Internal Assignment Activity # 1

Enter your roll number here => 9 <= (Roll number)

Compute ratios and interpret financial performance of the company

Profit & Loss Account for the year ended 31 Mar'17

Rs Lakh
Sales 8,869
Cost of Goods Sold (-6,936)
Gross Profit 1,933
Selling. General and Admin Expenses (SG&A) (-403)
Depreciation (-239)
Other income (-19)
PBIT 1,272
Interest (-191)
PBT 1,081
Taxes (-159)
PAT / Net profit 922

Balance Sheet As At As at 31/3/17

EQUITY AND LIABILITIES Rs Lakh
Shareholders' Funds / Equity
Share Capital Face Value Rs 100 each 1,184
Reserves and Surplus 1,893
Total Equity 3,077
Non-current Liabilities
Secured Loans 1,037
Other Long term Liabilities 525
Current Liabilities
Trade Payables 1,022
Short term Debt 100

Current Portion of Long term Debt 52

Total Current Liabilities 1,174
Total Liabilities 2,736

Total Equity and Liabilities 5,813

As at 31/3/17
ASSETS Rs Lakh
Fixed Assets 2,230
Other Non-current Assets 213
Total Non-current Assets 2,443
Current Assets
Cash 703
Trade Receivables 1,312
Inventories 1,270
 Other Current Assets 85
Total Current Assets 3,370

Total Assets 5,813

Year Ended
Cash Flow Statement for the year 31/3/17
Cash from Operating Activities Rs Lakh
Net profit 922
Depreciation 239
Change in Trade Receivables (-108)
Change in Inventory 244
Change in Other Current Assets (-18)
Change in Trade Payables (-107)
Net Cash from Operations 1,172

Cash from Investing Activities

Fixed Assets (-205)
Other Non-current Assets 20
Net Cash from Investing Activities (-185)

Cash from Financing Activities Rs Lakh

Short term Debt (-50)

Current Portion of Long-term Debt 1

Long term Debt (-121)
Other Long-term Liabilities 34
Dividends (-220)
Net Cash from Financing (-356)

Net Cash Surplus / (Deficit) 631

Opening Cash Balance 72
Closing Cash Balance 703

A. Evaluating a company's ability to generate profits

i.e., to increase revenues and control expenses YE 31.03.2017
Solution

A1 Gross Margin = Gross Profit 0.22

Revenue

Operating profit
A2 Operating Margin = (PBIT) 0.14
Revenue
A3 Net profit Margin = Net profit 0.10
Revenue

A4 Return on capital employed = EBIT 0.27

Use opening Capital employed Capital employed

A5 Return on equity = Net profit 0.30

Use Opening equity Shareholders' equity

B. Evaluating how efficiently a company is managing its

resources

B1 Inventory days / days in inventory = Average inventory 21.01

Use 365 days per year COGS / day

B2 Inventory turnover = 360 17.13

(For Yr 0, use only closing inventory) days in inventory

B3 Days sales outstanding = Average AR 54

Use Closing Accts Receivable for Yr
0 sales / day

B4 Days payable outstanding = Average AP 50.71

Use Closing Accts Payable for Yr 0 COGS / day

B5 Fixed asset turnover = Sales 3.98

Fixed assets

B6 Total asset turnover = Sales 1.53

Total assets
B7 Return on Assets = EBIT 0.22
Total Assets

C. Leverage ratios: indication of financial leverage

i.e., the extent to which a company's asset base is
financed by debt

C1 Debt / equity ratio = Funded debt 0.05

Shareholders' equity

Earnings before
C2 Interest coverage = interest & tax 6.66

Total interest charges

D. Liquidity ratios indicate a company's ability to meet

its financial obligations i.e.,
how comfortable its liquidity or cash position is at a
given time

D1 Current ratio = Current assets 2.87

Current liabilities

D2 Quick ratio = Quick assets 1.79

(Acid test) Current liabilities

E. Market performance has to do with how well the

company is faring in the capital market.

Market price of share

E1 Price earnings ratio = = 420

NOTE : Face Value 100- per share Earnings per share 5.39
PE Ratio

E2 Dividend Yield = Dividend declared =

Market price of share 420.00

 Div Yield %

(Increase in share
price + Dividend per
E3 Total Shareholder return share) 0.05
NOTE : Calculate only for Year 1. Opening market
Ignore for Year 0 price
Enter only last two digits

31 Mar'16
Rs Lakh
8,244
(-6,390)
1,854
(-978)
(-244)
(-22)
610
(-201)
409
(-145)
264

As at 31/3/16
Rs Lakh

1,184
1,191
2,375

1,158
491

1,129
150

51
1,330
2,979

5,354

As at 31/3/16
Rs Lakh
2,264
233
2,497

72
1,204
1,514
 67
2,857

5,354

Year Ended
31/3/16
Rs Lakh
264
244
84
(-164)
(-40)
99
487

(-356)
(-9)
(-365)

Rs Lakh
10

0
100
24
(-220)
(-86)

36
36
72

YE 31.03.2016
Solution

0.22

0.07
0.03

0.15

0.11

4.11

87.53

53

64.49

3.64

1.54
 0.11

0.08

3.03

2.15

1.01

400

17.94

Dividend not
declared

400.00
DO NOT Compute
Compared to previous year, the company has a decline in current year.
Declining gross margins are problematic because they indicate a reduction in profitability.
If a company doesn't achieve strong gross profit, it is difficult to generate operating profit and bottom-line n

Compared to previous year, the company has experienced an increase in current year.
This indicates that the company’s operating margin creates value for shareholders and continuous loan ser
The higher the margin that a company has, the less financial risk it has as compared to having a lower ratio

Compared to previous year, the company has an increased profit in current year.
A high net profit margin means that a company is able to effectively control its costs and provide goods or s

Compared to previous year, the company has an increased ROCE in current year.
A higher ROCE indicates more efficient use of capital. ROCE should be higher than the company’s capital cos

Compared to previous year, the company has an increased ROE in current year.

A high ROE could mean that a company is more successful in generating profit internally. It also indicates h

Compared to previous year, the company's inventory days in current year has increased.
If economic or competitive factors cause a sudden and significant drop in sales, the inventory days or days

Compared to previous year, the company has experienced a decline in current year.

Inventory turnover measures how fast a company sells inventory. A low turnover implies weak sales and p

The company's current year days sales outstanding has declined as compared to previous year.

A low DSO indicates that the company is getting its payments quickly. That money can be put back into the

The company's current year days payable outstanding has declined as compared to previous year.

A company with a low DPO may indicate that the company is not fully utilizing its credit period offered by c

Compared to previous year, the company has experienced an increase in current year.
A higher fixed asset turnover ratio indicates that a company has effectively used investments in fixed assets

Compared to previous year, the company has experienced an increase in current year.
A rise in TAT essentially means that the company's net sales have increased. It means that the investment w
Compared to previous year, the company has experienced an increase in current year.
A ROA that rises over time indicates that the company is doing well at increasing its profits with each inves

Compared to previous year, the company has experienced a decline in current year.

A low debt to equity ratio shows that a company has sufficient funds in the form of equity and there is no ne

Compared to previous year, the company has an increased interest coverage in current year.

A higher interest coverage ratio indicates stronger financial health – the company is more capable of meetin

The company's current ratio in current year has increased as compared to previous year.
A higher current ratio indicates that a company is able to meet its short-term obligations.

The company's quick ratio in current year has increased as compared to previous year.
This means that the company have just enough current assets to cover its existing amount of near-term debt. A

The current year's PE Ratio is increased as compared to previous year.

A high P/E ratio could mean that a company's stock is overvalued, or else that investors are expecting high

The dividend of the company has not declared

The total shareholder return is the total amount of money that a shareholder would make from each individ
profit margin.

ignificantly higher than its costs.

icates that the company is not employing its capital effectively and is not generating shareholder value.

y's management is deploying the shareholders' capital.

will increase.

ntory, also known as overstocking.

as made in assets, is finally paying out.

y to obtain debt for financing the business.

than a lower one because you have excess cash.

g both capital gains and dividends.