Report on financial statement for five years using trend, comparative  & common size analysis
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Report on financial statement for five years using trend, comparative & common size analysis

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Detailed analysis of five years financial statements( Income statement and Balance Sheet) using Trend , Comparative and Common size analysis.

Detailed analysis of five years financial statements( Income statement and Balance Sheet) using Trend , Comparative and Common size analysis.

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Report on financial statement for five years using trend, comparative  & common size analysis Report on financial statement for five years using trend, comparative & common size analysis Document Transcript

  • Report on Financial Analysis<br />Of<br /> <br /> <br /> <br />INTRODUCTION:<br />Company Profile:<br />Wockhardt is one of the top global pharmaceutical and biotechnology companies. Wockhardt, incorporated in 1999, is engaged the pharmaceutical and biotechnology segments. The company has 14 manufacturing unit located in India, France, UK, Ireland and US.It has market capitalization of about US $1 billion and annual turnover of about US $400 million. Europe and US pharma markets account for about 50% of Wockhardt's revenue. Wockhardt has six dedicated manufacturing plants built in accordance with international standards. It has a competent, multi-disciplinary research team of over 450 skilled scientists. It owns 6 breakthrough biotechnology products and more than 250 patent filings. It has a strong presence in international pharmaceutical market. Its product portfolio comprises of biopharmaceuticals, formulations, vaccines, nutrition products, and active pharmaceuticals ingredients (API). <br />Wockhardt has headquarters in India and three subsidiaries in UK, US and Ireland. It possesses 11 manufacturing plants in 3 countries viz. India, Ireland and UK. The four successful acquisitions done by Wockhardt in the European market have strengthened the global position of the company.The company holds strong position in leading markets such as Europe and United States, which contributes 65% to Wockhardt's revenue. The company has two subsidiaries Negma Lerads, France and Morton Grove Pharmaceuticals, USA.<br />Salient Features of Wockhardt Limited:<br />The salient features of Wockhardt Limited can be categorized on two factors as mentioned below:<br />
    • Products: The products offered by the company includes:
    • Biopharmaceuticals
    • Topicals (Creams and Ointments)
    • Steriles (Injectables)
    • Orals (Tablets and Liquids)
    Business Area:<br />Biopharmaceutical- Under this the company has developed a basket of products such as Erythropoietin, Recombinant Human Insulin, Glargine are among others. The company sells 23 products under generic segment in US market.<br />Wockhardt has set up Wockhardt Biotech Park a biopharmaceuticals manufacturing complex located at Aurangabad, India. This complex comprises six manufacturing facilities developed as per USFDA and EMEA standards. It has capacity to serve 10-15% of global demand for major biopharmaceuticals.In new drug discovery area; it has developed number of lead molecules in the anti-infective field.<br />Currently the company has a significant presence in pain management, cough therapy, psychotic drugs, diabetology, vaccines, nutrition and animal health. It has produced brands like Wosulin, Wepox, Proxyvon, Dexolac, Viscodyne, Libotryp, Methycobal and many more.<br />Management Details:<br />Chairperson - Habil Khorakiwala <br />MD - Murtaza Khorakiwala<br />Directors – <br />Abid Hussain, Aman Mehta, Bharat Patel, H F Khorakiwala, Habil Khorakiwala, Huzaifa H Khorakiwala, Huzaifa Khorakiwala, Murtaza H Khorakiwala, Murtaza Khorakiwala, R A Shah, Rajiv B Gandhi, Rajiv Gandhi, S Giridhar, Shekar Datta, Shekhar Datta, V R Khetan, Vijay Khetan<br />Outlook<br />Wockhardt is set to market a patented drug used in treatment of osteoporosis in India. Switzerland-based DSM Nutritional Products, the patent holder of Bonistein, has licensed the drug to Wockhardt. The Indian market for osteoporosis formulations market is over Rs 250 crore, as per data from ORG IMS. This market is growing at 19%. Wockhardt plans to launch the drug by mid-2009. Wockhardt’s strategies are aligned towards being a significant player in the emerging global biopharmaceuticals market. In order to achieve this goal, the company has set up the Wockhardt Biotech Park, India’s largest biopharmaceuticals complex, with six dedicated plants built to international standards.<br />Corporate Address: Wockhardt LimitedWockhardt towers, Bandra-Kurla Complex, Bandra (East), Mumbai-400051, Maharashtra, India. <br />Analysis of the Financial Statement:<br />Analysis of financial statements is attempted to assess the efficiency and performance of an enterprise. The financial statements here I consider are Profit & Loss A/C and Balance Sheet of Wockhardt Limited. The analysis and interpretation of financial statements is very essential to measure the efficiency, profitability, financial soundness and future prospects of the business units.<br />Here we consider three different tools for analyzing financial statements of Wockhadrt Limited considering five years values.<br />
    • Trend Analysis:
    Trend analysis is a technique of studying several financial statements (Balance Sheet & Income Statement) over a series of years. In this analysis the trend percentages are calculated for each item by taking the figure of that item for the base year taken as 100. Generally, the first year is taken as a base year. This analysis is done to see the upward or downward trend of the financial statements throughout five different years.<br />
    • Trend Analysis of Income Statement:
    • The trend analysis of income statement shows the analysis on the different periods of the income statement assuming one year as base. The trend of increasing or decreasing in the items of income statement is analyzed.
    • Interpretation:
    • The absolute value of net sales is in increasing trend. While comparing the value to 2006, the net sales figure is increasing rapidly throughout the four years up to 2010. At 2011 the actual value of net sales is low in compare to 2008 so the absolute change in value during 2011 compared to 2006 is less than rest of the years.
    • The total income is increasing parallel with the net sales. While the expenditure is increasing rapidly above the net sales due to increase in the material consumption and operating expenses. This results low in the pace of increasing operating profit.
    • The financial expenses, exceptional items, current tax and deferred tax are affecting the growth of the company. The company is in loss due to the heavy increase in the amount of exceptional items and financial expenses. This shows that the company accrues unusual charges in the ordinary course of its business.
    • The increase in the amount of financial expenses indicates the company possess large amount of debt than its equity.
    • The deferred tax is increasing after 2008 which adds up the net profit value as shown in the worksheet. It is an assets to the company.
    • Despite of the heavy loss seen through the trend of five years, the loss is minimized from the balanced transferred from previous years.
    • Trend Analysis of Balance Sheet:
    • The different periods of balance sheet is compared with base year in order to know the fluctuation of the items based on one year.
    • Interpretation:
    • The trend analysis of the company reveals that the absolute change in fixed assets is negative during 2006-2010 & 2006-2011 due to the decrease in the large value of fixed assets which shows investment in fixed assets is down from the year 2010.
    • The percentage of total debt is negative during the year 2006-2011 due to decrease in the value of secured and unsecured loan. This shows that the outsider fund is less in the year 2011 in compare to 2006. The company is financing largely through its shareholders’ fund.
    • The share capital of the company is in increasing trend. This shows that the company is issuing its share.
    • The reserve & surplus fund of the company depends on the profit it makes in the previous year. Here the reserve is in decreasing trend up to negative and after 2010 it remains constant. This means the company has utilized reserves and surplus for the payment of dividends to shareholders either in cash or by way of bonus.
    • The percentage of outsiders fund is more than that of the of shareholders fund which means the company uses long term debt to purchase fixed assets.
    • The percentage change in current assets is more than percentage change in current liabilities which show current assets is more than current liabilities during all five years. This further confirms that the company has used long-term finances even for the current assets resulting into an improvement in the liquidity position of the company.
    • The working capital is insufficient to finance investment of the company due to the exceed of current liabilities over current assets.
    • Common Size Analysis:
    • The common Size statements (Balance Sheet and Income Statement) are shown in analytical percentages. The figures of these statements are shown as percentages of total assets, total liabilities and total sales respectively.
    • Common Size Income statement:
    • The items in income statement can be shown as percentages of Net sales to show the relations of each item of sales.
    • Interpretation:
    • The sale and operating profit have increased in absolute value as well as in terms of percentage of net sales.
    • The percentages of income are more than percentage of expenditure with respect to its net sales, so the operating profit (PBDIT) is positive throughout the years.
    • The net profit of the company is negative in the year 2008 & 2010 due to heavy increased in percentage of exceptional items.
    • Common Size Balance Sheet:
    • A statement where balance Sheet items are expressed in the ratio of each asset to total assets and the ratio of each liability is expressed in the ratio of total liabilities in called Common Size Balance Sheet.
    • Interpretation:
    • An analysis of pattern of financing of Wockhardt Ltd throughout five years shows that the company’s shareholders fund has Net worth in terms of its total fund as 34.08% (2006), 29.86% (2007), 21.52% (2008), 27.64% (2010) & 30.69% (2011) while Outsiders fund has total debt in terms of its total fund as
    • 62.97 %( 2006), 67.98% (2007), 78.48% (2008), 72.36% (2010) & 69.31% (2011). This shows that the company depends more on its outsiders funds account than Shareholders’ fund.
    • The company has sufficient working capital. The percentage of current liabilities is less than percentage of current assets in all five years.
    • A close look at the balance sheet shows that investments in fixed assets have been from working capital in the company. The fixed assets account for 44.69%, 59.76%, 55.52%, 25.90% & 27.86% of the total assets respectively from 2006 to 2011. The percentage of fixed assets varies in accordance with the change in current assets and current liabilities throughout the years.
    • The investment in the company seems to be in increasing due to high level of working capital in the company.
    • Comparative Analysis:
    • The comparative study of financial statements is the comparison of the financial statements of the business with the previous year’s financial statements. It enables identification of weak points and applying corrective measures through analyzing balance sheet and income statement.
    • Comparative Income Statement:
    • The income statement provides the results of the operations of a business.the comparative income statement gives an idea of the progress of a business over a period of time.
    • Interpretation:
    • The comparative income statement shows that the amount of net sales is increased in its absolute value but rate of increment is low in the following years. The net sales is decrease with negative rate at 2011.
    • Due to the net sales decreasing figure , total income of the company is in decreasing figure resulting to negative income in the year 2011.
    • The absolute change in the value of expenditure is increasing which shows the decreasing value for the operating profit of the company. At 2011, the absolute changed value of expenditure is less than the income which helps to uplift the absolute value of operating profit to 8.44%.
    • The net profit after for the year is negative at 2008 & 2010 due to high amount of exceptional items which shows the absolute change in the value of net profit in the year 2008 & 2010 is negative. But in comparision to 2008, the net profit is 620.64% increased in 2010. The net profit earned from 2011 is insuffient to cover the loss of 2010, so the percentage change in net profit is still negative.
    • It is concluded that there is not sufficient progress in the performance of the company and the overall profitability of the company is not good.
    • Comparative Balance Sheet:
    • The comparative balance sheet shows the different assets and liabilities of the firm on different dates to make comparison of balances from one date to another.
    • Interpretation:
    • The comparative balance sheet of the company reveals that during the five years comparison the fixed assets is negative at 2008-2010 due to the decrease in the value of fixed assets by Rs. 22809.52 which shows investment in fixed assets is down from the year 2010.
    • The percentage of total debt is negative during the year 2008-2010 due to decrease in the value of secured and unsecured loan. This shows that the outsider fund is less in the year 2010 in compare to 2008.
    • The share capital of the company is increased by 1221.86% in the year 2010 but due to the decrease in the reserve fund by 96.39% in the same year the company suffers negative net worth. This means the company has utilized reserves and surplus for the payment of dividends to shareholders either in cash or by way of bonus.
    • The percentage of outsiders fund is less than that of the year of shareholders fund in the year 2010 which means the company uses long term debt to purchase fixed assets.
    • The percentage change in current assets is more than percentage change in current liabilities which show current assets is more than current liabilities during all five years. This further confirms that the company has used long-term finances even for the current assets resulting into an improvement in the liquidity position of the company.
    • Conclusion:
    • The profitability, efficiency and financial soundness are not achieved throughout the analysis of five different years.
    • From the above analysis we can say that financial position of the Wockhardt Limited is found different. The trend analysis depicts the results relating only to the base year. This can help the company to know the rise or fall in the position with reference to the base year. On the other hand, the common size analysis standardizing financial statements by introducing a common denominator as a percentage of total assets or sales. This helps the company to know the growth in terms of its net sales through the relative magnitude of asset, liability, equity and income statement components. Moreover, the comparative analysis reveals that the company’s performance in respect to the preceeding years. This shows the short term growth of the company with only two years range.
    • Thus the different results have been extract from the above mentioned analysis. At the end of fiscal year 2010-2011, the net profit shown by the comparative analysis is -670.37%, by trend analysis is -69.83% and by common size analysis is -18.91%. All the analysis shows negative results which indicate the performance of the company is not satisfactory.
    • ***************THANK YOU*****************