ntpc ratio analysis_final
TRANSCRIPT
RATIO ANALYSIS
Group Members
•SAKET AMBEKAR
04•H
IMANSHU ANAND
05
•DEVENDRA BELANI
12
•RAVI JESWANI
37
•AKSHAYE KAPSE
40
•ROHAN KULKARNI
48
COMPANY PROFILE OF NTPC
India’s largest power company, NTPC was set up in 1975 to accelerate power development in India. NTPC is emerging as a diversified power major with presence in the entire value chain of the power generation business.
NTPC
Apart from power generation, which is the mainstay of the company, NTPC has already ventured into consultancy, power trading, ash utilisation and coal mining. NTPC ranked 317th in the ‘2009, Forbes Global 2000’ ranking of the World’s biggest companies.
Growth
Market Capacity
Ratio Analysis
Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures.
Ratio Analysis
According to Myers , "Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."
Profitability ratios
Gross profit ratio (GP ratio)
Gross profit ratio = Gross Profit *100 Net Sales
Gross Profit Ratio
• In 08-09 the G.P. Ratio has declined drastically (591bps) indicating sudden increase in cost of production.
• In 09-10 Co. has managed to control its cost which can be seen by increase in the gross margin (167 bps).
Company NTPC
F.Y. Gross Profit Net Sales Gp Ratio ( in %)
2007-08 11,540.90 37,050.10 31.15
2008-09 10,583.60 41,923.80 25.24
2009-10 12,466.10 46,322.60 26.912007-08 2008-09 2009-10
0
5
10
15
20
25
30
3531.15
25.24 26.91
GP Ratio ( in %)
GP Ratio ( in %)
Net Profit Ratio
Net profit ratio = Net Profit *100 Net Sales
Net Profit Ratio
Company NTPC
F.Y. Net Profit Net Sales Np Ratio ( in %)
2007-08 7414.8 37050.1 20.01
2008-09 8201.3 41923.8 19.56
2009-10 8728.1 46322.6 18.84
•NTPC is able to increase its net profit from 2007-08 to 2009-10 but is not increased proportionately as compared to increase in Net sales from 2007-08 to 2009-10 and thus Net profit ratio has a decreasing trend•Not able to control their expenses.
2007-08 2008-09 2009-1018.218.418.618.8
1919.219.419.619.8
2020.2 20.01
19.56
18.84
NP Ratio ( in %)
NP Ratio ( in %)
Operating Ratio
Operating ratio = Cost of good sold+ Operating expenses
*100 Net Sales
Operating RatioCompany NTPC
F.Y. Operating Cost
Net Sales Operating Ratio ( in
%)2007-08 25550.1 37050.1 68.962008-09 31391.6 41923.8 74.882009-10 33980.1 46322.6 73.36
•Increase in 08-09 (592 bps) and slight decrease in 09-10 (152 bps).
•NTPC is not able control their operational cost and thus their operational ratio is increasing from 07-08 to 09-10.
2007-08 2008-09 2009-106667686970717273747576
68.96
74.88
73.36
Operating Ratio ( in %)
Operating Ratio ( in %)
Return On Shareholder’s Investment Ratio
Return on
shareholder’s = Net profit after tax - Preference dividend *100
investment Share holder's fund
Return On Shareholder’s Investment Ratio
Company NTPC
F.Y. NPAT Shareholder'sFund Ratio ( in %)
2007-08 7414.8 54267.4 13.66
2008-09 8201.3 58994.9 13.9
2009-10 8728.1 62437.5 13.982007-08 2008-09 2009-10
13.5
13.6
13.7
13.8
13.9
14
14.1
13.66
13.9
13.98
Ratio ( in %)
Ratio ( in %)
•NPTC’s return on shareholder’s investment is more or less same for last 3 years.•Overall efficiency is increasing.
Return on Equity Capital (ROEC) Ratio
Net profit after tax - Preference dividend *100
Return on Equity Capital = Equity share capital
Return on Equity Capital (ROEC) Ratio
Company NTPC
F.Y. NPATEquity Share
Capital
ROEC Ratio (in %)
2007-08 7414.8 8245.5 89.93
2008-09 8201.3 8245.5 99.46
2009-10 8728.1 8245.5 105.85
2007-08 2008-09 2009-1080
85
90
95
100
105
110
89.93
99.46
105.85
ROEC Ratio (in %)
ROEC Ratio (in %)
•ROEC ratio has increasing trend in 08-09 (953 bps) and in 09-10 (639bps).•Investors are getting good returns suggest increase in the profitability.
Earnings per Share (EPS) Ratio
Earnings per Share= Net profit after tax - Preference dividend *100
No. of Equity share
Earnings per Share (EPS) Ratio
2007-08 2008-09 2009-1080
85
90
95
100
105
110
89.93
99.46
105.85
EPS Ratio (in %)
EPS Ratio (in %)
Company NTPC
F.Y. NPAT No. of Equity Shares
EPS Ratio (in %)
2007-08 7414.8 8245.5 89.93
2008-09 8201.3 8245.5 99.46
2009-10 8728.1 8245.5 105.85
•Increasing trend in 08-09 (953 bps) in 09-10 (639)•Suggests increase in the profitability
Price Earnings Ratio (PE Ratio)
Market price per equity share *100
Price Earnings Ratio = Earning per share
Price Earnings Ratio (PE Ratio)
Company NTPC
F.Y. Market Price Share EPS PE Ratio
(in %)
2007-08 181 8.99 20.132008-09 235.7 9.95 23.692009-10 203.47 10.59 19.21 2007-08 2008-09 2009-10
0
5
10
15
20
2520.13
23.69
19.21
PE Ratio (in %)
PE Ratio (in %)
• NTPC shares has potential increase in the market price
DUO POINT ANALYIS
Rate of Return of Investment
Net Profit as Percentage of
Sales
Net Profit Sales
Investment turnover
Sales Total assets
2007-08 2008-09 2009-100.08
0.082
0.084
0.086
0.088
0.09
Liquidity ratios
Current Ratio
Current Assets Current Ratio = Current Liability
Current Ratio
2007-08 2008-09 2009-102.6
2.7
2.8
2.9
3
3.1
3.2
3.33.22
2.89 2.86
Current Ratio
Current Ratio (In %)
Company NTPC
F.Y. Current Assets
Current Liabilities Current Ratio
2007-0825548.8 7929.9 3.22
2008-0930925.3 10688.6 2.89
2009-1030815.7 10758.1 2.86
•The NTPC has achieved the current ratio of 3.22, 2.89 & 2.86 during the years 07-08, 08-09, 09-10 respectively.•NTPC may have adapted aggressive working capital policy. The NTPC has high liquidity because of high value of current ratio and also can easily fulfill the short term liability.
Quick Ratio
Quick Assets
Liquidity Ratio = Current Liability
Quick Ratio
2007-08 2008-09 2009-101.9
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.16
2.592.5
Quick Ratio
Quick Ratio
Company NTPC
F.Y. Quick Ratio
2007-08 2.16
2008-09 2.59
2009-10 2.5
•NTPC’s quick ratio lies between 2 times to 3 times from 07-08 to 09-10 which means very high short term liquidity position.•The company can easily pay its liabilities
Leverage Ratios
Debt -to- Equity Ratio
Debt Debt to Equity Ratio = Equity
Debt -to- Equity Ratio
Company NTPC
F.Y. Debt Equity D/E Ratio
2007-0827190.6 54267.4 0.5
2008-0934567.8 58994.9 0.59
2009-1037797 62437.5 0.61 2007-08 2008-09 2009-10
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.5
0.590.61000000000
0001
D/E Ratio
D/E Ratio
•NTPC’s debt- equity ratio there is more or less no changes in the from 2007-08 to 2009-10 •More of owner’s funds are invested and the less funds ae borrowed.
Activity Ratios
Inventory Turnover Ratio
Cost Of Good Sold Inventory Turnover ratio = _____________________
Average inventory at cost
Inventory Turnover Ratio
Company NTPC
F.Y. Inventory Turnover Ratio
2007-08 33.59
2008-09 28.21
2009-10 13.99 2007-08 2008-09 2009-100
5
10
15
20
25
30
35
4033.59
28.21
13.99
Inventory Turnover Ratio
Inventory Turnover Ratio
•NTPC’s Inventory turnover ratio was very high in 2008 i.e. 33.59 and it has decreased to 13.99 in 2010.•Indicates inefficient management of inventory or investment in inventory is lowered.
Debtors Turnover Ratio
Net Credit Sales Debtors turnover Ratio = __________________
Average Trade Debtor
Debtors Turnover RatioCompany NTPC
F.Y. Debtors Turnover Ratio
2007-08 17.52
2008-09 12.78
2009-10 9.06
• NTPS’s debtors turnover ratio is more decrease from 17.52% in 2007-08 to 9.06% in 2009-10
• It shows that NTPC’s efficiency to convert its debtors into liquid is decreasing.
2007-08 2008-09 2009-1002468
101214161820
17.52
12.78
9.06
Debtors Turnover Ratio
Debtors Turnover Ratio
Working Capital Turnover Ratio
Cost Of Sales Working Capital turnover Ratio = _________________
Net Working Capital
Working Capital Turnover Ratio
Company NTPC
F.Y. Cost of Sales Net Wokring Capital Ratio
2007-08 37050.1 17618.9 2.1
2008-09 41923.8 20236.7 2.07
2009-10 46322.6 20057.6 2.312007-08 2008-09 2009-10
1.91.95
22.05
2.12.15
2.22.25
2.32.35
2.12.07
2.31
Ratio
Ratio
•Working capital turnover ratio of NTPC is more or less same for last 3 years between the range of 2.10 times to 2.31 from 2007-08 to 2009-10.
•Indicates the efficient utilization of working capital
Fixed Assets Turnover Ratio
Cost Of Sales
Fixed Assets turnover Ratio = ______________
Net Fixed Assets
Fixed Assets Turnover Ratio
2007-08 2008-09 2009-100.655
0.660.665
0.670.675
0.680.685
0.690.695
0.70.705 0.70000000000
0001
0.670000000000001
0.690000000000001
Ratio
Ratio
•NTPC’s ratio is more or less between 0.67 to 0.70 from 2008 to 2010.•Indicates Efficiency and the profit earning capacity is high.
Company NTPC
F.Y. Ratio
2007-08 0.7
2008-09 0.67
2009-10 0.69
Key Findings
• NTPC is a key organization in India as far as the supply of power is concerned.
• The financial health of NTPC is sound enough and it appears positive in accordance with its balance sheet and profit & loss A/c.
• Gross profit ratios and Net Profit ratios are decreasing from 2007 to 2010 due to more increase in operational cost as compared to Net Sales
• Ntpc’s current ratio is very good which shows highly liquidity available
• NTPC’s ability to convert the debtors in liquid has highly come down compare to last two years.
Suggestions
• firm should efficiently manage its operational activity so that operational cost is controlled or maintained with increase in Net Sales and thus will lead to increase in gross profit ratio and net profit ratio.
• NTPC’s more funds are blocked in current asset leading to high current asset ratio.Instead the funds to more used in operational activity to increase productivity
• NTPC should tighten the debt collection efforts and should reduce the amount tied up in debtors.
• NTPC is more traditionally financed with low debt and more of equity financing, so in future debt should be preferred for financing to bring the ratio close to the ideal ratio of 1:1.
Thank You