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  • Ratio Analysis of Voltas

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    riya gupta
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    The document analyzes various liquidity and profitability ratios for Voltas over a 10-year period compared to industry benchmarks. Some key points: - Voltas' current ratio was generally close to or above industry benchmarks, indicating adequate liquidity to meet short-term obligations. However, in some years like 2016-2018 it was slightly below benchmarks. - Voltas' gross profit margin and net profit margin were significantly lower than industry benchmarks for most years, suggesting it needs to improve pricing strategies. - Operating profit, return on equity, and return on capital employed ratios were sometimes close to benchmarks but often lower, meaning Voltas could better manage costs and profits relative to industry.

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    The document analyzes various liquidity and profitability ratios for Voltas over a 10-year period compared to industry benchmarks. Some key points: - Voltas' current ratio was generally close to or above industry benchmarks, indicating adequate liquidity to meet short-term obligations. However, in some years like 2016-2018 it was slightly below benchmarks. - Voltas' gross profit margin and net profit margin were significantly lower than industry benchmarks for most years, suggesting it needs to improve pricing strategies. - Operating profit, return on equity, and return on capital employed ratios were sometimes close to benchmarks but often lower, meaning Voltas could better manage costs and profits relative to industry.

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    © All Rights Reserved
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    128 views11 pages

    Ratio Analysis of Voltas

    Uploaded by

    riya gupta
    The document analyzes various liquidity and profitability ratios for Voltas over a 10-year period compared to industry benchmarks. Some key points: - Voltas' current ratio was generally close to or above industry benchmarks, indicating adequate liquidity to meet short-term obligations. However, in some years like 2016-2018 it was slightly below benchmarks. - Voltas' gross profit margin and net profit margin were significantly lower than industry benchmarks for most years, suggesting it needs to improve pricing strategies. - Operating profit, return on equity, and return on capital employed ratios were sometimes close to benchmarks but often lower, meaning Voltas could better manage costs and profits relative to industry.

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    © All Rights Reserved
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    of 11

    VOLTAS

    1. Liquidity Ratio
    It is being used to analyze the liquidity position or meeting the short-term obligations
    capacity of the company.

    I. Current ratio

    years 19-Mar 18-Mar 17-Mar 16-Mar 15-Mar 14-Mar 13-Mar 12-Mar 11-Mar 10-Mar
    Voltas: 1.63 1.3 1.21 1.35 1.34 1.39 1.37 1.35 1.32 1.22

    industry benchmark 1.47 1.41 1.35 1.42 1.36 1.29 1.26 1.26 1.32 1.4

    current ratio
    1.8
    1.6
    1.4
    1.2
    1
    0.8
    0.6
    0.4
    0.2
    0

    Voltas industry benchmark

    Close to benchmark:

    The company Voltas is almost matching up industry’s benchmark in the years 2011, 2015, 2018
    which is a good indicator for the company as this shows company is able to meet its short-term
    obligations using its current assets which is a good indicator for the company.

    Lower than benchmark:

    Although, there is not much significant difference with the industry benchmark but in the years
    2016, 2017, 2018 the company had low current ratio as compared to the industry which indicates
    that company was not much efficient in paying the current liabilities.

    Higher than benchmark:


    In the years 2012, 2013, 2014 the company had a better ratio than the industry which means the
    company had a better liquidity position than the industry and the company is running well.

    II. Quick ratio

    years 19-Mar 18-Mar 17-Mar 16-Mar 15-Mar 14-Mar 13-Mar 12-Mar 11-Mar 10-Mar
    Voltas 1.3 1.05 0.91 1.08 1.04 1.09 1.03 1.02 1.02 0.71
    Industry
    benchmark 0.97 0.92 0.89 0.97 0.9 0.85 0.82 0.82 0.84 0.88

    quick ratio
    1.4
    1.2
    1
    0.8
    0.6
    0.4
    0.2
    0

    Voltas Industry benchmark

    In the year 2010 and 2017 we can see the company Voltas is almost close to the benchmark,
    which means company was able to pay its liabilities using its liquid assets.

    If seen as an average of last ten years, the company is almost above from the industry benchmark
    which means the company has a better liquidity position which means company has assets that
    can be readily converted into cash.

    This signifies company holds a good position in terms of top-line statement of financial
    statements.

    2.PROFITABILITY RATIO
    Profitability ratios enables to let know how the business is working by letting know the profits of
    the business firm. This is one of the most important ratios as it enables to know about the
    performance of business.
    I. Gross profit margin:

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 9.09 11.9 12.25 8.43 8.09 3.53 3.24 2.94 6.88 6.42

    industry
    benchmark 27.76 31.93 31.65 29.75 43.81 24.42 20.85 25.45 26.71 46.3

    Gross profit margin


    50
    45
    40
    35
    30
    25
    20
    15
    10
    5
    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
    Voltas industry benchmark

    Higher gross profit margin indicates better position of the company.

    After having a glance at the graph shown, it can be said company has significantly very less
    gross profit margin as compared to the industry benchmark. The company is not even close with
    the benchmark in any of the year. This shows company doesn’t hold a good position in
    generating gross profits as compared to the industry.

    This shows Voltas is under-charging the price of its goods as compared to industry. It should
    work upon its revenue by creating a hike in the prices.

    II. Net profit margin

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 6.98 8.68 9.07 6.45 6.42 3.53 3.24 2.94 6.88 7.58
    industry
    benchmark 7.76 7.28 9.61 8.25 6.93 5.65 6.01 6.78 8.05 8.77

    Net Profit Margin


    12

    10

    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas industry benchmark

    Net profit helps to know how much actual profit is actually earned by the business from the sales
    after deducting all the expenses of the business. Higher the ratio, higher is the profitability of
    business.

    After having a glance at the graph, it can be analyzed the company is not able to make high
    profits as compared to the industry which is not at all a good part on the company’s side. From
    the years 2010 to 2017 the company significantly lower ratio than the industry benchmark.

    In the year 2018, company somehow managed to cover up the industry benchmark but again in
    2019 it showed a downfall.

    The company should hike its prices of products to increase its revenues and also try to cut-down
    its indirect expenses.

    III. Operating Profit

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 9.82 11.96 12.32 9.22 8.76 5.31 4.98 4.52 10.43 10.04
    industry
    benchmark 9.54 13.25 11.76 9.04 9.43 6.55 6.88 7.66 10.44 12.16
    Operating profit margin

    14
    12
    10
    8
    6
    4
    2
    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas industry benchmark

    This margin should be higher of the company as high profits shows the business is working out
    well because it shows how much revenue the business generating through its operating income.

    Comparing the company with the industry benchmark:

    In the year 2011, 2016, 2017 and 2019 the company however was close to the
    “industry”benchmark which means company was able to generate profits majorly through its
    sales which is good for the company.

    The comparison shown in the years 2011, 2012, 2013, 2014, 2015 and 2018 states that the
    company’s operating profit is significantly lower than the industry’s benchmark showing
    company is not able to manage its profit through its sales.

    The company should increase its price of products and reduce operating expenses.

    IV. Return on Equity

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 6.81 7.74 8.69 7.45 7.75 4.42 4.45 4.02 9.31 11.06
    industry benchmark 6.54 8.35 2.81 4.05 4.46 -7.07 1.88 3.57 12.86 13.37
    Return on Equity
    15

    10

    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
    -5

    -10

    Voltas industry benchmark

    Return on equity means how well the company is managing the money which shareholder have
    invested in the company, for every rupee invested by the shareholder in the company and how
    much they get back.

    In the year 2012, 2018 and 2019 the company is close to the benchmark which shows company
    is able to maintain its position in the market. Similarly, in 2014 the company’s position is very
    good in the market than the industry as a whole, therefore more investors will invest.

    In 2010 and 2011, the company has low ratio than the industry which is not good.

    V. Return on Capital Employed

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 11.99 13.47 15.1 15.1 16.13 11.21 12.19 11.2 27.84 31.22
    industry
    benchmark 21.2 20.34 20.92 20.94 13.96 12.21 16.14 21.72 29.79 34.96
    Return on capital employed

    40
    35
    30
    25
    20
    15
    10
    5
    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas industry benchmark

    The ratio which tells about the company whether it is able to generate profits from the capital it
    has invested.

    In almost years company’s ratio is less than the benchmark which shows company is not able to
    much profits from the capital employed as compared to the industry which is not good on
    company’s part.

    3. SOLVENCY RATIO
    It tells about the company’s ability to pay out its long-term debt and interest expenses.

    I. Total Debt- Equity Ratio

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11
    Voltas 0.82 0.84 0.87 1.15 1.31 1.57 1.73 1.77 1.99
    Industry bench
    mark 1.01 1.12 2.02 2.17 2.17 2.69 2.19 2.09 2.17
    Total Debt-Equity ratio

    2.5

    1.5

    0.5

    0
    Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas Industry benchmark

    According to the graph, the company’s total-debt equity ratio is low in almost every year
    comparing the last 10 years with the benchmark of industry. This shows company is at lower risk
    and interest payments are also secured. The company can pay its debt.

    II. Interest Coverage Ratio

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11
    Voltas 28.51 92.03 68.39 59.09 27.68 17.06 8.15 9.01 40.93
    Industry
    benchmark 15.87 47.91 35.74 30.8 14.24 8.99 5.07 6.4 23.95

    Interest coverage ratio


    100
    90
    80
    70
    60
    50
    40
    30
    20
    10
    0
    Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas Industry benchmark


    The company’s ratio is close to the benchmark in the early years that is from 2011-2015 and
    higher from industry benchmark from the years 2016-2019 which shows company has good
    interest coverage ratio compared to the benchmark as higher the ratio, better the company is
    paying off its interest expenses with the earnings available.

    IV. TURNOVER RATIOS


    1. Asset turnover Ratio:

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 0.98 0.89 0.96 1.16 1.21 1.25 1.37 1.37 1.35 1.46
    Industry
    Benchmark 1 1.03 1.19 1.3 1.39 1.48 1.51 1.64 1.63 1.68

    Asset turnover ratio


    1.8
    1.6
    1.4
    1.2
    1
    0.8
    0.6
    0.4
    0.2
    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
    Voltas Industry Benchmark

    The graph represents that the company’s ratios are less the industry benchmark in every year
    since last 10 years which is not good on company’s part. This represents company is not using its
    fixed assets efficiently to generate sales.

    2. Receivable turnover ratio

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 4.77 4.52 4.51 5.07 4.46 4.85 4.75 5.12 5.66 5.36
    industry
    benchmark 3.67 3.65 3.91 4.09 4.55 5.22 5.19 6 5.83 7.06
    Receivable turnover ratio

    8
    7
    6
    5
    4
    3
    2
    1
    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas industry benchmark

    According to the graph, in the year 2011, 2013, 2014 and 2015 the company’s ratio is almost
    close to the benchmark of the industry which is good for company meaning conversion of
    receivables in cash is same as industry.

    In the years 2010, 2012, 2013 and 2014 the company’s ratio are less than the benchmark
    showing the company is not able to convert receivables into cash.

    The company’s ratios are higher from last years that is from 2016-2019 as compared with the
    benchmark showing company has improved its method of collection from debtors.

    3. Inventory turnover ratio

    years Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
    Voltas 6.67 7.86 7.05 8.77 7.51 7.61 6.06 8.55 7.88 9.81
    industry
    benchmark 4.84 4.96 4.45 5.2 5.08 5.59 5.28 6.04 5.48 5.01
    Inventory Turnover Ratio
    12

    10

    0
    Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

    Voltas industry benchmark

    The graph depicts that in the last 10 years the ratio of Voltas is higher than the benchmark of
    company which is good on company’s part. It shows assets are converted into sales quickly.

    In 2010, the company showed very high ratio than the benchmark which is also not good as it
    shows overtrading.

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