This will be very helpful for Anna University MBA Examination. I Did M.B.A 2011-2013 at Jei Mathaajee College of Engineering (Affiliated to Anna University).
Ratio Analysis - Tata Motors 2004 - 2008Full description
problems on ratio analysis
An idea about how to go through a ratio analysis for a company under observation
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Ratio Analysis mba project report
Learn how to analyse financial statements of companies with key financial ratios
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this word file contains formulae of various financial ratios, ideal values and interpretation... this will be very helpful for those who wants to do ratio analysis.....Full description
Comments Indicates firm’s fir m’s commitment to meet financial obliations. A!ery "ea!y ratio is not desirable as it indicates less efficient use of funds %"is ratio also indicates s"ort term sol!ency of a firm Indicates lon term sol!ency *i"er ratio is ris$ier for t"e creditors ariant of debteuity ratio S"o0s t"e etent of s"are"olders’ funds in t"e total assets em-loyed in t"e business *i"er ratio indicates relati!ely little daner to creditors and !ice !ersa
1) Current assets are t"ose assets 0"ic" can be con!erted into cas" 0it"in a -eriod of one year or normal o-eratin cycle of t"e business 0"ic"e!er is loner (am-les : Cas" in "and cas" at ban$ stoc$ debtors bills recei!able -re-aid e-enses 2) Current liabilities are t"ose liabilities -ayable 0it"in an year or o-eratin cycle 3) #uic$ assets 4 current assets ' 5stoc$6-re-aid e-enses) +) #uic$ ratio is also $no0n as t"e acid test ratio or liuidity ratio 7) %anible assets are t"ose assets 0"ic" "a!e -"ysical eistence 8) 9on term debt /eternal funds/eternal euities 4debentures6termloans ) S"are "olders’ funds/internal funds/-ro-rietary funds/o0ners funds4euity s"are ca-ital6-reference s"are ca-ital6reser!es6-rofit and loss account fictitious assets
2) ,rofitability ratios
S.no Ratio
Formula
Ideal ratio
comments
1
;ross -rofit < 1== et sales
*i"er t"e ratio better it is
%"is ratio e-resses t"e relations"i- bet0een ross -rofit and net sales
;ross ,rofit Ratio
2
et ,rofit ratio
3
et o-eratin -rofit ratio
et -rofit <1== et sales
5et o-eratin -rofit/net sales)<1==
*i"er t"e ratio better it is *i"er ratio is better
;ross -rofit s"ould be adeuate to co!er o-eratin e-enses %"is ratio e-resses t"e relations"i- bet0een net -rofit and et sales *el-s in determinin t"e efficiency 0it"
0"ic" t"e affairs of t"e business bein manaed +
>-eratin Ratio
>-eratin cost <1== net sales
Ratio s"ould be lo0
7
Fied c"ares co!er
,?I% Interest
8 times for an industrial concern
8
&ebt Ser!ice co!erae ratio
>!erall -rofitability ratio/Return on in!estment/return on ca-ital em-loyed Return on s"are "olders’ funds
@
,?I%/interest6 5-rinci-al)/1tarate
>-eratin -rofit Ca-ital em-loyed <1==
,rofit after ta5,A%) S"are "olders funds <1==
Return on (uity s"are "olders Funds
,A%-ref.di!idend <1== (.s"are"olders funds
1=
,rice (arnins
Bar$et -rice -er s"are
%"is ratio is a test of o-eratin efficiency 0it" 0"ic" t"e business is bein carried Im-ortant from lender’s -oint of !ie0
It indicates 0"et"er t"e business 0ould earn sufficient -rofits to -ay -eriodically t"e interest c"ares Indicates ability of t"e com-any to re-ay -rinci-al *i"er ratio Indicates t"e is better -ercentae return on ca-ital em-loyed in t"e business
*i"er ratio Indicates t"e is better -ercentae return on s"are "olders’ funds *i"er ratio Indicates t"e is better -ercentae return on euity s"are"olders funds *i"er ratio Indicates t"e number of
Ratio
11
(arnins -er s"are
(arnins -er s"are
,A% ' -ref.di!idend o of (uity s"ares
is better
times t"e earnin -er s"are is co!ered by t"e mar$et -rice
*el-s t"e in!estor in decidin 0"et"er to buy or not to buy t"e s"ares *i"er ratio *el-s in estimatin is better com-any’s ca-acity to -ay di!idend to t"e s"are"olders
otes 1) Calculation of ;ross -rofit ;ross -rofit 4 Sales Cost of oods sold Cost of oods sold 5C>;S) 4 o-enin stoc$ 6-urc"ases6 all direct e-enses 'closin stoc$ 2) >-eratin -rofit 4 ;ross -rofito-eratin e-enses >-eratin e-enses4 C>;S 6administration e-enses 6sellin and distribution e-enses ote: does not include financial c"ares li$e interest and -ro!ision for ta 3) Ca-ital em-loyed4 sum total of all t"e lon term funds em-loyed in t"e business C (4 (uity s"are ca-ital6 -reference s"are ca-ital6 reser!es6 -rofit and loss account6 lon term loansfictitious assets S"are"older’s funds4 (uity s"are ca-ital 6-reference s"are ca-ital 6reser!es 6-rofit and loss accountfictitious assets
(uity s"are "older’s funds4 euity s"are ca-ital 6 reser!es6 -rofit and loss accountfictitious assets
3) %urno!er ratios
S.no
Ratio
Formula
Ideal ratio *i"er ratio is better
1
Fied assets turn o!er ratios
et sales Fied Assets
2
or$in ca-ital turno!er et sales ratio or$in ca-ital
comments Indicates t"e etent to 0"ic" in!estment in fied assets contribute to0ards sales %"is ratio indicates 0"et"er or not 0or$in ca-ital "as been effecti!ely utiliDed in ma$in sales A!erae debtors45o-enin debtors6o-enin bills recei!able6closin debtors6closin bills recei!able)/2 Indicates t"e etent to 0"ic" debts "a!e been collected in time Indicates t"e s-eed 0it" 0"ic" t"e -ayments for t"e credit -urc"ases are made A!erae creditors4 o-enin creditors6bills
8
Credit -ayment -eriod
Bont"s in a year C%R
Stoc$ turno!er ratio
Cost of oods sold A!erae Stoc$
recei!able6closin creditors6closin bills -ayable 9o0 ratio Indicates t"e -rom-tness is better 0it" 0"ic" t"e -ayments are made to t"e creditors *i"er Indicates 0"et"er ratio is in!estment in stoc$ is better efficiently used or not A!erae stoc$4 5o-enin stoc$6closin stoc$)/2