2.
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
3.
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.
4.
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
5.
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.
6.
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
7.
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.
8.
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
9.
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.
10.
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
11.
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.
12.
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
13.
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.
14.
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
15.
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.
16.
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%
17.
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%
18.
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%
19.
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%
20.
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
21.
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.
22.
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%
23.
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.
24.
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
25.
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.
26.
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
27.
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%.
28.
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
29.
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.
30.
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
31.
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..
Clipping is a handy way to collect and organize the most important slides from a presentation. You can keep your great finds in clipboards organized around topics.
Be the first to comment