Marico

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Ratio Analysis of Marico

Current Ratio: this ratio explains the relationship between the current assets and the current
liabilities. It helps to measure a company’s ability to pay short-term obligations or dues within
one year.
The standard current ratio is 2:1.
Current Ratio = Current Assets/Current Liabilities

Ratio 2020 2019 2018 2017 2016

Current Ratio 1.78 1.86 1.92 1.91 1.60

● As the ratio depicts the current assets of the business should be twice of its current
liabilities, which Marico does not have that mean the current assets of the company
is not sufficient to meet its current liabilities.
● As the ratio of all the five years is less than the ideal ratio of 2:1 which indicates lack
of liquidity and shortage of working capital.
● It indicates that Marico's financial position is not sound.
Quick ratio: it’s an indication of the company's short term liquidity position and measure a
company's ability to meet its short term obligations with its most liquid assets.
The standard Quick ratio is 1:1.

Quick Ratio = Quick Assets/Current Liabilities

Ratio 2020 2019 2018 2017 2016

Quick Ratio 1.01 1.04 0.88 0.91 0.90

● Till 2018 Marico’s is not in the position to pay its current liabilities within the month or
immediately as the quick ratio is less than 1:1.
● From the year 2019 the quick ratio becomes more than that of its standard ratio of
1:1, which implies the better test of the short term financial position of the company
as there is an ample amount of assets which can be easily and readily converted into
cash.

2. Efficiency Ratios
Inventory turnover Ratio: The ratio helps to determine efficient inventory
management capacity of the management.

Inventory turnover ratio = Net Sales/ Inventory

Inventory Turnovers Period = 52 weeks / Inventory turnover ratio

Ratio 2020 2019 2018 2017 2016

Inventory Turnover Ratio 5.30 5.20 4.18 4.72 6.50

Inventory Holding Period (weeks) 9.8 10 12.44 11.01 08

● In 2016 the company is having the highest inventory turnover ratio which indicates
higher operational efficiency of the management and the company takes lesser time
to convert its inventory into cash.
● In 2018 the company is having the lowest inventory turnover ratio which indicates
lower operational efficiency of the management and the company will take more time
to convert its inventory into cash faster. And it shows the inactive stock and
insufficient inventory indicating risk.

Total Asset Turnover Ratio: The ratio establishes a relationship between net sales and total
assets of the company and helps to determine effectiveness of management to utilize their
assets.
 Total Asset Turnover Ratio= Net sales/Total Assets

Ratio 2020 2019 2018 2017 2016

Asset Turnover Ratio 1.46 1.49 1.55 1.63 1.78

● As the FMCG company, the sector generates more sales as compared to any other.
● As the ratio indicates the efficiency within which the company is using its assets to
generate revenue. In case of Marico as per the data of their ratio the company is not
using their assets sufficiently enough to generate revenue.
● The company should focus more on optimum utilization of the resources available to
them at levels of increasing it in stages over the years.
3. Profitability Ratio (Return Ratio)

1) Return on Capital Employed: The ratio reflects the overall profitability of the business.
It is calculated by comparing the profit earned and capital employed to earn it. Capital
employed includes shareholders fund and long term debt fund available to the
company.

Also known as rate of return or yield on capital

Return on Capital Employed: EBIT/ Capital Employed

Ratio 2020 2019 2018 2017 2016

Return on Capital Employed

Return on Assets: The ratio measures profitability of a company in terms of assets employed
in the firm.

Return on Assets = Net Profit After Tax/ Total Assets

Ratio 2020 2019 2018 2017 2016

Return on Assets 20.41% 22.69% 19.96% 21.98% 21.04%

● As the company maintains the ratio in the range between 19 - 23% which depicts that
the company is utilizing its assets efficiently and effectively. As the company is
effectively converting the money it invested into net income.
● Company is generating a sufficient amount of earnings from the invested capital. And
companies are generating more money in less investments.