INTRODUCTION

ABOUT RATIO ANALYSIS

The ratio analysis is the most powerful tool of financial analysis. Several ratios
calculated from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated.

• DEFINITION:

“The indicate quotient of two mathematical expressions “and as “The relationship

between two or more things. “It evaluates the financial position and performance
of the firm. As started in the beginning many diverse groups of people are
interested in analyzing financial information to indicate the operating and
financial efficiency and growth of firm. These people use ratios to determine
those financial characteristics of firm in which they interested with the help of
ratios one can determine.

• The ability of the firm to meet its current obligations.

• The extent to which the firm has used its long-term solvency by borrowing
funds.

• The efficiency with which the firm is utilizing its assets in generating the sales
revenue.

• The overall operating efficiency and performance of firm.

The information contained in these statements is used by management, creditors,

investors and others to form judgment about the operating performance and
financial position of firm. Uses of financial statement can get further insight about
financial strength and weakness of the firm if they properly analyze information
reported in these statements.Management should be particularly interested in
knowing financial strength of the firm tomake their best use and to be able to
spot out financial weaknesses of the firm to take suitable corrective actions. The
further plans firm should be laid down in new of the firm’s financial strength and
weaknesses. Thus financial analysis is the starting point for making plans before
using any sophisticated forecasting and planning procedures. Understanding the
past is a prerequisite for anticipating the future.

REVIEW OF LITERATURE

FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and
weakness of the firm. It is done by establishing relationships between the items of
financial statements viz., balance sheet and profit and loss account. Financial
analysis can be undertaken by management of the firm, viz., owners, creditors,
investors and others.

Objectives of the financial analysis

Analysis of financial statements may be made for a particular purpose in view.

1. To find out the financial stability and soundness of the business enterprise.

2. To assess and evaluate the earning capacity of the business

3. To estimate and evaluate the fixed assets, stock etc., of the concern.

4. To estimate and determine the possibilities of future growth of business.

5. To assess and evaluate the firm’s capacity and ability to repay short and long
term loans
Parties interested in financial analysisThe users of financial analysis can be
divided into two broad groups.

INTERNAL USERS

1. Financial executives

2. Top management

External users

1. Investors

2. Creditor.

3. Workers

4. Customers

5. Government

6. Public

7. Researchers

Significance of financial analysis

Financial analysis serves the following purpose:

To know the operational efficiency of the business:

The financial analysis enables the management to find out the overall efficiency of
the firm. This will enable the management to locate the weak Spots of the
business and take necessary remedial action.

Helpful in measuring the solvency of the firm:

The financial analysis helps the decision makers in taking appropriate decisions
for strengthening the short-term as well as long-term solvency of the firm.

Comparison of past and present results:

Financial statements of the previous years can be compared and the trend
regarding variousexpenses, purchases, sales, gross profit and net profit can be
ascertained.

Helps measuring the profitability:

Financial statements show the gross profit, & net profit.

Inter‐firm comparison:

The financial analysis makes it easy to make inter-firm comparison. This

comparison can also be made for various time periods.

Bankruptcy and Failure:

Financial statement analysis is significant tool in predicting the bankruptcy and

the failure of the business enterprise. Financial statement analysis accomplishes
this through the evaluation of the solvency position.

Helps in forecasting:

The financial analysis will help in assessing future development by making

forecasts and preparing budgets.

METHODS OF ANALYSIS:
A financial analyst can adopt the following tools for analysis of the financial
statements. These are also termed as methods of financial analysis.

A. Comparative statement analysis

B. Common-size statement analysis

C. Trend analysis

D. Funds flow analysisE.

Ratio analysis

NATURE OF RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the

indicated quotient of mathematical expression" and as "the relationship between
two or more things". A ratio is used as benchmark for evaluating the financial
position and performance of the firm. The relationship between two accounting
figures, expressed mathematically, is known as a financial ratio. Ratio helps to
summarizes large quantities of financial data and to make qualitative judgment
about the firm's financial performance.

The persons interested in the analysis of financial statements can be grouped

under three head owners (or) investors who are desired primarily a basis for
estimating earning capacity. Creditors who are concerned primarily with Liquidity
and ability to pay interest and redeem loan within a specified period.
Management is interested in evolving analytical tools that will measure costs,
efficiency, liquidity and profitability with a view to make intelligent decisions.

STANDARDS OF COMPARISON
The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio in itself does not indicate favorable or unfavorable
condition. It should be compared with some standard. Standards of comparison
are:

1. Past Ratios

2. Competitor's Ratios

3. Industry Ratios

4. Projected Ratios
Past Ratios: Ratios calculated from the past financial statements of the same firm.

Competitor's Ratios: Ratios of some selected firms, especially the most

progressive and successful competitor at the same point in time.

Industry Ratios: Ratios of the industry to which the firm belongs.

Projected Ratios: Ratios developed using the projected financial statements of

the same firm.

TIME SERIES ANALYSIS

The easiest way to evaluate the performance of a firm is to compare its present
ratios with past ratios. When financial ratios over a period of time are compared,
it is known as the time series analysis or trend analysis. It gives an indication of
the direction of change and reflects whether the firm's financial performance has
improved, deteriorated or remind constant over time.

CROSS SECTIONALANALYSIS

Another way to comparison is to compare ratios of one firm with some selected
firms in the industry at the same point in time. This kind of comparison is known
as the cross-sectional analysis. It is more useful to compare the firm's ratios with
ratios of a few carefully selected competitors, who have similar operations.

INDUSTRY ANALYSIS

To determine the financial conditions and performance of a firm. Its ratio may be
compared with average ratios of the industry of which the firm is a member. This
type of analysis is known as industry analysis and also it helps to ascertain the
financial standing and capability of the firm & other firms in the industry. Industry
ratios are important standards in view of the fact that each industry has its
characteristics which influence the financial and operating relationships.
TYPES OF RATIOS
Management is interested in evaluating every aspect of firm's performance. In
view of the requirement of the various users of ratios, we may classify them into
following four important categories:

1. Liquidity Ratio

2. Leverage Ratio

3. Activity Ratio

4. Profitability Ratio

1.Liquidity Ratio
It is essential for a firm to be able to meet its obligations as they become due.
Liquidity Ratios help in establishing a relationship between cast and other current
assets to current obligations to provide a quick measure of liquidity. A firm should
ensure that it does not suffer from lack of liquidity and also that it does not have
excess liquidity. A very high degree of liquidity is also bad, idle assets earn
nothing. The firm's funds will be unnecessarily tied up in current assets. Therefore
it is necessary to strike a proper balance between high liquidity. Liquidity ratios
can be divided into three types:

1.1 Current Ratio

1.2 Quick Ratio

1.3 Cash Ratio

1.1 Current Ratio

Current ratio is an acceptable measure of firm’s short-term solvency Current
assets includes cash within a year, such as marketable securities, debtors and
inventors. Prepaid expenses are also included in current assets as they represent
the payments that will not made by the firm in future. All obligations maturing
within a year are included in current liabilities. These include creditors, bills
payable, accrued expenses, short-term bank loan, income-tax liability in the
current year. The current ratio is a measure of the firm's short term solvency. It
indicated the availability of current assets in rupees for every one rupee of
current liability. A current ratio of 2:1 is considered satisfactory. The higher the
current ratio, the greater the margin of safety; the larger the amount of current
assets in relation to current liabilities, the more the firm's ability to meet its
obligations . It is a cured –and -quick measure of the firm's liquidity.

Current ratio is calculated by dividing current assets and current liabilities.

1.2 Quick Ratio

Quick Ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset, other assets
that are considered to be relatively liquid asset and included in quick assets are
debtors and bills receivables and marketable securities (temporary quoted
investments).

Inventories are converted to be liquid. Inventories normally require some time for
realizing intocash; their value also has a tendency to fluctuate. The quick ratio is
found out by dividing quick assets by current liabilities
Generally, a quick ratio of 1:1 is considered to represent a satisfactory current
financial condition. Quick ratio is a more penetrating test of liquidity than the
current ratio, yet it should be used cautiously. A company with a high value of
quick ratio can suffer from the shortage of funds if it has slow- paying, doubtful
and long duration outstanding debtors. A low quick ratio may really be prospering
and paying its current obligation in time.

1.3 Cash Ratio

Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its
equivalent current liabilities. Cash and Bank balances and short-term marketable
securities are the most liquid assets of a firm, financial analyst stays look at cash
ratio. Trade investment is marketable securities of equivalent of cash. If the
company carries a small amount of cash, there is nothing to be worried about the
lack of cash if the company has reserves borrowing power. Cash Ratio is perhaps
the most stringent Measure of liquidity. Indeed, one can argue that it is overly
stringent. Lack of immediate cash may not matter if the firm stretch its payments
or borrow money at short notice.
2. LEVERAGE RATIOS
Financial leverage refers to the use of debt finance while debt capital is a cheaper
source offinance: it is also a riskier source of finance. It helps in assessing the risk
arising from the use of debtcapital. Two types of ratios are commonly used to
analyze financial leverage.

1. Structural Ratios

2. Coverage ratios.

Structural Ratios are based on the proportions of debt and equity in the financial
structure of firm. Coverage Ratios shows the relationship between Debt Servicing,
Commitments and the sources for meeting these burdens.The short-term
creditors like bankers and suppliers of raw material are more concerned with the
firm's current debt-paying ability. On the other hand, long-term creditors like
debenture holders, financial institutions are more concerned with the firm's long-
term financial strength. To judge the long-term financial position of firm, financial
leverage ratios are calculated. These ratios indicated mix of funds provided by
owners and lenders.

There should be an appropriate mix of Debt and owner's equity in financing the
firm's assets. The process of magnifying the shareholder's return through the use
of Debt is called "financial leverage" or "financial gearing" or "trading on equity".
Leverage Ratios are calculated to measure the financial risk and the firm's ability
of using Debt to shareholder’s advantage.

Leverage Ratios can be divided into five types.

2.1 Debt equity ratio.

2.2 Debt ratio.

2.3 Interest coverage ratio

2.4 Proprietary ratio.

2.5 Capital gearing ratio

2.1 Debt equity ratio

It indicates the relationship describing the lenders contribution for each rupee of
the owner's contribution is called debt-equity ratio. Debt equity ratio is directly
computed by dividing total debt by net worth. Lower the debt-equity ratio, higher
the degree of protection. A debt-equity ratio of 2:1 is considered ideal. The debt
consists of all short term as well as long-term and equity consists of net worth
plus preference capital plus Deferred Tax Liability.

2.2 Debt ratio

Several debt ratios may use to analyze the long-term solvency of a firm. The firm
may be interested in knowing the proportion of the interest-bearing debt in the
capital structure. It may, therefore, compute debt ratio by dividing total total debt
by capital employed on net assets. Total debt will include short and long-term
borrowings from financial institutions, debentures/bonds, deferred payment
arrangements for buying equipment’s, bank borrowings, public deposits and any
other interest-bearing loan. Capital employed will include total debt net worth.
2.3 Interest Coverage Ratio

The interest coverage ratio or the time interest earned is used to test the firms’
debt servicing capacity. The interest coverage ratio is computed by dividing
earnings before interest and taxes by interest charges. The interest coverage ratio
shows the number of times the interest charges are covered by funds that are
ordinarily available for their payment. We can calculate the interest average ratio
as earnings before depreciation, interest and taxes divided by interest.

2.4 Proprietary ratio

The total shareholder's fund is compared with the total tangible assets of the
company. This ratio indicates the general financial strength of concern. It is a test
of the soundness of financial structure of the concern. The ratio is of great
significance to creditors since it enables them to find out the proportion of
shareholders’ funds in the total investment of business.
2.5 Capital gearing ratio:
This ratio makes an analysis of capital structure of firm. The ratio shows
relationship between equity share capital and the fixed cost bearing i.e.,
preference share capital and debentures.

3. ACTIVITY RATIOS
Turnover ratios also referred to as activity ratios or asset management ratios,
measure how efficiently the assets are employed by a firm. These ratios are based
on the relationship between the level of activity, represented by sales or cost of
goods sold and levels of various assets. The improvement turnover ratios are
inventory turnover, average collection period, receivable turn over, fixed assets
turnover and total assets turnover. Activity ratios are employed to evaluate the
efficiency with which the firm manages and utilize its assets. These ratios are also
called turnover ratios because they indicate the speed with which assets are
being converted or turned over into sales. Activity ratios thus involve a
relationship between sales and assets. A proper balance between sales and assets
generally reflects that asset utilization.

Activity ratios are divided into four types:

3.1 ASSET turnover ratio

3.2 Working capital turnover ratio

3.3 Fixed assets turnover ratio

3.4 Stock turnover ratio

3.1ASSET turnover ratio:
This ratio expresses relationship between the amounts invested in this assets and
the resulting in terms of sales. This is calculated by dividing the net sales by total
sales. The higher ratio means better utilization and vice-versa. Some analysts like
to compute the total assets turnover in addition to or instead of net assets
turnover. This ratio shows the firm's ability in generating sales from all financial
resources committed to total assets.

3.2 Working capital turnover ratio

This ratio measures the relationship between working capital and sales. The ratio
shows the number of times the working capital results in sales. Working capital as
usual is the excess of current assets over current liabilities. The following formula
is used to measure the ratio:
3.3 Fixed asset turnover ratio
The firm may which to know its efficiency of utilizing fixed assets and current
assets separately. The use of depreciated value of fixed assets in computing the
fixed assets turnover may render comparison of firm's performance over period
or with other firms. The ratio is supposed to measure the efficiency with which
fixed assets employed a high ratio indicates a high degree of efficiency in asset
utilization and a low ratio reflects inefficient use of assets. However, in
interpreting this ratio, one caution should be borne in mind, when the fixed assets
of firm are old and substantially depreciated the fixed assets turnover ratio tends
to be high because the denominator of ratio is very low.

3.4 Stock turnover ratio

Stock turnover ratio indicates the efficiency of firm in producing and selling its
product. It is calculated by dividing the cost of goods sold by the average stock. It
measures how fast the inventory is moving through the firm and generating sales.
The stock turnover ratio reflects the efficiency of inventory management. The
higher the ratio, the more efficient the management of inventories and vice versa
However, this may not always is true. A high inventory turnover may be caused a
low level of inventory which may result if frequent stock outs and loss of sales of
customer goodwill.
4. PROFITABILITY RATIOS
A company should earn profits to survive and grow over a long period of time.
Profits are essential but it would be wrong to assume that every action initiated
by management of a company should be aimed at maximizing profits. Profit is the
difference between revenues and expenses over a period of time. Profit is the
ultimate 'output' of a company and it will have no future if it fails to make
sufficient profits. The financial manager should continuously evaluate the
efficiency of company in terms of profits. The profitability ratios are calculated to
measure the operating efficiency of company. Creditors want to get interest and
repayment of principal regularly. Owners want to get a required rate of return on
their investment.

Generally, two major types of profitability ratios are calculated:

• Profitability in relation to sales

• Profitability in relation to investment

Profitability Ratios can be divided into six types:

4.1 Gross profit ratio

4.2 Operating profit ratio

4.3 Net profit ratio

4.4 Return on investment

4.5 Earns per share

4.6 Operating expenses ratio

4.1 Gross profit ratio
First profitability ratio in relation to sales is the gross profit margin the gross profit
margin reflects. The efficiency with which management produces each unit of
product. This ratio indicates the average spread between the cost of goods sold
and the sales revenue. A high gross profit margin is a sign of good management. A
gross margin ratio may increase due to any of following factors: higher sales
prices cost of goods sold remaining constant, lower cost of goods sold, sales
prices remaining constant. A low gross profit margin may reflect higher cost of
goods sold due to firm's inability to purchase raw materials at favorable terms,
inefficient utilization of plant and machinery resulting in higher cost of production
or due to fall in prices in market.

4.2 Operating profit ratio

This ratio expresses the relationship between operating profit and sales. It is
worked out by dividing operating profit by net sales. With the help of this ratio,
one can judge the managerial efficiency which may not be reflected in the net
profit ratio.
4.3 Net profit ratio
Net profit is obtained when operating expenses, interest and taxes are subtracted
from the grossprofit. Net profit margin ratio established a relationship between
net profit and sales and indicatesmanagement's efficiency in manufacturing,
administering and selling products.This ratio also indicates the firm's capacity to
withstand adverse economic conditions. A firm witha high net margin ratio would
be in an advantageous position to survive in the face of falling sellingprices, rising
costs of production or declining demand for product

4.4 Return on investment:

This is one of the most important profitability ratios. It indicates the

relation of net profit with capital employed in business. Net profit for
calculating return of investment will mean the net profit before
interest, tax, and dividend.
4.5 Earnings per share

This ratio is computed by earning available to equity shareholders by

the total amount of equity share outstanding. It reveals the amount of
period earnings after taxes which occur to each equity share. This ratio
is an important index because it indicates whether the wealth of each
shareholder on a per share basis as changed over the period.

4.6 Operating expenses ratio

It explains the changes in the profit margin ratio. A higher operating expenses
ratio is unfavorable since it will leave a small amount of operating income to meet
interest, dividends. Operating expenses ratio is a yardstick of operating efficiency,
but it should be used cautiously. It is affected by a number of factors such as
external uncontrollable factors, internal factors. This ratio is computed by dividing
operating expenses by sales. Operating expenses equal cost of goods sold plus
selling expenses and general administrative expenses by sales.
Research Methodology

Research Design

In view of the objects of the study listed above an exploratory research design has
been adopted. Exploratory research is one which is largely interprets and already
available information and it lays particular emphasis on analysis and
interpretation of the existing and availableInformation.

• To know the financial status of the company.

• To know the credit worthiness of the company.

• To offer suggestions based on research finding.

Data Collection Methods

Primary Data
Information collected from internal guide and finance manager. Primary data is
first-hand information

Secondary Data
Company balance sheet and profit and loss account. secondary data is second
hand information.

Data Collection Tools

To analyze the data acquire from the secondary sources “Ratio Analysis “The
scope of the study is defined below in terms of concepts adopted and period
under focus. First the study of Ratio Analysis is confined only to the Simoco
Telecommunications (South Asia) LtdSecondly the study is based on the
annualreports of the company for a period of 3 years from 2018-19 to 2020-21the
reason for restricting the study to this period is due time constraint.
DATA ANALYSIS &
INTERPRETATION
1- LIQUIDITY RATIOS

1.1 Current Ratio

Current ratio is an acceptable measure of firm’s short-term solvency Current
assets includes cash within a year, such as marketable securities, debtors and
inventors. Prepaid expenses are also included in current assets as they represent
the payments that will not made by the firm in future. All obligations maturing
within a year are included in current liabilities. These include creditors, bills
payable, accrued expenses, short-term bank loan, income-tax liability in the
current year. The current ratio is a measure of the firm's short term solvency. It
indicated the availability of current assets in rupees for every one rupee of
current liability. A current ratio of 2:1 is considered satisfactory. The higher the
current ratio, the greater the margin of safety; the larger the amount of current
assets in relation to current liabilities, the more the firm's ability to meet its
obligations . It is a cured –and -quick measure of the firm's liquidity. Current ratio
is calculated by dividing current assets and current liabilities

S.NO YEAR CURRENT CURRENT CURRENT

ASSETS LIABILITIES RATIO
1. 2018-19 815581605 466061040 1.74

2. 2019-20 825560502 486061028 1.69

3. 2021-21 825325391 472405246 1.74

4. 2021-22 850817920 501657006 1.70

GRAPH- 1.1
1.2 QUICK RATIO
Quick Ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset, other assets
that are considered to be relatively liquid asset and included in quick assets are
debtors and bills receivables and marketable securities (temporary quoted
investments .Inventories are converted to be liquid. Inventories normally require
some time for realizing into cash; their value also has a tendency to fluctuate. The
quick ratio is found out by dividing quick assets by current liabilities

TABLE-1.2
S.NO YEAR QUICK CURRENT QUICK
ASSETS LIABILITIES RATIO
1. 2018-19 325024070 466061040 0.697

2. 2019-20 305035067 486061028 0.627

3. 2020-21 241956456 472405246 0.512

4. 2021-22 244218892 501657006 0.486

1.3 Cash Ratio
Cash is the most liquid asset; a financial analyst may examine Cash Ratio and its
equivalent current liabilities. Cash and Bank balances and short-term marketable
securities are the most liquid assets of a firm, financial analyst stays look at cash
ratio. Trade investment is marketable securities of equivalent of cash. If the
company carries a small amount of cash, there is nothing to be worried about the
lack of cash if the company has reserves borrowing power. Cash Ratio is perhaps
the most stringent Measure of liquidity. Indeed, one can argue that it is overly
stringent. Lack of immediate cash may not matter if the firm stretch its payments
or borrow money at short notice.

S.NO YEAR CASH &BANK CURRENT CASH RATIO

BALANCE LIABILITIES

1. 2018-19 12071567 466061040 0.025

2. 2019-20 10712966 486061028 0.02

3. 2020-21 9200811 472405246 0.35

4. 2021-2022 17481767 472405246 0.34

GRAPH – 1.3
1.4 NET WORKING CAPITAL RATIO – The difference between current assists and
current liabilities excluding short-term bank borrowing is called networking
capital or net current assets .

NET WORKING
CAPITAL RATIO = NET WORKING CAPITAL \ TOTAL ASSETS

TABLE 1.4

S.NO YEAR NETWORKING TOTAL NET

CAPITAL ASSEST WORKING
CAPITAL
RATIO
1. 2018-19 349520565 1040518824 0.33

2. 2019-20 820699892 1010244151 0.33

3. 2020-21 352920145 1004078337 0.35

4. 2021-22 349160914 1026278588 0.34

GRAPH-1.4
 LEVERAGE RATIO
2.1 Debt Ratio
If the firm may be interested in knowing the proportion of the
interest bearing debt in the capital structure .

TABLE 2.1
S.NO YEAR TOTAL DEBT EQUITY DEBT RATIO

1. 2018-19 198755886 317472952 0.62

2. 2019-20 196699675 327483448 0.02

3. 2020-21 197697175 333975916 0.60

4. 2021-22 187397751 33723831 0.55

GRAPH 2.1
2.2 INTREST COVERED RATIO- The ratio shows the number of
times the interest charges are covered by fund that are
ordinarily available for their payment.

S.NO YEAR EBIT INTREST I.C. RATIO

1. 2018-19 41925682 38786348 1.08

2. 2019-20 43927084 39729641 1.11

3. 2020-21 40886487 33248289 1.22

4. 2021-22 43602645 39781569 1.09

GRAPH 2.2
2.3 INVENTORY TURNOVER RATIO
It indicates the firm efficiency of the firm in production and
selling its product. It is calculate by dividing the cost of goods
sold by the average inventory.

S.NO YEAR COST OF AVERAGE I.T. RATIO

GOOD INVENTORY
SOLD
1. 2018-19 532466519 74683788 7.12

2. 2019-20 889064745 8743176 10.17

3. 2020-21 724072623 39685671 18.24

4. 2021-22 855089434 40875589 20.91

GRAPH 2.3
2.4 DEBT TURN OVER RATIO
It is found out by dividing the credit sales by average debtors.
Debtors turnover indicates the number of times debtors
turnover each year.
Debtors turnover ratio = Sales/ Average Debtors

S.NO YEAR SALES AVERAGE D.T RATIO

DEBTORS

1. 2018-19 920603526 285036547 3.23

2. 2019-20 920603526 265070484 3.47

3. 2020-21 745391098 264619610 2.81

4. 2021-22 745391098 128390995 6.57

GRAPH 2.4
3.1 FIXED ASSESTS TURNOVER RATIO
The firm may which to know its efficiency of utilizing fixed assets and current
assets separately. The use of depreciated value of fixed assets in computing the
fixed assets turnover may render comparison of firm's performance over period
or with other firms. The ratio is supposed to measure the efficiency with which
fixed assets employed a high ratio indicates a high degree of efficiency in asset
utilization and a low ratio reflects inefficient use of assets. However, in
interpreting this ratio, one caution should be borne in mind, when the fixed assets
of firm are old and substantially depreciated the fixed assets turnover ratio tends
to be high because the denominator of ratio is very low.

S.NO YEAR NET SALES NET FIXED F.A.T RATIO

ASSETS
1. 2018-19 920603526 128865789 7.14

2. 2019-20 920603526 126753649 7.26

3. 2020-21 745391098 120822946 6.16

4. 2021-22 745391098 113345668 6.57

GRAPH 3.1
3.2 CURRENT ASSESTS TURNOVER RATIO

Current asset turnover ratio = sales/ current assets

S.NO YEAR SALES CURRENT C.A.T.

ASSESTS RATIO

1. 2018-19 920603526 815581605 1.12

2. 2019-20 920603526 825560502 1.11

3. 2020-21 745391098 825325391 0.90

4. 2021-22 745391098 850817920 0.87

GRAPH 3.2
3.3 TOTAL ASSEST TURN OVER RATIO
This ratio ensures whether the capital employed has been
effectively used or not. this is also test of managerial efficiency
and business performance.
Total asset turnover ratio = Sales \ Capital employed

S.NO YEAR SALES TOTAL T.A.T.

ASSETS RATIO

1. 2018-19 920603526 1040518824 0.88

2. 2019-20 920603526 1010244151 0.91

3. 2020-21 745391098 1004078337 0.74

4. 2021-22 745391098 1026278588 0.74

GRAPH 3.3
3.4 WORKING CAPITAL TURNOVER RATIO
A firm may also like to relate net current assets or net working
capital to sales. Working capital turnover indicates for one
rupee of sales the company needs how many net current
assets.
Working capital turnover ratio= sales/working capital

S.NO YEAR SALES NET W.C.T.

CURRENT RATIO
ASSETS
1. 2018-19 920603526 815581605 2.12

2. 2019-20 920603526 339499474 2.71

3. 2020-21 745391098 339499474 2.19

4. 2021-22 745391098 349160914 2.13

GRAPH 3.4
4.1 CAPITAL TURNOVER RATIO

CAPITAL TURNOVER RATIO = SALES/ CAPITAL EMPLOYED

S.NO YEAR SALES CAPITAL C.T RATIO

EMPLOYED

1 2018-19 920603526 5532586521 1.66

2 2019-20 920603526 524183123 1.75

3 2020-21 745391098 531673091 1.40

4 2021-22 745391098 524621582 1.42

GRAPH 4.1
4.2 GROSS PROFIT RATIO
This ratio shows that the margin left after meeting
manufacturing cost. It measures the efficiency of production
as well as pricing.
Gross profit margin Ratio= gross profit / net sales X 100

S.NO YEAR GROSS SALES G.P. RATIO

PROFIT in percent
1 2018-19 22564896 920603526 2.83

2 2019-20 31538781 920603526 3.42

3 2020-21 21318475 745391098 2.86

4 2021-22 855089434 745391098 2.80

GRAPH- 4.2
4.3 NET PROFIT RATIO
This ratio also indicates the firms capacity to with stand adverse
economic condition. A firms with a high net margin ratio would
be in an advantages position to survive in the face falling prices.
Net Profit = net profit / net sales X100

S.NO YEAR PROFIT SALES NET PROFIT

AFTER TAX MARGIN in
percentage
1 2018-19 7586524 920603526 0.82

2 2019-20 3426197 920603526 0.37

3 2020-21 6492468 745391098 0.87

4 2021-22 3247915 745391098 0.43

GRAPH -4.3
4.4 RETURN ON INVESTMENT
The conventional approach of calculate ROI is divide PAT by
investments.

SNO YEAR EBIT CAPITAL R.O.I RATIO

EMPLOYED

1 2018-19 45985624 558465475 8.2

2 2019-20 43972084 524183123 8.3

3 2020-21 40886487 531673091 7.3

4 2021-22 43602645 524621582 8.3

GRAPH-4.4
4.5 RETURN ON EUITY SHARE HOLDERS FUND
The return on equity shareholder fund explains about the
return of shares holder with they get on the investment.

Return on equity share holder fund = net profit/ equity share

holder fund

S.NO YEAR PROFIT NET R.O.E.

AFTER TAX WORTH RATIO

1 2018-19 7498473 385462655 1.94

2 2019-20 3426197 327483448 1.04

3 2020-21 6492468 333975916 1.94

4 2021-22 3247915 337223831 0.96

GRAPH -4.5
 CONCLUSION
Liquidity ratios, both current ratio and quick ratio are showing effectiveness in liquidity
as in all the years current ratio is greater than the standard 2:1 and quick ratio is greater
than the standard 1:1 ratio

The firm is maintaining a low cash balance and marketable securities which means they
done cash payments.

Debt equity ratio, solvency ratio and interest coverage ratio are showing an average
increase in the long term solvency of the firm.

The proprietary ratio is showing an average increase which means, the shareholders
have contribute more funds to the total assets

Average payment period of the firm is showing the credit worthiness of the firm to its
suppliers.

Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed
assets to generate sales.

The increasing trend of current assets turnover ratio indicates that the firm needs more
Investment in current assets for generating sales .

The gross profit ratio, net profit ratio is showing the increasing trends. The profitability
of the firm the increasing

Operating ratio of the company has observed decreasing trend, hence it may be good
Control over the operating expenses.

The interest that has to be paid is very less when compared to the sales. The firm is not
Utilizing the debt conservatively

The firm is retaining much of the earnings (based on dividend payout ratio)
RECOMMENDATION & LIMITATION OF THE PROJECT

 The company is suggested to maintain enough cash and bank balances

to pay its quick liability.
 Although the Ratio analysis of the company is fluctuating, still the
company is in manageable position and the company's present status of
maintaining current asset and current liabilities are satisfactory
 Company should try to maintain their ratio which shows financial health
of the company
 Current ratio of the company is not very good it is just an average by
changing the policy for the company the current ratio of the company
can be improved.
 The Company may initiate suitable actions for reducing cost of
operations.
 The analysis could have been made more realistic if the relevant data
for longer periods were available.
 The study is purely based on secondary data which were taken
primarily from Published annual reports of simoco
Telecommunications (private Ltd)