A Report On Summer Internship/ Project Work: Ravi Pharmaceuticals Private Limited, Khambhat

A REPORT ON
SUMMER INTERNSHIP/ PROJECT WORK

for
RAVI PHARMACEUTICALS PRIVATE LIMITED, KHAMBHAT
Submitted to
INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT(I2IM)
CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY
(CHARUSAT) – CHANGA
Prepared by
AFIFA M. MAULVI
ID NO.:18MBA045
M.B.A. First Year
Under the Guidance of

Mr. ARPIT PATEL
INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE & TECHNOLOGY (CHARUSAT)
AT. & PO. CHANGA – 388421 TA:PETLAD DIST. ANAND, GUJARAT
JULY 2019
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DECLARATION
I, Afifa Maulvi, student of the two year MBA programme at Indukaka Ipcowala
Institute of Management(I2IM) hereby declare that the report on summer training and
project work entitled “A Study on Financial leverages and Profitability for Ravi
Pharmaceuticals Private Limited, khambhat” is the result of my own work. I also
acknowledge the other works / publications cited in the report.
(Signature)
Place : Changa
Date : Afifa M. Maulvi
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ACKONOWLEDGEMENT
Every project whether it is big or small is being successful only due to the effort of
number of wonderful people who have always given their valuable advice. I sincerely
appreciate the support and guidance of all those people who have been instrumental in
making this project successful.
I would like to express my heartfelt thanks to CHAROTAR UNIVERSITY OF
SCIENCE AND TECHNOLOGY( CHARUSAT), INDUKAKA IPCOWALA
INSTITUTE OF MANAGEMENT(I2IM), Changa and Ravi Pharmaceuticals
Private Limited, Khambhat for giving me an opportunity to carry out my summer
internship training as a part of my MBA Programme.
I express my gratitude and special thanks to Dr. Govind Dave- Dean of I2IM for
arranging the summer training in good schedule and also for his guidance and support.
I would like to express my gratitude and special thanks to Mr. Piyushbhai H. Patel
(Managing Director), Miteshbhai Patel (Manager), Mr. Sureshbhai
Patel(Executive Worker), Mr. Arpan Patel (Chief Accountant) and all the company
members who in spite of being highly busy with duties, took time out to hear, guide
and keep on the correct path and allowing to carry out our industrial project work at
their esteemed organization and extending during the training.
I would also like to thank Mr. Arpit Patel for his advice and guidance without which
this project would not have been possible and my friends who have been constant
source of inspiration during the preparation of this project work.
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TABLE OF CONTENTS
Sr. No. Particulars Page No.

Part 1 Organizational Profile 8
1 INTRODUCTION 9
2 The Company: 10
2.1 Company Profile 10
2.2 Evolution & History 10
2.3 Vision & Mission 11
2.4 Management Structure 12
2.5 Products 13
2.6 Geographical Spread of Facility 17
3 Functional Areas 18
3.1 Markets & Marketing of the Company 18
3.2 Production Department 20
3.3 Supply Chain & Logistics 24
3.4 Human Resource Management Department 27
3.5 Finance Department 33
4 Decision Making 36
4.1 Strategic Decision Areas and Decision Making Process 36
4.2 Decision Making in Drug Development 36
4.3 Tactical and Operating Decision Making 36
5 Financial Analysis 38
5.1 Profitability of the firm 38
5.2 Assets Build up By the Company in Last Five Years 42
5.3 Key Financial Ratios and their interpretation 44
5.4 Financial Health & Future of the Organization 60
6 My learning from the study of the organization 61
Part 2 Project Study 62

7 Introduction & Concept of Financial Leverages 63
8 Overview of the Project 66
8.1 Background of the Study 66
8.1.1 Literature Review 66
8.2 Importance of the Study to the Organization 68
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8.3 Objective of the Study 69
9 Research 70
9.1 Hypothesis 70
9.2 Research Design 70
9.3 Data Source & Data Collection Method 70
10 Data Analysis, Findings & Interpretation 72
10.1 Data Analysis 72
10.2 Findings 75
11 Conclusion & Limitation 76
11.1 Limitation 76
11.2 Conclusion 76
12 References 77
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EXECUTIVE SUMMARY
Summer internship is very important part of the MBA programme. For a young
management student the summer internship training is the most wonderful and actual
field experience. The objective of such an exercise is to get a first hand exposure to the
realities of the business world and gain an insight into the working of the corporate
world and develop managerial skills.
The summer internship training gives opportunity to apply management theory into
practice, to understand the complexities of organizational life, and to become aware
about my strengths and weakness as required for potential managers. It also teaches to
understand coordination process of different important areas.
It has been observed that practical knowledge plays a vital role than the theoretical
knowledge. This is so because practical knowledge gives chance to express our own
ideas, way of thinking and different thoughts. It increases ability to learn, in managing
our views towards the practical knowledge.
The project is divided in two parts. The first part shows the overall organization study
and second part shows the research work carried out during the training period. First
part of the report let us know about the history and evolution of Ravi Pharmaceuticals
Private Limited and also about the various functional areas of the company. This part
also includes the financial analysis and decision making strategies of the company.
The second part is based on research work. The research study was carried out on topic
of “ A Study on Leverage Analysis and Profitability of Ravi Pharmaceuticals Pvt. Ltd.
Located in Khambhat. The data for the period of study.
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PART 1
ORGANIZATIONAL PROFILE
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1. INTRODUCTION
Pharmaceuticals companies may deal in generic or brand medications and medical

devices. They are subjected to variety of laws and regulations and that govern the
patenting, testing , safety and marketing of drugs. The modern pharmaceuticals
industries traces its roots to two sources. The first of these were local apothecaries and
expanded from their traditional role distributing botanical drugs such as morphine and
quinine to wholesale manufacture in the mid 1800s. Rational drug discovery from
plants started particularly with the isolation of morphine , analgesic and sleep inducing
agent from opium, by the German apothecary assistant friedrich Returner, who named
the compound after the Greek god of Dreams, Morphenus.
At Ravi Pharmaceuticals Pvt. Ltd., Company has one common factor in all its activities
i.e. single minded pursuit of excellence. This pursuit menifests itself in our commitment
to achieve Quality Excellence. A reflection of the extent of Ravi Pharmaceuticals Pvt.
Ltd. expertise is the wide range of products which are presently being marketed and
that has achieved great success.The main keystone to company’s progress is product
innovation and the company is particularly well placed to take advantage of new
product opportunities.
The company’s expert knowledge of raw materials and their behavior is first brought
to bear on new formulations, then extensive testing is carried out to ensure that product
specification can meet the rigorous demands of regulatory authorities.
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2. THE COMPANY
2.1 Company Profile
Name RAVI PHARMACEUTICALS PVT.LTD.

address 69/1, G.I.D.C. Kansari, Khambhat(388620)
Gujarat
Telephone Number 91 2698222448
fax 912698220856
E-mail ravipharma.cby@rediffmail.com
Marketing Office 69/1, G.I.D.C. Kansari, Khambhat(388620)
Gujarat
Started From 1986
Main Products S.V.P., External Preparation and ointment & Dry

Powder (Beta-Lactum) Products
➢ MANAGING DIRECTORS
1. Mr. Piyush H. Patel

2. Mrs. Nayana V. Patel
2.2 Evolution and History

From 1995, Ravi Pharmaceuticals Pvt. Ltd. is under the management of
dynamic and foresighted Mr. Piyush H. Patel and Mrs. Nayana V. Patel with a single
minded devotion to constantly upgrade systems, knowledge and technology. At Ravi
Pharmaceuticals Pvt. Ltd., the company has one common factor to all its activities and
that is single minded pursuit of excellence. This pursuit manifests itself in the
commitment to achieve Quality Excellence.
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A reflection of the extent of Ravi Pharmaceuticals Pvt. Ltd. expertise is the wide range
of products which are presently being marketed with great success. Product innovation
is the key stone of company’s progress. It is particularly well placed to take advantage
of new product opportunities. The company’s expert knowledge of raw materials and
their behavior is first brought to bear on new formulations, and then extensive testing
is carried out to ensure that product specifications can meet the rigorous demands of
regulatory authorities.
A highly sophisticated, quality control system which provides accurate results , records
and statistics, ensure accuracy and speed in checking products at all stages during and
after manufacturing process documentation is specially designed to ensure that quality
and compliance are maintained during manufacture from receipt of raw materials and
packing materials to ship finished products.
The company has ambitious plans of our product range , which consists of full
range of anesthetics , Analgesic , Antipyretic, Antispasmodic and diuretics,
Tranquilizers and vitamins and ointment section internal and external of both
dental and skin very shortly.
2.3 Vision & Mission
Vision
“ The vision of the company is to be leading pharmaceutical company in India

and to become a significant global player by providing high quality, affordable
and innovative solution in medicine and treatment.”
Mission
“Company will discover, develop and successfully market pharmaceutical products to
prevent, diagnose, alleviate and cure diseases.”
“Company shall provide total customer satisfaction and achieve leadership in chosen
markets, products and service across the globe based on World class research and
development.”
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2.4 Management Structure
Director
General Manager
HR Finance Marketing Warehouse

QC
Dept. Dept. Dept. Dept.
Dept.
Marketing Warehouse
HR QC Finance
Manager
Manager
Manager Manager Manager
AMM WDS Driver

Staff AFM AAM
Staff
Financial Collection
Accountant Staff
Staff Staff
Full Form:
QC : Quality Control
AFM : Assistant Finance Manager
AAM : Assistant Accounting Manager
AMM : Assistant Marketing Manager
WDS : Warehouse Delivery Staff
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2.5 Products
➢ Details of the Products
Sr No. Name of Product Packing
1. CALCIUM BOROGLUCONATE IN J.P.B. 450ml
( POUCH PACK)
2. CALCIUM BOROGLUCONATE IN J.P.B. 450ml
(GLASS BOTTLE)
3. IV – CAMBOL INJ.(GLASS BOTTLE) 450ml
4. ATROPINE SULPHATE INJ. I.P. 30ml
5. ANALGIN ANJ. 30ml
6. CALCINATE INJ. (CAL + VIT.D3 +B12) 30ml
7. RANOVET 15ml / 30ml/
50ml
8. IV DEX INJ 5ml / 10ml
9. GENTARINE INJ. 30ml
10. IV-RIL INJ. 30ml / 100ml
11. LIVOVIL INJ. 10ml / 30ml /
50ml
12. OXETETRACYCLINE INJ. (50mg / ml) 30ml / 50ml/
100ml
13. OXETETRACYCLINE DIHYDRATE 200mg. 30ml / 50ml
14. R – LOG ( Triamcinolon acetonic Injection I.P.(vet) 5ml
15. RAVITADE (Vit – A, Vit – D3 & Vit – E injection) 10ml /30ml
16. RALPHOS INJ. (elemental phosphorus 79.4 mg) 10ml / 30 ml
17. RV- LEX INJ. 10ml 10ml
DRY POWDER SECTION
18. RAYOX – V 10ml

19. RAMOX - C 15ml
FEED SUPPLEMENT
20. CALVIT LIQUID FEED SUPPLIMENT 500ml

21. Calcium with Vit. B12 & D3 1000ml / 5000ml
22. CLOSANTEL SOLDIUM INJECTION 5% WET 10/20/30/50
(ml)
23. TRIFLUPROMAZINE HYDROCLORIDE 5ml Vial
INJECTION I.P.
24. STERILE PENICILLINE G PROCAIN WITH 10ml
ALUMINIUM STERATE SUSPENSIOM U.S.P.
VETERINARY
25. PHENYLBUTAZONE & ANALGIN INJECTION 5ml
26. MELOXICAM INJECTION VETERINARY 30ml
27. MELOXICAM & PARACETAMOL INJECTION 10/30/50/100
(ml)
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28. MEFENAMIC ACID WITH PARACETAMOL 30ml & 100ml
INJECTION
29. R – BATE (Betamethasone sodium, Phosphate 5ml
injection USP)
30. SOLON (Prednisolone Acetate Injectable Suspension 10ml
USP)
31. BUTAPHOSPHAN & CYANOCOBALMIN 30ml
INJECTION
32. CHLORAMPHENICOL INJECTION U.S.P. 30ml
33. RAVICTIN 30ml/50ml/100ml
34. AMPICILLINE & CLOXACILLINE FOR 2 , 3 & 4 gm/vial
INJECTION (VET)
SMALL VOLUME LIQUID PARENTERALS
Sr No. Products Packing
VIALS
1. ANTIBIOTICS:- 2ml
Amikacin Sulphate Injection I.P. 250mg/ml
2. Gentamicin Injection I.P. 40mg/ml 2ml &10ml
ZENTIN INJECTION
3. ANALGESIC :- (NSAID) 30ml
Diclofenac Sodium Injection I.P. 25 mg/ ml
4. STERIODS:- 2ml & 10ml
Dexamethasone Sodium Phosphate Injection I.P. 4
mg/ml
RIDEX INJECTION
AMPOULES
i. Antimaterial
5. R – QUINE (Quinine Dihydrochloride Injection I.P. 2ml

300mg / ml
6. F – CURE Inj. 2ml
ii. ANALGESIC (NSAID)
7. Diclofenac Sodium Injection I.P. 25mg/ml 3ml

DICLONZA
iii. Vitamins
8. Ascorbic Acid Injection I.P. 100mg/ml 2ml

iv. For Peptic Ulcer
9. Ranitidine Hydrochloride Injection I.P. 25mg/ml 2ml
v. Electrolytes
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10. Injection of Calcium Glucono – Galacto 0.1375gm/ml 10ml
11. Magnesium Sulphate Injection B.P. 25% w/v 2ml
12. Magnesium Sulphate Injection B.P. 50% w/v 2ml
13. Potassium Chloride Concentrate Sterile B.P. 15% w/v 10ml
14. Sodium Bicarbonate Injection I.P. 0.9% w/v 10ml & 25ml
15. Sodium Chloride Injection 75% w/v 10ml & 25ml
vi. Nutrient
16. Dextrose Injection I.P. 25% w/v & w/v 25ml

17. Macrolides 2ml
Lincomycin Injection U.S.P.
vii. Vehicle
18. Sterile Water for Injection 2,3,5 & 10ml
OPTHALMIC SOLUTION
Sr. No. Product Packing
1. Ciprofloxacin Opthalmic Solution U.S.P. 0.3% w/v 5ml vial

Cipcin eye / ear drops
2. Diclofenac Sodium & Gentamicin Eye Drops 1% w/v & 5ML vial
0.3% w/v DICLO G
3. Gentamicin Sulphate Eye Drops I.P. 0.3% w/v 5ml vial
4. Nepthazoline in Methyl Cellulose Sterile Isotonic eye 10ml vial
solution 0.1% w/v
5. Neomycin Sulphate & Dexamethasone Sodium 5ml vial
Phosphate Opthalmic Solution U.S.P. 0.35% w/v
6. Ofloxacin Opthamic Solution U.S.P. 0.3% w/v CINFLO 5ml vial
7. Phenylephrine Hydrochloride , Napthazoline 10ml vial
Hydrochloride Menthol & Camphor Opthalmic Solution
0.12% w/v, 0.05%w/v, 0.01%w/v
8. BRISTOL 5ml vial
Polymyxin B Sulphate with Chlorephenicol Eye/Ear
Drops 5000 I.U./ml & 0.5% w/v
9. CEPOL 5ml
Polymyxin B Sulphate, Chlorephenicol &
Dexamethason Sodium Phosphate Eye/Ear Drops
5000I.U./ml 0.5% w/v 0.1% w/v
10. CEPOL – D 10ml Vial
Sodium Iodide & Monobasic Clacium Phosphate Eye
Drops 1%w/v & 0.5% w/v
11. Sulcin Eye Drops 10ml
12. Monosol Eye Drops 5ml
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EXTERNAL PREPARATION
ENEMA (FULL):
Sr No. Products Packing
1. Phosphate Enema Solution B.P. Formula 9a) 100ml in P.V.C.
PRONEMA Pouch
EAR DROPS:
Sr No products Packing
1. Deshing Ear Drops 5ml Pet Bottle
2. Betabiotic Plus Ear Drops 5ml Pet Bottle
Mouth Wash
Sr No Products Packing
1. OROBA (Liquid) 100ml Pet Bottle
2. SENSI KF (Liquid) 100ml Pet Bottle
Ointment
Sr. No. Name Packing

1. CELL-MR (Linseed Oil, Disclofenac Methyl 30gm
2. MONACAN-B (Clobetasol Propionate, Gentamicin & 10gm Tube
Miconazole
3. BETA-GM 10gm (Clobetasol Propionate, Gentamicine & 10gm Tube
Miconazole
4. METRODINE (Metronidazole and Providine- 15gm
5. SENSI-QA (Potassioum Nitrate Medicated 50gm
6. OROBA Antiseptic Gel 15gm
7. ALOE-S (Silver Sulphadiazine, Allantoin Chlorthexidine 15gm Tube
Gluconate,
(Source : As per the details given from company)
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2.6 Geographical spread of facilities
Ravi Pharmaceutical Private Limited is located at Khambhat GIDC Kansari. Company
have ambitious plans of their product range which consists of full range of Anesthetics,
Analgesic, Antipyretic, Antispasmodic, Ant malarial and Antihistamines vitamins and
ointment section internal and external of both dental and skin very shortly.
➢ A highly refined quality control system, providing accurate results, records and
statistics, ensure accuracy and speed in checking products at all stages during
and after manufacturing process documentation is specially designed to ensure
that quality and compliance are maintained during manufacture from receipt of
raw materials and packing materials to the shipment of finished goods.
➢ Company have ambitious plans of their product range which consists of full
range of anethetics, analgesic, Antipyretic, Antispasmodic, Ant material and
Antihistamines vitamins and ointment section internal and external of both
dental and skin very shortly.
➢ The department of Ravi Pharmaceutical in mulling the creation of drug research
facilities which can be used by private companies for research work on rent.
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3. FUNCTONAL AREAS
3.1 Markets and Marketing of the Company

Ravi pharmaceuticals has the Marketing and sales department for the regular sale on
time and to generate income and regulate the process of the firm to earn maximum
profit. Ravi pharmaceuticals has their own Private and Public Marketing Representative
to advertise and sale the company’s medicines and drops to needed medical stores and
other pharma companies.
Marketing Representative keeps the record of monthly sales and order received by the
company for the further supply. Decided amount is also given by the finance
department for the advertisement and sponsoring events.
Marketing to health care providers takes three main forms activities by the company’s
sales representatives provision of drug samples and sponsoring continuing medical
education.
3.1.1 Markets
Sr No. Name of Company Nos. of products

1 Polycare Labs Pvt. Ltd. 31
2 Zydus Animal Health Ltd. 43
3 Crest Health Care 34
4 Credence Remedies Pvt. Ltd. 08
5 P & B Laboratories Ltd. 11
6 Centurion Laboratories 11
7 Centurian Healthcare Pvt. Ltd. 14
(Source : Company
Guide)
3.1.2 Key Competitors of Company

➢ Pharmanza India Pvt. Ltd.
➢ Baroque Pharmaceuticals Pvt. Ltd.
➢ Herbal India Ltd.
➢ Sun Pharma
➢ Crystal Pharmaceuticals Pvt. Ltd.
➢ Lovika Pharmaceuticals
➢ Zydus Pharmaceuticals
➢ Cadila Pharmaceuticals Pvt. Ltd.
3.1.3 Marketing Strategy

The use of gifts including pens and coffee mugs embossed with pharmaceutical
products names has been prohibited by Pharma ethics guidelines.
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Free samples have been shown to affect physician prescribing behaviour. Physician
with access to free samples are more likely to prescribe brand name medications over
equivalent generic medications.
Drug coupons to customers to help offset the co-payments charged by health insurers
for prescriptions medication.
These coupons are generally used to promote medications that compete with non –
preferred products and cheaper , generic alternatives by reducing or eliminating the
extra out of pocket costs that and insurer typically charges a patient for non -
preferred drug products.
3.1.4 Position of the Company’s Product in Product Life Cycle

The main four stages of product life cycle are as follows:
Position of Ravi Pharma’s product in product Life cycle:

According to the analysis, the Ravi Pharma’s product is in the maturity stage.
Reason:
Indicative Product Life Cycle Stage
Features
Introduction Growth Maturity Decline
Sales volume Low High Maximum Low
Investment cost Maximum High Low/ medium Low
Competition Low Low-Medium High Maximum
Profitability Low Maximum High Low
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3.2 Production Department
3.2.1 Production process of sterile water of Injection
Internal Laboratory Bags

Check of Raw Bags Inspection Overwrapping
Material
Central Control of Bags Filling &

All Water Sealing With Packing
Parameters Printing Batch &
Expiry Date
Production of Storage &

Sampling &
Purified water Quarantine
Testing
Production of Preparation of
WFI Filling Solution
With Dosage of
Raw Material
1. Internal Laboratory Check of Raw Material

➢ When raw material is received from the suppliers than the main important
thing for the company is to check that raw material and there is a separate
cleaning room to make that raw material useful and than different
machines are available to check that material and than the material
becomes according to quality standards.
2. Central Control of all Water Parameters

➢ Water is the main important thing to make sterile for injection but it cannot
be used directly to the process. Water passes from three process where in
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which it is processed and than it becomes useful for the further process of
sterile.
3. Production of Purified Water

➢ Water that is controlled by the parameters than it will be processed to
make it according to standards where in which half of the water is purified
and half of the water is wasted and that will use for further process.
4. Production of WFI (Water For Injection)
➢ After applying heat energy to water to make it purified as per e.p. , the
water is gone through another process when the final useful water for
injection is been prepared.
5. Preparation of Filling Solution with Dosage of Raw Material

➢ The material that has been checked in laboratory and approved by quality
control department than the filling material is been prepared by making
process on raw material and for that the air purifying room is important
which purifies external air and protect the material to be secured form
external environment and the person who are working in that department
have also required to use the required clean clothes.
6. Sampling & Testing:

➢ The filled material that is prepared will go to quality control lab for testing.
If it’s approved than that filling material can be used for further process
and there are various testing instruments available there to assure the
material as per the quality standards. The main important thing is to be
taken care is just that external air should not affect that material otherwise
the filling material will be of no use.
7. Bags Filling & Sealing With Printing batch & Expiry Date
➢ After sampling and testing of raw material, the standardized quality
material is being prepared than it filled in the vials. Before filling the
sterile in the vials the vials must be properly washed and cleaned than and
than only that is useful. The approved filling solution is filled through
machinery in the vials and than it is sealed with the printing batch and
expiry dates.
8. Bags Inspection
➢ After the above said process, all the bags are properly inspected and if
there any vials in which the filling solution is not according to quality will
be rejected and the accepted vials will go to further processes.
9. Bags Overwrapping
➢ The inspected bags wil be finally overwrapped so that that would not be
any wastage ahead.
10. Packing
➢ Finally packing material is being prepared that means boxes are prepared
and the manufacturing details and prices are printed and than the bottles
are packed into that boxes.
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11. Storage and quarantine
➢ After packing , the boxes are stored in the godown and that will shipped to
client and according to their order.
3.2.3 Critical Path Method:

Sr. No. Activity Name of Activity Preceding Time
Activity (minutes)-
1. A. Internal Laboratory Check of - 60
Raw Material
2. B. Central Control of all Water A 30
Parameters
3. C. Production of Purified Water as B 60
Per E.P.
4. D. Production of WFI (Water For B,C 30
Injection)
5. E. Preparation of Filling Solution A,D 300
with Dosage of Raw Material
6. F. Sampling & Testing E 45
7. G. Bags Filling & Sealing With E,F 180
Printing batch & Expiry Date
8. H. Bags Inspection G 30
9. I. Bags Overwrapping H 45
10. J. Sterilization H,I 60
11. K. Packing J 120
12. L. Storage and quarantine K 150
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0 60 180 480 480 525
A60 E F
300 45
120 180 180 480 480 525
150 180
D
30
150 180
525 705
G180
60 90 90 150
B30 C60
525 705 735 780
I
60 90 90 150
45
735 780
705 735
H30
705 735
780 840
J 60
780 840
840 960
K
120
840 960
960 1110
L
150
960 1110
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3.3 SUPPLY CHAIN & LOGISTICS
3.3.1 Supply Chain Of the Company
➢ Business to Customer
Raw Material Manufacturi

Material
From ng the
Warehouse
Suppliers goods
Finished
Regional
Distributors goods
Warehouse
Warehouse
Retailers/
Customers
Hospitals
The above supply chain management is used in Ravi Pharmaceuticals Pvt. Ltd. For
business to customers.
1. Raw Material From Suppliers
➢ The first step of supply chain management in Ravi Pharma is to purchase raw
material. For the smooth production process, adequate amount of raw material
should be available so the company purchases the minimum stock so that would
be not any stoppage in production.
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2. Material Warehouse
➢ Once the material is procured than it is stored in the warehouse and special care
is to be taken for that and than the material is being cleaned in the separate
cleaning and after that the further process is made on the material to make it
useful and the quality control lab will test it and than approved raw material will
be shifted to approved area.
3. Manufacturing the Goods

➢ The main client of Ravi Pharmaceuticals is Zydus Hospital so based on its
demand approved raw material will go for the production of the injection where
special care is being taken and final goods are prepared with the seal of the
company and expiry dates and it will be packed in the boxes.
4. Finished Goods Warehouse

➢ Once the goods are ready than it will be delivered to finished goods warehouse
for the purpose to store the product.
5. Regional Warehouse
➢ Based on the demand and speedy supply the company sends the finished goods
to the regional warehouses.
6. Distributors
➢ The distributors plays very important role for the supply of products to the
customer so for the Ravi Pharmaceuticals, the distributors will store the
products in cool and dry place to protect the products.
7. Retailers / Hospitals
➢ As the main client of Ravi Pharmaceuticals in the Zydus Hospital, the goods are
delivered to them as per their order and that will used by them for the final sale
to the customers.
8. Customers
➢ Finally the product will be delivered to the customers that means to the hospitals
and small medicine stores.
3.3.2 LOGISTICS
➢ Logistics management is part of supply chain management that plans,
implements and controls the efficient, effective forward and reverse flow and
storage of goods, services and related information between the point of origin
and the point of consumption in order to meet consumer’s requirement.
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3.3.2.1 Inbound Logistics
➢ The basic concern in concentrating on purchasing and arranging the availability
of material, parts or finished inventory form the suppliers to manufacturing
plants. It ensures the availability of raw material to manufacturing units.
3.3.2.2 Outbound Logistics

➢ It is related to the storage and movement of the final product and the related
information flows from the end of the production line to the user. It collect the
information of order and based on that it manufactures the goods.
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3.4 HUMAN RESOURCE MANAGEMENT
Human resource is of paramount importance in the success of any organization because
most of the problem in the organization setting are human and social rather than
physical or economical. Men are most crucial out of the other M’s viz Material,
Machine, Money and Method.
Human Resource Department has the task of handling the human problems of the
organization and it is devoted to acquiring , developing , utilizing and maintaining
efficient workforce. The department undertakes the function of recruitment , selection
etc. HR manager discuss the problems of employees, he is the advisor to the top
management and a counsellor of employees. He undertakes the function which are
related to Human Relations.
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3.4.1 Organizational Structure of the Company Covering all the Functions &
Activities
HR Director
Assistant
Compensation Employee Workforce

Training and
Recruitment and Safety
Relations Development
Benefit
Job Job Strategy Training

Security
Posting Evaluation Planning Program
Education
Applicant Attendance Dispute Leadership

Checking Resolution Facility
Sourcing Training
Inspection
Interview Contract
Salary Promotion Emergency
Arranging Negotiation
Policy Policy Preparedness
Applicant
Insurance Advisory
Choosing
Service
Bonus
Managing
28
3.4.2 Recruitment & Selection
Recruitment is understood as the process of searching for and obtaining applications
for jobs , from among whom right people can be selected.
Recruitment Process :
Identify the Vacancy
Prepare Job description and job specification
Advertising the vacancy
Managing the responses
Short Listing
Arrange the Interviews
Conducting Interview and Decision Making
Sources of Recruitment at Ravi Pharmaceutical Private Limited

➢ Advertisement
➢ Employment Exchange
➢ Campus Interview
➢ Notice on Board
➢ Interval Promotion
➢ Relative / References of Employees
29
Recruitment Policy at Ravi Pharmaceutical Private Limited
➢ There is no discrimination related to cast, sex and creed. Recruitment is carried

for at least two bases i.e. Preliminary and final. All the dates of interview are
been sent by HRD at least prior 10 days.
Selection Process at Ravi Pharmaceutical Private Limited

Selection is a part of human resource department, based on the feedback of recruitment
committee, selection committee will select the appropriate person for the vacancy or to
fulfill the place of empty place of the employee as per the requirement.
Following steps are been followed for selection of the employee at Ravi
Pharmaceuticals.
Scrutinizing of Preparation of Final

Issue of Letter
Applicaton Selection List
Preliminary Reference Joining of job

Interview Check by Candidate
Physical Test Physical Check up
3.4.3 Performance Appraisal System

In the company performance of employees is evaluated every year by the senior
authorities. Senior authorities are required to fill a particular form in which the
necessary criteria’s for evaluating the employees are given. The review form is sent to
the manager of personnel department who discuss the performance review with senior
authorities.
Following are the purpose of the Performance Appraisal at the company:
➢ Evaluate the performance of the worker for the work being assigned.
30
➢ Plan for training and development need.
➢ Determine the suitability for promotion
➢ Whether plan his/her work
➢ Whether follows schedule
➢ Recommendation for salary review
3.4.4 Training & Development

➢ Training is the systematic procedure to add and to improve skills, knowledge
and technical know how of the personnel in the organization. Development is
not only an activity that is desirable but also an activity that an organization
must commit resources to, if it is to maintain the viable and knowledge work
force. To improve the quality of managers the company has to spend money and
introduce systematic development schemes for them.
➢ Ravi pharma gives on the job training to the workers because in small scale
industries basically they are giving training to the workers on the job they are
showing the work to the new workers 1 week training or 3 or 4 days training.
Chart:
No. Types of Training No. Of Employees No. of Days
1 Induction/ Orientation Training 146 3
2 Job Training 125 2
3 Safety/ Hazardous Training 160 2
4 Refresher Training 74 5
5 Promotional Training 28 7
(Source :
Company Guide)
3.4.5 Promotion and Retention Policy

Promotion Policy:
Promotion means an improvement in pay , prestige, position and responsibility of
employee within the organization.
In Ravi pharmaceuticals, promotion is given to the employees on the basis of following
factors.
➢ Qualification
➢ Experience
➢ Performance
➢ Merit Based
Retention Policy:
If the employee wants to resign the job than firstly reason is been asked for leaving the
job. If the reason to leave the job is related to increment than performance appraisal and
31
reviews are taken and the time period in the company is taken into consideration and if
there is valid reason than increment is given.
If the employee’s performance is good than steps are taken to retain that employee
otherwise the company don’t do anything to retain that employee in the company.
3.4.6 Employee Welfare Measures

Employee welfare measures means something that is been given to the employees along
with the salary or wages to the workers and employees. In Ravi Pharmaceuticals also
looks for employee welfare services as it is necessary for the company to do it.
Following are employee welfare measures applied in Ravi Pharmaceuticals:
1. Canteen Facility
2. Medical Facility
3. Insurance Coverage
32
3.5 FINANCE DEPARTMENT
3.5.1 Introduction
Finance is the field that deals with the study of investments. It includes the dynamics
of assets and liabilities over time under conditions of different degrees of uncertainty
and risk. Finance can also be defined as the science of money management. Finance
aims to price assets based on their risk level and expected rate of return.
To succeed, pharmaceuticals and life sciences companies need to maintain financially
sustainable, fiscally healthy operations and adopt strategies to accelerate performance,
maximize resources and find new sources of revenue.
The finance department of every pharmaceutical company is handled and ruled by the
Ministry of Pharmaceuticals of India. Company has their own finance department for
the better flow of business and further need of finance in the firm.
Ravi pharmaceuticals has the different section in the firm along with the Chief
accountant and clerk to maintain the records of daily supply and the finance along with
the paying the salaries to the workers on time and submit the government documents
including income tax return and provident fund amount submission of workers on time.
3.5.2 The key areas of company’s personal financing:

➢ Financial Position
➢ Adequate Protection
➢ Tax Planning
➢ Investment Goals
➢ Retirement Planning
➢ Estate Planning
3.5.3 Board of Directors:

➢ Nayanaben V. Patel
➢ Piyushbhai H. Patel
➢ Vikrambhai A. Patel
➢ KAmleshbhai B. Patel
Auditors
Mukund Patel & Co.
Chartered Accountants,
1,2,3, Thakkar Arcade,
Sardar Gunj Road,
Anand- 388001
Bankers
➢ Kalupur Commercial Co-operative Bank Ltd., Vadodara
33
➢ Bank of Baroda, Vadodara
Registered Office
Plot No. 69/1
GIDC Estate,
Kansari
Cambay – 388630
(Gujarat)
3.5.4 Investment in Various Assets

Sr. No. Name of Assets Sr. No. Name of Assets
1. Lease hold land 19. Motor Car- Innova
2. Buildings 20. Motor Car- Scorpio
3. Electrical Equipment 21. Motor Car- Accord
4. Furniture & Fixures 22. Motor Car – Vema
5. Plant & Machinery 23. Motor Car – Creta
6. R O Plant 24. Bajaj Discover
7. Boiler 25. Honda scooter
8. Telephone & Fax 26. Scooter (Eterno)
9. Air Conditioner 27. AHU System
10. CCTV Cameras 28. Material Handling Equipment
11. Xerox Machine 29. Generator
12. LCD TV 30. Tumal
13. Lawn Cutter Machine 31. Lab Equipment
14. Refrigerator 32. Counting Machines
15. Washing Machine 33. ETP Plant
16. Attendance System 34. Computer System
17. Water Cooler 35. Software
18. Cycle 36. Solar System
(Source : Financial Statements of the company)
34
3.5.5 Working Capital Management
➢ For working capital the company has its own plan. To utilize the funds and how
to source the fund is an important content in the organization. The company
uses cash and money received from the debtor to purchase the raw material.
Many additional expenses are made which are fulfilled by the on hand cash
reserves.
➢ Salaries are the major expenses to be made to employees. Timely salaries are
paid to the employees in the first to tenth date of the every month salary and
wages are paid to employees and workers.
➢ Major other expenses are purchase of raw material , transportation, electricity
and others. All such expenses are negotiated and paid to reduce the cost so as to
bring the cost of production down and generate maximum profit for the
company.
➢ Also the costs that are incurred for the inventory management, it starts from the
storage of raw material till the goods are finished and there after storing of
finished goods until and unless the products are delivered to the customers or
dealers.
35
4. DECISION MAKING
4.1 Strategic Decision Areas & Decision Making Process

Decision making is a core function of any drug development firm. Developing
drugs demands a firm to be highly innovative, while at the same time the activity is
strictly regulated. Successful drug development offers the right to apply for a long term
patent that confers exclusive marketing rights. This article addresses the issue of what
constitute an adequate portfolio. Drug development decision as important
organizational elements should get more emphasis and decision in drug portfolio using
modern decision making methods should be used more widely than what currently
happens, structured informed decision would help avoiding late termination of drugs
in phase III development. An improved research and development pipeline and drug
portfolio management are the major element in general strategy targeting success.
4.2 Decision Making in Drug Development

There is a need for decision that requires expert and preplanned decision time
points. While each project will need decision in a timely manner upon project
progression, a portfolio needs constant decision-making at preplanned time points to
ensure that the portfolio will match to the business plan of the company.
The competitive environment in today’s biopharmaceutical market place is
forcing organization to be more flexible, responsive and efficient than ever before. The
challenge for leaders of life science companies to ensure that the project portfolio
remains aligned to strategic intent. A key characteristic of mature organization is the
ability to ensure that the most valuable projects are selected prioritized accordingly and
receives the appropriate resource. The pressure on companies to replenish pipeline with
innovative
The key to choosing products that contribute to sustainable profitability lies in
changing the business focus of portfolio management from financial metrics to a
business model that maximizes customer value. The challenge is how to maximize
return on investment within an increasingly competitive and tough economic
environment that is focused on value.
The answer is to ensure that Senior Management takes a strategic view of its
portfolio based on maximizing value as a whole. Once the strategy is set, tactical
resource allocation should align with the strategy and be followed through at an
operational level where demonstrating product value and shorter cycle times are critical
success factors. This paper discusses the necessary evolution of portfolio management
to respond to growing demands stakeholders and, in particular, payers expecting that
value be demonstrated in order to better inform decision- making.
4.3 Tactical and Operating Decision and Decision Making Process

The tactical components include the methods in the pharmaceutical executive’s
armamentarium to assess risk. Clinical risk is assessed by known safety signals as well
as unanticipated safety signals which could be seen after a product is marketed. Risk
36
can be managed by due diligence, assessing the risk associated with in-licensed
compounds as well as ongoing due diligence on the compounds in the portfolio. Other
tactical components include employing methodologies to avoid bias with a careful
consideration of the trade-offs for each decision in order to optimize the ever-changing
portfolio.
The clinical contribution involves product development risk (but not patent risk)
and estimating the probability of technical success(POTS), which includes an
evaluation of safety risk, probability of regulatory success, and market access. To avoid
bias, due diligence must be conducted both for in-licensed assets and, on an ongoing
basis, for the existing portfolio. Depending on the clinical mix of the portfolio, as
determined by the therapeutic areas, the value of the entire portfolio then becomes a
combination of clinical risk and net present value (NPV) risk.
37
5. FINANCIAL ANALYSIS
5.1 Profitability of the firm
Balance Sheet of Last 6 Years ( From 2012-13 to 2017-18)
Sr. Particulars 31-3-2018 31-3-2017 31-3-2016

No.
A. Equity & Liabilities
1. Shareholders’ funds
a. Share Capital 9,97,700 9,97,700 9,99,700
b. Reserves & Surplus 2,47,26,101 1,73,69,796 1,37,87,439
2,57,23,801 1,83,67,496 1,47,85,139
2. Non- Current Liabilities
a. Long Term Borrowings 3,15,07,978 3,01,41,389 2,66,76,206
b. Deferred Tax Liabilities 7,52,022 6,39,333 3,57,538
3,22,60,000 3,07,80,722 2,70,33,744
3. Current Liabilities
a. Short Term Borrowings 40,95,680 90,06,995 84,62,113
b. Trade Payable 3,47,29,421 2,64,03,063 2,63,94,875
c. Other Current Liabilities 62,86,020 52,51,175 49,04,379
4,51,11,120 4,06,61,232 3,97,61,367
Total A 10,30,94,922 8,98,09,450 8,15,80,250
B. Assets
1. Non -Current Assets

a. Fixed Assets Tangible 4,09,82,654 3,59,05,979 3,60,71,593
b. Non- Current Investment 1,00,511 2,13,011 2,13,011
c. Long Term Loan & 73,01,906 66,72,144 23,86,815
Advances
8,83,85,071 4,27,91,134 3,86,71,419
2. Current Assets
a. Inventories 1,62,34,668 1,28,91,169 1,11,56,996
b. Trade Receivables 2,75,03,699 2,77,95,095 2,52,85,832
c. Cash & Bank Balance 78,71,281 46,25,182 47,93,317
d. Short Term Loan & 30,59,726 16,60,397 16,21,725
Advances
e. Other Current Assets 40,478 46,474 50,972
5,47,09,851 4,70,18,316 4,29,08,842
Total B 10,30,94,922 8,98,09,450 8,15,80,250
38
Sr. Particulars 31-3-2015 31-3-2014 31-3-2013
No.
A. Equity & Liabilities
1. Shareholders funds
a. Share Capital 9,97,700 9,97,700 9,97,700
b. Reserves & Surplus 1,00,31,747 65,70,041 34,06,392
1,10,29,447 75,67,741 44,04,092
2. Non- Current Liabilities
a. Long Term Borrowings 2,33,05,298 2,37,00,437 2,23,41,551
b. Deferred Tax Liabilities 3,53,512 3,61,701 4,45,603
2,36,58,810 2,40,62,138 2,27,87,154
3. Current Liabilities
a. Short Term Borrowings 81,29,011 47,16,385 47,68,252
b. Trade Payable 1,94,71,581 1,51,33,034 1,57,44,124
c. Other Current Liabilities 82,66,828 63,30,622 70,90,232
3,58,67,420 2,61,80,041 2,76,02,608
Total A 7,05,55,677 5,78,09,920 5,47,93,855
B. Assets
1. Non -Current Assets

a. Fixed Assets Tangible 3,22,23,314 2,79,02,252 2,82,51,112
b. Non- Current Investment 2,13,011 2,13,011 2,13,011
c. Long Term Loan & 13,54,343 11,45,235 10,12,623
Advances
3,37,90,668 2,92,60,498 2,94,76,747
2. Current Assets
a. Inventories 1,16,11,685 85,19,653 59,15,442
b. Trade Receivables 1,90,28,525 1,55,60,284 1,52,67,494
c. Cash & Bank Balance 26,37,773 27,82,962 24,12,020
d. Short Term Loan & 34,33,058 16,35,552 16,88,597
Advances
e. Other Current Assets 53,969 50,972 33,556
3,67,65,010 2,85,49,423 2,53,17,108
Total B 7,05,55,677 5,78,09,920 5,47,93,855
39
Profit & Loss Statement of last 6 years ( From 2012-13 to 2017-18 )
Particulars 2017-18 2016-17 2015-16
Sales 16,40,52,131 12,76,12,731 11,07,54,347
Less COGS 8,31,61,595 6,86,37,133 5,78,21,142
Gross Profit 8,08,90,536 5,89,75,598 5,29,33,205
Other Income 10,74,933 12,47,495 7,74,875

8,19,65,469 6,02,23,093 5,37,08,080
Less: 7,19,39,404 5,48,80,038 4,82,37,478

Operating Expenses
PBIT 1,00,26,065 52,43,055 54,70,602
Less - - -
Interest
PBT 1,00,26,065 52,43,055 54,70,602
Less 26,69,760 16,60,698 17,14,910

Tax
PAT 73,56,305 35,82,357 37,55,692
Particulars 2014-15 2013-14 2012-13
Sales 9,73,39,177 9,57,37,804 8,28,42,136
Less 4,96,21,145 5,19,76,658 4,31,24,677

COGS
Gross Profit 4,77,18,032 4,37,61,146 3,97,17,459
Add 2,10,425 5,92,395 2,42,361

Other Income
4,79,28,457 4,43,53,541 3,99,59,820
Less: Operating 4,28,91,784 3,97,45,830 3,59,60,743

Expenses
PBIT 50,36,673 46,07,711 39,99,077
Less - - -
Interest
PBT 50,36,673 46,07,711 39,99,077
Less 15,74,966 14,44,063 12,43,872

Tax
40
PAT 34,61,707 31,63,648 27,55,205
Cash Flow Statement

For the year ended on For the year ended on
Particulars 31-3-2018 31-3-2017
Amount Amount Amount Amount
A. Cash Flow From
Operating Activities
Net Profit Before Tax 1,00,26,065 52,43,055
Adjustment For:
Depreciation 66,07,818 65,51,230
Finance Cost 25,45,970 91,53,788 25,79,980 91,31,210
Operating Profit 1,91,79,853 1,43,74,265
Before Changes in
Working Capital
Adjustment For:
Decrease/Increase in 2,91,396 (25,09,263)
Receivables
Decrease/Increase in (33,43,499) (17,34,173)
Inventories
Decrease/Increase in (13,99,329) (38,672)
Short Term Advances
Decrease/Increase in (6,29,762) (28,19,431)
Long Term Advances
Decrease/Increase in 5996 4,498
Other Current Assets
Increase/ Decrease in 83,26,358 8,188
Payables
Increase/Decrease in 7,94,845 40,46,005 3,46,796 (67,42,056)
Other Current
Liabilities
Cash Generated From 2,32,25,857 76,32,209
Operations
Income Tax Paid (25,57,071) (13,89,339)
Net Cash From 2,06,68,786 62,42,870
Operating Activities
B) Cash From
Investing Activities
Purchase of fixed (1,16,84,493) (63,85,626)
Assets
Purchase of 12,500
Investments
Sale of Investments 1,25,000
Net Cash From (1,15,71,993) (63,85,626)
Investing Activities
41
C) Cash Flow From
Financing Activities
Proceeds From Long 16,06,589 34,65,183
Term Borrowings
Proceeds From Short (49,11,315) 5,44,881
Term Borrowings
Finance Cost (25,45,970) (25,79,980)
Net Cash Used in (58,50,696) 14,30,084
Financing Activities
Net Increase in Cash 32,46,098 12,87,328
& Cash equivalents
Cash & Cash 46,25,182 33,37,854
equivalents at the
beginning of the year
Cash & cash 78,71,281 46,25,182
equivalents at the end
of the year
5.2 Assets build up by the company in the last 5 years (2013-14 to 2017-18)
Sr. Particulars 2013-14 2014-15 2015-16 2016-17 2017-18

No.
1. Lease hold 45,098 45,098 45,098 45,098 45,098
land
2. Buildings 1,08,08,980 99,34,736 1,13,12,538 1,06,44,113 1,07,41,178
3. Electrical 3,84,949 6,75,391 6,45,061 6,18,880 5,93,949
Equipment
4. Furniture & 4,88,558 6,07,020 7,82,119 8,25,220 9,10,177
Fixures
5. Plant & 1,02,51,102 93,98,961 88,45,664 1,28,36,070 1,59,98,322
Machinery
6. R O Plant - - - 4,11,000 3,49,350
7. Boiler - 7,98,357 7,49,528 6,37,099 5,41,534
8. Telephone 8,174 6,948 10,762 15,310 13,014
& Fax
9. Air 2,92,490 2,48,617 5,00,974 4,73,002 6,71,268
Conditioner
10. CCTV 2,42,713 2,06,306 1,95,748 1,71,486 1,45,763
Cameras
11. LCD TV 28,864 24,534 20,854 17,726 15,067
12. Lawn 12,364 10,509 8933 7,593 6,454
Cutter
Machine
13. Xerox 29,478 92,119 78,301 66,556 1,46,831
42
Machine
14. Refrigerator 4,186 27,358 23,255 32,644 27,747
15. Water 15,556 13,222 11,239 9,553 8,120
Cooler
16. Washing - 29,835 25,360 21,556 18,322
Machine
17. Attendance 16,717 14,210 12,078 10,266 8,727
System
18. Cycle 75,502 6,303 5,357 4,554 3,871
19. Motor Car- 18,480 6,24,856 5,31,128 4,51,459 3,83,740
Innova
20. Motor Car- 1,647 1,63,692 1,39,138 1,18,267 1,00,527
Scorpio
21. Motor Car- 8,71,979 7,41,183 6,30,005 5,35,504 4,55,179
Accord
22. Motor Car 7,96,735 6,77,225 5,75,641 4,89,295 4,15,901
– Vema
23. Motor Car - - - - 12,50,636
– Creta
24. Bajaj 33,046 28,089 23,876 20,294 17,250
Discover
25. Honda 36,597 31,108 26,442 22,475 19,104
scooter
26. Scooter 14,905 12,669 10,769 9,154 7,780
(Eterno)
27. AHU 16,25,708 15,77,621 16,46,486 13,99,513 11,89,586
System
28. Material 1,17,488 2,01,098 3,36,470 4,32,534 4,27,015
Handling
Equipment
29. Generator 5,73,130 85,970 4,14,087 3,51,974 2,99,178
30. Tumal - - 18,84,533 16,01,853 13,61,575
31. Lab - - 19,02,720 16,35,280 26,61,985
Equipment
32. Counting - - - - 8,500
Machines
33. ETP Plant - - - - 9,19,617
34. Computer 7,35,125 86,893 1,89,177 94,421 82,551
System
35. Software 1,92,578 36,792 14,717 20,287 12,172
36. Solar - - - 18,75,942 11,25,565
System
Total 2,77,22,150 2,68,07,911 3,15,98,058 3,59,05,979 4,09,82,654
43
5.3 Key Financial Ratios and their interpretation
1. Current Ratio
➢ Current Ratio shows the relationship between current assets and current
liabilities. It is liquidity ratio that measures firm’s ability to pay off its short
term liabilities with its current assets. The idle current ratio is 2:1. Higher the
ratio, better it is because the firm’s will be able to pay current liabilities more
easily.
Current Ratio is calculated as under:

Current Ratio = Current Assets / Current Liabilities
Year Current Assets Current Liabilities Ratio
2015-16 4,14,53,379 3,97,61,367 1.04
2016-17 4,70,18,316 4,06,61,232 1.16
2017-18 5,47,09,851 4,51,11,120 1.21
Current Ratio
1.25
1.21
1.2
1.16
1.15
1.1
1.04
1.05
0.95
2015-16 2016-17 2017-18
Interpretation
➢ Current Ratio of Ravi Pharmaceuticals for last three years are less than the idle
ratio but the current ratio for the year 2017-18 is the higher as compared to
2015-16 & 2016-17. This shows that the development of current assets is slow
as compared to current liabilities.
44
2. Quick Ratio
➢ Quick ratio shows the relationship between quick assets and current liabilities.
Quick assets are those which can be converted into cash very easily. The idle
quick ratio is 1:1 which means that the company can meet its current financial
obligations with the availability of quick funds on hand. A quick ratio lower
than 1:1 shows that company depends too much on inventory or other assets to
pay its short term liabilities.
Quick Ratio is calculated as under:

Quick Ratio = Quick Assets / Current Liabilities
Year Quick Assets Current Liabilities Ratio

2015-16 3,02,96,383 3,97,61,367 0.76
2016-17 3,41,27,147 4,06,61,232 0.8

2017-18 3,84,75,183 4,51,11,120 0.85
Quick Ratio
0.86 0.85
0.84
0.82
0.8
0.8
0.78
0.76
0.76
0.74
0.72
0.7
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph, we can say that quick ratio for the year 2017-18 is 0.85
which is higher as compared to the previous 2 years. As it is less than the idle
ratio, we can say that the situation is not idle because current liabilities are not
easily repayable in a particular year , but still in 2017-18 quick assets are more
as compared to previous 2 years.
45
3. Gross Profit Ratio
➢ Gross profit ratio is the ratio of gross profit to sales revenue. Gross profit ratio
shows how much a company earns taking into consideration the costs incurs for
producing its products or services. It is good indicator to know how profitable
the company is at the most fundamental level, how efficiently a company uses
its resources, material and labour.
It is calculated as under:
Gross Profit Ratio =( Gross Profit/sales )*100
Year Gross Profit Sales Gross Profit Ratio

2015-16 5,29,33,205 11,07,54,347 47.79
2016-17 5,89,75,598 12,76,12,731 46.21
2017-18 8,08,90,536 16,40,52,131 49.31
Gross Profit Ratio

50
49.5 49.31
49
48.5
48 47.79
47.5
47
46.5 46.21
46
45.5
45
44.5
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph it can be interpret that the gross profit of Ravi
pharmaceuticals in the year 2017-18 is the highest and the lowest is in the year
2016-17. Higher the ratio, better it is. So it can be said that the gross profit
margin in the year 2015-16 & 2017-18 is better as the company performs better
to generate more sales and control the costs.
46
4. Net Profit Ratio
➢ Net Profit margin is a ratio of profitability that is calculated by dividing sales

by net profit after tax and it is displayed as percentage. It shows that the amount
of each sales left over after all expenses have been paid. When we want to
compare the companies in similar industries than net profit margin is very
important. A higher net profit margin shows that the company is more efficient
to cover sales into actual profit.
Net Profit Ratio = (Net Profit / sales) *100
Year Net Profit Sales Ratio

2015-16 37,55,692 11,07,54,347 3.39%
2016-17 35,82,357 12,76,12,731 2.81%
2017-18 73,56,305 16,40,52,131 4.48%
Net Profit Ratio

5.00%
4.48%
4.50%
4.00%
3.39%
3.50%
3.00% 2.81%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph, it can be interpret that net profit ratio for the year 2015-
16 is 3.39%, for 2016-17 is 2.81% and for 2017-18 is 4.48%. So we can say that
net profit ratio for the year 2017-18 is higher as compared to the other two years
so higher the ratio better it is. So company is more efficient in 2017-18 to cover
sales into actual profit.
47
5. Operating Profit Margin
➢ Operating Ratio is the profitability ratio that measures what percentage of total
revenue is made up by operating income. This ratio is important for both
creditors and investors because it helps to show how strong and profitable
company operated is. It also shows whether the fixed costs are too high for the
production or sales volume.
Operating Profit Margin =( Operating Income / Net Sales ) * 100
Year Operating Net Sales Operating Profit

Income Margin
2015-16 54,70,602 11,07,54,347 4.94%
2016-17 52,43,055 12,76,12,731 4.11%
2017-18 1,00,26,065 16,40,52,131 6.11%
Operating Profit Margin

7.00%
6.11%
6.00%
4.94%
5.00%
4.11%
4.00%
3.00%
2.00%
1.00%
0.00%
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph, it can be interpret that the operating profit margin is
highest in the year 2017-18 and lowest in the year 2016-17. For operating profit
margin, high or increasing margin is preferred so margin of Ravi
pharmaceuticals in the year 2017-18 is better than two years because the
company’s earning from sales are more.
48
6. Inventory Turnover Ratio
➢ The inventory turnover ratio is an efficiency ratio that measures how effectively
inventory is managed by comparing cost of goods sold with average inventory
for a period. The ratio measures how many times average inventory is turned or
sold during a period. The idle inventory turnover is about 4 to 6.
Inventory Turnover Ratio = COGS / Average Inventory
Year COGS Average Ratio

Inventory (Times)
2015-16 5,78,21,142 1,13,84,340.5 5.08
2016-17 6,86,37,133 1,20,24,082.5 5.71
2017-18 8,31,61,595 1,45,62,918.5 5.71
Inventory Turnover Ratio

5.8 5.71 5.71
5.6
5.4
5.2 5.08
5
4.8
4.6
2015-16 2016-17 2017-18
Interpretation
➢ By observing the above graph, it can be interpret that inventory turnover ratio
for 2016-17 & 2017-18 is same and it is also higher than the year 2015-16,
which shows that the number of times the inventory is sold is increasing and
that is good situation for the company and its between idle inventory turnover
ratio ( 4 to 6).
49
7. Average Inventory Holding Period
➢ The inventory holding period shows the number of days on an average that a
business holds inventory. It shows how long it takes a company to sell its current
inventory. It is important because it shows how inventory turnover changes over
time. This is very important and essential measure of a company’s efficiency
converting goods into sales. If the inventory period is decreasing than it shows
product is moving at a faster rate and if its increasing than it shows it is taking
longer to sale the products.
Average Inventory Holding Period = 365 / Inventory Turnover Ratio
Year Inventory Turnover Average Inventory

Ratio Holding Period
( Days)
2015-16 5.08 72
2016-17 5.71 64
2017-18 5.71 64
Average Inventory Holding Period

74
72
72
70
68
66
64 64
64
62
60
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph, it is clear that the average inventory holding period from
2015-16 to 2016-17 is decreasing and the period is same in last two years. The
situation if 2015-16 indicated that the company is taking too much time to sale
its current inventory while the situation of 2016-17 and 2017-18 is decreasing
which shows the company makes efforts to sale its inventory in less time period.
50
8. Debt to Equity Ratio
➢ The debt to equity ratio is the financial ratio that measures a company’s financial
leverage that is calculated by dividing company’s total liabilities by
shareholder’s equity. The debt to equity ratio shows the percentage of company
financing that comes from creditors and investors. A higher debt to equity ratio
indicates that more creditor financing is used than investor financing. If debt to
equity ratio is 1 that means creditors and investors have equal stake in the
business assets. If the debt to equity ratio is lower than that is considered to be
more financially stable business.
Debt to Equity Ratio is Calculated as under:

Debt to Equity Ratio = Total Liabilities / Shareholder’s Equity
Year Total Shareholder’s Ratio

Liabilities Equity
2015-16 6,67,95,111 1,47,85,139 4.5177
2016-17 7,14,41,954 1,83,67,496 3.8896
2017-18 7,73,71,121 2,57,23,801 3.0077
Debt to Equity Ratio

5 4.5177
3.8896
4
3.0077
3
0
2015-16 2016-17 2017-18
Interpretation
➢ By observing the above graph, it can be interpret that debt to equity ratio from
the last three years is decreasing but still there in not idle situation in any of the
three years. But as compared to 2015-16, debt to equity ratio in 2017-18 is low
so that is good for the company because the company is able to generate enough
cash to satisfy its debt obligation.
51
9. Capitalization Ratio
➢ The capitalization ratio compares total debt to total capitalization. It tells the
investors about the extent to which the company is using its equity to support
the operations and growth. This ratio helps in assessment of risk. If the
capitalization ratio of a company is high than it is considered as more risky if
they are not able to repay their debt on time and that would be difficult to get
loan in future. If the debt is low and shareholders’ equity is high than that shows
good quality of investment.
Capitalization Ratio = Long Term Debt
Long Term Debt + Shareholder’s equity
Year Long Term Debt Shareholder’s Ratio

Equity
2015-16 2,70,33,744 1,47,85,139 0.64
2016-17 3,07,80,722 1,83,67,496 0.62
2017-18 3,22,60,000 2,57,23,801 0.56
Capitalization Ratio
0.66
0.64
0.64
0.62
0.62
0.6
0.58
0.56
0.56
0.54
0.52
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph it can be interpret that the capitalization ratio of 2017-18
IS lower than the past two years which shows the good situation for the
company as it’s falling from past three years. The decreasing capitalization ratio
also shows good quality of investment of the company and the risk is also low
and also that would be benefitted for the company if it wants to take loan in
future.
52
10.Debtors Turnover Ratio
➢ Debtors turnover ratio indicates the velocity of company’s debt collection, the
number of times average receivables are turned over during a year. This ratio
determines how quickly a company collects outstanding cash balances from its
customers during an accounting period. It is an important indicator of a
company’s financial and operational performance and can be used to determine
if a company is having difficulties collecting sales made on credit.
Debtors Turnover Ratio = Net Credit Sales / Average Accounts Receivable
Year Net Credit Sales Average Accounts Ratio

Receivable
2015-16 11,07,54,347 2,21,57,178.5 4.9986
2016-17 12,76,12,731 2,65,40,463.5 4.8082
2017-18 16,40,52,131 2,77,99,397 5.9012
Debtors Turnover Ratio

7
5.9012
6
4.9986 4.8082
5
0
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph, it can be interpreted that the debtors turnover ratio for
2015-16 is 4.9986, for 2016-17 is 4.8082 and for 2017-18 is 5.9012 which is
higher than the other years and that shows the more efficient is the management
of debtors and more liquid the debtors are and the company is better to collect
their accounts receivables while the lowest debtors turnover ratio is in the year
2016-17 which shows that the debtors are less liquid.
53
11.Creditors Turnover Ratio
➢ Creditors Turnover Ratio is an accounting liquidity matric that evaluates how
fast the company pays off its creditors. The ratio shows how many times in a
given period (typically 1 year) a company pays its average accounts payable. It
shows how business handles its outgoing payments and it will help the company
to assess its cash situation. Higher the ratio, better it is.
Creditors Turnover Ratio = Net Credit Purchase / Average Bills Payable
Year Net Credit Average Ratio

Purchase Bills Payable
2015-16 5,76,22,388 2,29,33,228 2.51
2016-17 6,98,23,345 2,63,98,969 2.64
2017-18 8,61,36,054 3,05,66,242 2.82
Creditors Turnover Ratio

2.85 2.82
2.8
2.75
2.7
2.64
2.65
2.6
2.55 2.51
2.5
2.45
2.4
2.35
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph, it can be interpreted that the creditors turnover ratio for
the last three years is increasing and the highest is in 2017-18 i.e. 2.82 which
shows that company is very accurate to make payments means the company is
taking very short time between purchase of goods and services and make
payments of them so that is good. Lower creditors turnover ratio is 2.51 which
is in the year 2015-16 which cannot be directly say bad but may be company
wants to get extra liquidity that’s why that situation had happened.
54
12. Return on Capital Employed
➢ Return on capital employed is the measure of the returns that the company is
achieving from the capital employed and that is expressed in percentage terms.
Return on capital employed indicates the efficiency and profitability of
company’s capital investment. It should always higher than the rate at which
the company borrows otherwise any increase in borrowings will reduce the
shareholders earnings.
Return on capital can be calculated as under:

Return on Capital Employed = PBIT + Dividend * 100
Net Capital Employed
Year PBIT Net Capital Return on Capital

Employed Employed
2015-16 54,70,602 4,18,18,883 13.08
2016-17 52,43,055 4,91,48,218 10.66
2017-18 1,00,26,065 5,79,83,801 17.29
Return on Capital Employed

20
18 17.29
16
14 13.08
12 10.66
10
8
6
4
2
0
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph we can say that the return on capital employed is higher
in the year 2017-18 and lowest in the year 2016-17. The situation in 2017-18 is
much better than the other years because the ratio is higher which shows the
company is able to manage its borrowings while 2015-16 is also better but the
situation in the year 2016-17 shows less efficiency and profitability of
company’s capital investments.
55
13.Net Profit to Net Worth Ratio
➢ The net profit to net worth ratio states the return that shareholders could receive
on their investment in the company, if all of the profit earned were to be passed
through directly to them. Thus, the ratio is developed firm the perspective of the
shareholder, not the company and used to analyse investor returns. The ratio is
useful as a measure of how well a company is utilizing the shareholder
investment to create returns for them and can be used for comparison purpose
with competitors in the same industry.
It can be calculated as under:

Net profit to net worth ratio = (Profit After Tax / Shareholders Net Worth) *
100
Year PAT Shareholders’ Net Ratio

Worth ( %)
2015-16 37,55,692 1,47,85,139 25.40
2016-17 35,82,357 1,83,67,496 19.50
2017-18 73,56,305 2,57,23,801 28.59
Net Profit to Net Worth Ratio

35
30 28.59
25.4
25
19.5
20
15
10
0
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph it can be interpret that the highest ratio is in the year 2017-
18 and lowest in the year 2016- 17 which is better than higher ratio and best
among all three years because higher net profit to net worth ratio indicate that
the company is funding its operations with a disproportionate amount of debt
and trade payable so lower the ratio better it is for the company.
56
14. Total Asset Turnover Ratio
➢ Asset turnover is the financial ratio that measures the efficiency of company’s
use of its assets to product sales. It measures how efficiently management is
using the assets at its disposal to promote sales. The ratio helps to measure the
productivity of company’s assets.

Total Asset Turnover Ratio = Net Sales / Average Total Assets
Year Net Sales Average Ratio

Total Assets
2015-16 11,07,54,347 7,60,67,963.5 1.4555
2016-17 12,76,12,731 8,56,94,850 1.4892
2017-18 16,40,52,131 9,64,52,186 1.70086
TOTAL ASSETS TURNOVER RATIO

1.75
1.70086
1.7
1.65
1.6
1.55
1.4892
1.5
1.4555
1.45
1.4
1.35
1.3
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph it can be interpret that the highest ratio 1.70086 which is
in the year 2017-18 and that is good and the company can utilize its assets
effectively in compare to its revenue while the situation in the year 2015-16
shows that the company should either utilize its assets effectively or sale them.
While in the year 2016-17, the ratio is 1.4892.
57
15.Equity / Proprietary Ratio
➢ The proprietary is the proportion of shareholder’s equity to total assets and it

provides estimate of amount of capitalization currently used to support a
business. It is the general indicator of financial stability higher the ratio better it
is because in case of lower proprietary ratio the company may place at the risk
of bankruptcy because of making too much use of debt or trade payables.
Equity / Proprietary Ratio = (Shareholders funds / Total Assets) * 100
Year Shareholders Total Assets Ratio

Funds (%)
2015-16 1,47,85,139 8,15,80,250 18.12
2016-17 1,83,67,496 8,98,09,450 20.45
2017-18 2,57,23,801 10,30,94,922 24.95
Proprietary Ratio
30
24.95
25
20.45
20 18.12
15
10
0
2015-16 2016-17 2017-18
Interpretation
➢ From the above graph we can say that the proprietary ratio is increasing from
the last three years and the highest is in 24.95 which is in the year 2017-18
which shows that Ravi Pharmaceuticals has a sufficient amount of equity to
support the functions of the business and probably has space in its financial
structure to take additional debt, if necessary while the lower proprietary ratio
is in the year 2015-16 i.e. 18.12 which shows that the company was making use
of too much debt and trade payables.
58
16.Return on Assets
➢ Return on assets is a profitability ratio that measures the net income produced
by total assets during a particular period. It measures how effectively and
efficiently a company can manage its assets to profits during a period. It is
calculated by comparing net income to average total assets. This ratio is very
important and helpful for the management and investors to analyse how well
the company can convert its investment of assets into profits.
Return on Assets = Net Income / Average Total Assets
Year Net Income Average Total Assets Return on Assets

(%)
2015-16 37,55,692 7,60,67,963.5 4.94
2016-17 35,82,357 8,56,94,850 4.18
2017-18 73,56,305 9,64,52,186 7.63
Return on Assets
9
7.63
8
7
6
4.94
5 4.18
4
3
2
1
0
2015-16 2016-17 2017-18
Interpretation
➢ By observing the above graph, Return on assets of Ravi Pharmaceuticals Private
Limited is highest in the year 2017-18 which is 7.63% and lowest in the year
2016-17. For return on assets higher the ratio better it is. So the situation of
2017-18 is better because that indicates the company is effectively managing its
assets to produce greater profits. While as compared to 2015-16 the ratio in the
year 2016-17 is decreasing that shows the company may be not able to manage
its assets effectively and profits goes down.
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5.4 Financial Health and Future of the Organization
➢ Financial health of the organization is quiet good. The net profit from 2012-13
to 2015-16 is increasing while in the year 2016-17 profit is decreased by
1,73,335 in comparison to 2015-16 but in the year 2017-18 the net profit was
increased by 37,73,948. This shows that profit condition of the company is
increasing. By comparing the net profit of last 6 years (from 2012-13 to 2017-
18), only in the year 2016-17 it is decreasing this may be due to the company
has hold much cash and not invested the cash in assets which restricts the
company to generate higher profits.
➢ Company pays tax accurately and put a stand in the development of the country.
By paying tax timely, it practice legal rules and regulations of the government.
It paid Rs. 26,69,760 as a tax for the year 2017-18.
➢ The future of the organization is bright. From the comparison of last six years
of balance sheet and profit and loss account it is found that the company is
putting its efforts in increasing profit by fully utilizing production capacity and
also by reducing the unnecessary cost incurred in the organization.
➢ The company maintained wide range of assets and also increases it year after
year. Despite of great competition, it’s able to generate profit and there is
constant growth in the market. The company spends huge amount in quality
assurance and also overcome the change in the market by getting latest
technology.
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6. MY LEARNING FROM THE STUDY OF THE ORGANIZATION
➢ From the report and study of the organization , I learned many things. The
theoretical and practical knowledge is totally different. The way I talk and
behave in normal life like in college, society and at home that behaviour is up
to that only.
➢ I learned about different departments of the company and mainly production in

which I go for around 2 hours and I have seen how a small thing is being taken
care to make it safe from external environment.
➢ A part from this I learned how to take quick decisions in the organization. There
are many departments like HR department, marketing department, finance
department, production department and many more. All the departments are
interrelated with each other, so how to manage all department at one time is
very important and if there is mistake in one department so it will ultimately
affect all the departments. The head of the department has to be careful in their
duty. In organization, punctuality of time is very important. Due to this training
period, I have learned to be on time as an when required in the organization.
➢ In finance, how to record books of account and very important thing is to

maintain all the financial records and data. Because sometimes it happens that
the financial data is leaked by some mistakes.
➢ I learnt about organizational culture and organizational study which is much

requires in the company.
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PART II
PROJECT STUDY
62
PROJECT STUDY
A STUDY ON LEVERAGE ANALYSIS & PROFITABILITY FOR

RAVI PHARMACEUTICALS PRIVATE LIMITED
7. Introduction
The main objective of finance management is to increase the shareholders
wealth of a firm. The objective can be achieved based on the investment
decision or capital expenditure decision and the financing decision or capital
expenditure decision or capital expenditure decision and the financing decision.
Capital structure decisions represents the total debt reported to the equity of a
firm, reflecting the capacity of the firms to attract external financial resources
in order to improve the efficiency of the equity. The theory of capital structure
is one of the most important financial themes in corporate finance and various
studies use this theory to highlight the significance of debt financing.
Capital structure of the firm is defined by its leverage; that is debt and equity
financing that is subjected to different financial difficulties. Financial leverage
is the one by which the company can increase its growth opportunity. So,
leverage decision is fundamental for any business organization because of the
need to maximize the return to the shareholders and because of the fact that such
decision has the great impact on the firms’ ability to deal with competitive
environment.
Leverage had incorporated also the meaning of the risk increasing philosophy.
It is important for the business that how to choose combination of debt to equity
to achieve optimum capital structure that would minimize the firm’s cost of
capital and improves return to the owner of the business. One of the best ways
in which the firm increases its profit is through financial leverage. Financial
leverage uses debt instruments so that the anticipated level return on the firm’s
equity would increase.
7.1 CONCEPT OF LEVERAGE

➢ The term leverage indicates the ability of the firm to earn higher profit by
employing fixed assets or debt. It also indicated percentage of change in one
variable by percentage of change in other variable or variables. It also indicates
the impact of investment patterns or financing patterns adopted by the firm. The
employment of an assets or source of funds for which firm has to pay fixed cost
or interest has great impact on the earning available for equity shareholders.
63
7.2 Definitions
1. The employment of an asset or source of funds for which the firm has to pay
fixed cost or fixed return is called leverage.
2. According to James C. Van Home, “ leverage may be defined as using fixed
cost in order to increase the profitability’.
3. According to J. E. Walter, leverage can be defined as percentage return on
equity and the net rate of return on total capitalization.
4. In the words of S.C. Kuchhal, “ Leverage can be defined as firm’s ability to use
fixed cost bearing assets or funds to magnify the return to its owners”.
7.3 Risk
➢ Leverage magnifies profits when the returns from the asset more than offset the
cost of borrowings, it may also magnifies losses. A corporation having high
borrowing or less borrowings both may face the problems because if the
borrowings are high than that would be a chance of bankruptcy or the company
might be default during a business downturn, while a less leveraged corporation
might survive. Leverage is useful to measure higher or lower risk. There are two
types of risks i.e., operating and financial risk. Operating risk arise due to use
of fixed operating costs while the financial risk arises due to use of fixed
financial costs i.e. interest on loan, interest on debentures etc.
7.4 Types Of leverage

➢ Operating Leverage
➢ Financial Leverage
➢ Combined leverage
7.4.1 Operating leverage

➢ Operating Leverage results from the existence of fixed operating expenses to
magnify the effect of changes in sales on earnings before interest and taxes.
Operating Leverage depends on the proportion of fixed operating expenses in
total operating cost of the firm. Generally operating leverage is greater for firms
with a higher proportion of fixed operating costs. Specifically for a percentage
increase in sales , the greater operating leverage, the greater the percentage of
increase in EBIT.
➢ Operating Leverage = EBIT / Sales
7.4.2 Degree of Operating Leverage ( DOL)

➢ The degree of operating leverage is a financial ratio that measures the sensitivity
of a company’s operating income to its sales. The degree of operating leverage
helps the company to understand the effects of operating leverage on company’s
probable earnings. It helps to determine how the change in sales volume would
affect profit of the company. Higher operating leverage means smallest
64
percentage change in sales can increase the net operating income. In order to
minimize the losses to the company, it is very important to ascertain and
understand the value of degree of operating leverage.
➢ DOL = % Change in EBIT / % Change in sales
7.4.3 Financial Leverage

➢ Financial leverage deals with the profit magnification in general. It is also
known as ‘trading on equity’. Financial leverage indicates the total reliability of
business on its debts in order to operate. Financial leverage helps to understand
a business’ financial solvency and its dependency upon its borrowings.
Financial leverage is caused due to fixed financial interest in every organization.
Businesses used fixed financial charges to increase the effects of changes in
earnings before interest and tax on profits. It includes use of those funds that are
obtained at a fixed cost in the expectation of increasing the return to the
shareholders in future. The financial leverage used by every firm is anticipated
to earn more return on the fixed charges funds than their costs. The surplus will
increase the return on owners’ equity and return on investment.
➢ If the financial leverage of a company is higher than 2:1 than business is
considered as financially weak and it is considered to be near to bankruptcy and
the company cannot be able to secure new capital that means it will not capable
to meet its current liabilities.
➢ Financial Leverage = Total Debt / Shareholders’ Equity
7.4.4 Degree of Financial Leverage (DFL)
➢ The degree of financial leverage sums up the effect of an amount of financial
leverage on the earning per share of a company. DFL makes use of fixed cost
to provide finance to the firm and also includes the expenses before interest and
taxes. If DFL is high, the earning per share would be more unpredictable while
all other factors would remain same.
➢ DFL = % change in EPS / % change in EBIT
7.4.5 Combined Leverage

➢ Operating and financial together wide variations in EBT for a given change in
sales and operating costs. Total leverage is simply expressed as operating
leverage multiplied by financial leverage. The operating leverage affects the
EBIT and the financial leverage affects the EBT, EPS, ROE & ROI. The
management needs to manage the true combinations of operating and financial
leverage. Combined leverage shows the entire effect of the operating and
financial leverages. In other words it shows the total risk associated with the
firm. It is very useful for a company or firm because it helps to understand the
effect of combining financial and operating leverage on the earning of company.
If combined leverage is high than it shows that the risk in the company is high
as there are more fixed cost in the company. If the combined leverage is low
than that is considered to be better for the company.
➢ Degree of Combined Leverage (DCL) = DOL * DFL
65
8. OVERVIEW OF THE PROJECT
8.1 Background of the study

➢ In this research study the main objective is to find out leverages and Degree of
leverages and its impact on profitability. The choice of the company to make it
debt intensive or equity intensive company that will formulate the financing of
the company assets leads to the concept of capital structure formulation. Most
of the times companies used some extent of debt and some extent of equity to
finance their assets. Therefore right choice of the combination of debt and equity
is very important for any company.
➢ The aim of this study is to find relation between leverages and profitability at
Ravi Pharmaceuticals Pvt. Ltd. For this purpose firm’s profitability is taken as
dependent variable and degree of financial leverage, degree of operating
leverage and degree of combined leverage has been taken as independent
variales. And than correlation is performed in SPSS by comparing all the Degree
of leverages with Return on Capital Employed(ROCE).
8.1.1 REVIEW OF LITERATURE

1. Gautam Sen and Ravi Rajan (2018) have studied the relationship between
Leverages and Profitability for TVS Motor Company. They examined the
impact of leverage on the performance of the company. For the analysis
Statistical tools like Mean, SD, One way ANOVA and simple linear regression
have been used and the period of the study was between 2006 to 2016. Based
on ANOVA test they found that there is significant difference in the mean value
of the leverage of the company. The regression result suggested that the
operating, financial and combined leverage does not play any major role in
making investment decision for the company. Whereas Financial, Operating
and Combined Leverage of the company has no impact on the Return on
Assets(ROA).
2. Pradeep Kumar (2018) has studied relationship between Leverages and

Profitability in Indian Steel Industry. For this purpose correlation between Debt
to equity ratio and Earnings Per Share of the Steel Authority of India
Limited(SAIL) and tata Steel Limited has been carried using the MS Excel
2010. From the correlation analysis the result shows negative correlation
between the Financial leverage and Profitability in Indian Steel Industry. So he
has given the suggestion that the steel companies should avoid using debt capital
in their future financing requirements in order to improve their profitability for
their shareholders.
3. Dr. N.S. Pandey & Ponni R. (2017) has studied corporate leverage and
Profitability of Pharmaceutical Industry in India. He has studied the impact of
Operating leverage on Return on Assets(RPA), Return on Equity(RPE) and
Earnings Per share(EPS) and same impact of financial leverage and combined
leverage. For that the period of the study is 10 years i.e. 2004-05 to 2013-14.
66
For this purpose correlation and Regression analysis have been performed and
from that the result comes that Operating leverage has significant impact on
ROA, ROE and EPS of pharmaceuticals industry in India While Financial
Leverage and Combined Leverage has not significant impact on profitability
measures.
4. Dr. M. Ramana Kumar ( 2014 ) have studied relationship between leverages

and profitability for BATA India Limited. As per his analysis there is positive
correlation between degree of operating leverage and its Return on investment
which shows good position of Bata India, whereas degree of financial leverage
and degree of combined leverage were not at optimum level. So the suggestion
has been given by him to revise the capital structure of the company in which
there should be proper mix of debt and equity so that could have positive impact
on Return on Investment.
5. Khushbhakht Tayyaba (2013) have examined the effect of leverage on the

profitability of the oil and gas sector. It shows the relationship between leverage
( Financial , Operating and Combined ) and Earning Per Share of this sector. It
analyses how earning capacity of this sector is affected by operating costs and
fixed financial charges. It also shows the relationship between the Debt Equity
Ratio and Earnings Per Share and how this sector does debt financing
efficiently. In this paper, oil and gas companies are selected for analysis and
hypothesis are examined with the balanced panel using descriptive statistics,
correlation and estimate equation.
67
8.2 Importance of the study to the organization
➢ Leverage refers to the use of fixed cost in order to increase the profitability.
Leverage affects the level and variability of the firm’s after tax earnings and so,
firm’s overall risk and return.
The study of leverage is important for the organization due to the following reasons:
1. Helps to Measure Operating Risk
➢ Operating risk refers to the risk of the firm not being able to cover its fix
operating costs. Operating leverage depends on the fixed operating cost of the
firm so if the fixed operating cost is larger than it shows that degree of operating
leverage is higher so operating risk of the firm also tends to high. High operating
leverage is good when sales are rising but it’s not good when sales are falling.
So leverage is important to measure whether the operating risk for the firm is
high or low.
2. Helps to measure Financial Risk

➢ Financial risk occurs when the firm is not capable to cover its fixed financial
costs. Financial leverage depends on the fixed financial cost. If the fixed
financial costs is high than that shows higher degree of financial leverage and
so financial risk tends to be higher. High financial risk is good when operating
profit is high and bad when it’s falling. So to determine that situation leverage
is important to study for any organization.
3. Helps to Manage Risk

➢ Relationship between operating leverage and financial leverage is multiplicative
rather than addictive. Operating and financial leverage can be combined in a
number of different ways to obtain a desirable degree total leverage and level
of total firm risk.
4. Helps to design appropriate capital structure mix

➢ To design an appropriate capital structure mix or financial plan, the amount of
EBIT under various financial plans, should be related to earning per share. One
widely used means of examining the effects of leverage to analyse the
relationship between EBIT and earning per share.
5. Increase Profitability
➢ Leverage is an effort or attempt by which a firm tries to show high results or
more benefits by using fixed costs assets and fixed return sources of capital. It
ensures the maximum utilization of capital and fixed assets in order to increase
the profitability of a firm, it helps to know the reasons not having more profit
by a company.
68
8.3 Objectives of the study
➢ To examine leverage analysis of Ravi Pharmaceuticals Private Limited.
➢ To analyse financial performance of Ravi Pharmaceuticals Private Limited.
➢ To study relationship between leverage and profitability in Ravi
Pharmaceuticals Private Limited.
RESEARCH MODEL
Independent Variable
Dependent Variable
Degree of
financial Leverage
Firm’s
Degree of
Operating Leverage Profitability
Degree of
Combined Leverage
69
9. RESEARCH
9.1Hypothesis
1) Ho : There is no significant relation between Degree of Operating Leverage

and Profitability of Ravi Pharmaceuticals Private Limited.
2) H1 : There is a significant positive co relation between Degree of Operating
Leverage and Profitability of Ravi Pharmaceuticals Private Limited.
3) Ho : There is no significance relation between Degree of Financial Leverages

H1 : There is significant positive correlation between Degree of Financial
Leverage and Profitability of Ravi Pharmaceuticals Private Limited.
4) Ho : There is no significance relation between Degree of Combined Leverage

5) H1: There is significant positive correlation between Degree of combined
leverage and profitability of Ravi Pharmaceuticals Private Limited.
9.2Research Design
9.2.1 Research Technique
➢ For this study, descriptive research is used to explore the existing
information, analysed and interpret results in meaningful way.
9.2.2 Data Source

➢ The source of data for analysis is the annual reports of the company and
available data. The period of study has been taken from 2012-13 to 2017-
18.
9.2.3 Data Collection

➢ The data is collected from annual reports of Ravi Pharmaceuticals for the
last six years. All the data have been suitably re arranged, classified and
tabulated as per the requirement of the study.
➢ The sources used to collect the information are purely secondary in nature.
Secondary data is the one which is already collected by the individuals or
organization which is either published. The secondary data has been
collected from the annual reports and the rest of the literature through
website, books, internet etc.
9.2.4 Period of study

➢ The period of the study is 6 years ( From 2012-13 to 2017-18 ) Company’s
six years data has been taken for the analysis purpose.
70
9.2.5 Methodology
➢ The study is based on the secondary source of data. The relevant data for
the measurement has been taken from the annual reports of Ravi
Pharmaceuticals Pvt. Ltd. To examine leverage analysis of Ravi
pharmaceuticals, Operating Leverage, Financial Leverage and combine
leverage are calculated.
71
10. DATA ANALYSIS, FINDINGS & INTERPRETATION
10.1 Data Analysis

The Financial Data of Ravi Pharmaceuticals Private Limited has been explored and
tabulated for the aforesaid objectives.
Table No. 1 :
The table shows the financial performance of Ravi Pharmaceuticals in terms of sales
and Operating Profits and calculation of Degree of Operating Leverage.
YEAR SALES OPERATING % % DOL ROCE

PROFIT CHANGE CHANGE (%)
IN EBIT IN
SALES
2012- 8,28,42,136 39,99,077
13
2013- 9,57,37,804 46,07,711 15.22 15.56 0.98 14.57
14
2014- 9,73,39,177 50,36,672 9.31 1.67 5.57 14.52
15
2015- 11,07,54,347 54,70,602 8.62 13.78 0.63 13.08
16
2016- 12,76,12,731 52,43,055 -4.16 15.22 0.27 10.66
17
2017- 16,40,52,131 1,00,26,065 91.22 28.55 3.19 17.29
18
(Source : Financial Statement of Ravi Pharma)
Table no. 1 has depicted the trends in degree of operating leverage using the
relationship with percentage change in earnings before interest and taxes and
percentage change in sales.
Correlations
DOL ROCE
DOL Pearson Correlation 1 .564
Sig. (2-tailed) .322

N 5 5
ROCE Pearson Correlation .564 1

N 5 5
(Source : SPSS Output of Correlation)
72
Interpretation
➢ By performing correlation test for DOL and ROCE, Pearson correlation ( R )
is 0.564 which means that there is moderate level of correlation exists between
Degree of Operating Leverage and Return on Capital Employed and
significance value is 0.322 which is higher than significance value 0.05 so we
don’t have enough evidences to reject the null hypothesis.
Table No. 2
The table depicts the financial performance of Ravi Pharmaceuticals Private Limited in
terms of earnings per share and operating profits and calculation of Degree of Financial
Leverage.
YEAR EPS OPERATING % % DFL ROCE

PROFIT Change Change (%)
in EPS in EBIT
2012-13 276.16 39,99,077
2013-14 317.09 46,07,711 14.82 15.22 0.97 14.57
2014-15 346.97 50,36,672 9.42 9.31 1.01 14.52
2015-16 376.43 54,70,602 8.49 8.62 0.98 13.08
2016-17 359.06 54,43,055 -4.61 -4.16 1.11 10.66
2017-18 737.33 1,00,26,065 105.35 91.22 1.15 17.29
Correlations
DFL ROCE
DFL Pearson Correlation 1 .162
N 5 5
N 5 5
Interpretation
➢ By performing correlation between Degree of Financial Leverage and Return
on Capital Employed we can say that there is low level of correlation exists
between them as the Pearson Correlation is 0.162. and the significance value (p)
is 0.794 which is higher than 0.05 which shows that we don’t have enough
evidences to reject the null hypothesis. So there is no relation between DFL and
ROC
73
Table No. 3
The exhibit shows the Degree of Operating Leverage, Degree of Financial Leverage
and the Degree of Combined Leverage for Ravi Pharmaceuticals Private Limited.
YEAR % CHANGE IN % DOL DFL DCL = ROCE

EPS CHANGE DOL * DFL
IN SALES
2012-13
2013-14 14.82 15.56 0.98 0.97 0.95 14.57
2014-15 9.42 1.67 5.57 1.01 5.62 14.52
2015-16 8.49 13.78 0.63 0.98 0.62 13.08
2016-17 -4.61 15.22 0.27 1.11 0.29 10.66
2017-18 105.35 28.55 3.19 1.15 3.67 17.29
Correlations
DCL = DOL * ROCE
DFL
DCL = DOL * DFL Pearson Correlation 1 .611
N 5 5
N 5 5
Interpretation
➢ From the above table it is revealed that the Degree of Combined Leverage is
moderately related with the Return on Capital Employed as the pearson
correlation is 0.611. This result is statistically significant at 0.05 level of
significance as the significant level ( P value = 0.274 ) which is higher than 0.05.
So, we don’t have enough evidences to reject the null hypotheisis.
74
10.2 FINDINGS
➢ With regard to the profitability and leverage relationship analysis, it is observed

that Degree of Operating Leverage is significantly negatively corelated with the
Return on Capital Employed. That means the degree of operating leverage is
not at all at the good position.
➢ The degree of financial leverage is negatively correlated with ROCE that means
degree of financial leverage of Ravi Pharmaceuticals is not at optimal level.
➢ Degree of combined leverage is moderately related with the ROCE which shows
better position than degree of operating leverage and degree of financial
leverage with relation to ROCE. But still degree of combined leverage is
statistically not significant with ROCE that means it is not at good position.
➢ It is suggested to Ravi Pharmaceuticals to revise its capital structure which

should include the optimum level of equity and borrowed funds so that it could
have positive impact on Return on Capital Employed.
75
11. CONCLUSION & LIMITATIONS
11.1 Limitation of the Study

▪ The study is based on secondary data to that extent it has limitation.
▪ The concentration of the study is only one particular company, not inter firm
comparison.
▪ Due to non-availability of data, the study is limited to only period of five
years.
11.2 Conclusion of the Study

▪ From the deep analysis of the research on the topic, A study on Leverage
analysis and Profitability at Ravi Pharmaceuticals Pvt. Ltd., it can be conclude
that Degree of operating leverage, Degree of Financial Leverage and Degree of
combined leverage are not correlated with Return on capital employed or very
low level of correlation exists between them. So it can be said that the company
should revise its capital structure so that would have proper balance of debt and
equity and also there should be increase in sales so that would ultimately have
positive impact on Return on Capital Employed.
76
REFERENCES
➢ Annual Reports of the Ravi Pharmaceuticals Private Limited from 2012-13 to

2017-18
➢ https://www.academia.edu/7655353/An_Empirical_Study_on_Relationship_betwee
n_Leverage_and_Profitability_in_Bata_India_Limited
➢ http://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20180602.11.pdf
➢ http://oaji.net/articles/2017/488-1535976538.pdf
➢ http://www.pbr.co.in/2017/2017_month/Dec/14.pdf
➢ https://www.ijbmi.org/papers/Vol(2)7/Version-2/F0272050059.pdf
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A REPORT ON

SUMMER INTERNSHIP/ PROJECT WORK

Under the Guidance of

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

Sr. No. Particulars Page No.

Part 2 Project Study 62

Pharmaceuticals companies may deal in generic or brand medications and medical

2.1 Company Profile

Name RAVI PHARMACEUTICALS PVT.LTD.

Started From 1986

Main Products S.V.P., External Preparation and ointment & Dry

1. Mr. Piyush H. Patel

2.2 Evolution and History

2.3 Vision & Mission

“ The vision of the company is to be leading pharmaceutical company in India

HR Finance Marketing Warehouse

AMM WDS Driver

DRY POWDER SECTION

18. RAYOX – V 10ml

20. CALVIT LIQUID FEED SUPPLIMENT 500ml

5. R – QUINE (Quinine Dihydrochloride Injection I.P. 2ml

ii. ANALGESIC (NSAID)

7. Diclofenac Sodium Injection I.P. 25mg/ml 3ml

8. Ascorbic Acid Injection I.P. 100mg/ml 2ml

9. Ranitidine Hydrochloride Injection I.P. 25mg/ml 2ml

16. Dextrose Injection I.P. 25% w/v & w/v 25ml

1. Ciprofloxacin Opthalmic Solution U.S.P. 0.3% w/v 5ml vial

Sr. No. Name Packing

3.1 Markets and Marketing of the Company

Sr No. Name of Company Nos. of products

3.1.2 Key Competitors of Company

3.1.3 Marketing Strategy

3.1.4 Position of the Company’s Product in Product Life Cycle

Position of Ravi Pharma’s product in product Life cycle:

Investment cost Maximum High Low/ medium Low

Competition Low Low-Medium High Maximum

Profitability Low Maximum High Low

Internal Laboratory Bags

Central Control of Bags Filling &

Production of Storage &

1. Internal Laboratory Check of Raw Material

2. Central Control of all Water Parameters

3. Production of Purified Water

5. Preparation of Filling Solution with Dosage of Raw Material

6. Sampling & Testing:

3.2.3 Critical Path Method:

3.3.1 Supply Chain Of the Company

Raw Material Manufacturi

3. Manufacturing the Goods

4. Finished Goods Warehouse

3.3.2.2 Outbound Logistics

Compensation Employee Workforce

Job Job Strategy Training

Applicant Attendance Dispute Leadership

Identify the Vacancy

Prepare Job description and job specification

Advertising the vacancy

Managing the responses