Ratio analysis and Definition

1. Profitability ratio
Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratios which are used to determine the company's bottom
line and its return to its investors. Profitability measures are important to company managers and
owners alike. If a small business has outside investors who have put their own money into the
company, the primary owner certainly has to show profitability to those equity investors.
1:GROSS PROFIT RATIO
This ratio looks at how well a company controls the cost of its inventory and the manufacturing
of its products. By looking at gross profit ratio of atlas Honda the average trend shows a decline
in gross profit % margin for last 5 years comparison which indicates the increase in cost of good
sold and average % is just 14 to 15% which is not a good thing. The larger the gross profit
margin, the better for the company.
2:OPERATING RATIO
A ratio that shows the efficiency of a company's management by comparing operating expense to
net sales. The atlas batteries operating ratio is very much high in last 5 average perform 85% it
was to high the production cost is huge and profit margin is less. The smaller the ratio, the
greater the organization's ability to generate profit if revenues decrease. Atlas batteries try to put
effort to minimize their expense and their operating ratios.
3:OPERATING PROFIT
Operating profit is also known as EBIT and is found on the company's income statement. EBIT
is earnings before interest and taxes. The operating profit margin ratio is a measure of overall
operating efficiency, incorporating all of the expenses of ordinary, daily business activity.by
looking at the financial statement of atlas battery the operating ratio increase but decrease in
term of % for last year which shows that the company cannot perform well to manage his
expenses in a good way which decrease his profit margin.
RATIO ANALYSIS

2. 4:NET PROFIT MARGIN
Net profit margin is the most often margin ratio used. The net profit margin shows how much of
each sales dollar shows up as net income after all expenses are paid. the net profit of atlas Honda
is increase because of increase in sale but the net profit margin stills stand 6 to 6.5% for last 5
years which shows that the firm cannot adopt such major achievement in his past 5 years and stiil
not cut down his expenses and earn at almost same rate.
5:ROCE
A financial ratio that measures a company's profitability and the efficiency with which its capital
is employed. A higher ROCE indicates more efficient use of capital. ROCE should be higher
than the company’s capital cost it indicates that the company is effectively generating
shareholder value. The ROCE of atlas battery is about 40 to 42% in last 5 years that shows a
good trend its mean the company is earn 42% from his equity and remaining from their debts
finance. more earning from equity is more beneficial for the organization.
6:RETURN ON ASSETS
The Return on Assets ratio is an important profitability ratio because it measures the efficiency
with which the company is managing its investment in assets and using them to generate profit.
The atlas batteries earns 16% return from its assets which shows a small decline from its
previous year the return of assets of atlas batteries is shown a good % which means the company
puts effort to generate their profit for better utilization of their assets but it’s a tough time for the
organization to enhance the efficiency of their assets in run of profit generates.
7:RETURN ON EQUITY
The Return on Equity ratio is perhaps the most important of all the financial ratios to investors in
the company. It measures the return on the money the investors have put into the company. This
is the ratio potential investors look at when deciding whether or not to invest in the company.it
shows the return from the amount of equity finance. The atlas battery show a good return from
the equity amount of almost 32% but it is just little bit down from their previous years return but
still it’s a good health return from its equity finance. Need to increase the profit margin from
their equity like perform in past years.

3. 8:INTREST COVERAGE RATIO
The interest coverage ratio (ICR) is a measure of a company's ability to meet its interest
payments. The interest coverage ratio is a measure of the number of times a company could
make the interest payments on its debt with its EBIT. Atlas batteries interest coverage ratio is
good it indicates that the firm is able to pay his interest 14 times to see his EBIT. which indicates
a good trend for the organization and chances of insolvency of the firm minimize.
9:Current ratio
Current Ratio is a liquidity ratio that measures company's ability to pay its debt over the next 12
months or its business cycle.
Current ratio is a financial ratio that measures whether or not a company has enough resources to
pay its debt over the next business cycle (usually 12 months) by comparing firm's current assets
to its current liabilities. The atlas battery current ratio is performing well in last 5 years which
shows that current ratio is very good & the company is easily pay his debts with his current
liabilities.2013 ratio is 1:1.69 .
10:Quick /liquid ratio
Quick ratio specifies whether the assets that can be quickly converted into cash are sufficient to
cover current liabilities.
Ideally, quick ratio should be 1:1.
Atlas battery quick ratio is less than 1 for last many years which is not a good sign the company
only pay his 70% debt with their quick assets.
11:Working capital turnover
A measurement comparing the depletion of working capital to the generation of sales over a
given period. This provides some useful information as to how effectively a company is using its
working capital to generate sales. The atlas battery working capital turn over is showing a better
result current ratio is 8.83 which means it generate 8.33 times sales from its working capital in a
year.

4. 12:Receivable turnover ratio
Receivables Turnover Ratio is one of the efficiency ratios and measures the number of times
receivables are collected, on average, during the fiscal year. Atlas battery receivable ratio is 105
times in a year which shows how efficient they recover in money.
13:Receivable turnover days
Receivables Turnover Ratio is one of the efficiency ratios and measures the number of times
receivables are collected, on average, during the fiscal year. Atlas battery turnover ratio is very
good they recover their money twice in a week.
14:Payable turnover ratio
The measure shows investors how many times per period the company pays its average payable
amount. Atlas battery company turnover ratio is just 11 times which is show a bad thing in the
market because his receivable is 105 times in a year.
15:Payable turnover in days
Accounts payable turnover ratio is an accounting liquidity metric that evaluates how fast a
company pays off its creditors (suppliers). The ratio shows how many times in a given period
(typically 1 year) a company pays its average accounts payable. Atlas battery pay his payment
after 30 days but receive in only 3.5 days which means they utilize their money in many ways.
16:Inventory turnover ratio
Inventory Turnover Ratio is one of the efficiency ratios and measures the number of times, on
average, the inventory is sold and replaced during the fiscal year. Atlas battery turnover ratio is
5.12 which mean they makes their battery only 5 times in a financial year.
17:Inventory conversion period
A ratio showing how many times a company's inventory is sold and replaced over a period. A
ratio showing how many times a company's inventory is sold and replaced over a period. Atlas
battery ratio is 70 days the prepare their stock in finished product after every 5 years.

5. 18:Operating cycle
Operating cycle is the number of days a company takes in realizing its inventories in cash. It
equals the time taken in selling inventories plus the time taken in recovering cash from trade
receivables. operating cycle ratio of Atlas battery is 110 days which shows that organization
operating cycle is just average.
19:Cash cycle or conversion
A metric that expresses the length of time, in days, that it takes for a company to convert
resource inputs into cash flows. The cash conversion cycle attempts to measure the amount of
time each net input dollar is tied up in the production and sales process before it is converted into
cash through sales to customers. cash conversion ratio of Atlas battery is 30 days which mean
inventory made and sell and meet payables in 30 days.