FINANCIAL ANALYSIS

REPORT

A. Financial Statements for the financial year 2012-13 and 2013-14.

I.

II.

III.

Notes on Financial Statements for the Year ended

31st March, 2014
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Notes on Financial statements

B. Financial Statements Analysis

I.

Liquidity Ratios
a. Current Ratio:
Definition:
Current Ratio establishes the relationship between current Assets and current Liabilities.
It attempts to measure the ability of a firm to meet its current obligations.
Current Assets
Current Ratio = Current Liabilities
Calculation:
Particulars
Current Assets
Current Liabilities
Current Ratio

N
D
N/
D
*The figures of N & D are in crores

F.Y. 13-14
1,35,333
95,566
1.416

F.Y. 12-13
1,43,976
83,286
1.728

Interpretation:
There has been a decrease in current assets while an increase in current liabilities in 201314 than 2012-13, resulting in decrease in current ratio relatively. The company may find it
difficult to pay its current obligations if the current assets do not get liquid easily as and
when needed. Though, the ratio in both the years is less than the ideal current ratio of 2:1;
the company still has a reliable margin of safety and fairly adequate working capital.
b. Quick Ratio
Definition:
The acid test ratio is a more severe and stringent test of a firm's ability to pay its shortterm obligations as and when they become due. Quick Ratio establishes the relationship
between the quick assets and current liabilities.
Quick Assets
Quick Ratio = Current Liabilities
Calculation:
(Quick Assets = Current Assets Inventories)
Particulars
Quick Assets
Current Liabilities
Quick Ratio

N
D
N/
D
*The figures of N & D are in crores

F.Y. 13-14
92,401
95,566
0.966

F.Y. 12-13
1,01,247
83286
1.215

Interpretation:
Financial year 2012-13 has shown an impressive liquidity position of the company with
quick ratio of 1.2, more than the ideal ratio of 1:1. Even though the quick ratio has
relatively decreased in 2013-14 but is still around ideal value and is satisfactory for
meeting its current obligations. Thus, the dilemma we had from the current ratio that it
may be difficult to pay current obligations is not an issue.

II.

Profitability Ratios
a. Net Profit Ratio
Definition:
Net Profit Ratio is also termed as Sales Margin Ratio (or) Profit Margin Ratio (or) Net
Profit to Sales Ratio. This ratio reveals the firm's overall efficiency in operating the
business. Net profit Ratio is used to measure the relationship between net profit (either
before or after taxes) and sales.
Net Profit
Net Profit Ratio = Net Sales
x 100
Calculation:
Particulars
N
Net Profit after tax
D
Total Revenue
N/
Net Profit Ratio
D
*The figures of N & D are in crores

F.Y. 13-14
21,984
399053
5.50%

F.Y. 12-13
21003
368295
5.70%

Interpretation:
The Net profit of the company has increased but the Net profit ratio has decreased in
2013-14. The managerial efficiency to use the firms resources to generate income on its
invested capital has decreased.
b. Operating Profit Ratio
Definition:
Operating Profit Ratio indicates the operational efficiency of the firm and is a measure of
the firm's ability to cover the total operating expenses.
Operating Profit
Operating Profit Ratio = Net Sales
Calculation:
Operating Profit = Operating revenue Cost of materials consumed Purchase of stockin-trade Changes in inventory Other Expenses Employee Benefit expense
Depreciation and Amortisation Expenses
Other Expenses = Manufacturing Expense + Selling & Distribution Expenses +
Establishment Expenses Transfer to project development expenditure-Donation-Loss on
sale/discard of fixed assets
Particulars
N
Operating Profit
D
Operating Revenue
N/
Operating Profit Ratio
D
*The figures of N & D are in crores

F.Y. 13-14
22740
3,90,117
5.83%

F.Y. 12-13
21653
360297
6%

Interpretation:
The operating profit has increased but the operating profit ratio has decreased in 2013-14.
The company has been able to cover its total operating expenses but the operating
efficiency has reduced.

c. Return on Investment Ratio

Definition:
This ratio measures a return on the owner's or shareholders' investment. This ratio
establishes the relationship between net profit after interest and taxes and the owner's
investment.
Net Profit after Interest and Tax
100
ROI Ratio = Shareholde r ' s Funds
Calculation:
Particulars
Net Profit After Tax
Shareholders Funds
ROI Ratio

N
D
N/
D
*The figures of N & D are in crores

F.Y. 13-14
21984
197074
11.15%

F.Y. 12-13
21,003
1,79,995
11.66%

Interpretation:
The returns compared to the investment made by the shareholders has reduced. The funds
invested by them in the company has increased but the return has not increased
proportionately, thus the efficiency of handling shareholders funds has reduced.
d. Earnings per share
Definition:
Earnings per Share Ratio (EPS) measures the earning capacity of the concern from the
owner's point of view and it is helpful in determining the price of the equity share in the
market place.
EPS=

Net Profit After Tax and Preference Dividend

No of Equity Shares

Calculation:
N
D
N/
D

Particulars
Net profit after tax and
Preference Dividend
Number of Equity
Shareholders
EPS

F.Y. 13-14
21984,00,00,000
3,23,06,12,815

F.Y. 12-13
21003,00,00,00
0
3,23,99,64,480

68.05

64.82

Interpretation:
The earnings per share is almost the same in both the years. Thus, the company has been
able to maintain its performance in context of market.
e. Dividend Pay-out Ratio
Definition:
This ratio highlights the relationship between payment of dividend on equity share capital
and the profits available after meeting tax and preference dividend.

Calculation:
N
D

Particulars
Dividend
Net profit after tax and
Preference Dividend
Dividend Payout Ratio

N/
D
*The figures of N & D are in crores

F.Y. 13-14
2793
21984

F.Y. 12-13
2643
21003

12.7%

12.58%

Interpretation:
The company has increased the dividend payout i.e. the dividend amount to be paid to
shareholders out of the total earnings. Around 87% of the earnings are retained by the
company.
III.

Solvency Ratios
a. Debt-Equity Ratio
Definition:
This ratio also termed as External - Internal Equity Ratio. This ratio is calculated to
ascertain the firm's obligations to creditors in relation to funds invested by the owners.
The ideal Debt Equity Ratio is 1: 1. This ratio also indicates all external liabilities to
owner recorded claims.
Total LongTerm Debt
DER=
'
Shareholder s Funds
Calculation:
Particulars
Total Long Term Debts
Shareholders Funds
Debt-Equity Ratio

N
D
N/
D
*The figures of N & D are in crores

F.Y. 13-14
62,711
1,97,074
0.318

F.Y. 12-13
43,012
1,79,995
0.239

Interpretation:
The total long term debts of the company has increased more compared to increase of
shareholders fund in the company, resulting in increase in the debt-equity ratio.
b. Proprietary Ratio
Definition:
Proprietary Ratio is also known as Capital Ratio or Net Worth to Total Asset Ratio. This is
one of the variant of Debt-Equity Ratio. The term proprietary fund is called Net Worth.
This ratio shows the relationship between shareholders' fund and total assets.
Shareholder s' Funds
Proprietary Ratio=
Total Assets
Calculation:
N
D
N/

Particulars
Shareholders Funds
Total Assets
Proprietary Ratio

F.Y. 13-14
1,97,074
3,67,583
0.536

F.Y. 12-13
1,79,995
3,18,511
0.565

D
*The figures of N & D are in crores

IV.

Interpretation:
The share of shareholders funds in the total assets of the company has not increased
proportionately compared to the increase in the total assets value. But as it is more than
the ideal value of 0.5, the company is in secure position in the event of solvency.
Turnover Ratios
a. Stock Turnover Ratio
Definition:
This ratio is also called as Inventory Ratio or Stock Velocity Ratio.
This ratio is used to measure whether the investment in stock in trade is effectively
utilized or not. It reveals the relationship between sales and cost of goods sold or average
inventory at cost price or average inventory at selling price.
Net Sales
STR=
Closing Inventory
Calculation:
Particulars
Operating Revenue
Closing Inventory
Stock Turnover Ratio

N
D
N/
D
*The figures of N & D are in crores

F.Y. 13-14
3,90,117
42,932
9.087

F.Y. 12-13
3,60,297
42,729
8.432

Interpretation:
The company has maintained almost about same inventory in the two years while its
operating revenue has shown a comparative increase, thus the company has invested in
inventories within proper limits and utilized it efficiently for operations resulting in
relatively greater stock turnover ratio. The number of times the stock turns over during a
year has increased by around 0.5, thus refilling it by 10 days faster in 2013-14.
b. Fixed Assets Turnover Ratio
Definition:
This ratio indicates the efficiency of assets management. Fixed Assets Turnover Ratio is
used to measure the utilization of fixed assets. This ratio establishes the relationship
between Sales and Net fixed assets.
Sales
Fixed Assets Turnover Ratio=
Net Fixed Assets
Calculation:
Particulars
Total Revenue
Net Fixed Assets
Fixed Assets Turnover Ratio

N
D
N/
D
*The figures of N & D are in crores

F.Y. 13-14
3,99,053
1,51,122
2.64

F.Y. 12-13
3,68,295
1,28,864
2.858

Interpretation:
The fixed assets turnover ratio is more than 2.5 for both years, hence there has been
efficient utilization of fixed assets for obtaining total revenue.

Comparing the two years, the ratio has reduced by around 0.2 in 2013-14 than 2012-13,
thus there has been a relative under utilization of fixed assets. However, overall the
company has successfully managed its assets.

C. Summary:
Analyzing the companys financial statements for the financial year 2013-14 and comparing it with its
performance in the financial year 2012-13; we conclude that the companys performance overall has
reduced compared to previous year.
The company in 2013-14 is still near to its efficiency in 2012-13. The small reduction in efficiency has
also been due to the poor market conditions of India in 2013-14.
The liquidity position of the company is still near to the ideal position. Also, the profitability ability of
the company is to the edge of the ideal position. The solvency has reduced somewhat but needs to be
improved in the current financial year.
The company can expect a better growth in the current financial year as despite of poor market
conditions in 2013-14, it has succeeded in being closer to the expected performance.