2. Common Size Income Statement Analysis
• Revenue from Sale of Products: This item has shown a gradual increase over the years, which is a positive trend. It indicates the company's
ability to grow its core product sales.
• Revenue from Sale of Services: The revenue from the sale of services has also increased slightly, showing diversification in revenue
streams.
• Other Operating Revenue: This item has seen fluctuations over the years, with a decrease in the last two years. The decrease may be due
to changes in product offerings or market conditions.
• Other Income: Other income has gradually decreased over the years, which might be a result of changes in non-operating income sources.
• Cost of Materials Consumed: The cost of materials consumed increased significantly in 2021-2022 but decreased in 2022-2023. The
substantial increase may be due to factors like supply chain disruptions or rising material costs induced by the Pandemic.
• Purchases of Stock-in-Trade: This item increased over the years, especially in 2021-2022 and 2022-2023. The company may be investing in
more stock to meet demand.
• Changes in inventories of finished goods, Stock-in-trade, and work-in-progress: There was a significant negative change in 2021-2022,
possibly due to inventory management adjustments.
• Employee Benefits Expense: This expense has been relatively stable and slightly decreased in 2022-2023, which could be a result of cost
management.
• Other Expenses: Other expenses have remained relatively stable with a slight increase in 2022-2023.
3. Common Size Balance Sheet Analysis
Non-Current Assets
Property, Plant and Equipment: This category has shown a consistent decrease in percentage from 34.83% in 2018-2019 to 15.48% in
2022-2023. The company may have reduced its investment in fixed assets or undergone depreciation, which could indicate a shift towards
more operational efficiency.
Right-of-Use Asset: This item has been relatively stable, with a slight increase in recent years, indicating continued use of lease assets.
Capital Work-in-Progress: After a decrease in 2019-2020, it increased significantly in 2022-2023. This could reflect an increase in capital
investment or expansion plans.
Investments in Subsidiaries and Associates: This category has shown minor fluctuations but has increased slightly in 2022-2023, possibly
indicating strategic investments.
Financial Assets: The percentage of financial assets, such as investments, loans, and other financial assets, has shown some variations,
with a notable decrease in 2022-2023.
Current Assets
Inventories: The percentage of inventories increased significantly in 2021-2022 but decreased in 2022-2023. This may reflect changes in
inventory management and production volumes.
Financial Assets: The percentage of financial assets has seen fluctuations, with a significant decrease in 2020-2021 and an increase in
2022-2023.
Trade Receivables: Trade receivables as a percentage of total assets have gradually increased, indicating more credit sales.
4. Profitability Ratio Analysis
Analysis:
• The increase in profitability ratios in FY21 can be explained by the decrease in COGS which was caused by a decrease in the price of raw
materials required by paint manufacturers because of a decrease in crude oil prices during the pandemic.
• But the crude oil prices started to increase in FY22 and affected the profit margin of Asian Paints, which can also be seen in the graph.
38.15% 37.85% 38.05%
31.86%
33.52%
12.79% 12.47% 13.59%
10.49% 11.46%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Profitability Ratio Trendline
Gross Profit Margin Net Profit Margin
Interpretation:
The gross profit margin has been fluctuating over the years, with a peak of
38.15% in FY19 and a low of 31.86% in FY22. The margin has been
increasing since then and is currently at 33.52% in FY23. This indicates
that the company has been able to maintain its profitability despite the
challenges faced in the industry.
The net profit margin has been fluctuating over the years, with a peak of
13.59% in FY21 and a low of 10.49% in FY22. The margin has been
increasing since then and is currently at 11.46% in FY23. This indicates
that the company has been able to control its expenses and improve its
profitability.
5. Profitability Return Ratio Analysis
Analysis:
• The return on asset has been fluctuating over the years, with a peak of 18.83% in FY20 and a low of 15.53% in FY22. The ratio has been
increasing since then and is currently at 17.74% in FY23. This indicates that the company has been able to generate more profit per unit
of assets.
• The return on equity has been fluctuating over the years, with a peak of 27.06% in FY20 and a low of 23.16% in FY22. The ratio has been
increasing since then and is currently at 25.64% in FY23. This indicates that the company has been able to generate more profit per unit
of shareholder equity.
Interpretation:
ROE of Asian paint is the highest in the industry. It’s a sign to investors that the
company is an attractive investment for those who are seeking to invest in the
Paint sector.
As ROA of Asian paints is better compared to its peers, it can be concluded
that it has deployed its assets efficiently to generate sales & profit.
33.52%
17.74%
19.12%
10.78%
10.44%
7.50%
25.40%
12.22%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
ROE ROA
FY23 Profitability Return Ratio
Asian paints Berger Paints Nerolaic Paints Akzo india
Profitability Ratio 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Return On Asset 16.21% 18.83% 17.02% 15.53% 17.74%
Return on Equity 23.99% 27.06% 24.75% 23.16% 25.64%
6. Liquidity Ratio Analysis
Interpretation:
The current ratio has been increasing over the years, indicating that the
company’s ability to pay its short-term obligations has improved.
The quick ratio has also been increasing, which is a positive sign as it
indicates that the company has enough liquid assets to cover its short-term
liabilities.
However, the cash ratio has been fluctuating and is currently at a low of
0.03, which means that the company has very little cash on hand to meet its
short-term obligations.
1.63
1.82
2.17 2.26
2.38
0.93 0.94
1.49
1.32
1.47
0.03 0.11 0.02 0.05 0.03
0.00
0.50
1.00
1.50
2.00
2.50
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Liquidity Ratio Trendline
Current Ratio Quick Ratio Cash Ratio
Analysis:
The increase in the current ratio and quick ratio can be attributed to the company’s efficient management of its working capital. The
company has been able to reduce its inventory levels and improve its collection period, which has resulted in an increase in its cash
flows. However, the decrease in the cash ratio could be due to the company’s investments in long-term projects, which has tied up its cash
reserves.
Overall, the trend in the liquidity ratios of Asian Paints is positive, indicating that the company is in a good financial position and has the
ability to meet its short-term obligations
7. Working Capital Management Ratio Analysis
Interpretation & Analysis:
• The working capital cycle has been fluctuating over the years, with a low of 99.57 days in FY20 and a high of 130.68 days in FY22. The
cycle has been decreasing since then and is currently at 118.87 days in FY23. This indicates that the company is able to convert its
working capital into cash more efficiently.
• The cash conversion cycle has been fluctuating over the years, with a peak of 67.08 days in FY23 and a low of 28.21 days in FY21. The
cycle has been increasing since then. This indicates that the company is taking longer to convert its inventory into cash.
Conclusion:
Overall, the trend in the working capital management ratios of Asian Paints is mixed, with some ratios improving and others deteriorating.
However, the company is still able to manage its working capital efficiently and generate cash flows.
117.52
99.57
112.48
130.68
118.87
39.58 44.30
28.21
65.64 67.08
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Working Capital Cycle Yearly Trend
Working Capital Cycle Cash Conversion Cycle
8. Working Capital Management Ratio Analysis
Interpretation & Analysis:
The inventory turnover ratio has been fluctuating over the years, with a
peak of 4.51 in FY20 and a low of 3.81 in FY22. The ratio has been
increasing since then and is currently at 4.36 in FY23. This indicates that
the company is selling its inventory more efficiently.
The receivables turnover ratio has been fluctuating over the years, with a
peak of 18.50 in FY20 and a low of 10.07 in FY23. The ratio has been
decreasing since then. This indicates that the company is taking longer to
collect its receivables.
The payables turnover ratio has been increasing over the years, indicating
that the company is taking longer to pay its suppliers. The ratio has
increased from 4.68 in FY19 to 7.05 in FY23.
3.99
13.39
4.68
4.51
18.50
6.60
4.36
12.17
4.33
3.81
10.11
5.61
4.36
10.07
7.05
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
Inventory Turn over Receivables Turn over Payable Turn over
Working Capital Turnover Ratio Bar Chart
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Conclusion:
Overall, the trend in the working capital management ratios of Asian Paints is mixed, with some ratios improving and others deteriorating.
9. Interpretation & Analysis:
• The total debt ratio has been fluctuating over the years, with a low of 0.30 in FY20 and a high of 0.33 in FY22. The ratio has been
decreasing since then and is currently at 0.31 in FY23. This indicates that the company has been able to reduce its reliance on debt
financing.
• The long-term debt ratio has been increasing over the years, indicating that the company has been relying more on long-term debt to
finance its operations. The ratio has increased from 0.04 in FY19 to 0.05 in FY23.
• The short-term debt ratio has been fluctuating over the years, with a low of 0.24 in FY20 and a high of 0.28 in FY22. The ratio has been
decreasing since then and is currently at 0.26 in FY23.
• The debt-equity ratio has been fluctuating over the years, with a low of 0.44 in FY20 and a high of 0.49 in FY22. The ratio has been
decreasing since then and is currently at 0.45 in FY23. This indicates that the company has been able to reduce its reliance on debt
financing and increase its equity financing.
• The equity multiplier has been fluctuating over the years, with a low of 1.44 in FY20 and a high of 1.49 in FY22. The ratio has been
decreasing since then and is currently at 1.45 in FY23. This indicates that the company has been able to generate more assets per unit of
equity.
• The interest coverage ratio has been fluctuating over the years, with a low of 34.68 in FY20 and a high of 45.63 in FY21. The ratio has
been decreasing since then and is currently at 39.00 in FY23. This indicates that the company may face difficulty in meeting its interest
obligations.
• The debt service coverage ratio has been fluctuating over the years, with a low of 14.06 in FY20 and a high of 33.17 in FY19. The ratio
has been decreasing since then and is currently at 14.39 in FY23. This indicates that the company may face difficulty in meeting its debt
obligations.
Solvency Ratio Analysis
10. Asset Utilization Ratio Analysis
Conclusion:
Overall, the trend in the asset utilization ratios of Asian Paints is positive, indicating that the company is utilizing its assets efficiently and
generating more revenue per unit of assets.
1.27
1.51
1.25
1.48 1.55
3.64
4.02
4.20
4.52
4.78
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Asset Utilization Ratio Trendline
Total Asset Turn-Over Fixed Asset Turn-Over
Interpretation & Analysis:
• The total asset turnover ratio has been fluctuating over the years,
with a peak of 1.51 in FY20 and a low of 1.25 in FY21. The ratio has
been increasing since then and is currently at 1.55 in FY23. This
indicates that the company is generating more revenue per unit of
assets.
• The fixed asset turnover ratio has been increasing consistently over
the years, indicating that the company is generating more revenue
per unit of fixed assets. The ratio has increased from 3.57 in FY19
to 9.79 in FY23. This could be due to the company’s investments in
new and efficient machinery, which has resulted in higher
production capacity and increased revenue
