Type Profitability ratio

Name of Ratio Operating profit ratio

Mar'11 3.68

Mar10 3.87

Reasons It is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. The reason would be both the operating income and EBIT are increasing. The company is earning more revenue by incurring less amount on variable expenses.

Suggestions Co. has to minimize its variable expenses in order to gain more profit and also the income from other sources should be increases.

Gross profit ratio

30.03

25.76

Operating expenses should be minimized and co. also has to make more credit sales. The co. have to increase its sales and decrease its expenses i.e. tax and depreciation. in order gain more profit.

Net profit ratio

9.05

7.14

Co. is increasing its sales and also generating revenue from other sources. This would be the reason in increasing net profit.

Return on capital employed

6.99

7.83

Under this the EBIT is increasing and the total assets and c. liabilities are decreasing. The total assets are decreases because of loans and advances.

The co. has to take money from out side in the form of loans and advances in order to sustain or increase the ratio.

Return on net 1.90 worth

2.02

As the net income of the co. is increasing but the shareholders equity is decreasing. Share holders equity means current assets less current liabilities.

Liquidity ratio

Current ratio

1.77

1.05

Quick ratio

0.87

0.65

Co. has to increase more its equity share capital and the net income. Because the investors would lie their behavior to invest is depends on this ratio. The current ratio is The suggestion would totally depends upon be the co. has to make the investments in its sales more on current assets and the credit. As the buying current liabilities. behavior of customer All the current assets would be increased. are increasing and the And also they have to liabilities are spend less on variable decreasing. expenses in order to decrease current liabilities. Quick ratio is current Suggestion would be assets less inventories the investments in divided by current inventories and liabilities. Under this current liabilities both the investments in should be minimized inventories are in order to increase increases in the year 11. the ratio. The cos debt and equity both are increasing. But they have to increase more equity as compare to debt because it is tax free. The total debt is rising with the rise in the total assets. More capital has to be employed in the form of equity more than debt.

Solvency ratio

Debt equity ratio

2.02

1.96

Debt Ratio

0.39

0.32

Turnover ratio

Inventory 3.47 turnover ratio

5.07

Co. has to invest more and in the fixed assets to have the future prosperity. Under this both the It shows a very good sales and the inventory turnover as how much are increases. But the frequents the reason is inventory does inventory should be not increases with the purchase and sold out. same proportion as the But only the co. sales are increases. should also focus on their credit sales..

Debtors 4.20 turnover ratio

3.50

The debtors and the sales are increases so this would means that the ratio also increases.

Assets 1.13 turnover ratio

0.97

The firm is very efficient in increase its revenue by employing their assets.

Debt Coverage ratio

Interest coverage ratio Debt to capital ratio

0.40

0.39

It is calculated by dividing the debt to shareholders equity + debt. Under this both the debt and equity are increases. It is calculated by dividing the net operating income by total debt service.

This shows how frequents the co. can sales on credit and collects their debts. And also co. has to increase its credit sales. It also indicated pricing strategy. Companies with low profit margin tend to have high assets turnover, while those with high profit margin will have low asset turnover. The companies have to increase their profit margin in order to have a good asset turnover. The debt is increases but co. should increase the shareholders equity in order to have more funds available to shareholders. Operating expense should be minimized and the debt should be increase in the form of loans.

Debt service coverage ratio

0.27

0.29