1. A PRESENTATION ON THE TOPIC :
RATIO ANALYSIS
FOR THE TRAINING UNDER GONE AT:
PRESENTED BY: SOURABH MODGIL
5TH SEMESTER
ROLL NO. - 44
2. COMPANY PROFILE
Liberty group started operation in 1954 and comprises of
five firms namely:
Liberty footwear company
Liberty enterprise
Liberty leathers
Liberty group marketing division
Liberty shoes limitted
3. The company was started by three dreamers in a
small town- MR.DP GUPTA,MR.PD GUPTA AND
MR.R BANSAL.
Liberty Shoes have been fashioning footwear, for
well over 50 years now Currently with an annual
turnover exceeding INR.600 crore (U.S. $150
million), we figure amongst the top 5 manufacturers
of leather footwear of the world producing more
than 50,000 pairs a day.
Liberty has quality-seeking customers in more than
25 countries.
5. OBJECTIVES OF THE STUDY:
The basic objective of studying the ratios of the
company is to know the financial position of the
company.
To study the profit of the business and net sales of
the business and to know stock reserves for the
sales of the business.
To spot out the strength and weakness of the
business.
6.
7. CURRENT ASSETS = CURRENT ASSETS/CURRENT LIABILITIES
YEAR CURRENT ASSETS CURRENT RATIO
LIABILITIES
2005-06 938896527 653083419 1.4376
2006-07 1216862601 733828909 1.6582
2007-08 2007940647 673965547 2.98
2008-09 2544279053 1201432362 2.1177
2009-10 3015416632 1147817477 2.6271
8. current ratio
3.5
3
2.5
2
current ratio
1.5
1
0.5
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
IT INDICATES THAT THE LIQUIDITY POSITION OF THE COMPANY IS NOT
SOUND IN THE YEAR 2005-06 AS IT IS LESS THEN 2:1.SIMILARLY IS
IN 2006-07 .BUT IN 2007-08,08-09 AND IN 2009-2010 THE
CURRENT RATIO EXCEEDS. THIS IS A POSITIVE SIGN.
9. QUICK/LIQUID RATIO = CASH +MARKETABLE
SECURITIES+ ACCOUNTS RECEIVABLE/ CURRENT
LIABLITIES
YEAR LIQUID ASSETS CURRENT RATIO
LIABILITIES
2005-06 174140837 653083419 0.2666
2006-07 164562907 733828909 0.2242
2007-08 112633117 637965547 0.1671
2008-09 196033579 1201432362 0.1632
2009-10 273411559 1147817477 0.2382
10. Quick/Liquid ratio
0.3
0.25
0.2
0.15
Quick/Liquid ratio
0.1
0.05
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
AS AN IDEAL QUICK RATIO SHOULD BE1:1, IT INDICATES THAT
THE COMPANY ABILITY TO USE ITS NEAR CASH OR QUICK ASSETS
TO RETIRE ITS CL IS NOT SOUND IN ALL THOSE YEARS.
11. DEBT EQUITY RATIO = TOTAL
LIABILITIES/SHAREHOLDERS EQUITY
YEAR TOTAL SHARHOLDERS’ RATIO
LIABILITIES S EQUITY
2005-06 4182856914 2148508410 2.0561
2006-07 4465142153 1942541010 2.2986
2007-08 5755393303 2153921231 2.6721
2008-09 7705393303 1984602576 3.8825
2009-10 9236673519 1878040034 4.9183
12. Debt-equity ratio
6
5
4
3
Debt-equity ratio
2
1
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
IF THE DEBT EQUITY RATIO IS MORE THAN 1,THIS MEANS THE
DEBT IS MAINLY USED FINANCING ITS OPERATIONS. IT
INDICATES THAT THE BUSINESS HAS LOT OF RISK BECAUSE IT
MUST MEET PRINCIPAL AND INTEREST ON ITS OBLIGATIONS.
13. PROPRITORY RATIO = SHAREHOLDERS
FUND/TOTAL ASSETS
YEAR SHAREHOLDERS TOTAL ASSETS RATIO
’S FUND
2005-06 1730508410 4182856914 0.4137
2006-07 1942541010 4465142153 0.4350
2007-08 2153921231 5755393303 0.3742
2008-09 1948602576 7705316033 0.2528
2009-10 1878040034 9236673519 0.2033
14. Proprietary ratio
0.5
0.45
0.4
0.35
0.3
0.25
Proprietary ratio
0.2
0.15
0.1
0.05
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
THE RATIO CAN BE INTERPRETED AS GOOD IF IT IS HIGH
BECAUSE A HIGHER PROPRIETARY RATIO WOULD IMPLY THAT
COMPANY HAS ENOUGH CAPITAL TO REPAY ITS CREDITORS,
WHENEVER ANY SUCH DEMAND IS MADE BY THE CREDITORS.
16. Fixed assets turnover ratio
2
1.8
1.6
1.4
1.2
Fixed assets turnover
1 ratio
0.8
0.6
0.4
0.2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
HIGHER THE FIXED ASSETS TURNOVER RATIO, THE BETTER IT
IS FOR THE COMPANY BECAUSE A HIGH RATIO INDICATES THE
BUSINESS HAS LESS MONEY TIED UP IN THE FIXED ASSETS
FOR EACH UNIT OF CURRENCY OF SALES REVENUE.
17. INVENTORY TURNOVER RATIO =NET
SALES/INVENTORY
YEAR SALES INVENTORY RATIO
2005-06 3662420296 279046650 13.1247
2006-07 4182472441 366045505 11.4261
2007-08 5012789202 557230198 8.9959
2008-09 8026752955 947127445 8.4748
2009-10 10466193853 1219791118 8.5803
18. inventory turnover ratio
14
12
10
inventory turnover ratio
8
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
A HIGH INVENTORY TURNOVER RATIO MEANS THE COMPANY IS
EFFICIENTLY MANAGING AND SELLING ITS INVENTORY AND
INDICATE BETTER LIQUIDITY, BUT IT CAN ALSO INDICATE A
SHORTAGE OR INADEQUATE INVENTORY LEVELS WHICH MAY
CAUSE LOSE IN BUSINESS.
20. Debtors turnover ratio
14
12
10
8
Debtors turnover
ratio
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
THE HIGHER THE VALUE OF DEBTORS TURNOVER RATIO ,THE
MORE EFFICIENT IS THE MANAGEMENT OF DEBTORS OR MORE
LIQUID THE DEBTOR’S ARE. HIGHER TURNOVER SIGNIFIES
SPEEDY AND EFFECTIVE COLLECTION.
21. WORKING CAPITAL TURNOVER RATIO=
COST OF SALES/NET WORKING CAPITAL
YEAR COST OF SALES NET WORKING RATIO
CAPITAL
2005-06 3120167111 285813108 10.917
2006-07 3425500099 485813108 7.0916
2007-08 4326627922 1333975100 3.2434
2008-09 7444286989 1342846691 5.5437
2009-10 9424223978 1867599155 5.0461
22. Working capital turnover ratio
12
10
8
Working capital turnover
ratio
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
POSITIVE SIGN SHOWING THE
A HIGH RATIO IS
COMPANY IS ABLE TO GENRATE SALES FROM
AND INDICATES EFFICENT UTILISATION OF
WORKING CAPITAL.
23. TOTAL ASSETS TURNOVER RATIO= TOTAL
ASSETS/NET SALES
YEAR TOTAL ASSETS NET SALES RATIO
2005-06 4182856914 3662420296 1.142
2006-07 4465142153 4182472441 1.068
2007-08 5755393303 5012789202 1.148
2008-09 7705316033 8026752955 0.959
2009-10 9236673519 10466193853 0.882
24. Total assets turnover ratio
1.4
1.2
1
0.8 Total assets turnover
ratio
0.6
0.4
0.2
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
HIGHER THE COMPANY ASSETS TURNOVER
RATIO ,THE LOWER THE PROFIT MARGINES
SINCE THE COMPANY IS ABLE TO SALE MORE
PRODUCTS AT A CHEPER RATE.
25. NET PROFIT RATIO= NET PROFIT/SALES*100
YEAR NET PROFIT SALES %
2005-06 845169350 3662420296 23.076
2006-07 1057201950 4182472441 25.276
2007-08 1266429294 5012789202 25.264
2008-09 1057292022 8026752955 13.172
2009-10 992700974 10466193853 9.485
26. net profit ratio
30
25
20
15
net profit ratio
10
5
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
IT’S A NOT GOOD SIGN FOR THE COMPANY AS
HIGHER THE NET PROFIT RATIO WILL HELP THE
FIRM SERVICE IN THE FALL OF INCOME FROM THE
SERVICE S,RISE IN COST OF PRODUCTION OR
DECLINING DEMAND.
28. Gross profit ratio
50
45
40
35
30
25
Gross profit ratio
20
15
10
5
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
THE PROFIT MARGIN IS GOOD WHICH IS A
POSITIVE SIGN FOR THE COMPANY.
29. RETURN ON CAPITAL EMPLOYED= PROFIT BEFORE
TAX AND INTEREST/CAPITAL EMPLOYED*100
YEAR 2005-06 2006-07 2007-08 2008-09 2009-10
ROCE% 5.3 8.9 6.6 5.2 4.5
30. RETURNE ON CAPITAL EMPLOYED
10
9
8
7
6
5
Column1
4
3
2
1
0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRITATION :
THE LOW PERCENTAGE IS INDICATING THAT THE
MANAGEMENT HAS NOT EFFICENTLY USED THE
INVESTMENTS MADE BY THE OWNERS AND
CREDITORS INTO THE BUSINESS.
31. EARNING PER SHARE= PAT/NO. OF SHARES
YEAR 2005-06 2006-07 2007-08 2008-09 2009-10
EPS 17.65 26.48 27.33 27.75 31.02
32. EARNING PER SHARE
35
30
25
20 EARNING PER
SHARE
15
10
5
0
2006-07 2007-08 2008-09 2009-10
INTERPRETSTION:
THE HIGHER THE RATIO ,THE BETTER IT IS
BECAUSE THE VALUE OF THE SHARE WILL
INCREASE.
33. RECOMMENDATIONS AND SUGGESTIONS :
Either the company should decrease the prices or
the shoes of less price range should also be there
so that need of every kind of customers could be
fulfilled.
The dealer should regularly visit the retailers and
listen to there complaints .
Stock should be verified more frequently to avoid
difference between book figures and actual figures .
Funds should be available in smooth and steady
flow so that the construction at the site is not
affected.
