debtor and eps

8/2/2019 Debtor and Eps

1/4

5) (A) Debtors Turnover Ratio=Sales/Debtors

1998-99 1999-2000 2000-01 2001-02 2002-03

Sales 3410 4483 4526 5282 9351

Debtors 460 591 516 669 1368

Ratio (Times) 7.41 7.59 8.77 7.90 6.84

INDICATION:

The ratio shows the number of days taken to collect the dues of credit sales. It

means that the number of times debtor turnover each year. Generally, the higher the value of

debtors turnover, the more efficient is the management of credit. The ratio is computed bydividing credit sales by debtors.

Debtors turnover ratio

7.41 7.598.77

7.906.84

0.00

2.00

4.00

6.00

8.00

10.00

1998-99 1999-

2000

2000-01 2001-02 2002-03

YEARS

TIMES

Debtors turnover ratio

INTERPRETATION:Cadila Health Care ltd has ratio, which is increased up to year 2000-

01 and then start to decrease. It is highest in year 2000-01, which is good sign for the company.This ratio higher is better. This ratio shows that in year 2000-01, 8.77 times the amount of credit

sale is collected. Then it is decreased this is happening because of inefficient

Or liberal credit policy.

5)(B) Debtors Collection Period=365/Debtors Turnover Ratio

48


2/4

1998-99 1999-2000 2000-01 2001-02 2002-03

Days 365 365 365 365 365

Debtors Turnover Ratio 7.41 7.59 8.77 7.90 6.84

Ratio (Days) 49 48 42 46 53

INDICATION:

The debtors turnover suggest the number of times the amount of credit sale is

collected during the year, while debtors ratio indicates the number of the days during which the

dues for credit sales are collected. The average number of days for which debtors remainsoutstanding is called the average collection period (A.C.P) and it is computed by dividing 365 days

by debtors turnover ratio.

Debtors collection period

49 4842

4653

0

10

20

30

40

50

60

1998-99 1999-2000 2000-01 2001-02 2002-03

YEARS

DAYS

Debtors collection period

INTERPRETATION:The average collection period measures of the quality of the debtors .The

CADILA HEALTH CARE LIMITED has ratio of 49,48,42,46and 53 for the year 1998-99,1999-00,2000-01,2001-02 and 2002-03 respectively. Cadila has credit policy to grant credit of 7 days for

local parties (debtors) and 21 days for out station parties (debtors). But the lowest ratio amongst

last five years is 42 days, which is doubled of credit term policy. This collection period implies avery liberal and inefficient credit and collection.

1998-99 1999-2000 2000-01 2001-02 2002-03

49


3/4

EARNING PER SHARE 6.75 6.28 10.97 11.27 12.2

INDICATION;Earning per share is widely used ratio. It measures the profit available to the

equity shareholders on a per share basis that is the amount that they can get on every share held. Itis calculated by dividing the profits available to the shareholders by the numbers of outstandingshares.

Earning Per Share

6.75 6.28

10.97 11.2712.2

0

2

4

6

8

10

12

14

1998-99 1999-2000 2000-01 2001-02 2002-03

YEARS

RS

Earning Per Share

INTERPRETATION:Ratio of the Cadila health care limited shows increasing trend over

last five years. Apparently it seems good sign for the companys point of view. But this EPS has

increase over the year is the effect of the increase in profit to the owners is actually is effect of the

enlarge equity capital as a result of profit retention, though the number of ordinary sharesoutstanding still remains constant. And this earning per share dose not reveal how much paid to the

owners as dividend, how much of the earning retained in the business. It only shows how much

theoretically belongs to the shareholders.

1998-99 1999-002000-01 2001-02 2002-03

50


4/4

DIVIDEND PER SHARE 2 2.32 3 3.5 3.5

INDICATION:Dividend per share is the dividend paid to the shareholders on a per share

basis. in other words, dividen per share is the profi belonging to the shareholders divided by thenumbers of ordinary shares outstanding. The DPS would be a better indicator than EPS as the

former shows the exactly is received by the owners.

Dividend Per Share

2 2.32

3

3.5 3.5

0

0.5

1

1.5

22.5

3

3.5

4

1998-99 1999-2000 2000-01 2001-02 2002-03

YEARS

RS

Dividend Per Share

INTERPRETATION:Dividend per share of the company shows increase over last five years.

This is good sign for the Equity investors but it does not show actual measure of profitability

because DPS has increase retention due to without any change in the number of outstandingshares.

51

debtor and eps

Documents