9-Data Analysis and Interpretation

7/30/2019 9-Data Analysis and Interpretation

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Data Analysis and Interpretation

For a research, researcher may depend either on primary data or secondary data. Primary data is

usually collected with the help of questionnaires and schedules and secondary data is collected

from published annual reports of the company.

In the present study most of the information is collected from balance sheet and profit and loss

account of the company period of five years starting from 2007-2011. The data received from the

company is shown in the appendices.

Besides some information are collected through discussion with company executives and

collecting information using questionnaire. The questionnaire is also shown in the appendices.

Financial analysis is the process of identifying the financial strengths and weaknesses of the firm

by properly establishing relationship between the items of the balance sheet and the profit and

loss account. There are mainly two techniques used in analyzing financial statement, such asratio analysis and schedule of changes in working capital.

Ratio Analysis

Liquidity Ratios

1. Current Ratio:-Current ratio shows the relationship between current assets and current liabilities.

Current ratio = Current AssetsCurrent Liabilities

Table No: 3.1

Year Current Assets

(Rupees in Millions)

Current Liabilities

(Rupees in Millions)

Current Ratio

(Times)

2007 10346.3 5975.56 1.73

2008 11258 6589.1 1.70

2009 10407.01 5557.55 1.87

2010 12203.12 8689.48 1.40

2011 18208.07 12219.16 1.49

Source: Company Annual Report


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Chart No: 3.1

InterpretationThe chart shows the relationship between current assets to current liabilities. The ideal current

ratio is 2:1. It indicates firms ability to cover current liabilities over current assets. The abovetable and chart exhibits the current ratio of the company. In 2007, the ratio was 1.73 but in 2008,

the ratio decreased to 1.70. By the end of 2009 the ratio increased to 1.87 then again decreased to

1.40 in 2010. In 2011 the ratio increased to 1.49. So the ratio is fluctuating in nature.

2. Liquid RatioLiquid ratio shows the relationship between liquid assets and current liabilities. Liquidassets include those assets which can be easily converted into cash

Liquid Ratio = Liquid Assets

Current Liabilities

Table No: 3.2

Year Liquid Assets

(Rs in Millions)

Current Liabilities

(Rs in Millions)

Liquid Ratio

2007 5826.79 5975.56 0.975

2008 6125.09 6589.1 0.929

2009 6236.54 5557.55 1.122

2010 6675.84 8689.48 0.7682011 6844.73 12219.56 0.560


0

0.5

1

1.5

2

2007 2008 2009 2010 2011

Current Ratio

Current Ratio


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Chart No: 3.2

Interpretation

The ratio shows the liquidity position of the company. The ratio is a more conservative ratio i.e.,it measures the companys ability to meet current contingencies with only those assets that can

be readily liquidated. The standard ratio is 1:1 this means that there is not any liquidity problemin the organization. While checking the above table and chart, we can say that the liquid ratio of

the firm is relatively sound except in 2011 because it is comparatively low.

3. Sales to Current Assets ratio:It shows the productivity of the companys current assets. It is the relation between sales

and current assets.

Sales to Current Asset ratio= Sales

Current Asset

0

0.2

0.4

0.6

0.8

1

1.2

2007 2008 2009 2010 2011

Liquid Ratio

Liquid Ratio


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Table 3.3

Year Sales

(Rs in Millions)

Current Assets

(Rs in Millions)

Ratio

2007 37743.43 10346.3 3.64

2008 42469.83 11258 3.77

2009 45496.32 10407.01 4.37

2010 54256.38 12203.12 4.45

2011 60009.56 18208.07 3.29


Chart 3.3

InterpretationFrom the above table and chart, it is seen that the sales to current assets is showing andincreasing trend from 2007 to 2010. In 2011 it decreased to 3.29 due to issues related to labor.

0

1

2

3

4

5

20072008

20092010

2011

Sales to Current Assets ratio

Sales to Current Assets ratio


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Turnover Ratios

4. Debtors Turnover Ratio:This ratio indicates the number of times that the firms average accounts receivablesbalances passes through sales during the year under consideration. This ratio shows theextend of trade credit granted and their efficiency in this collection of debts.

Debtors Turnover Ratio = SalesDebtors

Table No: 3.4

Year Sales

(Rs in Millions)

Debtors

(Rs in Millions)

Ratio

2007 37743.43 1890.995 19.952008 42469.83 1790.94 23.71

2009 45496.32 1212.085 37.53

2010 54256.38 1124.135 48.26

2011 60009.56 1709.115 35.11


Chart No: 3.4

0

10

20

30

40

50

60

2007 2008 2009 2010 2011

Debtors Turnover Ratio

Debtors Turnover Ratio


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InterpretationDebtors turnover ratio shows the relationship between sales and debtors. It measures how

fast the firm collects debts. From the above analysis it is clear that ratio shows an

increasing trend till 2010 later on it shows a decreasing trend.

5. Debt Collection Period:-The average collection period determines how much the company is efficient in

collecting the debtors. In other words, it is the ratio which indicates the extent to which

have been collected in time.

Debt Collection period = 365

Debtors Turnover ratio

Table 3.5

Year Days Debtors Turnover Ratio Debt Collection Period2007 360 19.95 18

2008 360 23.71 15

2009 360 37.53 10

2010 360 48.26 7

2011 360 35.11 10


Chart 3.5

0

20

40

60

20072008

20092010

2011

Debt Collection Period

Debt Collection Period


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InterpretationA shorter collection period indicates prompt receipt and vice versa and the trend is

satisfactory. The period is higher in the initial time but eventually it started decreasing.

Again it increased in last year i.e. 10 days.

6. Creditors Turnover Ratio:-Creditors turnover ratio indicates the number of items the accounts payable rotate in ayear.

Creditors Turnover ratio = Purchase

Creditors

Table No: 3.6

Year Purchase

(Rs in Millions)

Creditors

(Rs in Millions)

Credit Turnover

Ratio

2007 22580.31 3581.235 6.31

2008 23849.6 4447.865 5.36

2009 27946.64 4552.815 6.14

2010 30449.67 5025.815 6.06

2011 40696.2 6922.805 5.88


Chart No: 3.6

4.8

5

5.2

5.4

5.6

5.8

6

6.2

6.4

2007 2008 2009 2010 2011

Creditors Turnover Ratio



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InterpretationThe creditors turnover ratio indicates the promptness in making payment of creditpurchases. The ratio signifies that the creditors are being paid promptly, thus enhancing

the credit worthiness of the company.

7. Debt Payment Period:-The average payment period determines how much the company is efficient in paying the

creditors. In other words, it is the ratio which indicates the extent to which have been paidin time.

Debt Payment Period = 360


Table No: 3.7


Chart No: 3.7

52

54

56

58

60

62

64

66

68

2007 2008 2009 2010 2011

Debt Payment Period

Debt Payment Period

Year Days Creditors Turnover Ratio Debt payment Period

2007 360 6.31 57

2008 360 5.36 67

2009 360 6.14 58

2010 360 6.06 59

2011 360 5.88 61


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Interpretation

The above table and chart reveals that the inventory turnover ratio is higher in 2009 and

the lowest in the year 2011. This is indicating the speed with which the inventory is sold

by the firm. From 2009 onwards the ratio is decreasing due to labor issues which lead to

less production.

9. Stock Conversion Period:-Inventory conversion period or the stock velocity shows the duration taken by the

company to convert its stock to sales or debtors.

Inventory Conversion Period = 360

Stock Turnover Ratio

Table No: 3.9

Year Days Stock Turnover Ratio Stock Conversion Period

2007 360 4.934450569 73

2008 360 4.042003464 89

2009 360 6.931851806 52

2010 360 5.26350393 68

2011 360 3.067772328 117


Chart No: 3.9

0

20

40

60

80

100

120

2007 2008 2009 2010 2011

Stock Conversion Period

Stock Conversion Period


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Interpretation:

From the above table and chart, it is clear that the firm takes lesser time to convert its

inventory to sales or debtors. The period of holding the inventory should be reduced in

order to convert stock to sales quickly. In 2009, it was 52 days and in the coming years

also the fluctuation is high. And in 2011 it was increased to 117 days from 68 days in

2010.

10.Fixed Assets Turnover Ratio:This ratio measures a companys ability to generate sales from fixed assets. A higher

fixed asset turnover ratio shows that the company has been more effective in using the

investment in fixed asset to generate revenue.

Fixed Assets Turnover Ratio = Net Sales

Fixed Assets

Table No: 3.10

Year Sales

(Rs in Millions)

Fixed Assets

(Rs in Millions)

Fixed Assets Turnover

Ratio

2007 37743.43 14925.12 2.53

2008 42469.83 15697.79 2.71

2009 45496.32 18379.96 2.48

2010 54256.38 24141.7 2.25

2011 60009.56 32991.27 1.82Source: Company Annual Report

Chart No: 3.10

0

0.5

1

1.5

2

2.5

3

2007 2008 2009 2010 2011

Fixed Assets Turnover Ratio

Fixed Assets Turnover Ratio


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Interpretation:

The above chart and table exhibits the fixed assets turnover ratio of the company. It is

showing a permanent trend with slight variations. From 2007 to 2010, the fluctuation is

very less. But in 2010 the fluctuation is comparatively high.

11.Working Capital Turnover Ratio:Working capital turnover ratio shows the amount of cash required to maintain a certain

level of sales, i.e. how many times the working capital is resolved to generate sales.

Working capital Turnover Ratio = Net Sales

Working capital

Table No: 3.11

Year Sales

(Rs in

Millions)

Net Working Capital Working capital

Turnover Ratio

2007 37743.43 5836.2 6.47

2008 42469.83 6280.61 6.76

2009 45496.32 6071.53 7.49

2010 54256.38 7121.88 7.62


Chart No: 3.11

0

1

2

3

4

5

6

7

8

2007 2008 2009 2010 2011

Working Capital Turnover Ratio

Working Capital Turnover

Ratio


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Interpretation:

From the above tables and chart, it can be observed that the working capital turnover ratio

of the company is showing an increasing trend till 2010 from 2007 onwards. In 2011, it

was decreased to 5.74. But the volume of working capital is showing an increasing trend

by avoiding the decline in 2009 and the ratio is high in 2009 due to consistent growth of

sale.

12.Cash Turnover Ratio:This ratio indicates a firms efficiency in its use of cash for the generation of sales

revenue.

Cash Turnover Ratio = Sales

Cash

Table No: 3.12

Year Sales

(Rs in Millions)

Cash

(Rs in Millions)

Cash Turnover Ratio

2007 37743.43 1720.02 21.94

2008 42469.83 2658.53 15.97

2009 45496.32 3405.98 13.36

2010 54526.38 2588.28 20.96


Chart No: 3.12

0

10

20

30

40

50

2007 20082009

20102011

Cash Turnover Ratio

Cash Turnover Ratio


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Interpretation:

From the above chart and table we can understand that the cash turnover ratio shows a

decreasing trend till 2009 after that it is an increasing trend which means effective use of

cash for generating sales revenue.

13.Cash Holding Period:-It is the period during which cash is kept idle in the organization. It is calculated by

dividing number of days with the cash turnover ratio.

Cash holding Period = 360

Cash Turnover Ratio

Table No: 3.13

Year Days Cash Turnover Ratio Cash Holding Period2007 360 21.94 16

2008 360 15.97 23

2009 360 13.36 27

2010 360 20.96 17

2011 360 42.48 8


Chart No: 3.13

Interpretation:

Cash holding period is showing a declining trend from 2009 onwards so the cash volume

in the hand is less in those years.

0

5

10

15

20

25

30

2007 2008 2009 2010 2011

Cash Holding Period

Cash Holding Period


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WORKING CAPITAL ANALYSIS

Statement showing the schedule of Changes in Working capital for the year

2007 & 2008

Table No: 3.14

Particulars 2007

(Rs in Millions)

2008

(Rs in Millions)

Increase Decrease

CURRENT ASSETS

Inventories 4519.49 5132.91 613.42 Nil

Sundry Debtors 2030.55 1551.33 Nil 479.22

Cash and Bank 1720.02 2658.53 938.51 Nil

Other Current Assets 139.14 128.39 Nil 10.75

Loans and Advances 1937.10 1786.84 Nil 150.26

(A) 10346.30 11258CURRENT LIABILITIES

Liabilities 5422.01 5658.25 Nil 236.24

Provisions 553.75 930.85 Nil 377.10

(B) 5975.76 6589.10

WC (A-B) 4370.54 4668.90

Increasing in WC 298.36 298.36

TOTAL 4668.90 4668.90 1551.95 1551.95


Interpretation:

While analyzing the above statement, the current assets are more than current liability.

Inventories, cash and bank shows an increase. But in the same case other current assets

including debtors, loans and advance shows a decrease. Increase in cash and bank shows

the company has enough cash for day to day management.


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Statement showing the Schedule of changes in Working Capital for the year

2008 and 2009

Table No: 3.15

Particulars 2008

(Rs in Millions)

2009

(Rs in Millions)

Increase Decrease

CURRENT ASSETS

Inventories 5132.91 4170.47 Nil 962.44

Sundry Debtors 1551.33 872.84 Nil 678.49

Cash and Bank 2658.53 3405.98 747.45 Nil

Other Current Assets 128.39 5.03 Nil 123.36

Loans and Advances 1786.84 1952.69 165.85 Nil(A) 11258 10407.01CURRENT LIABILITIES

Liabilities 5658.25 4601.22 1057.03 Nil

Provisions 930.85 956.28 Nil 25.43

(B) 6589.10 5557.50

WC (A-B) 4668.90 4849.51

Increasing in WC 180.61 180.61

TOTAL 4668.90 1970.33 1970.33


Interpretation:

While evaluating the above statement, it is found that the volume of cash is increasing as

well as the liabilities. Decrease in inventories and debtors shows that the improper

utilization of current assets. As far as the firm is concerned they have cash and bank

balance to do the day to day activities of the business. The provision is also increased to

Rs. 25.43 million.


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2009 and 2010

Table No: 3.16

Particulars 2009

(Rs in Millions)

2010

(Rs in Millions)

Increase Decrease

CURRENT ASSETS

Inventories 4170.47 5527.28 1356.81 Nil

Sundry Debtors 872.84 1375.43 502.59 Nil

Cash and Bank 3405.98 2588.28 Nil 817.7

Other Current Assets 5.03 44.18 39.15 NilLoans and Advances 1952.69 2667.95 715.26 Nil

(A) 10407.01 12203.12CURRENT LIABILITIES

Liabilities 4601.22 6904.60 Nil 2305.38

Provisions 956.28 1748.88 Nil 792.6

(B) 5557.50 8689.48

WC (A-B) 4849.51 3513.64

Decrease in WC 1335.87 1335.87

TOTAL 4849.51 4849.51 3949.68 3949.68


Interpretation:

While analyzing the above statement, almost all the current assets are increasing except

cash and bank balance due to increase in current liabilities. From this we can understand

that the liability s high in 2010


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2010 and 2011.

Table No: 3.17

Particulars 2010

(Rs in Millions)

2011

(Rs in Millions)

Increase Decrease

CURRENT ASSETS

Inventories 5527.28 11363.34 5836.06 Nil

Sundry Debtors 1375.43 2042.82 667.37 Nil

Cash and Bank 2588.28 1412.63 Nil 1175.65Other Current Assets 44.18 Nil 44.18

Loans and Advances 2667.95 3389.30 721.35 Nil

(A) 12203.12 18208.07CURRENT LIABILITIES

Liabilities 6904.60 10290.48 Nil 3385.88

Provisions 1748.88 1929.08 Nil 144.2

(B) 8689.48 12219.56

WC (A-B) 3513.64 5988.51

Increasing in WC 2472.87

TOTAL 5988.51 5988.51 7224.78 7224.78


Interpretation:

While considering the above statement, current assets are more than current liabilities. In

2010, Inventories and sundry debtors have increased. That mean the company has

properly utilized its current assets. But the cash and bank balances have decreased; this

means that the company has not properly used the cash for day to day management. Both

liabilities and provisions are increased.

Documents

9-Data Analysis and Interpretation