Financial Analysis in Ranbaxy Laboratories Limited

Name:         Meenakshi Srivastava (2006 – 2008)

Title:           Financial Analysis in Ranbaxy Laboratories Limited

Summary

The concept of writing the project is one of the essential features for Master of Business Administration (“M.B.A."), at Skyline Business School. It enables a student to apply his mind, time and labour for going deep into the understanding and applications of the Finance function in an organization.

Contemporary business world is becoming increasingly complex and unpredictable, thanks to the dramatic shift brought in by the leaps made in information technology and telecommunications. Today continuously excel or perish seems to be the message emerging from the Darwinian dance in the corporate world. To compete in such a turbulent business environment, organisations need to relentlessly adopt strategies towards Value Creation. It is these strategies, which enables organizations to build sustainable competitive edge.

The project titled “Comparative analysis of Ranbaxy Laboratories Limited” involves an attempt to identify the benefits that would accrue to Ranbaxy Laboratories Limited.

The following report projects the comparative study between Ranbaxy Laboratories Limited of the past years. The following comparative analysis of the given organisations depicts the profitability, solvency and growth during the past two years and how they are ahead of each other.

Conclusion

The essence of the financial soundness of a company lies in balancing its goals, commercial strategy, product – market choices and resultant financial needs. This analysis has helped in finding out answers to all such questions.

The financial analysis has been undertaken and the results have been analysed by using various ratios to calculate the overall profitability and the operating efficiency of Ranbaxy.

It has been from the results of the study there has been a DRASTIC change. This is shown by comparing the past year with the current year. The past year involved high profitability and higher operating efficiency where as both of the components can be seen decreasing in the next year.

In short it can be concluded by saying that falling results of the organization are due to:

• Increased debt – equity mix which reflects that the shareholder’s position in the firm has decreased resulting in more debts taken by the organization.
• The overall profitability of the firm has decreased. Though, the sales have increased but this increase is much less than the substantial increase in the debtors, inventory and net assets.
• Inefficient utilization of its assets to generate sales revenue.
• The firm is able to meet its current obligations.

Suggestions

• Price Cuts: The Company needs to reduce its selling price to fight back the increase in competition and to achieve the desired increase in sales.
• Cost increases: The price which the firm pays its suppliers during period of inflation has risen and this in turn reduces the gross profit margin unless an appropriate adjustment is made to the selling price.
• Change in mix: A change in the range of mix of products sold may result in better sales or better substitutes to this mix may also lead to better sales.
• Valuation of stocks: The under – valuation of stocks leads to inflation in the cost of goods sold and understated profits. Therefore, the stocks are supposed to be valued properly and efficiently.
• The top management should be more responsive towards the changes and take the immediate steps to control unfavourable conditions.
• Optimum utilization of the assets should be done and if not happening proper steps should be taken in this regard.

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The above article is a summary extract from the dissertation projects of the MBA and BBA students of Skyline College. Skyline, situated in Delhi and Gurgaon (NCR) is a premier institute providing management education specialising in MBA and BBA degrees and specialist courses for travel and tourism as well as mass communication.