BY: JYOTSNA KUMARI

REG NO: 1261333028

LIQUIDITY RATIO Liquidity ratios are the ratios that measure the ability of a company

to meet its short term debt obligations. These ratios measure the

ability of a company to pay off its short-term liabilities when they

fall due.

The liquidity ratios are a result of dividing cash and other liquid

assets by the short term borrowings & current liabilities.

The ratios under liquidity ratio are:

Current ratio

Quick ratio

Absolute liquid ratio

Inventory to working capital ratio

CURRENT RATIO An indication of a company's ability to meet short-term

debt obligations.

Higher the ratio the more liquid the company is.

If current assets are more than twice of the current liabilities then

it is considered to have good short term financial strength and if

current liabilities exceed current assets then company may have

problem to meet its short term obligations.

Formula:

Current ratio=Current assets/Current liabilities

Year Current Assets

Current Liabilities

Current ratio

2011 1333.03 2216.96 0.601

2010 1094.70 1751.61 0.624

2009 903.36 1501.18 0.601

2008 836.86 1259.75 0.664

2007 678.69 1027.31 0.660

GRAPHICAL REPRESENTATION

0.56

0.58

0.6

0.62

0.64

0.66

0.68

2011 2010 2009 2008 2007

current ratio

current ratio

INTERPRETATION To measure whether or not a company has enough resources to

pay its debt over the next business cycle, I have calculated the

Current Ratio, which shows a fluctuating trend of 0.60 in

2011 then 0.62 in 2010 and finally a slowdown from 0.66 in 2008

to 0.60 in 2009.Though the general rule is a company should have

neither more nor less liquidity rather a company should always

have sufficient liquidity and as we know that the Thumb Rule is

2:1 but the calculated Current Ratios show an in-sufficient

liquidity.

QUICK RATIO Measure of a company's  liquidity and ability

to meet its obligations.

Also referred to as acid-test ratio and Liquid Asset ratio.

Liquid asset means all current asset except closing stock and

prepaid expenses.

Formula: quick ratio = liquid assets/current liabilities.

Year Liquid Assets

Current Liabilities

Quick ratio

2011 598.99 2216.96 0.270

2010 518.75 1751.61 0.296

2009 404.62 1501.18 0.269

2008 401.95 1259.75 0.319

2007 277.47 1027.31 0c.270

GRAPHICAL REPRESENTATION

0.240.250.260.270.280.29

0.30.310.320.33

2011 2010 2009 2008 2007

quick ratio

quick ratio

INTERPRETATION We have also calculated Quick Ratios to show a fluctuating trend

and a decline at the end of the year 2011. Though, the thumb

rule is that companies with a quick ratio of greater than 1.0 are

sufficiently able to meet their short-term liabilities but here the

company has low Quick Ratio indicating the company’s liquidity

position is not good enough

ABSOLUTE LIQUID RATIO In addition to computing current and quick ratio, some analysts

also compute absolute liquid ratio to test the liquidity of the

business.

Absolute liquid ratio is computed by dividing the absolute liquid

assets by current liabilities.

Formula: absolute liquid ratio = absolute liquid

assets/current liabilities.

Year Absolute Liquid Assets

Current Liabilities

Absolute Liquid ratio

2011 227.21 2216.96 0.1024

2010 255.29 1751.61 0.1457

2009 155.59 1501.18 0.1036

2008 193.69 1259.75 0.1537

2007 37.76 1027.31 0.0367

GRAPHICAL REPRESENTATION

00.020.040.060.08

0.10.120.140.160.18

2011 2010 2009 2008 2007

absl. Liquid ratio

absl. Liquid ratio

INTERPRETATION To check whether the liquidity position of the company is

good or not we have also calculated absolute liquid ratio and

as we can see in every year the absolute liquid ratio is lower

than the thumb rule that is 1:2, so the company’s liquidity

position isn’t good.

INVENTORY TO WORKING CAPITAL RATIOWorking capital is known as excess of current assets over

current liabilities.Formula: Inventory to working capital ratio

=Inventory/working capital

INVENTORY TO WORKING CAPITAL RATIOYEAR

Inventory Working capital Inventory to working capital ratio

2011 734.04 -883.93 -83.04277488

2010 575.95 -656.91 -87.67563289

2009 498.74 -597.82 -83.42644943

2008 434.91 -422.82 -102.8593728

2007 401.22 -348.61 -115.0913628

-140

-120

-100

-80

-60

-40

-20

0

2011 2010 2009 2008 2007

Inventory to working capital ratio

inventory to w.c ratio

INTERPRETATION

The company total liabilities is greater than the total assets.

So the working capital we are getting is in negative terms.

So the organisations performance is not good due to the lesser assets.

FINDINGSIn current ratio, we have to find out current

asets and the current liabilities. In 2008, it is the highest as compared to other years. But it remains same in 2009 and 2011.

In quick ratio, we have to find out liquid assets and current liabilities. In 2008, it is highest as compared to other years . But it is lowest in 2007 and the ratio is showing average in 2009, 2010 and 2011

Cont……In absolute liquid ratio, we need to find out

theabsolute liquid assets and current liabilities. In 2008 , it is highest as compared to the other years. It is average in 2011,2010,2009 and lowest in 2007

In inventory to working capital ratio, we need to find out the working capital which requires current assets value and current liabilities value.

and inventory or closing stock. As, current liabilities exceeds current assets, so it is

showing negative terms in all years.