Introduction

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Ratio Analysis

Ratios FY 2022-23 FY 2021-22

1. Current Ratio: -
The current ratio for the financial year 2022-23 is 1.14 and for the year 2021-22 was
1.94. By this, we can see a decrease in the ratio and the idle ratio for a company is 2:1.
Since the ratio is reduced to 1.14 the company may face some difficulty in paying off its
debts.
2. Quick Ratio: -
The quick or acid test ratio for the financial year 2022-23 is 0.73 and for the year 2021-
22 was 1.55. We can see there is a decrease in the ratio and the idle ratio for a company
is 1:1. Since the ratio is below 1 the company lacks the ability to pay its short-term debt
obligations and does not have enough liquidity to meet it.

3. Debtors turnover Ratio: -

The Debtors turnover ratio for the financial year 2022-23 is 38.25 and for the year 2021-
22 was 33.33. We can see there is an increase in the ratio. By this, we can understand
the customers are paying the money on time and the company is good at collecting
money has increased compared to the previous financial year.

4. Creditors turnover Ratio: -

The Creditors turnover ratio for the financial year 2022-23 is 4.46 and for the year 2021-
22 was 3.7. We can see there is an increase in the ratio. By this, we can understand that
the company is able to pay its creditors quickly and has a better cash flow than the
previous year.

5. Inventory turnover Ratio: -

The Inventory turnover ratio for the financial year 2022-23 is 7.65 and for the year 2021-
22 was 6.50. We can see there is an increase in the ratio. By this, we can understand
that there is an increase in its sales of inventory than the previous year.

6. Debtors Day: -
The Debtors day for the financial year 2022-23 is 7.0 and for the year 2021-22 was 6.12.
We can see an increase in the ratio. By this, we can understand the debtors are taking
more time to pay their money to the company than the previous year.

7. Creditors Day: -
The Creditors day for the financial year 2022-23 is 79.97 and for the year 2021-22 was
101.16. We can see there is a decrease in the ratio. By this, we can understand the
company is paying off its creditors in fewer days than the previous year.
8. Inventory Days: -
The Inventory days for the financial year 2022-23 is 30.28 and for the year 2021-22 was
35.39. We can see there is a decrease in the ratio. By this, we can understand the
inventories held and tied up in the company have decreased than the previous year.
9. Fixed asset to Sales Ratio: -
The Fixed asset to sale ratio in the financial year 2022-23 is 0.33 and for the year 2021-
22 was 0.41. We can see a decrease in the ratio. By this we can understand the
company's efficiency using its fixed assets to generate sales has decreased compared to
the previous year.

10. Debt to Equity Ratio: -

The total debt-to-equity ratio in the financial year 2022-23 is 1.47 and for the year 2021-
22 was 0.467. we can see there is an increase in the ratio. By this, we can understand
that the company is borrowing more money from the market and utilizing its assets.

11. Total Debt to Total Asset Ratio: -

The total debt-to-asset ratio in the financial year 2022-23 is 0.22 and for the year 2021-
22 was 0.22. we can see that there is no change in the ratio. By this, we can understand
that the company has more assets than its debts.

12. Interest Coverage Ratio: -

The interest coverage ratio in the financial year 2022-23 is 136.60 and for the year 2021-
22 was 118.28. we can see there is an increase in the ratio. By this, we can understand
that the company is more capable of meeting its interest obligation than the previous
year.

13. Asset turnover Ratio: -

The asset turnover ratio in the financial year 2022-23 is 0.82 and for the financial year
2021-22 was 0.67. we can see there is an increase in the ratio. By this we can
understand that the company is using its assets to generate revenue have increased.

14. Operating Ratio: -

The operating ratio in the financial year 2022-23 is 0.80 and for the year 2021-22 was
0.835. We can see there is a decrease in the percentage. By this, we can understand the
company spending money to generate the same amount of revenue has decreased a
little bit compared to the previous year.

15. Asset to Shareholders Fund Ratio: -

The asset to shareholders fund ratio for the year 2022-23 is 1.28 and for the year 2021-
22 was 1.28. We can see there is no change in the ratio. By this, we can understand that
the company is holding less debt and is financially stable.
16. Dividend Coverage Ratio: -
The dividend coverage ratio for the financial year 2022-23 is 5.07 and for the year 2021-
22 was 3.61. We can see there is an increase in the ratio. By this, we can understand
that the company has earned more income than the previous year and also were able to
pay more dividends to shareholders than the previous year.

17. Return on capital employed ratio: -

The return on capital employed ratio for the financial year 2022-23 is 27.48 and for the
year 2021-22 was 18.31. We can see there is an increase in the ratio. By this, we can
understand that the company is generating more profits from the capital than the
previous year.

18. Operating profit margin Ratio: -

The operating profit margin ratio for the financial year 2022-23 is 20.20 and for the year
2021-22 was 16.7. We can see there is a decrease in the ratio. By this, we can
understand the efficiency of the company in using its resources reduced from the
previous year.

19. Net profit margin Ratio: -

The net profit margin ratio for the financial year 2022-23 is 20.18 and for the year 2021-
22 was 21.43. We can see a decrease in the ratio. By this, we can understand that there
is a reduction in the company’s efficiency at covering sales into profits after covering
every costs including interest and taxes.
 Conclusion

Based on the financial statements of Eicher Motors Limited for the financial year 2022-23, we
can say that it is well-positioned for continued growth in the immediate future. The company
has a strong financial position, a healthy product portfolio, and a growing dealer network. The
company is also investing in new products and capacity expansion to meet the growing demand
for its products. We can also expect the following in the immediate future: -

➢ Continued profit growth: Eicher Motors' profitability has improved in recent years,
with the company reporting a net profit margin of 20.18% in FY 2022-23. This is higher
than the company's historical average profit margin of 13.0%. Eicher Motors is expected
to maintain its profit growth momentum in the immediate future, driven by strong
demand for its Royal Enfield motorcycles.

➢ Reducing costs: Eicher is focusing on cost control by using more efficient

manufacturing processes and sourcing components from cheaper suppliers. They are also
reducing its reliance on imported components by increasing its local sourcing

➢ Increased market share: Eicher Motors is the market leader in the premium
motorcycle segment in India. The company is expected to increase its market share in
the coming years, driven by its strong brand recognition, its expanding product
portfolio, and its growing dealer network.

➢ New product launches: Eicher Motors is planning to launch several new products in
the coming years, including electric motorcycles and scooters and premium segment
vehicles. These new product launches are expected to boost the company's sales and
profitability. They are also investing in building vehicles that have the capability of
autonomous driving.

➢ Capacity expansion: Eicher Motors is expanding its production capacity to meet the
growing demand for its products. The company is expected to invest over ₹1,000 crores
in FY 2023-24 to expand its production capacity. This capacity expansion will help the
company to meet the increasing demand for its products and to maintain its market
share.

➢ Market Development: Eicher Motors is also expanding its presence in international

markets, such as North America and Europe. By this, the company can increase its
presence and market share in the international market.