RATIO ANALYSIS

OF
COMPANY OVERVIEW
• Type - Listed company
• Industry - Textiles Lifestyle & Retail
• Founded - 1925, Thane
• Headquarters - Mumbai, Maharashtra , India
• Key people - Gautam Singhania, Chairman & Managing Director
• Parent - Raymond Group
• Subsidiary companies –
. ColorPlus Fashions Ltd. Raymond Luxury Cottons Ltd.

Silver Spark Apparel Ltd. J.K. Helene Curtis Ltd.

EverBlue Apparel Ltd. J.K. Investo Trade (India) Ltd.

Celebrations Apparel Ltd. JK Files (India) Ltd.

RATIO ANALYSIS
• Ratio Analysis is the process of computing, determining and presenting the
relationship of related items and groups of items of the financial statements.

• Ratio Analysis is used to obtain a quick indication of a firm's financial

performance in several key areas.

• Types –
• Liquidity Ratios
• Asset Management Ratios
• Debt Management Ratios
• Profitability Ratios
• Market Value Ratios
LIQUIDITY RATIOS
• It indicates the ability of the firm to pay off debts that are maturing within a
year.

• Types –
• CURRENT RATIO
It indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future.

• QUICK RATIO
It indicates the ability of the firm to pay off short-term obligations without
relying on the sale of inventories.
 CURRENT RATIO QUICK RATIO

1.46 0.835
1.45 0.832
1.45

0.83
1.44

1.43
0.825
1.42

1.41
0.82 0.819
1.4
1.4

1.39
0.815

1.38

1.37 0.81
2014-15 2015-16 2014-15 2015-16
ASSET MANAGEMENT RATIOS
• It indicates how efficiently the firm is using its assets.

• Types –
• INVENTORY TURNOVER RATIO
It indicates how many times the inventory is “turned over” during the year.

• DEBTORS TURNOVER RATIO

It indicates average number of times the firm has collected its receivables during
the year.

• TOTAL ASSET TURNOVER RATIO

It indicates the ability of the firm to generate sales from its total assets.
 INVENTORY TURNOVER RATIO DEBTORS TURNOVER RATIO
4.7 5.9 5.82
4.65
4.64 5.8
5.7
4.6
5.6
4.55
5.5
4.5 5.37
4.45 5.4
4.45 5.3
4.4 5.2
4.35 5.1
2014-15 2015-16 2014-15 2015-16

TOTAL ASSET TURNOVER RATIO

1.16
1.15
1.15

1.14

1.13

1.12
1.11
1.11

1.1

1.09
2014-15 2015-16
DEBT MANAGEMENT RATIOS
• It indicates how the firm has financed its assets as well as the ability of the
firm to repay its long-term debt.

• Types –
• DEBT TO EQUITY RATIO
It indicated how much assets are financed by debt and how much assets are
financed by equity.

• TIMES-INTEREST-EARNED RATIO
It indicated the ability of the firm to meet its annual interest payments.
 DEBT TOEQUITY RATIO TIMES-INTEREST-EARNED RATIO

2.08 1.98
2.07
1.96
2.06 1.96

2.04 1.94

2.02 1.92

2 1.9

1.98
1.98 1.88
1.87

1.96 1.86

1.94 1.84

1.92 1.82
2014-15 2015-16 2014-15 2015-16
PROFITABILITY RATIOS
• It indicates how profitably the firm is operating and utilizing its assets.

• Types –
• OPERATING MARGIN
It indicates operating income per rupee of sales.

• PROFIT MARGIN
It indicates net income per rupee of sales.

• BASIC EARNING POWER

It indicates the ability of the firm’s assets to generate operating income.

• RETURN ON EQUITY
It indicates the rate of return on common shareholders’ investment.
 OPERATING MARGIN PROFIT MARGIN

6.50% 2.50%

6.38%
6.40% 2.10%
2.00%
6.30%

6.20% 1.63%
1.50%
6.10%

6.00%
1.00%
5.90% 5.86%

5.80%
0.50%

5.70%

5.60% 0.00%
2014-15 2015-16 2014-15 2015-16
 BASIC EARNING POWER RETURN ON EQUITY

7.60% 8.00%
7.32%
7.40% 7.35% 7.00%

7.20% 6.00% 5.64%

7.00% 5.00%

6.80% 4.00%

6.60% 3.00%
6.50%

6.40% 2.00%

6.20% 1.00%

6.00% 0.00%
2014-15 2015-16 2014-15 2015-16
MARKET VALUE RATIOS
• It indicates what investors think about the firm and its future
prospects.

• Types –
• PRICE/EARNINGS RATIO
The amount investors will pay for ₹1 of current earnings.

• MARKET/BOOK RATIO
It indicates how investors regard the firm.
 PRICE/EARNING RATIO MARKET/BOOK RATIO

27.5 1.85
27.04
27 1.8 1.79

26.5 1.75

26 1.7

25.5 1.65

25 1.6

24.48
24.5 1.55 1.53

24 1.5

23.5 1.45

23 1.4
2014-15 2015-16 2014-15 2015-16
THE DuPONT EQUATION
• It shows the relationships among profitability ratios, asset management and
debt management.

• 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅 = 𝑅𝑅𝑅 × 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅

= 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅 × 𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 × 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅

𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅

= × ×
𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅 𝑅𝑅𝑅𝑅𝑅𝑅
• Profit margin
It indicates the operating cost of the firm.
It tells how much the firm earns on its sales.

• Total Asset Turnover

It indicates the investments of the firm.
It is a “multiplier” that tells how many times the profit margin is earned each year.

• Equity Multiplier
It indicates the financing cost of the firm.
It tells the amount assets that are financed by debt and by equity.
 DuPONT EQUATION

8
7.32

6
5.64

3.02 3.11
3

2.1
2 1.63
1.15 1.11
1

Profit Margin Total Assets Turnover Equity Multiplier Return on Equity

2014-15 2015-16
CONCLUSION
• Raymond should imply strict credit policy as they have incurred huge loss due
to bad debts this year.
• The inventory management should be improved.
• The marketing team of Raymond should improve the sales.
• Raymond’s operating costs have increased i.e they are not working efficiently
and the expenditure on production is high as compared to previous year.
• The decline in liquidity ratio shows that most of the assets that firm has is
stuck in inventory and the inventory turnover ratio is low. So there is again a
possibility of bad debt.
• Raymond has also taken a huge debt this year but at a very low interest
rate which is good on their part.
THANK YOU