portfolio report ratio analysis

8/13/2019 Portfolio Report Ratio Analysis

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RATIO ANALYSIS

A statistic has little value in isolation. Hence, a profit figure of Rs.100 million is meaningless unless it is

related to either the firms turnover (sales revenue) or the value of its assets. Accounting ratios attempt to

highlight the relationships between significant items in the accounts of a firm.

inancial ratios are the anal!sts microscope" the! allow them to get a better view of the firms financial

health than #ust loo$ing at the raw financial statementsRatios are used b! both internal and e%ternal anal!sts

&nternal uses

' lanning

' valuation of management

* %ternal uses' +redit granting

' erformance monitoring

' &nvestment decisions

' a$ing of policies

CATEGORIES OF FINANCIAL RATIOS

-he accounting ratios can be grouped in to five categories1. /iuidit! Ratios shows the e%tent to which the firm can meet its financial obligations.

. Asset anagement Ratios shows that how effectivel! the firm is managing its assets.

2. 3ebt anagement Ratios shows the e%tent to which a firm uses debt financing or financial leverages.

4. rofitabilit! Ratios relates profits to sales and assets.

5. ar$et 6alue Ratios are a measure of the return on investment.

LIQUIDITY RATIOS

Current Ratio:

+urrent Ratio shows a firms abilit! to meet current liabilities with its current assets.

ormula

+urrent ratio 7 +urrent Assets

+urrent /iabilities

2012

+urrent ratio 7 1489212

82:549

2013

+urrent ratio 7 49:241

149;54

Anal!i!:

-he current ratio is lower in 00; as compared to 009.-here is an increase in all the current assets e%cept

other receivables which decreased in 00;. -he net current assets increased b! 11 million in 00; and at

the same time the net current liabilities increased b! 14: million in 00;.


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Qui"# Ratio

A"i$ Te!t Ratio:

Acid -est Ratio or


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ASSET (ANAGE(ENT RATIO

In)entor Turno)er Ratio

ormula

Receivables -urnover Ratio 7 -otal ?ales

Account Receivable

2012

Receivables -urnover Ratio 7 ;1;119

1142

2013

Receivables -urnover Ratio 7 ::;5114

;88:;

Anal!sis

Da! Sale! Out!tan$in&:

ormula

3a!s ?ales @utstanding 7 295

Receivable -urnover

2012


Receivable -urnover

2013


Receivable -urnover

Anal!i!:

3?@ in !ear 009 was 12.89 da!s which has now decreased to 11.8 da!s which shows that the compan!

is more effective in collecting receivables now in comparison of previous !ear, even the sales has

increased b! 2;9 million on the other hand receivables decreased which resulted /ower 3?@.


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11;:58

2013

i%ed Asset -urnover 7 49:2411155:54

Anal!i!:According to the calculations above the productivit! of fi%ed assets in !ear 00; is better than it was in

previous !ears. &n 009, it was 5.04 times and now it has been slightl! increased to 5.1 times. -his change

was brought about b! increase in total sales b! 21C, whereas the fi%ed assets increased onl! b! 8.;C.

Total A!!et Turno)er:

ormula

-otal Asset -urnover 7 ?ales

-otal Assets

2012

-otal Asset -urnover 7 1489212

921;2

2013

-otal Asset -urnover 7 49:241

292;142

Anal!i!:

According to the calculations above the productivit! of assets in !ear 00; is not as good as it was in

previous !ears. &n 009, it was .15 times and now it has been decreased to .1 times. -his change was

brought about b! increase of 24C in the total assets, whereas the total sales onl! increased b! 21C.

LEA+ERAGE RATIO

DE,T (ANAGE(ENT RATIO

De-t Ratio:

ormula

3ebt Ratio 7 -otal 3ebt

-otal Assets

2012

3ebt Ratio 7 82:549D41428D12;::9

921;2

2013


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3ebt Ratio 7 149;54D4922D1584

292;142

Anal!i!:

-he debt ratio in 009 was 0.52 which shows that 52C of the firms assets are debt financed and 4;C are

b! euit! finance. &n 00; the debt ratio increased to 0.55 which means that 55C of the firms assets are

debt financed and 45C are euit! financed. -he compan! assets are alread! in more debt finance however

the ratio of debt financing has increased in 00;.

De-t to E.uit Ratio:

ormula

3ebt to uit! Ratio 7 -otal 3ebt

-otal uit!

2012

3ebt to uit! Ratio 7 82:549D41428D12;::9

921;2

2013

3ebt to uit! Ratio 7 149;54D4922D1584

292;142

CO+ERAGE RATIO

&nterest +overage Ratio 7 E&-

&nterest %pense

2012

&nterest +overage Ratio 7 ;58545

98:89

2013

&nterest +overage Ratio 7 :::44

58849

Anal!i!:

-imes &nterest arned ratio was 4.; in 009 which have increased to 9.5 in 00; therefore the compan! is


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able to cover the interest e%pense at a higher margin of safet!. -his was due to the fact the compan!

increased the short term borrowing and decreased its long term borrowing from 40 million to Fero. As a

result the net profit increased b! 49 million whereas the interest charges onl! increased b! 4. million.

-hus it shows an intelligent move made b! the compan! to borrow less and depend more on the

investment through other financing techniues.

/ROFITA,ILITY RATIO

Gro!! /roit (ar&in:

ormula

ross rofit argin 7 ross rofit

?ales

2012

ross rofit argin 7 119;9:

1489212

2013

ross rofit argin 7 121519;

49:241

Anal!i!:

-he profit margin has increased from 2.4C in 009, to 5.5C in 00;. According to the figures, compan!

has been successful in raising their ?ales b! 21C in 00; but the increases in net income available

common stoc$ holders was 111C which leaded to an increase in the profit margin.

Net /roit (ar&in:

ormula

Bet rofit argin7 B& before e%tra*ordinar! items

?ales

2012

Bet rofit argin7 4:9014

1489212

2013

Bet rofit argin7 5:112

49:241

Anal!sis

-he profit margin has increased from 2.4C in 009, to 5.5C in 00;. According to the figures, compan!

has been successful in raising their ?ales b! 21C in 00; but the increases in net income available

common stoc$ holders was 111C which leaded to an increase in the profit margin.


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Return on A!!et:

ormula

Return on Asset 7 Bet &ncome

-otal Assets

2012

Return on Asset 7 4:9014

921;2

2013

Return on Asset 7 5:112

292;142

Anal!i!:

-he Return on Assets graduall! rose in !ear 00;, to 11.5C from ;.24C, in !ear 009. -his was due to

the fact as the Bet income b! 111.;C whereas total asset onl! increased b! 24.1;C. Atlas Eatteries has

been able to use its total assets more efficientl! over these !ears and have been successful in raising netprofit as well.

Return on E.uit:

ormula

Return on uit! 7 arnings available for common stoc$ holders before e%tra*ordinar! items

+ommon stoc$ holders euit!

2012

Return on uit! 7 4:9014


2013

Return on uit! 7 5:112


Anal!i!:According to the figures, Atlas Eatteries shows a favorable trend to the shareholders, initiall! being at15.9C and then rising b! 10.2:C to 9C. -his again has been due to 111.;C increase in Bet income.

-hough shareholders euit! has also increased as the compan! is increase debt financing, but the increase

in shareholders euit! is lower relative to the increase in net profit.

Earnin& /oer:


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ormula

arning ower 7 E&-

-otal Assets

2012

arning ower 7 ;58545

921;2

2013

arning ower 7 :::44

292;142

Anal!i!:

-he E has increased from 14.84C in 009, to 18.1C in 00;. -his increase was due to increase in

E&- b! ;1.9C and the total assets increased b! #ust 24.1;C which leaded to increase in the E.

(ARET +ALUE RATIO

/ri"e Earnin&! Ratio:

ormula

rice arnings Ratio 7 ar$et rice per ?hare

arnings per ?hare

2012

rice arnings Ratio 7 01.; 40.

2013

rice arnings Ratio 7 22:.0

40.15

Anal!i!:

-he ratio shows how much the investors are willing to pa! per Rupee of reported profits. &t can be seenfrom calculations that in !ear 00; the ratio has increased from 8.5 to 11.;. -his was due to the fact that

the earnings per share over the !ear is increased with great difference due to which the mar$et price

increased as a result of demand of shares. However a higher rice arnings ratio shows high growth

prospects due to which the income has therefore increased in the !ear 00;.


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Earnin& Yiel$ Ratio:

ormula

arning Gield Ratio 7 arnings per ?hare

ar$et rice per ?hare

2012

arning Gield Ratio 7 40.

01.;

2013

arning Gield Ratio 7 40.15

22:.0

Anal!i!:

Di)i$en$ Yiel$ Ratio:

ormula

3ividend Gield Ratio 7 3ividend per ?hare

ar$et rice per ?hare

2012

3ividend Gield Ratio 7 100:.5 7 5.0

01.;

2013

3ividend Gield Ratio 7 1014 7 2.0 22:.0

Anal!i!:

(ar#et to ,oo# Ratio:

ormula

ar$et to Eoo$ Ratio 7 ar$et rice per ?hare

Eoo$ value per ?hare


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2012

ar$et to Eoo$ Ratio 7 01.;

Eoo$ value per ?hare

2013

ar$et to Eoo$ Ratio 7 22:.0Eoo$ value per ?hare

Anal!i!:

&t can be seen from calculations that in !ear 00; the ratio is more than doubled from 0.; to 1.49. -his

was due to the fact that the price per share over the !ear has increased with great difference of 82.8 per

share whereas boo$ value per share increased b! #ust 11.;C.

portfolio report ratio analysis

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