Ratio analysis

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What is ratio analysis? Objectives, classification and comparison with the other firms

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Ratio analysis

  1. 1. Team Members: 1) Shashank Chauhan 2) Prashant Mishra 3) Nitesh Patil 4)Mahesh Chavade 5) Srinivas Mittapelli
  2. 2. <ul><li>It is NOT just comparing different numbers from the balance sheet, income statement, and cash flow statement. </li></ul><ul><li>It is about comparing the number against previous years, other companies, the industry, or even the economy in general. </li></ul><ul><li>Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future. </li></ul>
  3. 3. OBJECTIVE OF RATIOS <ul><li>Solvency- </li></ul><ul><ul><li>Long term </li></ul></ul><ul><ul><li>Short term </li></ul></ul><ul><ul><li>Immediate </li></ul></ul><ul><li>Stability </li></ul><ul><li>Profitability </li></ul>
  4. 4. <ul><li>Operational efficiency </li></ul><ul><li>Credit standing </li></ul><ul><li>Structural analysis </li></ul><ul><li>Effective utilization of resources </li></ul><ul><li>Leverage or external financ ing </li></ul>
  5. 5. CLASSIFICATION OF RATIO BASED ON FINANCIAL STATEMENT BASED ON FUNCTION BASED ON USER 1] BALANCE SHEET RATIO 2] REVENUE STATEMENT RATIO 3] COMPOSITE RATIO 1] LIQUIDITY RATIO 2] LEVERAGE RATIO 3] ACTIVITY RATIO 4] PROFITABILITY RATIO 5] COVERAGE RATIO 1] RATIOS FOR SHORT TERM CREDITORS 2] RATIO FOR SHAREHOLDERS 3] RATIOS FOR MANAGEMENT 4] RATIO FOR LONG TERM CREDITORS
  6. 6. <ul><li>Its registered office is at Garden Mills Complex, Sahara Gate ,Surat ,Gujarat </li></ul><ul><li>Mr. M R Momaya is the Managing Director of the Mill The company is running 16,232 spindles </li></ul><ul><li>It produces 7.3 tons of yarn per day </li></ul><ul><li>The company produces high quality yarn for weaving. </li></ul>Surat Textile Mills
  7. 7. <ul><li>Vijayeswari, a Pioneering textile company, produces the finest quality Bed Linen that is enjoyed by consumers worldwide. </li></ul><ul><li>It has over 90 years experience in the business </li></ul><ul><li>In spinning the company’s 50,000 spindles produce 1260 tons of yarn every year. </li></ul>
  8. 8. <ul><li>It is located at Jay Bharat Rangshala Compound, Saraspur, Ahmedabad-380018.(INDIA) </li></ul><ul><li>It has established a good clientele. Where this company have supplied on regular basis the machine to many Textile processing utile in Gujarat all over India as well as Abroad also </li></ul>
  9. 9. LIQUIDITY RATIO RATIOS FORMULA CURRENT RATIO = Current Assets/Current liabilities 1.50 6.90 1.53 LIQUID RATIO/ QUICK RATIO =Quick assets/Quick liabilities 1.02 2.017 0.10 <ul><ul><li>SUPER QUICK/CASH RATIO </li></ul></ul>=(Cash+Bank+Marketabtle Securities)/ Total current Liabilities 0.32 0.645 0.012
  10. 10. PROFITABILITY RATIO <ul><ul><li>RATIOS </li></ul></ul><ul><ul><li>FORMULA </li></ul></ul>GROSS PROFIT MARGIN =(Gross profit / Net Sales) 0.06 0.23 0.21 OPERATING PROFIT MARGIN =(Operating Profit / Net Sales) 0.052 <ul><ul><li>0.21 </li></ul></ul>0.15 NET PROFIT MARGIN =(NPAT / Net Sales) 0.029 0.03 0.09
  11. 11. ACTIVITY RATIO <ul><ul><li>RATIOS </li></ul></ul>FORMULA INVENTORY TURNOVER RATIO =COGS/ Average Inventory 12.02 0.86 0.94 <ul><ul><li>FIXED ASSET TURNOVER RATIO </li></ul></ul>= Sales/ Net Fixed Assets 11.70 0.87 2.81 TOTAL ASSET TURNOVER RATIO = Sales/ Total Assets 2.68 0.27 0.785
  12. 12. LEVERAGE RATIOS RATIOS FORMULA DEBT EQUITY RATIO =Long Term Debt / Shareholder’s Equity 0.91 2.02 nil INTEREST COVERAGE RATIO =EBIT / Interest 3.17 <ul><ul><li>1.57 </li></ul></ul>172.06 PROPRIETORY RATIO =Shareholder’s fund/Total Assets 0.33 0.312 0.58
  13. 13. SUMMARY OF FINANCIAL POSITION OF TEXTILE COMPANIES:
  14. 14. CONCLUSION

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