.... Credit-Risk-Management@ Cipla

A STUDY ON
CREDIT RISK MANAGEMENT

WITH REFERENCE TO
CIPLA PHARMACEUTICALS LTD.,
Cipla Pharmaceuticals Limited

Pharmaceutical Products Wholesaler
Address: Prashanthi Nagar, Near Y junction,
Kukatpally, Hyderabad, Telangana 500072
Phone:
040 2307 5811
TABLE OF CONTENTS
CHAPTER
TITLE
INTRODUCTION
REVIEW OF LITERATURE
INDUSTRY PROFILE
& COMPANY PROFILE
RESEARCH METHODOLOGY
NEED OF THE STUDY

OBJECTIVES OF THE STUDY
SCOPE OF THE STUDY
LIMITATIONS OF THE STUDY
RESEARCH DESIGN
DATA ANALYSIS
&
INTERPRETATION
FINDINGS, SUGGESTIONS &

COCLUSION
ANNUXURE & BIBLIOGRAPHY
CHAPTER 1
INTRODUCTION
INTRODUCTION:
Trade credit arises when a firm sells in products or services on Credit and does not receive
cash immediately. It is an essential marketing tool, acting for the moment of goods through
production and distribution stages to customer. A firm grants trade credit to protect is sales
form the competitors and to attract the potential customers to by its products at favorable
terms. Trade creates Accounts receivable or trade debtors that the firm is expected to in the
near futures. The customers from whom receivable or book debits have to be collected in the
future is called trade debtors or simply as debtors and represent the firms clime or asset.
A credit sale has characteristics:

i)
ii)
iii)
It involves an element of risk that should be carefully analyzed. Cash sales are totally
risk less, but not the credit sales as the cash sales as the cash payment are yet too
received.
It is based on economic value to the buyer, the economic value goods services passes
immediately at the time of sales while the seller expects on the equivalent value to be
received later on.
It implies futurity the buyer will make the cash payment for goods services Received
by him in future period. Debtors constituted a substantial portion of customer assets
several firms. For e.g.:- n India, traders Debtors after inventories are the major
components of current assets. They from 1/3rd of current assets in India. Granting
credit and creating Drs amount to the blocking of the firms founds. Thus trade
debtors represent investment as substantial amount are tide-up in trade debtors it
needs careful analysis and proper management
CHAPTER 2
Good risk management at a strategic level helps protect an organizations reputation,
safeguard against financial loss, minimize disruption to services and increase the likelihood
of achieving business objectives successfully.
This also gives assurance on how an organizations business is managed and at the
same time will satisfy any compliance requirements of the organization, where an internal
control mechanism is established. Internal control includes:
The establishment of clear business objectives, standards, processes and

procedures
Clear definition of responsibilities
Measurement of inputs, outputs and performance outcomes in relation to objectives
Performance Management
Financial controls over expenditure and budget.
Identification of risk helps:
The establishment and understanding of a risk management policy and framework

The identification, assessment and judgement of threats to the achievement of clear
business objectives
Effecting the right action to anticipate and mitigate against risk - this includes
establishing effective internal controls to counter key risks
Where necessary, to take reasonable and calculated risks based on well informed
management decisions
Balancing risks by design control to give reasonable assurance to contain risks and
offer value for money
Monitoring risks and reviewing progress
Quantifying risks by assessing any potential costs or benefits arising from possible
impact
Reporting on the above
Identifying risks
Step 1 - Clarity of Objectives
Be clear first of all about the overall objectives of the organisation and understand
how departmental objectives are aligned to the delivery of same. Think about:
What needs to be done

By when
Who is accountable for delivery.
Step 2 - Identify Risks

With your objectives in mind, ask the following questions:
What can go wrong?

How and why can it happen?
What do we depend on for continued success?
What could happen?
Consult with staff and others as appropriate and consider a range of possible scenarios
including the best and worst cases. Be as creative with this process as possible. Consider the
'cause and effect' and scope of the risk and state as clearly as possible to avoid
misunderstanding and misinterpretation. Try to quantify where possible based on what the
effect might be.
Go back to Step 1 above and do the same for external risks by considering the relationship
between the organisation and its wider environment and follow the steps above. Consider
potential external cause of business disruption, issues affecting relationship with partners,
suppliers and any possible changes in government policy and legislation.
Step 3 - Assess Risks
Identify existing controls and their effectiveness

Assess what other controls may be necessary
Determine likelihood / impact - use a bespoke template:
Likelihood of risk occurring is used as a qualitative description of probability or
frequency
Impact is the outcome of the risk impacting and is expressed qualitatively or
quantitatively, i.e. being a loss, injury, disadvantage or gain. NB - there may be a
range of possible outcomes.
Set out a realistic timeframe for managing / mitigating risk.
Step 4 - Address Risks

This involves practical steps to managing and controlling risks. Think about:
What actions or responses are required to control risks

What are the associated cost of these actions
Are the costs proportionate to the risk that it is controlling
What information is needed to make an informed decision to accept, manage, avoid,
transfer or reduce the risks
Is it better to work to eliminate or innovate through taking reasonable calculated risks.
Step 5 - Review, Quantify and report Risks

Although policy may dictate a review and half yearly update should be enacted, risk owners
need to regularly review to ensure there is ongoing relevant management of risks
Advice should be sought where quantification / confirmation is needed, i.e. Finance or Audit
Department
Build into the current reporting structure via the business planning round. Where key risks
need to be considered, ensure it is given priority within the agreed framework.
Risk Defined
Risk: is the actual exposure of something of human value to a hazard and is often regarded as
the product of probability and loss - Source: Smith K 2001; Environmental Hazards
Assessing Risk and Reducing Disaster: London: Routledge: 6 -7.
Risk Assessment: The evaluation of a risk to determine its significance, either quantitatively
or qualitatively.
Risk Management: Determines the levels at which risk acceptability is set and methods of
risk reduction are evaluated and applied.
Resilience: The ability at every relevant level to detect, prevent and, if necessary handle
disruptive challenges. Source: CCS Resilience
Business Continuity: A proactive process which identifies the key functions of an
organization and the likely threats to those functions; from this information plans and
procedures which ensure that key functions can continue, whatever the circumstances, can be
developed.
Credit Policies
The first decision area is credit policies:
The credit policy of a firm provides the frame work to determine
a) Whether or not to extend credit to a customer and
b) How much credit to extend.
Credit Policy Variables:

In establishing an optimum credit policy. The financial manager must consider the important
decisions variables which influence the level of receivables.
The major controllable decision variable include the following
Credit standards
Credit analysis
Credit terms
Collection policies and procedures
Credit Standards
The term credit standards represent the basic criteria for the extension of credit to customers.
The quantitative basic of establishing credit standards or factors such as credit rating, credit
reference, average payment period and certain financial ratios since we are interested in
illustrating the trade off between benefit and cost to the firm as a whole.
We do not consider here these individual components of credit standards. To illustrate
the effect we have divided the overall standards into:
Tight or restrictive and. Liberal or non- restrictive i.e., to say our aim is to show what
happens to the trade-off when standards are relaxed or alternatively, tighten.
The trade off with reference to credit standards covers

The collection cost
The average collection period or investment in receivables

Levels of bad debts losses and
Level of sales. These factors should be considered while deciding whether to relax
credit standards or not.
If standards are relaxed, it means more credit will be extended while. If credit
standards are tightened. Less credit will be extended.
Collection Cost:
The implication of relaxed credit standards are
More credit
A large credit department to service accounts receivables and related matters
Increase in collection cost
The effect of tightening of credit standards will be exactly the opposite. These costs are
likely to be semi-variable.
This is because up to a certain point the existing staff will be able to carry on the
increased workload but beyond that, additional staff would be required these are assumed
to be included in the variable cost per unit and need not be separately identified.
Investment in Receivable or Average Collection Period

The investment in accounts receivable involves a capital cost as funds have to be
arranged by the firm to finance them till customers make payment. Moreover, the higher
the average accounts receivables; the higher is the capital or carrying cost. a change in the
credit standards relaxation or tightening leads to a change in the level of accounts
receivables either.
Through a change in sale,

Through a change in collection.
A relaxation in credit standards as already stated, implies an increase in sales which in

turn would lead to higher average accounts receivables? Further relaxed standards would
mean that credit is extended liberally so, that it is available to even less credit worthy.
Customers who will take longer period to pay over dues.
The extension of trade credit to slow paying customers would result in a higher level of
accounts receivables.
A tightening of credit standards would signify:
i)
ii)
A decrease in sales and lower average accounts receivables / ACP and

An extension of credit limited to more credit worthy customers who can promptly
pay their bills and thus, a lower average level of accounts receivables.
Thus a change in sales and change in collection period together with a relaxation in
Standards would produce a higher carrying cost, while changes in sales and collection
period result in lower costs when credit standards are tightened. These basic reactions
also occur when changes in credit terms or collection procedures are made.
Bad Debts
Another factor which is expected to be affected by changes in the credit standards is bad
debts (default) expenses. They can be expected to increase with relaxation in credit
standards and decreases if credit standards become more restrictive.
Sales Volume:
Changing credit standards can also be expected to be change the volume of sales. As
standards are relaxed, sales are expected to increase; conversely a tightening is expected
to cause a decline in sales.
The basic changes and effects on profits arising from a relaxation of credit
standards are summarized in exhibit If the credit standards are tightening, the opposite
effects, as shown in the brackets would follow:
Credit standards influence the quality of the firms customers. There are two aspects of
the quality of customers.
i)
ii)
The time taken by customers to repay credit obligations,

The default rate.
The ACP determines the speed of payment by customers. It measures the number of days
for which credit sales remains outstanding. The longer the ACP, the higher the firms
investment in accounts receivables.
Default Rate-Can be measured in terms of bad debts losses ratios the proportion of
uncollected receivable. Bad debts losses ratio indicates default risk.
Default Risk-Is the likelihood that a customer will fail to repay the credit obligation.
On the basis of past practice and experience, the financial or credit manager should be
able to form a reasonable judgment regarding the chance of default.
To estimate the probability of default, the financial or credit manager should consider 3
cs
a) Character b) capacity and
c) Conditions
Character
Refers to the customers willingness to pay the financial or credit manager should Judge
whether the customer will make honest efforts to honor their credit obligation. The moral
factor is considerable importance in credit evaluation in practice.
Capacity
Refers to the customers ability to pay can be judged by assessing the customers capital
and assets which he may offer as security capacity is evaluated by the financial position
of the firms as indicated by analysis of ratios and trends in firms cash and working
Capital position. The financial position or credit manager should determine the real worth
of assets offered as collateral (security).
Conditions
Refers to the prevailing economy and other conditions which may effects the customers
ability to pay. Adverse economic conditions can affect the ability or willingness of a
customer to pay. An experienced financial or credit manager will be able to judge the
extent and genies ness to which the customers ability to pay is effected by the economic
conditions.
Information on these variables may be collected from the customers themselves, their
published financial statement and outside agencies which may keep credit information
about customers. A firm should use this information in preparing categories of customers
according to their credit worthiness and default risk. This would be an important input for
the financial or credit manager in formulating its credit standards. The firm may
categorized its customers at least, in the following 3 categories:
Good Accounts: that is financially strong customers.

Bad Accounts: that is financially very weak, high risk customers.
Marginal Accounts: that is customers with moderate financial health and risk (falling
between good and bad accounts).
The firm will have no difficulty in quickly deciding about the extension of credit to Good
accounts and rejecting the credit request of bad accounts.
Most of the firms time will be taken in evaluating marginal accounts. i.e., customers who
are not financially very strong but are also not so bad to be rightly rejected. A firm can
expand its sales by extending credit to marginal accounts but the firms cost and bad debts
losses may also increases. Therefore credit standards should be relaxed upon the point
where incremental return equals incremental cost (IR = IC).
Credit Terms:
The 2nd decision area in accounts receivable management is the credit terms. After
the credit standards have been established and the worthiness of the customers has been
assessed the management of a firm must determine the terms and conditions on which trade
credit terms. These relate to the repayment of the amount under the credit sale.
Credit term is the stipulation under which the firm sells on credit to customers are
called credit terms.
Credit Period:
The length of time which credit is to customers is called the credit period. It is
generally stated in net terms of a net date. A firms credit period may governed by the industry
norms. But depending on its objective the firm can lengthen the credit period. On the other
hand, the firm may lengthen its credit period if customers are defaulting to frequently and bad
debts losses are building up.
A firm lengthens to credit period to increases its operating profit through expanding
sales however, there will be net increases in operating profit when the cost of extended credit
period is less than the incremental operating profit. With increased sales and extended credit
period receivable would increases.
Incremental sales result in incremental receivables and

Excising customer will take more time to repay credit obligations i.e. avg.
Collection period will increase.
The 2nd component of credit terms is the credit period.

The expected effect of an increase in the credit period is summarized in table below.
Cash Discount:
A cash discount is a payment offered to customers to induce them to repay credit

obligations within a specified period of time which is less than the normal credit period.
It is usually expressed as a percentage of sales cash discount terms indicate the rate of
discount and the period for which it is available. It the customer does not avail the. Offer, he
must make payment within the normal credit period. Credit term would include.
Rate of cash discount
The cash discount period.
The net credit period
A firm uses cash discount as a tool to increases sales & accelerates collections form
customers. Thus the level of receivable & associated costs may be reduced the cost involved
in the discounts taken by customers. The effects of increasing the cash discounts are
summarized in below table.
Cash Discount Period:

Which refers to the duration during which the discount can be availed of these terms are
usually written in abbreviation for instance 2/10 net 30 i.e. 2% 10 days (time available) 30
days (maxi)
Collection Policy & Procedures:

A collection policy is needed because all customers do not pay the firms bill in time, some
customers are slow payers while some are non payers. The collection effort should, therefore
aim at accelerating collections from slow payers and reducing bad debts losses.
A collection policy should ensure prompt and regular collection. Prompt collection is needed
for fast turn over or working capital keeping collection costs and bad debts within limits and
maintaining collection efficiencys. Regularity in collection keeps drs alert & they tend to
pay their dues promptly.
The collection policy should lay down clear cut collection procedures. The collection
procedures for past dues or delinquent accounts should also be establish in unambiguous
terms. The slow paying customers should be handled very tactfully, some of them maybe
permanent customers the collection process initiated quickly. Without giving any chance to
them may antagonize them, and the firm may loss them to competitors.
The accounting dept maintains the credit records and information it is responsible for
collection, it should consult the sales dept before initiating an action against non paying
customers similarly the sales dept must obtain past information about customers from the
Accounting dept before granting credit to him.
Through collection procedure should be firmly established, individual cases should be dept
with on their merits. Some customers may be temporarily in tight financial position and in
spite of their best intention may not be able to pay on due date this may be due to
recessionary conditions, or other factors beyond the contract of the customers, such cases
need special consideration. The collection procedure against them should be initiated only
after they have overcome their financial difficulties and do not intend to pay promptly.
Credit Granting Decision:

Once a firm has assessed the credit worthiness of a customer, it has to decide whether or not.
Credit should be granted.
The firm should use the NPV (net present value) rule to make the decision, if the NPV is
positive, credit should be granted. If the firm chooses not to grant any credit, the firm avoids
the possibility of any losses but losses the opportunity of increasing its profitability.
On the other hand if it grants credit then it will benefit if the customer pays. There is some
profitability that a customer will default, and then the firm may lose its investment. The
expected net pay-off of the firm is the differences between the present values of net benefit
and present value of the expected loss.
Credit Limit:
A credit limit is a maximum amt of credit which the firm will extend at a point of time.
It indicates the extent of risk taken by the firm by supplying goods on credit to a customer.
Once the firm has taken a decision to extend credit to the applicant, the amount and duration
of the credit has to be decided. The decision on the magnitude of credit will depend upon the
amount of contemplated scale and the customers financial strength in case of customers who
are frequent buyers of the firms goods, a credit limit can be establish. This would avoid the
need to investigate each order from the customers.
Depending on the regularity of payment, the line of credit for a customer can be fixed on the
basis of his normal buying pattern
The credit limit must be reviewed periodically. If tendencies of slow paying are found. That
credit can be revised downward.
Why Do Companies Grant In India:

Companies in practice feel the necessity of granting credit reason:
Competition:
Generally the higher the degree of competition, the more the credit granted by a
firm however, there are exceptions such as firms in the electronics industry in India.
Companies Bargaining Power:

If A Company has higher bargaining power vis--vis its buyers, no or less credit.
The company will have a string bargaining power if it has a strong product, monopoly, and
brand image, large size or strong financial position.
Buyer Requirement:
In a number of business sectors buyers or dealers are not able to operate with extend
credit this is particularly so, in the case of industrial products.
Buyers Status:
Large buyers demand easy credit terms because bulk purchasers and higher bargaining
power some companies fallow a policy of not giving much credit to small retailers since it is
quite difficult to collect dues from them.
Relationship with Dealers:

Companies sometimes extend credit to dealers to build long term relationship with or to
reward them for their loyalty.
Marketing Tool:
Credit is used as a marketing tool, particularly when a new product is launched or
when a new company wants to push its week products.
Industry Practice:
Small companies have been found guided by industry practice or norm more than the
large companies. Sometimes companies continue givining credit because of past practice
rather than industry practice.
Trynist Delay:
This is a forced reason for extended credit in the case of a number of companies in
India most companies evolved systems to minimize the impact of such delays some of them
take the help of banks to control cash flows in such situations.
Nature of Credit Policy:

A firms investment in accounts receivable depends on
a) The volume of credit sales, and
b) The collection period
For example; if a firms credit sales are Rs. 30, 00,000 per day and customers, on an
average, take 45 days to make payment then the firms average investment in accounts
receivable is:
Daily credit sales x ACP
[30, 00,000 x 45 = 1, 350, 00,000]
The investment in receivables may be expressed in terms of cost of sales instead of sales
value.
The volume of credit sales is a function of the firms total sales and the % of credit sales to
total sales. Total sales depends on market size, firms share, product quality, intensity of
competition, economic condition etc.
The financial manager hardly has any control over these variables. The % of credit sales to
total sales are mostly influence by the nature of the business and industry norms.
For example: Car manufacture in India, until recently, was not selling cars on credit.They
required the customers to make payments at the time of delivery. Some of them even asked
for the payment to be made in advance this were so, because of the absence of genuine
competition and a wide gap between demands for and supply of cars in India. This position
changed after economic liberalization which led to intense competition. In contrast, the textile
manufacture sold 2/3 rd of their total sales on credit to the wholesale dealers. The textile
industry is still going through a difficult phase.
Goals of Credit Policy:

A firm may follow a Lenient or a stringent credit policy.
The firm follow a lenient credit policy tend to sell on credit to customers on very liberal
terms and standards, credits are granted for longer period even to those customers whose
credit worthiness is not fully known or whose financial position is doubtful.
A firm follow a stringent credit policy sells on credit on a highly selective basis only
to those customers who have proven credit worthiness and who are financially strong. In
practice firms follow credit policies ranging between stringent to lenient.
Cost of Credit Policy:

1) If the credit policy is loose, bad debts are more.
2) If the credit policy is tight, bad debts are less.
3) If the credit policy is tight, opportunity cost is more.
4) If the credit policy is loose, opportunity cost is less-optimum credit policy.
Research on Credit Management

Business have receivables i.e. dues from credit customers. To increase sales, to earn
more, to meet the competitors, to achieve break even volumes, to gain a foot hold in the
market, to help the customers on whom the business fortune is intimately in nexus and to
develop a strong brand, receivables, i.e. credit sales, are vital. Maintaining accounts
receivables involves cost. Administration cost, capital cost, collection cost, and bad-debt cost
etc. are diverse costs involved. As in any financial decision matching costs with benefits are
needed here too. And what is the optimum level of accounts receivables is to be decided. Too
little of accounts receivable, that is very limited credit ales reduced sales, loss of customer to
the competitors camp, reduced profit and so on. Of course no bad debt, less capital locked up
in accounts receivables resulting lower capital cost etc., are benefits. But, a little more risk
can be taken and profits can be inflated. Too much of accounts receivables lead to scale
advantage and hence more profit can be inflated. Too much of accounts receivables lead to
scale advantage and hence mire profit, but costs of added bad debts, capital cost etc. are
involved. Perhaps by reducing accounts receivables costs can be steeply reduced, while
benefits are not similarly 53 decreasing. Therefore optimum investment in accounts

receivable has to be planned and achieved
Credit Policy
Policy is a guideline to action. Policy establishes guideposts or limits for actions.
Credit policy, therefore, refers to guide lines regarding credit sales, size of accounts
receivables etc. Credit policy has a few variables. Credit standard, Credit period, Credit terms
and collection policies are the policy variables.Credit standards refer to classification of
customers on the basis of their Credit standards and stipulation of Credit eligibility of
different classes of customers. The high rated customers may be extended unlimited Credit,
the moderate Credit standards class may be extended a limited credit facility and the rest may
not be given any Credit facility .credit period refers to how long credit is allowed. Longer
credit period might help drawing more customers and vice-versa. Credit terms refer to
discount incentive for prompt payments by offering cash discount can be ensured. 2/30,net 45
means.2% cash discount for payment within 30 days ,failing which full payment by the 45th
day of truncation.
Collection policy refers the seriousness or otherwise with which collection is
dealt with, especially the delinquent customers. It may be harsh or warm.
Credit policy can be liberal or stringent. Liberal credit policy adopts a lenient
credit Standards ,i.e. almost all are extended credit; longer Credit period, higher cash discount
for a longer entitlement period and informal and accommodative collection procedure.
Stringent credit policy does the opposite. Both policies have advantages and
accompanying costs .hence, choice must be exercised by individual firms after assessing the
net effect of liberalizing or tightening up the Credit policy..
Control on Credit Management

The investment in accounts should be within accepted level. To achieve this, control
measures are needed so that when actual fall outside the prescribed range, corrective actions
can be taken. In controlling accounts receivables certain techniques are adopted. Three such
techniques are described below. These are
Debtors turnover ratio (DTR):

Debtors turnover ratio refers to ratio of sales to accounts receivable (sundry
debtors plus bills receivables). The accounts receivables may be closing figure, or average of
year beginning and year-end figures or average of monthly opening and closing figures. An
acceptable range for the ratio is within this band, is all right. if the actual DTR is less than 5,it
means more money is locked up in accounts receivables. Either sales have slumped relative
to size of debtors, or debtors have risen to sales. If the ratio exceeds the upper hand, it means
customers promptly pay willingly or buy over force. It is good.
Debtors velocity:
Debtors velocity refers to how much many days sales are outstanding with the
customers.
This is given by: accounts receivables/ per day credit sales. If fact, debtors velocity indicates
the average collection period allowed, everything is fine. If it exceeds the credit period
allowed, this should be corrected. If ACP is less than credit allowed, it can be considered as
good, debtors velocity can be computed ,this vary also, that: number of working days in the
year/DTR.
Age of debtors:
Age of debtors refers how long debts are outstanding. Say 10% of accounts
receivables is 6 months old,15% is 5 months old,25% is 4 months old,25% is 3% months
old,15% is 2 months i.e., 15% is 2 months old and 10% is 1 month old. The average age of
debtors olds to: 6+75+100+75+3+1=3.5 months. An ideal break up of accounts receivables
can be establishes and actual position is monitored accordingly. The idle average age and
actual average age of accounts receivables can be compared and control is exercised on
accounts receivables.
Research on Credit Management

The objectives of research non credit management could be:
To study the credit policies adopted across firms/ industries or in a firm/

industry.
To study the extent of impact of lenient and stringent credit policies on sales,
capital cost, profit, bad debts, etc.
To study the influence of different factors like credit allowed by suppliers,
credit allowed by companies, etc. on credit policy.
Credit Management is a branch of accountancy, and is a function that falls under the
label of "Credit and Collection' or 'Accounts Receivable' as a department in many companies
and institutions. They will usually deal with the credit vetting of customers, the resolution of
any invoice queries or disputes, allocations of payments or cash application, internal fund
movements, reconciliations and also maintaining positive working relationships with
customer during the debt collection or credit review and approval process.
A key requirement for effective revenue and receivables management is the ability to
intelligently and efficiently manage customer credit lines or credit limits. In order to
minimize exposure to bad debt, over-reserving, and bankruptcies, companies must have
greater insight into customer financial strength, credit score history and changing payment
patterns. Likewise, the ability to penetrate new markets and customers hinges on the ability of
a company to quickly make well informed credit decisions and set appropriate lines of credit.
Credit Management has evolved now from being a pure accounting function into a frontend customer facing function. It involves screening of customers and only those who is credit
worthy are allowed to do business. A sound review of the financial position of the customer,
and understanding of their business model is the first step in ensuring that the company does
not end up selling to a customer who ends up seriously delinquent or in default.
Hence, before the sales function commences its business with the particular customer, the
credit management role begins. Later as the customer starts dealing with the company, the
accounts receivable function is used to ensure recovery as per agreed terms of credit is
followed.
Credit Analysis
It is the method by which one calculates the creditworthiness of a business or
organization. The audited financial statements of a large company might be analyzed when it
issues or has issued bonds. Or, a bank may analyze the financial statements of a small
business before making or renewing a commercial loan. The term refers to either case,
whether the business is large or small.
Credit analysis involves a wide variety of financial analysis techniques, including ratio
and trend analysis as well as the creation of projections and a detailed analysis of cash flows.
Credit analysis also includes an examination of collateral and other sources of repayment as
well as credit history and management ability.
Before approving a commercial loan, a bank will look at all of these factors with the
primary emphasis being the cash flow of the borrower. A typical measurement of repayment
ability is the debt service coverage ratio. A credit analyst at a bank will measure the cash
generated by a business (before interest expense and excluding depreciation and any other
noncash or extraordinary expenses). The debt service coverage ratio divides this cash flow
amount by the debt service (both principal and interest payments on all loans) that will be
required to be met. Bankers like to see debt service coverage of at least 120 percent. In other
words, the debt service coverage ratio should be 1.2 or higher to show that an extra cushion
exists and that the business can afford its debt requirements.
Credit Control:
Policies aimed at serving the dual purpose of (1) increasing sales revenue by
extending credit to customers who are deemed a good credit risk, and (2) minimizing risk of
loss from bad debts by restricting or denying credit to customers who are not a good credit
risk. Effectiveness of credit control lies in procedures employed for judging a prospect's
creditworthiness, rather than in procedures used in extracting the owed money. Also called
credit management. People have become increasingly dependent on credit. Therefore, it's
crucial that you understand personal credit reports and your credit rating (or score). Here
we'll explore what a credit score is, how it is determined, why it is important and, finally,
some tips to acquire and maintain good credit.
What is a Credit Rating?

When you use credit, you are borrowing money that you promise to pay back within a
specified period of time. A credit score is a statistical method to determine the likelihood of
an individual paying back the money he or she has borrowed. The credit bureaus that issue
these scores have different evaluation systems, each based on different factors. Some may
take into consideration only the information contained in your credit report, which we look at
below. The primary factors used to calculate an individuals credit score are his or her credit
payment history, current debts, time length of credit history, credit type mix and frequency of
applications for new credit. Because the scoring systems are based on different criteria which
are weighted differently, the three major credit bureaus in the U.S. (Equifax, TransUnion, and
Experian) may issue differing scores for an individual, even though the scores are based on
the same credit report information.
You may hear the term FICO score in reference to your credit score - the terms are
essentially synonymous. FICO is an acronym for the Fair Isaacs Corporation, the creator of
the software used to calculate credit scores.
Scores range between 350 (extremely high risk) and 850 (extremely low risk). Here is a
breakdown of the distribution of scores for the American population in 2003:
What about a Credit Rating?

In addition to using credit (FICO) scores, most countries (including the U.S. and Canada) use
a scale of 0-9 to rate your personal credit. On this scale, each number is preceded by one of
two letters: "I" signifies installment credit (like home or auto financing), and "R" stands for
revolving credit (such as a credit card).
Each creditor will issue its own rating for individuals. For example, you may have an R1
rating with Visa (the highest level of credit rating), but you might simultaneously have an R5
from MasterCard if you've neglected to pay your MasterCard bill for many months. Although
the "R" and "I" systems are still in use, the prevailing trend is to move away from this
multiple rating scale toward the single digit FICO score. Nevertheless, here is how the scale
breaks down.
When you borrow money, your lender sends information to a credit bureau which
details, in the form of a credit report, how well you handled your debt. From the information
in the credit report, the bureau determines a credit score based on five major factors: 1)
previous credit performance, 2) current level of indebtedness, 3) time credit has been in use,
4) types of credit available, and 5) pursuit of new credit.
Although all these factors are included in credit score calculations, they are not given
equal weighting. Here is how the weighting breaks down:
As you can see by the pie graph, your credit rating is most affected by your historical
propensity for paying off your debt. The factor that can boost your credit rating the most is
having a past that shows you pay off your debts fairly quickly. Additionally,
Maintaining low levels of indebtedness (or not keeping huge balances on your credit
cards or other lines of credit), having a long credit history, and refraining from constantly
applying for additional credit will all help your credit score.
Although we would love to explain the exact formula for calculating the credit score,
the Federal Trade Commission has a secretive approach to this formula.
Credit is a Fragile Thing being aware of your credit and your credit score is very
important, especially since you can harm your credit without even being aware of it. Here's a
true story of what can happen:
Paul applied for a travel reward miles card, but never received any response from the
credit card company. Since it was a high-limit travel card, Paul just assumed that he'd been
declined and never thought about it again. More than a year later, Paul goes to the bank to
inquire about a mortgage. The people at the bank pull up Paul's credit report and find a bad
debt from the credit card company. According to the credit report, the company tried to
collect for a year but recently wrote it off as a bad debt, reporting it as an R9, the worst score
you can get. Of course, all this is news to Paul.
Well, it turns out there was a clerical error, and Paul's apartment suite number was missing
from the address the credit card company had on file. Paul had been approved for the card but
never actually received it, and any subsequent correspondence didn't get through either.
So the credit card company still charged Paul the annual fee, which he didn't pay,
because he didn't know the debt existed. The annual fee collected interest for a year until the
credit card company wrote it off. In the end, after jumping though several fiery hoops, Paul
was able to get the problem rectified, and the card company admitted fault and notified the
credit-reporting agency.
The point is, even though it was a small balance due (about $150), the administration
error almost got in the way of Paul getting a mortgage. Nowadays, since all data goes through
computers, incorrect information can easily get onto your credit report.
Tips to Improve or Maintain a High Credit Score:
Make loan payments on time and for the correct amount.

Avoid overextending your credit. Unsolicited credit cards that arrive by mail may
be tempting to use, but they won't help your credit score.
Never ignore overdue bills. If you encounter any problems repaying your debt, call
your creditor to make repayment arrangements. If you tell them you are having
difficulty, they may be flexible.
Be aware of what type of credit you have. Credit from financing companies can
negatively affect your score.
Keep your outstanding debt as low as you can. Continually extending your credit
close to your limit is viewed poorly.
Limit your number of credit applications. When your credit report is looked at, or
"hit," it is viewed as a bad thing. Not all hits are viewed negatively (such as those for
monitoring of accounts, or prescreens), but most are.
Credit is not built overnight. It's better to provide creditors with a longer historical
time frame to review: a longer history of good credit is favoured over a shorter period
of good history.
Credit Policies:
Credit policies are decided by zonal manager and credit will be given to dealers
based up on track record, history and credit worthiness of the distributors.
It is depends on the management and under control of the credit controller (zonal
Manager and one of the directors).
Credit Standards:
Depends on the credit market position if the position is down. The zonal manager or
Credit controller is looking (i.e., to extend the credit period or limit).
Credit standards are determined based on the economic conditions. If the economy is in the
recession more credit will be extended and if the economy is in boom less credit will be
extended.
Credit Period:
The length of time for which credit is extended to customers.
Credit period = 90 days
Cash Discount Period:

A cash period is a reduction in payment offered to customers to induce them to repay
credit obligation within a specified period of time, which will be less than the normal credit
period.
Cash discount period = 30 days
Cash discount = 3%
Credit discount = 40% on MRP
Credit Limit:
Credit limit is a maximum amount of credit which the firm will extend at a point of
time.
Credit limit is depending on the dealers deposit amount.
For example: if he deposit = 500,000
The credit limit = 25, 00,000 will be given.
Eligibility for Taking Dealership:

5 years Bank statement
2 cheques for security
1 DD for the dealer deposit amount
He should have the Tin number (wholesaler, retailer)
Three Types of Customers:

1) Builders of contractors-sales: Company is giving discount depends on the volume
of goods taking by the builders.
2) Institutions-sales: Up to 6% giving.
3) Ordinary dealers:
Company standards discount. Payment terms 30 days for every sale.
CHAPTER 3
INDUSTRY PROFILE
&
COMPANY PROFILE
INDUSTRY PROFILE:
Introduction
The Indian pharmaceuticalindustrycurrentlytopsthechartamongstIndia'ssciencebasedindustrieswithwiderangingcapabilitiesinthecomplexfieldofdrugmanufactureandtechnol
ogy.Ahighlyorganizedsector,theIndianpharmaceuticalindustryisestimatedtobeworth$4.5billi
on,growingatabout8to9percentannually.Itranksveryhighamongstallthethirdworldcountries,int
ermsoftechnology,qualityandthevastrangeofmedicinesthataremanufactured.Itrangesfromsim
pleheadachepillstosophisticatedantibioticsandcomplexcardiaccompounds,almosteverytypeof
medicineisnowmadeintheIndianpharmaceuticalindustry.
TheIndianpharmaceuticalsectorishighlyfragmentedwithmorethan20,000registeredunits.Ithase
xpandeddrasticallyinthelasttwodecades.ThePharmaceuticalandChemicalindustryinIndiaisane
xtremelyfragmentedmarketwithseverepricecompetitionandgovernmentpricecontrol.ThePhar
maceuticalindustryinIndiameetsaround70%ofthecountry'sdemandforbulkdrugs,drugintermedi
ates,pharmaceuticalformulations,chemicals,tablets,capsules,orals,andinjectibles.Thereareapp
roximately250largeunitsandabout8000SmallScaleUnits,whichformthecoreofthepharmaceutic
alindustryinIndia(including5CentralPublicSectorUnits).
TheGovernmenthasalsoplayedavitalroleinthedevelopmentoftheIndiaSoftwareIndustry.In1986
,theIndiangovernmentannouncedanewsoftwarepolicywhichwasdesignedtoserveasacatalystfor
thesoftwareindustry.Thiswasfollowedin1988withtheWorldMarketPolicyandtheestablishmento
ftheSoftwareTechnologyParksofIndia(STP)scheme.Inaddition,toattractforeigndirectinvestme
nt,theIndianGovernmentpermittedforeignequityofupto100percentanddutyfreeimportonallinpu
tsandproducts.
The first Indian pharmaceutical company, Bengal Chemicals and Pharmaceutical Works,
which still exists today as one of 5 government-owned drug manufacturers, appeared in
Calcutta in 1930. These five public sector drug-manufacturing units under the Ministry of
Chemicals and Fertilizers are: Indian Drugs and Pharmaceutical Limited (IDPL), Hindustan
Antibiotics Limited (HAL), Bengal Immunity Limited (BIL), Bengal Chemicals and
Pharmaceutical Limited (BCPL) and Smith Stanistreet Pharmaceutical Limited (SSPL). In
addition, there are a number of pharmaceutical manufacturing units under the control of state
governments such as Goa Antibiotics Ltd. and Karnataka Antibiotics Ltd.
For the next 60 years, most of the drugs in India were imported by multinationals either in
fully-formulated or bulk form. There are 24,000 licensed pharmaceutical companies. Of the
465 bulk drugs used in India, approximately 425 are manufactured here. India has more drug-
manufacturing facilities that have been approved by the U.S. Food and Drug Administration
than any country other than the US. Indian generics companies supply 84% of the AIDS
drugs that Doctors without Borders uses to treat 60,000 patients in more than 30 countries.
The Indian pharmaceutical sector has expanded drastically in the last two decades. The
Pharmaceutical industry in India is an extremely fragmented market with severe price
competition and government price control. The Pharmaceutical industry in India meets
around 90% of the country's demand for bulk drugs, drug intermediates, pharmaceutical
formulations, chemicals, tablets, capsules, orals and injectables. There are approximately 300
big and medium scale Pharmaceutical companies and about 8000 Small scale units, which
form the core of the pharmaceutical industry in India.
Current Scenario
Indianpharmaceuticalindustryisexpectedtogrowat19%in2013.Indiaisnowamongthetopfivepha
rmaceuticalemergingmarkets.Therewillbenewdruglaunches,newdrugfilings,andPhaseIIclinict
rialsthroughouttheyear.Onbackofincreasingsalesofgenericmedicines,continuedgrowthinchron
ictherapiesandagreaterpenetrationinruralmarkets,thedomesticpharmaceuticalmarketisexpecte
dtoregisterastrongdouble-digitgrowthof13-14percentin2013.
In future it will be a growth period of the Indian Pharmaceutical Industry. The growth is
expected to emerge from three major areas:
Contract research and development services.
Export led business of generics and bulk drugs and
Growth in specialty therapeutic areas in the domestic market.

The growth in the institutional segment is likely to raise the market for diagnostics.
Increasing industrialization, literacy levels and urbanization are likely to increase the health
awareness of the general public. Consequently the demand for preventive medicine in general
and immunological like tetanustoxoid, triple antigen (DPT), measles vaccine, Hepatitis
vaccine, anti-rabies vaccine, polio vaccine and typhoid vaccine are likely to increase.
Companies are likely to pay greater attention to their human resources development effort in
general and management developmental programs in particular.
The present state of armed truce between the trade and the industry is likely to continue in the
future. But with a difference. The industry is likely to be united more closely than before.
Companies, which have strong research, focus and competence only can achieve a
sustainable growth and performance in the borderless future market place. Now the
companies are steadily increasing their investment in Research and Development.
Companies that think strategically are the ones that are likely to succeed in the future.
Marginal firms are likely to be marginalized. Strategic thinking plays an even greater role in
the coming years. Unless the pharmaceutical companies in India start preparing for future
competition right now by upgrading in all areas it could be very difficult to exploit growth
opportunities. It might become difficult even to survive any longer.
The industry will continue to be in consolidation mode and mood. The last few years have
seen a spate of mergers and acquisitions of brands as well as companies. Indian companies
continue to be aggressive in pursuing merger and acquisition strategies to gain access to
international markets and to reinforce their position. Strategic alliances too will be on the rise
particularly in the areas of contract research, contract manufacturing and product licensing.
ADVANTAGE INDIA
As regards the pharmaceutical marketing in the world, India is becoming one of the
front runner destinations because of its second largest population in the world, the pace of
development of its economy, adoption of technological advancements, economical medical
treatment cost and also availability of world renowned physicians etc. Following are the
advantages of Indian Healthcare Scenario:
Competent workforce: India possesses a skillful work force with high managerial
and technical competence.
Cost-effective chemical synthesis: The track record for development, particularly

in the area of improved cost-beneficial chemical synthesis for various drug molecules is
excellent.
Legal and Financial Framework: India is a democratic country with a solid legal
framework and strong financial markets. There is already an established international
industry and business community.
Information and Technology: It has a good network of world-class educational

institutions and established strengths in Information Technology.
Globalization: The country is committed to a free market economy and

globalization. Above all, it has a 70 million middle class market, which is constantly
growing.
Major Pharmaceutical Companies in India

Some of the leading Indian players by sales (INR Billion)
Company Name
Sales in INR billion
Cipla
69.77
Ranbaxy Lab
76.86
Dr Reddy's Labs
66.86
Sun Pharma
40.15
Lupian Ltd
53.64
AurobindoPharma
42.84
Jubilant Life
26.41
Cadila Health
31.52
Ipca Labs
23.52
Wockhardt
26.50
Cipla Limited
Cipla is a global pharmaceutical company whose goal is ensuring no patient shall be denied
access to high quality & affordable medicine and support. Ciplas journey began in 1935
when our founder, Dr K A Hamied, set up an enterprise with the vision to make India selfsufficient in healthcare. Over the past 77 years, they have emerged as one of the worlds most
respected pharmaceutical names, not just in India but worldwide.
For patients, caring is a promise that they will do whatever it takes to ensure they have
continued access to the highest quality medicines at affordable prices; whether a disease
affects millions or just a few hundreds.
To the medical fraternity, caring means the assurance of world-class medicines and support
across multiple therapeutic areas.
For business partners, caring brings the confidence of always getting world-class quality and
competitive prices.
For employees, caring manifests itself in a safe, equal-opportunities' workplace that fosters
innovation for a healthier world.
Ranbaxy Laboratories Limited:

Ranbaxy Laboratories was established in 1961. It is a research-based international
pharmaceutical company serving customers in over 150 countries and has experience of more
than 50 years in providing high quality, affordable medicines trusted by healthcare
professionals and patients.
Ranbaxy is a member of the Daiichi Sankyo Group which is a leading global pharma
innovator, headquartered in Tokyo, Japan.
Ranbaxy has operations in 43 countries and 21 manufacturing facilities spread across eight
countries. The company covers all the top 25 pharmaceutical markets of the world and has a
robust presence across both developed and emerging markets. Driven by innovation and
through their continued focus on research & development (R&D), Ranbaxy has achieved
several regulatory approvals in both developed and emerging markets.
Dr. Reddy's Laboratories:

Dr Reddys began as an active pharmaceutical ingredients (API) manufacturer in 1984,
producing high-quality APIs for the Indian domestic market. In 1987, the company started its
formulations operations and, after becoming a force to reckon with in the Indian formulations
market, went international in 1991.
Dr Reddys today is more than a 200-million dollar venture with presence in almost all major
therapeutic areas. The company is committed to providing affordable and innovative
medicines for healthier lives. Through its three businesses Pharmaceutical Services and
Active Ingredients, Global Generics, and Proprietary Products, Dr Reddys offers a portfolio
of products and services including APIs, custom pharmaceutical services, generics,
biosimilars and differentiated formulations. The companys major therapeutic focus is on
gastrointestinal, cardiovascular, diabetology, oncology, pain management and anti-infective.
Major markets for Dr Reddys include India, USA, Russia-CIS and Europe, apart from other
select geographies within emerging markets.
Recently, Dr Reddys deepened its focus into the rural markets in India to ensure the
expansion of its reach. In this initiative, the company collaborated with its CSR wing, Dr
Reddys Foundation to reach the millions who are still away from effective treatment and
availability of the right medicines.
Sun Pharmaceutical Industries Ltd:

Sun Pharmaceutical Industries Ltd is an international specialty pharma company. The
Company manufactures and markets pharmaceuticals formulations as branded generics, as
well as generics in India, the United States (US) and several other markets across the world.
The Companys business is divided into four segments: Indian Branded Generics, US
Generics, International Branded Generics (ROW) and Active Pharmaceutical Ingredients
(API).
Its brands are prescribed in chronic therapy areas like cardiology, psychiatry, neurology,
gastroenterology, diabetology and respiratory. It makes specialty APIs, including peptides,
steroids, hormones and anticancers. APIs and Dosage forms are made at 20 plants across
India, Israel, the US, Canada, Hungary, Brazil, Mexico and Bangladesh. Its API products
include Acamprosate Calcium, Alendronate Sodium, Amifostinetrihydrate, Budensonide and
Carvedilol.
In September 2010, it acquired Taro Pharmaceutical industries Ltd.
Lupin Limited:
Lupin is a renowned pharma player having a wide range of quality, affordable generic and
branded formulations and APIs. The company, which was named after the Lupin flower,
commenced its business in 1968.
It has world class manufacturing facilities across India and Japan that have played a critical
role in enabling the company realise its global aspirations. Benchmarked to international
standards, Lupins facilities are approved by international regulatory agencies such as US
FDA, UK MHRA, Japan's MHLW, TGA Australia, WHO, and the MCC South Africa.
The company first gained recognition when it became one of the world's largest
manufacturers of Tuberculosis (TB) drugs. Today, it has significant market share in the
cardiovascular, diabetology, asthma, paediatrics, CNS, anti-infectives and NSAIDs therapy
segments.
Advanced market formulations comprised nearly 52 per cent of Lupins revenues in FY 12.
Its drugs and products reached over 100 countries in the world.
The company has emerged as the fifth largest and among the fastest-growing companies in
the US. The company's consolidated revenues and profit after tax were Rs 94,616 million
(US$ 1.55 billion) and Rs 13,142 million (US$ 216.05 million), respectively, for FY 2012
13.
Cipla pharma ltd.Limited:

Cipla pharma ltd.was founded in 1986. The company commenced its operations in 198889
with a single unit that manufactured semi-synthetic penicillin (SSP) at Pondicherry. The
company became a public company in 1992 and listed its shares in the Indian stock
exchanges in 1995.
In addition to being the market leader in SSPs, Cipla pharma ltd.has presence in key
therapeutic segments such as neurosciences, cardiovascular, anti-retrovirals, anti-diabetics,
gastroenterology and cephalosporins, among others.
The company has nine units for APIs/intermediates and seven units for formulations, which
are designed to meet the requirements of both advanced as well as emerging market
opportunities.
Cipla pharma ltd.exports to over 125 countries across the globe with more than 70 per cent of
its revenues derived out of international operations. The company makes use of in-house
research and development (R&D) for rapid filing of patents, drug master files (DMFs),
abbreviated new drug applications (ANDAs) and formulation dossiers across the world. It is
among the largest filers of DMFs and ANDAs from India.
Jubilant Food Works Ltd:

Jubilant Life Sciences Ltd is an integrated global pharmaceutical and life sciences company
engaged in manufacture and supply of APIs, Solid Dosage Formulations,
Radiopharmaceuticals, Allergy Therapy Products and Life Science Ingredients. It also
provides services in Contract Manufacturing of Sterile Injectable and Drug Discovery
Solutions. The Companys strength lies in its unique offerings of Pharmaceutical and Life
Sciences products and services across the value chain.
Jubilant Life Sciences serves its customers globally with sales in over 100 countries and
ground presence in India, North America, Europe and China.
Innovation at Jubilant is backed by strong chemistry, bio science expertise and the knowledge
bank created over the years.
Corporate Social Responsibility is an integral part of how Jubilant Life Sciences conducts
business and how the efforts are directed towards community development through focus on
primary education, basic healthcare service, and livelihood generation programs focused on
improving the employability of women and local youth.
Cadila Pharmaceuticals Limited:

Cadila Pharmaceuticals Ltd is one of the largest privately held pharmaceutical companies in
India, headquartered at Ahmadabad, Gujarat. Over the last six decades, the company has been
developing and manufacturing pharmaceutical products in India and selling and distributing
these in over eighty-five other countries around the world.
Focused strongly on innovation and research, the company is present in more than forty-five
therapeutic areas spread across twelve specialities, including cardiovascular, gastrointestinal,
analgesics, haematinics, anti-infectives and antibiotics, respiratory agents, antidiabetics and
immunologicals.
At Cadila Pharmaceuticals, R&D is at the core of all its initiatives, be it biotechnology, APIs,
formulations, plant tissue culture or phytochemistry.
More than 300 scientists in its various R&D setups reinforce the competitiveness of research
in the therapeutic areas which have high unmet medical needs.
Ipca Laboratories:
For more than 60 years, Ipca has been partnering healthcare globally in over 110 countries
and in markets as diverse as Africa, Asia, Australia, Europe and the US.
Ipca is a fully-integrated Indian pharmaceutical company manufacturing over 350
formulations and 80 APIs for various therapeutic segments.
They are one of the world's largest manufacturers and suppliers of over a dozen APIs. These
are produced right from the basic stage at manufacturing facilities endorsed by the world's
most discerning drug regulatory authorities like US-FDA, UK-MHRA, EDQM-Europe,
WHO-Geneva and many more.
Ipca is a therapy leader in India for anti-malarials with a market-share of over 34 per cent
with a fast expanding presence in the international market as well. They have leading brands
in 5 therapeutic areas, with 4 of our branded formulations being ranked among the Top-300
Wockhardt Ltd:
Wockhardt Limited is an India-based pharmaceutical and biotechnology company. The
Company also owns a chain of advanced super speciality hospitals. The Company offers
treatment regimens for cardiology, neurosurgery, orthopaedics, critical care, oncology,
nephrology and urology. The Company has filed ANDA applications for its products in the
United States. The Companys products include anti-infectives, cardiology, dermatology,
diabetology, neurology, others, pain management and respiratory products. The Companys
product includes Ace Proxyvon, Aceroc, Alphadopa, Aziwok, B.G.Prot and Bio-Corneum.
The Companys subsidiaries include WockhardtBiopharm Limited, Vinton Healthcare
Limited, Wockhardt Infrastructure Development Limited, Wockhardt UK Holdings Limited,
Wockhardt Bio AG and Wockhardt Europe Limited.
The top ten pharmaceutical companies in Indian market are listed here under:
Cipla ranks first with largest value growth rate of 18% and volume growth of 15.3%, with an
annual value turnover of ` 2155 crores and at the bottom of the table is Aristo Pharmaceutical
with 18.6% value growth rate and 20.1% volume growth on an yearly turnover of ` 966
crores. The other pharmaceutical companies which tops in top 10, in Indian Pharmaceutical
market are Ranbaxy, Glaxo, Piramal, ZydusCadilla, Sun pharmaceutical, Alke Mankind,
Lupin. The total scenario in this regard has a positive impact on growth of pharmaceutical
industry which is explained hereunder with the help of table as well as graphic presentation.
Top 10 Companies Driving Market
COMPANY PROFILE:
Cipla is a global pharmaceutical company whose goal is to ensure that no

patient shall be denied access to high quality & affordable medicine and
support.
Mission:
Ciplas mission is to be a leading global healthcare company which uses
technology and innovation to meet every day needs of all the patients.
Incorporated
1935
Employees*
20,000+
Turnover*
USD 1.78 Billion
Founder (1898-1972)
Dr. K.A. Hamied
Non-Executive Chairma
Dr. Y.K. Hamied
Non-Executive Vice-Chairman
Mr. M.K. Hamied
Registered Office
Cipla Limited, Cipla House, Peninsula Business Park,
Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013
Listing
Equity Shares: BSE Limited and National Stock Exchange of India Limited
Global Depository Receipts: Luxembourg Stock Exchange
Highlights
Continuous innovation in R & D with 35+ world firsts.

Over 1,500 products across various therapeutic categories, with 60+
dosage forms.
Presence in over 100 countries
Approvals
US FDA, WHO-Geneva, MHRA-UK, TGA-Australia, SUKL-Slovak Republic,
APVMA-Australia, MCC-South Africa, PIC-Germany, Danish Medical Agency,
ANVISA-Brazil, INVIMA- Colombia, NDA-Uganda, Department of HealthCanada and MOH-Saudi Arabia, among others
Board Of Directors:
DR. Y.K. HAMIED

Non-Executive Chairman
MR. M.K. HAMIED

Non-Executive Vice-Chairman
MR. SUBHANU SAXENA

Managing Director & Global Chief Executive Officer
MR. S. RADHAKRISHNAN
Whole-time Director
MS. SAMINA VAZIRALLI

Executive Director
MR. ASHOK SINHA

Non-Executive / Independent Director
DR. PETER MUGYENYI

MR. ADIL ZAINULBHAI
MS. PUNITA LAL

MS. NAINA LAL KIDWAI

Milestones:
1935Dr K A Hamied sets up 'The Chemical, Industrial and Pharmaceutical Laboratories Ltd.' in a
rented bungalow, at Bombay Central. 1941As the Second World War cuts off drug supplies, the
company starts producing fine chemicals, dedicating all its facilities for the war effort. 1952 Sets up
first research division for attaining selfsufficiency in technological development. 1960 Starts
operations at second plant at Vikhroli, Mumbai, producing fine chemicals with special emphasis on
natural products. 1968 Cipla manufactures ampicillin for the first time in the country. 1972Starts
Agricultural Research Division at Bangalore, for scientific cultivation of medicinal plants. 1976Cipla
launches medicinal aerosols for asthma. 1980Wins Chemexcil Award for Excellence for
exports. 1982Fourth factory begins operations at Patalganga, Maharashtra. 1984Develops anti
cancer drugs, vinblastine and vincristine in collaboration with the National Chemical Laboratory,
Pune.
Wins Sir P C Ray Award for developing inhouse technology for indigenous manufacture of a number
of basic drugs. 1985US FDA approves Cipla's bulk drug manufacturing facilities. 1988Cipla wins
National Award for Successful Commercialisation of Publicly Funded R&D. 1991Lauches
etoposide, a breakthrough in cancer chemotherapy, in association with Indian Institute of Chemical
Technology.
The company pioneers the manufacture of the antiretroviral drug, zidovudine, in technological
collaboration with Indian Institute of Chemical Technology, Hyderabad. 1994Cipla's fifth factory
begins commercial production at Kurkumbh, Maharashtra. 1997Launches transparent Rotahaler, the
world's first such dry powder inhaler device now patented by Cipla in India and abroad. The palliative
cancer care centre set up by the Cipla Foundation, begins offering free services at Warje, near Pune.
1998 Launches lamivudine, becoming one of the few companies in the world to offer all three
component drugs of retroviral combination therapy (zidovudine and stavudine already
launched). 1999Launches Nevirapine, antiretroviral drug, used to prevent the transmission of AIDS
from mother to child. 2000Cipla became the first company, outside the USA and Europe to launch
CFCfree inhalers ? ten years before the deadline to phase out use of CFC in medicinal
products. 2002Four stateoftheart manufacturing facilities set up in Goa in a record time of less
than twelve months. 2003Launches TIOVA (Tiotropium bromide), a novel inhaled, longacting
anticholinergic bronchodilator that is employed as a oncedaily maintenance treatment for patients
with chronic obstructive pulmonary disease (COPD).Commissioned second phase of manufacturing
operations at Goa. 2005Sestup stateoftheart facility for manufacture of formulations at Baddi,
Himachal Pradesh.
2007Setsup stateoftheart facility for manufacture of formulations at Sikkim. 2010Sets up
stateoftheart facility for manufacture of formulations at Indore.
CHAPTER -4
RESEARCH METHODOLOGY
NEED OF THE STUDY:
Credit risk management is one of the key areas of financial decision-making. It is

significant because, the management must see that an excessive investment in current assets
should protect the company from the problems of stock-out. Current assets will also
determine the liquidity position of the firm. The goal of Credit risk management is to manage
the firm current assets and current liabilities in such a way that a satisfactory level of working
capital is maintained. If the firm cannot maintain a satisfactory level of working capital, it is
likely to become insolvent and may be even forced into bankruptcy.
SCOPE OF THE STUDY:
The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The scope of the study limited to collecting the data
published in the reports of the company and opinions of the employees of the organization
with reference to the objective stated above and theoretical framework of the data. With a
view to suggest solutions to various problems relating to Credit risk management. The
analysis is done to suggest the possible solutions.
OBJECTIVES OF THE STUDY:
To study the credit policies of Cipla pharma ltd.ltd and its credit risk management
process.
To study debtor turnover ratio and average collection period.
To study whether it is profitable to extend credit period or reduce credit period

adopted by Cipla pharma ltd.
To study the need for credit risk management in Cipla pharma ltd.
To study the credit limits of Cipla pharma ltd.
To study the financial position of Cipla pharma ltd.
LIMITATIONS OF THE STUDY:
The study is based on only secondary data.

Another limitation is that of standard ratio with which the actual ratios may be compared
generally there is no such ratio, which may be treated as standard for the purpose of
comparison because conditions of one concern differ significantly from those of another
concern.
The accuracy and correctness of ratios are totally dependent upon the reliability of the
data contained in financial statements on the basis of which ratios are calculated.
RESEARCH DESIGN:
The data used for analysis and interpretation from annual reports of the company.
That is secondary forms of data. DTR, ACP and Increase in credit period analysis are the
Techniques used for calculation purpose. The project is presented by using tables, graphs and
with their interpretations.
Primary data
The primary data is very important source for to make suggestions to the title
obtained.
This data can be collected in various methods like survey, interviewing, feedback, i.e.
Group Discussion etc., for collection of primary data the survey method is used,
which involved predetermined questions.
The structured questionnaire contained a form list of question framed so as to get the
facts.
But it involves high risk and huge expensive method to get the facts.
Secondary Data:
The Secondary data are those which have already been collected by some other
agency and which have already been processed. The sources of Secondary data are Annual
Reports, browsing Internet, through magazines.
1. It includes data gathered from the annual reports of Cipla pharma ltd.
2. Articles are collected from official website of Cipla pharma ltd.
CHAPTER 5
DATA ANALYSIS & INTERPRETATION
Data analysis and interpretations

The calculations using in Data analysis are:
1) DTR ( Debtors turnover ratio )
2) ACP (Average collection period)
Calculation of DTR :This measures a relationship between debtors and sales.

DTR =
Total sales
Closing Debtors
Calculation for: 2009-10: (Amount in crores)

DTR=
3252.06
1151.35
= 2.82
Calculation for: 2010-11:- (Amount in crores)
DTR = 4130.45 = 2.78

1480.71
DTR = 4284.63 = 3.00
1426.28
DTR = 5425.10 = 3.13
1730.59

DTR = 7110.71 = 2.39
2970.12
YEAR
TOTAL SALES
CLOSING
BEBTORS
DTR
2009-10
3252.06
1151.35
2.82
2010-2011
4130.45
1480.71
2.78
2011-12
4284.63
1426.28
3.00
2012-13
5425.10
1730.59
3.13
2013-14
7110.71
2970.12
2.39
DTR from 2009-10 to 2013-14

3.5
3
2.5
DTR from 2009-10 to
2013-14
2
1.5
1
0.5
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation:
DTR indicates velocity of debt collection of the company. In other words it shows the number
of times average turnover during a year.
A high debtor turnover ratio indicates a more efficient management of debtors and low ratio
implies inefficient management of debtors
In the present analysis the debtor turnover ratio of Cipla pharma ltd.ltd shows that in the year
2012-13 with 3.13 and lowest in the year 2013-14 with 2.39
Calculation of ACP :- (Average collection period)

The ACP calculation is compared with the firms stated credit period to judge the collection
efficiency.
The ACP measures the quantity of receivables.
Since, it indicates the speed of their collection ability.
ACP = (Debtors / credit sales)*360 or 360/DTR
Calculation for 2009-10:
ACP = 360 = 127.65

2.82
ACP = 360 = 129.49

2.78
ACP = 360 =120.00

3.00
ACP = 360 = 115.01

3.13
ACP = 360 = 150.62

2.39
ACP from 2006-07 to 2010-11 are:

ACP
127.65
YEAR
2009-10
129.49
2010-11
120.00
2011-12
115.01
2012-13
150.62
2013-14
ACP from 2009-10 to 2013-14

160
140
120
100
ACP from 2009-10 to

2013-14
80
60
40
20
0
2009-10
2010-11
2011-12
2012-13
2013-14
Interpretation:
ACP (Average collection period) indicates the average debt collection periods of the
company.
A higher ACP indicates that more time is taken by the management for collection of debts.
And lower ACP implies efficient and faster collection of debts.
In the present analysis the average collection period of Cipla pharma ltd.ltd shows that in the
year 2013-14 with 150.62 (150) days and lowest in the year 2012-13 with 115.01 or 115 days.
It shows that the collection period of the company has been decreasing every year from 201011 to 2012-13.
But a tremendous increase in the year 2013-14 with 150 days
A SCENARIO ANALYSIS:+
Suppose credit period is extended to 100 days.
Then sales may increase by 15%. If credit period is decreased to 80 days.
Then sales decrease by 10%.
Calculation of Increase in Credit Period:

Statement of increase in credit period (Rupees in crores)
PARTICULARS
EXISTING
DAYS (+15%)
DAYS (- 10%)
A)Credit period
90
100
80
B)Annual sales
3252.06
3739.86
2926.85
1038.85
650.41
225.84
-(162.6)
45.16
-(32.52)
C)Levels
receivables
(@sales value)
(AxB /360)
of 813.01
D)Increment
investment
in receivable
(C- 813.01)
E)Assume
incremental
profit @20% (0.2xD)
WORKING NOTES:1) Annual sales:

100days =3252.06 + (3252.06x15%)
=3252.06 + 487.80
= 3739.86
80days
= 3252.06 (3252.06x10%)
=
3252.06 325.20
= 2926.85
2) Level of receivables:
90 days = (annual sales*period)/360
= (3252.06*90)/360
=
292685.4/360
813.01
100days = (3739.86*100)/360
= 1038.85
80days = (2926.85*80)/360
= (234148/360)
= 650.41
3) Incremental investment in receivables : -(C 813.01)
90days =
813.01-813.01 = 0
100days = 1038.85-813.01 = 225.84

80days =
650.41-813.01 = - (162.6)
4) Assume incremental profit @ 20% (0.20x D) :90 days = 0

100days = (225.84x20%) = 45.16
80dys = - (162.6x20%) = - (32.52)

PARTICULARS
EXISTING
DAYS (+15%)
DAYS (- 10%)
A)Credit period
90
100
80
B)Annual sales
4130.45
4750.01
3717.40
C)Levels
receivables
(@sales value)
(AxB /360)
of 1032.61
1319.44
826.08
286.83
-(206.53)
57.366
-(41.306)
D)Increment
investment
in receivable
(C- 1032.61)
E)
Assume
incremental
profit @20% (0.2xD)
100days =4130.45 + (4130.45x15%)
=4130.45 + 619.56
= 4750.01
80days = 4130.45 (4130.45x10%)
=
4130.45 413.045
= 3717.40

= (4130.45*90)/360
=
371740.5/360
= 1032.61
100days = (4750.01*100)/360
= 475001/360
= 1319.44
80days = (3717.40*80)/360
= (297392/360)
= 826.08
90days =
1032.61-1032.61 = 0
100days = 1319.44-1032.61 = 286.83

80days =
826.08 -1032.61= - (206.53)

100days = (286.83x20%) = 57.36
80dys = - (206.53x20%) = - (41.30)

PARTICULARS
EXISTING
DAYS (+15%)
DAYS (- 10%)
A)Credit period
90
100
80
B)Annual sales
4284.63
4927.32
3856.16
C)Levels
receivables
(@sales value)
(AxB /360)
of 1071.15
1368.7
856.92
297.55
-(214.23)
59.51
-(42.84)
D)Increment
investment
in receivable
(C- 1071.15)
E)
Assume
incremental
profit @20% (0.2xD)

100days =4284.63 + (4284.63x15%)
=4284.63 + 642.69
= 4927.32
80days = 4284.63 (4284.63x10%)
4284.63 428.463
= 3856.16
= (4284.63*90)/360
=
385616.7/360
= 1071.15
100days = (4927.32*100)/360
= 492732/360
= 1368.7
80days = (3856.16*80)/360
= (308492.8/360)
= 856.92
90days = 1071.15-1071.15 = 0
100days 1368.7-1071.15 = 297.55
80days = 856.92 -1071.15= - (214.23)
4) Assume incremental profit @ 20% (0.20x D) :90 days =
100days = (297.55x20%) = 59.51

80dys = - (214.23x20%) = - (42.84)

PARTICULARS
EXISTING
DAYS (+15%)
DAYS (- 10%)
A)Credit period
90
100
80
B)Annual sales
5425.10
6238.86
4882.59
C)Levels
receivables
(@sales value)
(AxB /360)
of 1356.27
1733.01
1085.02
376.74
-(271.25)
75.34
-(54.25)
D)Increment
investment
in receivable
(C- 1356.27)
E)
Assume
incremental
profit @20% (0.2xD)
100days =5425.10 + (5425.10x15%)
=5425.10 + 813.76
= 6238.86
80days = 5425.10 (5425.10x10%)
=
5425.10 542.51
= 4882.59
= (5425.10*90)/360
=
488259/360
= 1356.27
100days = (6238.86*100)/360
= 623886/360
= 1733.01
80days = (4882.59*80)/360
= (390607.2/360)
= 1085.02
90days =
1356.27-1356.27 = 0
100days = 1733.01-1356.27 = 376.74

80days =
1085.02 -1356.27= - (271.25)

100days = (376.74x20%) = 75.34
80dys = - (271.25x20%) = - (54.25)

PARTICULARS
EXISTING
DAYS (+15%)
DAYS (- 10%)
A)Credit period
90
100
80
B)Annual sales
7110.71
8177.31
6399.63
C)Levels
receivables
(@sales value)
(AxB /360)
of 1777.67
2271.47
1422.14
493.8
-(355.53)
98.76
-(71.10)
D)Increment
investment
in receivable
(C- 1777.67)
E)
Assume
incremental
profit @20% (0.2xD)
100days =7110.71 + (7110.71x15%)
=7110.71 + 1066.60
= 8177.31
80days = 7110.71 (7110.71x10%)
=
7110.71 711.07
= 6399.63
= (7110.71*90)/360
=
639963.9/360
= 1777.67
100days = (8177.31*100)/360
= 817731/360
= 2271.47
80days = (6399.63*80)/360
= (511970.4/360)
= 1422.14
90days = 1777.67-1777.67 = 0
100days = 2271.47-1777.67 = 493.8
80days =1422.14 -1777.67= - (355.53)
100days = (493.8x20%) = 98.76
80dys = - (355.53x20%) = - (71.10)
CHAPTER 6
FINDINGS, SUGGESTIONS
& CONCLUSION
Findings:
Company`s average collection period is decreasing and debtor turnover ratio is

Increasing
Company profits are influenced by volume of sales with respect to credit policy
The scenario analysis was conducted assuming credit period to be 80 days and 100
days.
The result showed that while credit period is 100 days the company is getting
higher sales when the credit period is 80 days the company is getting lower sales
when compared with 90 days.
If Credit Period increased, profits (or sales) increases and vice-versa.i.e.,annual
salesRs 7110.71 crores when credit period is 90 days, Rs 8177.31 crores when 100
days and 6399.63 crores when credit period is 80 days.
Credit standards are determined based on economic conditions.
The present credit policy of Cipla pharma ltd.ltd regarding managing credit is
satisfactory
Suggestions:
On the basis of the analysis given above the following suggestions can be made.
Management is advised to increase credit period to 100 days so that company can
earn more profits.
Management should offer more incentives for prompt payment of credit. So that
receivables are collected promptly by dealers.
The management should have liberal credit policies.
Relaxing credit standards will enable to increase the customers.
Company should employ the skilled persons to collect payments and deal with
customer.
Management should control the fluctuations.
Conclusion:
Although a relatively young discipline, credit risk management has matured rapidly.
Improved risk measurement and reporting techniques paired with comprehensive credit risk
policies can provide extremely effective protection against credit risk losses. The best risk
management techniques are operational and legal, with collateral providing the best financial
risk mitigation. Credit insurance and credit default swaps offer financial protection against
default, but each at its own costwhich must be compared to the benefits of reducing the
specific risk it is intended to mitigate.
In view of these limitations, we believe that an alternative approach is now needed
which should have two components. First we believe that the regulatory capital regime
should seek directly to assess the extent to which a firm's earnings are vulnerable to stress
losses of any type - a measure we refer to as regulatory equity at risk - and should then
establish a capital requirement which is sufficient to provide a high level of assurance that the
firm could survive such a stress event and still remain solvent during a workout period.
We argue that there needs to be much more explicit regulatory oversight of the
liquidity management arrangements in place at the firm, since effective liquidity management
arrangements rather than capital provide the primary protection against any stress events
affecting the firm.
CHAPTER 7
ANNUXURE
&
BIBLIOGRAPHY
ANNEXURE
Balance Sheet of cipla Pharma ltd., ------------------- in Rs. Cr. -------------------
Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Mar '14 Mar '13
Mar '12
Mar '11
Mar '10
12 mths
12 mths
12 mths
12 mths
12 mths
29.15
29.15
0.00
0.00
3,983.2
4
4,012.3
9
1,970.2
0
844.66
2,814.8
6
6,827.2
5
Mar '14
29.12
29.12
0.00
0.00
29.11
29.11
0.00
0.00
29.11
29.11
0.00
0.00
27.86
27.86
0.00
0.00
2,909.98
2,464.06
2,540.50
1,886.50
2,939.10
2,493.17
2,569.61
1,914.36
1,875.72
2,346.33
1,038.01
702.25
899.24
95.62
1,279.71
1,242.53
2,774.96
2,441.95
2,317.72
1,944.78
5,714.06
4,935.12
4,887.33
3,859.14
Mar '13
Mar '12
Mar '11
Mar '10
12 mths 12 mths
12 mths
12 mths
12 mths
Application Of Funds
Gross Block
Less: Revaluation Reserves
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deferred Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets

Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)
3,004.8
6
0.00
1,066.9
2
1,937.9
4
203.89
872.62
1,711.81
2,970.1
2
9.72
4,691.6
5
869.43
0.00
5,561.0
8
0.00
1,633.8
0
114.48
1,748.2
8
2,903.53
2,359.40
1,955.17
1,526.88
0.00
0.00
0.00
0.00
891.62
732.66
605.28
481.54
2,011.91
1,626.74
1,349.89
1,045.34
166.34
707.98
1,431.73
563.56
629.00
1,219.26
582.92
493.09
1,261.02
499.47
379.24
944.82
1,730.59
1,426.28
1,480.71
1,151.35
114.57
14.01
4.21
4.02
3,276.89
2,659.55
2,745.94
2,100.19
661.45
0.00
677.41
0.12
568.61
118.12
593.67
0.54
3,938.34
3,337.08
3,432.67
2,694.40
0.00
0.00
0.00
0.00
1,037.26
1,159.59
913.82
719.94
73.25
61.67
57.42
39.37
1,110.51
1,221.26
971.24
759.31
2,115.82
2,461.43
1,935.09
0.00
0.00
0.00
4,935.12
4,887.33
3,859.14
74.59
85.64
219.10
88.27
139.04
343.51
3,812.8
2,827.83
0
0.00
0.00
6,827.2
5,714.06
5
358.37
137.67
474.51
100.93
Profit & Loss account of cipla

------------------- in Rs. Cr. ------------------Pharma ltd.,
Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Mar '14 Mar '13
Mar '12
Mar '11
Mar '10
12 mths 12 mths
12 mths
12 mths
12 mths
7,110.71
0.00
7,110.71
74.80
35.75
4,378.73
94.10
4,284.63
-525.06
-89.87
4,229.99
99.54
4,130.45
17.61
136.37
3,319.60
67.54
3,252.06
112.22
147.48
5,425.10
0.00
5,425.10
26.51
121.08
Total Income
7,221.2
5,572.69
6
3,669.70
4,284.43
3,511.76
3,273.04
2,599.02
2,487.19
2,010.02
316.34
431.42
0.00
0.00
567.32
0.00
225.54
364.10
75.61
234.56
74.07
0.00
184.55
303.60
79.03
207.53
37.22
0.00
135.48
232.62
59.14
186.29
18.71
0.00
4,588.12
3,572.90
3,299.12
2,642.26
Mar '13
Mar '12
Mar '11
Mar '10
12 mths 12 mths
12 mths
12 mths
12 mths
958.06
621.86
967.70
757.28
984.57
96.80
985.31
869.50
250.06
93.11
55.02
62.58
734.51
3.69
930.29
806.92
171.39
0.00
142.94
0.00
125.04
0.00
95.46
0.00
563.12
-139.25
805.25
711.46
0.00
-16.52
-0.95
-1.61
563.12
-155.77
804.30
709.85
67.13
-113.16
210.50
184.09
495.99
-42.61
593.80
525.76
1,315.08
973.88
811.93
632.24
0.00
43.68
7.20
0.00
29.11
4.72
0.00
58.72
9.64
0.00
27.74
4.67
2,911.21
2,911.21
557.29
-1.46
20.40
94.34
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
3,689.0
5
335.71
514.21
0.00
0.00
688.02
0.00
5,226.9
9
Mar '14
1,919.4
7
1,994.2
7
288.84
1,705.4
3
185.97
0.00
1,519.4
6
0.00
1,519.4
6
347.37
1,172.0
9
1,537.9
4
0.00
87.41
14.85
2,914.5
2,912.11
7
40.21
17.03
Equity Dividend (%)

Book Value (Rs)
300.00
137.67
150.00
100.93
100.00
85.64
BIBLIOGRAPHY
200.00
88.27
100.00
343.51
BOOKS:
1. Financial management -
by I.M.PANDEY
2. Financial management -
by MY KHAN PK JAIN
3. Management Accounting -
by RP TRIVEDI.
4. Company`s annual reports.
WEBSITES:
www.moneycontrol.com
www.cipla.com

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A STUDY ON

CREDIT RISK MANAGEMENT

Cipla Pharmaceuticals Limited

040 2307 5811

NEED OF THE STUDY

FINDINGS, SUGGESTIONS &

ANNUXURE & BIBLIOGRAPHY

A credit sale has characteristics:

The establishment of clear business objectives, standards, processes and

Identification of risk helps:

The establishment and understanding of a risk management policy and framework

What needs to be done

Step 2 - Identify Risks

What can go wrong?

Step 3 - Assess Risks

Identify existing controls and their effectiveness

Step 4 - Address Risks

What actions or responses are required to control risks

Is it better to work to eliminate or innovate through taking reasonable calculated risks.

Step 5 - Review, Quantify and report Risks

Credit Policy Variables:

The trade off with reference to credit standards covers

The average collection period or investment in receivables

Investment in Receivable or Average Collection Period

Through a change in sale,

A relaxation in credit standards as already stated, implies an increase in sales which in

A decrease in sales and lower average accounts receivables / ACP and

The time taken by customers to repay credit obligations,

Good Accounts: that is financially strong customers.

Incremental sales result in incremental receivables and

The 2nd component of credit terms is the credit period.

A cash discount is a payment offered to customers to induce them to repay credit

Cash Discount Period:

Collection Policy & Procedures:

Credit Granting Decision:

Why Do Companies Grant In India:

Companies Bargaining Power:

Relationship with Dealers:

Nature of Credit Policy:

Goals of Credit Policy:

Cost of Credit Policy:

Research on Credit Management

benefits are not similarly 53 decreasing. Therefore optimum investment in accounts

Control on Credit Management

Debtors turnover ratio (DTR):

Research on Credit Management

To study the credit policies adopted across firms/ industries or in a firm/

What is a Credit Rating?

What about a Credit Rating?

Tips to Improve or Maintain a High Credit Score:

Make loan payments on time and for the correct amount.

Cash Discount Period:

Eligibility for Taking Dealership:

Three Types of Customers:

Contract research and development services.

Export led business of generics and bulk drugs and

Growth in specialty therapeutic areas in the domestic market.

Cost-effective chemical synthesis: The track record for development, particularly

Information and Technology: It has a good network of world-class educational