It contains the financial statement analysis of a company taken as an example to compute the various ratios and determine the current position of the company.
Nicola Mining Inc. Corporate Presentation May 2024
Ratio Trend Analysis of Hindalco Ltd.
1. Apurba Lahiri
Heritage Business School
Roll No : 73
Section : B
2nd year, 3rd Semester
Management Accounting
Assignment
This assignment report will help in indicating the
direction of change in performance of the company.
All the trend ratios of two years 2016-17 and 2015-
16 have been collected from the published annual
reports of the company.
Submitted to : Mr Sitangshu Khatua
Date : 11th September, 2018
Ratio Trend
Analysis of Aditya
Birla Hindalco
Industries Limited
2. Type of ratios to be calculated
1. Liquidity Ratio
a. Current Ratio :
As per the formula ,
b. Acid Test Ratio:
As per the formula ,
2. Turnover Ratio
a. Inventory Turnover Ratio :
As per the formula ,
Current Ratio =
Current Assets
Current Liabilities
Acid-test Ratio =
Current Assets – Inventory – Prepaid Expenses
Current Liabilities - Bank Overdraft –Short term loan
Inventory Turnover Ratio =
Cost of goods sold
Average Inventory
3. b. Total Asset Turnover Ratio
As per the formula ,
3. Leverage Ratio
a. Debt-equity Ratio
As per the formula ,
4. Coverage Ratio
a. Interest Coverage Ratio
As per the formula ,
Debt -Equity Ratio =
Long –term debt
Shareholder’s equity
Interest Coverage Ratio =
EBIT or Interest Accurals
Interest payment
Total Asset Turnover Ratio =
Sales
Average total assets
4. 5. Profitability Ratio
a. Gross Profit Margin
As per the formula ,
b. Net Profit Margin
As per the formula ,
c. Return on Capital Employed
As per the formula ,
GPM =
Gross Profit X 100
Sales
NPM =
Net Profit X 100
Sales
ROCE =
Dividend Paid X 100
Total Assets
5. d. Dividend –Payout Ratio
As per the formula ,
e. Return on Investment
As per the formula of Du Pont Chart Analysis ,
f. Return on Earnings
As per the formula of Du Pont Chart Analysis ,
NJ
Dividend Payout Ratio =
Dividend per ordinary share (DPS) X 100
Earning Per share (EPS)
Net Profit Margin X Asset Turnover Ratio
Net Profit X 100
Equity
6. Relevant financial information required
from annual reports of Hindalco
Industries Ltd.
2016-17 2015-16
Rs (Cr.) Rs (Cr.)
1. Net Earnings 1,557 552
2. Cash Earnings 2,985 1,834
3. Earning Per Share 7.56 (0.64)
4. Dividend Per Share 1.10 1.00
5. Dividend Payout Ratio 19.08 % 41.23%
6. Non-current Assets 56,732.39 56,083.63
7. Current Assets 29,589.76 24,357.89
8. Prepaid Expenses 360.80 373.00
9. Total Assets 86,322.15 80,441.52
10. Shareholder’s Equity 47,332.56 42,159.48
11. Share capital 223 205
12. Current Liabilities 18,424.67 12,309.09
13. Long-term borrowings 18,391.95 23,904.29
14. Short-term borrowings 5285.11 3,944.52
15. Interest received 383.02 445.01
16. Loan-repayment 169.76 234.11
17. Interest accruals 534.05 536.37
18. Interest paid (2319) (2374)
19. Dividend paid (239) (223)
20. Gross sales 39,383.12 36,713.05
21. Sales 102,631.45 101,201.52
22. Inventory Stock 9,268.03 8405.49
23. Cost of materials consumed 58,396.63 58,134.50
24. Opening Inventory 9323.41 10,354.40
25. Closing Inventory 11,910.73 9323.41
26. EBITD 5819 4325
27. PBT 2,153 653
28. Tax 34.61% 34.61%
29. PAT /Net Profit 1557 552
30. Cost of Goods sold 90,184 92,387
31. Capital Employed 109,882 108,540
32. Net Fixed Assets 86,501 89,887
33. Net Current Assets 16,513 15,074
7. Presentation of Trend Ratios for the
years 2016-17 & 2015-16
Type of Ratios 2016-17 2015-16
1. Current Ratio 1.6 1.9
2. Quick Ratio 1.1 1.8
3. Inventory Turnover Ratio 8.5 9.4
4. Total Asset Turnover Ratio 2.4 2.5
5. Dividend Payout Ratio 19.08 % 41.23%
6. Interest Coverage Ratio 2.36 1.95
8. Gross Profit Margin 12.13% 8.71%
9. Net Profit Margin 1.85% (0.25)%
10. Return on Capital Employed (ROCE) 8.27% 5.06%
11. Debt- Equity Ratio 1.39 1.66
12. Return on Earnings (ROE) 4.12% (0.62)%
13. Return on Investment (ROI) 4.44% (62.5)%
Note:
In the figure below, a trend line has been drawn to the 2016-17 financial year of Hindalco
Industries Ltd upon all the plotted points.
9. Analysis & Interpretation of Trend ratios
Ratio Trend in direction Interpretation
Current Ratio Decreased from previous year The company’s ability to meet
current obligations is not so great
and the safety of funds of short-term
creditors is too less .
Quick Ratio Decreased from previous year The firm will little lag behind in
quickly converting it’s current
assets into cash or meeting it’s
current liabilities.
Inventory
Turnover Ratio
Increased from previous year The firm’s inventory sells fast and
doesn’t stay in the shelf or
warehouse for a long time.
Total Asset
Turnover Ratio
Decreased from previous year The firm has undergone
underutilization of available
resources and presence of idle
capacity.
Dividend
Payout Ratio
Decreased from previous year The firm is using more of it’s
earnings to reinvest in the firm
itself in order t grow further.
Interest
Coverage Ratio
Increased from previous year The payment of interest to the
creditors has got better assurance &
also the firm gained greater ability
to handle fixed-charge liabilities.
Gross Profit
Margin
Increased from previous year A good sign of profit maximization ,
sustainability and growth.
Net Profit
Margin
Profit . Increased from previous
year
Greater ability in improving profit,
minimizing cost and investing for
beginners.
Return on
Capital
Employed
(ROCE)
Increased from previous year More efficiency in using of capital.
Debt- Equity
Ratio
Decreased from previous year Lesser amount of debts are being
taken . Operational flexibility is not
jeopardized and it will be able to
raise additional funds.
Return on
Earnings (ROE)
Profit . Increased from previous
year
The company is still in more debt
with less shareholder’s equity.
Return on
Investment
(ROI)
Profit . Increased from previous
year
Investments made by the firm have
been efficient.
