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Profitability ratios

Profit margin

This ratio also known as return on sales (ROS),measures the amount of net profit
earned by each rupee of revenue .The profit margin also gives us a indication of
the cushion available to the company in the event of the increase in costs or drop
in sales prices

for 2008

profit margin = (PAT/SALES)*100


= (262.37/2205.7)*100
=11.89%
for 2007
profit margin =(218.43/1888.26)*100
=11.56%
Assets turnover

This is the firm's efficiency in utilising its assets.It indicates how many times the
Assets were turn over in a period and and thereby generated sales .If assets
turnover is high then the company is managing its assets efficiently.

Assets turnover = Sales/(avg.total assets )


=2205.05/(478.38+432.97)/2
= 4.840

Here the assets turnover ratio is high so it indicates that the company is
managing its assets efficiently

Return on Assets

This is the measure of profitability from a given level of investment. It is an


excellent indicator of the over all performance of the company

Return on assets = PAT/avg. Total assets *100


=262.37/455.675
=57.57%
Return on equity

This is a measure of profitability from the standpoint of the company's


shareholders.It measures the efficiency with which the shareholders' funds are
employed

Return in equity= PAT/avg. Shareholder equity *100


262.37/123.64*100

=212.20%
Earnings per share
EPS is an important measure of profitability .EPS is a useful in comparing
performance over time

Earning per share =PAT/weighted avg. number of of equity share


=262.37/12,36,40,298
=.000002124

Liquidity ratios
Current Ratio:-
Current Ratio of company=Current Assets/Current Liabilities

=775.54/468.97

=1.65

Quick Ratio:-
Quick Ratio=Quick Assets/Current Liabilities

=508.24/468.97

=1.08

Debtor Turnover Ratio:-


Debtor Turnover Ratio=Sales/Avg Debtors

=2531.71/310.29

=8.159

Average Debt Collection Period:-


Avg Debt Collection Period=360/8.159
=44.12 days

Inventory Turnover Ratio:-


Inventory Turnover Ratio=Cost of Goods Sold/Avg Inventories

=1317.40/492.28

=2.67

Average Inventory Holding Period:-


Avg Inv. Holding Period=360/2.67

=134.83 days

Operating Cycle:-
Operating Cycle=44.12+134.83

=178.95 days

SOLVENCY RATIOS

DEBT-TO-EQUITY RATIO
This ratio indicates the extent of use of financial leverage. A high debt-to-equity
ratio indicates aggressive use of leverage, and a highly leveraged company is
more risky for creditors.

debt-to-equity ratio = secured loans + unsecured loans

shareholder's equity

2008
2007

= 2.79
2.79

123.64+351.93
123.64+306.54
= 0.0058
0.00648
COMMENT: Thus, we can see that that castrol has a low debt-equity ratio which
means that it is not risky for creditors.

LIABILITIES-TO-EQUITY RATIO
It is a variant of debt-to-equity ratio current provisions and liabilities in the
numerator to get the firm's total liabilities.

Liabilities-to-equity ratio = debt+current liabilities


shareholder's equity

2008
2007
= 2.79+468.97
= 2.79+511.61

475.57
432.18

= 0.991
= 1.19
COMMENT: It shows that the liabilities to equity ratio is decreasing over the year.

INTEREST COVER RATIO


Measures the protection available to creditors for payment of interest charges by
the company. It shows whether the company has sufficient income to cover its
interest requirements by a wide margin.

Interest cover ratio = PBIT

INTEREST EXPENSE

2008
2007

= 412.20+3.65
=339.84+3.79
3.65
3.79
= 113.93
= 90.66
COMMENT: It shows that company has ample amount of interest coverage in
both the years.

CAPITAL MARKET RATIOS


CMR relate the market price of a company's share to the company's earnings and dividends.
CMR are as follows :

Price Earning Ratios = avg. stock price/earning per share


=246.4/21.22
=11.60 times
It is used in investment analysis.Many view P/E multiple as an
indicator of a firm's growth prospects.A high price earnings ratio indicates the
good future of a company.

Dividend yield = dividend per share /avg. stock price


= (15/246.4)*100
=6.08%
It represents the current cash return to shareholders .

Cash flow statement analysis -:

cash flow from oprating activities -:


• In this year our company have net profit before tax =412.20 crores. And after paying tax the
profit remanins =262.37 crores . Company payes 149.83 crores Rs in tax

• In the begining our company have the cash=317.9 crores. And at the ending time castrol india
have the cash 255.63 crores

• paid to sundry creditors =35.31 crores & sundry debtors didn't pay= 15.98crors (bal.)

• Company's inventries =(59.36) .It means company cash goes out

Comment:-
The operating profit before working capital changes is more then last year (439.39
against 351.44) but net cash flow from operating activities has gone down by almost half
compared to last year. This is because company had paid more income tax in the current
year 2008 and its creditors has gone down by more than half.

Cash flow from investing activites -:


• company purchaged fixed assets of amount 37.25 crores so the cash goes out of this amount

• And sale of fixed assets is so less which is.14 crore. In the previous year it was 3.75 crores

• sales of investment was 20.06 crores and interest receved was 21.04 crores . Which is
increasing the cash of companies
comment:-
The net cash flow from investing activities shows positive balance but has gone down by
four times in comparision to last year because of above mentioned facts

Cash flow from financing activities -:


• Company paid the interest 3.73crores, Dividend 191.64 crores and Dividend tax32.57 crores

Net cash flow from financing activities-:

• The total cash flow from the financing activities was (227.94crores) it shows company paid the
cash

• In the begining our company have the cash=317.9 crores. And at the ending time castrol india
have the cash 255.63 crores
• At the end of the year due to all of the (Oprating ,investing & financing) activities company
have the cash 255.63 crore which is less then the year 2007. In 2007 it was 317.91 it's main
reasion was company paid the cash to all of it's debtors and it paid 191.64 crores divedend But
it's debtors didn't paid the cash in 2008. and recession was the another reasion But the company
have a good position at the end of year 2008.

Comment:-

The cash flow from financing activities shows a deficit balance here.
This is because castrol India has not issued any shares and just have made payments .It
could have been positive if it
had issued shares