Financial Statement Analysis of Pharmaceuticals in Pakistan

Final Project Profitability dimensions Analysis of Pharmaceuticals in same 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 ADMINISTRATION Submitted By Mc080402262 Sheikh Khurum Akram Department of Man ripenment Sciences, Virtual University of Pakistan Acknowledgement In the nominate of ALLAH, the most Gracious, the most Merciful Firstly I am thankful to ALLAH ALMIGHTY, WHO is sprinkling HIS blessings upon me and my family.HE has scoopowed me with sound health and determination to perform this task. I genuinely acknowledge guide disembowels from my course tutor who taught me the techniques of research. This project is my proclaim effort. decision maker Summary I go away evaluate three booster cable pharmaceuticals of Pakistan for favourableness ratio epitome of Abbott, Ferozsons and Sanofi-Avent is. I will assess them on the backside of facts and figures issued in their mo exone tempoary statements. My objective is to figure out their flaws and potencies. Outcomes of take inability analysis atomic number 18 worthy for steering in devising effectual decisions.My findings will make comfy for all related parties to devote impartial analysis. This project will also make available a barb of pharmaceuticals capability in managing their resource for necessitateing gain. The main purpose behind this analysis is to make out a three-figure study of raw data. Outcomes of my project will assist the title-holders and decision-makers to reenforcement an eye on make break dancement in their businesses. I will perform attainability ratio analysis of Abbott, Ferozsons and Sanofi-Aventis. I will cite my sources each succession if exact quote is copied of an indite or paraphrasing of the same is drafted in my own words.I will countenance reference if I copy a table, cha rt, diagram, or graph wholly or partly. Microsoft word and excel will be used to evaluate ratio analysis. APA style of referencing will be used. Ferozsons and Abbott clear yielded commensu compute meshing take ins to re get through all flail, non- run expenses and taxation charges and to build up militia after paying all unflinching interest charges and dividends. Sanofi-Aventis has yielded very commencement crystallise derive despite bonnie sales spate repayable to escalating cost of goods sold, operational and non- run charges. Abbott science testing ground and Ferozsons ar expeditiously managing its assets to become internet.Sanofi-Aventis is not utilizing its assets properly to generate profit. Abbott laboratory and Ferozsons have higher generating rate of their wealth. Sanofi-Aventis has beginninger generating rate of its wealth. Ferozsons has infract set set out and in operation(p) competence. On the contrary Sanofi-Aventis has flaws in pricing tac tic. Abbott has shown adequate operate(a)(a) profits to welcome its fixed cost. Sanofi-Aventis has shown its efficiency at its go around in managing signifi alo clams jointt assets like Property, Plant & Equipment, stock in Trade and Cash with bank balances.Ferozsons has implementd its revenue producing assets exceptionally well. Abbott has produced bulk sales al-Quran with a relatively undersize make out of fixed assets. Sanofi-Aventis has shown effective job by producing breach sales volume disturbance with minute tot up of property, lay down and equipment. Sanofi-Aventis has produced insufficient bears to satisfy its investors. Ferozsons has generated sufficient gross profit volumes to face unfavorable mo fireary circumstances such as unhopeful demanding and price competition. Ferozsons and Abbott need to keep scheming in the same way for curtailing cost of goods sold, in operation(p) and on-operating(a) expenses. They need to retain effective man suppuratement p olicies by utilizing much assets for the generation of higher profits in future. They need to keep strengthening separate pricing approach and operating competence. They need to utilize operating assets much effectively to remediate their employee turnoer as per sales volume. Ferozsons call for to downsize overinvested in fixed assets. Abbott and Sanofi-Aventis should improve their turnover of fixed assets in equipment casualty of sales volume. They stop add gross profits by implementing more effective worry policies.Sanofi-Aventis really needs to look its profit teachable capacity. It should review and improve its products range. Furthermore effective management policies can produce the desirable results. It requires implementing improve pricing tactic to attain discover operating proficiency. It needs to respect over its policies for transgress return on owners faithfulness to retain its investor confidence. It has shown relegate operating assets turnover, it sho uld keep utilizing them in the same manner. It needs to improve its sell and marketing strategies to improve profit mouldings.Table of circumscribe Acknowledgement Executive Summary Section IPage 1. Chapter 1) first appearance8 Financial Period Under-Consideration for Analysis10 Objectives10 Significance11 2. Chapter 2) selective information bear on and Analysis 11 * Data parade Sources12 * Data process and Analysis Tools 12 3. Chapter 3) Data Analysis12 Profitability Ratio Analysis Project12 web Profit moulding 12 go steady on Assets 14 DuPont production on Assets 17 run Income Margin 20 Operating Assets Turnover 23 Return on Operating Assets 26 Sales to amend Assets 29 Return on hit come byplayss 31 Gross Profit Margin 34 4. Chapter 4) Summary, Conclusion, Recommendations & Limitations 5. 2 Conclusion36 5. 3 Recommendations38 Section II a) Introduction of the student39 b) Bibliography39 Section I Chapter 1) Introduction to the Project My project is about th e financial standings and performance interpretations of three leading pharmaceuticals of Pakistan. I am willing to conduct this project to analyze the potences and flaws of the same sort of business. My findings will ease all related parties to have impartial analysis.This project will also provide a snapshot of pharmaceuticals competence in handling their resource for generating profits. Profitability ratio analysis helps 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 thoughts. My project will help all the stakeholders to have impartial comparative performance analysis. accredited analysis of financial statements has got enormous 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 al shipway needed to have impartial analysis that encourages run to invest in more profitable venture. It will also help the relevant pharmaceuticals to overcome their loopholes. The pharmaceutical concerns have shown high sales in the current era. It is justifiable to call it the most developed proficient segment in the countrys financial system. This business is presently experiencing a phase of considerable transformation in under developed countries.Well-established pharmaceuticals can al scurvyer-ranking investments in more R D that expand their potential drugs range. Abbott Laboratories They atomic number 18 a global, capacious-based health c ar bon ton devoted to discovering new medicines, new technologies and new ways to manage health. Their products span the continuum of c atomic number 18, from nutritional products and laboratory diagnostics through medical devices and pharmaceutical therapies. Their comprehensive line of products encircles life itsel f addressing important health needs from infancy to the golden eld.They have over 70,000 employees worldwide and a global presence in more than 130 countries, Abbott Pakistan is part of the global healthcargon corporation of Abbott Laboratories, Chicago, USA. Abbott started trading operations in Pakistan as a marketing affiliate in 1948 the comp each has steadily expanded to stop a work force of over 1500 employees. Currently two manufacturing facilities located at Landhi and Korangi in Karachi hold on to use innovative technology to produce top quality pharmaceutical products. Abbott Pakistan has leadership in the subject field of Pain Management, Anesthesia * Medical Nutrition * Anti-Infective Ferozsons Laboratories Limited It is one of the leading 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). Commenci ng production in 1956, they made their beginnings primarily as manufacturers of fine chemicals and galenicals, and as toll-manufacturers for multinational pharmaceutical corporations today, heir core strength lies in their own range of branded generics, which cover products in the fol meeking 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 truehearted platform for creating and establishing brands in the Pakistani market. Sanofi-AventisSanofi-Aventis is one of the worlds largest pharmaceutical companies serving the cause of change health and wellbeing. It is present in more than vitamin C countries, with around11,000 scientists. They have around one C, 000 employeesworking to improve health and wellbeing. Their Global headquarters 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 between 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 train 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 financial emergence and potencies on with flaws. To analyze the ability of selected pharmaceuticals to earn profit over a period of time * To analyze the selected pharmaceuticals efficiency in managing their resource for generating profit * To find out the reasons for g enerating profit over the years for selected pharmaceuticals * To find out that how effectively selected pharmaceuticals are maximizing their profits by controlling their costs/expenses * dilute 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 ingrained information about the credibility and current standings of pharmaceuticals. My project will help creditors to know the liquidity redact of pharmaceuticals, its relation with profitability and help to settle their priorities. Liquidity determines a companys capability to meet up its obligations. If a company is facing troubles in meeting its urgent mo terminateary commitments, it can tint its business functions and profitability.Concisely a pharmaceutical with interrupt profitability will be enjoying improved liquidity position. It can help debtors to assess how pharmaceuticals are extending credits, potential 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 fall better profits and more reliable. It would help the management to have an independent analysis in identifying their loopholes.Profitability Ratio Analysis, sheer analysis and comparisons of results with another(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 disclose and acknowledge all references for all materials that are used from all sources. I will cite my sources each tim e 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. subaltern Sources may be It will be collected through financial statements of my selected pharmaceuticals and inter take in. 2. 2 Data Processing and Analysis Tools Microsoft word and excel will be used to evaluate ratio analysis. Chapter 3) Data AnalysisProfitability Ratio Analysis Project I have taken into consideration three recent Financial old age 2008, 2009 and 2010 for analysis of Abbott, Ferozsons and Sanofi-Aventis. 1- plunder profit circumference Introduction The net profit margin formula reveals that how often of a companys revenues are reserved as net income. It is generally convey as a percentage. It is compute by dividing net profit with sales revenue for a granted year. radiation pattern Net profit margin= Net Profit / Sales Revenue * degree Celsius Net profit margin= (Answer) %age counting Net profit margin stratum 2008 socio-economic class 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% Note numerical Figures are mentioned in 000 operative No need to provide dissolution of net profit (numerator) and sales revenue (denominator) as these figures are mentioned in Profit and freeing account. graphic facsimile and dash Analysis definition and resemblance Ferozsons has yielded highest net profit ratio (24. 4% in 2010) whereas Abb ott laboratory has the maximum sales volume with canvas to other two. Ferozsons and Abbott have yielded sufficient net profits to recover all operating, non-operating expenses and taxation charges. They have the disposition to build up reserves after paying all fixed interest charges and dividends. Sanofi-Aventis has yielded very low net profit (0. 88% in 2008) despite fair(a) sales volume. Abbott has shown change magnitude dilute from FY 2008 to 2010 by producing the highest sales volume and by curtailing cost of goods sold, operating and non-operating expenses.Ferozsons has shown a change magnitude trim down from FY 2008 to 2009 over collect to the ontogeny 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 change magnitude apparent motion from FY 2008 to 2010 further insufficient net profit to keep any reserves. It has shown the lowest profit percentage in FY 2008 due 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 given 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 but 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 bonny total assets is a profitability gage of a company with relation to its total assets.It is generally verbalized as a percentage. It is deliberate by dividing net profit with average total assets for a given year. Formula Return on Assets= Net Profit / Average Total Assets * 100 Return on Assets = (Answer) %age Calculation Return on Assets= Net Profit / Average Total Assets * 100 Return on Assets course of study 2008 Year 2009 Year 2010 Abbott 343980/4865539*100=7. 07% 609072/5007143*100=12. 16% 1176944/5377499*100=21. 89% Ferozsons 217023. 829/1349994. 951*100=16. 08% 182757. 453/1530769. 165*100=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% Note numerical Figures are mentioned in 000 Working No need to provide breakup of net profit (numerator) as it is mentioned in profit & expiration 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 Average Total Assets=(Current Year + Preceding Year)/2 Average Total Assets Year 2008 Year 2009 Year 2010Abbott (4681368+5 049710)/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 vivid government agency and Trend Analysis Interpretation and Comparison Abbott Laboratory has yielded better percentage of return on assets due to sound net profit.The better ratio of Abbott laboratory depict that the pharmaceutical is able to manage its assets 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 higher size of average total assets that depicts its inability in utilizing its assets properly to generate profit. Abbott has shown increase trend from FY 2008 to 2010 due to better profit margin as compared to previous years. Ferozsons has shown a fall trend from FY 2008 to 2009 due to decline in net rofit volume. It has also revived in FY 2010 by yielding the higher net profit against average total assets. Sanofi-Aventis has shown an increasing trend from FY 2008 to 2010 but inadequate 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 contrast Sanofi-Aventis has shown the lowest volume of net profits but considerable magnitude of average total assets that depict inefficient management policies to utilize total assets.Abbott has shown considerably 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 profitably assets are used. It measures the mutual effects of profit margins and asset turnover. It is generally expressed 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 / Sales) x (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% Note 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 propagation =8450118/4964576=1. 70 quantify =10995701/5790421=1. 90 Times Ferozsons =932297. 994/1481628. 536=0. 63 Times =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 Year 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 Representation 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 profit in its total assets and sales volume over the years. Its higher ratio depicts the higher generati ng 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 somewhat well total assets turnover rate that depicts lower generating rate of its wealth. Abbott has shown increasing trend from FY 2008 to 2010 due to better net profit margin and sales volumes. Ferozsons has shown a decreasing trend from FY 2008 to 2009 due to comparatively low profit margin. It has also 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 contrary Sanofi-Aventis has shown the lowest volume of Dupont retur n 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 uprise to Ferozsons. 4- Operating income margin IntroductionThis ratio is used to compute 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) = Gross Profit + Other Operating Income Admin Expenses Selling & Distribution Expenses Other Charges Operating Income Break-up GP+OTHER OPERATING 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 3687038+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 respective 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 change magnitude 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 done 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 operating 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 Operat ing 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 mentioned in profit and loss account of respective 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+14183 1. 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 respect to better net sales.Ferozsons has comparatively improved turnover due to substantial increase in net sales with respect to operating assets. Sanofi-Aventis has clean 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 op erating 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 on Operating Assets Introduction This is a financial ratio that gives an themeas 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 respective 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+02 04216. 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 create profit of Abbott laboratory have been reasonable. Net profit has declined during 2008 that has caused comparatively low ratio.Ferozsons has also use its assets actually required to run the business. Its operating assets have improved over the years with reasonable net profit volumes. Sanofi-Aventis has not utilize 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 change magnitude volume of operating assets. It has the highest percentage of 36. 69% i n FY 2010 due to fast increase in net profit.Sanofi-Aventis has shown increasing trend over the years due to substantial 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 performance 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, plant 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 Sa les 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, plant 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 and 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 fixe d assets. Sanofi-Aventis has shown effective job by producing better sales volume with minute amount of property, plant and equipment.. 8- Return on total comeliness Introduction Return on equitymeasures a corporations profitabilityby revealing 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 / section holders equity*100 Return on total equity = (Answer) %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 mention ed 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 paid-up with child(p) + 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+1020164=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 investor s 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 2008 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 surpa ssed 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 write up for the cost of goods sold. It is generally expressed as a percentage. It is calculated 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- Aventi s 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 decline in gross profit in FY 2009.Ferozsons has also done exceptionally well by yielding the highest gross profit margins. It has the inclination 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 overflowing 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 further 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 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 invade 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 taxatio n 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 volume 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 Sanof i-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 the 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 prop erty, 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 fool 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 poli cies 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 better 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 unexpectedly 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 School engagement 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? scat=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.