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A report on

Ratio Analysis of HDFC ERGO

Table of Contents
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1. Introduction ………………………………………………… 03

2. Ratio analysis of HDFC ergo ……………………………….. 04

2.1. Return on equity

…………………………………………04

2.2. Earnings per share

……………………………………….04

2.3. Return on Assets%

……………………………………… 05

2.4. Debt equity Ratio

……………………………………….. 05

2.5. Current Ratio

…………………………………………… 06

2.6. Interest Coverage Ratio

………………………………….06

2.7. Dividend Yield

………………………………………….. 06

2.8. Quick Ratio

……………………………………………… 07
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2.9. Return on capital Employed

…………………………….. 07

Introduction
Ratio analysis is a quantitative procedure of obtaining a look into a firm’s functional efficiency, liquidity,
revenues, and profitability by analyzing its financial records and statements. Ratio analysis is a very
important factor that will help in doing an analysis of the fundamentals of equity.

Analysts and investors make use of the methods for ratio analysis to study and evaluate the fiscal
wellbeing of businesses by closely examining the historical performance and monetary statements.

Comparative data and analysis can give an insight into the performance of the business over a given
period of time by comparing it with the industry standards. At the same time, it also measures how well a
business racks up against other businesses functioning in the same sector.

Liquidity Ratios
These ratios evaluate a business’ efficiency to settle its debts as and when they become due, with its
revenues or assets in the disposal. Liquidity ratios cover quick ratio, current ratio, and the
working capital ratio.

Solvency Ratio
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Solvency ratios are also referred to as the financial leverage ratios. These ratios will compare an
organization’s level of debt with assets, earnings, and equity in order to determine the possibility of an
organization to stay in operation over an extended period of time by settling all its short and long-term
debts and by paying coupon/interest regularly. Solvency ratios include interest coverage ratios, debt-asset
ratios, and debt-equity ratios.

Profitability ratios
Profitability ratios indicate how efficiently a business will be able to generate revenues and profits
through its operations. Profit margins, return on equity, return on assets, gross margin ratios, and return
on capital employed are good examples of profitability ratios.

Efficiency ratios
Efficiency ratios are also called as the activity ratios. These ratios determine the efficiency of a business
by using its liabilities and assets to boost sales and optimize profits. Inventory turnover and turnover
ratios are examples of efficiency ratios.

Ratio Analysis of HDFC ERGO (in thousands)

1. Return on Equity

Return on equity (ROE) is a measure of financial performance calculated by dividing net

income by shareholders' equity. Because shareholders' equity is equal to a company's assets
minus its debt, ROE is considered the return on net assets.

ROE = Net Income / Shareholders equity

From the balance sheet it shows

Net Income = 3269418

Shareholders Equity = 6058421
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ROE = 3269418 / 6058421

0.5396485

2. Earnings Per share

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of

its common stock. The resulting number serves as an indicator of a company's profitability. It is
common for a company to report EPS that is adjusted for extraordinary items and potential share
dilution.

Earnings per share = Net Income / Number of Shares

From the balance sheet it shows

Net Income = 3269418

Number of Shares = 614623

Earnings per share = 3269418 / 614623

5.3193877

3. Return on Assets (%)

The return on assets shows the percentage of how profitable a company's assets are in generating
revenue

Return on Assets% = Net Income / Total Assets

From the balance sheet it shows

Net Income = 3269418

Total Assets = 32716857

Return on Assets% = 3269418 / 32716857

9.99%

4. Debt Equity Ratio

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Debt to equity ratio is calculated by dividing total liabilities by stockholder's equity. The

numerator consists of the total of current and long term liabilities and the denominator consists of
the total stockholders' equity including preferred stock.

Debt Equity Ratio = total debt / shareholders fund

From the balance sheet it shows

Total Debt = 5040000

Shareholders fund = 27,676,857 (32716857-5040000)

Debt Equity Ratio = 5040000 / 27,676,857

0.18

5. Current Ratio

The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its
short-term obligations.

Current Ratio = Current Assets / Current Liabilities

From the balance sheet it shows

Current Assets = 31283994

Current Liabilities = 137886594

Current Ratio = 31283994 / 137886594

0.23

6. Interest coverage ratio

Times interest earned or interest coverage ratio is a measure of a company's ability to honor its
debt payments.
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Interest coverage Ratio = Operating Activity / Net Income

From the balance sheet it shows

Operating activity = 3,975,429

Net Income = 268,980

Interest coverage Ratio = 3,975,429 / 268,980

14.779645 Times

7. Dividend Yield

The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how
much a company pays out in dividends each year relative to its stock price. The reciprocal of
the dividend yield is the price/dividend ratio.

The company haven’t gave any dividend. So, the dividend yield ratio will be zero.

8. Quick Ratio

The quick ratio also measures the liquidity of a company by measuring how well its current assets
could cover its current liabilities.

Quick Ratio = Current Assets – Inventory / Current Liabilities

From the balance sheet it shows

Current Assets = 7821307

Current Liabilities = 137886594

Quick Ratio = 7821307 / 137886594

0.0567228

9. Return on Capital Employed

Return on capital employed is an accounting ratio used in finance, valuation, and accounting. It is
a useful measure for comparing the relative profitability of companies after taking into account
the amount of capital used.

Return on Capital Employed = Earnings before interest and tax / Capital Employed
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From the balance sheet it shows

Earnings before interest and tax = 4364200 (3269418 + 1094782)

Capital Employed = 32716857

Return on capital Employed = 4364200 / 32716857

13.34%