INTRODUCTION

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 Finance is a blood of business. Financial management helps in achieving group
goals. IT reduces the cost and optimum utilization of funds and maximum efforts.

Financial management also referred to as corporate finance and managerial finance.

It involves planning, allocation of resources and control. There are three broad areas of
financial decision they are capital budgeting, capital structure and working capital
management and dividend decisions.

The financial activity plays a major role for success of an enterprise. For a proper
financial activity, the organizations need to evolve suitable and well-defined policies,
procedures and to manage the different specific function coming the financial activity. The
various policies and system relating to the finance wing hear to be covered comprehensively
and clearly in a policy document know as annual report which consists of balance sheet,
profit and lose account, financial statement, audit report etc. thus the annual report plays a
key role for guiding; the decision and actions of personnel of finance in a particular
direction for the success of financial function in an organization.

WORKING CAPITAL MANAGEMENT:

Working capital is one of the most important requirements of any business concern.
Working capital can be compared with the blood of human beings. As human cannot survive
without blood, in the same way no business concern can survive without capital.

Working capital management deals with maintaining the level of working capital to
optimum, because if a concern has inadequate opportunities and if the working capital is more
than required then the concern will lose money in the form of interest on the blocked funds.
Therefore working capital management plays a very important role in the profitability of
company.

To go deeper into the first of all the meaning of capital should be made clear. The
term working capital stands for that part of the capital, which is required for financing the
current needs of the company.

It is usually invested in raw materials stock (both finished and semi finished)
accounts receivable, securities and in cash. Capital in all these from is constantly being
converted into cash and this flow out again in exchange for other forms of working

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constantly turned over management of work in capital usually involves planning and
controlling these current asset.

NEED FOR WORKING CAPITAL

The basic objective of financial management is to maximize the shareholders wealth.

This is possible only when the company earns sufficient profits. The amount of such profits
largely depends upon the magnitude of sales. However do not into cash instantaneously. These
are always a time gap between the sale of goods and there actual realization in cash.
Working capital is required in order to sustain the sales activities in this adequate working
capital is not available for this period.

The company will not be in a position to purchase raw materials, pay wages and
oilier expenses required for manufacturing the goods. Therefore sufficient amount of working
capital is to be maintained at any point of time.

ADEQUACY OF WORKING CAPITAL

A firm must have adequate working capital i.e., as much as needed by the firm. It should
neither be excessive nor inadequate. Both the situations are harmful to the concern.
Excessive working capital means the firm has idle funds, which earn no profits for the firm
inadequate working capital ultimately results in production interruptions and lowering down
of the profitability.

It will be interesting to understand the relationship between working capital, risk and
return in a manufacturing concern. It is generally accepted that higher levels of working
capital because the risk and have the potential of increasing the profitability also.

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OBJECTIVES OF THE STUDY

1. To study the existing system of working capital management in Ranbaxy

Laboratories Limited (Ranbaxy).
2. To analyze the financial performance of the company with reference to it’s working
capital components.
3. To know the liquidity position of the company.
4. To know the profitability position of the company using with ratios.
5. Suggesting a better way to improve management working capital.

SCOPE OF THE STUDY

1. The scope is limited to the operations of Ranbaxy Laboratories Limited (Ranbaxy).

2. The study mainly focuses on working capital management only.

3. The study focuses on ratios to find profitability position.
4. The study is confined to evaluation of the last 5 years annual reports.

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LIMITATIONS OF THE STUDY

1. The study was confined to a period of five years.

2. As most of the data is from secondary sources, to the results are not accurate.
3. This analysis was confine to Ranbaxy Laboratories Limited (Ranbaxy) only.
4. The study was based on the annual reports of the Ranbaxy Laboratories Limited
(Ranbaxy).
5. The study period is restricted to 45 days.

COLLECTION OF THE DATA

This study adopts the methodology of collecting data from both sources primary and
secondary.

PRIMARY DATA
The primary data was collected by interacting with the finance manager and other
concerned executives at the administrative office of the Ranbaxy Laboratories Limited
(Ranbaxy).

SECONDARY DATA
All the secondary data used for the study have been extracted from the annual report,
manuals and other published materials of the Ranbaxy Laboratories Limited (Ranbaxy)

1) Annual reports and published generals from Ranbaxy Laboratories Limited

(Ranbaxy).
2) Information related the topic from text books of financial management.
3) Website www.ranbaxy.com

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COMPANY PROFILE

6
 Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, is
an integrated, research based, international pharmaceutical company, producing a wide range
of quality, affordable generic medicines, trusted by healthcare professionals and patients
across geographies. Ranbaxy today has a presence in 23 of the top 25 pharmaceutical
markets of the world. The Company has a global footprint in 46 countries, world-class
manufacturing facilities in 7 countries and serves customers in over 125 countries.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese
innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and generic
pharmaceutical powerhouse. The combined entity now ranks among the top 20
pharmaceutical companies, globally. The transformational deal will place Ranbaxy in a
higher growth trajectory and it will emerge stronger in terms of its global reach and in its
capabilities in drug development and manufacturing.

Financials

Ranbaxy was incorporated in 1961 and went public in 1973. For the year 2009, the
Company recorded Global Sales of US $ 1519 Mn. The Company has a balanced mix of
revenues from emerging and developed markets that contribute 54% and 39% respectively.
In 2009, North America, the Company's largest market contributed sales of US $ 397 Mn,
followed by Europe garnering US $ 269 Mn and Asia clocking sales of around US $ 441 Mn.

Strategy

Ranbaxy is focused on increasing the momentum in the generics business in its key
markets through organic and inorganic growth routes. Growth is well spread across
geographies with focus on emerging markets. The Company continues to evaluate acquisition
opportunities in India, emerging and developed markets to strengthen its business and
competitiveness. Ranbaxy has forayed into high growth potential segments like Biologics,
Oncology and Injectable. These new growth areas will add significant depth to the existing
product pipeline.

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R&D

Ranbaxy views its R&D capabilities as a vital component of its business strategy that
will provide a sustainable, long-term competitive advantage. The Company has a pool of
over 1,200 scientists engaged in path-breaking research.

Ranbaxy is among the few Indian pharmaceutical companies in India to have started
its research program in the late 70's, in support of its global ambitions. A first-of-its-kind
world class R&D centre was commissioned in 1994. Today, the Company's four multi-
disciplinary R&D centers at Gurgaon, in India, house dedicated facilities for generics
research and innovative research. The robust R&D environment for both drug discovery and
development reflects the Company's commitment to be a leader in the generics space offering
value added formulations based on its Novel Drug Delivery System (NDDS) and New
Chemical Entity (NCE) research capabilities.

The new drug research areas at Ranbaxy include anti-infectives, inflammatory /

respiratory, metabolic diseases, oncology, urology and anti-malaria therapies. Presently, the
Company has 8-10 programs including one Anti-malaria molecule for which Phase-III
clinical trials have commenced in India, Bangladesh and Thailand. The Company has signed
collaborative research programs with GSK and Merck.

NDDS focus is mainly on the development of NDA/ANDAs of oral controlled-

release products for the regulated markets. Ranbaxy’s first significant international success
using the NDDS technology platform came in September 1999, when the Company out-
licensed its first once-a-day formulation to a multinational com

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People
The Company’s business philosophy based on delivering value to its stakeholders
constantly inspires its people to innovate, achieve excellence and set new global benchmarks.
Driven by the passion of its over 13,000 strong multicultural workforce comprising 50
nationalities, Ranbaxy continues to aggressively pursue its mission to become a Research-
based International Pharmaceutical Company.

BOARD OF DIRECTORS

At the helm of the entire operations is the experience and able direction of the people
who make it all happen, Ranbaxy acknowledges their inspiring stewardship and indefatigable
work.
Dr. Tsutomu Une - Chairman, Non Executive & Non Independent Director
Mr.Atul Sobti - Chief Executive Officer & Managing Director
Mr. Takashi Shoda - Non Executive & Non Independent Director
Dr.Anthony H.Wild - Independent Director
Mr.Rajesh V. Shah - Independent Director
Mr.Akihiro Watanabe - Independent Director
Mr.Percy Shroff - Independent Director

EXECUTIVE TEAM

The Executive Committee is an apex body at Ranbaxy, that oversees Company’s

global functioning. The group deliberates on important company issues steering it in the
right direction. The Committee ensures that all decisions are taken in the best interest of the
organization. This forum brings in different perspectives on a subject. Issues are discussed,
analyzed and concluded through exchange of ideas, reflecting the Company’s philosophy of
participative management. It also facilitates the Company’s compliance with the best
standards of Corporate Governance.

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Mr. Atul Sobti - Chief Executive Officer & Managing Director

Mr. Arun Sawhney - President – Global Pharmaceuticals Business

Mr. Omesh Sethi - Chief Financial Officer

Mr. Ramesh L. Adige - President, Corporate Affairs & Global Corporate

Communications

Dr. Sudarshan K. Arora - President – Research & Development

Mr. Bhagwat Yagnik - Head – Global Human Resources

Mr. Hiroyuki Okuzawa - Head – Global Synergy Project

Mr. ale Adkisson - Head – Global Quality

Mr. Dipak Chattaraj - President, Corporate Development & Strategy

Mr. David Briskman - Chief Information Officer

Worldwide Operations

Global Pharma Companies are experiencing an ever changing landscape ripe with
challenges and opportunities. In this challenging environment Ranbaxy is enhancing its reach
leveraging its competitive advantages to become a top global player.

Driven by innovation and speed to market we focus on delivering world-class

generics at an affordable price. Our unwavering determination to achieve excellence leads us
to new global benchmarks. Our people have consistently risen above all challenges
maximized opportunities and positioned Ranbaxy as a leader in the global generics space.

Ranbaxy’s global footprint extends to 46 countries embracing different locales and

cultures to form a family of 50 nationalities with an intellectual pool of some of the best
minds in the world.

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Research and development

Ranbaxy views its R&D capabilities as a vital component of its business strategy that
will provide the company with a sustainable, long-term competitive advantage. The company
today has a pool of 1,200 scientists who are engaged in path-breaking research.

The robust R&D environment within the company for both drug discovery &
development reflects the Company's commitment to be a leader in the generics space and
offer value added formulations based on the Company's Novel Drug Delivery System
(NDDS) and New Chemical Entity (NCE) research outcomes.

NOVEL DRUG DELIVERY SYSTEMS (NDDS)

The NDDS research at Ranbaxy focuses on maximizing the overall therapeutic and
commercial value of commonly prescribed pharmaceutical formulations by enhancing their
performance and reducing their adverse event profile. Such innovation also helps to improve
the overall patient convenience and compliance

The company's NDDS focus is mainly on the development of New Drug Applications
(NDA) / Abbreviated New Drug Applications (ANDAs) of oral controlled- release products
for the regulated markets. The Company's first significant international success using the
NDDS technology platform came in September 1999, when Ranbaxy licensed its once-a-day
Ciprofloxacin formulation on a worldwide basis to a multinational Company.

Ranbaxy's in-house NDDS programs are primarily focused on the oral segment.
Inhalation (patented devices) and trans-dermal (patented adhesive polymers) programs are
also being pursued through collaborations.

In the oral NDDS space, Ranbaxy has already developed four platform technologies
namely Gastro Retentive, Modified Matrix, Multi-particulate and AeroGel. Several products
leveraging these technologies have been successfully developed.

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NEW DRUG DISCOVERY RESEARCH (NDDR)

The Company’s NDDR program focuses on select therapeutic segments of Infectious

diseases, Metabolic diseases, Inflammatory/ Respiratory disease and Oncology. Presently,
the Company has 8-10 programs in the area of NDDR.

The company has commenced Phase-III clinical trials for its new Anti-malaria
combination drug, Arterolane maleate + Piperaquine phosphate in India, Bangladesh and
Thailand.

The Company’s potential drug candidate for Dyslipidemia RBx 10558, has been
successfully out-licensed to Pharmaceutical Product Development Inc. (PPD), a leading
global Contract Research Organization for clinical development for further development.

The Company is also profiling DPP-IV Inhibitors (Di-Peptidyl Peptidase IV

Inhibitors) for Type-2-diabetes, a selective Phosphodiesterase 4-b inhibitor for COPD and
Asthma, and a novel antibiotic antibacterial for Community Acquired Respiratory Tract
Infection.

The Company continues to forge ahead with its various research alliances, in order to
expedite its Drug Discovery program.

Significant progress has been made on two research programs, one each in the Anti-
infective and Respiratory segments, which are being pursued with GlaxoSmithKline (GSK).
Consequently, Ranbaxy and GSK have expanded the original agreement and Ranbaxy now
has the responsibility for advancing the selected compounds to ‘proof of concept’ in man,
whereby total milestone payments, excluding royalties, could exceed over US $ 100 Mn.

Under an alliance with a leading academic institution in India, a number of medicinal

plants are being evaluated as potential sources for novel pharmaceutical agents. The
Company also has collaborative research projects with other academic institutions in India in
the area of Respiratory and Infectious disease.

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R&D INFRASTRUCTURE

Ranbaxy is among the few Indian pharmaceutical companies in India to have

recognized the importance of Research & Development (R&D) and invested early in it. The
first research activity at Ranbaxy was initiated way back in the year 1973. Later when
Ranbaxy drew its ambitious global plans, it embarked on R&D in a significant way by
establishing its first R&D centre in 1994.

Ranbaxy today has state-of-the-art multi-disciplinary centre at Gurgaon (near New

Delhi) in India, with dedicated facilities for generics research and innovative research.

The prowess of Indian scientists is widely acknowledged today and it is believed that
the cost of developing a new drug in India can be one third to one fifth of doing the same, in
the developed world. It is a long term objective of Ranbaxy to build a proprietary
prescriptions business, based on its prowess in NDDS and NCE research.

Life at Ranbaxy

A career at Ranbaxy means an opportunity for ample learning & growth. It offers
avenues to work across the globe along side the finest minds. The Company offers a
challenging assignment, a world class working environment, professional management,
competitive salaries, stock options along with exceptional rewards.

If you have an appetite for challenges, we have an exciting career for you

Opportunities

The global spread of Ranbaxy and the blazing growth in business provides ample
opportunities for our employees to build careers in various fields. Opportunities have never
been a constraint for the deserving. We believe in employee growth that goes beyond vertical
movements and change in designations. Potential and performance are the pillars of career
progression at Ranbaxy. A robust development process supports this.

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 Our managers will generally have the opportunity to live and work in different
countries; such international experience will help them better understand our complex
business and grow both personally and professionally.

Salary and Benefits

Salaries and other benefits in Ranbaxy are comparable with the best in the industry
and one can expect to be rewarded highly if the performance is consistently outstanding.

Group Life Insurance, Medical Insurance and Pension plans are a few examples of the
benefits we provide to our employees and their dependents with adequate financial protection
on long term basis.
Stock Ownership

The ownership in business is fundamental to personal progression, we encourage you

to take ownership of your investments.

Stock ownership is a part of the compensation for our managers early in their career
at Ranbaxy: you will see the business results straight in your pay slip.

Products

Using the finest R&D and Manufacturing facilities, Ranbaxy Laboratories Limited
manufacture and markets generic pharmaceuticals, value added generic pharmaceuticals,
branded generics, active Pharmaceuticals (API) and intermediates.

The Company remains focused on ascending the value chain in the marketing of
pharmaceutical substances and is determined to bring in increased revenues from dosage
forms sales. Ranbaxy's diverse product basket of over 5,000 SKUs available in over 125
countries worldwide, encompasses a wide therapeutic mix covering a majority of the chronic
and acute segments. Healthcare trends project that the chronic treatment segments will
outpace the acute treatment segments, primarily driven by a growing aging population and
dominance of lifestyle diseases. Our robust performance in Cardiovasculars, Central Nervous

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System, Respiratory, Dermatology, Orthopedics, Nutritionals and Urology segments, clearly
indicates that the Company has strengthened its presence in the fast-growing chronic and
lifestyle disease segments.

Top 20 Molecules

1. Simvastatin

2. AmoxiClav Potassium

3. Isotretinoin

4. Amoxycillin and Combinations

5. Ciprofloxacin and Combinations

6. Ketorolac Tromethamine

7. Omeprazole and Combinations

8. Cefuroxime Axetil

9. Cephalexin

10. Loratadine and Combinations

11. Clarithromycin

12. Ginseng+Vitamins

13. Diclofenac and Combinations

14. Ranitidine

15. Cefaclor

16. Cefpodoxime Proxetil

17. Efavirenz

18. Atorvastatin and Combinations

19. Fenofibrate

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 20. Ofloxacin and Combinations

Manufacturing Facilities

An organizations’ capabilities and intent are strongly reflected in the product it

manufactures. In other words, the manufacturing competencies and facilities echo truly, the
R&D extent and the ability to implement it for the best of the market it targets.

RANBAXY possesses the manufacturing strengths that have established it as a

producer of world-class generics, branded generics and a major supplier of its range of
Active Pharmaceutical Ingredients for pharmaceutical products of companies worldwide.

Ranbaxy has world-class manufacturing facilities in 7 countries namely Ireland, India,

Malaysia, Nigeria, Romania, South Africa and USA. Its overseas facilities are designed to
cater to the requirements of the local regulatory bodies of that country while the Indian
facilities meet the requirements of all International Regulatory Agencies. Some of the
agencies such as MCA-UK, MCC-South Africa, FDA-USA and TGA-Australia, have
audited Ranbaxy’s manufacturing facilities for the compliance with international Good
Manufacturing Practices and have registered its products for safety, quality and efficacy.

Collaborative Research

We believe that networking in R&D is key for accelerated progress. We have developed
major strengths in the areas of Chemical Research, Bio-equivalent generics and Novel Drug
Delivery System (NDDS). We have taken initiatives to create infrastructure and capabilities
in the area of New Drug Discovery Research. We have state-of-art research and development
Facilities at our R&D Center.

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Major Alliances/ Collaborations

1. Drug Discovery & Clinical Development - GlaxoSmithKline

2. Drug Discovery & Clinical Development – Merck
3. Cipro OD Technology Out Licensed - Bayer
4. Statin molecule out licensed to PPD, USA

Our Focus

New Drug Discovery Research(NDDR)

1. Metabolic Diseases
2. Respiratory/ Inflammatory
3. Anti-Infectives
4. Oncology

We seek partners for -

Co-development in the above therapeutic areas for collaboration with companies /

universities / research institutions to undertake a discovery program starting from the
conceptual stage.

Novel Drug Delivery Systems (NDDS)

Our focus is on oral controlled release delivery systems
NDDS Technologies developed are on the following platforms

1. Multiparticulate
2. Modified matrix
3. Gastroretentive

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 4. Aerogel

Pharma Research

For Value Added Dosage Forms

Current

1. Soft gel
2. Dispersible tabs / chewable tabs
3. Taste masking
4. Gels
5. Effervescent

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 Theoretical Concepts

Working capital

Working capital is the firm’s holdings of current assets such as cash, receivable,
inventory and marketable securities. Every firm required working capital for its day-
to-day transactions such as purchasing raw material, for meeting salaries, wages,
rates, advertising etc.but there is much disagreement among various financial
authorities (financial managers, accountants, businessmen and economist) as to the
exact meaning of the term working capital. Working capital management is one of the
most important aspects of financial managers. Working capital management is

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concerned with the Problem that arise in attempting to manage the current assets, the
current Liabilities and the inter relationship between them. It also refers to
management of short time financing, negotiating favorable credit terms, controlling
the movement of cash; administration account receivables and monitoring the
investment in inventories. The interaction between current assets and current
liabilities is therefore, the main theme of theory of working capital management.
The aim of working capital management is to manage the firm’s current assets and
current liabilities in such a way that a satisfactory level of working capital is
maintained otherwise, if the firm cannot maintain a satisfactory level of working
capital it may become insolvent. The current assets should be large enough to cover
current liabilities. The terms current assets refers to those assets, which can be
converted into cash within a short period.E.g.Inventery, B/Resource, Marketable
securities etc current liabilities are those liabilities are B/Products, Bank over draft
and outstanding expenses. The interaction between current assets assets and current
liabilities is therefore, in other words; the goal of working capital management is to
manage the current assets, current liabilities in such a way that an acceptable level of
net working capital is maintained.

CURRENT ASSETS
 Cash and bank balances
 Short loans advances
 Bills receivable
 Sundry debtors
 Inventories such as,
• Raw materials
• Work-in-progress

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 • Finished goods
 Prepaid expenses
 Accrued incomes
 Money receivable with in 12 months
The term working capital refers to the networking capital. Networking capital is the
excess of current assets over current liabilities. Current liabilities are those liabilities,
which are intended to be paid in the ordinary course of business within a short period
of normally one accounting one accounting year.
CURRENT LIABILITIES
 Bills payable
 Sundry creditors
 Accounts payable
 Short term borrowings
 Dividend payable
 Stationary liabilities
 Accrued on outstanding expenses
 Bank over draft
 Provident fund due
 Any other payment due with in 12months

Significance of working capital

The world in which real firms function is not perfect. It is characterized by the firm’s
considerable uncertainty regarding the demand, market price, quality and availability
of its own products and those of suppliers. This real world circumstances introduce
problems to the firm must deal. While the firm has many strategies available to
address this circumstance, strategies that utilize investment or financing with working

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capital account often offer a substantial advantage over the other techniques. The
importance of working capital management is reflected in fact that financial managers
spend a great deal of time in managing correct assets and current liabilities like. The
management of working capital plays an importance role in maintaining the financial
health during the normal course of business. This critical role can be enunciated by
examine the flow of resources through the firm. By far the major flow is the working
capital cycle.

WORKING CAPITAL CYCLE

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This is the loop which starts at the cash and the marketable securities account, goes
trough the current account as direct labor and materials which are purchased and use
to produce inventory, which in turn is sold and generates accounts receivables, which
are finally collected to replenish cash. The major point to notice about this cycle is
that the turnover or velocity of resources through this loop is very high related to the
other inflows of the cash account.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital
 Gross working capital
 Net working capital
Gross working capital

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Gross working capital, simply called as working capital refers to the firm’s
investment in current assets. Current assets are the assets, which in ordinary course of
business can be converted into cash within an accounting year. Examples of current
assets are:

 Cash and bank balances

 Short term loans and advances
 Bills receivables
 Sundry debtors
 Inventory
 Prepaid expenses
 Accrued incomes
 Money receivable in 12 months

The gross working capital concept forces attention of two aspects of Current assets
management.
 Optimum investment in current assets and
 Financing of current assets.

The consideration of the level of investment in current assets should avoid two-danger
points-excessive and inadequate investment in current arranging funds to finance
current assets. When ever a need for working capital
Funds arise due to the increasing level of business activity or for any other reason
arrangement should be made quickly.

Net working capital

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 Net working capital refers to the difference between the current assets and current
liabilities. Current liabilities are those claims of outsiders, which are accepted, to
mature for payment with an accounting year and include creditors, bills payable and
outstanding expenses.
Net working capital = current assets – current liabilities
Net working capital can be positive or negative. A positive net working capital will
arise when current assets exceeds current liabilities. It is a quantitative concept.
 Indicate the liquidity position of the firm and
 Suggest the extent to which working capital needs may be financed
By permanent sources of funds.

TYPES OF WORKING CAPITAL:

Working capital can be divided into categories on the basis of time:

1. Permanent working capital.

2. Variable or temporary working capital.

Permanent working refers to minimum amount of investment in all current assets which
is required at all times to carryout minimum level of business activities in other words, it
represents the current assets required on a counting basis over the entire year the Tendon
committee has referred to this type of working capital as 'core current assets'.

Temporary working capital refers to that amount of working capital, which keeps on
fluctuating, from time to time on the basis of business activities. In other words it represents
additional currents assets required at different times operating year.

DETERMINING WORKING CAPITAL RAQUIREMENTS

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 Prudent principal of financial management calls for holding small amount of working
capital as possible as possible. So long as the firm is not exposed to undue solvency risk. In
order to forecast the working capital requirements more objectively the financial manager often
makes use of percentage sales method, or operating cycle method. Operating cycle method call
for a precise estimation of the length of time (in week/ moths) required for converting the raw
materials into finished goods and holding the finished stock and debtors as well. Thus it
indirectly takes into account the policy the policy requirement of inventory and credit
management apart from the cash.

A wide variety of factors influence the total investment in working capital in an

enterprise. Significant amount them are discussed here with.

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 1) NATURE OF BUSINESS

The nature of business has an important bearing on its working capital needs. Some
ventures like retail stores, construction companies etc., require on abundance of working capital.
In order cases, such as power generation and supply, the current assets play a minor and
secondary role.

2) MANUFACTURING CYCLE

An extended time span, between the raw material purchase and the completion of the
manufacturing process yielding the finished product, will obviously mean a larger tie-up of
funds in the form of enhanced working capital need. In such cases management should
endeavor to contain the intervening period and effect economy in working capital need, though
process changes where possible, or though affective organizations and co-ordination at all
levels of enterprise activity to ensure that the operating cycle time is minimal. Frequent
changes in set-ups, waiting for materials, tools or instructions and accumulations of working-
in progress have the inevitable consequence of extending the cycle time freezing.

3) CREDIT TERMS TO CUSTOMERS

The credit terms to customers influence the working capital level by determining ihe
level of investment in block debts. Management's has to decide on suitable credit policy relevant
to each customer based on the merits of his case. Unduly liberal credit policies and slack
collection procedures or permissive attitude in the matter of collection of out standings can
look up funds that would otherwise be available for operating needs.

4) VAGRIES IN SUPPLY OF RAW MATERIAL

The sources of certain raw material are few and irregular and pose problems in the matter
of procurement and holding, using up more funds. Materials that are available only in certain
seasons have to be obtained and stored, in advance, for the lean months. The working capital
requirements, in such, instances, will show seasonal fluctuations.

27
 5) SHIFTS IN DEMAND FOR PRODUCTS

Some manufactured are subject to seasonal fluctuations in sales. In the interest of

utilization of capacity. Steady productions will have to be maintained, Independent of shifts on
demand for finished products. Goods inventories will, therefore, pile up during off-season and
will require increased amounts of working capital to be provided. Financial planning will have
to incorporate this pattern of funds requirement associated with steady production and seals.

6) PRODUCTION POLICIES

To off-set the problem of having to find funds to support the mounting inventory levels
of finished goods until they got off-loaded in the peak seasons. Some companies report to
diversification of activities, enabling production of the main product to follow the seasonal
pattern of demand.

7) COMPETITIVE CONDITION

In a competitive market, wining and retaining customer satisfaction on a continuing

basis wills involve extra costs and present a variety of products will have to be manufactured
and stocked. This would mean higher levels of inventories in all stages and therefore, additional
working capital funds. More generous credit terms may have to be extended and the
investments in account receivable may have to be higher, requiring additional funds, the
degree of competition is thus an important factor influencing working capital requirements.

8) GROWTH AND EXPANSION PROGRAMMES

As business grows, additional working has to be found. In fact, the need for increased
working capital does not capital does not follow the growth in business activities, but
precedes it. Advance planning of working capital is thus a containing necessary for a growing
concern. Or else, the company may have substantial earning but little cash. With fast growth
they may be under constant financial pressure for external funds to reinforce internal
generation. Forward planning and continuous review therefore are absolutely for such
companies.

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 9) PROFITS LEVEL

By the very nature of things, some enterprises generate high margins compared to others.
The product category and the firm's position in the market may have conferred advantage.
Others may have struggle in a highly competitive environment. But profits cannot be considered
as available cash at the end of the period even as the company's operations are in progress cash
is used up for augmenting stocks, book debts and fixed assets. Elaborating planning and
projections of expected surplus, appropricite effective uses can planned, the funds application,
then occur by design and not be accident.

10) TAXATION

Tax liability is an inescapable element in working capital planning. It is a short-term

liability in cash. Advance taxes may have to be remitted in installments. On the basis of
estimated profits. Periods of high taxation impose additional strain on working capital. To be
able to get the best out of the operating plans of the company in advance and steer the resources
towards research and development. Export or other directions, which promise tax benefits and
promote the company's earnings.

11) DIVIDEND POLICY

Management has to preserve cash resources, but at the same, time it cannot fail to satisfy
investor expectations. Market prestige for the shares of the company has also to be natured and
maintained in its long-run interests. During periods of low profits, maintained of steady
dividends will involve draining resources but may needed to preserve the company's image

12) RESERVES POLICY

One of cherished goals of enterprise management is to build up adequate reserves out

of profits, the funds position getting priority of consideration over dividend policy.

13) DEPRECIATION POLICY

Depreciation policy centers on the determination of the amount to be provided as

depreciation charge make up the ultimate resource for replacement for worn out absolute

29
assets. The depreciation charges do not involve any cash outflow. Enhanced rates of
depreciation have effect of reducing profits corresponding, which in turn can help in holding
back distribution of -dividends. This process conserves cash. Depreciation policy, thus, exert,
influence on the status of working capital in the enterprise from time to time.

14) PRICE LIVEL CHANGES

Rapidly rising prices create the need for more funds for maintaining the present
volume off activity. For same levels off inventories, higher cash outlays are need. In an
inflationary setup, even operating expenses will grow for given levels of activity. Some
companies may be able to compensate parts of these cost increases through increase hi prices
levels on the working capital position will vary from company to company depending on the
nature off its. Operations and its standing in the market.

15) OPERATING EFFICIENCY

There is an obvious relationship between the operating efficiency of a company and its
working capital position. Waste elimination, improved coordinate to cut delays, efficiency in
operations and fuller utilization of resources is among the initiatives takes to avert erosion of
profits. They also have the effect of getting more out of a given volume of working capital.
Efficiency of operations accelerates the pace of the cycle, and improves the working turnover. It
releases the pressure on working capital by improving profitability and aiding added internal
generation of funds.

30
Analysis of Data & Interpretation

31
 STATEMENT SHOWING CHANGE IN WORKING CAPITAL
FOR THE YEAR 2004 AND 2005

(Rs in Millions)
st
Year ended as 31
Working Capital
Particulars March
2004 2005 Increase Decrease
Current Assests:

Inventory 8963.38 8909.33 ------ 54.05

Sundry Debtors 7846.89 8066.18 219.29 ------

Cash and Bank Balance 372.60 1165.93 793.33 ------

Other Current Assests 805.08 1179.16 374.08 ------

Loans and Advances 5094.25 3333.08 ------ 1761.17

Total (A) 23082.20 22653.68

Current Liabilities ------

Liabilities 8307.37 7282.80 1024.57 ------

Provisions 5078.10 4139.92 938.18

Total (B) 13385.47 11422.72

Networking Capital (A-B) 9696.73 11230.96

Increase in Working Capital 1534.23

1534.23
Total 11230.96 11230.96 3349.45 3349.45

32
25000 23082.2

20000

15000 13385.47
2004

10000 8963.38 2005

WorkingCaital
4822.63
5000

0
inventory current Asset Net Working Current Liabilities
Capital

INTERPRETATION:

The stock has been decreased by Rs.54.05 (millions) due to less purchases.The total current

assets were decreased by Rs.428.52 (millions)because of decreased in loans & advances.Net

working capital increased by Rs.1534.23 (millions).The total current liabilities were

decreased by Rs.1962.75 (millions) because of increased in other current assets.The overall

financial performance of the company was satisfactory.

33
 STATEMENT SHOWING CHANGE IN WORKING CAPITAL
FOR THE YEAR 2005 AND 2006

(Rs in Millions)
st
Year ended as 31 March Working Capital
Particulars
2005 2006 Increase Decrease
Current Assests:

Inventory 8909.33 16115.52 7206.19 ------

Sundry Debtors 8066.18 15716.33 7650.15 ------

Cash and Bank Balance 1165.93 2951.16 1785.23 ------

Other Current Assests 1179.16 978.05 ------ 201.11

Loans and Advances 3333.08 5343.03 2009.95 ------

Total (A) 22653.68 41104.09
Current Liabilities

Liabilities 7282.80 12127.86

Provisions 4139.92 5468.71 ------ 4845.06

Total (B) 11422.72 17596.57
Networking Capital (A-B) 11230.96 23507.52 ------ 1328.79
Increase in Working Capital 17230.96

12276.56
Total 23507.52 23507.52 18651.22 18651.22

34
 90000

80000

70000

60000

50000
WorkingCapital
41104.09
40000
2006
30000 2005
23507.52
20000 17596.51
16115.52
10000

0
Inventory Current Assests Current Net Working
Liabilities Capital

INTERPRETATION:

The stock has been increased by Rs.7206.19 (millions) due to more purchases.The total

current assets were increased by Rs.18450.41 (millions) because of increased in cash & Bank

Balances. The total current liabilities were increased by Rs.6173.85 (millions) because of

increased in other current liabilities.Net working capital increased by Rs.12276.56 (millions)

due to increased in current assets.The overall financial performance of the company was

satisfactory.

35
 STATEMENT SHOWING CHANGE IN WORKING CAPITAL
FOR THE YEAR 2006 AND 2007

(Rs in Millions)
st
Year ended as 31 March Working Capital
Particulars
2006 2007 Increase Decrease
Current Assests:

Inventory 16115.52 9760.71 ------ 6354.81

Sundry Debtors 15716.33 8829.07 ------ 6887.26

Cash and Bank Balance 2951.16 1804.50 ------ 1146.66

Other Current Assests 978.05 1020.25 42.20 ------

Loans and Advances 5343.03 6886.29 1543.26 ------

Total (A) 41104.09 28300.82
Current Liabilities

Liabilities 12127.86 8331.20

Provisions 5468.71 7381.42 3796.66 ------

Total (B) 17596.57 15712.62
Networking Capital (A-B) 23507.52 12588.20 ------ 1912.71
Increase in Working Capital 10919.32

10919.32
Total 23507.52 23507.52 16301.44 16301.44
80000

70000 1280.27

60000
28300.82
50000

40000 10919.32 WorkingCapital

1883.95 2007
30000 6354.81 12588.2
15712.62 2006
20000 9760.71 41104.09

10000 23507.52
16115.52 17596.57

0 36

Inventory Current Assests Current Net Working

Liabilities Capital
INTERPRETATION:

The stock has been decreased by Rs.6354.01 (millions) due to less purchases.The total

current assets were decreased by Rs.128.03 (millions) because of decreased in Bank Balances

& cash.The total current liabilities were decreased by Rs.1883.95 (millions) because of other

current liabilities were decreased.Net working capital decreased by Rs.10919.32

(millions)The overall financial performance of the company was not satisfactory

37
 STATEMENT SHOWING CHANGE IN WORKING CAPITAL
FOR THE YEAR 2007 AND 2008

(Rs in Millions)
Year ended as 31st March Working Capital
Particulars
2007 2008 Increase Decrease
Current Assests:

Inventory 9760.71 11985.19 2224.48 ------

Sundry Debtors 8829.07 10245.35 1416.28 ------

Cash and Bank Balance 1804.50 19349.39 17544.89 ------

Other Current Assests 1020.25 1345.53 325.28 ------

Loans and Advances 6886.29 8559.78 1673.49 ------

Total (A) 28300.82 51485.24
Current Liabilities

Liabilities 8331.20 35414.02

Provisions 7381.42 7311.95 ------ 27082.82

Total (B) 15712.62 42725.97
Networking Capital (A-B) 12588.20 8759.27 69.47 ------
Increase in Working Capital 3828.93

120000
3828.93
Total 12588.20 12588.20 27082.82 27082.82
100000
23184.42
80000
27013.35
60000 WorkingCapital
51485.24
2008
40000 2007
42725.97

20000 2224.48 3828.93

11985.19 28300.82 8759.27
9760.71 15712.62 12588.2
0 38

Inventory Current Assests Current Net Working

Liabilities Capital
INTERPRETATION:

The stock has been increased by Rs.2224.48 (millions) due to more purchases.The total

current assets were increased by Rs.23184.42 (millions) because of increased the cash &

Bank Balances. The total current liabilities were increased by Rs.27013.35 (millions) because

of increased in other current liabilities.Net working capital decreased by Rs.3878.93

(millions) due to increased in current liabilities.The overall financial performance of the

company was not satisfactory.

39
 STATEMENT SHOWING CHANGE IN WORKING CAPITAL
FOR THE YEAR 2008 AND 2009

(Rs in Millions)
Year ended as 31st March Working Capital
Particulars
2008 2009 Increase Decrease
Current Assests:

Inventory 11985.19 12304.82 319.63 ------

Sundry Debtors 10245.35 15346.48 5101.13 ------

Cash and Bank Balance 19349.39 7541.24 ------ 11808.15

Other Current Assests 1345.53 9648.16 8302.63 ------

Loans and Advances 8559.78 1558.74 ------ 7001.04

Total (A) 51485.24 46399.49
Current Liabilities

Liabilities 35414.02 26558.44

Provisions 7311.95 7630.34 8855.58 ------

Total (B) 42725.97 34188.78
Networking Capital (A-B) 8759.27 12210.66 ------ 318.39
Increase in Working Capital 3451.40

3451.40
Total 12210.66 12210.661 22578.98 22578.98

40
 120000

100000 5085.8

80000 8537.19
46399.49

60000 34188.78 WorkingCapital

2009
40000 2008

319.63 51485.24 3451.4

20000 42725.97
12304.82
12210.66
11985.19 8759.27
0
Inventory Current Assests Current Net Working
Liabilities Capital

INTERPRETATION:

The stock has been increased by Rs.319.63 (millions) due to more purchases.The total

current assets were decreased by Rs.5085.80 (millions) because of decreased in cash & Bank

Balances and loans & advances.The total current liabilities were decreased by Rs.8537.19

(millions) because of decreased current liabilities.Net working capital has been increased by

Rs. 345.14 (millions).The overall financial performance of the company was satisfactory.

41
 RATIO ANALYSIS

CURRENT RATIO:

Current ratio may be defined as the relationship between the current assets and the

current liabilities. This ratio is also known as working capital ratio, it measures of general

liquidity and is most widely used to make the analysis of a short term financial position or

liquidity of a firm. It is calculated by dividing the total current assets by total of the current

liabilities. Thus

Current Assets
Current Ratio =
Current Liabilities

CURRENT CURRENT
YEAR RATIO
ASSETS LIABILITES
2004-05 22653.68 11422.72 0.64:1
2005-06 41104.09 17596.57 2.34:1
2006-07 28300.82 15712.62 1.80:1
2007-08 51485.24 42725.97 1.20:1
2008-09 46399.44 34188.78 1.36:1
Average 143590.22 145410.77 0.99:1

42
INTERPRETATION:

The average current ratio of the five years is 0.99:1 it can observed that the
current ratio of RAMBAXY Laboratories Limited is less than the standard ration i.e.,
2:1. Hence the current of the company was not satisfactory.

43
QUICK RATIO:

The term liquidity refers to the ability of a firm to pay its short term obligation as and

when they become due. Liquid ratio may be defined as the relationship between liquid assets

and current or liquid liabilities. An asset is said to be liquid if it can be converted into cash

within a short period without loss of value.

Quick Assets
Quick Ratio=
Current Liabilities

QUICK CURRENT
YEAR RATIO
ASSETS LIABILITES
2004-05 13744.35 11422.72 1.20:1
2005-06 24988.57 17596.57 1.42:1
2006-07 18540.11 15712.62 1.17:1
2007-08 39500.05 42725.97 0.93:1
2008-09 34094.62 34188.78 0.99:1
Average 130867.73 145410.77 1.07:1

44
INTERPRETATION:

The average quick of five years is 1.07:1 it can be observed that the quick ratio
of RAMBAXY is here the standard ratio i.e. 1:1. Hence the quick ratio of the
company was satisfactory.

45
NET PROFIT RATIO:

The net profits are obtained after deducting income tax and generally non operating

expenses and incomes are excluded from the net profits for calculating this ratio. The

symptoms such as interest on investment out side the business. Profit and sales are fixed

assets and losses on sales of fixed assets.

Net Profit after tax

Net Profit Ratio= X 100
Net sales

NET PROFIT
YEAR NET SALES RATIO
AFTER TAX
2004-05 2236.98 8741.76 25.59
2005-06 5103.60 13866.94 36.81
2006-07 6177.20 12043.98 51.29
2007-08 10448.07 9532.36 109.60
2008-09 5719.84 11145.96 51.32
Average 29685.69 55331.00 53.65

46
INTERPRETATION:

The average net profit ratio of five years 53.65 of RAMBAXY it can be
observed that ne profit ratio of the company was satisfactory.

47
 GROSS PROFIT RATIO:

This ratio establishes relationship between gross profit and sales to measures the

relative efficiency of the corporation and to reflect it pricing policies it indicates the position

of trading results.

GROSS PROFIT
Gross profit Ratio= X 100
NET SALES

NET PROFIT
YEAR NET SALES RATIO
AFTER TAX
2004-05 2236.98 35697.69 62.66
2005-06 5153.60 61915.78 83.23
2006-07 4246.56 74617.56 56.91
2007-08 2162.69 45031.48 48.02
2008-09 5719.84 47974.89 119.2
Average 19519.67 264937.40 73.67

48
INTERPRETATION:

The average gross profit ratio of five years 73.67 of RAMBAXY it can be
observed that gross profit ratio of the company is very high. Higher the gross profit
greater the operating efficiency so gross profit ratio was satisfactory.

49
DEBIT EQUITY RATIO:

Debt equity ratio also known as external equity ratio is calculated to measure the

relative claims of outsiders and the share holders against the company assets. This ratio

indicate the relationship the outsiders funds and share holders fund usually this ratio is

calculated by dividing long term depth with share holder funds.

External Equities
Debt Equity Ratio=
Internal Equities

EXTERNAL INTERNAL
YEAR RATIO
EQUITIES EQUITIES
2004-05 10298.04 23770.19 0.44
2005-06 39556.19 25849.91 1.53
2006-07 35030.28 25372.16 1.38
2007-08 37253.71 35411.07 1.05
2008-09 33483.80 41346.05 0.81
Average 155622.02 151749.38 1.02

50
INTERPRETATION:

Average debt equity of five years 1.07:1 it can be observed that the debt equity the
ratio of RAMBAXY was more than standard ratio i.e, 1:1 hence the debt equity was not
satisfactory.

CONCLUSIONS

51
1. The financial position of the company was satisfactory.

2. The liquidity position of the company was satisfactory.

3. The cash and bank balances were maintaining sufficiently.

4. The operating expenses was increasing year to year.

5. The working capital management of the company was satisfactory.

6. The inventory levels of the company was satisfactory.

52
SUGGESTIONS

1. The company should decrease their operating expences, inorder to increase the
profits.

2. The networking capital of the company was fluctuations, so maintain standard.

3. The company should decrease the bank balance inorder to increase the efficiency.

4. The company has to maintain sufficient current assets.

5. The company has to maintain the results and surplus to expand its business
operations.

6. The company must increase its share capitals, which was not consistant over the
period of study.

53