Solvency ratio

Current ratio

Quick ratio

Absolute Liquidity Ratio

LEVERAGE RATIO

Working Capital Turnover Ratio

Gross Margin Ratio

Return On Assets Ratio

Debtors Turnover Ratio

Asset Turnover Ratio

Ratio Analysis

Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed.

Ratios

Profitability Liquidity Turnover

Valuation Leverage

Profitability RatiosA profitability ratio is a measure of profitability, a way of measuring a company's performance. Profitability is simply the capacity to make a profit.Types of Profitability Ratios

Gross Margin Ratio

Return on Assets RatioNet Profit Ratio

Operating Profit Ratio

Return On Capital Employed

• Ratio measures how effectively the company produces income from its assets.

• It measures how efficiently a company can manage its assets to produce profits during a year.

• Return on Assets = net income/assets x 100, here., Assets = Fixed Assets + Current Assets.

• The net income can be found on the income statement.

Return on Assets

Return on Assets = Net Income x 100Assets

Hindustan Unilever 2014 2015

Ratio 67.021 74.443

Gross Margin Ratio

• It tells you about the profitability of your goods and services. It tells you how much it costs you to produce the product.

• It indicates the efficiency of the production department.

• One of the popular tools to evaluate operational performance of the business.

Gross Margin = Gross Profit x 100Net Sales

Hindustan Unilever 2014 2015

Ratio 17.131 17.928

• The net profit percentage is the ratio of after-tax profits to net sales.

• It reveals the remaining profit after all costs of production, administration, and financing have been deducted from sales, and income taxes recognized.

Net Profit Ratio

Net Profit Ratio = Net Profit Before Tax x 100Net Sales

Hindustan Unilever 2014 2015

Ratio 17.774 18.308

Liquidity RatiosThe term liquidity is defined as the ability of a company to meet its financial obligations as they come due. The liquidity ratio, then, is a computation that is used to measure a company's ability to pay its short-term debts.

Types of Liquidity RatiosAbsolute Liquid Ratio

Quick Ratio or Acid Test RatioCurrent Ratio

Absolute Liquid Ratio

• It shows the relationship between absolute liquid or super quick current assets and liabilities. Absolute liquid assets include cash, bank balances, and marketable securities.

• It indicates the adequacy of the 50% worth absolute liquid assets to pay the 100% worth current liabilities in time.

Absolute Liquid Ratio = Absolute Liquid Assets Current Liabilities

• Absolute liquid assets : Cash + Bank+ Marketable Securities.

Hindustan Unilever 2014 2015

Ratio 0.270 0.296

Quick Ratio Or Acid Test Ratio• The acid test ratio is a stringent and meticulous test

of a firm's ability to pay its short-term obligations 'as and when they are due.

• It is a measure of how well a company can meet its short-term financial liabilities.

Quick Ratio = Liquid AssetsCurrent Liabilities

• Liquid assets : Current assets – Stock And Prepaid Expenses.

Hindustan Unilever 2014 2015

Ratio 0.261 0.289

Current Ratio• The current ratio is a financial ratio that measures

whether or not a firm has enough resources to pay its debts over the next 12 months.

• It compares a firm's current assets to its current liabilities.

• The ideal current ratio is 2: 1. It is a indication of the financial soundness of a business concern. When Current assets double the current liabilities, it is considered to be satisfactory.

Current Ratio = Current AssetsCurrent Liabilities

Hindustan Unilever 2014 2015

Ratio 1.069 1.084

turnover Ratios• It establish the relationship of sales with various assets.

These are expressed in integers or times rather than as a percentage or proportion. These are mostly computed to measure the efficiency.

Types of Turnover RatiosDebtors turnover ratio

Total assets turnover ratioFixed Assets Turnover ratio

Working Capital turnover ratio

Debtor Turnover Ratio• It is an accounting measure used to quantify a firm's

effectiveness in extending credit as well as collecting debts.

• The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

• This ratio establishes the relationship between net credit sales and average debtors for the year.

• It shows how quickly the credit sales of the company have been converted into cash.

Debtors Turnover Ratio = Net Credit SalesAverage Account Receivable

Hindustan Unilever 2014 2015

Ratio 34.298 39.30

Total Assets Turnover Ratio• Total assets turnover ratio shows the relationship between total

assets and sales.

• Total assets turnover ratio indicates how well the firm's total assets are being used to generate its sales.

Hindustan Unilever 2014 2015

Ratio 2.055 2.369

Total Assets Turnover Ratio = Net SalesTotal Assets

Fixed Assets Turnover Ratio• Fixed assets turnover ratio is also termed as the ratio of sales

to fixed assets.• Fixed assets turnover ratio indicates how efficiently the fixed

assets are used.• It measures the efficiency with which the firm has been using

its fixed assets to generate sales.

Hindustan Unilever 2014 2015

Ratio 7.646 8.336

Fixed Assets Turnover Ratio = Net SalesNet Fixed Assets

Creditors Turnover Ratio

• It is a ratio of net credit purchases to average trade creditors. Creditors turnover ratio is also know as payables turnover ratio

Creditors Turnover Ratio = Total supplier purchases (Beginning accounts payable + Ending accounts payable) / 2

Ratio 0.24 0.28

Hindustan Unilever 2014 2015

Working Capital Turnover Ratio• The working capital turnover ratio measures how well a

company is utilizing its working capital to support a given level of sales.

• Working capital is current assets minus current liabilities.• A high turnover ratio indicates that management is being

extremely efficient in using a firm's short-term assets and liabilities to support salesFixed Assets Turnover Ratio = Net Sales

Beginning working capital + Ending working capital

2Hindustan Unilever 2014 2015

Ratio 4.382 4.639

Valuation RatioIt is a measure of how cheap or expensive a business is, compared to some measures of profit or value

Earning Per Share

Types of Valuation Ratios

Earnings per Share Ratio

• The earnings per share ratio (EPS ratio) measures the amount of a company's net income that is theoretically available for payment to the holders of its common stock.

• A company with a high earnings per share ratio is capable of generating a significant dividend for investors, or it may plow the funds back into its business for more growth; in either case, a high ratio indicates a potentially worthwhile investment, depending on the market price of the stock

Earnings per Share Ratio = Net income after tax - Preferred stock dividends Average number of common shares outstanding

Hindustan Unilever 2014 2015

Ratio 3.277 3.725

Proprietary Ratio• The proprietary ratio (also known as the equity ratio) is

the proportion of shareholders' equity to total assets, and as such provides a rough estimate of the amount of capitalization currently used to support a business

Proprietary Ratio = Shareholders' equity Total tangible assets

Ratio 0.24 0.28

Hindustan Unilever 2014 2015

debt-to-equity ratio• The debt-to-equity ratio (D/E) is a financial ratio

indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage

Leverage/Solvency RatiosAbility of the firm to use fixed costs to magnify the returns to the shareholders

Hindustan Unilever 2014 2015

Ratio 2.48 3.02

Leverage Ratio• Companies rely on a mixture of owners

equity and debt to finance their operations.• A leverage ratio is any one of several financial

measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet financial obligations.

Hindustan Unilever 2014 2015Ratio 2.63 2.38

Solvency Ratio

• A key metric used to measure an enterprise's ability to meet its debt and other obligations.

• The solvency ratio indicates whether a company's cash flow is sufficient to meet its short-term and long-term liabilities.

Hindustan Unilever 2014 2015Ratio 0.317 0.336

Other Ratios

Inventory Turnover RatioReturn On Investment Ratio

Capital Turnover RatioOperating Profit Ratio

Equity Ratio

Inventory Turnover Ratio

Hindustan Unilever 2014 2015

Ratio 0.317 0.336

The inventory turnover ratio is a key measure for evaluating just how efficient management is at managing company inventory and generating sales from it. Inventory Turnover. Like a typical turnover ratio, inventory turnover details how much inventory is sold over a period of time.

Ratio = Net Sales Average Inventory At Cost

Return On Investment Ratio

Hindustan Unilever 2014 2015

Ratio 1.46 1.48

Return on investment (ROI) is the benefit to the investor resulting from an investment of some resource. A high ROI means the investment gains compare favorably to investment cost.

Ratio = Net Profit Before Tax Net Working Capital

Capital Turnover Ratio

Hindustan Unilever 2014 2015

Ratio 5.117 7.308

• Working Capital Turnover' A measurement comparing the depletion of working capital to the generation of sales over a given period.

• This provides some useful information as to how effectively a company is using its working capital to generate sales.

Ratio = Net Sales Capital Employed

Operating Profit Ratio

Hindustan Unilever 2014 2015

Ratio 15.86 16.84

• Operating margin is a margin ratio used to measure a company's pricing strategy and operating efficiency.

• Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc.

Ratio = Operating Profit x 100 Net Sales

Equity Ratio

Hindustan Unilever 2014 2015

Ratio 0.30 0.24

Equity Ratio is a good indicator of the level of leverage used by a company. The Equity ratio measures the proportion of the total assets that are financed by stockholders and not creditors.

Ratio = Total Equity Total Assets

Evaluation sheet

Serial No. Roll No. Name Of Student Marks

1 12 Arka Das Gupta

2 49 Shreel Dwivedi

3 38 Raj Karan Marhas

4 2 Aarya

5 9 Anwesha Chatterjee

6 57 Varun Mani Tiwari

7 20 Gaurav Deshmukh