ratio analysis of hul sd
TRANSCRIPT
Solvency ratio
Current ratio
Quick ratio
Absolute Liquidity Ratio
LEVERAGE RATIO
Working Capital Turnover Ratio
Gross Margin Ratio
Return On Assets Ratio
Debtors Turnover Ratio
Asset Turnover Ratio
Ratio Analysis
Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed.
Ratios
Profitability Liquidity Turnover
Valuation Leverage
Profitability RatiosA profitability ratio is a measure of profitability, a way of measuring a company's performance. Profitability is simply the capacity to make a profit.Types of Profitability Ratios
Gross Margin Ratio
Return on Assets RatioNet Profit Ratio
Operating Profit Ratio
Return On Capital Employed
• Ratio measures how effectively the company produces income from its assets.
• It measures how efficiently a company can manage its assets to produce profits during a year.
• Return on Assets = net income/assets x 100, here., Assets = Fixed Assets + Current Assets.
• The net income can be found on the income statement.
Return on Assets
Return on Assets = Net Income x 100Assets
Hindustan Unilever 2014 2015
Ratio 67.021 74.443
Gross Margin Ratio
• It tells you about the profitability of your goods and services. It tells you how much it costs you to produce the product.
• It indicates the efficiency of the production department.
• One of the popular tools to evaluate operational performance of the business.
Gross Margin = Gross Profit x 100Net Sales
Hindustan Unilever 2014 2015
Ratio 17.131 17.928
• The net profit percentage is the ratio of after-tax profits to net sales.
• It reveals the remaining profit after all costs of production, administration, and financing have been deducted from sales, and income taxes recognized.
Net Profit Ratio
Net Profit Ratio = Net Profit Before Tax x 100Net Sales
Hindustan Unilever 2014 2015
Ratio 17.774 18.308
Liquidity RatiosThe term liquidity is defined as the ability of a company to meet its financial obligations as they come due. The liquidity ratio, then, is a computation that is used to measure a company's ability to pay its short-term debts.
Types of Liquidity RatiosAbsolute Liquid Ratio
Quick Ratio or Acid Test RatioCurrent Ratio
Absolute Liquid Ratio
• It shows the relationship between absolute liquid or super quick current assets and liabilities. Absolute liquid assets include cash, bank balances, and marketable securities.
• It indicates the adequacy of the 50% worth absolute liquid assets to pay the 100% worth current liabilities in time.
Absolute Liquid Ratio = Absolute Liquid Assets Current Liabilities
• Absolute liquid assets : Cash + Bank+ Marketable Securities.
Hindustan Unilever 2014 2015
Ratio 0.270 0.296
Quick Ratio Or Acid Test Ratio• The acid test ratio is a stringent and meticulous test
of a firm's ability to pay its short-term obligations 'as and when they are due.
• It is a measure of how well a company can meet its short-term financial liabilities.
Quick Ratio = Liquid AssetsCurrent Liabilities
• Liquid assets : Current assets – Stock And Prepaid Expenses.
Hindustan Unilever 2014 2015
Ratio 0.261 0.289
Current Ratio• The current ratio is a financial ratio that measures
whether or not a firm has enough resources to pay its debts over the next 12 months.
• It compares a firm's current assets to its current liabilities.
• The ideal current ratio is 2: 1. It is a indication of the financial soundness of a business concern. When Current assets double the current liabilities, it is considered to be satisfactory.
Current Ratio = Current AssetsCurrent Liabilities
Hindustan Unilever 2014 2015
Ratio 1.069 1.084
turnover Ratios• It establish the relationship of sales with various assets.
These are expressed in integers or times rather than as a percentage or proportion. These are mostly computed to measure the efficiency.
Types of Turnover RatiosDebtors turnover ratio
Total assets turnover ratioFixed Assets Turnover ratio
Working Capital turnover ratio
Debtor Turnover Ratio• It is an accounting measure used to quantify a firm's
effectiveness in extending credit as well as collecting debts.
• The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
• This ratio establishes the relationship between net credit sales and average debtors for the year.
• It shows how quickly the credit sales of the company have been converted into cash.
Debtors Turnover Ratio = Net Credit SalesAverage Account Receivable
Hindustan Unilever 2014 2015
Ratio 34.298 39.30
Total Assets Turnover Ratio• Total assets turnover ratio shows the relationship between total
assets and sales.
• Total assets turnover ratio indicates how well the firm's total assets are being used to generate its sales.
Hindustan Unilever 2014 2015
Ratio 2.055 2.369
Total Assets Turnover Ratio = Net SalesTotal Assets
Fixed Assets Turnover Ratio• Fixed assets turnover ratio is also termed as the ratio of sales
to fixed assets.• Fixed assets turnover ratio indicates how efficiently the fixed
assets are used.• It measures the efficiency with which the firm has been using
its fixed assets to generate sales.
Hindustan Unilever 2014 2015
Ratio 7.646 8.336
Fixed Assets Turnover Ratio = Net SalesNet Fixed Assets
Creditors Turnover Ratio
• It is a ratio of net credit purchases to average trade creditors. Creditors turnover ratio is also know as payables turnover ratio
Creditors Turnover Ratio = Total supplier purchases (Beginning accounts payable + Ending accounts payable) / 2
Ratio 0.24 0.28
Hindustan Unilever 2014 2015
Working Capital Turnover Ratio• The working capital turnover ratio measures how well a
company is utilizing its working capital to support a given level of sales.
• Working capital is current assets minus current liabilities.• A high turnover ratio indicates that management is being
extremely efficient in using a firm's short-term assets and liabilities to support salesFixed Assets Turnover Ratio = Net Sales
Beginning working capital + Ending working capital
2Hindustan Unilever 2014 2015
Ratio 4.382 4.639
Valuation RatioIt is a measure of how cheap or expensive a business is, compared to some measures of profit or value
Earning Per Share
Types of Valuation Ratios
Earnings per Share Ratio
• The earnings per share ratio (EPS ratio) measures the amount of a company's net income that is theoretically available for payment to the holders of its common stock.
• A company with a high earnings per share ratio is capable of generating a significant dividend for investors, or it may plow the funds back into its business for more growth; in either case, a high ratio indicates a potentially worthwhile investment, depending on the market price of the stock
Earnings per Share Ratio = Net income after tax - Preferred stock dividends Average number of common shares outstanding
Hindustan Unilever 2014 2015
Ratio 3.277 3.725
Proprietary Ratio• The proprietary ratio (also known as the equity ratio) is
the proportion of shareholders' equity to total assets, and as such provides a rough estimate of the amount of capitalization currently used to support a business
Proprietary Ratio = Shareholders' equity Total tangible assets
Ratio 0.24 0.28
Hindustan Unilever 2014 2015
debt-to-equity ratio• The debt-to-equity ratio (D/E) is a financial ratio
indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage
Leverage/Solvency RatiosAbility of the firm to use fixed costs to magnify the returns to the shareholders
Hindustan Unilever 2014 2015
Ratio 2.48 3.02
Leverage Ratio• Companies rely on a mixture of owners
equity and debt to finance their operations.• A leverage ratio is any one of several financial
measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet financial obligations.
Hindustan Unilever 2014 2015Ratio 2.63 2.38
Solvency Ratio
• A key metric used to measure an enterprise's ability to meet its debt and other obligations.
• The solvency ratio indicates whether a company's cash flow is sufficient to meet its short-term and long-term liabilities.
Hindustan Unilever 2014 2015Ratio 0.317 0.336
Other Ratios
Inventory Turnover RatioReturn On Investment Ratio
Capital Turnover RatioOperating Profit Ratio
Equity Ratio
Inventory Turnover Ratio
Hindustan Unilever 2014 2015
Ratio 0.317 0.336
The inventory turnover ratio is a key measure for evaluating just how efficient management is at managing company inventory and generating sales from it. Inventory Turnover. Like a typical turnover ratio, inventory turnover details how much inventory is sold over a period of time.
Ratio = Net Sales Average Inventory At Cost
Return On Investment Ratio
Hindustan Unilever 2014 2015
Ratio 1.46 1.48
Return on investment (ROI) is the benefit to the investor resulting from an investment of some resource. A high ROI means the investment gains compare favorably to investment cost.
Ratio = Net Profit Before Tax Net Working Capital
Capital Turnover Ratio
Hindustan Unilever 2014 2015
Ratio 5.117 7.308
• Working Capital Turnover' A measurement comparing the depletion of working capital to the generation of sales over a given period.
• This provides some useful information as to how effectively a company is using its working capital to generate sales.
Ratio = Net Sales Capital Employed
Operating Profit Ratio
Hindustan Unilever 2014 2015
Ratio 15.86 16.84
• Operating margin is a margin ratio used to measure a company's pricing strategy and operating efficiency.
• Operating margin 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.
Ratio = Operating Profit x 100 Net Sales
Equity Ratio
Hindustan Unilever 2014 2015
Ratio 0.30 0.24
Equity Ratio is a good indicator of the level of leverage used by a company. The Equity ratio measures the proportion of the total assets that are financed by stockholders and not creditors.
Ratio = Total Equity Total Assets
Evaluation sheet
Serial No. Roll No. Name Of Student Marks
1 12 Arka Das Gupta
2 49 Shreel Dwivedi
3 38 Raj Karan Marhas
4 2 Aarya
5 9 Anwesha Chatterjee
6 57 Varun Mani Tiwari
7 20 Gaurav Deshmukh