Financial Ratio Analysis of Bata India LTD and

Relaxo Footwear LTD:

Prepared By:
Divyesh Chadotra(119021)
Chandan Bhagat (119012)

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Capital Structure Ratios/Leverage Ratios:

Proprietary Fund Ratio: Proprietary ratio (also known as Equity Ratio or Net
worth to total assets or shareholder equity to total equity). Establishes
relationship between proprietor's funds to total resources of the unit. Where
proprietor's funds refer to Equity share capital and Reserves, surpluses and Tot
resources refer to total assets.

Bata India LTD Relaxo Footwear

Proprietary Fund Ratio= Proprietary Fund/Total asset

2474.08/1741.84=1.42 1604.56/1105.07 =0.688

Bata India: A Proprietary Ratio of 1.42 shows that the company has 1.42 units
of shareholder’s fund for each unit of total asset in other words we can say
142% of total assets of the company are financed by proprietors’ funds.

Relaxo Footwear:A Proprietary Ratio of 0.688 shows that the company has
0.688 units of shareholder’s fund for each unit of total asset in other words we
can say 68% of total assets of the company are financed by proprietors’ funds.
Comparison: Comparing both the companies, we can say that Bata has more
proprietary funds in compare to Relaxo so we can infer that creditors are in
comfort as Bata has more than 75% of proprietary fund which is ideal for any
company

Profitability Ratios:

1.Gross Profit Ratio: Gross profit ratio (GP ratio) is a profitability ratio that shows the
relationship between gross profit and total net sales revenue

Bata India LTD Relaxo Footwear

Gross Profit Ratio = G.P/Sales *100 Gross Profit Ratio = G.P/Sales *100

1516.50/2931.10*100 = 51.74 1022.62/2305.12*100 =44.36

Bata India: Bata shown the 51.74% Gross profit on the basis of net sales, There
is no norm or standard to interpret gross profit ratio (GP ratio). Generally, a
higher ratio is considered better.

Relaxo: Relaxo shown the 44.36 Gross profit on the basis of net sales, There is
no norm or standard to interpret gross profit ratio (GP ratio). Generally, a
higher ratio is considered better.
Operating Profit Ratio: The operating ratio shows the efficiency of a company's
management by comparing the total operating expense of a company to net
sales.

Bata India LTD Relaxo Footwear

Operating Profit=EBIT/Sales*100
477.06/2931.10*100 =16.27 324.31/2292.08*100 =14.14

Bata India Analysis: Bata shows 16.27% Operating profit on the basis of sales
this shows the efficiency of management .

Relaxo Footwear: Relaxo shows 14.14% operating profit on the basis of sales
which is lower than Bata, this shows Bata has more efficiency than Relaxo
Footwear in Management.

Return on Assets: Return on assets (ROA) is an indicator of how profitable a

company is relative to its total assets.

Bata India LTD Relaxo Footwear

Return on Assets=Net Income/Total Asset*100

329.66/2474.08*100 = 13.32 175.44/1604.56*100 = 10.93

Bata India Analysis: Bata has 13.32% return on Asset that means company has
earned return of 13.32% on the investment of assets.

Relaxo Footwear Analysis: Relaxo has 10.93% Return on Asset that means
company has earned return of 10.93% on their invested assets.

Comparison: Bata has earned more return on their total Asset in compared to
Relaxo it shows that Bata is working more efficiently than Relaxo footwear.

Net profit Ratio: is a popular profitability ratio that shows relationship

between net profit after tax and net sales. It is computed by dividing the net
profit (after tax) by net sales.

Bata India LTD Relaxo Footwear

Net Profit Ratio = PAT/Sales*100
329.66/2928.44*100 = 11.25 175.44/2292.08*100 = 7.6

Bata India Analysis: Bata has reported 11.25% profit on the basis of net sales

Relaxo footwear: Relaxo has reported 7.6% profit on the basis of net sales

Comparison: Bata has shown more profit on the basis of net sales in compare
to Relaxo which shows Bata has more profitability than Relaxo
Asset Turnover Ratio: measures the efficiency with which a company uses its
assets to produce sales.

Bata India LTD Relaxo Footwear

Asset Turnover Ratio = Net sales/Total Asset
2928.44/2478.64 = 1.181 2292.08/1604.56 = 1.428

Comparison: Relaxo has 1.428 asset turnover ratio than of Bata 1.181 this
shows Relaxo is using its assets better than Bata to generate the sales.

Operating Profit Margin Ratio:The operating profit margin ratio is a measure

of overall operating efficiency, incorporating all of the expenses of ordinary,
daily business activity
.

Bata India LTD Relaxo Footwear

EBIT/Net Sales*100
545.96/2928.44*100 = 18.64% 337.35/2292.08*100 = 14.71%

Comparison: Bata has shown 18.64% of Operating profit more than Relaxo of
14.71%, This shows that Bata has more operating efficiency than Relaxo
footwear.
Interest coverage Ratio: evaluates the number of times a company is able to
pay the interest expenses on its debt with its operating income.

Bata India LTD Relaxo Footwear

Interest coverage Ratio= Operating Income/Interest expense
477.28/3.35 =142.47 Times 324.31/6.90 = 47 Times

Bata India Analysis: Bata India has excellent interest coverage ratio, ideally 2 is
the minimum requirement but due to low interest payment in Bata India that
is why the ratio is very high.

Relaxo Footwear Analysis: Relaxo also has excellent interest coverage ratio as
the interest payment is too low in Relaxo.

Comparison: Bata has more excellent coverage ratio than Relaxo but both are
having excellent coverage.

Cash Coverage Ratio: The cash coverage ratio, which is used to compare the
company’s cash balance to its annual interest expense.

Bata India LTD Relaxo Footwear

Cash Coverage Ratio = Total Cash/Total Interest Expense
839/3.55 = 250.44 Times 2.22/6.9 = 0.32 Times

Bata India Analysis: Ideal Cash coverage ratio is 1:1 but bata has excellent
250.44 times than the ideal coverage ratio
Relaxo Footwear: Relaxo is having 0.32 times than the idea ratio of 1:1 this
shows company does not have enough cash balance to pay it annual interest
payments

Comparison: Bata is in excellent position to pay the annual interest in compare

to Relaxo.

Liquidity Ratios:

Current Ratio: The current ratio is a liquidity ratio that measures a

company's ability to pay short-term obligations or those due within one
year.

Bata India LTD Relaxo Footwear

Current Ratio=Current Assets/Current liabilities
1840.49/629.72=2.92 720.11/456.04=1.576

Bata India Analysis: Bata India has current ratio of 2.92:1 , this shows company
has sufficient current assets to pay its current liabilities, the ideal ratio is 1:1 or
1.2:1

Relaxo Footwear: Relaxo footwear has current ratio of 1.58:1 that shows
company has sufficient amount of current asset to repay its current liabilities
as per the ideal ratio of 1:1 or 1.2:1

Comparison: Both the companies have sufficient amount of current assets to

repay their current liabilities but Bata has more current assets than Relaxo.
 Quick Ratio: The quick ratio measure of a company's ability to meet its
short-term obligations using its most liquid assets (near cash or quick
assets).

Bata India LTD Relaxo Footwear

Quick Ratio=Current assets/Current liabilities
1001.12/629.72=1.59 318.57/456.04=0.70

Bata India Analysis: Bata has 1.59:1 more than ideal quick ratio of 1:1 or
higher, it shows company has sufficient cash or cash equivalent assets to replay
its short term obligations

Relaxo Analysis: Relaxo has 0.70:1 less than the ideal quick ratio of 1:1, it
shows company has no sufficient liquid funds to repay its short term liabilities.

Comparison: Bata is in a better condition in terms of liquidity than Relaxo

which has lower than the ideal quick ratio of 1:1

Retained Earning Ratio: The retention ratio measures the percentage of

a company’s profits that are reinvested into the company in some way
rather than being paid out to investors as dividends.

Bata India LTD Relaxo Footwear

Retained earnings ratio = Net Income-Dividend/Net Income*100
(329.66-51.41)/329.66*100 = 84.40 (175.44-18.05)/175.44*100 = 89.72

Bata India Analysis: Bata India has retained 84.40% of its total profit, it shows
that they reinvested their profit in the company rather than being paid out to
the investors.

Relaxo Footwear Analysis : Relaxo has retained 89.72% of its total profit, it
shows that they reinvested their profit in the company rather than being paid
out to the investors.

Fixed Asset Ratio: It helps to determine the capacity of a company to discharge

its obligations towards long-term lenders indicating its financial strength and
ensuring its long-term survival.

Bata India LTD Relaxo Footwear

Fixed Asset Ratio = Net Fixed Assets/Long Term Funds
319.51/1746.53 = 0.18 848.14/1191.99 = 0.71

Bata India Analysis: Bata India shows that they have 0.18 Rs for every 1 Rs to
discharge its long term fund obligation, the ideal ratio is around 0.67.

Relaxo Footwear : Relaxo Shows that they have 0.71 Rs for every 1 Rs of long
term funds to discharge the long term fund repayment obligations, the ideal
ratio is 0.67 this shows Relaxo have the sufficient fund to repay their long term
obligations.

Comparison: From the above calculation it is clear that Bata has no sufficient
fund as per ideal ratio where as Relaxo footwear has the sufficient funds, so we
can conclude that Relaxo is in good position in terms of Net Fixed assets to
long term fund in compared to Bata.