Financial Ratios:

1. Inventory Turnover:
This is a parameter that reflects how quickly a company is able to covert its inventories into
finished goods. For Air India, this is the seats on the airplane. The bookings that air India can get
for each flight and how fast they take to get a flight completely booked. Looking at the inventory
turnover of Air India for past 8 years we can see that it has increased consistently till March
2020, post that we can see a huge decline in the inventory turnover. One of the major reason
for this is the curbs on domestic and international travel due to the onset of Covid-19 Pandemic.
With increasing restrictions on travel, Air India faced a huge decline in flight bookings. This can
also be understood using Inventory Days. We can observe that the days required to completely
book a flight took kept on reducing year on year. Until March 2020, we can see that it took 12.41
days to completely book a flight, while this rose to 29.44 days for the year 2020-21.

Inventory Days = (365 / Inventory Turnover)

Inventory Turnover = (Cost of Goods Sold / Average Inventory)

Ratio Mar 2021 Mar 2020 Mar 2019 Mar 2018 Mar 2017 Mar 2016 Mar 2015 Mar 2014

   Inventory
Turnover(x
) 12.4 29.41 26.11 20.99 16.94 14.95 12.36 9.23
   Inventory
Days 29.44 12.41 13.98 17.39 21.55 24.42 29.53 39.55

2. Receivable Days:
Receivable Days tells us how fast can a company earn its receivables, i.e. the earnings from
credit sales. For Air India, we can see that the days required to receive the payments for credit
sales known as account receivables. Here, we can observe that Air India has managed to reduce
the time taken to clear their accounts receivables from 40.67 days in year 2013-14 to 19.19 days
in year 2019-2020. One more observation is in the next year, we can see that the day’s
receivable has increased to 38.81 days. A contributor to this change can be the disrupted cash
flows of major clients and their inability to clear their existing bills recorded as account
receivables. We can calculate Receivable days by dividing 365 by receivables turnover.

Receivable days = (365 / Receivable turnover)

Receivable turnover = (Net Sales (Credit) / Average Receivables)

Mar 202 Mar 202 Mar 201 Mar 201 Mar 201 Mar 201 Mar 201 Mar 201

Ratio 1 0 9 8 7 6 5 4
   Receivabl 38.81 19.19 24.9 27.37 29.96 36.2 37.63 40.67
e days

3. Net Profit Margin:

Net Profit Margin tells us how has the company performed for the year. How has the company
managed its bottom line. Here we see the performance of the company and how has the
expenses affected the net profit of the company. In case of Air India, we can see that, the
margins have been reducing year on year. In the year 2020-21 we can see that the net profit
margins have curbed drastically. This can be attributed to the reduced sales for the year due to
travel restrictions.

Net Profit Margin (%) = (Net Profit / Revenue) *100

Mar 202 Mar 202 Mar 201 Mar 201 Mar 201 Mar 201 Mar 201 Mar 201

Ratio 1 0 9 8 7 6 5 4
   Net
Profit
Margi
n (%) -52.86 -18.95 -28.75 -21.7 -27.04 -18.5 -27.68 -33.23

4. Quick Ratio (Acid Test Ratio):

This ratio helps us analyze the Working Capital of the company. We can use this parameter to
calculate the working capital requirement of the company. This ratio takes into account the
Current Assets less inventories and Current Liabilities. This ratio gives us an exact idea about the
cash or marketable securities required to manage the working capital of the company. Here, we
can see that Air India, has tried to maintain their Quick ratio near to 0.25. In recent years the
company has managed their working capital requirements nearly constant. The company is not
performing well compared to industry standards and would need more capital to meet their
working capital.

Quick Ratio = (Current Assets – Inventories) / Current Liabilities

Mar 202 Mar 202 Mar 201 Mar 201 Mar 201 Mar 201 Mar 201 Mar 201

Ratio 1 0 9 8 7 6 5 4
   Quick
Ratio(x
) 0.24 0.28 0.23 0.3 0.16 0.35 0.14 0.16