LIQUIDITY RATIO

Liquidity ratios provide information about a firm's ability to meet its short-term financial
obligations. They are of particular interest to those extending short-term credit to the firm. Two
frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick
ratio.

Capital Structure Ratios

The capital structure ratio shows the percent of long term financing represented by long term
debt. A capital structure ratio over 50% indicates that a company may be near their
borrowing limit (often 65%)
Profitability Ratios
A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a
previous period is indicative that the company is doing well.

INTRESTED PARTIES IN PROFITABILITY RATIOS:

 MANAGEMENT
 CREDITORS
 OWNERS

EFFECIENCY RATIOS
Ratios that are typically used to analyze how well a company uses its assets and liabilities
internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of
liabilities, the quantity and usage of equity and the general use of inventory and machinery.

Some common ratios are accounts receivable turnover, fixed asset turnover, sales to inventory,
sales to net working capital, accounts payable to sales and stock turnover ratio. These ratios are
meaningful when compared to peers in the same industry and can identify businesses that are
better managed relative to the others. Also, efficiency ratios are important because an
improvement in the ratios usually translate to improved profitability. 

OTHER RATIOS
 1. Current Ratio

The current ratio is the ratio of current assets to current liabilities:

Current Assets
Current Ratio   =  
Current Liabilities
Table No :1

Year Current Assets Current Liabilities Current Ratio

31/03/200 2274484.47 155650 14.61281381
1
31/03/200 1320653.85 755682.5 1.747630586
2
31/03/200 2622403.44 1422584.63 1.843407685
3
31/03/200 5697050.37 2249569.97 2.532506411
4
31/03/200 11707970.88 3219700.52 3.636354005
5
31/03/200 12723501.4 5493157.67 2.316245439
6
31/03/200 18309120.25 6746756.07 2.713766447
7
31/03/200 13392387.14 5473558.07 2.446742497
8
31/03/200 15875995.03 8473543.77 1.873595683
9
31/03/201 45091933.65 24675512.24 1.827396052
0
Average 3.555045862

Interpretation: Short-term creditors prefer a high current ratio since it reduces their risk.
Shareholders may prefer a lower current ratio so that more of the firm's assets are working to
grow the business. Typical values for the current ratio vary by firm and industry. For the 2 years
i.e; 2006-07, ratio is ideal (2:1)
 Quick Ratio

The current assets used in the quick ratio are cash, accounts receivable, and notes
receivable. These assets essentially are current assets less inventory. The quick ratio often is
referred to as the acid test.

Current Assets - Inventory

Quick Ratio   =  
Current Liabilities
Year Quick Assets Current Liabilities Quick Ratio
31/03/2001 2145608.44 155650 13.78482775
31/03/2002 898131.15 755682.5 1.188503307
31/03/2003 1767687.83 1422584.63 1.242588871
31/03/2004 3454969.12 2249569.97 1.535835367
31/03/2005 10074365.64 3219700.52 3.128975996
31/03/2006 11061186.51 5493157.67 2.013629896
31/03/2007 16665805.26 6746756.07 2.470195319
31/03/2008 10156935.14 5473558.07 1.855636683
31/03/2009 12602266.41 8473543.77 1.487248636
31/03/2010 34395024.09 24675512.24 1.393893012
Average   3.010133484
Table No : 2

Interpretation: Quick ratio of year 2009 is greater than other years when compared. An acid-
test ratio of 1:1 is considered satisfactory as a firm can meet all current claims. This ratio is
satisfactory as it is above 1.

Net Working Capital Ratio

A measure of both a company's efficiency and its short-term financial health. The working
capital ratio is calculated as:
 
Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets

Table No : 3

Year Current Assets Current Liabilities working capital working capital ratio
31/03/2001 2274484.47 155650 2118834.47 21188.3447
31/03/2002 1320653.85 755682.5 564971.35 5649.7135
31/03/2003 2622403.44 1422584.63 1199818.81 11998.1881
31/03/2004 5697050.37 2249569.97 3447480.4 34474.804
31/03/2005 11707970.88 3219700.52 8488270.36 84882.7036
31/03/2006 12723501.4 5493157.67 7230343.73 72303.4373
31/03/2007 18309120.25 6746756.07 11562364.18 115623.6418
31/03/2008 13392387.14 5473558.07 7918829.07 79188.2907
31/03/2009 15875995.03 8473543.77 7402451.26 74024.5126
31/03/2010 45091933.65 24675512.24 20416421.41 204164.2141

Interpretation: In the current year the current liabilities of the company are more than the
current assets. It is not favorable for the company during the time of crisis. The company should
make an attempt to increase the current assets.

Interest Coverage Ratio

A ratio used to determine how easily a company can pay interest on outstanding debt. The
interest coverage ratio is calculated by dividing a company's earnings before interest and taxes
(EBIT) of one period by the company's interest expenses of the same period:

Table No : 4

Year EBIT Interest expenses Interest coverage ratio

2009 203.67 15.16 13.4347

2008 99.3 20.65 4.808717
 2007 71.5 14.51 4.927636
2006 58.57 13.51 4.335307
2005 45.44 14.37 3.162143

Interest coverage ratio

14

12

10
Interest coverage ratio
8

0
2009 2008 2007 2006 2005

Interpretation:

The Company’s ability to pay interest on outstanding debt has increased in the current year as the
earnings of the company has increased from 99.3 to 203.67.

Debt Equity Ratio

The debt-to-equity ratio is total debt divided by total equity. This ratio is obtained by dividing
the 'Total Liability or Debt ' of a company by its 'Owners Equity and Net Worth'. The ratio
measures how the company is leveraging its debt against the capital employed by its owners. If
the liabilities exceed the net worth then in that case the creditors have more stake than the
shareowners.

Total Debt
Debt-to-Equity Ratio   =  
Total Equity
Table No : 5

Year Debt Equity Debt-Equity Ratio

31/03/200 155650 3750000 0.041506667
1
31/03/200 755682.5 3900000 0.193764744
2
31/03/200 1432584.63 3900000 0.367329392
3
 31/03/200 2249569.97 3900000 0.576812813
4
31/03/200 3219700.52 5800000 0.555120779
5
31/03/200 5493157.67 5800000 0.94709615
6
31/03/200 6746756.07 17000000 0.396868004
7
31/03/200 5473558.072 17000000 0.321974004
8
31/03/200 8473543.77 17000000 0.498443751
9
31/03/201 24675512.24 23800000 1.036786229
0
Average 0.493570253

Interpretation:

The debt ratio has gone up from the previous 3 years which means borrowings has gone up. It
indicates that company depends upon outsiders i.e. on outsiders fund & and it also indicates that
company is not having sound financial position. The ratio has come down from the previous year
i.e. 1.356368 to 1.328701.
Gross Profit Ratio

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage.
It expresses the relationship between gross profit and sales. The gross profit margin ratio tells us
the profit a business makes on its cost of sales, or cost of goods sold. It is a very simple idea and
it tells us how much gross profit per £1 of turnover our business is earning.
Gross profit is the profit we earn before we take off any administration costs, selling costs and so
on. So we should have a much higher gross profit margin than net profit margin.
The formula to calculate is

Gross profit Ratio= Gross Profit * 100

Sales

Table No : 6

Year Gross profit Net sales Ratio(%)

31/03/2001 1855492.36 3181093.2 58.32876446
31/03/2002 3704740.86 5490924 67.47026293
31/03/2003 7791351.66 11353195 68.6269518
31/03/2004 23262626.74 34679176.41 67.0795248
31/03/2005 34998715.27 47984222.25 72.93796508
31/03/2006 24779386.4 58407209.84 42.42521851
31/03/2007 19158364.66 42621368.09 44.95014008
31/03/2008 19477736.17 41293352 47.16918154
31/03/2009 33667226.11 70331847.75 47.86910509
31/03/2010 41387413.9 130024841.4 31.83038984
Average 54.86875041
Interpretation:

The gross profit of the company has come down. There is frequent fluctuation in the gross profit.

The ratio has come down from 5.44 to 3.86 in the current year.

Net Profit Ratio

The net profit ratio is net profit expressed as a percentage of total sales. Net profit is taken before
tax and other indirect costs. Essentially the net profit ratio tells us about how the company's
profits relate to their sales. Different industries have fundamentally different net profit
ratios. The net profit ratio can tell us about the nature of the industry the company is operating in
as well as serving to compare past performances of a company. The formula to calculate is

Net profit ratio = Profit After Tax * 100

Sales

Table No : 7

Year Net Profit Net Sales Ratio( % )

31/03/2001 -154993.12 3181093.2
31/03/2002 228479.33 5490924
31/03/2003 1152728.92 11353195
31/03/2004 1273925.12 34679176.41
31/03/2005 901406.29 47984222.25
31/03/2006 369772.66 58407209.84
31/03/2007 1005176.27 42621368.09
31/03/2008 1169797.52 41293352
31/03/2009 3107366.12 70331847.75
31/03/2010 7426555.91 130024841.4
Average

Interpretation:

There is a lot of fluctuation in the net profits of MCF every year. In the year 2008 it was in its
high at ratio 2.91. In the current year the profits have gone up to ratio 5.46. There is a positive
trend in the net profits of the company.

Earnings Per Share Ratio

The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serve as an indicator of a company's profitability.

Calculated as: EPS = Net Earnings / Number of Outstanding Shares

Table No : 8

Year PAT No. Of Equity Shares Ratio

31/03/2001 -154993.12 37500
31/03/2002 228479.33 39000
31/03/2003 1557505.07 39000
31/03/2004 2272911.87 39000
31/03/2005 2028185.02 58000
31/03/2006 5121260.5 58000
31/03/2007 1005176.27 170000
31/03/2008 1264255.52 170000
31/03/2009 5698295.12 170000
31/03/2010 17533331.91 238000

Interpretation:

The EPS of the current year is 0.11. As the earnings of the current year has gone up 134.87 when
compared to all the previous years. The Share holders are get huge returns.

Cash Profit Margin

It measures the cash generation in the Business a result of the operations expressed in the terms
of Sales. The cash profit is the most reliable indicator of performance. Cash Flow ratio evaluates
the efficiency of operations in terms of cash generation & it is not affected by the method of
depreciation

The Formula: Cash Profit × 100

Sales

Table No : 9
Year Cash Net sales Ratio
31/03/2001 48792.84 3181093 1.533839
31/03/2002 25199.61 5490924 0.458932
31/03/2003 25982.34 11353195 0.228855
31/03/2004 91922.29 34679176 0.265065
31/03/2005 310814.8 47984222 0.647744
31/03/2006 369753.6 58407210 0.633061
31/03/2007 8847945 42621368 20.75941
31/03/2008 209251.7 41293352 0.506744
31/03/2009 698310.1 70331848 0.992879
31/03/2010 217383.5 1.3E+08 0.167186
Average 2.619372

Interpretation:

The cash profit margin has come down. This year its facing the lowest cash profit margin
compared to that of any other years listed above.

Operating profit Margin

The operating profit margin ratio indicates how much profit a company makes after paying
for variable costs of production such as wages, raw materials, etc. It is expressed as a percentage
of sales and shows the efficiency of a company controlling the costs and expenses associated
with business operations. Phrased more simply, it is the return achieved from standard operations
and does not include unique or one time transactions. Terms used to describe operating profit
margin ratios this includes operating margin, operating income margin, operating profit margin
or return on sales (ROS).

Formula: Operating profit margin = Operating income ÷ Total revenue

Table No : 10

Year Operating Income Total Revenue Ratio

2005 42.18 877.33 2.81
2006 54.74 1,130.80 1.44
2007 68.06 1,340.52 1.02
2008 93.18 1,621.29 0.67
2009 190.61 2,369.05 0.37
 Operating profit margin ratio
3.00

2.50

2.00 Operating profit margin

ratio
1.50

1.00

0.50

0.00
Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09

Interpretation:

The operating profit ratio of the company has been coming down drastically over the years. The
expenses of the company such as wages, raw materials etc has gone up.

Return on Investment (ROI) Ratio 

The ROI is perhaps the most important ratio of all. It is the percentage of return on funds
invested in the business by its owners. In short, this ratio tells the owner whether or not all the
effort put into the business has been worthwhile. If the ROI is less than the rate of return on an
alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell
the company, put the money in such a savings instrument, and avoid the daily struggles of small
business management. The ROI is calculated as follows:

Return on Investment= Net Profit before Tax/ Net Worth

Table No : 11

Year EBIT Capital Employed Ratio (%)

31/03/2001 154993.12 4115000 3.766539976
31/03/2002 228479.33 4745486.21 4.814666399
31/03/2003 2085467.57 6302991.28 33.08694995
31/03/2004 2344266.87 9157903.15 25.59829288
31/03/2005 2149463.02 10258088.17 20.95383647
31/03/2006 5001298.91 13583940.24 36.81773345
31/03/2007 2991160.22 21389116.52 13.98449635
 31/03/2008 3336222.14 22558914.04 14.78893059
31/03/2009 8515944.1 25870511.16 32.91757185
31/03/2010 26888856.91 35050400.07 76.71483594
Average 26.34438539

Return on Investment Ratio

0.20
0.18
0.16
0.14
0.12 ratio
0.10
0.08
0.06
0.04
0.02
0.00
2005 2006 2007 2008 2009

Interpretation:

The ROI of the current year has come down from the previous year i.e. from 0.20 to 0.15 for the
current year. The ratio was in its high in the previous year.
Inventory Turnover. 
Inventory turnover illustrates how well a company manages its inventory levels. If inventory
turnover is too low, it suggests that a company may be overstocking or overbuilding its inventory
or that it may be having issues selling products to customers. All else equal, higher inventory
turnover is better.

Inventory Turnover = (Cost of Sales) / (Average Inventory)

Table No : 12

Year Cost of Sales Inventories Turnover

2005 828.18 94.09 8.80
2006 1,074.08 142.25 7.55
2007 1,267.07 141.96 8.93
2008 1,531.61 170.68 8.97
2009 2,272.16 170.77 13.31
 Inventory Turnover ratio
14.00

12.00

10.00

8.00 Inventory Turnover ratio

6.00

4.00

2.00

0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Interpretation:

The inventory turnover of the company is been increasing over the years which means the sales
of the company has come up and is doing good. The turnover has increased from 11.93 to 14.48.

Debtors Turnover. 
The accounts receivable turnover ratio measures how effective the company's credit policies are.
If accounts receivable turnover is too low, it may indicate the company is being too generous
granting credit or is having difficulty collecting from its customers. All else equal, higher
receivable turnover is better.
Accounts Receivable Turnover = Revenue / (Average Accounts Receivable)

Table No : 13

Year Accounts receivable Revenue Times

2005 22.18 879.19 39.64
2006 13.19 1,083.84 82.17
2007 37.39 1,372.56 36.71
2008 17.01 1,627.67 95.69
2009 9.05 2,471.98 273.15
 Accounts Receivable Turnover
300.00

250.00

200.00 Accounts Receivable

Turnover
150.00

100.00

50.00

0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Interpretation:

The credit policies of the company are very good. The turnover is not low it has been increasing
over the years. The difficulty of collecting credit from the customers has come down as the
turnover is better.

Total Assets Turnover Ratio

 Total asset turnover is a catch-all efficiency ratio that highlights how effective management is at
using both short-term and long-term assets. All else equal, the higher the total asset turnover, the
better. The total asset turnover ratio measures the ability of a company to use its assets to
generate sales. The total asset turnover ratio considers all assets including fixed assets, like plant
and equipment, as well as inventory and accounts receivable. The calculation for the total asset
turnover ratio is:

Asset Turnover Ratio= Net Sales/Total Assets

Table No : 14

Year Net Sales Total Assets Turnover

2005 878.02 417.74 2.10
2006 1,082.31 544.3 1.99
2007 1,371.05 575.86 2.38
 2008 1,625.39 752.81 2.16
2009 2,469.62 785.98 3.14

Asset Turnover Ratio

3.50

3.00

2.50
Asset Turnover Ratio
2.00

1.50

1.00

0.50

0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Interpretation:

The ability of a company to use its assets to generate sales has increased compared to the
previous years i.e. from 2.47 to 3.14. Due to increase in sales of the company there is effective
management in short & long term assets.

Dividend Payout Ratio

The dividend payout ratio is the percentage of a company's annual earnings paid out

as cash dividends. A low dividend payout ratio can indicate a fast-growing company whose
shareholders willingly forego cash dividends, because the company uses the extra money to
generate higher returns and, in turn, a high stock price. A high dividend payout ratio can indicate
a blue-chip that pays high dividends and whose stock price is temporarily depressed. But a high
dividend payout ratio can also point to a mature company with few growth opportunities.

Earnings
Dividends Per Share Per Share Dividend  Ratio
Payout Ratio   =   (Rs)
Earnings Per Share
Year
2005 1.88 0 0.00
2006 2.12 6 2.83
2007 2.32 6 2.59
2008 3.41 6 1.76
2009 2.38 7 2.94
Table No : 15
 Payout Ratio
3.00

2.50

2.00
Payout Ratio
1.50

1.00

0.50

0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Interpretation:

The dividend payout ratio is high compared to previous years so the company is a matured
company. The dividend paid over the years is high. The stock price of the company is
temporarily depressed.

Return on capital Employed

This Ratio shows the relation between the Profits Earned Before Interest & Tax and the Capital
Employed to earn such Profit. It measures the profit which a firm earns on investing a unit of
capital. This Ratio has a great importance to the shareholders and investors and also to the
Management. Higher the Ratio the better it is.

Return on capital Employed= EBIT/Capital Employed

Table No : 16

Year EBIT Capital employed Return on capital

Employed
2005 49.15 307.09 0.16
2006 56.72 294.09 0.19
2007 73.45 331.78 0.22
2008 89.68 448.39 0.20
2009 96.89 434.1 0.22
 Return on capital Employed
0.25

0.20

Return on capital
0.15 Employed

0.10

0.05

0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Interpretation:

Higher the return on capital higher is the benefit to the shareholders and investors of the
company. The company is earning sufficient Revenues and profits in order to make the best use
of its capital assets.