Auto components Industry

Key Financial Ratios

Year 2015 2016 2017 2018 2019 Latest
No.Of 287 276 270 249 184 441
Companies
Key Ratios            
Debt-Equity 0.76 0.63 0.58 0.49 0.48 0.51
Ratio
Long Term Debt- 0.76 0.62 0.57 0.48 0.47 0.5
Equity Ratio
Current Ratio 1.83 1.86 1.83 1.78 1.76 1.81
Turnover Ratios            
  Fixed Assets 1.91 1.99 2 2.33 2.01 2.14
  Inventory 9.75 9.73 9.35 10.48 9.13 9.75
  Debtors 7.7 7.85 6.81 6.67 5.81 6.76
Interest Cover 2.55 2.75 3.21 4.51 6.69 4.97
Ratio
PBIDTM (%) 11.41 10.24 10.18 11.34 11.94 11.23
PBITM (%) 7.37 6.32 6.38 7.74 8.01 7.48
PBDTM (%) 8.51 7.94 8.19 9.63 10.75 9.72
CPM (%) 7.1 6.92 7 7.3 8.39 7.72
ROCE (%) 12.51 10.84 10.39 13.31 12.39 12.6
RONW (%) 9.42 8.71 8.49 9.62 10.32 10.39

The above table provides an overview the key financial ratios of the companies in the industry. Some
of the important ratios will be interpreted below

a) Debt equity ratio: this ratio shows the dependence of the company on debt. If we see the
that the average ratio for this industry is below 1 and is reducing year on year suggesting the
companies in the industry are less dependent on debt for doing the business. Use of debt is
a debatable topic but according to me it is good for auto components industry to maintain a
low debt equity ratio and depend less on debt to avoid interest cost and bankruptcy cost.
b) Current ratio: this ratio measures the capability of company to pay off its short-term
obligations with help of short term assets. If notice that over the period of five years, the
ratio is always above 1 which suggest the majority of the companies can pay off its short
term obligations. Year on year it has been constant (no major change).
c) Turnover ratios:
i) Fixed asset turnover ratio: this ratio shows the utilization of assets for generating
revenue. We see that over the years it has been more than one suggesting the
companies are utilizing more than the capacity of assets. It the latest year we can
see the industry ratio is 2.14 suggesting it is using 214% of it assets i.e.
overutilization of resources.
ii) Inventory turnover ratio: the average ratio over the year is 9 which suggest that
inventory turnover in days (365/9) is 40days approx. the inventory lies with the
manufacture for 40 days.
d) Return on net worth: this is a major indicator of the companies’ performance. The industry
is showing a positive RONW year on year and it is increasing. We can see that the average
return in this industry is 9-10% suggesting that the industry is still profitable.