Final Ratio Analysis

Topics: Financial ratios, Financial ratio, Generally Accepted Accounting Principles Pages: 33 (1435 words) Published: April 16, 2015
RATIO ANALYSIS

Submitted to:- Fac. Pinakin Jaisval

submitted by :- Sahista Baxi
Abhilasha Kashyap
Nidhi shah

Company profile
Tata Power is a Indian electric utility company
based in Mumbai, Maharashtra, India and is part
of the Group. The core business of the company
is to generate, transmit and distribute electricity.
With an installed electricity generation capacity
of about 8560 MW, it is India's second largest
private power producer. At the end of August
2013, its market capitalization was $2.74 billion
(INR 182 billion).

Ratio analysis
Ratio Analysis is the process of determining and
interpreting numerical relationship based on
financial statements. It is the technique of
interpretation of financial statements with the
help of accounting ratios derived from the
balance sheet and profit and loss account.

Types of ratio
There are 5 main heads of ratio under which all
the other ratios are defined. They are
• Liquidity ratio
• Activity ratio
• Capital structure ratio
• Flow ratio
• Profitability ratio

Most important ratio
The most important ratio that are generally used
in analyzing the financial statements are






Current ratio (liquidity ratio)
Quick ratio (liquidity ratio)
Debt to equity ratio (capital structure ratio)
Return on equity (profitability ratio)
Net profit margin (profitability ratio )

Liquidity ratio
The liquidity ratios are used to test the short term
solvency or liquidity position of the business.
It indicates whether a firm has adequate working
capital to carry out routine business activity.
Types of liquidity ratio
• Net working capital ratio
• Current ratio
• Quick ratio

Current ratio
• It is the most widely used of all analytical
devices based on balance sheet. It establishes
relationship between total current assets and
current liabilities.
• Current ratio = current assets /current liability

Calculation
Current assets

2010

2011

2012

2013

2014

Current investments

 

92.73

584.14

258.56

1.36

Inventories

589.36

625.02

854.47

761.09

710.67

Trade receivables

119.2

841.55

1003.37 1300.06 1320.1

Cash and bank balance
Short term loans and
advances

1857.11 837.29

1087.35 413.17

67.86

2071.61 256.39

1310.62 920.9

873.08

Other current assets

39.34

114.62

186.64

562.42

141.35

Unbilled revenues

119.2

 

 

 

 

Total

4676.62 2767.6

5026.59 4216.2

3114.42

Current liabilities
Current liabilities
Short terms borrowings

2010

1465.7

 
Total

2014

758.06 1172.15 1579.53
923.55

1329.77 1586.25 4305.99 2027.64
702.57

 

2013

739.57 1061.55 1057.68

 

Short term provisions

2012

683.06

 

Trade payables
Other current liabilities

2011

352.93
 

391.93
 

437.61
 

661.01
 

2168.27 3105.33 3797.79 6973.43 5191.73

Current ratio

2010

2011 2012 2013 2014

CR

2.16

0.89 1.32

0.60

0.60

 

 

 

 

 

CR

2.61:1 0.89:1 1.32:1 0.60:1 0.60:1

 

Trend analysis of current ratio
CR
2.50

2.00

1.50
CR

1.00

0.50

0.00
2010

2011

2012

2013

2014

Interpretation
• CR indicates the availability of current assets
in rupees for every one rupee of current
liability. Here initially the ratio was much high
that is 2.16 : 1 which decreased to 0.60 : 1
over the years.
• It shows that the firm is not even having 1
rupee of CA for every one rupee of its CL.

Quick Ratio
• It establishes relationship between liquid
assets and liquid liabilities.
• Quick Ratio = Quick Assets/ Current Liabilities

Calculation
Quick
assets

2010

2011

2012

2013

2014

QA

4087.26

2142.58

4172.12

3455.11

2403.75

quick ratio

2010

2011

2012

2013

2014

QAR=

1.89

0.69

1.10

0.50

0.46

QAR

1.89:1

0.69:1

1.10:1

0.50:1...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay on Ratio Analysis
  • Essay about Ratios Analysis
  • RATIO ANALYSIS of masood textile mills Essay
  • Ratio Analysis Essay
  • Ratio Analysis Essay
  • Ratio Analysis Essay
  • Ratio Analysis Essay
  • Ratio Analysis Essay

Become a StudyMode Member

Sign Up - It's Free