The analysis of Hero Motocorp Ltd. based on various ratios

1. 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2011 2012 2013 2014 2015
current
ratio
quick
ratio
Liquidity ratios
Both the current as well as quick ratio is
following an increasing trend except a slight
fall in the year 2014. This makes it clear that
company is having more and more current
assets every year and less current liabilities
as compared to previous year which is an
indicator of good liquidity position of the
company .On the other hand if the ratios in
individual year is analysed, it is seen that the
company maintains a large amount of
inventory due to which there is a huge gap
between current ratio and quick ratio but in
neither of the years the current ratio is equal
to the ideal ratio.

2. 0
0.2
0.4
0.6
0.8
1
1.2
2011 2012 2013 2014 2015
debt equity ratio
debt to capital
employed ratio
proprietary ratio
Solvency ratios
The chart shows that the debt equity ratio is
decreasing which means that company is having
less debt in current year as compared to
previous year which is a good sign as it
decreases a fixed financial charge on the
company i.e. interest payment. This also leads to
decrease in debt to capital employed ratio which
means that out of total money invested in the
business, less money is borrowed one which
ultimately causes an increase in proprietary
ratio. The company is having same equity share
capital every year just the reserves are
increasing which means that company is having
more profits and is retaining more of them .

3. 0
2
4
6
8
10
12
14
16
18
20
2011 2012 2013 2014 2015
Total assets to debt ratio
total assets to
debt ratio
This ratio shows that how much part
of total assets is financed by debt.
High ratio indicates that less of total
assets are financed out of debt. As
the value of debt is decreasing every
year and ultimately becomes nil so
the ratio is increasing and in the last
two years as the value of debt is nil so
the ratio cannot be determined s is a
good sign as it indicates that the
company is in good solvency position.

4. 0
50
100
150
200
250
300
350
400
2011 2012 2013 2014 2015
Interest coverage ratio
Interest coverage ratio
This ratio shows that how much profit is
available to pay off the interest
payment.
It is increasing every year. This reveals
that the company is having enough
profits to pay off interest. The ratio is
increasing because the interest payment
is decreasing because debt is decreasing
year after year the company is having
good solvency position

5. 0
20
40
60
80
100
120
140
160
180
2011 2012 2013 2014 2015
Inventory turnover ratio
Debtor turnover ratio
Total assets turnover ratio
Turnover ratios
Turnover ratios indicate the speed at which the activities
of business are performed .Inventory turnover ratio
shows number of times inventory is converted into
revenue .this ratio is somewhat same every year and the
company is in goodposition. Debtor turnover ratio shows
the number of times debtors are convertedinto cash. The
chart shows that the ratio is decreasing which means that
the collection is not speedy. Company must take steps to
cope up with this problem assets turnover ratio is
somewhat same every year. It indicates good working
activity of the firm.

6. 0%
5%
10%
15%
20%
25%
2011 2012 2013 2014 2015
Gross profit ratio
Operating profit ratio
Net profit ratio
Profitability ratios
There is a huge difference between gross
profit and net profit ratio & operating
profit ratio every year which means that
the company is spending a lot on
operating expenses which is leading to fall
in the operating profit. So the company
must take some steps to control the
operating and non-operating expenses.

7. 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2011 2012 2013 2014 2015
Return on investment
Return on shareholders
funds
76%
77%
77%
78%
78%
79%
79%
80%
2011 2012 2013 2014 2015
Operating ratio
Operating ratio
Graph 1
Graph 2
Graph 1 shows return on investment. It explains the overall
utilisation of funds by a business enterprise.This ratio is
decreasing every which indicates that company is not good
return on investment and same is the case with return on
shareholder funds
Graph 2 shows operating ratio .This ratio indicates all the
expenses. This ratio is very high but is decreasingyear after
year which is a good sign for the company.

8. ₹ 0.00
₹ 50.00
₹ 100.00
₹ 150.00
₹ 200.00
₹ 250.00
₹ 300.00
₹ 350.00
2011 2012 2013 2014 2015
Earning per share
Book value
0
0.2
0.4
0.6
0.8
1
1.2
2011 2012 2013 2014 2015
Dividend payout ratio
Dividend payout ratio
Graph 3
Graph 4
Graph 3 shows the earning which a shareholder is getting on his share.
This is increasing every year which means that the company is in good
financial condition and is getting enough profit which is ultimately
leading to good book value of the firm’s share.
Graph 4 shows the dividend pay-out ratio which shows a decreasing
trend which means although the company is having enough profits to
pay dividend but it is not paying because it is keeping more as retained
earnings in the form of reserves .