CHAPTER - IV

DATA ANALYSIS & INTERPRETATION

INTRODUCTION
Data analysis is the process of evaluating data using analytical reasoning and logical
reasoning to examine each component of the data provided. This form of analysis is just one
of the many steps that must be completed when conducting a research experiment. Data from
various sources is gathered, reviewed and then analyzed to from some sort of finding or
conclusion. There are a variety of specific data analysis methods. Some of which include data
mining, text analytics, business intelligence, and data visualizations.

MEANING OF FINANCIAL ANALYSIS:

Financial Statements Analysis is an analysis which critically examines the
relationship between various elements of the Financial Statements. It focuses on the
evaluation of past operations as revealed by the analysis of basic statements

MEANING OF RATIO ANALYSIS: Ratio-analysis means the process of

computing, determining and presenting the relationship of related items and
groups of items of the financial statements.

OBJECTIVES OF RATIO ANALYSIS:

Following are the important objectives of Ratio Analysis:

To help in providing a part of information needed in the process of decision-making.

To focus on facts on a comparative basis and facilitate drawing of conclusions relating to

the performance of a firm.

To evaluate the performance of a firm in determining the important aspects of a business

such as liquidity, solvency, operational efficiency, overall profitability capital gearing,
etc.

To throw light on the degree of efficiency in the management and the effectiveness in the
utilization of its assets.

To provide the way for effective control of the enterprise in the matter of achieving the
physical and monetary targets.

To help management in discharging its basic functions like forecasting, planning, coordination, communication, control, etc

CLASSIFICATION OF RATIOS:
i. Balance Sheet Ratios or Financial Ratios
ii. Profit & Loss Account Ratios or Operating Ratios
iii. Composite Ratios
Balance Sheet Ratios or Financial Ratios
Ratios calculated from the different items as appearing in the Balance Sheet of a
concern are called Balance Sheet Ratios, e.g. Current Ratio, Liquid Ratio, Debt-equity Ratio,
and so on.

Profit & Loss Account Ratios or Operating Ratios

Ratios calculated from the different items as appearing in the Profit & Loss Account of a
concern are called Profit & Loss Account Ratios or operating Ratio, e.g. Gross Profit Ratio,
Net Profit Ratio, Operating Ratio.

Composite Ratios
Ratios calculated, taking some items as appearing in the Balance Sheet and taking some
items as appearing in Profit & Loss Account are called Mixed Ratios or Composite Ratios,
e.g. return on Net Worth, Return on Investment (ROI), Capital Turnover Ratio, etc.

 Current ratio:- It is the relationship between the current assets and current liabilities
of a concern.
A current ratio of 2:1 (current assets twice of current liabilities) is satisfactory. The Formula
for computation of current ratio is given below:
Current Assets
Current Assets = Current Liablities

Quick ratio: - It is the ratio between Quick Current Assets and Current
Liabilities. They should be at least equal to 1.
Quick Current Assets: Cash/Bank Balances + Receivables upto 6 months + quickly
realizable securities such as Govt. Securities or quickly marketable/quoted shares and
Bank Fixed Deposits.
Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities
Debt equity ratio:-it is the relationship between borrowers fund (Debt) and Owners
Capital (Equity).

it discloses to the creditors the extent of their in interest being covered by the net worth by the
company. It can be computed by using the following formula.
'

Debt-Equity Ratio =

Total Debt (Outsider s Fund )

Shareholder s ' Funds

Where,
Total Debt Debentures + Term Loans + Loans on Mortgage + Loans from Financial
= Institutions + Other Long-Term Loans + Redeemable Preference Share
Capital + All Current Liabilities.
Shareholders Funds

Equity Share Capital + Irredeemable Preference Share Capital +

= Capital Reserves + Retained Earnings + Any Earmarked Surplus
Like Provision for Contingencies etc. Fictitious Assets

 Capital Gearing Ratio:

This ratio is also known as Capital Structure Ratio or Leverage Ratio. It is used to analyze
capital structure of the company. It establishes the relationship between fixed interest,
dividend bearing securities and equity shareholders funds. It is an indicator of the degree of
risk involved in the total capital employed in the business. It can be calculated as follows:

Capital Gearing Ratio =

Interest Dividend bearing Funds

Equity Shareholder s ' Funds

Where,
Fixed Interest and Dividend bearing Funds = Preference Share Capital + Debentures +
Long-Term Loans
Equity Shareholders Funds = Equity Share Capital + Reserves and Surplus {Goodwill
+ Preliminary Expenses + Profit and Loss A/c (Dr.)}.
Return on Assets (ROA):Here, the profitability ratio is measured in terms of the relationship of between net
profits and assets. The ROA may also be called profit to assets ratio. It is calculated
to measure the productivity of total assets. It is calculated using the following
formula:
Return on Assets =

Net Profit after Interest Tax

100
Total AssetsFictitious Assets

Return on Investment
Return on Investment is also known as Return on Capital Employed or
Overall Profitability Ratio. It is calculated by establishing the relationship between
the operating profit earned and capital employed. It is an indicator of the earning
capacity of the capital invested in the business. It shows efficiency of the business as a
whole. This ratio is calculated by using the following formula:
Return on Investment =
Where,

Operating Profits
100
Capital Employed

Capital Employed = Equity Share Capital + Preference Share Capital + Reserves and
Surplus + Debentures and Long-Term Loans (Fictitious Assets
+
Intangible Assets + Investments outside the Business).
(Or)
Capital Employed = Proprietors Funds + long-Term Loans.
Earnings Per Share (EPS):- Earnings per Share (EPS) measures the profit available
to the equity shareholders on a per share basis, that is, the amount they can get on
every share held. It is calculated by dividing the profits available to the equity
shareholders by number of outstanding shares. The profits available to the ordinary
shareholders are represented by net profits after tax and preference dividend. Thus,

EPS =

Net Profit after Interest , Tax ,Preference Dividend

Number of Ordinary SharesOutstanding

OPERATING PROFIT RATIO :

It is expressed as => (Operating Profit / Net Sales) x 100
Higher the ratio indicates operational efficiency
NET PROFIT RATIO :
It is expressed as =>

(Net Profit / Net Sales) x 100

It measures overall profitability.

CURRENT ASSET TURNOVER RATIO:

Current assets turnover ratio= Net Sales / Current Assets
ASSET TRUNOVER RATIO :
Assets turnover ratio= Net Sales/Tangible Assets
CREDITORS TURNOVER ratio: This is also called Creditors Velocity Ratio, which
determines the creditor payment period.
Creditors turnover ratio = Average Creditors/cost of goods sold or purchase

Table 4.1 showing composition of current Ratio:

year

Current assets (RS.)

Current liabilities (RS.)

Current ratio

2009-2010

42.22

12.64

3.34

2010-2011

27.76

27.00

1.03

2011-2012

30.27

22.36

1.34

2012-2013

34.24

22.75

1.51

2013-2014

34.91

19.22

1.82

Graph 4.1 showing current Ratio

curent ratio
3.5
3
2.5
curent ratio

2
1.5
1
0.5
0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Table 4.2 showing composition of quick Ratio:

year

Quick asset

Current liabilities

Quick ratio

2009-2010

21.83

12.64

1.73

2010-2011

14.83

27.00

0.55

2011-2012

18.08

22.36

0.81

2012-2013

25.58

22.75

1.12

2013-2014

25.66

19.22

1.34

Graph 4.2 showing the quick Ratio:

quick ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

quick ratio

Table 4.3 showing composition of debt equity Ratio:

Year

Long term liabilities

(RS.)

Intangible net worth

(RS.)

Debt equity
ratio

2009-2010

44.41

35.11

1.26

2010-2011

19.18

31.62

0.61

2011-2012

20.69

32.38

0.64

2012-2013

18.63

30.81

0.60

2013-2014

17.94

27.3

0.66

Graph 4.3 showing debt equity Ratio:

debt equity ratio

1.4
1.2
1
0.8
0.6

debt equity ratio

0.4
0.2
0

Table 4.4 showing composition of operating profit Ratioyear

Operating profit (RS.)

Net sale (RS.)

Operating
profit ratio

20092010

13.00

29.42

44.19

20102011

14.21

44.23

20112012

9.38

22.83

41.19

20122013

5.73

21.45

26.71

20132014

1.48

19.4

7.63

32.13

Graph 4.4 showing operating profit Ratio:

operating profit ratio

50
45
40

44.19

41.19

35
30

32.13

25

operating profit ratio

26.71

20
15
10
7.63

5
0

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Table 4.5 showing composition of assets turnover ratioyear

Net sales (RS.)

Tangible assets (RS.)

Assets turnover
ratio

2009-2010

29.42

35.11

0.84

2010-2011

44.23

31.62

1.40

2011-2012

22.83

32.38

0.71

2012-2013

21.45

30.81

0.70

2013-2014

19.4

27.3

0.71

Graph 4.45assets turnover Ratio:

assets turnover ratio

1.4
1.2
1
0.8

assets turnover ratio

0.6
0.4
0.2
0

Table 4.6 showing composition of net profit ratio:

Year

Net profit (RS.)

Net sales (RS.)

Net profit ratio

2009-2010

-8.19

29.42

-27.84

2010-2011

3.27

44.23

7.39

2011-2012

0.93

22.83

4.07

2012-2013

-1.57

21.45

-7.32

2013-2014

-3.51

19.4

-18.09

Graph 4.6 net profits Ratio:

net profit ratio

10
5
0
-5

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

-10
-15
-20
-25
-30
net profit ratio

Table 4.7 showing the debtor turnover ratio ratio/velocity:

year

Debtors (RS.)

Sales (RS.)

Debtor turnover
ratio

2009-2010

21.64

29.42

0.74

2010-2011

13.51

44.23

0.31

2011-2012

17.46

22.83

0.76

2012-2013

24.93

21.45

1.16

2013-2014

25.33

19.4

1.31

Graph 4.7 debtor turnover ratios:

debtor turnover ratio

1.31
1.16

1.4
1.2
1

0.76

0.74

0.8
0.6

debtor turnover ratio

0.31

0.4
0.2
0

Table 4.8 showing the current assets turnover ratio:

Year

Net sales (RS.)

Current assets
(RS.)

Current assets turnover

ratio

2009-2010

29.42

42.22

0.70

2010-2011

44.23

27.76

1.59

2011-2012

22.83

30.27

0.75

2012-2013

21.45

34.24

0.63

2013-2014

19.4

34.91

0.56

Graph 4.8 current assets turnover ratios:

current assets turnover ratio

1.8
1.6
1.4
1.2
1

current assets turnover

ratio

0.8
0.6
0.4
0.2
0

Table 4.9 showing the return on assets ratio:

year

Net profit after tax (RS.)

2009-2010

Tangible net worth

(RS.)

Return on assets

35.11

-0.23

-8.19
2010-2011

3.27

31.62

0.10

2011-2012

0.93

32.38

0.029

2012-2013

-1.57

30.81

-0.051

2013-2014

-3.51

27.3

-0.13

Graph 4.9 showing the return on assets ratios:

0.1
0.05
0
-0.05
return on assets ratio
-0.1
-0.15
-0.2
-0.25