Chapter: - 3 RATIO ANALYSIS

(1) Simple Ratio :-

One number by another e.g. Current assets to current liabilities ratio is 2:1

(2) Rate Numeric :-

The ratio between two Facts Usually over a period of time e.g. stock Turnover is 3 times in year.

(III) Percentage

:-

Special types of rate which The Relation in profits is 25% on sale.

expresses

hundred e.g. Gross

Calculation of Ratios SPREDSHEET

Particular
Financial Expenses PBIT PAT Pref. Dividend Equity Share Capital No. of Equity Shares Total Dividend Paid To Eq. Shareholders DPS EPS Interest Average Stock Cost of Goods Sold Sales -Gross Profit Current Assets Stock Sundry Debtors Cash & Bank Balance Loan & Advances Current Liabilities Liabilities Provisions Liquid Assets Current Assets Less: Stock 74504.46 -26171.64 48332.82 55281.33 -20114.69 35166.64 39641.22 -15736.94 23904.28 35138.71 31510.20 66648.91 31722.51 26540.97 58263.48 27770.31 7838.16 35608.47 26171.64 11236.01 14368.48 22728.33 74504.46 20114.69 10046.43 6826.46 18293.75 55281.33 15736.94 6097.87 5024.75 12781.66 39641.22 242367.89 -116354.10 126013.79 211778.86 -102898.24 108880.62 163736.12 -80293.21 83442.91

2009
1333.55 42499.59 37355.26 0.00 8650.76 864907642 1296824000 1.50 4.32 1333.55 23143.17

2008
854.50 36517.59 31695.79 0.00 8640.23 863826759 664747000 0.77 3.67 854.50 17925.82

2007
443.01 28422.30 25207.63 0.00 8628.84 860884512 1768431000 2.05 2.93 443.01 14515.60

3.2 Profit & Loss A/c

(All amounts in Indian Rupees in Lacs, except share data) 31-Mar-09 Income: Sales Less Returns Less: Excise Duty Net Sales Other Income Total Income Expenditure: Cost of Materials Manufacturing Expenses Payments to & Provisions for Employees Selling & Administrative Expenses Financial Expenses Miscellaneous Expenditure Written Off Depriciation Total Expenditure Balance being Operating Net Profit before Taxation Provision for Taxation: Current Deferred 122243.11 7076.13 16732.46 50901.37 1333.55 394.18 2742.04 201422.84 42499.59 4748.45 -255.09 650.97 102833.54 6985.57 14969.23 45827.98 854.5 566.79 2575.26 174612.87 36517.59 4057.25 75.32 707.81 76798.44 5393.94 11865.88 35923.33 443.01 649.36 2197.81 133271.77 28422.3 3152.16 -265.64 328.15 242367.89 2751.5 239616.39 4306.04 243922.43 211778.86 3439.26 208339.6 2790.86 211130.46 163736.12 3696.22 160042.9 1651.17 161694.07 31-Mar-08 31-Mar-07

Fringe Benefit Net Profit After Taxation & before Extraordinary Items Credit Balance Transferred from Merged Entity Net Profit After Taxation & Extraordinary Items Balance Brought Forxard Provision for Taxation of earlier years written back Provision for Taxation for earlier year 37355.26 0 37355.26 32322.99 0.11 71.68 69606.68 Appropriations Interim Dividend Proposed Final Dividend Corporate Tax on Interim Dividend Corporate Tax on Proposed Dividend Transferred to Capital Reserve Transferred to General Reserve Balance Carried over to Balance Sheet Earning Per share (in Rs.) (Face Value Rs 1/-each) Basic Diluted No of Shares Basic Diluted Notes to Accounts 864907642 869156259 863826759 868807461 800884512 869534762 4.32 4.31 3.66 3.64 2.93 2.9 6488.07 8650.76 1102.65 1470.2 0.95 9000 42894.05 69606.68 6480.05 6480.17 1101.28 1101.31 49 7000 32322.99 54525.8 12212.54 0 1712.81 0 334.82 3000 25434.71 42694.87 31677.21 18.58 31695.79 22915.63 68.55 154.19 54525.8 25207.63 0 25207.63 17500.64 22.82 36.22 42694.87

3.3 RATIO ANALYSIS

Liquidity Ratios Current Ratio:Meaning:- This ratio compares the current assets of the company to its liability the measuring the ability of the firms to meet it current obligations. This ratio indicates the position of liability. They are computed to a certain whether the company is capable of meeting its short-term obligations from its short-term recourses.

Formula:Current Ratio:-Current Assets / Current Liabilities

Current Assets Stock Sundry Debtors Cash & Bank Balance Loan & Advances 2009 2008 Current 2007 Liabilities Liabilities Provisions 2009 2008 2007

Calculation:Current Ratio of year 2007:- 39641.22/35608.47 = 1.11:1 Current Ratio of year 2008:- 55281.33/58263.48 = 0.95:1 Current Ratio of year 2009:- 74504.46/66648.91 = 1.12:1 Interpretation:-

Liquid Ratio:Meaning :- The variant of current ratio is Liquid ratio which shows the amount of cash available to meet immediate payments. This ratio indicates the position of liquidity. They are computed to a certain whether the company is capable of meeting its short-term obligations from its short-term recourses.

Formula:Liquid Ratio:- Liquid Assets / Liquid Liabilities

Liquid Assets Current Assets Less: Stock 2009 2008 Liquid 2007 Liabilities Current Liabilities Less: Bank Overdraft 2009 2008 2007

Calculation:-

Interpretation:

Profitability Ratio Gross Profit Ratio:-

Meaning: It is a ratio expressing relationship between gross profit earned to net sales it is an useful indication of the profitability of business.
Formula:Gross profit Ratio:- Gross Profit / Net Sales * 100
Particular Gross Profit Net Sales 2009 2008 2007

Calculation:-

Interpretation:

Net Profit Ratio:Meaning :- This ratio is valuable for the purpose of ascertaining
the overall profitability of the business and shows the efficiency of the business. It is the reserve of the operating ratio.

Formula:Net Profit Ratio:- Net Profit / Net Sales * 100

Particular Net Profit Net Sales 2009 2008 2007

Calculation:Interpretation:

Operating Ratio:It is the ratio showing the relationship between COGS plus operating activities with net sales, it shows the efficiency of the company. Formula:Operating Ratio:Cost of Goods Sold + Operating Expenses / Net Sales * 100
Particular Cost of Goods Sold Operating Expenses Net Sales 2009 2008 2007

Calculation:-

Interpretation:

Selling Expense Ratio:Formula:Selling Expense Ratio:- Adm. Expenses / Net Sales * 100
Particular Selling Expenses Net Sales 2009 38123.85 239616.39 2008 28639.18 208339.60 2007 34361.18 160042.90

Calculation:Interpretation:

Administrative Expense Ratio:-

Formula:Administrative Expense Ratio:- Adm. Expenses / Net Sales * 100

Particular Administrative Expenses Net Sales 2009 11391.54 239616.39 2008 8775.25 208339.60 2007 10487.85 160042.90

Calculation:Interpretation:

Financial Expense Ratio:Formula:Financial Expense Ratio:- Financial Expenses / Net Sales * 100
Particular Financial Expenses Net Sales 2009 2008 2007

Calculation:Interpretation:

Return on Capital Employed (ROCE):Capital Employed:- Share capital + Reserve & surplus + Long term loans Fictitious assets Formula:ROCE:- PBIT / Capital Employed * 100

Particular PBIT Capital Employed

2009

2008 36517.59

2007 28422.30 40344.99

86852.84

53170.76

Interpretation:

Return on Shareholders Equity (ROSE):Formula:ROSE:- PAT / Shareholders funds * 100

Particular PAT Shareholders' Funds 2009 2008 2007

Calculation:Interpretation:

Return on equity share capital (ROESC):Formula:(ROESC):- PAT Pref. Dividend / Equity Share Capital * 100
Particular PAT Pref. Dividend Equity Share Capital 2009 2008 2007

Calculation:Interpretation:

Return on Total Assets (ROTA):Formula:ROTA:- PAT / Total Assets * 100

Particular PAT Total Assets 2009 37355.26 156550.25 2008 31695.79 114162.21 2007 25207.63 78217.45

Calculation:Interpretation:

Earning Per Share (EPS):Formula:Earning Per Share:- PAT Pref. Dividend / No. of Equity Shares
Particular PAT Pref. Dividend No. of Equity Shares 2009 2008 2007

Calculation:Interpretation:

Dividend Per Share (DPS):Formula:Dividend per Share:Total Dividend Paid to Eq. Shareholders / No. of Equity Shares
Particular 2009 2008 2007

Total Dividend Paid To Eq. Shareholders No. of Equity Shares

Calculation:Interpretation:

Dividend Pay-out Ratio:Formula:Dividend Pay-out Ratio:- DPS / EPS * 100

Particular DPS EPS 2009 2008 2007

Calculation:Interpretation:

Leverage Ratios Debt-Equity Ratio:Formula:Debt-Equity Ratio:- Long term Liabilities / Shareholders Funds * 100
Particular 2009 2008 2007

Long Term Liabilities Shareholders' Funds

Calculation:Interpretation:

Proprietary Ratio:Formula:Proprietary Ratio:- Proprietors Funds / Total Assets * 100

Particular Proprietors' Funds Total Assets 2009 2008 2007

Calculation:Interpretation:

Fixed Capital-Fixed Assets Ratio:Fixed Capital = Share Capital + Reserves + Long term Liabilities Formula:Fixed Capital-Fixed Assets Ratio:Long term Funds (Fixed Capital) / Fixed Assets
Particular Fixed Capital Fixed Assets 2009 2008 2007

Calculation:Interpretation:

Interest Coverage Ratio:Formula:Interest Coverage Ratio:- PBIT / Interest

Particular PBIT Interest 2009 2008 2007

Calculation:Interpretation:

Activity Ratios Stock Turnover:Average Stock:- Opening Stock + Closing Stock / 2 Formula:Stock Turnover:- Cost of Goods Sold / Average Stock
Particular Cost of Goods Sold Average Stock 2009 2008 2007

Calculation:Interpretation:

Fixed Assets turnover:Formula:Fixed Assets turnover:- Sales / Fixed Assets

Particular Sales Fixed Assets 2009 2008 2007

Calculation:Interpretation:

Current Assets Turnover:Formula:Current Assets Turnover: - Sales / Current Assets

Particular Sales current Assets 2009 2008 2007

Calculation:Interpretation:

Total Assets Turnover:Formula:Total Assets Turnover:- Sales / Total Assets

Particular Sales Total Assets

2009

2008

2007

Calculation:Interpretation: