ratio analysis axis

Upload: sameer-hussain

Post on 03-Jun-2018

230 views

Category:

Documents


0 download

TRANSCRIPT

  • 8/11/2019 Ratio Analysis AXIS

    1/60

    INTRODUCTION

    Profit maximization is one of the basic objectives of every business organization. Profits areone of the factors which judge the financial performance and analysis of the organization.

    There are various techniques or methods for analyzing information obtained in the financial

    statements viz. comparative statements, common size statements, Trend Percentages, Funds

    flow analysis, cash flow analysis and atio !nalysis. Financial !nalysis is to underta"en by

    the manager of the firm or by parties outside to viz. #wners, $reditors etc.

    atio !nalysis is most widely used and powerful tool or technique of financial analysis. The

    term ratio refers to the numerical or quantitative relationship between two variables.

    atio !nalysis help%s in ma"ing inter and intra comparison. ! study of the trend of strategic

    ratios helps the management in planning, forecasting and decision&ma"ing. 't helps in

    identifying specific wee" areas. 'n short, through the technique of ratio analysis, the firm%ssolvency, efficiency and profitability can be accessed.

  • 8/11/2019 Ratio Analysis AXIS

    2/60

    NEED AND SCOPE OF THE STUDY:

    Financial statement is the instruments to watch out the performance of a (usinessenterprise. atio analysis technique of analyzing the financial 'nformation contained in the

    balance sheet and profit ) loss account, for more *eaningful ) understanding of the financial

    position ) performance of firm.

    'n financial analysis, a ratio is used as the index or yardstic" for evaluating the financial

    position and performance of a firm. The analysis is very useful for both inside and outside

    groups. They are interested in the results or relationship reported in the financial attachment.

    The analysis helps to ma"e a qualitative judgment about the firm%s financial positions

    ) relationship. The ratio indicates a qualitative relationship, which can in turn be used to ma"e

    a qualitative judgment. 't estimates the enterprise with other similar underta"ings. +nterprise is

    possible through ratios. They help an analysis to find out liquidity profitability, leverage )

    efficiency.

  • 8/11/2019 Ratio Analysis AXIS

    3/60

    OBJECTIVES OF THE STUDY:

    The following are some of the objectives that are set for the study, that is

    To find out the ability of the firm to meet its current obligations.

    To examine the solvency position of the #rganisations.

    To assess the profitability position of the company.

    To "now overall operational efficiency ) financial performance of the company.

    T# evaluate the activity position with the help of profitability ratios.

  • 8/11/2019 Ratio Analysis AXIS

    4/60

    RESEARCH METHODOLGY:

    The methodology adopted for any study includes both primary data and secondary data.

    PRIMARY DATA:

    Primary data collected through the personal interviews conducted with the finance manager

    and interaction with the officiates !xis ban".

    SECONDARY DATA:

    !nnual reports of the company from --&--/ to -00&-0.

    $ollecting the relevant information from the standard text boo"s related to finance.

    equired information is collected from lecturers.

  • 8/11/2019 Ratio Analysis AXIS

    5/60

    LIMITATIONS OF THE STUDY:

    This study suffers from different limitations. The ratios may not be ta"en for granted

    and accepted at face values.

    !ll the ratios could not be covered under the study because of inadequate information

    Price level changes are not ta"en into account in the financial statemants over the years.

    The study is limited period from --&--/ to -00&-0.

    The project study is confirmed to short period i.e, 12 days only.

    Financial ratios of a firm often show a high degree of correlation. 'n view of ratios

    correlations, it is redundant and often confusing to employe a large number in financial

    statement analysis.

  • 8/11/2019 Ratio Analysis AXIS

    6/60

    INDUSTRY PROFILE

    BANK:

    ! (an" is a profit see"ing business firm which deals with money and credit. 't accepts

    deposits from the public and ma"es these funds available to those who need them. 't helps in

    the remittance of money from one place to another.

    ! ban"ing company is defined as a company which transacts the business of ban"ing in

    'ndia. ! ban"ing company in 'ndia has been defined in the ban"ing companies act 0313 as

    4one which transacts the business of ban"ing which means the purpose of lending of

    investment, of deposits of money from the public. epayable on demand and withdraw able

    by cheques, draft, order or otherwise.

    Types of Ba!s:"

    Co##e$%&a' Ba!s:

    $ommercial ban"s perform all "inds of ban"ing business. 'ts primary function is to

    accept deposits from the public and ma"es the funds available to those who need them. These

    ban"s usually give short term loans and advances. They also render services such as collection

    of cheques, safe custody of valuables, remittance facilities etc.

    I()s*$&a' Ba!s:

    'ndustrial ban"s are also 4'nvestment (an"s5 they are primary meant to cater to the

    financial needs of industrial underta"ings. They provide medium&term and long&term credits to

    the industries for the purchase of fixed assets.

    Ce*$a' Ba!:

    ! central ban" is the apex financial system of a country. 't is regarded as the highest

    monetary authority in the country. 't acts as the leader in the money mar"et. 't supervises

    controls and regulates the activities of the commercial ban"s.

    Sa+&,s Ba!s:

    6avings (an" collects the small savings of the people. The pool together the scattered

    savings of these ban"s is to encourage the habit of thrift among the people hence these ban"s

    impose many restrictions on the withdrawals.

  • 8/11/2019 Ratio Analysis AXIS

    7/60

    E-%.a,e Ba!s:

    +xchange ban"s mainly deal in foreign exchange. They purchase and sell foreign

    currencies and discount foreign bills. They finance foreign trade.

    Co"ope$a*&+e Ba!s:

    These are a group of financial institutions organized under the provision of the co&

    operative societies of the states. The main objective of these ban"s is to provide cheap credit

    to their members.

    P$&+a*e Ba!s:

    'n every country there are large numbers of private ban"s. 'ndividuals and firms do

    ban"ing business such private ban"s are also "nown as indigenous ban"s in 'ndia. Private

    (an"s also carry trading a port from the ban"ing business.

    Re,&oa' R)$a' Ba!s:

    egional rural (an"s were established under regional rural ban" act 032. ural (an"s

    may be defined as primary ban"ing institutions. 't was established to perform the ban"ing

    functions with the objective of developing the village areas.

    Lea( Ba!s:

    This ban"s a district and integrates its schemes with district plans for an effective

    distribution of credit along with the expanded ban"ing facilities as per local needs. ('

    introduced the lead ban"s scheme in 7ecember 0383. The lead ban" co&ordinates the activities

    at all the credit institutions, co&operative ban"s, commercial ban"s and other in its allotted

    districts.

    Ba!&, sys*e# & I(&a:

    (an"ing system occupies an important place in nation%s economy. ! ban"ing

    institution is an dispensable in a modern society. 't plays a pivotal role in the economic

    development of a country and forms the care of the money mar"ets in an advanced country.

    'n 'ndia, through the money mar"et is still characterized by the existence of both

    organized and unorganized segments, institutions in the organized money.

  • 8/11/2019 Ratio Analysis AXIS

    8/60

    BAKING STRUCTURE IN INDIA

    Rese$+e Ba! of I(&a

    Ce*$a' Ba! a( s)p$e#e #oe*a$y a)*.o$&*y

    6cheduled (an"s

    $ommercial (an"s $o&operative (an"s

    Foreign Banks

    (40)

    Regional Rural

    Banks (196)

    Urban Co-

    operative Banks

    (52)

    tate Co-

    operative

    Banks (16)

    !ubli" e"tor

    Banks (2#)

    !rivate e"tor

    Banks ($0)

    tate Bank o% &n'ia

    an' sso"iate Banks

    ()

    *t+er ,ationalie'

    Banks

    (19)

    *l' Banks (22) ,e. Banks ()

  • 8/11/2019 Ratio Analysis AXIS

    9/60

    Rese$+e Ba! of I(&a /RBI0:

    The eserve (an" of 'ndia was setup in the 0392 as a private shareholders ban". 't was

    nationalized in :anuary 0313 by the Passage of the reserve ban" act of 031/. !s a result, all

    the paid&up capital of the ban" of s. 2 crore, has since been hold by the central ;overnment,

    which may from time to time give such directions to the ban", as it may, after consultation with

    the governor of the ban", consider necessary in the public interest.

    O$,a&1a*&o a( #aa,e#e*:

    The (', as the central ban" of the country is the centre of the 'ndian financial and

    monetary system as the ban" of +ngland, is" (an" of 6weden, and the Federal eserve

    (oard of the

  • 8/11/2019 Ratio Analysis AXIS

    10/60

    Ro'e of RBI:

    >ote issuing authority

    ;overnment (an"er

    ?ays and *eans advances

    #verdrafts

    (an"ers (an"

    6upervising authority

    +xchange $ontrol !uthority

    Promoter of the financial system

    *oney *ar"et

    !griculture 6ector

    'ndustrial Finance

    $redit 7elivery

    M&ss&o of RBI:

    The mission statement of the eserve (an" of 'ndia is to faster price stability coupled

    with productivity led economic growth consistent with employment objectives while ensuring

    the integrity efficiency of financial and payment systems.

    T.e O$,a&1a*&oa' Va')es:

    The values underlying the mission statement include.

    0. Public 'nterest

    a. !ccountability

    b. esponsiveness

    . 'ntegrity endorsing professional ethics and standards in operational and dealings.

    9. +xcellence

    1. Fastening motivation

    2. 'ndependence of view, and

    8. esponsiveness and dynamism

  • 8/11/2019 Ratio Analysis AXIS

    11/60

    V&s&o fo$ f)*)$es:

    The vision statement states, the ban" @('A aims to be a leading central ban" credible,

    transparent, proactive and contemporaneous policies and see"s to be a catalyst for the

    emergence of a globally competitive financial system that helps deliver a high analytic of life

    to the people of the country.

    O23e%*&+es:

    To maintain the internal value of the nation%s country

    To preserve the external value of currency

    To secure reasonable price stability and

    To promote economic growth with rising levels of employment, output and real time.

    F)%*&os of RBI:

    !ccording to the ban"ing commission the rural ban"s perform the following functions.

    !ccepting deposits from the customers

    ;ranting loans and advances to the needy rural people Providing ancillary ban"ing services on par with the commercial ban"s.

    =elping for the overall development of villagers in its area of operation

    Providing assistance in the mar"eting of their products

    To provide employment opportunities and encouraging the setting up rural industries.

  • 8/11/2019 Ratio Analysis AXIS

    12/60

    COMPANY PROFILE

    INTRODUCTION TO A4IS BANK

    !xis (an" was of the new private ban"s to have begun operations in 0331, after the

    government of 'ndia allowed new private ban"s to be established. The ban" was promoted

    jointly by the administration of the specified underta"ing of the unit trust of 'ndia @ew 'ndia

    !ssurance $ompany Btd., The #riental 'nsurance $ompany Btd., and

  • 8/11/2019 Ratio Analysis AXIS

    13/60

    H&s*o$y of A-&s Ba!:

    5667: The (an" was incorporated on 9rd 7ecember and certificate of business on 01 th

    7ecember. The ban" transacts ban"ing business of all description. o. of equity shares of s.

    0-D& each a premium of s. 00 per share aggregating to s, 90.2- crores and offer for sale of

    ,--,--,--- >o. equity share for cash at a price of s. 0 per share out of the public issue

    ,-,--- shares were reserved for allotment on preferential basis to employees of agar here,

    ta"ing the total number of its office !T*s to (*.

    ;;;: The ban" has announced the launch of Tele&7epository services for its depository

    clients.

  • 8/11/2019 Ratio Analysis AXIS

    14/60

    a 8 percent rise in net profit for the quarter ended 6eptember 9-, --0 at s. 9-.32 crore. For

    the second quarter ended 6eptember 9-, --0, the next profit was s. 03.-/ crore. The total

    income of the ban" during the quarter was up 29 percent at s. 988.2 crore.

    ;;: (haradwaj, *anaging 7irector of B'$ has been

    appointed as an !dditional 7irector of the (an" with immediate effect.

  • 8/11/2019 Ratio Analysis AXIS

    15/60

    ;;=::

  • 8/11/2019 Ratio Analysis AXIS

    16/60

    Types of A%%o)*s:

    >ormal current !ccount

    (usiness advances !ccount

    (usiness select account

    (usiness classic account

    $urrent account

    6aving account

    E#p'oyees:

    Private sector lender, !xis (an", plans to hire around 1,2-- employees in the current

    fiscal of which ,2-- appointments will be through the lateral route, a ban" official said

    on *onday.

    The ban" plans to cover up the shortage of nearly ,2-- officers in retail ban"ing

    through the new recruitments this year, !xis President @=A%s (hattacharya said in

    *umbai.

    4The attrition rate has gone up to 01.8 percent in the current fiscal, up percent from

    last years rate of 0 percent. This has come as a challenge, 4(hattacharya said5.

    !ccording to him, the country%s private ban"ing sector has an average attrition rate of

    0/ percent which is growing every year.

    !ttrition rate among :unior&level staffers of our ban" has been found comparatively

    history, which will be at around 0/ percent in Fy -/ as against about 08 percent last

    year5 he said.

    MILESTONES:

    *arch&-0E =ighest net wor" of +7$ machines eached la"h installed +7$

    machines& the highest for any ban" in india.

    #ctober K -00E !xis (an" launchesour new payroll giving program & A-&s Ca$es

    *arch K -0-E !xis (an" launches platinum credit card, 'ndia%s first +*H chip

    based card.

  • 8/11/2019 Ratio Analysis AXIS

    17/60

    7ecember&--3 !xis (an" gets !!! >ational long&term rating from Fitch

    ratings.

    6eptember&--3 !xis (an" ties up with (asque Private +dmond de othschild

    +urope for ?ealth management.

    :uly --/

  • 8/11/2019 Ratio Analysis AXIS

    18/60

    7r. .=. Patil & 7irector

    6mt. ama (ijapur"ar & 7irector

    6hire .(.B. anish & 7irector

    6hri *.. 6ubbaiah & 7irector

    6hri G.>. Prithviraj & 7irector

    6hri .. Gaundinya & 7irector

    6hri 6.(. *athur & 7irector

    A4IS BANK EMPLOYEES DETAILS /KARIMNAGAR0:

    (ranch *anager E 0

    !sst. *anager E 0

    !ccount #fficer E 0

    = *anager E 0

    Financial *anager E 0

    *ar"eting *anager E 0

    Technical 7ept E 0

    #ffice !dministration E E 9

    $ashiers E 9

    *ar"eting +xecutive E 8

    'nsurance 7ept @:>;A

    (ranch E *u"arampura

    (ranch *anager E ijay Gumar

  • 8/11/2019 Ratio Analysis AXIS

    19/60

    RATIO ANALYSIS

    atio !nalysis is a widely used tool of financial analysis. The term ratio in it refers to

    the relationship expressed in mathematical terms between two individual figures

    of group of figures connection with each other in some logical manner and are

    selected from financial statement of the concern. The ratio analysis is based on

    the fact that a single accounting figure by itself may not communicate any

    meaningful information but when expressed as relative to some other figure, it

    may definitely provide some significant information. The relationship between

    two or more accounting figuresD groups is called financial ratio.

    Na*)$e of Ra*&o Aa'ys&s:

    atio analysis is technique of analysis and interpretation of financial statements. 't is

    the process of establishing and interpreting is for helping in ma"ing certain decisions.

    =owever, ratio analysis is not an end in itself. 't is only a means of better understanding of

    financial strengths and wea"ness of a firm. The ratios may be used as a symptom li"e blood

    pressure, the pulse rate or the body temperature and their interpretation depends upon the

    caliber and competence of the analyst.

  • 8/11/2019 Ratio Analysis AXIS

    20/60

    App'&%a*&o of $a*&o aa'ys&s & f&a%&a' (e%&s&o #a!&,:

    ! popular technique of analyzing the performance of a business concern is that of

    financial ratio analysis. !s a tool of financial management, they are of crucial

    significance. The importance of ratio analysis lies in the fact that it presents facts

    on a comparative basis ) enables drawing of inferences regarding the

    performance of a firm. atio !nalysis is relevant in assessing the performance of

    a firm in respect of the following aspectsE

    F&a%&a' Ra*&os fo$ e+a')a*&, pe$fo$#a%e:

    L&)&(&*y Pos&*&o:

    ?ith the help of ratio analysis one can draw conclusion regarding liquidity position

    of a firm. The liquidity position of a firm would be satisfactory if it is able to

    meet its current obligations when they become due. ! firm can be said to have the

    ability to meet its short&term liabilities if it has sufficient liquid funds to pay the

    interest on its short&term maturing debt usually within a year as well as the

    principal. This ability is reflected in the liquidity ratios of a firm. The liquidity

    ratios are particularly useful in credit analysis by ban"s and other suppliers of

    short&term loans.

    Lo,"*e$# So'+e%y:

    Ratio analysis is equally useful for assessing the long&term financial viability of a firm.

    This aspect of the financial position of a borrower is of concern to the long&term

    creditors, security analysts and the present and potential owners of a business.

    The long&term solvency is measured by the leverageDcapital structure and

    profitability ratios, which focus on earning power and operating efficiency.

    Ope$a*&, Eff&%&e%y:

    atio analysis throws light on the degree of efficiency in the management and utilization

    of its assets. The various activity ratios measure this "ind of operational

    efficiency. 'n fact, the solvency of a firm is, in the ultimate analysis, dependent

    upon the sales revenues generated by the use of its assets&total as well as its

    components.

  • 8/11/2019 Ratio Analysis AXIS

    21/60

    O+e$ a'' p$of&*a2&'&*y:

  • 8/11/2019 Ratio Analysis AXIS

    22/60

    FINANCIAL RATIO FOR BUDGETING:

    'n this field ratios are able to provide a great deal of assistance, budget is only an estimate

    of future activity based on past experience, in the ma"ing of which the

    relationship between different spheres of activities are invaluable. 't is usually

    possible to estimate budget figures using financial ratios.

    ACCORDING TO SIGNIFICANCE:

    The (ritish 'nstitute of *anagement has recommended the classification of

    according to their significance or importance for inter&firm comparison. These

    areE

    P$a$y Ra*&o:

    These ratios are one, which is of the prime importance to a concernL eturn on $apital

    +mployed is named as primary ratio.

    Se%o(a$y Ra*&o:

    The other ratios, which support or explain the primary ratios, are called as secondary

    ratios.

    A%%o$(&, *o So)$%e:

    Financial atios can be classified on following basis according to sourceE

    Re+e)e Ra*&os:

    ?hen two variables are ta"en from revenue statement the ratio so computed is called as

    evenue atio.

    Ba'a%e S.ee* Ra*&o:

    ?hen two variables are ta"en from the balance sheet the ratio is called (alance 6heet

    atio.

  • 8/11/2019 Ratio Analysis AXIS

    23/60

    M&-e( Ra*&o:

    ?hen one variable is ta"en from the evenue 6tatement and the other from (alance 6heet the

    ratio is called as mixed ratio.

    CLASSIFICATION OF RATIOS:

    The use of ratio analysis is not confined to financial management only. There are

    different parties interested in the ratio analysis for "nowing the financial position

    of a firm for different purposes. 'n view of various uses of ratios, there are many

    types of ratios, which can be calculated from the information given in the

    financial statements. The particular purpose of the user determines particular

    ratios that might be for financial analysis. arious accounting ratios can be

    classified as followE

    L&)&(&*y Ra*&oE&

    $urrent atio

    !cid&test atio

    $ash atio

    Le+e$a,e Ra*&o :"

    7ebt&+quity atio

    Total 7ebt atio

    'nterest $overage atio

    Preference 7ividend atio

    Fixed Payment $overage atio

    7ebt 6ervice $overage atio

    $apital ;earing atio

    Proprietary atio

  • 8/11/2019 Ratio Analysis AXIS

    24/60

    A%*&+&*y Ra*&o:"

    $apital Turnover atio

    Fixed !ssets Turn over ratio

    ?or"ing $apital Turnover atio

    Total !ssets Turnover atio

    'nventory Turnover atio

    7ebtors Turnover atio

    $reditors Turnover atio

    P$of&*a2&'&*y Ra*&o:"

    ;ross Profit atio

    >et Profit atio

    #perating atio

    #perating Profit atio

    A%%o$(&, *o Usa,e:

    The ratios, which cover different aspects of a business organization, are classified as

    belowE

    L&)&(&*y Ra*&os:

    These are the ratios, which measure the short&term solvency or financial position of the

    firm. These ratios are calculated to comment upon the short&term paying capacity of a firm or

    to meet its current obligations.

    Cap&*a' S*$)%*)$eLe+e$a,e Ra*&os:

    These are the ratios, whish convey a firm%s ability to meet the interest costs and

    repayment schedule of its long&term obligations. These ratios show the proportions of debt and

  • 8/11/2019 Ratio Analysis AXIS

    25/60

    equity in financing of the firm. These ratios measure the contribution of financing by owners as

    compared to financing by outsiders.

  • 8/11/2019 Ratio Analysis AXIS

    26/60

    A%*&+&*y $a*&os:

    These are calculated to measure the efficiency with which the resources of a firm have

    been employed. These ratios are also called turnover ratios because they indicate the speed

    with which assets are being turned over into sales.

    P$of&*a2&'&*y Ra*&os:

    These ratios measure the resultsof the business operations or overall performance and

    effectiveness of the firm. The results of the firm can be evaluated in terms of its earning with

    reference to a given level of assets or sales or owners interest etc.

    Barge number of financial ratios is used within each category and some of these

    may carry same information rather than focusing on any new light. Therefore, it

    is necessary to avoid duplicate of information. The analyst should be selective

    with regard to the use of financial ratios. For our analysis following important

    ratios are been dealt which are discussed in detail as belowE

    L&)&(&*y Ra*&os:

    The terms Mliquidity% and Mshort&term solvency% are used synonymously. Biquidity

    or short&term solvency means ability of the business to pay its short&term

    liabilities. 'nability to pay&off short&term liabilities affects its creditability as well

    as its credit rating. $ontinues default on the part of the business leads to

    commercial ban"ruptcy. +ventually such commercial ban"ruptcy may lead

    sic"ness and dissolution. 6hort&term lenders and creditors of a business are very

    much interested to "now its state of liquidity because of their financial sta"e. The

    important liquidity ratios areE

    C)$$e* Ra*&o:

    't measures the ability of the firm to meet its current liabilities. $urrent assets get

    converted into cash during the operating cycle of the firm and provide the funds needed to pay

    current liabilities. !pparently, the higher the current ratio the greater the short&term solvency. 't

    is defined asE

    $urrent ratioN

    $urrent !ssets

    """"""""""""""""""""""""

    $urrent Biabilities

  • 8/11/2019 Ratio Analysis AXIS

    27/60

    $urrent assets include cash, current investment, debtors, inventories, loans and

    advances, and pre&paid expenses. $urrent liabilities comprise short&term loan,

    creditors, ban" overdraft, proposed dividend, provision for tax, outstanding

    expenses. The general norm in 'ndia is 0.99. 'nternationally it is .

    A%&("*es* Ra*&o:

    !lso called, as quic" ratiois a fairlystringent measure of liquidity. 't is based on those

    current assets, which are highly liquid inventories are excluded from current assets as are

    deemed to be the least component of current assets. 't is defined asE

    !cid&test ratioN

    Juic" assets are defined as current assets excluding inventories. The general rule is 0E0.

    Cas. $a*&o:

    The cashratio is perhaps the most stringent measure of liquidity. 'ndeed, one can argue that it

    is overly stringent. Bac" of immediate cash may not matter if the firm can stretchits payments or borrow money at short notice. 't is defined asE

    $ash atio

    The general norm is at -.2E0 or 2-C.

    Le+e$a,e Ra*&os:

    Financial leverage refers to the use of debt finance. ?hile debt capital is a cheaper

    source of finance, it is also a ris"ier source of finance. Beverage ratios help in assessing the

    ris" arising from the use of debt capital. Two types of ratios are commonly used to analyses

    financial leverageE M6tructural ratios% and M$overage ratios%. 6tructural ratios are based on the

    proportions of debt and equity in the financial structure of the firm. $overage ratios show the

    relationship between debt servicing commitments and the sources for meeting these burdens.

    The important ratios areE

    Juic" !ssets

    &&&&&&&&&&&&&&&&&&&&&$urrent liabilities

    $ash and (an" balance O $urrent 'nvestment

    --------------------------------------------

    $urrent liabilities

  • 8/11/2019 Ratio Analysis AXIS

    28/60

    De2*"E)&*y $a*&o:

    't is the basic and the most common measure of studying the indebtedness of the firm. 't is

    based on the assumption that the extent to which a firm should employ the debt

    should be viewed in terms of the size of the cushion provided by the shareholders

    funds. 't is calculated asE

    7ebt&+quity atio

    ?here debt includes long&term loan, borrowings and debentures. >et worth

    includes equity share capital, preference share capital and all the accumulated

    reserves and surplus.

    To*a' De2* $a*&o:

    This depicts the proportion of total assets financed by the total liabilities. 'mpliedly, theremaining assets are financed by the shareholders funds. The higher the ratio the more ris"y is

    the situation because all liabilities are to be repaid sooner or later. *oreover, higher liabilities

    imply greater financial ris" also. 't is computed asE

    To*a' De2*

    To*a' De2* $a*&o """""""""""""""""""""""""

    To*a' Asse*

    ?here total debts include long&term debt and current liabilities. ?hile total assets

    include fixed assets and current assets.

    7ebt

    ..

    7ebt O +quity

  • 8/11/2019 Ratio Analysis AXIS

    29/60

    I*e$es* Co+e$a,e Ra*&o:

    't measures as to how many times the interest liability of the firm is covered with the

    operating profits of the firm. This ratio gives an idea as to how much fall in +('T, the firm can

    sustain before it commits a default in payment of the interest liability. The higher the ratio, the

    better it is for the firm and for the lenders. 't is calculated asE

    IC

    ?here +('T is operating profit of the firm and interest is fixed interest liability of the firm.

    P$efe$e%e D&+&(e( Ra*&o:

    The ratio attempts to measure the ability of the firm to pay the fixed preference

    dividend and tells as to how secure the preference dividend is in relation to the earning power

    of the firm. The higher the ratio, better the preference shareholders. 't is calculated asE

    PC Ra*&oN

    F&-e( Pay#e* Co+e$a,e Ra*&o:

    The F$ ratio incorporates the coverage of the principal repayment of the liability. 't

    shows the relationship between the operating profits of the firm and the fixed liabilities in

    respects of interest, preference dividend repayment etc. it may be calculated asE

    FC

    EBIT

    ----------

    Interest

    Profit after Tax

    ----------------------

    Preference Dividend

    EBIT

    ----------------------

    I + (PR+PD)/ (1-t)

  • 8/11/2019 Ratio Analysis AXIS

    30/60

    ?here ' am interest liability, P is principal repayment, P7 is fixed preference

    dividend and t is tax rate.

    De2* Se$+&%e Co+e$a,e Ra*&o:

  • 8/11/2019 Ratio Analysis AXIS

    31/60

    A%*&+&*y Ra*&os:

    The activity ratiosare also called the Turnover ratios or performance ratios. These are

    employed to evaluate the frequency of sales w.r.t. its assets. These assets may be capital assets

    or wor"ing capital or average inventory. These ratios are usually calculated with reference to

    salesDcost of goods sold and are expressed in terms of rate or times. 6everal activity ratios are

    as followsE

    Cap&*a' T)$o+e$ Ra*&o:

    This ratio indicates the firm%s ability of generating sales per rupee of long&term

    investment. The higher the ratio, the more efficient the utilization of owner%s and long&term

    creditors fund. 't is calculated asE

    Cap&*a' T)$o+e$ Ra*&o

    ?here capital employed includes shareholders fund and long&term loan.

    F&-e( Asse*s T)$o+e$ Ra*&o:

    ! high fixed assets ratio indicates efficient utilization of fixed assets in generating

    sales. ! firm whose plant and machinery are old may show a higher

    Fixed assets turnover ratio than the firm, which has purchased them recently.'t is calculated asE

    F&-e( Asse*s T)$o+e$ Ra*&o

    ?here capital assets is all fixed assets.

    &aes

    ----------------------

    apita Empo!ed

    &ae

    -------------------

    apita Assets

  • 8/11/2019 Ratio Analysis AXIS

    32/60

    To*a' Asse*s T)$o+e$ Ra*&o:

    This ratio measures the rupee sales generated by per rupee of tangible assets being

    maintained by the firm. 't may be calculated asE

    To*a' Asse*s T)$o+e$ Ra*&o

    o$!&, Cap&*a' T)$o+e$ Ra*&o:

    't studies the velocity of utilization of the wor"ing capital of the firm during a year.

    The higher the ratio the lower is the investment in wor"ing capital and higher the profitability.

    't is calculated asE

    o$!&, Cap&*a' T)$o+e$ Ra*&o

    The wor"ing capital here refers to net wor"ing capital i.e. total assets less total

    liabilities.

    I+e*o$y T)$o+e$ Ra*&o:

    This ratio is also "nown as stoc" turnover ratio establishes the relationship between the

    cost of good sold during the year and the average inventory held during the year. ! high ratio

    indicates good liquidity. 't is calculated as

    I+e*o$y T)$o+e$ Ra*&o

    ?here cost of good sold is opening stoc", purchase less closing stoc" and gross profit.

    !nd average inventory is average of opening and closing stoc".

    &aes

    -------------------

    Tota Assets

    &aes

    ----------------------

    or*inapita

    ,&

    ------------------------

    Averae Inventor!

  • 8/11/2019 Ratio Analysis AXIS

    33/60

    De2*o$s T)$o+e$ Ra*&o:

    'n case firm sells good on credit, the realization of sales revenue is delayed and the

    receivable are created. The cash is realized from these receivables later on. The speed with

    which these receivables are collected affects the liquidity position of the firm. The debtor%s

    turnover ratio throws light on the collection and credit policies of the firm. 't is calculated asE

    De2*o$s T)$o+e$ Ra*&o N

    .e$e a+, a%%o)* $e%e&+a2'e &s a+e$a,e of (e2*o$s 2&''s $e%e&+a2'e

    +valuation of the ratio can be made better and meaningful in terms of average

    collection period, which is as followE

    A+, Co''e%*&o Pe$&o( N

    The shorter the collection period implies quic" payment by debtors. ?hile longer the

    period larger the chance of bad debts.

    C$e(&*o$s T)$o+e$ Ra*&o:

    This ratio is calculated on the same lines as receivable ratio. This ratio shows the

    velocity of debt payment by the firm. 't compares the annual credit purchases with the average

    payable as followE

    C$e(&*o$s T)$o+e$ Ra*&o N

    redit &aes

    --------------------------

    Av. Acco#nts receiva"e

    0

    -------------------

    D/T Ratio

    redit P#rchase

    -------------------------

    Av. Acco#nts Pa!a"e

  • 8/11/2019 Ratio Analysis AXIS

    34/60

    ?here average accounts payable are creditors ) bills payable. ! low creditor%s turnover ratio

    reflects liberal credit terms granted by suppliers. ?hile a high ratio shows that

    accounts are settled rapidly.

    +valuation of the ratio can be made better and meaningful in terms of average

    payment period, which is as followE

    A+, Pay#e* Pe$&o( N

    (y this firm can compare what credit period it receives from the suppliers.

    P$of&*a2&'&*y Ra*&os:

    The profitability ratios measure the profitability or the operational efficiency of the

    firm. There are two groups of persons who may be specifically interested in the analysis of the

    profitability of the firm. These are @iA the management, which is interested in the overall

    profitability and operational efficiency of the firm, and @iiA the equity shareholders who are

    interested in the ultimate returns available to them. (oth of these parties and any other party

    such as creditors can measure the profitability of the firm. The performance of the firm can be

    evaluated in terms of its earning with reference to a given level of assets or sales or owner

    interest etc. broadly the profitability ratio are calculated by relating the returns with reference

    to @iA sales of the firm, @iiA assets of the firm, @iiiA the owner%s contribution.

    P$of&*a2&'&*y Ra*&o 2ase( o Sa'es of *.e f&$#:

    Profit is a factor of sales and is earned indirectly as a part of the sales revenue. This

    ratio analyses how much of profit is earned, how is it going to be used for meeting he cost of

    goods sold, depreciation indirect expenses, tax liability and return to shareholders. The

    important ratios areE

    0

    -----------------

    /T Ratio

  • 8/11/2019 Ratio Analysis AXIS

    35/60

    G$oss P$of&* Ra*&o:

    This ratio is also called the average mar" up ratio.This ratio reflects the efficiency with

    which the firm producesDpurchase the goods. =igher the ratio better is the result. ! low ;P

    ratio, generally indicates high cost of goods sold due to unfavorable purchasing policies, lesser

    sales, lower selling prices, excessive competition, over investment in plant and machinery etc.

    it is calculated asE

    ross profit

    GP Ra*&o N ---------------

    2et saes

    Ne* P$of&* Ra*&o:

    't measures the efficiency of the management in generating additional revenue over and

    above the total cost of operation. 't shows the overall efficiency in manufacturing,

    administrative, selling and distributing the product. 't is calculated asE

    NP Ra*&o N

    2et profit

    ---------------

    2et saes

  • 8/11/2019 Ratio Analysis AXIS

    36/60

    Ope$a*&, P$of&* Ra*&o:

    This refers to the pure operating profit of the firm i.e. the profit generated by the

    operation of the firm and hence is calculated before considering any financial leverage, non&

    operating incomeDlosses and tax liability. The operating profit is also "nown as earnings before

    interest and tax @+('TA. The #P ratio is calculated asE

    OP p$of&* Ra*&o N

    Ope$a*&, Ra*&o:

    This ratio establishes relationship between cost of good sold and other operating

    expenses on the one hand and the sales on the other hand. Thus, it measures the cost of

    operations per rupee of sales. 't also indicates the percentage of net sales that is consumed by

    operating cost. The higher the ratio, the less favorable it is, it would have a small margin to

    covert interest, income&tax, dividend and reserve. 't is calculated asE

    OR Ra*&o

    ?here operating cost includes administrative cost, selling cost and financial cost

    P$of&*a2&'&*y Ra*&o 2ase( o Asse*sI+es*#e*:

    The profitability of a firm can also be analyzed with reference to assets employed to

    earn a return. >ormally, the more the assets employed, greater should be the profits and vice&

    versa. The important ratio areE

    EBIT

    ------------

    2et &aes

    Tota ,peratin ost

    ------------------------

    2et &aes

  • 8/11/2019 Ratio Analysis AXIS

    37/60

    Re*)$ o Asse*s:

    This measures the profitability of the firm in terms of assets employed in the firm. The

    #! is measured by establishing the relationship between the profits and the assets employed

    to earn that profit. 't is calculated asE

    ROA

    Re*)$ o Cap&*a' E#p'oye(I+es*#e*:

    This is the post&tax version of earning power. 't considers the effect of taxation, but not the

    capital structure. 't is internally consistent. 'ts merit is that it is defined in such a

    way that it can be compared directly with the post&tax weighted average cost of

    capital of the firm. 't is calculated asE

    ROCEN

    ?here capital employed includes share capital, reserve ) surplus, debentures less

    miscellaneous expenses and non&trade investment.

    P$of&*a2&'&*y Ra*&os 2ase( o O?e$s V&e?:

  • 8/11/2019 Ratio Analysis AXIS

    38/60

    Ea$&,s pe$ S.a$e:The #+ measures the profitability in terms of the total funds and

    explains the return as a percentage while +P6 measures the same in terms of

    number of equity shares. 't is calculated asE

    EPS

    D&+&(e( pe$ S.a$e:6ometimes the +quity shareholders may not be interested in the +P6

    but in the return which they are actually receiving from the firm in the form of

    dividends. The amount of profits distributed to shareholders per share is "nown

    as 7P6 and may be calculated asE

    DPS

    D&+&(e( Payo)* Ra*&o: This ratio is the between the 7P6 and +P6 of the firm i.e. it

    refers to the proportion of the +P6 which has been distributed by the company as

    dividend. 't is calculated asE

    DP Ra*&o

    E$#it! Earnins

    ------------------------------

    2o. of E$#it! shares

    Tota Profits Distri"#ted

    ----------------------------

    2o. of E$#it! shares

    Dividend per &hare

    --------------------------

    Earnins per &hare

  • 8/11/2019 Ratio Analysis AXIS

    39/60

    P$&%e Ea$&, Ra*&o:This is the ratio, which establishes the relationship between the +P6

    and the mar"et price of a share. 't indicates the expectations of the equity

    investors about the earnings of the firm. The investor%s expectations are reflected

    in the mar"et price of the share and therefore the PD+ atio gives an ides of

    investor%s perception of the +P6. 't is thus the ris" factor of the share. 't is

    calculated asE

    PE Ra*&oN

    L&*a*&os of Ra*&o Aa'ys&s:

    The atio analysis is one of the most powerful tools of financial management.

    Though ratios are simple to calculate and easy to understand, they suffer from

    serious limitationsE

    L&*e( )se of a s&,'e $a*&o:

    ! single ratio, usually, does not convey much of a sense. To ma"e a better

    interpretation a number of ratios have to be calculated which is li"ely to confuse

    the analyst than help him in ma"ing any way meaningful condition.Q

    La%! of A(e)a*e S*a(a$(s:

    There are no well&accepted standards or norms of thumb for all ratios, which can

    be accepted as norms. 't renders interpretation of the ratios difficult.

    I.e$e* L&*a*&os of A%%o)*&,:

    Bi"e financial statements, ratios also suffer from the inherent wea"ness o

    accounting records such as their historical nature. atios of the past are not

    necessarily true indicators of the future.

    3ar*et Price per &hare

    ------------------------

    Earnins per &hare

  • 8/11/2019 Ratio Analysis AXIS

    40/60

    C.a,e of A%%o)*&, P$o%e()$es:

    $hange in accounting procedure by a firm often ma"es ratio analysis misleading,

    e.g.E a change in the valuation of methods of inventories from F'F# to B'F#

    increases the cost of sales and reduces considerably the value of closing stoc"s

    which ma"es stoc" turnover ratio to be lucrative and unfavorable gross profit

    ratio.

    Pe$soa' B&as: atios are not only means of financial analysis and not an end in itself.

    atios have to be interpreted and different people may interpret the same ratio in

    different ways.

    I%o#pa$a2'e:

    >ot only industries differ in their nature but also the firms of the similar business

    widely differ in their size and accounting procedures, etc. this ma"es comparison

    of ratios difficult and misleading. *oreover, comparisons are made difficult due

    to difference in definitions of various financial terms used in the ratio analysis.

    A2so')*e f&,)$es D&s*o$*:

    atios devoid of absolute figures may prove distort, as ratio analysis is primarily

    a quantitative analysis and not a qualitative analysis.

    P$&%e 'e+e' C.a,es:

    ?hile ma"ing ratio analysis, no consideration is made to the changes in price

    level and this ma"es the interpretation of ratios invalid.

  • 8/11/2019 Ratio Analysis AXIS

    41/60

    CURRENT RATIO

    Fo$#)'a: $urrent atio N $urrent !ssets D $urrent Biabilities

    Rs & 'a!.s

    CHART:

    YEARCURRENT

    ASSETS

    CURRENT

    LIABILITIES

    RATIO

    --&-/ 1309.9 1-33.20 .-8

    --/&-3 29320.1/ 01/-./3 .20

    --3&0- 89-89.2 9-. .9

    -0-&00 8-3/0.9 912.1 .28

    -00&0 /8/00.13 9829.10 .93

  • 8/11/2019 Ratio Analysis AXIS

    42/60

    INTERPRETATIONS: "

    The above table shows that the liquidity position of the firm is very good. The current

    assets increased on the whole from --&-/ to -00&0. This is because of continues increases

    in inventories and decreases in other current assets. Though sundry debtors, loans and

    advances and ban" balance fluctuated during these 2 years. 't also implies a large part of the

    current assets is idle.

  • 8/11/2019 Ratio Analysis AXIS

    43/60

    ACID TEST RATIO

    Juic" !ssets

    Fo$#)'a: !cid&test atio N &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

    $urrent Biabilities

    Rs & 'a!.s

    H+! $T !66+T6$T

    B'!('B'T'+6!T'#

    --&-/ 9-00- 1-33.20 0.1

    --/&-3 99812 01/-./3 0.28

    --3&0- 1--93 9-. 0.9

    -0-&00 92189 912.1 0.13

    -00&0 1309 9829.10 0.92

    CHART:

    INTERPRETATIONS: "

    The above table shows that Juic" ratio for the year --&-/ is of 0.1,in --/&-3 is

    0.28, in --3&0- the ratio is 0.9, in the year -0-&00 is 0.13 ,in the year -0-&00 the ratio is

    0.92, in the year -00&0 the ratio is 0.1,in the year -00&0 the ratio is 0.99 and more than

    that of the standard rule of 0E0 due to continuous increases in the current assets which are

    easily convertible in cash.

  • 8/11/2019 Ratio Analysis AXIS

    44/60

    CASH RATIO

    $ash )(an" balanceO$urrent 'nvestment

    Fo$#)'a:$ash atioN

    $urrent liabilities

    Rs & 'a!.s

    YEAR CASHCURRENT

    LIABILITIESRATIO

    ;;8";9 659>5;

  • 8/11/2019 Ratio Analysis AXIS

    45/60

    DEBT EUITY RATIO

    7ebt

    Fo$#)'a: 7ebt&equity atio N

    7ebt O+quity

    Rs & 'a!.s

    CHART

    INTERPRETATIONS: "

    From the above it is clear that the shareholders fund is less than that of the long&term

    debt. 6o, we can infer that the firm assets are financed less by the internal funds rather than the

    external funds by which it is using its resource more effectively.

    YEAR DEBT EUITY RATIO

    ;;8";9 =

  • 8/11/2019 Ratio Analysis AXIS

    46/60

    TOTAL DEBT RATIO

    Total 7ebts

    Fo$#)'a: Total 7ebt atio N &&&&&&&&&&&&&&&&&&&&

    Total !ssets

    RS IN LAKHS

    YEAR TOTAL DEBTTOTAL

    ASSETSRATIO

    ;;8";9 >95968 55>78;8 ;>;

    ;;9";6 >>56 579;

    ;55"5 57=775

    CHART:

    INTERPRETATIONS : "

    The above table depicts that the total liabilities of the firm are increasing but this is less

    than proportionate increase to total assets. !s such it implies that total assets are financed by

    outside liabilities and only a fractional part is been financed by owner%s fund. Thus it shows a

    better position of the company.

  • 8/11/2019 Ratio Analysis AXIS

    47/60

    INTEREST COVERAGE RATIO

    +('T

    Fo$#)'a: 'nterest $overage atio N

    'nterest

    RS IN LAKHS

    YEAR EBITFI4ED

    INTERESTRATIO

    ;;8";9 8966= =6=9 58;

    ;;9";6 5587759 796 78=78 7

  • 8/11/2019 Ratio Analysis AXIS

    48/60

    PREFERENCE DIVIDEND RATIO

    Profit after Tax

    Fo$#)'a: Preference dividend atioN Preference dividend

    RS INLAKHS

    YEAR EBITFI4ED

    INTERESTRATIO

    ;;8";9 958 5;7>> 85

    ;;9";6 >66=8 56;5

  • 8/11/2019 Ratio Analysis AXIS

    49/60

    PROPRIETARY RATIO

    Proprietary fund

    Fo$#)'a: Proprietary atioN &&&&&&&&&&&&&&&&&&&&&&&&&&

    Total !ssets

    RS IN LAKHS

    YEAR NET ORTHTOTAL

    ASSETSRATIO

    ;;8";9 7798978;8 ;7;

    ;;9";6 7

  • 8/11/2019 Ratio Analysis AXIS

    50/60

    CAPITAL TURNOVER RATIO

    Sa'es

    Fo$#)'a: $apital turnover atio N &&&&&&&&&&&&&&&&&&&&

    $apital employed

    RS IN LAKHS

    YEAR SALESCAPITAL

    EMPLOYEDRATIO

    ;;8";9 57=78=7 99=78== 5=

    ;;9";6 56>8767 656>>6 557588< 55

  • 8/11/2019 Ratio Analysis AXIS

    51/60

    FI4ED ASSETS TURNOVER RATIO

    Sa'es

    Fo$#)'a: Fixed !ssets Turnover atio N &&&&&&&&&&&&&&&&&&&

    F&-e( Asse*s

    RS IN LAKHS

    YEAR SALESFI4ED

    ASSETSRATIO

    ;;8";9 57=78=7 =96==76 6

    ;;9";6 56>8767 =>667;9 8

    ;;6"5; 5>; 55;=56;5 ;;

    CHART:

    INTERPRETATIONS: "

    The above ratios indicates that the fixed assets turnover rates are in the decreasing

    trend, but is satisfactory as the sales generated are showing good figure. 't shows that there is

    a scope for increasing in production and sales with effective use of fixed assets. (ut present

    year the ratio is decreased to -.0.

  • 8/11/2019 Ratio Analysis AXIS

    52/60

    TOTAL ASSETS TURNOVER RATIO

    6ales

    Fo$#)'a: Total !ssts Turnover atio N &&&&&&&&&&&&&&&&&&

    Total !ssets

    RS IN LAKHS

    YEAR SALESTOTAL

    ASSETSRATIO

    ;;8";9 57=78=7 55>78;8 5;

    ;;9";6 56>8767 55757588< 579;

  • 8/11/2019 Ratio Analysis AXIS

    53/60

    ORKING CAPITAL TURNOVER RATIO

    6ales

    Fo$#)'a: wor"ing capital Turnover ratio N &&&&&&&&&&&&&&&&&&&&&

    ?or"ing capital

    RS IN LAKHS

    YEAR SALESORKING

    CAPITALRATIO

    ;;8";9 57=78=7 =>579; =9

    ;;9";6 56>8767 757588< 787>;8

  • 8/11/2019 Ratio Analysis AXIS

    54/60

    INVENTORY TURNOVER RATIO /TABLE 570

    $ogs

    Fo$#)'a: 'nventory Turnover atio N &&&&&&&&&&&&&&&&&&&&&&&&&

    !verage 'nventory RS IN LAKHS

    CHART:

    INTERPRETATIONS: "

    The ratio indicates the efficiency of the firm is selling its products or services. ! high

    ratio indicates efficient management of inventory. 'n the above ratio it indicated that the

    inventory is getting converted into cash in the five years. This implies that the management of

    inventory is satisfied. Though the table shows that the ratio has decreased in the year -00&0

    to -.18.

    YEAR

    COST OF

    GOODS

    SOLD

    AVERAGE

    INVENTORYRATIO

    ;;8";9 57=78=7 56>;76;

    ;;9";6 56>8767 ;7;>> >79

    ;;6"5; 5>; 78>998 =9>

  • 8/11/2019 Ratio Analysis AXIS

    55/60

    GROSS PROFIT RATIO

    G$oss p$of&*

    Fo$#)'a: ;ross profit atio N &&&&&&&&&&&&&&&&&&&&&&&&

    Ne* sa'es

    RS IN LAKHS

    YEARGROSS

    PROFITSALES RATIO

    ;;8";9 559;=;> 57=78=7 987

    ;;9";6 57879;8 56>8767 5;=6

    ;;6"5; 5> ;96>>; 5;

    CHART:

    INTERPRETATIONS: "

    This ratio indicates the extent to which selling prices of goods per unit may decline

    without resulting losses in operating of a firm. The higher the ratio the better the results. 't

    implies that the profitability of the firm is not satisfactory and it is not covering various

    operating expenses without incurring losses. The ratio is decreasing from year --&-/ to

    -00&0. The gross profit ratio is at very low level.

    NET PROFIT RATIO

  • 8/11/2019 Ratio Analysis AXIS

    56/60

    Ne* p$of&*

    Fo$#)'a: >et profit atio N &&&&&&&&&&&&&&&&&&&&&&

    Ne* sa'es

    RS IN LAKHS

    YEAR NET PROFIT SALES RATIO

    ;;8";9 7998=9 57=78=7 98

    ;;9";6 >8767 =;;

    ;;6"5; 7789 5=>97 ;96>>; 5;

    CHART:

    INTERPRETATIONS: "

    The above ratio shows that the firm is earning the constant returns over its sales. The

    above table shows that the firm is earning profit over its net sales, which is good for any

    manufacturing concern.

  • 8/11/2019 Ratio Analysis AXIS

    57/60

    OPERATING PROFIT RATIO

    EBIT

    Fo$#)'a: #perating Profit atio N &&&&&&&&&&&&&&&&&&&&& Ne* sa'es

    RS IN LAKHS

    YEAR EBIT SALES RATIO

    ;;8";9 8966= 57=78=7 ;;=9

    ;;9";6 5587759 56>8767 ;;6;

    ;;6"5; 57 ;96>>; ;5>6

    CHART:

    INTERPRETATIONS: "

    From the above table we can infer that more than /-C of the sale has been consumed

    by the operating profit. #nly less than -C is left to cover interest charges, income tax

    payments, dividend and the retention of profits as a reserve. The ratio is not satisfactory.

  • 8/11/2019 Ratio Analysis AXIS

    58/60

    CONCLUSIONS:

    *gt of company is efficient which reflects a healthy functioning and performance.

    The current ratio of 'cici lombard general insurance is satisfactory as the current assess

    are more then $urrent liabilities.

    >et profit ratio of the current year increased which is not a good sign for

    company.

    !s the operating expenses ratio of #($ is satisfactory there is n improvement in

    the current year return on assess ratio is satisfactory.

    There is increase in fixed assess return over ratio it is average.

    ?or"ing capital turnover ratio is good.

    There is decrease in the debt equity ratio of 'cici lombard general insurance it

    shows that the firm fall to get advantage from the debt to minimize the share

    value.

    $ompany%s ;ross profit ratio is quite good during the study period

    The proprietary ratio shows that the five years ratio is more then 9-C. 6o we consider

    that the long term solvency of the firm is satisfactory.

    6heholders fund is less then that of the long term debt. 6o less by the internal funds

    rather then the external funds by which it is using its resource more effectively.

    $ash ratio clearly indicates that the firm is highly liquid as the cash ratio for all the five

    years is 0E0 this also indicates that most of the liquid assets are idle which can ne

    invested elsewhere.

  • 8/11/2019 Ratio Analysis AXIS

    59/60

    SUGGESTIONS:

    $ompany should maintain adequate reserves.

    't should control costs.

    $ompany should maintain adequate liquidity.

    't should try to raise its owner equity.

    $ompany should maintain adequate rations.

    $ompany should ta"e all the measures to promote its sales.

    $ompany should try to utilize assets to the fullest extent. To improve the liquidity position of the company it is suggested that the company shall

    finance more in current assets or pay off part of current liabilities form long term funds.

    $ompany should maintain good cash and ban" balances.

    The company should try to generate required wor"ing capital )also try to manage if

    efficiency.

    The company should try to effectively utilize in fixed assets.

  • 8/11/2019 Ratio Analysis AXIS

    60/60

    BIBILIOGRAPHY

    BOOKS:

    MANAGEMENT ACCOUNTING

    & G. 6=!*!

    & G.;