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Liquidity ratios  its me
 

Liquidity ratios its me

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    Liquidity ratios  its me Liquidity ratios its me Presentation Transcript

    • CURRENT RATIO Current AssetsCurrent ratio = ------------------------- Current Liabilities Year Current Assets Current Liabilities Current Ratio 2006-2007 24678965 21128392 1.16 2007-2008 21588683 11339964 1.90 2008-2009 20683915 25537988 0.80ANALYSISThe current ratio decreased to 1.16 in the year 2006-2007 , and again it is increased to1.90 in 2007-2008, later it is again fallen down to 0.80. This shows that there is noimprovement in the short-term solvency of the company for the year 2008-2009.
    • 2 2006-2007 1.8 2007-2008 1.6 2008-2009 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Current RatioINTERPRETATION: Due to instability in the rate of ratios, it shows that there is no improvement in theshort-term solvency of the company for the year 2008-2009.
    • Liquid Assets Acid test ratio = ---------------------------- Current liabilities Year Liquid assets Current liabilities Liquid ratio 2006-2007 23362359 21128392 1.10 2007-2008 15428377 11339964 1.36 2008-2009 16701025 25537988 0.65ANALYSISThe liquid ratio is decreased to 1.10 in the year 2006-2007 , and again it is increased to1.36 in the year 2007-2008. This further confirms that there are fluctuations in theshort-term liquidity .
    • 1.4 2006-2007 2007-2008 1.2 2008-2009 1 0.8 0.6 0.4 0.2 0 Liquid ratioINTERPRETATION:This further confirms that there are fluctuations in the short-term liquidity of thecompany. This is mainly because of low realization of sundry debtors and an inincrease in quick assets and decrease in cash and bank.
    • DEBT-EQUITY RATIO Total debts Debt-Equity ratio = ---------------------- Equity Year Total debt Equity Debt-Equity Ratio 2006-2007 24812845 28416205 0.87 2007-2008 15626471 28057713 0.56 2008-2009 14358681 30391887 0.47ANALYSISDebt equity ratio is 0.87 in 2006-2007 and it is decreased to 0.56 in the year 2007-2008 though it was decreased to 0.47 in the year 2008-2009. This shows that there isimprovement in the long-term solvency position of the company.
    • GRAPH SHOWING DEBT-EQUITY RATIO 0.9 2006-2007 0.8 2007-2008 2008-2009 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Debt-Equity RatioINTERPRETATION:It indicates the relative proportions of capital contribution by creditors andshareholders.
    • EquityProprietory Ratio = ---------------------- Total Asset Year Equity Total Assets Proprietory Ratio 2006-2007 28416205 53229050 0.53 2007-2008 28057713 43684184 0.64 2008-2009 30391887 44750568 0.67 ANALYSIS This ratio is decreased in the year 2006-2007 to 0.53 when compared to 2005-2006 and further increased to 0.67 in the year 2008-2009 when compared to 2007-2008. this shows that there is an increase in the long-term solvency of the business.
    • TABLE SHOWING PROPRIETORY RATIO 0.7 2006-2007 0.6 2007-2008 2008-2009 0.5 0.4 0.3 0.2 0.1 0 Proprietory RatioINTERPRETATION:This shows that there is an increase in the long-term solvency of the business.It shows proprietor have invested their portion to the growth and welfare ofthe company.
    • Fixed Assets (After depreciation)Fixed assets to Net ---------------------------------------------worth Ratio = Shareholder’s funds Year Fixed Asset Net worth Fixed assets to Net worth Ratio 2006-2007 6079307 28416205 0.21 2007-2008 5378748 28057713 0.19 2008-2009 7775901 30391887 0.25ANALYSISThe ratio of fixed assets to net worth ratio is found to be fluctuating in the year2006-2007 and 2007-2008. But it is slightly increased in the year 2008-2009 to 0.25.
    • INVENTORY TURNOVER RATIO SalesStock Turnover Ratio = ---------------- Inventory Year Sales Inventory Stock turnover Ratio 2006-2007 483975 21 22444998 2.15 2007-2008 62649553 17500270 3.57 2008-2009 90124231 29520878 3.05 ANALYSIS Inventory turn over ratio has decreased to 2.15 in the year 2006-2007 when compared to 2005-2006 and again increased in the year 2007-2008 to 3.57 but in the year 2008-2009 it shows a fall that is 3.05.
    • GRAPH SHOWING INVENTORY TURNOVER RATIO 4 2006-2007 2007-2008 3.5 2008-2009 3 2.5 2 1.5 1 0.5 0 Stock turnover RatioINTERPRETATION:From the above table, its shown the adequacy of goods available to sell incomparison to the actual sale order. Running out of stock due to low inventory(high turnover) may indicate future shortages. It also identifies of poormanagement.
    • Credit SalesDebtors Turnover Ratio = ------------------------ Average Debtors Year Credit Sales Debtors Debtors Turnover Ratio 2006-2007 48397521 11818945 4.09 2007-2008 62649553 4174430 15.0 2008-2009 90124131 5947413 15.15ANALYSISThe debtors turn over ratio has decreased to 4.09 in the year 2006-2007 and againhas increased to 15.15 in the year 2008-2009.
    • GRAPH SHOWING DEBTORS TURNOVER RATIO 2006-2007 16 2007-2008 14 2008-2009 12 10 8 6 4 2 0 Debtors Turnover RatioINTERPRETATION:This shows that the company is running out of cash shortage. Since creditfacilities are provided to debtors, it has lead to less avoid of competitors.
    • DebtorsDebt collection period = ---------------- * 365 days Credit Sales Year Debtors Credit Sales Debt collection Ratio 2006-2007 11818945 48397521 89 Days 2007-2008 4174430 62649553 24 Days 2008-2009 5947413 90124131 24 DaysANALYSISThe debt collection period ratio remains constant in the 2007-2008 and 2008-2009but has increased in the year 2006-2007 to 89 days .
    • GRAPH SHOWING DEBT COLLECTION PERIOD RATIO 2006-2007 90 80 2007-2008 70 2008-2009 60 50 40 30 20 10 0 Debt collection RatioINTERPRETATION:The debt collection period ratio has increased to 89 days in the year 2006-2007. buthas remained constant in the future i.e,24 days. Hence it shows that the companyhas been extending its credit facilities to customer to avoid competition.
    • credit purchases Credit Turnover Ratio = ------------------------------------- average creditors Year Credit purchase Creditors Creditors turn over Ratio 2006-2007 25501189 12827919 1.98 2007-2008 32984848 7452623 4.42 2008-2009 69718267 20032834 3.48ANALYSISThe creditors turnover ratio has decreased to 1.98 in 2006-2007 again it is increasedto 4.42 in 2007-2008 but again there is slight fall in the year 2008-2009 to 3.48.
    • GRAPH SHOWING CREDITORS TURNOVER RATIO 2006-2007 4.5 2007-2008 4 3.5 2008-2009 3 2.5 2 1.5 1 0.5 0 Creditors turn over RatioINTERPRETATION:There has been a decline in creditors turn over ratio in 2006-2007 but a rise innext year and again a decline in 2008-2009
    • SalesFixed assets turnover ratio = ------------------ Fixed Asset Year Sales Fixed Assets Fixed assets turn over Ratio 2006-2007 48397521 6079307 7.96 2007-2008 62649553 5378248 11.64 2008-2009 90124131 7775901 11.59ANALYSISFixed assets turnover ratio is 7.96 in the year 2006-2007 and more or less remainsconstant in the years 2007-2008 and 2008-2009 with slight variations standing at11.64 and 11.59.
    • GRAPH SHOWING FIXED ASSETS TURNOVER RATIO 2006-2007 12 2007-2008 10 2008-2009 8 6 4 2 0 Fixed assets turn over RatioINTERPRETATIONS:There is a an increase in fixed asset turnover ratios from year 2006-2007 and itremains almost the same for two year 2007 to 2009.
    • GROSS PROFIT RATIO Gross profit Gross profit ratio = ------------------ * 100 Sales Year Gross Sales Gross profit profit Ratio 2006-2007 ------------- 48397521 -------- 2007-2008 3711530 62649553 5.92% 2008-2009 2736963 90124131 3.03%ANALYSISGross profit ratio has increased in the year 2007-2008 to 5.92% having no profits inthe year 2006-2007 and shows a fall in 2008-2009 to 3.03%.
    • GRAPH SHOWING GROSS PROFIT RATIO 2006-2007 0.06 2007-2008 0.05 2008-2009 0.04 0.03 0.02 0.01 0 Gross profit RatioINTERPRETATION:This shows that the gross profit relate to sales is average and the profit standpoint isthat the firm be able to generate adequate profit on each unit of sales.
    • NET PROFIT RATIO. Net profitNet profit ratio = ------------------- * 100 Sales Year Net profit Sales Net profit Ratio 2006-2007 ----------- 48397521 ------- 2007-2008 ----------- 62649553 ------- 2008-2009 2334174 90124131 2.6% ANALYSIS The net profit ratio has decreased in the year 2008-2009 to 0.02% having no profit in the immediate previous years . This shows there is decline in the profitability of the company
    • GRAPH SHOWING NET PROFIT RATIO 0.0002 2006-2007 2007-2008 0.00015 2008-2009 0.0001 0.00005 0 Net profit RatioINTERPRETATION:It is shown that net profit ratio is low which would indicate some mismanagementin the areas ex cluding production. This shows there is decline in the profitable ofthe company.
    • OPERATING RATIO Operating costOperating ratio = ------------------------ * 100 Sales Year Operating Sales Operating cost Ratio 2006-2007 15647946 48397521 32.33% 2007-2008 11102218 62649553 18% 2008-2009 21072481 90124131 23.38%ANALYSISThe operating ratio in the year 2005-2006 increased to 32.33% . But it is increasedin the year 2007-2008 to 23.38% when compared to that of 17.72% in the year 2006-2007. So this is the reason for decline in the net profit of the company
    • GRAPH SHOWING OPERATING RATIO 2006-2007 35.00% 2007-2008 30.00% 2008-2009 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Operating RatioINTERPRETATION:There was an increase in operating ratio in 2006-2007 and decline in 2007-2008and a slight increase in 2008-2009.
    • RETURN ON CAPITAL EMPLOYED Net profit before tax Return on capital employed = ----------------------------- * 100 capital employed Year Profit before Capital Return on tax employed capital employed 2006-2007 -106398 53229050 ------- 2007-2008 3711530 43684184 8.5% 2008-2009 2736963 44750568 6.1%ANALYSISThe return on capital employed ratio shows nil return on capital employed in the year2006-2007 because of losses incurred by the company in that year. In the next year itreaches to 8.5% which is 6.1% more when compared to the one in the year 2008-2009 .
    • GRAPH SHOWING RETURN ON CAPITAL EMPLOYED 2006-2007 0.09 0.08 2007-2008 0.07 2008-2009 0.06 0.05 0.04 0.03 0.02 0.01 0 Return on capital employedINTERPRETATION:Capital employed is strong in 2007 & 2008 and its decline in 2008 & 2009
    • Net profit after tax – preference dividendEarning per share= ------------------------------------------------------------- no. of equity shares Year Number of Profit after Earnings equity shares tax per share 2006-2007 15000 ----------- -------- 2007-2008 15000 ----------- -------- 2008-2009 15000 2334174 156 ANALYSIS: The earnings per share have increased to 156 in the year 2008-2009 when compared to all the remaining previous year’s earnings per share.
    • GRAPH SHOWING EARNING PER SHARE (EPS) 160 2006-2007 140 2007-2008 120 2008-2009 100 80 60 40 20 0 Earnings per shareINTERPRETATION:From the above table, it can easily understood that the company EPS issteadily progressed. The share capital of the company has increased withoutthe proportionate increase in the net income.
    • 1.In spite of incurring losses ,it has successfully managed to overcome this bymaking profits in future, which is a good sign of prosperity to the company.2.The long-term solvency position of the company has shown a recurrent increase.3.The sales of the company has increased in the year 2008-2009 which indicates thatthe foreign companies are well satisfied with the company’s product, which is agood sign to company’s prosperity.SUGGESTIONS1.Modern Collections should make proper financial planning so that the availablefunds are utilized in more efficient and effective manner.2.The company must try to maintain its short-term liquidity position, by investingonly in those investments, which are easily convertable into cashThe company should reduce the idle capacity in order to increase the efficiency inthe operations.3.Modern Collections must take immediate measures to reduce the length of theOperating cycle