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    Ratio Analysis Dabur

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    Pramod Shing
    This document provides an overview of ratio analysis and key financial ratios used to analyze a company's financial statements. It discusses the importance of ratio analysis for lenders and investors to evaluate a company's liquidity, profitability, leverage, asset management, and market value. The document then explains definitions and calculations for various common ratios, including current ratio, debt-to-equity ratio, gross profit ratio, inventory turnover, return on assets, and others. These ratios are categorized as liquidity, leverage, profitability, and turnover ratios.

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    Download as PPT, PDF, TXT or read online from Scribd

    Ratio Analysis Dabur

    Uploaded by

    Pramod Shing
    421 views19 pages
    This document provides an overview of ratio analysis and key financial ratios used to analyze a company's financial statements. It discusses the importance of ratio analysis for lenders and investors to evaluate a company's liquidity, profitability, leverage, asset management, and market value. The document then explains definitions and calculations for various common ratios, including current ratio, debt-to-equity ratio, gross profit ratio, inventory turnover, return on assets, and others. These ratios are categorized as liquidity, leverage, profitability, and turnover ratios.

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    This document provides an overview of ratio analysis and key financial ratios used to analyze a company's financial statements. It discusses the importance of ratio analysis for lenders and investors to evaluate a company's liquidity, profitability, leverage, asset management, and market value. The document then explains definitions and calculations for various common ratios, including current ratio, debt-to-equity ratio, gross profit ratio, inventory turnover, return on assets, and others. These ratios are categorized as liquidity, leverage, profitability, and turnover ratios.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    421 views19 pages

    Ratio Analysis Dabur

    Uploaded by

    Pramod Shing
    This document provides an overview of ratio analysis and key financial ratios used to analyze a company's financial statements. It discusses the importance of ratio analysis for lenders and investors to evaluate a company's liquidity, profitability, leverage, asset management, and market value. The document then explains definitions and calculations for various common ratios, including current ratio, debt-to-equity ratio, gross profit ratio, inventory turnover, return on assets, and others. These ratios are categorized as liquidity, leverage, profitability, and turnover ratios.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    Ratio Analysis Worksheet

    Financial Statement
    2010-2011

    Financial Statement Analysis


    Prepared By:- MFM 2011-14
    Harshad Khambale Mahendra Gajarmal Nayan Kshatriya Vishal Rathod Vijay Sethe 11 56 14 33 43

    Financial Analysis
    Assessment of the firms past, present and future financial conditions Done to find firms financial strengths and weaknesses Primary Tools:
    Financial Statements Comparison of financial ratios to past, industry, sector and all firms
    2

    Financial Statements
    Balance Sheet Income Statement Cashflow Statement Statement of Retained Earnings

    Sources of Data
    Annual reports
    Via mail, SEBI or company websites

    Published collections of data


    Newspapers, magazines etc.

    Investment sites on the web


    Examples
    http://moneycontrol.com http://www.indiainfoline.com http://scribd.com http://www.dabur.com
    4

    Why needed ?
    Lenders need it for carrying out the following Technical Appraisal Commercial Appraisal Financial Appraisal Economic Appraisal Management Appraisal
    5

    Ratio Analysis
    Its a tool which enables the banker or lender to arrive at the following factors : Liquidity position Profitability Solvency Financial Stability Quality of the Management Safety & Security of the loans & advances to be or already been provided
    Prof. Anjali Kulkarni 6

    Five Major Categories of Ratios and Their Implications


    Liquidity: Can we make required payments? Asset management: right amount of assets vs. sales? Also known as Turnover/ Activity Ratios. Debt management: Right mix of debt and equity? Also known as Leverage/ Capital Structure Ratios. Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in PM, ROE, and ROA? Market value: Do investors like what they see as reflected in P/E and M/B ratios? Also known as Valuation Ratios.
    7

    Classification of Ratios
    Balance Sheet P&L Ratio or Ratio Income/Revenue Statement Ratio
    Financial Ratio Operating Ratio

    Balance Sheet and Profit & Loss Ratio


    Composite Ratio

    Current Ratio Quick Asset Ratio Proprietary Ratio Debt Equity Ratio

    Gross Profit Ratio Operating Ratio Expense Ratio Net profit Ratio Stock Turnover Ratio

    Fixed Asset Turnover Ratio, Return on Total Resources Ratio, Return on Own Funds Ratio, Earning per Share Ratio, Debtors Turnover Ratio,
    8

    Prof. Anjali Kulkarni

    Review: Income Statement


    Gross Profit = Sales - Costs of Goods Sold EBITDA = Gross Profit - Cash Operating Expenses EBIT = EBDIT - Depreciation - Amortization EBT = EBIT - Interest NI or EAT = EBT- Taxes
    Net Income is a primary determinant of the firms cash flows and, thus, the value of the firms shares

    Ratios : Liquidity
    1. Current Ratio : It is the relationship between the current assets and current liabilities of a concern. Current Ratio = Current Assets/Current Liabilities

    If the Current Assets and Current Liabilities of a concern are Rs.4,00,000 and Rs.2,00,000 respectively, then the Current Ratio will be : Rs.4,00,000/Rs.2,00,000 = 2 : 1 The ideal Current Ratio preferred by Banks is 1.33 : 1 2. Net Working Capital : This is worked out as surplus of Long Term Sources over Long Term Uses, alternatively it is the difference of Current Assets and Current Liabilities. NWC = Current Assets Current Liabilities
    Prof. Anjali Kulkarni 10

    Ratios : Liquidity
    3. ACID TEST or QUICK RATIO : It is the ratio between Quick Current Assets and Current Liabilities. Quick Current Assets : Cash/Bank Balances + Receivables upto 6 months + Quickly realizable securities such as Govt. Securities or quickly marketable/quoted shares and Bank Fixed Deposits.

    Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities


    Example : Cash 50,000 Debtors 1,00,000 Inventories 1,50,000 Total Current Assets 3,00,000 Current Ratio = > Quick Ratio =>

    Current Liabilities

    1,00,000

    3,00,000/1,00,000 1,50,000/1,00,000
    Prof. Anjali Kulkarni

    = 3:1 = 1.5 : 1
    11

    Ratios: Leverage
    4. DEBT EQUITY RATIO : It is the relationship between borrowers
    fund (Debt) and Owners Capital (Equity). DER =

    Debt ----------Equity

    Debentures + Long Term loans = ------------------------------------------------------------------------------------Equity Shares+ Preference Shares + Reserves and Surplus For instance, if the Firm is having the following : Capital Free Reserves & Surplus Long Term Loans/Liabilities Debt Equity Ratio will be = Rs. 200 Lacs = Rs. 300 Lacs = Rs. 800 Lacs => 800/500 i.e. 1.6 : 1

    Prof. Anjali Kulkarni

    12

    Ratios : Leverage
    5. PROPRIETARY RATIO : This ratio indicates the extent to which Tangible Assets are financed by Owners Fund. Proprietary Ratio = (Tangible Net Worth/Total Tangible Assets) x 100 The ratio will be 100% when there is no Borrowing for purchasing of Assets. 6. GEARING RATIO Debt + Preference Shares = ---------------------------------------

    Equity 7. INTEREST COVERAGE RATIO: Extent of earnings available to pay off interest burden. Is given by Earnings Before Interest and Taxes (EBIT ) ICR = ------------------------------------------------------Interest
    Prof. Anjali Kulkarni 13

    Ratios: Profitability
    8. GROSS PROFIT RATIO : By comparing Gross Profit percentage to Net Sales we can arrive at the Gross Profit Ratio which indicates the manufacturing efficiency as well as the pricing policy of the concern. Gross Profit Ratio = (Gross Profit / Net Sales ) x 100

    Alternatively , since Gross Profit is equal to Sales minus Cost of Goods Sold, it can also be interpreted as below :
    Gross Profit Ratio = [ (Sales Cost of goods sold)/ Net Sales] x 100 A higher Gross Profit Ratio indicates efficiency in production of the unit.

    Prof. Anjali Kulkarni

    14

    Ratios : Profitability
    9. OPERATING PROFIT RATIO :
    It is expressed as => (Operating Profit / Net Sales ) x 100

    Higher OP ratio indicates higher operational efficiency Operating Profit = NP + Non-operating Expenses Non-operating Income

    10. NET PROFIT RATIO :


    It is expressed as => ( Net Profit / Net Sales ) x 100

    It measures overall profitability.

    Prof. Anjali Kulkarni

    15

    Ratios : Turnover
    11. STOCK/INVENTORY TURNOVER RATIO : COGS ----------------------------Average Inventory
    (Opening Stock + Closing Stock)

    STR =

    Average Inventory or Stocks =

    ------------------------------------------------2

    COGS = Sales GP

    or

    OS+ Purchases CS

    This ratio indicates the number of times the inventory is rotated during the relevant accounting period

    Prof. Anjali Kulkarni

    16

    Ratios : Turnover
    12. DEBTORS TURNOVER RATIO : This ratio reflects the
    relationship between credit sales and debtors. Credit Sales DTR = ----------------------------Average Debtors 365 Average Collection Period = ---------------DTR

    13. CREDIT TURNOVER RATIO : This ratio indicates the


    intention of the firm to pay quickly to its creditors Credit Purchases CTR = -------------------------------Average Creditors 365 Average Payment Period = ------------CTR
    Prof. Anjali Kulkarni 17

    Ratios : Turnover
    14. CURRENT ASSET TURNOVER RATIO : CATR = Net Sales / Current Assets 15. FIXED ASSET TURNOVER RATIO : FATR = Net Sales /Fixed Assets 16. TOTAL ASSETS TURNOVER RATIO : TATR = Net Sales / Total Assets

    Prof. Anjali Kulkarni

    18

    Ratios : Profitability
    16. RETRUN ON ASSETS : Assets Net Profit after Taxes/Total

    17. RETRUN ON CAPITAL EMPLOYED :

    ( Net Profit before Interest & Tax / Average Capital Employed) x 100
    Average Capital Employed is the average of the equity share capital and long term funds provided by the owners and the creditors of the firm at the beginning and end of the accounting period.

    Prof. Anjali Kulkarni

    19

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