RATIO ANALYSIS OF

ASIAN PAINTS
By-
Avneesh Pandey(PRN-12030141071)
Amit Mekane(PRN-12030141093)
Savita Marwal(PRN-12030141094)
MBA-IT(2012-2014)
LIQUIDITY RATIOS
Current Ratio
Quick Ratio/Acid Test Ratio
Super Quick/Cash Ratio
Current Ratio
F.Y 2013(in Crores) F.Y 2012(in crores)

=Current Assets =4006.5 =3506.67

Current Liabilities 2931.4 2587.03

Current Ratio= 1.366753087 1.355480996

Mostly Current Ratio of 2 or 1.3 is considered acceptable.

Indicates a firms commitment to meet financial obligations.
A heavy ratio is not desirable as it indicates less efficient use of funds.
 Quick Ratio/Acid Test Ratio
=Cash+Marketable securities+Recievable Fy2013 Fy2012
Current Liabilities
OR =Current Ratio-Stock =4006.5-1830.29 =3506.67-1598.89
Current Liabilities 2931.41 2587.03

Quick Ratio= 0.74 0.73

A Quick Ratio of 1 or greater is acceptable.

This ratio indicates short term solvency of a firm.
A ratio of 1:1 means that a social enterprise can pay its bills without
having to sell inventory.
 Super Quick/Cash Ratio
=Cash+Marketable securities
Current Liabilities
OR =Current Ratio-Recievables-Inventories =4006.50 1830.29 980.83 =3506.67 1598.89 788.25
Current Liabilities 2931.41 2587.03

Super Quick/Cash Ratio 0.40 0.43

Ideal Ratio is 1 or higher.

SOLVENCY RATIOS
Debt-Equity Ratio
Proprietor's Ratio/Equity Ratio
Debt-Equity Ratio
= short term+Long term Debt = 2931.41+ 47.8 =2587.03+55.32
Shareholder's fund 3384.29 2748.5

Debt-Equity Ratio= 0.8803 0.9613

Debt-
Equity
Ratio:- Long term Debt =47.8 =55.32

Shareholder's fund 3384.29 2748.5

Debt-Equity Ratio= 0.0141 0.0201

Ideal Ratio-1:2or less

Indicates long term solvency
Higher ratio is riskier for the creditors
 Proprietor's Ratio/Equity Ratio
=Equity =3384.29 =2748.5
Total Tangible assets 2455.95 1876.11

Proprietor's Ratio/Equity Ratio= 1.3780 1.4650

Higher ratio indicates little danger to creditors and vice-versa.

ACTIVITY RATIOS/TURNOVER RATIOS

Inventory Turnover Ratio

Debtor's Turnover ratio
Creditor's TurnOver Ratio
Fixed Asset TurnOver Ratio
Total Assets TurnOver Ratio
 Inventory Turnover Ratio
A)Inventory Turnover Ratio:- =Cost of goods sold =6254.94 =5720.53
Average inventory during the year 1714.59 1452.16

Inventory Turnover Ratio= 3.6481 3.9393

where,
Average inventory during the =1598.89+1830. =1305.43+1598.
year= =Opening stock+Closing stock 29 89
2 2 2
Hence,Avg Inventory= 1714.59 1452.16

Higher ratio is desirable which means more cycles in a year.

Indicates whether investment in stock is efficiently used or not.
Inventory Holding Period(One Cycle time)

Inventory Holding Period

i) (One Cycle time):- =365 =365 =365
Inventory Turnover ratio 3.6481 3.9393

Inventory Holding Period

(One Cycle time)= 100 days 93 days

Less cycle time is acceptable.

 Debtor's Turnover ratio
B)Debtor's Turnover ratio:- =Credit Sales =10901.01 =9598.33
Average Recievables 881.065 677.175

Debtor's Turnover ratio= 12.3725 14.1741

where,
Average Receivables =Opening Receivables+Closing
during the year= Receivables =781.25+980.88 =573.10+781.25
2 2 2
Hence,Avg Receivables= 881.065 677.175

Higher ratio is better.

 Average Debtor's Period
i) Average Debtor's Period:- =365 =365 =365
Debtor's Turnover ratio 12.3725 14.1741

Average Debtor's
Period= 30 days 26 days

Lower period is better.i.e Cash should be received faster.

 Creditor's TurnOver Ratio
C)Creditor's TurnOver Ratio:- =Credit Purchase =6631.74 =6049.61
Average Payables 1352.01 1174.94

Creditor's TurnOver
Ratio= 4.91 5.15
where,
Average Payables during =Opening Payables+
the year= Closing Payables =1262.45+1441.57 =1087.44+1262.45
2 2 2
Hence,Avg Payables= 1352.01 1174.94

Lower ratio is better.

 Average Creditor's Period
i)Average Creditor's Period:- =365 =365 =365
creditor's Turnover ratio 4.91 5.15

Average Creditor's
Period= 75days 71 days

Higher cycle time is better.

Indicates the speed with which the payments of creditors are made
 Total Cycle time
Inventory Cycle Time
+Recievables Cycle Time
TOTAL CYCLE TIME= -Creditor's Cycle Time 55 days 47 days

This cycle time(Days in cash operating cycle) should be high.

Fixed Asset TurnOver Ratio
Fixed Asset TurnOver
D) Ratio:- =Net Sales =10906.01 =9598.33
Average Fixed Assets 2166.03 1596.05

Fixed Asset TurnOver Ratio= 5.04 6.01

where,
Average Fixed Assets =Opening Fixed Assets+Closing =1876.11+24
during the year= Fixed Assets 55.95 =1316+1876.11
2 2 2
Hence,Avg Fixed Assets= 2166.03 1596.05

Higher ratio is better.

An increasing ratio indicates you are using your assets more productively
Total Assets TurnOver Ratio
Total Assets TurnOver
E) Ratio:- =Net Sales =10906.01 =9598.33
Average Total Assets 6788.96 5713.93

Total Assets TurnOver

Ratio= 1.61 1.68

Higher ratio is better.

COVERAGE RATIOS
Interest Coverage Ratio
Debt Service Coverage Ratio
Interest Coverage Ratio
Interest Coverage
A) Ratio:- =Cash flow from operations p.a =1186.79 =699.63
Interest payable to bank p.a 10.52 9.11

Interest Coverage Ratio= 112.81 76.80

Measures your ability to meet interest payment obligations with business

income. Ratios close to 1 indicates company having difficulty generating enough
cash flow to pay interest on its debt. Ideally, a ratio should be over 2.
Debt Service Coverage Ratio
B)Debt Service Coverage Ratio:- =Net Operating Income =1846.46 =1616.18
Debt Service 312.49 241.7

Debt Service Coverage Ratio:- 5.91 6.69

2 and higher is better.

Indicates ability of a company to repay principal.
RATIOS IMPORTANT FOR SHAREHOLDERS
AND POTENTIAL INVESTORS
Book Value per share
Earnings per Share(EPS)
Dividend per share(DPS)
Earnings Yield/Capitalization Rate(%)
Dividend Yield(%)
Dividend Cover
Dividend Payout Ratio(%)
Price to Earnings Ratio
Book Value per share
A)Book Value per share:- =Equity =3384.29 =2748.5
No. Of shares(Outstanding) 9.59 9.59

Book Value per share= 352.90 286.60

Earnings per Share(EPS)
B)Earnings per Share:- =Net Profit-Preference dividend-tax dividend =1113.88 =988.73
Outstanding shares 9.59 9.59

Earnings per Share(EPS):- 116.15 103.10

Higher ratio is better.

Helps in estimating companys ability to pay dividend to shareholders.
Dividend per share(DPS)
C)Dividend per share(DPS):- =Dividend paid =462.05 =383.07
No. of shares 9.59 9.59

Dividend per
share(DPS):- 48.18 39.94
Earnings Yield/Capitalization Rate(%)

D)Earnings Yield/Capitalization Rate(%):- =EPS =116.15 =103.10

Market Price per share 406.5 370.1

Earnings Yield OR
Capitalization Rate(%):- 28.57% 27.86%
Dividend Yield(%)
E)Dividend Yield(%):- =DPS =48.18 =39.94
Market Price per share 406.5 370.1

Dividend Yield(%):- 12% 11%

Dividend Cover
F)Dividend Cover:- =EPS =116.15 =103.10
DPS 48.18 39.94

Dividend Cover:- 2.41 2.58

Dividend Payout Ratio(%)
Dividend Payout
G) Ratio(%):- =DPS =48.18 =39.94
EPS 116.15 103.10

Dividend Payout
Ratio(%):- 41.48% 38.74%
Price to Earnings Ratio
H)Price to Earnings Ratio:- =Market Price per share =406.5 =370.1
EPS 116.15 103.10

Price to Earnings Ratio:- 3.50 3.59

Higher ratio is better.

Helps the investor in deciding whether to buy or not to buy the shares.
EXPENSE RATIOS
Operating Expense
A) Ratio(%):- =(Cost of goods sold+Operating Expenses) =9238.8 =8123.47
Net sales 10906.01 9598.33

Operating Expense Ratio(%):- 84.71% 84.63%

A decreasing ratio is considered desirable since it generally indicates increased

efficiency
PROFITABILITY RATIOS
Return On Investment(%)
Return on Equity(%)
Return on Capital Employed(%)
Return on Assets(%)
Return on Total Capital(%)
Return on Equity(%)
B)Return on Equity(%):- =EAT(Net income after tax) =1113.88 =988.73
Equity 3384.29 2748.5

Return on Equity(%):- 32.91% 35.97%

Rate of return on investment by shareholders

It measures how profitable a company is for the owner of
the investment, and how profitably a company employs its
equity
Return On Investment(%)
A)Return On Investment(%):- =Net Profit After Interest and Tax/EAT =1159.52 =1020.58
Total Assets 6788.96 5713.92

Return On Investment(%):- 17.08% 17.86%

ROI measures how effectively the firm uses its capital to

generate profit
The income that an investment provides in a year.
The higher the ROI, the better.
Return on Capital Employed(%)
Return on Capital
C) Employed(%):- =EBIT =1846.46 =1616.18
Total Assets-Current Liabilities 6788.96-2931.41 5713.92-2587.03

Return on Capital
Employed(%):- =1846.46 =1616.18
3857.55 3126.89

Return on Capital
Employed(%):- 47.87% 51.69%

A higher ROCE indicates more efficient use of capital.

ROCE should be higher than the companys capital cost; otherwise it indicates
that the company is not employing its capital effectively and is not generating
shareholder value.
A good ROCE is one that is greater than the rate at which the company
borrows.
Return on Assets(%)
D)Return on Assets(%):- =EBIT =1846.46 =1616.18
Average total assets 6251.44 5253.39

Return on Assets(%):- 29.54% 30.76%

where,
Average Total Assets =Opening Total Assets
during the year= +Closing Total Assets =6788.96+5713.92 =4610.50+5896.21
2 2 2
Hence,Avg Total Assets= 6251.44 5253.39

Measures your ability to turn assets into profit.

This is a very useful measure of comparison within an industry. A low ratio
compared to industry may mean that your competitors have found a way to operate
more efficiently.
Return on Total Capital(%)
Return on Total =(Net Income+Interest
E) Capital(%):- Expense) =(1159.52+10.52) =(1020.58+9.11)
Average Total Capital 3343.49 2705.11

Return on Total Capital(%):- =1170.04 =1029.69

3343.49 2705.11

ROTC(%)= 34.99% 38.06%

where,
Average Total
Capital during the Opening Total Capital (3384.29+312.49)+(27 (2748.50+241.70)+(
year= +Closing Total Capital 48.50+241.70) 2187.42+232.61)
2 2 2
Hence,Avg Total Capital= 3343.49 2705.11
 Z-score
8) Z-SCORE
Z- Score = A=1809.81/6788.96 A=1575.21/5713.92
A*3.3+B*.99+C*0.6+D*1.2+E*1.4 A = EBIT/Total Assets= = 0.27 =0.28
B=10906.01/6788.96 B=9598.33/5713.92
B= Net Sales/ Total Assets =1.61 = 1.69
C=424.55*9.59Cr C=362.50*9.59Cr/
C= MV of Equity/ Total /6788.96Cr 5713.92Cr
Liabilities= =0.60 =0.62
D=(4006.50-2931.41)/ D= (3506.67-2587.03)/
D= Working Capital/ Total 6788.96 5713.92
Assets= =0.16 =0.16
E= Retained Earnings/ E=(3288.37/6788.96) E=(2652.58/5713.92)
Total Assets= =0.4844 =0.5
Z=0.27*3.3+1.61*.99+0.60*. Z=0.28*3.3+1.69*.99+0.6
Thus,Z= 6+0.16*1.2+0.4844*1.4 2*0.6+0.16*1.2+0.5*1.4

Z= 3.7089 3.86
Note:-Since,Z>3- Company is solvent based on Financial
Figures