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FINANCIAL STATEMENT ANALYSIS OF “INDIAN TOBACCO PVT LTD.” PREPARED BY: Milan Padariya
CENTRE FOR MANAGEMENT STUDIES
GANPAT UNIVERSITY |
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INTRODUCTION OF COMPANY ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited.
In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full stops in the Company's name were removed effective September 18, 2001.
The Company now stands rechristened 'ITC Limited'.
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India Tobacco Company Limited in was established on 1910
Plant location
The Company's headquarter building, 'Virginia House'
Kolkatta
Registered office:
M/S India Tobacco Company Limited
Kolkatta
Subsidiary companies:
Packaging and printing business
Itc-welcomed group of hotel
Papercraft business
Classmate,papercraft
Itc setup Agree business devision
Itc infotech ltd.
Sunfeast
Wills classic
Mint-o
Candymen
Bingo! Etc..
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Chairman
Y C Deveshwar
executive directors
Nakul Anand
P V Dhobale
K N Grant
non-executive directors
A Baijal
S Banerjee
AV Girija Kumar
D K Mehrotra
S B Mathur
S H Khan
H G Powell
Basudeb Sen
P B Ramanujam
K Vaidyanath
Anthony Ruys
B Vijayaraghavan
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VERTICAL ANALYSIS |
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INTRODUCTION Vertical analysis is the proportional expression of each item on a financial statement to the statement total.
The results of vertical analysis are presented in the form of common-size-statements in which all the elements within each statement are expressed in percentage of some common number and always add up to 100 percent |
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VERTICAL ANALYSIS OF BALANCE SHEET FROM 2007 TO 2011 SOURCE OF FUNDS |
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INTERPRETATION In 2007 If we consider total Source of Fund as 100%, from this 90.54% was by Reserve and Surplus. This contribution of the reserve and surplus remain almost same for the rest of year. And the less contribution by secured loan in all year which contributed less than 0.1%.
We can say that the contribution in source of fund was mainly by Shareholder’s fund. Contribution of deferred tax was b/w 4 to 6% for all years.
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Application of Funds |
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INTERPRETATION if we consider application of fund as 100%, contribution of fixed assets, investment and net current assets was 50.50%, 27.62% and 21.88% in 2007. It was 56.92%, 22.89% and 20.19% in 2008. And for rest of the year it was b/w 57 to 62%, 19 to 33% and 09 to 24% respectively except 2010. In 2010 contribution of net current assets was only 0.52% and for that year investment contribution increased up to 39%.
So for 2011 business year company must be increased its net current assets. It was increased up to 10%.
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vertical ANALYSIS OF PROFIT AND LOSS ACCOUNT from 2007-2011
1.NET INCOME
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INTERPRETATION If we consider net Income as 100%, contribution of net sales is more than 95% for all 5 years. And about less than 5% contribution of other income. For any company net sale is much important than other income. If expense remain same for every year and net income will increase your net profit will increase.
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INTERPRETATION The contribution of total expenditure was b/w 66 to 70% which was almost remain same the all 5 years, from this we can say that the expenses made by the company was stable for every year and this is good sign for the company .
For analysis we took the data of 2007, in 2007 the contribution of the raw material, manufacturing expenses and depreciation was 41.56%, 24.13% and 2.90%. from this we can say that the depreciation on the machinery is less compare to others.
The good thing for this company is the all expenses remain nearly same for the all 5 year. |
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INTERPRETATION Net profit comes from deducting expenses from the net income. From all income net profit is by 21.6% for 2007. Net profit for all the year remains almost same for the company. So we can say that the stability of the company is very good.
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HORIZONTAL ANALYSIS |
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Financial statements present comparative information for the current year and the previous year. A simple approach to financial statement analysis, known as Horizontal analysis, is to calculate amount changes and percentage changes from the previous year to the current year.
While an amount change in itself may mean something, converting amount changes to percentages is more useful in appreciating the order of magnitude of the change. INTRODUCTION |
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ANALYSIS OF BALANCE SHEET OF YEAR 2007-2008
1.SOURCE OF FUNDS
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INTERPRETATION From the above analysis of balance sheet we came to know that source of fund increased to 15.35% compare to the last year (2007).
Let’s first talk about the shareholder’s fund.
SHAREHOLDER’S FUND
Shareholder’s fund increased to 15.52% in 2008 due to increase of Capital (0.17%) and Reserve and Surplus (16.10%). From the data we can easily understand that increase in Shareholder’s Fund is mainly due to increase in Reserve and Surplus.
LOAN FUNDS
Here, Loan Fund increased to only 06.74% because secured loan decreased to 90.83% and unsecured loan increased only to 49.08%. Decreased in to secured loan is mainly responsible for the less increase in to Loan Fund.
Deferred Tax-Net
As compared to 2007, in 2008 deferred tax net increased to 15.27%
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2.APPLICATION OF FUNDS |
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INTERPRETATION Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.
Here, application of fund increased to 15.35%. And net current assets increased to 06.36%.
FIXED ASSETS
Increased to 30% due to increase in capital and gross block. Another thing is depreciation it is increased to 16.80%. Net block and capital increased in almost same proportion.
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CONTINUOUS Current Assets, Loans and Advances
Inventory increased to 20.76%, Sundry debtors increased to 15.74% and Loan advances increased to 24.65% while cash and other current assets decreased to 36.65% and 20.19% respectively. From this data we can say that most affected change was in cash. So, at the end total these were increased to 11.60%.
CURRENT LIABILITIES
Current liabilities increased to 14.9% this is due to increase in liability and provision increased to 16.86% and 11.71% respectively.
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1.SOURCE OF FUNDS ANALYSIS OF BALANCE SHEET OF YEAR 2008-2009 |
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INTERPRETATION From the above analysis of balance sheet we came to know that source of fund increased to 15.31% compare to the last year (2008). This was 15.35% increase in 2008 as compare to 2007.
Let’s first talk about the shareholder’s fund.
SHAREHOLDER’S FUND
Shareholder’s fund increased to 14.31% in 2009 due to increase of Capital (0.15%) and Reserve and Surplus (13.91%). From the data we can easily understand that increase in Shareholder’s Fund is mainly due to increase in Reserve and Surplus.
LOAN FUNDS
Here, Loan Fund increased to only 17.20% because unsecured loan decreased to 20.55% and secured loan increased only to 108.79%. Decreased in to unsecured loan is mainly responsible for the less increase in to Loan Fund because amount increase in to secured loan is very small as compare to unsecured loan.
Deferred Tax-Net
As compared to 2008, in 2009 deferred tax net increased to 59.10%
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2.APPLICATION OF FUNDS |
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INTERPRETATION Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.
Here, application of fund increased to 15.31%. And net current assets increased to 33.60%.
FIXED ASSETS
Increased to 16.31% due to increase in capital and gross block. Another thing is depreciation it is increased to 17.76%. Net block increased to 17.88% and capital increased to 07.74%.
INVESTMENT
In 2008 investment decreased to 3.30%. Value of investment decreased to Rs. 96.8 cr.
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Continuous Current Assets, Loans and Advances
Inventory increased to 13.55%, Sundry debtors decreased to 09.26% and Loan advances increased to 08.54% while cash and other current assets increased to 81.04% and 47.42% respectively. From this data we can say that most affected change was in cash. So, at the end
total these were increased to 16.26%. here, increased in total is mainly due to increase in cash.
CURRENT LIABILITIES
Current liabilities increased to 06.15% this is due to increase in liability and provision increased to 06.37% and 05.78% respectively.
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1.SOURCE OF FUNDS ANALYSIS OF BALANCE SHEET OF YEAR 2009-2010 |
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INTERPRETATION From the above analysis of balance sheet we came to know that source of fund increased to 15.31% compare to the last year (2008). This was 15.35% increase in 2008 as compare to 2007.
Let’s first talk about the shareholder’s fund.
SHAREHOLDER’S FUND
Shareholder’s fund increased to 14.31% in 2009 due to increase of Capital (0.15%) and Reserve and Surplus (13.91%). From the data we can easily understand that increase in Shareholder’s Fund is mainly due to increase in Reserve and Surplus.
LOAN FUNDS
Here, Loan Fund increased to only 17.20% because unsecured loan decreased to 20.55% and secured loan increased only to 108.79%. Decreased in to unsecured loan is mainly responsible for the less increase in to Loan Fund because amount increase in to secured loan is very small as compare to unsecured loan.
Deferred Tax-Net
As compared to 2008, in 2009 deferred tax net increased to 59.10%
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2.APPLICATION OF FUNDS |
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INTERPRETATION Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.
Here, application of fund increased to 15.31%. And net current assets increased to 33.60%.
FIXED ASSETS
Increased to 16.31% due to increase in capital and gross block. Another thing is depreciation it is increased to 17.76%. Net block increased to 17.88% and capital increased to 07.74%.
INVESTMENT
In 2008 investment decreased to 3.30%. Value of investment decreased to Rs. 96.8 cr.
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Continuous Current Assets, Loans and Advances
Inventory increased to 13.55%, Sundry debtors decreased to 09.26% and Loan advances increased to 08.54% while cash and other current assets increased to 81.04% and 47.42% respectively. From this data we can say that most affected change was in cash. So, at the end total these were increased to 16.26%. here, increased in total is mainly due to increase in cash.
CURRENT LIABILITIES
Current liabilities increased to 06.15% this is due to increase in liability and provision increased to 06.37% and 05.78% respectively.
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1.SOURCE OF FUNDS ANALYSIS OF BALANCE SHEET OF YEAR 2010-2011 |
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INTERPRETATION From the above analysis of balance sheet we came to know that source of fund increased to 12.48% compare to the last year (2011). This was 1.20% increase in 2010 as compare to 2009.
Let’s first talk about the shareholder’s fund.
SHAREHOLDER’S FUND
Shareholder’s fund increased to 13.43% in 2011 due to increase of Capital (102.66%) and Reserve and Surplus (10.94%). From the data we can easily understand that increase in Shareholder’s Fund is mainly due to increase in capital.
LOAN FUNDS
Here, Loan Fund decreased to only 7.90% because unsecured loan decreased to 9.70% and secured loan was increase by Rs.1.20 Cr.
Deferred Tax-Net
As compared to 2010, in 2011 deferred tax net decreased to 2.14% this was good for company.
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2.APPLICATION OF FUNDS |
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INTERPRETATION Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.
Here, application of fund increased to 12.48%. And net current assets decreased by Rs.1542.35 Cr. this was good for company
FIXED ASSETS
Increased to 6.66% due to increase in gross block. Another thing is depreciation it is increased to 15.56%. Net block increased to 20.49% and capital in progress increased to 32.15%.
INVESTMENT
In 2011 investment decreased to 30.07%. Value of investment increased to Rs.172.21 cr.
This was not good for the company. So, may be production will be in control.
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Continuous Current Assets, Loans and Advances
Inventory increased to 15.79%, Sundry debtors increased to 5.77% and Loan advances increased to 8.57% while cash and other current assets increased to 99.17% and 20.47% respectively. This means company is in way of progress
CURRENT LIABILITIES
Current liabilities increased to 6.38% this is due to increase in liability and decreased provision increased to 20.40% and 9.78% respectively. Net Current Assets increased to Rs.1542.35 Cr. mainly due to decrease in provision.
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ANALYSIS OF PROFIT AND LOSS ACCOUNT 2007-08 GROSS INCOME
Gross profit of the company increased by 11.66% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this. |
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NET INCOME
Net income is increased by 16.46% due to increase in net sales and other income. Here, other income is increased by 81.55% but in small amount while Net sales are increased by 14.66% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales. |
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EXPENDITURE Expenditure is increased by 16.47% as compared to previous year. This was happened due to increase in Raw material expense, Manufacturing and selling expense and depreciation by 15.82%, 17.07% and 20.81% respectively. |
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PROFIT Profit after taxation is increased by 15.56%. at present year company is increased provision for taxation by 18.33% from profit before tax. At present year profit before taxation is also increased by 16.42%. we can say easily from this data that company is running in path of success. |
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APPROPRIATIONS After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say that company increased the general reserve by 20% and proposed dividend is also increased by 13.1% so, obviously income tax on dividend is increased by 13.1%. These all reserve will help the company in
future. |
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ANALYSIS OF PROFIT AND LOSS ACCOUNT 2008-09 GROSS INCOME Gross profit of the company increased by 7.8% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this. |
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NET INCOME Net income is increased by 9.37% due to increase in net sales and other income. Here, other income is decreased by 12.43% but in small amount while Net sales are increased by 10.1% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales. |
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EXPENDITURE Expenditure is increased by 11.12% as compared to previous year. This was happened due to increase in Raw material expense, Manufacturing and selling expense and depreciation by 9.37%, 7.14% and 25.30% respectively. |
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PROFIT Profit after taxation is increased by 4.56%. at present year company is increased provision for taxation by 7.61% from profit before tax. At present year profit before taxation is also increased by 5.55%. we can say easily from this data that company is running in path of success. |
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APPROPRIATIONS After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say company was not interested in change general reserve and proposed dividend is also increased by 5.87% so, obviously income tax on dividend is increased by 5.87%. these all reserve will help the company in future. |
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ANALYSIS OF PROFIT AND LOSS ACCOUNT 2009-10 GROSS INCOME Gross profit of the company increased by 13.44% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this.
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NET INCOME Net income is increased by 16.16% due to increase in net sales and other income. Here, other income is increased by 12.80% but in small amount while Net sales are increased by 16.27% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales. |
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EXPENDITURE Expenditure is increased by 12.54% as compared to previous year. This was happened due to increase in Raw material expense, Manufacturing and selling expense and depreciation by 17.01%, 7.21% and 10.79% respectively. |
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PROFIT Profit after taxation is increased by 24.43%. at present year company is increased provision for taxation by 18.33% from profit before tax. At present year profit before taxation is also increased by 16.42%. we can say easily from this data that company is running in path of success. And as compare to the last year company was earn more. |
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APPROPRIATIONS After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say that company decreased the general reserve by 72.92% and proposed dividend is also increased by 23.03% so, income tax on dividend is increased by 16.71%. these all reserve will help the company in future. |
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ANALYSIS OF PROFIT AND LOSS ACCOUNT 2010-11 GROSS INCOME Gross profit of the company increased by 16.92% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this.
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NET PROFIT Net income is increased by 17.14% due to increase in net sales and other income. Here, other income is increased by 33.20% but in small amount while Net sales are increased by 16.60% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales. |
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EXPENDITURE Expenditure is increased by 15.91% as compared to previous year. This was happened due to increase in Raw material expense, Manufacturing and selling expense and depreciation by 15.47%, 15.55% and 7.76% respectively. |
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PROFIT Profit after taxation is increased by 22.81%. at present year company is increased provision for taxation by 16.09% from profit before tax. At present year profit before taxation is also increased by 20.82%. we can say easily from this data that company is running in path of success. |
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APPROPRIATION After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say that company increased the general reserve by 22.81% and proposed dividend is also increased by 126.10%. |
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RATIO ANALYSIS |
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A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise's financial statementS.
Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors.
Financial ratios allow for comparisons
between companies
between industries
between different time periods for one company
between a single company and its industry average
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TYPES OF RATIOS Return on investment ratios
Return on net worth (RONW)
Earning per share (EPS)
Cash earning per share (CEPS).
Solvency ratios
Net asset value-NAV
Debt equity ratio-D/E
Interest cover
Debt service covering ratio
Liquidity ratios
Current ratio
Quick ratio
Collection period allowed to customers
Suppliers credit
Inventory holding period
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Resource efficiency or turn over ratios
Fix asset turn over ratio
Net worth turn over ratio
Profitability ratios
Multi step Profit margin to sales ratio
Valuation or capital market ratios
P/E ratio
Market price to NAV ratio
Market capitalisation |
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RETURN ON INVESTMENT RATIO Return on net worth (RONW)
It measures the net profit earned on the equity share holders funds.
Return on net worth = (PAT – Preference dividend)*100/net worth
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Interpretation : There has been a gradual improvement in the RONW ratio from 2007,though it went down a bit in 2009 but it has managed to shoot up in 2011 as seen in the graph above.These are good signs for the company as a high ratio means high dividend,better growth prospects,high valuation in capital market etc.Variety of factors like growth in sales or efficient tax planning may have played a vital role. |
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EARNING PER SHARE (EPS) This ratio measures the overall profitability in terms of per equity share capital contributed by the owners.
EPS = PAT/Weighted average number of equity shares.
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Interpretation
Fall in EPS as compared to 2010.Owing to the good reputation of the company,the equity was good.But somehow the EPS is not high as expected. |
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CASH EARNING PER SHARE (CEPS) This ratio measures the overall cash profitability in terms of per equity shares of capital contributed by the owners
CEPS = PAT + Non-cash charges(Depreciation)/Weighted no of equity shares
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Interpretation
Fall in CEPS ratio as compared to 2010. |
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NET ASSET VALUE Net asset value –NAV value:This ratio measures the net worth or net asset value per equity share.It thus seeks to assess as to what extent the value of equity share of a company contributed at par or at a premium has grown or the value/wealth has been created for the share holders.
NAV = NW (Equity shareholders fund) / No .of equity shares o/s |
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Interpretation : The company witnessed a rise in NAV ratio from 2007 to 2010.Due to which the company was successful in raising more capital from the share holders in the current year.But 2011 saw a decrease in the Net asset value.The reasons for the same may be in efficientness of the company to create a back up of reserves and surplus,may be some flaws in its dividend policy.Speculations at peak. |
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DEBT EQUITY RATIO This ratio measures the proportion of debt and capital-both equity and in preference in the capital structure of the company.It measures the extents of assets financed Debt equity ratio = Long term debt / Total NW |
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Interpretation: The D/E ratio has been very low as compared to the standard ratio of 1.5:1.These are very good signs for the company as company has to pay very less debt from its profit margins and it can further raise its resources because of it.Leveraging capacity also increases due to this. |
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INTEREST COVER RATIO This ratio measures the capacity of a company to pat yhe interest liability it has incurredon its long term borrowings out of its cash profits.It is also known as Times –Interest covered.
Interest cover = EBIT/Interest
EBIT = Earnings before interest and taxation
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Interpretation: Interest cover ratio is extremely high.Though it did decrese in 2010 but it has managed to pull up in 2011.This high ratio indicates that company is well placed to meet its interst obligations from the revenue it is generating. |
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CURRENT RATIO This ratio measures the abitlity of company to discharge its day to day bills,or current liabilities as and when they fall sue,out of the cash or near cash or current assets that it posses.
Current ratio = Current assets,loans and advances + Short term Investment / Current liabilities and provisions + short term debts
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Interpretation: The ratio is comfortably placed at 1.18,though 1.33 is desirable.This ratio calculated is without the numbers of short term investment.The figures of the same may have an impact on the over all ratio and it may further rise.But this ratio can be considered good. |
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QUICK RATIO This ratio measures as to how quick is the ability of a company to discharge its current liabilities net of working capital limits as and when they fall due out of cash or current assets net of inventories they posses.It is also called as Acid test ratio
Quick ratio = Currents assets,Loans and advances – Inventories + Short term investment/Current liabilities+Provisions
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Interpretation : Generally desired and standard ratio is 1:1.But as the graph suggests they have been slightly below 1.This may be due to absence of information regarding short term investments.Needless to say but the ratio have declined from 2009 irrespective of the information of short term investment |
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COLLECTION PERIOD ALLOWED TO CUSTOMERS The ratio measures credit period allowed to the customers on credit sales or how fast a company realizes its outstanding dues.It is also known as days sales in receivables ratio
Collection period allowed to customers(Days) = Receivables * 365/Credit sales
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Interpretation: The scenario is very conducive to the company as it has a very short collection or credit giving period to its customers in comparision to a staggering 176 days period it enjoys from its suppliers. |
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SUPPLIERS CREDIT RATIO This ratio measures the average credit period availed by a company from its suppliers on credit purchases or how much leverage it posses to settle its outstanding payables.Also known as Days purchases in payables ratio.
Suppliers credit ratio (Days) = Payables * 365/Credit purchases
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Interpretation : A marked increase from 2010.Just shows the reputation of the company in attracting new suppliers from the market and the existing suppliers extending the credit period they are allocating to the company.If compared to customer collect period,it scores very high in that too.Very favourable. |
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INVENTORY HOLDING PERIOD This ratio measures the period of inventory build up or the number of days that is cash is blocked in inventory or how fast a company is able t convert its inventory into cash or near cash
Inventory holding period (days) = Inventory * 365 / Cost of goods sold (COGS)
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Interpretation : High ratio.It gives a measure is to how fast a company is able to convert its inventory into cash..Though went up in 2008-09 it managed to come down which indicates good sign for the company
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FIXED ASSET TURN OVER RATIO This ratio measures the extent of turnover or volume of gross income generated by the fixed assets of the company in other words the efficiency in utilization.
FATR = Netsales/Net block or fixed assets
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Interpretation: It is a capital intensive industry.Growth in the efficiency of fixed asset utilization.
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NET WORTH TURNOVER This ratio measures the extent of turn over or volume of gross income generated by the net worth of a company.It is the efficiency in the resource utilization from the angle of residual interest i.e equity share holders
NWTO = Net sales/Net worth
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Interpretation : There is an increase in the net worth turn over the years and due to this it will play a very important role in improving the over all profitability and financial position of the company. |
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GROSS PROFIT MARGIN Gross profit margin (GP %) = Gross profit * 100/ Net sales
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Interpretation : The gross profit margin of the company has rised from 2007 but it is less if in comparison with the rise in net sales.These may be due to various reasons. |
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RATIO OF INDIVIDUAL COST AND EXPENSES TO SALES Raw materials consumed (%) = raw materials consumed * 100/ Net sales
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Interpretation : There is a decline in the ratio as compared to 2007 which suggest that the consumption of raw material has decreased over a period of time. |
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OTHER INCOME TO PBT Other income to PBT (%) = Other income*100/PBT
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Slide 94 :
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Interpretation : The ratio of other income to PBT has rised in the current year.The analysis helps in knowing that what is the quality of income.
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Slide 95 :
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P/E RATIO It measures as to how many times an equity share is priced in the stock market in relation to its EPS.
P/E = market price of equity share/EPS
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Slide 96 :
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Interpretation : Drastic rise in the P/E ratio as compared to previous years.This is mainly due to rise in the closing price of 3/2011 in the BSE |
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Slide 97 :
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MARKET PRICE TO NAV Market price to NAV = market price of equity share/NAV
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Slide 98 :
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Interpretation : This ratio gives company the opportunity to the company to buy back its own shares.There is a huge rise as compared to previous years in 2011.This are good signs for the company. |
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Slide 99 :
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MARKET CAPITALIZATION It measures the total market value of the number of equity shares of a company outstanding.
Market capitalization = No of equity shares O/S * Market price
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Slide 101 :
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CASH FLOW STATEMENT ANALYSIS |
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Slide 102 :
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Cash Flow From Operating Activity Cash outflow of ITC Ltd during 2007-2008 had been contributed by operating activities.
As comparison of 2007-08 cash is inflow in 2009-10.
Here in 2008 depreciation is less as compared to 2009 means company production is less than 2009 because depreciation is more means more machine used. Here in 2009 depreciation is more as compared to 2008 means company produce more goods in 2009 as compared to 2008.
In 2009 highest depreciation means machine is used for the production and highest production is done. |
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Slide 103 :
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CONT… Here interest and finance charges is more as compared to 2008 in 2009 means more cash outflow in 2008 as compared 2009. In 2008 financing charges and interest is more than the 2009 means more cash inflow in 2008.
Profit on sale of current investment is lower in 2008 than 2009. Inventories are raw material and finished good for the company. In 2008 it is more as compared to 2009.
Sundry debtors increase in 2008 compared to all years, its good sign of company in 2008, means company has more credit.
Overall operating activities in 2009 is bad and in 2008, it is favorable cash position so company has to improve its condition for future growth after 2009.
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Slide 104 :
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Cash Flow From Investing Activity This indicates ITC is purchasing more fixed asset in 2008 It is an indication of not expanding business. Fixed assets are income producing assets, which are expected to produce higher future revenues. It try to be stable
In 2009 company sold fixed asset it shows company is in decline position.
Purchase of long term investment is higer in 2009 as compared to 2009 and current investment also hiher than 2008. |
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Slide 105 :
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Cash Flow From Financial Activity Here in 2008 and 2009 issued share capital means higher valuation in capital market and purchase its own share so if market increase they get profit from that.
Repayment long term borrowing loans is less in 2008 as compared to 2009 means less payment done in 2009 as compared to 2008.
Here interest paid on loans is less in 2008 as compared to 2009 means company paid less money in 2009 as compared 2008.
In these years company financial position is not good but compare to 2008 it increase. In 2009 cash inflow is good and it is in favorable position. |
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Slide 106 :
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CONCLUSION From analysis of profit and loss and balance sheet of the company it is evident that the company has gained profit and its growth is increasing and net profit remains stable for 5 year.
We can observe that company is in stable position as its liabilities decreases, and against it sales turnover and profit increases. So if company continues with the same position in near future it may not go for insolvency.
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