Liquidity Ratios

Hindustan Petroleum:
1.) Earnings Yield Ratio
Earnings Yield Ratio = EPS / Stock Price Per Share*100
= 23.03/277
= 0.83
To summarize, an earnings yield of 7% or better will immediately identify a company
with a low and possibly attractive current valuation. However, whether the stock is a
good investment or not will be relative to the company's other fundamental strengths and
future growth potential

2.) Price/BV Ratio

Price/BV Ratio = Market Price Per Share / Book Value Per Share
= 277/291.87
= 0.95
Any value under 1.0 is considered a good P/B for value investors, indicating a potentially
undervalued stock

3.) Inventory Turnover Ratio

Inventory Turnover Ratio = Net Sales / Average Inventory
= 348,427.79 / 31,968.89
= 10.9
A good inventory turnover ratio is between 5 and 10 for most industries, which indicates that you
sell and restock your inventory every 1-2 months. This ratio strikes a good balance between
having enough inventory on hand and not having to reorder too frequently.

4.) Earning Retention Ratio

Earnings Retention Ratio = Retained Earnings / Net Income
= 3,155.43 / 7,294.23*100
= 44.2%
The ideal ratio for retained earnings to total assets is 1:1 or 100 percent. However, this ratio is
virtually impossible for most businesses to achieve. Thus, a more realistic objective is to have a
ratio as close to 100 percent as possible, that is above average within your industry and
improving.

5.) Dividend Payout Ratio

Dividend Payout Ratio = Dividend Per Share / EPS
= 14 / 23.03 *100
= 60.1%
Generally, a dividend payout ratio of 30-50% is considered healthy, while
anything over 50% could be unsustainable.
Bharat Petroleum:
1.) Earnings Yield Ratio
Earnings Yield Ratio = EPS / Stock Price Per Share*100
= 50.04 / 374.4 *100
= 0.13
To summarize, an earnings yield of 7% or better will immediately identify a company
with a low and possibly attractive current valuation. However, whether the stock is a
good investment or not will be relative to the company's other fundamental strengths and
future growth potential

2.) Price/BV Ratio

Price/BV Ratio = Market Price Per Share / Book Value Per Share
= 374.4 / 239.46
= 1.56
Any value under 1.0 is considered a good P/B for value investors, indicating a potentially
undervalued stock

3.) Inventory Turnover Ratio

Inventory Turnover Ratio = Net Sales / Average Inventory
= 361,128.36 / 31,531.905
= 11.45
A good inventory turnover ratio is between 5 and 10 for most industries, which indicates
that you sell and restock your inventory every 1-2 months. This ratio strikes a good
balance between having enough inventory on hand and not having to reorder too
frequently.

4.) Earning Retention Ratio

Earnings Retention Ratio = Retained Earnings / Net Income
= -7,086.92 / 10,145*100
= -69.85%
The ideal ratio for retained earnings to total assets is 1:1 or 100 percent. However, this
ratio is virtually impossible for most businesses to achieve. Thus, a more realistic
objective is to have a ratio as close to 100 percent as possible, that is above average
within your industry and improving.

5.) Dividend Payout Ratio

Dividend Payout Ratio = Dividend Per Share / EPS
= 16 / 50.04
= 31.9%
 Generally, a dividend payout ratio of 30-50% is considered healthy, while anything over
50% could be unsustainable.

1.) A low Earnings Yield Ratio show an overvalued stock and vice versa. So, in this case Bharat
Petroleum has a low earnings ratio as compared to Hindustan Petroleum. So, we can say that
Bharat Petroleum stock is overvalued.
2.) Any value below 1 is considered good for Price/BV. So therefore, Hindustan Petroleum’s
stock can be considered good as compared to Bharat Petroleum because it has a price/BV less
than 1.
3.) A good inventory turnover ratio is between 5 and 10 for most industries. So, Hindustan
Petroleum inventory turnover ratio is considerably better than Bharat Petroleum.
4.) So, an ideal Earnings retention ratio should be close to 100, in this case Hindustan
Petroleum’s earnings retention ratio is better than Bharat Petroleum.
5.) A dividend payout ratio of 30-50% is considered healthy. So Bharat Petroleum has a good
dividend payout ratio.