ratio trend

8/7/2019 Ratio Trend

1/12

3

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.


2/12

4

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).


3/12

5

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,


4/12

6

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.


5/12

7

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%).


6/12

8

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).


7/12

9

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).


8/12

10

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).


9/12

11

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%).


10/12

12

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


11/12

13

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


12/12

14

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.

ratio trend

Documents