35360936 ratio analysis of itc

8/9/2019 35360936 Ratio Analysis of ITC

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1. Objective of the Assignment

The assignment assigned was to analyze the Annual Report of any companyin the country and to study its financial health. ITC Ltd. is one of Indiasbiggest companies (under the leadership of Mr. Y.C. Deweshwar) in a sectorthat has rapidly grown over the last few years. ITC Ltd. has been able todiversify successfully.

Through this report, we try and analyze and evaluate the various ratios toappreciate their impact on companys performance over the last few years.ADupont analysis is also done to check the credibility of company as pershareholders, financial analysts and other mutual funds.

The financial statements of last few years are identified, studied andinterpreted in light of companys performance. As a benchmark, we alsoanalyze various components of the company vis--vis other competitors inthe same segment.


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2. Prospects of FMCG Sector The fast moving consumer goods (FMCG) sector would witness over 40 percent growth in the semi-urban and urban areas, according to an analysiscarried out by the Associated Chambers of Commerce and Industry of Indiaon `Future prospects of FMCG'.

The size of the sector would go up from the present Rs 38,500 crore to Rs50,000 crore by 2010, says the analysis.

In urban India alone, the sector would witness over 100 per cent growth withits size increasing to Rs 35,000 crore by 2010 from the present Rs 16,500

crore, says the analysis adding that the overall size of the sector, whichwould include the rural and semi-urban market, would grow to Rs 85,000crore.

Over the years the FMCG sector has registering an increase of double digitper cent. Currently, the urban market for FMCG is growing at an annualgrowth rate of around 20 per cent while the growth for semi-urban and ruralareas is less than 10 per cent, says the analysis.

Though the semi-urban and urban market for FMCG would grow larger,according to the analysis, it is bound to put a severe pressure on the margins

of manufacturers of FMCG products due to intense competition. With 12.2%of the world population living in the villages of India, the Indian rural FMCGmarket is something no one can overlook. More focus on farm sector willboost the rural income thus providing better growth prospects to the FMCGcompanies. Better infrastructure facilities will improve their supply chain.Also, with rising income and growing consumerism, FMCG sectors are likelyto benefit. Growth potential for all the FMCG companies is huge as the percapita consumption of almost all products in the country is amongst thelowest in the world. Further, if these companies can change consumersmindset and offer new generation products, they would be able to generatehigher growth in the future.

Source:


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3. Company Overview

ITC is one of India's foremost private sector companies with a marketcapitalisation of nearly US $ 18 billion and a turnover of over US $ 5.1 Billion.ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and theWorld's Most Reputable Companies by Forbes magazine, among India's Most

Respected Companies by BusinessWorld and among India's Most ValuableCompanies by Business Today. ITC also ranks among India's top 10 `MostValuable (Company) Brands', in a study conducted by Brand Finance andpublished by the Economic Times.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & SpecialtyPapers, Packaging, Agri-Business, Packaged Foods & Confectionery,Information Technology, Branded Apparel, Personal Care, Stationery, Safety


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Matches and other FMCG products. While ITC is an outstanding marketleader in its traditional businesses of Cigarettes, Hotels, Paperboards,Packaging and Agri-Exports, it is rapidly gaining market share even in itsnascent businesses of Packaged Foods & Confectionery, Branded Apparel,Personal Care and Stationery.

As one of India's most valuable and respected corporations, ITC is widelyperceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar callsthis source of inspiration "a commitment beyond the market". In his ownwords: "ITC believes that its aspiration to create enduring value for thenation provides the motive force to sustain growing shareholder value. ITCpractices this philosophy by not only driving each of its businesses towardsinternational competitiveness but by also consciously contributing toenhancing thecompetitiveness of the larger value chain of which it is a part."

ITC's diversified status originates from its corporate strategy aimed atcreating multiple drivers of growth anchored on its time-tested corecompetencies: unmatched distribution reach, superior brand-buildingcapabilities, effective supply chain management and acknowledged serviceskills in hoteliering. Over time, the strategic forays into new businesses areexpected to garner a significant share of these emerging high-growthmarkets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products.ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billionin the last decade). The Company's 'e-Choupal' initiative is enabling Indian

agriculture significantly enhance its competitiveness by empowering Indianfarmers through the power of the Internet. This transformational strategy,which has already become the subject matter of a case study at HarvardBusiness School, is expected to progressively create for ITC a huge ruraldistribution infrastructure, significantly enhancing the Company's marketingreach.

ITC's wholly owned Information Technology subsidiary, ITC Infotech IndiaLimited, is aggressively pursuing emerging opportunities in providing end-to-end IT solutions, including e-enabled services and business processoutsourcing.

ITC's production facilities and hotels have won numerous national andinternational awards for quality, productivity, safety and environmentmanagement systems. ITC was the first company in India to voluntarily seeka corporate governance rating.

ITC employs over 24,000 people at more than 60 locations across India. TheCompany continuously endeavors to enhance its wealth generating


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capabilities in a globalizing environment to consistently reward more than3,81,000 shareholders, fulfill the aspirations of its stakeholders and meetsocietal expectations. This over-arching vision of the company isexpressively captured in its corporate positioning statement: "EnduringValue. For the nation. For the Shareholder."

HISTORY OF ITC

TC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India Limited'. Its beginnings were humble. A leasedoffice on Radha Bazar Lane, Kolkata, was the centre of the Company'sexistence. The Company celebrated its 16th birthday on August 24, 1926, bypurchasing the plot of land situated at 37, Chowringhee, (now renamed J.L.Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of theCompany was historic in more ways than one. It was to mark the beginningof a long and eventful journey into India's future. The Company'sheadquarter building, 'Virginia House', which came up on that plot of landtwo years later, would go on to become one of Kolkata's most veneratedlandmarks. The Company's ownership progressively Indianised, and thename of the Company was changed to I.T.C. Limited in 1974. In recognitionof the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology,Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, LifestyleRetailing and Greeting Gifting & Stationery - the full stops in the Company'sname were removed effective September 18, 2001. The Company nowstands rechristened ' ITC Limited '.

Though the first six decades of the Company's existence were primarilydevoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporatetransformation that would usher in momentous changes in the life of theCompany.

ITC's Packaging & Printing Business was set up in 1925 as a strategicbackward integration for ITC's Cigarettes business. It is today India's mostsophisticated packaging house.

In 1975 the Company launched its Hotels business with the acquisition of ahotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'.

The objective of ITC's entry into the hotels business was rooted in theconcept of creating value for the nation. ITC chose the hotels business for its
http://www.itcportal.com/the_itc_profile/ads/ad.htmhttp://www.itcportal.com/the_itc_profile/ads/ad.htm


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potential to earn high levels of foreign exchange, create tourisminfrastructure and generate large scale direct and indirect employment.Since then ITC's Hotels business has grown to occupy a position of leadership, with over 70 owned and managed properties spread across India.

In 1979, ITC entered the Paperboards business by promoting ITCBhadrachalam Paperboards Limited, which today has become the marketleader in India. Bhadrachalam Paperboards amalgamated with the Companyeffective March 13, 2002 and became a Division of the Company,Bhadrachalam Paperboards Division. In November 2002, this division mergedwith the Company's Tribeni Tissues Division to form the Paperboards &Specialty Papers Division. ITC's paperboards' technology, productivity,quality and manufacturing processes are comparable to the best in theworld. It has also made an immense contribution to the development of Sarapaka, an economically backward area in the state of Andhra Pradesh. Itis directly involved in education, environmental protection and community

development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. TheKovai Unit allows ITC to improve customer service with reduced lead timeand a wider product range.

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. Since inception, its shares have been held by ITC, BritishAmerican Tobacco and various independent shareholders in Nepal. In August2002, Surya Tobacco became a subsidiary of ITC Limited and its name waschanged to Surya Nepal Private Limited (Surya Nepal).

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty papermanufacturing company and a major supplier of tissue paper to the cigaretteindustry. The merged entity was named the Tribeni Tissues Division (TTD).

To harness strategic and operational synergies, TTD was merged with theBhadrachalam Paperboards Division to form the Paperboards & SpecialtyPapers Division in November 2002.

Also in 1990, leveraging its agri-sourcing competency, ITC set up the AgriBusiness Division for export of agri-commodities. The Division is today one

of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 with soya farmers in Madhya Pradesh. Nowit extends to 10 states covering over 4 million farmers. ITC's first rural mall,christened 'Choupal Saagar' was inaugurated in August 2004 at Sehore. Onthe rural retail front, 24 'Choupal Saagars' are now operatonal in the 3 statesof Madhya Pradesh, Maharashtra and Uttar Pradesh.


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In 2000, ITC launched a line of high quality greeting cards under thebrand name ' Expressions '. In 2002, the product range was enlarged withthe introduction of Gift wrappers, Autograph books and Slam books. Inthe same year, ITC also launched 'Expressions Matrubhasha' , avernacular range of greeting cards in eight languages and 'Expressions

Paperkraft' , a range of premium stationery products. In 2003, the companyrolled out 'Classmate' , a range of notebooks in the school stationerysegment.

ITC also entered the Lifestyle Retailing business with the Wills Sport rangeof international quality relaxed wear for men and women in 2000. The WillsLifestyle chain of exclusive stores later expanded its range to include WillsClassic formal wear (2002) and Wills Clublife evening wear (2003). ITCalso initiated a foray into the popular segment with its men's wear brand,

John Players , in 2002. In 2006, Wills Lifestyle became title partner of thecountry's most premier fashion event - Wills Lifestyle India Fashion

Week - that has gained recognition from buyers and retailers as the singlelargest B-2-B platform for the Fashion Design industry. To mark the occasion,ITC launched a special 'Celebration Series', taking the event forward toconsumers. In 2007, the Company introduced ' Miss Players '- a fashionbrand in the popular segment for the young woman.

In 2000, ITC spun off its information technology business into a wholly ownedsubsidiary, ITC Infotech India Limited, to more aggressively pursueemerging opportunities in this area. Today ITC Infotech is one of Indiasfastest growing global IT and IT-enabled services companies and hasestablished itself as a key player in offshore outsourcing, providing

outsourced IT solutions and services to leading global customers across keyfocus verticals - Manufacturing, BFSI (Banking, Financial Services &Insurance), CPG&R (Consumer Packaged Goods & Retail), THT (Travel,Hospitality and Transportation) and Media & Entertainment.

ITC's foray into the Foods business is an outstanding example of successfullyblending multiple internal competencies to create a new driver of businessgrowth. It began in August 2001 with the introduction of 'Kitchens of India'ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectioneryand staples segments with the launch of the brands mint-o and Candymanconfectionery and Aashirvaad atta (wheat flour). 2003 witnessed the

introduction of Sunfeast as the Company entered the biscuits segment.ITC's entered the fast growing branded snacks category with Bingo! in 2007.In just six years, the Foods business has grown to a significant size with over200 differentiated products under six distinctive brands, with an enviabledistribution reach, a rapidly growing market share and a solid marketstanding.


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In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value chain found yet another expression in the Safety Matchesinitiative. ITC now markets popular safety matches brands like iKno,Mangaldeep, Aim, Aim Mega and Aim Metro.

ITC's foray into the marketing of Agarbattis (incense sticks) in 2003marked the manifestation of its partnership with the cottage sector. ITC'spopular agarbattis brands include Spriha and Mangaldeep across a rangeof fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambraniand Nagchampa.

ITC introduced Essenza Di Wills , an exclusive range of fine fragrances andbath & body care products for men and women in July 2005. Inizio, thesignature range under Essenza Di Wills provides a comprehensivegrooming regimen with distinct lines for men ( Inizio Homme ) and women(Inizio Femme ). Continuing with its tradition of bringing world class

products to Indian consumers the Company launched ' Fiama Di Wills ', apremium range of Shampoos, Shower Gels and Soaps in September, Octoberand December 2007 respectively. The Company also launched the ' Superia 'range of Soaps and Shampoos in the mass-market segment at selectmarkets in October 2007 and Vivel De Wills & Vivel range of soaps inFebruary and Vivel range of shampoos in June 2008.

Source:http://itcportal.com


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4. Financial Statement Analysis

1. Liquidity Ratios Year 2008

a. Current ratio: Current assets / Current Liabilities

II.3:Current assets, Loans and advances 7019.27II.4:Current liabilities and provisions 4432.30(II.3/II.4) 1.58

The current ratio of 1.58 times says that the company is in relatively goodshort-term financial standings.

The ratio is an indication of a company's ability to meet short term debtobligations; the higher the ratio, the more liquid the company is.

The reason why the ratio increases mainly is because of a more thanproportionate increase of the Current Assets when compared to the CurrentLiabilities.

Refer Table # 1


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1. Liquidity Ratios Year 2008

b. Quick ratio or Acid test ratio: (Current assets - inventories)/Current Liabilities

II.3: Current assets, Loans and advances 7019.27Less: II.3a: Inventories 4050.52

2968.75II.4: Current liabilities and provisions 4432.30(II.3-II.3a)/(II.4) 0.67


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1.

Liquidity Ratios Year 2008c. Cash ratio or Absolute liquidity ratio: (Cash + Marketable

securities)/Current liabilities

The small Quick ratio, i.e. 0.67 times says that the company's financialstrength is not so strong. In general, a quick ratio of 1 or more is accepted by

most creditors; however, quick ratios vary greatly from industry to industryand ITC does not have as such any worries in getting creditors.

ITC has strong financial positions in many other aspects.

The company has also shown an increasing trend in the liquidity ratio overthe years. The current assets (less inventories) have again increased morethan proportionately reflecting in an increasing liquidity ratio.

Refer Table # 1


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II.3c:Cash and bank Balances 570.25Add: Marketable securities 0.0

570.25II.4: Current liabilities and provisions 4432.3(II.3c)/(II.4) 0.13

The cash ratio of 0.13 times says that the company is not in the position tovery quickly liquidate its assets and cover short-term liabilities. But there isno such liquidity need for the company and so the small value of the ratio hasno such important implications. (The ratio is of interest to short-termcreditors)

The absolute cash ratio follows more or less the same trend as the other twoliquidity measures. The increase again is because of a more thanproportionate increase in the cash items (and near cash items) of ITC Limited.

Refer Table # 1


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2. Solvency Ratios Year 2008

a. Debt equity ratio: Long term debt/ equity (net worth)

I.2: Loan funds 214.43I.1: Shareholders funds 12057.67(I.2)/(I.1) 0.018

The debt-to-equity ratio offers one of the best pictures of a company'sleverage. The higher the figure, the higher is the leverage the companyenjoys.

The ratio of 0.018 times , which means that the company has not beenaggressive in financing its growth with debt. Thus its earnings are stable. Thecompany has better support from the shareholders.

Over the years, ITC Limited has shown a mix-match of the debt-equity ratio.

Refer Table # 1


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b. Debt ratio: debt (long term)/ (debt (long term) + equity) or debt/capital employed


I.2: Loan funds 214.43I.1: Shareholders funds 12057.67(I.2)+(I.1) 12272.1(I.2)/(I.2+I.1) 0.018

The ratio of 0.018 times signifies that the company has employed morecapitals over its debts. Thus the company is efficiently utilizing its loan funds.


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c. Interest Coverage ratio : (earnings before interest and tax) /Interest

3. Turnover Ratios Year 2008

P/L:III: profit before taxation andexceptional items

4571.77

II.4a-13: Interest accrued but not due onloans

0.74

(P.III)/(II.4a-13) 6178.1

The interest coverage ratio is a measurement of the number of times acompany could make its interest payments with its earnings before interestand taxes. Lower the ratio, higher is the companys debt burden. This ismeasured as the ratio between the profit before interest and taxes to theinterest amount paid that year.

The ratio of 6178.1 times is magnificently very high and hence the companyhas very sound financial position. It has no tension of paying interests over its

loans. Refer Table # 1


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a. Inventory turnover: Cost of goods sold or net sales /Average (orclosing) inventory.


b. Days of Inventory holding: Number of days in the year (say 360)/Inventory turnover ratio.


c. Debtors turnover ratio: Credit sales or net sales/ Average (orclosing) debtors (or accounts receivable (total debtors +billsreceivable)

P/L:IB:Net sales 13947.53II.3a:Inventories 4432.43(P/L:IB)/(II.3a:) 3.15

The ratio of 3.15 times signifies that the company is efficient in selling its

stocks.

Number of days in a year 365Inventories turnover ratios 3.15(360)/(ITR) 116

116 days or about four months periods for the liquidation of stocks is quietefficient.


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d. Collection period: Number of days in the year (say 360)/ Debtorsturnover


e. Current assets turnover: Net sales/ Current assets

P/L:IB:Net sales 13947.53II.3b:Sundry debtors 736.93(P/L:IB)/(II.3b) 18.93

The ratio of 18.93 times signifies that the company is getting good returnsand has no visible risk but benefits out of its debtors.

Number of days in the year 365Debtors turnover 18.93(365)/(DTR) 19.28

The debt collection period of 19 days is quiet good and the company isefficient in getting back its dues.


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g. Fixed assets turnover: Net sales/ Net fixed assets


h. Net assets turnover: Net sales/ Net assets or capital employed :(Net assets = all assets accumulated depreciation)

P/L:IB:Net sales 13947.53II.1:Net Fixed Assets 7295.65(P/L:IB)/(II.1) 1.91

The ratio of 1.91 times signifies that the company is very efficiently utilizingits fixed assets for generating sales revenue.


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4. Profitability Ratios Year 2008a. Profit Margin: (Profit before interest and tax (PBIT)/ Net

sales)100

P/L:IB:Net sales 13947.53II.1:Net Fixed Assets 7295.65II.2: Investments 2934.55

Net Current assets 2586.97Net assets 12817.17(P/L:IB)/(NA) 1.09

The ratio of 1.09 times signifies that the company is efficient in utilizing itsnet assets in generating sales revenue but needs to improve more.

P/L:III:Profit before taxation andExceptional items

4571.77

P/L:IB:Net Sales 13947.53(P/L:III)/(P/L:IB)100 32.78

The ratio between the profit before interest and taxes (equal to the operatingincome, in our case) to that of the sales for the given period during which theprofit has been earned is a measure of the profitability of the company forthat period.

The Profit margin of 32.78% is quiet impressive and the company is makinggood profits.

ITC Limited has done well in the last few years and has continuously reportedhigher and higher profit every subsequent time. The sales of the companyhave also experienced a similar trend that has led to the expansion of profit.Because the growth in the two components has nearly been equal, the ratiobetween them has not changed significantly.

Refer Table # 1


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4. Profitability Ratios Year 2008

b. Net margin: Profit after tax (PAT) 100 / Net sales

P/L:III:Profit after taxation 3120.1P/L:IB:Net Sales 13947.53(P/L:III)/(P/L:IB)100 22.4

PAT or, the profit after tax is directly correlated with the profit before tax. Theinterest component is the sole parameter that can differentiate the trendfollowed by the ratio above and this one.

The net margin of 22.4% is quiet impressive, and the company is performingwell.PAT for ITC Limited, like PBIT, has shown an upward trend. The financingdecisions and also the tax have altered the overall impact on the profitabilityof the company.


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c. Net assets turnover: Net sales/ Net assets or capital employed :(Net assets = all assets accumulated depreciation)


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d. Return on equity: (PAT/Equity (net worth)) 100

P/L:III:Profit before taxation andExceptional items

5471.77

II.1:Net Fixed Assets 7295.65II.2: Investments 2934.55Net Current assets 2587.97Net assets 12817.17(P/L:IB)/(NA)x100 42.69

The Return of 42.69% is quiet good and company is performing well.

P/L:III:Profit after taxation 3120.1I.1:Shareholders funds 12057.67(P/L:III)/(P/L:IB)100 25.88

The ratio of net income after taxes to total end of the year net-worth of thecompany is called the RONW for that company. This ratio indicates the returnon stockholder's total equity that is invested in the business.

The ratio of 25.88% is quiet good and the company is utilizing theshareholders funds in a better way.

Refer Table # 1


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5. Equity-related Ratios Year 2008

a. Earning per share (EPS): PAT/Number of ordinary shares

P/L:III:Profit after taxation 3120.1P/L:IV-19(iv):Weighted average Numberof ordinary shares outstanding

3764167486

(P/L:III)/(P/L:IV)(10^7: to convert in per

rupee)

8.28

Earnings per share, as it is called, are a company's profit after tax (PAT)divided by its number of outstanding (equity) shares. It is therefore measuredas the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.

In comparison to the face value of Re.1/share the EPS of Rs.8.28 is verygood.

It is to be noted that there was a stock split in the year 2005-06 due to whichthe face value of the shares changes from Rs. 10/- per share to from Rs. 1/-per share.

Refer Table # 1


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b. Dividends per share (EPS): PAT/Number of ordinary shares

P/L:IV:Proposed Dividend 1319.01P/L:IV-19(iv):Weighted average Numberof ordinary shares outstanding

3764167486

(P/L:III)/(P/L:IV)10^7(to convert into unitruppes)

3.50

Dividend per share (DPS) is a simple and intuitive number. It is the amount of the dividend that shareholders have (or will) receive, over a year, for eachshare they own. As mentioned earlier, there was a stock split for ITC Limitedin the year 2005-06 that resulted in more than a 10 fold increase in thenumber of equity shares in the market.

In compared to the face value of the shares, i.e. Re.1.00/share. DPS of Rs.3.50 is quiet good .

Refer Table # 1


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5. Equity-related Ratios Year 2008c. Pay out ratios: DPS/EPS or Dividends/PAT

DPS 3.5EPS 8.28(DPS)/(EPS) .42

A very low payout ratio indicates that a company is primarily focused onretaining its earnings rather than paying out dividends.

The payout ratio also indicates how well earnings support the dividendpayments: the lower the ratio, the more secure the dividend because smallerdividends are easier to pay out than larger dividends.So the value of 0.43 times is quiet good.


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d. Dividend Yield: DPS/Market value per share


e. Price/Earning ratio: Market value per share/ EPS

We have to get the Market value per share of the relevantperiod.

Market Price Per Share

The closing price of the common or preferred stock as reported on theapplicable stock exchange consolidated tape as of the date indicated

We have to get the Market value per share of the relevantperiod.

Price-Earnings ratio is a measure of the price paid for a share relative to theincome or profit earned by the firm per share. A higher P/E ratio means thatinvestors are paying more for each unit of income.

Refer Table # 1


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g. Book value per share: Net worth/ Number of ordinary shares

I.1:Shareholders funds 12057.67P/L:IV-19(iv):Weighted average Number

of ordinary shares outstanding

3764167486

(I.1)/(P/L:IV)10^7(to convert into unitRs)

32.03

BV is considered to be the accounting value of each share, drasticallydifferent than what the market is valuing the stock at. The book value, i.e.Rs.32.03 is far higher than the face value of each share, i.e. Re.1.00. Here

diluted value in considering numbers of shares is not considered.


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a. Return on capital employed (ROCE): (EBIT(PBIT)/ Capitalemployed) 100


b. Return on assets or earning power (ROTA): (PAT/ Average totalassets (of the given years, here 2006&07)) 100 or ((PAT+

P/L:III:Profit before taxation and Exp.items

4571.77

I:Sources of Funds 12817.17

((P/L:III)/I)100 35.67

The return on capital employed is another measure of the returns that thebusiness generates. This is expressed as the ratio between the profit beforeinterest and taxes (PBIT) to the Capital Employed (Loans and Owners Fund)in the business. The ROCE of 35.67% signifies that the company is gettinggood return out of its investment decisions.

Refer Table # 1


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Interest)/Average fixed assets) 100

P/L:III:Profit after taxation 3120.10Fixed assets 2008 7295.65Investments 2008 2934.55Current assets 2008 7019.27Fixed assets 2007 5610.91Investments 2007 3067.77Current assets 2007 6289.72Average total assets 16108.94(PAT/ATA)100 19.37

The return on Total Assets is yet another method of calculating the return of

the company. This is calculated by taking the ratio between the PBIT (Profitbefore Interest and Taxes) to the Total Assets of the company.

Earning power of the company, i.e. 19.37% is quiet good and the company isdoing well.

Refer Table # 1


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c. ROTSE (return on total shareholders equity): (PAT/ Totalshareholders equity) 100

P/L:III:Profit after taxation 3120.1I.1:Shareholders funds 12057.67(P/L:III)/(P/L:IB)100 25.88

The ratio ( 25.88 times ) is same as that of Return on equity, since thereare no preference shares.


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Du Pont analysis for year 2008:Net Profit after Tax: 3120.10Net sales: 13947.53Net Profit Margin: 22.27%

Current Asset: 7019.27Fixed Asset: 7295.65

Total Asset: 14314.92Net Sales: 13947.53Total Asset Turnover: 0.98 times

Return on Total Assets: 21.70%

Du Pont analysis for year 2007:


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Net Profit after Tax: 2699.97Net sales: 12164.29Net Profit Margin: 22.20%

Current Asset: 6289.72Fixed Asset: 5610.91

Total Asset: 11900.63Net Sales: 12164.29Total Asset Turnover: 0.98 times


Du Pont analysis for year 2006:Net Profit after Tax: 2280.37Net sales: 9790.53Net Profit Margin: 23.29%

Current Asset: 5161.90Fixed Asset: 4405.13 Total Asset: 9567.03Net Sales: 9790.53Total Asset Turnover: 0.98 times



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35360936 ratio analysis of itc

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