accounts (2015)

A Presentation on

Godrej Interio ( Furniture Industry)

Presented By:- LTB05Deeptanshu Dwivedi 057Asem Naocha Singh 056

Maitrey Pandey 058Poorva Narain 080

Priyanka 088

FURNITURE INDUSTRY IN INDIA

Market size- approximately Rs.65000 Crores The range of indigenous furniture available

in India includes both residential and contract system furniture, with an increased concentration in office and household furniture.

Furniture parts and contract furniture in wood, metal, plastic, cane and bamboo.

80% of the Indian market lies in the unorganized sector.

FURNITURE INDUSTRY IN INDIA

The most popular forms of Indian furniture include:

Home Garden furniture Office furniture Kitchen furniture Bedroom furniture Upholstered furniture Seating

The annual Per Capita Consumption of Furniture in India is not more than INR 2000.

This sector has some 5000 active companies of which 65% produce wooden furniture, 25% metal furniture and 10% manufacture accessories and furnishing items in plastic.

In the wood used for furniture in India, teak accounts for almost 50% while Sal and Deodar for about 20%; Mahogany and balance 30% between white cedar, Silver oak and pinewood, in order to conserve the forests, the cutting of soft jungle wood has been banned by the Indian government.

Domestic furniture accounts for 65% of the production value whilst corporate/office furniture represents % of the production, hotel furniture 15% a15nd other furniture.

One study carried out by the World Bank attributed 33% of private consumption in India to the richest 10% of the population, whereas the poorest decile of the Indian population claimed only 3% of the consumption. If the richest 20% of the population are considered, the quota of total consumption attributable to this group is around 47%.

PRO’S AND CON’S OF THE FURNITURE INDUSTRY IN INDIA

Pro’s Huge market still untapped Largest open market economy Consumers are exposed to information age and

becoming more demanding in terms of product quality, usage and design.

Business model is outdated, unorganized and high on operating cost.

Con’s No “Do-It Yourself” culture Needs to change sourcing strategy Competitors with very low prices Low home and garden expenditure

BRANDS IN ORGANIZED MARKET:

Godrej Interio Home Town Zuari Usha Lexus Durian Damro

GODREJ INTERIO OVERVIEW

Established in 1897, the Company was incorporated with limited liability on March 3, 1932, under the Indian Companies Act, 1913.

Godrej Interio is a business unit of Godrej & Boyce Mfg. Co. Ltd. - part of the Godrej Group, one of India’s largest engineering and consumer product groups.

Godrej Interio is India’s largest furniture brand. From manufacturing the humble Storwel cupboard

80 years back to being a vibrant, innovative brand with a diverse portfolio.

GODREJ INTERIO OVERVIEW

The Company has a nationwide network of GODREJ INTERIO Retail Stores, operated by the Company and the Franchisees, more than 2,200 Wholesale Dealers, and more than 18,000 Retail Outlets.

It present across India through our 50 exclusive showrooms in 18 cities and through 800 dealer outlets.

Has employees around 26,000 (2013).

PRODUCTS (“INTERIO” FURNITURE)

Office Furniture - Desking, Seating, Open Plan Office Systems, Computer Furniture and Storages.

Home Furniture - Living, Dining, Bedroom Furniture; Kitchen Cabinets.

Laboratory Furniture, Marine Accommodation, Healthcare Furniture; Turnkey Interiors, Carpet Tiles, and Mattresses

REVENUE FROM OPERATIONS (INCLUDING EXCISE DUTY)

Fiscal Year 2013-14: ₹ 78 billion (US$1.3 billion) Combined Revenue from Operations of the Company and its major subsidiaries and affiliates, for FY 2013-14: ₹ 247 billion (US$4.1 billion) and according to 2015, its Revenue is ₹ 320 billion (US$5.0billion).

FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is an exceptionally powerful tool for a variety of users of financial statements, each having different objectives in learning about the financial circumstances of the entity.

Users of financial statement are- Creditors Investors Management Regulatory Authorities

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Horizontal Analysis Financial statements present comparative information for

at least two years. Calculates the amount and percentage changes from the

previous year to current year. Trend Analysis

Calculation of percentage changes in financial statement items for a number of successive years.

It is an extension of horizontal analysis. First a value of 100 is assigned to the items in the

financial statement in the base year and then express the amounts in the following years as a percentage of the base year value.


Vertical Analysis Proportional expression of the amount of each item

on a financial statement to the statement total. Common size statements are prepared in which the

items within each statement are expressed in percentages of some common number and always add up to 100.

It is conventional to express items in the profit and loss account as percentage to sales and balance sheet items as percentages of the total of shareholders` equity and liabilities.

Ratio Analysis

Profitability Ratio

Liquidity Ratios

Solvency Ratios

Capital Market Ratios

Profit MarginAsset TurnoverReturn on AssetsReturn on EquityEarning Per Share

Current RatioQuick RatioDebtor TurnoverInventory Turnover

Debt to Equity RatioLiability to Equity Ratio Interest Coverage Ratio

Price Earning RatioDividend YieldPrice to Book Ratio

PROFITABILITY RATIOS

1.Profit Margin/Return on SalesMeasures the amount of net profit

earned by each rupee of revenue. Profit Margin = [PAT ÷ Sales] x 100 The pressure on margin should be

analyzed by looking at major categories of expenses such as

material , salaries ,wages ,advertising etc.

2010 - 2011

2011 - 2012

2012 - 2013

2013 - 2014

2014 - 2015

11.29% 14.01% 6.6% 8.23% 10.23%

Comment on Net Profit Margin: It has been observed Godrej Industries Limited (GIL) enjoy a profit margin of 11.99 % in the year ending March 2011 which got increased to 14.01 % in year 2012. This increase in net profit margin is due to the reason of substantial increase in the net sales and relatively lower increase in the expenses or cost of sales.

Then it is observed there is a substantial decrease in the net profit margin from 14.01 % in the year 2012 to 6.6 % in the year 2013. It was apparent that though there was an increase in the sales turnover yet there was a substantial increase in the expenses category (power and fuel from 97.48 crore in 2012 to 108.82 crore in 2013) and that even after the increase in the sales the company experiences the pressure in its profit margin.

Again it is observed that there is an increase in the net profit margin from 6.6 % in the year 2013 to 8.23 % in the tear 2014. It is because of the reason of an increase in other income from 93.54 crore in 2013 to 144.98 crore in 2014 although the even though there is a decrease in the net sales and an increase in the cost of sales.

The net profit margin increases in the year 2015 also from 8.23 % to 10.23% and this is due to the reason of a substantial decrease in the cost of sales (decrease in raw materials consumption as a result of more efficient employees).

2. Asset Turnover Measures the firm's efficiency in utilizing its

assets. It indicates how many times the assets were turned over in a period in order to generate sales.

Asset Turnover = [Sales ÷Average Total Assets] High: we can infer that the enterprise is managing

its assets efficiently. Low: it implies that there is presence of more

assets than a business needs for its operations. Decrease in asset turnover could be because of

excess capacity , frequent breakdown, non-availability of raw materials or power, strikes and lock outs and so on.

2010 - 2011

2011 - 2012

2012 - 2013

2013 - 2014

2014 - 2015

0.75 times

0.99 times

0.73 times

0.55 times

0.47 times

Comment on Asset Turnover Ratio: It may be observed that the asset turnover in the year 2011 was 0.75 times which got increased to 0.99 times in the year 2012. This increase in the asset turnover is because of the efficient management of the inventories and the resulting increase in net sales.

The asset turnover ratio steadily decreases or declines from 2013 to 2015 but it can be observed that the net sales and revenue is almost constant in the above years. It may be because of the inefficient management of the inventories (overstocking) and the increased or added capacity in the fixed assets and not being used.

3. Return on Assets / Return on investments Measure of profitability from a given level of

investment. It is an excellent indicator of a company's over all profitability

Return on Assets = [PAT ÷ Average Total Assets] x 100

2010 - 2011

2011-2012

2012-2013

2013-2014

2014-2015

9% 13.95% 4.85% 4.55% 4.77%

Comment on Return on Assets: It is observed that the ROA substantially increases from 9 % in the year 2011 to 13.95 % in the year 2012. This is because of the efficient management and the resulting increased revenue or sales turnover.

Then it is observed that the ROA consistently declines from the year 2013 to 2015 even though the net sales increases in the year 2013 over the sales of 2012 and remains almost constant in the year 2014 and 2015. This decrease in the ROA is majorly because of the substantial increase in the total expenses of GIL.

4.Return on Equity Measures the profitability from the

shareholders` point of view. It measures the efficiency in the use of shareholders` funds.

Return on Equity= [PAT÷ Average Shareholders Equity] x100

Shareholders` expect managers to earn

an ROE higher than the firm's cost of equity. Decrease: may imply lack of opportunities

that would yield higher returns.

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

13.32% 17.35% 6.77% 7.82% 9.62%

Comment on Return on Equity: You can calculate the return on equity of a company by

dividing the PAT (profit after tax) by the average shareholders’ equity and multiply by 100. Average shareholders’ equity is obtained by dividing the sum of the opening and the closing shareholders’ equity by 2. It can be observed from the ratio calculated of the return on equity of the five years of Godrej Ltd that in the year 2012 the return on equity of the company was 17.35% which got reduced by 10.78% and reached 6.77% in the year 2013. The reduction in the return on equity indicates the low efficiency of the company to tap the beneficial opportunities in the market which could have increased their market share. This can be attributed to the reduction in the profit after tax in the year 2013(99.74) in comparison to 2012(201.56). So it can be concluded that Godrej Ltd was inefficient in tapping the profit opportunities in the market in the year 2013.

5.Earning Per Share= net profit after tax for the period attributable to equity shareholders ÷ number of equity shares outstanding during that period.

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

4.2 per share

6.35 per share

2.89 per share

3.57 per share

4.43 per share

Comment on the Earning per Share You can calculate the earnings per share of a company by

dividing the PAT(profit after tax) by the number of equity shares outstanding. It can be seen from the ratios calculated for all the five years of Godrej Ltd for the earnings per share that there is a drastic fall in the earnings per share in the year 2013 in comparison to the year 2012, that is from 6.35 in 2012 it fell down to 2.89 in 2013, which is a change of 3.46 per share. The reason for this can be concluded to be the fall in the fall in profit after tax in the year 2013 (99.74) in comparison to profit after tax in the year 2012 (201.56). this denotes the inefficiency of the company in being able to tap the profits in the market in the year 2013.

LIQUIDITY RATIOS

1. Current Ratio Indicates the company's ability to pay its debts in the

short-term. It shows the amount of current assets a company has per rupee of current liabilities.

Current Ratio = Current Assets ÷ Current Liabilities

Rule of the thumb: current ratio is expected to be atleast 2:1.

A large current ratio by itself is not satisfactory measure of liquidity

when inventories constitute a major part of the current assets. Quick Ratio is calculated as a supplement to the current ratio.

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

0.71:1 0.65:1 0.86:1 0.38:1 0.36:1

Comment on Current Ratio You can calculate the Current ratio of a company by dividing the

current asset of the company by the current liabilities of the company of the respective year. Current ratio is expected to be atleast 2:1. A reduction in the current ratio of company in comparison to previous year denotes that the company does not enjoy good liquidity condition and must take necessary measures to improve its liquidity position. It can be observed from the current ratio calculated of all the five years of Godrej Ltd that the current ratio of the company fell down from 0.86:1in the year 2013 to 0.38:1 in the year 2014,which shows a significant difference of 0.48. This reduction in the current ratio can be attributed to the increase in the current liability of the company in the year 2014 in comparison to the year 2013. This indicates that the company is not able to enjoy good liquidity conditions and must take necessary steps and measures to improve its liquidity position in the market.

Quick Ratio / Acid Test Ratio All current assets are not equally liquid. While cash

is readily available for use , debtors can be converted into cash with some effort, and inventories are two steps away from cash( sale and collection).

Quick Ratio = Quick Assets ÷ Current Liabilities, where

quick assets = current assets – inventoriesRule of the thumb: quick ratio is expected to be atleast 1:1 This means that a firm must have atleast as much

liquid assets as its current obligations so that it does not face any difficulty in paying those obligations.

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

0.6:1 0.53:1 1.29:1 0.41:1 0.5:1

Comment on Quick Test/Acid Test Ratio All current assets are not equally liquid. While cash is readily

available for use, debtors can be converted into cash with some effort, and inventories are two steps away from cash (sale and collection).

Quick Ratio = Quick Assets /Current Liabilities Whereas, Quick Assets = Current assets – Inventories Rule of the thumb: quick ratio is expected to be at least 1:1 This means that a firm must have at least as much liquid

assets as its current obligations so that it does not face any difficulty in paying those obligations

It has been observed that the Godrej Company has a quick ratio of 0.60 in march 2011 which further get reduced to 0.53 in march 2012 and it again increased to 1.29 in march 2013 which means that company does not have sufficient liquid funds in order to pay off its current liability during march 2012 and it again gets tremendously reduced to 0.41 in march 2014 and slightly increases to 0.50 in march 2015. In March 2013 the company performance was good in terms of quick ratio which is now being seen the some better results from March 2015.

3. Debtor Turnover A company's ability to collect from its customers in a prompt

manner enhances its liquidity. Debtor Turnover measures the efficacy of a firm's credit policy

and collection mechanism and shows the number of times each year the debtor turns into cash. It indicate the quality of a firm's debtors and collection efforts.

Debtor Turnover= Sales ÷ Average Debtors , where average debtor = [opening debtors + closing debtors] ÷ 2 High: debtors are being converted rapidly into cash and the

quality of the company's portfolio of debtors is good. Average Debt Collection / Days` Sale Outstanding Measures the time taken for collection of debt. It helps the

company to calculate leads or lags in collection relative to the company's

credit period. Average Debt Collection = Average Debtors ÷ Average Daily

Sales average daily sales = Sales ÷360 days

Average Debt Collection = 360 days ÷ Debtor Turnover

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

9.53 times

11.24 times

10.73 times

11.95 times

13.99 times

Comment on Debtor’s Turnover Ratio A company's ability to collect from its customers in a prompt manner

enhances its liquidity. Debtor Turnover measures the efficacy of a firm's credit policy and

collection mechanism and shows the number of times each year the debtor turns into cash. It indicates the quality of a firm's debtors and collection efforts.

Debtor Turnover= Sales / Average Debtors,Whereas, Average Debtor = [opening debtors + closing debtors]/ 2 High: Debtors are being converted rapidly into cash and the quality of

the company's portfolio of debtors is good. It has been observed that Godrej company debtor’s turnover in march

2011 was 9.53 and we witnessed that it has increase to 11.23 in next year i.e. march 2012 which was good for the company in collection of its outstanding debts and in march 2013 it was slightly decrease to 10.73 and again the company mange to increase its debtor’s turnover to 11.95 in march 2015 and it has moved towards a very good progress in march 2015 in debtor’s turnover to 13.99 in collection of its outstanding debts.

4.Average Debt Collection PeriodObtained by dividing 360 by the Debtors

Turnover Ratio . Is expressed in terms of days.

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

37.77 days

32.02 days

33.55 days

30.12 days

25.73 days

Comment on Average Debt Collection Period You can calculate the average debt collection period of a company by

dividing 360 by the debtors turnover. Measures the time taken for collection of debt. It helps the company to calculate leads or lags in collection relative to the company's credit period. A high average debt collection period denotes a company’s delay in collecting debts and thus reflects its efficiency. A low average debt collection period reflects that a company is efficiently collecting the debts on time and on regular basis. From the calculations it can be concluded that in the year 2011 the average debt collection period was 37.77 days which came down in the year 2012 to 32.02, which is a fall of 5.75 days. This shows that the company improved its efficiency to collect its debts on time and thus the average debt collection period reduced and also because the debtors turnover also increased which resulted in reduction in average debt collection period. The same is the reason for the fall in the average debt collection period of the year 2015 which was 25.73, in comparison to the year 2014 which was 30.12.

5.Inventory Turnover Measure the number of times a company's

inventory is turned into sales. Inventory Turnover= Cost of Goods Sold ÷

Average Inventories High: indicates efficient inventory management

.fast-moving inventory. It runs lower risk of obsolescence and reduces interest, insurance and storage charges.

Average Inventory holding Period= 360 days ÷ Inventory Turnover

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

6.01 times

7.2 times

11.29 times

6.65 times

9.3 times

Comment on Inventory Turnover Ratio You can calculate a company’s inventory turnover ratio by dividing

the cost of goods sold by the value of its inventory. This inventory figure can either be averaged over a period of time such as a year, or it can refer to one particular time, giving a snapshot. A company’s inventory turnover ratio can give you an idea of how well it manages its resources. A high inventory turnover ratio is a little harder to interpret. It could mean the company has had unexpectedly strong sales -- a good sign. Or it could mean the firm is not managing its buying as well as it might and is having difficulty in administering its inventory. If its ratio is very low, it may mean the company has much more inventory than it really needs at any one time. Therefore it has too much of its capital tied up in goods or raw materials that it will take a long time to sell or make a profit on. Generally speaking, a business with high profit margins on its finished goods can worry less about a low turnover ratio.

It may be observed that there has been a significant change in the inventory turnover of Godrej Ltd from 6.01times in the year 2011 to 7.20times in the year 2012.The change of 1.19times can be said to have taken place because of the change in the sales from the year 2011(1112.33) to the year 2012 (1438.04). So there is a change of Rs 325.71cr. This can be taken as a positive sign for the company as the sales are increasing. It may be observed that there is a change of 4.64times in the inventory turnover from the year 2013(11.29 times) to the year 2014(6.65 times). The reason for this drastic change can be attributed to a significant change in the closing inventories of the year 2013 (Rs138.25cr) and the closing inventory of the year 2014 (Rs232.17cr). There is a difference of Rs93.92 cr which is a big difference and this shows that Godrej has been less efficient in the year 2014 in matching its actual inventory requirement and the inventory that it has store at the year end.

6.Average Inventory Holding PeriodObtained by dividing 360 days by the

inventory turnover.

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

59.9 days

50 days

31.88 days

54.13 days

38.70 days

Comment on the Average Inventory Holding Period You can calculate a company’s average inventory holding

period by dividing the 360 by the inventory turnover of the respective year. This figure is always expressed in terms of days. A company’s average inventory holding period tells about a company’s efficiency to dispose of its inventory in time.

It may be observed that there is drastic change in the average inventory holding period of the 2014 from the preceding year 2013. In the year 2013 the average inventory holding period is 31.886 days whereas in the year 2014 the average inventory holding period is 54.135 days. Thus there is a difference of 32.249 days, which is a big difference and this shows that Godrej Ltd has been inefficient in disposing of its inventory on time.

SOLVENCY RATIOS

Long-term solvency of a business is affected by the extent of debt used to finance the assets of the company. The presence of heavy debt in the company's capital structure is thought to reduce the company's solvency because debt is more risky than equity.


1. Debt Equity Ratio A wise mix of debt and equity can increase the return on equity

for two reasons: Debt is generally cheaper than equity Interest payments are tax-deductible expense, Debt Equity Ratio measures the relationship of the capital

provided by the creditors to the amount provided by shareholders. It indicates the extent of use of financial leverage.

Debt Equity Ratio = Debt ÷ Equity debt includes interest bearing interest-bearing liabilities both

short term and long term and secured loan + unsecured loans but excludes operating liabilities.

High: aggressive use of leverage. A highly leverage company is

more risky for creditors. Low: a small degree of leverage and the company is too

conservative.


2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

0.29:1 0.23:1 0.54:1 0.93:1 1.08:1


Comment on the Debt Equity Ratio You can calculate the debt equity ratio of a company by dividing

the debt of an year by the equity of the same year of a company. In general, a high debt-to-equity ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations. However, low debt-to-equity ratios may also indicate that a company is not taking advantage of the increased profits that financial leverage may bring.

Capital-intensive industries tend to have higher debt-to-equity ratios than low-capital industries because capital-intensive industries must purchase more property, plants and equipment to operate. This is why comparison of debt-to-equity ratios is generally most meaningful among companies within the same industry, and the definition of a "high" or "low" ratio should be made within this context.


Lenders and investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a business decline. Thus, firms with high debt-to-equity ratios may not be able to attract additional capital.

It may be observed from the balance sheet of Godrej Ltd that they have been successful in attracting increased additional capital for their company in the year 2013 (0.54:1) as compared to the year 2012 (0.23:1). This can be attributed to their low debt equity ratio of the year 2012 of 0.23:1 as lower the debt equity ratio higher is the probability of a company to secure additional capital as lenders and investors prefer low debt equity ratios. In the year 2012 total debt was Rs1497.58cr and in the year 2013 it was Rs 2484.02cr. so Godrej enjoys increased confidence of the investors and lenders.

http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/lender-5069


2.Liability to Equity Ratio

Liability to Equity Ratio = All Liabilities ÷ Shareholders`

Equity All liabilities = Total liabilities –

shareholders` equity


2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

0.01:1 0.11:1 0.25:1 0.11:1 -


Comment on the Liability to Equity Ratio You can calculate the liability to equity ratio of a company

by dividing all liabilities of a company by the shareholder’s equity. It can be observed from the ratio calculated of the five years of the company that the liquidity ratio was 0.11 in 2012 which rose to 0.25 in 2013 and then again fell down to 0.11 in the year 2014. This fluctuation in the liquidity ratio indicates that the company was not enjoying a good liquidity condition in the years 2012 and 2014 as the liquidity ratios were low whereas in the year 2013 the company had a liquidity ratio of 0.25 which is highest in all the five years and so the enjoyed maximum liquidity in the year 2013.


3.Interest Coverage Ratio Measures the protection available to the

creditors for payment of interest charges by the company. This shows whether the company has sufficient income to cover its interest payments.

Interest Coverage Ratio = Profit Before Interest and Tax ÷ Interest Expense

High: adequate safety for payment of interest even if there were to be a drop in the company`s earnings.


2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

1.93:1 2.53:1 1.59:1 1.22:1 0.54:1


Comment on Interest Coverage Ratio You can calculate the interest coverage ratio of any company by dividing

the profit before interest and tax by the interest expenses. In general, a high coverage ratio may suggest a company is "too safe" and is neglecting opportunities to magnify earnings through leverage. An interest coverage ratio below 1.0 indicates that a company is not able to meet its interest obligations. Because a company's failure to meet interest payments usually results in default, the interest coverage ratio is of particular interest to lenders and bondholders and acts as a margin of safety. However, because the interest coverage ratio is based on current earnings and current expenses, it primarily focuses a company's short-term ability to meet interest obligations. Some industries tend to have higher interest coverage ratios than others, and cyclical companies in particular can experience significant swings in their interest coverage ratios (especially during recessions). Thus, comparison of interest coverage ratios is generally most meaningful among companies within the same industry, and the definition of a "high" or "low" ratio should be made within this context.

http://www.investinganswers.com/financial-dictionary/ratio-analysis/coverage-ratio-1042

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/earnings-1514

http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/leverage-61

http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/default-5956

http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/lender-5069

http://www.investinganswers.com/financial-dictionary/bonds/bondholder-5222

http://www.investinganswers.com/financial-dictionary/stock-valuation/margin-safety-1273


It may be observed from the figures of the interest coverage ratio of Godrej Ltd that in the year 2015 its interest coverage ratio is 0.54:1 which is less than 1, which is not a positive sign as an interest coverage ratio less than 1 indicates that a company is not able to meet its interest obligations. Higher the interest coverage ratio higher is the confidence of the shareholders and lenders in the company’s ability to meet the short term interest expenses and thus they invest more in the company. It may also be noticed that in the year 2012 the interest coverage ratio of Godrej Ltd is the highest, 2.53:1, in the last five years which indicates that the investors would have invested more in the company in the succeeding year that is 2013.


Capital market ratios relate the market price of a company`s share to the

company`s earning an dividends.1. Price Earning Ratio Popular measure extensively used in investment

analysis. It is considered as an indicator of a firm's growth prospects.

Price Earning Ratio= Average Stock Price ÷ Earning

Per Status High: stock market is confident in the company`s

future earning growth. Low: lower faith in in the company`s future earning

growth.


2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

41.69 39.88 99.71 87.61 78.216


Comment on Price Earnings ratio The price earnings ratio of Godrej during the year 2010-11 was 41.61

which in the year decreased to 39.88 in the year 2011-2012, this shows that the investors are not confident about the company’s future earnings growth. The earning power of the company decreased this year.

During the year 2012-2013 the earnings ratio of Godrej company increased to 99.71 which shows that the investors are confident about the company and they are ready to pay 99.71 rupees to the company for 1 rupee earning. The earning power of the company increased this year.

The price earnings ratio of Godrej company again decreased during the year 2013-14 to 78.21 which shows that the investors are not confident about the company’s future earnings growth and they are not ready to pay 78.21 rupees to the company for 1 rupee earnings. The earning power of the company again decreased this year.


2. Dividend Yield Represents the current cash return

to shareholders. Dividend Yield = Dividend Per

Share ÷ Average Stock PriceTotal return to shareholder consists of

dividend and change in stock price.

2010-2011

2011-2012

2012-2103

2013-2014

2014-2015

0.993 0.69 0.591 0.437 0.50


Comment on Dividend Yield From 2010-11 the company Godrej earned .993% returns

on their investment, while during the year 2011-12 the company earned 0.69% returns on their investment, which decreased from the previous year. The dividend yield further decreased to 0.591% during the year 2012-13. During the year 2013-14 the dividend yield gradually declines to 0.50%.

According to these data it is clear that the investors received the highest return in comparison to the risk assumed by them during the year 2010-2011. In the rest of the year the company’s dividend yield kept declining showing a decline in returns earned by shareholders.


3. Price to Book Ratio This compares a company`s stock price with

the book value (accounting value). Book value per share is equal to the shareholders equity divided by the number of equity shares.

Price to Book Ratio = Market Price per Share ÷ Book

Value per Share More than 1: market expects the stock to earn

at a rate higher than the required rate. Low: under-pricing of shares.


2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

6.11 6.61 6.07 6.87 8.14


Comment on Price to book Ratio During the year the price to book ratio

was 6.11 times while during the year 2011-12 it was 6.9 times which gradually shows a marginal decline during the year 2012-13 to 6.07 times. But during the year 2013-14 the price to book ratio decreased to 4.80 this indicates under pricing of the stocks.

accounts (2015)

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