Group members

Amol More-41 Sonal Nahak-42 Priyanka Pawar-

CIPLA
Cipla Limited

Type : Public Traded

Industry : Pharmaceuticals Founded : 1935 Headquarters : Mumbai Maharashtra India Products : Pharmaceuticals Diagnostics Revenue : 69775.0 million (US$1.3 billion) (2012) Net income : 11.23 billion (US$210 million) (2012) Employees over 16000 Website www.cipla.com

Liquidity ratios
1. Current ratio
2. Quick ratio 3. Cash ratio

Current ratios
Liquidity ratio determines a firms ability to meet its short term financial obligations on time.
Current ratio :The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. Current ratio :

Current Asset Current Liabilities

RATIO

2012 (in cores)

2011(in cores)

Current ratio Current assets Current liabilities Current ratio= Current assets/Current liabilities 4535.25 1431.31 6022.56 2659.59

4535.25/1431.31=3.1686 6022.56/2659.59=2.2644

Current ratio of cipla Ltd shows a sound liquid position in both the yrs as it is necessary to meet 2:1

Quick ratio
An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. The quick ratio is calculated as: Quick Ratio = (Current Assets - Inventories) / Current Liabilities Also known as the "acid-test ratio" or the "quick assets ratio". Quick ratio should be 1:1

2012(in cores )
Quick ratio Quick assets=current assets -inventories Current liabilities Quick ratio =Current assets inventories/Current liabilities

2011(in cores)

4535.251824.50=2710.75 1431.31 2710.75/1431.31=1.89

6022.56-1883.16=4139.4

2659.59 4139.4/2659.59=1.55

Company is able to meet its short term obligations in both the yrs but in 2012 ,it is more efficient in maintaining a sound position as compared to 2011.

Cash ratio
Cash ratio indicates prompt payment ability.
The cash ratio is generally a more conservative look at a

company's ability to cover its liabilities than many other liquidity ratios Cash ratio= Cash + Marketable securities Current liabilities

2012(in cores) Cash ratio

2011(in cores)

Cash
Current liabilities Cash ratio = Cash + Marketable Securities/Current liabilities

53.82
1431.31 53.82+0/1431.31=0.037

83.56
2659.59 83.56+0/2659.59=0.0314

Cash maintenance of the company is not up to the mark in terms of current liabilities and maintenance of cash has gone down in 2012 as compared to 2011.

Solvency ratios
Solvency ratios are used to measure a company's

ability to meet long-term obligations. Solvency ratios vary from industry to industry , but as a general rule of thumb, a solvency ratio of greater than 20% is considered financially healthy. lower a company's solvency ratio, the greater the probability that the company will default on its debt obligations. Solvency ratios denote ability of organization to repay loan and interest.

Solvency ratios
1.Debt Equity ratio
2. Proprietary ratio 3.Stock to working capital ratio

4. Debt coverage ratio

a) Debt service coverage ratio b) Interest coverage ratio

Debt Equity ratio

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders equity and debt used to finance a company's assets.
Debt-Equity ratio =Debt /equity Debt = All liabilities including long term and short term loans Equity = Equity shares + Preference shares + Reserves and surplus

2012(in cores ) Debt Equity ratio Debt Equity Debt Equity ratio=Debt /Equity 12.20 7550.28 12.20/7550.28=0.0016 0.0016:1

2011(in cores)

441.39 6612.95 441.39/6612.95=0.0667 0.0667:1

In 2011 equity is 12 times of debt and in 2012 equity is 600 times of debt so in 2012 company has maintained a very solvent position.

Proprietary ratio
Proprietary Ratio (also known as Equity Ratio or the Net Worth to Total Assets Ratio) is the proportion of shareholders' funds to total assets. A high ratio will indicate that the firm has sufficient amount of equity to support the functions of the business. Proprietary Ratio = Shareholders funds / net worth Total Assets/capital employed

2012(in cores) Proprietary ratio Net worth Capital employed/liabilities Proprietary ratio=Net worth/capital employed 7550.28 7562.48 7550.28/7562.48=0.993 =99%

2011(in cores) 6612.95 7054.34 6612.95/7054.34=0.934 =93%

Proprietary ratio should be 50% and we can see company has maintained a solvent position through maintaining a 99% in 2012 as compared to 93% in 2011

Stock to working capital ratio

Stock is an item in the total Current Assets. Current Assets - Current Liabilities = Working Capital Therefore stock should not exceed the Working Capital. If Stock is greater than WC then it indicates there will be a fall in the value of stock in the near future. Therefore Working Capital should always be greater. Stock Working Capital Ratio = Stock Working Capital

2012(in cores) Stock to working capital ratio Stock Working Capital (CACL) Stock to working capital= stock/working capital 1824.50 3103.94 1824.50/3103.94=0.58 =58%

2011(in cores)

1883.16 3362.97 1883.16/3362.97=0.55 =55%

Cipla ltd has tried to maintain its stock position by keeping it lower. In 2012 company has improved more as compared to 2011

Debt coverage ratio

Debt coverage measures the companys ability to pay in a

shorter duration of time. It consists of Interest coverage ratio: Profit before interest depreciation and tax /interest Debt service coverage ratio: Profits after tax + depreciation +interest on loan/Interest on loan +Installment

Interest coverage ratio

It indicates how many times a company can cover out of

current profits. Interest coverage ratio= Profit before interest + depreciation and tax /Interest

2012(in cores) Interest coverage ratio Profit before interest ,depreciation and tax interest Interest coverage ratio= Profit before interest ,depreciation and tax/interest 1694.22 12.13 1694.22/12.13=139.67

2011(in cores)

1391.12 10.87 1391.12/10.87=127.97

Cipla Ltd is taking more time in 2012 to pay off its interest as compared to 2011.

conclusion
Through analyzing the company liquidity position we came to know that 1. sound liquidity position 2. Good image of the company in the minds of debtors and market. Through Solvency position 1. Company is able to maintain its debts and assets in proper proportion. 2. It is able to pay off the debts faster .