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TATA STEEL
RATIO ANALYSIS ( GROUP 5- GLC- IB)
CONTENTS
About Tata Steel
Tata Steel- Its Acquisitions
Vision
Mission
Liquidity Ratios
Turnover Ratios
Profitability Ratios
Leverage Ratios
Conclusion
ABOUT: TATA STEEL
One of the World’s top ten steel producers
Combined presence in nearly 50 countries
Tata Steel includes Corus Steel, Tata Steel
Thailand, and Nat Steel Asia which are its
acquisitions.
Comprises of 80,000 employees across 5
continents
Has crude steel production capability of 28
million tones.
TATA STEEL- ITS ACQUISITIONS
VISION
LIQUIDITY RATIOS
QUICK RATIOS
CURRENT RATIOS
This Ratio indicates the firm’s ability to meet its current
liabilities.
This ratio is of very high importance to the suppliers of short
term funds like the bankers and trade creditors
This will ensure sufficient amount of working capital. If the
ratio is too low or negative that means there is working
capital crisis.
The ratio can be calculated as follows:
current ratios
1.2
1
0.8 current ratios
0.6
0.4
0.2
0
2008-2009 2009-2010
QUICK RATIOS
This ratio is calculated to get a real picture of liquidity.
The ratio is calculated on pre-assumption that all the
current assets are of same level of liquidity.
This ratio can be calculated as follows:
Quick ratio
0.8
0.7
0.6
0.5
0.4 Quick ratio
0.3
0.2
0.1
0
2008-2009 2009-2010
TURNOVER RATIOS
These ratios determine how quickly certain assets are
converted into cash
It measures the ability of the firm to manage its assets and
convert into cash.
High turnover ratios are usually associated with good asset
management and low turnover ratios with poor asset
management.
TOTAL ASSETS T/O RATIO
OR
AVERAGE PAYMENT PERIOD=12/CREDITORS TURNOVER RATIO
AVERAGE PAYMENT PERIOD(Contd…)
As per Balance Sheet as on 31st March 2009 and 2010
YEAR MONTHS CREDITORS AVERAGE
TURNOVER PAYMENT
RATIO PEIOD
2008-2009 12 2.22 5.40 months
2009-2010 12 2.04 5.88 months
PROFITABILITY RATIO
ON BASIS OF SALES NET PROFIT RATIO
EXPENSE RATIO
GROSS PROFIT RATIO
Gross Profit is defined as Sales- Cost of Goods Sold.
The Gross profit ratio is the ratio of Gross profit to the
Sales.
The ratio can be calculated as follows:
EXPENSE RATIO
1.68%
1.66% EXPENSE RATIO
1.64%
1.62%
2008-2009 2009-2010
PROFITABILITY RATIO- II
RETURN ON CAPITAL
EMPLOYEED
RETURN ON INVESTMENT
PROFITABILITY RATIOS
BASED ON INVESTMENT
RETURN ON NETWORTH
RETURN ON INVESTMENT
4.20%
4.00%
3.80% RETURN ON
INVESTMENT
3.60%
3.40%
3.20%
2008-2009 2009-2010
RETURN ON NETWORTH
The Return on Net worth of a company measures the
ability of the management of the company to generate
adequate returns for the capital invested by the owners
of a company.
Generally a return of 10% would be desirable to
provide dividends to owners & have funds for future
growth of the company.
The ratio can be calculated as follows:
RETURN ON NETWORTH
20.00%
15.00% RETURN ON
10.00% NETWORTH
5.00%
0.00%
2008-2009 2009-2010
EARNINGS PER SHARE
The shareholders invest their money with the
expectation of getting dividends and capital
appreciation on the shares. Since the earnings form
the basis for dividend payments as well as a basis for
any future increase in the market price of the shares,
investors are always extremely interested in knowing
the earnings per share.
The ratio can be calculated as follows:
20
0
2008-2009 2009-2010
DIVIDEND PER SHARE
Dividend per share (DPS) is the total dividends paid
out over an entire year (including interim dividends
but not including special dividends) divided by the
number of outstanding ordinary shares issued
The ratio can be calculated as follows:
LEVERAGE RATIOS
RETURN ON EQUITY
RATIOS
DEBT-EQUITY RATIO
It indicates what proportion of equity and debt the
company is using to finance its assets.
A measure of a company's financial leverage calculated
by dividing its total liabilities by stockholders' equity.
Also known as the Personal Debt/Equity Ratio, this
ratio can be applied to personal financial statements as
well as corporate ones.
The ratio can be calculated as follows:
DEBT-EQUITY RATIO
4.00%
3.50%
3.00%
2.50% DEBT-EQUITY
2.00% RATIO
1.50%
1.00%
0.50%
0.00%
2008-2009 2009-2010
RETURN ON EQUITY
Return on Equity is the amount of net
income returned as a percentage of shareholders
equity.
Return on equity measures a corporation's
profitability by revealing how much profit a company
generates with the money shareholders have invested.
The ratio can be calculated as follows:
RETURN ON EQUITY
8
6
RETURN ON
4 EQUITY
2
0
2008-2009 2009-2010
CONCLUSION
These Liquidity, Leverage, Profitability, and
Management Ratios allow the business owner to
identify trends in a business and to compare its
progress with the performance of others through data
published by various sources.
The owner may thus determine the business's relative
strengths and weaknesses.
Therefore Ratio Analysis plays a major role in an
organization for doing major business decisions as
well as knowing the growth of the organization.
PRESENTED BY:
Komal Nerlekar
Aditi Lala
Sayak Mazumdar
Mohamad Aftab
Hitesh Wadhwani
Yogita Sharma