Ratio Trend
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Transcript of Ratio Trend
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RATIO ANALYSIS
Current ratio:
Current ratio = current asset/current liability
Table: 1
Year 2009 2008 2007Current asset 17987.1 14936.2 10454.4Current liability 11921.3 11523.3 7045.9Current ratio 150.88% 129.62% 151.34%
Current ratio has decreased in 2008 by (21.88%) than 2007. But in 2009 ithas increased by(21.26%)than 2008. A discontinuous trend in current ratio
was in 2007-09.
In 2008 decrease in current ratio indicates that the company was not able to
meet its current obligations as compared to 2007. The decrease was due to
lower increase in current asset (2022.9) than current liability (2990.9). But
the increase in gross profit margin in 2009 indicates that the company was
having more ability to meet its current obligations as compared to 2008. The
increase was due to comparatively higher increase in current asset (20.42%)
than current liability (3.45%).
The industry current ratio is 1.11, so Asian paint is having more efficiency in
meeting their current obligations as compared to the whole industry.
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Profitability ratio:
Gross profit margin = gross profit/sales
Table: 2
Year 2009 2008 2007Gross profit 6030.8 6069.3 4565.8Sales 44950.5 35887.6 29445.7Gross profitmargin
13.42% 16.91% 15.51%
Gross profit margin has in 2008 by (1.4%) than 2007. But in 2009 it hasdecreased by(3.49%) than 2008. A discontinuous trend in gross profit margin
was in 2007-09.
In 2008 increase in gross profit margin indicates that the management has
produced each unit of goods more efficiently than 2007. The increase was
due to a comparatively higher increase in gross profit (32.92%) than in sales
(21.88%). The decrease in gross profit margin in 2009 indicates that the
management has produced each unit of goods less efficiently than in 2008.
The decrease was due to decrease in gross profit by (38.5) and increase in
sales by(9062.9).
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The turnover ratio:
Fixed asset turnover ratio = sales/net fixed asset.
Table: 3
Year 2009 2008 2007Sales 44950.5 35887.6 29445.7Net fixedasset
15119.6 12555.7 11300.1
Fixed asset
turnoverratio
2.97/297.29
%
2.86/285.83
%
2.61/260.58
%
Fixed asset turnover ratio has increased in 2008 by (0.25) than 2007. But in
2009 it has increased by (0.11) than 2008. An increasing trend in fixed asset
turnover ratio was in 2007-2009.
The increase in fixed asset turnover ratio indicates that management is
successful in utilizing fixed assets more efficiently than the previous year.The increase in 2008 was due to higher increase in sales by (0.21/20.84%)
than the increase in fixed assets (0.11/11.11%). The increase in 2009 was
attributed by comparatively higher increase in sales by (0.23/23.05%) than
the increase in fixed assets (0.20/20.42%).
The industry fixed asset turnover ratio is 3.68, so Asian paints has failed to
generate more sales from fixed asset as compared to the whole industry,
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Inventory Turnover Ratio = Cost of goods
sold/Average inventory
Table: 4
Year 2009 2008 2007 2006Cost of goods sold
39367.3 30625 25915.4 21183.8
Inventory 7689.5 7140.1 5980.1 4888.7Average
inventory
7414.8 6560.1 5434.4 --
Inventoryturnoverratio
5.31/530.93%
4.67/466.84%
4.77/476.88%
--
Inventory turnover ratio has decreased in 2008 by (0.1/10%) than 2007. But
in 2009 it has increased by (0.64/64%) than 2008. A discontinuous trend in
inventory turnover ratio was in 2007-09.
Decrease in inventory turnover ratio in 2008 indicates efficiency of
management to able to bring down the cost for selling the finished goods for
each unit of inventories. The decrease was due to comparatively lower
increase in cost of goods sold (18.17%) than the increase in average
inventory (20.71%). The increase in inventory turnover ratio in 2009
indicates the inefficiency of management as they were unable to keep cost
for selling finished goods down than 2008. The increase was due to a
comparatively higher increasing in cost of goods sold (28.55%) than the
increase in average inventory (13.03%).
The industry inventory turnover ratio is 7.57, so Asian paint is unable to
generate more sales from their inventory as compared to industry as a
whole.
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Receivables turnover ratio = net sales/averagedebtors
Table: 5
Year 2009 2008 2007 2006Net sales 44950.5 35887.6 29445.7 24414.6Debtors 5719.2 4603.3 4206.1 3475.2
Averagedebtors 5161.25 4404.7 3840.65 --
Receivablesturnoverratio
8.71 8.15 7.67 --
Receivables turnover ratio has increased in 2008 by (0.48) than 2007. Again
in 2009 it has increased by (0.56) than 2008. An increasing trend inreceivables turnover ratio was in 2007-09.
Increase in receivables turnover ratio indicates the efficiency of the credit
management. It shows that the increase in cash sales is higher than the
increase in debtors than previous year. The increase in 2008 was due to a
comparatively higher increase in net sales (21.88%) than the increase in
average debtors (14.69%). Again the increase in receivables turnover ratio in
2009 was due to a comparatively higher increase in net sales (25.25%) than
the increase in average debtors (17.18%).
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Return on equity:
Return on equity = profit after tax/net worth
Table: 6
Year 2009 2008 2007
Profit aftertax 3623.6 3752 2720.5
Net worth 12031.7 9823.7 7777.9Return onequity
30.12%/0.30 38.19%/0.38 34.98%/0.35
Return on equity has increased in 2008 by (3.21%) than 2007. But in 2009 it
has decreased by (8.07%) than 2008. A discontinuous trend in return on
equity was in 2007-09.
The increase in return on equity in 2008 indicates that management was
able to give a higher return to the equity holder than 2007. The increase was
due to a comparatively higher increase in profit after tax by (37.92%) than in
net worth by (26.30%). The decrease in return on equity in 2009 indicates
that management has failed to give a higher return to the equity holder than
2008. The decrease was due to decrease in profit after tax by (128.4) and
increase in net worth by (2208).
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Return on capital employed (ROCE):
ROCE = profit before interest and tax(PBIT)(1- tax rate
t)/capital employed
Table: 7
Year 2009 2008 2007PBIT 5618.4 5766.2 4239.6
Tax rate 0.34 0.33 0.34Capitalemployed
15873.6 13149.5 11440.4
ROCE 0.23/23.36% 0.29/29.38% 0.25/24.46%
Return on capital employed has increased in 2008 by (4.92%) than 2007. But
in 2009 it has decreased by (6.02%) than 2008. A discontinuous trend in
return on capital employed was in 2007-2009.
The increase in return on capital employed in 2008 was due to comparatively
higher increase in profit before interest & tax (36.01%) than the increase in
capital employed (14.94%) & a decrease in tax rate by (0.01). This shows
that company has managed to extract more operating profit from the capital
employed. But the decrease in return on capital employed in 2009 reflects
inefficiency of the company to manage to extract operating profit out of the
capital employed. This decrease was due to decrease in profit before interest
& tax by (147.8) and increase in capital employed by(2724.1) & tax rate
by(0.01).
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Investor ratio:
Earning per share (EPS) = profit after
tax(PAT)/number of shares
Table: 8
Year 2009 2008 2007Profit aftertax(PAT)
3623.6 3752 2720.5
Number ofshares
104.13 103.56 102.62
Earning pershare(EPS)
34.80 36.23 26.51
Earning per share has increased in 2008 by (9.72) than 2007. But it has
decreased in 2009 by (1.43) than 2008. A discontinuous trend in earning per
share was in 2007-09.
Increase in earning per share in 2008 indicates the efficiency of the
management in generating higher overall profit for each share than 2007.
The increase was due to a comparatively higher increase in profit after tax
by (37.91%) than the increase in number of shares by(0.92%). But the
decrease in earning per share in 2009 indicates the inefficiency of the
management in generating higher overall profit for each share than 2008.The decrease was due to an increase in number of share by (0.57) and a
decrease in profit after tax by (128.4).
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Dividend per share (DPS) = dividend/number of
share
Table: 9
Year 2009 2008 2007Dividend 1678.6 1630.6 1247Number ofshare
104.13 103.56 102.62
Dividend pershare(DPS)
16.12 15.75 12.15
Dividend per share has increased in 2008 by (3.6) than 2007. Again in 2009
it has increased by (0.37) than in 2008. An increasing trend dividend per
share was in 2007-09.
Increase in dividend per share indicates the efficiency of the management in
encouraging the ordinary shareholder for investing in their company. The
increase in dividend per share in 2008 was due to a comparatively higher
increase in dividend by (30.76%) than the increase in number of share by
(0.92%). The increase in dividend per share in 2009 was due to a
comparatively higher increase in dividend by (2.94%) than the increase in
number of share by (0.55%).
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CASH FLOW ANALYSIS
In 2008 there was a higher cash inflow from operating activities than 2007. It
was mainly due to: higher profit before tax in 2008 than 2007. A lower cash
outflow in2008 than 2007 due to a comparative lower cash outflow in
inventories & tax paid than cash outflow from trade receivables, sales of
asset & sales of invest in 2008 than 2007. A higher cash inflow in 2008 than2007. Higher increase in cash inflow from trade payables than decrease in
interest results higher cash inflow.
In 2008 there was a higher cash outflow from investing activity than 2007.
Higher increase in cash outflow from purchase of fixed assets, purchase of
investment & loans to subsidiaries than increase in cash inflow from sale of
investment, interest received & dividend received in 2008 resulted to higher
cash outflow than 2007.
In 2008 there was a lower cash outflow from financing activities than 2007.Higher cash outflow from long term & short term borrowings, dividend paid
and interest paid than cash inflow from other long term borrowing resulted to
lower cash outflow.
In 2009 there was a lower cash inflow from operating activities than 2008. It
was mainly due to: lower profit before tax in 2009 than 2008. A lower cash
outflow in 2009 than 2008 due to a decrease in cash outflow in inventories,
trade payables, sale of investment & tax paid than increase in cash outflow
from trade receivables, sales of asset in 2009 than 2008. Increase in cash
inflow from interest resulted higher cash inflow in 2009 than 2008.
In 2009 there was a lower cash outflow from investing activity than 2008.
Decrease in cash outflow from purchase of fixed assets, purchase of
investment & loans to subsidiaries than increase in cash inflow resulted to
lower cash outflow in 2009. higher increase in cash inflow from sale of
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investment & sale of fixed assets than decrease in cash inflow from interest
received & dividend received in 2009 than 2008 resulted to cash inflow.
In 2009 there was a higher cash outflow from financing activities than 2008.
Higher increase in cash outflow from long term borrowings, dividend paid
and interest paid than decrease in cash outflow from long term borrowing &decrease in cash inflow from other long term borrowings resulted higher
cash outflow.
Conclusion:
Lower cash outflow from current asset than cash inflow from current liability
leads to cash inflow & results to decrease in current asset in 2008. Higher
cash outflow from current asset than cash inflow from current liabilities leads
to cash outflow results to increase in current ratio in 2009.
Higher cash inflow from gross profit than cash inflow from sales leads to cash
inflow & results to increase in gross profit margin in 2008. Lower cash inflow
from gross profit than cash inflow from sales leads to cash inflow & results to
decrease in gross profit margin in 2009.
Higher cash inflow from sales than cash outflow from fixed asset leads to
cash inflow & results to increase in fixed asset turnover ratio in both the year
2008 & 2009.
Lower cash outflow from cost of goods sold than cash outflow from average
inventory leads to cash outflow & decrease in inventory turnover ratio in
2008. Higher cash outflow from cost of goods sold than cash outflow from
average inventory leads to cash outflow & increase in inventory turnover
ratio in 2009.
Higher cash outflow from average debtors than cash inflow from sales leadsto cash outflow & results to decrease in receivables turnover ratio in 2008.
Higher cash inflow from sales than cash outflow from average debtors leads
to cash inflow & results to increase in receivables turnover ratio in 2009.
Higher cash inflow from profit after tax than cash inflow from net worth leads
to cash inflow & results to increase in return on equity in 2008. Higher cash
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inflow from net worth than cash inflow from profit after tax leads to cash
inflow & results to decrease in return on equity in 2009.
Higher change in cash inflow from profit before interest & tax than the
change in cash outflow from capital employed leads to cash inflow & results
to increase in return on capital employed in 2008. Lower change in cashinflow from profit before interest & tax than change in cash outflow from
capital employed leads to cash outflow & results to decrease in return on
capital employed in 2009.
Higher cash inflow from profit after tax & increase in number of share leads
to cash inflow & results to increase in earning per share in 2008. Lower cash
inflow from profit after tax & increase in number of share leads to cash inflow
& results to decrease in earning per share in 2009.Higher cash outflow from
dividend & increase in number of share leads to cash outflow & results to
increase in dividend per share in both 2008 & 2009.