This document discusses various financial ratios used to analyze the liquidity, solvency, profitability, and efficiency of Patanjali. It provides the formulas and calculations for key ratios like current ratio, quick ratio, debt-equity ratio, gross profit ratio, operating ratio, return on investment, return on assets, and return on shareholders' funds. For each ratio calculated for Patanjali, it evaluates whether the ratio meets industry ideals. Overall, the ratios indicate Patanjali has good liquidity, solvency, and profitability.

1. RATIO ANALYSIS

2. Liquidity
Ratios
• The liquidity ratios are used to test the short-term
solvency or liquidity position of the business.
• It enables us to know whether the short-term
liabilities can be paid out of short-term assets.
• It indicates whether a firm has adequate working
capital to carry out routine business activity.
• It helps in checking the efficiency with which
working capital is being employed.
• It also helps the shareholders and long-term
creditors in determining the prospects of dividend and
interest payment.

3. Current Ratio
It is the most widely used of all the analytical devices based on the balance
sheet.
It establishes relationship between total current assets and current liabilities.
Current Ratio= Current Assets/ Current Liabilities
Ideal Ratio= 2:1
Patanjali’s= 1.7:1
This indicates over trading and under capitalization.

4. Quick Ratio
It establishes relationship between liquid assets and liquid liabilities.
It is a refinement to current ratio.
Quick Ratio= Quick Assets/ Current Liabilities
Ideal Ratio= 1:1
Patanjali’s= 0.5:1
This shows that the firm’s liquidity position is not good, i.e. the firm is not liquid
and lacks the ability to meet its current or liquid liabilities in time.

5. Super Quick Ratio
This ratio establishes a relationship between absolute liquid assets to quick
liabilities.
Super Quick Ratio= Absolute Liquid Assets/ Quick Liabilities
Ideal Ratio= 1:2
Patanjali’s= 0.26:1
If the ratio is less than the idea ratio it shows that the firm is not liquid, i.e.
Patanjali is not liquid in this case.

6. Solvency
Ratios
• Solvency indicates that position of an organization
where it is capable of meeting it’s long term
obligations.
• Long term solvency ratios denote the ability of the
organization to repay the loan and interest.
• A solvent organization is the one who’s Assets are
more than its liabilities.

7. Debt-Equity Ratio
It is calculated to measure the relative claims of outsiders and the owners
against the firm’s assets.
This ratio indicates the relationship between the outsider’s funds and the
shareholder’s funds.
Debt Equity Ratio= Long-term Debt/ Shareholders Funds
Ideal Ratio- 2:1 (It means for every two shares there is 1 debt)
Patanjali’s= 0.03:1
This shows that the creditors are relatively less and the financial structure of
the company is sound.
This is also indicating that a firm has a strong financial structure.

8. Total Assets to Debt Ratio
The debt to total assets ratio is an indicator of a company's financial leverage.
It tells you the percentage of a company's total assets that were financed
by creditors.
Total Assets to debt Ratio= Total Assets/ Long-term Debt
Ideal Ratio= 0.6:1
Patanjali’s= 30.62:1
This indicates that Patanjali’s assets are being financed by the owners, and the
owners are providing more of the assets' cost. The financial leverage is less
hence the risk is also low in this case

9. Proprietary Ratio
It establishes the relationship between the proprietor’s fund or shareholders’
funds and the total assets.
Proprietary Ratio= Proprietors Funds/ Total Assets
Ideal Ratio= 0.5/1
Patanjali’s= 0.99/1
It indicates a better long-term solvency (financial) position of the company.
This ratio indicates the extent to which the assets of the company can be lost
without affecting the interest of the creditors of the company.

10. Interest Coverage Ratio
The Interest coverage ratio is also called “times interest earned.”
It shows the relationship between Earnings and Interest.
Interest Coverage Ratio= Earnings before Interest and Taxes/ Interest on long-
term debt
Ideal Ratio= >1.5
Patanjali’s= 28 times
It indicates that 28 times Patanjali can cover it’s current interest payment with
it’s available earnings.

11. Profitability
Ratio
• They are a class of financial metrics that are used to
assess a business’s ability to generate earnings relative
to it’s revenue, operating costs, balance sheet assets,
and shareholders’ equity over time at a specific point
of time.
• It shows how well companies use their existing
assets to generate profit and value for shareholders.
• They generally fall into two categories, i.e. margin
ratios and return ratios.
• They are expressed as a percentage.

12. Gross Profit Ratio
It is a profitability ratio that shows the relationship between gross profit and
total net sales revenue.
It is a popular tool to evaluate operational performance of the business.
Gross Profit Ratio= Gross Profit/ Net Sales x 100
Ideal Ratio= A higher ratio is considered better
Patanjali’s= 45.55%
It means that Patanjali may reduce the selling price of its products by 45.55%
without occurring any loss.

13. Operating Ratio
It shows the efficiency of a company’s management by comparing the total
operating expenses of a company to net sales.
It shows how efficient a company’s management is at keeping costs low while
generating revenue or sales.
Operating Ratio= Operating Cost/ Net Sales x 100
Ideal Ratio= <80 is considered desirable
Patanjali’s= 77.17%
This means that 77.17% of Patanjali’s net sales are operating expenses.

14. Operating Profit Ratio
It establishes a relationship between operating profit and net revenue generated
from operations (net sales).
It helps to find out Operating Profit earned in comparison to revenue earned from
operations.
Operating Profit ratio= Operating Profit/ Net Sales x 100
Ideal Ratio= A higher ratio is considered better
Patanjali’s= 22.82%
This means that every 1 unit of net sales Patanjali earns 22.82% as operating profit.
Alternatively, the company has an Operating Profit margin of 22.82%, i.e. 0.23 unit
of operating profit for every 1 unit if revenue generated from operations.

15. Net Profit Ratio
It establishes a relationship between net profit earned and net revenue
generated from operations (net sales).
It helps to determine the overall efficiency of the business’ operations. It is an
indicator of how well a company’s trading activities are performing.
Net Profit Ratio= Net Profit/ Net Sales x 100
Ideal Ratio= Higher the better, indicating low direct and indirect costs which will
result in higher net profit
Patanjali’s= 21.12%
This means that for every 1 unit of net sales Patanjali earns 21.12% as net
profit.

16. ROI
It is the return to the amount invested.
It is used in the context of internet marketing and the adoption of wellness
programs at large companies.
Return on investment= Net Profit before Interest and Tax/ Capital Employed x
100
Ideal= Higher the better
Patanjali’s= 30.35%
This means Patanjali’s profit generated from net operating income equal to
30.35% of the averaging operating expenses.

17. Return on Total Assets
It measures the net income produced by total assets during a period by
comparing net income to the average total assets.
It measures how efficiently a company can manage its assets to produce profits
during a period. It measures how profitable a company’s assets are.
Return on Total Assets= Net Profit before Interest and Tax/ Total Assets x 100
Ideal= Higher the better
Patanjali’s= 31.10%
Every rupee that Patanjali invested in assets during the year produced 31.10%
of net income.

18. Return on Shareholders’ Funds
It is a measure of overall profitability of the business. It indicates the efficiency of
the management in using the resources of the business.
It is also known as return on total equity ratio and return on net worth ratio.
Return on Shareholders’ Funds= Net Profit after Interest and Tax/ Shareholders’
Funds x 100
Ideal= Higher the better
Patanjali’s= 22.84%
The return on shareholders’ investment or return on equity ratio of Patanjali is %.
This means for every Rs.100 invested by shareholders.

19. THANK YOU