The concept of ratio analysis is the technique of analysis of financial statements which is used for the purposes of obtaining the financial performance of the companies over the years. These ratios are categorised into short term solvency ratios, debt management ratios, the assets management ratio, the profitability ratios and the market value ratios.
Ratio Analysis is the technique which possess some of the very important features. The data which is used in the ratio analysis is readily available. The calculation of these ratios could be used amongst the firms that are of different sizes. These are used for the purposes comparing the financial performance of the companies with the industry averages. These are also used to do the trend analysis for the purposes of identifying the areas wherein an improvement is required (Zen wealth, 2018).
The first company taken is Mayne Pharma Group Limited which is the company listed on ASX. The company is a pharmaceutical company that focus on the expertise on the drug deliveries and also commercialises the branded and as well as the generic pharmaceuticals. The company also provides development of the contracts and also renders the manufacturing services to more than 100 cities all across the world.
The company has its roots traced in to the FH Faulding and company for many of the years. The company has been one of the largest and most prominent public companies which has it’s headquarter in South Australia.
The technology given by the company has a significant product portfolio and also the pipeline which has the global reach through the distribution partners in the various countries of Australia, North America, Europe and Asia etc. there are various regions with the help of which the company develops products and also provides the manufacturing facilities in many of the other regions such as Salisbury, Australia, Greenville etc. (Mayne pharma, 2018).
The competitor company undertaken for review is Glenmark Pharmaceuticals which was established in the year 1977. The company manufactures a generic drug along with an active pharmaceutical ingredient. The company has been named after the founders sons. During the initial years, the company only sold its products in the countries of India, Russia and Africa. Then the company went public in India during the year 1999. The company then invested more money into building its first research facility. The founder’s son took over as the post of CEO of the company. By the year 2008, the company was the fifth biggest pharmaceutical company in the country of India (Glen mark pharma, 2018).
The following table shows the calculated ratios:
|
2017 |
2016 |
|
|
0.55145609 |
0.629923676 |
|
|
3,15,761.00 |
1,68,366.00 |
|
|
5,72,595.00 |
2,67,280.00 |
|
|
0.150238825 |
0.129164172 |
|
|
86,026.00 |
34,523.00 |
|
|
5,72,595.00 |
2,67,280.00 |
|
|
3.525473089 |
8.708032645 |
|
|
5,72,595.00 |
2,67,280.00 |
|
|
1,62,416.50 |
94,186.50 |
|
|
7.87954891 |
8.708032645 |
|
|
5,72,595.00 |
2,67,280.00 |
|
|
72,668.50 |
30,693.50 |
|
|
2.146141724 |
1.051473897 |
|
|
4,29,003.00 |
10,77,051.00 |
|
|
1,99,895.00 |
10,24,325.00 |
|
|
1.613892293 |
1.01345569 |
|
|
3,22,609.00 |
10,38,108.00 |
|
|
1,99,895.00 |
10,24,325.00 |
|
|
0.462094217 |
3.160313843 |
|
|
6,02,496.00 |
11,49,561.00 |
|
|
13,03,838.00 |
3,63,749.00 |
|
|
0.153312758 |
2.816021487 |
|
|
1,99,895.00 |
10,24,325.00 |
|
|
13,03,838.00 |
3,63,749.00 |
|
|
6.18 |
4.77 |
|
|
0.161812298 |
0.394129979 |
|
|
1 |
1.88 |
|
|
6.18 |
4.77 |
(Yahoo finance-historical prices, 2018)
(Mayne Pharma, 2017)
(Mayne Pharma, 2016)
Glenpharma:
The following are the calculated ratios for Glenpharma:
|
Glenpharma |
|
|
|
Particulars |
2017 |
|
|
Profitability: |
||
|
Gross profit ratio: |
0.705777682 |
|
|
Gross profit |
58,182.47 |
|
|
Net sales |
82,437.39 |
|
|
Net profit ratio: |
0.259664698 |
|
|
Net profit |
21,406.08 |
|
|
Net sales |
82,437.39 |
|
|
Efficiency: |
||
|
Accounts receivables turnover ratio: |
2.376724488 |
|
|
Net sales |
82,437.39 |
|
|
Average Accounts receivables |
34,685.30 |
|
|
Inventory turnover ratio: |
7.802669688 |
|
|
Net sales |
82,437.39 |
|
|
Average inventory |
10,565.28 |
|
|
Liquidity: |
||
|
Current ratio: |
3.017392971 |
|
|
Current assets |
59,508.30 |
|
|
Current liabilities |
19,721.76 |
|
|
Quick ratio: |
2.436788096 |
|
|
Current assets-inventory |
48,057.75 |
|
|
Current liabilities |
19,721.76 |
|
|
Capital structure: |
||
|
Debt equity ratio: |
0.483640062 |
|
|
Debt |
45,639.27 |
|
|
Equity |
94,366.19 |
|
|
Ratio of Current Liabilities to Proprietors’ Funds: |
0.208991801 |
|
|
Current liabilities |
19,721.76 |
|
|
Equity share capital |
94,366.19 |
|
|
Market performance: |
||
|
Earnings per share (in cents) |
75.86 |
|
|
Price earnings ratio: |
11.23714738 |
|
|
Price per share |
852.45 |
|
|
Earnings per share |
75.86 |
|
(Yahoo finance, 2018)
(Glen Pharma, 2018).
The following statement shows the changes in the financials of the company during the years:
|
(Amounts in $in thousands) |
|||
|
Particulars |
2017 |
2016 |
change in % |
|
Sale of goods |
5,03,521.00 |
2,06,629.00 |
143.68% |
|
Services revenue |
68,163.00 |
59,170.00 |
15.20% |
|
License fee revenue |
53.00 |
391.00 |
-86.45% |
|
Royalties revenue |
858.00 |
1,090.00 |
-21.28% |
|
Revenue |
5,72,595.00 |
2,67,280.00 |
114.23% |
|
Cost of sales |
-2,56,834.00 |
-98,914.00 |
159.65% |
|
Gross profit |
3,15,761.00 |
1,68,366.00 |
87.54% |
|
Other income |
33,241.00 |
7,491.00 |
343.75% |
|
Research and development expenses |
-8,275.00 |
-8,731.00 |
-5.22% |
|
Marketing and distribution expenses |
-39,122.00 |
-38,029.00 |
2.87% |
|
Administration expenses and other expenses |
-1,53,133.00 |
-75,650.00 |
102.42% |
|
Impairments |
-20,213.00 |
– |
|
|
Finance expenses |
-12,324.00 |
-3,610.00 |
241.39% |
|
Profit before income tax |
1,15,935.00 |
49,837.00 |
|
|
Income tax expense |
29,909.00 |
15,314.00 |
95.30% |
|
Net profit from continuing operations after income tax |
86,026.00 |
34,523.00 |
|
The significant changes occurs in the other income and then in the finance expenses of the company.
|
|
(Amounts in $in thousands) |
|||
|
Particulars |
2017 |
2016 |
change in % |
|
|
Current assets |
||||
|
Cash and cash equivalents |
63,027.00 |
47,481.00 |
32.74% |
|
|
Trade and other receivables |
2,32,716.00 |
92,117.00 |
152.63% |
|
|
Inventories |
1,06,394.00 |
38,943.00 |
173.20% |
|
|
Income tax receivable |
7,972.00 |
7,399.00 |
7.74% |
|
|
Other financial assets |
8,025.00 |
3,458.00 |
132.07% |
|
|
Other current assets |
10,869.00 |
8,87,653.00 |
-98.78% |
|
|
Total current assets |
4,29,003.00 |
10,77,051.00 |
||
|
Non-current assets |
||||
|
Property, plant and equipment |
1,89,272.00 |
84,449.00 |
124.13% |
|
|
Deferred tax assets |
61,204.00 |
31,799.00 |
92.47% |
|
|
Intangible assets and goodwill |
12,35,441.00 |
3,32,483.00 |
271.58% |
|
|
Total non-current assets |
14,85,917.00 |
4,48,731.00 |
||
|
Total assets |
19,14,920.00 |
15,25,782.00 |
||
|
Current liabilities |
||||
|
Trade and other payables |
1,54,460.00 |
9,88,954.00 |
-84.38% |
|
|
Interest-bearing loans and borrowings |
13,124.00 |
503.00 |
2509.15% |
|
|
Income tax payable |
– |
12,308.00 |
-100.00% |
|
|
Other financial liabilities |
24,050.00 |
13,273.00 |
81.19% |
|
|
Provisions |
8,261.00 |
9,287.00 |
-11.05% |
|
|
Total current liabilities |
1,99,895.00 |
10,24,325.00 |
||
|
Non-current liabilities |
||||
|
Interest-bearing loans and borrowings |
3,27,122.00 |
76,331.00 |
328.56% |
|
|
Other financial liabilities |
16,905.00 |
5,814.00 |
190.76% |
|
|
Deferred tax liabilities |
56,912.00 |
41,640.00 |
36.68% |
|
|
Provisions |
1,662.00 |
1,451.00 |
14.54% |
|
|
Total non-current liabilities |
4,02,601.00 |
1,25,236.00 |
||
|
Equity |
||||
|
Contributed equity |
11,30,404.00 |
2,63,161.00 |
329.55% |
|
|
Reserves |
23,337.00 |
39,058.00 |
-40.25% |
|
|
Retained earnings |
1,50,097.00 |
61,530.00 |
143.94% |
|
|
Non-controlling interests |
8,586.00 |
12,472.00 |
-31.16% |
|
|
Total equity |
13,12,424.00 |
3,76,221.00 |
||
|
Total liabilities and equity |
19,14,920.00 |
15,25,782.00 |
||
The significant changes occur in the current assets and the interest bearing loans of the company.
Gross profit ratio:
The gross profit ratio is the profitability ratio which shows the relationship which exists between the gross profit and the total amount of the net sales. It is one of the most popular tools when it comes to the valuation of the operational performance of the business. This ratio who’s the profits that are being earned by the company. It is calculated by dividing the gross profit by the total amount of the net sales. The higher it is, the better it is for the company (Accounting for management, 2018).
Upon analysis, it could be stated that the company ratio has reduced during the year 2017 when compared with the year 2016. This is due to the increase in sales but the increase in the amount of cost of sales is much more than the increase in the amount of sales. The management must look for the ways to increase the same.
Net profit ratio:
The net profit ratio is the profitability ratio which shows the relationship which exists between the net profit and the total amount of the net sales. It is one of the most popular tools when it comes to the valuation of the operational performance of the business. This ratio who’s the profits that are being earned by the company. It is calculated by dividing the net profit by the total amount of the net sales. The higher it is, the better it is for the company. The net profit is derived after reducing the amounts of the taxes from the earnings before taxes (Accounting for management, 2018).
Upon analysis, it could be stated that the company ratio has increased during the year 2017 when compared with the year 2016. This is due to the increase in sales along with an increase in the amount of the net profit.
Assets turnover ratio:
This is the ratio which measures the ability of the company to generate profits from the employment of the assets into the company. The higher this ratio, the better it is for the company. This ratio is calculated by dividing the net sales by the total amount of the average assets (My accounting course, 2018).
Upon analysis, it could be stated that the company ratio has reduced during the year 2017 when compared with the year 2016. This is due to the increase in sales but a lesser increase in the amount of the average accounts receivables. This is not good for the company and hence, the management must look for the ways so that the accounts receivables of the company increases. This shows that the management of the company is not efficient enough to generate sales.
Inventory turnover ratio:
The inventory turnover ratio is the ratio which shows the efficiency of the management of the company and the same is calculated by comparing the cost of goods sold with the average amount of the inventory for the period. This ratio indicates the number of times the average inventory is turned or is sold during any stated period. It helps in measuring the number of times, the company is able to sell it inventory. The higher it is, the better it is for the company.
This ratio is important since it depends upon two contents of performance. The first content is the purchase of stock. The higher stock would mean higher inventory ad in turn a higher sales. The second content is the inventory. If the company is not able to sell inventory, then it would end up incurring more storage costs and other holding costs (My accounting course, 2018).
Upon analysis, it could be stated that the company ratio has reduced during the year 2017 when compared with the year 2016. This is due to the increase in sales along with an increase in the amount of average inventory. This is not good for the company and hence, the management must look for the ways so that the sale of the company increases.. This shows that the management of the company is not efficient enough to generate sales.
Current ratio:
This is the liquidity ratio of the company which helps in the measurement of the ability of the company to pay off its short term liabilities with the amounts of the current assets. This ratio of the company is very important since it helps in measuring the short term liabilities of the company which are due within the period of next year.
This merely means that the company has a limited amount of time when it comes to raising of the funds to finance these liabilities. The current assets are like cash, cash equivalent, marketable securities that are capable of being converted into cash within a short period of time (My accounting course, 2018).
Upon analysis, it could be stated that the company ratio has increased during the year 2017 when compared with the year 2016. This is due to a decrease in the amounts of the current assets and a decrease in the amounts of the current liabilities. The ratio that the company has during this year is somewhat close to what an ideal ratio is. This is good for the company.
Quick ratio:
This is the liquidity ratio of the company which helps in the measurement of the ability of the company to pay off its short term liabilities with the amounts of the current assets. This ratio of the company is very important since it helps in measuring the short term liabilities of the company which are due within the period of next year.
This merely means that the company has a limited amount of time when it comes to raising of the funds to finance these liabilities. The current assets are like cash, cash equivalent, marketable securities that are capable of being converted into cash within a short period of time (My accounting course, 2018).
Upon analysis, it could be stated that the company ratio has increased during the year 2017 when compared with the year 2016. This is due to a decrease in the amounts of the current assets and a decrease in the amounts of the current liabilities. The ratio that the company has during this year is somewhat close to what an ideal ratio is. This is good for the company.
Debt equity ratio:
The debt to equity ratio is the ratio which calculates the total weight of the total amount of debt and the financial liabilities as against the total amount of the equity of the shareholders.
A higher ratio shows more levered company and hence, better (Corporate finance institute, 2018).
Upon analysis, it could be stated that the company ratio has decreased which is mainly due to a reduction in the amount of the total debt and an increase in the amount of the equity. The management must look for the ways to improve this ratio.
The proprietary ratio is the ratio which shows the net worth of the total amount of the current liabilities to the total amount of the equity. This ratio helps in the establishment of the relationship between the funds of the shareholders to the total amounts of the resources of the unit (Accounting explanation, 2018).
Upon analysis, it could be stated that the company ratio has increased during the year 2017 when compared with the year 2016. This is due to an increase in the amount of the debt and a n increase of the equity shareholders’ funds.
Earnings per share:
The earnings per share of the company shows the profitability of the company which is derived from the dividing of the net income of the company by the total number of the shares that the company. It is the sum total of the market participants that are used for the purposes of gauging the profitability of the company before the shares of the company are bought (Economic times, 2018).
Upon analysis, it could be stated that the company ratio has increased during the year 2017 when compared with the year 2016. This is due to an increase in the amount of the net profit that has been earned by the company during the year. This is good for the company.
Price to earnings ratio:
The price earnings ratio of the company shows the relationship which exists between the stock price of the company and the earnings that have been earned on each share of the company. This ration gives a sense of profitability or value of the company. This ration shows the expectations of the market and the price that each investor is willing to give to the market.
This ration is very important since it helps in valuing the stock of the company since each investor would want to know the profitability of the company and to understand how profitable the investment for an investor is. If the company is not able to grow along with the current level of the earnings which remains constant, then this ratio would be interpreted as the number of years that it would take to pay back the amounts that have been paid for the shares (Corporate finance institute, 2018).
Upon analysis, it could be stated that the company ratio has decreased during the year 2017 when compared with the year 2016. This is due to a decrease in the amounts of the price per share and an increase in the earnings per share of the company. This is not good for the company.
Conclusion:
From the point of an investor, it could be stated that the company’s management needs to undertake measures so that the profitability of the company increases. This would attract in more investors and more investment into the company.
If the company is compared with its competitor, Glenpharma, the following could be stated:
In terms of Gross profit ratio, Glenpharma is better
In terms of Net profit ratio, Glenpharma is better
In terms of Gross profit ratio, Glenpharma is better
In terms of Accounts receivables profit ratio, Mayne Pharma is better
In terms of Inventory turnover ratio, Mayne Pharma is better
In terms of current ratio, Glenpharma is better
In terms of quick ratio, Glenpharma is better
In terms of debt equity ratio, Glenpharma is better
In terms of ratio of current liabilities to equity shareholders’ funds ratio, Glenpharma is better
In terms of earnings per share, Glenpharma is better
In terms of price earnings ratio, Mayne Pharma is better
References
About Mayne Pharma. (2018). Retrieved from https://www.maynepharma.com/about-us/about-mayne-pharma/
About us. (2018). Retrieved from https://www.glenmarkpharma.com/
Annual report 2016. (2018). Retrieved from https://www.maynepharma.com/media/1788/2016-mayne-pharma-annual-report.pdf
Annual report 2017. (2018). Retrieved from https://www.maynepharma.com/media/1964/2017-annual-report.pdf
Annual report 2017. (2018). Retrieved from https://www.glenmarkpharma.com/Glenmark-Online-AR-2016-17/pdf/Glenmark-AR-2017.pdf
Asset Turnover Ratio | Analysis | Formula | Example. (2018). Retrieved from https://www.myaccountingcourse.com/financial-ratios/asset-turnover-ratio
Current Ratio | Formula | Example | Calculator | Analysis. (2018). Retrieved from https://www.myaccountingcourse.com/financial-ratios/current-ratio
Debt to Equity Ratio – How to Calculate Leverage, Formula, Examples. (2018). Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/finance/debt-to-equity-ratio-formula/
Gross profit (GP) ratio – explanation, formula, example and interpretation | Accounting for Management. (2018). Retrieved from https://www.accountingformanagement.org/gross-profit-ratio/
Inventory Turnover Ratio Formula | Example | Analysis. (2018). Retrieved from https://www.myaccountingcourse.com/financial-ratios/inventory-turnover-ratio
Mayne Pharma historical prices. (2018). Retrieved from https://finance.yahoo.com/quote/MYX.AX/history?period1=1466361000&period2=1539973800&interval=1wk&filter=history&frequency=1wk
Glenmark historical prices. (2018). Retrieved from https://in.finance.yahoo.com/quote/GLENMARK.NS/history?period1=1487529000&period2=1539973800&interval=1d&filter=history&frequency=1d
Net profit (NP) ratio – explanation, formula, example and interpretation | Accounting for Management. (2018). Retrieved from https://www.accountingformanagement.org/net-profit-ratio/
Quick Ratio | Acid Test | Formula | Example | Calculation. (2018). Retrieved from https://www.myaccountingcourse.com/financial-ratios/quick-ratio
Ratio Analysis. (2018). Retrieved from https://www.zenwealth.com/BusinessFinanceOnline/RA/RatioAnalysis.html
Definition of Earnings Per Share (eps) | What is Earnings Per Share (eps) ? Earnings Per Share (eps) Meaning – The Economic Times. (2018). Retrieved from https://economictimes.indiatimes.com/definition/earnings-per-share-eps
Price Earnings Ratio – Formula, Examples and Guide to P/E Ratio. (2018). Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/valuation/price-earnings-ratio/
Proprietary Ratio – Definition, Explanation, Formula, Example – AccountingExplanation.com. (2018). Retrieved from https://www.accountingexplanation.com/proprietory_ratio.htm
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
