HORIZONTAL ANALYSIS

Balance Sheet
YEAR
Inventories

2015
2,081.05

2014
2,254.76

Change (%)
-7.70

Trade Receivables

3,094.52

2,811.99

10.04

Cash And Cash Equivalents

1,141.64

2,650.98

-56.93

Total Current Assets

10,595.34

11,250.32

-5.82

Intangible Assets

743.94

748.61

-0.62

Total Non-Current Assets

27,015.75

20,728.02

30.33

Total Assets
Total NonCurrent Liabilities

52,893.23
13,781.47

49,811.33
13,267.67

6.18
3.87

Total Current Liabilities

52,893.23

49,811.33

6.18

The inventories have reduced by 7.70% from 2014 to 2015 and also the trade receivables has
increased by 10.04% during that period which means company has sold it products but hasnt
received full payment for the sales.
Also the non-current assets has increased by 30.33% which means the company is adopting a
positive approach to the future and increasing its operational capabilities.
The reduction in the cash might be because cash is used to acquire new assets and payment of
dividends.
Also short term debt and long term debt are used to fund the acquisition of new assets.

Profit and Loss Account

YEAR
Total Revenue

2015
57,602.84

2014
58,406.45

Change (%)
-1.37

Total Expenses

53,381.34

52,349.08

1.97

Profit/Loss Before Tax

4,284.36

6,402.32

-33.08

The total revenue has reduced and the total expenses have increased which has led
to reduction in profit before tax. The operating profit has reduced because of low
sales and increased expenses.

LIQUIDITY & LEVERAGE RATIO GROUP

Current Ratio:Current Ratio =

Current Assets
Current Liabilities

Current Ratio

2015
1.03

2014
1.1

This ratio measures the firms ability to pay its short term liabilities. Ideal ratio is
2:1.
Current assets shows cash inflows for the firm within a year and current liabilities
are the payment that the firm has to make within a year.
The higher the current ratio the more favorable a company is for the investors
because this shows that the company can pay its current liabilities.
Hence if current asset is 3 then the firm has 3 times the current assets then current
liabilities and hence it can easily pay off its current liabilities.
For GAIL LTD the current ratio has decreased because of increase in
current liabilities and reduction in current assets. As ratio is 1.03 it is in
good condition to pay its short term liabilities.

Quick Ratio:Quick Ratio=

Quick Assets
Current Liabilites

Quick Assets = Current Assets Inventory Prepaid expenses

Year
Quick Ratio

2015
0.91

2014
0.93

This ratio measures the ability of the company to meet its current assets with its
most liquid fund.
Generally ideal quick ratio is 1:1. This ratio generally varies with industries.

GAILs ratio of 0.91 is low but when compared with its peer companies like
ONGC, Gujarat Gas, Petronet LNG, etc. it is at par with them.
The ratio has decreased because of increase in current liabilities and
reduction in the cash and cash equivalents.

Debt-Equity Ratio

Debt Equity Ratio=

Long Term Debt

Equity

Year
Debt Equity Ratio

2015
0.27

2014
0.35

As of 2015 the company is using 27% of its equity to source its long term finance.
The reduction in the ratio is because of the reduction in the long term
borrowing during the period.

Coverage Ratio

Coverage Ratio=

EBIT
Interest

EBIT= Earnings before interest and taxes.

Year

2015

2014

Interest Coverage
Ratio

12.68

17.54

The ratio shows the ability of the company to pay its interest charges on its debts.
The coverage aspect shows how many times the interest can be paid from the
earnings.
The ratio of 12.68 shows that GAIL earns 12 times the money required to funds it
interest payments.
But the ratio has reduced in 2015 which might be due to reduced profits of the
company in 2015.

ACTIVITY RATIO GROUP

INVENTORY TURNOVER RATIO

Inventory

Turn Cost of Goods Sold

=
Ratio Average Inventory

Days of I nventory Holding=

360
Inventory

Turn
Ratio

Year
Inventory Turnover
Ratio

2015
27.61

2014
25.51

Days of Inventory
Holding

13.03

14.11

This ratio tells us about the business performance of the company as it tells the
speed with which company can sell its inventory. It demonstrates that the demand
for the companys product has increased or it has successfully controlled or
managed the inventory.
Days of inventory holding shows number of days a company takes to sell its
inventory.

RECEIVABLE TURNOVER RATIO

Debtor Turnover Ratio=

Net Credit S ales

Average Accounts Receivable

Year
Receivable Turnover
Ratio

2015
19.21

2014
21.44

Days Receivable
Total Revenue

18.74
57,602.84

16.79
58,406.45

Trades Receivable

3,094.52

2,811.99

It shows the efficiency of a in firm in collecting the credit it has provided to its
consumer. As this money doesnt attract any interest the firm loses money the
longer it takes to collect its credits.
Days receivable shows the amount of days in which the company collects its credits
sales amount.
When compared to ONGC the ratio of GAIL is much higher. And hence it is more
capable in collecting its credit sale amount.
The ratio has reduced because of reduction in sales and increase in the trade
receivables during 2014-2015.

TOTAL ASSET TURNOVER RATIO

Total Asset

Turn
Sales
=
Ratio Total assets

Year
Total Asset turnover
ratio

2015
1.56

2014
1.6

Ratio indicates how efficiently company is utilizing its assets for generating
revenues. Its analysis depends upon the type of company hence comparison must
be made within the same sector.
If we compare GAILs asset turn over ration with ONGC then trend is same ONGCs
ratio also decreased from 0.57 in 2014 to 0.52 in 2015.This might be due to more
investment assets due to consideration coming expansion or growth.

FIXED ASSET TURNOVER RATIO

 Asset Turnover Ratio=

Sales
Assets

Year
Fixed Asset turnover
ratio

2015
1.4

2014
1.73

It is the measure of how company is successful in converting its investments in

assets like property, Plant and Equipment. Manufacturing industries usually have
more investments in fixed assets due to investment for future expansion hence
comparison must be made with peer companies.
The ratio has decreased because of decrease in sales and increase in fixed assets
from 2014 to 2015.
If we compare GAILs asset turn over ration with ONGC then trend is same ONGCs
ratio increased from 0.73 in 2014 to 2.30 in 2015.

PROFITABILITY RATIOS
GROSS PROFIT MARGIN

Gross Profit Margin=

Gross Profit
100
Net Sales

Year

2014-2015

2013-2014

Gross Profit Margin

Total Revenue

6.55
57,291.97

9.6
58,012.06

Total Expenses

53,381.34

52,349.08

Gross profit margin measures the companys manufacturing and distribution

efficiency during production process. Gross margin is used to compare a company
with its competitor. If gross margin is low it means that the company is not able to
control its production cost.
The gross margin has reduced because of increase in expenses and reduction in
sales in 2014-2015.

NET PROFIT MARGIN

Net Profit Margin=

Net Profit ( After Taxes)

100
Net Sales

Year
Net Profit Margin

2014-2015
5.35

2013-2014
7.6

Net profit margin of a company shows the efficiency of the companys pricing
policies, cost structure.
Here the net profit margin of GAIL has reduced on because of increased cost and
reduced sales. Interest, Excise and Tax expenses have reduced in 2014-2015 when
compared to 2013-2014. Hence cost structure of the company hasnt affected the
net profit margin.

RETURN ON CAPITAL EMPLOYED

Return on Capital Employed=

Earnings Before Interest Tax( EBIT )

Capital Employed

Year

2014-2015

2013-2014

Return on Capital

12.33

17.55

Employed

This ratio shows the efficiency with which a company employs its capital. ROCE
should be greater than the cost of capital of the company else the company is not
using its capital effectively.
The ROCE of GAIL has reduced because of the reduced profits in 2014-2015 period.

RETURN ON EQUITY

Return on Equiy=

Net Income
'
Share Holde r s Equity

Year
Return on Equity

2014-2015
10.43

2013-2014
16.16