Financial Reporting and Analysis (MBA BA 103)

PROJECT REPORT

ON

RATIO ANALYSIS OF Dr Reddy Labs

SUBMITTED TO: SUBMITTED BY:-

Dr. Shivani Sharma Ayushi Jain

Krati Mangal

Muskan Agarwal

Royal Shivhare

MBA (BA) SEM -I

 TABLE OF CONTENT

S.NO: TOPIC PAGE

NO:
1 Introduction of the Organization 1

2 Introduction of Ratio Analysis

3 Ratio Analysis
a. Liquidity ratios
b. Solvency ratios
c. Activity ratios
d. Profitability ratios

4 Conclusion

5 References

6 Annexures
DR. REDDY LAB

Dr. Reddy's Laboratories is an Indian multinational pharmaceutical company located

in Hyderabad, Telangana, India. The company was founded by Anji Reddy, who previously
worked in the mentor institute Indian Drugs and Pharmaceuticals Limited.
Dr. Reddy's manufactures and markets a wide range of pharmaceuticals in India and overseas.
The company has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug
manufacture, diagnostic kits, critical care, and biotechnology products.
Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting to
other less-regulated markets that had the advantage of not having to spend time and money on
a manufacturing plant that would gain approval from a drug licensing body such as the U.S.
Food and Drug Administration (FDA). By the early 1990s, the expanded scale and profitability
from these unregulated markets enabled the company to begin focusing on getting approval from
drug regulators for their formulations and bulk drug manufacturing plants - in more-developed
economies. This allowed their movement into regulated markets such as the US and Europe. In
2014, Dr. Reddy Laboratories was listed among 1200 of India's most trusted brands according to
the Brand Trust Report 2014, a study conducted by Trust Research Advisory, a brand analytics
company.
By 2007, Dr. Reddy's had seven FDA plants producing active pharmaceutical ingredients in
India and seven FDA-inspected and ISO 9001 (quality) and ISO 14001 (environmental
management) certified plants making patient-ready medications – five of them in India and two
in the UK.
In 2010, the family-controlled Dr Reddy's denied that it was in talks to sell its generics
business in India to US pharmaceutical giant Pfizer, which had been suing the company for
alleged patent infringement after Dr Reddy's announced that it intended to produce a generic
version of atorvastatin, marketed by Pfizer as Lipitor, an anti-cholesterol medication. Reddy's
was already linked to UK pharmaceuticals multinational Glaxo Smithkline.
History
Dr. Reddy's originally launched in 1984 producing active pharmaceutical ingredients. In 1986,
Reddy's started operations on branded formulations. Within a year Reddy's had launched Norilet,
the company's first recognized brand in India. Soon, Dr. Reddy's obtained another success with
Omez, its branded omeprazole – ulcer and reflux oesophagitis medication – launched at half the
price of other brands on the Indian market at that time. This is now branched in Hyderabad
Within a year, Reddy's became the first Indian company to export the active ingredients for
pharmaceuticals to Europe. In 1987, Reddy's started to transform itself from a supplier of
pharmaceutical ingredients to other manufacturers into a manufacturer of pharmaceutical
products.

International expansion
The company's first international move took it to Russia in 1992. There, Dr. Reddy's formed a
joint venture with the country's biggest pharmaceuticals producer, Biomed. They pulled out in
1995 amid accusations of scandal, involving "a significant material loss due to the activities of
Moscow's branch of Reddy's Labs with the help of Biomed's chief executive". [10] Reddy's sold
the joint venture to the Kremlin-friendly Sistema group. In 1993, Reddy's entered into a joint
venture in the Middle East and created two formulation units there and in Russia. Reddy's
exported bulk drugs to these formulation units, which then converted them into finished
products. In 1994, Reddy's started targeting the US generic market by building state of art
manufacturing facility.

Expansion and acquisition

By 1997, Reddy's made the transition from being an API and bulk drug supplier to regulated
markets like the US and the UK, and a branded formulations supplier in unregulated markets like
India and Russia, into producing generics, by filing an Abbreviated New Drug
Application (ANDA) in the USA. The same year, Reddy's out-licensed a molecule for clinical
trials to Novo Nordisk, a Danish pharmaceutical company.
It strengthened its Indian manufacturing operations by acquiring American Remedies Ltd. in
1999. This acquisition made Reddy's the third largest pharmaceutical company in India,
after Ranbaxy and Glaxo (I) Ltd., with a full spectrum of pharmaceutical products, which
included bulk drugs, intermediates, finished dosages, chemical synthesis, diagnostics and
biotechnology.
Reddy's also started exploiting Para 4 filing as a strategy in bringing new drugs to the market at a
faster pace. In 1999 it submitted a Para 4 application for omeprazole, the drug that had been the
cornerstone of its success in India. In December 2000, Reddy's had undertaken its first
commercial launch of a generic product in the US, and its first product with market exclusivity
was launched there in August 2001. The same year, it also became the first non-Japanese
pharmaceutical company from the Asia-Pacific region to obtain a New York Stock
Exchange listing, ground-breaking achievements for the Indian pharmaceutical industry.
In 2001 Reddy's became the first Indian company to launch the generic drug, fluoxetine (a
generic version of Eli Lilly and Company’s Prozac) with 180-day market exclusivity in the USA.
Prozac had sales in excess of $1 billion per year in the late 1990s. Barr Laboratories of the U.S.
obtained exclusivity for all of the approved dosage forms (10 mg, 20 mg) except one (40 mg),
which was obtained by Reddy's. Lilly had numerous other patents surrounding the drug
compound and had already enjoyed a long period of patent protection. The case to allow generic
sales was heard twice by the Federal Circuit Court, and Reddy's won both hearings. Reddy's
generated nearly $70 million in revenue during the initial six-month exclusivity period. With
such high returns at stake, Reddy's was gambling on the success of the litigation; failure to win
the case could have cost them millions of dollars, depending on the length of the trial.
The fluoxetine marketing success was followed by the American launch of Reddy's house-
branded ibuprofen tablets in 400, 600 and 800 mg strengths, in January 2003. Direct
marketing under the Reddy's brand name represented a significant step in the company's efforts
to build a strong and sustainable US generic business. It was the first step in building Reddy's
fully-fledged distribution network in the US market.
In 2015, Dr. Reddy's Laboratories bought the established brands of Belgian drugmaker UCB SA
in South Asia for 8 billion rupees ($128.38 million). Dr. Reddy's Laboratories also signed a
licensing pact with XenoPort for their experimental treatment to treat plaque psoriasis. As per the
agreement, Dr. Reddy's will be granted exclusive US rights to develop and commercialize
XP23829 for all indications for an upfront payment of $47.5 million

COVID-19 vaccine development

The company entered into an agreement to conduct final-stage trials of Russia's Gam-COVID-
Vac vaccine (trade name Sputnik V) in India. They plan to distribute up to 100 million doses
after regulatory clearances and successful conduct of the trials. The Russian Direct Investment
Fund will be supplying the vaccine to Indian company for distribution On 11 January 2021 the
company submitted mid-stage trial data to the Indian regulator and recommended moving onto
late-stage trials. The company's subsidiary Hetero Biopharma has announced plans to
manufacture over 100 million doses of Sputnik V.

Top active pharmaceutical ingredients

 Abiraterone
 Ranitidine HCI  Clopidogrel (Not in US
Acetate
Form 2  Losartan Potassium due to 2007 patent case)
 Canagliflozin
 Naproxen  Sparfloxacin  Omeprazole
 Ciprofloxacin
Sodium  Nizatidine  Finasteride
Hydrochloride
 Naproxen  Fexofenadine  Sumatriptan
 Ramipril
 Atorvastatin  Ranitidine  glimepiride
 Terbinafine HCI
 Montelukast Hydrochloride  Stolin gum astringent
 Ibuprofen
 Nelfinavir Form 1  Senquel f
 Sertraline
Mesylate  Stolin r
Hydrochloride
 Ratio Analysis
Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational
efficiency, and profitability by studying its financial statements such as the balance sheet and
income statement. Ratio analysis is a cornerstone of fundamental equity analysis.
People who are interested in long term investing in stocks knows about financial ratio analysis. If
you have heard about terms like price to earnings ratio, price to book value ratio etc., you know
ratio.
But in this financial ratio analysis we will go beyond these usual ratios. Generally I do a
detailed fundamental analysis of my stocks using my stock analysis worksheet. My worksheet
calculates financial ratios of stocks and presents it systematically as a final report.
These ratios are calculated using numbers taken from a company’s balance sheet, profit & loss
a/c, and cash flow statements

Uses of Ratio Analysis

 
1. Comparisons
One of the uses of ratio analysis is to compare a company’s financial performance to similar
firms in the industry to understand the company’s position in the market. Obtaining financial
ratios, such as Price/Earnings, from known competitors and comparing it to the company’s ratios
can help management identify market gaps and examine its competitive advantages, strengths,
and weaknesses. The management can then use the information to formulate decisions that aim
to improve the company’s position in the market.
2. Trend line
Companies can also use ratios to see if there is a trend in financial performance. Established
companies collect data from the financial statements over a large number of reporting periods.
The trend obtained can be used to predict the direction of future financial performance, and also
identify any expected financial turbulence that would not be possible to predict using ratios for a
single reporting period.
3. Operational efficiency
The management of a company can also use financial ratio analysis to determine the degree of
efficiency in the management of assets and liabilities. Inefficient use of assets such as motor
vehicles, land, and building results in unnecessary expenses that ought to be
eliminated. Financial ratios can also help to determine if the financial resources are over- or
under-utilized.
Types of Ratio Analysis

1. Liquidity Ratios
This type of ratio helps in measuring the ability of a company to take care of its short-term debt
obligations. A higher liquidity ratio represents that the company is highly rich in cash.
2. Profitability Ratios
This type of ratio helps in measuring the ability of a company in earning sufficient profits.
3. Solvency Ratios
Solvency ratios can be defined as a type of ratio that is used to evaluate whether a company is solvent and
well capable of paying off its debt obligations or not.
4. Turnover Ratios
Turnover ratios are used to determine how efficiently the financial assets and liabilities of an organization
have been used for the purpose of generating revenues.
 LIQUIDITY RATIOS
Liquidity ratios measure a company's ability to pay off its short-term debts as they become due,
using the company's current or quick assets. Liquidity ratios include the current ratio, quick ratio,
and working capital ratio.

1. Current Ratio: The current ratio is the ratio between the current assets and current liabilities of
a company. The current ratio is used to indicate the liquidity of an organization in being able to
meet its debt obligations in the upcoming twelve months. A higher current ratio will indicate that
the organization is highly capable of repaying its short-term debt obligations.
Current Ratio = Current Assets / Current Liabilities
This is the data of Dr. Reddy lab and ratio analysis of last 5 YEARS.
Current Ratio

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Current 10,106.70 8,933.20 9,038.50 8,593.80 10,094.90
Assets
Current 4,180.50 3,079.30 4,719.90 4,258.00 4,798.70
Liabilities
Current Ratio 2.4175816 2.90104894 1.914977 2.0182715 2.1036739
Current ratio 2.41 2.90 1.91 2.01 2.10

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Current 2.1 2.01 1.91 2.9 2.41
ratio
 Current ratio
3.5

2.5

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

In 2016, the firm’s ability to cover its current liabilities with its current assets was 2.10. In 2020,
the ratio goes up to 2.41 as compared to last five years, which means that the company has the
ability to pay its liabilities, as the definition says that higher the ratio, greater the ability of the
firm to pay its bills. This tells that Dr. Reddy Labs is improving their liquidity and efficiency,
because their current ratio is improving.

2. Quick Ratio: The quick ratio is used to ascertain information pertaining to the capability of a company
in paying off its current liabilities on an immediate basis.
The formula used for the calculation of a quick ratio is-
 

Quick Ratio = liquid assets / Current Liabilities

Liquid assets= current assets – (stock +prepaid expenses)

Quick/Liquid or Acid test Ratio

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Current 10,106.70 8,933.20 9,038.50 8,593.80 10,094.90
Assets
 Inventories 2,190.40 2,015.60 1,856.80 1,809.70 1,699.60

Quick/Liquid 7,916.30 6,917.60 7,181.70 6,784.10 8,395.30

Assets
Current 4,180.50 3,079.30 4,719.90 4,258.00 4,798.70
Liabilities
Quick/Liquid 1.8936252 2.246484591 1.5215788 1.59326 1.7494947
Ratio
Quick/Liquid 1.89 2.24 1.52 1.59 1.74
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Quick/Liquid 1.74 1.59 1.52 2.24 1.84
Ratio

Quick/Liquid Ratio
2.5

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

According to the definition of Acid Test Ratio, the company should have the ability to pay its liabilities
through its most liquid assets. The table shows that in 2016, the firm has the ratio 1.74 cents. Then we
observe an improvement in 2019. Then again we observed a decline from 2.24 to 1.89 in 2020... This
leads us to believe that Dr. Reddy Labs is a somewhat risky business, even though it is the largest in the
pharmaceutical.
3. Absolute Liquid Ratio: It indicates the adequacy of the 50% worth absolute liquid assets to
pay the 100% worth current liabilities in time. If the ratio is relatively lower than one, it
represents the company's day-to-day cash management in a poor light.
The formula used for the calculation of the Absolute Liquid Ratio is-

ABSOLUTE LIQUID RATIO = CASH+BANK+MARKETABLE

SECURITIES/CURRENT LIABILITIES.

Absolute Liquid Ratio

Years Mar-20 Mar-19 Mar-18 Mar-17
Mar-16
Cash 39.2 113.2 120.7 66.7
1,268.0
0
Current 4,180.50 3,079.30 4,719.9 4,258.0 4,798.7
Liabilities 0 0 0
Absolute 0.00937 0.036761602 0.02557 0.01566 0.26423
Liquid Ratio 7 3 5 8
Absolute .009 .036 .025 .015 .26
Liquid Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Absolute 0.26 0.015 0.025 0.036 0.009
Liquid Ratio
 Absolute Liquid Ratio
0.3

0.25

0.2

0.15

0.1

0.05

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The company absolute liquid ratio in 2016 was 0.26 but as we can see from the graph it goes on
decreasing and in 2020 it came to 0.009. So, if the ratio is relatively lower than one, it represents
the company's day-to-day cash management is going in a poor light.

Activity Ratio/ Turnover Ratios

Turnover ratios are used to determine how efficiently the financial assets and liabilities of an organization
have been used for the purpose of generating revenues.
The types of turnover ratios are: –

1. Fixed Assets Turnover Ratios: Fixed assets turnover ratio is used to determine the efficiency of an
organization in utilizing its fixed assets for the purpose of generating revenues.
The formula used for the determination of fixed assets turnover ratio is-

Fixed Assets Turnover Ratio = Net Sales / Average Fixed Assets

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Net Sales 11,850 10,625 9,359 9,719 10,207
 Fixed 4,845.70 5,082.80 5,392.30 5,382.10 5,044.30
Assets
Fixed 2.44546711 2.09038325 1.73562301 1.80580071 2.02347204
Assets 5 3 8
Turnover
Ratio
Fixed 2.44 Times 2.09 Times 1.73 Times 1.80 Times 2.02 Times
Assets
Turnover
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Fixed Assets 2.02 1.8 1.73 2.09 2.44
Turnover
Ratio

Fixed Assets Turnover Ratio

2.5

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The fixed assets turnover ratio in 2016 was 2.02 times and in 2020 it was 2.44. Which means
higher fixed asset. A higher fixed assets turnover ratio indicates that a company has efficiently
used investments in fixed assets to generate sales.
2. Inventory Turnover Ratio: Inventory turnover ratio is used to determine the speed of a
company in converting its inventories into sales.
The formula used for calculating inventory turnover ratio is-
Inventory Turnover Ratio = Cost of Goods Sold / Net Sales / Average Inventories

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Average 2,190.40 2,015.60 1,856.60 1,809.70 1,699.60
Inventory
Sales 11,850 10,625 9,359 9,719 10,207

Inventory 5.4099707 5.2713832 5.040935043 5.3705034 6.005530713

turnover 8
ratio
Inventory 5.40 Times 5.27 Times 5.04 Times 5.37 6.00 Times
turnover Times
ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Inventory 6 5.37 5.04 5.27 5.4
turnover ratio

Inventory turnover ratio

6

5.8

5.6

5.4

5.2

4.8

4.6

4.4
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The Dr. Reddy Labs Inventory turnover ratios deteriorated from 2016 to 2020, which means that its
ability to sell inventory has relatively come down. In 2016, Dr. Reddy Labs had a ratio of 6 and in 2020
has a ratio of 5.40. These ratios are not what we expected; we assumed that the ratios would be much
higher because Dr. Reddy Labs sell its syrup to bottling partners around the world so it does not need to
deal with the storing of the bottled product.

3. Debtors / Receivable Turnover Ratio: Receivable turnover ratio is used to determine the

efficiency of an organization in collecting or realizing its account receivables.
The formula used for calculating the receivable turnover ratio is-
Receivables Turnover Ratio = Net Credit Sales / Average Receivables

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Sales 11,850 10,625 9,359 9,719 10,207
Average 4638.7 3717.7 4203.8 4405.4 3893.5
Debtors
Debtors 2.5546 2.85795 2.226319 2.20616 2.6215487
Turnover Ratio
Debtors 2.55 Times 2.85 Times 2.22 Times 2.20 Times 2.62 Times
Turnover Ratio
Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar
Debtors 2.62 2.2 2.22 2.85 2.55
Turnover Ratio

Debtors Turnover Ratio

3

2.5

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar
 INTERPRETATION
Debtor’s velocity indicate the number of times the debtors are turned over during a year. The
ratio in 2016 was 2.62 times and in 2020 it was 2.55 times. Hence, low debtors turn over implies
inefficient management of debtors/sales and less liquid debtors.

4. Average collection period: - The average collection period represents the average number of

days between the date a credit sale is made and the date the purchaser pays for that sale. A
company's average collection period is indicative of the effectiveness of its accounts receivable
management practices
The formula used for calculating the average collection period is-
Average collection period = average debtors / sale per days
Sales per days= net sales / no of working days

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Average Debtors 4638.7 3717.7 4203.8 4405.4 3893.5
Sales 11,850 10,625 9,359 9,719 10,207
No. of Working 365 365 365 365 365
Days
Sales Per Day 32.4658 29.109589 25.6411 26.627397 27.964384
average 142.88 Days 127.71 Days 163.94 Days 165.44 Days 139.23 Days
collection period

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

average collection 139.23 165.44 163.94 127.71 142.88
period
 average collection period
180

160

140

120

100

80

60

40

20

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The ability of the firm of collecting the receivables in the specific time. Here in the year 2016 the
turnover in days was almost 139 days, but the collection day’s increase in the year 2020 by 142
days. This shows that the collection is slower as compared to the previous year.

5. Creditors or Payable Turnover Ratio Formula:-The accounts payable turnover ratio, also
known as the payables turnover or the creditor’s turnover ratio, is a liquidity ratio that measures
the average number of times a company pays its creditors over an accounting period. The ratio is
a measure of short-term liquidity, with a higher payable turnover ratio being more favorable.
Creditors or Payable Turnover Ratio Formula
The formula for the accounts payable turnover ratio is as follows:
Payable Turnover Ratio = Net Credit Purchases/ Average Account Payables
Net Credit Purchase= Credit Purchase – Purchase Return
Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Average Creditors 1,068.40 1,031.60 1,061.00 778.70 719.20

Annual Net Credit 1,117.20 868.6 671.6 671.5 610.4
Purchases
Creditors or 1.045675777 0.84199302 0.632987747 0.862334 0.8487208
Payable Turnover 7
Ratio
Creditors or 1.04 Times 0.84 Times 0.63 Times 0.86 0.84 Times
Payable Turnover Times
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Creditors or Payable 0.84 0.86 0.63 0.84 1.04
Turnover Ratio

Creditors or Payable Turnover Ratio

1.2

0.8

0.6

0.4

0.2

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The creditors payable turnover ratio indicates to creditors the short-term liquidity and, to that
extent, the credit worthiness of the company. A high ratio indicates prompt payment is being
made to suppliers for purchases on credit.

6. Average payment period ratio (APP) is a solvency ratio that measures the average number

of days it takes a business to pay its vendors for purchases made on credit. Average payment
period is the average amount of time it takes a company to pay off credit accounts payable.
Average Payment Period = Average Accounts Payable / (Total Credit Purchases / Days)

Average Accounts Payable = (Beginning + Ending AP Balance) / 2

 Average Payment Period = (Beginning + Ending AP Balance) / 2 / (Total Credit Purchases
/ Day

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Average 1,068.40 1,031.60 1,061.00 778.70 719.20
Creditors
Annual Net 1,117.20 868.6 671.6 671.5 610.4
Credit
Purchases
No.of Working 365 365 365 365 365
Days
Average Daily 3.060821918 2.379726027 1.84 1.839726 1.6723288
Purchase
Average 349.05 Days 433.49 Days 576.63 Days 423.26 Days 430.05 Days
Payment
Period Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Average 430.05 423.26 576.63 433.49 349.05
Payment
Period Ratio

Average Payment Period Ratio

600

500

400

300

200

100

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar
 INTERPRETATION

Dr. Reddy Lab’s average period for payment has reduce to 349 days in 2020 which was 430 days
in 2016. This reduction in average payment period shows that how efficiently company is paying
back their creditors and also assuring that payments are being made in a prompt manner by Dr.
Reddy Labs to its creditors. This period should remain low as much as possible.

7.Working Capital Turnover Ratio - The working capital turnover ratio is calculated by

dividing net annual sales by the average amount of working capital—current assets minus
current liabilities—during the same 12-month period.
Working capital turnover ratio = cost of sales / Net working capital or Average working
Capital
{Average working capital = opening + closing / 2}, {Net WC = CA – CL}

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Sales 11,850 10,625 9,359 9,719 10,207

Current Assets 10,106.70 8,933.20 9,038.50 8,593.80 10,094.90

Current 4,180.50 3,079.30 4,719.90 4,258.00 4,798.70

Liabilities
Working 5,926.20 5,853.90 4,318.60 4,335.80 5,296.20
Capital
Working 1.999595019 1.815029297 2.16713749 2.2415702 1.9272308
Capital 8
Turnover Ratio
Working 1.99 Times 1.81Times 2.16 Times 2.24 1.92
Capital Times Times
Turnover Ratio
 Years 16-Mar 17- 18- 19- 20-
Mar Mar Mar Mar
Working Capital 1.92 2.24 2.16 1.81 1.99
Turnover Ratio

Working Capital Turnover Ratio

2.5

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The working capital turnover ratio measures how well a company is utilizing its working

capital to support a given level of sales. So, in year 2016 it was 1.92 and in year 2020 it was
1.99. A high turnover ratio indicates that management is being extremely efficient in using a
firm's short-term assets and liabilities to support sales.

8. Total Asset Turnover Ratio - The total asset turnover ratio compares the sales of a
company to its asset base. The ratio measures the ability of an organization to efficiently
produce sales, and is typically used by third parties to evaluate the operations of a business.
Ideally, a company with a high total asset turnover ratio can operate with fewer assets than a
less efficient competitor, and so requires less debt and equity to operate. The result should
be a comparatively greater return to its shareholders .
Total assets turnover ratio – net sales / Average tangibles assets

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Sales 11,850 10,625 9,359 9,719 10,207

Tangible 3,769.80 3,950.40 3,979.00 4,043.3 3,593.8

Assets
Total assets 3.14340283 2.68960105 2.35209851 2.403729 2.840169
Turnover
Ratio
Total assets 3.14 2.68 2.35 2.40 2.84
Turnover
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Total assets 2.84 2.4 2.35 2.68 3.14

Turnover Ratio

Total assets Turnover Ratio

3.5

2.5

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar
 INTERPRETATION
The ratio measures the efficiency of how well a company uses assets to produce sales. So, in
year 2016 it was 2.84 and in year 2020 it was 3.14. A higher ratio is favorable, as it indicates a
more efficient use of assets. 

Solvency ratios

Solvency ratios can be defined as a type of ratio that is used to evaluate whether a company is
solvent and well capable of paying off its debt obligations or not.
The types of solvency ratios are: –
1. Debt Equity Ratio: The debt-equity ratio can be defined as a ratio between total debt and
shareholders fund. The debt-equity ratio is used to calculate the leverage of an organization. An
ideal debt-equity ratio for an organization is 2:1.
The formula for debt-equity ratio is-
Debt Equity Ratio = Total Debts / Shareholders Fund

Debt-Equity
 Ratio
Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Long Term 19.3 345.4 488 485.2 994.4
Borrowings
Other Long Term 29.6 28.5 31.3 41.1 57.1
Liabilities
Total Long Term 48.9 373.9 519.3 526.3 1051.5
Liabilities
Total Shareholder's 15,191.90 12,684.10 11,807.80 11,600.60 11,605.40
Funds

Debt Equity Ratio 0.003219 0.02947785 0.0439794 0.0453683 0.0906044

Debt Equity Ratio 0.003 0.02 0.04 0.04 0.09

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Debt 0.09 0.04 0.04 0.02 0.003
Equity
Ratio

Debt Equity Ratio

0.09

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
A low debt-to-equity ratio indicates a lower amount of financing by debt via lenders, versus
funding through equity via shareholders. As shown in 2020 the ratio was 0.003 which shows
lower debt-equity ratio compare to previous years.

2. Total Debt Ratio - The debt ratio is a financial ratio that measures the extent of a company's
leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed as a decimal
or percentage. ... In other words, the company has more liabilities than assets.
Total debt ratio = total debt / total assets
Or
Long term debts+ current liability / total debts + net worth

Total Debt Ratio

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Total Non- Current 103.4 484.1 572.6 588.6 1153.5
Liabilities
Total Current 4,180.50 3,079.30 4,719.90 4,258.00 4,798.70
Liabilities
Total Debt 4,283.90 3,563.40 5,292.50 4,846.60 5,952.20
Total Non-Current 9,369.10 7,314.30 8,061.80 7,853.40 7,462.70
Assets
Total Current Assets 10,106.70 8,933.20 9,038.50 8,593.80 10,094.90
Total Assets 19,475.80 16,247.50 17,100.30 16,447.20 17,557.60
Total Debt Ratio 0.21996016 0.2193199 0.309497494 0.2946763 0.33900989

Total Debt Ratio 0.21 0.21 0.30 0.29 0.33

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Total Debt
Ratio 0.33 0.29 0.3 0.21 0.21
 Total Debt Ratio

0.35

0.3

0.25

0.2
Axis Title

0.15

0.1

0.05

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The debt ratio measures the amount of leverage used by a company in terms of total

debt to total assets. A debt ratio less than 100% indicates that a company has more assets
than debt. In given chart 2020 the total debt ratio was 0.21 which is lower than previous years.

3. Equity Ratio - The equity ratio is a financial metric that measures the amount of leverage
used by a company. It uses investments in assets and the amount of equity to determine how well
a company manages its debts and funds its asset requirements.

Equity Ratio = Shareholder’s Fund / Total Asset

Equity
Ratio
Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Total Shareholder's Funds 15,191.90 12,684.10 11,807.80 11,600.60 11,605.40

Total Assets 19,475.80 16,247.50 17,100.30 16,447.20 17,557.60

 Equity Ratio 0.78003984 0.780680 0.6905025 0.7053237 0.6609901
1
Equity Ratio 0.78 0.78 0.69 0.70 0.66

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Equity Ratio 0.66 0.7 0.69 0.78 0.78

Equity Ratio

0.78

0.76

0.74

0.72
Axis Title

0.7

0.68

0.66

0.64

0.62

0.6
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
Equity ratios with higher value generally indicate that a company's effectively funded its asset
requirements with a minimal amount of debt. As we see an equity ratio is better than previous
four years i.e. 0.78 in Mar 20.

4. Solvency ratio: - Solvency ratios can be defined as a type of ratio that is used to evaluate
whether a company is solvent and well capable of paying off its debt obligations or not.

Solvency ratio= total liabilities the outsiders / Total Assets

Solvency Ratio
Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
 Total Assets 19475.8 16247.5 17100.3 16447.2 17557.6
Long Term Borrowings 19.3 345 488 485 994
Other Long Term 29.6 28.5 31.3 41.1 57.1
Liabilities
Short Term Borrowings 1043.6 546.3 2100.8 1869.9 2089.6
Trade Payables 1068.4 1032 1061 779 729
Other Current Liabilities 1861 1316.7 1384.7 1401 1409.5
Total Capital And 4021.9 3268.5 5065.8 4576 5279.2
Liabilities

Solvency Ratio 0.206508 0.201169 0.29624 0.278224 0.300679

Solvency Ratio 0.21 0.20 0.29 0.27 0.30

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Solvency Ratio 0.3 0.27 0.29 0.2 0.21

Solvency Ratio

0.3

0.25

0.2
Axis Title

0.15

0.1

0.05

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
A solvency ratio measures the size of a company's profitability and compares it to its obligations.
By interpreting a solvency ratio, an analyst or investor can gain insight into how likely a
company will be to continue meeting its debt obligations. A stronger or higher ratio indicates
financial strength. As shown in the table the company’s solvency ratio is fluctuating between the
years and decrease in 2020 i.e. 0.2.
5.  Interest Coverage Ratio: The interest coverage ratio is used to determine the solvency of an
organization in the nearing time as well as how many times the profits earned by that very
organization were capable of absorbing its interest-related expenses.

The formula used for the calculation of interest coverage ratio is-

Interest Coverage Ratio = Earnings before Interest and Taxes / Interest Expense

Interest Coverage Ratio

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

EBIT 2823 1,757 759 1,601 1,643

Interest 47 56 62 57 63

Interest Coverage Ratio 60.06383 31.375 12.24194 28.08772 26.07937

Interest Coverage Ratio 60.06 31.37 12.24 28.08 26.17

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Interest
Coverage Ratio
26.17 28.08 12.24 31.37 60.06
 Interest Coverage Ratio

70

60

50

40
Axis Title

30

20

10

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The interest coverage ratio measures the ability of a company to pay the interest on its

outstanding debt. A high ratio indicates that a company can pay for its interest expense several
times over. In table shown the company is having 60.1 interest coverage ratio in 2020 which is
higher than previous years.

6. Current Debt to Inventory Ratio: - A company cannot be solvent if it is not paying its
current liabilities. This ratio compares the company’s current liabilities with its inventory levels.

It is a way to tell that, how much of current inventory it must sell to pay-off all its current
liabilities. In terms of formula, it looks like this:

Debt to Inventory Ratio = Current Liability / Total inventory

Current Debt To Inventory Ratio

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
Current Liability 4,181 3,079 4719.9 4,258 4,799
Total Inventory 2190.4 2015.6 1856.8 1809.8 1699.6
Current Debt To Inventory Ratio 1.908556 1.527734 2.541954 2.352746 2.823429
Current Debt To Inventory Ratio 1.90 1.53 2.54 2.35 2.82
 Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Current Debt To Inventory Ratio 2.82 2.35 2.5 1.53 1.9

Current Debt To Inventory Ratio

2.5

2
Axis Title

1.5

0.5

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

It is a way to tell that, how much of current inventory it must sell to pay-off all its current
liabilities. Higher the current debt to inventory ratio better for the company to pay off its debts
more frequently. As shown in the table of Dr.Reddy Labs the ratio has been decreased compare
to previous years i.e. 1.9.

7. Current Debt to Net worth Ratio: - There are few companies which do not have to maintain
a lot of inventory. This is a characteristic of their business model. For such companies, the above
ratio may give unnecessarily high values. They may not be a correct indicator of solvency.

For such companies, use of current debt to net worth ratio is better. In terms of formula, this
ratio looks like below:
Current Debt to Net worth Ratio = Current Liability / net worth
 Current Debt To Net worth

Years Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Current Liability 4,181 3,079 4719.9 4,258 4,799

net worth 15191.9 12684.1 11807.8 11600.6 11605.4

Current Debt To net worth 0.27518 0.242769 0.399727 0.36705 0.413489

Current Debt To net worth 0.27 0.24 0.39 0.36 0.41

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Current Debt To net worth 0.41 0.36 0.39 0.24 0.27

Current Debt To net worth

0.45

0.4

0.35

0.3
Axis Title

0.25

0.2

0.15

0.1

0.05

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The debt to net worth ratio is used to gauge how much of a company's assets are financed by
debt. The higher the ratio, the higher the percentage financing by debt. A ratio above 100% is
not good as it means that the company cannot use its assets to pay off its debt. As shown in the
table of Dr.Reddy Labs the ratio has been decreased compare to previous years i.e. 0.27 in
mar20.
 PROFITABILITY RATIOS
This type of ratio helps in measuring the ability of a company in earning sufficient profits.

=>PROFIT MARGIN RATIO:-

The types of profitability ratios are: –

1. Gross Profit Ratios: Gross profit ratios are calculated in order to represent the operating
profits of an organization after making necessary adjustments pertaining to the COGS or cost of
goods sold.

The formula used for the calculation of gross profit ratio is-

Gross Profit Ratio = (Gross Profit / Net Sales) * 100

Gross profit ratio

Years 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar

Net sales 11,803.00 10,572.90 9,302.60 9,628.10 10,150.60
COGS 3,573.80 3,037.80 2,631.00 2,578.00 2,664.30
Gross profit 8,229.20 7,535.10 6,671.60 7,050.10 7,486.30
Gross profit 69.72126 71.26805 71.71758 73.22421 73.75229
Ratio
Gross profit 69.72% 71.26% 71.71% 73.22% 73.75%
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Gross profit Ratio 73.75% 73.22% 71.71% 71.26% 69.72%
 Gross profit Ratio

74.00%

73.00%

72.00%

71.00%
Axis Title

70.00%

69.00%

68.00%

67.00%
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The ratio should be high according to the definition. Because higher the ratio, higher will be the
firm’s ability to produce goods and services at low cost with high sales. Here in this table there is
difference between the ratios in five years, but its low, which means it is unfavorable. As shown
in the table of Dr.Reddy Labs the ratio has been decreased compare to previous years i.e. 69.72
in Mar-20.

2. Operating Profit Ratio: Operating profit ratio is used to determine the soundness of an

organization and its financial ability to repay all the short term and long term debt obligations.

The formula used for the calculation of operating profit ratio is-

Operating Profit Ratio = (Earnings before Interest and Taxes / Net Sales) * 100

Operating Profit

Years 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar

EBIT 2775.8 1700.7 697 1544.5 1580
Net sales 11,803.00 10,572.90 9,302.60 9,628.10 10,150.60
operating profit 23.51775 16.08546 7.492529 16.04159 15.56558
operating profit 23.51% 16.08% 7.49% 16.04% 15.56%
 Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

operating profit Ratio

15.56% 16.04% 7.49% 16.08% 23.51%

operating profit Ratio

25.00%

20.00%

15.00%
Axis Title

10.00%

5.00%

0.00%
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The operating profit margin ratio indicates how much profit a company makes after paying for
variable costs of production such as wages, raw materials, etc. Higher operating margins are
generally better than lower operating margins. Here in this table there is difference between the
ratios in five years, but it’s still high, which means it is favorable as shown in the table of
Dr.Reddy Labs the ratio has been increased compare to previous years i.e. 23.51%

3. Net Profit Ratio: Net profit ratios are calculated in order to determine the overall profitability
of an organization after reducing both cash and non-cash expenditures.
The formula used for the calculation of net profit ratio is-
Net Profit Ratio = (Net Profit or profit after tax / Net Sales) * 100

Net Profit Ratio

Years 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar

Profit After 2937.7 1277.3 566.9 1384.1 1354.5
Tax
Net Sales 11,803.00 10,572.90 9,302.60 9,628.10 10,150.60
Net Profit 24.88943 12.08089 6.093995 14.37563 13.34404
Ratio
Net Profit 24.88% 12.08% 6.09% 14.37% 13.34%
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Net Profit Ratio 13.34 14.37 6.09 12.08 24.88

Net Profit Ratio

25

20

15
Axis Title

10

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have been deducted
from sales, and income taxes recognized. A low net profit margin means that a company uses an
ineffective cost structure and/or poor pricing strategies. Here in this table there is difference
between the ratios in five years, but its high, which means it is favorable.

=>EXPENSE RATIO
Expense ratio is the annual maintenance charge levied by mutual funds to finance its
expenses. It includes annual operating costs, including management fees, allocation charges,
advertising costs, etc. of the fund.
Types of expense ratio:-
1. COGS ratio: - The ratio indicates the percentage of each dollar of revenue that the company
retains as gross profit.
Cost of Goods Sold (COGS) = COGS / net sales * 100

Cost Of Goods Sold Ratio

Years 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar

COGS 3,573.80 3,037.80 2,631.00 2,578.00 2,664.30

Net Sales 11,803.00 10,572.90 9,302.60 9,628.10 10,150.60

COGS 30.27874 28.731947 28.282416 26.77579 26.24770
Ratio 3 2 9
COGS 30.27% 28.73% 28.28% 26.77% 26.24%
Ratio

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

COGS Ratio 26.24% 26.77% 28.28% 28.73% 30.27%
 COGS Ratio

31.00%

30.00%

29.00%

28.00%
Axis Title

27.00%

26.00%

25.00%

24.00%
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

The cost of goods sold (COGS) is a significant ratio considered by lenders to find out about the

financial health of a business. A company where COGS is more than sales is a warning sign for
the company's bad financial health. It means that company cost is more than the company sales.

2. Operating Ratio:-  

Operating profit is that money which remains in the hand of the company after considering all
operating expenses.

It is different from gross profit because some additional expenses are considered here. Expenses
like depreciation, selling & administrative expense, and other expense are considered to compute
operating profit.

In terms of formula, operating profit looks like shown below:

Operating Ratio = Operating Profit / Net Sales

Operating Profit = (Gross Income – Operating Expense) / Net Sales

 Operating Ratio

Years 20- 19-Mar 18- 17- 16-

Mar Mar Mar Mar
Net sales 11,803. 10,572.90 9,302. 9,628. 10,150.
00 60 10 60
total 9817.8 9163.2 8866.3 8766.5 8516.6
expenses
operating 1,985.2 1,409.70 436.30 861.60 1,634.0
cost 0 0
operating 16.819 13.33314 4.6900 8.9488 16.097
Ratio 45 87 06 57
operating 16.81 13.33% 4.69% 8.94% 16.09
Ratio % %

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

operating Ratio 16.09% 8.94% 4.69% 13.33% 16.81%

operating Ratio

18.00%

16.00%

14.00%

12.00%
Axis Title

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The operating ratio is used to measure the operational efficiency of the management. It shows
whether or not the cost component in the sales figure is within the normal range. A low operating
ratio means a high net profit ratio (i.e., more operating profit) and vice versa. Here in this table
there is difference between the ratios in five years, but its high, which means it is favorable.

=> Overall profitability ratio:-

1. Return on Asset (ROA):-setting up an asset base of the company which in turn will
produce and render goods and services for the customers. These goods and services in turn will
yield sales and net profit.

 ROA is calculated in terms of Formula:

ROA= Net Profit / Total Asset

Return On Asset Ratio      

           
Years 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar
           
Net Profit 2937.7 1277.3 566.9 1384.1 1354.5
Total Asset 19475.8 16247.5 17100.3 16447.2 17557.6
Return On Asset Ratio 0.150838 0.078615 0.03315 0.084154 0.077146
1
Return On Asset Ratio 0.15% 0.07% 0.03% 0.08% 0.07%

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Return On 0.07% 0.08% 0.03% 0.07% 0.15%
Asset Ratio
 Return On Asset Ratio

0.16%

0.14%

0.12%

0.10%
Axis Title

0.08%

0.06%

0.04%

0.02%

0.00%
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.

Return on assets is displayed as a percentage; the higher the ROA the better. Here in this table
there is difference between the ratios in five years, but its high, which means it is favorable.

2. Return on Equity (ROE)

Equity is a portion of total asset. Another way to look at total asset of a company is through this
formula (Total Asset = Equity + Debt). It depicts the total capital that the company has put to use
(as on date) to do its business.

Out of this total capital, a portion is equity (shareholders money) and balance is borrowing. In
ROA calculation we are considering the total capital put to use to derive company’s profitability.

But in ROE, we consider only the equity portion. Why? Because this metric (ROE) will highlight
how profitably the company is using shareholders money to yield net profits.

High ROE or improving ROE is a symbolic of higher shareholders returns. Formula for ROE is
shown below:

= Net Profit / (Equity Capital + Reserves)

Return on Equity (ROE) = Net Profit / Total Equity

Return On Equity Ratio      

           
 Years 20-Mar 19-Mar 18-Mar 17-Mar 16-Mar
           
Net Profit 2937.7 1277.3 566.9 1384.1 1354.5
Total Equity 15191.9 12684.1 11807.8 11600.6 11605.4
Return On Equity Ratio 0.193373 0.100701 0.048011 0.119313 0.116713
Return On Equity Ratio 0.19% 0.10% 0.04% 0.11% 0.11%

Years 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

Return On Equity 0.11% 0.11% 0.04% 0.10% 0.19%
Ratio

Return On Equity Ratio

0.20%

0.18%
0.16%
0.14%

0.12%
Axis Title

0.10%

0.08%
0.06%

0.04%
0.02%

0.00%
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
ROE is more than a measure of profit: It's also a measure of efficiency. A rising ROE suggests
that a company is increasing its profit generation without needing as much capital. It also
indicates how well a company's management deploys shareholder capital. Here in this table there
is difference between the ratios in five years, but its high, which means it is favorable.

3. Return on Capital Employed (RoCE)

This is one of those profitability ratios that is perhaps the most effective ones of all. It actually
nails the concept of doing business. It defines how much returns a business is able to yield per
unit capital it consumed.
Here we are not talking about “Total Asset” of the company. Here what is considered is called
“Employed Capital”. What is employed capital? In terms of formula it looks like this:
Employed Capital = Total Assets – Current Liability
Employed capital is that portion of total asset which is locked for long term growth of the
company. This is the portion of total asset which is actually contribution to yield long term
benefits.
Why current liability is not a part of employed capital? Because this is that portion of the total
capital which is already booked to meet the current needs of the company.
Here it is assumed that this money (equivalent to current liability) either stays idle in company’s
bank account or locked in short term instruments. Hence we can say that this money is actually
not employed. They do nothing for the company. They are just waiting to be paid to the
suppliers, bills, salaries etc.
The formula of Return of Capital Employed looks like this:
Return of Capital Employed = PBIT / (Total Asset – Current Liability)

Capital
Employed

PBIT 2775.8 1700.7 697 1544.5 1935.9

Total Asset 19475.8 16247.5 17100.3 16447.2 17557.6
Current 4180.5 3079.3 4719.9 4258 4798.7
Liability
Capital 15295.3 13168.2 12380.4 12189.2 12758.9
Employed
Return on 0.181481 0.129152 0.056299 0.126711 0.151729
Capital
Employed
Return on 0.18 0.12 0.05 0.12 0.15
Capital
Employed

Years 16- 17- 18- 19- 20-

Mar Mar Mar Mar Mar
Return on Capital Employed 0.15 0.12 0.05 0.12 0.18
 Return on Capital Employed

0.18

0.16

0.14

0.12
Axis Title

0.1

0.08

0.06

0.04

0.02

0
16-Mar 17-Mar 18-Mar 19-Mar 20-Mar

INTERPRETATION
The return on capital employed shows how much operating income is generated for each dollar
of capital invested. A higher ROCE is always more favorable, as it indicates that more profits are
generated per dollar of capital employed. Here in this table there is difference between the ratios
in five years, but its high, which means it is favorable.

Conclusion
 
Ratio analysis is a basic tool of financial analysis and financial analysis itself is an
important part of any business planning process financial analysis determines a
company’s health and stability, providing an understanding of how the company
conducts its business. A financial statement analysis is only one of the tools
(although a major one) while taking an investment decision.
 
The study is made on the topic financial performance using accounting ratios with
five years in Dr. Reddy Labs. The current and liquid ratio indicates the short term
financial position of Dr. Reddy Labs whereas solvency ratio indicates the long
term financial position. Similarly, activity ratio and profitability ratio are helpful in
evaluating the efficiency of performance in Dr. Reddy Labs. After applying all the
ratios we got an idea that the Dr. Reddy Labs is a profitable firm. Because
throughout the analysis of five years, we found that the company is getting
profitable return on short term and long term investment, their profit margin has
been increased as well and they are in the position to pay their debts with in their
resources.

REFERENCES
 https://getmoneyrich.com/financial-ratio-analysis/
 https://www.drreddys.com/
 https://theinterviewportal.com/2017/05/11/internship-at-dr-reddys-labs/
 https://www.moneycontrol.com/india/stockpricequote/
pharmaceuticals/drreddyslaboratories/DRL