RATIO ANALYSIS

• ROHAN KULKARNI
48
40
• AKSHAYE KAPSE
• RAVI JESWANI
37
• DEVENDRA BELANI
12
05
• HIMANSHU ANAND
• SAKET AMBEKAR
04
Group Members
 COMPANY PROFILE OF NTPC
India’s largest power company, NTPC was set
up in 1975 to accelerate power development
in India. NTPC is emerging as a diversified
power major with presence in the entire value
chain of the power generation business.
 NTPC
Apart from power generation, which is the
mainstay of the company, NTPC has already
ventured into consultancy, power trading, ash
utilisation and coal mining. NTPC ranked 317th
in the ‘2009, Forbes Global 2000’ ranking of
the World’s biggest companies.
Growth
Market Capacity
 Ratio Analysis
Ratio analysis is one of the techniques of
financial analysis to evaluate the financial
condition and performance of a business
concern. Simply, ratio means the comparison
of one figure to other relevant figure or
figures.
 Ratio Analysis
According to Myers , "Ratio analysis of
financial statements is a study of relationship
among various financial factors in a business
as disclosed by a single set of statements and
a study of trend of these factors as shown in a
series of statements."
Profitability ratios
 Gross profit ratio (GP ratio)

Gross profit ratio = Gross Profit *100

Net Sales
 Gross Profit Ratio
GP Ratio ( in %)
Company   NTPC   35
31.15
30 26.91
25.24
F.Y. Gross Profit Net Sales Gp Ratio ( in %) 25
20
2007-08 11,540.90 37,050.10 31.15
15
10
2008-09 10,583.60 41,923.80 25.24
5

2009-10 12,466.10 46,322.60 26.91 0

2007-08 2008-09 2009-10

GP Ratio ( in %)

• In 08-09 the G.P. Ratio has declined drastically (591bps)

indicating sudden increase in cost of production.
• In 09-10 Co. has managed to control its cost which can be
seen by increase in the gross margin (167 bps).
 Net Profit Ratio

Net profit ratio = Net Profit *100

Net Sales
 Net Profit Ratio
NP Ratio ( in %)
Company   NTPC   20.2 20.01
20
19.8
Np Ratio ( in 19.56
F.Y. Net Profit Net Sales 19.6
%) 19.4
19.2
2007-08 7414.8 37050.1 20.01 19 18.84
18.8
2008-09 8201.3 41923.8 19.56 18.6
18.4
2009-10 8728.1 46322.6 18.84 18.2
2007-08 2008-09 2009-10

NP Ratio ( in %)

•NTPC is able to increase its net profit from 2007-08 to 2009-10 but is
not increased proportionately as compared to increase in Net sales
from 2007-08 to 2009-10 and thus Net profit ratio has a decreasing
trend
•Not able to control their expenses.
 Operating Ratio

Operating ratio = Cost of good sold+ Operating expenses

*100
Net Sales
 Operating Ratio
Operating Ratio ( in %)
Company   NTPC   76
74.88
Operating 75
Operating 74
F.Y. Net Sales Ratio ( in 73.36
Cost 73
%) 72
71
2007-08 25550.1 37050.1 68.96 70
68.96
2008-09 31391.6 41923.8 74.88
69
68
2009-10 33980.1 46322.6 73.36 67
66
2007-08 2008-09 2009-10

Operating Ratio ( in %)

•Increase in 08-09 (592 bps) and slight decrease in 09-10 (152

bps).

•NTPC is not able control their operational cost and thus their
operational ratio is increasing from 07-08 to 09-10.
 Return On Shareholder’s Investment Ratio

Return on
shareholder’s = Net profit after tax - Preference dividend *100

investment Share holder's fund

 Return On Shareholder’s Investment Ratio
Ratio ( in %)
14.1
Company   NTPC  
14 13.98
Shareholder's 13.9
F.Y. NPAT Ratio ( in %) 13.9
Fund
13.8
2007-08 7414.8 54267.4 13.66
13.7 13.66
2008-09 8201.3 58994.9 13.9
13.6
2009-10 8728.1 62437.5 13.98 13.5
2007-08 2008-09 2009-10

Ratio ( in %)

•NPTC’s return on shareholder’s investment is more or less

same for last 3 years.
•Overall efficiency is increasing.
 Return on Equity Capital (ROEC) Ratio

Net profit after tax - Preference dividend *100

Return on Equity Capital = Equity share capital
 Return on Equity Capital (ROEC) Ratio
ROEC Ratio (in %)
Company   NTPC   110
105.85
Equity
ROEC Ratio 105
F.Y. NPAT Share
(in %) 99.46
Capital 100

2007-08 7414.8 8245.5 89.93 95

89.93
2008-09 8201.3 8245.5 99.46
90

85
2009-10 8728.1 8245.5 105.85
80
2007-08 2008-09 2009-10

ROEC Ratio (in %)

•ROEC ratio has increasing trend in 08-09 (953 bps) and in 09-10
(639bps).
•Investors are getting good returns suggest increase in the
profitability.
 Earnings per Share (EPS) Ratio

Earnings per Share= Net profit after tax - Preference dividend *100
No. of Equity share
 Earnings per Share (EPS) Ratio
EPS Ratio (in %)
Company   NTPC   110
105.85
105
No. of Equity EPS Ratio
F.Y. NPAT 100
99.46
Shares (in %)
95
2007-08 7414.8 8245.5 89.93 90
89.93

2008-09 8201.3 8245.5 99.46

85

80
2009-10 8728.1 8245.5 105.85 2007-08 2008-09 2009-10

EPS Ratio (in %)

•Increasing trend in 08-09 (953 bps) in 09-10 (639)

•Suggests increase in the profitability
 Price Earnings Ratio (PE Ratio)

Market price per equity share *100

Price Earnings Ratio = Earning per share
 Price Earnings Ratio (PE Ratio)
PE Ratio (in %)
Company   NTPC   25 23.69
20.13 19.21
Market Price PE Ratio 20
F.Y. EPS
Share (in %) 15

2007-08 181 8.99 20.13 10

2008-09 235.7 9.95 23.69

5

0
2009-10 203.47 10.59 19.21 2007-08 2008-09 2009-10

PE Ratio (in %)

• NTPC shares has potential increase in the market price

 DUO POINT ANALYIS
Rate of
Return of
Investment

Net Profit as
Investment
Percentage of
turnover
Sales

Net Sales
Profit Sales Total assets
0.09
0.09
0.09
0.08
0.08
0.08
2007-08 2008-09 2009-10
Liquidity ratios
 Current Ratio

Current Assets
Current Ratio = Current Liability
 Current Ratio
Current Ratio
Company   NTPC   3.3
3.22
3.2
Current Current
F.Y. Current Ratio 3.1
Assets Liabilities
3
2.89
2.9 2.86
2007-08
25548.8 7929.9 3.22 2.8

2008-09 2.7
30925.3 10688.6 2.89
2.6
2009-10 2007-08 2008-09 2009-10
30815.7 10758.1 2.86
Current Ratio (In %)

•The NTPC has achieved the current ratio of 3.22, 2.89 & 2.86
during the years 07-08, 08-09, 09-10 respectively.
•NTPC may have adapted aggressive working capital policy. The
NTPC has high liquidity because of high value of current ratio and
also can easily fulfill the short term liability.
 Quick Ratio

Quick Assets
Liquidity Ratio = Current Liability
 Quick Ratio
Quick Ratio
Company NTPC
2.7
2.59
F.Y. Quick Ratio 2.6
2.5
2.5
2.4
2007-08 2.16 2.3
2.2 2.16
2008-09 2.59 2.1
2
2009-10 2.5 1.9
2007-08 2008-09 2009-10

Quick Ratio

•NTPC’s quick ratio lies between 2 times to 3 times from 07-08 to

09-10 which means very high short term liquidity position.
•The company can easily pay its liabilities
Leverage Ratios
 Debt -to- Equity Ratio

Debt
Debt to Equity Ratio = Equity
 Debt -to- Equity Ratio
D/E Ratio
Company   NTPC   0.7
0.61
0.59
0.6
0.5
F.Y. Debt Equity D/E Ratio 0.5
0.4
2007-08
27190.6 54267.4 0.5 0.3
0.2
2008-09
34567.8 58994.9 0.59 0.1
0
2009-10 2007-08 2008-09 2009-10
37797 62437.5 0.61
D/E Ratio

•NTPC’s debt- equity ratio there is more or less no changes in

the from 2007-08 to 2009-10
•More of owner’s funds are invested and the less funds ae
borrowed.
Activity Ratios
 Inventory Turnover Ratio

Cost Of Good Sold

Inventory Turnover ratio = _____________________
Average inventory at cost
 Inventory Turnover Ratio
Inventory Turnover Ratio
Company NTPC 40
35 33.59
Inventory Turnover 28.21
F.Y. 30
Ratio 25
20
13.99
2007-08 33.59 15
10
2008-09 28.21 5
0
2007-08 2008-09 2009-10
2009-10 13.99
Inventory Turnover Ratio

•NTPC’s Inventory turnover ratio was very high in 2008 i.e. 33.59
and it has decreased to 13.99 in 2010.
•Indicates inefficient management of inventory or investment in
inventory is lowered.
 Debtors Turnover Ratio

Net Credit Sales

Debtors turnover Ratio = __________________
Average Trade Debtor
 Debtors Turnover Ratio
Debtors Turnover Ratio
Company NTPC
20
18 17.52
Debtors Turnover 16
F.Y.
Ratio 14 12.78
12
10 9.06
8
2007-08 17.52 6
4
2008-09 12.78 2
0
2007-08 2008-09 2009-10
2009-10 9.06
Debtors Turnover Ratio

• NTPS’s debtors turnover ratio is more decrease from 17.52%

in 2007-08 to 9.06% in 2009-10
• It shows that NTPC’s efficiency to convert its debtors into
liquid is decreasing.
 Working Capital Turnover Ratio

Cost Of Sales
Working Capital turnover Ratio = _________________
Net Working Capital
 Working Capital Turnover Ratio
Ratio
Company   NTPC   2.35 2.31
2.3
Net Wokring 2.25
F.Y. Cost of Sales Ratio 2.2
Capital
2.15 2.1
2.1 2.07
2007-08 37050.1 17618.9 2.1 2.05
2
2008-09 1.95
41923.8 20236.7 2.07 1.9
2007-08 2008-09 2009-10
2009-10 46322.6 20057.6 2.31
Ratio

•Working capital turnover ratio of NTPC is more or less same for last
3 years between the range of 2.10 times to 2.31 from 2007-08 to
2009-10.

•Indicates the efficient utilization of working capital

 Fixed Assets Turnover Ratio

Cost Of Sales
Fixed Assets turnover Ratio = ______________
Net Fixed Assets
 Fixed Assets Turnover Ratio
Ratio
Company NTPC 0.71 0.7
0.7
F.Y. Ratio 0.7 0.69
0.69

2007-08 0.7
0.69
0.68
0.68 0.67
2008-09 0.67 0.67
0.67
0.66

2009-10 0.69 0.66

2007-08 2008-09 2009-10

Ratio

•NTPC’s ratio is more or less between 0.67 to 0.70 from 2008 to

2010.
•Indicates Efficiency and the profit earning capacity is high.
 Key Findings
• NTPC is a key organization in India as far as the supply of power is
concerned.
• The financial health of NTPC is sound enough and it appears
positive in accordance with its balance sheet and profit & loss A/c.
• Gross profit ratios and Net Profit ratios are decreasing from 2007
to 2010 due to more increase in operational cost as compared to
Net Sales
• Ntpc’s current ratio is very good which shows highly liquidity
available
• NTPC’s ability to convert the debtors in liquid has highly come
down compare to last two years.
 Suggestions
• firm should efficiently manage its operational activity so that
operational cost is controlled or maintained with increase in Net
Sales and thus will lead to increase in gross profit ratio and net
profit ratio.
• NTPC’s more funds are blocked in current asset leading to high
current asset ratio.Instead the funds to more used in operational
activity to increase productivity
• NTPC should tighten the debt collection efforts and should
reduce the amount tied up in debtors.
• NTPC is more traditionally financed with low debt and more of
equity financing, so in future debt should be preferred for
financing to bring the ratio close to the ideal ratio of 1:1.
Thank You