INTERNSHIP REPORT ON FINANCIAL RATIO ANALYSIS AT INDIA TOBACCO

COMPANY LIMITED

BY
SAI PAVAN MALISETTY
( BL.BU.P2MBA16033 )

Guide

Prof. Priyanshi Gupta

INDUSTRY PROFILE

INTRODUCTION:

ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of
India Limited' . The Company's ownership progressively Indianite, and the name of the
Company was changed to I.T.C. Limited in 1974. India is part of the large and very fast growing
Asian tobacco market. The Indian market for tobacco products, however, has some rather
different characteristics to most other markets in that non-cigarette consumption comprises 65%,
or around two thirds, of the total domestic tobacco market.
Tobacco is one of the major commercial crops in India. Irrespective of the health hazards
associated with it, the Indian tobacco industry contributes significantly to the economy in terms
of employment, income and government revenue. It is the second largest sector in terms of
central excise revenue contribution after the oil and gas sector. The industry also acts as a major
foreign exchange earner for the government. Besides tobacco farming and production, the Indian
tobacco industry also comprises of companies involved in manufacturing, sales and distribution
of tobacco products like cigarettes, cigars, beedis and chewing tobacco.
The Fast Moving Consumer Goods (FMCG) sector is the fourth largest sector in the economy
with atonal market size in excess of Rs 60,000 core. This industry essentially comprises
Consumer Nondurable (CND) products and caters to the everyday need of the population.
ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, ITC has
a leadership position in every segment of the market. ITC's highly popular portfolio of brands
includes Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Scissors,
Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal.
The Company has been able to consolidate its leadership position with single minded focus on
continuous value creation for consumers through significant investments in creating & bringing
to market innovative product designs, maintaining consistent & superior quality, state-of-the-art
manufacturing technology, & superior marketing and distribution. With consumers & consumer
insights driving strategy, ITC has been able to fortify market standing in the long-term, by
developing & delivering contemporary offers relevant to the changing attitudes & aspirations of
the constantly evolving consumer.
Tobacco today is the largest contributor to Indian excise collections. The tobacco
industry in India is quite complex when compared to the nature of the industry in many other
countries. The particular features that distinguish the Indian industry are the existence of three
distinct consumer markets for tobacco products, each of which comprises approximately one
third of the national market for tobacco products.
One consumer market is formed by what is called the ‘organized sector’ and is
based on filter tipped cigarettes; a second consumer market exists in what called the
‘unorganized sector’ and this is for beedis; the third consumer market also exists in the
‘unorganized sector’ and this includes chewing tobacco, smokeless tobacco and a number of
other forms of tobacco products.
A future characteristic of the domestic Indian market for tobacco products is the pattern of
consumption. Although there is a very large population in India, in general, incomes are
relatively low and this leads to consumers purchasing small quantities of goods on a very regular
basis.

Fig: 1.1 Plant at the ILTD, Chirala.

The world tobacco industry generated sales of almost $721 billion in 2010, Cigarettes represent
the leading market segment with revenue exceeding $681 billion, which accounts for almost 95%
of the overall market. The yearly rate of market growth is expected to accelerate to be 4.5% until
2015, bringing the market to almost $890 billion.
ITC LEADERSHIP:
Flowing from the concept and principles of Corporate Governance adopted by the Company,
leadership within ITC is exercised at three levels. The Board of Directors at the apex, as trustee
of shareholders, carries the responsibility for strategic supervision of the Company. The strategic
management of the Company rests with the Corporate Management Committee comprising the
whole time Directors and members drawn from senior management. The executive management
of each business division is vested with the Divisional Management Committee (DMC), headed
by the Chief Executive. Each DMC is responsible for and totally focused on the management of
its assigned business. This three-tiered interlinked leadership process creates a wholesome
balance between the need for focus and executive freedom, and the need for supervision and
control.
INDUSTRY BACKGROUND:
India is a major grower and exporter of tobacco in the world. Presently India is among
top three producers of tobacco in the world. Despite lower proportion of total produce being
exported Indian exports it figures among top 10 exporters of the product in the product in the
world. In addition to being the largest contributor to government coffers, the industry also
provides employment to more than 26 million people in the country both directly and indirectly.
The Indian tobacco is largely used for making beedis and chewing products like
khaini etc. tobacco is a very peculiar crop, it is grown in rain starved areas on soils which are
otherwise not suitable for any other crop. Thus it makes use of the least resources available to it,
to give a produce which provides so much to government coffers in terms of excise, exports as
well as employment that today the per acre earning of farmers from a special type of tobacco is
much higher than any other crop grown in the country.
There are various types of tobacco grown in the country but most of the exports of
tobacco by our country are of Flue Cured Virginia (FCV) type. The Indian tobacco exported, is
mostly used as filler in the international cigarettes. In fact like any other agri-product, the
characteristics of tobacco, its taste, its aroma and other properties largely depend on the soil or
area in which it is grown.
Moreover cigarette smokers are very particular about the taste, the aroma of their cigarette brand.
So it becomes extremely necessary to maintain the blend of tobacco used for cigarette
manufacturing to give the same quality product to consumers. This is to maintain the consistency
of taste of a brand.

GOING BEYOND ECONOMIC CONTRIBUTION:

Generating Livelihoods and Enriching the Environment
ITC's vision to contribute to a sustainable, secure and inclusive future has brought about
transformational change, particularly in areas of its engagement in rural India. Apart from ITC's
e-Chou pal that has helped raise farm productivity and incomes, the Company's social
investment programmers have created large-scale sustainable livelihoods along with
environmental replenishment that promotes climate change resilience.
These widely acknowledged initiatives include Afforestation, Watershed Development,
Livestock Development, Women Empowerment, Primary Education, Vocational Training and
Health & Sanitation
Tobacco’s share in India’s GDP dropped from 1.8 per cent in 1999-2000 to 1.1 per cent in 2005-
06, the report said. The net foreign exchange earnings from tobacco stands at Rs 346 core —
just 0.2 per cent of total foreign exchange reserves.
EMPLOYMENT CONTRIBUTION:
The tobacco industry makes a very substantial contribution to employment in rural
states, with some 6 million farmers growing tobacco leaf.
In addition, around 20 million people work as labour on tobacco farms, emphasizing the
importance of this source of employment in the tobacco growing states in India.
With tobacco products being sold from up to 1.2 million retail premises, there is a large number
of people employed in retail trade who are dependent at least in part on the sale of tobacco
products for their livelihoods.

CHARACTERISTICS OF THE TOBACCO INDUSTRY:

Indian has a very large, highly integrated tobacco industry, involving the growing of a
range of leaf types, the manufacture of different tobacco products including un-processed and
chewing tobacco, and an extensive distribution and retail system.
It is estimated that the value of the total tobacco market in India is in the order of $US
6.2 billion a year. With cigarette consumption of around 97 billion sticks a year, the value of this
segment of the tobacco market is around $US 2.4 billion. Thus, the magnitude of the non-
cigarette component of the market for tobacco products in India is in the order of $US 3.8
billion.

TOBACCO GROWING:
Tobacco leaf is grown predominantly in Andhra Pradesh, Karnataka, Gujarat and Uttar
Pradesh. Regional resource endowments tend to determine the type of leaf that is produced.
Growers in Andhra Pradesh and Karnataka, for example, have traditionally produced flue cured
leaf.
India was second only to China in terms of the area of land on which tobacco leaf was
grown, with more than 4, 32, 000 hectares of tobacco planted. Around 6, 33,000 FSW tones of
tobacco leaf were produced. A combination of strong prices for tobacco, good export demand,
and low prices for other crops was expected to result in a larger crop being planted.

There is continuing research being undertaken in India to seek to identify crops that
could be used as an alternative to tobacco growing. The results of the research, however, indicate
that farmers appear to be reluctant to switch to other crops.

Tobacco has a short growing season, and this provides the capacity for farmer to grow
other crops such as green gram, black gram and certain varieties of rice outside the tobacco
growing seasons. Crops such as cotton and chilies do not seem to offer the same surety of quality
of crops and of generation of regular income and employment as do’s tobacco leaf.
Further more, the attraction of tobacco as a cash crop in countries such as India is that
tobacco leaf can be grown on either large or small farms the sale of tobacco leaf potentially
generates important public revenue as well as a cash flow for farmers and rural communities, and
the prices received by tobacco growers are relatively stable over time.
The growing of tobacco leaf, therefore, underpins the prosperity of many people in rural areas of
India and contributes to regional development opportunities, which might not otherwise be
available.

THE TOBACCO CONISTS:

Tobacco needs a country like India. Hot climate. Fertile soil. Plenty of rain. And it
needs a manufacturer like sopariwala Exports, Quality-conscious, Service-oriented, with a finger
upon the pulse of the market.

CIGARETTE_ SO MANY CHALLENGES:

The government has put severe regulatory restrictions of all types on cigarettes to restrict sales
and reduce smoking prevalence. Apart from consistent rises in taxes each year on cigarettes,
there is also a total ban on advertising and promotion, a ban on smoking in public, and also in
films, a ban on sale to minors, and there are impending graphic health warnings on packs in
2008. Moreover, the domestic industry also faces threats from imports and smuggled cigarettes.
Although imports constitute only negligible proportion of the domestic pie, their rising share
poses a threat to players.
VALUE OF OUTPUT:
The value of output of the activities in the tobacco industry can be expressed at various
points along the production and distribution change. Using this analysis, it is possible to develop
estimates of the value of all activities associated with supply of products from the tobacco
industry that are consume in terms of domestic consumption through demand from export
markets.

CURRENT DEVELOPMENT:
India will shortly set up a tobacco testing laboratory that will trace tobacco and nicotine
content in all products. The lab will be the biggest in the region, and come up in Ahmadabad.
The government wants to set up a national regulatory authority to ensure the effective
implementation of tobacco control laws. Besides, tobacco testing laboratories would be set up at
state and district levels for content regulation.
 In the background of a ban on advertisement of tobacco and tobacco products, the Central
Tobacco Research Institute (CTRI) has been conducting extensive research for developing
harmless tobacco and tobacco products with emphasis on finding alternative uses. The entry of
MNCs is generally welcomed. This would encourage research, processing and marketing
facilities.

FUTURE DEVELOPMENT:
The tobacco industry in India is an important contributor to a number of Indian state
economics, particularly through providing valuable employment opportunities in regional and
rural areas. The industry has the potential to continue in this role and, given the right
circumstances, to increase its role as a regional employer.
The combined impacts of gradually increasing incomes among consumer and the
development of emerging export markets could read to an increase in demand and, in turn, the
production of various types of tobacco leaf and he manufacturing of tobacco products by the
organized sector of the industry.
At the same time, the tobacco industry in India makes a significant contribution to
government revenues through the collection of excise and other forms of taxation. The revenues
will continue to be important in a national context for sustaining public sector activities in urban,
regional and rural locations.

ITC CIGARETTE REVENUES CONTINUE TO DECLINE:

According to Indian government tobacco usage should be band. But ITC gets major
revenue from ILTD. If tobacco is completely wipe off then their profit rate will be decline. So,
The company decide to focus on FMCG products especially Sun Feast. As it is the second
leading product in ITC
COMPANY PROFILE

Economic development policy of any nation depends upon its industrial

development. It consists of small medium, large-scale industrial development. In these three
types of industries large-scale industries plays a crucial role in economic development of the
country. Among such industries ITC limited is one of the largest most diversified business
houses represent through out India. It overseas offices are at New York, Chicago, London,
Singapore and Dubai.
ITC is having 2 lakhs shareholders in India. In ITC directly recruited employees are
30,000 and indirectly 5,00,000 employees. It is largest foreign exchange in private sector. ITC is
a multi business group. Turn over per annum is around 400 crores.
ITC LIMITED OPERATING DIVISIONS

 India Tobacco Division (ITD)

 India Leaf Tobacco Development (ABD ILTD) Division
 Packing & Printing Division (PPD)
 Paper Boards & Specialty Papers (PSPD) Division
 Hotels Division
 Information Systems Division (InfoTech)
 International Business Division (ABD IBD)
 LRBD-Apparels
 Food Division
 Personnel care
 SBU

CREATING WEALTH FOR NATION:

Tobacco Industries creates wealth for nation is the excise all tobacco consumption
was in the form of excise. All tobacco consumption as in the firm of cigarettes excise collections
would theoretically have been in the range of Rs.18, 000 crores and would account for 30% of
Government excise revenue instead of 10% it provided now. More cigarette generation mean a
giant leap in revenue generation.
Cigarette excise is determined by length and type. The larger the length the higher the
excise. Therefore the king size-segment (Cigarette longer than 75 mm) pay a highest excise Rs.1,
100 cigarettes and also has the smallest market sales only about 5%.
Excise rates in India has increased annually volume in the conventional length
segment of cigarettes has shown a small growth of 2.7% since 1993-94 while is sharp contrast
the excise revenues have grown at compound rated of 10.7%. This volume and revenue growth
must be seem in contract with impressive performance of the micro segment (non-filter
cigarettes not exceeding 60 mm in length) after duly reduction in march 1994.
The golden leaf in India yields tremendous promise. It is capable of not only making
a much larger social economic contribution at home but had the ability to make India emerge as
a major player in the world tobacco market. India has the infra structural facilities trained and
experienced workforce spanning all stages of tobacco production and favorable agri climatic
conditions. The progressive tobacco policy to harmers these advantages.
In order to attain the stated objectives the Government needs to focus on these fundamentals.

 The specific duty structure in 1987 should be retained in view of enhanced revenues. It
provides and in order to achieve litigation free tax collection.
 The rate of duty of micro-segment should be resorted to Rs.60 per 1000 cigarettes which
have not affected the existing level of industry and fetnees major benefits to excise
revenue.
 Retaining single point taxation for cigarettes and discourage level and extra tax by state
Government which contravene the Act of 1957.
 Excise duty should be reduced by 5% of the weighted average impact of sales taxes on
cigarettes till the Supreme Court pronounces a judgment on pending cases.
 Give the consideration to premium segment which will provide importers to high quality
exportable tobacco. This will also protect excise erosion an account of increased smuggling
of foreign brands.
The cigarette industry should be allowed the benefits of brining back damaged or defective
goods for reprocessing denial of this benefit has caused substantial cases to the industry.
TOBACCO INDUSTRIES IN INDIA:
Tobacco grown in India for over countries, contributed significance on unirrigates small
land holidays to retailers in remote corners of India. Over 26 million of people benefit from their
direct or indirect association with tobacco industry. Among all commercial crops tobacco
occupies a significant role. Tobacco uses just 0.3% of arable land to yield if of agricultural
values nearly 4% of India’s agri exports.
The states, which provide tobacco, are mainly Andhra Pradesh, Karnataka, West
Bengal, Bihar, Tamilnadu, UP, Orissa, and Maharastra are providing tobacco mainly. Above all
Andhra pradesh and Karnataka are 2 states growing the cured Virginia tobacco used in making
cigarettes and also the exportable variety. Grown on a commercial scale in over 100 countries
worldwide tobacco firms a major part of the socio-economic lifeline of over 15 developing
countries. Besides creating economic prosperity for rural population it generates substantial
revenues for this government and boosts agri-exports.
The global production and consumption of tobacco continue to grow at an estimated
rated of 1.95% and the total market in tobacco, products is valued at as $275 billion above 8% of
Indio’s GDP tobacco and export of tobacco products are major sources of income in developing
countries over 70% of mallow is and 40% of timababwes exports earning from tobacco. Brazil
and china also depends in tobacco export incomes while are in the region of us $5 billion.
 In India tobacco is a major contributes to agrarian economy. In exchequer and to agri-
exports and nearly 6 million farm laborers find gainful employment in tobacco farming. The
tobacco industry’s provides almost 10% of government excise collections and 4% of all agri-
exports while 85% of tobacco consumptions would arise is in the form of cigarettes but ensured
that cigarettes but ensured that cigarettes amounts for 87% of revenue generated by the tobacco
sector.
The cigarettes tobacco grower received regular scientific inputs an improving yield quality and
developing new varieties from the private sector as well as the government the central tobacco
research institute in Rajahmundry, Andhra Pradesh has played and important part in agricultural
universities and 6 centers under the Indian council for agricultural research.

RECENT TREND IN INDIAN TOBACCO MARKET:

Continuing with a policy to control smoking, the tax measures became harsher in 2007, with an
increase of 6% in excise and an additional 12.5% in VAT, bringing the totaleffective tax to about
20% (although the most populous state, Uttar Pradesh, imposed32.5% VAT). As expected,
volume sales declined due to the subsequent price rises. ITC Group, the leading company, is
estimated to have taken price hikes as high as 20% on some brands. The industry expected a
volume decline of 5%-10%, but the overall industry declines have been lower than expected,
reflecting consumer resilience to price rises

PROMOTED COMPANIES:

 Surya Tobacco Company Limited

 Triveni Hand Looms Limited
 ITC International Limited
 ITC Global Holding Private Limited

KEY CORPORATE STRATEGIES:

 Focus on the chosen business portfolio

 FMCG; Hotels; Paper, Paperboards & Packaging; Agribusiness, Information, Technology
  Blend diverse core competencies residing in various businesses to enhance the
competitive power of the portfolio
 Position each business to attain leadership on the strength of world class standards in
quality and costs
 Leverage the goodwill of trademarks
 Capture emerging opportunities
 Further enhance current brand equity
 Craft appropriate strategy of organization and governance process to :
 Enable focus on each business and
Harness diversity of portfolio to create unique sources of competitive advantage
CORE VALUES:
Core values are aimed at developing a customer focused high performance
organizations that creates values for all its shareholders:
 Trusteeship
 Customer focus
 Respect for people
 Excellence
 Innovation
 Nation Orientation
HR PHILOSOPHY:
The ITC group’s philosophy offers the brief that people are the group’s major assets
that together they will sustain ITC as on institution with vitality and perpetuity the consequent
H.R philosophy and articulate over beliefs and principles to guide out human resource
management process.
VISION
Sustain ITC's position as one of India's most valuable corporations through world class
performance, creating growing value for the Indian economy and the Company's stakeholders
MISSION
To enhance the wealth generating capability of the enterprise in a globalizing
environment, delivering superior and sustainable stakeholder value
COMPANY OBJECTIVES:
 The goal of ITC division is not different form that of another to operate the company. In
manner, which would enable it to have sustained, grow with stability.

LIMITATIONS:
It is believed that apparent limitation. In people are the result of a variety of
circumstances and factors and can be overcome with support awareness and correction following
which the potential has a chance to follower again.

ITC LIMITED PRODUCTS:

 Cigarettes
 Paper and Boards
 Hotels
 Biscuits
 Agrotech
 Apparels
 Deos
 Soaps
 Shampoo
 Agarabattis
 Stationary
 Snacks
 Fig 2.1 Products of ITC
 Confectionary
 Mint-o-Masti blue
 Ashirvad Ready Meals
 Salts
 Aashirvaad Atta
 Greeting Cards
 Safety Matches
 Paper Cups

ORGANIZATIONAL HIERARCHY

3.1 ORGANIZATIONL CHART

 DIVISION
MANAGER

ADM

WELFARE PRODUCTION FINANCE

HR MANAGER MANAGER MANAGER MANAGER

CANTEEN
AHR SUPERVISOR ACCOUNTING
STAFF

DAILY
HOSPITALITY
LABOURS

WORKERS

Fig 3.1 Organizational chart in ILTD, Chirala

3.2 PRODUCT PROFILE

 The ABD ILTD is one of the major key division in ITC ABD ILTD division is having
two sub businesses 1. Tobacco 2. Spices.
Tobacco: ITC ABD ILTD pioneered the cultivation and development of Leaf Tobaccos in
India. Nearly a century of creating customer delight ensures that globally, ITC ABD ILTD Leaf
Tobacco business is synonymous with being "The One Stop Shop for Quality Indian Tobaccos".
The Leaf Tobacco business' partnership with the farmer is also almost a 100 years old. In a spirit
that truly embodies the Company's "commitment beyond the market", ITC ABD ILTD has
helped the Indian farmer grow quality leaf tobaccos and linked him to global markets.
Spices: ITC ABD ILTD foray into the spices business is an endeavour to provide quality
differentiation across the value chain from the farmer to the customer. The spices business also
provides supply chain support to the Company's Foods business.
ABD ILTD division head quarters located at Guntur and the processing operations are at
Anaparti, Chirala and Mysore and marketing offices is located at Rajahmundry, Ongole, Yelwal.
ABD ILTD is having separate research department at Rajahmundry.

ITC LIMITED – ABD ILTD DIVISION, CHIRALA

ITC ABD ILTD is the largest buyer, processor and exporter of leaf tobaccos in India - creating a
global benchmark as the single largest integrated source of quality tobaccos. Serving customers
in 50 countries across more than 70 destinations, ITC co-creates and delivers value at every stage
of the leaf tobacco value chain.
The ITC Limited ABD ILTD division, Chirala factory located at Prakasam.Dt The factory
started in the year 1941.
The Chirala unit is basically a leaf processing industry and ac capacity of 140 tons per day, The
main objective function of the AGLT factory is to separate the stem and lamina and increase the
self life of the leaf from 3 months 3 years.
This division of ILTD manufactures unmanufactured tobacco and exports the following finished
products.
1. Lamina
2. Stem
3. By products (Scrap)
Fig 3.2 Tobacco Leaf

The plant is located at 27 km from Rajahmundry on Vijayawada-Visakhapatnam railhead nearest

railway station at Chirala.

NATURE OF ACTIVITY:
The Chirala unit is basically a leaf processing industry designed to separate the stem and
lamina from tobacco leaf to under unwanted dusty san particles and to give uniform moisture to
threshed leaf according to customer requirements. The raw materials are green leaf tobacco,
which is an agricultural commodity.

Objectives of the study:

 To examine the financial performance of the ITC ABD ILTD.

 To analyses interpret and to suggest the operational efficiency of ITC ABD ILTD by
comparing the balance sheet& profit & loss A\c
 To critically analyses the financial performance of the company With Help of the ratios.
Methodology

1. Current Ratio:

Current ratio is calculated by dividing current assets by current liabilities.

Current ratio = Current assets / Current Liabilities

Current assets include cash and other assets that can be converted into cash within in a year, such
as marketable securities, debtors and inventories. Prepaid expenses are also included in the current
assets as they represent the payments that will not be made by the firm in the future. All obligations
maturing within a year are included in the current liabilities. Current liabilities include creditors,
bills payable, accrued expenses, short-term bank loan, income tax, liability and long-term debt
maturing in the current year.

The current ratio is a measure of firm’s short-term solvency. It indicates the availability
of current assets in rupees for every one rupee of current liability. A ratio of greater than one
means that the firm has more current assets than current claims against them Current liabilities.

2. Quick Ratio:

Quick ratio also called Acid-test ratio, establishes a relationship between quick, or
liquid, assets and current liabilities. An asset is a liquid if it can be converted into cash immediately
or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets that are
considered to be relatively liquid and included in quick assets are debtors and bills receivables and
marketable securities (temporary quoted investments). Inventories are considered to be less liquid.
Inventories normally require some time for realizing into cash; their value also has a tendency to
fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.
 Quick ratio = quick assets /current liabilities

3.debt-Equity Ratio:

The relationship describing the lenders contribution for each rupee of the owners’
contribution is called debt-equity (DE) ratio is directly computed by dividing total debt by net
worth:

Debt - equity ratio = Total debt (TD) / Net worth (NW)

4. Inventory Turnover Ratio:

Inventory turnover indicates the efficiency of the firm in producing and selling its product. It is
calculated by dividing the cost of goods sold by the average inventory:

Inventory turnover Ratio = Cost of goods sold/

Average inventory

5.Debtors (Accounts Receivable) Turnover Ratio:

A firm sells goods for cash and credit. Credit is used as a marketing tool by number of
companies. When the firm extends credits to its customers, debtors (accounts receivable) are
created in the firm’s accounts. Debtors are convertible into cash over a short period and, therefore,
are included in current assets. The liquidity position of the firm depends on the quality of debtors
to a great extent. Financial analyst applies these ratios to judge the quality or liquidity of debtors
(a) Debtors Turnover Ratio (b) Debtors Collection Period Debtors’ turnover is found out by
dividing credit sales by average debtors:

Debtors turnover = Credit sales/ Debtors

Debtors’ turnover indicates the number of times debtors’ turnover each year generally, the higher
the value of debtors’ turnover, the more efficient is the management of credit.

6.Total Assets Turnover:

 This ratio shows the firms ability in generating sales from all financial resources committed
to total assets.

Total Assets Turnover = Sales/ Total assets

7. Fixed Assets Turnover:

The firm to know its efficiency of utilizing fixed assets separately. This ratio measures
sales in rupee of investment in fixed assets. A high ratio indicates a high degree of utilization in
assets and low ratio reflects the inefficient use of assets

Fixed Assets Turnover = Sales / Fixed Assets

Data analysis
LIQUIDITY RATIOS:
Current Ratio:

Current Ratio= Current assets / Current Liabilities

Year Current Ratio

2012 1.12

2013 1.22

2014 1.25

2015 1.45
 2016 1.20

1.45

1.25 1.27
1.22
1.12

2012 2013 2014 2015 2016

profit

INTERPRETATION:

By observing the current ratios between 2012-2016,we can see a gradual increase in current
ratio from 2012-2015.But suddenly in 2016,it has reduced to 1.20 which is lessthan the current
ratio of 2013.This is because of the variations in current assets and current liabilities.

Quick ratio:

Quick ratio= quick assets / current liabilities

Year Quick Ratio

2012 0.56

2013 0.66
 2014 0.68

2015 0.87

2016 0.69

quick ratio
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2012 2013 2014 2015 2016

quick ratio

INTERPRETATION:

From quick ratio analysis between 2012-2016,we can see a gradual increase in
quick ratio from 2012-2015.But suddenly in 2016,it has reduced to 0.69 which is just greater than
the quick ratio of 2013.

LEVERAGE RATIOS:
Debt – equity ratio:

Debt – equity ratio = Total debt (TD) / Net worth (NW)

Debt equity ratio is 0 because here total debt is very very less than the net worth and even negligible, so
it becomes 0.

ACTIVITY RATIOS:

Inventory turnover Ratio:

Inventory turnover = Cost of goods sold/

Average inventory
 ratio
6.5

6.4

6.3

6.2

6.1

5.9
2012 2013 2014 2015 2016

ratio

Year Ratio

2012 6.10

2013 6.43

2014 6.40

2015 6.38

2016 6.25

INTERPRETATION:

Inventory turnover ratio between 2012-2016 kept on fluctuating like current and quick
ratios.this increased from 2012-2013,but after 2013 this kept on decreasing to 6.25.
Debtor turnover Ratio:

Debtors turnover = Credit sales / Debtors

Year Ratio

2016 21.61

2015 18.78

2014 19.97

2013 27.82

2012 26.91

ratio
30

25

20

15

10

0
2012 2013 2014 2015 2016

ratio

INTERPRETATION:
 Debtor turnover ratio was high at 27 in the year 2013 due to increase in credit
sales and after that it has decreased to 18 in 2015 due to decrease in credit sales and in 2016 it
again got increased to 21.

Fixed Assets Turnover Ratio:

Fixed Assets Turnover Ratio = Sales / Fixed Assets

Year Ratio

2016 1.68

2015 1.74

2014 1.83

2013 1.80

2012 1.82

ratio
1.85

1.8

1.75

1.7

1.65

1.6
2016 2015 2014 2013 2012

ratio
INTERPRETATION: fixed assets turnover ratio was at 1.82 in 2012 and due to increase in
sales it went to 1.83 and again with the increase of fixed assets it went on declining to 1.68 in
2016.

Total Assets Turnover Ratio:

Total Assets Turnover Ratio= Sales / Total Assets

Year ratio

2016 1.13

2015 1.20

2014 1.27

2013 1.35

2012 1.35
 ratio
1.4

1.35

1.3

1.25

1.2

1.15

1.1

1.05

1
2016 2015 2014 2013 2012

ratio

INTERPRETATION: total assets turnover ratio it was steady at 1.5 in 2012 and 2013and in 2014 the total
assets got increased and it starts declining and reaches 1.13 in 2016.