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Financial Accounting & Analysis

FLOW OF PRESENTATION
• • • • • • • • Saumya Goel Suparna Rao Pranay Jain Somya Matta Rishabh Mulani Nikhil Nair Rushabh Gala Nitesh Dubal 208 210 209 364 365 366 308 307

COMPANY OVERVIEW
• Larsen & Toubro Limited is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector. • The company ranked #14 in the 2011 Fortune India 500 list of the largest Indian companies by total revenues.

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Calculation of Ratios 1) Current Ratio : Current Asset (C.A.2)/36355.) / Current Liabilities (C.8 = 1.L.A.L.65-1776. = (46074.) = 46074. – Inventories & Prepaid Expenses) / C.21 .65 / 36355.8 = 1.26 2) Quick Ratio (Acid Test Ratio) : (C.

06+2936.02 = 0.72+33419.08)/25223.3) Debt Ratio : Total Debts / Shareholder’s Fund = (5330.06+2936.02 =1.06/25223.21 5) Debt to Total Asset Ratio : Total Debt / Total Assets = (5330.44 4) Debt Ratio : Long Term Debt / Shareholder’s Fund = 5330.08 ) / 67692.96 = 0.72+33419.61 .

6) Proprietors Funds to Total Assets Ratio : = Proprietors Funds / Total Assets = 25223.02 / 67692.37 7) Long Term Debt to Total Capitalization Ratio : = Long Term Debt / Total Capitalization = 6114.14 / (25223.195 .14 / 31337.16 = 0.02 + 6114.96 =0.14) = 6114.

94 = 1.44 9) Price Earning Ratio : Market Price per share / Earning per share = 1437.8) / 42469.02+36355.93 = 19.90 .8) Capital Bearing Ratio : Variable cost Bearing Funds / Fixed cost Bearing Funds = (25223.37 / 72.

COVERAGE RATIOS 10) Interest Coverage Ratio : Earnings Before Interests & Taxes (EBIT) / Interest Expenses Interest Expense = 609.85 Total = 666.45 .44 / 609.10 = 6914.11 = 11.11 Other Borrowing Costs = 6.14 Exchange Loss = 55.

) Debt Service Coverage Ratio: = (PAT + Interest + Depreciation + Amortization) / (Principal + Interest + Lease Rentals) .00.11) Dividend Coverage Ratio : Profit After Tax (PAT) / Preference Dividend Note : – – According to the Balance sheet of 2011-2012. 12. Dividend Coverage Ratio is 0. the preference dividend value is quotes as Rs 0.

583% 14) Return on Equity (ROE) : NPAT / Shareholder’s Equity = 4456.96 x 100 = 6.50/25223.50/67692.02 x 100 = 17.13) Return on Investment (ROI) : Net Profit After Tax (NPAT) / Total Assets x 100 = 4456.668% .

785 x 8.Du Pont Approach 15) Earning Power (ROI) = Sales Profitability x Asset Efficiency Asset Efficiency = Net sales / Total Assets = 4456.38 Sales Profitability = Total Assets / Turnover = 53170.96 = 0.52/67692.50/53170.58 .785 = 0.38 = 6.52 = 8.

96/25223.785 x (67692.16) ROE : Net Profit Margin x Total Asset Turnover x Equity Fund = 8.02) = 17.66 .38 x 0.

14% 18) Operating Expense Ratio : (Administrative Expense + Selling Expense) / Sales x 100 = 2223.18/53170.18% .52 x 100 = 77.Expenses Ratio 17) Cost of Goods Sold Ratio : Cost of Goods / Sales x 100 = 41020.52 x 100 = 4.03/53170.

) / Sales x 100 = (41020.19) Operating Ratio : (Cost of Goods sold + Operating Exp.18 + (6552.75) / 53170.436% .52) x 100 = 89.58 – 18.

18)/53170.52-41020.Profitability Ratios 20) Gross Profit Margin : (Net Sales – Cost of Goods sold / Net sales) x 100 = ((53170.52)x100 = 22.85% .

It is the result of the relationship between prices sales volume and cost. .Importance • Gross Profit Margin is used to measure the relationship between profit in relation to sales.

18)/53170.17)/43905.5241020.87)x100 = 23.77 % • Profitability ratios for 2011-2012:Gross Profit Margin : (Net Sales – Cost of Goods sold / Net sales) x100 = ((53170.Comparisons • Profitability ratios for 2010-2011:Gross Profit Margin=((Net Sales – Cost of Goods sold) /Net sales) x 100 =((43905.52)x100 = 22.87 – 33468.85% .

Indicative of higher sales price without an increase in cost of goods.Comments • A high ratio of gross Profit to sales is a sign of good management. It implies that cost of production is relatively low. The gross profit margin has decreased since the last year .

20) Operating Profit Margin EBIT(Earnings Before Interest and Taxes) Sales .

• It gives an idea of how much profit a company makes (before interest and taxes) on each dollar of sales. raw materials.Importance: • The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages. . Operating margin ratio shows whether the fixed costs are too high for the production or sales volume. • It is best to analyze the changes of operating margin over time and to compare company's figure to those of its competitors. etc.

1/53170.82)X100 = 13.52 = 16.Comparision • Operating Profit Margin for the year 2011-12 = (EBIT / Sales)X100 = 8693.34% • Operating Profit Margin for the year 2010-11 = (5830.63/43905.279% .

. the company is quite profitable.e. a growth of 3. i. Hence. The Operating profit margin has had a significant increase from last year.06%. • The Operating profit margin has increased since last year which shows that the earnings on per dollar of sales is more than last year’s.Comments & Analysis • A high or increasing operating margin is preferred because an operating margin shows that the company is earning more per rupee of sales.

21) Pre-Tax Margin : EBT (Earnings Before Tax) Sales .

Comparision • Pre-tax Margin for the year 2011-12 = (EBT / Sales) x 100 = 6310.87)X100 = 13.33/53170.52 = 11.44% .47/43905.86% • Pre-tax Margin for the year 2010-11 = (EBT / Sales)X100 = (5901.

showing the company is able to keep its operations costs low. while being able to pull in strong earnings .Importance: • The Pretax Margin measures how well a company can generate before-tax profits at the current level of sales. • A high or increasing Pretax Margin is usually a positive sign.

the ability of the company to pull high earnings while keeping operations cost is still good. . but has significantly dipped down (by about 1. This means that the company is although able to pull high earnings in while keeping the cost of operations the least.Comments & Analysis • The higher the pre-tax profit margin. • Hence. this rate has decreased. The Pre-Tax margin Ratio has decreased from last year’s ratio. • The Pre-tax margin has significantly reduced in comparision to last year.6%). the more profitable the company.

38% .87)X100 = 9. 23) Year – 2010 to 2011 Net Profit Margin= (NPAT / Sales) x 100 = (3957.Net Profit Margin.50/53170.014% Year .2011-2012 Net Profit Margin : NPAT / Sales x 100 = 4456.52 x 100 = 8.89/43905.

taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's total revenue.Importance:• Net profit margin is the percentage of revenue remaining after all operating expenses. . it shows how good a company is at converting revenue into profits available for shareholders. interest.

.Analysis:• The Net Profit Margin has decreased since last year which shows that a lesser amount of sales that last year is being converted to Profit.

Comments:• This is used to see which are most effective at converting sales into profits. The Net Profit Margin has decreased since last year. . This ratio should also be high.

collection period) : = Receivables x Days in year / Annual credit sales = 365/3.52/15578.24) Receivable to Turnover Ratio : Annual net credit sales / Average Receivables = 53170.413 25) Receivable Turnover in days (Avg.91 = 107 days .78 = 3.413 = 106.

40-1577.26) Payable Turnover Ratio : Annual net credit Purchases / Average Payables = 1776.14 27) Payable Turnover in days : 365/0.8+12853.62+2369.14 = 2607 days .42/2) = 0.15/(157572.

46 = 14.15)/2 = 41020.62+1577.18/1676.9 = 15 days 29) Operating Time : Inventory Turnover in days + Receivable Turnover in days = 15+107 = 122 days .18/(1776.46 Days = 365/24.28) Inventory Turnover Ratio : Cost of Goods sold / Avg.885 = 24. Inventory = 41020.

96 = 0.30) Cash Cycle : Operating cycle – Payable Turnover in days = 122-2607 = -2485 days 31) Total Asset Turnover : Net Sales / Total Assets = 53170.52/67692.785 .

96-36355.16 33) Total Capital Turnover : Net Sales/Capital Employed = 53170.66 = 6.16 = 1.35 Capital Employed : Total Assets – Current Liabilities = 67692.32) Fixed Asset Turnover : Net Sales / Net Fixed Asset = 53170.52/8363.52/31337.80 = 31337.70 .

52/9718.80) = 53170.52/(46074.85 = 5.34) Working Capital Turnover Ratio : Net Sales / Working Capital = 53170.47 .65-36355.

THANK YOU ! .

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