. The average of the industry is 2.0 where as the value of the company is 2.55 which is a bit higher than the industry and it shows better position of the company.

MARKET MEASURES
EARNING PER SHARE
This ratio is related to the market measures it tells about the earning of one share. We can get the value of earning per share by dividing total earnings with total No. of shares. We can get the value of

total earnings from income statement and the value of total No. of shares from the balance sheet. If its value is high it is good and vice versa. Its value is 2.36 where as the industry value is 2 so again it is higher than the industry and shows very good performance of the company.

DIVIDEND PER SHARE

This ratio is related to the market measures it tells about the dividend of one share and it also shows the availability of cash with the company. We can get the value of dividend per share by dividing dividend paid with total No. of shares. We can get the value of dividend from profit and loss appropriation and the value of total No. of shares from the balance sheet. If its value is high it is good and vice versa. Its value is 1.10 where as the industry value is 1.0 so again it is higher than the industry and shows very good performance of the company and also showing that company has no cash flows problems.

AVERAGE MARKET PRICE

This ratio is related to the market measures it tells about the market value of the share if the market price of the share is higher than the book value so it is good and shows that company is a very reputed company in its commitments. We can get the value of average market price by taking average of the highest and lowest prices prevailed in the market. We can get the value of prices from news papers and the annual reports. If its value is high it is good and vice versa. The average market price of the shares of the companies in this industry is almost 40 which is not a sure thing because it fluctuate all the times and the value of our company is 56.03 which is again very high than the market average.

EARNING YIELD
This ratio is related to the market measures it tells about the earning of one share in comparison with the price paid for it. We can get the value of earning yield by dividing earning per share with market price per share. We can get the value of earning per share from the ratios calculated above and the

value of price of share from the news paper. If its value is high it is good and vice versa. Its value is 0.04 where as the industry value is 0.02 so again it is higher than the industry and shows very good performance of the company and also showing that company is paying a very good return for the price paid by the owners.

DIVIDEND YIELD
This ratio is related to the market measures it tells about the earning of one share in comparison with the price paid for it. We can get the value of earning yield by dividing earning per share with market price per share. We can get the value of earning per share from the ratios calculated above and the value of price of share from the news paper. If its value is high it is good and vice versa. Its value is 1.96 where as the industry value is 1.50 so again it is higher than the industry and shows very good performance of the company and also showing that company has no cash flows problems.

DIVIDEND PAYOUT RATIO

This ratio i9s related to the market measures we can find this ratio by dividing the dividend paid with the total earnings. We can get the value of dividend paid from the profit and loss appropriation account and the value of earnings from the net profit. It tells about the dividend declared by the company the value of this ratio is 39% which is lower than the industry as the industry is paying almost 50% which is the reason of its constant growth.

PRICE EARNING RATIO

This ratio is related to the market measures of the company it tells that what the return of your investment is. We can get the value of price earning ratio by dividing the market price with the earning

per share. We can get the value of earning per share from the profit and loss account and the value of market price from the news paper and the annual report. This ratio exactly helps the investor to take the decision of investment in our company. The average of the industry is 20% whereas our company has got the value of 23.72% which again encourage the investor to invest in our company.

RETENTION RATIO
This ratio is related to the market measures of the company it tells about the retention or ploughing back of the profit and increasing of the reserves and the owners equity. We can find this ratio by subtracting dividend payout ratio from one. We can get the value of dividend payout ratio from the ratios calculated above. Normally the retention ratio is 50% but our company is retaining 61% which is the reason of its constant growth.

COMMON SIZE ANALYSIS

Here in our company we can see that the cost of goods sold are continuously decreasing showing a better performance of the company from 2000 to 2001 the company is increasing the marketing expenses but

after this the marketing expenses of the company starts decreasing the companys trend shows that the company is spending more and more on research and development the companys net income is also increasing on the trend. The companys fixed assets first decreases then the fixed assets starts increasing from the year 2002 if we look at the current assets of the company they are continuously decreasing and shows the better performance because they are growing by minimizing the cost of production. By looking at the capital structure we can see that owners equity first increases then it decreases as more debts were taken to get the leverage advantage then again by the increase of financial cost the starts increasing their owners equity. The debts were continuously increasing but last year they had increased the equity and have paid the debts. The companys current liabilities first decrease then it starts increasing.

TREND ANALYSIS
From the trend analysis we can see that the companys sales were decreased in 2001 to 2003 but this decrease in sales was not due to the decrease in sales it was just due to decreased prices as we can see that the company is spending huge expenses on research and development so its prices and effects the sales. There is a drastic decrease in the year 2003 but trend shows that now once again the sales are increasing and will continue to increase. Same is the effect on net income before minority interest we can see that the sales percentage and the net profit before minority interest has almost the same ratio. Here we can see that same like the sales all the assets decrease with the decrease in sales and we can also see that the current assets are continuously decreasing showing the effective utilization of resources. As we know that the companys sales have been decreased so same is the effect on the capital structure because of the decreased sales the capital structure also decreases as they have utilized first the debts in 2001 to 2003 so the in 2004 they starts paying the debts and equity remains the same due to less usage of the companys assets due to efficient utilization of resources.