RATIO ANALYSIS

Introduction

Comparison of ratio between two

consequent years of one company

Comparison of ratio between two

companies for the same year

Conclusion
 WHAT IS RATIO ANALYSIS?

It is NOT just comparing different numbers from the

balance sheet, income statement, and cash flow
statement.

It is about comparing the number against previous

years, other companies, the industry, or even the
economy in general.

Ratios look at the relationships between individual

values and relate them to how a company has performed
in the past, and might perform in the future.
 Profitability Ratios for

Ratio Formula Mar’07 Mar’06

Gross profit Revenue – COGS x100 28.57 28.58
margin (%) Revenue

Net profit Net profit x 100 28.05 26.17

margin (%) Revenue

Adjusted Net income x100 33.47 36.21

return on net
Avg. stockholder’s equity
worth(%)
Return on long EBIT x 100 36.64 40.62
term funds (%)  Long term funds
 Per Share Ratios for

Ratio Formula Mar’07 Mar’06

Adjusted EPS (Rs.) EBIT-Adjustments 65.42 90.65
Total No. of Shares
Dividend per share Total Dividend 11.50 45.00
(Rs.) Total No. of Shares
Operating profit per Operating profit 73.98 108.51
share (Rs.) Total No. of Shares
Net operating income Net Operating Income 230.20 327.63
per share (Rs.) Total No. of Shares

Free reserves per Total free reserves 190.30 245.07

share (Rs.) Total No. of Shares
 Leverage Ratios for

Ratio Formula Mar’07 Mar’06

Long term debt/ Long Term Debt 0 0
Equity Equity
Total debt/ equity  Total Debt 0 0
Equity
Owners fund as % Equity *100 100 100
of total source  Total Funds
Fixed assets Sales 3.38 3.18
turnover ratio  Fixed Assets
 Liquidity Ratios for

Ratio Formula Mar’07 Mar’06

Current ratio  Current Assets 4.96 2.75
Current Liabilities
Current Assets-Inventories
Quick ratio Current Liabilities
4.91 2.73
 Payout Ratios for

Ratio Mar’07 Mar’06

Dividend payout 19.85 58.32
ratio (net profit) 

Dividend payout 17.66 49.89

ratio (cash profit) 

Earning retention 79.91 43.48

ratio 

Cash earnings 82.15 51.43

retention ratio 
 Per Share Ratio for
the year 06-07
Ratio
Adjusted EPS 65.42 6.68

Dividend Per Share 11.5 2.00

Operating Profit per 73.98 12.91

share
Net Operating income 230.20 59.04
per share
Free Reserves per 190.30 54.23
share
 Profitability Ratios for
the year 06-07

Ratio
Operating Margin(%) 32.13 21.87

Gross Profit Margin(%) 28.57 17.72

Net Profit Margin(%) 28.05 14.48

Adjusted Return On 33.47 16.91

Net worth(%)
Return on long term 36.64 6.81
funds(%)
 Leverage Ratios for
the year 06-07

Ratio
Long Term 0 1.75
Debt/Equity
Total Debt/Equity 0 1.79

Owners Fund as % 100 35.88

of total source
Fixed assets 3.38 2.96
Turnover Ratio
 Liquidity Ratios for
the year 06-07

Ratio

Current Ratio 4.96 3.24

Quick Ratio 4.91 3.03

 Payout Ratios for
the year 06-07

Ratio Formula

Dividend payout Dividends 19.85 32.63

Ratio (net profit) (yearly) /Net
Income

Earning Retention Net Income- 79.91 62.61

Ratio Dividends/
Net Income
 CONCLUSION
Ratio Analysis is the basic tool of financial
analysis and Financial analysis itself is an
important part of any business planning process
as SWOT ,being basic tool of the strategic
analysis plays a vital role in a business planning
process and no SWOT analysis would be
complete without an analysis of companies
financial position. In this way Ratio Analysis is
very important part of whole business strategic
planning.
As Companies Dispatch their
long annual report once a
year, the financial ratio help us
to profile a company easily.