A PROJECT REPORT ON

FINANCIAL STATEMENT ANALYSIS By SWATHI.V (11141E0005) Carried out At DR.REDDYS LABORATORIES PVT LIMITED

Under the esteemed guidance of

Mr.K.Vardha raju sir MBA,MSA

INTRODUCTION
DEFINITIONS:
The term financial analysis is also known as analysis and interpretation of financial statements. It refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationships between the items of the balance sheet, profit and loss account and other operative data. By financial statements by means of two statements Profit and loss account or Income Statement Balance Sheet or Position Statement

NEED AND IMPORTANCE OF STUDY

Financial performance of an enterprise will affect other types of performance and

also the productivity of finances is good, the productivity of men and material would be good. Moreover the study of non-economic and qualitative performance, which studies

the non economic factors like customer satisfaction, citizen satisfaction etc.

OBJECTIVES OF THE STUDY:

To understand the theoretical framework of financial statement analysis and its tools. To assess the performance of Reddys on the basis of earnings and also to evaluate the solvency position of the company through ratio analysis. To understand the funds movement at Dr.reddy's Laboratories using funds flow statement.

SCOPE OF STUDY:
The scope and period of the study is being restricted to the following. The scope is limited to the operations of the Reddys. The information is obtained from the secondary data was limited to the Reddys. The study is based on The profit and loss a/c, the balance sheets of the last four years.

RESEARCH & METHODOLOGY:

Research design or research methodology is the procedure of collecting, analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be

achieved to arrive at a particular conclusion.

The methodology used in the study for the completion of the project and the fulfilment of the project objectives, is as follows: Collection of Data: 1. Secondary data.

Secondary data:
Study has been taken from secondary sources i.e. published annual reports of the

company editing, classifying and tabulation of the financial data. For this purpose
performance data of DR.REDDYS LABORATORIES for the years 2007-2008 to 20092010 has been used.

METHODS OF DATA ANALYSIS

The data collected were edited, classified and tabulated for analysis. The analytical tools used in this study are:

ANALYTICAL TOOLS APPLIED:

The study employs the following analytical tools: Comparative statement. Trend Percentage. Ratio Analysis. Cash Flow Statement.

LIMITATIONS OF STUDY:
The study is confined to a period of last 4 years. Not all tools of financial statement analysis are used . The duration of the study was limited to period of 45days.so that the extensive and deep study could not be possible.

COMPANY PROFILE:
Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is an emerging global
pharmaceutical company. As a fully integrated pharmaceutical company, our purpose is to provide affordable and innovative medicines through our three core businesses: Pharmaceutical Services and Active Ingredients (PSAI), comprising our Active Pharmaceuticals and Custom Pharmaceuticals businesses; COMPANY VISION, MISSION VISION A world class, innovation, Competitive and profitable Engineering Enterprise Providing total business Solutions. To be a top 20 global pharmaceutical company by 2020 MISSION To be the leading Engineering Enterprise providing Quality products System and services in the field of Energy, Transportation, Industry, Infrastructure and other potential areas.

REVIEW OF LITERATURE
FINANCIAL STATEMENT ANALYSIS:
DEFINITIONS: The term financial analysis is also known as analysis and interpretation of financial statements. It refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationships between the items of the balance sheet, profit and loss account and other operative data.

FUNCTION:
The finance functions are: Investment or long term asset mix decision Financing or capital mix decision Dividend or profit allocation decision

Liquidity or short term asset mix decision.

TYPES OF FINANCIAL STATEMENTS: Financial statements primarily comprise two basic statements:

The position statements of the balance sheet.

The income statements or the profit and loss account. Accounting principles specify that a complete set of financial statements must include: A balance sheet An income statement A statement of change in owners accounts. A statement of changes in financial position.

Current Asset Liability Ratio

year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11800000
700000 600000 500000 400000 300000 200000 100000 0 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201002 03 04 05 06 07 08 09 10 11 Current asset liabilities ratio Current Asset Current asset liabilities ratio Current Liability Current Asset Liability Ratio

current assets 155792 166669 155652 192697 235062 276062 310002 453597 580804 771519

current liability 73129 74427 84990 116644 143200 208869 243220 376332 397574 502024

Ratios 2.13 2.23 1.83 1.65 1.64 1.32 1.27 1.2 1.46 1.54

Interpretation The ideal ratio for the concern is 2:1 i.e. current assets doubled for the current liabilities considered to be satisfactory. The current ratio of DR.REDDYS LABORATORIES is less than! .Thus it has to maintain its efficient current assets.

Acid Test Ratio

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
600000 500000 400000 300000 200000 100000 0 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201002 03 04 05 06 07 08 09 10 11 Liquid Assets Liquid Liabilities Ratios

Liquid assets 898 1281 472 2094 4643 12 14 15 1475 1415

Liquid liabilities 73129 74427 84990 116644 143200 208869 243220 376332 397574 502024

Ratio 0.012 0.017 0.005 0.018 0.032 0.00005 0.00003 0.00003986 0.00371 0.002818

Acid Test Ratio Current Assets Inventory / Current Liabilities

The ideal quick ratio is 1:1 which is considered satisfactory for the concern. The company is maintaining the ratio above the standard norm, thus the management of DR.REDDYS LABORATORIES is label to meet its current obligations.

FINDINGS
The net working capital was Rs 91021 lacs in 2000-2001. This decreased to Rs 82663 lacs in the year 2001-2002. In the year 2006-2007 the net working capital is Rs 67193

lacs.
The current ratio of DR.REDDYS LABORATORIES was 2.41 in the year 2000-2001. There was decrease in the ratio up to the year 2007-2008. The ratio is decreasing year by year. But the DR.REDDYS LABORATORIES is maintaining current ratio more than the standard norms of 2. The organization is able to maintain both current ratio and quick ratio above the standard norms. i.e. the ideal current ratio for the concern is 2:1 and the quick ratio is 1:1 but the cash ratio is fluctuating.

The quick ratio of the organization is in decreasing trend year by year.

Investment in current assets has been increasing from Rs 155302 lacs in 2000-2001 to Rs 310002 in 2007-2008. The inventory turnover ratio of DR.REDDYS LABORATORIES is fluctuating i.e., showing decreasing trend during the years 2000-2001 to 2003-2004. But there onwards it has slowly increased till the financial year. The debtors turnover ratio has decreased from the year 2001-2002 to 2002-2003. It was 2.10 in the year 2003-2004. There was decrease in debtors turnover ratio till the financial

year.

CONCLUSIONS AND SUGGESTIONS:

The current ratio of DR.REDDYS LABORATORIES is decreasing year by year. In the

year 2000-2001 it was 2.41 and during the year 2008-2009 it has gone down to 1.2 later in the next financial year 2009-2010 it has gone up to 1.46, so the company should concentrate effectively on the management of Current Assets and Current Liabilities. The Net Working Capital of DR.REDDYS LABORATORIES is good for almost in range for each and every year. It is always in the ideal ratio for every organization. The DR.REDDYS LABORATORIES is using the moving average method in valuation of stock.

The debtors constitute nearly 50% of the Total Current Assets. For the Company it is
difficult to manage the accounts receivables. The company should collect debts as quickly as possible.

The company has to exercise cost of control and cost of reduction techniques to increase its profitability. The debtors turnover ratio in 2005-2006 is 1.97. The ratio has increased than previous years except for 2003-2004, which had 2.10. The decreasing ratio shows the inefficient management. They should concentrate more on the collection of the debts. The return on investment ratio of the DR.REDDYS LABORATORIES is 59.40 in 2005-

2006. It has increased when compared to previous years ratios. It is beneficial to

investors who are interested to know the profits earned by the company. The investment in loans and advances should be minimized to possible extent. Effective internal control system should be established. So that it can have control over all aspects of the company.

BIBILOGRAPHY:
http://www.Dr.ReddysLaboratoriescom/financialinformation/index.php http://www.studyfinance.com/lessons/workcap www.bizsearchpapers.com http://www.Dr.ReddysLaboratorieshyderabad.com/Dr.ReddysLaboratories

_hyderabad_unit.htm
http://en.wikipedia.org/wiki/Bharat_Heavy_Electricals_Limited Financial Management I M Pandey. Accounting for Managers-Jelsy Joseph Kuppapally. Financial statement analysis - Gokul Sinha.