A STUDY ON FINANCIAL STATEMENTS AND CASH FLOW ANALYSIS

WITH REFERENCE TO AUROBINDO PHARMA LIMITED

INDUSTRY AND COMPANY PROFILE

Aurobindo Pharma Limited is a pharmaceutical manufacturing company headquartered

in HITEC City, Hyderabad, India. The company manufactures generic pharmaceuticals and
active pharmaceutical ingredients. The company’s area of activity includes six major
therapeutic/product areas: antibiotics, anti-retrovirals, cardiovascular products, central nervous
system products, gastroenterological, and anti-allergics. The company markets these products in
over 125 countries. Its marketing partners include AstraZeneca and Pfizer.

Company

The company commenced operations in 1988-89 with a single unit manufacturing semi-
synthetic penicillin (SSP) in Puducherry. Aurobindo Pharma became a public company in 1992
and listed its shares in the Indian stock exchanges in 1995. Aurobindo Pharma also has a
presence in key therapeutic segments such as neurosciences, cardiovascular, anti-retrovirals,
anti-diabetics, gastroenterology and cephalosporins, among others.

Aurobindo Pharma features among the top 10 companies in India in terms of consolidated
revenues. Aurobindo exports to over 125 countries across the globe with more than 70% of its
revenues derived out of international operations.

In 2014, Aurobindo purchased the generic operations of Actavis in 7 Western European

countries for $41 million.

Business Expansion

Aurobindo Pharma plans to expand its product portfolio with high value products
in oncology, hormones, biosimilars and novel drug delivery solutions like depot injections,
inhalers, patches and films. It has also set its sights on geographic expansion in new territories
like Poland, Italy, Spain, Czech Republic, Portugal and France as generic penetration in these
countries is low.

In 2017, Aurobindo Pharma inked a pact to acquire Portugal’s Generis Pharmaceutical SA from
Magnum Capital Partners for a consideration of €135 million. It also acquired four biosimilar
products from Swiss firm TL Biopharmaceutical AG.

INTRODUCTION

A Study on Introduction to Financial Statement & cash flow analysis

Financial statement analysis can be referred as a process of understanding the risk and
profitability of a company by analyzing reported financial info, especially annual and quarterly
reports. Putting another way, Financial Statement & cash flow analysis is a study about
accounting ratios among various items included in the balance sheet. These ratios include asset
utilization ratios, profitability ratios, leverage ratios, liquidity ratios, and valuation ratios.
Moreover, Financial Statement & cash flow analysis is a quantifying method for determining the
past, current, and prospective performance of a company.
Advantages of Financial Statement & cash flow analysis

The different advantages of Financial Statement & cash flow analysis are listed below:
 The most important benefit if Financial Statement & cash flow analysis is that it provides an
idea to the investors about deciding on investing their funds in a particular company.
 Another advantage of Financial Statement & cash flow analysis is that regulatory authorities
like IASB can ensure the company following the required accounting standards.
 Financial Statement & cash flow analysis is helpful to the government agencies in analyzing
the taxation owed to the firm.
 Above all, the company is able to analyze its own performance over a specific time period.
Financial statements are prepared primarily for decision making. They play a dominant role in
setting the framework of managerial decisions. But the information provided in the financial
statements is not an end in itself as no meaningful conclusions can be drawn from these
statements alone. However, the information provided in the financial statements is of immense
use in making decisions through analysis and interpretation of financial statements. Financial
analysis ‘the process of identifying the financial strengths and weaknesses of the firm by
properly establishing relationship between the items of the balance sheet and the profit and loss
account’. There are various methods or techniques used in analyzing financial statements
financial statements are an important source of information for evaluating the performance and
prospects of firm, if properly analyzed and interpreted these statements can provide valuable
insights into firm’s performance. Analysis of financial statements is if interest to lenders,
investors, security analyst, manager and others.
Financial statements analysis may be done for a variety of purposes, which may range from
simple analysis of short term liquidity position of the form to a comprehensive assessment
of the strengths and weakness of the firm in various areas, it is helpful in assessing
corporate excellence , judging credit worthiness forecasting bond rating, evaluating intrinsic
value of equity shares predicting bankruptcy and assessing market risk.

Financial statements:
Managers, shareholders, creditors and other interested groups seek answer to the following
question about firm:

 What is the financial position of the firm at a given point of time?

 How has the firm performed financially over a given period of time?

 What have been the sources and uses of cash over a given period?

To answer these questions, accountant prepares two principle statements, the Balance sheet and
the profit and loss account, ancillary statement, the Cash Flow statement.
OBJECTIVES OF FINANCIAL STATEMENTS

Broadly the objective of the Analysis of Financial statement is to understand the

information contained in the financial statement with a view to the weakness and
strengths of the firm and to make forecast about the future prospects of the firm and their
by enabling the financial analyst to take different decision regarding the operation of
the firm. The objectives of the analysis can be identified as:

a. To assess the present profitability and operating efficiency of the firm as a whole as well as
for its different departments
b. To find out the relative importance of different components of the financial position of the
firm.
c. To identify the reasons for change in the profitability\financial position of the firm.
d. To assess the short-term as well as the long-term liquidity position of the firm.
e. To examine the solvency of the firm.
f. To find out the ability of the firm to meet its current obligations.

OBJECTIVES OF THE STUDY

 To determine the financial statements and weakness of the firm.

 To determine the short –term solving of the firm

 To diagnose the information contained to financial statements so as to judge the
profitability and fondness of the firm.

 To establish relationship between various figures or the income statement and balance
sheet.
NEED FOR STUDY
 Need of Financial Statement & cash flow analysis study to diagnose the information
contain in financial statement. So as to judge the profitability and financial position of the
firm AUROBINDO PHARMA LTD

 Financial analyst analyses the financial statements with various tools of analysis before
commanding upon the financial health of the firm.

 Essential to bring out the history of AUROBINDO PHARMA LTD

 Significance and meaning of the financial statements.

RESEARCH METHODOLOGY

SOURCES OF DATA

Data we collected based on two sources.

 Primary data.
 Secondary data.
Primary data

The Primary data are those information’s, which are collected afresh and for the first time, and
thus happen to be original in character.

Secondary Data:

The Secondary data are those which have already been collected by some other agency and
which have already been processed. The sources of Secondary data are Annual Reports,
browsing Internet, through magazines.
1. It includes data gathered from the annual reports of AUROBINDO PHARMA LTD
2. Articles are collected from official website of AUROBINDO PHARMA LTD.
LIMITATIONS OF FINANCIAL STATEMENTS

 It is only a study of interim reports.

 Financial analysis is based upon only monetary information and non-monetary factors are
ignored.

 Different people may interpret the same analysis in different ways.

 It does not consider the changes in prices level.

 Changes in accounting procedure by firm may often make financial analysis misleading.

CONCLUSION
Even though company is utilizing its own funds there is very need that company should improve
its liquidity position, debtor’s collection period. Utilization of proper management of its current
assets and current liabilities.