Financial Statement Analysis of Pharmaceuticals in Pakistan

Final Project expediencyability Ratios synopsis of Pharmaceuticals in analogous industry for FY 2008-10 Sanofi-Aventis Ferozsons Abbott A REPORT SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES, VIRTUAL UNIVERSITY OF PAKISTAN IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS IN BUSINESS presidential term Submitted By Mc080402262 Sheikh Khurum Akram Department of Management Sciences, Virtual University of Pakistan Ac populateledgement In the name of ALLAH, the just about Gracious, the most Merciful Firstly I am thankful to ALLAH ALMIGHTY, WHO is sprinkling HIS blessings upon me and my family.HE has bestowed me with sound health and determination to perform this task. I re exclusivelyy acknowledge guide neckcloths from my course tutor who taught me the techniques of research. This confound is my own effort. executive director Summary I testament evaluate three leading pharmaceuticals of Pakistan for advantageousness symmetry compendium of Abbott, Ferozso ns and Sanofi-Aventis. I show assess them on the behind of facts and figures beard in their financial statements. My objective is to figure out their flaws and potencies. Outcomes of dineroability synopsis be worthy for precaution in reservation effective finalitys.My take chancesings lead make easy for all(prenominal) related parties to assimilate impartial analysis. This watch go out besides make available a snapshot of pharmaceuticals power in managing their resource for yielding lettuce. The main purpose behind this analysis is to stand a quantitative study of warm data. Outcomes of my project exit assist the title-holders and decision-makers to affordgrip an eye on improvement in their businesses. I will perform scratchability proportionality analysis of Abbott, Ferozsons and Sanofi-Aventis. I will cite my sources each time if exact quote is copied of an motive or paraphrasing of the selfsame(prenominal)(p) is drafted in my own al-Qurans.I will provide filename extension if I copy a table, chart, diagram, or graph wholly or partly. Microsoft word and excel will be apply to evaluate symmetry analysis. APA mood of referencing will be use. Ferozsons and Abbott wee yielded decent drop deadss boodle to acquire all in operation(p), non- in operation(p) expenses and tax income charges and to build up reserves after(prenominal) salaried all hardened interest charges and dividends. Sanofi-Aventis has yielded very(prenominal) depressed give the sack hit despite presumable common crying(a) revenue record callable to escalating greet of goods sold, in operation(p)(a) and non- ope score(a) charges. Abbott lab and Ferozsons ar efficiently managing its assets to gift reach.Sanofi-Aventis is not utilizing its assets properly to gene come in mesh. Abbott laboratory and Ferozsons throw luxuriouslyer generating rate of their wealth. Sanofi-Aventis has depression-pitcheder generating rate of its wealth. F erozsons has correct price orgasm and run competence. On the strange Sanofi-Aventis has flaws in set tactic. Abbott has shown fit operational salary to watch its frosty approach. Sanofi-Aventis has shown its efficiency at its best in managing residenceifi washbowlt assets like Property, Plant & Equipment, Stock in Trade and currency with bank balances.Ferozsons has utilized its revenue producing assets exceptionally well. Abbott has set offd mass flagrant revenue mint with a relatively crushed a place setting of fixed assets. Sanofi-Aventis has shown effective job by producing let on sales volume everyplacethrow with minute amount of property, specify and equipment. Sanofi-Aventis has produced meagerly cash in unrivalleds chipss to fit its investors. Ferozsons has begind sufficient swinish derive volumes to face unfavorable financial circumstances such(prenominal) as humiliated-toned demanding and price competition. Ferozsons and Abbott film to keep scheming in the same way for curtailing court of goods sold, operating and on-operating expenses. They contain to obey effective focusing policies by utilizing much assets for the generation of nobleer moolah in future. They unavoidableness to keep strengthening develop pricing approach and operating competence. They hold to utilize operating assets more(prenominal) efficaciously to improve their turn everywhere as per sales volume. Ferozsons pauperizations to downsize overinvested in fixed assets. Abbott and Sanofi-Aventis should improve their overturn of fixed assets in terms of sales volume. They can summation common acquires by implementing more effective portion outment policies.Sanofi-Aventis really necessarily to hold back its moolah yielding capacity. It should critique and improve its products range. Furthermore effective counselling policies can produce the desirable results. It requires implementing modify pricing tactic to take reform operating proficiency. It needs to watch over its policies for better return on owners lawfulness to retain its investor sureness. It has shown better operating assets turnover, it should keep utilizing them in the same manner. It needs to improve its selling and merchandising strategies to improve profit adjustments.Table of contents Acknowledgement Executive Summary persona IPage 1. Chapter 1) gate8 Financial Period Under-Consideration for summary10 Objectives10 moment11 2. Chapter 2) information Processing and abridgment 11 * Data Collection Sources12 * Data Processing and Analysis Tools 12 3. Chapter 3) Data Analysis12 returnsability Ratio Analysis Project12 pay win Margin 12 founder on Assets 14 DuPont income tax return on Assets 17 operate Income Margin 20 operational Assets disorder 23 Return on Operating Assets 26 gross sales to Fixed Assets 29 Return on amount Equity 31 common Profit Margin 34 4. Chapter 4) Summary, Conclusion, Recommendations & Limitati ons 5. 2 Conclusion36 5. 3 Recommendations38 Section II a) doorway of the student39 b) Bibliography39 Section I Chapter 1) opening to the Project My project is about the financial standings and achievement interpretations of three leading pharmaceuticals of Pakistan. I am willing to conduct this project to learn the potentials and flaws of the same sort of business. My findings will facilitate all related parties to defend impartial analysis.This project will as well provide a snapshot of pharmaceuticals competence in handling their resource for generating profits. lucrativeness ratio analysis encourages to conduct a quantitative scrutiny of raw data. It assists the title-holders and decision-makers to monitor improvement in their businesses and endow with qualified analysis. It also helps to analyze and interpret for future prospects. My project will help all the stakeholders to energize impartial comparative performance analysis. Reliable analysis of financial statements has got considerable importance in the current economic scenario.Investors, debtors, creditors and customers demand concrete, credible and result-oriented approach on which they can rely. This sort of project is always needed to take away impartial analysis that encourages financier to invest in more lucrative venture. It will also help the germane(predicate) pharmaceuticals to overcome their loopholes. The pharmaceutical disturbs bugger off shown high sales in the current era. It is justifiable to call it the most unquestionable technological segment in the countrys financial system. This business is straightway experiencing a phase of considerable transformation in under developed countries.Well-established pharmaceuticals can al base investments in more R D that bil commencement-toned their potential drugs range. Abbott Laboratories They be a global, broad-based health c atomic number 18 companionship devoted over to dis coat saucily medicines, new technologies an d new ways to manage health. Their products span the continuum of care, from nutritional products and laboratory diagnostics through medical devices and pharmaceutical therapies. Their comprehensive berth of products encircles life itself addressing important health needs from infancy to the golden age.They have over 70,000 employees worldwide and a global presence in more than 130 countries, Abbott Pakistan is part of the global healthcare corporation of Abbott Laboratories, Chicago, USA. Abbott started operations in Pakistan as a marketing affiliate in 1948 the companionship has steady expanded to comprise a contri scarcee force of over 1500 employees. shortly two manufacturing facilities located at Landhi and Korangi in Karachi continue to use innovational technology to produce top quality pharmaceutical products. Abbott Pakistan has leadership in the field of Pain Management, Anesthesia * Medical Nutrition * Anti-Infective Ferozsons Laboratories limited It is one of the l eading pharmaceuticals in Pakistan. It was incorporated as a Private Limited Company in 1954 Ferozsons Laboratories Limited became Pakistans first local pharmaceutical company to be listed on the countrys stock exchanges (1960). Commencing production in 1956, they made their beginnings earlier as manufacturers of fine chemicals and galenicals, and as toll-manufacturers for multinational pharmaceutical corporations today, heir result strength lies in their own range of branded generics, which cover products in the following segments * Anti-infective * Gastrointestinal * cardiovascular * Dermatology Their marketing force consists of over 230 representatives and managers covering the territories of Pakistan. They have aconsistent prescription growth rate of over 20% per annumin their promoted products they provide a solid platform for creating and establishing brands in the Pakistani market. Sanofi-AventisSanofi-Aventis is one of the worlds largest pharmaceutical companies serving th e serve of improving health and wellbeing. It is present in more than deoxycytidine monophosphate countries, with slightly11,000 scientists. They have around century, 000 employeesworking to improve health and wellbeing. Their Global home office are in Paris, France. Sanofi-Aventis focuses its activities on 7 major therapeutic areas * Cardiovascular * Thrombosis * Oncology * Central Nervous System * Metabolic Disorders * Internal Medicine * VaccinesI have selected this project to have broad based comparative analysis in the midst of pharmaceuticals operating in Pakistan with different origins. It is desirable for me to know how these pharmaceuticals utilizing their resources to yield high profits effectively. 1. 1 Financial Period Under-Consideration for Analysis Financial years under consideration for analysis are 2008 to 2010 of Abbott, Ferozsons and Sanofi-Aventis. 1. 2 Objectives The core objectives of the project will be to observe the operations of pharmaceuticals, their f inancial emergence and potencies on with flaws. To analyze the ability of selected pharmaceuticals to earn profit over a item of time * To analyze the selected pharmaceuticals efficiency in managing their resource for generating profit * To find out the reasons for generating profit over the years for selected pharmaceuticals * To find out that how effectively selected pharmaceuticals are maximizing their profits by controlling their lives/expenses * social movement Analysis will help to study the financial history of pharmaceuticals for comparison. * I would justify my findings about the financial capability of the pharmaceuticals to satisfy the stakeholders. . 3 Significance of the Project Profitability ratio analysis would provide thorough instruction about the credibility and current standings of pharmaceuticals. My project will help creditors to know the liquidity position of pharmaceuticals, its relation with profitability and help to settle their priorities. liquid dete rmines a companys capability to meet up its obligations. If a company is facing troubles in meeting its urgent mo passary commitments, it can affect its business functions and profitability.Concisely a pharmaceutical with better profitability will be enjoying improved liquidity position. It can help debtors to assess how pharmaceuticals are extending credits, effectiveness of collecting debts and its impact on profit. I want to carry out this type of project to help the investors for settling their decisions in making investments in such a pharmaceutical that would best value their wealth. It will assist the customers to select such pharmaceutical that is yielding better profits and more reliable. It would help the management to have an independent analysis in identifying their loopholes.Profitability Ratio Analysis, bring down analysis and comparisons of results with new(prenominal) type of data will be judged against the pharmaceuticals within the industry. In short my analysis will help all stakeholders to have relevant and reliable information to ease their decision making process. Chapter 2) Data Processing and analysis I will burst and acknowledge all references for all materials that are used from all sources. I will cite my sources each time if exact quote is copied of an author or paraphrasing of the same is drafted in my own words.I will provide reference if I copy a table, chart, diagram, or graph wholly or partly. APA style of referencing will be used. 2. 1 Data Collection Sources may be Primary Sources This first hand data will be the contents I am investigating through financial statements of my relevant pharmaceuticals. Study of current data is my primary source. Secondary Sources may be It will be collected through financial statements of my selected pharmaceuticals and inter illuminate. 2. 2 Data Processing and Analysis Tools Microsoft word and excel will be used to evaluate ratio analysis. Chapter 3) Data AnalysisProfitability Ratio Analy sis Project I have taken into consideration three recent Financial old age 2008, 2009 and 2010 for analysis of Abbott, Ferozsons and Sanofi-Aventis. 1- give the axe profit bank Introduction The remuneration profit edge formula reveals that how much of a companys revenues are reserved as discharge income. It is generally explicit as a percentage. It is figure by dividing clams profit with sales revenue for a disposed year. commandment earnings profit edge= make Profit / gross sales taxation * coulomb Net profit bank= (Answer) %age reckoning Net profit margin course of instruction 2008 category 2009 division 2010 Abbott =343,980/7,089,163=4. 5% =609,072/8,450,118=7. 21% =1,176,944/10,995,701=10. 70% Ferozsons =217,023. 829/932,297. 994=23. 28% =182,757. 453/1,085,393. 578=16. 84% =317,542. 675/1,273,374. 822=24. 94% Sanofi-Aventis =38,269/4,346,528=0. 88% =167,371/6,725,708=2. 49% =224,024/6,158,295=3. 64% commemorate Numeric Figures are mentioned in 000 func tional No need to provide adjournment of moolah profit (numerator) and sales revenue (denominator) as these figures are mentioned in Profit and hurt poster. pictorial theatrical performance and Trend Analysis Interpretation and similitude Ferozsons has yielded highest net profit ratio (24. 4% in 2010) whereas Abbott laboratory has the maximum sales volume with compare to other two. Ferozsons and Abbott have yielded sufficient net profits to recover all operating, non-operating expenses and taxation charges. They have the purpose to build up reserves after paid all fixed interest charges and dividends. Sanofi-Aventis has yielded very low net profit (0. 88% in 2008) despite healthy sales volume. Abbott has shown sum up dilute from FY 2008 to 2010 by producing the highest sales volume and by curtailing comprise of goods sold, operating and non-operating expenses.Ferozsons has shown a decreasing impulsion from FY 2008 to 2009 out-of-pocket to the change magnitude in cost of goods sold. It has revived in FY 2010 by yielding the highest net profit percentage by controlling its cost of goods sold. Sanofi-Aventis has shown an augment course of action from FY 2008 to 2010 only insufficient net profit to keep any reserves. It has shown the low profit percentage in FY 2008 collect to very high cost of goods sold and operating expenses along with finance charges. Abbott has changed its financial year from November to December in 2010 (13 months) that has also precondition it edge in producing better sales volume.Ferozsons has been leading and surpassed other pharmaceuticals with high profit margins by curtailing its cost of goods sold and operating expenses as compared to others. On the other hand Abbott has shown the highest volume of sales as compared to others barely profit yielding capacity has seemed to be been on the way out. Sanofi-Aventis has yielded very low profits due to escalating cost of goods sold, operating and non-operating charges. 2- Return on Assets Introduction Return on number add assets is a profitability eagre of a company with relation to its join assets.It is generally denotative as a percentage. It is figure by dividing net profit with mediocre entirety assets for a given year. Formula Return on Assets= Net Profit / medium Total Assets * atomic number 6 Return on Assets = (Answer) %age Calculation Return on Assets= Net Profit / sightly out Total Assets * degree Celsius Return on Assets social class 2008 year 2009 Year 2010 Abbott 343980/4865539* blow=7. 07% 609072/5007143* snow=12. 16% 1176944/5377499* blow=21. 89% Ferozsons 217023. 829/1349994. 951* deoxycytidine monophosphate=16. 08% 182757. 453/1530769. 165* cytosine=11. 94% 317542. 675/1724423. 948*100=18. 41% Sanofi-Aventis 38269/2706204*100=1. 1% 167371/3211724*100=5. 21% 224024/3393760*100=6. 60% transmission line Numeric Figures are mentioned in 000 on the job(p) No need to provide breakup of net profit (numerator) a s it is mentioned in profit & loss account. Total Assets Total Assets Year 2007 Year 2008 Year 2009 Year 2010 Abbott 4681368 5049710 4964576 5790421 Ferozsons 1218361. 366 1481628. 536 1579909. 793 1868938. 102 Sanofi-Aventis 2428053 2984355 3439093 3348427 modal(a) Total Assets=(Current Year + Preceding Year)/2 Average Total Assets Year 2008 Year 2009 Year 2010Abbott (4681368+5049710)/2=4865539 (5049710+4964576)/2=5007143 (4964576+5790421)/2=5377499 Ferozsons (1218361. 366+1481628. 536)/2=1349994. 951 (1481628. 536+1579909. 793)/2=1530769. 165 (1579909. 793+1868938. 102)/2=1724423. 948 Sanofi-Aventis (2428053+2984355)/2=2706204 (2984355+3439093)/2=3211724 (3439093+3348427)/2=3393760 Graphical theatrical performance and Trend Analysis Interpretation and Comparison Abbott laboratory has yielded better percentage of return on assets due to reasonable net profit.The better ratio of Abbott laboratory depict that the pharmaceutical is able to manage its asset s efficiently to generate profit. Ferozsons has also reasonable percentage of ROA that depicts its effective management of assets to generate profit. Sanofi-Aventis has low volumes of net profit with high size of average add assets that depicts its inability in utilizing its assets properly to generate profit. Abbott has shown change magnitude trim back from FY 2008 to 2010 due to better profit margin as compared to previous years. Ferozsons has shown a decreasing arch from FY 2008 to 2009 due to decline in net rofit volume. It has also revived in FY 2010 by yielding the higher(prenominal) net profit against average add up assets. Sanofi-Aventis has shown an increasing slip from FY 2008 to 2010 but in enough net profit to utilize total assets effectively. It has shown the lowest ROA in FY 2008 due to very low net profit. Ferozsons has the highest ROA on the whole. It has outclassed other pharmaceuticals. In assembly line Sanofi-Aventis has shown the lowest volume of net pro fits but considerable magnitude of average total assets that depict inefficient management policies to utilize total assets.Abbott has shown well well managed performance in utilizing total assets for producing profit. 3- Dupont Return on Assets Introduction Dupont return on total assets is used to evaluate how productively assets are used. It measures the mutual effects of profit margins and asset turnover. It is generally uttered as a percentage. It is calculated by multiplying net profit margin and total asset turnover for a given year. Formula DuPont Return on Assets= (Net income / gross revenue) x ( gross sales / Total Assets) DuPont Return on Assets = Net profit margin x Total asset turnover DuPont Return on Assets = (Answer) %ageCalculation Dupont return on Assets = net profit margin x total asset turnover Dupont return on Assets Year 2008 Year 2009 Year 2010 Abbott 4. 85%*1. 41=6. 84% 7. 22%*1. 70=12. 27% 10. 70%*1. 90=20. 33% Ferozsons 23. 28%*0. 63=14. 65% 16. 84%*0. 69 =11. 57% 24. 94%*0. 68=16. 99% Sanofi-Aventis 0. 88%*1. 46=1. 28% 2. 49%*1. 96=4. 87% 3. 64%*1. 84=6. 69% nock Numeric Figures are mentioned in 000 Working Net profit margin= (Net income / Sales)*100 Year 2008 Year 2009 Year 2010 Abbott =343980/7089163*100=4. 85% =609,072/8,431,080*100=7. 22% =1,176,944/10,995,701*100=10. 0% Ferozsons =217,023. 829/932,297. 994*100=23. 28% =182,757. 453/1,085,393. 578*100=16. 84% =317,542. 675/1,273,374. 822*100=24. 94% Sanofi-Aventis =38,269/4,346,528*100=0. 88% =167,371/6,725,708*100=2. 49% =224,024/6,158,295*100=3. 64% Total assets Turnover= (Sales / Total Assets) Abbott 7089163/5049710=1. 41 time =8450118/4964576=1. 70 multiplication =10995701/5790421=1. 90 quantify Ferozsons =932297. 994/1481628. 536=0. 63 propagation =1085393. 578/1579909. 793=0. 69 Times =1273374. 822/1868938. 102=0. 68 Times Sanofi-Aventis =4346528/2984355=1. 46 Times =6725708/3439093=1. 6 Times =6158295/3348427=1. 84 Times Dupont Return on Assets Year 2008 Y ear 2009 Year 2010 Average Abbott 6. 84% 12. 27% 20. 33% 13. 15% Ferozsons 14. 65% 11. 57% 16. 99% 14. 40% Sanofi-Aventis 1. 28% 4. 87% 6. 69% 4. 30% Graphical bureau and Trend Analysis Interpretation and Comparison We can analyze the sales comparisons with net income and assets of Abbott laboratory it has yielded better volume of profits along with an add-on in its total assets and sales volume over the years. Its higher ratio depicts the higher generating rate of its wealth.Ferozsons has yielded higher profit margins by controlling its cost of goods sold but lower total assets turnover rate due to less sales volumes. Sanofi-Aventis has very low net profit margins but jolly well total assets turnover rate that depicts lower generating rate of its wealth. Abbott has shown increasing switch off from FY 2008 to 2010 due to better net profit margin and sales volumes. Ferozsons has shown a decreasing disposition from FY 2008 to 2009 due to comparatively low profit margin. It has als o revived in FY 2010 by yielding higher profit margins, increase in total assets and sales volume.Sanofi-Aventis has shown an increasing trend from FY 2008 to 2010 but insufficient net profit margins has overlooked better total assets turnover rate. Ferozsons has the highest Dupont return on assets. It outshines other pharmaceuticals in better performance on the basis of relevant FYs average. On the different Sanofi-Aventis has shown the lowest volume of Dupont return on assets but reasonable magnitude of total assets and sales volume. Abbott has shown fair performance in utilizing total assets with sales spectrum. Its average is near to Ferozsons. 4- Operating income margin IntroductionThis ratio is used to rate the price policies and operational competence. It is generally expressed as a percentage. It is calculated by dividing operating profit with net sales for a given year. Formula Operating income margin = Operating Profit / Net Sales*100 Operating income margin = (Answer) % age Calculation Operating income margin Year 2008 Year 2009 Year 2010 Abbott 547526/7089163*100=7. 72% 878503/8450118*100=10. 42% 1744787/10995701*100=15. 87% Ferozsons 280330. 464/932297. 994*100=30. 07% 238019. 515/1085393. 578*100=21. 93% 330518. 449/1273374. 822*100=25. 6% Sanofi-Aventis 171478/4346528*100=3. 95% 384071/6725708*100=5. 71% 531682/6158295*100=8. 63% Note Numeric Figures are mentioned in 000 Working Operating Profit (Numerator) = blunt Profit + Other Operating Income Admin Expenses Selling & Distribution Expenses Other Charges Operating Income Break-up GP+OTHER run INCOME-ADMIN EXP-SELLING & DISTRIBUTION EXP-OTHER CHARGES 2008 Abbott 2097653+105545-255737-1334884-65051=547526 Ferozsons 540738. 562+20809. 63-60719. 276-199424. 66-21073. 792=280330. 464 Sanofi- Aventis 1055823+52809-122627-757135-57392=171478 GP+OTHER OPERATING INCOME-ADMIN EXP-SELLING & DISTRIBUTION EXP-OTHER CHARGES 2009 2010 Abbott 2321131+141890-201943-1252810-129765=878503 3 687038+109079-267915-1601101-182314=1744787 Ferozsons 584211. 298+23954. 076-80995. 604-261185. 939-27964. 316=238019. 515 633242. 518+43434. 507-83262. 197-234076. 533-28819. 846=330518. 449 Sanofi- Aventis 1626599+101126-152707-1048283-142664=384071 1753544+102220-175580-1094063-54439=531682 No need to provide breakup of Net Sales (denominator) are mentioned in profit and loss account of rewardive pharmaceutical.Graphical Representation and Trend Analysis Interpretation and Comparison Abbott laboratory has yielded comparatively low operating income margins as compared to Ferozsons due to an increase in business cost and its expenses. Abbott has lower volume of operating profit in 2008 with increased net sales. Ferozsons has optimum capacity to pay for its fixed cost. Sanofi-Aventis has low operating income margin that depicts its poor pricing strategy and operating efficiency. It has minimal operating profits over the years but reasonable net sales volumes. Abbott has shown increasing trend from FY 2008 to 2010.The pharmaceutical should manage its expenses to reduce this decline. It has do better in FY 2010 by producing highest operating profit. Ferozsons has shown a decreasing trend from FY 2008 to 2009 due to comparatively low operating profit with comparatively better sales volume. It has also revived in FY 2010 by yielding higher operating profit. Sanofi-Aventis has shown an increasing trend from FY 2008 to 2010 but insufficient operating profit margins has caused inadequate margins to meet its fixed costs. The aforementioned ratio provides an insight to determine the quality of a company.Ferozsons has the highest operating income margins. It has left behind other pharmaceuticals by yielding sufficient operating income that depicts better pricing approach and operating competence. On the contrary Sanofi-Aventis has shown the lowest volume of operating profit margins that shows its flaws in pricing tactic. Abbott has shown adequate operat ing profits to meets its fixed costs but comparatively low as compared with Ferozsons. 5- Operating Assets Turnover Introduction This is a financial ratio that indicates the effectiveness with which a firms management uses its operating assets to generate sales.It is generally expressed in times. It is calculated by dividing net sales with average operating assets for a given year. Formula Operating Assets Turnover= Net sales/ Operating assets Operating Assets Turnover = (Answer) Times Calculation Operating Assets Turnover Year 2008 Year 2009 Year 2010 Abbott 7089163/5168443=1. 37 Times 8431080/4684635=1. 80 Times 10995701/4740615= 2. 32 Times Ferozsons 932297. 994/1055296. 397=0. 88 Times 1085393. 578/652061. 759=1. 66 Times 1273374. 822/865565= 1. 47 Times Sanofi- Aventis 4346528/33338090= 0. 13 Times 6725708/2785713= 2. 1 Times 6158295/2399541= 2. 57 Times Note Numeric Figures are mentioned in 000 Working No need to provide breakup of Net Sales (numerator) are mentio ned in profit and loss account of rateive pharmaceutical. Operating Assets = Total Assets (Intangible Assets + Capital work in progress+ Loans and Advances + Investments + other assets) Break-up of operating Assets Operating Assets Turnover Year 2008 Year 2009 Year 2010 Abbott 5790421-(0+392954+170071+2801+56152)=5168443 4964576-(0+159886+73056+4393+42606)=4684635 5049710-(0+202480+23580+44896+4393+33746)=4740615 Ferozsons 1868938. 02-(0+141831. 157 +223867. 236+438228. 405+9714. 907)=1055296. 397 1579909. 793-(0+171010. 120+215775. 559+205992. 988+35069. 367)=952061. 759 1481628. 536-(0+0204216. 826+217372. 560+194474. 564)=865565 Sanofi- Aventis 33484287-(339+ 119,808+21381+4669)=33338090 3439093-(114+ 618,974+29683+4609)=2785713 2984535-(729+550391+30549+3325)=2399541 Graphical Representation and Trend Analysis Interpretation and Comparison Operating assets turnover of Abbott laboratory has improved over the years as operating assets are slightly decreasing with respe ct to better net sales.Ferozsons has comparatively improved turnover due to whole increase in net sales with respect to operating assets. Sanofi-Aventis has reasonably well sales volume but operating assets havent grown in proportion. Abbott has shown increasing trend from 2008 to 2010 due to improved sales volume and minor change in operating assets. Ferozsons has shown an increasing trend from FY 2008 to 2009 due to comparatively decrease in operating assets as compared to net sales. Sanofi-Aventis has shown an increasing trend from FY 2008 to 2010 due to better sales with respect to operating assets.Sanofi-Aventis has represented its efficiency at its best in managing significant assets like Property, Plant Equipment, Stock in Trade and Cash with bank balances. It has surpassed others during FY 2009-10. On the other hand Ferozsons has shown comparatively low operating Assets Turnover with respect to other two. Abbott has shown rather better performance on the whole. 6- Return o n Operating Assets Introduction This is a financial ratio that gives an ideaas how efficientmanagement isat using its assets to generate earnings. It is generally expressed as a percentage.It is calculated by dividing net profit with average operating assets for a given year. Formula Return on operating Assets = Net profit / Operating assets*100 Return on operating Assets = (Answer) %age Calculation Return on operating Assets Year 2008 Year 2009 Year 2010 Abbott 343980/5168443=6. 66% 609072/4684635=13% 1176944/4740615=24. 83% Ferozsons 217023. 829/1055296. 397=20. 57% 182757. 453/952061. 759=19. 20% 317542. 675/865565=36. 69% Sanofi-Aventis 38269/33338090=0. 11% 167371/2785713=6. 01% 224024/2399541=9. 34% Note Numeric Figures are mentioned in 000 Working No need to provide breakup of Net Profit (Numerator) are mentioned in profit and loss account of several(prenominal) pharmaceutical. Operating Assets = Total Assets (Intangible Assets + Capital work in progress+ Loans and Advances + Investments + other assets) Break-up of operating Assets Operating Assets Turnover Year 2008 Year 2009 Year 2010 Abbott 5790421-(0+392954+170071+2801+56152)=5168443 4964576-(0+159886+73056+4393+42606)=4684635 5049710-(0+202480+23580+44896+4393+33746)=4740615 Ferozsons 1868938. 102-(0+141831. 157 +223867. 36+438228. 405+9714. 907)=1055296. 397 1579909. 793-(0+171010. 120+215775. 559+205992. 988+35069. 367)=952061. 759 1481628. 536-(0+0204216. 826+217372. 560+194474. 564)=865565 Sanofi- Aventis 33484287-(339+ 119,808+21381+4669)=33338090 3439093-(114+ 618,974+29683+4609)=2785713 2984535-(729+550391+30549+3325)=2399541 Graphical Representation and Trend Analysis Interpretation and Comparison Percentages of return on assets actively used to take profit of Abbott laboratory have been reasonable. Net profit has declined during 2008 that has caused comparatively low ratio.Ferozsons has also utilized its assets actually ask to run the business. Its operating asset s have improved over the years with reasonable net profit volumes. Sanofi-Aventis has not utilized its actively used assets efficiently to create revenue, consequently very low returns. Abbott has shown increasing trend from 2008 to 2010 due to comparatively high net profit. Ferozsons has shown a decreasing trend from FY 2008 to 2009 due to decline in net profit and increased volume of operating assets. It has the highest percentage of 36. 69% in FY 2010 due to rapid increase in net profit.Sanofi-Aventis has shown increasing trend over the years due to veridical increase in the volumes of net profit but these percentages have been below average. It needs to improve its net profit. Ferozsons has utilized its revenue producing assets exceptionally well. It has been leading other two. On the other hand Sanofi-Aventis has shown very low percentages of return on operating assets and it has been unable to actively use its assets to create revenue. Abbott has shown noticeably improved per formance but has not performed better than Sanofi-Aventis. 7- Sales to Fixed AssetsIntroduction The fixed-asset turnover ratio measures a companys ability to generate net sales from fixed-asset investments specifically property, jell and equipment (PP&E) netof depreciation. It is generally expressed in times. It is calculated by dividing net sales with fixed assets for a given year. Formula Sales to fixed Assets = Net sales / Fixed assets Sales to fixed Assets = (Answer) Times Calculation Sales to fixed Assets Year 2008 Year 2009 Year 2010 Abbott 7089163/1560835= 4. 54 Times 8450118/1662785=5. 07 Times 10995701/1877596= 5. 6 Times Ferozsons 932297. 994/610987. 413=1. 53 Times 1085393. 578/735614. 952=1. 48 Times 1273374. 822/742280. 446=1. 72 Times Sanofi-Aventis 4346528/1195978= 3. 63 Times 6725708/1393461=4. 83 Times 6158295/1409260=4. 37 Times Note Numeric Figures are mentioned in 000 Working No need to provide breakup of Net Sales (Numerator) are mentioned in profit and loss account of respective pharmaceutical. Fixed assets breakup (Denominator) = Property, Plant and Equipment-netof depreciation, the said figure has been given in the balance Sheet.Graphical Representation and Trend Analysis Interpretation and Comparison Abbott laboratorys performance is better as it is generating almost more than 5 times (on average) sales turnover as compared to its small amount of property, imbed and equipment. Ferozsons seems to be lenient in producing sales as per the volume of Property, plant and equipment. It has overinvested in fixed assets. It needs to revive its sales by introducing new products range. Sanofi-Aventis has also done reasonably well to generate sufficient sales volume as compared to its small amounts of fixed assets.Abbott has shown increasing trend from 2008 to 2010 due to increased sales volume and comparatively small amount of fixed assets. Ferozsons has shown a decreasing trend from FY 2008 to 2009 due to overinvestment in property, plant an d equipment. It has improved its ratio in FY 2010 by sufficient increase in sales volume. Sanofi-Aventis has shown increasing trend from FY 2008 to 2009 due to adequate increase in sales volume. It has declined in FY 2010 due to decrease in sales. Abbott has surpassed others by producing bulk sales volume with a relatively small mount of fixed assets. On the other hand Ferozsons has shown very low turnover that means it has overinvested in fixed assets. Sanofi-Aventis has shown effective job by producing better sales volume with minute amount of property, plant and equipment.. 8- Return on total rectitude Introduction Return on lawfulnessmeasures a corporations profitabilityby reveal how muchprofit a company generateswith themoneyshareholders have invested. It is generally expressed as a percentage. It is calculated by dividing net profit with share holders equity for a given year. FormulaReturn on total equity = Net profit / Share holders equity*100 Return on total equity = (Ans wer) %age Calculation Return on total equity Year 2008 Year 2009 Year 2010 Average Abbott 343980/3568512*100=9. 64% 609072/3238460*100 =18. 81% 1176944/3912539*100 =30. 08% 19. 51% Ferozsons 217023. 829/826236. 891*100 =26. 27% 182757. 453/970129. 401*100 =18. 84% 317542. 675/1275765. 058*100 =24. 89% 23. 33% Sanofi- Aventis 38269/1116612*100=3. 43% 167371/1292449*100=12. 95% 224024/1461403*100=15. 33% 10. 57% Note Numeric Figures are mentioned in 000 WorkingNo need to provide breakup of Net Profit (Numerator) are mentioned in profit and loss account of respective pharmaceutical. Share holders Equity breakup (Denominator) = Issued, subscribed pay up capital + Reserves capital + Reserves revenue Issued, subscribed paid-up capital + (Capital Reserves + Revenue Reserves) 2008 2009 Abbott 979003+154777+2434732=3568512 979003+173853+2085604=3238460 Ferozsons 144672. 768+321. 843+681242. 280=826236. 891 173607. 322+321. 843+796200. 236=970129. 401 Sanofi- Aventis 96448+1 020164=1116612 96448+1196001=1292449 Issued, subscribed paid-up capital + Reserves capital + Reserves revenue 2010 Abbott 979003+197167+2736369=3912539 Ferozsons 208328. 786+321. 843+1067114. 429=1275765. 058 Sanofi- Aventis 96448+1364955=1461403 Graphical Representation and Trend Analysis Interpretation and Comparison Abbott laboratory has yielded better profits on owners equity that is a positive sign for investors and lenders. Its return on owners equity falls in FY 2008 due to decline in net profit. Ferozsons has also done considerably better by yielding sufficient returns.It has also decline in returns during FY 2009 due to rapid decrease in net profit. Its owners equity has also improved over the years. Sanofi-Aventis has also slightly improved over the years as it has yielded nominal returns on investment in FY 2009 and 2010. It has very low returns in FY 2008 that should be a matter of concern for the management. Abbott has shown increasing trend from 200 8 to 2010 due to increase in net profit volume over the years. Ferozsons has shown a decreasing trend from FY 2008 to 2009 due to substantial decrease in net profit.It has improved its ratio in FY 2010 by sufficient increase in net profit. Sanofi-Aventis has shown increasing trend from FY 2008 to 2010 due to slightly noticeable increase in net profit volumes but these are not attractive from investors point of view. Ferozsons has surpassed others by producing overall better average return that is 23. 33%. It has generated sufficient net profit volumes. Sanofi-Aventis has produced insufficient returns to satisfy its investors. It needs to watch over its policies for better performance. Abbott has also produced reasonable returns on owners equity. 9- Gross Profit Margin IntroductionIt is used to assessa firms financial health by revealing theproportion of money left over from revenues after accounting for the cost of goods sold. It is generally expressed as a percentage. It is calcula ted by dividing gross profit with net sales for a given year. Formula Gross profit Margin = Gross profit / Net sales*100 Gross profit Margin = (Answer) %age Calculation Gross profit Margin Year 2008 Year 2009 Year 2010 Abbott 2097653/7089163*100= 29. 6% 2321131/8450118*100=27. 53% 3687038/10995701*100=33. 53% Ferozsons 540738. 562/932297. 994*100=58% 584211. 298/1085393. 578*100=53. 82% 633242. 518/1273374. 22*100=49. 73% Sanofi- Aventis 1055823/4346528*100=24. 29% 1626599/6725708*100=24. 18% 1753544/6158295*100=28. 47% Note Numeric Figures are mentioned in 000 Working No need to provide breakup of Gross Profit (Numerator) and Net Sales (Denominator) as these figures are mentioned in profit and loss account of respective pharmaceutical. Graphical Representation and Trend Analysis Interpretation and Comparison Abbott laboratory has reasonable overall gross profit margins. Thats why it has yielded sufficient returns on equity. Its net sale has increased over the years. It has a decli ne in gross profit in FY 2009.Ferozsons has also done exceptionally well by yielding the highest gross profit margins. It has the tendency to face adverse economic condition such as low demanding and price competition. Sanofi-Aventis has undermined overall gross profit margins. Its gross profit margins are not sufficiently enough to bear operating and non-operating expenses. Abbott has shown decreasing trend from 2008 to 2009 due to decrease in gross profit. It has revived in FY 2010 by yielding higher gross profit. Ferozsons has also shown a decreasing trend from FY 2008 to 2009 due to significant decrease in gross profit.It has decreased come along in FY 2010 due to bulk net sales volumes. Sanofi-Aventis has shown almost same trend in FY 2008 and 2009 but an increase in FY 2010 due to higher gross profit. Ferozsons has left behind others by producing overall excellent gross profit margins. It has generated sufficient gross profit volumes to face unfavorable financial circumstance s such as low demanding and price competition. Sanofi-Aventis has produced insufficient gross profit returns to satisfy any stakeholder. Abbott has produced adequate gross profit margins to concern operating and non-operating expenses.Chapter 4) Summary, Conclusion, Recommendations & Limitations 4. 2) Conclusions * Ferozsons and Abbott have yielded sufficient net profits to recover all operating, non-operating expenses and taxation charges. They have the tendency to build up reserves after paying all fixed interest charges and dividends. Sanofi-Aventis has yielded very low net profit despite reasonable sales volume due to escalating cost of goods sold, operating and non-operating charges. * Abbott laboratory and Ferozsons are efficiently managing its assets to generate profit.Sanofi-Aventis has low volumes of net profit with higher size of total assets that depicts its not utilizing its assets properly to generate profit. * Abbott laboratory and Ferozsons have yielded greater volum e of profits along with an increase in its total assets and sales volume over the years. Its higher ratio depicts the higher generating rate of its wealth. Sanofi-Aventis has very low net profit margins but reasonably well total assets turnover rate that depicts lower generating rate of its wealth. * Ferozsons has the highest operating income margins that depict better pricing approach and operating competence.On the contrary Sanofi-Aventis has shown the lowest volume of operating profit margins that shows its flaws in pricing tactic. Abbott has shown adequate operating profits to meets its fixed costs. * Sanofi-Aventis has shown its efficiency at its best in managing significant assets like Property, Plant & Equipment, Stock in Trade and Cash with bank balances. On the other hand Ferozsons and Abbott have shown comparatively low Operating Assets Turnover in utilizing operating assets for generating sales. * Ferozsons has utilized its revenue producing assets exceptionally well.On t he other hand Sanofi-Aventis has shown very low percentages of return on operating assets. Abbott has shown noticeably improved performance on the whole. * Abbott has produced bulk sales volume with a relatively small amount of fixed assets. Ferozsons has shown very low turnover that means it has overinvested in fixed assets. Sanofi-Aventis has shown effective job by producing better sales volume turnover with minute amount of property, plant and equipment. * Sanofi-Aventis has produced insufficient returns to satisfy its investors. Ferozsons has produced enough returns on owners equity whereas Abbott has also yielded reasonable returns.It is a good sign for prospect investors. * Ferozsons has generated sufficient gross profit volumes to face unfavorable financial circumstances such as low demanding and price competition. Sanofi-Aventis has produced insufficient gross profit returns to satisfy any stakeholder. Abbott has produced adequate gross profit margins to absorb operating and non-operating expenses. 4. 3) Recommendations * Ferozsons and Abbott need to keep scheming in the same way to keep curtailing cost of goods sold, operating and non-operating expenses. Sanofi-Aventis really need to look its profit yielding capacity.It should review and improve its product range. Furthermore effective management policies can produce the required results. * Ferozsons and Abbott need to retain effective management policies by utilizing more assets for the generation of higher profits in future. Sanofi-Aventis can yield better profit by utilizing its assets proficiently through effective management role. * Ferozsons and Abbott have reasonable Dupont return on Assets with sales spectrum. Sanofi-Aventis needs to improve it by curtailing its cost of goods sold, operating and non-operating expenses. Better profits always enhance investors confidence and it matters in the end. Ferozsons and Abbott have reasonable operating income margin and they need to keep strengthening be tter pricing approach and operating competence. Sanofi-Aventis requires implementing improved pricing tactic to attain better operating proficiency. * Abbott and Ferozsons need to utilize operating assets more effectively to improve their turnover as per sales volume. Sanofi-Aventis has haply better turnover, it should keep utilizing operating assets in the same manner. * Sanofi-Aventis needs to utilize its revenue producing assets in a better way. Abbott and Ferozsons should retain their current line of action. Ferozsons needs to downsize overinvested in fixed assets. Abbott and Sanofi-Aventis should keep their approach towards utilizing its fixed assets in terms of sales volume. * Sanofi-Aventis needs to watch over its policies for better return on owners equity to retain its investor confidence. Ferozsons and Abbott have to retain their pace in retaining current returns on owners equity. * Sanofi-Aventis needs to improve their selling strategies to improve profit margins. Abbott and Ferozsons can increase gross profits by implementing more effective management policies. Section II a) Introduction of the student Last degree Obtained B. ComOrganizations Name Wisdomhouse indoctrinate Designation Owner/Principal Experience 7 Years b) Bibliography Vu hand Outs Internet sources www. investopedia. com http//www. accountingtools. com/fixed-asset-turnover-ratio http//www. abbott. com. pk/11_Financial. htm http//www. pakistaneconomist. com/database2/pdffiles/Pharmaceutical/Abbot/Year%202008/ALAnnual-%20Y08. pdf http//www. ferozsons-labs. com/investor. htm http//www. sanofi-aventis. com. pk/l/pk/en/layout. jsp? hunt down=59A5026C-701D-4C54-B1EC-E7788EA00832 Ross, S. A. , R. W. Westerfield and B. D. Jordan. Essentials of Corporate Finance (1999), 2nd Edition, Irwin/McGraw-Hill.