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  • 1. A RATIO is a expression relating onenumber to another .2. It can be expressed in decimal or fractionor pure ratio or as an absolute terms.3. It is one of the powerful tool offinancial analysis.
  • Shareholders Investors And Lenders Creditors ManagementGovernment
  •  Tata Iron and Steel Company was established by Dorabji Tata on August 26, 1907, as part of his father Jamsetji’s Tata Group Tata Steel Limited)) is an Indian multinational steel-making company headquartered in Mumbai, Maharashtra, India, View slide
  •  Itis the 12th-largest steel producing company in the world, Tata Steel is listed on the Bombay Stock Exchange, where it is a constituent of the BSE SENSEX index, and the National Stock Exchange of India View slide
  • VERTICAL INCOME STATEMENT 2004 2003 RS RS Particulars Gross Sales 3,47,000 2,71,450Less : Sales return 5000 10,050Net Sales 3,42,000 2,61,400Less :COST OF GOODS SOLD : Opening Stock 1,00,000 99,000Add : Purchases 1,98,000 1,40,000Add : Depreciation on Machinery 8,000 7,000Less : Closing Stock 62,000 1,00,000 COST OF GOODS SOLD 2,44,000 1,46,000GROSS PROFIT 98,000 1,15,000Less :OPERATING EXPENSES ADMINISTRATIVE EXPENSES : salaries 28,000 22,000 office rent 16,000 14,000 total administration expenses 44,000 36,000 SELLING AND DISTRIBUTION EXPENSES : sales expenses 4,000 6,000Total operating expenses 48,000 42,000Operating net profit 50,000 73,400Add : NON-OPERATING INCOME
  • 2004 2003 RS RS Profit on sale of land 9,000 - 71,000 83,200LESS : NON-OPERATING EXPENSES : - loss in sale of plant 4,200 loss by fire 2,800 1,200 goodwill written off 10,000 10,000 EBIT 54,000 72,000Less :Interest on mortgage loan 9,000 10,000EBT 45,000 62,000Less : Tax provision 22,000 28,000 EAT 23,000 34,000Less : APPROPRIATIONS : preference dividend 3,000 4,000 proposed equity dividend 20,000 30,000 - -
  • VERTICAL BALANCE SHEET PARTICULARS 2004 2003SOURCES OF FUNDSOWNERS FUNDS:equity share capital 100000 100000+ profit and loss a/c 38000 40000equity share holders 138000 140000+ preference capital 30000 40000 168000 180000BORROWED FUNDS: mortgage loan 80000 100000 TOTAL CAPITAL EMPLOYED 248000 280000APPLICATION OF FUNDSFIXED ASSETS: goodwill 10000 machinery at cost 110000 100000 - depreciation (28000) (20000) wdv machinery 82000 80000 + land 100000 100000 NET FIXED ASSETS 182000 190000
  • PARTICULARS YEAR 2004 2003WORKING CAPITAL : CURRENT ASSETS QUICK ASSETS debtors 80000 60000 Marketable securities 20000 20000 cash 2000 30000 NON QUICK ASSETS stock 62000 100000 TOTAL CURRENT ASSETS 164000 210000- CURRENT LIABILITIES QUICK LIABILITIES creditors 42000 60000 bills payable 18000 10000 taxes payable 38000 50000 TOTAL CURRENT LIABILITIES 98000 120000WORKING CAPITAL (CURRENT ASSETS-CURRENT LIABILITIES) 66000 90000 TOTAL NET ASSET OWNED 248000 280000
  •  Current Ratio Quick ratio StockTo Working Capital ratio Proprietor’s Ratio
  • RATIOS FORMULAE YEAR 2004 2003CURRENT RATIO Current Assets 164000 210000 Current Liabilites 98000 120000 =1.67 =1.75QUICK RATIO Quick Assets 102000 140000 Quick Liabilities 98000 140000 =1.04 =1STOCK TO Closing Stock × 100 62000 ×100 100000 × 100WORKING CAPITAL Working Capital 66000 90000RATIO =93.94% =111.11%PROPRIETOR’S Proprietors Funds ×100 168000 ×100 180000 ×100RATIO Total Assets 346000 400000 =48.55% =45%
  •  Capital Gearing Ratio Debt Equity Ratio Gross Profit Ratio Operating Ratio
  • RATIOS FORMULAE YEAR 2004 2003CAPITAL GEARING Fixed Interest 1,10,000 1,40,000RATIO Bearing Securities 1,38,000 1,40,000 Non-Fixed Interest =0.8:1 =1:1 Bearing SecuritiesDEBT EQUITY Long Term Debt 80,000 1,00,000RATIO Proprietors Equity 1,68,000 1,80,000 =0.47 =5.55GROSS PROFIT Gross Profit × 100 98,000 × 100 1,15,400 ×100 Net Sales 3,42,000 2,61,400 =28.65% =44.14%OPERATING RATIO Operating Profit×100 50,000 ×100 73,400 ×100 Net Sales 3,42,000 2,61,400 =14.61% =28.07
  •  Expenses Ratio Net Profit Ratio StockTurnover Ratio COMPOSITE RATIOS Return On Capital Employed
  • RATIOS FORMULAE YEAR 2003 2004EXPENSES RATIO Operating Expenses × 100 73400 ×100 50000 ×100 Net Sales 261400 342000 =28.08% 14.26%NET PROFIT RATIO NAPT × 100 34000 × 100 23000×100 Net Sales 261400 342000 =13% 6.72%STOCK TURNOVER COGS 146000 24400 0RATIO Average Stock 99500 81000 =1.46 tms =3.01 tmsRETURN ON NPBIT ×100 72000 ×100 54000 ×100CAPITAL Capital Employed 280000 248000EMPLOYED =25.71% =21.77%
  •  Return On Proprietor’s Funds Ratio Earnings Per Share Ratio Debtors Turnover Ratio Creditors Turnover Ratio
  • RATIOS FORMULAE YEAR 2004 2003RETURN ON NPAT 13.7 % 18.9 %PROPRIETOR’S PROPRIETORS *100FUNDS RATIO FUNDEARNING PER NPAT – PREFERENCE RS. 2 PER SHARE RS. 3 PER SHARESHARE RATIO DIVDEND NO. OF EQUITY SHARESDEBTORS NET CREDIT SALES 4.8857 TIMES 4.36 TIMESTURNOVER AVG. ASSETRATIO RECEIVABLESCREDITORS NET CREDIT 3.05 TIMES 2 TIMESTURNOVER PURCHASESRATIO AVG CREDITORS