ITC ratio analysis

Topics: Financial ratios, Financial ratio, Generally Accepted Accounting Principles Pages: 34 (3488 words) Published: September 21, 2013
Ratio Analysis of

Submitted to:
Mrs.Vaishali Apte
Faculty of International Finance, Muenchen
International Business School, Pune

Presented By:

Vinod Prajapat (63)
1

Ratio Analysis
It’s a tool which enables the banker or
lender to arrive at the following
factors :
 Liquidity position
 Profitability
 Solvency
 Financial Stability
 Quality of the Management
 Safety & Security of the loans &
advances to be or already been
provided


How a Ratio is expressed?
As Percentage

- such as 25% or

50% . For example if net profit is
Rs.25,000/and
the
sales
is
Rs.1,00,000/- then the net profit can be
said to be 25% of the sales.
 As Proportion
- The above figures may
be expressed in terms of the relationship
between net profit to sales as 1 : 4.
 As Pure Number /Times - The same
can also be expressed in an alternatively
way such as the sale is 4 times of the net
profit or profit is 1/4th of the sales.

Classification of Ratios
Balance Sheet
Ratio

P&L Ratio or
Income/Revenue
Statement Ratio

Balance Sheet
and Profit & Loss
Ratio

Financial Ratio

Operating Ratio

Composite Ratio

Current Ratio
Quick Asset Ratio
Proprietary Ratio
Debt Equity Ratio

Gross Profit Ratio
Operating Ratio
Expense Ratio
Net profit Ratio
Stock Turnover Ratio

Fixed Asset
Turnover Ratio,
Return on Total
Resources Ratio,
Return on Own
Funds Ratio,
Earning per Share
Ratio, Debtors’
Turnover Ratio,

Format of balance sheet for ratio analysis

LIABILITIES

ASSETS

NET WORTH/EQUITY/OWNED FUNDS
Share Capital/Partner’s Capital/Paid up
Capital/ Owners Funds
Reserves ( General, Capital, Revaluation &
Other Reserves)
Credit Balance in P&L A/c
LONG TERM LIABILITIES/BORROWED
FUNDS : Term Loans (Banks & Institutions)
Debentures/Bonds, Unsecured Loans, Fixed
Deposits, Other Long Term Liabilities

FIXED ASSETS : LAND & BUILDING,
PLANT & MACHINERIES
Original Value Less Depreciation
Net Value or Book Value or Written down value

NON CURRENT ASSETS
Investments in quoted shares & securities
Old stocks or old/disputed book debts
Long Term Security Deposits
Other Misc. assets which are not current or
fixed in nature
CURRENT LIABILTIES
CURRENT ASSETS : Cash & Bank Balance,
Bank Working Capital Limits such as
Marketable/quoted Govt. or other securities,
CC/OD/Bills/Export Credit
Book Debts/Sundry Debtors, Bills Receivables,
Sundry /Trade Creditors/Creditors/Bills
Stocks & inventory (RM,SIP,FG) Stores &
Payable, Short duration loans or deposits
Spares, Advance Payment of Taxes, Prepaid
Expenses payable & provisions against various expenses, Loans and Advances recoverable items
within 12 months
INTANGIBLE ASSETS
Patent, Goodwill, Debit balance in P&L A/c,
Preliminary or Preoperative expenses

Some important notes










Liabilities have Credit balance and Assets have
Debit balance
Current Liabilities are those which have either
become due for payment or shall fall due for
payment within 12 months from the date of
Balance Sheet
Current Assets are those which undergo change
in their shape/form within 12 months. These
are also called Working Capital or Gross
Working Capital
Net Worth & Long Term Liabilities are also called
Long Term Sources of Funds
Current Liabilities are known as Short Term
Sources of Funds

Some important notes


Assets other than Current Assets are Long Term
Use of Funds



Installments of Term Loan Payable in 12 months
are to be taken as Current Liability only for
Calculation of Current Ratio & Quick Ratio.



If there is profit it shall become part of Net
Worth under the head Reserves and if there is
loss it will become part of Intangible Assets



Investments in Govt. Securities to be treated
currentonly if these are marketable and due.
Investments in other securities are to be treated
Current if they are quoted. Investments in
allied/associate/sister units...
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