COMPARATIVE RATIO ANALYSIS OF TWO COMPANIES.docx

BIRLA INSTITUTE OF  TECHNOLOG  TECHNOL OGY Y

AN ASSIGNMENT ON FINANCIAL MANAGEMEN

  TOPIC: COMPARATIVE RATIO ANALYSIS OF TWO COMPANIES: COMPANIES :

PANAS ANASON ONIC IC AND AND VOL VOLTAS

Submitted To: Prof.SHELL SH ELLY Y SRIVAST SRI VASTAV AVA A

Submitted By: Sweta (MBA/10084/16)

Ra!a" #umar (MBA/1008$/16)

A%i&! Ba%ia (MBA/100$$/16)

WHAT IS RATIO ? Ratio 'a% be defi%e a& betwee% reatio%&!i betwee% two fiure& e*re&&ed i% arit!meti'a term& 'aed ratio.

A++,R- T, R. AT,2:

3A Ratio i& &imy o%e %umber e*re&&ed i% term& of a%ot!er .t i& fou%d by di"idi% o%e %umber i%to a%ot!er.

ADVANTAGES OF RATIO  

efu i% a%ay&i& of fi%a%'ia &tateme%t&.

 

Simifi'atio% of a''ou%ti% data.

 

efu i% 'omarati"e &tudy.

 

efu i% fore'a&ti%.

 

5ffe'ti"e 'o%tro

 

Study of fi%a%'ia &ou%d%e&&

MTAT,S ,7 RAT,

 

7a&e a''ou%ti% data i"e& fa&e ratio.

 

+omari&o% %ot o&&ibe if differe%t firm& adot differe%t a''ou%ti% oi'ie&.

 

imited u&e of &i%e ratio.

 

a' of roer &ta%dard&.

 

Ratio ao%e are %ot ade9uate for roer 'o%'u&io%&.

T!e foowi% i%'ome &tateme%t a%d baa%'e &!eet& reate to PAAS,+ a%d ,TAS.  Income statement 

SA5S

40;00;000

48;00;000

e&&: +o&t of Sae&

<=;00;000

<>;44;000

R,SS PR,7T

8;00;000

10;?6;000

e&&: ,erati% e*.(admi%i&trati"e a%d &ei% e*.)

=;?0;000

<;00;000

,P5RAT +,M5 (A)

?;?0;000

>;?6;000

e&&: ot!er e*.: dere'iatio% o% a%t a%d ma'!i%ery i%tere&t o% debe%ture& reimi%ary 5*. @ritte% off

=;=0;000 >?;600 4;000

=;>6;000 $0;000 4;000

T,TA ,T5R 5P. (B)

=;$$;600

<;>0;000

 et i%'ome before ta* (AB)

=;?0;400

<;86;000

e&&: ro"i&io% for ta*

<6;000

?6;000

 5T +,M5 A7T5R TA

=;14;400

<;<0;000

  iabiitie&

Pa%a&o%i'

ota&

59uity &!are 'aita &!are& of r&.10 ea'!

1?;00;000

1$;=0;000

Re&er"e& C &uru&

8;00;000

10;00;000

Se'ured oa%&: $D debe%ture&

8;40;000

10;00;000

E%&e'ured oa%&





+urre%t iabiitie& C  ro"i&io%&: (a)+urre%t iabiitie& 'reditor& (b)ro"i&io%& %'ome ta*  ro"i&io%

$;64;000 <6;000

10;64;000 ?6;000

41;40;000 BAA+5 S55T

?1;>0;000

ASST5S

Pa%a&o%i' ota&

7i*ed a&&et&: a%d Pa%t C ma'!i%ery

?;00;000 6;00;0 1$;16;000 18;?0;

i%"e&tme%t&

1;00;000

<;00;0

+urre%t a&&et&; oa%& C ad"a%'e&: (A)+urre%t a&&et& Sto'  -ebe%ture& +a&! a%d  ba%  (B) oa%& C ad"a%'e&

>;=0;000 8;00;000 80;000 

11;00; 1=;00; 1;00;0 

Mi&'e. e*e%diture Preimi%ary e*.

=4;000

=0;000

41;40;000 ?1;>0;

2ou are re9uired to reare a roFe't reort 'omme%ti% uo% t!e  erforma%'e a%d fi%a%'ia o&itio% of t!e firm o% t!e ba&i& of ratio% a%ay&i&. Liquidity ratio  

+urre%t ratio : 'urre%t ratio / 'urre%t iabiitie& Pa%a&o%i': 16;00;000/ 10;00;000 G 1.6 : 1 ota&: =4;00;000/ 11;=0;000 G =.14 : 1

 

Hui' ratio: i9uid a&&et& / 'urre%t iabiitie& Pa%a&o%i': 8;80;000/ 10;00;000 G 0.88 : 1 ota&: 1<;00;000/ 11;=0;000G 1.16 : 1

COMMENT: &!ort term fi%a%'ia o&itio% of t!e 'oma%y i& 9uite &ati&fa'tory  be'au&e t!e 'urre%t ratio of t!e 'oma%y i& =.14 : 1; w!i'! i& more t!e% t!e idea ratio of =: 1. t!e fa't i& a&o &uorted by 9ui' ratio; w!i'! more t!e% t!e idea ratio of 1: 1.

So!"#$%y ratio:

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-ebt e9uity ratio : o% term debt&/ &!are!oderI& fu%d Pa%a&o%i': 8;40;000/ 1?;00;000 J 8;00;000 K =4;000 G 0.<> : 1 ota& : 10;00;000 / 1$;=0;000 J 11;<0;000 K =0;000 G 0.<< : 1

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Tota a&&et& to debt ratio : tota a&&et&/ o% term debt& Pa%a&o%i' : 41;40;000 K =4;000 / 8;40;000 G 4.$ time& ota& : ?1;>0;000 K =0;000 G ?.1? time&

COMMENT : debt e9uity ratio i%di'ate& t!at roortio% of fu%d& ro"ided by o% K term e%der& i% 'omari&o% to t!e ow%er& i& o%y .<> i% t!e Pa%a&o%i' 'oma%y . T!i& roortio% !a& furt!er 'ome dow% to .<< i% ota& 'oma%y. t &!ow& t!at t!e o% term &o"e%'y o&itio% of t!e 'oma%ie& i& "ery &ou%d.  

T!e fa't i& a&o &uorted by tota a&&et& to debt ratio. t i%di'ate& t!at o% term debt& are 'o"ered 4.$ time& by a&&et& i% t!e Pa%a&o%i' a%d t!i& mari% of &afety !a& i%'rea&ed to ?.1? time& i% t!e ota&.

A%ti"ity ratio  

7i*ed a&&et& tur%o"er ratio : %et &ae& / fi*ed a&&et& Pa%a&o%i' :40;00;000 / =4;16;000 G 1.66 time& ota& : 48;00;00 / ==4;?0;000 G 1.$6 time&

COMMENTS:  fixed assets turnover ratio has improved. It indicates better utilization of fixed assets eneratin sales

Pro&ita'i!ity ratio  

ro&& rofit ratio : ro&& rofit / &ae& L 100 Pa%a&o%i' : 8;00;000/ 40;00;000 L 100 G =0 D ota& : 10;?6;000 / 48;00;000 L 100 G ==D

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,erati% ratio: 'o&t of &ae& J oerati% e*. / &ae& L 100 Pa%a&o%i' G <=;00;000 J =;?0;000 / 40;00;000 L 100G 86.=? D ota& G <>;44;000 J <;00;000 / 48;00;000 L 100 G 84.=? D

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 et rofit ratio : %et rofit / &ae& L 100 Pa%a&o%i' : =;14;400 / 40;00;000 L 1oo G ?.<6 D ota& : <;<0;000 / 48;00;000 L 100 G 6.88 D

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Retur% o% e9uity : %et rofit after ta* / &!are!oder & fu%d&

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S!are!oderN& fu%d& G e9uity &!are 'aita J re&er"e& C &uru&  K reimi%ary e*e%&e& Pa%a&o%i' : 1?;00;000 J 8;00; 000 K =4;0000 G ==;>6;000

ota& : 1$;=0;000 J 11;<0;000 K =0;000 G <0;<0;000 R.,.5. for Pa%a&o%i' G =;14;4000/ ==;>6;000 L 100 G $.4= D R.,.5. for ota& G <;<0;000 / <0;<0;000 L 100 G 10.8$ D  

5ar%i% er &!are (5.P.S.): %et rofit after ta* / %o. of e9uity &!are& Pa%a&o%i' : =;14;400 / 1;?0;000 G 1.4< er &!are& ota& : <;<0;000 / 1;$=;000 G 1.>= er &!are&

COMMENT: ro&& rofit ratio !a& imro"ed by = D w!i'! refe't& a% i%'rea&e i% t!e &ae& ri'e of ood& &od wit!out 'orre&o%di% i%'rea&e i% t!e 'o&t of &ae&.

 

,erati% ratio !a& a&o 'ome dow% by = D. oweri% of oerati% ratio !a& re&uted i% !i!er mari% of rofit o% &ae&.

 

 et rofit ratio !a& o%e u from ?.<6 D to 6.88 D w!i'! i& a% i%di'atio% of imro"eme%t i% t!e o"era effi'ie%'y a%d  rofitabiity of t!e firm.

 

Retur% o% e9uity !a& a&o o%e u from $.4= D to 10.8$ D w!i'! i%di'ate& t!at &!are!oderN& fu%d& are bei% utiiOed more effi'ie%ty. T!ere are better ro&e't& of de'aratio% a%d 'reatio% of re&er"e&.

 

5ar%i% er &!are !a& a&o o%e u from 1.4< to 1.>= w!i'! i%di'ate& t!at o"era rofitabiity of t!e 'oma%y i&

imro"i% . T!i& ratio a&o i%di'ate& t!at maret ri'e of t!e&e 'oma%ie& &!are i& iey to o u.

  Co$%!uio$ o"era rofitabiity a%d fi%a%'ia o&itio% of ota& !a& imro"ed i% 'omari&o%