CHAPTER-6

DATA ANALYSIS

1
❖ Liquidity analysis:

Liquidity analysis aims to determine the ability of a business to meet its

financial obligations during the short term and to maintain its short-term
debt-paying ability. The liquidity ratios answer the question of whether a
business firm can meet its current debt obligations with its current assets.

1. Current ratio:-

The Current ratio is also known as the working capital ratio or banker's
ratio. It expresses the relationship of a current asset to current liabilities.

Current Ratio = Current Assets / Current Liability

NBFC’s name Year

2024 2023 2022
Bajaj finance 1.8 1.87 2.39
Shriram finance 1.19 1.28 0.73
Muthoot finance 0.69 0.96 0.9

Current Ratio
3

2.5

1.5

0.5

0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:-

In the above data, it represents that the highest current ratio is held by
Bajaj Finance, which is 2.39 in the year 2022, and the lowest current ratio
is held by Muthoot Finance, which is 0.69 in the year 2024.

Bajaj Finance's current ratio has been decreasing over the years, while
Shriram Finance has shown significant improvement. Muthoot Finance has

2
experienced fluctuations and a declining trend, indicating a less stable
liquidity position.

2. Quick ratio:-

The quick ratio is also known as the Acid test ratio. The quick ratio
measures whether the firm can meet its short-term debt obligations without
selling any inventory.

Quick Ratio = Current assets - Inventories / Current liabilities

NBFC’s name Year

2024 2023 2022
Bajaj finance 60.45 55.17 51.06
Shriram finance 76.91 77.51 2.82
Muthoot finance 42.09 38.89 28.71

Quick Ratio
90
80
70
60
50
40
30
20
10
0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:-

In the above data, it represents that the highest quick ratio is held by
Shriram Finance, which is 77.51 in the year 2023, and the lowest quick
ratio is held by Muthoot Finance, which is 28.71 in the year 2022.

Shriram Finance has maintained a consistently high quick ratio, indicating

strong liquidity. Bajaj Finance has shown a steady increase in its quick ratio
over the years, reflecting an improving ability to meet short-term

3
obligations. Muthoot Finance, while showing some improvement, still lags
behind the other two companies in terms of liquidity.

3. Debt Equity Ratio:-

debt-to-equity (D/E) ratio shows how much debt a company has relative to
its equity. It's a key metric that helps assess a company's financial
health and risk.

Debt Equity Ratio = Total liabilities/Total shareholder's funds

NBFC’s name Year

2024 2023 2022
Bajaj finance 3.07 3.17 2.95
Shriram finance 3.83 3.66 2.65
Muthoot finance 2.42 2.36 2.72

Debt Equity Ratio

4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:-

In the above data, it represents that the highest debt-to-equity (D/E) ratio is
held by Shriram Finance, which is 3.83 in the year 2024, and the lowest
debt-to-equity ratio is held by Muthoot Finance, which is 2.36 in the year
2023.

Shriram Finance has consistently maintained a higher debt-to-equity ratio,

reflecting its aggressive financing strategy. Bajaj Finance has shown a
relatively stable debt-to-equity ratio, indicating a balanced approach to debt
and equity financing. Muthoot Finance, while showing some fluctuations,

4
generally maintains a lower debt-to-equity ratio, indicating a more cautious
approach to leveraging.

• Profitability ratio:-
Earning profit is the first and foremost objective of any business. And it is a
major source of internal funds by the way of retained earnings and reserve
and surplus. The dividend paid to the equity shareholders depends upon
the company's profitability.

1. Net profit margin (%):-

Net profit margin, also known as net income or bet margin, is the
percentage of a company's revenue that remains after accounting for all
expenses, including operating costs, interest, and taxes, and is the total
amount of profit a company keeps.

Net Profit Margin = Net Profit / Net sales * 100

NBFC’s name Year

2024 2023 2022
Bajaj finance 26.93 28.83 22.79
Shriram finance 20.56 20.08 14.06
Muthoot finance 32.05 33.03 35.68

Net Profit Ratio

40
35
30
25
20
15
10
5
0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:-

5
Muthoot Finance Ltd. Has the highest net profit ratio in 2022 with 35.68%,
and Shriram Finance Ltd. Has the lowest net profit ratio in 2022 with
14.06%. Muthoot Finance has the highest net profit ratio values in every
year compared to the other NBFCs.

Because Muthoot Finance has the highest net profit margin, it is more
profitable compared to the other two companies, which are Shriram Finance
Ltd. And Bajaj Finance Ltd.

2. Return On Equity (%):

Return on equity (ROE) is a profitability metric that shows how much profit
a company can generate from the money contributed by its shareholders
and retained profits.

Return On Equity = Net Income / Shareholder's Equity

NBFC’s name Year

2024 2023 2022
Bajaj finance 17.63 20.2 15.24
Shriram finance 14.82 13.86 10.44
Muthoot finance 16.67 16.49 21.56

Return on Equity
25

20

15

10

0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:

Muthoot Finance Ltd. has the highest Return on Equity (ROE) in 2022 with
21.56%, and Shriram Finance Ltd. has the lowest ROE in 2022 with

6
10.44%. Muthoot Finance has the highest ROE values in 2022 compared to
the other NBFCs.

Because Muthoot Finance has the highest ROE, it is more efficient at

generating profit from the money contributed by its shareholders and
retained earnings compared to the other two companies, which are Shriram
Finance Ltd. and Bajaj Finance Ltd. This indicates that Muthoot Finance is
better at utilizing its equity to generate profits. Shriram Finance, on the
other hand, has the lowest ROE, reflecting lower efficiency in generating
profit from shareholders' equity. Bajaj Finance shows improvement over the
years but still trails behind Muthoot Finance in terms of ROE.

4. Return on capital employed (%):

The term return on capital employed (ROCE) refers to a financial ratio that
can be used to assess a company's profitability and capital efficiency. In
other words, this ratio can help to understand how well a company is
generating profits from its capital as it is put to use.

Net operating profit / total assets-current liability * 100

NBFC’s name Year

2024 2023 2022
Bajaj finance 10.56 10.86 9.78
Shriram finance 10.44 10.3 14.04
Muthoot finance 12.16 11.81 13.41

Return on capital employed

16
14
12
10
8
6
4
2
0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:

7
In the above data, it represents that the highest Return on Capital
Employed (ROCE) is held by Shriram Finance, which is 14.04% in the year
2022, and the lowest ROCE is held by Bajaj Finance, which is 9.78% in the
year 2022.

As can be seen, Shriram Finance has the highest ROCE in 2022, reflecting
strong capital efficiency. Muthoot Finance also maintains a high ROCE,
indicating good profitability from its capital employed. Bajaj Finance, while
showing some improvement, still has the lowest ROCE among the three
companies, suggesting it needs to enhance its capital efficiency.

• EFFICIENCY RATIO:

An efficiency ratio measures a company's ability to use its assets to generate

income. For example, an efficiency ratio often looks at various aspects of the
company, such as the time it takes to collect cash from customers or the
amount of time it takes to convert inventory to cash.

1. Assets turnover ratio:

The asset turnover ratio measures the value of a company's sales or

revenues relative to the value of its assets. The asset turnover ratio can be
used as an indicator of the efficiency with which a company is using its
assets to generate revenue.

Assets turnover ratio = Net Sales / Average Total Assets

NBFC’s name Year

2024 2023 2022

Assets turnover ratio

0.25

0.2

0.15

0.1

0.05

0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

8
 Bajaj finance 0.19 0.19 0.19
Shriram finance 0.16 0.2 0.17
Muthoot finance 0.16 0.15 0.17

Interpretation:

In the above data, it represents that the highest asset turnover ratio is held
by Bajaj Finance, which is consistently 0.19 across the years 2022, 2023,
and 2024. The lowest asset turnover ratio is held by Muthoot Finance,
which is 0.15 in the year 2023.

Bajaj Finance maintains a consistently high asset turnover ratio, reflecting

strong efficiency in asset utilization. Shriram Finance shows some
fluctuations but generally maintains a moderate asset turnover ratio.
Muthoot Finance, while showing slight variations, has the lowest asset
turnover ratio, indicating a need for improvement in efficiently using its
assets to generate revenue.

• Debt Coverage Ratio:

The debt service coverage ratio (DSCR) measures a company's ability to pay
its debts using its cash flow. It's calculated by dividing the company's net
operating income by its total debt service.

1. Interest coverage ratio:-

The interest coverage ratio (ICR) is a financial metric that measures how
well a company can pay interest on its debt. It's also known as the "times
interest earned" ratio. It is a financial ratio that is used to determine how
well a company can pay the interest on its outstanding debts.

Interest coverage ratio = EBIT/interest on long term debt

NBFC’s name Year

2024 2023 2022
Bajaj finance 2.23 2.5 2.13
Shriram finance 1.65 1.65 1.36
Muthoot finance 2.17 2.26 2.38

9
 Interest coverage ratio
3

2.5

1.5

0.5

0
2024 2023 2022

Bajaj finance Shriram finance Muthoot finance

Interpretation:-

In the above data, it represents that the highest interest coverage ratio is
held by Muthoot Finance, which is 2.38 in the year 2022, and the lowest
interest coverage ratio is held by Shriram Finance, which is 1.36 in the year
2022.

Muthoot Finance maintains a consistently high interest coverage ratio,

reflecting a strong ability to meet its interest obligations. Bajaj Finance also
shows a stable interest coverage ratio, though slightly lower than Muthoot
Finance. Shriram Finance has the lowest interest coverage ratio, suggesting
it may face more difficulty in servicing its debt compared to the other two
companies.

10