Accounts Assignment

Classification of Ratios
Ashok Leyland (Company 1)
Swaraj Mazda (Company 2)
Profitability Ratios
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012 Gross Profit Margin (%)
7.86
4.77
7.49
8.32
6.78
7.31
3.38
6.61
6.62
6.76 Operating Profit Margin (%)
10.09
7.66
10.23
10.67
9.43
7.8
4.96
7.81
7.62
7.78
Liquidity Ratios

Current ratio
1.08
1.29
1.22
1.09
0.88
0.96
0.85
1.19
1.23
1.25 Quick ratio
0.6
0.72
0.72
0.53
0.48
1.03
1.16
0.91
0.78
0.87
Activity Ratios

Debtors Turnover ratio
17.74
9.25
7.51
10.34
11.02
3.35
3.28
5.09
7.04
8.67 Total Assets Turnover ratio
2.7
1.54
1.65
2.19
2.75
2.84
1.72
2.63
2.99
2.63
Leverage Ratios

Debt Equity ratio
0.42
0.93
0.98
1
0.83
1.52
2.28
0.45
0.4
0.41 Interest Coverage ratio
8.33
2.27
5.83
5.23
3.68
4.53
1.27
2.76
6.36
6.95
AUTOMOBILE SECTOR

Interpretation of ratios
Profitability Ratios Gross Margin Ratio From the above chart it is clearly seen that Gross Profit Margin of Ashok Leyland is decreasing because of various factors such as increase in raw material cost, labor cost, power and fuel cost. So company has to undertake research and development to reduce the costs.
Similar is the case with Swaraj Mazda as their ratio is also decreasing.
So we can say that there is a common trend in both the companies but on the other hand if we see the sales turnover Ashok Leyland has more than Swaraj Mazda so still they can improve its margin.
Operating Margin Ratio:-
Here, Ashok Leyland has increase and decrease trend in operating ratio. In 2009 it is decreasing as compared to 2008 because of increase in raw material affects the company’s overall operating margin capacity. There is high fluctuations in steel

References: http://www.moneycontrol.com/financials/ashokleyland/balance-sheet/AL#AL http://www.moneycontrol.com/financials/smlisuzu/balance-sheet/SM#SM For ratios interpretation “A Textbook of Accounting for Management” Third Edition S N Maheshwari (Page No 3.1-3.68)