Chapter1:Introduction

Background Of The Topic

Every business is done with an specific goals and objectives and businesses have to
periodically check how far they are able to meet the set goals and objectives while there are
various measures to check the progress towards the achievement of goals of the firm .

Financial ratio analysis is one of the technique that can be used by business for evaluating
their progress towards achievement of goals and even the success rate of the achievement as
ratios provide relationship between two variables which help to analyze how one variable
have an impact on the other variable .

Ratio analysis is a popular method used by various stakeholders associated with the firm to
evaluate the performance of the firm like creditors , employees , government , investors etc
to evaluate the financial health and how far company is able to perform better compared to
other firms in the industry.

Financial ratio analysis summarizes the financial information available in financial statements
of the firm and gives complete information about companies financial health at one glance
users of ratios can relay on company data and calculate the ratios .

Ratios are broadly classified into

 Liquidity ratios
 Profitability ratios
 Leverage ratios
 Activity ratios
 Efficiency ratios

However there are further various ratios under each head these are the five major categories .

Computing ratios and comparing with that of competitors will reveal the positive and
negative aspects of both the companies and also ratios help in identifying how far the
company have improved its performance over time .
 Need And Importance Of The Topic
Financial statements provide a clear summary of all financial information of the company
presented in a structured manner ratio analysis is one of the technique of financial
management used by various stakeholders of the firm like creditors, employees , investors etc
for judging the financial health and soundness of the firm for investing in the company.

Ratios help in judging the operational and managerial efficiency and how fine firms are able
to use their assets in earning money and ratio analysis also help in identifying the weakness
of the firm and help the management to take out the weakness that is affecting the firm
performance of the firm.

Ratio analysis help in analyzing the past and present performance of the firm but also further
assists in establishing trends about the performance for setting of future goals and objectives
and also formulating company‟s future plans .

Ratio analysis is also a powerful parameter in comparing performance of one company with
others in identifying the differences strengths and weakness and take corrective actions to
become the best in industry also ratio analysis is essential for knowing how various
subdivisions of a company are performing .

Ratio analysis further assists in assessing the business and financial risks of the company
through leverage ratios to see weather the firm is capable of paying its debt and how far the
company is depended on external funds and assess its capacity in repaying the debt.

Ratio analysis assists in analyzing the liquidity and operational efficiency of the firm in terms
of how far the firm is able to meet its short term obligations and how well the firm is able to
use its assets to generate sales.

Ratio analysis is helpful in the above stated ways.

 Recent Trends Related To Topic

Trend Analysis
A“trend analysis requires a business owner to calculate ratios over many business years. An
existing entrepreneur, in business for four (4) years, for example, would use each year's
Balance Sheet and Income Statement to calculate four sets of ratios; one set for each business
year. By comparing previous year's ratios to the current year ratios, the entrepreneur can
determine which areas of his/her business has improved or faltered. An aspiring entrepreneur,
on the other hand, planning on establishing a business, would use their three
annual forecasted balance sheets and forecasted income statements to calculate three sets of
ratios - one set of ratios for each forecasted business year. This will show investors and the
aspiring entrepreneur whether the planned business venture intends to improve in
performance or decline in performance during the three year forecasted period.

The ratio trend analysis compares a company's previous years performance to its current year
performance and determines whether or not a company is improving or deteriorating

Therefore, the trend analysis can show how a company is improving internally over the years.
What it does not tell a company is how well it's performing compared to other businesses
within the same industry. To do this, a company would compare its ratios to ratios of similar
companies within”the industry.
 Chapter 2

Literature Review
1. “Prof. Vijay S Patel , Prof . Chandresh- B Mehta had written a article in International
Journal of Marketing, Financial & Management Research in October 2012 titled „A
Financial Ratio Analysis OF Krishak Bharati Cooperative Limited”. The authors have
clearly described about the various ratios under profitability ratio to find out whether
the firm is generating good profits by computing different profitability ratios and
finding the correlation for each ratio computed and the study also brief how the
computed data can be used different stakeholders of the firm and the author also
compared ratios for different years and concluded how to improve profitability of the
firm. (Patel, Prof.Chandresh, B.Mehta, patel, & J.D.Gabani, 2012)

2. „“Prof Mr.S Sabarinathan ,Ms, V.Jenifer In their IOSR journal of Business and
Management conducted ratio analysis in Kaleeswarar Mills B Unit Of National
Textile Corporation Ltdfor” data of five years and did an in depth analysis of different
ratios like the acid test ratio, current ratio , absolute liquid ratio and others further
interpreted the ratios accordingly and clear comparison of the interpreted results using
tables with clear representation of formulas of computation. The author further
discussed in detail about comparison of computed results and concluded that the
company should improve its absolute liquid ratio and also evaluated the liquidity
position and the analysis is satisfactory the study assists the management to diagnose
the issues affecting the profitability of the firm. (SabarinathanMrS & MsVJenifer)

3. “Florenz C.Tugas in his paper titled ‟A Comparative Analysis of the Financial Ratios
of Listed Firms Belonging to Education Subsector in the Philippines for the Years
2009-2011‟ ofInternational Journal of Business and Social Science” have done an in
depth investigation and analysis of financial statements of Centro Escolar University
,Far Eastern University and Ipeople,Inc for 3 years using the five ratios like liquidity
,activity, leverage, profitability, market value ratios and a du point equation is derived
and computed the profit margin, total assets turnover and equity multiplier for the 3
institutes. All the above mentioned ratios were computed and given the insights
separately fo reach ratio making it easy to understand to interpret the result. The paper
 clearly details each and every aspect and the author provided a table concluding the
results and suggestions. (FlorenzCTugas, 2012)

4. “Enekwe Chinedu Innocent, Okwo Ifeoma Mary, Ordu Monday Matthew in their
article titled ‟Financial Ratio Analysis as a Determinant of Profitability in Nigerian
Pharmaceutical Industry‟ in International Journal of Business & Management Year
2013” stated thatProfitability is index of efficiency and ability of the investment to
gain return over it hence it is important parameter for efficiency measurement and
done a deep study on four ratios for Nigerian Pharmaceutical Industry for 5 firms and
computed the correlation and standard deviation for Each ratio of each firm with
ordinary least squares method and regression and anova tests and identify the
relationship between the Gross profit margin and Inventory turnover ratio, Debtors
turnover ratio, Creditors Velocity and Total assets turnover ratio and obtained the
values of mean, standard deviation and correlation and further provided a detailed
description on each ratio comparing with other ratio value obtained the author
thoroughly investigated how significant is each ratio in determining the profitability
of the firm and concluded that there is negative relation between the computed data
and suggested to improve the Debtors turnover ratio and Creditors velocity to be zero
. The author also significantly detailed how to use the formulas specified in the paper
to obtain the results and interpreted the results obtained from those calculations.
(Innocent, Okwo, & Ordu, 2013)

5. “Sanghani Divyesh Damjibhai in his article titled „Performance Measurement

Through Ratio Analysis :The Case Of Indian Hotel Company Ltd.‟ In The IUP
Journal Of Management Research 2014” Have conducted ratio analysis Of Indian
Hotel Company Ltd from secondary data of annual reports for 5 years from 2007-
2008 to 2011-2012 the author used ratio analysis formulas and chi square method for
statistical analysis. Ten ratios were computed for Indian Hotel Company Ltd. The
author tabulated the data and interpreted the results main it easy to know and also
stated that ratio analysis is the best to measure the profitability of a firm. The author
analysed the 10 ratios in depth and explained the results and the trend of each ratio
and tested the stated hypothesis by comparing the ratios with the Chi square results
and relatively proved alternate and null hypothesis where there are only two out of ten
cases alternate hypothesis is proved and remaining eight cases the null hypothesis is
 proved. Finally the author concluded that Gross profit and net profit is declined during
the past four years.The company should maintain proper working capital and increase
the fixed assets turnover ratio by using the assets effectively.Indian Hotel Company
follows a stable rate dividend policy so it is maintaining a stable share price. (Divyesh
& Damjibhai, 2014)

6. “Hamidreza Mahboobinejad in his article titled „Applying Ratio Analysis Appropriate

to the Probiotec Ltd to Measure and Comment upon the Company‟s Liquidity‟
inInternational Journal of Management, Accounting and Economics” have performed
ratio analysis for the firm Probiotec Ltd and investigated In detail Profitability ratios,
Return on capital employed, return on assets, profit ratios, liquidity ratios like
working capital and quick ratio and other ratios like inventory turnover ,debtors and
creditors turnover ratio and other financial ratios and clearly interpreted the outcome
of each ratio for 3 years. The author also described the company background in detail
and explained the limitations of the study in the later part he further concluded that
Probiotec Ltd has not have a appropriate performance though 2012 is considered as
positive performance of the company but the current ratio during 2010 is more than in
2012 also the researcher stated that the short term liabilities have become more
compared to the short term assets of the firm and also detailed that the current ratio
should be between 1 or 2 but the firms current ratio is less than 1 indicating poor
liquidity position and the quick ratio is bad such that liquid assets can not cover the
short term liabilities. The performance of the company in debtor and creditor turnover
period has become better and the ability of the company to payback the debt is better
in 2012 compares to past years. (Hamidreza & Mahboobinejad, 2015)

7. “A.J.Singh&Raymond S. Schmidgall in their paper titled „Analysis of Financial ratios

commonly used by US Lodging financial executives”.in Journal of Leisure Property”
have conducted an detail study to identify the preference of ratios by financial
executives of US Lodging the researcher used a sample of 500 financial executives at
a random and developed a questionnaire was designed to collect the responses and the
questionnaire was pretested prior and used a 5 point scale 5 indicating crucial ratio
and 1 indicating an unimportant ratio the author clearly described the ratios and their
importance and calculated the different ratios under each head and the relative
 importance is ranked with overall mean of obtained responses for all the ratios like
liquidity, solvency,activity, profitability and operating ratios and concluded that 10
ratios were mostly used and preferred the financial executives of hotel industry and 7
out of 10 ratios are operating ratios indicating the executives concentrating more on
management efficiency to its operation.Where the average room rate is ranked 1 with
4.66 mean importance and beverage cost percentage is ranked 10 with 4.28 mean
importance. (A.J.Singh & Schmidgall, 2002)

8. “Shubhra Johri&Taru Maheshwari in their paper titled „An Empirical Study On The
Practical Efficacy Of Ideal Financial Ratios‟ in Pranjana” have conducted ratio
analysis for 100 companies of 8 industries where from different sectors like Fmcg,
Pharma, Auto, Cement etc. Four ratios have been studied the current ratio, Debt
equity ratio, Interest coverage ratio and quick ratio for different companies in 8
sectors and interpreted the results accordingly and have used t-test to test the
significance of deviations from ideal ratios which were 2 for Current 1 for quick 0.5
for debt equity and 5 for interest coverage ratio and use the T-test to prove the stated
hypothesis and identify deviations. The researcher further calculated the above
mentioned 4 ratios for 5 years data for different companies form different sectors and
provided interfaces for each sector how each of 4 ratios is relevant and ideal for
performance evaluation and compared the different ratios of one company with other
company of same sector and tabulated the entire data accordingly to understand it
easier and standard deviations for all ratios are calculated and the identified that ideal
ratios are more theoretical in approach and there exists no ideal ratios in practice. The
researcher finally concluded that ratio analysis as a tool of fundamental analysis is not
applicable in most business conditions and cannot be compared to ideal ratios for
decision making . (Johri & Maheshwari, 2015)

9. “Srinivasan A.P in his paper titled „A Study on Financial ratio analysis of vellore
cooperative sugar mills at ammundi, vellore‟ in International Journal Of Advanced
Engineering and Management” done a through analysis of VCSM in Vellore the
researcher have clearly computed the different ratios for VCSM from the annual
reports from 2013-2017 and computed the different activity, liquidity, solvency and
profitability ratios and clearly drawn inferences for each ratio computed and
comparing each ratio with ideal ratio and determining if the firm is maintaining the
 profitability, liquidity and solvency position or any deviations are there is identified
and proper justification is given regarding each ratio and what level is to be
maintained and how improve the low ratios is also suggested all the data is tabulated
clearly and indetail inferences are drawn for each ratio calculated. The researcher
further conducted a trend analysis of sales of the firm for the period the data is
analyzed and further forecasted the sales based on previous trend analyses the
researcher also explained the working capital analysis and finally suggested the
company must adopt to cost reduction methods to avoid critical situation and
company should maintain the current assets properly for a better position of working
capital. The researcher stated that the company is not performing well as per the
analysis so the company should take proper steps to control costs increase sales and
profits in future. (SrinivasanAP, 2018)

10. “Henry W. Collier, Timothy Grai, Steve Haslitt&Carl B. McGowan in a conference

held in „Decision Sciences Institute Conference, Florida” conducted a case analysis on
Motorola on how to use financial ratio analysis to make the students understand how
different are real cases from text book homogenous problems. The authors further
stated that Motorola have several segments of which the semiconductor and
communications contributing for more sales of the firm. The authors clearly
calculated the ratios for Motorola and interpreted the results by comparing them
amongst the obtained figures with the semiconductor and telecommunication
equipment industry and at the later part a Dupoint analysis was done to know the
Return on Equity for the three industries and clarified the reasons for negative or low
figures with appropriate reasons. The authors further investigated the short term
liquidity management and capital structure and debt management to determine the
liquidity position and debt equity ratio of Motorola. The authors finally concluded
that conducting ratio analysis for industries have characteristic differences is
complicated as in case of Motorola (Collier, Grai, Haslitt, & McGowan, 2004)

11. “Mohammed Nuhu in his article titled “Role of Ratio Analysis in Business Decisions:
A Case Study NBC Maiduguri Plant” in “Journal of Educational and Social Research”
have conducted a study with 5 questions and obtained responses from various
management and non management staff of NBC Maiduguri plant with 27 members
and clearly tabulated the data for each response obtained in form of percentages the
 author also clearly explained the various ratios clearly with the formulas and provided
a clear description ideal ratios for each ratio and concluded that every financial
statement will not give valid information so ratios needed to be calculated for reveal
the hidden truth in financial statements for effective decision making and stated that
financial ratios highpoint crucial aspects like financial position and operational results
demanding further investigation to trace the strengths and weaknesses of an entity the
author further stated that ratios can help in evaluating the past and present
performance and forecast future performance and set goals providing a helping hand
for planning, control and decision making. (Nuhu, 2014)

12. “Elijah Adeyinka Adedeji in his article titled “A Tool for Measuring Organization
Performance using Ratio Analysis” in “Research Journal of Finance and Accounting”
have conducted a study to find weather Financial ratios highlight the prominence of
effective management of an 9 rganization or not to know the fact the researcher
phrased 6 questions on ratio analysis and conducted a study with the staff of PZ
CUSSONS PLC the researcher have selected the respondents through simple random
sampling and obtained the responses through questionnaire and tested the hypothesis
for each question using variance and other statistical methods by tabulating the
responses for each question and testing of hypothesis was done clearly for each
question the researcher selected few questions for testing of hypothesis and rejected
the null hypothesis and accepted the alternate hypotheses and concluded that ratios are
vital for measuring the financial performance and identify the strengths and weakness
of a firm and also helps to find where the company is going. (Adedeji, 2014)

13. “Sarkodie EE, Addai Iand Asiedu DK in their article titled “Financial Ratios
(Accounting Ratios) and Survival of Micro finance Institutions in Ghana” in “Journal
of Business and Financial affairs” conducted a research to know the survival of the
microfinance institutions by using current, quick and debt to equity ratios with a
sample of 117 observations and used logistic regression technique and later defined
the each ratio chosen for the study and how to calculate them and mentioned the ideal
ratios for each selected ratio and computed the ratios of 117 institutions annual reports
and tabulated the data and drawn inferences accordingly and concluded that the
institutions should grant more short term loans for more gains and long term loans
 from other financial institutions should be invited and frequent calculation of ratios
helps them from collapsing. (EESarkodie, Addai, & Asiedu)

14. “Dušan BARAN, Andrej PASTÝR, Daniela BARANOVÁin their article titled
“Financial analysis of a selected company” have done ratio analysis for mining,
energy and chemical sector industries including marine and boat component
manufacturing industries with the annual reports published the researchers have
calculated activity, profitability, liquidity, horizontal liquidity, indebtedness ratios and
clearly explained the each ratio and in what way they are indicators of financial
performance of the firm and how to calculate each ratio is also clearly specified
including the interpretation and the obtained results from these calculations are clearly
tabulated and also further represented graphically the author further drawn inferences
for each ratio calculated accordingly and finally concluded that through prediction
models of financial economic analysis the future development of a business unit can
be known including the bankruptcy. (BARAN, PASTÝR, & BARANOVÁ, 2016)

15. “Halimahton Borhan, Rozita Naina Mohamed and Nurnafisah Azmi in their article
titled “The impact of financial ratios on the financial performance of a chemical
company” have conducted a research on financial ratios for LyondellBasell Industries
from 2004 to 2011 with the secondary data and the author have selected only few
ratios for the analysis like current ratio, quick ratio, debt ratio, net profit margin and
debt equity ratio and used multiple regression model has been used by the researcher.
The researcher clearly provided a description about the company and the researcher
further used the method of least square method for analysis of ratios the researcher
clearly interpreted the results and concluded that current ratio, quick ratio, debt ratio,
net profit margin have positive relationship and debt equity ratio and operating profit
margin have negative relationship with company‟s financial performance and the
current ratio , debt ratio and net profit margin show the highest significant impact on
the companies performance. (Borhan, Mohamed, & Azmi, 2014)

16. “Sweta Singh in their article titled Ratio Analysis in Manufacturing Sector-A Study
have conducted a study in HAL organization” in 11 finance sectors the researcher
have done an in depth investigation on the financial statements the researcher clearly
 defined the various liquidity and solvency ratios and clearly defined all the ratios
under each category with formulas to calculate and further tabulated the current assets
and current liabilities and drawn graphs for both the current assets and liabilities and
interpreted the position of assets and liabilities and calculated the current ratio of the
firm for five years and concluded that company must focus on productivity and
efficiency and short term liabilities should be cleared with in an year so that company
can focus on sales volume. (Sweta, 2017)

17. “Dr. Ayad Shaker Sultan in their article titled Financial Statements Analysis –
Measurement of Performance and Profitability: Applied Study of Baghdad Soft-Drink
Industry” have conducted ratio analysis in Baghdad Sort-drink Industry for a period of
10 years and have calculated Profit Margin (PM), Return on Assets (ROA), Return on
Equity (ROE), Capital turnover ratio and Expense ratio the above ratios are calculated
for the research purpose the researcher have provided a clear description of the
selected ratios and calculated the ratios stated and computed the descriptive statistics
for the ratios along with correlation matrix and tabulated the entire data accordingly
and concluded that grey areas took place in june 2007 to 2009 which affected the
performance of the company ROE is the most comprehensive measure of profitability
of a firm; it considers the operating and investing decisions made as well as the
financing and tax related decisions (Sultan, 2014)

18. “S.Saigeetha and Dr.S.T.Surulivel in their article titled A STUDY ON FINANCIAL

PERFORMANCE USING RATIO ANALYSIS OF BHEL, TRICHY” the researcher
have conducted ratio analysis at BHEL using the secondary data published by the
company the researcher clearly specified the usefulness and importance of ratio
analysis clearly and the researcher computed the current, liquid ratio creditors and
debtors turnover ratio and gross profit and net profit margin and tabulated the data
obtained through analysis clearly and drew graphs for each tabulated data and drawn
the inferences accordingly under each ratio the researcher finally concluded that
current ratio to be improved by lowering the current liabilities and the debtors
turnover ratio is declined over the past five years and the creditors turnover ratio is
satisfactory which indicates that the creditors are decreasing every year . (S.Saigeetha
& Dr.S.T.Surulivel, 2017)
19. “Ms. PADMA in their article titled RATIO ANALYSIS: A COMPARATIVE
STUDY OF SELECTED STEEL SECTOR INDUSTRIES” the researcher have done
a clear study in the above titled paper have selected few companies from the steel
sector and have computed the ratios and presented the results graphically the
researcher have done the study with an aim to identify the strengths and weaknesses
by comparing different firms with in the industry the researcher have selected 6 ratios
and computed the results using the data published by the firms and clearly drawn
inferences accordingly and concluded that only 2 companies among 5 selected
companies are performing better than others after the analysis. (PADMA, 2016)

20. “ V. Harsha Vardhan, A.Aruna, T.Shilpa in their article titled Role Of Ratio Analysis
In Business Decisions” have conducted a study to know answers for the few questions
raised by the researchers and have designed a questionnaire and obtained the
responses from management staff and non management staff and interpreted the
results clearly and precisely the researchers have provided a clear description of
various ratios and their advantages and limitations and who will be the users of the
information and how can these information be obtained and concluded that ratio
analysis helps to analyse the past and present performance of the company and future
goals and policies can formulated using ratios also ratios help in planning and
decision making (Vardhan, Aruna, & Shilpa, 2017)
 Chapter 3
Company Profile

Sree Rayalaseema Hi-Strength Hypo Ltd, the torchbearer of the TGV Group is the only
Indian manufacturer of Calcium Hypochlorite. Sree Rayalaseema Hi-Strength Hypo is one of
the very few in the world known for decades of dedicated research and development in water
purification and treatment consistently raising the standards and hence the global bench mark
in water purification.

MISSION

 To provide products and services of international standards through pioneering

innovations, while keeping in sight, our responsibility towards the society we dwell
in.

VISION

 To empower ourselves with excellence and to thus, grow and reach the pinnacle of
market leadership

Overview

 Sree Rayalaseema Hi-Strength Hypo Ltd. The torchbearer of the conglomerate, is the
only Indian manufacturer of Calcium Hypochlorite, and one of the very few in the
world.
 A state-of-the-art sodium process technology developed through in-house R&D
efforts helps the company in manufacturing the product with a chlorine content of
65% to 70%.
 The Certificate of Merit awarded by CHEMEXCIL for outstanding export
performance reinforces its status as a recognized export house.
 Calcium Hypochlorite produced by Sree Rayalaseema Hi-Strength Hypo touches
vital facets of human existence and is of proven importance in many areas of day-to-
day activity.
 Sree Rayalaseema Hi-Strength Hypo Ltd. has a distinctive edge in the manufacture
of this product, thanks to the twin advantages of indigenous raw materials
 availability and supply of some specialized chemicals by Sree Rayalaseema Alkalies
and Allied Chemicals Ltd.
 The company is also a front-ranking producer of Monochloro Acetic Acid.
Manufactured by the scientific crystallizer technology, the product meets
international quality standards. Monochloro Acetic Acid is used by all leading
manufacturers of Non-Steroid Anti-Inflammatory Drugs, other pharmaceuticals,
pesticides, organic chemicals etc.

Innovation & Technology

 Sree Rayalaseema Hi-Strength Hypo Ltd has involved itself for decades on research
and developments in water treatment and purification.
 It has constantly raised its standards and today, it serves as the global benchmark in
water purification.
 A state-of-the-art sodium process technology developed through in-house R&D
efforts helps the company in manufacturing the product with a chlorine content of
65% to 70%.
 Sree Rayalaseema Hi-Strength Hypo Ltd. has provided capacitors and also uses steam
for refrigeration to conserve energy.
 The company is also a front-ranking producer of Monochloro Acetic Acid.
Manufactured by the scientific crystallizer technology, the product meets international
quality standards.

Product Range

 Calcium Hypo Chlorite

 Stable Bleaching Powder
 Aluminium Sulphate
 Monochloro Acetic Acid
 Sulphuric Acid
 Chlorosulphonic Acid
 Hydrochloric Acid
 Oleum
 Chapter 4

Research Design
Statement of the Problem
 In today‟s competing business scenario companies are striving to earn huge profits
and increase their profits every year hence to earn more and more profits consistently
firms need to improve their performance and outperform every day hence there are
various activities that influence profits and earnings of the firm.

 The activities done by the businesses needed to be monitored and proper forecast of
future goals should be made though there are various tools available to do so “Ratio
Analysis” is one of the tools in financial management that help the firms to draw
inferences on performance and financial health of the firm and assess the profitability
, leverage, activity position of the firm which are great influencing factors for the
firms growth and performance.

 Ratios look at the relationship between individual values and relate them how a
company has performed in past and might perform in future so a study on ratio
analysis gives the management a snapshot regarding the working of the company and
can identify the deviations easily and correct them

Nature Of The Study

 Ratio analysis is investigation and interpretation of financial statements of a company

to judge the financial performance of the company at one single glance and ratio
analysis helps to understand financial health of the enterprise “Ratio analysis is
basically a technique of Establishing meaningful relationship between significant
variables of financial
statements andInterpreting the relationships to form judgment regarding the financial
affairs of the unit.”

Need Of The Study

 Ratios help in judging the operational and managerial efficiency and how fine firms
are able to use their assets in earning money and ratio analysis also help in identifying
 the weakness of the firm and help the management to take out the weakness that is
affecting the firm performance of the firm.
 Ratio analysis help in analyzing the past and present performance of the firm but also
further assists in establishing trends about the performance for setting of future goals
and objectives and also formulating company‟s future plans .

Scope Of The Study

The scope of the study is limited to collecting financial data published in the annual reports of
the company every year. The analysis is done to suggest the possible solutions. The current
study involves calculating the

 Liquidity Ratios (Current, Quick and Cash Ratio)

 Leverage Ratios (Debt equity, Interest Coverage, Proprietary and Capital gearing
Ratio‟s)

 Activity Ratios (Debtors turnover, Fixed assets turnover and Inventory turnover ratio)

 Profitability Ratios (Gross profit, Net profit, Return on investment ratio and earnings
per share)

Objectives Of The Study

 To Study the financial performance of the organization for last twelve

years through ratio analysis.
 To measure profitability, liquidity and leverage position of SRHHL
 To measure the effect of liquidity on profitability.

Limitations “Of The Study

 Histoical Information
 Uniqueness of Companies
 Limited Information
 No Universal Standards “
Research Methodology

 Research type-Descriptive Research

 Sampling Period-12 Years ( 2006-2018)
 Sampling Unit- Financial Statement and Annual reports

Data collection method:-

 Secondary data:
 The major source of data for this project will be collected through Balance sheet and
Annual reports of SRHHL

Hypothesis

H0:-Liquidity of the firm do not have any affect on profitability of the firm

H1:-Liquidity of the firm have affect on profitability of the firm.

 Chapter 5

Data Processing And Analysis

Liquidity Ratios

 Current ratio = Current assets

Current Liabilities

Graph 1.0 Table 1.0

year Current ratio

Current ratio 2006-2007 1.707867
3 2007-2008 0.922258
2.5
2008-2009 2.526707
2009-2010 1.080508
2
2010-2011 1.362831
1.5 2011-2012 1.009153
1
2012-2013 0.851659
Current ratio
2013-2014 0.9169
0.5
2014-2015 0.920386
0 2015-2016 1.03029
2016-2017 1.330255
2017-2018 1.341946

 The above table and graph represents the current ratio of SRHHL from the period of
2006-2018 where the current ratio is greater than 1 is only in 8 years of 12 which
indicates the firm need to concentrate more on liquidity in the other remaining years
where the ratio is less than 1.
 2008,2013,2014 & 2015 the current ratio is less than 1 which indicates the firms
assets are not sufficient to pay off its short term obligations.
 In the year 2009 the current ratio of the company is very high indicating that that
company have excess cash and didn‟t invest properly and in 2010 and 2012 the ratio
is nearly exact 1 which indicates a healthy liquidity situation for the company to meet
its short term obligations.
  Quick Ratio= Quick assets
Quick Liabilities

Quick assets=Current assets-inventory-prepaid expenses

Quick liabilities=Current liabilities –bank od-cash credit

Graph 1.1 Table 1.1

year Quick ratio

Quick ratio 2006-2007 1.29956093
2.5 2007-2008 0.38758333
2008-2009 1.96727519
2
2009-2010 0.89327893
1.5 2010-2011 1.24618319
2011-2012 0.79693853
1
Quick ratio 2012-2013 0.65959554
0.5 2013-2014 0.69436972
0 2014-2015 0.63516447
2015-2016 0.8379358
2016-2017 0.99932584
2017-2018 1.00449266

 The above data represents the quick ratio of SRHHL for 12 years of period from 2006
to 2018 the quick ratio of the company is above 1 in only 4 cases of the total 12 years
that indicates company is not focusing on paying of its short term liabilities soon as
company is not maintaining proper cash balances with to meet its short term needs.
 In the year 2008 the quick ratio of the company is below 0.5 indicating that company
is not able to pay the current liabilities in short term and in other years where the
quick ratios is less than 1 indicates the same .
 In the year 2009 the quick ratio of the company is really high 1.9 indicating that
company has Rs1.9 of liquid assets available to cover Rs1 of current liabilities.
Leverage ratios

 Debt equity ratio=Total liabilities

Shareholders Equity
Shareholders Equity= Total assets-Total Liabilities
Table 1.2
Graph 1.2
year Debt equity
ratio
Debt equity ratio 2006-2007 0.819810588
2007-2008 0.711688408
1.2
2008-2009 1.053703569
1
2009-2010 1.004754401
0.8
2010-2011 0.81023228
0.6
2011-2012 0.447445628
0.4
Debt equity ratio 2012-2013 0.504291858
0.2
2013-2014 0.381615813
0
2014-2015 0.275259823
2012-2013

2015-2016
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012

2013-2014
2014-2015

2016-2017
2017-2018

2015-2016 0.301683894
2016-2017 0.199487739
2017-2018 0.174894692

 The above graph and table summarizes the debt equity ratio of SRHHL for a period of
12 years from 2006 to 2011 the debt equity ratio of the company is relatively high
indicating that company have used more of debt financing for its growth .
 From the year 2012 the debt equity ratio of the company started decreasing indicating
a positive sign for the company that not being relied on debt finance for its operations
and growth .
 A higher debt equity ratio may be dangerous for the firm in crisis period which may
affect the overall profits as company need to generate more earnings the optimal ratio
is 1 which is found only in 2 years of the entire period calculated in 2009 and 2010
indicating liabilities= equity
 Low ratio is always better indicating more of equity and less liabilities which is found
in last 2 years of companies performance 0.19 means company uses debt financing
equal to 19% of the equity and 17% similarly in 2018.
  Proprietary ratio= Shareholders Funds
Total assets
Graph 1.3 Table 1.3

year proprietary
ratio
proprietary ratio 2006-2007 42.64157267
70 2007-2008 47.29342561
60 2008-2009 37.65995822
50 2009-2010 33.57704179
40 2010-2011 42.89987372
30
2011-2012 41.3153219
20 proprietory ratio 2012-2013 38.87652876
10
2013-2014 40.64251285
0
2014-2015 47.91864263
2012-2013

2017-2018
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012

2013-2014
2014-2015
2015-2016
2016-2017

2015-2016 52.64579903
2016-2017 61.31310092
2017-2018 16.38631618

 The above graph and table provides a clear view about the proprietary ratio of
SRHHL for 12 years it shows the contribution of stockholders in capital of the
company .
 The contribution of shareholders was more in 2006 and 2007 which eventually Went
on increasing and then gradually started decreasing from last year ie: 2018
 The ratio of 42.64 in 2006 indicates that the remaining 57.36% of funds are
contributed by the creditors similarly in 2016 52.64% of capital is contributed by
stockholders and the remaining 47.36% is contributed by creditorsTh of the firm.
 Where this ratio is very less in 2018 which is a bad indicator for the firm for relaying
on shareholders funds which will ultimately dilute their earnings.
  Capital Gearing Ratio= Equity capital
Preference share capital + Debentures +loans

Graph 1.4 Table 1.4

year Capital gearing

Capital gearing ratio ratio
2006-2007 0.308628527
0.4
2007-2008 0.335065084
0.35
0.3 2008-2009 0.149410358
Capital
0.25 2009-2010 0.129713446
gearing ratio
0.2 2010-2011 0.140899762
0.15 2011-2012 0.173625411
0.1
2012-2013 0.140894643
0.05
0 2013-2014 0.167768219
2014-2015 0.217698547
2015-2016
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

2016-2017
2017-2018

2015-2016 0.201457349
2016-2017 0.30412571
2017-2018 0.2342347

 The above figures details about the capital gearing ratio of SRHHL from 2006 to 2018
 This ratio analyses the relationship between equity capital and other fixed cost bearing
source of funds this ratio analyses the capital structure of the firm.
 The capital gearing ratio of 1 is considered as very high financial risky as revenue
comes down and interest costs goes up.
 The optimal ratio is 0.25-0.5 for stable companies hence the capital gearing ratio for
only 3 years is between the optimal range and in all other years the ratio is less than
0.25 which indicates that the company is considered less risky by investors and
lenders hence companies capital structure is optimal company is not heavily depended
on external of interest bearing funds for its operations.
 As the capital gearing ratio for all the years is low geared company have the
capability to survive better in tough times.
 Interest coverage ratio= EBIT
Interest

Graph 1.5 Table 1.5

year ICR
Interest Coverage Ratio 2006-2007 7.357392403
8 2007-2008 4.536266468
7
2008-2009 7.256846246
6
5
2009-2010 3.232825161
4 2010-2011 3.171114494
3 ICR 2011-2012 4.679435241
2 2012-2013 2.62273257
1 2013-2014 2.261521647
0
2014-2015 3.21863614
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018

2015-2016 3.727156085
2016-2017 3.284311089
2017-2018 6.287718396

 The above graph and table summarizes the Interest coverage ratio of SRHHL
from 2006 to 2018 this ratio determines how easily a company can pay its
interest on debt .
 The interest coverage ratio of 7.35 in 2006 says that company is making
enough profits to pay off its interest similarly in all the cases the interest
coverage ratio is high indicating that earnings are 7.35 many times more to
pay the interest expense of the company .
 The ratio have decreased a little in 2013 and 2014 but in later years it is being
improved .
 In all the years company is making more profits to pay off its interest expense
the profits are really high we can see from the above table that in 2008
company have 4.53 times the profits to pay off interest similarly 7.25 times in
2009 and there on.
Activity ratios

 Debtors Turnover Ratio= Net credit sales

Average Debtors
Average Debtors=Opening Debtors + Closing Debtors
2

Graph 1.6 Table 1.6

year DTR
DebtorsTurnoverRatio 2006-2007 6.75997109
20 2007-2008 6.53618768
18 2008-2009 8.996746335
16
14 2009-2010 5.031955707
12
10
2010-2011 8.220476417
8 2011-2012 6.584662329
6
4 2012-2013 7.204951
2 DTR
2013-2014 7.417430149
0
2014-2015 9.344274924
2007-2008
2006-2007

2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018

2015-2016 9.992719133
2016-2017 18.59675287
2017-2018 9.405566352

 The above graph and table summarizes the Debtors turnover ratio of SRHHL from
2006 to 2018 it measures the ability of the firm how efficiently it collects its
receivables.
 Higher the ratio indicates that the firm is collecting money from its debtors that many
times in a year like in 2006 the ratio 6.75 means the company have collected many
every 2 months once on average. In other words company takes 60 days to collect the
payment after a sale is made.
 Similarly in other cases in 2017 company is collecting its debts 18 times an year .
 When compared with all years in 2010 the ratio is less at 5.03 means company have
collected its debts only 5 times in that year.
 Fixed Assets turnover ratio= Net sales
Average Fixed Assets
Average Fixed Assets= Opening Balance + Closing balance
2
Graph 1.7 Table 1.7

year FTR
Fixedassets Turnver Ratio 2006-2007 1.841910774
2.5 2007-2008 1.597184237
2 2008-2009 1.994565419
1.5 2009-2010 1.005165824
1 2010-2011 1.091190548
0.5 2011-2012 1.242459654
FTR
0 2012-2013 1.187736134
2013-2014 1.015142709
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
2014-2015 1.371998707
2015-2016 1.280068266
2016-2017 1.339998638
2017-2018 1.58219087

 The above graph and table summarizes the Fixed assets turnover ratio of SRHHL
from 2006 to 2018 this ratio indicates the efficiency of company in using its fixed
assets.
 A high ratio indicates good utilization of assets to generate sales but the from the
above table we can see that the ratio of the company is very less in all the cases
neither it is not too low but less.
 The reason for less ratio is the amount of investment made on equipment and property
is highest among the assets and company is depended on these assets for revenue
generation.
 The ratio of 1.84 in 2006 indicates the company is generating Rs1.84 for every Rs1
invested in fixed assets of the company.
 Inventory Turnover Ratio= Cost of goods sold
Average inventory
COGS=Opening inventory+ Purchases-Closing inventory
Avg Inventory=Opening Inventory+ Closing Inventory

Graph 1.8 Table 1.8

year ITR
InventoryTurnoverRatio 2006-2007 5.282074421
7 2007-2008 4.574452614
6 2008-2009 6.052879393
5 2009-2010 4.282079528
4
2010-2011 4.280037995
3 ITR 2011-2012 3.996187408
2
1 2012-2013 4.538093677
0 2013-2014 4.16917405
2008-…

2013-…
2006-…
2007-…

2009-…
2010-…
2011-…
2012-…

2014-…
2015-…
2016-…
2017-…

2014-2015 4.499512733
2015-2016 4.269557973
2016-2017 4.866450033
2017-2018 4.979362635

 The above graph and table summarizes the Inventory turnover ratio of SRHHL from
2006 to 2018 this ratio is measure of companies efficiency in controlling of
merchandise.
 The inventory turnover ratio of SRHHL is high in all the cases as for example the
ratio of 5.28 in 2006 indicates that company have sold its inventory 5.28 times in one
particular year which is good for the firm avoiding storage and other handling costs.
 Similarly in the following years also the company have sold its inventory for 4.57
times in 2007 6.05times in 2008 , 4.28 times in 2009 and so on.
 In most of the years the ratio lies between 4 and 5 and lowest is 3.99 in 2011 and
highest is 6.05 in 2008.
Profitability Ratios

 Gross Profit Ratio=Gross Profit *100

Net Sales
Table 1.9
Graph 1.9

year Gross profit ratio

Gross profit ratio 2006-2007 57.39932801
2007-2008 53.42598154
70
60 2008-2009 53.12059544
50 2009-2010 59.63437738
40 2010-2011 56.58519297
30 2011-2012 58.00066996
20
Gross profit 2012-2013 54.23349319
10
0 ratio 2013-2014 52.52620464
2014-2015 49.46698991
2007-2008

2016-2017
2006-2007

2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016

2017-2018

2015-2016 48.08836316
2016-2017 54.50672215
2017-2018 57.82410454

 The above graph and table summarizes the Gross profit ratio of SRHHL from 2006 to
2018 this ratio measures how efficiently a company uses the labour and material
available to produce and sell products at good profits. This ratio briefs management
about the profitability of core business with considering the indirect cost.
 The gross profit ratio 57.39% in 2006 indicates that for every Rs1 of sale company is
earning 57.39 paisa as profit similarly in other cases where company is getting 53.42
paisa for rs1 sale made in 2007 like wise it is similar in all the cases.
 The ratio is very high in 2009 at 59.63% compared to all other years the ratio kept on
fluctuating from beginning it is good for the company to maintain a gross profit ratio
above 50% to cover all its expanses and profit.
 Net Profit Ratio= Net profit *100
Sales
Graph 2.0 Table 2.0

year Net profit ratio

Net profit ratio 2006-2007 4.698374292
12 2007-2008 4.041896059
10 2008-2009 7.595613115
8 2009-2010 2.19798499
6 2010-2011 10.28001324
2011-2012 7.18940147
4
Net profit 2012-2013 2.962289212
2 ratio 2013-2014 2.385625072
0
2014-2015 4.711390175
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
2015-2016 4.911964073
2016-2017 4.69543746
2017-2018 6.590191594

 The above graph and table summarizes the Net profit ratio of SRHHL from 2006 to
2018 this ratio indicates how much profit is generates as a percentage of sales this
ratio speaks about how much of each rupee collected by the company converted to
profits.
 The ratio of 4.69 in 2006 indicates that only 4.69% of sales are being converted into
profits in that particular year .
 The ratio kept on fluctuating in all the years and the highest is 10.28 in 2010
indicating 10.28% of total sales are converted into profits of the firm .
 The lowest ratio is 2.19 in 2009 and 2.96 in 2012 and 2.38 in 2013 company would
have concentrated on cutting cost during these years to increase the profits .
 Return On Capital Employed= EBIT *100
Capital employed
Capital Employed= Total Assets-Current Liabilities
Table 2.1
Graph 2.1

year ROCE
Return On Capital Employed 2006-2007 17.10481351
30 2007-2008 16.5560727
25 2008-2009 24.16390287
2009-2010 20.78164595
20
2010-2011 18.75048452
15 ROCE
2011-2012 16.52961272
10
2012-2013 8.3654039
5 2013-2014 8.742846523
0 2014-2015 15.91864968
2011-2012
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018

2015-2016 14.43597103
2016-2017 8.078291943
2017-2018 12.28060679

 The above graph and table summarizes the return on capital employed ratio of
SRHHL from 2006 to 2018 this ratio measures companies ability to generate profits
from capital employed . This ratio measures how well company is gaining profits
from the capital..
 The Return on “capital employed shows how much operating income is generated for
each rupee invested in capital from the above table we can say that the company had
17.10% in 2006 indicates for every one rupee invested in capital company generated
Rs1.70 of operating income .
 The return on capital employed is very high in the year 2009 at 24.16% indicating that
for every one rupee of money invested in capital company have generated Rs2.46 of
operating income.
 The Return on capital employed is very less in the years2013, 2014 and 2017 ranging
between 8 to 9 indicating very less ROCE among all the years.”
 The ratio is high in 2009 and 2010 indicating the company have efficiently deployed
its capital and created share holder value.
  Earnings Per Share = Net Profit
No Of Equity Shares
Graph 2.2 Table 2.2

year Earnings per share

Earnings per share 2006-2007 5.508629299
2007-2008 4.665222011
25
2008-2009 14.95112995
20 2009-2010 3.284285491
15 2010-2011 18.9646656
2011-2012 13.02093169
10
2012-2013 6.531577596
5 Earnings per 2013-2014 5.052644722
share 2014-2015 13.16251529
0
2015-2016 12.71869916
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018

2016-2017 11.85126727
2017-2018 22.44879061

 The above graph and table summarizes the Earnings per share of SRHHL from 2006
to 2018 it is a “tool that market participants use frequently to judge the profitability
of a company before buying the shares of that company it is a portion of profit that is
allocated to every individual share of stock . ”
 The Earnings per share of the company should always be higher which indicates that
the company is more profitable and company have more profits to distribute to its
share holders.
 From the above table the EPS was less in the year 2006 at 5.50 which indicates every
common stock holder got Rs5.50 for each share the ratio is very high in the year 2018
at 22.44 indicating that each shareholder got Rs 22.44 for one share from the company
 The Eps of the company is low in 5 years in the total period calculated and lowest in
the year 2010 at 3.28 per share.”
 Hypothesis Test

To test the hypothesis SPSS linear regression is used where the independent variables current
and quick ratios were used to test their effect on gross and net profit ratios and return on
capital employed ratio.

Gross Profit Ratio

Table 2.3
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 8.619 2 4.310 .305 .745b
Residual 127.210 9 14.134
Total 135.829 11
a. Dependent Variable: Grossprofirratio
b. Predictors: (Constant), Quickratio, Currentratio

 The above table 2.3 summarizes the regression analysis for hypothesis where the P
value is 0.745 which is more than 0.05 and we fail to reject the null hypothesis that
liquidity of the firm do not have affect on profitability.

Net Profit Ratio

Table 2.4
ANOVAa
Model Sum of Squares df Mean Square F Sig.
b
1 Regression 20.504 2 10.252 2.248 .161
Residual 41.039 9 4.560
Total 61.543 11
a. Dependent Variable: Netprofitratio
b. Predictors: (Constant), Quickratio, Currentratio

 The above table 2.4 summarizes the regression analysis for hypothesis
where the P value is 0.161 which is more than 0.05 and we fail to reject
the null hypothesis that liquidity of the firm do not have affect on
profitability
 Return On Capital Employed
Table 2.5

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 90.210 2 45.105 2.138 .174b
Residual 189.846 9 21.094
Total 280.056 11
a. Dependent Variable: ROCE
b. Predictors: (Constant), Quickratio, Currentratio

 The above table 2.5 summarizes the regression analysis for hypothesis where the P
value is 0.174 which is more than 0.05 and we fail to reject the null hypothesis that
liquidity of the firm do not have affect on profitability
 Chapter 6

Findings

After a detail analysis of ratios of SRHHL from 2006-2018 the following are the findings of
my study.

 The company should try to improve its current and quick ratio 2008,2013,2014 &
2015 in these years the current ratio is less than one but company have improved its
ratio from past 3 years it is above 1. Quick ratio is completely different speaking
about the short term liquidity and quick ratio is above 1 in only 4 years of the total
period and from past 3 years the ratio around 1 and in 2018 the ratio is 1 and the
period where the quick ratio is less than 1 company “relied on inventory and other
assets to its short term debts”
 The debt equity ratio of the company is satisfactory as the company is not being relied
on debt financing for its growth and the ratio is less from past 2 years which indicates
healthy financial position of the firm.
 The proprietary ratio of the firm is very strong providing a strong security to the stock
holders of the company over the assets of the firm and the ratio is less in 2018
indicating a bad sign where company depended on debt or other sources for its
growth.
 The capital gearing ratio of the company is sound indicating the capital structure of
the firm is very optimum neither it is low geared in all the years the ratio lied below
0.25 in many years indicating that the capital structure of the company is optimal.
 The Interest coverage ratio of the company is excellent in all the years which is many
times more than the amount to be paid as interest.
 The debtors turnover ratio of the firm is very high in all the years indicating that the
company is collecting at least twice or thrice money from its debtors.
 The fixed assets turnover ratio is little less of the company as the company is able
generate only a maximum of 1.84 ratio as highest in all the years the ratio is little less.
 The inventory turnover ratio is very good company is able to sell its inventory at least
3 times a year this is the lowest of among total period analyzed.
 The Gross profit ratio of the firm is very high and good for the company to generate
profits and firm have used its labour and material effectively to produce goods.
 The net profit ratio of the company is little less as it ranges between 3 to 10% only as
margin to be converted as profits among sales .
 The return on capital employed of the company is satisfactory it is neither too high or
too low company is generating good profits from the capital employed.
 The earnings per share of the company is low in some years but in most of the years
Eps is high indicating that company is more profitable.
 From the hypothesis test conducted through SPSS linear regression analysis to find
the effect of independent variables (liquidity ratios) on dependent variables
(profitability ratios) we fail to reject the null hypothesis and rejected the alternate
hypothesis.
 From the entire analysis it is found that all the ratios of the firm are sound except the
current and quick ratio in some cases.
 The financial health of the company is appropriate and company is doing its best in all
aspects right from capital deployment to asset utilization.
 Chapter 7

Recommendations

1. Financial ratios are key financial metric to measure a companies ability in all aspects
and therefore company need to perform this analysis every 3 years to provide valuable
information to interested parties.
2. Company should try to improve its current ratio as the ratio is less than 1 in 4 years of
the total period computed as low current ratio signals the company can not pay its
current liabilities even if it converts its current assets to cash and company should try
to improve its current assets or reduce its current liabilities.
3. The Quick ratio of the company need to improved as in major cases the ratio is less
than 0.5 means company can only pay 50% of its current liabilities without using
inventory and company is having week position has more current liabilities in relation
to current assets (excluding inventory).
4. The company have a optimal debt equity ratio as the ratio is equal to 1 in only 2 years
of the total period computed indicating creditors have invested the same amount as
owners have invested and in remaining years the ratio is less than 1 where the owners
investment is high than creditors indicating a healthy sign and investors will prefer to
invest in the company when the ratio is less.
5. The proprietary ratio of the company is high in all the years except 2018 and company
should look into this aspect on decreasing of ratio and the reason is shareholders funds
have reduced in 2018 and company should focus on this aspect.
6. The capital gearing ratio of the company is low geared in all the cases how ever this is
good sign indicating that company is high cyclical in sales.
7. The Interest coverage ratio of the company so good and the ratio is more than3 in all
the cases indicating company have earnings to pay interest that many times as in the
ratio.
8. The Debtors turnover ratio is also satisfactory and company is collecting money from
its debtors at least twice a year.
9. The fixed assets turnover ratio is less and company should try to improve this ratio
even the ratio is satisfactory but company should try to reduce the investment in assets
of company or improve its sales figures.
10. The inventory is satisfactory and company is selling its inventory at least 3 times in a
year.
11. The companies gross profit ratio is high and company have set up a good profit
margin in all the years “company has a higher gross profit margin than is typical of its
industry, it likely holds a competitive advantage in quality, perception or branding,
enabling the firm to charge more for its products. Alternatively, the firm may also
hold a competitive advantage in product costs due to efficient production techniques
or economies of scale”
12. The net profit ratio of the company is less and company should try to improve this
ratio to improve its net profit which is distributed by the shareholders of the firm. It
can be improved by increasing the sale prices and by reducing the expenses.
13. The company should try to improve the return on capital employed as the ratio is less
in some cases company should improve its ebit and assets to improve the ratio.
14. The EPS of the firm is relatively less in some years but in many years the EPS is very
high indicating that the shareholders are getting good returns. Company should save
some profits rather distributing total to the shareholders of the firm.
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T

He
the company should