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Administrative Spends Eat Into Profits

A look at companies with high administrative expenses reveals that they eat into a lot of their profits

Expenses are integral to accounting in any company. Not only do they tell where the money goes, it also helps companies evaluate and check their expenses. No wonder, during times of difficulty, administrative and general expenses become the easiest to control. For instance, administrative expenses on rentals is easy to cut down. Other such expenses include director's remuneration, professional and legal fees, travel expenses among other such heads.

We extracted companies with the highest administrative expenses from the BSE 500 list as a per cent of their revenues. These manageable expenses form a substantial part of their total expenses. However, many of these expenses depend on the type of business and the industry that a company is in. For instance, Reliance Mediaworks, Inox and PVR have high ratios due to the rents paid on the property where their screens run film shows.

The presence of Sun Pharma Advanced Research, Glenmark Pharmaceuticals and Astrazeneca Pharma in the top 10 comes as a surprise. On closer look we figured that Sun Pharma Advanced Research has a high ratio due to high professional fees while the other two have a substantially high travelling expenses. Interestingly, the top 10 companies ate away 20 to 50 per cent of the profits through admin and general expenses.