Professional Documents
Culture Documents
PROJECT
Ratio Analysis
Raymond’s
2007-08
Submitted to-:
Mrs. Rachna Banerjee
By:-
Manhar Srivastava -
46
~ 1 ~
Manoj Kumar Singh -
47
Mansi Duggal – 48
Mayank Sharma - 49
Neeru Parashar - 50
CONTENTS
1. Company Profile
2. Ratio’s
Return on Investment Ratios
1. Rate of Net Worth (RONW)
2. Earnings Per Share (EPS)
Solvency Ratios
1. Net Asset Value (NAV)
2. Debt Equity
3. Interest Coverage Ratio
Liquidity Ratios
1. Current Ratio
2. Quick Ratio
3. Collection Period Allowed to Customers
4. Suppliers Credit
5. Inventory Holding Period
Turnover Ratio
1. Fixed Assets Turnover
2. Inventory Turnover
Profitability Ratio
1. Gross Profit Margin
2. Net Profit Margin
Valuation Ratio
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1. P/E Ratio
2. Market Capitalisation
~ 3 ~
~ 4 ~
~ 5 ~
Company Profile
India has been on a high growth path for some years now. However, during
the past few months, worrying developments like the housing crisis in USA,
high inflation – especially in food, fuel and commodities – have emerged.
This could increase costs of operations, dampen consumer sentiment and
moderate growth going forward.
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RATIO’s
This ratio measures the net profit earned on the equity shareholders fund.
Current Year –:
RONW =
= 5.38 %
Previous Year –:
RONW =
= 7.92%
ANALYSIS-
The return on net worth has dropped down drastically with comparison to
last year. Also company has created more reserves for its future projects.
This implies-
• Overall profitability of company has fallen down. The reason could the
economic conditions of the economy.
• Shareholders will receive low dividends in contrast to last year.
• New investors will not find the company lucrative to invest.
• Suppliers will strict the credit policy as risk for them has increased.
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2. Earnings Per Share (EPS)
The ratio measures the overall profitability in terms of per equity share of
capital contributed by the owners.
Current Year -:
EPS =
= Rs. 12.28
Previous year -:
EPS =
= Rs. 17.51
ANALYSIS-
Last year EPS of company was Rs. 17.51 which has fallen to Rs. 12.28.
This is not good for company as well as for investors. This ratio shows
that with the same shareholders fund the profit of the company
decreased.
• The investors in the company will be highly disappointed because
of its performance. Their earnings have fallen down.
• Also company won’t be able to attract new investors. Moreover
chances of existing shareholders selling their shares also
increase.
• Company needs to increase its EPS as it is a important measure
which helps company to survive in future.
• In case company want to raise funds through initial public offer
company won’t be able to attract many investors.
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LIQUIDITY RATIO
This ratio seeks to assess as to what extent the value of equity share of
a company contributed at par or at premium or the value created for the
shareholders.
Current Year -:
NAV =
= Rs. 227.80
Previous Year -:
NAV =
= Rs. 220.94
ANALYSIS-
Even though the profit of company has fallen down still Net Asset Value
of company has increased though marginally. This shows the efficiency
of company management. Company has created more of reserves as it
has undertaken many new projects. So it can rely on these reserves for
internal financing. NAV of company will help it to raise further capital-
borrowed as well as equity because investors will believe that company
has significant growth prospects.
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This ratio measures the debt- equity proportion in capital structure of the
company.
Current Year -:
= 0.485 times
Previous Year -:
= 0.435 times
ANALYSIS
Last year when the profitability of company was high As the profitability
of company has reduced significantly they are playing safe by not raising
more debt. They have reduced the risk of defaulting in payment of
interest. It is a prudent practice i.e. not to put shareholders fund at risk
when profitability of company is low. But in comparison to last year this
ratio has increased. Company has raised more secured loan and foreign
currency loans from banks as they have undertaken few foreign projects
also.
This ratio measures the capacity of the company to pay the interest
liability it has incurred on its long term borrowings, out of the profit.
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Current Ratio -:
= 5.17 times
Previous Year -:
= 5.95 times
ANALYSIS-
Company has adequate amount to fulfil its interest liability out of its
revenue. Though in comparison to last year, interest coverage ratio has
fallen down. But still company was able to maintain it at 5 times which
implies it has funds to pay its interest by 5 times. The risk of default in
payment is not much. So the suppliers and other creditors need not be
worried about their funds. This also develops the creditability of company
in market.
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LIQUIDITY RATIO
1. Current Ratio
The ratio measures the ability of a company to discharge its day to day
bills, or current liabilities as and when they become due out of cash or
current assets.
Current Year -:
Current Ratio =
= 2.27 times
Previous Year -:
Current Ratio =
~ 12 ~
= 1.97 times
ANALYSIS-
2. Quick Ratio
Current Year -:
Quick Ratio =
~ 13 ~
= 1.24 times
Previous Year -:
Quick Ratio =
= 0.965 times
ANALYSIS
The standard quick ratio is 1:1. Company has improved its quick ratio
which means now it has the ability to discharge its current liabilities as
and when due out of its most liquid assets. Last year company’s liquidity
was not good. Possibility of default in payment to suppliers was there.
But now this risk is eliminated. Now it has some assets which are not put
to use efficiently.
The ratio measures the credit period allowed by the company to its
debtors on credit sales or how fast a company is able to realise its
outstanding dues.
Current Year -:
~ 14 ~
= 79.10 days
= 79 days
Previous Year -:
= 75.48 days
= 75 days
ANALYSIS-
The company is able to receive its debts in 2-3 months. It has also
extended its credit period by 4 days. The reason behind this could be
increase in sales. But debtors have also increased. This shows company
is selling more on credit.
4. Suppliers Credit
The ratio measures the average credit period allowed to the company by
its creditors or how much leverage it possesses to settle its outstanding
payables.
Current Year -:
~ 15 ~
Suppliers Credit =
= 129.88 days
= 130 days
Previous Year -:
Suppliers Credit =
= 159.37 days
= 159 days
ANALYSIS-
The ratio measures the number of days that cash is blocked in inventory
or how fast a company is able to convert its inventory into cash.
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Current Year -:
= 129.63 days
= 130 days
Previous Year -:
= 117.4 days
= 117 days
ANALYSIS
TURNOVER RATIO
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1. Fixed Assets Turnover
The ratio measures the volume of gross income generated by the fixed
assets of the company.
Current Year -:
= 1.84 times
Previous Year -:
= 1.89 times
ANALYSIS
Sales have increased by 2.98%. And fixed assets have increased by
6.4%. This shows company is not using its resources efficiently. There is
under usage of fixed assets. In comparison to last year this ratio has also
decreased. This under usage can be the cause of lower operating
revenues. Company should improve its management and look towards
efficient convention of its fixed assets.
2. Inventory Turnover
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This ratio measures the level of inventory
Current Year -:
Inventory Turnover =
= 2.815 times
Previous Year -:
Inventory Turnover =
= 3.108 times
ANALYSIS
A lower turnover ratio indicates overstocking, obsolescence and
deficiencies in product line. The company is having adequate inventory
turnover. It is not too much and not too less. But in respect to last year
this ratio has decreased. This means that to sell more it has to keep a
stock of more goods.
PROFITABILITY RATIO
These ratios measure several intermediate profit margin indicators.
Current Year -:
~ 19 ~
= 29.79 %
Previous Year -:
= 31.33%
ANALYSIS
This ratio indicates the change in gross profit margin. This shows that
sales have increased but the gross profit has fallen. This implies change
in cost of goods sold is much more than change in sales. In comparison
to Net Profit Margin it can concluded that company spends more on its
operating and manufacturing activities.
Current Year -:
= 5.69 %
Previous Year -:
= 8.37 %
ANALYSIS
From this ratio it can be interpreted that overall profitability of company
has fallen down drastically. The expenses incurred by company have
increased much more than increase in income.
VALUATION RATIO
~ 20 ~
1. P/E Ratio
Current Year -:
P/E Ratio =
= 15.475 times
Previous Year -:
P/E Ratio =
= 14.625 times
ANALYSIS
Though the market price of equity and earnings per share has reduced in
comparison to last year but still its P/E ratio has increased. Despite the
existing situation of markets still P/E ratio has increased. So investors
should hold on the shares as its performance in past has also been
good. So it has scope of recovery and leading to increase in P/E ratio.
2. Market Capitalisation
The ratio provides a base for total valuation of the company based on its
market price.
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Current Year -:
Market Capitalisation =
= Rs. 1140.44 crores
Previous Year - :
Market Capitalisation =
= Rs. 1571.94 crores
ANALYSIS
This ratio tells the value of the company. As the market price has
decreased the valuation has also shrunk. But from the past performance
of the company it can be inferred that valuation of company will improve
in future.
NOTES –
1. Profit After Tax
~ 22 ~
Particulars Current Year Previous Year
3. Gross Profit
~ 23 ~
FINANCIAL ANALYSIS OF COMPANY
The key business segments of the Company are Textile and Files & Tools Divisions.
The erstwhile denim division of the Company was combined with the denim
business of UCO NV, Belgium, to form a 50:50 joint venture from August 1, 2006.
Consequently the current year ending March 31, 2008 financials are not strictly
comparable with the previous year ending March 31, 2007.
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