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Inventory Turnover Is A Ratio Showing How Many Times A Company Has Sold and Replaced

The document discusses various financial metrics for evaluating companies over a 5-year period, including debtor's turnover ratio, inventory turnover ratio, current ratio, debt-to-equity ratio, dividend payout ratio, and EBITDA growth. It provides details on how these ratios have changed over 5 years for companies like Sun Pharma, Cipla, Zydus, and Dr. Reddy's. For example, it notes that Sun Pharma's inventory turnover ratio has increased by over 70% while its EBITDA growth has fluctuated, first increasing then decreasing over the 5 years.

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40 views2 pages

Inventory Turnover Is A Ratio Showing How Many Times A Company Has Sold and Replaced

The document discusses various financial metrics for evaluating companies over a 5-year period, including debtor's turnover ratio, inventory turnover ratio, current ratio, debt-to-equity ratio, dividend payout ratio, and EBITDA growth. It provides details on how these ratios have changed over 5 years for companies like Sun Pharma, Cipla, Zydus, and Dr. Reddy's. For example, it notes that Sun Pharma's inventory turnover ratio has increased by over 70% while its EBITDA growth has fluctuated, first increasing then decreasing over the 5 years.

Uploaded by

dingdong
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The Debtors turnover ratio is an accounting measure used to quantify a company's

effectiveness in collecting its receivables or money owed by clients. The ratio shows how
well a company uses and manages the credit it extends to customers and how quickly that
short-term debt is collected or is paid.
Sun Pharma Its good sign that its it increases steadily by 35%.
Cipla & Dr Reddy the debtor ratio has been stable is though out the 5 years.
Zydus debtor’s turnover ratio almost increase over 300%
Inventory turnover is a ratio showing how many times a company has sold and replaced
inventory during a given period. A company can then divide the days in the period by the
inventory turnover formula to calculate the days it takes to sell the inventory on hand.
Calculating inventory turnover can help businesses make better decisions on pricing,
manufacturing, marketing and purchasing new inventory.
Sun Pharma IV ratio has increased by over 70% in span of 5 years which has reduced the
inventory holding period by 30 days this shows that they have improve the movement over
the 5 years.
Cipla Inventory Turnover ratio increased by 100% in span of 5 years
Zydus Inventory Turnover ratio has gradually increase over the 5 years by 25%
Dr Reddy Inventory Turnover ratio decreased by 18-20% hence the inventory holding
period increase by 11 days. This is a red flag for the firm.
Current Ratio
The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current debt and other payables.
Weaknesses of the current ratio include the difficulty of comparing the measure across
industry groups, overgeneralization of the specific asset and liability balances, and the lack of
trending information.
The current ratio Sun Pharma, Zydus & Dr Reddy have been stable over the 5 years
The current ratio Cipla has been doubled over the 5 years
Debt to equity Ratio
The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its
shareholder equity. These numbers are available on the balance sheet of a company’s
financial statements.
The ratio is used to evaluate a company's financial leverage. The D/E ratio is an important
metric used in corporate finance. It is a measure of the degree to which a company is
financing its operations through debt versus wholly-owned funds. More specifically, it
reflects the ability of shareholder equity to cover all outstanding debts in the event of a
business downturn.
Sun Pharma & Dr Reddy both firm’s D/E are fairly low and has been constant over the 5
years
Cipla D/E decrease by very small margin
Zydus D/E increase by a close margin. This might prove to be negative from the point of
view of lenders because equity is resemblance to cushion to lenders
Dividend Payout Ratio
The dividend pay-out ratio is the ratio of the total amount of dividends paid out to
shareholders relative to the net income of the company. It is the percentage of earnings paid
to shareholders in dividends. The amount that is not paid to shareholders is retained by the
company to pay off debt or to reinvest in core operations.
Several considerations go into interpreting the dividend payout ratio, most importantly the
company's level of maturity. A new, growth-oriented company that aims to expand, develop
new products, and move into new markets would be expected to reinvest most or all of its
earnings and could be forgiven for having a low or even zero payout ratio.
Core EBITDA Growth(%)
Core EBITDA Growth(%) is a measure of a company's operating profit as a percentage of its
revenue.
Sun Pharma The EBITDA growth(%) has first increase and then decrease constantly over the
5 years
Cipla: Cipla has experience very steep decline in EBITDA growth(%)
Zydus & Dr Reddy EBITDA growth(%) increases over the 5 years

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