Looks at the ratio between
current assets and current
Mostly Current Ratio of 2 is consider acceptable. For
Atlas Honda, current ratio less than 2 is acceptable and
has improved during last 5 years and remain stable in
last 2 years at level of 1.45 which is quite acceptable.
Is similar to the current ratio
but it excludes inventory
from current assets.
A Quick Ratio of 1 or greater is acceptable. For Atlas
Honda, Quick Ratio mostly remain below 1 and remain
According to company financial statement they
are in Strong Liquidity position but their liquidity
position is not that good as they stated. Company
liquidity position appear to have remain stable
but below acceptable criteria. Company may
have problem to satisfy its short term obligations
when they come due. But, it is also a fact that
company do not have paid all its short term
obligations at the same time so company can
manage to pay its short liabilities.
Measures the speed with which
various accounts are converted into
sales or cash-inflows or cashoutflows.
Inventory Turnover Ratio
Measures the activity of a
Inventory turnover for ATLAS HONDA is improved very fast
during last 5 years and a level of 16.3 is quite remarkable.
Higher Inventory Turnover leads to reducing holding cost and
increase the net income and profitability. But company need to
remain conscious about inventory turnover because higher
level of inventory turnover may indicate inadequate inventory
level, which may leads to a loss for the business.
The company’s assets performance appears to
be in a good shape. It is clear that company has
efficiently use the various components of working
capital cycle. It has been able to effectively
control the receivables and inventories.
Indicates the amount the firm
uses to generate profits from
Measures the proportion of
total assets financed by the
The higher degree of debt ratio shows the greater the
firm’s degree of indebtedness. Debt ratio for Atlas Honda
in 2008 was nearly 61% which was not very favorable
for the organization. But during the last 5 years, the debt
ratio decrease continuously and reach to nearly 50%
which is not very good but fair enough.
Times Interest Earned Ratio
Measures the firm’s ability to make
contractual interest payments. It is
also called Interest Coverage Ratio.
Interest Coverage Ratio of Atlas Honda increase during
the last 5 years but you can see a surprising increase in
this ratio in 2012. You can understand this increase by
comparing Debt and Interest coverage ratio.
In this graph you can see a negative relationship
between Debt and Interest coverage ratio. As the
company debt ratio decrease, the company times
interest earned ratio increase rapidly. It is due to
company policy introduced in 2010 to reshape its
balance sheet approach and worked to reduce the
interest bearing liabilities to improve its balance
sheet. The outcome of this policy is the
Achievement of “DEBT FREE STATUS” in 2012.
The Company’s Gross profit margin declined
but it is due to the higher cost of goods sold.
While the Operating and Net profit margin is
improving so we can evaluate that company
profitability is improving.
Return on Total Assets (ROA)
Measures the overall effectiveness of the
management in generating profits with its
available assets. It is also called Return
on Investment (ROI).
The higher the firm’s return on total asset consider the
better. Return on total asset of ATLAS HONDA appear to
be improved in last 3 year and rose to 11% despite
significant in assets base on account of capacity
Relates the firms’ market value as
measured by its current share
price, to certain accounting values.
Price/Earnings Ratio (P/E)
Measures the amount that investors
are willing to pay for each dollar of a
The higher level price earnings ratio consider the better.
Price earnings ratio for ATLAS HONDA decrease during
previous years but it not due of low earning but due to
the higher market price of ATLAS HONDA’s shares.
DuPont System of Analysis
System used to dissect the firm’s financial
statement and to assess its financial
The two measures of this this system are:
1. Return on total assets (ROA)
2. Return on common equity (ROE)
Multiplies the firm’s net profit margin by its
total asset turnover to calculate the firm’s
return on total assets.
Modified DuPont Formula
Relates the firm’s return on total assets to
its return on common equity using financial