COURSE: FINANCIAL ACCOUNTING FOR MANAGERS

CASE STUDY: CAPITAL GOODS INDUSTRY

Project Submission Overview:

S.No. Assessment Submission Format Marks

1 Profitability ratios Text 4

2 Liquidity ratios Text 4

3 Solvency ratios Text 4

4 Efficiency Ratios Text 4

5 Shareholder return ratios Text 4

6 Presentation ppt 10

Project Maximum Marks 30

Question 1 Profitability Ratios
Marks 4
Your Answer Calculations:
Company Name: L&T Gross Profit Margin: 2019= 24%,
2018=26%, 2017=26%. Weighted Avg GP Margin= 25%
Company Name: Kalpatru Gross Profit Margin 2019= 26%,
2018=28%, 2017= 34%. Weighted Avg GP Margin= 28%.
Company Name: BHEL Gross Profit Margin: 2019=36%,
2018=39%, 2017= 34%, Weighted Avg GP Margin=36%.
Company Name: NBCC Gross Profit Margin: 2019=9%,
2018=13%, 2017=11% Weighted Avg GP Margin=11%.
Company Name: Siemens Gross Profit Margin 2019=30%,
2018=31%, 2017=30% Weighted Avg GP Margin=30%
Comparison & Analysis:
After analyzing the above ratios, in 2019 BHEL, Siemens have high
GP ratios. In 2018, again BHEL and Siemens have high. For 2017,
Kalpatru and BHEL have formed better. This shows that these
companies are managing cost of goods sales are effective manner.
Weighted Avg margin of BHEL and Kalpatru is high. The gross profit
margin ratio, also known as gross margin, is the ratio of gross margin
expressed as a percentage of sales. Gross margin, alone, indicates how
much profit a company makes after paying off its Cost of Goods Sold.
Top Two companies:
Accordingly best company would be BHEL, Siemens in terms of
ratios calculated above.
Calculations:
Company Name: L&T Net Profit Margin: 2019= 8%, 2018=7%,
2017=8%. Weighted Avg Net Profit Margin= 8%
Company Name: Kalpatru Net Profit Margin 2019= 6%,
2018=6%, 2017= 5%. Weighted Avg Net Profit Margin = 6%.
Company Name: BHEL Net Profit Margin: 2019=4%, 2018=3%,
2017= 2%, Weighted Avg Net Profit Margin =3%.
Company Name: NBCC Net Profit Margin: 2019=4%, 2018=5%,
2017=4% Weighted Avg Net Profit Margin =4%.
Company Name: Siemens Net Profit Margin 2019=8%, 2018=7%,
2017=10% Weighted Avg Net Profit Margin =8%
Comparison & Analysis:
After analyzing, in all the year L&T and siemens have high profit
ratio. Also weighted avg margin of L&T and siemens are high
followed by kalpatru and NBCC. Profit margin is one of the
commonly used profitability ratios to gauge the degree to which a
company or a business activity makes money. It represents what
percentage of sales has turned into profits.
This shows that of both the companies are high in generating profit.
Top Two companies:
Accordingly best company would be L& T and Siemens.
Question 2 Liquidity Ratios
Marks 4
Your Answer Calculations:
Company Name: L&T Current ratio: 2019= 1.30, 2018=1.32,
2017=1.44. Weighted Avg Current ratio = 1.33
Company Name: Kalpatru Current ratio: 2019= 1.50, 2018=1.33,
2017=1.30. Weighted Avg Current ratio = 1.41
Company Name: BHEL Current ratio: 2019= 1.60, 2018=1.84,
2017=1.96 Weighted Avg Current ratio = 1.73
Company Name: NBCC Current ratio: 2019= 1.08, 2018=1.18,
2017=1.26 Weighted Avg Current ratio = 1.15
Company Name: Siemens Current ratio: 2019= 1.91, 2018=1.82,
2017=1.70 Weighted Avg Current ratio = 1.84
Comparison & Analysis:
After analyzing the above ratio, In all the 3 years Siemens & BHEL
have high current ratio. The current ratio is a liquidity ratio that
measures a company’s ability to pay short-term obligations or those
due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current
debt and other payables.
Avg weighted current ratio of BHEL and Siemens are high.
Top Two companies:
Top of two companies are BHEL & Siemens are preferable.

Calculations:
Company Name: L&T Quick ratio: 2019= 0.51, 2018=0.45,
2017=0.48 Weighted Avg Quick ratio = 0.49
Company Name: Kalpatru Quick ratio: 2019= 0.78, 2018=0.86,
2017=0.92 Weighted Avg Quick ratio = 0.83
Company Name: BHEL Quick ratio: 2019= 0.75, 2018=1.04,
2017=1.38 Weighted Avg Quick ratio = 0.95
Company Name: NBCC Quick ratio: 2019= 0.66, 2018=0.72,
2017=0.75 Weighted Avg Quick ratio = 0.69
Company Name: Siemens Quick ratio: 2019= 1.22, 2018=1.12,
2017=1.02 Weighted Avg Quick ratio = 1.15
Comparison & Analysis:
After analysing the above ratios, in 2019, Siemens and Kalpatru is
good Quick ratio. In 2018, Siemens and BHEL have good ratio. In
2017, BHEL and Siemens have good ratio.
Weighted Avg ratio of Quick ratio is Siemens and BHEL are high.
The quick ratio is an indicator of a company’s short-term liquidity
position and measures a company’s ability to meet its short-term
obligations with its most liquid assets.
Top Two companies:
BHEL and Siemens have good quick ratio.
Question 3 Solvency Ratios

Marks 4
Your Answer Calculations:
Company Name: L&T Debt to asset ratio: 2019= 0.08,
2018=0.09, 2017=0.1. Weighted Debt to asset ratio = 0.09
Company Name: Kalpatru Debt to asset ratio: 2019= 0.08,
2018=0.11, 2017=0.11. Weighted Debt to asset ratio = 0.09
Company Name: BHEL Debt to asset ratio: 2019= 0.04,
2018=Nil, 2017=Nil Weighted Debt to asset ratio = 0.02
Company Name: NBCC Debt to asset ratio: 2019= Nil,
2018=Nil, 2017=Nil Weighted Debt to asset ratio =Nil
Company Name: Siemens Debt to asset ratio: 2019= Nil,
2018=Nil, 2017=Nil Weighted Debt to asset ratio = Nil.
Comparison & Analysis:
After analyzing the ratio, in all three years NBCC and Siemens have
low ratio.
A debt-to-assets ratio is a type of leverage ratio that compares a
company's debt obligations (both short-term debt and long-term debt)
to the company's total assets. Weighted avg ratio of NBCC and
Siemens have low ratio.
Top two companies:
Again, NBCC and Siemens would be great has this have low ratios.

Calculations:
Company Name: L&T Debt to Equity ratio: 2019= 0.19,
2018=0.23, 2017=0.23 Weighted Debt to Equity ratio = 0.21
Company Name: Kalpatru Debt to Equity ratio: 2019= 0.21,
2018=0.28, 2017=0.28 Weighted Debt to Equity ratio = 0.24
Company Name: BHEL Debt to Equity ratio: 2019=0.08,
2018=Nil, 2017=Nil Weighted Debt to Equity ratio = 0.04
Company Name: NBCC Debt to Equity ratio: 2019= Nil,
2018=Nil, 2017=Nil Weighted Debt to Equity ratio =Nil
Company Name: Siemens Debt to Equity ratio: 2019= Nil,
2018=Nil, 2017=Nil Weighted Debt to Equity ratio = Nil.
Comparison & Analysis
Based on above NBCC and Siemens have low ratio, which indicates
that company unleveraged company without any debt.
The Debt-to-Equity ratio (also called the “debt-equity ratio”, “risk
ratio”, or “gearing”), is a leverage ratio that calculates the weight of
total debt and financial liabilities against total shareholders’ equity.
Unlike the debt-assets ratio which uses total assets as a denominator,
the D/E Ratio uses total equity.
Top two companies:
NBCC and Siemens have low ratio. However, it is also preferable that
company should have decent mix of debt-to-equity ratio.

Calculations:
Company Name: L&T Interest Coverage ratio: 2019= 6.09,
2018=5.64, 2017=5.64 Weighted Interest Coverage ratio = 5.86
Company Name: Kalpatru Interest Coverage ratio: 2019= 4.79,
2018=4.09, 2017=3.79 Weighted Interest Coverage ratio = 4.39
Company Name: BHEL Interest Coverage ratio: 2019= 7.72,
2018=8.2, 2017=4.58 Weighted Interest Coverage ratio = 7.35
Company Name: NBCC Interest Coverage ratio: 2019= 3.58,
2018=4.16, 2017=7.23 Weighted Interest Coverage ratio =4.39
Company Name: Siemens Interest Coverage ratio: 2019= 49.02,
2018=43, 2017=41.23 Weighted Interest Coverage ratio = 46.67
Comparison & Analysis:
After analyzing the ratio, 2019 Siemens and BHEL, 2018 BHEL and
Siemens 2017 NBCC & NBCC.
The interest coverage ratio is a debt and profitability ratio used to
determine how easily a company can pay interest on its outstanding
debt. The interest coverage ratio is calculated by dividing a company's
earnings before interest and taxes (EBIT) by its interest expense
during a given period.
Top two companies:
BHEL & NBCC
Question 4 Efficiency Ratios
Marks 4
Your Answer Calculations:
Company Name: L&T Account receivable days: 2019= 118,
2018=112, 2017=110 Weighted Account receivable days = 115
Company Name: Kalpatru Account receivable days: 2019= 168,
2018=209, 2017=206 Weighted Account receivable days = 188
Company Name: BHEL Account receivable days: 2019= 144,
2018=178, 2017=283 Weighted Account receivable days = 179
Company Name: NBCC Account receivable days: 2019= 90,
2018=114, 2017= 126 Weighted Account receivable days =104
Company Name: Siemens Account receivable days: 2019= 101,
2018=105, 2017= 113 Weighted Account receivable days= 104
Comparison & Analysis:
After analyzing the ratio, 2019 Siemens and NBCC, 2018 Kalpatru
and BHEL 2017 NBCC & Kalpatru.
Accounts receivable days is a formula that helps you work out how
long it takes to clear your accounts receivable. In other words, it's the
number of days that an invoice will remain outstanding before it's
collected.
Top two companies:
BHEL & Kalpatru are suggested comapany since these have decent
days
Question 5 Shareholder return ratios

Marks 4
Your Answer Calculations:
Company Name: L&T RoE: 2019= 13, 2018=11, 2017=12
Weighted RoE = 12
Company Name: Kalpatru RoE: 2019= 13, 2018=12, 2017=11
Weighted RoE = 12
Company Name: BHEL RoE: 2019= 4, 2018=2, 2017=2
Weighted RoE = 3
Company Name: NBCC RoE: 2019= 26, 2018=9, 2017= 9
Weighted RoE =23
Company Name: Siemens RoE: 2019= 12, 2018=11, 2017= 15
Weighted RoE = 12
Comparison & Analysis:
After analyzing the ratio, 2019 Kalpatru and NBCC, 2018 Kalpatru
and Siemens 2017 Siemens and L&T are companies which are
selected.
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.
Top two companies:
Siemens and L&T are companies which are good RoE .

Calculations:
Company Name: L&T ROCE: 2019= 20, 2018=16, 2017=14
Weighted ROCE = 17
Company Name: Kalpatru ROCE: 2019= 21, 2018=21, 2017=20
Weighted ROCE = 21
Company Name: BHEL ROCE: 2019= 6, 2018=5, 2017=3
Weighted ROCE = 5
Company Name: NBCC ROCE: 2019= 44, 2018=30, 2017= 30
Weighted ROCE =37
Company Name: Siemens ROCE: 2019= 12, 2018=11, 2017= 10
Weighted ROCE = 11
Comparison & Analysis:
After analyzing the ratio, 2019 NBCC and L&T, 2018 NBCC &
Kalpatru and 2017 Siemens and Kalpatru are companies which are
selected.
Return on capital employed (ROCE) is a financial ratio that can be
used to assess a company's profitability and capital efficiency. In other
words, this ratio can help to understand how well a company is
generating profits from its capital as it is put to use.
Top two companies:
NBCC & Kalpatru are companies which are good ROCE
Question 6 Top two companies in which to invest.

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Marks 10
Your Answer The list of companies which are mentioned are covering all the
sectors.
Let’s first understand all important ratio which are covered by
covering major ratio from above.
Coming to After analyzing the above ratios, in 2019 BHEL, Siemens
have high GP ratios. In 2018, again BHEL and Siemens have high. For
2017, Kalpatru and BHEL have formed better. This shows that these
companies are managing cost of goods sales are effective manner.
Weighted Avg margin of BHEL and Kalpatru is high. The gross profit
margin ratio, also known as gross margin, is the ratio of gross margin
expressed as a percentage of sales. Gross margin, alone, indicates how
much profit a company makes after paying off its Cost of Goods Sold.
After analyzing, in all the year L&T and siemens have high profit
ratio. Also weighted avg margin of L&T and siemens are high
followed by kalpatru and NBCC. Profit margin is one of the
commonly used profitability ratios to gauge the degree to which a
company or a business activity makes money. It represents what
percentage of sales has turned into profits.
This shows that of both the companies are high in generating profit.

After analyzing the above ratio, In all the 3 years Siemens & BHEL
have high current ratio. The current ratio is a liquidity ratio that
measures a company’s ability to pay short-term obligations or those
due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current
debt and other payables.
Avg weighted current ratio of BHEL and Siemens are high.
After analysing the above ratios, in 2019, Siemens and Kalpatru is
good Quick ratio. In 2018, Siemens and BHEL have good ratio. In
2017, BHEL and Siemens have good ratio.
Weighted Avg ratio of Quick ratio is Siemens and BHEL are high.
The quick ratio is an indicator of a company’s short-term liquidity
position and measures a company’s ability to meet its short-term
obligations with its most liquid assets.
After analyzing the ratio, in all three years NBCC and Siemens have
low ratio.
A debt-to-assets ratio is a type of leverage ratio that compares a
company's debt obligations (both short-term debt and long-term debt)
to the company's total assets. Weighted avg ratio of NBCC and
Siemens have low ratio.
After analysing the above ratios, in 2019, Siemens and Kalpatru is
good Quick ratio. In 2018, Siemens and BHEL have good ratio. In
2017, BHEL and Siemens have good ratio. After analyzing the ratio,
2019 Siemens and BHEL, 2018 BHEL and Siemens 2017 NBCC &
NBCC.
The interest coverage ratio is a debt and profitability ratio used to
determine how easily a company can pay interest on its outstanding
debt. The interest coverage ratio is calculated by dividing a company's
earnings before interest and taxes (EBIT) by its interest expense
during a given period.
After analyzing the ratio, 2019 Siemens and NBCC, 2018 Kalpatru
and BHEL 2017 NBCC & Kalpatru.
Accounts receivable days is a formula that helps you work out how
long it takes to clear your accounts receivable. In other words, it's the
number of days that an invoice will remain outstanding before it's
collected.
After analyzing the ratio, 2019 NBCC and L&T, 2018 NBCC &
Kalpatru and 2017 Siemens and Kalpatru are companies which are
selected.
Return on capital employed (ROCE) is a financial ratio that can be
used to assess a company's profitability and capital efficiency. In other
words, this ratio can help to understand how well a company is
generating profits from its capital as it is put to use.

According to me, the best company would be Siemens and NBCC

considering all the above points.