Accounts Project on Ratio Analysis

7/31/2019 Accounts Project on Ratio Analysis

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H M T Ltd. was incorporated in 1953 by the Government of India as a

Machine Tool manufacturing company.Over the years diversified into

Watches, Tractors, Printing Machinery, Metal Forming Presses, Die

Casting & Plastic Processing Machinery, CNC Systems &

Bearings.Successful technology absorption in all product groups through

collaborations with world renowned manu- facturers & further

strengthened by continuous inhouse R&D.Today

Main ProductsAccessories, Watches, Sound Wave Ballast, Tractors, Miscellaneous

Sales & Sundry Jobs, Job Work, Lamp Components, Lamps GLS,

Fluorescent Lamps, Lamps MV, SV & MH, Miniature Batteries, Lamp

Making Machines, Precision Machines, Precision Boring Machinery,

Machine Tools (Including Plastic Injection Moulding Machines), CNC

Systems, Metal Forming Presses, Printing Machines, Food Processing

Machinery, Ball Screws,


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Titan Industries is the world's fifth large wrist watch manufacturer and

India's leading producer of watches under the Titan, Fastrack, Sonata,

Nebula, RAGA, Regalia, Octane & Xylys brand names. It is a joint

venture between the Tata Group, and the Tamil Nadu IndustrialDevelopment Corporation (TIDCO). Its product portfolio includes

watches, accessories and jewellery, in both contemporary and traditional

designs. It exports watches to about 32 countries around the world with

manufacturing facilities in Hosur, Dehradun, Goa and manufactures

precious jewellery under the Tanishq brand name, making it India's only

national jewellery brand. It is a subsidiary of the Tata Group.

Titan watch division was started in 1987. At launch it was the third watch

company in India afterHMT and Allwyn. Titan formed a jointventure with Timex, which lasted until 1998, and setup a strong

distribution network across India. As of 2010, Titan watches account for

a 60% share of the total Indian market and are also sold in about 40

countries through marketing subsidiaries based

in London, Aden, Dubai and Singapore. Titan watches are sold in India

through retail chains controlled by Titan Industries.
http://en.wikipedia.org/wiki/Wrist_watchhttp://en.wikipedia.org/wiki/TIDCOhttp://en.wikipedia.org/wiki/TIDCOhttp://en.wikipedia.org/wiki/Hosurhttp://en.wikipedia.org/wiki/Dehradunhttp://en.wikipedia.org/wiki/Goahttp://en.wikipedia.org/wiki/Tanishqhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Hindustan_Machine_Toolshttp://en.wikipedia.org/wiki/Hyderabad_Allwyn_Limitedhttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Timex_Group_USAhttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Adenhttp://en.wikipedia.org/wiki/Dubaihttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Dubaihttp://en.wikipedia.org/wiki/Adenhttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Timex_Group_USAhttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Hyderabad_Allwyn_Limitedhttp://en.wikipedia.org/wiki/Hindustan_Machine_Toolshttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Tanishqhttp://en.wikipedia.org/wiki/Goahttp://en.wikipedia.org/wiki/Dehradunhttp://en.wikipedia.org/wiki/Hosurhttp://en.wikipedia.org/wiki/TIDCOhttp://en.wikipedia.org/wiki/TIDCOhttp://en.wikipedia.org/wiki/Wrist_watch


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BALANCE SHEET OF HMT LTD.

March 2010 March 2009

Sources Of Funds

Total Share Capital 760.35 760.35

Equity Share Capital 760.35 760.35

Share Application Money 443.00 443.00

Preference Share Capital 0.00 0.00

Reserves -506.11 -453.20

Revaluation Reserves 0.00 0.00

Networth 697.24 750.15

Secured Loans 254.65 341.70Unsecured Loans 366.26 231.42

Total Debt 620.91 573.12

Total Liabilities 1,318.15 1,323.27


Application Of FundsGross Block 136.39 132.49

Less: Accum. Depreciation 96.93 93.42

Net Block 39.46 39.07

Capital Work in Progress 0.82 2.29

Investments 765.56 765.71

Inventories 29.00 40.38

Sundry Debtors 68.64 74.44

Cash and Bank Balance 2.69 2.02

Total Current Assets 100.33 116.84Loans and Advances 624.66 583.89

Fixed Deposits 1.69 9.64

Total CA, Loans & Advances 726.68 710.37

Deffered Credit 0.00 0.00

Current Liabilities 142.56 124.26

Provisions 71.81 70.20

Total CL & Provisions 214.37 194.46

Net Current Assets 512.31 515.91

Miscellaneous Expenses 0.00 0.29


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Total Assets 1,318.15 1,323.27

Contingent Liabilities 10.52 14.40

Book Value (Rs) 3.34 4.04

P/L ACCOUNTS OF HMT LTD.


Income

Sales Turnover 194.94 164.44

Excise Duty 1.48 1.92

Net Sales 193.46 162.52

Other Income 53.36 54.56

Stock Adjustments -12.23 -11.90

Total Income 234.59 205.18

ExpenditureRaw Materials 120.83 105.96

Power & Fuel Cost 3.97 4.31

Employee Cost 67.62 63.67

Other ManufacturingExpenses

0.07 0.06

Selling and AdminExpenses

20.11 34.40


Preoperative Exp

Capitalised -4.62 -4.67

Total Expenses 214.60 209.46


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Operating Profit -33.37 -58.84

PBDIT 19.99 -4.28

Interest 68.61 63.68

PBDT -48.62 -67.96

Depreciation 3.92 3.40Other Written Off 1.87 1.38

Profit Before Tax -54.41 -72.74

Extra-ordinary items 1.50 3.77

PBT (Post Extra-ordItems)

-52.91 -68.97

Tax 0.00 1.81

Reported Net Profit -52.91 -70.79

Total Value Addition 93.77 103.50

Preference Dividend 0.00 0.00Equity Dividend 0.00 0.00

Corporate Dividend Tax 0.00 0.00

Per share data (annualised)

Shares in issue (lakhs) 7,603.50 7,603.50

Earning Per Share(Rs)

-0.70 -0.93

Equity Dividend (%) 0.00 0.00

Book Value (Rs) 3.34 4.04

ADDITIONAL INFORMATION:

Opening balance of inventory for year 2008-09 is 52.40

Opening balance of share holder equity for year 2008-09 is 377.94

opening balance of debtors for year 2008-09 is 104.02

opening balance of Total assets for year 2008-09 is 1341.93

High and low share prices on 31st march 2009 72.10 and 69.00



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BALANCE SHEET OF TITAN INDUSTRIES


Total Share Capital 44.39 44.39

Equity Share Capital 44.39 44.39

Share Application Money 0.00 0.00

Preference Share Capital 0.00 0.00

Reserves 679.99 506.85

Revaluation Reserves 0.00 0.00

Networth 724.38 551.24

Secured Loans 72.79 116.76

Unsecured Loans 0.00 58.65

Total Debt 72.79 175.41

Total Liabilities 797.17 726.65

Mar '10 Mar '09

Gross Block 624.33 593.04

Less: Accum. Depreciation 361.70 318.56

Net Block 262.63 274.48

Capital Work in Progress 12.29 19.52

Investments 7.63 7.66

Inventories 1,340.33 1,202.69


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Sundry Debtors 93.61 106.22

Cash and Bank Balance 61.72 54.69

Total Current Assets 1,495.66 1,363.60

Loans and Advances 200.99 128.82

Fixed Deposits 125.00 0.00

Total CA, Loans & Advances 1,821.65 1,492.42

Deffered Credit 0.00 0.00

Current Liabilities 1,172.28 974.00

Provisions 134.74 93.44

Total CL & Provisions 1,307.02 1,067.44

Net Current Assets 514.63 424.98


Total Assets 797.18 726.64

Contingent Liabilities 72.19 65.46

Book Value (Rs) 163.19 124.18


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P/L ACCOUNTS OF TITAN INDUSTRIES.

Sales Turnover 4,703.12 3,926.09

Excise Duty 28.70 44.34

Net Sales 4,674.42 3,881.75

Other Income 8.62 -5.91

Stock Adjustments 111.66 178.67

Total Income 4,794.70 4,054.51

Raw Materials 3,561.05 2,940.86

Power & Fuel Cost 17.47 16.11

Employee Cost 275.64 234.20

Other Manufacturing Expenses 6.11 8.99

Selling and Admin Expenses 458.69 427.47


Preoperative Exp Capitalised -0.04 -0.09

Total Expenses 4,349.78 3,713.74

Mar '10 Mar '09

12 mths 12 mths

Operating Profit 436.30 346.68

PBDIT 444.92 340.77

Interest 63.52 68.46


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PBDT 381.40 272.31

Depreciation 60.08 41.76

Other Written Off 0.00 0.00

Profit Before Tax 321.32 230.55

Extra-ordinary items -2.92 -10.92

PBT (Post Extra-ord Items) 318.40 219.63

Tax 68.08 60.68

Reported Net Profit 250.32 158.96

Total Value Addition 788.73 772.88

Preference Dividend 0.00 0.00

Equity Dividend 66.58 44.39

Corporate Dividend Tax 11.06 7.54

Shares in issue (lakhs) 443.89 443.89

Earning Per Share (Rs) 56.39 35.81

Equity Dividend (%) 150.00 100.00

Book Value (Rs) 163.19 124.18


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ADDITIONAL INFORMATION:

Opening balance of inventory for year 2008-09 is 1021.09

Opening balance of share holder equity for year 2008-09 is 436.17

opening balance of debtors for year 2008-09 is 96.45

opening balance of Total assets for year 2008-09 is 694



PROFITIBILTY RATIO

Profit Margin Ratio

Profit margin shows how much of each sales rupee shows up as net income after allthe expenses paid.

Profit Margin Ratio = (Profit After Tax/ Sales) * 100

HMT ltd.

Profit margin (2008-2009) = (-70.79/162.52)*100

= -43.55%

Profit margin (2009-2010) = (-52.91/193.46)*100

= -27.34%

Here HMT Ltd is suffering loss, as the loss margin has decreased from

-43.55% in 2009 to -27.34% in 2010 because sales has increase more in

comparison to increases in expenses and as profit maximization is equal to

loss minimization , it is good sign for the company.


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Titan industries

Profit margin (2008-2009) = (158.96/3881.75)*100

= 4.09%

Profit margin (2009-2010) = (250.32/4794.70)*100

= 5.22%

Titan industries profit margin has increased from 4.09 to 5.22% because in our view

sales has increased more in comparison of expenses .

COMPARISON:

For year 2008-2009:- HMT Ltd.is suffering loss with loss margin of -43.55 % as

Titan Industries has profit margin of 4.09 %.It clearly indicates Titan Industry is

better.

For year 2010-2011 :- HMT Ltd.is suffering loss and as Titan Industry has profit

margin of 5.22%,it clearly indicates Titan is better.

2 ASSETS TURNOVER:The assets turnover ratio measures the ability of a company to use its assets togenerate sales. It can be calculated in the following manner: -

ASSETS TURNOVER = Sales/Average Total Assets

Average Total Assets = [Opening Assets+ Closing Assets] / 2

HMT Ltd.

Asset turnover ratio (2008-2009) =

[164.44/ {(341.93 +1323.27)/2}]*100

=0.1219times


[193.46/ {(1318.15 +1323.27)/2}]*100 =0.15times


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The assets turnover has increased from 0.12 times in 2009 to 0.15 times in

2010 mainly because of inventory management has improved as we can see

with closing figures of inventories of both the years.

Titan industries


[3881.75/ {(694.05 +726.64)/2}]

= 5.4times


[4794.70/ {(726.04+797.18)/2}]

= 6.30times

Assets turnover has improved as in 2009, assets turnover ratio was 5.46 times

as in 2010 it was 6.30.It indicates company is managing its assets efficiently.

COMPARISON:

For year 2008-2009:-as HMT Ltd is suffering loss, and by the figures of assets

turnover ratio we can say that Titan Industries is performing better.

For year 2009-2010:- Also in this year HMT Ltd. is suffering huge loss and Titan

Industries assets turnover ratio has improved, it clearly shows that titan

industries is better.

3) Return on Assets :-

It measures the profitability from a given level of investment.

Return on Assets= [Profit after Tax / Average Total Assets] * 100

Average Total Assets= (Opening Assets+ Closing Assets) / 2


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HMT Ltd.

Return on Assets (2008-2009) =

[-70.79/ {(1341.93 + 1323.27)/2}]*100

= -5.31%


[-52.91/ {(1318.15 +1323.27)/2}]*100

= -4.006%

In HMT Ltd, return on assets has increased from -5.31%to -4%. This shows

overall loss of HMT ltd has drecresed.

Titan industries


[158.96/ {(694.05 + 726.64)/2}]*100

= 22.38%


[250.32/ {(726.64+797.18)/2}]*100

= 32.85%

In titan industries return on assets has increased from 22.38% to 32.85 this

shows that overall profitability of Titan industries is increased.

COMPARISON:

For year 2008-2009:- HMT Ltd has return on assets of 5.31% and that of Titan

industries it is 5.46% which menace Titan industries is more profitable.

For year 2009-2010:- HMT Ltd has return on assets of 4.006% and that of Titan

industries it is 6.30% which menace Titan industries is more profitable.

4) Return on Equity:-

The Return on Equity or return on net worth allows investors to see how

effective the money invested is being used.

Return on Equity= [Profit after Tax / Avg. Shareholders Equity]* 100


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Avg. Shareholders Equity= [Opening+ closing Shareholder Equity] / 2

Share holder equity = Share capital + Preferential share capital+ Reserve &

Surplus

HMT Ltd.

Return on Equity (2008-2009) =

[-70.79/ {(307.15 + 377.90)/2}]*100

= -20.66%


[-52.91/ {(254.24 + 307.15)/2}]*100

= -18.84%

As HMT Ltd is suffering loss Return on equity is in negative but Return on

equity has shown some improvement from -20.66% in 2009 to -18.84% in

2010.This is the good sign for the company.

Titan industries


[158.96/ {(436.17 + 151.24)/2}]*100

= 32.20%


[250.32/ {(551.24 + 724.38)/2}]*100

= 39.25%

Titan industries has shown improvement in return on equity of 7.05% it is good

sign for the company.

COMPARISON:

For year 2008-2009:- As HMT Ltd. return on equity is negative and Titan

industries has return on equity of 32.20%, which means Titan industries has

good profitability from shareholders view.


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For year 2009-2010:-As HMT Ltd has ROE of -18.84% which is slightly good

than previous year but still HMT Ltd is less profitable than Titan industries

which has ROE of 32.85%.

5) Earning Per Share:-

Earning per share shows income earned per share by the share holders.

Earning per Share = [Profit after tax / Number of Equity shares]

HMT LTD.

Earning per share (2008-2009) = -70.99*10000000/7603.5*100000

= Rs -0.93 per share

Earning per share (2009-2010) = -52.91*10000000/7603.50*100000

= Rs -0.70 per share

Earning per share of HMT has improvement from -0.93 to -0.77. This gives ray

of hope to share holder that company may turn out to be profitable.

Titan Industries

Earning per share (2008-2009) = 158.96*10000000/443.89*100000

= Rs. 35.81 per share

Earning per share (2009-2010) = 250.32*10000000/443.89* 100000

= Rs 56.39 per share

EPS has improved from 35.8% to 56.39% which means profitability has

improved i.e. earning of share holder has increased.

COMPARISON:

For year 2008-2009:-EPS of HMT ltd. is negative that is o -0.93 whereas Titan

industries has EPS of 35.81 which clearly means Titan Industries is better from

investors point of view.


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For year 2009-2010:-EPS of HMT ltd. is of -0.70 whereas Titan industries has

EPS of 56.39 which clearly means Titan Industries is better from investors

point of view.

LIQUIDITY RATIOS

1) Current Ratio:-

The current ratio is used to evaluate the firms ability to pay its short term

debts obligations.

Current Ratio = Current Assets / Current Liabilities

Current Assets = Inventories + sundry debtors + cash +

Loan & Advances

Current Liability = Current Liabilities + Provision

HMT ltd:

Current Ratio (2008-2009) = 724.99/214.37

= 3.38:1

Current Ratio (2009-2010) = 700.73/194.46

=3.60:1

In 2009 current ratio was 3.38:1 which moved to 3.60 :1 which shows that

company is moving towards ideal ratio of 2:1.It also shows that company has

sufficient current assets to pay its debts in short term.

Titan Industries:Current Ratio (2008-2009) = 1492.42/1067.44

= 1.40:1

Current Ratio (2009-2010) = 1821.65/1307.02

=1.39:1

As current ratio of Titan Industries is less than 2:1 which is ideal position, it

means that Titan Industries may default in payment of its short term debts.


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COMPARISON:

For the year 2009-2010:- In this year HMT Ltd has current ratio more than Titan

Industries, but Titan Industries has current ratio of 1.40:1 which in our opinion is

dangerous for the company. As higher current ratio is better than lower i.e. lower

than 2:1, so HMT Ltd is better.

For the year 2010-2011:- In this year HMT Ltd has current ratio more than Titan

Industries, but Titan Industries has current ratio of 1.39:1 which in our opinion is

dangerous for the company. As higher current ratio is better than lower than 2:1, So

HMT Ltd is better.

2) Quick Ratio:-

It is a measurement of how well a business can meet its short term financial

obligation without selling any inventory.

Quick Ratio = Quick Assets / Current Liabilities

Quick Assets = Current Assets - Inventories

HMT Ltd.

Quick Ratio (2008-2009) = (700.73-40.38)/194.46

=3.40:1

Quick Ratio (2009-2010) = (724.99 29)/214.37

= 3.25:1

In both the years quick ratio is higher than ideal level of 1:1.It means company

does not require to sell its inventory to generate cash.

Titan Industries

Quick Ratio (2008-2009) = (1492.42 1202.69)/1067.44

=0.27

Quick Ratio (2009-2010) = (1821.65 1340.33)/1307.02

= 0.37


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Debtor Turnover Ratio (2009-2010) =

[4674.42/ {(93.61 + 106.22)/2}] = 46.78

DTR has increased from 38.31 to 46.78 which means debtors are being quickly

converted in cash in comparison to 2009 which reflects good portfolio ofdebtor.

COMPARISON:-

As DTR of Titan Industries is very high than HMT Ltd. which clearly indicates

that Titan Industries has quality debtors and debt collection mechanism is

good than HMT Ltd.

4) Average debt collection period:-

It is basically measures the time taken for collection of debt.

Average Debt Collection Period = 360 days / Debtors Turnover

HMT Ltd.

Average debt collection period (2008-2009) = 360/1.82

= 197.80 days


= 133.33 days

Average Debt Collection period has decreased from 197.80 to 133.33.In 2009-2010 recovery of debt from debtors are taking less days as compared to

previous years but still this period is quite high which is not good for the

company.

Titan Industries


= 9.40 days


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= 7.70 days

Average debt collection period has decreased from 9.40 days to 7.70 days. It

shows limited blockage of funds with debtors which decreases chance of bad

debt and also indicates the efficiency of good management. In this year

recovery of debt from debtors are taking less days as compare to previous

year.

COMPARISON:-

For the year 2008-2009:- Average debt collection period of both companies

clearly shows that titan industries is better as it has average collection period

of 9.40 in comparison to 197.80 of HMT Ltd. Titan industries Debtors are being

quickly converted into cash.

For the year 2009-2010:-. In this year HMT Ltd collects debt from its debtors in

133.33 days where as Titan industry collects debts from its debtors in 7.70

days. It is clearly being concluded that the amount from debtors of Titan

Industry has being quickly collected as compared to HMT ltd.

5) Inventory Turnover Ratio:-

It measures the number of times a companys inventory is turned into sales.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventories

Average Inventory = [Opening Inventory + Closing Inventory] / 2

HMT Ltd.

Inventory Turnover Ratio (2008-2009)

= [208.4/ {(552.40 + 40.38)/2}]

= 4.49 times


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= [212.6/ {(29 + 40.38)/2}]

= 6.13 times

It has increased from 4.49 times in 2008-2009 to 6.13 times in 2009 it shows

that stock has been efficiently used and also that stock is selling quickly in

comparison to previous year.

Titan Industries


= [3627.63/ {(1021.09 + 1202.69/2}]

= 3.26 times


= [4318.96/ {(1340.33 +1202.69)/2}]

= 3.40 times

There is marginal increase of 0.14 from 2009-2010 it shows bit improvement in

inventory management but still inventory turnover is quite low which is notgood.

COMPARISON:

For the year 2008-2009:- Here HMT Ltd. Has inventory turnover of 4.49 and

where as Titan Industries has inventory turnover of 3.26 it shows HMT Ltd. has

slightly better Inventory management.

For the year 2009-2010:- In this year HMT Ltd. had inventory turnover ratio of

6.13 times and where as Titan Industries had inventory turnover ratio is 3.40

times. It is clearly being concluded that the HMT Ltd. indicates efficient

inventory management and fast moving inventory as compared to Titan

Industries.

6) Average Inventory Holding Period:-

It means the period or average no. of days the company is holding the

inventory.


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Average inventory holding period = 360 days / Inventory Turnover Ratio

HMT Ltd:-

Average Inventory Holding period (2008-2009) = 360/4.49

=80.17 days


= 58.13 days

Average Inventory Holding Period has gone down from 80.17 days to 58.13

days which is good for HMT Ltd. as the money blocked in Inventories will get

converted into sales in fewer days this year as compare to previous year.

Titan Industries:-


= 110.42 days


= 105.88days

Average Inventory Holding Period has gone down from 110.42 days to 105.88

days which is good for Titan industries as the money blocked in Inventories

will get converted into sales in fewer days this year as compare to previous

year.

COMPARISON:

For the year 2008-2009:- In this year HMT Ltd. had Average Inventory Holding

Period is 80.17 days and where as Titan industries had Average Inventory

Holding Period is 110.42 days. It is clearly being concluded that the HMT Ltd.

indicates efficient inventory management as compared to Titan industries.

For the year 2009-2010:- In this year HMT Ltd. had Average Inventory Holding

Period is 58.13 days and where as Titan Industries had Average Inventory


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Holding Period is 105.88 days. It is clearly again being concluded that the HMT

Ltd. indicates efficient inventory management as compared to Titan Industries.

7)OPERATING CYCLE PERIOD:-

It is the time taken to turn inventory into debtors via credit sales PLUS time

taken to turn debtors into cash.

HMT Ltd:-

2008-2009 2009-2010Average Inventory holdingperiod

80.17 days 58.13 days

Average Debt Collectionperiod

197.80 days 133.33 days

Operating Cycle 277.97 days 191.46 days

It is clearly been seen from the above table that operating cycle has improved

from the previous year.

Titan Industries:-

2008-2009 2009-2010Average Inventory holdingperiod

110.42 days 105.85 days

Average Debt Collectionperiod

9.40 days 7.70 days

Operating Cycle 119.82 days 113.85 days

It is clearly been seen from the above table that operating cycle has improved

from the previous year.


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COMPARISON:

For the year 2008-2009:-As operating cycle period of HMT Ltd. is 277.97 days

and whereas of Titan industries is 119.82 days, so we can easily conclude that

Titan industries is having better position in operating cycle period as

compared to HMT Ltd.

For the year 2009-2010:-As operating cycle period of HMT Ltd. is 191.46 days

and whereas of Titan industries is 113.85 days, so we can again conclude that

Titan industries is having better position in operating cycle period as

compared to HMT Ltd.

SOLVENCY RATIOS

It gives a picture of a companys ability to generate cash flow and pay it

financial obligations. It includes Debt Equity Ratio, Liability to Equity Ratio and

Interest coverage ratio.

1) Debt Equity Ratio:-

It measure the relationship of the capital provided by the creditors to the

amount provided by the shareholders .

Debt Equity Ratio = Debt / Equity

Debt = Secured loans + Unsecured loans

Equity = Share capital + Reserve & Surplus

HMT Ltd

Debt Equity Ratio (2008-2009) = [573.10/(760.35+(-453.20))]

= 1.86

Debt Equity Ratio (2009-2010) = [620.91/(760.35+(-506.11))]

= 2.44

Debt-Equity ratio in 2008-2009 is 1.86 and where as in 2009-2010 is 2.44 which

is clearly showing that it is low in present year, which indicates company is

increasing its degree of financial leverage and company is taking more risk

than to previous year.


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Titan Industries:-

Debt Equity Ratio (2008-2009) = [175.41 /(44.39+506.89)]

= 0.32

Debt Equity Ratio (2009-2010) = [72.79/ (44.39+679.99)]

= 0.10

Debt-Equity ratio in 2008-2009 is 0.32 and where as in 2009-2010 is 0.10 which

is clearly showing that it is low in present year, which indicates there is a small

degree of leverage and the company is too conservative and it is less risky for

creditors.

COMPARISON:-

For the year 2008-2009:-Debt-Equity Ratio of HMT Ltd. is 1.86 and whereas of

Titan Industries is 0.32. So we can easily conclude that HMT Ltd. has higher

leverage and risky for creditors.

For the year 2009-2010:-Debt-Equity Ratio of HMT Ltd. is 2.44 and that of titan

industries is 0.10 and we can clearly conclude that titan industry is less risky

and more conservative using less leverage than HMT Ltd.

2) Liability to Equity Ratio:-

A variant of the Debt-Equity Ratio is the liabilities to equity Ratio. Here, the

numerator has not only debt but also current liabilities and deferred tax

liability in order to get the firms total liabilities.

Liability to Equity Ratio = All Liabilities / Shareholders Equity

All Liabilities = Total Liabilities - Shareholders Equity

All liabilities = Secured loans + Unsecured Loans + Current liability &

Provisions

Share holder equity = Share capital + Preferential share capital+ Reserve &

Surplus


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HMT Ltd.

Liability to Equity ratio (2008-2009) =

All liabilities= total liabilities- share holders equity

=(1590-{760.35-382.41})=1212.7

Liability to Equity ratio= (1212.7 / 377.94)

= 3.21


All liabilities= total liabilities- share holders equity=

(1087.52-{160.35-506.11})= 833.28

Liability to Equity ratio= (833.28/254.24)

=3.28

Liability-Equity Ratio in 2008-2009 is 3.21 and it has increased to 3.28 in 2009-

2010. It shows that liabilities has increased and shareholders equity had also

increased but at low rate

Titan Industries:-


All liabilities= total liabilities- share holders equity=

(1794.09 551.24)=1242.85

Liability to Equity ratio = (1242.85 / 551.24)

= 2.25


All liabilities= total liabilities- share holders equity

=(2104.19-724.38)=1379.81


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Liability to Equity ratio = (1379.81 / 724.38)

= 1.90

Liability-Equity Ratio in 2008-2009 is 2.25and it has decreased to 1.90 in 2009-

2010. It shows that shareholder equity has increased but all liabilities had

decreased at high rate.

COMPARISON:-

For the year 2008-2009:-Liability-Equity Ratio of HMT Ltd. is 3.21 and whereas

of Titan is 2.25, which means HMT Ltd. has more liability than Titan industries.

For the year 2009-2010:-Liability-Equity Ratio of HMT Ltd. is 3.28 and whereas

of Titan industries is 1.90, which means that Titan industries has less liabilityas compare to HMT Ltd.

Interest Coverage Ratios

Measures the protection available to the creditors for payment of interest

charges by the company. This shows whether the company has sufficient

income to cover its interest payments

Interest coverage ratio =PBIT/Interest Expense

PBIT=PBDIT-Dep.

HMT Ltd:-

Interest coverage ratio(2008-2009) =

(-4.28-3.20)/63.68 = -0.12

Interest coverage ratio(2009-2010) =

(19.99-3.92)/68.61=0.23

As Interest coverage ratio has improved from -0.12 to 0.23,it shows that

company has sufficient income for the payment of interest in comparison to

previous year.

Titan industries:-

Interest coverage ratio(2008-2009)=

(340.77-41.76)/68.46=4.37


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Interest coverage ratio(2009-2010)=

(444.92-60.08)/63.52=6.06

As Interest coverage ratio has improved from 4.37 to 6.06,it shows that

company has sufficient income for the payment of interest in comparison toprevious year.

COMPARISON

For 2008-2009:- As HMT Ltd.has interest coverage ratio of -0.12 and that of

Titan Industries it is 4.37. Which clearly shows that Titan Industries has more

safety for the payment of interest.

2009-2010:- As HMT Ltd.has interest coverage ratio of 0.23 and that of Titan

Industries it is 6.06. Which clearly shows that Titan Industries has more safety

for the payment of interest.

Capital Market Ratios

Capital Market ratio evaluate the economic status of the company in the widermarket place.

1) Price Earning Ratio:-

It is considered as an indicator of a firms growth prospects.

Price Earning Ratio = Average stock price per Share / Earning per Share

HMT Ltd:-

Price Earning ratio (2008-2009) =

Average Stock Price= (72.10+69)/2=70.55

Price Earning ratio = 70.55 / -0.93 = -75.86 times


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Average Stock Price= (70.75+68.65)/2= 69.7

Price Earning ratio = 69.7/-0.70= -99.57times

In 2008 -2009 HMT Ltd has profit earning ratio of -75.86 in 2009-2010 it is -99.52

which shows stock market has almost no faith that company will recovered

from loss in future.

Titan Industries:-


Average Sock Price=(74.75+70.76)/2=72.76

Price Earning ratio= 72.76/ 35.81= 2.03 times


Average stock price=(181.75+176.75)/2=179.25

Price earning ratio=179.25/56.39 = 3.18 times

In 2008-2009 Titan industries has profit earning ratio of 2.03 and in 2009-2010 it

is 3.18. It shows stock market is showing some confident in companies future

earning.

COMPARISON:-

For the year 2008-2009:- In 2008-2009 HMT Ltd. Has profit earning ratio of

-75.86 and Titan industries has that of 2.03 which clearly indicates that stock

market is more confident about titan industries.


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For the year 2009-2010:- Price Earning ratio of HMT Ltd. is -99.57 whereas of

Titan industries is 3.18. We can easily conclude that Titan industries is having

a bright future earning growth.

2) Dividend Yield Ratio:-

It represents the current cash return to shareholders.

Dividend Yield Ratio = Dividend per Share / Average stock Price per Share

HMT Ltd:-

Dividend Yield Ratio (2008-2009) = 0 /69.15

= 0

Dividend Yield Ratio (2010-2011) = 0/ 69.10

= 0

In both the year dividend yield is 0 as no dividend by the company which

means shareholders are not getting any return of their investment.

Titan industries:-

Dividend Yield Ratio (2008-2009) = 10/72.76

= 0.14

Dividend Yield Ratio (2009-2010) = 15/ 179.25

= 0.08

Dividend yield has declined from 0.14 in2008-209 to 0.08in 2009-2010 which

shows declining cash return to shareholders.


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COMPARISON:-

For the year 2008-2009:- As HMT Ltd. has 0 dividend yield and Titan industries

has dividend yield of 0.19 therefore, Titan industries is better than HMT ltd.

For the year 2009-2010:- Dividend Yield ratio of HMT Ltd. is 0 whereas of Titan

Industries is 0.08. So we can easily conclude that Titan industries is having

high Dividend Yield ratio which indicates that the cash return on the shareswent up.


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Accounts Project on Ratio Analysis

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