7/31/2019 Ratio Analysis of LML

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Type Name of

Ratio

Mar'11 Mar10 Reasons Suggestions

Profitability

ratio

Operating

profit ratio

3.68 3.87 It is a measurement of

what proportion of acompany's revenue is

left over after payingfor variable costs ofproduction such as

wages, raw materials,

etc. The reason would

be both the operatingincome and EBIT are

increasing.

Co. has to minimize

its variable expensesin order to gain more

profit and also theincome from othersources should be

increases.

Gross profit

ratio

30.03 25.76 The company is earning

more revenue byincurring less amount

on variable expenses.

Operating expenses

should be minimizedand co. also has to

make more credit

sales.

Net profitratio

9.05 7.14 Co. is increasing itssales and also

generating revenue

from other sources.This would be the

reason in increasing net

profit.

The co. have toincrease its sales and

decrease its expenses

i.e. tax anddepreciation. in order

gain more profit.

Return on

capitalemployed

6.99 7.83 Under this the EBIT is

increasing and the totalassets and c. liabilities

are decreasing. The

total assets are

decreases because ofloans and advances.

The co. has to take

money from out sidein the form of loans

and advances in order

to sustain or increase

the ratio.

7/31/2019 Ratio Analysis of LML

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Return on net

worth

1.90 2.02 As the net income of

the co. is increasing butthe shareholders equity

is decreasing. Share

holders equity means

current assets lesscurrent liabilities.

Co. has to increase

more its equity sharecapital and the net

income. Because the

investors would lie

their behavior toinvest is depends on

this ratio.

Liquidity

ratio

Current ratio 1.77 1.05 The current ratio istotally depends upon

the investments in

current assets and thecurrent liabilities.

All the current assets

are increasing and theliabilities are

decreasing.

The suggestion wouldbe the co. has to make

its sales more on

credit. As the buyingbehavior of customer

would be increased.

And also they have tospend less on variable

expenses in order todecrease current

liabilities.

Quick ratio 0.87 0.65 Quick ratio is current

assets less inventoriesdivided by current

liabilities. Under this

the investments ininventories are

increases in the year 11.

Suggestion would be

the investments ininventories and

current liabilities both

should be minimizedin order to increase

the ratio.

Solvencyratio

Debt equityratio

2.02 1.96 The cos debt andequity both areincreasing. But they

have to increase more

equity as compare to

debt because it is taxfree.

More capital has to beemployed in the formof equity more than

debt.

Debt Ratio 0.39 0.32 The total debt is risingwith the rise in the total

assets.

Co. has to invest moreand in the fixed assets

to have the future

prosperity.

Turnoverratio

Inventoryturnover ratio

3.47 5.07 Under this both thesales and the inventoryare increases. But the

reason is inventory does

not increases with the

same proportion as thesales are increases.

It shows a very goodturnover as how muchfrequents the

inventory should be

purchase and sold out.

But only the co.should also focus on

their credit sales..

7/31/2019 Ratio Analysis of LML

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Debtors

turnover ratio

4.20 3.50 The debtors and the

sales are increases sothis would means that

the ratio also increases.

This shows how

frequents the co. cansales on credit and

collects their debts.

And also co. has to

increase its creditsales.

Assets

turnover ratio

1.13 0.97 The firm is very

efficient in increase its

revenue by employing

their assets.

It also indicated

pricing strategy.

Companies with low

profit margin tend tohave high assets

turnover, while those

with high profitmargin will have low

asset turnover. The

companies have toincrease their profit

margin in order to

have a good asset

turnover.

Debt

Coverage

ratio

Interest

coverageratio

- - - -

Debt tocapital ratio

0.40 0.39 It is calculated bydividing the debt to

shareholders equity +

debt. Under this boththe debt and equity are

increases.

The debt is increasesbut co. should

increase the

shareholders equity inorder to have more

funds available to

shareholders.

Debt service

coverage

ratio

0.27 0.29 It is calculated by

dividing the net

operating income bytotal debt service.

Operating expense

should be minimized

and the debt should beincrease in the form of

loans.