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Analysis and Interpretation are closely related. Interpretation is not possible without
analysis and without interpretation analysis has no value.
In the words of Kenndy and Memullar, The analysis and interpretation of finical
statements are an attempt to determining the significance and meaning of the
financial statements data so that a forecast may be made of the prospects for future
earnings, ability to pay interest and debt maturities and probability of a sound
dividend policy.
Objectives of the Ratio analysis: The Ratio analysis is used to know the following factors
The operational efficiency of the concern as a whole and of its various parts or
departments.
The comparative study in regard to one firm with another firm or department with
another department.
Advantages:
The advantages to using annual reports are:
Shows the public that the organization does keep in touch with what they want.
Limitations:
Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of
financial ratio analysis are:
1. Different companies operate in different industries each having different environmental
conditions such as regulation, market structure, etc. Such factors are so significant that a
comparison of two companies from different industries might be misleading.
2. Financial accounting information is affected by estimates and assumptions. Accounting
standards allow different accounting policies, which impairs comparability and hence ratio
analysis is less useful in such situations.
3. Ratio analysis explains relationships between past information while users are more
concerned about current and future information.
Ratio Analysis:
The study of the significance of financialratios for a company. Ratio analysis is very imp
ortant infundamentalanalysis, whichinvestigates the financial health of companies. An example o
f ratio analysis is the comparison of priceearningsratios of differentcompanies. This helps analyst
s determine which companies' share prices properly reflect their performances and therefore what
investments are most likely to be the most profitable.
Types of ratios
A. Liquidity Ratio
B. Turnover Ratio
C. Solvency or Leverage ratios
D. Profitability ratios
E. Stability Ratio Growth and performance.
Balance Sheet:
PARTICULARS
Schedule
2008-09
2009-10
2010-11
2011-12
2012-13
Rs.
Rs.
Rs.
Rs.
Rs.
1.SOURCE OF
FUNDS
A .Share holders
funds a) Equity
shares capital
b) Reserves &
Surplus
B) Loan funds
a) Secured loans
55351000
55351000
55351000
55351000
55351000
-113230842
121871748
131769708
1535979
1535979
124412166
123421934
118323986
17554308
16525160
17597491
124265284
123762967
16878362
16457311
84086632
74622897
63801570
196834073
192808456
128744087
128744087
129350453
130940766
131221531
75598731
83431974
92191194
101041843
109690611
53145356
45312113
37159259
29898923
21530920
b) Un secured
loans
Total 1 AND 2
11.Application
of funds
1.FIXED
ASSETS
a) Gross Block
less:
Depreciation
Net block
2. Investments
701500
701500
701500
701500
701500
3.Current
Assets, loans and
advance
41654241
40018498
36063112
38395190
39943933
Less:
4.
Current
liability&
provisions
Net
Current
assets(G-H)
5.Miscellaneous
expenditure(to
the extent not
written
or
adjusted)
Notes
accounts
Total 1 to 5
on
J
-
40847539
40842288
39555375
41598478
39819313
806702
-823790
-3492263
3203288
124620
29433074
29433074
29433074
14000386
4
14101834
2
84086632
74622897
63801570
196834073
192808456
SALES
2008-09
2009-10
2010-11
2011-12
2012-13
Rs.
Rs.
Rs.
Rs.
Rs.
12353450
20582346
33262721
75263228
88880317
9541652
15867208
25608054
66045182
73510727
2811798
4715138
7654667
9218048
15369590
3927032
4776618
7760578
6487062
7820214
9080119
7833243
8759220
8850648
8705418
12838748
104918
267580
152862
18423
231372
115287
176299
335446
351264
22802728
7884355
-8956412
-5784218
-804778
77467
80376
22802728
7884355
-8956412
-5861685
-885154
48228
756552
941547
836491
129324
22850956
8640907
-9897959
-140003864
-141018342
Selling
Administrative
expenses
and
Depreciation
Interest
Other Income
PBIT
Provision for income
tax
PAT
Prior period adjustment
Balance c / f
balance sheet
to
LIQUIDITY RATIOS:
1. Current Ratio:
company by its Total Current Liabilities. The ratio is regarded as a test of liquidity for a
company. It expresses the working capital relationship of current assets available to meet the
companys current obligations.
Formula
Current ratio = Total current assets/ Total current Liabilities
Year
2008
2009
2010
2011
2012
Current Assests
4,16,54,241
4,00,18,498
3,60,63,112
3,83,95,190
3,99,43,933
Current Liabilities
4,08,47,539
4,08,42,288
3,95,55,375
4,15,98,478
3,98,19,313
Current Ratio
1.02
0.98
0.91
0.93
1.00
Current Ratio
1.05
1
Current Ratio
0.95
0.9
0.85
2008
2009
2010
2011
2012
Interpretation:
The current ratio helps us in analyzing the companys ability in meeting its immediate
obligations. The acceptable ratio is 2:1. However calculations and graph we find that the
company is able to meet below its standards. As it is a cause of concern the company has to
focus on development current assets.
2. Liquid/Quick Ratio:
It is also known as acid test ratio, it is more vigorous of liquidity than the current ratio.
The term liquidity refers to the ability of affirm to pay its short term obligation as and when they
become due.
Formula:
Liquid ratio = Quick assets / current liabilities
Year
2008
2009
2010
2011
2012
Quick Assests
4,08,47,539
3,91,94,708
3,25,70,849
3,51,91,902
3,98,19,313
Current Liabilities
4,08,47,539
4,08,42,288
3,95,55,375
4,15,98,478
3,98,19,313
Liquid Ratio
1.00
0.96
0.82
0.85
1.00
Quick Ratio
1
0.8
0.6
Quick Ratio
0.4
0.2
0
2008
2009
2010
2011
2012
Interpretation:
The quick ratio is a most conservative measure which helps us to analysis wheather a
company is in a position to meet current liabilities with its most liquid assets. 1:1 ratio is
considered ideal ratio for a concern because it is wise to keep the liquid assets at least equal to
the liquid liabilities at all times. from the above graph we observe that the company is satisfying
this measure .so we can analyse that the company is stable & healthy financially.
PROFITABILITY RATIOS
3. Gross profit Ratio: This Ratio is used to compare departmental profitability. It costs
are classified suitably into fixed and variable elements.
Formula:
Gross profit ratio = Gross Profit / Sales * 100
Year
2008
2009
2010
2011
2012
Gross Profit
28,11,798
47,15,138
76,54,667
92,18,048
1,53,69,596
Sales
1,23,53,450
2,05,82,346
3,32,62,721
7,52,63,228
8,88,80,317
22.9
23.01
12.24
17.29
Gross
profit 22.76
Ratio
10
5
0
2008
2009
2010
2011
2012
Interpretation:
The gross profit ratios show the companys ability to cover its operating expenses and
thus provide an adequate return to proprietors. Te higher GP ratio it is more satisfy able .but
the above graph shows that the company gross GP ratio has come down in 11 and again
increase in 12 but not to a satisfactory level.
relationship between net profit after tax and net sales. It is computed by dividing the net profit
(after tax) by net sales. It measures overall profitability of the business.
Formula:
Net profit ratio = Net Profit / Sales * 100
Year
2008
2009
2010
2011
2012
Net Profit
2,28,50,956
86,40,907
98,97,959
1,40,00,3864
14,10,18,342
Sales
1,23,53,450
2,05,82,346
3,32,62,721
7,52,63,228
8,88,80,317
84.97
41.98
29.76
86.01
58.66
40
20
0
2008
2009
2010
2011
2012
Interpretation:
The ratio explains per rupee profit generating capacity of sales. If the cost of sales is
lower, then the net profit will be higher and then we divide it with the net sales, the result is
the sales efficiency. Higher the ratios the better it is because it gives idea of improved
efficiency of the concern. The graph shows high net profit ratio 86.01 in the year 2011 and
very less in the year 2010.
leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in
percentage, and can be interpreted as the proportion of a companys assets that are financed by
debt.
Formula:
Debt ratio = Total Debt / Capital Employed
Year
2008
2009
2010
2011
2012
Total Debt
141966474
141143646
140220278
139947094
135921477
Capital Employed
168581842
177222748
187120708
56886979
56886979
Debt Ratio
0.84
0.79
0.75
2.46
2.39
Debt Ratio
3
2
Debt Ratio
1
0
2008
2009
2010
2011
2012
Interpretation
Debt ratio is used to analyze the long term solvency of a concern. In the above
calculations and graph we observe that, though the companys Debt ratio is low it has improved
from raising funds by issuing debentures and bonds and investing wisely to improve this position
financially. The above graph shows the slight decrease and immediate increase from 0.84 to 2.39
in the years 2008 and 2012 respectively.
6. Equity Ratio:
company. The Equity ratio measures the proportion of the total assets that are financed by
stockholders and not creditors.
Formula:
Equity ratio = Shareholders equity /Total Capital Employed
Year
2008
2009
2010
2011
2012
Equity
55351000
55351000
5535100
5535100
5535100
Capital Employed
168581842
177222748
187120708
56886979
56886979
Debt Ratio
0.33
0.31
0.30
0.97
0.97
Equity Ratio
1
Equity Ratio
0.5
0
2008
2009
2010
2011
2012
Interpretation:
The ratio indicates proportion of owners fund to total fund invested in the business .it is
believed that higher the proportion of owners fund lower is the degree of risk. The above figures
shows that the ratio is same in the 2012&2013.
7. Debt to Equity Ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating
the relative proportion of shareholders' equity and debt used to finance a company's assets.
Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage.
Formula:
Equity ratio = Total Liabilities / Shareholders equity
Year
2008
2009
Total Liabilities
124934171
Shareholders Equity
Debt Ratio
2010
2011
2012
115465185 103356945
238432551
232627769
55351000
55351000
5535100
5535100
5535100
22.57
2.09
1.87
4.31
4.20
0
2008
2009
2010
2011
2012
Interpretation:
The ratio indicates the proportion of debt fund in relation to equity. A high ratio Here
means less protection for creditors. a low ratio, on the other hand ,indicates a wider safety
cushion. The graph shows immediate decrease 22.57 to 4.20 in the years 2008 and 2012. This
gives the moderated difference in the High ratio.
8. Interest Coverage Ratio: A ratio used to determine how easily a company can pay
interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's
earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the
same period.
Formula:
Interest Coverage ratio = EBIT / Interest
Year
2008
2009
2010
2011
2012
EBIT
22802728
7884355
8956412
5784218
804778
Interest
12838748
104918
267580
152862
18423
Coverage Ratio
22.57
2.09
1.87
4.31
4.20
20
0
2008
2009
2010
2011
2012
Interpretation:
This ratio indicates extents to which earnings may fall without causing any
embarrassment to the firm regarding the payment of interest charges. A high coverage ratio
means that an enterprise can easily meet its interest obligations even if earnings before interest
and taxes suffer considerable decline. The graph shows the immediate increase and slow
decrease from 2008 to 2012.
TURNOVER RATIOS
9. Total Assets Turnover Ratio:
To show what extranet the total assets are being utilized in the business. The ratio is
obtained by dividing the sales or cost of goods sold of a company by its Total assets.
Formula:
Total Assets Turnover Ratio = sales or cogs / Total asset
Year
2008
2009
2010
2011
Sales
23,53,450
2,05,82,346
3,32,62721
7,52,63,228 8,88,80,317
Total Assets
9,55,01,097
8,60,32,111
7,39,23,871
6,89,95,613 6,21,76,353
0.13
0.24
0.45
1.09
Ratio
2012
1.43
2009
2010
2011
2012
Interpretation:
This ratio is calculated by dividing the net sales by the value of total assets. A high ratio is
an indicator of overtrading of total assets while a low reveals idle capacity .The traditional
standard for the ratio is two times. A companys position has improved year by year it has
fulfilled the obligations. Hence it is stable. The graph shows the increment from 2008 to 2012 as
0.13 to 1.43, which gives the improvements in the Capital fund.
company's inventory is sold and replaced over a period. The days in the period can then be
divided by the inventory turnover formula to calculate the days it takes to sell the inventory on
hand or "inventory turnover days."
Formula:
Inventory/ Stock Turnover Ratio = sales or cogs / Avg Stock
Year
2008
2009
2010
2011
Sales
23,53,450
2,05,82,346
3,32,62721
7,52,63,228 8,88,80,317
AVG Stock
47,70,826
79,33,604
1,28,04,027
3,30,22,591 3,67,55,536
2.59
2.60
2.60
2.28
Ratio
2012
2.41
2009
2010
2011
2012
Formula:
Working Capital Turnover Ratio = sales or cogs / Avg Stock
Year
2008
2009
2010
2011
2012
Sales
23,53,450
2,05,82,346
3,32,62721
7,52,63,228
8,88,80,317
Working
806702
-823790
-3492263
-3203288
3246288
15.31
24.98
9.52
23.49
27.38
Capital
Ratio
2009
2010
2011
2012
Interpretation: The higher is the ratio, the lower is the investment in working capital and the
greater or the profits. However, a very high turn of over of working capital is a sign of over
trading and may put the concern into financial difficulties. On the other hand, a low working
capital turnover ratio indicates that working capital in not efficiently utilize. The above graph
shows the clear variance based on the working capital employed from 2009 to 2012.
claims that it cannot absorb. The amount of premium written is a better measure than the total
amount insured because the level of premiums is linked to the likelihood of claims.The solvency
or leverage ratios throws light on the long term solvency of a firm reflecting its ability to assure
the long term creditors with regard to periodic payment of interest during the period and loan
repayment of principal on maturity or in predetermined installments at due dates. There are thus
two aspects of the long-term solvency of a firm.
a. Ability to repay the principal amount when due
b. Regular payment of the interest.
Formula:
Solvency Ratio = Total Debts / Total Assets
Year
2008
2009
2010
2011
2012
Total Debt
141966474
141143646
140220278
139947094
135921477
Total Assets
9,55,01,097
8,60,32,111
7,39,23,871
6,89,95,613
6,21,76,353
1.49
1.64
1.90
2.03
2.19
Ratio
Solvency Ratio
3
2
Solvency Ratio
1
0
2008
2009
2010
2011
2012
Interpretation: The ratio is based on the relationship between borrowed funds and owners
capital it is computed from the balance sheet, the Regular payment of the interest type are
calculated from the profit and loss a/c. The above graph shows the clear increment from 2008 to
2012 with respect to the total Assets and debts employed.
establishes the relationship between fixed assets and long-term funds and is calculated by
dividing fixed assets by long term funds.
Formula:
Fixed Assets to Long terms Funds= Fixed Assets*100 / Long term funds
Year
2008
2009
2010
2011
2012
Fixed assets
9,55,01,097
8,60,32,111
7,39,23,871
6,89,95,613
6,21,76,353
141966474
141143646
140220278
139947094
135921477
67
61
52
49
48
Ratio
40
20
0
2008
2009
2010
2011
2012
Interpretation: This ratio is often used as a measure in manufacturing industries, where major
purchases are made for PP&E to help increase output. When companies make these large
purchases, prudent investors watch this ratio in following years to see how effective the
investment in the fixed assets was. The above graph shows the slight decrement from 2008 to
2012 with respect to the value of the detrimental fixed assets.
14. Proprietary ratio: Proprietary Ratio is also known as Capital Ratio or Net Worth to
Total Asset Ratio. This is one of the variant of Debt-Equity Ratio. The term proprietary fund is
called Net Worth.
Formula:
Proprietary Ratio = share holders fund / Total assets current liabilities
Year
2008
2009
2010
2011
2012
177222748
187120708
56886979
56886979
Fixed assets
9,55,01,097
8,60,32,111
7,39,23,871
6,89,95,613
6,21,76,353
1.76
2.06
2.53
0.82
0.92
Ratio
Proprietary Ratio
3
2
Proprietary Ratio
1
0
2008
2009
2010
2011
2012
Interpretation: The proprietary ratio is not a clear indicator of whether or not a business is
properly capitalized. For example, an excessively high ratio can mean that management has not
taken advantage of any debt financing, so the company is using nothing but expensive equity to
fund its operations. Instead, there is a balance between too high and too low a ratio, which is not
easy to discern. Also, the ratio is not necessarily a good indicator of long-term solvency, since it
does not make use of any information on the income statement, which would indicate
profitability or cash flows. The above graph shows the slow increment and gradual decrement
from 2008 to 2010 and 2011 to beyond, because of the shareholders value on the market.
A high ratio In the above table and diagram seen that the proprietary ratio in the year of
2011 was 0.92 it decreases to 2.06 in the year 2012.
Formula:
Return on investment= Net profit/ Operating profit/ Capital employed *100
Year
2008
2009
2010
2011
2012
Net Profit
2,28,50,956
86,40,907
98,97,959
1,40,00,3864
14,10,18,342
Capital employed
168581842
177222748
187120708
56886979
56886979
13.55
4.87
5.23
24.64
24.89
Ratio
2009
2010
2011
2012
Interpretation: ROI is one of the most used profitability ratios because of its flexibility. That
being said, one of the downsides of the ROI calculation is that it can be manipulated, so results
may vary between users. When using ROI to compare investments, it's important to use the same
inputs to get an accurate comparison. The above graph clearly showing that the gradual
decrement from 2008 to 2009 and immediate increment from 2010 to 2012 with respect to the
net profit and capital employed.
FINDINGS
The following key feature are identified and described as follows,
From the whole study I have found that the manufacturing company is goods in terms of
growth.
The products produced by the Yamaha are best in India.
This is effective use of technology in their company.
The financial position of Yamaha is good according to the balance sheet.
It has been analyzed the sales turnover get increased in the financial year 2012 compared to other
years 2008, 2009, 2010 and 2011.
BIBLOGRAPHY
WEBSITES:
http://www.deloitte.com/
www.google.com
www.datamonitor.com
www.scribed.com
http://www.investopedia.com/
http://www.accountingformanagement.org/
NEWS PAPERS:
TIMES OF INDIA.
Economic Times
BOOKS:
Cost accounting and Financial Management Vol1 by The institute of
Charted accountants of India (Set up by an Act of Parliament) New
Delhi.
Cost and Management accounting by S.P.JAIN , K.L. NARANG,
SIMMI AGARAWAL & MONIKA SEHGAL.