Efficiency Ratios : An efficiency ratio measures a

company's ability to use its assets to generate income. The following

are as follow:
 
• Fixed asset turnover ratio =  

• Equity Turnover ratio =  

• Inventory Turnover ratio =  

• Debtor Turnover ratio =  

• Creditor Turnover ratio =

Efficiency Ratio March 21 March 20 March 19 March 18 March 17
    
Fixed asset turnover ratio (times) 3.63 4.20 5.12 4.97 4.94

Equity turnover ratio (times) 1.11 1.40 1.44 1.52 1.55

Inventory turnover ratio (times) 2.89 3.44 4.04 3.82 3.85

Debtor turnover ratio (times) 6.85 7.95 8.2 8.18 8.35

Creditor turnover ratio (times) 4.06 6.35 6.36 6.17 6.43

 Graphical Representation
10

7.5

RATIOS
• Black - Fixed Asset
2.5
• Blue - Debtor Turnover
• Red - Creditor Turnover
• Green - Inventory Turnover
0 • Orange- Equity Turnover
2017 2018 2019 2020 2021
ANALYSIS
• Fixed asset turnover ratio helps us by evaluating how efficiently the assets are being utilized in
order to generate sales. There is a positive impact from 4.94 times in 2016-17 to 5.12 times in
2018-19 afterwards there is a negative impact in the following years from 4.20 times to 3.63
times.

• Equity turnover ratio helps us by evaluating how efficiently the equity funds are being utilized
in order to generate revenue. From the above data we can say the company has performed
well in the year 2016-17 (1.55 times) with the following years decrease.

• Inventory turnover ratio on the other hand tells us how well the inventory is being managed by
the company. The higher the inventory turnover ratio of a company in a given year, the better it
is for the company's future (4.04 times in 2018-19). Low inventory turnover means low sales,
too much inventory or overstocking and poor liquidity of its inventory.

• Debtor turnover ratio helps us evaluate the efficiency of accounts receivable management. A
higher debtor turnover ratio indicates that customers are paying on time and converting it into
cash. The company showed a positive impact with the highest ratio of 8.35 times in 2016-17.

• Credit turnover ratio evaluates the efficiency of accounts payable management of the
company. We can say that higher the ratio, better the performance of the company. A high
ratio denotes that the company majorly operates on cash basis.
 DuPont Analysis
DuPont analysis is a useful technique used to decompose the different drivers of return on equity
(ROE) for a business. This allows an investor to determine what financial activities are contributing the
most to the changes in ROE. An investor can use analysis like this to compare the operational efficiency
of two similar firms.
DuPont Analysis/ Years ROE (%) Net Profit Margin (%) Total Assets turnover (%) Leverage (Total Assets/Total
Equity)

2016-17 25.57 14.67 1.36 1.28

2017-18 27.44 17.54 1.22 1.28

2018-19 25.27 16.20 1.21 1.29

2019-20 25.47 17.51 1.13 1.29

2020-21 21.57 17.48 0.92 1.34

From the above table we can infer the change in return on equity (ROE) as it keeps on fluctuating.
Further on dividing the components related to it which can be further classified into :
• Operational efficiency: it measures the efficiency of profit earned as a function of operating cost.
From that point of view that the company has performed the best in 2017-18 (17.54%).
• Resource efficiency: it measures how efficiently are the resources being used in the process. The
company has the highest efficiency in the year 2016-17 (1.36 times) followed by a continuous
decline in the subsequent years.
• Leverage advantage: It tells how efficiently the company is able to finance the purchase of
assets from the money borrowed. From the above analysis it is clear that the company is a
conservative company (since ratio is higher than 0.50) and also because they access more
funding from shareholder equity than they do from debt.