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CHAPTER- IV
DATA ANALYSIS AND INTERPRETATION
management and employee and because of strike company is in lose so company
should take serious step regarding employee satisfaction for to improve
shareholder wealth
B. LEVERAGE ANALYSIS:-
1. DEGREE OF OPERATING LEVERAGE (DOL
2. DEGREE OF FINANCIAL LEVERAGE (DFL
3. DEGREE OF TOTAL LEVERAGE (DTL)
1. DEGREE OF OPERATING LEVERAGE:-
DOL 2005:-
DOL=GROSS PROFIT / EBIT
DOL=882.45/136.08
DOL=6.484
DOL 2006:-
DOL= GROSS PROFIT / EBIT
DOL=1161.21/221.17
DOL=.5254 DOL 2007:-
DOL=GROSS PROFIT / EBIT
DOL=1895.53/193.08
DOL=9.817
DOL 2008:-
DOL= GROSS PROFIT / EBIT
DOL=1704.72/317.29
DOL=5.372
DOL 2009:-
DOL=GROSS PROFIT / EBIT
DOL=1668.90/426.11
DOL=3.916
TABLE-2
DEGREE OF OPERATING LEVERAGE:
Interpretation and Analysis:
The above table and diagram shows the operating leverage during
the study period except in the year 2006-2007 is more than previous year but in
year 2007-08 it again decreased and year 2008-09 it again come down
The DOL is an index number which measures the effect
of a change in sales on operating income, or EBIT. It shows that
Interpretation and Analysis:
The above table and diagram shows the operating leverage during
the study period except in the year 2006-2007 is more than previous year but in
year 2007-08 it again decreased and year 2008-09 it again come down
The DOL is an index number which measures the effect
of a change in sales on operating income, or EBIT. It shows thatcompany is giving less amount and bear less depritiation charge it is good for company.
2. DEGREE OF FINANCIAL LEVERAGE:-
DFL 2005:-
DFL=PBIT / PBT
DFL=136.08/86.76
DFL=1.568
DFL 2006:-
DFL=PBIT/PBT
DFL=221.17/161.20
DFL=1.372
DFL 2007;-
DFL=PBIT/PBT
DFL=193.08/72.48
DFL=2.663
DFL 2008:-
DFL=PBIT/PBT
DFL=317.29/140.74
DFL=2.254
DFL 2009:-
DFL=PBIT / PBT
DFL=426.11/247.26
DFL=1.723
TABLE-3
DEGREE OF FINANCIAL LEVERAGE:
Year DFL
2004-20052005-20062006-20072007-20082008-2009
1.5681.3722.6632.2541.723
CHART-3
DFL:
Interpretation and Analysis:
The above table and diagram shows the student period 2004-05 to 2008-
09.in the year 2006-07it was very high it was nit good for the company because
during this period company is paying fixed interest on debt but in year 2008-09
It comes down it mean company is is paying less interst so it is good for
Interpretation and Analysis:
The above table and diagram shows the student period 2004-05 to 2008-
09.in the year 2006-07it was very high it was nit good for the company because
during this period company is paying fixed interest on debt but in year 2008-09
It comes down it mean company is is paying less interst so it is good for company.
3. DEGREE OF TOTAL LEVERAGE:-
DTL 2005:-
DTL=DOL*DFL
DTL=6.484*1.568
DTL=10.17
DTL 2006:-
DTL=DOL*DFL
DTL=.5254*1.372
DTL=.720
DTL 2007:-
DTL=DOL*DFL
DTL=9.817*2.663
DTL=26.14
DTL 2008:-
DTL=DOL*DFL
DTL=5.372*2.254
DTL=12.108
DTL 2009:-
DTL=DOL*DFL
DTL=3.916*1.723
DTL=6.747
TABLE-4
DEGREE OF TOTAL LEVERAGE:
B)L EVERAGE RATOS:
Many financial analyses are interested in the relative use of debt and
equity in the firm. The term ‘solvency’ refers to the ability of a concern to meet
its long-term obligation. Accordingly, long-term solvency ratios indicate a
firm’s ability to meet the fixed interest and costs and repayment
schedules
associated with its long-term borrowings. (E.g.) debt equity ratio,
proprietary
ratio, etc….
i) DEBT EQUITY RATIO:
It expresses the relationship between the external equities and internal equities or the relationship between borrowed funds and ‘owners’
capital. It is a popular measure of the long-term financial solvency of a firm.
This relationship is shown by the debt equity ratio. This ratio indicates the
relative proportion of dept and equity in financing the assets of a firm. This ratio
is computed by dividing the total debt of the firm by
its equity (i.e.) net worth.
Outsider’s funds
Debt equity ratio = ------------------------------
Proprietor’s funds
TABLE-5
DEBT EQUITY RATIO:
Interpretation and Analysis:
The above table and diagram shows the debt equity relationship of the
company during the study period. It was 0.4 in the 2004-05 and then reached its
highest in the next year and from there it began to slope downwards and
ultimately came to 1.08 in the year 2008-09.
In all the years the equity is more when compared with borrowings.
Hence the company is maintaining its debt position
ii) PROPRIETARY RATIO:
Proprietary ratio relates to the proprietors funds to total assets. It
reveals the owners contribution to the total value of assets. This ratio shows the long-time solvency of the business it is calculated by dividing proprietor’s funds
by the total tangible assets.
Proprietor’s funds
Proprietary ratio = ---------------------------
Total tangible assets
TABLE-5
:
CHART-5
PROPRIETARY RATIO:
Interpretation and Analysis:
The above table and diagram shows the proprietary ratio during the
period. In all the years the owner's contribution to the total assets was approp
and they maintain their share in the company's assets.
Except 2005-06 in all the years the proprietor's contribution in to the
assets is more than the 2/3. During 2006-07 it is more than 50%
C. ROI-ROE ANALYSIS:-
ROE= [ROI+(ROI-r)D/E](1-t)
RETURN ON INVESTMENT = Net profit /capital employed ×
(ROI)
ROI OF 2005
ROI=99.52/644.22*100
ROI=15.44
ROI OF 2006
ROI=131.50/932.85*100
ROI=14.09
ROI OF 2007
ROI=75.43/1693.59*100
ROI=4.45
ROI OF 2008
ROI=111.52/1952.42*100
ROI=5.71
ROI OF 20O9:
ROI=169.78/1756.79*100
ROI=9.6609
ROI-ROE ANALYSIS:- 2005
ROE=[ROI+(ROI-r)D/E](1-t)
ROE=[15.44+(15.44-10 )*.39](1-.24)
ROE= 13.34
ROI-ROE ANALYSIS:- 2006
ROE=[ROI+(ROI-r)D/E](1-t)
ROE=[14.09+(14.09-12 )*1.27](1-.29)
ROE= 12.59
ROI-ROE ANALYSIS:- 2007
ROE=[ROI+(ROI-r)D/E](1-t)
ROE=[4.45+(4.45-10 )*.67](1-.039)
ROE=o.88
ROI-ROE ANALYSIS:- 2008
ROE=[ROI+(ROI-r)D/E](1-t)
ROE=[5.71+(5.71-12 )*.65](1-.228)
ROE= 1.25
ROI-ROE ANALYSIS:- 2009
ROE=[ROI+(ROI-r)D/E](1-t)
ROE=[9.66+(9.66-11 )*1.08](1-.726)
ROE=2.25
INTERPRETATION:-
IN the study of 2004-05 to 2008-09 the return on equity from 2005-2006 was
good but in year 2007-09 it was not good its mean investment is not up to the
mark it’s a drawback for shareholder so company should work hard to control
this low graph.