modified 15ratios (1)

8/10/2019 Modified 15Ratios (1)

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DATA ANALYSIS & INTERPRETATION


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ANNUAL REPORT ANALYSIS

Analysis is the process of critically examining in detail accounting information given in

the financial statements. Analyzing financials of firms position statements is a process ofevaluating relationship between component parts of Financial statements to obtain a better

understanding of firms position and performance. As per the Mayer, Financial statements

analysis is largely a study of relationship among financial factors in a business as disclosed

by a single set of statements and a study of the trend of these factors as shown in a series of

statements.

Analysis and Interpretation are closely related. Interpretation is not possible without

analysis and without interpretation analysis has no value.

In the words of Kenndy and Memullar, The analysis and interpretation of finical

statements are an attempt to determining the significance and meaning of the

financial statements data so that a forecast may be made of the prospects for future

earnings, ability to pay interest and debt maturities and probability of a sound

dividend policy.

Objectives of the Ratio analysis: The Ratio analysis is used to know the following factors

The present and future earning capacity or profitability of the concerns.

The operational efficiency of the concern as a whole and of its various parts or

departments.

The financial stability of business concern.

The real meaning and significance of financial data, and

The long-term liquidity of its funds.

The comparative study in regard to one firm with another firm or department with

another department.

Methods of Annual analysis and interpretation:

1. Comparative financial analysis

2. Common measurement analysis


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3. Trends percentages analysis

4. Funds flow analysis

5. Networking capital analysis.

6. Cash flow statement analysis

7. Ratio analysis.

Six things in an annual report necessary for fundamental analysis:

Compare this year annual report with the last year annual report

See how the cash flow compares with the net incomes.

Consider operating margin and gross margin

Look for deterioration.

Take a look of CEOs pay cheque.

Sleuth for potential conflix of interest

Advantages:

The advantages to using annual reports are:

It can contain detailed information such as figures.

Visual information can be used e.g., tables, charts etc.

A written record of the business is kept at a particular moment in time.

Shows the public that the organization does keep in touch with what they want.

Limitations:

Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of

financial ratio analysis are:

1.

Different companies operate in different industries each having different environmentalconditions such as regulation, market structure, etc. Such factors are so significant that a

comparison of two companies from different industries might be misleading.

2. Financial accounting information is affected by estimates and assumptions. Accounting

standards allow different accounting policies, which impairs comparability and hence ratio

analysis is less useful in such situations.


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3. Ratio analysis explains relationships between past information while users are more

concerned about current and future information.

Factors to select Ratio analysis for annual report:

The Ratio analysis is useful in simplifying the accounting figures to make them

understandable to a layman, because it is easier to understand ratios then plain figures.

It is also useful in forecasting and planning for the future, also it helps in control by

comparing the actual performance with that of forecasted performance and looking for

reason for it.

It is also used for analysis of financial statements by various interested parties like

bankers, creditors, supplier etc. for taking future decision about the company.

Ratio Analysis:

The study of the significance offinancialratios for a company. Ratio analysis is very imp

ortant infundamentalanalysis,whichinvestigates the financial health of companies. An example o

f ratio analysis is the comparison ofpriceearningsratios of differentcompanies. This helps analyst

s determine which companies' share prices properly reflect their performances and therefore what

investments are most likely to be the most profitable.

Types of ratios

A. Liquidity Ratio

B. Turnover Ratio

C. Solvency or Leverage ratios

D. Profitability ratios

E. Stability Ratio Growth and performance.
http://financial-dictionary.thefreedictionary.com/Financial+Ratioshttp://financial-dictionary.thefreedictionary.com/Fundamental+Analysishttp://financial-dictionary.thefreedictionary.com/Price-Earnings+Ratioshttp://financial-dictionary.thefreedictionary.com/Investmentshttp://financial-dictionary.thefreedictionary.com/Investmentshttp://financial-dictionary.thefreedictionary.com/Price-Earnings+Ratioshttp://financial-dictionary.thefreedictionary.com/Fundamental+Analysishttp://financial-dictionary.thefreedictionary.com/Financial+Ratios


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Balance Sheet:

PARTICULARS Schedule 2008-09

Rs.

2009-10

Rs.

2010-11

Rs.

2011-12

Rs.

2012-13

Rs.

1.SOURCE OFFUNDS

A .Share holders

funds a) Equity

shares capital

b) Reserves &

Surplus

B) Loan funds

a) Secured loans

b) Un secured

loans

A

B

C

D

55351000

-113230842

124412166

17554308

55351000

-

121871748

124265284

16878362

55351000

-

131769708

123762967

16457311

55351000

1535979

123421934

16525160

55351000

1535979

118323986

17597491

Total 1 AND 2 84086632 74622897 63801570 196834073 192808456

11.Application

of funds

1.FIXED

ASSETS

a) Gross Block

less:

Depreciation

Net block

E

128744087

75598731

53145356

128744087

83431974

45312113

129350453

92191194

37159259

130940766

101041843

29898923

131221531

109690611

21530920

2. Investments F 701500 701500 701500 701500 701500

3.Current

Assets, loans and

advance

G 41654241 40018498 36063112 38395190 39943933


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Less:

4. Current

liability&

provisions

Net Currentassets(G-H)

H 40847539

806702

40842288

-823790

39555375

-3492263

41598478

3203288

39819313

124620

5.Miscellaneousexpenditure(to

the extent not

written or

adjusted)

I 29433074 29433074 29433074 14000386

4

14101834

2

Notes on

accounts

J - - - - -

Total 1 to 5 - 84086632 74622897 63801570 196834073 192808456


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Profit and Loss Account:

DESCRIPTION 2008-09

Rs.

2009-10

Rs.

2010-11

Rs.

2011-12

Rs.

2012-13

Rs.

SALES 12353450 20582346 33262721 75263228 88880317

Cost of goods sold 9541652 15867208 25608054 66045182 73510727

Gross profit (k-1) 2811798 4715138 7654667 9218048 15369590

Selling and

Administrative

expenses

3927032 4776618 7760578 6487062 7820214

Depreciation 9080119 7833243 8759220 8850648 8705418

Interest 12838748 104918 267580 152862 18423

Other Income 231372 115287 176299 335446 351264

PBIT 22802728 7884355 -8956412 -5784218 -804778

Provision for income

tax

0 0 0 77467 80376

PAT 22802728 7884355 -8956412 -5861685 -885154

Prior period adjustment 48228 756552 941547 836491 129324

Balance c / f to

balance sheet

22850956 8640907 -9897959 -140003864 -141018342


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LIQUIDITY RATIOS:

1. Current Ratio: This ratio is obtained by dividing the Total Current Assets of a

company by its Total Current Liabilities. The ratio is regarded as a test of liquidity for a

company. It expresses the working capital relationship of current assets available to meet the

companys current obligations.

Formula

Current ratio = Total current assets/ Total current Liabilities

Year 2008 2009 2010 2011 2012

Current Assests 4,16,54,241 4,00,18,498 3,60,63,112 3,83,95,190 3,99,43,933

Current Liabilities 4,08,47,539 4,08,42,288 3,95,55,375 4,15,98,478 3,98,19,313

Current Ratio 1.02 0.98 0.91 0.93 1.00

Interpretation:

The current ratio helps us in analyzing the companys ability in meeting its immediate

obligations. The acceptable ratio is 2:1. However calculations and graph we find that the

company is able to meet below its standards. As it is a cause of concern the company has to

focus on development current assets.

0.85

0.9

0.95

1

1.05

2008 2009 2010 2011 2012

Current Ratio

Current Ratio


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2. Liquid/Quick Ratio:

It is also known as acid test ratio, it is more vigorous of liquidity than the current ratio.

The term liquidity refers to the ability of affirm to pay its short term obligation as and when they

become due.

Formula:

Liquid ratio = Quick assets / current liabilities

Year 2008 2009 2010 2011 2012

Quick Assests 4,08,47,539 3,91,94,708 3,25,70,849 3,51,91,902 3,98,19,313

Current Liabilities 4,08,47,539 4,08,42,288 3,95,55,375 4,15,98,478 3,98,19,313

Liquid Ratio 1.00 0.96 0.82 0.85 1.00

Interpretation:

The quick ratio is a most conservative measure which helps us to analysis wheather a

company is in a position to meet current liabilities with its most liquid assets. 1:1 ratio is

considered ideal ratio for a concern because it is wise to keep the liquid assets at least equal to

the liquid liabilities at all times. from the above graph we observe that the company is satisfying

this measure .so we can analyse that the company is stable & healthy financially.

0

0.2

0.4

0.6

0.8

1

2008 2009 2010 2011 2012

Quick Ratio

Quick Ratio


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PROFITABILITY RATIOS

3. Gross profit Ratio:This Ratio is used to compare departmental profitability. It costs

are classified suitably into fixed and variable elements.

Formula:

Gross profit ratio = Gross Profit / Sales * 100

Year 2008 2009 2010 2011 2012

Gross Profit 28,11,798 47,15,138 76,54,667 92,18,048 1,53,69,596

Sales 1,23,53,450 2,05,82,346 3,32,62,721 7,52,63,228 8,88,80,317

Gross profit

Ratio

22.76 22.9 23.01 12.24 17.29

Interpretation:

The gross profit ratios show the companys ability to cover its operating expenses and

thus provide an adequate return to proprietors. Te higher GP ratio it is more satisfy able .but

the above graph shows that the company gross GP ratio has come down in 11 and again

increase in 12 but not to a satisfactory level.

0

5

10

15

20

25

2008 2009 2010 2011 2012

Gross Profit Ratio

Gross Profit Ratio


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4. Net Profit Ratio (NP ratio): NPis a popular profitability ratio that shows

relationship between net profit after tax and net sales. It is computed by dividing the net profit

(after tax) by net sales.It measures overall profitability of the business.

Formula:

Net profit ratio = Net Profit / Sales * 100

Year 2008 2009 2010 2011 2012

Net Profit 2,28,50,956 86,40,907 98,97,959 1,40,00,3864 14,10,18,342

Sales 1,23,53,450 2,05,82,346 3,32,62,721 7,52,63,228 8,88,80,317

Net profit Ratio 84.97 41.98 29.76 86.01 58.66

Interpretation:

The ratio explains per rupee profit generating capacity of sales. If the cost of sales is

lower, then the net profit will be higher and then we divide it with the net sales, the result is

the sales efficiency. Higher the ratios the better it is because it gives idea of improved

efficiency of the concern. The graph shows high net profit ratio 86.01 in the year 2011 and

very less in the year 2010.

0

20

40

60

80

100

2008 2009 2010 2011 2012

Net Profit Ratio

Net Profit Ratio


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SOLVENCY OR LEVERAGE RATIOS

5. Debt Ratio:A financial ratio that measures the extent of a companys or consumers

leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in

percentage, and can be interpreted as the proportion of a companys assets that are financed by

debt.

Formula:

Debt ratio = Total Debt / Capital Employed

Year 2008 2009 2010 2011 2012

Total Debt 141966474 141143646 140220278 139947094 135921477

Capital Employed 168581842 177222748 187120708 56886979 56886979

Debt Ratio 0.84 0.79 0.75 2.46 2.39

Interpretation

Debt ratio is used to analyze the long term solvency of a concern. In the above

calculations and graph we observe that, though the companys Debt ratio is low it has improved

from raising funds by issuing debentures and bonds and investing wisely to improve this position

financially. The above graph shows the slight decrease and immediate increase from 0.84 to 2.39

in the years 2008 and 2012 respectively.

0

1

2

3

2008 2009 2010 2011 2012

Debt Ratio

Debt Ratio


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6. Equity Ratio: Equity Ratio is a good indicator of the level of leverage used by a

company. The Equity ratio measures the proportion of the total assets that are financed by

stockholders and not creditors.

Formula:

Equity ratio = Shareholders equity /Total Capital Employed

Year 2008 2009 2010 2011 2012

Equity 55351000 55351000 5535100 5535100 5535100

Capital Employed 168581842 177222748 187120708 56886979 56886979

Debt Ratio 0.33 0.31 0.30 0.97 0.97

Interpretation:

The ratio indicates proportion of owners fund to total fund invested in the business .it is

believed that higher the proportion of owners fund lower is the degree of risk. The above figures

shows that the ratio is same in the 2012&2013.

7. Debt to Equity Ratio:The debt-to-equity ratio (D/E) is a financial ratio indicating

the relative proportion of shareholders' equity and debt used to finance a company's assets.

Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage.

Formula:

Equity ratio = Total Liabilities / Shareholders equity

0

0.5

1

2008 2009 2010 2011 2012

Equity Ratio

Equity Ratio


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Year 2008 2009 2010 2011 2012

Total Liabilities 124934171 115465185 103356945 238432551 232627769

ShareholdersEquity 55351000 55351000 5535100 5535100 5535100

Debt Ratio 22.57 2.09 1.87 4.31 4.20

Interpretation:

The ratio indicates the proportion of debt fund in relation to equity. A high ratio Here

means less protection for creditors. a low ratio, on the other hand ,indicates a wider safety

cushion. The graph shows immediate decrease 22.57 to 4.20 in the years 2008 and 2012. This

gives the moderated difference in the High ratio.

8. Interest Coverage Ratio:A ratio used to determine how easily a company can pay

interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's

earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the

same period.

Formula:

Interest Coverage ratio = EBIT / Interest

Year 2008 2009 2010 2011 2012

EBIT 22802728 7884355 8956412 5784218 804778

Interest 12838748 104918 267580 152862 18423

Coverage Ratio 22.57 2.09 1.87 4.31 4.20

0

20

40

2008 2009 2010 2011 2012

Debt to Equity Ratio

Debt to Equity Ratio


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Interpretation:

This ratio indicates extents to which earnings may fall without causing any

embarrassment to the firm regarding the payment of interest charges. A high coverage ratio

means that an enterprise can easily meet its interest obligations even if earnings before interest

and taxes suffer considerable decline. The graph shows the immediate increase and slow

decrease from 2008 to 2012.

TURNOVER RATIOS

9. Total Assets Turnover Ratio:

To show what extranet the total assets are being utilized in the business. The ratio is

obtained by dividing the sales or cost of goods sold of a company by its Total assets.

Formula:

Total Assets Turnover Ratio = sales or cogs / Total asset

Year 2008 2009 2010 2011 2012

Sales 23,53,450 2,05,82,346 3,32,62721 7,52,63,228 8,88,80,317

Total Assets 9,55,01,097 8,60,32,111 7,39,23,871 6,89,95,613 6,21,76,353

Ratio 0.13 0.24 0.45 1.09 1.43

0

20

40

60

80

2008 2009 2010 2011 2012

Interest Coverage Ratio

Interest Coverage Ratio


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Interpretation:

This ratio is calculated by dividing the net sales by the value of total assets. A high ratio is

an indicator of overtrading of total assets while a low reveals idle capacity .The traditional

standard for the ratio is two times. A companys position has improve d year by year it has

fulfilled the obligations. Hence it is stable.The graph shows the increment from 2008 to 2012 as

0.13 to 1.43, which gives the improvements in the Capital fund.

10. Inventory/Stock turnover Ratio: A ratio showing how many times a

company's inventory is sold and replaced over a period. The days in the period can then be

divided by the inventory turnover formula to calculate the days it takes to sell the inventory on

hand or "inventory turnover days."

Formula:

Inventory/ Stock Turnover Ratio = sales or cogs / Avg Stock

Year 2008 2009 2010 2011 2012

Sales 23,53,450 2,05,82,346 3,32,62721 7,52,63,228 8,88,80,317

AVG Stock 47,70,826 79,33,604 1,28,04,027 3,30,22,591 3,67,55,536

Ratio 2.59 2.60 2.60 2.28 2.41

0

0.5

1

1.5

2008 2009 2010 2011 2012

Total Assets turnover Ratio

Total Assets turnover Ratio


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Interpretation: Inventory Turnover Ratio measures company's efficiency in turning its

inventory into sales. Its purpose is to measure the liquidity of the inventory. Inventory Turnover

Ratio is figured as "turnover times". Average inventory should be used for inventory level to

minimize the effect of seasonality. In the above graph the inventory ratio is equal in the years

2009 ,2010 and reduced because of the capital employed and production methods on the other

respective years.

11. Working Capital Turnover Ratio:A measurement comparing the depletion of

working capital to the generation of sales over a given period. This provides some useful

information as to how effectively a company is using its working capital to generate sales.

Formula:

Working Capital Turnover Ratio = sales or cogs / Avg Stock

Year 2008 2009 2010 2011 2012

Sales 23,53,450 2,05,82,346 3,32,62721 7,52,63,228 8,88,80,317

Working

Capital

806702 -823790 -3492263 -3203288 3246288

Ratio 15.31 24.98 9.52 23.49 27.38

2

2.2

2.4

2.6

2008 2009 2010 2011 2012

Inventory / Stockturnover Ratio

Inventory / Stockturnover Ratio


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Interpretation:The higher is the ratio, the lower is the investment in working capital and the

greater or the profits. However, a very high turn of over of working capital is a sign of over

trading and may put the concern into financial difficulties. On the other hand, a low working

capital turnover ratio indicates that working capital in not efficiently utilize. The above graphshows the clear variance based on the working capital employed from 2009 to 2012.

12. Solvency Ratio: The Solvency Ratio is a measure of the risk an insurer faces of

claims that it cannot absorb. The amount of premium written is a better measure than the total

amount insured because the level of premiums is linked to the likelihood of claims.The solvency

or leverage ratios throws light on the long term solvency of a firm reflecting its ability to assure

the long term creditors with regard to periodic payment of interest during the period and loan

repayment of principal on maturity or in predetermined installments at due dates. There are thus

two aspects of the long-term solvency of a firm.

a. Ability to repay the principal amount when due

b. Regular payment of the interest.

Formula:

Solvency Ratio = Total Debts / Total Assets

Year 2008 2009 2010 2011 2012

Total Debt 141966474 141143646 140220278 139947094 135921477

Total Assets 9,55,01,097 8,60,32,111 7,39,23,871 6,89,95,613 6,21,76,353

Ratio 1.49 1.64 1.90 2.03 2.19

0

10

20

30

2008 2009 2010 2011 2012

Working Capital turnover Ratio

Working Capital turnover Ratio


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Interpretation: The ratio is based on the relationship between borrowed funds and owners

capital it is computed from the balance sheet, the Regular payment of the interest type are

calculated from the profit and loss a/c. The above graph shows the clear increment from 2008 to

2012 with respect to the total Assets and debts employed.

13. Fixed Assets To Long Term Funds: Fixed assets to long term funds ratio

establishes the relationship between fixed assets and long-term funds and is calculated by

dividing fixed assets by long term funds.

Formula:

Fixed Assets to Long terms Funds= Fixed Assets*100 / Long term funds

Year 2008 2009 2010 2011 2012

Fixed assets 9,55,01,097 8,60,32,111 7,39,23,871 6,89,95,613 6,21,76,353

Long term Debts 141966474 141143646 140220278 139947094 135921477

Ratio 67 61 52 49 48

0

1

2

3

2008 2009 2010 2011 2012

Solvency Ratio

Solvency Ratio

0

20

40

60

80

2008 2009 2010 2011 2012

Fixed assets to long term funds Ratio

Fixed assets to long term funds

Ratio


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Interpretation:This ratio is often used as a measure in manufacturing industries, where major

purchases are made for PP&E to help increase output. When companies make these large

purchases, prudent investors watch this ratio in following years to see how effective the

investment in the fixed assets was. The above graph shows the slight decrement from 2008 to

2012 with respect to the value of the detrimental fixed assets.

14. Proprietary ratio: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.

Formula:

Year 2008 2009 2010 2011 2012

share holders fund 168581842 177222748 187120708 56886979 56886979

Fixed assets 9,55,01,097 8,60,32,111 7,39,23,871 6,89,95,613 6,21,76,353

Ratio 1.76 2.06 2.53 0.82 0.92

0

1

2

3

2008 2009 2010 2011 2012

Proprietary Ratio

Proprietary Ratio

Proprietary Ratio = share holders fund / Total assetscurrent liabilities


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Interpretation:The proprietary ratio is not a clear indicator of whether or not a business is

properly capitalized. For example, an excessively high ratio can mean that management has not

taken advantage of any debt financing, so the company is using nothing but expensive equity to

fund its operations. Instead, there is a balance between too high and too low a ratio, which is not

easy to discern. Also, the ratio is not necessarily a good indicator of long-term solvency, since it

does not make use of any information on theincome statement, which would indicate

profitability orcash flows.The above graph shows the slow increment and gradual decrement

from 2008 to 2010 and 2011 to beyond, because of the shareholdersvalue on the market.

A high ratio In the above table and diagram seen that the proprietary ratio in the year of

2011 was 0.92 it decreases to 2.06 in the year 2012.

15. Return on investment (ROI): It measures thegain or loss generated on

an investment relative to the amount of money invested. ROI is usually expressed as a

percentage and is typically used for personal financial decisions, to compare a company's

profitability or to compare the efficiency of different investments.

A performance measure used to evaluate the efficiency of an investment or to compare the

efficiency of a number of different investments. To calculate ROI, the benefit (return) of an

investment is divided by the cost of the investment; the result is expressed as a percentage or aratio.

Formula:

Return on investment= Net profit/ Operating profit/ Capital employed *100

Year 2008 2009 2010 2011 2012

Net Profit 2,28,50,956 86,40,907 98,97,959 1,40,00,3864 14,10,18,342

Capital employed 168581842 177222748 187120708 56886979 56886979

Ratio 13.55 4.87 5.23 24.64 24.89
http://www.accountingtools.com/income-statement-overviewhttp://www.accountingtools.com/cash-flow-definitionhttp://www.investinganswers.com/financial-dictionary/investing/gain-5503http://www.investinganswers.com/financial-dictionary/investing/gain-5503http://www.accountingtools.com/cash-flow-definitionhttp://www.accountingtools.com/income-statement-overview


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Interpretation:ROI is one of the most used profitability ratios because of its flexibility. That

being said, one of the downsides of the ROI calculation is that it can be manipulated, so results

may vary between users. When using ROI to compare investments, it's important to use the same

inputs to get an accurate comparison. The above graph clearly showing that the gradual

decrement from 2008 to 2009 and immediate increment from 2010 to 2012 with respect to the

net profit and capital employed.

0

10

20

30

2008 2009 2010 2011 2012

Return on Investment Ratio

Return on Investment Ratio
http://www.investinganswers.com/financial-dictionary/investing/downside-6160http://www.investinganswers.com/financial-dictionary/investing/downside-6160


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FINDINGS

The following key feature are identified and described as follows,

From the whole study I have found that the manufacturing company is goods in terms ofgrowth.

The products produced by the Yamaha are best in India.

This is effective use of technology in their company.

The financial position of Yamaha is good according to the balance sheet.

It has been analyzed the sales turnover get increased in the financial year 2012 compared to other

years 2008, 2009, 2010 and 2011.


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BIBLOGRAPHY

WEBSITES:

http://www.deloitte.com/

www.google.com

www.datamonitor.com

www.scribed.com

http://www.investopedia.com/

http://www.accountingformanagement.org/

NEWS PAPERS:

TIMES OF INDIA.

Economic Times

BOOKS:

Cost accounting and Financial ManagementVol1 by The institute of

Charted accountants of India (Set up by an Act of Parliament) New

Delhi.

Cost and Management accounting by S.P.JAIN , K.L. NARANG,

SIMMI AGARAWAL & MONIKA SEHGAL.
http://www.google.com/http://www.datamonitor.com/http://www.scribed.com/http://www.investopedia.com/http://www.investopedia.com/http://www.scribed.com/http://www.datamonitor.com/http://www.google.com/

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