Financial analysis of novartis pharmaceuticals


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Financial analysis of novartis pharmaceuticals

  2. 2. Discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life. NOVARTIS
  3. 3. COMPANY PROFILE and HISTORY Novartis was created in 1996 through the merger of Ciba- Geigy and Sandoz, two companies with a rich and diverse corporate history. Headquartered in Basel, Switzerland Novartis has been in India since 1947. The Group operates in India through four entities namely Novartis India Limited, Novartis Healthcare Private Limited, Sandoz Private Limited and Chiron-Behring Vaccine Private Limited.
  4. 4. In India Novartis have a presence in pharmaceuticals, generics Vaccines, OTC (over-the-counter medicines), eye care and Animal Health. Novartis is among top 20 best performing companies worldwide in carbon emissions from 2005 to 2012 out of 100 companies analyzed, Novartis ranked 18th across all industries, 4th in the healthcare sector and 1st in Switzerland. Continued…
  5. 5. PRODUCT PROFILE Novartis is the only company with leading positions in each of these key areas:- 1) Pharmaceuticals: innovative patent-protected medicines 2) Alcon: global leader in eye care with surgical, ophthalmology and consumer products 3) Sandoz: affordable, high-quality generic medicines and biosimilars 4) Consumer Health: self-medication products and treatments for animals 5) Vaccines and Diagnostics: vaccines and diagnostic tools to protect against life-threatening diseases
  6. 6. SWOT Analysis SWOT Analysis Strength 1.Has a global reach in over 140 countries 2.Core businesses in pharmaceuticals, vaccines, consumer health, generics and animal health Weakness 1. Controversies regarding their advertising of certain products affected brand image Opportunity 1. Broad-based medical innovation, in technologies and businesses across the spectrum of health care 2. Venture into health needs in under-developed and poor countries Threats 1. Competition from peers
  7. 7. Financial and Ratio Analysis Financial Analysis is the process of determining the operating & financial characteristics of a firm from accounting data & financial statement. The goal of such analysis is to determine efficiency & performance of the firm management. Financial analysis is undertaken to fulfil the following objectives.:- such as,  To estimate the earning capacity  To know the financial position and financial performance of the firm  To determine the long terms liquidity of the funds as well as solvency  To decide about the future prospective of the firm
  8. 8. Financial Ratio analysis:-  A ratio may be defined as a fixed relationship in degree or number between two numbers.  The ratio analysis is one of the most powerful tools of financial analysis. It is use as a device to analysis and interprets the financial health of enterprise.  Ratio analysis is very helpful in financial forecasting. Ratio relating to the past sales, profits & financial position from the basis for setting future trends.
  9. 9. Types of Financial Ratios:- Liquidity Ratio Current ratio Liquid ratio Leverage Ratio Debt equity Total Assets Proprietary Capital Interest Ratio to Debt Ratio Gearing Coverage Turnover Ratio Stock Debtors Creditors Fixed assets working capital Turnover turnover turnover turnover turnover Profitability Ratio Gross Operating Net profit Profits Ratio Ratio Profitability Ratio based on investment Return on Return on Return on equity Earning Per Capital Shareholder fund shareholder fund Share Employed
  10. 10. Total Share Capital 15.98 15.98 Equity Share Capital 15.98 15.98 Share Application Money 0 0 Preference Share Capital 0 0 Reserves 801.89 687.01 Revaluation Reserves 0 0 Networth 817.87 702.99 Secured Loans 0 0 Unsecured Loans 0.14 0.2 Total Debt 0.14 0.2 Total Liabilities 818.01 703.19 Mar '12 Mar '11 12 mths 12 mths Application Of Funds Gross Block 23.37 24.15 Less: Accum. Depreciation 13.26 16.2 Net Block 10.11 7.95 Capital Work in Progress 0.1 0.73 Investments 0.03 0.04 Inventories 79.01 53.61 Sundry Debtors 69.95 60.38 Cash and Bank Balance 5.22 6.15 Total Current Assets 154.18 120.14 Loans and Advances 1,551.62 672.89 Fixed Deposits 80.06 82.31 Total CA, Loans & Advances 1,785.86 875.34 Deffered Credit 0 0 Current Liabilities 142.9 114.46 Provisions 835.19 66.43 Total CL & Provisions 978.09 180.89 Net Current Assets 807.77 694.45 Miscellaneous Expenses 0 0 Total Assets 818.01 703.17
  11. 11. Profit and Loss Account of Novartis india:- 31 march 2013 31 march 2012 Revenue:- Revenue from Operations (Gross) 9,065.0 8,468.0 Less: Excise Duty 31.4 25.1 Revenue from Operations (Net) 9,033.6 8,442.9 Other Income 831.9 840.1 Total Revenue 9,865.5 9,283.0 Expenses:- Cost of Materials Consumed 403.6 313.9 Purchases of Stock-in-Trade 3,579.3 3,023.8 Changes in Inventories of Finished Goods and Stock-in-Trade (266.4) (222.9) Employee Benefits Expense 1,623.0 1,376.8 Finance Costs 2.2 5.4 Depreciation Expense 35.9 26.7 Other Expenses 2,793.7 2,512.4 Total Expenses 8,171.3 7,036.1 Profit before Tax 1,694.2 2,246.9 Tax Expense For the year Current Tax 570.0 745.0 Deferred Tax 10.5 (15.0) 580.5 730.0 For earlier years Current Tax (Net) (73.7) (3.3) Fringe Benefits Tax (9.9) — 496.9 726.7 Profit for the year 1,197.3 1,520.2
  12. 12. Liquidity Ratio Liquidity ratios are generally based on the relationship between current assets and current liabilities . Liquidity ratio refers to the ability of the firm to meet its short term obligations. 1.Current ratio:- this is used to evaluate short term financial position of the business concern. It compares the current assets and current liabilities of the firm. Current ratio = current assets Current liabilities 2012 2011 1785.86/978.09=1.9 i. e. 1.9:1 875.34/180.89=4.8 i.e. 4.8:1 Interpretation:- Ideal current ratio should be 2:1. So, we can say that the company’s financial position is satisfactory in year 2011 and not satisfactory in year 2012
  13. 13. Liquid Ratio: -It is very useful in measuring liquidity position of a firm. It measures the firm’s capacity to pay off current obligations. It is used as complimentary ratio to the current ratio. Quick ratio = liquid assets Current liabilities. 2012 2011 1706.85/978.09=1.8 i. e. 1.8:1 821.73/180.89=4.5 i. e. 4.5:1 Interpretation:- Liquid ratio of 1:1 is considered satisfactory. If quick assets are equal to current liabilities, then the concern may be able to meet its short term obligations. Here in both the years liquid asset is greater than the current liabilities, hence the company is much liquid in meeting its short term obligations during both the years.
  14. 14. Leverage ratios Leverage ratios analyze the long term solvency that help us judge the ability of a firm to pay the interest regularly 1.Debt equity ratio: shows a relationship between long term debt and shareholder’s fund. This ratio indicates the relation between outsider’s fund and shareholder’s fund. Also called external internal equity ratio Debt equity ratio= debt or long term debt Equity shareholder’s fund . 2012 2011 0.14/817.87=0.00017 0.2/702.99=0.00028 Interpretation:- A ratio of 1:1 is usually considered to be satisfactory. This ratio is calculated to know about the organization’s repayment capacity of long term debts. Here the ratio obtained for both the years is satisfactory.
  15. 15. 2.Proprietary ratio: this establishes the relationship between shareholder’s funds to assets of the firm. It is important for determining long term solvency of the firm. Also known as equity ratio or net worth to total assets ratio. Proprietary ratio= Equity Total assets 2012 2011 817.87/818.01=0.99 702.99/703.17=0.99 Interpretation: Higher the ratio, dependency on external sources and loans for working capital will be less and financial condition of the organization will be sound. Here in both the years the ratio is same i. e. o.99 or 99% and very much sound as it is much higher.
  16. 16. Turnover ratios They indicate the rapidity with which the resources available to the concern are being used to produce sales. In other words, they measure the efficiency and rapidity of resources of the company 1. Stock turnover Ratio:- inventory ratio. This ratio indicates relationship between cost of goods sold during the year and average stock kept during that year. Stock turnover ratio= cost of goods sold Average stock 2012 2011 843.61/66.31=12.72 742.71/52.49=14.14 Interpretation:- This ratio indicates whether stock has been efficiently used or not ,the number of times the stock is turned into sales during the year. The higher the ratio, the better it is, since it indicates that stock is selling quickly. STR is much higher in year 2011 compared to 2012, hence in 2011 the company's stock has been turned into sales efficiently.
  17. 17. 2. Fixed assets turnover ratio: This ratio indicates relationship between costs of goods sold and fixed assets during a year. Fixed assets turnover ratio= cost of goods sold Net fixed assets . 2012 2011 845.61/154.18=5.47 742.71/120.14=6.18 Interpretation:- This ratio reveals how efficiently the fixed assets are being utilized. If there is increase in ratio, it indicates that there is better utilization of fixed assets , here in year 2011 the fixed assets have been utilized efficiently compared to year 2012.
  18. 18. 3. Working capital turnover ratio: This ratio indicates relationship between sales and working capital. Working capital turnover ratio = cost of goods sold or sales Working capital 2012 2011 845.61/807.77=1.04 742.71/694.45=1.06 Interpretation:- This ratio reveals how efficiently working capital has been utilized in making sales. A high working turnover ratio shows efficient use of working capital. Here we find that working capital of Novartis pharmaceuticals in year 2011 was efficiently utilized to make sales.
  19. 19. CONCLUSION After the overall financial ratio analysis of Novartis pharmaceuticals , it is found that the financial performance and management of company was sound and efficient enough in year 2011 as compared to 2012,as the company was very much liquid during 2011 , current ratio was satisfactory , stock and working capital was efficiently used.
  20. 20. THANK YOU