chapter

CHAPTER- IV

DATA ANALYSIS AND INTERPRETATION

management and employee and because of strike company is in lose so company

should take serious step regarding employee satisfaction for to improve

shareholder wealth

B. LEVERAGE ANALYSIS:-

1. DEGREE OF OPERATING LEVERAGE (DOL

2. DEGREE OF FINANCIAL LEVERAGE (DFL

3. DEGREE OF TOTAL LEVERAGE (DTL)

1. DEGREE OF OPERATING LEVERAGE:-

DOL 2005:-

DOL=GROSS PROFIT / EBIT

DOL=882.45/136.08

DOL=6.484

DOL 2006:-

DOL= GROSS PROFIT / EBIT

DOL=1161.21/221.17

DOL=.5254 DOL 2007:-

DOL=GROSS PROFIT / EBIT

DOL=1895.53/193.08

DOL=9.817

DOL 2008:-

DOL= GROSS PROFIT / EBIT

DOL=1704.72/317.29

DOL=5.372

DOL 2009:-

DOL=GROSS PROFIT / EBIT

DOL=1668.90/426.11

DOL=3.916

TABLE-2

DEGREE OF OPERATING LEVERAGE:

Interpretation and Analysis:

The above table and diagram shows the operating leverage during

the study period except in the year 2006-2007 is more than previous year but in

year 2007-08 it again decreased and year 2008-09 it again come down

The DOL is an index number which measures the effect

of a change in sales on operating income, or EBIT. It shows that

Interpretation and Analysis:

The above table and diagram shows the operating leverage during

the study period except in the year 2006-2007 is more than previous year but in

year 2007-08 it again decreased and year 2008-09 it again come down

The DOL is an index number which measures the effect

of a change in sales on operating income, or EBIT. It shows thatcompany is giving less amount and bear less depritiation charge it is good for company.

2. DEGREE OF FINANCIAL LEVERAGE:-

DFL 2005:-

DFL=PBIT / PBT

DFL=136.08/86.76

DFL=1.568

DFL 2006:-

DFL=PBIT/PBT

DFL=221.17/161.20

DFL=1.372

DFL 2007;-

DFL=PBIT/PBT

DFL=193.08/72.48

DFL=2.663

DFL 2008:-

DFL=PBIT/PBT

DFL=317.29/140.74

DFL=2.254

DFL 2009:-

DFL=PBIT / PBT

DFL=426.11/247.26

DFL=1.723

TABLE-3

DEGREE OF FINANCIAL LEVERAGE:

Year DFL

2004-20052005-20062006-20072007-20082008-2009

1.5681.3722.6632.2541.723

CHART-3

DFL:

Interpretation and Analysis:

The above table and diagram shows the student period 2004-05 to 2008-

09.in the year 2006-07it was very high it was nit good for the company because

during this period company is paying fixed interest on debt but in year 2008-09

It comes down it mean company is is paying less interst so it is good for

Interpretation and Analysis:

The above table and diagram shows the student period 2004-05 to 2008-

09.in the year 2006-07it was very high it was nit good for the company because

during this period company is paying fixed interest on debt but in year 2008-09

It comes down it mean company is is paying less interst so it is good for company.

3. DEGREE OF TOTAL LEVERAGE:-

DTL 2005:-

DTL=DOL*DFL

DTL=6.484*1.568

DTL=10.17

DTL 2006:-

DTL=DOL*DFL

DTL=.5254*1.372

DTL=.720

DTL 2007:-

DTL=DOL*DFL

DTL=9.817*2.663

DTL=26.14

DTL 2008:-

DTL=DOL*DFL

DTL=5.372*2.254

DTL=12.108

DTL 2009:-

DTL=DOL*DFL

DTL=3.916*1.723

DTL=6.747

TABLE-4

DEGREE OF TOTAL LEVERAGE:

B)L EVERAGE RATOS:

Many financial analyses are interested in the relative use of debt and

equity in the firm. The term ‘solvency’ refers to the ability of a concern to meet

its long-term obligation. Accordingly, long-term solvency ratios indicate a

firm’s ability to meet the fixed interest and costs and repayment

schedules

associated with its long-term borrowings. (E.g.) debt equity ratio,

proprietary

ratio, etc….

i) DEBT EQUITY RATIO:

It expresses the relationship between the external equities and internal equities or the relationship between borrowed funds and ‘owners’

capital. It is a popular measure of the long-term financial solvency of a firm.

This relationship is shown by the debt equity ratio. This ratio indicates the

relative proportion of dept and equity in financing the assets of a firm. This ratio

is computed by dividing the total debt of the firm by

its equity (i.e.) net worth.

Outsider’s funds

Debt equity ratio = ------------------------------

Proprietor’s funds

TABLE-5

DEBT EQUITY RATIO:

Interpretation and Analysis:

The above table and diagram shows the debt equity relationship of the

company during the study period. It was 0.4 in the 2004-05 and then reached its

highest in the next year and from there it began to slope downwards and

ultimately came to 1.08 in the year 2008-09.

In all the years the equity is more when compared with borrowings.

Hence the company is maintaining its debt position

ii) PROPRIETARY RATIO:

Proprietary ratio relates to the proprietors funds to total assets. It

reveals the owners contribution to the total value of assets. This ratio shows the long-time solvency of the business it is calculated by dividing proprietor’s funds

by the total tangible assets.

Proprietor’s funds

Proprietary ratio = ---------------------------

Total tangible assets

TABLE-5

:

CHART-5

PROPRIETARY RATIO:

Interpretation and Analysis:

The above table and diagram shows the proprietary ratio during the

period. In all the years the owner's contribution to the total assets was approp

and they maintain their share in the company's assets.

Except 2005-06 in all the years the proprietor's contribution in to the

assets is more than the 2/3. During 2006-07 it is more than 50%

C. ROI-ROE ANALYSIS:-

ROE= [ROI+(ROI-r)D/E](1-t)

RETURN ON INVESTMENT = Net profit /capital employed ×

(ROI)

ROI OF 2005

ROI=99.52/644.22*100

ROI=15.44

ROI OF 2006

ROI=131.50/932.85*100

ROI=14.09

ROI OF 2007

ROI=75.43/1693.59*100

ROI=4.45

ROI OF 2008

ROI=111.52/1952.42*100

ROI=5.71

ROI OF 20O9:

ROI=169.78/1756.79*100

ROI=9.6609

ROI-ROE ANALYSIS:- 2005

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[15.44+(15.44-10 )*.39](1-.24)

ROE= 13.34

ROI-ROE ANALYSIS:- 2006

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[14.09+(14.09-12 )*1.27](1-.29)

ROE= 12.59

ROI-ROE ANALYSIS:- 2007

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[4.45+(4.45-10 )*.67](1-.039)

ROE=o.88

ROI-ROE ANALYSIS:- 2008

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[5.71+(5.71-12 )*.65](1-.228)

ROE= 1.25

ROI-ROE ANALYSIS:- 2009

ROE=[ROI+(ROI-r)D/E](1-t)

ROE=[9.66+(9.66-11 )*1.08](1-.726)

ROE=2.25

INTERPRETATION:-

IN the study of 2004-05 to 2008-09 the return on equity from 2005-2006 was

good but in year 2007-09 it was not good its mean investment is not up to the

mark it’s a drawback for shareholder so company should work hard to control

this low graph.