BUSINESS FINANCE

BY KHADIJA"S GROUP MBA 24 B

SEARLE PHARMATEUCALS COMPANY

SEARLE COMPANY

INTRODUCTION:
Searle's mission is to build an organization which provides its customers with the best possible products and services in the healthcare and consumer industry.Today, Searle is one of the leading pharmaceutical companies in Pakistan having two state-ofthe art manufacturing facilities in Lahore, and Karachi, Pakistan

PRODUCTION: Searle has capabilities to produce following dosage forms: I. Tablets

II. III. IV. V. VI. Liquid Powder Capsule Injectable Semi Basic Chemical Manufacturing

THREE YEARS FINANCIAL SYSTEM:

We have analysis the three years performance of Searle Pakistan limited. All the calculations of ratio analysis regarding the Searle Pakistan.

Balance Sheet
ASSETS

2010

2011

2012

Non-current assets: Fixed assets - Property, plant and equipment - Intangible assets Long-term loans Long-term deposits Total non-current assets Current assets Stores and spares Stock-in-trade trade debts 3852 545421 1387399 2,604 850,160 1,061,501 2229 559231 1083534 740548 69445 1786 6086 817865 822,026 104,352 1,552 6,401 934,331 2647734 43030 146 6625 2797535

Loans and advances

Trade deposits and short term prepayments Other receivables Cash and bank balances Total current assets Total assets Long term investment

66352
67795 130415 132808 2334006 3151876

698,275
74,353 198,931 167,590 3,053,414 3,987,745

103414
68290 153172 9019 1978889 4776424 100000

Balance Sheet
EQUITY AND LIABILITIES Shareholders' equity Authorized share capital 50,000,000 (2010: 50,000,000) ordinary shares of Rs.10 each Issued, subscribed and paid-up capital General reserve Un appropriated profit Attributable to the holding Company's shareholders Non-controlling interest Total equity Surplus on revaluation of fixed assets Non-current liabilities Long term finances secured Liabilities against assets subject to finance leases Deferred liabilities _ _ _ Taxation Gratuity unfunded Total non-current liabilities Current liabilities Trade and other payables Accrued mark-up Short-term finances Long term finances Current portion of liabilities against assets subject to finance leases 10184 Provision for taxation net Total current liabilities Total liabilities Total equity and liabilities 500,000 500,000 306268 280251 770986 1,684,024 124060 1484565 207484 500000 306,268 280,251 1,097,505 _ 146,818 1,830,842 179,901

336895 280251 1369151 _ 1986297 161383 966067 2294 52000 26008

1357505

22927 17077 55,732 32,472 1046969 984,345 28,950 839,011 33333 10749 7,881 1,871,721 1,977,002 3,987,745

65681 29187 105,281 74429 23634 385997 80393 1345027 1462822 3151871

117795

846319 35501 655096 11,534 1342 1581775 2628744 4776424

99960

Income statement
PARTICULARS 2010 2011 2012

NET SALES 4,176,468 4,238,840 Cost of sold 2,389,703 2,352,430 Gross profit 1,786,765 1,886,410 selling and distribution expenses Administrative expenses 104,045 Amortization of intangible assets 1,131,898 1,124,827 1,252,330 OPERATING PROFIT 654,867 Other operating income 65,119 719,986 876,648 925,949 other operating expenses finance cost 112,355 66,416 Other charges 50,204 301,011 162,559 367,959 369,852 PROFIT BEFORE INCOME TAX Income tax expense 191,268 PROFIT FOR THE YEAR 366,159
EARNING PER SHARE 12

4,936,049 2,806,470 2,129,579 1,014,855 1,005,244 1,116,442 113,199 126,806 12,988 6,393 9,082 761,583 115,065 877,249 48,700

73,884 295,852 557,427 141,262 367,959 10.92 509,221 179,586 376,511 11.18 556,097

RATIO ANALYSIS
We analyze following ratios such as: 1: Liquidity ratios. Current Ratio Quick Ratio Cash Ratio Working capital 2: Profitability ratios: Gross profit margin Net profit margin c) Operating profit margin d) Cost of good sold e) Operating profit expense ratio f) Selling Expense ratio g) Administrative Expense Ratio: 3: Activity Ratio/Asset Management Ratio: Inventory turnover Ratio Account receivable turnover Ratio Fixed asset turnover ratio Total asset turnover ratio 4: Debt management ratio: Debt to equity ratio Long term debt ratio Return on equity Return on assets Basic earning power Total debt to asset ratio. 5: Market Ratios.

1: Liquidity ratios:
The ability of the firm to meet its current obligations (liabilities). Reflect the short-term financial strength and solvency of a firm. In fact, liquidity is a prerequisite for the very survival of a firm. The short-term creditors of the firm are interested in the short-term solvency or liquidity of a firm.

Current Ratio:
The current ratio is the ratio of total current assets to total current liabilities. In a business, a current ratio of 2:1 is considered an ideal one.
years current asset current liabilities20 current ratio

10

2334006

1345027

1.735285611

2011 2012

3,053,414 1978889

1,871,721 1581775

1.631340355 1.251055934

Current Ratio:

ANALYSIS:
Current ratio of Searle company 2010 is 1.73 and 2011 is 1.63 and 2012 is 1.25 so we show that decrease in current ratio it means that increase in current liabilities

Quick Ratio:
Quick ratio measures the liquidity of a business by matching its cash and near cash current assets with its total liabilities .It helps us to determine whether a business would be able to pay off all its debts by using its most liquid assets.
years 2010 2011 2012 current asset current liabilities prepaid payments quick ratio

2334006 3,053,414 1978889

1345027 1,871,721 1581775

67795 74,353 68290

1.27 1.13 0.99

QUICK RATIO

iii. Cash Ratio:

Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It measures the ability of a business to repay its current liabilities by only using its cash and cash equivalents and nothing else
YEAR 2010 2011 2012 CASH 132808 167590 9019 CURRENT LIABILITIES 1345027 1871721 1581775 0.098 0.089 0.057 CASH RATIO

cash ratio

WORKING CAPITAL
It means that total capital amount in company so we subtracted current liabilities from current assets.
CURRENT ASSETS
YEARS 2010 2011 2012 2334006 3053414 1978889

CURRENT LIABILITIES
1345027 1871721 1581775

WORKING CAPITAL
988979 1181693 397114

WORKING CAPITAL

2: Profitability ratios: A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.so we calculated following ratios:

GROSS PROFIT MARGIN: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings .Calculated as: COGS = Cost of Goods Sold

GROSS PROFIT MARGIN

YEARS GROSS PROFIT SALE GROSS PROFIT MARGIN

2010
2011 2012

1,786,765 2806470 1886410

4176468 4936049 4238840

43% 56% 44%

GROSS PROFIT MARGIN

NET PROFIT MARGIN:

We show that net profit margin also tells that net income and sales of a year Searle company.
YEARS EARNING AFTER TAX NET.SALE NET PROFIT MARGIN

2010 2011

366,159 376,511

4,176,468 4,936,049

9% 8%

2012

367,959

4,238,840

8.60%

NET PROFIT MARGIN:

OPERATING PROFIT MARGIN

It tells about the operating profit of a company
YEARS EARNING BEFORE INCOM TAX NET SALES OPERATING PROFIT MARGIN

2010 2011 2012

557,427 556097 509,221

4,176,427 4,936,049 4,238,840

13% 11% 11%

OPERATING PROFIT MARGIN:

COST OF GOOD SOLD

It takes analysis.It tells the about the total cost on producing goods so compans on production.
YEARS 2010 COST OF GOOD SOLD 2,389,703 NET SALES 4,176,468 COST OF GOOD SOLD RATIO 57%

2011
2012

376,511
2,352,430

4,936.05
4,238,840

57%
55%

COST OF GOOD SOLD RATIO:

OPERATING EXPENSE RATIO:

It tells about the total operating expense in company
YEARS OPERATING EXPENSES NET SALE OPERATING EXPENSE RATIO

2010 2011

1,118,900 1,243,248

4,176,468 4,936,049

27% 25%

2012

11.184843

4,238,840

26%

OPERATING EXPENSE RATIO:

Selling Expense ratio:

The costs that are associated with selling and distributing merchandise are termed as selling expenses. In other words, these costs are used for promoting and creating sales of merchandise.
years 2010 2011 2012 net sales 4176468 4238840 4936049 selling expense 1014855 1005244 1116442 selling expense ratio 24.6 23.7 22.6

SELLING EXPENSE RATIO

Administrative Expense Ratio

The Sales to Administrative Expenses ratio measures how well the company is keeping its administrative costs under control for its current sales level. Some companies include their sales and marketing expenses in with administrative expenses, but others will keep these figures separate.
years net sales administrative expense administrative expense ratio

2010

104045

2.49

2011

113199

2.67

2012

126806

2.56

Administrative Expense Ratio:

3: Activity Ratio/Asset Management Ratio

Asset Management Ratio measures how effectively the firm is manage with assets.

Inventory turnover Ratio:

This shows that how many times the company sells and replace its inventory.

Inventory turnover Ratio:

years CGS Average inventory Inventory turnover ratio 2010 2389703 545421 4.381391622 2011 2352430 850160 2.767043851 2012 2806470 559231 5.018444972

Inventory turnover Ratio:

ACCOUNT RECEIVEABLE TURNOVER RATIO

An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

years

net sales

account receivables

account receivable turnover ratio

2010

4176468

130415

32

2011

4238840

198931

21.3

2012

4936049

153172

32.22

ACCOUNT RECEIVEABLE TURNOVER RATIO

DSO ACCOUNT RECEIVABLE TURNOVER RATIO:

We analysis according to days outstanding ratio of account receivables.

years days account receivable turnover ratio DSO

2010

365

32

11.4

2011

365

21.3

17.13

2012

365

32.22

11.32

Fixed asset turnover ratio:

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.

years

net sales

fixed assets

total fixed asset turnover ratio

2010

4176468

5.1

817865
2011 4238840 4.5

934,331
2012 4936049 1.76

2797535

Total Asset Turnover Ratio:

The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars This ratio is more useful for growth companies to check if in fact they are growing revenue in proportion to sales. Also known as the Asset Turnover Ratio.
years
2010 2011 2012

net sales
4176468 4238840 4936049

average total assets

3151876 3987745 4776424

total asset turnover ratio

1.325073702 1.062966664 1.033419353

3: Debt management ratios:

Debt ratios are said to be a set of ratios that measures how effectively a firm manages its debts. These ratios are also known as solvency ratios.

Debt to Equity Ratio

This ratio shows the extent to which debt is covered by shareholders funds. Formula Debt to Equity Ratio= Total debt / Total shareholder equity

DSO

Long term debt to equity ratio:

This ratio is similar to the debt to equity ratio. It separates long-term debt from overall debt. This gives investors a more accurate long-term picture of a companys ability to pay its debts. Formula for this ratio is as follows: Long term debt to equity ratio=long term debt / shareholder equity
years long term debt shareholder equity long term debt to equity ratio=

2010

11611919

4134208

2.8

2011

14653399

3133287

4.68

Long term debt to equity ratio

Total debt to total assets ratio=

This ratio measures the percentage of funds provided by creditors Formula for total debt to total assets is Debt ratio=-total debt /total assets

years

net sales

average total assets

total asset turnover ratio

2010

4176468

3151876

1.325073702

2011

4238840

3987745

1.062966664

2012

4936049

4776424

1.033419353

Total debt to total assets ratio=

Return on equity:
The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder's Equity
YEARS NET INCOME TOTAL STOCK HOLDER EQUTY Return on equity

2010

366159

1484565

24.60%

2011
2012

367959
376511

1830842
1986297

20%
19%

Return on equity:

Return on asset:
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". The formula for return on assets is:

years net income total assets 2010 366159 2011 367959 2012 376511

return on assets 3151876 11.61717656 3987745 9.227244972 4776424 7.882696344

f: Basic earning power:

A business's ability to generate profit from conducting its operations . Earnings power is used to analyze stocks to assess whether the underlying company is worthy of investment. Possessing greater long-term earnings power is one indication that a stock may be a good investment.
YEARS 2010 2011 2012 EBIT 557427 509221 556097 TOTAL ASSETS 3151876 3987745 4776424 BASIC EARNING POWER 17.60% 12.70% 11.60%

BASIC EARNING POWER:

Market Ratio:
A ratio used to find the value of a company by comparing the book value of a firm to its market value. Book value is calculated by looking at the firm's historical cost, or accounting value. Market value is determined in the stock market through its market capitalization. Formula:

Market Ratio:
market ratios: Price Earnings Ratio: Market price per share(MPS) Earning Per Share (EPS) Price Earning Ratio= 0.44 Market to Book Ratio: Market price per share Book Value per share Market to Book Ratio= Book value Per share : Book value of Equity 4134208 No of shares outstanding Book value Per share 0.97 0.59 Price to Cash flow ratio : Market price per share Cash flow per share -0.36114 Price to Cash flow ratio= Cash Flow per share : Net Income+ -2583955 Depreciation 1043975 No of shares outstanding Cash Flow per share= 3133287 4264108 0.73 3.11 -0.0979 -8.61 -1769036 1253266 4264108 -0.36 2.06 0.4039 -21.04 496194 1635375 5267130 -0.10 4.63 11.46 3828861 5267130 3.11 7.08 0.55 3.11 0.9695 3.21 2.06 3.72 5.51 2.06 0.5948 3.46 4.63 0.84

4.63 0.73 6.38

5277340

5277340 0.40

COMMON SIZE ANALYSIS:

Assets 2010 2011 property plant and equipment 0.234957 intangible assets 0.0220329 long term loans 0.0005666 lonng term deposits 0.0019309 total fixed assets 0.2594851 stores and spares 0.0012221 stock in trade 0.1730465 trade debts 0.440182 0.2661908 loan advances 0.0210516 trade deposits and prepayments 0.0215094 other receivables 0.0413769 cash and bank balances 0.0421362 total current assets 0.7405133 share holder equity authroized share capital 0.1586357 issued and paid up capital 0.0971701 general reserve 0.0889156 unapproprriated profit 0.23446118 attributable to the holding company's shareholders non controlling interest 0.0393607 total equity 0.47101 0.4591171 surplus on revalution on fixed assets non current liabilities long term finances-secured liabilities against assets subject to finance leases deferred liabilities taxation 0.0208387 0.0139758 gratuity-unfunded 0.0092602 total non current liabilities 0.037373 current liabilities trade and other payable 0.0236142 accured mark-up 0.0074984 short term finances 0.1224658 current portion of liabilities against assets subject to assets provision for taxation-net 0.0255064 total current liabilities 0.4267386 total equity and liabilities 1 2012 0.2061381 0.0261682 0.0003892 0.0016052 0.2343006 0.000653 0.2131932 0.2268505 0.1751052 0.0186454 0.0498856 0.0420263 0.7656994 0.1253841 0.0768023 0.0702781 0.2752195 0.4306975 0.0368173 0.4158544 0.0658287 common analysis 0.554334 property plant/total assets 0.0090088 intangible assets/total assets 0.0000306 long term loans/total assets 0.0013996 long term deposits/total assets 0.5856965 total fixed assets/total assets 0.0004667 stores and spares/total assets 0.1170815 stock in trade /total assets trade debts/total assets 0.216509 loan advances/total assets 0.0142973 trade deposits/total assets 0.0320683 other receivables/total assets 0.0018882 cash and bank balance/total assets 0.4143035 total current assets/total assets 0.1046808 0.0705329 0.0586738 0.2866477 0.4222988 autorized share capital/total assets issued capital/total assets General reserve/total assets unappropriated profit/total assets attributable to the holding/t.assets non controlling interest/total assets total equity/total assets 0.0451135 0.0337874 surplus on assets/total assets 0.2022574 0.0042824 long term finance/total assets 0.0004803 liabilities against assets/total assets

0.0072741 0.0108868 0.0081429 0.0264011 0.2468425 0.0072597 0.2152555 finance leases 0.0019763 0.4693683 1

taxation/total assets 0.0556919 gratuity unfunded/total assets 0.2191952 total non current liabilities/T.assets 0.1771867 0.0074325 0.137152 0.0034103 0.0021321 0.331163 1 trade and payable/total assets accured markup/total assets short term finances/total assets 0.0029591 0.0069787 provision for taxation/total assets total current liabilities/total assets

current portion of liabilities/total

INDEX ANALYSIS:
ASSETS 2010 Non-current assets: Fixed assets 2011

- Property, plant and equipment 11% - Intangible assets Long-term loans Long-term deposits Total non-current assets Current assets Stores and spares Stock-in-trade trade debts 23.48% 2.07% Loans and advances Trade deposits and short term prepayments Other receivables Cash and bank balances Total current assets Total assets 19.77% Long term investment 0 0.00%

222% 50.26% 13.10% 5.17% 104.24% 58.76% 90.59% 3.49% 199.41%

32.39% 55.87%
952.37% 9.67% 52.53% 26.18% 30.82%

14.40% 34.22%
85.19% 8.15% 23.00% 94.62% 35.19% 26.52%

INDEX ANALYSIS:
EQUITY AND LIABILITIES Shareholders' equity Authorized share capital 0 0 Issued, subscribed and paid-up capital General reserve Un appropriated profit Attributable to the holding Company's shareholders Non-controlling interest Total equity Surplus on revaluation of fixed assets Non-current liabilities Long term finances secured Liabilities against assets subject to finance leases Deferred liabilities Taxation Gratuity unfunded Total non-current liabilities Current liabilities Trade and other payables Accrued mark-up Short-term finances Long term finances Current portion of liabilities against assets subject to finance leases Provision for taxation net Total current liabilities Total liabilities Total equity and liabilities

24.05%

0 0 42.35% 0 18.34% 23.33% 13.29% 0 25.51% 15.14% 11.25% 8.94% 1222.25% 22.49% 117.36% 0.00% 90.19% 39.19% 35.15% 26.52%

10% 0 24.75% 0 8.49% 10.29% 0 86.56% 6.69% 19.91%

10.62%

14.02% 22.62% 21.92% 7.30% 82.97% 15.49% 32.96% 19.77% 11.70%

THANK YOU
SO MUCH.