Corrected afs ppt

Ratio Analysis

There are total 5 types of ratios

•Liquidity Ratios

•Leverage Ratios

•Asset Management Ratios

•Profitability Ratios

•Operating Ratios

•Market Based Ratios

Liquidity Ratios

• Liquidity ratios provide information about a firm’s ability to meet its short-term financial obligations.

• They are of particular interest to those extending short-term credit to the firm.

Liquidity Ratios

Current Ratio =

Tata Motors = = 0.45

Maruti = = 1.48

Total current liabilities

Total current assets

7,133.06

15,740.69

6,443.10

4,331.00

Liquidity Ratios

Quick Ratio =

Tata motors= =

Maruti = =

Current liabilities – Bank overdraft

Current assets - Inventory – prepaid expenses

14,775.61 - 3,891.39 - 0

18,963.40– 0

6,443.10 - 1,415.00 – nil

4,331.00– nil

0.57

1.16

Leverage Ratios

• Leverage ratios provide an indication of the long-term solvency of the firm.

• Leverage ratios measure the extent to which the firm is using long term debt.

Leverage Ratios

Debt- Equity Ratio =

Tata Motors =

Maruti =

Shareholders Fund

Long Term Debt (sec.& unsec. Loan)

15,898.75

19,986.05

309.3

13,867.50

0.79

0.022

Leverage Ratios

Capital Gearing Ratio =

Tata Motors =

Maruti =

Equity shareholders Funds

Fixed interest Bearing Funds

15898.7520013.30

309.3

013867.50

0.79

0.02

Leverage Ratios

Interest Coverage Ratio =

Tata Motors = = 3.64

Maruti =

Interest

PBDIT

4,258.20

24.4 =173.5

5,047.25

1,383.79

Asset Management Ratios

• Asset Management Ratios are the key to analyzing how effectively & efficiency your small business is managing its assets to produce sales.

• Asset Management Ratios are also called “Turnover Ratios” or “Efficiency Ratios”.

Asset Management Ratios

Inventory Turnover Ratio=

Tata Motors = = 14.25

Maruti = =

Average Inventory

COGS

4,258.20

274.1

31.07

5,047.25

480.425

Asset Management Ratios

Total Asset Turnover Ratio =

Tata Motors = = 1.33

Maruti = =

Total Assets

Sales

36,561.50

14,722.70 2.48

47,957.24

35,912.1

Profitability Ratios

• Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return

• They are of great importance to investors since they measure how effectively A firm's management is generating profits on sales, total assets, and stockholders' investment.

Profitability Ratios

Gross Profit Margin =

Tata Motors =

Maruti =

Sales

Sales - COGS

47,957 – 43606

47,9570.089 %

36561.5- 4258.2

36561.50.088%

* 100

*100

*100

Profitability Ratios

Net Profit Margin =

Tata Motors =

Maruti =

Sales

EBIT

0.0769 %

2419

36561.500.066%

* 100

* 100

* 100

3686

47957

Operating Ratios

• The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc.

• It is expressed as a percentage of sales and shows the efficiency of a company controlling the costs and expenses associated with business operations.

Operating Ratios

Material Cost Ratio =

Tata Motors =

Maruti =

Sales

Material Consumed

35,047.05

47,957.24 0.73 %

28,880.00

36,561.50 0.78%

* 100

* 100

* 100

Operating Ratios

Administrative Expenses Ratio =

Tata Motors =

Maruti =

Sales

Admin expenses

2,790.19

47,957.240.058 %

1,153.87

36,561.500.0315 %

* 100

* 100

* 100

Operating Ratios

Operating Ratio =

Tata Motors =

Maruti =

Sales

COGS + operating expenses

5047 + 36996

47,957.24

= 0.87%

29,768.10 + 4258.20

36,561.50

* 100

* 100

= 0.93 %

* 100

Operating Ratios

Selling and Distribution Ratio =

Tata Motors =

Maruti =

Sales

S & D expenses

2,790.19

47,957.240.05 %

1,153.87

36,561.500.03%

* 100

* 100

* 100

Market Based Ratios

• A market-based ratio is a metric used to gauge a company's viability in terms of such variables as profitability and the market valuation of its stock.

• Different ratios indicate a company's viability, or financial health, where asset values, revenue, income, and ability to pay bills are concerned.

Market Based Ratios

RONetWorth =

Net worth

PAT*

20,013.3

2581 *

12.89

*3220.3

13867.50

0.12

* =

=

100

MarutiTata Motors

100

= = 100

2.32=

100