CHAPTER-IV

RESEARCH METHODOLOGY
 Research methodology

Aim of the research:

It is process to estimate that the company whether collapse in future that was Altman Z socre ,

to calculate z -score we want four ratios:

• Working capital to assets
• Retained earnings to assets
• Earning before interest and taxes to assets
• Market value of equity to total liabilities

Hypothesis:

Hypothesis 1:The Altman Z-score is useful for Indian retail companies, it was
financial indicator

Hypothesis 2:On the basis of Z—Score we can estimate the financial Performance and the
profitability of company

The firms that have been chosen for a four-year study are displayed below.

Companies chosen for analysis:

1. Avenue super marts Ltd (Dmart)

2. Spencer Retail Ltd
3. V- mart retail Ltd.

Sample Design

Population: Retail Industry

Sample Frame: Companies Annual Reports, Money control, Articles

Data Collection Method: Secondary Data.

Sample Size: Three retail Companies.

• Avenue super marts Ltd (Dmart)

• Spencer Retail Ltd
• V- mart retail Ltd.
Statistical tool used:

The following topics provide an explanation of the analysis techniques used in this study.

Altman Z Score.

Companies’ financial data is important for the understanding the companies financial health.
But that data is not shows the complete picture of the company. They shows only profit and
loss and net profit of the companies. From the financial data we can see the net profit and loss
but we can’t see whether the the performing good or bad. For the better understand we have to
calculations and analysis is needed.

Ratios are important for the analysis of the data, it helps to understand the information about
companies. The main goal for he business to create the profits for the shareholders and owners
of the companies profit sare plays an important role in the growth of the companies and market
positioning. So, for the better understand the future profits and estimate the bankruptcy of the
companies we required to calculate the Z-Score.

The Z-Score Formula

Z-Score Formula bankruptcy model:

Z” = 6.56 X1 + 3.26 X2 + 6.72 X3 + 1.05 X4

X1= Working Capital / Total Assets.

X2= Retained Earnings / Total Assets.

X3= Earnings Before Interest and Taxes/Total Assets.

X4 Market Value of Equity/Total Liabilities

XI is that compare the working capital and assets of the company.It is very important for the
potential . If the business in negative working capital then it can struggle for meet the short
term obligations because there is not sufficient acurrent asset in the company. If there is
positive working capital themn there will be no problem’s in the company
X2 is measure the profitability and their financial bedt of the company. It says that the how
much profit / loss a company reinvest low rate of this ratio(Retained earnings to total assets)
is tell for the financial expenses, company borrowing money instead of using ht retained
earnings. A high rate of the RE/TA is tells the history profits and strengths.
 X3 is way for the generate the profits from its own assets without the interest and taxes . It is
variation of the Return on Assets.. From this ratio we can see the company make money from the
assets and before the taxes and interest

X4 is assess the potential decrease in companies asset value before its debts surpass its assets.
It is tell the decreasing of the company stock price. The ratio indicates the amount by
company market value can drop before the market confidence in company’ s financial
strength beyond the companies fundamentals, adding market value perspective to analysis.

Zones of Discrimination:

The following factors are used to determine a firm's classification:

1) Z>2.6 "Safe" "Zone- If a companies score is greater than 2.6 means it tell the less
bankruptcy, if the companies score is less than the 2.6 meands it tell that the company may
be bankruptcy.If the company score is more than the 2.6 means safe zone

2) 1.1 <Z<2.6 -"Grey “Zone – If the company score is less than the 1.1 then tells that
not in the safe zone and it is indicates the bankruptcyIIf the score is between the 1.1 and
2.6 means that was in the grey zone

3) Z<1.1-"Distress" Zone- If the company score is less than the 1.1 then it tells that it
may be bankruptcy in the future. And it was concluded as the distress zone. It tell tha less
sales ,more amount of costs , losses and more competition, it all putting under the distress
zoneAltaman Z—scor eis tells that was not in safe zone .It was in the risk.
Chapter -V
Data Analysis
Table: 1-Avenue Supermats Private Ltf.
Altman Z Score
Table-1Avenue Supermarts Private Ltd.
Particulars Mar-23 Mar-22 Mar-21 Mar-20 Mar-19
X1 0.219504 0.146511 0.211707 0.129961 0.11668
X2 0.861878 0.861878 0.854256 0.867895 0.7103
X3
0.177112 0.141634 0.113201 0.14754 0.20688
X4 0.904565 0.903931 0.901724 0.9215 0.79949
Z” = 6.56 X1 + 3.26 X2 + 6.72 X3 + 1.05
X4 6.389655 5.671746 5.881198 5.640919 5.31069
Zone safe safe safe safe safe

Table-2 Spencer Ltd.

Particulars Mar-23 Mar-22 Mar-21 Mar-20 Mar-19
X1 -0.2646 -0. 2023 -0.1398 -0.0995 0.22284
X2 0.14154 0.14154 0.20639 0.25072 0.57888
X3
-0.0987 -0.0565 -0.0882 -0.0402 0.01012
X4
0.06558 0.17163 0.23745 0.27943 0.62111
Z” = 6.56 X1 + 3.26 X2 + 6.72 X3 + 1.05
X4 -1.869 -1.064 -0.5875 0.18789 4.0691
Zone Distress Distress Distress Distress Safe

Table-3 V-mart Retail Ltd.

Particulars Mar-23 Mar-22 Mar-21 Mar-20 Mar-19
X1 0.10372 0.23924 0.3804 0.16085 0.33258
X2 0.39527 0.39527 0.49103 0.3555 0.61313
X3
0.90895 0.79531 0.68008 1.30509 2.10506
X4 0.30957 0.40468 0.50735 0.37505 0.64774
Z” = 6.56 X1 + 3.26 X2 + 6.72 X3 + 1.05 X4 8.40217 8.62745 9.19903 11.3781 19.0067
Zone- Safe Safe Safe Safe Safe
 COMPARING THE THREE COMPANIES:

Companies Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

Avenue Supermarts Ltd. 5.3 5.6 5.8 5.6 6.3
Spencer Ltd. 4 0.18 -0.58 -1 -1.8
V-mart Retail Ltd. 19 11.3 9.1 8.6 8.4

Altman Z-Socre
25

20

15

10

Mar-19 Mar-20 Mar-21 Mar-22 Mar-23

-5
Avenue Supermarts Ltd. Spencer Ltd. V-mart Retail Ltd.

The graph shows the 3 companies z--score data these are:

• Avenue super marts Ltd.
• Spencer Ltd.
• V-mart Ltd.
The data is from 2019-2023:
Coming to the Avenues supermarts Ltd.
• The company slowly increases the score
• The company performing well and also that was wealthy position from the year 2019 -2023
• From 2019 the company maintaining the above 5 score
Second one is Spencer Ltd.
• The performed well in 2019
• In Year 2019 the score was 4
• And year the z score was 0.18 it decreased
• In 2020 the company score was became negative that was-0.58
• In the 2021 the decreases more then last year
 Third one is V-mart Ltd.
• Th V-Mart performed well in year 2019, that was 8.4
• In year 20220 the company score was decrased to 11.3
• Slowly company performance was decreasing
• But the company was mainttian safe position
• In Year 2023 the score is 8.4
• So it was safe position

Ratio Analysis:
Avenue Supermarts Private Ltd.
Current Ratio:
Mar- Mar-
Ratio Mar-23 Mar-22 Mar-21 20 19
Current Ratio
3.71 2.83 3.67 3.23 1.7
(X)

Current Ratio
4

3.5

2.5

1.5

0.5

0
Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation:

• In Mar—2023 the retio is 3.71 it indicates good for the company.

• The lowest is 1.7 in the year 2019.
• In Mar-2022 is 2.83, it was also good .
• In 2021 that was 3.6 of company
• In Mar—2019 the company is ratio is 1.7.
Quick Ratio:-

Mar- Mar-
Ratios Mar-23 Mar-22 Mar-21 20 19
Quick Ratio (X) 1.5 0.57 1.64 0.55 0.39

Quick Ratio (X)

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation:

• The quick rratio is 0.39 in 2019

• In year 2020 the ratio was increased and it was 0.55.

• In Mar-2021 it was increased to 1.64.

• In 22 the company ratio is decreased to 0.5

• In 2023 it was increased to1.5

 Debt to Equity

Mar- Mar-
Ratios Mar-23 Mar-22 Mar-21 20 19
Debt to Equity
0 0 0 0 0.08
(x)

Debt to Equity (x)

0.09
0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretaion:

• From 2020-2023 there is no debt for the company and in 2019 it was 1.008

• The ratio was dercresed to the 0 from the year 2020

• In the year 2023 the ratio was 0

 Spencer’s Private Ltd.
Current Ratio:
Year Mar-23 Mar-22 Mar-21 Mar-20 Mar-19
Current Ratio (X) 0.43 0.51 0.63 0.72 1.6

Current Ratio (X)

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretaation:

• In 2019 the current ratio is 1.6

• In 202 the ratio was decreasing and it was 0.72

• In 2021 that was to 0.63

• In 2022 The that was dercreases to 2.51

• 0.43 is current ratio in 2023

• The company financially weak

 Quick Ratio:

Year Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Quick Ratio (X) 0.12 0.14 0.19 0.27 0.84

Quick Ratio (X)

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation:

• In 2023 the company quick ratio is 0.12

• Coming to the 2022 the company ratio is 0.14

• In year 2021 the ratio is 0.19

• I0.27 is quick ratio in 2020

• In the year 2019 the ratio was 0.84

• From 2019-2023 the ratio was decreasing it was not good for the comapny
 Debt to Equity

Year Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Debt to Equity (x) 4.32 1.14 0.48 0.23 0

Debt to Equity (x)

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation:

• In year 2019 the ratio was 0

• In 2020 the ratio was 0.23

• In the year 2021 the ratio was 0.48

• In 2022 the ratio was1.14

• I n the the ratio is increased to 4.32

• The company”s financial is not good

 V-Mart Private Ltd.
Current Ratio
Mar- Mar- Mar- Mar- Mar-
Year
23 22 21 20 19
Current Ratio (X) 1.37 2.27 3.35 1.61 1.99

Current Ratio (X)

4

3.5

2.5

1.5

0.5

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation:

• In 2019 the company current ratio is 1.99

• In 2020 the current ratio is is 1.61

• In the year 2021 the ratio was increased to 3.35

• But in year the company’s ratio wasa decraed to 2.27

• In 2023 the ratio is 1.37, it was not good for the company
Quick Ratio

Mar- Mar- Mar- Mar- Mar-

Year
23 22 21 20 19
Quick Ratio (X) 0.24 0.58 1.72 0.12 0.44

Quick Ratio (X)

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation
• In year 2019 the ratio was 1.44

• In year 2020 the rato is 0.12

• 1.72 is ratio in year 2021

• But in2022 year the ratio was drecresed to 0.58

• In year the ratio was decreased to 0.24

 Debt to Equity

Mar- Mar- Mar- Mar- Mar-

Year
23 22 21 20 19
Debt to Equity (x) 0.17 0 0 0 0

Debt to Equity (x)

0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Interpretation:

• In year 2019 the company debt was o0

• From 2019-2022 there is no debt for the company

• In 2023 the ratio was increased to 0.17

 Chapter-VI
Findings, Conclusions & Suggestions
 Findings and Conclusions

In this study we can see that the possibility of bankruptcy by using the Altman model.
For this study I have taken three companies Avenue supermarts Ltd ,Spencer’s Ltd and
V-mart Ltd. And their 5 years financial data form 2019-2023.
Here I have observed that the Avenue supermats Ltd was highly safe when we compare
to the other companies This was safe from year 2019-2023
Coming to the Spencers Ltd the company was safe in the year 2019 but slowly it was
decreasing and it in negative score so as per the Altman model it was distree zone
Finally V- mart Ltd is was performing well from the 2019 but it was slowly decreasing
score when we compare year to year. But it was in good position as per the model it was
in safe zone.

By using this formaula we ca estimate the bankruptcy before the investment. It was also helpful
for the invetors whether invest in companies and to get more profits from the investment.Also
we can see bankruptcy by usins the Z’model

Suggestions:
suggestions for invetors:

• To make good portfolio so we have to see performance of the company and Z’score.

• By using the formula we can tell that company whether bankruptcy or not

• Invest in the safe companies to get the profits