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Chapter 4
 

Chapter 4

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    Chapter 4 Chapter 4 Document Transcript

    • CHAPTER – IV  Data Analysis & Interpretation
    • STUDY OF RATIO ANALYSIS AT VISAKHAPTNAM PORT TRUST 1. CURRENT RATIO: The current ratio is calculated by dividing current assets by current liabilities, as a conventional role Current ratio of 2:1 or more is considered to be satisfactory. But for service oriented organization 1:1 is satisfactory. Current assets = debtors, cash, inventory, bills receivable short term investments. Current liabilities = Short term bank loan, creditors bills, payable, provisions, bank over draft. Current Assets Current Ratio = X 100 Current Liabilities Year Current assets Current liabilities Current ratio 2005-06 34132.38 32320.68 1.06 2006-07 39866.35 35419.47 1.13 2007-08 81879.49 78575.95 1.04 2008-09 81065.03 73379.22 1.10 2009-10 103005.50 96495.64 1.16
    • CURRENT RATIO 1.18 1.16 1.14 1.12 1.1 #REF! 1.08 #REF! 1.06 Column3 1.04 1.02 1 0.98 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The ideal ratio for current ratio is 2:1 as the norm in the industry. However Visakhapatnam port trust is not involved in any manufacturing activity and concerned with providing service in order to increase the imports and exports. Hence the ratio according for Visakhapatnam port trust i.e. 1.419 to 1.13 is found to be satisfactory.
    • 2. QUICK RATIO: This ratio establishes a relationship between quick or liquid assets and current liabilities. an asset is liquid if it can be converted into cash immediately. Quick assets Quick Ratio = X 100 Quick Liabilities Quick Assets= Current Assets – Inventory Current Assets = Debtors, cash, inventory , bills receivable, short turn investments. Inventory is nothing but stock. Year Quick assets Current liabilities Quick ratio `2005-06 33553.73 32320.68 1.04 2006-07 39143.09 35419.47 1.11 2007-08 81031.40 78575.95 1.03 2008-09 80163.51 73379.22 1.09 2009-10 10232.26 96495.64 0.10
    • QUICK RATIO 1.2 1 0.8 Series 1 0.6 Series 2 Series 3 0.4 0.2 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: Quick ratio is the ratio of quick assets to current liabilities. A ratio of 1:1 for quick assets and current liabilities is considered as idle. A very high quick ratio is also not advisable as funds can be more profitability employed. Higher the ratio higher the short term solvency of the firm. From the above graph the quick ratio of Visakhapatnam port trust is satisfactory. It crosses the ideal ratio, however the port had always having higher safety levels than ideal level.
    • 3. DEBT-EQUITY RATIO: Debt- equity ratio can be computed by dividing total debt by total owner’s equity. Total debt = debentures, bank loan, current liabilities, outsiders funds Total owners equity = share holders fund investment, equity share capital, preference share capital reserves & surplus Total debt Debt –Equity Ratio = X 100 Total owners equity . Year Total debt Owners equity Ratio 2005-06 1594.61 119817.58 0.01 2006-07 1416.61 123873.44 0.01 2007-08 1299.01 152099.21 0.008 2008-09 1480.16 168452.21 0.008 2009-10 1190.68 177493.77 0.006
    • DEBT EQUITY RATIO 0.014 0.012 0.01 0.008 Series 3 Series 2 0.006 Series 1 0.004 0.002 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The ideal ratio of Debt-Equity ratio is 1:2.Visakhapatnam port trust is not having any outside debt except from Government of India. The debt equity ratio of VPT shows decreasing trend as per the above graph.
    • 4. PROPRIETARY RATIO: This Ratio has been calculated by considering owners equity and Total assets. Owner’s equity Proprietary ratio = X 100 Total assets Owners equity = share holders fund investment, equity share capital, preference share capital reserves & surplus. Year Owners equity Total assets Ratio 2005-06 119817.58 121412.20 0.99 2006-07 123873.44 137269.35 0.90 2007-08 152099.21 153398.22 0.99 2008-09 168452.22 170307.54 0.99 2009-10 177493.77 179564.48 0.99
    • PROPRIETARY RATIO 1 0.98 0.96 0.94 Column1 0.92 Column2 0.9 Series 1 0.88 0.86 0.84 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The purpose of the ratio is to indicate what position of assets is financed by the share holders. A ratio of 1 indicates that entity is a debt less one and totally is funded by equity. A high proprietary ratio indicates the strong financial position of the organization. The ratio in Visakhapatnam port trust is ranging from 90-99.However there was a decrease in the ratio during 2006-07 in mainly providing a pension fund.
    • 5. DEBTOR’S TURNOVER RATIO: Debtor’s turnover ratio can be computed by dividing sales by average debtors. Sales Debtor’s turnover ratios = X 100 Average debtors Here, in VPT sales are considered as operating income. Operating debtors + closing debtors And average debtors = 2 Year Sales Average debtors Ratios 2005-06 52845.78 8323.34 6.35 2006-07 53374.60 8222.95 6.44 2007-08 56542.42 6034.64 9.36 2008-09 59972.93 5383.86 11.14 2009-10 66080.18 5902.30 11.19
    • DEBTOR’S TURNOVER RATIO 12 10 8 Series 1 6 Series 2 Series 3 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: Debtor’s turnover ratio indicates the number of times the debtors turned each year. A high turnover indicates an efficient credit management system and the company is able to convert its receivables into cash From the above graph it can be interpreted that the ratio has been increasing for the past five years i.e. 2006-2010. The debtors turnover ratio is satisfactory due to increase in debtors due to increase due to increase in govt dues and operating income.
    • 6. AVERAGE COLLECTION PERIOD: Average collection period can be computed by using the following formula. Days in a year Average collection period = Debtor’s turnover ratio Debtors turnover Average Collection ratio Period 365 6.34 58 2006-07 365 6.49 56 2007-08 365 9.36 39 2008-09 365 11.14 33 2009-10 365 11.09 32 Year No. of Days in a year 2005-06
    • AVERAGE COLLECTION PERIOD 70 60 50 40 Series 1 30 20 10 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: From the above graph it can be observed that the collection period is in decreasing stage during last four years. So the collection of the economy is satisfactory.
    • 7. FIXED ASSETS TURNOVER RATIO: Fixed assets turnover ratio can be computed by dividing net sales by fixed assets. Net Sales Fixed assets turnover ratio = X 100 Fixed assets Here Net Sales = Operating income Year Sales Fixed assets Ratio 2005-06 52845.78 71680.82 0.74 2006-07 53374.60 69635.54 0.76 2007-08 56542.43 69258.05 0.82 2008-09 59972.93 70260.95 0.85 2009-10 66080.18 72834.58 0.90
    • FIXED ASSETS TURNOVER RATIO 1 0.9 0.8 0.7 0.6 0.5 Series 1 0.4 0.3 0.2 0.1 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The fixed assets turnover ratio indicates the number of times fixed assets has been fixed over. The highest the ratio the more efficient has been the utilization of fixed assets. On the other hand a low turnover ratio might be an indication of over capitalization or inefficient use of fixed assets From the above graph it can be interpreted that the ratio has been increasing for the past five years i.e. 2006-10.It indicates that the company is having more efficiency to utilize fixed assets.
    • 8. GROSS PROFIT RATIO: Gross profit ratio can be computed by dividing gross profit by sales. Gross profit Gross profit ratio = X 100 Sales Year Gross profit Sales Ratio 2005-06 28535.65 52845.78 54.00% 2006-07 28995.76 53374.60 54.32% 2007-08 28609.11 56542.43 50.60% 2008-09 24985.64 59972.93 41.66% 2009-10 19609.28 66080.18 30.00%
    • GROSS PROFIT RATIO 60 50 40 Series 1 30 Series 2 Column1 20 10 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: It reveals the result of trading operation of the business. It measures the efficiency of production as well as pricing. There is no ideal or standard gross profit ratio. The higher the ratio is the better the performance of the business. From the above graph it can be interpreted that the ratio has been decreased in the years 2006-10. That is from 54-30%
    • 9. NET PROFIT RATIO: This ratio has been calculated by considering net profit and sales. Net Profit Net profit ratio = X 100 Sales Year Net profit Sales Ratio 2005-06 15515.51 52845.78 29.36% 2006-07 12187.90 53374.61 22.83% 2007-08 11143.66 56542.43 19.70% 2008-09 9342.83 59972.93 15.58% 2009-10 12050.89 66080.18 18.23%
    • NET PROFIT RATIO 35 30 25 20 Series 1 Series 2 15 Series 3 10 5 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: This ratio establishes relationship between sales and net profit and it indicates the management efficiency in manufacturing, administrating and selling the products. From the above graph it can be interpreted that the ratio has been decreasing from the year 2006-2010 ie, 29.36%-18.23%
    • 10. OPERATING RATIO: Operating ratio can be computed by dividing operating expenditure operating Sales. Operating expenditure Operating Ratio = X 100 Operating Sales Ratio Year Operating expenses Net sales 2005-06 24310.13 52845.78 46.00% 2006-07 24378.84 53374.61 45.67% 2007-08 27933.32 56542.43 49.40 2008-09 34987.29 59972.93 58.34 2009-10 46470.89 66080.18 70.33% by
    • OPERATING RATIO 80 70 60 50 Series 1 40 Series 2 30 Series 3 20 10 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: From the above graph it can be interpreted that the ratio has been increasing from the years 2006-10.This indicates that the firm is having a good operating ratio.
    • 11. RETURN ON TOTAL ASSETS RATIO: Return on total assets ratio can be computed by dividing net profit by total assets. Net profit Return on Total Assets Ratio: X 100 Total Assets Ratio Year Net profit Total assets 2005-06 15515.55 121412.20 12.77 2006-07 12187.90 137269.50 8.87 2007-08 11143.66 153398.22 7.26 2008-09 9342.83 170307.54 5.48 2009-10 12050.89 179564.48 6.7%
    • RETURN ON TOTAL ASSETS RATIO 14 12 10 8 Series 1 Series 2 6 Series 3 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: From the above graph it can be interpreted that the ratio has decreased from 2005-06 to 2006-07 the ratio is12.77%-8.84, again the ratio is increased. The main ratio for decrease in ratio during 2004-05 to 2006-07 is mainly due to creation of liability towards pension fund by Rs.180.00 crores and Rs. 32.50 crores respectively.
    • 12. NET WORKING CAPITAL TURNOVER RATIO: Net working capital turnover ratio can be computed by using the following formulae, SAIES NET WORKING CAPITAL TURNOVER RATIO = --------------------------- X 100 NET WORKING CAPITAL Here, Sales =operating income. Net working capital=current assets-current liabilities. Year Sales Net working Ratio capital 2005-06 52,845.78 1811.7 29.16 2006-07 53,374.60 4446.88 12.00 2007-08 56,542.42 3303.51 17.11 2008-09 59,972.93 7685.81 7.80 2009-10 66,080.18 6509.86 10.15
    • NET WORKING CAPITAL TURNOVER RATIO 35 30 25 20 Series 1 Series 2 15 Series 3 10 5 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: The ratio is used to measure the firms liquidity. The ratio measures the firms potential reservoir of funds From the above graph it can be interpreted that the net working capital turn over ratio of Visakhapatnam port trust is satisfactory, because it is a service oriented organization. It is needed not to maintain current assets more than current liabilities. Maintain equal to current liabilities. But V.P.T maintains current assets more than current liability.
    • 13. ABSOLUTE CASH RATIO: The absolute cash ratio is calculated by dividing absolute cash by current liabilities. Absolute cash=cash in hand + cash at bank + marketable securities. Current liabilities = short term borrowing + creditors +bills payables + provisions + bank over draft + o/s expenses + advances received. absolute cash Absolute cash ratio = -------------------------- X 100 Current liabilities Year Absolute cash Current liabilities Ratio 2005-06 7,656.52 32,320.68 0.24 2006-07 8,142.14 35,419.47 0.23 2007-08 41,478.51 78575.95 0.52 2008-09 28089.82 73379.22 0.38 2009-10 38,571.99 96495.64 0.39
    • ABSOLUTE CASH RATIO 0.6 0.5 0.4 Series 1 0.3 Series 2 Series 3 0.2 0.1 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: Service oriented organization like VPT maintains the ratio as per requirement from the above graph absolute cash ratio of VPT is satisfactory. They maintain cash ratio as per there safety level. Cash ratio decreased due to decreasing bank balance in the year 2008-09. In the year 2009-10 the cash ratio was 0.39%.
    • 14. CAPITAL EMPLOYED TURNOVER RATIO: Capital employed turnover ratio can be computed by dividing cost of goods sold by capital employed. Cost of goods sold Capital employed turnover ratio= --------------------------- X 100 Capital employed Here Cost of goods sold= operating expenditure. Capital employed=fixed assets + net working capital Fixed assets = Goodwill + trade mark + patents + machinery + plant + furniture + vehicles + buildings + land. Net working capital = current assets – current liabilities. Year Cost of goods sold Capital employed Ratio 2005-06 24310.13 73493.00 0.33 2006-07 24378.84 74082.43 0.33 2007-08 27933.32 72561.57 0.38 2008-09 34987.29 77946.76 0.44 2009-10 46470.89 72561.56 0.64
    • CAPITAL EMPLOYED TURNOVER RATIO: 0.7 0.6 0.5 0.4 Series 1 Series 2 0.3 Series 3 0.2 0.1 0 2005-06 2006-07 2007-08 2008-09 2009-2010 INTERPRETATION: From the above graph it can be interpreted that the ratio showing increasing trend, it refers to more efficient utilization of owners and long term funds. So the capital employed turnover ratio of Visakhapatnam port trust is satisfactory. Reasons for increasing trend is increasing consumption of stores, increase in credit balance, decrease in inventory, increase in liability towards capital expenditure.
    • 15. OPERATING EXPENCES RATIO: Operating expenses include new minor works, safety and security, dredging charges etc. this ratio shows the relationship between operating expenses and sales. Operating expenses Operating expenses ratio = ------------------------- x 100 Sales Year Operating expenses sales ratio 2005-2006 24310.13 52845.78 46.00 2006-2007 24378.84 53374.60 45.67 2007-2008 27933.32 56542.43 49.40 2008-2009 34987.31 59972.93 58.33 2009-2010 46470.89 66080.18 70.32
    • OPERATING EXPENSES RATIO 80 70 60 50 Series 1 40 Column1 30 Series 3 20 10 0 2005-06 2006-07 2007-08 2008-09 2009-10 INTERPRETATION: From the above graph it can be interpreted that the ratio had been increasing from last 3 years due to increase in cargo handling storage expenses, railway working expenses, salaries, wages, bonus, pension fund etc. so operating expenses of Visakhapatnam port trust is said to be good..