ratio analysis vinay

8/9/2019 Ratio Analysis Vinay

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SYDENHAM INSTITUTE OF MANAGEMENT

STUDIES, RESEARCH AND

ENTREPRENEURSHIP EDUCATION

Financial Accounting

Ratio Analysis of Berger Paints Limited

Report ByVinay Deshmukh

MMS Batch

M914


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Acknowledgement

It is my great pleasure and privilege to present this Project Report to Sydenham Institute of

Management Studies, Research and Entrepreneurship Education. The Report is based on the

project entitled Ratio Analysis of Berger Paints Limited.

This report bears the imprint of many people. This acknowledgement is humble attempt to

earnestly thank all those who were directly or indirectly involved in the completion of the project

and were of immense help to me.

I am grateful to our Accounting Faculty, to Mr. Dharmendra Jain for his valuable guidance

and explanation of concepts and giving us this wonderful opportunity to learn and understand the

practical significance of Ratio analysis and Accounting as a subject in whole. To know in detail

about how exactly these concepts are used in the real life world gave us an opportunity to apply

what we have been taught in the class.

I would also like to mention that the regularly updated books and the reference material available

in our college library have provided excellent help.


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Company Profile

B ERGER PAINTS is the culmination of over seven-decade process of evolution and growth that

began in 1923. Its growth has been closely linked with the business and industrial development

of modern India.

B ERGER'S performance is anchored today in a wide variety of Decorative and Industrial paints

which continue to gain an increasing share of the highly competitive Indian paint market. B eing

an ISO 9001 company its quality products have attained instant recognition, worldwide, and

continues to meet quality requirements that are demanded today even in the domestic market.

The Country's second largest decorative paint player, B erger is headquartered in Calcutta and

services the market through a distribution network comprising of 82 stock points and 12,000+ paint retailers.

Today the names " B erger" and "Lewis B erger" are synonymous with colour. B erger Paints

continues to be inspired by the creation and innovation of Mr. Lewis B erger, who through his

marvelous shades, had offered people a chance to transform their homes through the power of

imagination. At B erger we believe in taking paints to the level of fine art. Enriched by the

imagination of Lewis B erger since 1760.

Contact Details:

Website: http://www.bergerpaints.com/


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Companys last 2 yrs Balance sheet

Berger Paints IndiaBalance Sheet ---------- in Rs. Cr. ------------- --------------- in Rs. Cr. --------

Mar '08 Mar '0912 months 12 months

Sources Of FundsTotal Share Capital 63.77 63.77Equity Share Capital 63.77 63.77Share Application Money 0 9.9Preference Share Capital 0 0Reserves 284 350.37Revaluation Reserves 1.24 1.09

Net Worth 349.01 425.13Secured Loans 99.84 78Unsecured Loans 21.08 0.06Total Debt 120.92 78.06Total Liabilities 469.93 503.19

Application Of FundsGross B lock 275.22 322.68Less: AccumulatedDepreciation

141.51 160.37

Net B lock 133.71 162.31Capital Work in Progress 24.71 18.82Investments 21.85 29.52

Inventories 269.1 266.33Sundry Debtors 158.44 180.38Cash and B ank B alance 39.51 23.96Total Current Assets 467.05 470.67

Loans and Advances 61.24 61.6Fixed Deposits 0.39 7.91Total CA, Loans &Advances

528.68 540.18

Deferred Credit 0 0Current Liabilities 220.18 219.89Provisions 18.82 27.74


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Total CL & Provisions 239 247.63Net Current Assets 289.68 292.55Miscellaneous Expenses 0 0Total Assets 469.95 503.2

Contingent Liabilities 70.04 34.44B ook Value (Rs) 10.91 12.99


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Companys last 2 yrs Income statement

Berger Paints IndiaProfit & Loss account -------------in Rs. Cr.------------ ----------- in Rs. Cr. ------------

Mar '08 Mar '09

12 months 12 months

IncomeSales Turnover 1,521.80 1,688.66Excise Duty 182.4 177.7

Net Sales 1,339.40 1,510.96Other Income 15.22 25.64Stock Adjustments 12.81 14.16Total Income 1,367.43 1,550.76

ExpenditureRaw Materials 886.65 1,027.64Power & Fuel Cost 15.05 17.18Employee Cost 68.19 77.21Other ManufacturingExpenses

19.81 20.5

Selling and Admin Expenses 200.02 224.84Miscellaneous Expenses 27.44 30.33Preoperative Exp Capitalized 0 0Total Expenses 1,217.16 1,397.70

Operating Profit 135.05 127.42PB DIT 150.27 153.06Interest 12.78 15.33PB DT 137.49 137.73Depreciation 18.65 20.4Other Written Off 0.08 0Profit Before Tax 118.76 117.33

Extra-ordinary items 0 5.42PB T (Post Extra-order Items) 118.76 122.75Tax 26.7 34Reported Net Profit 92.08 88.76

Total Value Addition 330.51 370.06Preference Dividend 0 0


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Equity Dividend 15.94 19.13Corporate Dividend Tax 2.71 3.25

Per share data (annualized)Shares in issue (lakhs) 3,188.72 3,188.72Earnings Per Share (Rs) 2.89 2.78Equity Dividend (%) 25 30B ook Value (Rs) 10.91 12.99Face Value (Rs.) 2 2


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Ratio Analysis

Sr.No Ratios Formula Mar09 Mar08 Comments

1. Current ratioCurrent Assets/CurrentLiabilities

=(266.33+180.38+23.96)/219.89= 2.14

=(269.1+158.44+39.51)/220.18= 2.12

Current ratio helps youto ascertain the shortterm solvency of thefirm. B erger PaintsCurrent ratios are 2.14 &2.12. Solvency of thisfirm has improved.

2. Quick RatioQuick Assets/Quick Liabilities

=(540.18-266.33)/247.63=1.07

=(528.68-269.1)/239= 1.08

It gives better picture of firms ability to meet itshort-term debts from itsshort-tem assets.Immediate solvency has

come down.

3. Debt-Equityratio Debt/ Equity=78.06/425.13

= 0.018

=120.92/349.01=0.35

B erger Paints debtequity ratio is very low.It indicates that it is aconservative companywhich doesnt believe intaking debts(conservative attitude).Hence it will not have to

pay out a lot on interest.Long term solvency of

this firm is good as it hasredeemed some of itsdebt.

4. Gross ProfitRatio

Gross Profit / Net sales

(GrossProfit=Netsales-Cost of Goods Sold)

=(1510.96-1397.10)/1510.96 *100=7.5%

=(1339.40-1217.16)/1339.40 *100= 9.1%

It indicates the general profitability of the business. For thecompany ratio are lessthan 10%; whichindicates less thanadequate coverage of operating expense, and

build up of reserves. Thedecrease in this ratioshows that cost of saleshave increased over the

period.

5. Net ProfitRatio Net Profit / Net sales

=88.76/1510.96=5.87%

=92.08/1339.40=6.87%

It is useful to proprietorsas in it gives the idea of efficiency as well as


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profitability of the business. In thiscompany net Profitshave decreased whichmeans operational

efficiency has gonedown.

6. ProprietorsRatio

ProprietorsFund / TotalAssets

=425.13/503.19=0.84486

=349.01/469.93=0.74268

This ratio indicates theextent to which TangibleAssets are financed byOwners Fund.

7.

Return on

ProprietorsFund

Net Profit After

Tax/ ProprietorsFund

=88.76/425.13

=0.20878Or (20.878%)

=92.08/349.01

=0.26383Or (26.383%)

This ratio is of practicalimportance to

prospective investorsand share holders. If ratio is higher they feel

confident andencouraged to invest inthe company. Decreasein this ratio indicates thatfirm is generating lessreturns for its owners.

8. Earnings Per Share(EPS)

(Net Profit After TaxPreferenceDividend)/No of Equity Share

=(88.76*10^7-0)/ 318872000= 2.78355

=(92.08*10^7-0)/ 318872000= 2.88768

EPS indicates thequantum of net profit of the year that would beranking for dividend for each share of the

company being held bythe equity share holders .

9.Price/EarningsRatio

Market PricePer Share / EPS

=40.55/2.78355= 14.56773

=38.15/2.88768=13.2113

PE Ratio indicates thenumber of times theEarning Per Share iscovered by its market

price. Market price hasincreased in spite of earnings going downwhich means firmsmarket price is

overvalued.

10.Fixed AssetTurnover ratio

Net sales/totalfixed assets

=1510.96/(162.31+18.82)=8.341854

=1339.40/(133.71+24.71)=8.673747

This ratio is often usedas a measure inmanufacturingindustries, where major

purchases are made for PP&E to help increaseoutput. A higher fixed-


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asset turnover ratioshows that the companyhas been more effectivein using the investmentin fixed assets to

generate revenues. Firmis generating less salesfrom given fixed assets.

11. Dividend Per Share

Sum of dividends over a

period /No. of Equity shares

=19.13*10^7/318872000=0.59992724

=15.94*10^7/318872000

=0.499887

Dividends are a form of profit distribution to theshareholder. Having agrowing dividend per share can be a sign thatthe company'smanagement believesthat the growth can be

sustained.

12. DividendYield

AverageDividend Per Share/Price per share

=0.59992724/40.55= 0.014794753

=0.499887/38.15=0.07569279

This ratio throws lighton effective rate of return on investment.

13. DebtorsTurnover Ratio

Net Credit

Sales/AverageAccountReceivables(Debtors)

=1,510.96/

((158.44+180.38)/2)=8.918954017

=1,339.40/((143.52 +158.44)/2)= 8.87137369

Debtors turnover ratioor accounts receivableturnover ratio indicatesthe velocity of debt

collection of a firm. Insimple words it indicatesthe number of timesaverage debtors(receivable) are turnedover during a year.

14.Return onShareholdersFund

( Net Profit after Tax/Shareholdersfund )* 100

=(88.76 /425.13)*100= 20.8783%

=(92.08/349.01)*100 =26.3832%

It is used to compare performance companys equity capitalwith those of other

companies.

15.Return oncapitalemployed

Net profit beforeinterest andTax/Totalcapitalemployed *100

=(153.06 /503.19)*100 =30.41793%

=(150.27 /469.93)*100 =31.9771%

It is indicator of earning power of the capitalemployed in the

business. It acts as a pointer to managementshowing the progress /deterioration in the


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earning capacity of the business.

16. ROA(Returnon Assets)(Net Profit /TotalAssets)*100

=(88.76/503.20)*100=17.6391%

=(92.08/ 469.95)*100=19.5936%

It tells about the profitability of thecompany in terms of its

assets utilization.

17. ExpensesRatio

(ExpensesConsidered/NetSales)*100

(Expendituremay be Cost of Production or cost of sales,Admin or selling, etc.)

=((17.18+77.21+20.50+224.84+30.33)/1510.96)*100=24.49171 %

=((15.05+68.19+19.81+200.02+27.44)/1339.40)*100=24.67597%

Comparison of expenseratio with thecorresponding ratios of

previous years providesvaluable information asto the direction in whicheconomies are ought to

be affected.Expense ratio enables

the management incontrolling costs andimproving themanagerial efficiency.

18. Price toB ook Ratio

MarketPrice/ B ook Value

=40.55/12.99= 3.121362

=38.15/10.91=3.496792

A lower P/ B ratio couldmean that the stock isundervalued. However,it could also mean thatsomething isfundamentally wrongwith the company. As

with most ratios, thisratio varies by industry.

19.WorkingCapitalTurnover

NetSales/WorkingCapital(CA-CL)

=1510.96/(540.18-247.63)=5.1467

=1339.40/(528.68-239)=4.6237

A measurementcomparing the depletionof working capital to thegeneration of sales over a given period.This provides someuseful information as tohow effectively acompany is using its

working capital togenerate sales.

20.Stock toWorkingCapital

(Stock/WorkingCapital)

=266.33/(540.18-47.63)=0.91037

=269.1(528.68-239)=0.928956

Therefore stock shouldnot exceed the WorkingCapital. If Stock isgreater than WC then itindicates there will be afall in the value of stock


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in the near future.Therefore WorkingCapital should always begreater.

ratio analysis vinay

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