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J RATIO

J RATIO

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Published by Suman V Raichur

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Published by: Suman V Raichur on Jun 10, 2013
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RATIO ANALYSIS
Liquidity ratios:
Liquidity ratios show the firm’s ability to meet short term liabilities. This is usually measured by current ratio, quick ratio, cash ratio etc.PARTICULARSJSW STEELARCELOR MITTAL
2007-08 2008-09 2007 2008
CURRENT ASSETS41206509294532844414CURRENT LIABILITY47064826283220930760CA/CL
0.88
0.62 1.42 1.38
From the above figures we can see that the current liabilities are morethan current assets for both the years of JSW STEEL but in Arcelor mittal thefigures are vice versa. The both company is not in the position to maintainthe standard current ratio of 2:1. From above figures we can conclude thatthe company may face problem in order to meet its short term liability.
Quick ratio
Quick ratio =current assets-inventory\ current liabilitiesPARTICULARSJSW STEELARCELOR MITTAL
2007-08 2008-09 2007 2008
CURRENT ASSETS -STOCK 23578196731938921684CURRENT LIABILITY47064826283220930760CA/CL
0.42 0.27 0.74 0.70
 
 
From the above figures we can see that the current liabilities are morethan current assets in both years. The both company is not in the position tomaintain the standard quick ratio of 1:1. From above figures we canconclude that the company may face problem in order to meet its shortliability.
2.LEVERAGE/CAPITAL STRUCTURE RATIOSDEBT\EQUITY RATIO
Debt\equity ratio = total debt\ equityPARTICULARSJSW STEELARCELOR MITTAL
2007-08 2008-09 2007 2008
 Total debt1423972200543062734076Equity78888780395519856685Debt / equity
1.82 2.81 0.54 0.46
Debt-Equity ratio reflects relative contributions of creditors and ownersto finance the business. Above figures of Jsw indicates that company hasvery more amount of debt it means that owners contribution is less thancreditors in the company so that it is not good sign to the company butincase Arcelor mittal the company is havin debt this indicates that thecompany has to pay more interest towards debt.
 
DEBT TO TOTAL ASSETS
Debt /asset ratio = Total debt / assetPARTICULARSJSW STEELARCELOR MITTAL
2007-08 2008-09 2007 2008
 Total debt1423972200543062734076 Total assets261752343115133625133088Debt / Assets
0.54 0.64 0.23 0.26
 Total debt comprises of long term debt and short term debt. The totalassets comprise of fixed assets and current assets. The ratios measure therelationship between debt and total assets. The above figure says thatoutsiders are contributed nearly 50 – 60 % towards assets of jsw steel andnearly 25 % towards assets of Arcelor mittal. From the above ratios we canconclude that Arcelor mittal is using less debt than jsw steel.
INTEREST COVERAGE RATIO
ICR = EBIT / INTERESTPARTICULARSJSW STEELARCELOR MITTAL
2007-08 2008-09 2007 2008
EBIT30457148341483012236INTEREST62551168118011994EBIT / INTEREST
4.87 1.27 8.23 6.14
 The interest coverage ratio shows the number of times the interestcharges are covered by funds that are ordinarily available for the repayment.From the above ratios of Arcelor mittal we can say that the company canpay the interest sufficient and it can use the more debt so shareholders mayget advantage. In the year 2008-09 the jsw ratio is very less coverage ratio

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