Description
This is a presentation describes about ratio analysis of ITC.
RATIO ANALYSIS ITC Ltd
Group B2
Liquidity Ratios
31st March, 2006 Current Assets Current Liability Inventory Current Ratio Quick Ratio 5161.90 3578.07 2636.29 1.44 31st March, 2007 6289.72 3857.90 3354.03 1.63 31st March, 2008 7019.27 4432.30 4050.52 1.58
0.71
0.76
0.67
•Dividend increased by Rs.200Cr from 2007-2008. Thus CL increased. •A large part of assets is in the form of inventory. The current ratio of 1.58 times says that the company is in relatively good short-term financial standings. The ratio is an indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is.
Inventory Turnover Ratio
31st March, 2006 31st March, 2007 2877.57 5384.86 1.87 31st March, 2008 3050.63 6016.90 1.97
Average Inventory
COGS Inventory Turnover
2218.52 3983.23 1.80
Inventory is changed twice a year. Shelf life is approx 180 days. It is efficient in selling its stocks pretty efficiently.
Debtor Turnover Ratio
31st March, 2006 Gross Sales Debtors 16224.43 547.96 29.61 31st March, 2007 19505.05 636.69 30.64 31st March, 2008 21355.94 736.93 28.98
Debtor Turnover
The low ratio shows that debt is not being collected on time. Inference: Relaxation in credit terms promotes sales.
Debt Equity Ratio
31st March, 2006 31st March, 2007 200.88 10437.08 0.02 31st March, 2008 214.43 12057.67 0.02
Total Debt Shareholder’s Equity
Debt Equity Ratio
119.73 9061.48 0.01
The debt has although almost doubled in 2007. If the DE equity is high, then the owner’s have contributed less. The ratio of 0.02 times, which means that the company has not been aggressive in financing its growth with debt. Thus its earnings are stable. The company has better support from the shareholders.
Interest Coverage Ratio
31st March, 2006 EBIT Interest Paid Interest Coverage 3269.19 15.78 207.17 31st March, 2007 3926.70 8.62 455.53 31st March, 2008 4571.77 17.08 267.67
Interest in 2007 had decreased as a large part of loan was interest free. In 2008, debts had increased and hence interest increased. Thus the interest coverage ratio is less.
Profitability ratio
31st March, 2006 Gross Profit/EBIT Net Profit Net Sales 31st March, 2007 31st March, 2008
3269.19
2235.35 9790.53 0.33 .14
3926.70
2699.97 12369.3 0.317 .14
4571.77
3120.10 13947.53 0.327 .15
GP Margin NP Margin
A high GP margin is a sign of good management and the cost of production is low.
Profitability ratios
31st March, 2006 31st March, 2007 31st March, 2008
PAT Shareholder’s Equity EBIT Total Capital Employed ROE ROCE
2235.35 9061.48 3269.19 9181.21 0.25 0.36
2699.97 10437.08 3926.70 10637.96 0.26 0.37
3120.10 12057.67 4571.77 12272.10 0.26 0.37
There has been a better use of capital employed. The company has been using the share holders money pretty effectively.
31st March, 2006 Dividend Paid 995.12 3755178860.00 2.65 2235.35 5.95 Payout ratio 0.445
31st March, 2007 1166.29 3762222780.00 3.10 2699.97 7.17 0.432
31st March, 2008 1319.01 3768610050.00 3.50 3120.10 8.28 0.422
No of ordinary shares
DPS PAT EPS
EPS has increased due to increase in profits. A large part of assets is funded by retained profits. Lower the pay-out ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.
31st March, 2006
Market capitalization/No of shares EPS P/E
31st March, 2007
31st March, 2008
194.95 5.95
150.40 7.17
206.35 8.28
32.76
20.97
24.92
Share prices decreased in 2007. and thus P/E ratio has come down.
Asset Turnover & ROA
31st March, 2006 Sales Assets Asset Turnover PAT ROA 16224.03 9567.03 1.70 2235.35 0.23 31st March, 2007 19505.05 11900.63 1.64 2699.97 .23 31st March, 2008 21355.94 14314.92 1.49 3120.10 .22
•Assets have increased more when compared to sales. Reduced effective utilization of assets or they have not yet started to yield profits. •Most of assets have been funded by retained profits.
31st March, 2006 Asset Equity Financial Leverage Retained Profits PAT Retention Ratio 9567.03 9061.48 1.06 1100.65 2235.35 0.49
31st March, 2007 11900.63 10437.08 1.14 1335.47 2699.97 0.49
31st March, 2008 14314.92 12057.67 1.19 1576.92 3120.10 0.51
•The assets have increased by a greater extent, most of it is supported by retained profits. •Retention Ratio was higher 5 years back, greater part of the profits were ploughed back to their business.
Du Pont Analysis
31st March, 2006 Asset Turnover 1.69 .14 31st March, 2007 1.63 31st March, 2008 1.49
Profit Margin Financial Leverage
ROE
.14 1.14
.26
.15 1.19
.26
1.06
.25
•Assets have increased more when compared to sales. •Asset expansion has been funded more by retained profits. •Profit margin is almost the same.
Altman’s Z Score Model
31st March, 2006 1.2*NWC/TA 1.4*RE/TA 3.3*EBIT/TA 0.6*MV of equity/B.V of Total debts 0.999*sales/TA 0.20 0.16 1.13 3.36 1.69 6.54 31st March, 2007 0.25 0.16 1.09 2.27 1.64 5.40 31st March, 2008 0.22 0.15 1.05 2.70 1.49 5.62
The Company is safe and growing
doc_964687940.pptx
This is a presentation describes about ratio analysis of ITC.
RATIO ANALYSIS ITC Ltd
Group B2
Liquidity Ratios
31st March, 2006 Current Assets Current Liability Inventory Current Ratio Quick Ratio 5161.90 3578.07 2636.29 1.44 31st March, 2007 6289.72 3857.90 3354.03 1.63 31st March, 2008 7019.27 4432.30 4050.52 1.58
0.71
0.76
0.67
•Dividend increased by Rs.200Cr from 2007-2008. Thus CL increased. •A large part of assets is in the form of inventory. The current ratio of 1.58 times says that the company is in relatively good short-term financial standings. The ratio is an indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is.
Inventory Turnover Ratio
31st March, 2006 31st March, 2007 2877.57 5384.86 1.87 31st March, 2008 3050.63 6016.90 1.97
Average Inventory
COGS Inventory Turnover
2218.52 3983.23 1.80
Inventory is changed twice a year. Shelf life is approx 180 days. It is efficient in selling its stocks pretty efficiently.
Debtor Turnover Ratio
31st March, 2006 Gross Sales Debtors 16224.43 547.96 29.61 31st March, 2007 19505.05 636.69 30.64 31st March, 2008 21355.94 736.93 28.98
Debtor Turnover
The low ratio shows that debt is not being collected on time. Inference: Relaxation in credit terms promotes sales.
Debt Equity Ratio
31st March, 2006 31st March, 2007 200.88 10437.08 0.02 31st March, 2008 214.43 12057.67 0.02
Total Debt Shareholder’s Equity
Debt Equity Ratio
119.73 9061.48 0.01
The debt has although almost doubled in 2007. If the DE equity is high, then the owner’s have contributed less. The ratio of 0.02 times, which means that the company has not been aggressive in financing its growth with debt. Thus its earnings are stable. The company has better support from the shareholders.
Interest Coverage Ratio
31st March, 2006 EBIT Interest Paid Interest Coverage 3269.19 15.78 207.17 31st March, 2007 3926.70 8.62 455.53 31st March, 2008 4571.77 17.08 267.67
Interest in 2007 had decreased as a large part of loan was interest free. In 2008, debts had increased and hence interest increased. Thus the interest coverage ratio is less.
Profitability ratio
31st March, 2006 Gross Profit/EBIT Net Profit Net Sales 31st March, 2007 31st March, 2008
3269.19
2235.35 9790.53 0.33 .14
3926.70
2699.97 12369.3 0.317 .14
4571.77
3120.10 13947.53 0.327 .15
GP Margin NP Margin
A high GP margin is a sign of good management and the cost of production is low.
Profitability ratios
31st March, 2006 31st March, 2007 31st March, 2008
PAT Shareholder’s Equity EBIT Total Capital Employed ROE ROCE
2235.35 9061.48 3269.19 9181.21 0.25 0.36
2699.97 10437.08 3926.70 10637.96 0.26 0.37
3120.10 12057.67 4571.77 12272.10 0.26 0.37
There has been a better use of capital employed. The company has been using the share holders money pretty effectively.
31st March, 2006 Dividend Paid 995.12 3755178860.00 2.65 2235.35 5.95 Payout ratio 0.445
31st March, 2007 1166.29 3762222780.00 3.10 2699.97 7.17 0.432
31st March, 2008 1319.01 3768610050.00 3.50 3120.10 8.28 0.422
No of ordinary shares
DPS PAT EPS
EPS has increased due to increase in profits. A large part of assets is funded by retained profits. Lower the pay-out ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.
31st March, 2006
Market capitalization/No of shares EPS P/E
31st March, 2007
31st March, 2008
194.95 5.95
150.40 7.17
206.35 8.28
32.76
20.97
24.92
Share prices decreased in 2007. and thus P/E ratio has come down.
Asset Turnover & ROA
31st March, 2006 Sales Assets Asset Turnover PAT ROA 16224.03 9567.03 1.70 2235.35 0.23 31st March, 2007 19505.05 11900.63 1.64 2699.97 .23 31st March, 2008 21355.94 14314.92 1.49 3120.10 .22
•Assets have increased more when compared to sales. Reduced effective utilization of assets or they have not yet started to yield profits. •Most of assets have been funded by retained profits.
31st March, 2006 Asset Equity Financial Leverage Retained Profits PAT Retention Ratio 9567.03 9061.48 1.06 1100.65 2235.35 0.49
31st March, 2007 11900.63 10437.08 1.14 1335.47 2699.97 0.49
31st March, 2008 14314.92 12057.67 1.19 1576.92 3120.10 0.51
•The assets have increased by a greater extent, most of it is supported by retained profits. •Retention Ratio was higher 5 years back, greater part of the profits were ploughed back to their business.
Du Pont Analysis
31st March, 2006 Asset Turnover 1.69 .14 31st March, 2007 1.63 31st March, 2008 1.49
Profit Margin Financial Leverage
ROE
.14 1.14
.26
.15 1.19
.26
1.06
.25
•Assets have increased more when compared to sales. •Asset expansion has been funded more by retained profits. •Profit margin is almost the same.
Altman’s Z Score Model
31st March, 2006 1.2*NWC/TA 1.4*RE/TA 3.3*EBIT/TA 0.6*MV of equity/B.V of Total debts 0.999*sales/TA 0.20 0.16 1.13 3.36 1.69 6.54 31st March, 2007 0.25 0.16 1.09 2.27 1.64 5.40 31st March, 2008 0.22 0.15 1.05 2.70 1.49 5.62
The Company is safe and growing
doc_964687940.pptx