RATIO ANALYSISRATIO ANALYSIS

IntroductionIntroduction

Comparison of ratio between two Comparison of ratio between two consequent years of one companyconsequent years of one company

Comparison of ratio between two Comparison of ratio between two companies for the same yearcompanies for the same year

ConclusionConclusion

WHAT IS RATIO ANALYSIS?WHAT IS RATIO ANALYSIS?

It is NOT just comparing different numbers from the It is NOT just comparing different numbers from the balance sheet, income statement, and cash flow balance sheet, income statement, and cash flow statement. statement.

It is about comparing the number against previous It is about comparing the number against previous years, other companies, the industry, or even the years, other companies, the industry, or even the economy in general. economy in general.

Ratios look at the relationships between individual Ratios look at the relationships between individual values and relate them to how a company has performed values and relate them to how a company has performed in the past, and might perform in the future. in the past, and might perform in the future.

Profitability Ratios forProfitability Ratios for

RatioRatio FormulaFormula Mar’07Mar’07 Mar’06Mar’06

Gross profit Gross profit margin (%)margin (%)

Revenue – COGSRevenue – COGS x100 x100

RevenueRevenue28.5728.57 28.5828.58

Net profit Net profit margin (%)margin (%)

Net profitNet profit x 100 x 100

RevenueRevenue28.0528.05 26.1726.17

Adjusted Adjusted return on net return on net worth(%) worth(%)

Net income Net income x100 x100

Avg. stockholder’s equityAvg. stockholder’s equity

33.4733.47 36.2136.21

Return on long Return on long term funds (%)  term funds (%) 

EBIT EBIT x 100 x 100

Long term fundsLong term funds36.6436.64 40.6240.62

Per Share Ratios forPer Share Ratios for

RatioRatio FormulaFormula Mar’07Mar’07 Mar’06Mar’06Adjusted EPS (Rs.)Adjusted EPS (Rs.) EBIT-AdjustmentsEBIT-Adjustments

Total No. of SharesTotal No. of Shares

65.4265.42 90.6590.65

Dividend per share Dividend per share (Rs.)(Rs.)

Total DividendTotal Dividend

Total No. of SharesTotal No. of Shares

11.5011.50 45.0045.00

Operating profit per Operating profit per share (Rs.)share (Rs.)

Operating profitOperating profit

Total No. of SharesTotal No. of Shares

73.9873.98 108.51108.51

NetNet operating income operating income per share (Rs.)per share (Rs.)

Net Operating IncomeNet Operating Income

Total No. of SharesTotal No. of Shares230.20230.20 327.63327.63

Free reserves per Free reserves per share (Rs.)share (Rs.)

Total free reservesTotal free reserves

Total No. of SharesTotal No. of Shares

190.30190.30 245.07245.07

Leverage Ratios forLeverage Ratios for

RatioRatio FormulaFormula Mar’07Mar’07 Mar’06Mar’06

Long term debt/ Long term debt/ EquityEquity

Long Term DebtLong Term Debt

EquityEquity

00 00

Total debt/ equity  Total debt/ equity  Total DebtTotal Debt

EquityEquity

00 00

Owners fund as % Owners fund as % of total source  of total source 

EquityEquity *100 *100

Total FundsTotal Funds

100100 100100

Fixed assets Fixed assets turnover ratio  turnover ratio 

SalesSales

Fixed AssetsFixed Assets

3.383.38 3.183.18

Liquidity Ratios forLiquidity Ratios for

RatioRatio FormulaFormula Mar’07Mar’07 Mar’06Mar’06Current ratio  Current ratio  Current AssetsCurrent Assets

Current LiabilitiesCurrent Liabilities

4.964.96 2.752.75

Quick ratioQuick ratio Current Assets-InventoriesCurrent Assets-Inventories

Current LiabilitiesCurrent Liabilities4.914.91 2.732.73

Payout Ratios forPayout Ratios for

RatioRatio Mar’07Mar’07 Mar’06Mar’06

Dividend payout Dividend payout ratio (net profit)  ratio (net profit) 

19.8519.85 58.3258.32

Dividend payout Dividend payout ratio (cash profit)  ratio (cash profit) 

17.6617.66 49.8949.89

Earning retention Earning retention ratio  ratio 

79.9179.91 43.4843.48

Cash earnings Cash earnings retention ratio  retention ratio 

82.1582.15 51.4351.43

RatioRatio

Adjusted EPSAdjusted EPS 65.4265.42 6.686.68

Dividend Per ShareDividend Per Share 11.511.5 2.002.00

Operating Profit per Operating Profit per shareshare

73.9873.98 12.9112.91

Net Operating income Net Operating income per shareper share

230.20230.20 59.0459.04

Free Reserves per Free Reserves per shareshare

190.30190.30 54.2354.23

Per Share Ratio for Per Share Ratio for the year 06-07the year 06-07

RatioRatio

Operating Margin(%)Operating Margin(%) 32.1332.13 21.8721.87

Gross Profit Margin(%)Gross Profit Margin(%) 28.5728.57 17.7217.72

Net Profit Margin(%)Net Profit Margin(%) 28.0528.05 14.4814.48

Adjusted Return On Adjusted Return On Net worth(%)Net worth(%)

33.4733.47 16.9116.91

Return on long term Return on long term funds(%)funds(%)

36.6436.64 6.816.81

Profitability Ratios for Profitability Ratios for the year 06-07the year 06-07

RatioRatio

Long Term Long Term Debt/EquityDebt/Equity

00 1.751.75

Total Debt/EquityTotal Debt/Equity 00 1.791.79

Owners Fund as % Owners Fund as % of total sourceof total source

100100 35.8835.88

Fixed assets Fixed assets Turnover RatioTurnover Ratio

3.383.38 2.962.96

Leverage Ratios forLeverage Ratios forthe year 06-07the year 06-07

RatioRatio

Current RatioCurrent Ratio 4.964.96 3.243.24

Quick RatioQuick Ratio 4.914.91 3.033.03

Liquidity Ratios for Liquidity Ratios for the year 06-07the year 06-07

RatioRatio FormulaFormula

Dividend payout Dividend payout Ratio (net profit)Ratio (net profit)

DividendsDividends

(yearly) /Net (yearly) /Net IncomeIncome

19.8519.85 32.6332.63

Earning Retention Earning Retention RatioRatio

Net Income-Net Income-DividendsDividends//Net IncomeNet Income

79.9179.91 62.6162.61

Payout Ratios for Payout Ratios for the year 06-07the year 06-07

CONCLUSIONCONCLUSION

Ratio Analysis is the basic tool of financial Ratio Analysis is the basic tool of financial analysis and Financial analysis itself is an analysis and Financial analysis itself is an important part of any business planning process important part of any business planning process as SWOT ,being basic tool of the strategic as SWOT ,being basic tool of the strategic analysis plays a vital role in a business planning analysis plays a vital role in a business planning process and no SWOT analysis would be process and no SWOT analysis would be complete without an analysis of companies complete without an analysis of companies financial position. In this way Ratio Analysis is financial position. In this way Ratio Analysis is very important part of whole business strategic very important part of whole business strategic planning. planning.

As Companies Dispatch their As Companies Dispatch their long annual report once a long annual report once a year, the financial ratio help us year, the financial ratio help us to profile a company easily.to profile a company easily.