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    Symbiosis Law School, Pune: A F M I A - 1

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    The document appears to be an analysis of financial ratios for Cadence Ltd over four fiscal years from 2013 to 2016. It includes the company's balance sheet, income statement, calculations of key financial ratios such as current ratio, debt-to-equity ratio, interest coverage ratio, operating profit margin, net profit margin, return on equity, and more. It also analyzes trends and changes in the ratios over the four year period to glean insights into the company's performance and financial management.

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    Symbiosis Law School, Pune: A F M I A - 1

    Uploaded by

    pranjal
    36 views10 pages
    The document appears to be an analysis of financial ratios for Cadence Ltd over four fiscal years from 2013 to 2016. It includes the company's balance sheet, income statement, calculations of key financial ratios such as current ratio, debt-to-equity ratio, interest coverage ratio, operating profit margin, net profit margin, return on equity, and more. It also analyzes trends and changes in the ratios over the four year period to glean insights into the company's performance and financial management.

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    The document appears to be an analysis of financial ratios for Cadence Ltd over four fiscal years from 2013 to 2016. It includes the company's balance sheet, income statement, calculations of key financial ratios such as current ratio, debt-to-equity ratio, interest coverage ratio, operating profit margin, net profit margin, return on equity, and more. It also analyzes trends and changes in the ratios over the four year period to glean insights into the company's performance and financial management.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views10 pages

    Symbiosis Law School, Pune: A F M I A - 1

    Uploaded by

    pranjal
    The document appears to be an analysis of financial ratios for Cadence Ltd over four fiscal years from 2013 to 2016. It includes the company's balance sheet, income statement, calculations of key financial ratios such as current ratio, debt-to-equity ratio, interest coverage ratio, operating profit margin, net profit margin, return on equity, and more. It also analyzes trends and changes in the ratios over the four year period to glean insights into the company's performance and financial management.

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    Advanced Financial Management

    SYMBIOSIS LAW SCHOOL, PUNE

    Constituent of Symbiosis International (Deemed) University, Pune

    (Accredited by NAAC (UGC) with `A’ Grade)

    ADVANCED FINANCIAL MANAGEMENT


    INTERNAL ASSESSMENT - 1
    ‘Ratio Analysis’

    Submitted by: -

    Name- Pranjal Singh

    PRN – 18010126137

    Division - B

    RATIOS
    Advanced Financial Management

    Cadence Ltd
    Balance Sheet (Amt in Rs. Cr)
    Particulars FY16 FY15 FY14 FY13

    Share Capital 11.3 11.3 11.3 11.3


    Reserves 273.8 180.1 112.8 73.3
    Total shareholder fund 285.1 191.5 124.2 84.6
    Long Term loans 19.8 4.3 2.8 20.7
    Defrred Tax Liability 6.8 3.3 3.1 3.1
    Trade payables 101.3 74.0 49.1 12.7
    Long term debt payable within 1 yr 43.3 0.2 0.1 0.0
    Other Current Liabilities 83.3 60.7 41.0 46.4
    Other provisions 143.9 91.5 52.2 23.7
    Total Current Liabilities 371.8 226.4 142.4 82.9

    Total Liabilities 683.5 425.4 272.5 191.4

    Gross Block 289.2 137.4 83.5 75.5


    Net Block 150.6 41.9 40.5 35.9
    Capital WIP 89.0 50.9 23.5 23.7
    Investments 0.4 0.4 0.4 0.4
    Inventories 174.9 105.1 61.3 50.3
    Sundry Debtors 106.0 74.7 60.3 48.9
    Cash and Bank Balance 22.3 53.5 44.0 10.9
    Loans and Advances 139.7 98.6 42.4 21.3
    Other current assets 0.5 0.3 0.2
    Total Current Assets, Loans & Advances 443.4 332.2 208.1 131.5
    Total Assets 683.4 425.4 272.5 191.4

    Cadence Ltd
    Income Statement (Amt in Rs. Cr)
    Particulars FY16 FY15 FY14 FY13
    Sales (net) 1,106.5 767.8 509.1 401.8
    Raw Material cost 617.9 409.8 264.6 221.5
    Salaries & Wages 73.0 53.0 39.3 31.4
    Other manufacturing expenses 34.2 25.2 20.4 17.7
    Cost of Goods sold 725.1 488.0 324.4 270.6
    Selling & admin exp 206.3 153.9 106.2 91.5
    Expenses 931.4 641.9 430.6 362.0
    EBIDTA 175.1 126.0 78.5 39.8
    Depreciation 6.2 4.3 3.6 3.5
    EBIT/ Operating Profit 168.9 121.7 74.9 36.3
    Interest 5.6 0.8 3.5 7.3
    PBT 163.3 121.0 71.4 29.0
    Tax 49.9 36.6 23.0 6.6
    PAT 113.4 84.3 48.5 22.4

    Marketcap 3324 2232 612 89

    RATIOS
    Advanced Financial Management

    PART 1: Ratios

    Ratios FY16 FY15 FY14


    Current Ratio 1.19 1.47 1.46
    Debt to Equity Ratio 0.069 0.022 0.022
    Interest Coverage Ratio 30.16 152.125 21.40
    Operating Profit Margin 15.26% 15.85% 14.712%
    Net Profit Margin 10.24% 10.98% 9.53%
    Return on Equity 47.58% 53.40% 46.45%
    Return on Capital 67.46% 75.40% 64.48%
    Employed
    Fixed Asset Turnover Ratio 11.490 18.635 13.327
    Debtors/Receivables 12.246 11.374 9.324
    Turnover Ratio
    Price to Earnings Ratio 29.312 26.476 12.618

    RATIOS
    Advanced Financial Management

    PART 2: Analysis

    1. An ideal Current Ratio is suggested to be 2:1. The current Ratio of the given
    company is quite consistent, but takes a slight dip in the year 2016.

    2. The ideal debt to equity ratio is 1:2. The Debt to equity ratio is first seen to
    decline, which suggests that the company’s earnings have been good and is trying
    to pay off the debt. The sudden increase in debt in the year 2016 suggests that the
    company prefers debt as a source for financing over equity, as the share capital
    remains constant.

    3. The increase in the interest coverage ratio from FY14 to FY15 suggests that the
    company has paid off its majority debts and thereby the interest charged to it has
    decreased. In FY16, the company has again taken a large debt, which is
    suggestive of an expansion or a large investment, which implies a decrease in the
    interest coverage ratio, as the interest charged on EBIT has increased.

    4. The Fixed Asset Turnover Ratio of a company indicates the better management
    of fixed assets by the company. The increase in the Fixed Asset Turnover Ratio
    from FY14 to FY15 suggests that the sales of the company have increased and
    the average fixed assets have decreased, which indicate a better management of
    the latter. Whereas, the decrease in the Fixed Asset Turnover Ratio from FY15
    to FY16 suggests an influx in the investment of net fixed assets, but the sales
    have not performed at par with the investment in the fixed assets.

    5. The Operating Profit Margin Ratio does not see much fluctuation over the
    three Financial Years. A parallel increase in the sale as well as the operating profit
    suggests of a

    6. The Net Profit Margin Ratio sees low fluctuation as there is a sharp increase in
    interest in 2016 since there is a sharp increase in sale and operating expenses.
    Despite having a high interest cost in 2016 (As compared to FY15 and FY14),
    the high interest cost is compensated by the very high sales (Sales have almost
    doubled from FY15).

    RATIOS
    Advanced Financial Management

    7. The Return on equity has increased from FY14 to FY15, indicating that the
    company has a good earning capacity and has paid off majority of its debts. The
    Return on Equity Ratio takes a dip from FY15 to FY16 as the company’s profit
    decreased owing to the increase in interest charged on the debt.

    8. Return on Capital Employed determines the efficiency of the Long-Term funds


    of the company. An increase in the same from FY 14 to FY15 suggests an
    increase in the EBIT and decrease in the average Capital employed which means
    that the long-term funds of the company have been deployed efficiently and are
    giving and increasing profit. A decrease in the ROCE ratio from FY15 to FY16
    suggests that the capital deployed by the company is large but the return on that
    capital has relatively decreased.

    9. The gradual increase in the Receivables Turnover Ratio over the years indicates
    that the company has a good brand name. It further indicates efficiency in
    management of debtors.

    10.The Price to Earning Ratio indicates the amount that the investors are willing
    to pay for every rupee earned by the company. This ratio has increased in the past
    three financial years indicating a growth in the Market Capital. The sentiment of
    the market is that of growth, indicating that the investors expect that the company
    is in a growing phase. They expect higher returns on their investment in the
    future, in term of higher dividend and earning per share.

    RATIOS
    Advanced Financial Management

    PART 3: Working Notes

    1. Liquidity Ratios: Current Ratio-

    Current Ratio = Current Assets


    Current Liability

    Financial year 2016 –

    Current Assets = 443.4


    Current Liabilities = 371.8

    Current Ratio = 443.4/371.8


    = 1.19
    2. Leverage Ratio: Debt to Equity Ratio-

    Debt to Equity Ratio = Debt (Long Term)


    Shareholder’s Funds

    Financial year 2016 –

    Debt (Long Term) = 19.8


    Shareholder’s Funds= 285.1

    Debt to Equity Ratio = 19.8/285.1


    = 0.069

    3. Leverage Ratio: Interest Coverage Ratio-

    Interest Coverage Ratio = EBIT


    Interest Charges

    RATIOS
    Advanced Financial Management

    Financial year 2016 -

    EBIT = 168.9
    Interest Charges = 5.6

    Interest Coverage Ratio = 168.9/5.6

    = 30.16

    4. Profitability Ratio: Operating Profit Margin-

    Operating Profit Margin = EBIT*100


    Net Sales
    Financial Year 2016 –
    EBIT = 168.9
    Net Sales = 1,106.5

    Operating Profit Margin = 168.9*100/1,106.5


    = 15.26%

    5. Profitability Ratio: Net Profit margin-

    Net Profit Margin = Net Profit*100


    Net Sale

    Financial Year 2016 –


    Net Profit = 113.4
    Net Sales = 1,106.5

    Net Profit Margin = 113.4*100/1,106.5


    = 10.248%

    6. Profitability Ratio: Return on Equity-

    Return on Equity = Net Profit*100

    RATIOS
    Advanced Financial Management

    Average Shareholder’s Funds (SHF)

    Average Shareholder’s Funds = Current SHF + Last Year’s SHF


    2

    Financial Year 2016 –

    Net Profit = 113.4


    Average Shareholder’s Funds = 285.1 + 191.5/2
    = 238.5

    Return on Equity = 113.4*100/238.5


    = 47.5%

    7. Profitability Ratio: Return on Capital Employed-

    Return on Capital Employed = EBIT*100


    Average Capital Employed (CE)

    Average Capital Employed = Current CE + Last Year’s CE


    2
    Capital Employed (CE) = Long Term Debt + SHF

    Financial Year 2016-


    EBIT = 168.9
    Average Capital Employed = 19.8 + 285.1 + 191.5 + 4.3/2

    = 250.35

    Return on Capital Employed = 168.9*100/250.35


    = 67.46%

    RATIOS
    Advanced Financial Management

    8. Activity Turnover Ratios: Fixed Asset Turnover-

    Fixed Asset Turnover Ratio = Sales


    Average Net Fixed Asset

    Average Net Fixed Asset = Current FA + Last Year’s FA


    2
    Financial Year 2016 –
    Sales = 1,106
    Average Net Fixed Asset = 150.6+41.9/2
    = 96.25
    Fixed Asset Turnover Ratio = 1,106/96.25

    = 11.490

    9. Activity Ratio: Debtors/Receivables Turnover Ratio-

    Receivables Turnover Ratio = Sales


    Average Debtors

    Average Debtors = Current Year’s Debtors + Last Year’s Debtors


    2

    Financial Year 2016 –

    Sales = 1,106

    Average Debtors = 106 + 74.7/2


    = 90.35

    RATIOS
    Advanced Financial Management

    Receivables Turnover Ratio = 1,106/90.35

    = 12.246

    10. Valuation Ratios: Price to Earnings Ratios-

    Price to Earnings Ratio = Market Capital


    Net Profit

    Financial Year 2016 –

    Market Capital = 3324


    Net Profit = 113.4

    Price to Earnings Ratio = 3324/113.4

    = 29.312

    RATIOS

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