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Submitted to: Mrs. S.Sudha
Faculty of Financial Management, Indian Institute of Plantation Management, Bangalore
Presented By: Prit Ranjan Jha
All amounts worked here are in terms of Rupees in Crores (1 crore =10000000=10^7). MS Excel sheet has been used for computing the ratios.
63 times says that the company is in relatively good short-term financial standings.59 II. the more liquid the company is.3/II.4 1. The ratio is an indication of a company's ability to meet shortterm debt obligations.72 II.I Liquidity Ratios Year 2007 1 Current ratio: Current assets / Current Liabilities II.630479133 The current ratio of 1.3:Current assets.4:Current liabilities and provisions 3857. the higher the ratio.Loans and advances 6289. 5 .
-II.69 3857.0 2935.e. a quick ratio of 1 or more is accepted by most creditors. ITC has strong financial positions in many other aspects.761016593 II. however. :Current liabilities and provisions (II.72 5 .Loans and advances) Less:II. In general. a)/(II.I Year 2 Liquidity Ratios 2007 Quick ratio or Acid test ratio: (Current assetsinventories)/ Current Liabilities 6289. :(Current assets. i.59 0. ) The small µQuick ratio¶. quick ratios vary greatly from industry to industry and ITC does not have as such any worries in getting creditors. 0. 6 . a:Inventories II. 6 times says that the company's financial strength is not so strong.
3 0. (The ratio is of 7 interest to short-term creditors) .I Liquidity Ratios Year 2007 3 Cash ratio or Absolute liquidity ratio: (Cash +Marketable securities)/Current liabilities II. :C urrent liabilities and provisions (II. But there is no such liquidity need for the company and so the small value of the ratio has no such important implications. 3 times says that the company is not in the position to very quickly liquidate its assets and cover short-term liabilities. ) 900. 333 The cash ratio of 0.3c)/(II. 6 0 00. .3c:C ash and bank Balances Add:M arketable securites II.
Thus its earnings are stable.02 times. which means that the company has not been aggressive in financing its growth with debt.2:Loan funds 200.1) The ratio of 0. The company has better support from the shareholders.II Solvency Ratios Year 2007 1 Debt ± equity ratio: Long term debt/ equity (net worth) I.019246763 (I. 8 .1:Shareholders funds 10 7.88 I.2)/(I.08 0.
Thus the company is efficiently utilizing its loan funds.2+I.08 0 7.0 888 2 The ratio of 0.2: oan funds I.2)+(I.2)/(I.88 0 7.02 times signifies that the company has employed more capitals over its debts.9 0. 9 . ) 200.II Solvency Ratios Year 2007 2 Debt ratio: debt (long term)/ (debt (long term) + equity) or debt/capital employed I. ) (I. :Shareholders funds (I.
7 0. It has no tension of paying interests over its loans. ( . a13:Interest accrued but not due on loans 3 26.III)/(II. times is magnificently very high and hence the company has very sound financial position.II Solvency Ratios Year 2007 3 Interest Coverage ratio : (earnings before interest and tax) / Interest / :III:profit beforetaxationan exception item d al s II. 10 . 713 . a13) The ratio of 713 .
13 times signifies that the company is efficient in selling its stocks. a:) 71 . a:Inventories ( / :I )/(II. / :I :Net sales II. 11 .12 51525 The ratio of 2.7 .III Year 1 Turnover Ratios 2007 Inventory turnover: Cost of goods sold or net sales/Average (or closing) inventory.0 2.
12 .III Turnover Ratios Year 2007 2 Days of Inventory holding: Number of days in the year (say 360)/ Inventory turnover ratio. Num of days in a year ber Inventories turnover ratios (360)/(ITR) 16 360 2.127 6 16 days or about five and half months periods for the liquidation of stocks is quiet efficient.
3 ) b 73 5 1 5.3 : u d d b rs b n ry e to ( / :I )/(II.2 1 The ratio of 11.III Year 3 Turnover Ratios 2007 Debtors turnover ratio: Credit sales or net sales/ Average (or closing) debtors (or accounts receivable (total debtors +bills receivable) / :I : e s le t as II. 13 . 1 .7 3.2 times signifies that the company is getting good returns and has no visible risk but benefits out of its debtors.
III Turnover Ratios Year 2007 4 Collection period: Number of days in the year (say 360)/ Debtors turnover Nme o d ysinth ye r u br f a e a D b rstu o e e to rn v r (3 0 T ) 6 )/(D R 30 6 1 .2 7 10 3. 14 . 2 2 2 The debt collection period of 32 days is quiet good and the company is efficient in getting back its dues.
III Turnover Ratios Year 2007 5 Current assets turnover: Net sales/ Current assets / :I :N t sa s e le 7 55 1 . 15 .1 The ratio of 1.7 2 (P/ :I /(II.lo n a a v n s u n sse a s n a ce 2 .7 II. in spite of the current liabilities.13 times signifies that . : C rre t a ts. 13 . the company is efficient in making sales revenue.
III Turnover Ratios Year 2007 6 Net current assets turnover: Net sales/ Net current assets / :I :N t sa s e le N t u n sse e rre t ts / :I / N CA) 7 .1 23 .7 1 2 2 . 16 . 3 The ratio of 2. 3 times signifies that the company is highly efficient in utilizing its net current assets and generating sales revenue.
1:N Fixed ssets et / :I / II.III Turnover Ratios Year 2007 7 Fixed assets turnover: Net sales/ Net fixed assets / :I :N sales et II.1 71 . 17 . 1 1.7 10.27 times signifies that the company is very efficiently utilizing its fixed assets for generating sales revenue.27176 404 The ratio of 1.
7 II.2: Investments Net urrent assets 2 2.III Turnover Ratios Year 2007 8 Net assets turnover: Net sales/ Net assets or capital employed : (Net assets = all assets ± accumulated depreciation) / :I :Net sales 71 .1:Net i ed ssets 10.1 Net assets 11110. 18 . 1 0 7.81 0.6 times signifies that the company has still to be more efficient in utilizing its net assets in generating sales revenue.77 II.6 0 ( / :I )/(N ) The ratio of 0.
03% is quiet impressive and the company is making good profits.7 71 .IV Profitability Ratios Year 2007 1 Margin: (Profit before interest and tax (PBIT)/ Net sales)×100 P :III:P b foreta a a d x p a ite s / rofit e x tion n ce tion l m P :IB et ales / :N (P :III)/(P :IB 100 / / )× 92 . 19 .7 55.0 553 The Profit margin of 55.
3% is quiet impressive.7 7 . and the company is performing well. 20 .IV Profitability Ratios Year 2007 2 Net margin: Profit after tax (PAT) ×100 / Net sales P :III:P fit a r ta a n / ro fte x tio e le P :I :N t a s / (P :III)/(P :I )× 0 / / 10 2 . 3 7 7 The net margin of 37.7 1 3.
13 11110.2:Investments Net urrent assets Net assets (P/L:III)/(N )×100 3926.77 2432.91 3067.3 % is quiet good and company is performing well.7 5610.1:Net ixed ssets II.81 35.IV Profitability Ratios Year 2007 3 Before tax return on investment: (PBIT/Net assets) ×100 P/L:III:Profit before taxation and xceptional items II. 21 .3 125775 The Return of 35.
6 The ratio of 25.0 25. 22 .IV Profitability Ratios Year 2007 4 Return on equity: (PAT/Equity (net worth)) ×100 P :III:P after ta ation / rofit I.7 104 7.1: hareholders funds (P :III)/(P :I )×100 / / 2 . 6% is quiet good and the company is utilizing the shareholders funds in a better way.
7.1/share the EPS of Rs.V Equity-related Ratios Year 2007 1 Earning per share (EPS): PAT/Number of ordinary shares 2 .1 is very good.1 )( 71 P :III:P after ta ation / rofit In comparison to the face value of Re.7 -1 um 37 7 3 07 P/ :IV (iv):WeightedaverageN ber of ordinaryshares outstanding (P/ :III)/(P/ :IV 10 7: to convert in per rupee) 7. 23 .
Re. for each share they own.2 77 07 3.103 Dividend per share (DPS) is a simple and intuitive number. In compared to the face value of the shares.V Equity-related Ratios Year 2007 2 Dividends per share (DPS): Dividends/ Number of ordinary shares P/ :IV:Proposed Dividend P/ :IV-1 (iv): eighted average Number of ordinary shares outstanding (P/ :III)/(P/ :IV) 10 7(to convert into unit ruppes) 11 . 24 .e.1. over an year. i.3.10 is quiet good. It is the amount of the dividend that shareholders have (or will) receive. DPS of Rs.00/share.
V Equity-related Ratios Year 2007 3 Pay out ratios: DPS/EPS or Dividends/PAT DS P ES P D S/ E S P P 0. 7. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio. 3 times is quiet good. . 3 a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends. 3 3. the more secure the dividend because smaller dividends are easier to pay out than larger dividends. 25 So the value of 0.
Market Price Per Share The closing price of the common or preferred stock as reported on the applicable stock exchange consolidated tape as of the date indicated 26 .V Equity-related Ratios Year 2007 4 Dividend Yield: DPS/Market value per share e have to get the Market value per share of the relevant period .
27 .V Year 5 Equity-related Ratios 2007 Price/Earning ratio: Market value per share/ EPS e have to get the Market value per share of the relevant period .
28 .V Equity-related Ratios Year 2007 6 Earning Yield: EPS/ Market value per share e have to get the Market value per share of the relevant period .
Re. i. drastically different than what the market is valuing the stock at. i. Rs. ³Here ³diluted´ value in considering numbers of shares is not considered.00.27.e.1. The book value.1: hareholders funds / :V-19(iv : eighted average Number of ordinary shares outstanding (I.e.77 7 BV is considered to be the accounting value of each share.0 7 7 907 27.´ 29 .V Equity-related Ratios Year 2007 7 Book value per share: Net worth/ Number of ordinary shares .1 /(P/ :IV 10 7(to convert into unit ruppes 10 7.77 is far higher than the face value of each share.
e. 7 610.25% is quiet good and the company is doing well.2 2 1 .7 2 440 .7 7 6 2 . i.1 3 3 1 7 . 1 40 2 6 .0 1 161.2 53 Earning power of the company. 1 3 0 6 7 .VI Investment-related Ratios Year 2007 Return on assets or earning power (ROA): (PAT/ Average 1 total assets (of the given years. here 2006&07)) ×100 or ((PAT+ Interest)/Average fixed assets) ×100 P/ :III:Pro fit a fte r ta xa tio n ixe d a s s e ts 2 0 0 7 In ve s tm e n ts 2 0 0 7 u rre n t a s s e ts 2 0 0 7 Fixe d a s s e ts 2 0 0 6 In ve s tm e n ts 2 0 0 6 u rre n t a s s e ts 2 0 0 6 A ve ra g e to ta l a s s e ts (PA T /A T A )× 1 0 0 26 . 1 . 30 .
7 110 1 11.3 % signifies that the company is getting good return out of its investment decisions. 31 .VI Investment-related Ratios Year 2007 2 Return on capital employed (ROCE): (EBIT(PBIT)/ Capital employed) ×100 P :III:P e taa a dEce tion l ite s / rofit fore tion n p a m u s f ns I: o rce o u d ((P :III)/I)× 0 / 10 3 2 .3 1 7 2 7 The ROCE of 35. 3 .
0 0 7 2.VII Return on Equity (ROE) Year 2007 1 ROTSE (return on total shareholders equity): (PAT/ Total shareholders equity) ×100 P :III:P fit a r taa n / ro fte tio I. 7 times) is same as that of ³Return on equity´. 32 .1 h re o e fu d :S a h ld rs n s (P :III)/(P :I )× 0 / / 10 2 . 5 7 The ratio (25. since there are no preference shares.7 1 3 .
7 I. 33 .0 (P/ :III)/(P/ :I )×100 7 25. and ³return on total shareholders equity´ since there are no preference shares.VII Return on Equity (ROE) Year 2007 2 ROOSE (return on ordinary shareholders equity) / RONW (return on net worth): ((PAT-preferential dividends)/Net worth) ×100 P/ :III:Profit after ta ation 2 .1:Shareholders funds 10 37. The ratio (25. 7 times) is same as that of ³Return on equity´.
Du Pont Analysis 34 .
Du Pont analysis for year 2007: 35 .
Du Pont analysis for year 2006 36 .
Du Pont analysis for year 2005: 37 .
Du Pont analysis for year 200 : 38 .
00 20.00 . 2 . 23.00 2 .Du Pont Analysis Return on total assets (%) 30. . 9 Du Pont chart portrays the earning power of a firm.00 10.37 22. It implies that the performance of a firm can be improved either by generating more sales volume per rupee of investment or by increasing the profit margin per rupee of sales.00 1 2 3 Years:1~2004:2~2005:3~2006:4~2007 22.00 0. the company has to maintain more consistent and increasing 39 trend in its ROA in the following years. The ROA ratio is a central measure of the overall profitability and operational efficiency of a firm it shows the interaction of Profitability and activity Ratios. So as per the analysis.00 1 .
com 40 . books from the liabrary of IIPM.References Class notes of Sudha madam.htm http://www.econ.com/terms/d/debt equityratio.edu/ http://www.uconn.icmrindia.morningstar.morningstar.asp http://www.com http://www.org/casestudies/icmr_ case_studies. http://www.investopedia.
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