INTERPRETATION OF RATIOS OF MARUTI SUZUKI

CURRENT RATIO:

The current ratio of Maruti Suzuki is 0.51:1 in 2018. The current ratio is
decreasing every year. The low current ratio represents that the liquidity position
of the firm is not good and the firm shall not be able to pay its current liabilities in
time. The low current ratio is may be due to the firm has not sufficient funds to
pay off its liabilities and the firm may be trading beyond its capacity. The
resource may not warrant the activities.

QUICK RATIO:

Companies with ratios of less than 1 cannot pay their current liabilities and
should be looked at with extreme caution. Furthermore, if the acid test ratio is
much lower than the working capital ratio, it means current assets are highly
dependent on inventory In case of Maruti Suzuki Quick ratio in 2018 is 0.30, in
2017 is 0.41 and in 2018 is 0.43 that means every year it is declining. So, we can
say that the company is not in position to meet its immediate liabilities.

CASH RATIO:

The cash ratio indicates to creditors, analysts, and investors the percentage of a
company’s current liabilities that cash and cash equivalents will cover. A ratio
above 1 means that the company is able to pay off its current liabilities with cash
and cash equivalents. The ratio in 2018 is 0.004, in 2017 is 0.001 and in 2016 is
0.004 that means the company is not able to pay off its current liabilities with
cash and cash equivalents.
TOTAL DEBT RATIO:

Total debt ratio is a financial ratio that measures the extent of a company’s
leverage. It is the ratio of total debt to total assets. It can be interpreted as the
proportion of a company’s assets that are financed by debt. The total debt ratio of
a firm in 2018 is 0.29, in 2017 is 0.28 and in 2016 is 0.28. It shows that the lower
ratios are considered as better debt ratio.

DEBT EQUITY RATIO:

The Debt-Equity ratio of Maruti Suzuki is 0.40:1 in 2018. It’s almost same as in
2017. This means that the company is using little outsider’s fund in financing the
firm’s assets. However, the owners want to do business with the maximum of
outsider’s funds in order to take lesser risk of their investments and to increase
their earnings (per share) by paying a lower fixed rate of interest to the outsiders.
Therefore, interpretation of this ratio depends primarily upon the financial policy
of the firm and upon the firm’s nature of business.

EQUITY MULTIPLIER;

It shows the percentage of assets that are financed or owed by the shareholders.
In last 3 years the Equity multiplier ratio of Maruti Suzuki is high which means
that the company is using debt and other liabilities to finance its assets -- and,
everything else being equal, is more risky than a company with lower leverage.

TOTAL ASSET TURNOVER:

In case of Maruti Suzuki the total asset ratio in 2018 is 1.36 while in 2017 it was
1.48 and in 2016 it was 1.52. This means that there is minor decline in the total
sales. It measures the efficiency of a company's use of its assets in generating
sales revenue or sales income to the company. A high ratio means a high rate of
utilization of fixed assets and low ratio means improper use of assets. So we can
say that Maruti Suzuki is not efficiently utilizing its assets for sales.

CAPITAL INTENSITY:

It measures the ability of a company to effectively use its assets. Capital

intensity shows how much of an investment in fixed assets was required during a
given period to produce the per dollar sales revenue. In case of Maruti Suzuki
there is a minor increase in the capital intensity in last 3 years and is less than 1
dollar. It shows that the firm is having low capital intensity which means it is
better because it generates more revenue using less assets.

RECEIVABLE TURNOVER:

The receivables turnover ratio is an activity ratio measuring how efficiently a firm
uses its assets. In 2018 it is 55.98, in 2017 it was 64.29 and in 2016 it was 41.19
which mean company is not able to manage its receivable turnover. But the ratio
is high which shows that the company is somehow able to making the timely
collection of credit.

PROFIT MARGIN RATIO:

Net Profit Margin Ratio indicates the proportion of sales revenue that translates
into net profit. It indicates how much net income a company makes with total
sales achieved. In case of Maruti Suzuki, the company is facing lower profit
margin and is less sufficient to convert its sales into actual profit.
RETURN ON ASSETS:

The return on assets ratio measures how effectively a company can earn
a return on its investment in assets. The return on assets in 2018 is 1.39, in 2017
it was 1.53 and in 2016 it was 1.55. It shows that Maruti Suzuki has lower return
on assets so the company is not making enough income from the use of its
assets.

RETURN ON EQUITY:

The return on equity ratio or ROE is a profitability ratio that measures the ability
of a firm to generate profits from its shareholders investments in the company.
The return on equity in 2018 is comparatively lower than the last 2 years but still
the company manages to generate profit from its shareholders investment.