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Ratio Analysis
There are total 5 types of ratios
•Liquidity Ratios
•Leverage Ratios
•Asset Management Ratios
•Profitability Ratios
•Operating Ratios
•Market Based Ratios
Liquidity Ratios
• Liquidity ratios provide information about a firm’s ability to meet its short-term financial obligations.
• They are of particular interest to those extending short-term credit to the firm.
Liquidity Ratios
Current Ratio =
Tata Motors = = 0.45
Maruti = = 1.48
Total current liabilities
Total current assets
7,133.06
15,740.69
6,443.10
4,331.00
Liquidity Ratios
Quick Ratio =
Tata motors= =
Maruti = =
Current liabilities – Bank overdraft
Current assets - Inventory – prepaid expenses
14,775.61 - 3,891.39 - 0
18,963.40– 0
6,443.10 - 1,415.00 – nil
4,331.00– nil
0.57
1.16
Leverage Ratios
• Leverage ratios provide an indication of the long-term solvency of the firm.
• Leverage ratios measure the extent to which the firm is using long term debt.
Leverage Ratios
Debt- Equity Ratio =
Tata Motors =
Maruti =
Shareholders Fund
Long Term Debt (sec.& unsec. Loan)
15,898.75
19,986.05
309.3
13,867.50
0.79
0.022
Leverage Ratios
Capital Gearing Ratio =
Tata Motors =
Maruti =
Equity shareholders Funds
Fixed interest Bearing Funds
15898.7520013.30
309.3
013867.50
0.79
0.02
Leverage Ratios
Interest Coverage Ratio =
Tata Motors = = 3.64
Maruti =
Interest
PBDIT
4,258.20
24.4 =173.5
5,047.25
1,383.79
Asset Management Ratios
• Asset Management Ratios are the key to analyzing how effectively & efficiency your small business is managing its assets to produce sales.
• Asset Management Ratios are also called “Turnover Ratios” or “Efficiency Ratios”.
Asset Management Ratios
Inventory Turnover Ratio=
Tata Motors = = 14.25
Maruti = =
Average Inventory
COGS
4,258.20
274.1
31.07
5,047.25
480.425
Asset Management Ratios
Total Asset Turnover Ratio =
Tata Motors = = 1.33
Maruti = =
Total Assets
Sales
36,561.50
14,722.70 2.48
47,957.24
35,912.1
Profitability Ratios
• Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return
• They are of great importance to investors since they measure how effectively A firm's management is generating profits on sales, total assets, and stockholders' investment.
Profitability Ratios
Gross Profit Margin =
Tata Motors =
Maruti =
Sales
Sales - COGS
47,957 – 43606
47,9570.089 %
36561.5- 4258.2
36561.50.088%
* 100
*100
*100
Profitability Ratios
Net Profit Margin =
Tata Motors =
Maruti =
Sales
EBIT
0.0769 %
2419
36561.500.066%
* 100
* 100
* 100
3686
47957
Operating Ratios
• The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc.
• It is expressed as a percentage of sales and shows the efficiency of a company controlling the costs and expenses associated with business operations.
Operating Ratios
Material Cost Ratio =
Tata Motors =
Maruti =
Sales
Material Consumed
35,047.05
47,957.24 0.73 %
28,880.00
36,561.50 0.78%
* 100
* 100
* 100
Operating Ratios
Administrative Expenses Ratio =
Tata Motors =
Maruti =
Sales
Admin expenses
2,790.19
47,957.240.058 %
1,153.87
36,561.500.0315 %
* 100
* 100
* 100
Operating Ratios
Operating Ratio =
Tata Motors =
Maruti =
Sales
COGS + operating expenses
5047 + 36996
47,957.24
= 0.87%
29,768.10 + 4258.20
36,561.50
* 100
* 100
= 0.93 %
* 100
Operating Ratios
Selling and Distribution Ratio =
Tata Motors =
Maruti =
Sales
S & D expenses
2,790.19
47,957.240.05 %
1,153.87
36,561.500.03%
* 100
* 100
* 100
Market Based Ratios
• A market-based ratio is a metric used to gauge a company's viability in terms of such variables as profitability and the market valuation of its stock.
• Different ratios indicate a company's viability, or financial health, where asset values, revenue, income, and ability to pay bills are concerned.
Market Based Ratios
RONetWorth =
Net worth
PAT*
20,013.3
2581 *
12.89
*3220.3
13867.50
0.12
* =
=
100
MarutiTata Motors
100
= = 100
2.32=
100
