Description
This is a presentation explaining financial statement analysis of Bharti Enterprises. It also includes Bharti's comparison with Idea Cellular.
Bharti Enterprise Analysis
1. Current Ratio= Total current assets/ Total current liabilities
Airtel Idea
2006 2007 2008 0.4143 0.4204 0.7382 2.12 1.14 0.6
Increase in current ratio from 2007 to 2008 is due to-short term investment (trading investment 20 lakhs and 4.8 crores) bharathi airtel.xlsx
Bharti Enterprises
2. Quick Ratio or Acid Test Ratio= (Total current assets- InventoryPrepaid expenses)/ Total current liabilities
Airtel Idea
2006 2007 2008 0.2664 0.2723 0.5601 0.3425 0.95 0.285
Increase in quick ratio from 2007 to 2008 is due to short term investment bharathi airtel.xlsx
Bharti Enterprises
3. Super Quick Ratio= (Total current assets- Inventory- Prepaid expensesBills receivable)/ Total current liabilties
2006 2007 2008 0.0847 0.1036 0.3781 0.2252 0.8808 0.2092
Airtel Idea
Same as current ratio & super quick ratio bharathi airtel.xlsx
Bharti Enterprises
4. Cash flow from operations Ratio= Cash flow from operations/ Current liabilties
2006 2007 2008 0.6196 0.6694 0.3700 1.0627 0.7459 0.9531
Airtel Idea
Decrease in ratio from 2007 to 2008 is due to Increase in short term investment on account of negative cash out flow from operations Unbilled receivables have increased bharathi airtel.xlsx
Bharti Enterprises
5. Debt Equity Ratio= Total liabilties/ Shareholder’s equity
2006 2007 2008 1.3463 1.1842 1.1382 1.2979 1.3828 1.8456
Airtel Idea
Reason for decrease in ratio from 2006 to 2007 is due to Increase in retained earnings bharathi airtel.xlsx
Bharti Enterprises
6. Debt to total Capital Ratio=Long term debt/ Permanent Capital
2006 2007 2008 0.2920 0.2499 0.2767 0.5063 0.4785 0.5648
Airtel Idea
bharathi airtel.xlsx
Bharti Enterprises
7. Debt to total Assets Ratio= Total debt/ Total Assets
2006 2007 2008 0.5712 0.5389 0.5226 0.5648 0.5803 0.6455
Airtel Idea
bharathi airtel.xlsx
Bharti Enterprises
8. Proprietory Ratio= 100 x Proprietors fund/ Total Assets
2006 42.43 43.51 2007 45.50 41.96 2008 45.92 34.94
Airtel Idea
Bharti Enterprises
Increase in proprietory ratio from 2006 to 2007 is due to the increase in retained earning by more than 200% in 2007 while Total assets increased by just 38% bharathi airtel.xlsx
9. Interest Coverage Ratio= EBIT/ Interest
2006 9.29 1.94 2007 16.19 2.86 2008 18.86 3.45
Airtel Idea
Increase in coverage ratio from 2006 to 2007 is due to increase in EBIT by 81% while interest expense was almost constant From 2007 to 2008 is due to increase in EBIT by 55% and interest expense increased by 33% bharathi airtel.xlsx Bharti Enterprises
10. Gross Profit margin= Gross profit/ Sales
Airtel Idea
2006 2007 2008 0.4022 0.4204 0.4331 0.5021 0.4817 0.4799
bharathi airtel.xlsx
Bharti Enterprises
11. Operating Profit Ratio= EBIT/ Net Sales
2006 2007 2008 0.2365 0.2661 0.2829 0.2308 0.2112 0.2254
Airtel Idea
Increase in operating profit ratio is due to-Year on Year increase in EBIT was more than Net Sales bharathi airtel.xlsx
Bharti Enterprises
12. Pre-tax Profit Ratio= EBT/ Net Sales
2006 2007 2008 0.2110 0.2497 0.2679 0.1120 0.1375 0.1602
Airtel Idea
Increase in pre-tax profit ratio is due toYear on Year increase in EBIT was more than Net Sales bharathi airtel.xlsx
Bharti Enterprises
13. Net Profit Ratio= Net Profit (PAT)/ Net Sales
2006 2007 2008 0.1941 0.2298 0.2479 0.0622 0.1144 0.1550
Airtel Idea
bharathi airtel.xlsx
Bharti Enterprises
14. Returns on Assets (ROA)= 100 x (Net Profit after Tax+ Interest)/ Average total Assets
2006 2007 2008 11.74% 15.31% 15.03% 5.55% 7.47% 10.47%
Airtel Idea
Increase in ROA in 2007 is on account of increase in Net profit by 91% whereas assets increased by 36% bharathi airtel.xlsx
Bharti Enterprises
15. Return on Capital Employed= EBIT/ Average total Capital employed
2006 2007 2008 0.1271 0.1665 0.1647 0.0709 0.0836 0.1075
Airtel Idea
Increase in 2007 ROCE is due to increase in EBIT by approximately 90% whereas Total capital employed increased by approximately 50% only bharathi airtel.xlsx
Bharti Enterprises
16. Equity Multiplier= Total Assets/ Total Shareholders Equity
2006 2007 2008 2.3567 2.1976 2.1776 2.2979 2.3831 2.8589
Airtel Idea
Decrease in Equity multiplier in 2007 is due to decrease in total assets by 36% and increase in shareholder’s equity by 46%. bharathi airtel.xlsx
Bharti Enterprises
17. Return on Equity= PAT/ Total Shareholders’ Equity
2006 2007 2008 0.2448 0.3140 0.3087 0.0442 0.1084 0.2108
Airtel Idea
Increase in ROE in 2007 is due to 91% increase in PAT while shareholders’ equity has increased by 46% bharathi airtel.xlsx
Bharti Enterprises
18. Asset Turnover Ratio= COGS/ Average Total Assets
2006 2007 2008 0.3198 0.3603 0.3241 0.1546 0.2070 0.2481
Airtel Idea
COGS has increased in 2007 at a greater rate as compared to Total assets. bharathi airtel.xlsx
Bharti Enterprises
19. Fixed Assets Turnover Ratio = COGS/ Average Fixed Assets
Airtel Idea
2006 2007 2008 0.3756 0.4242 0.4269 0.2064 0.2667 0.2492
bharathi airtel.xlsx
Bharti Enterprises
20. Capital Turnover Ratio= COGS/ Average Capital Employed
Airtel Idea
2006 2007 2008 0.3212 0.3625 0.3301 0.1546 0.2070 0.2492
bharathi airtel.xlsx
Bharti Enterprises
20. Inventory Turnover Ratio= COGS/ Average Inventory
2006
2007
2008
Airtel Idea
150.00 165.96 149.15 90.67 170.94 154.30
bharathi airtel.xlsx
Bharti Enterprises
Du Pont Analysis
The return on investment (ROI) ratio is used to evaluate how effectively assets are used. It measures the combined effects of profit margins and asset turnover. ROI = NET INCOME = NET INCOME * SALES . TOTAL ASSETS SALES TOTAL ASSETS
(PROFIT MARGIN) TURNOVER) (ASSET
The return on equity (ROE) ratio is a measure of the rate of return to stockholders. Decomposing the ROE into various factors influencing company performance is often called the Du Pont system
ROE = NET INCOME = NET INCOME * SALES * TOTAL ASSETS Bharti Enterprises EQUITY SALES TOTAL ASSETS
The Du Pont identity allows analysts to determine which of the elements is dominant in any change of ROE
? High turnover industries
Certain types of retail establishments, may have very low profit margins on sales, and relatively moderate leverage. In contrast, they may have very high turnover. ? High margin industries Industries such as fashion may derive a substantial portion of their competitive advantage from selling at a higher margin, rather than higher sales. ? High leverage industries The financial sector, rely on high leverage to generate acceptable ROE. Bharti Enterprises
Bharti Airtel
ROI ROE Profit Margin Asset Turnover Equity Multiplier
2005-06 2006-07
2007-08
0.0258 0.0432
0.0599
0.0608 0.0894
0.1304
0.1941 0.2298
0.2479
0.1331 0.1884
0.2415
2.3567 2.0648
2.1776
Idea Cellular
ROI 2005-06 2006-07 0.0273 0.0532 ROE 0.0437 0.0980 Profit Margin 0.062 0.104 Asset Turnover 0.440 0.512 Equity Multiplier 1.601 1.850
2007-08
0.0085
0.0208
0.155
0.550
2.450
Bharti Enterprises
Bharti Airtel
3
Idea Cellular
2.5
2.5
2
2 Equity Multiplier
Asset Turnover 1.5 1.5 ROE
Profit Margin
1
1
0.5
0.5
0 2006 2007 2008
0 2006 2007 2008
Bharti Enterprises
Cost of Equity
Ke = rf + b*(rm – rf) Risk free interest, rf = 5.3554 % rm-rf = 17.79 – 5.3554 = 12.456 Beta, b = 0.89 Ke = 16.42%
Bharti Enterprises
Cost of Capital
Kc = Ke*We + Kd*Wd + Kp*Wp + Kr*Wr
Bharti Enterprises
Bharti Enterprises
Cost of Debt, Kd
Kd = [ i(1-t) + [(f+d+Pr-Pi)/n)] ] / (SV +RV)/2
Bharti Enterprises
Du Point Analysis
The return on investment (ROI) ratio is used to evaluate how effectively assets are used. It measures the combined effects of profit margins and asset turnover. ROI = Net Income = Net Income * Sales . Total Assets Sales Total Assets
(Profit Margin) (Asset Turnover)
The return on equity (ROE) ratio is a measure of the rate of return to stockholders. Decomposing the ROE into various factors influencing company performance is often called the Du Pont system ROE = Net Income = Net Income * Sales * Total Assets Equity Sales Total Assets Equity
Bharti Enterprises
(Profit margin) (Asset Turnover) (Equity
Multiplier)
Bharti Airtel
ROI ROE Profit Margin Asset Turnover Equity Multiplier
2005-06 2006-07
2007-08
0.0258 0.0432
0.0599
0.0608 0.0894
0.1304
0.1941 0.2298
0.2479
0.1331 0.1884
0.2415
2.3567 2.0648
2.1776
Idea Cellular
ROI 2005-06 2006-07 0.0273 0.0532 ROE 0.0437 0.0980 Profit Margin 0.062 0.104 Asset Turnover 0.440 0.512 Equity Multiplier 1.601 1.850
2007-08
0.0085
0.0208
0.155
0.550
2.450
Bharti Enterprises
doc_991186968.pptx
This is a presentation explaining financial statement analysis of Bharti Enterprises. It also includes Bharti's comparison with Idea Cellular.
Bharti Enterprise Analysis
1. Current Ratio= Total current assets/ Total current liabilities
Airtel Idea
2006 2007 2008 0.4143 0.4204 0.7382 2.12 1.14 0.6
Increase in current ratio from 2007 to 2008 is due to-short term investment (trading investment 20 lakhs and 4.8 crores) bharathi airtel.xlsx
Bharti Enterprises
2. Quick Ratio or Acid Test Ratio= (Total current assets- InventoryPrepaid expenses)/ Total current liabilities
Airtel Idea
2006 2007 2008 0.2664 0.2723 0.5601 0.3425 0.95 0.285
Increase in quick ratio from 2007 to 2008 is due to short term investment bharathi airtel.xlsx
Bharti Enterprises
3. Super Quick Ratio= (Total current assets- Inventory- Prepaid expensesBills receivable)/ Total current liabilties
2006 2007 2008 0.0847 0.1036 0.3781 0.2252 0.8808 0.2092
Airtel Idea
Same as current ratio & super quick ratio bharathi airtel.xlsx
Bharti Enterprises
4. Cash flow from operations Ratio= Cash flow from operations/ Current liabilties
2006 2007 2008 0.6196 0.6694 0.3700 1.0627 0.7459 0.9531
Airtel Idea
Decrease in ratio from 2007 to 2008 is due to Increase in short term investment on account of negative cash out flow from operations Unbilled receivables have increased bharathi airtel.xlsx
Bharti Enterprises
5. Debt Equity Ratio= Total liabilties/ Shareholder’s equity
2006 2007 2008 1.3463 1.1842 1.1382 1.2979 1.3828 1.8456
Airtel Idea
Reason for decrease in ratio from 2006 to 2007 is due to Increase in retained earnings bharathi airtel.xlsx
Bharti Enterprises
6. Debt to total Capital Ratio=Long term debt/ Permanent Capital
2006 2007 2008 0.2920 0.2499 0.2767 0.5063 0.4785 0.5648
Airtel Idea
bharathi airtel.xlsx
Bharti Enterprises
7. Debt to total Assets Ratio= Total debt/ Total Assets
2006 2007 2008 0.5712 0.5389 0.5226 0.5648 0.5803 0.6455
Airtel Idea
bharathi airtel.xlsx
Bharti Enterprises
8. Proprietory Ratio= 100 x Proprietors fund/ Total Assets
2006 42.43 43.51 2007 45.50 41.96 2008 45.92 34.94
Airtel Idea
Bharti Enterprises
Increase in proprietory ratio from 2006 to 2007 is due to the increase in retained earning by more than 200% in 2007 while Total assets increased by just 38% bharathi airtel.xlsx
9. Interest Coverage Ratio= EBIT/ Interest
2006 9.29 1.94 2007 16.19 2.86 2008 18.86 3.45
Airtel Idea
Increase in coverage ratio from 2006 to 2007 is due to increase in EBIT by 81% while interest expense was almost constant From 2007 to 2008 is due to increase in EBIT by 55% and interest expense increased by 33% bharathi airtel.xlsx Bharti Enterprises
10. Gross Profit margin= Gross profit/ Sales
Airtel Idea
2006 2007 2008 0.4022 0.4204 0.4331 0.5021 0.4817 0.4799
bharathi airtel.xlsx
Bharti Enterprises
11. Operating Profit Ratio= EBIT/ Net Sales
2006 2007 2008 0.2365 0.2661 0.2829 0.2308 0.2112 0.2254
Airtel Idea
Increase in operating profit ratio is due to-Year on Year increase in EBIT was more than Net Sales bharathi airtel.xlsx
Bharti Enterprises
12. Pre-tax Profit Ratio= EBT/ Net Sales
2006 2007 2008 0.2110 0.2497 0.2679 0.1120 0.1375 0.1602
Airtel Idea
Increase in pre-tax profit ratio is due toYear on Year increase in EBIT was more than Net Sales bharathi airtel.xlsx
Bharti Enterprises
13. Net Profit Ratio= Net Profit (PAT)/ Net Sales
2006 2007 2008 0.1941 0.2298 0.2479 0.0622 0.1144 0.1550
Airtel Idea
bharathi airtel.xlsx
Bharti Enterprises
14. Returns on Assets (ROA)= 100 x (Net Profit after Tax+ Interest)/ Average total Assets
2006 2007 2008 11.74% 15.31% 15.03% 5.55% 7.47% 10.47%
Airtel Idea
Increase in ROA in 2007 is on account of increase in Net profit by 91% whereas assets increased by 36% bharathi airtel.xlsx
Bharti Enterprises
15. Return on Capital Employed= EBIT/ Average total Capital employed
2006 2007 2008 0.1271 0.1665 0.1647 0.0709 0.0836 0.1075
Airtel Idea
Increase in 2007 ROCE is due to increase in EBIT by approximately 90% whereas Total capital employed increased by approximately 50% only bharathi airtel.xlsx
Bharti Enterprises
16. Equity Multiplier= Total Assets/ Total Shareholders Equity
2006 2007 2008 2.3567 2.1976 2.1776 2.2979 2.3831 2.8589
Airtel Idea
Decrease in Equity multiplier in 2007 is due to decrease in total assets by 36% and increase in shareholder’s equity by 46%. bharathi airtel.xlsx
Bharti Enterprises
17. Return on Equity= PAT/ Total Shareholders’ Equity
2006 2007 2008 0.2448 0.3140 0.3087 0.0442 0.1084 0.2108
Airtel Idea
Increase in ROE in 2007 is due to 91% increase in PAT while shareholders’ equity has increased by 46% bharathi airtel.xlsx
Bharti Enterprises
18. Asset Turnover Ratio= COGS/ Average Total Assets
2006 2007 2008 0.3198 0.3603 0.3241 0.1546 0.2070 0.2481
Airtel Idea
COGS has increased in 2007 at a greater rate as compared to Total assets. bharathi airtel.xlsx
Bharti Enterprises
19. Fixed Assets Turnover Ratio = COGS/ Average Fixed Assets
Airtel Idea
2006 2007 2008 0.3756 0.4242 0.4269 0.2064 0.2667 0.2492
bharathi airtel.xlsx
Bharti Enterprises
20. Capital Turnover Ratio= COGS/ Average Capital Employed
Airtel Idea
2006 2007 2008 0.3212 0.3625 0.3301 0.1546 0.2070 0.2492
bharathi airtel.xlsx
Bharti Enterprises
20. Inventory Turnover Ratio= COGS/ Average Inventory
2006
2007
2008
Airtel Idea
150.00 165.96 149.15 90.67 170.94 154.30
bharathi airtel.xlsx
Bharti Enterprises
Du Pont Analysis
The return on investment (ROI) ratio is used to evaluate how effectively assets are used. It measures the combined effects of profit margins and asset turnover. ROI = NET INCOME = NET INCOME * SALES . TOTAL ASSETS SALES TOTAL ASSETS
(PROFIT MARGIN) TURNOVER) (ASSET
The return on equity (ROE) ratio is a measure of the rate of return to stockholders. Decomposing the ROE into various factors influencing company performance is often called the Du Pont system
ROE = NET INCOME = NET INCOME * SALES * TOTAL ASSETS Bharti Enterprises EQUITY SALES TOTAL ASSETS
The Du Pont identity allows analysts to determine which of the elements is dominant in any change of ROE
? High turnover industries
Certain types of retail establishments, may have very low profit margins on sales, and relatively moderate leverage. In contrast, they may have very high turnover. ? High margin industries Industries such as fashion may derive a substantial portion of their competitive advantage from selling at a higher margin, rather than higher sales. ? High leverage industries The financial sector, rely on high leverage to generate acceptable ROE. Bharti Enterprises
Bharti Airtel
ROI ROE Profit Margin Asset Turnover Equity Multiplier
2005-06 2006-07
2007-08
0.0258 0.0432
0.0599
0.0608 0.0894
0.1304
0.1941 0.2298
0.2479
0.1331 0.1884
0.2415
2.3567 2.0648
2.1776
Idea Cellular
ROI 2005-06 2006-07 0.0273 0.0532 ROE 0.0437 0.0980 Profit Margin 0.062 0.104 Asset Turnover 0.440 0.512 Equity Multiplier 1.601 1.850
2007-08
0.0085
0.0208
0.155
0.550
2.450
Bharti Enterprises
Bharti Airtel
3
Idea Cellular
2.5
2.5
2
2 Equity Multiplier
Asset Turnover 1.5 1.5 ROE
Profit Margin
1
1
0.5
0.5
0 2006 2007 2008
0 2006 2007 2008
Bharti Enterprises
Cost of Equity
Ke = rf + b*(rm – rf) Risk free interest, rf = 5.3554 % rm-rf = 17.79 – 5.3554 = 12.456 Beta, b = 0.89 Ke = 16.42%
Bharti Enterprises
Cost of Capital
Kc = Ke*We + Kd*Wd + Kp*Wp + Kr*Wr
Bharti Enterprises
Bharti Enterprises
Cost of Debt, Kd
Kd = [ i(1-t) + [(f+d+Pr-Pi)/n)] ] / (SV +RV)/2
Bharti Enterprises
Du Point Analysis
The return on investment (ROI) ratio is used to evaluate how effectively assets are used. It measures the combined effects of profit margins and asset turnover. ROI = Net Income = Net Income * Sales . Total Assets Sales Total Assets
(Profit Margin) (Asset Turnover)
The return on equity (ROE) ratio is a measure of the rate of return to stockholders. Decomposing the ROE into various factors influencing company performance is often called the Du Pont system ROE = Net Income = Net Income * Sales * Total Assets Equity Sales Total Assets Equity
Bharti Enterprises
(Profit margin) (Asset Turnover) (Equity
Multiplier)
Bharti Airtel
ROI ROE Profit Margin Asset Turnover Equity Multiplier
2005-06 2006-07
2007-08
0.0258 0.0432
0.0599
0.0608 0.0894
0.1304
0.1941 0.2298
0.2479
0.1331 0.1884
0.2415
2.3567 2.0648
2.1776
Idea Cellular
ROI 2005-06 2006-07 0.0273 0.0532 ROE 0.0437 0.0980 Profit Margin 0.062 0.104 Asset Turnover 0.440 0.512 Equity Multiplier 1.601 1.850
2007-08
0.0085
0.0208
0.155
0.550
2.450
Bharti Enterprises
doc_991186968.pptx