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Company Analysis SAPM

This document discusses various factors for analyzing companies, including competitive edge, earnings, capital structure, management, operating efficiency, financial performance, and key financial ratios. It outlines different types of ratios to evaluate company liquidity, leverage, activity/efficiency, and profitability, such as current ratio, debt-to-equity ratio, inventory turnover, and return on capital employed. The ratios are used to assess a company's financial health, risk level, and profitability.

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397 views

Company Analysis SAPM

This document discusses various factors for analyzing companies, including competitive edge, earnings, capital structure, management, operating efficiency, financial performance, and key financial ratios. It outlines different types of ratios to evaluate company liquidity, leverage, activity/efficiency, and profitability, such as current ratio, debt-to-equity ratio, inventory turnover, and return on capital employed. The ratios are used to assess a company's financial health, risk level, and profitability.

Uploaded by

tincu_01
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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FACTORS

Share Value
Competitive edge
Earnings Historic Value of
Capital structure Stock
Management P/E ratio
Operating efficiency Economic Condition
Financial Performance Stock Market
condition

Future Price
Present Price
Factors for company analysis
COMPETITIVE EDGE OF THE COMPANY
 MARKET SHARE
 GROWTH OF SALES
 STABILITY OF THE SALES
 SALES FORECAST
EARNINGS OF THE COMPANY

CAPITAL STRUCTURE
MANAGEMENT

OPERATING EFFICIENCY

FINANCIAL PERFORMANCE
Ratio Analysis
Liquidity ratios

Efficiency ratios

Leverage Ratios

Profitability ratios
Liquidity Ratios
Measure of ability of the firm to meet its
current obligations.
Quick measure of liquidity
Lack of sufficient liquidity – poor credit
worthiness, loss of creditors confidence etc.
Very High – idle assets earn nothing.
Liquidity ratios
Current ratio:
current assets / current liabilities

Quick ratio:
(current assets-inventories)/current liabilities
Leverage Ratios
T o judge the long term position of the firm.
Ratios indicate mix of funds provided by
owners and lenders.
There should be an appropriate mix of debt
and owners equity in financing the firm’s
assets.
To calculate the financial risk and firm’s ability
of using debt to shareholders’ advantage.
Computed from Balance Sheet and P/L
account.
LEVERAGE RATIOS
Debt equity ratios:
Total debt/shareholder’s equity

Interest Coverage Ratio:


EBIT/Interest charged

Debt Service Coverage Ratio:


EBIT/Total Debt Service
ACTIVITY/EFFICIENCY
RATIOS
Better management of assets, the larger the amount of
sales.

Activity ratios are employed to evaluate the efficiency with


which the firm manages and utilizes its assets.

Indicate the speed with which assets are being converted


or turned over into sales.

Involves the relationship between sales and assets.


EFFICIENCY RATIOS
Inventory turnover ratio:
Net sales/turnover

Debtors turnover ratio:


Net credit sales/ average debtors

Asset turnover ratio:


Net Sales/Total assets
Profitability Ratios
It is used to give us an idea of how likely it is that a
company will turn a profit, as well as how that profit
relates to other important information about the
company.
Profitability Ratios can be found to have relation with
several important factors of conducting a business.
This gives the formation to different types of
profitability ratios.
PROFITABILITY RATIOS IN AIRTEL
 Return on Capital Employed:
EBIT/ (Capital + Reserve + Long Term Liability)

 Gross profit margin:


(Revenue-Cost of Goods Sold)/Revenue

 Net profit margin:


Net profit/ Sales

 Operating profit margin:


EBIT/ Sales
DU PONT ANALYSIS

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