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9-Data Analysis and Interpretation

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# Data Analysis and Interpretation

For a research, researcher may depend either on primary data or secondary data. Primary data is usually collected with the help of questionnaires and schedules and secondary data is collected from published annual reports of the company. In the present study most of the information is collected from balance sheet and profit and loss account of the company period of five years starting from 2007-2011. The data received from the company is shown in the appendices. Besides some information are collected through discussion with company executives and collecting information using questionnaire. The questionnaire is also shown in the appendices. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are mainly two techniques used in analyzing financial statement, such as ratio analysis and schedule of changes in working capital.

Ratio Analysis Liquidity Ratios 1. Current Ratio:Current ratio shows the relationship between current assets and current liabilities. Current ratio = Current Assets Current Liabilities Table No: 3.1
Year 2007 2008 2009 2010 2011 Current Assets (Rupees in Millions) 10346.3 11258 10407.01 12203.12 18208.07 Current Liabilities (Rupees in Millions) 5975.56 6589.1 5557.55 8689.48 12219.16 Current Ratio (Times) 1.73 1.70 1.87 1.40 1.49

Source: Company Annual Report 33 | P a g e

49.975 0.70. Liquid assets include those assets which can be easily converted into cash Liquid Ratio = Liquid Assets Current Liabilities Table No: 3. The ideal current ratio is 2:1. In 2011 the ratio increased to 1.73 but in 2008.929 1. the ratio was 1. So the ratio is fluctuating in nature.55 8689.87 then again decreased to 1.560 34 | P a g e .56 6589.1 Current Ratio 2 1.73 5975.Chart No: 3. It indicates firm’s ability to cover current liabilities over current assets. the ratio decreased to 1. Liquid Ratio Liquid ratio shows the relationship between liquid assets and current liabilities.79 6125. In 2007.09 6236.1 5557.84 6844. 2.768 0. The abo ve table and chart exhibits the current ratio of the company.122 0.48 12219.54 6675.5 0 2007 2008 2009 2010 2011 Current Ratio Interpretation The chart shows the relationship between current assets to current liabilities.5 1 0. By the end of 2009 the ratio increased to 1.56 0.40 in 2010.2 Year Liquid Assets (Rs in Millions) Current Liabilities (Rs in Millions) Liquid Ratio 2007 2008 2009 2010 2011 Source: Company Annual Report 5826.

we can say that the liquid ratio of the firm is relatively sound except in 2011 because it is comparatively low.2 1 0. it measures the company’s ability to meet current contingencies with only those assets that can be readily liquidated.2 0 2007 2008 2009 2010 2011 Liquid Ratio Interpretation The ratio shows the liquidity position of the company.. 3.Chart No: 3.6 0. It is the relation between sales and current assets. The standard ratio is 1:1 this means that there is not any liquidity problem in the organization.2 Liquid Ratio 1. While checking the above table and chart.e. Sales to Current Asset ratio= Sales Current Asset 35 | P a g e . Sales to Current Assets ratio: It shows the productivity of the company’s current assets.8 0. The ratio is a more conservative ratio i.4 0.

32 54256. In 2011 it decreased to 3.01 12203.12 18208.77 4.Table 3.3 Year Sales (Rs in Millions) 37743. 36 | P a g e .43 42469.56 Current Assets (Rs in Millions) 10346. it is seen that the sales to current assets is showing and increasing trend from 2007 to 2010.83 45496.64 3.29 Chart 3.07 Ratio 2007 2008 2009 2010 2011 Source: Company Annual Report 3.3 11258 10407.45 3.37 4.38 60009.3 Sales to Current Assets ratio 5 4 3 2 1 0 2007 2008 2009 2010 Sales to Current Assets ratio 2011 Interpretation From the above table and chart.29 due to issues related to labor.

56 Debtors (Rs in Millions) 1890.Turnover Ratios 4.4 Year 2007 2008 2009 2010 2011 Source: Company Annual Report Sales (Rs in Millions) 37743.135 1709.43 42469.26 35.995 1790. This ratio shows the extend of trade credit granted and their efficiency in this collection of debts.115 Ratio 19.94 1212.95 23.11 Chart No: 3.83 45496. Debtors Turnover Ratio: This ratio indicates the number of times that the firm’s average accounts receivables balances passes through sales during the year under consideration.38 60009.4 Debtors Turnover Ratio 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 Debtors Turnover Ratio 37 | P a g e .53 48.085 1124.71 37. Debtors Turnover Ratio = Sales Debtors Table No: 3.32 54256.

53 48. 5.5 Debt Collection Period 60 40 20 0 2007 2008 2009 2010 Debt Collection Period 2011 38 | P a g e .26 35.11 Debt Collection Period 18 15 10 7 10 Source: Company Annual Report Chart 3. In other words.5 Year 2007 2008 2009 2010 2011 Days 360 360 360 360 360 Debtors Turnover Ratio 19.95 23.Interpretation Debtors turnover ratio shows the relationship between sales and debtors. Debt Collection Period:The average collection period determines how much the company is efficient in collecting the debtors.71 37. From the above analysis it is clear that ratio shows an increasing trend till 2010 later on it shows a decreasing trend. it is the ratio which indicates the extent to which have been collected in time. Debt Collection period = 365 Debtors Turnover ratio Table 3. It measures how fast the firm collects debts.

815 6922.14 6.6 Year 2007 2008 2009 2010 2011 Source: Company Annual Report Purchase (Rs in Millions) 22580.2 6 5.815 5025.805 Credit Turnover Ratio 6.4 5.64 30449.6 5. Again it increased in last year i. 6. Creditors Turnover Ratio:Creditors turnover ratio indicates the number of items the accounts payable rotate in a year.6 27946.36 6.2 Creditors (Rs in Millions) 3581.Interpretation A shorter collection period indicates prompt receipt and vice versa and the trend is satisfactory.31 5.e.235 4447.31 23849. The period is higher in the initial time but eventually it started decreasing. Creditors Turnover ratio = Purchase Creditors Table No: 3.06 5.8 2007 2008 2009 2010 2011 Creditors Turnover Ratio 39 | P a g e .67 40696.88 Chart No: 3.8 5.865 4552. 10 days.4 6.6 Creditors Turnover Ratio 6.2 5 4.

06 5. thus enhancing the credit worthiness of the company. 7.88 Debt payment Period 57 67 58 59 61 Source: Company Annual Report Chart No: 3.36 6. Debt Payment Period = 360 Creditors Turnover Ratio Table No: 3.14 6. it is the ratio which indicates the extent to which have been paid in time.7 Debt Payment Period 68 66 64 62 60 58 56 54 52 2007 2008 2009 2010 2011 Debt Payment Period 40 | P a g e . Debt Payment Period:The average payment period determines how much the company is efficient in paying the creditors. In other words.31 5.7 Year 2007 2008 2009 2010 2011 Days 360 360 360 360 360 Creditors Turnover Ratio 6.Interpretation The creditor’s turnover ratio indicates the promptness in making payment of credit purchases. The ratio signifies that the creditors are being paid promptly.

From 2009 onwards.14 Inventories (Rs in Millions) 4519.8 Year 2007 2008 2009 2010 2011 Cost of Goods Sold (Rs in Millions) 22301.91 4170.24 28909.08 29092. the period is slightly increasing.49 5132. Stock Turnover Ratio = Cost of Goods Sold Inventories Table No: 3.86 34860.93 4.93 5. A higher inventory turnover indicates good inventory management.34 Stock Turnover Ratio 4.04 6.28 11363.07 Source: Company Annual Report Chart No: 3.26 3.47 5527.20 20747. The period is almost consistent in all years except 2008.8 Stock Turnover Ratio 7 6 5 4 3 2 1 0 2007 2008 2009 2010 Stock Turnover Ratio 2011 41 | P a g e . Stock Turnover Ratio: This ratio indicates the efficiency of the firm in providing and selling its products.Interpretation A higher collection period indicates prompt payment and vice versa and the trend is satisfactory. 8.

26350393 3.Interpretation The above table and chart reveals that the inventory turnover ratio is higher in 2009 and the lowest in the year 2011.067772328 Stock Conversion Period 73 89 52 68 117 Source: Company Annual Report Chart No: 3. Stock Conversion Period:Inventory conversion period or the stock velocity shows the duration taken by the company to convert its stock to sales or debtors.934450569 4. Inventory Conversion Period = 360 Stock Turnover Ratio Table No: 3.931851806 5. This is indicating the speed with which the inventory is sold by the firm.042003464 6. From 2009 onwards the ratio is decreasing due to labor issues which lead to less production.9 Year 2007 2008 2009 2010 2011 Days 360 360 360 360 360 Stock Turnover Ratio 4. 9.9 Stock Conversion Period 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 Stock Conversion Period 42 | P a g e .

Interpretation: From the above table and chart.71 2. Fixed Assets Turnover Ratio: This ratio measures a company’s ability to generate sales from fixed assets. it was 52 days and in the coming years also the fluctuation is high.43 42469. A higher fixed asset turnover ratio shows that the company has been more effective in using the investment in fixed asset to generate revenue. The period of holding the inventory should be reduced in order to convert stock to sales quickly. And in 2011 it was increased to 117 days from 68 days in 2010.7 32991.5 1 0.25 1. In 2009.10 Fixed Assets Turnover Ratio 3 2. Fixed Assets Turnover Ratio = Net Sales Fixed Assets Table No: 3.56 Fixed Assets (Rs in Millions) 14925.53 2. it is clear that the firm takes lesser time to convert its inventory to sales or debtors.32 54256.48 2.96 24141.5 2 1.82 Source: Company Annual Report Chart No: 3.79 18379.10 Year 2007 2008 2009 2010 2011 Sales (Rs in Millions) 37743.83 45496.12 15697.27 Fixed Assets Turnover Ratio 2.38 60009.5 0 2007 2008 2009 2010 2011 Fixed Assets Turnover Ratio 43 | P a g e . 10.

Working Capital Turnover Ratio: Working capital turnover ratio shows the amount of cash required to maintain a certain level of sales.43 42469. But in 2010 the fluctuation is comparatively high.2 6280. Working capital Turnover Ratio = Net Sales Working capital Table No: 3.74 2007 2008 2009 2010 2011 5836.47 6.83 45496. From 2007 to 2010.11 Working Capital Turnover Ratio 8 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 Working Capital Turnover Ratio 44 | P a g e .Interpretation: The above chart and table exhibits the fixed assets turnover ratio of the company.49 7.56 Net Working Capital Working capital Turnover Ratio 6. i.38 60009.88 10452. 11.11 Year Sales (Rs in Millions) 37743.62 5.e. It is showing a permanent trend with slight variations.61 6071. how many times the working capital is resolved to generate sales. the fluctuation is very less.76 7.53 7121.87 Source: Company Annual Report Chart No: 3.32 54256.

Interpretation: From the above tables and chart. Cash Turnover Ratio = Sales Cash Table No: 3.36 20.12 Cash Turnover Ratio 50 40 30 20 10 0 2007 2008 2009 2010 2011 Cash Turnover Ratio 45 | P a g e .74.02 2658.43 2008 42469.83 2009 45496. In 2011.32 2010 54526. Cash Turnover Ratio: This ratio indicates a firm’s efficiency in its use of cash for the generation of sales revenue.97 13.53 3405.38 2011 60009.56 Source: Company Annual Report Cash (Rs in Millions) 1720. 12.94 15.48 Chart No: 3. it can be observed that the working capital turnover ratio of the company is showing an increasing trend till 2010 from 2007 onwards.98 2588. But the volume of working capital is showing an increasing trend by avoiding the decline in 2009 and the ratio is high in 2009 due to consistent growth of sale.12 Year Sales (Rs in Millions) 2007 37743. it was decreased to 5.28 1412.63 Cash Turnover Ratio 21.96 42.

94 15. Cash Holding Period:It is the period during which cash is kept idle in the organization.13 Cash Holding Period 30 25 20 15 10 5 0 2007 2008 2009 2010 2011 Cash Holding Period Interpretation: Cash holding period is showing a declining trend from 2009 onwards so the cash volume in the hand is less in those years.97 13. 46 | P a g e .13 Year Days 2007 360 2008 360 2009 360 2010 360 2011 360 Source: Company Annual Report Cash Turnover Ratio 21. 13.48 Cash Holding Period 16 23 27 17 8 Chart No: 3.96 42.Interpretation: From the above chart and table we can understand that the cash turnover ratio shows a decreasing trend till 2009 after that it is an increasing trend which means effective use of cash for generating sales revenue. It is calculated by dividing number of days with the cash turnover ratio. Cash holding Period = 360 Cash Turnover Ratio Table No: 3.36 20.

10 1551. loans and advance shows a decrease.33 2658.30 5132.95 298.85 6589.10 10346.95 Interpretation: While analyzing the above statement.02 139.51 Nil Nil Nil 479.01 Provisions 553.25 930.84 11258 5658.90 4668.36 1551.49 2030.75 (B) 5975.91 1551. Increase in cash and bank shows the company has enough cash for day to day management. the current assets are more than current liability.10 4668.90 613.75 150.36 TOTAL 4668. Inventories.24 377.90 Source: Company Annual Report Nil Nil 236.26 Liabilities 5422.54 Increasing in WC 298.22 Nil 10. cash and bank shows an increase.14 Particulars CURRENT ASSETS 2007 (Rs in Millions) 2008 (Rs in Millions) Increase Decrease Inventories Sundry Debtors Cash and Bank Other Current Assets Loans and Advances (A) CURRENT LIABILITIES 4519.39 1786.76 WC (A-B) 4370.14 1937.WORKING CAPITAL ANALYSIS Statement showing the schedule of Changes in Working capital for the year 2007 & 2008 Table No: 3. 47 | P a g e .42 Nil 938.53 128.55 1720. But in the same case other current assets including debtors.

01 4601. 25. As far as the firm is concerned they have cash and bank balance to do the day to day activities of the business.61 TOTAL 4668. it is found that the volume of cash is increasing as well as the liabilities.43 million.44 678.36 Nil Liabilities 5658. The provision is also increased to Rs.47 872.53 128.85 (B) 6589.33 2658.22 956.28 5557.51 Nil Nil 747.69 10407.90 Increasing in WC 180.84 11258 4170.50 4849. Decrease in inventories and debtors shows that the improper utilization of current assets.33 Interpretation: While evaluating the above statement.03 1952.WORKING CAPITAL ANALYSIS Statement showing the Schedule of changes in Working Capital for the year 2008 and 2009 Table No: 3.91 1551.10 WC (A-B) 4668. 48 | P a g e .43 1970.84 3405.25 Provisions 930.98 5.85 962.49 Nil 123.15 Particulars CURRENT ASSETS 2008 (Rs in Millions) 2009 (Rs in Millions) Increase Decrease Inventories Sundry Debtors Cash and Bank Other Current Assets Loans and Advances (A) CURRENT LIABILITIES 5132.03 Nil Nil 25.90 Source: Company Annual Report 1057.45 Nil 165.39 1786.61 1970.33 180.

88 8689.60 1748.22 Provisions 956.15 715.98 5.51 Decrease in WC TOTAL 4849.38 792.64 1335.95 12203.47 872.87 3949.26 Nil Nil 817.03 1952.43 2588.01 5527.16 Particulars CURRENT ASSETS 2009 (Rs in Millions) 2010 (Rs in Millions) Increase Decrease Inventories Sundry Debtors Cash and Bank Other Current Assets Loans and Advances (A) CURRENT LIABILITIES 4170.59 Nil 39.87 4849. From this we can understand that the liability s high in 2010 49 | P a g e .50 WC (A-B) 4849.12 6904.18 2667.51 1356.81 502.28 (B) 5557.84 3405.6 1335. almost all the current assets are increasing except cash and bank balance due to increase in current liabilities.69 10407.68 Interpretation: While analyzing the above statement.28 44.7 Nil Nil Liabilities 4601.51 Source: Company Annual Report Nil Nil 2305.48 3513.28 1375.WORKING CAPITAL ANALYSIS Statement showing the Schedule of changes in Working Capital for the year 2009 and 2010 Table No: 3.68 3949.

this means that the company has not properly used the cash for day to day management.63 3389.78 Interpretation: While considering the above statement.18 Nil Liabilities 6904.95 12203.28 1375.88 (B) 8689.48 WC (A-B) 3513. Both liabilities and provisions are increased.17 Particulars CURRENT ASSETS 2010 (Rs in Millions) 2011 (Rs in Millions) Increase Decrease Inventories Sundry Debtors Cash and Bank Other Current Assets Loans and Advances (A) CURRENT LIABILITIES 5527.82 1412.12 11363.2 7224.30 18208.08 12219.18 2667. In 2010.65 44.51 5988.78 7224.51 5836.88 144. Inventories and sundry debtors have increased. current assets are more than current liabilities.87 TOTAL 5988.43 2588.34 2042. 50 | P a g e .51 Source: Company Annual Report Nil Nil 3385.60 Provisions 1748.07 10290.35 Nil Nil 1175.48 1929. Table No: 3. But the cash and bank balances have decreased.56 5988.37 Nil Nil 721.64 Increasing in WC 2472. That mean the company has properly utilized its current assets.WORKING CAPITAL ANALYSIS Statement showing the Schedule of changes in Working Capital for the year 2010 and 2011.06 667.28 44.

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