Financial Ratio Analysis

6669 words - 27 pages

Executive summary
The report has been prepared on the basis of the four annual report of a reputed company, “Techno Drugs Pharmaceutical” in respect to our partial MBA program. We have chosen four consecutive years 2005, 2006, 2007 and 2008 to analyze the ratios, and conduct a DuPont analysis to find the competitive position and the level of performance of both the organizations in respect to the calculated ratios. In addition we have done index analysis of both balance sheet and income statement to find the position of the organizations in respect of profitability.
The organizations are pharmaceutical companies. The reason behind calculating the ratios of different years of a company ...view middle of the document...

Ratio analysis expresses the relationship among selected items of financial statement of data. A ratio expresses the mathematical relationship between one quantity and another. The relationship is expressed in terms of a percentage, a rate or a simple proportion. For analysis of the primary financial statements, ratio can be used to evaluate liquidity, profitability and solvency.
Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. In order to do this, a firm can compare its ratios with those of businesses similar to the company as well as compare its own ratios for several successive years, watching especially for any unfavorable trends that may be alarming. Ratio analysis may provide the all-important early warning indications that allow the firm to solve its business problems before there is any sort of destruction. Ratio can provide clues to underlying conditions that may not be apparent from individual financial statement component.

2.1 Origin of the Report
Reporting means the written presentation of the evidence and findings of a research. After completion of the internship program report submission is essential. This report is prepared for satisfying both the organization and my academic institution. And it is based on the annual reports of the Techno Drugs Pharmaceuticals Ltd.

2.2 Purpose of the Report
The main purposes of the report are as follows:
To apply theoretical knowledge with practical situation.
To understand the real management and to gather practical knowledge.
To familiar with the pharmaceutical industry.
To gain some clear ideas about the ratio analysis
To know about the financial condition of selected company
To know the day to day activities of Techno Drugs pharmaceutical company.
To examine the balance sheet of the company.
To understand the different operation of techno drugs pharmaceutical company.

2.3 Scope of the Report
Techno Drugs Pharmaceuticals Limited is one of leading pharmaceuticals companies in Bangladesh. They export their products in different countries of the world. The report covers the ratio analysis as well as index analysis of income statement and balance sheet of these companies. After calculation, interpretation and evaluation have also been provided based on their financial condition.

2.4 Limitations of the Report
The limitations of the report are as follows:
Sometimes it is difficult to understand a few accounting and financial terms which could otherwise be incorporated sufficiently in preparing the report.
I have to be aware that ratio analysis is widely used as a performance indicator, but it does have its limitations too. For instance, accounts show only the monetary aspects of the business. They do not show management or staff strengths or weaknesses. So ratio analysis ignores this aspect of the performance as well....

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