Financial Accounting Ratio analysis of Indian companies
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Transcript of Financial Accounting Ratio analysis of Indian companies
Financial AccountingRatio AnalysisManufacturing : Birla Ericsson
BANK: ICICI
IT: Wipro
BIRLA ERICSSON
Liquidity Ratio
Analysis:
The ratios in 2009 & 2010 (3.4*4.48) show a very strong liquidity position of the company.
In 11 & 12 the decrease in ratio may be due to the reduction in cash balances, the company may have utilised these funds for the purchase of fixed assets
Year Current Ratio Quick Ratio
MAR'08 3.848605578 1.804211725
MAR'09 3.494907658 2.291859166
MAR'10 4.482485756 3.189312903
MAR'11 1.51559245 0.994797229
MAR'12 1.258695258 0.87981811
Profitability Ratio
Analysis:
Profit Margin: After a increase in 2010 the profit margin has decreased considerably. This is due to decrease in turn over of the company.
Return on Equity: The ratio of the company has been on a decreasing trend due to decrease in the amount of net income of the company. This indicates low managerial efficiency and low productivity of the capital utilized.
MAR'09 MAR'10 MAR'11 MAR'12-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Profit Margin
POA
ROE
Year Profit Margin POA ROE
MAR'09 -0.048069897 1.32549442 1.111651789
MAR'10 0.028679927 1.118506349 0.983608547
MAR'11 -0.062407124 0.754407331 0.577992019
MAR'12 -0.06235176 0.734744716 0.510221794
Turnover Ratio
Analysis: Inventory Turn over Ratio: this ratio has decreased from 4137 to 3.44 in 2009 &
2010 resp. This may be due to high inventory/reduction in selling price and the accumulation of stocks.
Asset Turn Over Ratio: The decrease in the ratio from the year 2010 to 2011 shows the inability of the company to use its assets to efficiently generate sales.
MAR'09 MAR'10 MAR'11 MAR'120
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7
Inventory Turnover Ratio
Asset Turnover Ratio
Year Inventory Turnover Ratio Asset Turnover Ratio
MAR'09 5.958472531 1.308147749
MAR'10 4.13772068 1.098216194
MAR'11 3.444529835 0.729297431
MAR'12 3.530779271 0.713254882
Solvency Ratio
Analysis:
The debt equity ratio of the company is less than 1, which indicates that the majority of the assets are financed through equity and not by debt.
This shows that the common share holder has low risk in investing in the company.
MAR'09 MAR'10 MAR'11 MAR'120
0.2
0.4
0.6
0.8
1
1.2
DEBT CAPITILISATION
DEBT EQUITY
Year DEBT CAPITILISATION DEBT EQUITY
MAR'09 0.421715314 0.393392767
MAR'10 0.366285409 0.338435846
MAR'11 0.027432388 0.943972875
MAR'12 0.012714786 0.984717786
Income and Funds Flow
Analysis: Operating working capital is reducing over the years, because of increasing
current liabilities.
Mar'09 Mar'10 Mar'11 Mar'120
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Operating working capital
Operating Cash
Year Operating working capital Operating Cash
Mar'09 4331.01 404.75
Mar'10 4290.91 449.33
Mar'11 1462.71 267.88
Mar'12 1198.68 167.7
WIPRO
Liquidity Ratio
Analysis: CURRENT RATIO: The current ratio of the company fell from 2.1 times to 1.1 times in the year 2008-09, but has shown an increasing trend in the next 3 years. In the year 2012 the current ratio has improved to 2.35 which indicates the company has worked on its liquidity management in a positive way.QUICK RATIO: The increasing trend in quick ratio after a fall in 2009, is a positive working capital indicator. In the year 2012, the quick ratio has risen to 2.2 which shows the strong cash position in managing the day to day affairs of the company.
Mar'08 Mar'09 Mar'10 Mar'11 Mar'120
0.5
1
1.5
2
2.5
Current Ratio
Quick Ratio
Year Current Ratio Quick Ratio
Mar'08 2.176285102 2.042985483
Mar'09 1.103857733 1.021259802
Mar'10 1.971297854 1.846785113
Mar'11 1.968147448 1.831115312
Mar'12 2.359647071 2.228451589
Profitability Ratio
Analysis:PROFIT MARGIN RATIO: This ratio of the company has been consistent over past five year though a good sign but the company has made investments and has expanded its production thereby using its profits efficiently. RETURN ON EQUITY: The ROE ratio of the company has to steady at 0.9 over the past five years. This is almost to the standard ratio level of 1:1..this states that the company is giving steady results to its shareholders.
Mar'08 Mar'09 Mar'10 Mar'11 Mar'120
0.2
0.4
0.6
0.8
1
1.2
1.4
Profit Margin
ROA
ROE
Profit Margin ROA ROE
0.1701219 1.166745502 0.958062645
0.141453924 1.199339377 0.910358736
0.204939811 1.029165805 0.850626054
0.179826548 1.033393439 0.859046404
0.145667835 1.086742331 0.903962631
Turnover Ratio
Analysis:INVENTORY TURNOVER RATIO : Company shows control over its stocks and material management.The inventory turnover ratio of 7times, 6times and 5.7 times over the last 5 years shows the company has control over its stock and material management. the conversion of stock into finished product which is more than the standard of 4times, shows the efficiency of production of the company.ASSET TURNOVER RATIO : This ratio signifies the relationship between asset and turnover. The ratio of 1and above for the past five years shows that assets are optimally utilized to get proportionate sales. The operating income has been efficiently applied in assets.
Mar'08 Mar'09 Mar'10 Mar'11 Mar'120
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Inventory Turnover Ratio
Asset Turnover Ratio
Year Inventory Turnover Ratio Asset Turnover Ratio
Mar'08 7.005132783 1.144170646
Mar'09 7.817232376 1.232980963
Mar'10 6.442906574 0.99069433
Mar'11 5.525313836 1.012898523
Mar'12 6.264552286 1.074595296
Income and Funds Flow
Mar'08 Mar'09 Mar'10 Mar'11 Mar'120
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OWC
Operating Cash
Year OWC Operating Cash
Mar'08 3954.2 16045.83708
Mar'09 577.896 18648.54571
Mar'10 4734.3 20387.19459
Mar'11 5121.5 23013.37174
Mar'12 8136.4 25915.22883
Analysis: Company made considerable investments in buying assets, but in turn the liabilities of the company are not increased , thus the operating working capital of the company is strong. Net operating profit of the company is increased marginally over the years. Since the operating income of the company is increased, the company has strong base of operating cash.
ICICI
Solvency Ratio
Analysis: Majority of the assets are financed through equity and not by debt. Debt/Asset ratio increased in the year 2009, in this year company made investments and changes in business plans. The consistent Debt/asset ratio shows that the company is in line with the industry. There is considerable drop in the ratio from 40% to 21%
Mar'08 Mar'09 Mar'10 Mar'11 Mar'120
0.2
0.4
0.6
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1
1.2
1.4
1.6
DEBT CAPITILISATION
DEBT EQUITY
Year DEBT CAPITILISATION DEBT EQUITY
Mar'08 0.32921357 1.32921357
Mar'09 0.400631243 1.400631243
Mar'10 0.312581958 1.312593262
Mar'11 0.222509369 1.222509369
Mar'12 0.215304384 1.215304384
Liquidity Ratio
Analysis:
The current ratio has shown an increasing trend from 2010, which shows sound liquidity position of the bank. The current ratio of the bank is much higher than the standard ratio of the bank.
Year Current Liabilities Current Ratio
Mar'08 42895.39 1.335629773
Mar'09 43746.43 1.196391797
Mar'10 15501.18 3.613464265
Mar'11 15896.35 3.003678203
Mar'12 17576.98 3.171438438
Profitability Ratio
Analysis: The ROE has fallen from 2008 to 2009 but has shown improvement in
2011 to 2012 which indicates the bank is trying to utilise the capital in an optimal way.
The profit margin has increased minimally but the proportion to net income which acts as a sound indicator of consistency.
YearPROFIT MARGIN
RETURN ON EQUITY
RETURN ON ASSSETS
Mar'08 0.104815088 0.847223667 0.099218807
Mar'09 0.095845455 0.786045231 0.103375193
Mar'10 0.121971456 0.639294887 0.090807337
Mar'11 0.155710674 0.600515548 0.081438252
Mar'12 0.1559745 0.68621105 0.087513997 Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
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0.9
PROFIT MARGIN
RETURN ON EQUITY
RETURN ON ASSSETS
Turnover Ratio
Analysis:. Asset Turn Over Ratio: The decrease in the ratio shows that the bank is
struggling to manipulate its assets to improve the turn over. The ratio has shown a decreasing trend after2009
Year TOTAL ASSETS ASSET TURNOVER RATIO
Mar'08 399795.07 0.099218807
Mar'09 379300.96 0.103375193
Mar'10 363399.71 0.090807337
Mar'11 406233.67 0.081438252
Mar'12 473647.09 0.087513997Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
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TOTAL ASSETS
ASSET TURNOVER RATIO
Solvency Ratio
Analysis:
The debt equity ratio has increased from 2010 to 2011 which indicates increase in volume of deposits and borrowings of the bank.
Mar'08 Mar'09 Mar'10 Mar'11 Mar'125.2
5.4
5.6
5.8
6
6.2
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DEBT EQUITY RATIO
DEBT EQUITY RATIO
Year DEBT EQUITY RATIO
Mar'08 6.622769953
Mar'09 5.726828688
Mar'10 5.739820339
Mar'11 6.083694539
Mar'12 6.550173536
Income and Funds Flow
Analysis:
Year OPERATING CASH
Mar'08 -11631.15
Mar'09 -14188.49
Mar'10 1869.21
Mar'11 -6908.52
Mar'12 9683.75
Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
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OPERATING CASH
OPERATING CASH
Presented By-
Hitesh Makhijani Ankit Bhatia
Shweta GundewarAnuradha Pai
Kandarp Desai
- Thank You