A REPORT OF RATIO ANALYSIS ON TATA CONSULTANCY SERVICES LIMITED
PREAPARED BY: NAME: MAHOMMADSHEJAD H. CHHIPA ROLL NO.: 25 CLASS: .MBA SEM-1 YEAR: 2011-2012
GUIDED BY: DARSHITA MIRANI
PRESENTED TO: LATE SMT. SARDABEN GHANSHYAMBHAI PATEL INSTITUTE OF MANAGEMENT STUDIES AMRAPATLI TOWNSHIP, PATLAD,KHAMBHAT ROAD, DHARMAJ,DIST. ANANAD
PREFACE In this advance age, practical knowledge are added advantage to theoretical studies. I was supposed to prepare a report on “TATA CONSULTANCY SERVICES LIMITED” in the subject of financial management.
Through this, I learn about the financial aspect of needed in every field today. This report is based on the 2 years annual report of “TATA CONSULTANCY SERVICES.” Ratios have been calculated with interpretation to present clear picture of financial position of the company.
Preparation of this report for ratio analysis has proved to be a matter of pride for me as a professional student.
Mo.Shejad H.Chhipa ROLL NO.: 25 CLASS:MBA. SEM-1
ACKNOWLEDGEMENT I am quite fortune enough to have cherished wishes of different personalities in the preparation of this report, which I wish to acknowledged as under. Firstly, I wish to extend my sincere feeling of gratitude to our Principal, Dr. Brhamchari Sir has their moral support.
I am especially thankful to our faculty Darshita Mirani for guiding and helping me during the preparation of this report. I also thankful to my friends who also help me in preparing this report.
Last but not the least, I am really thankful to all those who help me directly or indirectly in preparing this report.
Mo.Shejad H.Chhipa ROLL NO.: 25 CLASS:MBA. SEM-1
INDEX Sr. NO. 1
Particular Company Profile
Page no. 5
2
Result of Operation
8
3
Ratio Analysis
9
4
Summary of Ratio
38
5
Conclusion
39
COMPANY PROFILE Name
:
S.No.
Location Type
1
2
3
TATA CONSULTANCY SERVICES
Registered Office
Investor Service Centre
Corporate Office
Address 9th Floor, Nirmal Building, Nariman Point Mumbai , Maharashtra - India Pincode : 400021 Phone : 67789595,,, Fax: 67789660, 9th Floor, Nirmal Building, Nariman Point, Mumbai , Maharashtra - India Pincode : 400021 Phone : 55509576,,, Fax: 55509661, TCS House, Raveline Street, Fort Mumbai , Maharashtra - India Pincode : 400001 Phone : 67789999,,, Fax: 67789000,
Board of Directors: S.No Name
Designation
1
Mr.R N Tata
Chairman / Chair Person
2
Prof.Clayton M Christensen
Director
3
Mr.Laura M Cha
Director
4
Mr.V Thyagarajan
Director
5
Mr.Aman Mehta
Director
6
Dr.Ron Sommer
Director
7
Mr.Phiroz Vandrevala
Executive Director
8
Mr.S Mahalingam
Executive Director & CFO
9
Mr.N Chandrasekaran
Managing Director & CEO
10
Mr.S Ramadorai
Non Executive Vice Chairman
Company Secretary: Suprakash Mukhopadhyay Auditors: Delloite Haskins And Sells
History of the company: Tata Consultancy Services was established in the year 1968 and is a pioneer in the industry. Despite unfavorable government regulations like the License Raj the company succeeded in establishing the Indian IT Industry. It began as the "Tata Computer Centre", a division of the Tata Group whose main business was to provide computer services to other group companies. F C Kohli was the first general manager.JRD Tata was the first chairman, followed by Nani Palkhivala. One of TCS' first assignments was to provide punch card services to a sister concern, Tata Steel (then TISCO). It later bagged the country's first software project, the Inter-Branch Reconciliation System (IBRS) for the Central Bank of India. It also provided bureau services to Unit Trust of India, thus becoming one of the first companies to offer BPO services. In the early 1970s, Tata Consultancy Services started exporting its services. TCS's first international order came from Burroughs, one of the first business computer manufacturers. TCS was assigned to write code for the Burroughs machines for several US-based clients. In the early 1990s, the Indian IT outsourcing industry grew tremendously due to the Y2K bug and the launch of a unified European currency, Euro. TCS pioneered the factory model for Y2K conversion and developed software tools which automated the conversion process and enabled third-party developers and clients to make use of it. In 1999, TCS saw outsourcing opportunity in E-Commerce and related solutions and set up its E-Business division with ten people. By 2004, E-Business was contributing half a billion dollars (US) to TCS. On 9 August 2004, TCS became a publicly listed company, much later than its rivals, Infosys, Wipro and Satyam. During 2004, TCS ventured into a new area for an Indian IT services company - Bioinformatics In 2008, the company went through an internal restructuring exercise that executives claim would bring about agility to the organization.
Results of Operation Ratios Gross Profit Net Earning Before Tax Earning before Interest & Tax Capital Employed Shareholder Fund Debtors Creditors Bills Receivable Fixed Assets Current Asset Current Liability Net Sales
31-3-2010 31-3-2011 9242.28 10071.13 5003.86 5139.69 5007.28 5147.13 11059.3 13545.65 11059.3 13545.65 3747.01 3717.73 1312.57 1239.37 870.18 817.06 2830.27 3354.21 7329.57 9247.14 3591.62 4951.36 18979.67 21947.76
RATIO ANALYSIS Meaning: A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios. According to Kennedy and Macmillan, "The relationship of one item to another expressed in simple mathematical form is known as ratio." Robert Anthony defines a ratio as "simply one number expressed in terms of another."
Advantages and Uses of Ratio Analysis To workout the profitability: Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business. To workout the solvency: With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans. Helpful in analysis of financial statement:
Ratio analysis help the outsiders just like creditors, shareholders, debentureholders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc. Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them. To simplify the accounting information: Accounting ratios are very useful as they briefly summaries the result of detailed and complicated computations. To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources.
Limitations of Ratio Analysis Limited Comparability: Different firms apply different accounting policies. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc. False Results:
Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct. Effect of Price Level Changes: Price level changes often make the comparison of figures difficult over a period of time. Changes in price affect the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before any comparison. Qualitative factors are ignored: Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis. Effect of window-dressing: In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the convenience to show the financial position of the company in a better way. Costly Technique: Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it. Misleading Results: In the absence of absolute data, the result may be misleading. For example, the gross profit of two firms is 25%. Whereas the profit earned by one is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs. 10, 00,000 and sales are Rs. 40, 00,000. Even the profitability of the two firms is same but the magnitude of their business is quite different.
PROFITABILITY RATIO Profit is the difference between revenue and expenses over a period of time profit is the ultimate output of the company and there will no future if it tails to make profits. The profitability ratios are calculated to measure the operating efficiency of the company, creditors want to get interest and repayment of the principal regularly. Owners want to get a reasonable return on their investment. This ratio includes. a) b) c) d)
Gross Profit Ratio Net Profit Ratio Operating Ratio Returns on Share Holders Fund
A)
Gross Profit Ratio:
Meaning: Gross profit ratio measures the gross earning of the company to its net sales which means for the sale of every 100 Rs. how much amount of money is earned as gross profit after deducting all manufacturing expense. Gross Profit ratio is fund out with the help of gross profit and net sales. Manufacturing expense is like raw material, fuel; power, carriage inward, etc. are known as manufacturing expense. If the ratio is less it shows the in efficiency of company’s management. Here net Sales means = Sales – Sales Return
Formula: Gross Profit Ratio =
Gross Profit x 100 Net Sales
2009-10
2010-11
TABLE: YEAR 31-3-2010 31-3-2011
=
9242.28 * 100 18979.67
=
48.70%
=
10071.13* 100 21947.76
=
45.89%
PERCENTAGE 48.70% 45.89%
Graph:
GROSS PROFIT 49.00% PERCENTAGE
48.00% 47.00% 46.00% 45.00% 44.00% 31-3-2010
31-3-2011 YEAR
Interpretation: Gross profit ratio shows gross profit earned as compared to its net sale. In the year 2009-10 ratio was 48.70% which means that the company earns Rs. 48.70 as gross profit with the sale of every Rs. 100 and spend on the manufacturing expense in the year 2010-11 with the sale of every Rs. 100 company earns Rs. 45.89 as Gross profit. The ratio is lower than last year’s ratio. Gross profit is not satisfactory and company should try to minimize the manufacturing cost with the help of R & D. Even we already know that if the ratio is high it shows the efficiency of the company of the company’s management. So, here it proves the inefficiency of the company’s management.
B)
Net Profit Ratio:
Meaning: Net profit ratio is useful to measure the overall performance of the business as shows the efficiency of the company. Ratio shows the net profit earned by the company with the sale of every 100 Rs. Here net profit means gross profit less all administrative expense, selling and distribution expense and other operating expense. Here net Sales means, Sales= Sales Return- Excise duty
Formula: Gross Profit Ratio =
2009-10
2010-11
=
4508.76 * 100 18979.67
=
23.76%
=
4696.21* 100 21947.76
=
21.40%
TABLE: YEAR 31-3-2010 31-3-2011
Gross Profit x 100 Net Sales
PERCENTAGE 23.76% 21.40%
Graph:
PERCENTAGE
NET PROFIT 24.00% 23.50% 23.00% 22.50% 22.00% 21.50% 21.00% 20.50% 20.00% 31-3-2010
31-3-2011 YEAR
Interpretation: Net profit ratio shows profitability of the company. Ratio shows how much company earns as net profit for the sale of every Rs. 100 after deducting all expense. In the year 2009-10 the ratio was 23.76, which means that the sale of every Rs. 100 the company is earning Rs. 21.40 as net profit. In the year 2010-11 the ratio is 21.40% which means the net earning of the company has declined. Here the higher the ratio shows the better will be the profitability of the company. In the year 2010-2011 the net profit ratio is not satisfactory than the year 2009-11.
C)
Operating Ratio:
Meaning: Operating ratio shows the relationship between the cost of goods sold and operating expenditure with net sales Operating ratio shows how much company is spending out of the sale of Rs. 100. Higher the ratio found, higher the inefficiency of the company for e.g. if the sale is Rs. 100 and the cost of goods sold is Rs. 50 and other expense of P & L A/c is Rs. 30 then the net profit will be Rs. 20 operating expense will be Rs. 80 with respect to the sale of Rs. 100. Cost of goods sold = Sale – Gross profit Operating expense = expense of P & L A/c Operating expense = Operating expense + COGS
Formula: Operating Ratio
2009-10
2010-11
= C.O.G.S+ operating expenses x 100 Net Sales =
14470.91 * 100 18979.67
=
76.24%
=
17251.55* 100 21947.76
=
78.60%
TABLE: YEAR
PERCENTAGE
31-3-2010 31-3-2011
76.24% 78.60%
Graph:
PERCENTAGE
OPERATING RATIO 79.00% 78.50% 78.00% 77.50% 77.00% 76.50% 76.00% 75.50% 75.00% 31-3-2010
31-3-2011 YEAR
Interpretation: Operating ratio shows the relationship between cost of goods sold and operating expenditure to net sales. In the year 2009-10 the ratio is 76.24% which means that with the sale of every Rs. 100 company is spending Rs. 76.24 as manufacturing expense and other expense. In the year 2010-11 the ratio is increased to 78.60% that means company is spending Rs. 78.60 as manufacturing and other expense. There is not much difference in the ratio. Lower the ratio will increase the gross profit. But, here company will decrease their gross profit by increasing operating ratio in the year 2010-11.
D)
Return on Shareholder Fund:
Meaning: It measures the return that the shareholders get as compared to their investments made in the company. In other words, it measures the profitability of equity funds invested in the firm. It is influence by several factors like return on investment, equity ratio, cost of debtors and funds and tax returns. Ratio shows how much money the shareholders earn as compared to their investments.
Formula: Return on shareholder’s fund = N.P.A.T Share holder’s fund 2009-10
2010-11
TABLE: YEAR 31-3-2010 31-3-2011
Rs. 0.408 0.347
=
4508.76 11059.3
=
0.408
=
4696.21 13545.65
=
0.347
Graph:
RETURN ON SHAREHOLDER'S FUND 0.42 0.4 RS.
0.38 0.36 0.34 0.32 0.3 31-3-2010
31-3-2011 YEAR
Interpretation: As in the year 2009-10 for the every Rs. 100 invested by the shareholder in the company they get the return of Rs. 0.408 the ratio decrease to 0.347 in the year 2010-11 with the investment of Rs. 100, shareholders are earning 0.347 Rs. The ratio is not satisfactory. The normal bank rate is 5% to 6% the shareholders are earning less than bank rate which means the company is not efficient. Equity shareholders do not get satisfactory amounts as compared to their risk bearing.
TURNOVER RATIO Meaning: Turnover ratio indicates the efficiency with which the resources are utilized in the business. Turnover means “Sales” So. Turnover is related to the sales. This turnover ratio includes in it other ratio they are : a) Debtors Velocity Ratio b) Debtors Turnover Ratio c) Fixed Assets Turnover Ratio d) Capital Turnover Ratio
A)
Debtor Velocity Ratio:
Meaning: Debtor ratio shows the number of times of rotation of debtor cycle is done during a year. The ratio shows the number of days taken to collect the dues of credit sale. The lower the ratio good for the company. This ratio is also known as average collection period or debtor's days or debt collection period. This ratio indicates days within which debts are collected or in other words, sales remain uncollected prompt debt collection is always in the interest of the business, because cash will be ready available.
Formula: Debtor’s velocity period=
2009-10
2010-11
TABLE: YEAR 31-3-2010 31-3-2011
Days 89 75
365 days Debtors ratio
=
365 4.11
=
89 days
=
365 4.84
=
75 days
Graph:
DEBTORS VELOCITY PERIOD 95 90 DAYS
85 80 75 70 65 31-3-2010
31-3-2011 YEAR
Interpretation: Debtor velocity ratio shows after how many days company will receive payment from the customer or debtors. In the year 2009-10 the ratio is 89 days which shows that company receive payment after 89 days from the date of sale. The ratio decreased to 75 days in the year 2010-11. It means that company receives payment after 75 days from the date of sale, and company will receive its due 14 days earlier than the previous year.
B)
Debtors Ratio:
Meaning: This indicates the number of times average debtors have been converted into cash during a year. It is determined by dividing the net credit sales by average debtors. Net credit sales consist of gross credit sales minus sales return. Trade debtor includes sundry debtors and bill’s receivables. Average trade debtors (Opening + Closing balances / 2) When the information about credit sales, opening and closing balances of trade debtors is not available then the ratio can be calculated by dividing total sales by closing balances of trade debtor.
Formula: Debtor Turnover Ratio = Net Credit Sales Average Trade Debtors 2009-10
= =
2010-11
= =
TABLE: YEAR 31-3-2010 31-3-2011
Times 4.11 4.84
18979.67 4617.19 4.11 times 21947.76 4534.79 4.84 times
Graph:
DEBTORS RATIO 5 4.8 TIMES
4.6 4.4 4.2 4 3.8 3.6 31-3-2010
31-3-2011 YEAR
Interpretation: Debtors’ ratio shows how many times a debtor is converted into cash. In the year 2009-10 the ratio is 4.11 times which shows that company receives payment 4.11 times in a year. The ratio is increased to 4.84 times in the year 2010-11. It means that company receives payment more frequently than the previous year. So, higher is the ratio, good for the company so in the year 2010-11the company has improved its performance with respect to turnover of debtors.
C)
Fixed Assets Turnover Ratio:
Meaning: To ascertain the efficiency and profitability of the business the total fixed assets are compared to the sale. This ratio measured the sale of the company to its total asset used in the business. It shows how many times sales is greater than asset. If the ratio is higher it means the company is using its fixed assets efficiently. If sale is less as compared to the fixed assets it mean that company is not utilizing its fixed asset efficiency. This is a difficult set of ratios to interpret as asset values are based on historic cost.
Formula: Fixed assets turnover ratio = Fixed Assets Net Sales 2009-10
2010-11
TABLE: YEAR 31-3-2010
Times 4.11
=
2830.27 18979.67
=
0.149
=
3354.21 21947.76
=
0.153
31-3-2011
4.84
Graph:
TIMES
FIXED ASSETS TURNOVER RATIO 0.154 0.153 0.152 0.151 0.15 0.149 0.148 0.147 31-3-2010
31-3-2011 YEAR
Interpretation: The ratio is higher which shows that a company is efficient in the year 201011 the ratio is 0.153:1 times which shows that a sale is 1 times greater than fixed assets. The ratio is in the year 2009-10 is 0.149:1 times which shows that if company has fixed assets of Rs. 100 the company made sale Rs. 149 and in the year 2010-11 if fixed asset is Rs. 100 than the sale is Rs. 153. The ratio is increase in 2010-11 which shows the better utilization of the fixed asset in the company.
D)
Capital Turnover Ratio:
Meaning: Capital turnover ratio measure the sale of the company as compared to the capital employed in the business. It is shows how many times capital is rotated in the business. If capital is Rs. 100 and sales are Rs. 50 then we can say that capital turnover ratio is 5 times. It measures the sale of the business as compare to its capital employed. The ratio indicates the extent of capital turnover in achieving sales of the firm higher the ratio, better for the company.
Formula: Capital Turnover Ratio = Capital Employed 2009-10
2010-11
TABLE: YEAR 31-3-2010 31-3-2011
Times 1.716 1.620
Sales
=
18979.67 11059.3
=
1.716
=
21947.76 13545.65
=
1.620
Graph:
TIMES
CAPITAL TURNOVER RATIO 1.74 1.72 1.7 1.68 1.66 1.64 1.62 1.6 1.58 1.56 31-3-2010
31-3-2011 YEAR
Interpretation: This ratio shows that how much sales is generated with respect to capital employed. In the year 2009-10 the ratio is 1.716:1 times which mean that if Rs. 100 is invested in the business then with the capital of Rs. 100 sales is 171.6 Rs. The ratio decrease in the year 2010-11 it comes to 1.620:1 times which shows that with the capital of Rs. 100 the sale is made of Rs. 162. The ratios are not satisfactory and we can observe that company is not efficiently doing sales with respect to capital employed.
FINANCIAL RATIO Meaning: Financial ratio indicates the financial balance and stability of a firm. They are divided into two types. a) Long-term solvency ratio, which represents the solvency of the company over long period of time. b) Short-term solvency ratio, which indicate the solvency state of the company for a short period of time. a) b) c) d)
A)
Current Ratio Liquid Ratio Proprietary Ratio Debt-Equity Ratio
Current Ratio:
Meaning: Current Ratio is also known as working capital ratio which measures the capability of the company to pay the debt, which is due within 12 months period as compared to current liabilities. It shows company had how much current assets as compared to current liability. The ideal ratio is 2:1 mean it means company must have 2 times current asset as compared to current liability. The standard ratio by chore commission is 1:33:1 means that company must have current asset of Rs. 1.33 for every current liability of Rs. 1.
Formula: Current Ratio
= Current Assets Current Liabilities
2009-10
2010-11
=
7329.57 3591.62
=
2.04
=
9247.14 4951.36
=
1.87
TABLE: YEAR 31-3-2010 31-3-2011
Times 2.04 1.87
Graph:
CURRENT RATIO 2.1 2.05 TIMES
2 1.95 1.9 1.85 1.8 1.75 31-3-2010
31-3-2011 YEAR
Interpretation: Current Ratio shows how much company has current asset as compared to current liability. As per the ratio of the year 2009-10 ratio is 2.04:1 which means company has current asset of Rs. 204 for every current liability or Rs. 100. The ratio decrease to 1.87:1 in the year 2010-11. Company’s ratio is not satisfactory from the point of view of ideal ratio and also it does not satisfy the standard ratio of chore commission but it requires further improvement by the company.
B)
Liquid Ratio:
Meaning: Liquid ratio measure the liquid position of the company to pay off its debt within a very short period of time. It shows the liquid asset of the company as compared to its liquid liability. The standard ratio is 1:1 means that company have liquid asset is equal to liquid liability. Liquid Asset Liquid Liability
= =
Current Asset – stock Current Liability - BOD
Liquid Ratio
=
Liquid Assets Liquid Liabilities
=
5145.78 1187.44
=
4.334
Formula:
2009-10
2010-11
=
6140.34 1450.23
=
4.234
TABLE: YEAR 31-3-2010 31-3-2011
Times 4.334 4.234
Graph:
TIMES
LIQUID RATIO 4.36 4.34 4.32 4.3 4.28 4.26 4.24 4.22 4.2 4.18 31-3-2010
31-3-2011 YEAR
Interpretation: Liquid ratio measures the short term liability of the company. Company must have liquid asset is equal to liquid liability. In the year 2009-10 the ratio is 4.334:1 which explain that company has liquid asset of Rs. 4.334 for the liquid liability of
Rs. 1. The ratio is good. In the year 2010-11company is having a liquid asset of Rs. 4.234 for liquid liability of Rs. 1. The ratio of the year 2010-11 is decrease than the ratio of the year 2009-10. But it does not make any difference. The ratio is satisfactory as it satisfies standard ratio.
C)
Proprietary Ratio:
Meaning: The ratio indicates the relationship between proprietors fund and total assets. The proprietary ratio shows the proportion of the proprietary fund to the total asset employed in the business. The proprietary fund or shareholder fund consists equity share capital reserve and surplus, etc. Total assets include fixed, current and factious assets. This ratio measures the proportion of contribution as compared to the total asset of business. It show the fund contributed by the owner. Proprietary fund.
Formula: Proprietary Ratio
2009-10
2010-11
=
Proprietary fund Total Assets
=
10959.3 11077.55
=
0.989
=
13445.65 13586.02
=
0.990
TABLE: YEAR 31-3-2010 31-3-2011
Times 0.989 0.990
Graph:
TIMES
PROPRITARY RATIO 0.9902 0.99 0.9898 0.9896 0.9894 0.9892 0.989 0.9888 0.9886 0.9884 31-3-2010
31-3-2011 YEAR
Interpretation: Here in the year 2009-10 with the every 1 Rs. of shareholders Rs. 0.989 is invested in the fixed asset. The higher the ratio shows strong position of the business. It shows that large amount of shareholders fund is invested in fixed asset. The ratio is minor change 0.989 to 0.990 in the year 2010-11. There is no standard ratio for comparison but it should be sufficient to cover the fixed assets. The ratio is no down ward no upward trend.
D)
Debt Equity Ratio:
Meaning: It measures the portion of debt taken by the company as compare to owner’s fund. This ratio shows the relationship between debt and equity of the company. Debt means outsider fund and it includes debentures, long term borrowings and secured & unsecured loans while, equity is owner’s fund. Equity = Equity Capital. + Pref. sh. Capital + P & L A/c (All Reserve Surpluses) The standard debt equity ratio is 1:1 it shows that for company has equity of 1 Re.
Formula: Debt-equity Ratio
2009-10
2010-11
TABLE: YEAR 31-3-2010 31-3-2011
Times 0.002 0.003
=
Debt Equity
=
18.25 11059.3
=
0.002
=
40.37 13545.65
=
0.003
every debt of 1 Re
Graph:
DEBT EQUITY RATIO 0.0035 0.003 TIMES
0.0025 0.002 0.0015 0.001 0.0005 0 31-3-2010
31-3-2011 YEAR
Interpretation: This ratio helps us to know the proportion of external liabilities in relation to equity shareholder fund. Here, in the year 2009-10 the ratio was 0.002:1 which shows every Rs. 0.002 debt for the shareholder’s fund of Rs. 1. In the year 2010-11 company has moderate change in that ratio. Company is having a debt of Rs. 0.003:1 for shareholder’s fund or equity of Rs. 1. The ratio is satisfactory.
Summary of Ratio
No.
Particular
Ratio [2010-11)
Ratio [2009-10)
Increase
Decrease
1.
Gross Profit Ratio
45.89%
48.70%
-
2.81%
2.
Net Profit Ratio
21.40%
23.76%
-
2.36%
3.
Operating Ratio
78.60%
76.24%
2.36%
-
4.
Return on Share holder's fund
0.347Rs.
0.408Rs.
-
0.061
5.
Debt-equity Ratio
0.003:1
0.002:1
0.001:1
-
6.
Capital Turnover Ratio
1.620times
1.716times
-
0.096times
7.
Fixed Assets Turnover Ratio
0.153times
0.149times
0.004times
-
8.
Current Ratio
1.87:1
2.04:1
-
0.17:1
9.
Liquid Ratio
4.234:1
4.334:1
-
0.1:1
10.
Proprietary Ratio
0.990:1
0.989:1
0.001:1
-
13.
Debtors Ratio
4.84 times
4.11times
0.73times
-
14.
Debtors Velocity Ratio
75 days
89 days
-
14days
CONCLUSION This is one of the oldest companies among all other companies. The products produced in this company are comparatively of better quality and different sizes of product are also available here. The various ratios which we have studied are very important ratios. The company seems to maintain better ratios at a satisfactory level. But the important thing is that the Company has increased its profitability much more than the last year i.e. in the year 2010.
