Abstract

Srinivas, a retired central government employee, was considering suitable stocks to include in his investment portfolio. He was interested in investing in pharma stock and had identified Aarti Drugs Limited (ADL) as an attractive stock to invest in. However, before taking a final decision, he asked his investment advisor to give him some insights into the company, its activities, and its investment philosophy. The investment advisor then collected all the information to analyze and provide the necessary insights to Srinivas to help him decide on investing in ADL. The case study can be used to discuss the application of ratio analysis to analyze the financial statements of a company and to understand the criteria to be followed in understanding the profitability level using different profitability ratios.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Ratio analysis as a tool of financial statement analysis
• Profitability ratios used in the profitability analysis of a company
• Analysis and interpretation of the profitability position of a company

Keywords

Profitability Analysis; Net profit ratio; Operating Expenses ratio; Return on Assets; Return on Capital Employed; Return on Equity; API manufacturer; Aarti Drugs Limited; Pharma industry; Covid-19 Pandemic