Ratio analysis - establishing a relevant financial relationship between components of financial statements

Strengths and troble spots -evaluating profitability, solvency, liquidity, capital market standing
0.1 0.01

Figures in millions
2017 2016
Sales /Revenue 300 280 Costs/expenses per unit of sales
Cost of Goods Sold 148 140 0.49 0.50

Gross Profit 152 140

Selling expenses 25 22 0.283 0.286
General expenses 60 58
Operating Profit/Income (Earnings before
Interest & Tax ) 67 60
Interest expense 14 13
Profit before tax 53 47
Income Tax 26 23 0.49 0.49
Profit after tax / Net Profit 27 24

Dividends 2 2
Profit Retained 25 22

2017 2016
Assets
Cash 19 11
Accounts Receivable 32 20
Loans & Advances 43 34
Inventory 121 99

Other Current Assets 17 26

Total Current Assets 232 190
Fixed Assets 94 79

Other Assets 4 1

Total Assets 330 270

Liabilities & Equity
Current Liabilities
Acceptances 5 2
Accounts Payable 27 19
Advance against Sales 26 21

Other Liabilities 9 8
Interest accrued 3 2
Provisions 35 28
Total Current Liabilities 105 80

Long term/Non current liabilities

Bank term loans 40 32

10.5% debentures 26 26
Financial Institutions 24 22
Total liabilities 195 160
Shareholders's equity
Paid up Capital 37 37
Retained Earnings 98 73
Total shareholders' equity 135 110
Total liabilities & shareholders' equity 330 270

No. of ordinary shares (million) 3.7 3.7

Market price per share (Rs.) 30 28
DuPont analysis basically breaks down return on equity into three parts,
asset turnover, profit margin and leverage. 

Profitability Ratios 2017 2016

Gross Profit Margin (Gross Profit/Sales )*100 50.67 50.00
Operating Profit Margin (Operating Profit/Sales )
*100 22.33 21.43
Net Profit Margin (Net Profit/Sales )*100 9.00 8.57
Asset Turnover (Sales/ Total Assets) 0.91 1.04

Return on Assets (Net Profit/Total Assets)*100 8.18 8.89

PM*AT (varying margins)
Return On Equity (Net Profit/Equity)*100 20 21.82
Leverage (Assets/ Equity) 2.44 2.45
ROA*Leverage
Earnings Per Share i.e. EPS (Net Profit after
Tax/No of Shares Outstanding) 7.30 6.49

Liquidity Ratios

Current Ratio 2.21 2.38

Quick Ratio 1.06 1.14
Receivable Turnover Ratio 9.38 14.00
Average Collection Period (365/Receivable
Turnover) 38.93 26.07
Inventory Turnover (COGS/ Inventory) 1.22 1.41
Average Inventory 110.00
Inventory Turnover based on avg inventory
(COGS/ Average Inventory) 1.35
Inventory Holding Period (365/Inventory
Turnover) 298.41 258.11

Solvency Ratios
Debt to Equity Ratio 0.67 0.73
Liability to Equity Ratio 1.44 1.45
Interest Cover (Profit before Interest &
Tax/Interest) 4.79 4.62
Price/Earnings Ratio (Market price per
share/Earnings per share) 4.11 4.32
Dividends Per Share i.e. DPS (Dividends/No of
Equity Shares) 0.5 0.5
Dividend Payout Ratio (DPS/EPS) 0.07 0.08