Current ratio is also known as working capital ratio or 2 : 1 ratio. It is the ratio of total current assets to total current liabilities.Current ratio indicates the liquidity of current assets or the ability of the business to meet its maturing current liabilities. High current ratio finds favor with short-term creditors whereas low ratio causes concern to them. An increase in the current ratio reflects improvement in the liquidity position of the business while the decrease signals that there has been a deterioration in the liquidity position of the business. As a convention 2 :1 is regarded as satisfactory level i.e. current assets should be almost double than the current liabilities.Quick ratio also known as liquid ratio or acid test ratio. Current ratio provides a rough idea of the liquidity of a firm so subsequently a second testing device was developed named as acid test ratio or quick ratio. It establishes relationship between liquid assets and current liabilities.As quick ratio eliminates inventory and prepaid expenses for matching against current liabilities therefore it is a more rigorous test of liquidity as compared to Current ratio. When used along with Current ratio it gives a clearer picture of business's liquidity position. Rule of thumb for acid test ratio is 1 : 1 i.e., if business liquid assets are 100 percent of its current liabilities it is considered to be having fairly good current financial position.The relationship between borrowed funds and internal owner's funds is measured by Debt-Equity ratio. This ratio is also known as debt to net worth ratio.
How effective or efficient is the credit collection? Normally higher the debtors turnover ratio better it is. Higher turnover signifies speedy and effective collection. Lower turnover indicates sluggish and inefficient collection leading to the doubts that receivables might contain significant doubtful debts.Inventory Turnover ratio or Stock turnover ratio indicates the velocity with which stock of finished goods is sold i.e. replaced. Generally it is expressed as number of times the average stock has been "turned over" or rotate of during the year.
The return on assets (ROA) percentage shows how profitable a company's assets are in generating revenue.This number tells you what the company can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control.ROE measures a firm's efficiency at generating profits from every unit of shareholders' equity.High ROE yields no immediate benefit. Since stock prices are most strongly determined by earnings per share (EPS), you will be paying twice as much (in Price/Book terms) for a 20% ROE company as for a 10% ROE company.The benefit comes from the earnings reinvested in the company at a high ROE rate, which in turn gives the company a high growth rate. The benefit can also come as a dividend on common shares or as a combination of dividends and reinvestment in the company. ROE is presumably irrelevant if the earnings are not reinvested.ROCE is used to prove the value the business gains from its assets and liabilities, a business which owns lots of land but has little profit will have a smaller ROCE to a business which owns little land but makes the same profit.It basically can be used to show how much a business is gaining for its assets, or how much it is losing for its liabilities.Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.AT = Sales/Avg. total assets"Sales" is the value of "Net Sales" or "Sales" from the company's income statement"Average Total Assets" is the average of the values of "Total assets" from the company's balance sheet in the beginning and the end of the fiscal period.This ratio is useful to determine the amount of sales that are generated from each dollar of assets. As noted above, companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover.
o ITC Limited (BSE: 500875) is a public conglomerate company headquartered in Kolkata, India. o The company is currently headed by Yogesh Chander Deveshwar. o It employs over 26,000 people at more than 60 locations. Parameter 2009-10 2008-09 considered (in Rs.crores) (in Rs.crores) Gross Income 26862.98 23678.46 Net Income 18756.57 16146.85 Total Capital employed 14957.1 14779.82 a. Shareholders funds 14064.38 13735.08 b. Loan funds 107.71 177.55 c. Net Deferred tax 785.01 867.19 PBT 6015.31 4825.74 PAT 4061 3263.594 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o Rated by BCG amongst top 10 Consumer Goods companies in the world in terms of Total Shareholder Returns (TSR) during 2005-09 o One of the foremost in the private sector in terms of : • Sustained value creation (BT-Stern Stewart survey) • Operating profits • Cash Profits o Ranks No. 4 among Indian listed Private Sector Companies by market cap. o Only Indian FMCG Company to feature in Forbes 2000 List • A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value5 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
FMCG Cigarettes Foods Personal Care Lifestyle Retailing, Education & Stationery Matches Incense Sticks Information Hotels Paper & Packaging Agri Business Technology 6 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o FMCG – Cigarettes: ITC launched new variants of Gold Flake and Navy Cut Filter Kings, Flake Excel Filter, Duke Filter and premium hand-rolled cigars under the brand name Armenteros. Technology improved across units with the installation of high- speed cigarette making and packing machines o Packaged Goods: 21% growth in sales. ‘Bingo’ augmented with new variants, Tedhe Medhe and International Cream n Onion. • Staples: Aashirvaad atta grew 21% - market share of 56%. • Biscuits: Market share of 11% • Confectionaries: Candyman – Market Leader. New launch: ‘mint-O-gol’ o Personal Care: Achieved market share of 5% in soaps and 3.4% in shampoos. Launched Fiama Di Wills Gel bathing bar, Vivel Deo Spirit, milk cream and glycerine soap. o Lifestyle retailing: Expansion underway: 56 Wills Lifestyle stores and 225 John Players Stores. o Education and Stationary: Sales growth: 40% - market share: 12%8 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o FMCG – safety matches: Sales growth: 10.8%. Exports expansion to Africa and Middle East o Incense Sticks: Sales growth: 55%. New launch: ‘Fragrance of temple’ introduced in Tamil Nadu. Second largest brand in India. o Entered partnerships with Governments of Orissa, Assam and Tripura to set up sourcing centers to create opportunities for rural women. o Hotels: ITC Royal Gardenia – 292 room luxury offering opened in Bangalore. o Invested in wind energy to provide clean power to ITC Maratha in Mumbai. Implementation of solar energy to provide steam at ITC Maurya, New Delhi and ITC Royal Gardenia, Bangalore. o Paper, Paperboards & packaging: market share: 26%. o Agri business: Wellgro crops introduced for growing horticultural crops including chillies, tomato, banana, citrus fruits and leafy vegetables.9 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o 249.33crore shares constituting 65.3% of issued and subscribed share capital stand dematerialized as on 31st March 2010. o Company’s market capitalization: Rs.1,00,437crores. o 84,23,357 were traded during the financial year 2009-10.10 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Year high: 272.90 Year Low: 177.5011 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Particulars FY 2009-10 FY 2008-09 Dividend per share Rs.10.00/- Rs.3.70/- (Includes centenary dividend of Rs.5.50/-) Total Dividend Rs. 3818.18crores Rs. 1396.53crores amount (excluding tax) Net worth per share 36.84 36.39 Under the company’s Employee Stock option Schemes (ESOPs) 4,37,77,230 ordinary shares of Re.1/- each were issued and allotted during the financial year 2009-10.12 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Current Ratio(x) 2.32 2.74 2.52 2.64 Quick Ratio(x) 1.02 1.20 1.07 1.23 Total Debt/Equity(x) 0.01 0.01 0.02 0.0214 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Debtors turnover ratio (x) 24.31 21.32 20.43 20.79 Inventory turnover ratio (x) 6.04 5.26 5.51 3.7615 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 ROA(%) 28.92 24.93 27.24 27.25 ROE(%) 29.33 25.42 27.88 27.86 ROCE(%) 43.65 37.38 40.44 40.02 Asset Turnover(x) 1.87 1.77 1.86 1.9516 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Earnings Per Share (Rs) 10.64 8.65 8.28 7.18 Dividend per share (DPS) 10.00 3.70 3.50 3.10 Dividend pay- out ratio 0.94 0.43 0.42 0.4318 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o 2006-2010 o Keeping the Base year as 2006, shown the trend in the figures of company’s balance sheet and annual report. o Last 5-10 years trends can give traders and investors an idea of what may happen in the future or what has happened in past.20 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
ITC Group 20000 18756.57 15000 14558.43 16146.85 12500.78 10076.61 10000 5000 0 FY06 FY07 FY08 FY09 FY010 o Net Income has grown by 16.3% in 2009-10 o Non-cigarette FMCG businesses is 20.9%. o Cigarettes business is 19.8% o Paperboards, Paper & Packaging segment 17.4%22 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o Gross turn over grew at 12.4%. o PAT grew at 21.7%. o Return on Capital Employed improved substantially from 28.4% to 41%. o Total Shareholder Returns grew at 24.3%. o Foreign exchange earnings USD 4.1 billion .26 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o Claims not acknowledged as debts – Rs. 258.73crores: o Excise duty, sales taxes and other indirect taxes claims relating to issues of applicability and classification aggregating Rs.193.74crores. o Local authority taxes / Cess / royalty on property, utilities, etc relating to issues of applicability and classification aggregating Rs. 33.49crores. o Third party claims arising from disputes relating to contracts aggregating to Rs. 29.22crores. o Others: Rs.2.28crores o Uncalled liability on shares: Rs. 26.40crores o R&D expenses: Rs.77.08crores o Donations to political parties: Rs.6.28crores o The company chose out of the joint venture with Sitel Operating Corporation India Limited.37 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
• Launched a ‘Wealth out of Waste’ (WOW) initiative to increase the re- use of waste paper which domestically is very low at 14% as compared to 60%. • Became a member of WWF GFTN ( World Wide Fund for Nature’s global Forest and Trade Network – global industry benchmark for sustainable development. o Successful implementation of end-to-end ERP system for all plants. o Investment in renewable energy – 31% of company’s total energy requirements o During the financial year, the ISO quality management system certification upgraded the ISC for investor servicing from ISO 9001:2000 to ISO 9001:2008. o E-choupal network established provided farmers with value added services such as crop advisories, weather updates, price discovery and access to high quality agricultural inputs. o Owing to the declining tobacco consumption in India from 23% in 1971- 72 to about 15% currently, ITC is looking to establish itself as No.1 in FMCG sector.38 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o Joint Venture: • Maharaja Heritage Resorts Limited: Ownership interest of 50% Joint venture with Jodhana heritage Resorts Private limited. o Subsidiaries: • Russell Credit Limited • Srinivasa Resorts Limited • Gold Flake Corporation limited • Fortune Park Hotels Limited & Wills Corporation Limited • Bay Islands Hotels Limited • Landbase India Limited • King Maker Marketing • BFIL Finance Limited Inc., USA • ITC Infotech India Limited • Surya Nepal Private Limited39 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
o http://en.wikipedia.org/wiki/ITC_Limited o http://www.itcportal.com/shareholder/ann ual-reports/itc-annual-report-2010/page- 02.aspx o http://money.livemint.com/IID64/F100875/ Financial/Ratios/Company.aspx40 11/13/2012 ITC Annual Report Analysis (FY 2009-10)
Thank You! Before you can really star t setting financial goals, you need to determine where you stand financially. David Bach41 11/13/2012 ITC Annual Report Analysis (FY 2009-10)