The document discusses various financial ratios for Jamuna Oil Company for 2011-12 and 2010-11 fiscal years. The current ratio, quick ratio, inventory turnover, average collection period, average payment period, total asset turnover, debt ratio, gross profit margin, operating profit margin, net profit margin, earnings per share and return on total assets are presented with their calculations and comparisons between the two years. The ratios indicate the company's liquidity, efficiency, profitability and ability to pay debts over different time periods.

1. Current ratio:The current ratio is a financial ratio that measures whether or not a firm has
enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its
current liabilities. The current ratio is an indication of a firm's market liquidity and ability to meet
creditor's demands. Acceptable current ratios vary from industry to industry and are generally
between 1.5 and 3 for healthy businesses. If a company's current ratio is in this range, then it generally
indicates good short-term financial strength. If current liabilities exceed current assets (the current
ratio is below 1), then the company may have problems meeting its short-term obligations. If the
current ratio is too high, then the company may not be efficiently using its current assets or its short-
term financing facilities. This may also indicate problems in working capital management.
Current Ratio:
Current ratio= =
In 2011-
2012
Ratio is=1.12
In 2010-
2011
Ratio is=1.23
Decision: The current ratio of Jamuna Oil Company in 2011-12 ratio is 1.12 and 2010-11 is 1.23.
Which is acceptable.
Figure:
1.05
1.1
1.15
1.2
1.25
2011-12 2010-11
current ratio
ratio

2. Quick ratio:In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a
company to use its near cash or quick assets to extinguish or retire its current liabilities immediately.
Quick assets include those current assets that presumably can be quickly converted to cash at close to
their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current
liabilities. Note that Inventory is excluded from the sum of assets in the Quick Ratio, but included in
the Current Ratio. Ratios are tests of viability for business entities but do not give a complete picture
of the business' health. If a business has large amounts in Accounts Receivable which are due for
payment after a long period (say 120 days), and essential business expenses and Accounts Payable
due for immediate payment, the Quick Ratio may look healthy when the business is actually about to
run out of cash. In contrast, if the business has negotiated fast payment or cash from customers, and
long terms from suppliers, it may have a very low Quick Ratio and yet be very healthy.
Quick Ratio:
Quick
ratio=
In 2011-
2012
Ratio is=0.593
In 2010-
2011
Ratio is=0.6457
Decision: The quick ratio if Jamuna Oil Company in 2011-12 is 0.593 and 2010-11 is 0.6457. Usually a
quick ratio of1 or getter is recommended, so it is unacceptable.
Figure:
0.56
0.58
0.6
0.62
0.64
0.66
Quick Ratio
Quick Ratio
2011-12 2010-11

3. Inventory Turnover: In accounting, the Inventory turnover is a measure of the number
of times inventory is sold or used in a time period such as a year. The equation for inventory
turnover equals the Cost of goods sold divided by the average inventory. Inventory turnover is
also known as inventory turns, stockturn, stock turns, turns, and stock turnover.
Inventory turnover is the ratio of cost of goods sold by a business to its average inventory
during a given accounting period. It is an activity ratio measuring the number of times per
period, a business sells and replaces its entire batch of inventory again.
Inventory Turnover:
Inventory Turnover=
In 2011-
2012
Ratio is=0.2092
In 2010-
2011
Ratio is=0.1777
Decision: The inventory turnover of Jamuna oil company ratio in 2011-12 is 0.2092 and 2010-11 is
0.1777.
Figure:
0.16
0.165
0.17
0.175
0.18
0.185
0.19
0.195
0.2
0.205
0.21
0.215
Inventory Turn Over
Inventory turnover
2011-12 2010-2011

4. Average Collection Period: The average collection period is the average number of
days between 1) the date that a credit sale is made, and 2) the date that the money is received
from the customer. The average collection period is also referred to as the days’ sales in
accounts receivable.
The average collection period can be calculated as follows: 365 days in a year divided by the
accounts receivable turnover ratio. Assuming that a company has an accounts receivable
turnover ratio of 10 times per year, the average collection period is 36.5 days (365 divided by
10).
Average Collection Period:
Average collection
period=
In 2011-
2012
Ratio is=126.98
In 2010-
2011
Ratio is=141.02
Decision: The Average collection period of jamunaOil Company 2011-12 is 126.98 and 2010-11 is
141.02.It extends 60 days credit terms to customers and average collection of period 126.98days in
2011-12 and 141.02 days in 2010-11 which is unacceptable.
115
120
125
130
135
140
145
ACP
Average Collection Period
2011-12 2010-11

5. Average Payment Period:The average payment period (APP) is defined as the number
of days a company takes to pay off credit purchases. It is calculated as accounts payable / (total
annual purchases / 360). As the average payment period increases, cash should increase as well, but
working capital remains the same. Most companies try to decrease the average payment period to
keep their larger suppliers happy and possibly take advantage of trade discounts.
Since the average payment period does not affect working capital, APP typically has little or no effect
on the valuation of a company or on a merger or acquisition. Recent economic trends have lead to
the average APP increasing because of the typical trickle-down effect of payments.
Average Payment Period:
Average Payment
period=
In 2011-
2012
Ratio is=3929.55
In 2010-
2011
Ratio is=2821.93
Decision: The average payment period of JamunaOil Company in 2011-12 is 3929.55 and in 2010-11
is 2821.93.
Figure:
0
500
1000
1500
2000
2500
3000
3500
4000
4500
APP
Average Payment
2011-2012 2010-11

6. Total asset turnover: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.
Companies with low profit margins tend to have high asset turnover, while those with high
profit margins have low asset turnover. Companies in the retail industry tend to have a very
high turnover ratio due mainly to cutthroat and competitive pricing.
Total asset turnover:
Total asset turnover:
=
In 2011-
2012
Ratio is=0.4563
In 2010-
2011
Ratio is=0.4176
Decision: The total asset turnover ratio of JamunaOil Company is 2011-12 is 0.4563 and in 2010-11 is
0.4176.
Figure:
0.39
0.4
0.41
0.42
0.43
0.44
0.45
0.46
Category 1
Total asset turnover
2011-12 2010-2011

7. Debt Ratio:Debt Ratio is a financial ratio that indicates the percentage of a company's
assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and
long-term liabilities) and total assets (the sum of current assets, fixed assets, and other assets
such as 'goodwill').
Debt Ratio:
Debt Ratio=
In 2011-
2012
Ratio is=3.07
In 2010-
2011
Ratio is=36.29
Decision: Debt ratio of Jamuna oil Company in 2011-12 is 3.07 and 2010-11 is 36.29.
Figure:
0
5
10
15
20
25
30
35
40
Category 1
Debt ratio
2011-12 2010-11

8. Gross profit margin: A financial metric used to assess a firm's financial health by
revealing the proportion of money left over from revenues after accounting for the cost of
goods sold. Gross profit margin serves as the source for paying additional expenses and
future savings.
Gross profit margin:
Gross profit margin
=
In 2011-
2012
Ratio is=0.7554
In 2010-
2011
Ratio is=0.5195
Decision: The gross profit margin of JamunaOil Company in 2011-12 is 0.7554 and in 2010-11 is
0.5195.
Figure:
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Category 1
Gross Profit Margin
2011-12 2010-2011

9. Operating profit margin:Operating income is often called earnings before income
and taxes or EBIT. EBIT is the income that is left, on the income statement, after all
operating costs and overhead, such as selling costs and administration expenses, along with
cost of goods sold, are subtracted out.
Operating profit margin:
Operating profit margin
=
In 2011-
2012
Ratio is=0.6835
In 2010-
2011
Ratio is=0.5452
Decision: The Operating Profit margin in 2011-12 is 0.6835 and in 2010-11 is 0.5452.
Figure:
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Category 1
operating profit margin
2011-12 2010-11

10. Net profit margin:Net profit margin is the percentage of revenue remaining after all
operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends)
have been deducted from a company's total revenue.
Net profit margin:
Net profit margin
=
In 2011-
2012
Ratio is=0.0112
In 2010-
2011
Ratio is=0.0268
Decision: The Net profit margin in 2011-12 is 0.0112 and 2010-11 is 0.0268.
Figure:
0
0.005
0.01
0.015
0.02
0.025
0.03
Category 1
net profit margin
2011-12 2010-2011

11. Earnings per share (EPS):The portion of a company's profit allocated to each
outstanding share of common stock. Earnings per share serves as an indicator of a company's
profitability.
Earnings per share (EPS):
Earnings per share (EPS)
=
In 2011-
2012
Ratio is=29.62
In 2010-
2011
Ratio is=14.45
Decision: The EPS of Jamuna Oil Company in 2011-12 is 29.62 and in 2010-11 is 14.45.
Figure:
0
5
10
15
20
25
30
35
Category 1
EPS
2011-12 2010-11

12. Return on total assets:
A ratio that measures a company's earnings before interest and taxes (EBIT) against its total net
assets. The ratio is considered an indicator of how effectively a company is using its assets to
generate earnings before contractual obligations must be paid.
Return on total assets
=
In 2011-
2012
Ratio is=0.0051
In 2010-
2011
Ratio is=0.0112
Decision: The Return on total assets of Jamuna Oil Company in 2011-12 is 0.0051 and in 2010-11 is
0.0112.
Figure:
0
0.002
0.004
0.006
0.008
0.01
0.012
Category 1
Return on total assets
2011-12 2010-11