A presentation on the topic

A PRESENTATION ON THE TOPIC :RATIO ANALYSIS

FOR THE TRAINING UNDER GONE AT:

PRESENTED BY: SOURABH MODGIL

5TH SEMESTER

ROLL NO. - 44

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

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.

BRANDS

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.

RATIO ANALYSIS

CURRENT ASSETS = CURRENT ASSETS/CURRENT LIABILITIES

YEAR CURRENT ASSETS CURRENT LIABILITIES

RATIO

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

0.5

1

1.5

2

2.5

3

3.5

current ratio

current ratio

QUICK/LIQUID RATIO = CASH +MARKETABLE SECURITIES+ ACCOUNTS RECEIVABLE/ CURRENT LIABLITIES

YEAR LIQUID ASSETS CURRENT LIABILITIES

RATIO

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

0.05

0.1

0.15

0.2

0.25

0.3

Quick/Liquid ratio

Quick/Liquid ratio

DEBT EQUITY RATIO = TOTAL LIABILITIES/SHAREHOLDERS EQUITY

YEAR TOTAL LIABILITIES

SHARHOLDERS’S EQUITY

RATIO

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

1

2

3

4

5

6

Debt-equity ratio

Debt-equity ratio

PROPRITORY RATIO = SHAREHOLDERS FUND/TOTAL ASSETS

YEAR SHAREHOLDERS’S FUND

TOTAL ASSETS RATIO

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Proprietary ratio

Proprietary ratio

FIXED ASSETS TURNOVER RATIO = NET SALES/FIXED ASSETS

YAER SALES FIXED ASSETS RATIO

2005-06 3662420296 2932295556 1.2489

2006-07 4182472441 3049535389 1.3715

2007-08 5012789202 3569472285 1.4043

2008-09 8026752955 4971279443 1.6146

2009-10 10466193853 5864295515 1.7846

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.

2005-06 2006-07 2007-08 2008-09 2009-100

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Fixed assets turnover ratio

Fixed assets turnover ratio

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

2

4

6

8

10

12

14

inventory turnover ratio

inventory turnover ratio

DEBTORS TURNOVER RATIO = TOTAL SALES / DEBTORS

YAER SALES DEBTORS RATIO

2005-06 3662420296 314675202 11.6987

2006-07 4182472441 420749095 9.9405

2007-08 5012789202 1036080367 4.3832

2008-09 8026752955 643062814 12.4832

2009-10 10466193853 833322981 12.5596

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.

2005-06 2006-07 2007-08 2008-09 2009-100

2

4

6

8

10

12

14

Debtors turnover ratio

Debtors turnover ratio

WORKING CAPITAL TURNOVER RATIO=COST OF SALES/NET WORKING CAPITAL

YEAR COST OF SALES NET WORKING CAPITAL

RATIO

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

INTERPRETATION:A HIGH RATIO IS POSITIVE SIGN SHOWING THE COMPANY IS ABLE TO GENRATE SALES FROM AND INDICATES EFFICENT UTILISATION OF WORKING CAPITAL.

2005-06 2006-07 2007-08 2008-09 2009-100

2

4

6

8

10

12

Working capital turnover ratio

Working capital turnover ratio

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

0.2

0.4

0.6

0.8

1

1.2

1.4

Total assets turnover ratio

Total assets turnover ratio

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

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.

2005-06 2006-07 2007-08 2008-09 2009-100

5

10

15

20

25

30

net profit ratio

net profit ratio

GROSS PROFIT RATIO= GROSS PROFIT/NET SALES*100

YEAR GROSS PROFIT SALES %

2005-06 1399308423 3662420296 43.71

2006-07 1513523474 4182472441 41.45

2007-08 1787683614 5012789202 39.93

2008-09 2410931568 8026752955 23.31

2009-10 4333815676 10466193853 41.41

INTERPRETATION:THE PROFIT MARGIN IS GOOD WHICH IS A POSITIVE SIGN FOR THE COMPANY.

2005-06 2006-07 2007-08 2008-09 2009-100

5

10

15

20

25

30

35

40

45

50

Gross profit ratio

Gross profit ratio

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

INTERPRITATION :THE LOW PERCENTAGE IS INDICATING THAT THE MANAGEMENT HAS NOT EFFICENTLY USED THE INVESTMENTS MADE BY THE OWNERS AND CREDITORS INTO THE BUSINESS.

2005-06 2006-07 2007-08 2008-09 2009-100

1

2

3

4

5

6

7

8

9

10

RETURNE ON CAPITAL EMPLOYED

Column1

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

INTERPRETSTION:THE HIGHER THE RATIO ,THE BETTER IT IS BECAUSE THE VALUE OF THE SHARE WILL INCREASE.

2006-07 2007-08 2008-09 2009-100

5

10

15

20

25

30

35

EARNING PER SHARE

EARNING PER SHARE

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.