Strategic Finance

Mohamed Najeem
MANAGING FINANCIAL PRINCIPLES AND TECHNIQUES
Introduction.
Haritha Pharmaceuticals is one of the listed Ayurveda company in India. Its headquarters situates
near Thrissur. The Company is engaged in providing ayurvedic products. It provides healing and
wellness solutions. Haritha Pharmaceuticals formulates genuine quality Aurvedic medicine
referring ancient manuscripts and following traditional methods. Ayurvedic medicine including
classical medicines and patented medicine are also prepared at Haritha. Away from the
conventional methods Haritha Pharmaceuticals make use of all scientific methods and equipments
for manufacturing quality Ayurvedic medicine ensuring trust and consistency of patients and
customers. Effective Ayurvedic medicine for treating psoriasis, skin care and diabetes made
Haritha popular in India and abroad. Haritha Pharmaceuticals is an ISO, and GMP certified
company for quality and Ayurvedic medicine manufactures here is safe without any side effects.
Production unit of Haritha is situated at Varandarappilly, 25 Kilometeres away from Thrissur city.
Quality assured Ayurvedic medicine distributed to medical agencies after superior export quality
packing at Haritha Pharmaceuticals. Quality Ayurvedic medicine and products for wellness and
treatment are prepared here with the direction of experienced technical staff. Assurance of quality
distinguishes Haritha Ayurvedic medicine also establishes health and wellness for everyone.
Ayurveda is the inspirational spirit of Haritha pharmaceuticals, more than the research and
development, Haritha hubs on dedicating service for trust of the community held on.
Haritha Pharmaceuticals has 7 board of members which are following, Mr. Ramesh Vangal (CEO),
Mr. Gokul Patnaik, Dr. Anil Kumar, Mr. M.C Mohan, Mr. Krishnamurthy, and Mr. Kshiti Rajan
Das. Haritha Pharmaceuticals has four more branches within three states of India. Which are locate
in Tarapur (Maharashtra), Bangalore (Karnataka), Ernakulum, and Kottayam (Kerala). Haritha
Pharmaceuticalss turnover is over 360 million rupees in 2016-2107 financial year, in this year
HARITHA PHARMACEUTICALS’s total revenue is more than 363 million rupees.
Company Overview.
• Name of the company: Haritha Pharmaceuticals.
• Head office: Varadarappily.
• Branches: Bangalore (Karnataka), and Kottayam (Kerala).
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• Caption: Wellness, naturally.
• Industry: Ayurvedic Health Care.
• Status: Large scale.
• Commencement: 1948.
• Employment: 1280
• Main product: General or Immunity medicines.
• Working Time: 9.00 am to 8.00 pm.
Financial Statement of Haritha Pharmaceuticals.
Profit and Loss Account.
Profit and Loss account is a financial statement, which shows a firm’s incomes and expenses for
a particular period. The profit and loss account reflect an organization’s potential and earning
capacity of an organization. (Pandey, 2010).
Profit and Loss Account of Haritha Pharmaceuticals.

Haritha Pharmaceuticals Statement of Profit and Loss for the year ended 31st
March 2017
No
For the period For the period For the period
S te
Particulars ended 31st ended 31st ended 31st
L No
March 2017 March 2016 March 2015
.
Amount in Rs Amount in Rs. Amount in Rs.
1 Revenue from Operations 18 396164855 351768252 307040000
2 Other Income 19 1446910 1418427 368264
397611765 353186679 307408264
Less: Excise Duty and VAT 35095445 26746692 24171141
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3 Total Revenue 362516321 326439987 283237123
4 Expenses
(a) Cost of Material consumed 20 92321989 80133229 79684971
(b) Purchases of Medicines
21 3143718 3056481 2891415
(Stock In Trade)
(c) Changes in Inventories of
22 -3538376 2350404 -8646262
FG, WP & Stock in Trade
(d) Employee benefit expense 23 113384425 105712572 94481587
(e) Finance costs 24 10028915 9731174 11375749
(f) Depreciation 25 5639930 5236834 5835052
(g) Other expenses 26 109220081 95227597 81871089
Total Expenses 330200681 301448290 267493602
Profit Before Extraordinary

5 32315640 24991696 15743521
items and Tax (3-4)
6 Add: Extraordinary Items 708125 0
7 Profit Before Tax (5-6) 33023765 24991696 15743521
8 Tax expense:
(a) Current tax 6733166 0 0
(b) Deferred tax 10285862 -7731538 -4685742
(c) (Less): MAT credit (where
-6733166 0 0
applicable)
10285862 -7731538 -4685742

9 Profit for the period (7_+8) 22737903 17260158 11057779
1
Earnings Per Equity Share
0
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Basic & diluted (Nominal value

2.15 1.64 1.05
of shares Rs.10/- each)
Significant Accounting Policies 1
See accompanying notes 1 to

34 forming part of the financial
statements.
Balance Sheet.
Balance Sheet is the statement showing a firm’s accounting value on a particular date. It reflects
the fact that assets must be equal to the sum of liabilities and equity. Balance sheets, which
represent “snapshots” of its financial position on the last day of each year. (Ehrhardt and Brigham,
2015).
Balance Sheet of Haritha Pharmaceuticals.
Haritha Pharmaceuticals Balance Sheet as at 31st March 2017
As at As at As at
31st 31st 31st
Note
March 2017 March 2016 March 2015
Particulars
No.
Amount Amount Amount
in in in
Rs. Rs. Rs.
A EQUITY AND
LIABILITIES
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Shareholder's funds.
1
(a)Share Capital 2 105556700 105556700 105556700
(b)Reserves and 3 73943918 51206015 33945857

Surplus
(c) Money Received
4
against Share 0 0 1494
Warrants
179500618 156762715 139504051
2 Non-Current Liabilities
(a) Long term 5 479514487 496301535 499165076

Borrowings
(b)Other Long-Term 6 3915000 3867500 3667500
Liabilities
(c) Long Term 7 6641504 6578669 6455701
Provisions
490070991 506747704 509288277
3 Current Liabilities
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(a) Short Term 8 165702747 143691459 145137061

Borrowings
(b) Trade Payables 9 19687654 13535407 21099363
(c) Other Current 10 26099836 19776046 17010888

Liabilities
(d) Short Term 11 13134269 4121164 4527420
Provisions
224624507 181124076 187774732
TOTAL 894196117 844634495 836567060
B ASSETS
1 Non-Current Assets
(a) Fixed Assets
(1) Tangible 12 164163864 162627302 166069895

Assets
(2) Intangible 850149 0 0
Assets
(b) Non-Current 13 114658320 114647970 114647970
Investments
(c) Differed Tax 31 4418326 14704188 22435726
Assets (Net)
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(d) Long Term

14 428500401 412746951 401312989
Loans and
Advances
712591059 704726411 704466580
2 Current Assets
(a) Inventories 15 60724178 54900956 57379010
(b) Trade and 16 62177207 52607728 43614695

Receivable
(c) Cash and Cash 17 17128434 19853180 17361541
equivalents
(d) Short-Term
18 41575239 12546220 13745236
Loans and
Advances
181605057 139908085 132100480
TOTAL 894196116 844634496 836567060
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Assignment 1
Costing.
Costing is the establishment of budgets, standard costs and actual costs of operations, process,
activities, or products, and the analysis of variances, profitability, or the social use of funds. The
costing system of an organization is the foundation of the internal financial information. The
costing system provides the financial aspects of performance within an organization it helps to
planning and decision making in organization. (Lucey, 2002).
In Haritha Pharmaceuticals, there are two types of costs are there which are fixed costs and variable
and costs. In the case of fixed costs in Haritha Pharmaceuticals are following, Rent, Insurance, and
Capital costs (factories and machineries). Variable costs are, raw materials, utilities bill, salaries
and wages.
Pricing Strategy.
Costing has a significant role in Pricing strategy, Pricing decisions are complex and many
interacting factors need to be considered including, the type of market in which firm operates, the
degree of competition, demand and the elasticity of demand, the cost structure of the product and
firm, the state of economy and numerous other factors. Pricing is not simply a cost-based decision
although past cost and expected future costs are factors to be considered in pricing decisions or
pricing strategy. (Lucey, 2002).
The costs information shows whether the product or service can be made and sold profitably in
any price. The cost-based pricing strategy includes setting prices based on the costs of producing,
distributing, and selling the product plus a fair rate of return for its effort and risk. So, in a firm the
costing has a significant role in organization’s pricing strategy for surviving and profitable in
future. (Lucey, 2002). There are several types of pricing strategies are there, which are premium
pricing, penetration pricing, economy pricing, and skimming pricing.
Premium Pricing; Premium pricing is the practice of setting high price of a product or services
comparatively competitors in order to favorable perceptions among customers or buyers. The high
price is used as the definition criterion and such pricing strategies that work in the segments and
industries to a strong competitive advantage exist for the company. (Indiatimescom, 2018).
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Penetration Pricing; Penetration pricing strategy is; the price is set artificially low to gain market
share quickly. This is done when a new product is being launched and it understood that prices
will be raised once in the promotion period is over and market share objectives are achieved.
(Indiatimescom, 2018).
Economy Pricing; Economy pricing strategy is; the economy pricing is no- frills price. The
margins are wafer thin. Overheads like marketing and the advertising costs that are very low and
the targets mass the market and high market share. (Indiatimescom, 2018).
Skimming Pricing; Skimming pricing strategy is, the high price is charged for the product till
such time as the competitors allow after the prices that can be dropped. The idea is to be recover
maximum money before the product or the segment attracts more the competitors will lower profits
for all concerned. (Indiatimescom, 2018).
Pricing; Pricing is a process of determining a price for a business to sell its products and services,
and it may be also part of the business marketing plan. Pricing is a process; it is a firm set selling
price of firm’s products or services. The pricing decision can be considered as a balance of two
main factors, which are Costs, and Competition. (Lynch, 2000).
Pricing decision based on cost, it depends marginal cost of production, setting the market price
below the marginal cost of production may leads to lose the company money. Pricing decision
based on competition, during setting price of a product or service has to consider competitive price
in similar products also similar market, if price is high the product has to differentiated from
competitors. (Lynch, 2000).
The pricing strategy of Haritha Pharmaceuticals depends on its total costs. The major expenses are
purchasing raw materials and salaries or wages. The main income from sales of its wide range
Ayurvedic products. So, the pricing has to able to cover total costs and ensure it generates a
positive cash flow in Haritha Pharmaceuticals. The pricing strategy totally dependable on total
costs of Haritha Pharmaceuticals it has to cover fixed costs and variable costs, then also cover a
reasonable margin from selling products.
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Fixed Cost.
A cost which is incurred for an accounting period, and which, within certain output or turnover
limits tends to be unaffected by fluctuations in the levels of activity it may be turnover or output.
The fixed costs are time related and within limits are unaffected by changes in the level of activity.
Fixed costs are usually measured as costs per unit of time, such as rent per month or salaries per
year, etc. (Lucey, 2002).
Here in Haritha Pharmaceuticals there are number of fixed costs are there, which are rent,
insurance, machinery costs, factory costs, and capital costs. These fixed costs may influence on
Haritha Pharmaceuticals’ pricing strategy.
Variable Cost.
Variable costs are costs which are varies depend on result of output. Variable costs change as the
output changes, if the variable cost is zero, when the production is zero. Costs of direct labor and
raw materials are usually variable. The variable costs are constant per unit of output, which means
the total variable costs are totally depend up on the total level of the production within an
organization. (Ross, et al, 2016).
Here in Haritha Pharmaceuticals there are number of variable costs are there, which are raw
materials cost, utilities bills, wages, and salaries. Variable costs mainly depend on Haritha
Pharmaceuticals production, because of the raw material costs are may fluctuate as per the
fluctuations in production or raw materials, (both may be increase or decrease). If there are any
fluctuations in production it may affect all variable costs in Haritha Pharmaceuticals, like if
production will increase the raw materials require more quantity, require more working hours or
labors it may cause changes in wages or salaries, and the production hour increase will cause to
rise utilities bill, and the rise of demand of raw material also leads to rise variable costs in Haritha
Pharmaceuticals and if the production will fall the variable costs will down.
Semi Variable Cost.
Semi variable cost is mixed form both fixed cost and variable cost, when the costs are fixed for a
set level of production or consumption and later it become variable when the production level
exceeds. Semi variable cost also known as semi fixed cost or mixed cost. (Lucey, 2002).
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In the case of Haritha Pharmaceuticals, basically, the variable costs depend upon their production
quantity. The major variable costs are utility cost such as printing and stationary, electricity, water,
telephone charges, depreciation on plant, compensations to employee, and machines maintenance
and components costs are the major variable costs in Haritha Pharmaceuticals
Direct Cost.
Direct costs are those costs, which can be directly identified in the form of direct material costs,
direct wages costs and direct expenses. The total of direct costs is known as prime cost. For
example, direct material + direct labor + direct expenses= prime cost. (Lucey, 2002).
In the case of Haritha Pharmaceuticals direct costs are their raw materials costs which includes
various types of material like, herbal products, vegetable oils, and minerals etc. and direct labor
costs which include the production labour costs, sales labor costs, purchasing labor costs, and the
other direct expenses like transpiration of raw materials and finished goods transactions, those are
the main direct cost in Haritha Pharmaceuticals.
Indirect Production Cost.
Indirect production costs are costs; those are indirectly linked in full to actual production of goods
or provision of service. All material, labor, and expense costs which cannot be identified as direct
costs, these costs may be indirect costs, which are indirect material cost, indirect labor costs, and
indirect expenses. Indirect expenses are also known as overheads. (Lucey, 2002).
In the case of Haritha Pharmaceuticals the indirect production costs are following, maintenance of
machines, maintenance cost includes the maintenance engineers labour costs, rent, heating and
cooling factory and warehouse costs.
Indirect Non-Production Costs.
Indirect non production costs are costs, those are not directly related to production. Which includes
administration overheads, selling and distribution overheads costs and some cases research and
development costs are also include in indirect non production cost. Indirect non production costs
also known as overheads. It is cost for support function which is indirectly involved in the
manufacturing process or provision of main service. (Lucey, 2002).

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In the case of Haritha Pharmaceuticals the indirect non production costs are administrative
expenses which includes office expenses, printing and stationary costs, selling and distribution
costs, research and development of costs are the major indirect non production costs in Haritha
Pharmaceuticals
Absorption Costing
Absorption Costing is a form of costing in which costs of products are calculated by adding an
amount for indirect production costs to the direct costs of production. Absorption costing also
known as total absorption costing, is the basis of all financial accounting statement. The absorption
cost is used for reporting the financial data to comply with the accounting standards and for the
inventory valuations. The absorption cost that will help the companies to set the selling prices
based on the full cost of the production or sales of each product. (Horngren, et al, 2012).
Marginal Costing.
Marginal Costing is form of costing where only the direct costs are considered relevant for the cost
of a product. Fixed Costs are treated as Period Costs. the marginal cost system that gives more
useful information to the managers to take the decision to process and contribution to calculate
under the system and it is directly proportionate to the sales volume and it gives more accurate
picture of the impact of the sales volume on the cash flow and the profit. (Lucey, 2002).
Cost Sheet.
Cost sheet is a report which contains all of the cost associated with product or production job. Cost
sheet helps to identify the margin earned on a product and can form the basis for the setting of
prices on similar products in the future. It can also be used as the basis for a variety of cost control
measures. It enables the company to keep a close watch and control over the cost of production.

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Cost Sheet
Total Cost (100 Units) Cost Per Unit
Direct material 12000 120

Direct labour 6000 60
Prime Cost 18000 180
Add: Factory Overhead 6000 60
Factory Cost 24000 240
Add: Administrative Overheads 9000 90
Cost of Production 33000 330
Add: Selling and Distribution Overheads 3000 30
Total Cost or Cost of Sales 36000 360
As per the analysis of cost sheet of Haritha Pharmaceuticals in the case of 100 units’ total
production and sales cost will be 36000 rupees. The total prime cost will be 18000 which are
divided by direct labour and direct materials each cost will be 12000 rupees and 6000 rupees
respectively. The factory cost will be 6000 rupees as a factory overhead cost, the administrative
cost will be 9000 rupees under administrative overheads, and the total cost of production will be
33000 rupees. Finally, the total cost is 36000 rupees per 100 units, and the total cost will be 360
rupees per units.
Cost control and cost reduction.
Cost control and cost reduction are techniques used to control and reduce unnecessary cost or
expenses in an organization, these are very important and it may also help to increase market
demand in terms of competitive market. (Fraser, and Ormiston, 2015).
Importance of cost control.
Cost control is a technique that is used to regulate unnecessary expenses in business, cost control
is one of the important techniques which enables firm to achieve defined objective or goals. It is

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also helping to proper utilization of business resources through efficient and effective way, and
cost control helps to gain growth and sustain in future. (Fraser, and Ormiston, 2015).
In the case of Haritha Pharmaceuticals the cost control has a vital role, cost control helps to reduce
and avoid unnecessary cost in Haritha Pharmaceuticals. The cost control techniques also help to
achieve Haritha Pharmaceuticalss objectives and missions. The cost control process or techniques
which provides proper utilizations of resources in Haritha Pharmaceuticals it enables improve
operation in HARITHA PHARMACEUTICALS and it may enable to improve production quality.
An efficient and effective cost control system and techniques will help to achieve organizational
growth. As per the cost control system which enables to reduce the cost in HARITHA
PHARMACEUTICALS that would be enable selling products at low cost through reduce and
avoid unnecessary costs in HARITHA PHARMACEUTICALS, so HARITHA
PHARMACEUTICALS can sell its products at low cost rather than competitors. The cost control
process also ascertains the competence of different functions, which may enable gain a competitive
advantage and sustain in future.
Cost control techniques
There are number of techniques for cost control, which are help to control or regulate cost in a
organization. Those are budgetary control, benchmarking, and target costing, these techniques are
very important common cost control techniques, which are able to minimize or avoid unnecessary
cost in an organization. (Fraser, and Ormiston, 2015).
Budgetary control.
Budgetary control is a system whereby the budgets are used as a means of planning and controlling
cost. Budgetary control is concerned with the efficient use of resources to achieve a previously
determined objectives or set of objectives contained with a plan (Lucey, 1996).
In the case Haritha Pharmaceuticals budgetary control as an essential role for planning, preparation
of budgets and cost controlling, which can enable to efficient and effective use of resources which
include financial resources into an creative and effective operations in Haritha Pharmaceuticals.
The budgetary control system, that includes preparation of budgets, coordination of departments,

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and delivering responsibilities in order to actual performance with the budgeted and acting upon
results to achieve an successful growth and maximize profits in Haritha Pharmaceuticals
Benchmarking
Bench marking is used as a means of understanding how an organization compare with others
typically competitors. It is usually benchmarking exercise focus on outputs such as standard of
product or service, but others do attempt to take account of organizational capabilities. There are
two approaches to benchmarking which are, Best-in-class and Industry or sector benchmarking.
(Johnson, et al, 2016).
In the case of Haritha Pharmaceuticals benchmarking, which enables to analyze and identify
market, and market trends through compare competitors, or industry. The benchmarking process
help to identify the potential growth, competitive advantage, and potential strategies used by
competitors and within the industry, which enables successful growth, maximize productivity, and
growth in Haritha Pharmaceuticals So the benchmarking process can help to identify the strength
and weakness of organization, it would be unable to convert existing weakness into strength in
Haritha Pharmaceuticals. The benchmarking process can able to mold a sustainable competitive
strategy in Haritha Pharmaceuticals
Target costing.
A product cost estimate derived by subtracting a desired profit margin from a competitive market
price. This may be less than the planned initial product cost, but will be expected to be achieved
by the time product reaches the mature production stage. It is strategic tool, that used to reduce the
over cost of a product through its entire life cycle using over the production, engineering, design,
research and development. (Lucey, 2002).
In the case of Haritha Pharmaceuticals target costing in Haritha Pharmaceuticals has an essential
factor which has fundamental objectives in the organization. It can help to gain a competitive
advantage and survive in the highly competitive environment market place. Target costing in
Haritha Pharmaceuticals and ayurvedic health industry as a proactive cost planning, cost
managing, and cost reduction process whereby costs are planning and managed out of a product
and early in the design and development cycle rather than during the later stages of product

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development, and production in Haritha Pharmaceuticals. Through target costing Haritha

Pharmaceuticals which may enable economies scale in various products in highly competitive
environment. In Haritha Pharmaceuticals has a potential research and development departments,
which enables target costing in Haritha Pharmaceuticals easily.
Cost Reduction
Cost control aims at reducing the actual to the targets, cost reduction aims at reducing the targets
themselves. In other words, the aim of cost reduction is to see whether there is any possibility in
bringing about a saving in cost incurred material, labour, overheads, etc. Here the term cost
reduction denotes real or genuine saving in production, administration, selling and sharing costs
resulting to the elimination of wasteful and inessential elements from the design of the product and
from the techniques and practices carried out in connection therewith. The necessity for cost
reduction arises when the profit margin has to be increased without an increase in the sales turnover
i.e. for the same volume of sales, the cost should be reduced.
Importance of cost reduction techniques.
Cost reduction techniques are also one of the important techniques that are used to minimize and
avoid unnecessary costs or expenses in business. There are number of cost reduction techniques
are there which are value chain analysis, quality control, business process re-engineering, kaizen
cost, investment management, and work study. (Fraser, and Ormiston, 2015).
In the case of Haritha Pharmaceuticals cost reduction, initially which enables rise profit margins
through the minimize and avoid unnecessary costs, which may lead selling products to customers
at low cost or offer more quantity within the same price. So naturally it will create products demand
is high and require large volume supply, naturally Haritha Pharmaceuticals has to produce large
volume of products to meet the huge demand, so Haritha Pharmaceuticals will force to
organization development meet and require high per cent of demand and supply of its ayurvedic
products in the market. Over the development in Haritha Pharmaceuticals which can able to more
employment opportunities for the society, at same time low cost production ensures more profit
margin, and it will help to more market expansion which will also create more employment
opportunities, It will naturally lead standard of living will improve in the society over the create
employment opportunities in order to organization developments. Governments will get more

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revenue in the case tax in order to organization or industry development, and finally the cost
reduction cost techniques will help to increasing productivity, which is more favorable for
minimize and reduce resource utilizations in Haritha Pharmaceuticals especially in India
population is very high, but resources availability are limited, in the case high productivity within
available resources may lead save resources and bring more development within overall industry
in India.
Value Chain.
According to Richard Lynch, ‘The value chain identifies where the value is added in an
organization and links the process with the main functional parts of the organization. According
to Michel Porter ‘Value chain analysis is a process where a firm identifies its primary and support
activities that add value to its final product and analyze these activities to reduce cost or increase
differentiation’. There are two types of activities are in value chain that are, primary activities and
support activities. The primary activities include the following activities, which are Inbound
logistics, Operations, Outbound logistics, Marketing and Sales, and Service. The support activities
are Firm infrastructure, Human resource management, Technology development, and
Procurement. (Lynch, 2000). (Johnson, et al, 2016).
In the case of Haritha Pharmaceuticals the value chain analysis has a vital role to identify and
analyze where the costs or values are added on the basis of evaluation of both primary and
supporting activities of value chain. Value chain is strategic tool, which also used to cost reduction
tool in the organization through analyzing both primary and supporting activities in Haritha
Pharmaceuticals Value chain analysis help to reduce and avoid unnecessary costs in Haritha
Pharmaceuticals though the detailed analysis primary and supporting activities of Haritha
Pharmaceuticals. This cost reduction techniques or process also will help to gain or increase more
profit margin, improve product quality, and productivity in Haritha Pharmaceuticals. The value
chain analysis helps to gain a competitive advantage and sustainability in high competitive
environment market, and future challenges.
Quality control.
Quality control is the organized effort employed by the company to provide and maintain in the
final product the desired features, properties and characteristics of identity, purity, uniformity,

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potency and stability within established levels so that all merchandise shall meet professional
requirement, legal standards as the management of a firm may adopt. (Janakiraman and Gopal,
2006).
In the case of Haritha Pharmaceuticals the quality control has an essential factor in Haritha
Pharmaceuticals as a health care industry the quality control process or system has critical
importance, and vital role to ensure products safety and quality. The quality control system in
Haritha Pharmaceuticals which enables minimize or avoid maximum defects products through the
various quality measurement systems, process, and using various an effective and efficient
methods of production. Which also help to minimize the wastage, pollutions and side effects of
products as a part of ensure patients or customers safety and protection, rights of getting necessary
medicines, human rights protection, and environmental protection according to government’s
instructions, policies, rules, and laws.
However, the quality control system in Haritha Pharmaceuticals which can ensure the product
quality, safety, and improve productivity in Haritha Pharmaceuticals. Which is able to gain and
achieve competitive, sustainable and successful market growth within the health care industry.
Which also enables quality and safety products developments according to governments policies,
instructions, laws, and rules, and finally the in the way of keeps medical ethics and humanity.
BPR
Business process re-engineering is the critical analysis and radical redesign of existing process to
achieve breakthrough improvements in performance measures. It is also known as innovation, and
core process of design. Which enables attempts to restructure or redesign or obliterate inefficient
or unproductive organization process or operations or entire systems into an effective and efficient
production management layers, over the various process, or system of an organization.
(Janakiraman and Gopal, 2006).
In the case of Haritha Pharmaceuticals the business process re-engineering, which a strategic tool
that used to minimize, and eliminating unnecessary costs in Haritha Pharmaceuticals. The business
process re-engineering system help to minimize and eliminate by ineffective or efficient or
unproductive process, and employees who are unproductive in Haritha Pharmaceuticals in order

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to reduce cost or expenses, and increase productivity, and production quality within entire
operation in Haritha Pharmaceuticals. Usually business process re-engineering focus on cost
reductions in an organization, simplify operations, improve quality, and productivity, and meet
customer requirements, enhanced customer expectations, and ensure customer satisfaction. The
business process re-engineering can enable more responsibilities, and commitment among the
employees. Which will provide high productivity, and gain more revenue sales due to high
productivity, and selling at low cost or provides more quantity within the same price increase
demands of products, so Haritha Pharmaceuticals can sell more products and earns more revenue
from sales.
Inventory management.
Inventory management is the processes a business uses to manage their inventory levels and the
process of supply of raw-materials, partially finished goods, and finished goods an organization
maintains to meet its operational requirements or needs, as well as issues associated with
overstocking and understocking are important factors in the survival and success of that business.
Inventory is the materials held by a business in order to produce the product being sold to the
customer. Inventory is sometimes referred to as stock. An efficient and creative inventory
management minimize inventory cost, labor cost, and reduce time consuming by avoiding
unnecessary inventory management activities in an organization. (Bbccom, 2018).
In the case of Haritha Pharmaceuticals inventory management is an essential process in Haritha

Pharmaceuticals. The inventory management in Haritha Pharmaceuticals keeps raw materials, and
finished goods maintains at optimum levels. In ayurvedic health industry require various types of
raw materials, some kind of raw materials may not available at right time, it may available in a
various period of time, but finished products have requirement or demand in any time, so these
types of raw materials have to stoke within warehouses when those are available in Haritha
Pharmaceuticals. So in Haritha Pharmaceuticals has to keep too much stokes especially as health
care industry is a necessary. But the other hand some kind of raw materials managing through just
in time inventory management in Haritha Pharmaceuticals which raw materials and resources are
available at any time. These just in time inventory management help to reduce unnecessary cost in
Haritha Pharmaceuticals. The current inventory management process runs through computer-

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based inventory system in Haritha Pharmaceuticals to a certain context Haritha Pharmaceuticals

has successful minimize inventory costs in Haritha Pharmaceuticals
Kaizen costing
Kaizen costing is cost reduction system via continues improvement. Kaizen costing system is a
continues efforts to reduce product costs, improve products quality, or improve the production
process after manufacturing activities begun. Kaizen costing system involves making continual,
incremental improvements to the production process during the manufacturing phase of the
product or service lifecycle, typically involving setting targets for cost reduction. (Monden, 2012)
In the case of Haritha Pharmaceuticals kaizen costing is an essential factor as part of cost reduction
process. Kaizen costing has an important to reduce production costs, improve production quality,
and productivity through continues improvements in Haritha Pharmaceuticals. Kaizen costing
system, which enables an efficient cost control and improvements process in Haritha
Pharmaceuticals. Over the Kaizen costing system tracks all cost reductions activities in Haritha
Pharmaceuticals on continuously according quarter base.
Work study
Work study is a combination of two groups of techniques, method study and work measurement,
which are used to examine people's work and indicate the factors which affect efficiency. Work
study is normally used in an attempt to increase output from a given quantity of resources with
little or no further capital investment. This is achieved by systematically analyzing existing
operations, processes and work methods. Work study enables improve the production efficiency
through reorganization of work. (Prokopenko, 1987).
In the case of Haritha Pharmaceuticals goal of work study determines the effective method of
performing each operation to minimize, and eliminate wastage, so which enables Haritha
Pharmaceuticals production increases without any additional risk. The work study is also used to
determining the standard time that a qualified worker should take to perform the operation, when
working at a normal place in Haritha Pharmaceuticals. Eventually the work study is one of the
important techniques, that is employed to improve in production in Haritha Pharmaceuticals. Work

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study enables in the optimum level uses of human resources, raw material resources, and other
resources in Haritha Pharmaceuticals
Breakeven point.
Breakeven analysis, the point at which the total costs of undertaking a new strategy is equal to the
total revenue. It is usually determining as the number of units of a product which need to be sold
before the product has covered all its fixed costs. Break even analysis is directed at the breakeven
point, where fixed costs and variable costs are equal to total revenue. (Lynch, 2000).
In the case of Haritha Pharmaceuticals when analyzing break-even point to calculate the total
revenue is equal to the total cost of the products in Haritha Pharmaceuticals. Here in Haritha
Pharmaceuticals Imugest Tablet product, the total fixed cost is 40000 rupees, which includes
factory cost 18000, and the administrative overhead is 22000. The variable costs are, the direct
labour is 35 per unit, raw materials cost is 60 and selling and distribution cost per unit, so the total
variable cost is 25. The selling price of Imugest Tablet is 165 rupees. The total variable cost is 120
rupees.
To calculating the contribution = selling price- variable cost.
The contribution cost = 165-120
= 45.
So, the contribution is 45 rupees in Haritha Pharmaceuticals
To calculating the break-even point in Haritha Pharmaceuticals by dividing fixed cost by

contribution, the fixed cost id 40000 rupees, and contribution is 45 per unit in Haritha
Pharmaceuticals
Fixed
Break-even point =
Contribution cost

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Break-even point = = 889.
The break-even point of Imugest Tablet is 889 units, require to sell the 889 Imugest Tablet products
to reach break-even point in Haritha Pharmaceuticals
In the case of Haritha Pharmaceuticals as per the analysis of Haritha Pharmaceuticals’ pricing and
costing strategy is cost based pricing strategy which includes direct material, direct labour, factory
overheads, administrative overheads, and selling and distribution overheads. The main advantages
of this pricing system are it is easy to understand and calculation of cost and pricing strategy, as
well as the current pricing strategy ensure that incurred which types costs are covered. It will very
helpful to do simplify investment appraisal decisions for using required rate of returns, and it can
be useful to when setting the price of new innovative products of Haritha Pharmaceuticals
The existing pricing and costing strategy does not focus price elasticity and demand, as well as the
current pricing strategy and costing is difficult to determine a precision measures of costing and
pricing in Haritha Pharmaceuticals, So I’m suggest to a new cost and pricing strategy that may
concerns the demand and elasticity of pricing strategy and use absorption costing to determine a
reliable costing system development and it will be help to future growth in HARITHA
PHARMACEUTICALS. As per the breakeven point analysis and graph shows Haritha
Pharmaceuticals need to produce over 899 products to break the production cost or the production
cost would be equal to revenue in this stage. As a Ayurvedic health industry company Haritha
Pharmaceuticals their current breakeven point is a satisfactory level. If Haritha Pharmaceuticals
can improve their breakeven point to reduce as much as possible (bring to the breakeven point into
below 899) Haritha Pharmaceuticals can maximize their profit as much as possible and it will
enable growth and profitability to Haritha Pharmaceuticals
However, as per my conclusion the current Haritha Pharmaceuticals the existing pricing and
costing do not enough to future sustainable growth on Haritha Pharmaceuticals and the existing
costing also does not enough to reach the desired position as well as sustainable growth on Haritha
Pharmaceuticals. So, in this context Haritha Pharmaceuticals need to implement a new cost and
pricing strategy that has to concerns the demand and elasticity of pricing strategy and use
absorption costing to determine a reliable costing system development and it will be help to future

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growth in HARITHA PHARMACEUTICALS. These new pricing and costing strategy will enable
to maximize profit with minimize cost, so it naturally leads to sustainable growth and future
sustainability to Haritha Pharmaceuticals

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Assignment 2
Activity Based Costing.
Activity based costing is the simplest method of dealing with the fixed production costs is to
assume that all the production overheads can be treated together and the single overhead the
absorption rate per labor hour, or cost per machine hour, can be derived.
ABC Costing in Haritha Pharmaceuticals

Computation of the Activity Based Costs and profits for Imugest Tablet for 1000 units.
Step 1: Compute cost per unit

of cost driver
Cost pool / Cost driver
volume
Cost driver volume/ Cost/unit of
Activity Cost pool year cost driver
Rs.
Rs. 20/Graining
Graining 20000 20000 hour
Rs. Rs.
Inspection 150000 1000 150/batch
Rs.
Production Management 12,000 100
Step 2: Compute the cost

drivers consumed by each
contract
HARITHA
PHARMACEUTICALS
Cost driver spice product
Batches 100 unit/100 =1

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Graining hours 10batches x 2=20

Contracts 1 1
Step 3: Finally, compute the

Costs And Profit For Each
Contract
HARITHA
PHARMACEUTICALS
Rs.
Selling price 450
Materials 1,000x 180 Rs. 180000
Rs.
Graining 1000*20 2,0000
1000 batches x Rs.
Inspection 150 15,0000
Rs.
Management 12,000
Total cost Rs. 362000
Profit/(Loss) 88000
Absorption Costing
Cost Sheet Absorption
Total Cost Cost Heposem Biogest Imugest

(100 Pe
Units) r Tablet Tablet Tablet
Unit
Direct material 12000 120 30 40 50

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Direct labor 6000 60 15 20 25
Prime Cost 18000 180 45 60 75
Add: Factory 6000 60 18 22 20

Overhead
Factory Cost 24000 240 63 82 95
Add: Administrative 9000 90 25 35 30

Overheads
Cost of Production 33000 330 88 117 125
Add: Selling and

Distribution
Overheads 3000 30 8 12 10
Total Cost or Cost 36000 360 96 129 135

of Sales
Selling
pri
ce 140 135 165
Profit 44 6 30
Value Chain Analysis.

According to Richard Lynch, ‘The value chain identifies where the value is added in an
organization and links the process with the main functional parts of the organization. (Lynch,
2000). According to Michel Porter ‘Value chain analysis is a process where a firm identifies its
primary and support activities that add value to its final product and analyze these activities to
reduce cost or increase differentiation’. There are two types of activities are in value chain that are,
primary activities and support activities. The primary activities include the following activities,
which are Inbound logistics, Operations, Outbound logistics, Marketing and Sales, and Service.
The support activities are Firm infrastructure, Human resource management, Technology

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development, and Procurement. The basic model of Porters Value Chain is as follows; (Johnson,
et al, 2016). In the case of Haritha Pharmaceuticals the value chain analysis, which are divided
into two activities, which are primary activities, and supporting activities. In the case of primary
activities which are, Inbound logistics, Operations, Outbound logistics, Marketing, and Sales, and
Service. In the case of supporting activities which are, Firm infrastructure, Human resource,
Technology development, and procurement. Inbound logistics in Haritha Pharmaceuticals the key
raw materials of plant origin, which includes herbs, shrubs, leaves, barks, heartwood, flowers,
seeds, fruits, fruit kernel, oils, gums, resins etc. Animal origin; byproducts like ghee, milk, honey,
etc. are inevitable for most of the ayurvedic medicines. Metals and Minerals; different types of
metal and mineral like Gold, Silver, different types salts are the key materials. These raw materials
collect from various suppliers like, Red Fort Group in Bangalore, SLN Traders in Bangalore, and
Aryam in Gujarat are the bulk raw material suppliers. Usually raw material also collects from small
farmers or individual, and their own plants. Usually the raw materials transportation done by road.
The raw materials are usually store in Haritha Pharmaceuticals’ own warehouse, which is situates
near the production unit, so the raw material transportation become more easy. With a well
inventory management.
In the case of operations, the key operations are the production and developing medicines, with
use various production process, which includes automatic and manual process, it depends on
requirements of various medicine production procedure and Shasta. The finished goods products
quality checking and further procedures are another operation in Haritha Pharmaceuticals. In the
case of outbound logistics, the key function are the finished products are shift to warehouse, and
make sure order receiving, and order fulfillment under the outbound activities, and distributions
of finished goods through their transport system by road. In the case of marketing and sales, mostly
the marketing conducts by various advertisement using modern technologies like social medias,
televisions, and other websites. The sales are promoting through conducts different types
promotions and advertisement.
Procurement system is one of the important supporting activities of Haritha Pharmaceuticals’

inbound logistics. In Haritha Pharmaceuticals the purchasing operations runs well, currently the
purchasing department can able to purchase raw materials at low cost with high quality. The

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procurement process runs very well by various methods. If in Haritha Pharmaceuticals will
develop and expand their current herbal plant to vast area, then Haritha Pharmaceuticals gain
economies scale in Ayurveda industry. Technology development is one of the important and
supporting activities for operations. In Haritha Pharmaceuticals currently using most modern
machineries and technologies for production and provides training and knowledge to Haritha
Pharmaceuticals employees. Technology is helps to add value to its operations. Human resource
management is another important supporting activity in Haritha Pharmaceuticals which helps to
all primary activities in Haritha Pharmaceuticals. Human resource is strong, the employees are
well trained and more committed to encourage their job due to provides high motivations and the
unit based payment (piece rate). In the case of firm infrastructure, Firm infrastructure, it is a one
of the supporting activity all primary activities in Haritha Pharmaceuticals in Haritha
Pharmaceuticals there is a functional structure to control all operations under the Haritha
Pharmaceuticals. The structure of Haritha Pharmaceuticals is favorable for all primary activities
in organization and the other infrastructures like warehousing, are also favorable for its existing
business and primary activities.
Way to reduce Costs.
As per the analysis of the above-mentioned value chain analysis of Haritha Pharmaceuticals there
are number of opportunities to reduce cost in Haritha Pharmaceuticals which are following, in the
first one is the existing production method change into ‘Lean Production Method’, which may help
to reduce production cost and improve productivity in Haritha Pharmaceuticals In the second one
is the current inventory management change into ‘Just-In-Time’ inventory management, which
may help to minimize unnecessary inventories, it may naturally lead to minimize the inventory
cost in Haritha Pharmaceuticals Finally, the third one is implement ERP system that can integrate
all operations in Haritha Pharmaceuticals which may help to manage end to end operations in
Haritha Pharmaceuticals
In the case of primary operations activities of Haritha Pharmaceuticals which include the current
production method, here in the Haritha Pharmaceuticals can implement ‘Lean Production Method’,
by replace the current production method in order to cost reduction in Haritha Pharmaceuticals
lean production process, which enable improve productivity and minimize production cost in
effectively in Haritha Pharmaceuticals The lean manufacturing system can able to improve

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production quality, improve visual management, increase operation efficiency, ensure total firm
involvement, ensure safe work environment, improve employee morale, and minimize costs in
Haritha Pharmaceuticals So, the Haritha Pharmaceuticals can reduce cost by implementing lean
manufacturing system in Haritha Pharmaceuticals
In the case of primary out bound activities of Haritha Pharmaceuticals it includes warehousing
activities or inventory management, here in the Haritha Pharmaceuticals can implement the
‘JustIn-Time’ inventory management by replace the present inventory system, which will enable
minimize the unnecessary stock holding, require less space rather than existing inventory system,
minimize waste, and require smaller investment, those factors will help to reduce costs in Haritha
Pharmaceuticals And finally, implement the ERP software in Haritha Pharmaceuticals which
enable to manage overall operations from any where at any time. Haritha Pharmaceuticals reduce
cost by implementing the ERP system “Enterprise Resource Planning” it is used to manages the
end to end operations in Haritha Pharmaceuticals The ERP system will help to improve operational
efficiencies and productivity in Haritha Pharmaceuticals so by using ERP cost can reduce in
However, the above mentioned three cost reduction methods are derived from the above mentioned
value chain analysis, and overall Haritha Pharmaceuticals’ operations and strategy, those methods
are very useful to minimize costs and improve productivity in Haritha Pharmaceuticals Those will
enable improve productivity, improve operational efficiency, improve quality, and improve
employee morale as well as reduce costs in Haritha Pharmaceuticals

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Assignment 3
Budget.
Budget is plan which an estimate of income and expenditure for set a particular period of time, it
is usually set for a year, It is plan and not a forecast. A forecast is a prediction of what might
happen in future, whereas a budget is a planned outcome which the firm hopes to achieve within
a specified period in future. Mainly there are four types budgets are there, which are, Income or
Sales revenue budget., Production budget., Expenditure budget., and Profit budget. (Ross, et al,
2016).
Sales budget.
An Income or Sales revenue budget shows the planned income or revenue for a period of time.
Production budget shows the planned costs of production for a period of time. An expenditure
budget shows much money a business is expected to spend for a period of time, it is also known
as Total cost budget., and Profit budget shows the amount of profit a business is expected to make
over a period. Sales budget is initial and basic component of master budget, it shows the expected
sales units and price for a specific or planed period of time (Ross, et al, 2016).
Sales Budget
Sale Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
s
Dia
bet 4,00 4,10 4,20 4,25 4,30 4,40 4,45 4,50 4,55 4,60 4,65 4,70 52,7
es/h 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 00,0
ear 0 0 0 0 0 0 0 0 0 0 0 0 00
t
heal
th

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1,20 1,25 1,27 1,30 1,37 1,40 1,45 1,50 1,55 1,60 1,62 1,65 17,1
0,00 0,00 5,00 0,00 5,00 0,00 0,00 0,00 0,00 0,00 5,00 0,00 75,0
0 0 0 0 0 0 0 0 0 0 0 0 00
Hair
care
Chil 1,20 1,30 1,35 1,37 1,40 1,42 1,45 1,50 1,57 1,60 1,65 1,67 17,5
d/ 0,00 0,00 0,00 5,00 0,00 5,00 0,00 0,00 5,00 0,00 0,00 5,00 00,0
kids 0 0 0 0 0 0 0 0 0 0 0 0 00
heal
th
3,00 3,05 3,10 3,15 3,20 3,25 3,30 3,35 3,40 3,50 3,60 3,70 39,6
Wo 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 00,0
me 0 0 0 0 0 0 0 0 0 0 0 0 00
n
care
2,50 2,60 2,65 2,70 2,72 2,75 3,00 3,25 3,30 3,35 3,40 3,45 35,6
0,00 0,00 0,00 0,00 5,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 75,0
Men 0 0 0 0 0 0 0 0 0 0 0 0 00
's
care
1,50 1,55 1,57 1,60 1,62 1,65 1,70 1,75 1,80 1,82 1,87 1,90 20,3
0,00 0,00 5,00 0,00 5,00 0,00 0,00 0,00 0,00 5,00 5,00 0,00 50,0
Gast 0 0 0 0 0 0 0 0 0 0 0 0 00
ro
care

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Res
pir 2,00 2,05 2,10 2,15 2,17 2,20 2,27 2,30 2,35 2,37 2,40 2,45 26,8
ator 0,00 0,00 0,00 0,00 5,00 0,00 5,00 0,00 0,00 5,00 0,00 0,00 25,0
y 0 0 0 0 0 0 0 0 0 0 0 0 00
and
aller
gy
Gen
er
al
heal 12,0 12,5 12,8 12,9 13,0 13,5 14,0 14,5 15,0 15,5 16,0 16,6 168,
th/ 00,0 00,0 00,0 00,0 00,0 00,0 00,0 00,0 00,0 00,0 00,0 50,0 350,
imm 00 00 00 00 00 00 00 00 00 00 00 00 000
un
ity
2,00 2,05 2,10 2,17 2,20 2,25 2,30 2,37 2,40 2,45 2,50 2,55 27,3
0,00 0,00 0,00 5,00 0,00 0,00 0,00 5,00 0,00 0,00 0,00 0,00 50,0
Ren 0 0 0 0 0 0 0 0 0 0 0 0 00
al
care
3,00 3,05 3,10 3,15 3,17 3,25 3,30 3,35 3,40 3,45 3,47 3,50 39,2
0,00 0,00 0,00 0,00 5,00 0,00 0,00 0,00 0,00 0,00 5,00 0,00 00,0
Join 0 0 0 0 0 0 0 0 0 0 0 0 00
t
care
Mas 3,00 3,05 3,10 3,20 3,27 3,30 3,35 3,37 3,40 3,42 3,47 3,50 39,4
sa 0,00 0,00 0,00 0,00 5,00 0,00 0,00 5,00 0,00 5,00 5,00 0,00 50,0

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ge 0 0 0 0 0 0 0 0 0 0 0 0 00
oils
Tot
al 35,4 36,5 37,3 37,9 38,4 39,3 40,5 41,7 42,7 43,6 44,6 45,7 484,
Sale 00,0 50,0 50,0 50,0 50,0 75,0 75,0 50,0 25,0 75,0 50,0 25,0 175,
s 00 00 00 00 00 00 00 00 00 00 00 00 000
Purchase Budget.
Purchase budget provides a representation of what the business plans to buy for the inventory and
how much inventory plans to grow or hold over a given period of time. A purchase budget helps
to determine how much fund and material or goods are needed to reach desired goals. Purchase
budget is used for organizations that have inventory as the value of inventory plays a major role in
a complete purchase budget. (Jane, 2017).
Purchase Budget
Purc
ha
se Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Diab
et 3,50 3,55 3,60 3,65 3,40 3,45 3,50 3,56 3,60 3,64 3,68 3,70 42,8
es/he 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 30,0
ar 0 0 0 0 0 0 0 0 0 0 0 0 00
t
healt
h
Hair
1,00 1,05 1,07 1,10 1,17 1,22 1,26 12,2
care 800, 850, 890, 920, 950,

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000 000 000 000 000 0,00 0,00 5,00 0,00 5,00 0,00 0,00 90,0
0 0 0 0 0 0 0 00
Chil 1,02 1,05 1,10 11,7 1,20 1,24 1,29 1,35 1,40 24,2
d/ 900, 930, 980, 0,00 0,00 0,00 50,0 0,00 0,00 0,00 0,00 0,00 10,0
kids 000 000 000 0 0 0 00 0 0 0 0 0 00
healt
h
2,10 2,14 2,18 2,23 2,27 2,30 2,33 2,38 2,41 2,44 2,49 2,55 27,8
0,00 0,00 0,00 0,00 5,00 0,00 0,00 0,00 0,00 5,00 5,00 0,00 35,0
Wo 0 0 0 0 0 0 0 0 0 0 0 0 00
me n
care
1,80 1,89 1,95 2,04 2,09 2,15 2,19 2,24 2,27 2,30 2,33 2,37 25,6
0,00 0,00 0,00 0,00 0,00 0,00 5,00 0,00 5,00 0,00 0,00 0,00 30,0
Men' 0 0 0 0 0 0 0 0 0 0 0 0 00
s
care
1,00 1,04 1,08 1,12 1,15 1,19 1,22 1,26 1,30 1,33 1,38 1,42 14,5
0,00 0,00 0,00 0,00 0,00 0,00 0,00 5,00 0,00 5,00 5,00 0,00 05,0
Gast 0 0 0 0 0 0 0 0 0 0 0 0 00
ro
care
Resp
ir 1,35 1,40 1,44 1,49 1,52 1,55 1,58 1,61 1,65 1,67 1,70 1,73 18,7

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atory 0,00 0,00 0,00 0,00 0,00 0,00 5,00 5,00 0,00 5,00 0,00 5,00 10,0
and 0 0 0 0 0 0 0 0 0 0 0 0 00
aller
gy
Gen 8,00 8,10 8,20 8,29 8,38 8,47 8,57 8,66 8,76 8,85 8,94 9,03 102,
er 0,00 0,00 0,00 0,00 0,00 5,00 0,00 5,00 0,00 5,00 5,00 0,00 270,
al 0 0 0 0 0 0 0 0 0 0 0 0 000
healt
h/
imm
un
ity
1,45 1,47 1,50 1,54 1,61 1,67 1,70 1,74 1,79 1,83 1,88 1,92 20,1
0,00 0,00 0,00 0,00 0,00 5,00 0,00 5,00 0,00 0,00 5,00 0,00 15,0
Rena 0 0 0 0 0 0 0 0 0 0 0 0 00
l
care
2,10 2,13 2,21 2,25 2,30 2,39 2,44 2,49 2,53 2,57 2,61 2,65 28,6
0,00 0,00 0,00 0,00 0,00 0,00 5,00 5,00 0,00 5,00 0,00 0,00 85,0
0 0 0 0 0 0 0 0 0 0 0 0 00
Joint
care
Mas
sa 2,20 2,24 2,29 2,34 2,38 2,41 2,46 2,50 2,59 2,64 2,70 2,76 29,5
ge 0,00 5,00 5,00 0,00 5,00 0,00 5,00 0,00 0,00 5,00 0,00 0,00 35,0
oils

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0 0 0 0 0 0 0 0 0 0 0 0 00
Tota
l 25,2 25,7 26,3 26,8 27,1 27,6 38,8 28,7 29,2 29,7 30,3 30,7 346,
Purc 00,0 45,0 25,0 90,0 10,0 90,0 10,0 40,0 45,0 65,0 00,0 95,0 615,
ha 00 00 00 00 00 00 00 00 00 00 00 00 000
se
Expenditure Budget.
An expenditure or Total Cost budget shows how much money a business is expected to spend for
a period of time. It gives a detailed analysis of various types of expenditure. It is usually based on
production budget. Expenditure budget might include raw materials, labor, production overheads,
general overheads and capital expenditure such as new machinery etc. (Pandey, 2010).
Expenditure Budget.
Expe
ndit
ure
Budg Ma Tota
et Jan Feb r Apr May Jun Jul Aug Sep Oct Nov Dec l
Empl
oye 9,45 9,48 9,5 9,56 9,6 9,64 9,6 9,7 9,7 9,7 9,8 115,
es 0, 0,00 20, 0,00 9,590 10, 0,00 90, 20, 50, 80, 10, 600,
benef 000 0 000 0 ,000 000 0 000 000 000 000 000 000
it

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expe
nse
835, 845 860 870 880 885 890 895 10,3

0 840, ,00 850, 855,0 ,00 865, ,00 ,00 ,00 ,00 ,00 70,0
Finan 00 000 0 000 00 0 000 0 0 0 0 0 00
ce
costs
470, 490 520 540 550 560 570 580 6,30

0 480, ,00 500, 510,0 ,00 530, ,00 ,00 ,00 ,00 ,00 0,00
Depre 00 000 0 000 00 0 000 0 0 0 0 0 0
cia
tion
2,33 2,33 2,3 2,33 2,3 2,33 2,3 2,3 2,3 2,3 2,3 27,9
0, 0,00 30, 0,00 2,330 30, 0,00 30, 30, 30, 30, 30, 60,0
000 0 000 0 ,000 000 0 000 000 000 000 000 00
Rent
3,14 3,20 3,3 3,40 3,5 3,65 3,7 3,8 390 4,0 4,1 39,8
Sales 0, 0,00 00, 0,00 3,480 70, 0,00 30, 50, ,00 00, 20, 30,0
and 000 0 000 0 ,000 000 0 000 000 0 000 000 00
Mark
etin g

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3,64 3,68 3,7 3,79 3,9 4,10 4,1 4,2 4,3 4,4 4,5 48,4
0, 0,00 20, 0,00 3,860 80, 0,00 90, 70, 10, 20, 30, 90,0
other 000 0 000 0 ,000 000 0 000 000 000 000 000 00
expen
ses
Total 19,8 20, 20, 21, 21, 18, 21, 22,

Expe 6 20,0 205 20,4 870 21,1 350 600 225 990 265 248,
ndit 5,00 10,0 ,00 30,0 20,62 ,00 15,0 ,00 ,00 ,00 ,00 ,00 550,
ure 0 00 0 00 5,000 0 00 0 0 0 0 0 000

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Cash Flow Budget.
Cash budget is a summary statement of the firm’s expected cash inflows and outflows over a
projected time period. It is the most significant tool to plan for and control cash receipts and
payments. Cash budget helps to determine the future cash needs of the firm, plan for the financing
of these needs and exercise control over the cash and liquidity of the firm. (Pandey, 2010).
Cash Flow Budget

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Master Budget
Master budget combines cost and revenue budgets in one statement. The contents of all of the
individual budgets will be summarized in master budgets or it is a summary of all of the individual
budgets, usually consisting of a budgeted income statement, a budgeted balance sheet and a
budgeted cash flow statement. (Atrill & McLaney, 2006).

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Haritha Pharmaceuticals Balance Sheet as at 31st March 2017
As at 31st
Note
March 2017
Particulars N
Amount in
o.
Rs.
A EQUITY AND LIABILITIES
Shareholder's funds.
1
(a)Share Capital 2 105556700
(b)Reserves and Surplus 3 85943918
(c) Money Received against Share 4 0
Warrants
191500618
2 Non-Current Liabilities
(a) Long term Borrowings 5 469514487
(b)Other Long-Term Liabilities 6 4115000

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(c) Long Term Provisions 7 6841504
480470991
3 Current Liabilities
(a) Short Term Borrowings 8 185702747
(b) Trade Payables 9 25687654
(c) Other Current Liabilities 10 29099836
(d) Short Term Provisions 11 18134269
258624506
TOTAL 930596115
B ASSETS
1 Non-Current Assets
(a) Fixed Assets
(1) Tangible Assets 12 168163864
(2) Intangible Assets 1028300

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(b) Non-Current Investments 13 114658320
(c) Differed Tax Assets (Net) 31 4818326
(d) Long Term Loans and Advances 14 448500401
737169211
2 Current Assets
(a) Inventories 15 66724800
(b) Trade and Receivable 16 63177980
(c) Cash and Cash equivalents 17 19284990
(d) Short-Term Loans and Advances 18 44239134
193426904
TOTAL 930596115

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Haritha Pharmaceuticals Statement of Profit and Loss for the year ended 31st
March 2018
S Note For the period ended 31st

Particulars
L No. March 2017
Amount in Rs
1 Revenue from Operations 18 484175000
2 Other Income 19 2446000
486621000
Less: Excise Duty and VAT 43095445
3 Total Revenue 443525555
4 Expenses
(a) Cost of Material consumed 20 346615000
(b) Purchases of Medicines (Stock In Trade) 21 3343718
(c) Changes in Inventories of FG, WP & Stock in
22 -3838376
Trade
(d) Employee benefit expense 23 11560000
(e) Finance costs 24 10370000
(f) Depreciation 25 6300000
(g) Other expenses 26 48490000
Total Expenses 422840342
5 Profit Before Extraordinary items and Tax (3-4) 20685213

6 Add: Extraordinary Items 798126
7 Profit Before Tax (5-6) 21483339
8 Tax expense:
(a) Current tax 7733166

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(b) Deferred tax 9285862

(c) (Less): MAT credit (where applicable) -6733166
10285862
9 Profit for the period (7_+8) 11197477
1
Earnings Per Equity Share
0
Basic & diluted (Nominal value of shares Rs.10/-
2.15
each)
Significant Accounting Policies 1

See accompanying notes 1 to 34 forming part of the
financial statements.
Budget is plan that an estimate of income and expenditure for set a particular period that is usually
set for a year. The main advantages of a setting a budget, budgets are based on well-defined plans
which enable the different heads to know what is expected of them, they can understand how much
to spent and earn. The budgeting is an effective way of controlling cost and eliminating wastage
which promotes economy and efficiency in an organization, which can ensure reliability in
planning. The budgeting enables a proper communication within an organization by constructs a
budget require to collect feedback each level it gives a proper communication between the all level
employees in an organization. The budgeting can enable ensure to control cost by identify the weak
point in an organization, here management can able to resolve issues easily.
The budgeting enables the co-ordinations and delegation of authority in an organization, it

encourages delegation of authority, which fixes the limits within which delegated authority can be
used, subordinates and executives can exercise initiative and judgment within the budgetary limits.
which promotes co-ordination between different departments or divisions of the organization.
Which facilitates centralized regulation of diversified operations. The budget committee acts as a
coordinator of production, sales and other departments. Budgets act as a strong incentive to

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employees by fixing targets of performance within an organization, these are the main benefits
having budgeting in an organization.
Anyway, without an effective budgeting an organization could not able deliver a definite planning,
without a proper planning the organization could not able to achieve a successful growth and
sustainability in future. Without a budget will impact the efficiency will fall, difficult to
communication between top and lower level employees, which leads unawareness of organizations
targets, goals, weak points, and difficult to manage as well as it leads to demotivation employee
due to unclearness. When analyzing Haritha Pharmaceuticals’ cash budget there will be a shortage
of funds between May to August months, during this period Haritha Pharmaceuticals need to
overcome such a shortage of fund. So, here Haritha Pharmaceuticals can take loan to overcome
the shortage of funds during the period of May to August months.
However, the budgeting is an essential factor to an organization to achieve the desired position in
future. An effective budgeting enables improve productivity, performance, efficiency, and the
exact guidelines to achieve the desired position in future and ensure future sustainability to cope
with rapid business environment and technical changes across world. Without an effective
budgeting the organization could not able to achieve their desired future position and could not
sustain to cope with rapid business and technical environment changes. So, the budgeting has an
important role in an organization, the budgeting is a must for effective functioning or operations
in an organization with the efficient manner. The budgeting has a significant role to achieve the
desired future positions and goals in an organization, and which enable a exact guidelines to
employees to achieve the desired organizational goals, growth, and future sustainability with a
competitive advantage to cope with the nowadays rapid business environment changes.

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Assignment 4.
Ratio Analysis.
Ratio analysis is a tool for analyzing financial statement of a firm. It is used to evaluate relationship
among financial statement items within a firm. It is an important and useful technique of financial
analysis. Ratio analysis is one of the best tools for analyzing financial statement of an organization.
There are mainly five types of or grouped categories of ratios are there, which are, Short term
solvency, or liquidity ratios., Long term solvency, or financial leverage ratios., Asset management,
or turnover ratios., Profitability ratios, and Market value ratios. (Ross, et al, 2016).
The Importance of Ratio Analysis.
Ratio analysis is an important to identify the organizational performance through comparing with
competitors or other organization, basically comparison done through on the basis of financial data
or results, but sometimes it would be hard to compare different organization’s performance or even
same organization’s performance over the years. Here, one method used by business to compare
their performance is Ration Analysis. Ratio Analysis enables easy comparison in the form
profitability, liquidity, and efficiency. Ratio Analysis concerns compare current performance with
previous performance, similar competitors, and other firms. Finally, Ratio Analysis help to
monitor and identify issues that can be highlighted and resolved. (Bbccouk, 2014).
Liquidity ratio.
Liquidity ratio is the ratio that illustrates the solvency of a business whether it is in a position to
repay its debts. Liquidity ratios provide information about a firm’s liquidity, these ratios are also
called as short-term solvency ratios. The primary concern is the firm’s ability to pay it’s over the
short term run without undue stress, these ratios are mainly focus on current assets and current
liabilities. There are two ratios that are widely using for monitor liquid assets, which are current
ratio and acid test ratio or quick ratio. (Ross, et al, 2016).

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1. Current ratio.
Current ratio is one of several liquidity ratios, it measures a firm’s ability to pay off its short-term
liabilities with its current assets. It is used to measure short term solvency of a firm; it is mainly
focus on current assets and current liabilities. Current ratio is the sum of total current assets divided
by total current liabilities. It is also known as working capital ratio. It is closely related to the quick
ratio, which is also called acid test ratio. (Gallo, 2015).
Current ratio = Current assets\Current liabilities
In 2016
Current ratio = 139908085\181124076
=0.77:2
In 2017
Current ratio = 181605057\224634507
=0.80:2
2. Quick ratio.
Acid test ratio or Quick ratio: Acid test ratio or quick ratio refers to measure short term solvency
of a business. Quick ratio is a more serve test of liquidity. (Ross, et al, 2016).
Quick ratio = Current Assets-Inventory/Current liabilities
181605057-60724178
Quick ratio =
224624507
= 0.538:1
3. Debt ratio.

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Debt ratio is used to analyze the long term solvency of firm. Computing debt ratio is total debt
divided by total assets. Total debt includes short term and long term borrowings from financial
institutions, debenture or bonds, deferred payment arrangements for buying capital equipment,
bank borrowings, public deposits and any other interest bearing loan. (Pandey, 2010).
Total debt(or liabilities)

Debt ratio =
Total assets
649132234
Debt ratio =
894196116
= 0.725
4. Debt-to-net worth ratio.
Debt-to-net-worth ratio a simple ratio analysis that evaluates the financial health of a firm by
comparing firm’s total debt with firm’s total net worth. (Ehrhardt and Brigham, 2015).
Total debt
Debt ratio =
Tangible net worth
649132234
Debt ratio =
179500618
= 0.361
5. Times interest earned ratio.

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Times interest earned ratio is used to measure of long-term solvency of firm. Times interest
earned ratio measures how well a company has its interest obligation covered, this ratio is often
called the interest coverage ratio. (Ross, et al, 2016).
Earnings before Interest and taxes (or EBIT)
Times interest earned Ratio
Total interest Expense
Times interest earned ratio = 22994850/10028915
=2.29: 2.5
6. Receivables turnover ratio.
Receivable turnover ratio measures a firm’s ability to collect debts or outstanding bills from
debtors in a timely manner, it helps to investors analyze the efficiency of a firm’s collection and
credit policies. A high value ratio indicates an efficient and effective credit policy, and a low
value ratio indicates a debt collection problem. (Lan, 2012).
Credit sales
Receivable turnover ratio =
Accounts receivable
Receivable turnover ratio =198082427.5/62177207
= 3.18
7. Payables turnover Ratio
Payable turnover is a ratio that measures the speed with which a company pays its suppliers. If the
turnover ratio declines from one period to the next, this indicates that the company is paying its
suppliers more slowly, and may be an indicator of worsening financial condition.

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Purchases
Payables turnover Ratio
Accounts Payable
8. Average Payable period ratio
Average payment period means the average period taken by the company in making payments to
its creditors. It is computed by dividing the number of working days in a year by creditor’s turnover
ratio. The formulas for its computation are given below:
Days in accounting period

Average payable period ratio
Payable turnover ratio
9. Total Asset turnover Ratio
The asset turnover ratio is an efficiency ratio that measures a company’s ability to generate sales
from its assets by comparing net sales with average total assets. In other words, this ratio shows
how efficiently a company can use its assets to generate sales.
Net Sales
Total Asset turnover Ratio
Net Total assets
10. Net Profit on sales Ratio
Net profit ratio expresses the relationship between net profit after taxes and sales. This ratio is a
measure of the overall profitability net profit is arrived at after taking into accounts both the

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operating and non-operating items of incomes and expenses. The ratio indicates what portion of
the net sales is left for the owners after all expenses have been met.
Net Profit
Net Profit on sales Ratio
Net Sales
11. Net Profit to Asset Ratio
The return on assets ratio, often called the return on total assets, is a profitability ratio that measures
the net income produced by total assets during a period by comparing net income to the average
total assets. In other words, the return on assets ratio or ROA measures how efficiently a company
can manage its assets to produce profits during a period.
Net Profit
Net Profit to Asset Ratio
Total Assets
12. Net Profit to Equity Ratio
The return on equity ratio is a profitability ratio that measures the ability of a firm to generate
profits from its shareholders investments in the company. In other words, the return on equity ratio
shows how much profit each Rupees of common stockholders’ equity generates.
Net Profit
Net Profit to Equity Ratio
Owner’s equity (or net worth)

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After analyzing ratio analysis of Haritha Pharmaceuticals the current ratio is 0.77:2 in the
year of 2016, and it was shown a slightly improved in the year of 2017, when the current
ratio is 0.80:2. As a conventional rule, a current ratio of 2 to 1or more is considered
satisfactory. The Haritha Pharmaceuticals has a current ratio of 0.80:2; therefore, it may
be interpreted to be insufficiently liquid. If the current ratio become half of the current
liabilities the organization able to meet its obligation. But in the case of Haritha
Pharmaceuticals the current ratio is less than half of current liabilities, so the current ratio
shown a HARITHA PHARMACEUTICALS could not able to meet its obligations. In the
case of quick ratio analysis in HARITHA PHARMACEUTICALS, the quick ratio shown
a result of 0.538:1, the standard quick ratio is 1:1 as a satisfactory level therefore the
Haritha Pharmaceuticals could not able to meet the short-term solvency or its obligations
due to low result of quick ratio.
On the case of Debt ratio, a lower ratio is more favorable than higher ratio. A lower debt
ratio usually implies a more stable business with the potential of longevity because a
company with lower ratio also has lower overall debt. Each industry has its own
benchmarks for debt, but 0.5 is reasonable ratio. Here considering HARITHA
PHARMACEUTICALS’s debt ratio that is 0.725, it shows HARITHA
PHARMACEUTICALS’s liabilities are 72.5 per cent, so HARITHA
PHARMACEUTICALS need to sell its 72.5 per cent assets in order to pay of HARITHA
PHARMACEUTICALS’s liabilities. So the current debt ratio is not a healthy stage
HARITHA PHARMACEUTICALS need to improve their debt ratio to 0.50 or below in
order to sustain in future.
On the case of Debt to net worth ratio, the standard ratio is 1:1 that means the organization
has the capability to pay off its debts using all of its tangible net worth. A lower total debt
to total tangible net worth ratio indicates that the business is mostly being financed by its
investors or retained earnings, a good ratio may be less than 0.4. This indicates that the
firm has a strong financial standing, which makes it easier to raise money in the future.
Therefore, the lower this ratio is, the better. On the other hand, a higher value suggests that
a substantial part of the business is being financed by lenders. It makes getting future loans
more difficult as higher leverage means higher risk for the lenders. While analyzing

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HARITHA PHARMACEUTICALS’s Debt to net worth ratio, that shows 0.361 it is less
than 0.40. So, it indicates HARITHA PHARMACEUTICALS’s business is mostly being
financed by inventors or retained earnings. This indicates that the HARITHA
PHARMACEUTICALS has a strong financial standing, which makes it easier to raise
money in the future.
In the case of Time interest earned ratio a higher value is favorable as it shows that the
company has sufficient earnings to pay off interest expense and hence its debt obligations.
Lower values highlight that the company may not be in a position to meet its debt
obligations. When analyzing HARITHA PHARMACEUTICALS’s Times interest earned
ratio is 2.29:2.5, it shows a slightly lower than the standard ratio, which indicates credit
risk in future to HARITHA PHARMACEUTICALS. So, HARITHA
PHARMACEUTICALS need to improve to 2.5 or above to sustain in future.
In the case of Receivable turnover ratio, a higher value ratio indicates more strong ability
to collect its receivables, it will be able to use that cash to pay bills and other obligations
sooner, it is also indication of quality sales and receivables. When analyzing HARITHA
PHARMACEUTICALS’s Receivable turnover ratio that is 3.18, which means HARITHA
PHARMACEUTICALS has ability to collect its receivables more three times over its
credit sales. Which shows a healthy figure and it will be unable to pay bills and other
obligations in easily in HARITHA PHARMACEUTICALS. On the case of Payables
turnover ratio, a higher ratio shows suppliers and creditors that the company pays its bills
frequently and regularly. It also implies that new vendors will get paid back quickly. A
high turnover ratio can be used to negotiate favorable credit terms in the future. When
analyzing HARITHA PHARMACEUTICALS’s Payables turnover ratio that is 4.849,
which shows suppliers and creditors that the HARITHA PHARMACEUTICALS pays its
bills frequently and regularly. It also implies that new vendors will get paid back quickly.
So, it is a favorable figure to HARITHA PHARMACEUTICALS.
In the case of Average collection period ratio, to determine the average collection period
results are favorable or not simply compare organization’s clients credit terms and
organization’s average collection period. If it is higher value that means organization’s
may struggle to pay their bills and other obligations, and if it is lower value is favorable to

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organization to meet to pay their bills and meet other obligations. When analyzing
HARITHA PHARMACEUTICALS’s average collection period is 115 days it is slightly
higher value so HARITHA PHARMACEUTICALS need to improve their average
collection period ratio to 30 days or below to sustain and successful growth. In the case of
Average payable turnover ratio, here in HARITHA PHARMACEUTICALS’s ratio is
75.27 to a certain extent it is a favorable figure, it may not too high and too low. In the
case of Total asset turnover ratio, the ratio measures the ability of an organization to
efficiently produce sales, and is typically used by third parties to evaluate the operations
of a business. Ideally, a company with a high total asset turnover ratio can operate with
fewer assets than a less efficient competitor, and so requires less debt and equity to operate.
The result should be a comparatively greater return to its investors. When consider
HARITHA PHARMACEUTICALS’s Total asset turnover ratio that is 0.443. It indicates
a lower level figure so HARITHA PHARMACEUTICALS need to improve to operate
with fewer assets than a less efficient competitor, and so requires less debt and equity to
operate. In the case of Net profit sales ratio in HARITHA PHARMACEUTICALS that is
0.057, which shows favorable position to a certain extent, but HARITHA
PHARMACEUTICALS need to improve it will help to increase profit margin with keeps
expenses as constant. In the case of Net profit to assets ratio in HARITHA
PHARMACEUTICALS, that is 0.0254 and Net profit to equity ratio is 0.215 those are
indicates returns on assets and equity of HARITHA PHARMACEUTICALS, so here is
analyzing HARITHA PHARMACEUTICALS has favorable position in both aspects.
However, when analyzing Haritha Pharmaceuticals’ ratios to a certain extent those are
favorable, but in some areas Haritha Pharmaceuticals need to improve in order to sustain
in future as well as a successful growth to Haritha Pharmaceuticals. So, as per my
conclusion overall Haritha Pharmaceuticals’ ratio indicates a favorable status, which may
improve in coming years, because HARITHA PHARMACEUTICALS’s industry is one
of the growing industry across country as well as globally.

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Assignment 5
Net Present Value.
Net present value (NPV) is a value that shows difference between the present values of
cash inflows and outflows. Net Present Value is the present value of the cash flows at the
required rate of return of organization’s project compared to organization’s initial
investment. In practical terms, it’s a method of calculating organization’s return on
investment, or ROI, for a project or expenditure. By looking at all of the money
organization expect to make from the investment and translating those returns into today’s
dollars, organization can decide whether the project is worthwhile. (Gallo, 2014).
Internal Rate of Return
The IRR is the rate at which the project breaks even. The internal rate of return is a metric
used in the capital budgeting to estimate the profitability of the potential investments. The
internal rate of return is a discount rate that makes the net present value (NPV) of all cash
flows from a particular project equal to zero. It’s commonly used by financial analysts in
conjunction with net present value, or NPV. That’s because the two methods are similar
but use different variables. With NPV you assume a particular discount rate for your
company, then calculate the present value of the investment. But with IRR you calculate
the actual return provided by the project’s cash flows, then compare that rate of return with
your company’s hurdle rate (how much it mandates that investments return). If the IRR is
higher, it’s a worthwhile investment. (Gallo, 2016).
Investment appraisals.
The capital investment appraisal is known as the capital budgeting and it is primarily a planning
process and its facilities the determination of the concerned firm’s investments in the long term
and the short term. The components of the firm that come under this kind of the capital investment
appraisal it includes property, equipment, research and development projects, advertising
campaigns, new plants, new machinery etc. The capital investment appraisal is the budgeting of
major capital and investment to the company expenditure. (Atrill, and McLaney, 2009).

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The Ayurveda health industry is one of the old and ancient path to wellness, Ayurveda industry is
getting popular day by day. The reason is that it is regarded as 100 per cent safe, with littlie side
effects, and intelligent of medicine. The Ayurveda industry become truly world class business with
introduction of standard operating procedure and set up a stringent quality standard for Ayurveda
medicine, it may open multibillion-dollar global business opportunity. Ayurveda Business is a
promising industry; Ayurveda, which has been for thousands of years serving humanity, has seen
the times changing and the values remaining unchanged. Ayurveda industry is a rich place for
investments and amazing returns, it may offer 25-30 per cent and above returns, generally the
breakeven period may less than 18 months, which is making the Ayurveda business more attracts.
Ayurveda industry has grown very well over the two decades, which is one of the fast growing
industry across world. Ayurveda industry did not get affected by the recession of 2008, but the
same time it has showed a steady growth in the industry, which is also one of the attraction of the
industry.
As per the analysis of above mentioned importance, growth, and opportunities of Ayurveda
industry, which shows the current and future growth and opportunities are unlimited in globally,
and nationally, and growth of Ayurveda products market does not depend on one player, it is also
one of the attractions of Ayurveda industry. In the case of Haritha Pharmaceuticals those factors
ensure a number of successful investment opportunities within the industry in Haritha
Pharmaceuticals. In the case of Haritha Pharmaceuticals the first investment is one area of the
Ayurveda industry which can impact the future is the Research and Development sector as it is a
very promising area of investment and there is a very good need of uniquely designed tools and
equipment or devices., and the second most suitable investment is open a new Ayurveda Therapy
Clinic. With the conventional medicines failing to treat the nowadays medical conditions, people
are turning to the alternative medicine systems and the well-known alternative system of the
medicine is Ayurveda. R and D activities are happening at the all-time high in the industry which
promises to bring out effective medicines in the near future. However, the Ayurveda industry is
one of the fast growing industry, it is a one of the best investment place, and which ensure high
returns.
Project 1, Establish R&D.

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In the case of Haritha Pharmaceuticals the first investment project is, develop a new research and
development center for develop effective and new Ayurveda medicines in the near future. When
analyzing the importance of research and development center in Haritha Pharmaceuticals it helps
to develop number of opportunities, and sustainable growth in Haritha Pharmaceuticals with the
conventional medicines failing to treat the nowadays medical conditions, people are turning to the
alternative medicine systems and the well-known alternative system of the medicine is Ayurveda,
the current and future growth of Ayurveda industry, and the number investment and growth
opportunities of Ayurveda industry in India, and globally shows the importance of R and D center,
and the requirements of investments in R and D in Haritha Pharmaceuticals
In the future Ayurveda industry’s growth will rise more than twice rather than present market, the
R and D center, and departments can able to provide, and bring out effective and innovative
medicines in Haritha Pharmaceuticals the establishment of R&D, which will enable research new
products, new services, and improve existing product and service quality in Haritha
Pharmaceuticals, the R and D center, and departments has an essential role in Haritha
Pharmaceuticals’ future growth, in future more people will turn to use Ayurveda medicine rather
than other medicines like, Allopathy, and Homeopathy etc., that is why the R and D department
will make an effective and innovative medicines, which will attract to more customers in future, it
will lead to gain a sustainable competitive advantage, and successful growth in Haritha
Pharmaceuticals an efficient R and D department in Haritha Pharmaceuticals which ensure high
productivity, product depreciations, improve quality, minimize the costs, and gain more profit and
margin in Haritha Pharmaceuticals the R&D will help to develop unique selling point by develop
unique product and services, and engage in R&D will help to improve strengthen Haritha
Pharmaceuticals’ brand and reputation of Haritha Pharmaceuticals some time R&D will help to
get patent in Haritha Pharmaceuticals
Usually the research and development process are expensive, some time the organization does not
get the much expected results from R&D, when the investments will become liability, and it will
lead to huge loss in Haritha Pharmaceuticals. The R&D require skilled and talented research
employees who are fit R&D, the lack of availability of skilled and talented is another threat of
establish or develop a new R&D in Haritha Pharmaceuticals.
List of resource requirements, and cost of the project.

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SL, No. Resources Approximate cost

1 New Building. 25 lakhs.
2 Machineries and Equipment. 1 crore.
3 Skilled labors. 12 lakhs for a year.
4 Other employees. 2 lakhs for a year.
5 Other infrastructures. 10 lakhs.
6 Other expenses. 1 lakhs.
Total. 1.5 crore.
Source of finance.
In the case of establishment of this new research and development, finance is most important
factor, the establishment of new R&D in Haritha Pharmaceuticals require approximate 1.5 crore
rupees. Currently Haritha Pharmaceuticals runs with sufficient growth, so it has a well financial
ability to meet the require finance to implement the new research and development in Haritha
Pharmaceuticals and investors are well fit to meet required finance in Haritha Pharmaceuticals’
new R and D development. The required 1.5 crore will collect from both investors and profit,
which are 1 crore collect from investors, and the rest of the 50 lakhs will find from profit of the
Payback period.
The payback period (PP) is the length of time it takes for an initial investment to be repaid out of
the net cash inflows from a project. Since it takes time into account, the payback period method
seems to go some way towards overcoming the timing problem of ARR or at first glance it does.
Pay back period rule for making investment decision is simple (Atrill, and McLaney, 2009).
Formula

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The formula to calculate payback period of a project depends on whether the cash flow per period
from the project is even or not even. In case they are even, the formula to calculate payback period
is following. (Atrill, and McLaney, 2009).
Initial investment
Payback Period =
Annual cash flow
Year Cash Inflow
1 1756000
2 1945000
3 2137000
4 2346000
5 2605000
6 2894000
7 3233000
Total 16916000
The project is expected to generate 16916000 per year for seven years.
16916000
= .
7
= 2416571. 428
15000000
=

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2416571.428
= 6. 2
In the case of establishment of research and development in HARITHA

PHARMACEUTICALS, which can breakdown there spending cost after six years and two
months. It is very long to achieve the spending cost, but it is long term asset for Haritha
Pharmaceuticals
Average rate of return.
The average rate of return is the method that measures the net return each year as a percentage of
the capital cost of the investment. The accounting rate of return (ARR) method takes the average
accounting operating profit that the investment will generate and expresses it as a percentage of
the average investment made over the life of the project. (Atrill, and McLaney, 2009).
Net profit per annum

Average rate of return (%) = ∗ 100
Capital outlay
Here in the case of Haritha Pharmaceuticals we have to calculate the Average rate of return, here
the capital cost is 15000000.
Capital cost= 15000000
Year Cash Inflow CF
1 1756000 1756000
2 1945000 189000
3 2137000 192000
4 2346000 209000

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5 2605000 259000
6 2894000 289000
7 3233000 339000
Total 16916000 3233000

The total net cash flow= 3233000.
Total net profit= (Capital Cost-Net cash flow).
= 15000000-3233000.
= 11767000.
Net profit per annum= Profit/7
=11767000/7
=1681000
Average rate of return (%) = .
=11.27%.
Project 2, Ayurveda Clinic.
In the case of Haritha Pharmaceuticals the second investment project is open a new Ayurveda
clinic in Cochin. With the conventional medicines failing to treat the nowadays medical conditions,
people are turning to the alternative medicine systems and the well-known alternative system of
the medicine is Ayurveda. Especially youngsters, and educated people are turning to Ayurveda
medicines and related treatment. The reasons are that it is regarded as 100 per cent safe, with little
side effects, and intelligent of medicines. Nowadays majority of the Allopathy hospital and related
business are exploit people, the Allopathy doctors are working for multinational drugs company,
they also part of exploit people, while in the case of the Ayurveda industry has successful to attracts
customers, and people are also most trusted the Ayurveda medicines and related treatments in
across world. So, Haritha Pharmaceuticals has a well opportunity to establish a new Ayurveda
clinic in Cochin.

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Cochin is the largest city in Kerala, and one of the major tourist attractions in India, many tourists
are attracted both domestic and foreign with historic and well-known culture of Cochin. Cochin is
also one of the largest business hubs in India, it provides wide range of employment opportunities
for people, these reasons why many people attracts to Cochin in day by day, with various purpose
which may be getting a better or job, build a well business firm, and getting better life style etc.
Whatever, Cochin attracts to more people in day by day both domestic and foreign, which may
favorable for business. So, the Haritha Pharmaceuticals’ Ayurveda clinic investment has a
opportunity to success in Cochin.
The new Ayurveda clinic attracts more people in cochin due to lack of availability of wellbeing
Ayurveda clinic, medicines, and related treatments in cochin, currently in cochin there is no
Ayurveda clinic with efficient and use of modern technologies, it opens vast opportunity to Haritha
Pharmaceuticals to invest in cochin in their business. The new project that is new Ayurveda clinic
may attract many people, especially foreigners, it will help to a successful growth in Haritha
Pharmaceuticals. While opening new clinic at new market will help to improve branding and brand
image. Which will help to increase market share of all Haritha Pharmaceuticals’ products and
services across world. The new Ayurveda clinic project will help to gain more revenue, and profit
from Haritha Pharmaceuticals’ products and services.
However, the establishment of new project that is open new Ayurveda clinic in Cochin generally
require huge investment especially as metropolitan city, the infrastructure cost will high rather
than small city, but in a business, which require high population density to successful growth, so
it is necessary to Haritha Pharmaceuticals to establish new project. And another major problem is
shortage of skilled labors, especially Ayurveda doctors. Even though nowadays more youngsters
are attracting, and interested to practice in Ayurveda industry.
List of resource requirements, and cost of the project.
SL, No. Resources Approximate cost

1 New Building. 1 crore.
2 Machineries and Equipment. 80 lakhs.
3 Skilled labors. 23 lakhs for a year.

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4 Other employees. 4 lakhs for a year.

5 Other infrastructures. 18 lakhs.
6 Other expenses. 5 lakhs.
Total. 2.30 crore.
Source of finance.
In the case of establishment of this new Ayurveda clinic, here require huge finance investment, so
finance is most important factor the establishment of new Ayurveda clinic. Here in Haritha
Pharmaceuticals require approximate 2.30 crore rupees. Currently Haritha Pharmaceuticals runs
with sufficient growth, so it has a well financial ability to meet the require finance to implement
the new Ayurveda clinic in Haritha Pharmaceuticals and investors are well fit to meet required
finance in Haritha Pharmaceuticals’ new Ayurveda clinic establishment. The required 2.30 crore
will collect from both investors and profit, which are 1.5 crore collect from investors, and the rest
of the 80 lakhs will find from profit of the Haritha Pharmaceuticals
Payback Period
Payback Period = Initial investment/annual cashflow
Cash
Year
Inflow
1 2890000
2 3100000
3 3330000
4 3570000
5 3825000
6 4090000
7 4478000
Total 25283000

Mohamed Najeem
The project is expected to generate 25283000 rupees per year for seven years.
25283000
=
7
= 3611857.142
23000000
=
3611857.42
= 6.7
In the case of establishment of new Ayurveda clinic in HARITHA PHARMACEUTICALS,

which can breakdown there spending cost after six years and seven months. It is very long to
achieve the spending cost, but it is long term asset for Haritha Pharmaceuticals
Net profit per annum

Average rate of return (%) = ∗ 100
Capital outlay
Here in the case of Haritha Pharmaceuticals we have to calculate the Average rate of return, here
the capital cost is 23000000.
Capita Cost= 23000000
Year Cash Flow CF
1 2890000 2890000
2 3100000 210000
3 3330000 230000

Mohamed Najeem
4 3570000 240000
5 3825000 255000
6 4090000 265000
7 4478000 388000
The total net cash flow= 25283000.
Total net profit= (Capital Cost-Net cash flow).
= 23000000-4478000.
= 18522000.
Net profit per annum= Profit/7
=18522000/7
=2646000
Average rate of return (%) = 2646000/23000000
=11.50%.
As per the analysis of the above mentioned both future investment plans in Haritha
Pharmaceuticals the both investments will provide high profit, and successful growth, which are
the first one is develop a new research and development center, and the second one is open a new
Ayurveda clinic in Cochin. The both investments ensure high rate of investments returns and high
rate of profit margins without any doubts. In the case of fist investment plan, which is develop a
new research and development center, which will cost approximately 1.5 crore, and the second
one, which is open a new Ayurveda clinic in Cochin, it will cost approximately 2.30 crore. In the
case of first project the payback period will take 6 years and two months, the average rate of return
is 11.27 per cent, and in the case of second project the payback period will take 6 years and seven
months, the average rate of return is 11.50%.

Mohamed Najeem
After the analysis of both future investments in the case of payback period the first project slighter
faster than the second project, which are 6 years and two months, and 6 years and seven months
respectively. In the case of average rate of return the second project is a littlie bit more than the
first project, those are 11.27 per cent, and 11.5o per cent respectively. But here I’m suggest the
first project in order to the analysis of the market environment, market trends, and future
sustainability. The first project is, develop a new research and development center, which will
enable research and find new Ayurveda medicines, services, and related treatment methods in
Haritha Pharmaceuticals the R&D departments will also help to enable improve the productivity,
it will bring product differentiations, improve existing resources skill, develop a unique selling
point, it will help to gain more income and profit, develop and improve the Haritha
Pharmaceuticals’ brand and brand image, reputation, sustainable competitive advantage, and
growth by using various research and development methods. The investments cost of the project
develop a new research and development center is comparatively lower than the second project,
and the payback period also lower than the second period. The average rate of return also healthy
figure in the first project. These reasons are why I’m suggest the first project, which is develop a
new research and development center in Haritha Pharmaceuticals
Generally, the Ayurveda industry has been growing industry for the last few decades, nowadays
the scope of Ayurveda medicines and related activities has increased a lot, which continuous a
tremendous successful growth within industry across India and globally. These reasons why R&D
become an essential role in Ayurveda industry in order to achieve a sustainable growth, develop
a competitive strategy and competitive advantage, and gain more profit margins. R&D has vital
role to develop overall organization growth, which enables improve customer value, productivity,
and get patents for medicines or method or services etc.
However, R&D has a vital role to develop a successful organization growth in Haritha
Pharmaceuticals so R&D the best investment area in Haritha Pharmaceuticals in order to develop
a sustainable competitive strategy in their business, which will ensure a healthy per cent returns
within short period.

Mohamed Najeem
Conclusion.
Financial Management is a vital function of organization; it is an essential to smooth operations

in an organization. Nowadays, every organization has been facing challenges from the current red
ocean strategic market, here the importance of finance management has been carrying an
important role or functions to compete in the current red ocean strategic market, and may help to
a successful growth and development. In this assignment I analyzed and identified the importance
Managing Financial Principles and Techniques in Haritha Pharmaceuticals. When I go through
this assignment, I can identify about various types of costs reduction techniques, various financial
planning that includes various types of budgeting, risk and solutions get an effective and efficient
finance management and related activities into futuristic discussed and their relevance in Haritha
Pharmaceuticals as per the future investment plan I chose develop or establish a complete a new
ultra-modern R&D in Haritha Pharmaceuticals in order to achieve organization’s growth and
success. The R&D may help to gain a sustainable competitive advantage and ensure the
sustainability in future. However, the Managing Financial Principles and Techniques can help to
ease competitions and gain unbreakable economies of scale, and competitive edge among the
competitors by assure finance management run by creatively and innovatively.

Mohamed Najeem
References.
Book references.
1. A. Ross, S., W Westerfield, R., Jaffe, J., D Jordan, B., and Kakani, R.K. (2016). Corporate
Finance. 11th Edn. Chennai: McGraw Hill Education Private Limited.
2. Atrill, P., and McLaney, E. (2006). Accounting and Finance. 5th Edn. Essex: Pearson
Education Limited.
3. Atrill, P., and McLaney, E. (2009) Management Accounting for Decision Makers. 6th Edn.
Essex: Pearson Education Limited.
4. Ehrhardt, M.C., and Brigham, E. (2015) Financial Management Theory and Practice. 14th
Edn. Delhi: Cengage Learning India Pvt Ltd.
5. Fraser, L. M., and Ormiston, A. (2015) Understanding Financial Statements. 10th Edn.
Noida: Pearson India India Education Service Pvt Ltd.
6. Horngren, T. C., Datar M.S., and Madhav, R. (2012) Cost Accounting. 14th Edn. New
Jersey: Pearson Education Inc.
7. Janakiraman, B., and Gopal, R.K. (2006) Total Quality Management,1st Edn. Delhi: PHI
Learning Private Limited.
8. Johnson, G., Whittington, R., Scholes, K., Angwin, D., and Regner, P. (2016). Exploring
Strategy. 10th Edn. India: Pearson India Education Service Pvt Ltd.
9. Lucey, T. (1996). Management accounting. 4th Edn. London: Contimium Publisher.
10. Lucey, T. (2002). Costing. 6th Edn. London: Thomson Learning.
11. Lynch, R. (2000). Corporate Strategy. 4th Edn. Delhi: Dorling Kindersley.
12. Monden, Y. (2012) TOYOTA Production System. 4th Edn. New York: CRC Press.
13. Pandey, I, M. (2010). Financial Management. 10th Edn. Delhi: Vikas Publishing house Pvt
Ltd.
14. Prokopenko, J. (1987) Productivity Management A Practical Handbook. 2nd Edn. Geneva:
International Labour Office.

Mohamed Najeem
Journal References.
1. Gallo, A. (2015) A Refresher on Net Present Value. Harvard Business Review. November
19th.
2. Gallo, A. (2015) A Refresher on Current Ratio. Harvard Business Review. September 14th.
3. Gallo, A. (2016) A Refresher on Internal Rate of Return. Harvard Business Review. March
17th.
4. Jane, M. (2017) What Is a Purchase Budget? Journal. September 27th.

5. Lan, J. (2012) 16 Financial Ratios for Analyzing a Company’s Strength and Weakness.
American Association of Individual Investors Journal. September.
6. Pandit, A. (2016) Budgets and Budgetary Control. Journal of Business Management &
Social Science Research. (Volume, 5. No, 6). June.
Web references.
1. Bbccom (2018) Inventory Management [online]. Available at:
https://www.bbc.com/education/guides/zskgfcw/revision/1 [Accessed 10 Nov2019].
2. Bbccouk (2014) ‘Business Management: Ratio Analysis’ [online]. Available at:
http://www.bbc.co.uk/bitesize/higher/business_management/finance/ratio_analysi
s/revisi on/1/ [Accessed 9th Nov 2018].
3. Indiatimescom (2018) Definition of ‘Pricing Strategies’ [online]. Available at:
https://economictimes.indiatimes.com/definition/pricing-strategies [Accessed 9th Nov
2018].
4. Lexiconftcom (2018) Definition of average collection period [online]. Available at:
http://lexicon.ft.com/Term?term=average-collection-period [Accessed 2nd Nov 2018].

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Mohamed Najeem

MANAGING FINANCIAL PRINCIPLES AND TECHNIQUES

• Name of the company: Haritha Pharmaceuticals.

• Head office: Varadarappily.

• Branches: Bangalore (Karnataka), and Kottayam (Kerala).

November 22, 2018 1

• Caption: Wellness, naturally.

• Industry: Ayurvedic Health Care.

• Status: Large scale.

• Main product: General or Immunity medicines.

• Working Time: 9.00 am to 8.00 pm.

Financial Statement of Haritha Pharmaceuticals.

Profit and Loss Account.

Profit and Loss Account of Haritha Pharmaceuticals.

November 22, 2018 2

3 Total Revenue 362516321 326439987 283237123

Total Expenses 330200681 301448290 267493602

Profit Before Extraordinary

10285862 -7731538 -4685742

November 22, 2018 3

Basic & diluted (Nominal value

Significant Accounting Policies 1

See accompanying notes 1 to

Balance Sheet of Haritha Pharmaceuticals.

Haritha Pharmaceuticals Balance Sheet as at 31st March 2017

November 22, 2018 4

(a)Share Capital 2 105556700 105556700 105556700

(b)Reserves and 3 73943918 51206015 33945857

(a) Long term 5 479514487 496301535 499165076

November 22, 2018 5

(a) Short Term 8 165702747 143691459 145137061

(c) Other Current 10 26099836 19776046 17010888

224624507 181124076 187774732

TOTAL 894196117 844634495 836567060

(a) Fixed Assets

(1) Tangible 12 164163864 162627302 166069895

November 22, 2018 6

(d) Long Term

(a) Inventories 15 60724178 54900956 57379010

(b) Trade and 16 62177207 52607728 43614695

TOTAL 894196116 844634496 836567060

November 22, 2018 7

November 22, 2018 8

November 22, 2018 9

Semi Variable Cost.

November 22, 2018 10

Indirect Production Cost.

Indirect Non-Production Costs.

November 22, 2018 11

November 22, 2018 12

Total Cost (100 Units) Cost Per Unit

Direct material 12000 120

Cost control and cost reduction.

Importance of cost control.

November 22, 2018 13

Cost control techniques

November 22, 2018 14

(Johnson, et al, 2016).

November 22, 2018 15