1. RATIO ANALYSIS OF
‘ASIAN PAINTS’
ByAvneesh Pandey(PRN-12030141071)
Amit Mekane(PRN-12030141093)
Savita Marwal(PRN-12030141094)
MBA-IT(2012-2014)

2. LIQUIDITY RATIOS



Current Ratio
Quick Ratio/Acid Test Ratio
Super Quick/Cash Ratio

3. Current Ratio
F.Y 2013(in Crores)
F.Y 2012(in crores)
=Current Assets
=4006.5
=3506.67
Current Liabilities
2931.4
2587.03
Current Ratio=
1.366753087
1.355480996
Mostly Current Ratio of 2 or 1.3 is considered acceptable.
Indicates a firms commitment to meet financial obligations.
A heavy ratio is not desirable as it indicates less efficient use of funds.

4. Quick Ratio/Acid Test Ratio
=Cash+Marketable securities+Recievable
Fy2013
Fy2012
OR =Current Ratio-Stock
=4006.5-1830.29
=3506.67-1598.89
Current Liabilities
2931.41
2587.03
Quick Ratio=
0.74
0.73
Current Liabilities
A Quick Ratio of 1 or greater is acceptable.
This ratio indicates short term solvency of a firm.
A ratio of 1:1 means that a social enterprise can pay its bills without
having to sell inventory.

5. Super Quick/Cash Ratio
=Cash+Marketable securities
Current Liabilities
OR =Current Ratio-Recievables-Inventories =4006.50 – 1830.29 – 980.83 =3506.67 – 1598.89 – 788.25
Current Liabilities
Super Quick/Cash Ratio
Ideal Ratio is 1 or higher.
2931.41
2587.03
0.40
0.43

6. SOLVENCY RATIOS


Debt-Equity Ratio
Proprietor's Ratio/Equity Ratio

7. Debt-Equity Ratio
= short term+Long term Debt
= 2931.41+ 47.8
=2587.03+55.32
Shareholder's fund
3384.29
2748.5
Debt-Equity Ratio=
0.8803
0.9613
DebtEquity
Ratio:- Long term Debt
=47.8
=55.32
Shareholder's fund
3384.29
2748.5
Debt-Equity Ratio=
0.0141
0.0201
Ideal Ratio-1:2or less
Indicates long term solvency
Higher ratio is riskier for the creditors

8. Proprietor's Ratio/Equity Ratio
=Equity
Total Tangible assets
Proprietor's Ratio/Equity Ratio=
=3384.29
=2748.5
2455.95
1876.11
1.3780
1.4650
Higher ratio indicates little danger to creditors and vice-versa.

9. ACTIVITY RATIOS/TURNOVER RATIOS





Inventory Turnover Ratio
Debtor's Turnover ratio
Creditor's TurnOver Ratio
Fixed Asset TurnOver Ratio
Total Assets TurnOver Ratio

10. Inventory Turnover Ratio
A)Inventory Turnover Ratio:-
=Cost of goods sold
=6254.94
1714.59
Inventory Turnover Ratio=
where,
Average inventory during the
year=
=Opening stock+Closing stock
1452.16
3.6481
Average inventory during the year
=5720.53
3.9393
=1598.89+1830. =1305.43+1598.
29
89
2
Hence,Avg Inventory=
Higher ratio is desirable which means more cycles in a year.
Indicates whether investment in stock is efficiently used or not.
2
2
1714.59
1452.16

11. Inventory Holding Period(One Cycle time)
Inventory Holding Period
i) (One Cycle time):-
=365
Inventory Turnover ratio
Inventory Holding Period
(One Cycle time)=
Less cycle time is acceptable.
=365
=365
3.6481
3.9393
100 days
93 days

12. Debtor's Turnover ratio
B)Debtor's Turnover ratio:- =Credit Sales
=10901.01
=9598.33
Average Recievables
881.065
677.175
Debtor's Turnover ratio=
12.3725
14.1741
where,
Average Receivables
=Opening Receivables+Closing
during the year=
Receivables
2
Hence,Avg Receivables=
Higher ratio is better.
=781.25+980.88 =573.10+781.25
2
2
881.065
677.175

13. Average Debtor's Period
i) Average Debtor's Period:-
=365
=365
=365
Debtor's Turnover ratio
12.3725
14.1741
Average Debtor's
Period=
30 days
26 days
Lower period is better.i.e Cash should be received faster.

14. Creditor's TurnOver Ratio
C)Creditor's TurnOver Ratio:-
=6049.61
1352.01
1174.94
Creditor's TurnOver
Ratio=
4.91
5.15
=Opening Payables+
Closing Payables
=1262.45+1441.57
=1087.44+1262.45
2
2
2
Hence,Avg Payables=
Lower ratio is better.
=6631.74
Average Payables
where,
Average Payables during
the year=
=Credit Purchase
1352.01
1174.94

15. Average Creditor's Period
i)Average Creditor's Period:- =365
creditor's Turnover ratio
Average Creditor's
Period=
=365
=365
4.91
5.15
75days
71 days
Higher cycle time is better.
Indicates the speed with which the payments of creditors are made

16. Total Cycle time
TOTAL CYCLE TIME=
Inventory Cycle Time
+Recievables Cycle Time
-Creditor's Cycle Time
55 days
This cycle time(Days in cash operating cycle) should be high.
47 days

17. Fixed Asset TurnOver Ratio
Fixed Asset TurnOver
D) Ratio:-
=Net Sales
=10906.01
=9598.33
2166.03
1596.05
5.04
6.01
=Opening Fixed Assets+Closing =1876.11+24
Fixed Assets
55.95
=1316+1876.11
Average Fixed Assets
Fixed Asset TurnOver Ratio=
where,
Average Fixed Assets
during the year=
2
Hence,Avg Fixed Assets=
2
2
2166.03
1596.05
Higher ratio is better.
An increasing ratio indicates you are using your assets more productively

18. Total Assets TurnOver Ratio
Total Assets TurnOver
E) Ratio:-
=Net Sales
Average Total Assets
Total Assets TurnOver
Ratio=
Higher ratio is better.
=10906.01
=9598.33
6788.96
5713.93
1.61
1.68

19. COVERAGE RATIOS


Interest Coverage Ratio
Debt Service Coverage Ratio

20. Interest Coverage Ratio
Interest Coverage
A) Ratio:-
=Cash flow from operations p.a
Interest payable to bank p.a
Interest Coverage Ratio=
=1186.79
=699.63
10.52
9.11
112.81
76.80
Measures your ability to meet interest payment obligations with business
income. Ratios close to 1 indicates company having difficulty generating enough
cash flow to pay interest on its debt. Ideally, a ratio should be over 2.

21. Debt Service Coverage Ratio
B)Debt Service Coverage Ratio:- =Net Operating Income
Debt Service
Debt Service Coverage Ratio:-
2 and higher is better.
Indicates ability of a company to repay principal.
=1846.46
=1616.18
312.49
241.7
5.91
6.69

22. RATIOS IMPORTANT FOR SHAREHOLDERS
AND POTENTIAL INVESTORS








Book Value per share
Earnings per Share(EPS)
Dividend per share(DPS)
Earnings Yield/Capitalization Rate(%)
Dividend Yield(%)
Dividend Cover
Dividend Payout Ratio(%)
Price to Earnings Ratio

23. Book Value per share
A)Book Value per share:-
=Equity
No. Of shares(Outstanding)
Book Value per share=
=3384.29
=2748.5
9.59
9.59
352.90
286.60

24. Earnings per Share(EPS)
B)Earnings per Share:- =Net Profit-Preference dividend-tax dividend
Outstanding shares
Earnings per Share(EPS):-
=1113.88
=988.73
9.59
9.59
116.15
103.10
Higher ratio is better.
Helps in estimating company’s ability to pay dividend to shareholders.

25. Dividend per share(DPS)
C)Dividend per share(DPS):-
=Dividend paid
=462.05
=383.07
No. of shares
9.59
9.59
Dividend per
share(DPS):-
48.18
39.94

26. Earnings Yield/Capitalization Rate(%)
D)Earnings Yield/Capitalization Rate(%):- =EPS
Market Price per share
Earnings Yield OR
Capitalization Rate(%):-
=116.15
=103.10
406.5
370.1
28.57%
27.86%

27. Dividend Yield(%)
E)Dividend Yield(%):-
=DPS
Market Price per share
Dividend Yield(%):-
=48.18
=39.94
406.5
370.1
12%
11%

28. Dividend Cover
F)Dividend Cover:-
=EPS
DPS
Dividend Cover:-
=116.15
=103.10
48.18
39.94
2.41
2.58

29. Dividend Payout Ratio(%)
Dividend Payout
G) Ratio(%):-
=DPS
=48.18
=39.94
EPS
116.15
103.10
Dividend Payout
Ratio(%):-
41.48%
38.74%

30. Price to Earnings Ratio
H)Price to Earnings Ratio:- =Market Price per share
EPS
Price to Earnings Ratio:-
=406.5
=370.1
116.15
103.10
3.50
3.59
Higher ratio is better.
Helps the investor in deciding whether to buy or not to buy the shares.

31. EXPENSE RATIOS
Operating Expense
A) Ratio(%):-
=(Cost of goods sold+Operating Expenses)
Net sales
Operating Expense Ratio(%):-
=9238.8
=8123.47
10906.01
9598.33
84.71%
84.63%
A decreasing ratio is considered desirable since it generally indicates increased
efficiency

32. PROFITABILITY RATIOS





Return On Investment(%)
Return on Equity(%)
Return on Capital Employed(%)
Return on Assets(%)
Return on Total Capital(%)

33. Return on Equity(%)
B)Return on Equity(%):- =EAT(Net income after tax)
=1113.88
=988.73
Equity
3384.29
2748.5
Return on Equity(%):-
32.91%
35.97%
Rate of return on investment by shareholders
 It measures how profitable a company is for the owner of
the investment, and how profitably a company employs its
equity

34. Return On Investment(%)
A)Return On Investment(%):- =Net Profit After Interest and Tax/EAT
=1159.52
=1020.58
Total Assets
6788.96
5713.92
Return On Investment(%):-
17.08%
17.86%
•ROI measures how effectively the firm uses its capital to
generate profit
•The income that an investment provides in a year.
•The higher the ROI, the better.

35. Return on Capital Employed(%)
Return on Capital
C) Employed(%):-
=EBIT
=1846.46
=1616.18
Total Assets-Current Liabilities 6788.96-2931.41
5713.92-2587.03
Return on Capital
Employed(%):-
=1846.46
=1616.18
3857.55
3126.89
47.87%
51.69%
Return on Capital
Employed(%):-
•A higher ROCE indicates more efficient use of capital.
•ROCE should be higher than the company’s capital cost; otherwise it indicates
that the company is not employing its capital effectively and is not generating
shareholder value.
•A good ROCE is one that is greater than the rate at which the company
borrows.

36. Return on Assets(%)
D)Return on Assets(%):- =EBIT
=1846.46
=1616.18
Average total assets
6251.44
5253.39
Return on Assets(%):-
29.54%
30.76%
where,
Average Total Assets =Opening Total Assets
during the year=
+Closing Total Assets
=6788.96+5713.92
=4610.50+5896.21
2
2
6251.44
5253.39
2
Hence,Avg Total Assets=
Measures your ability to turn assets into profit.
This is a very useful measure of comparison within an industry. A low ratio
compared to industry may mean that your competitors have found a way to operate
more efficiently.

37. Return on Total Capital(%)
Return on Total
E) Capital(%):-
=(Net Income+Interest
Expense)
ROTC(%)=
where,
Average Total
Capital during the Opening Total Capital
year=
+Closing Total Capital
2
Hence,Avg Total Capital=
3343.49
2705.11
=1170.04
=1029.69
2705.11
34.99%
Return on Total Capital(%):-
=(1020.58+9.11)
3343.49
Average Total Capital
=(1159.52+10.52)
38.06%
(3384.29+312.49)+(27 (2748.50+241.70)+(
48.50+241.70)
2187.42+232.61)
2
2
3343.49
2705.11

38. Z-score
8) Z-SCORE
Z- Score =
A*3.3+B*.99+C*0.6+D*1.2+E*1.4 A = EBIT/Total Assets=
A=1809.81/6788.96
= 0.27
B=10906.01/6788.96
B= Net Sales/ Total Assets =1.61
C=424.55*9.59Cr
C= MV of Equity/ Total
/6788.96Cr
Liabilities=
=0.60
D=(4006.50-2931.41)/
D= Working Capital/ Total 6788.96
Assets=
=0.16
E= Retained Earnings/
E=(3288.37/6788.96)
Total Assets=
=0.4844
Z=0.27*3.3+1.61*.99+0.60*.
Thus,Z=
6+0.16*1.2+0.4844*1.4
Z=
Note:-Since,Z>3- Company is solvent based on Financial
Figures
3.7089
A=1575.21/5713.92
=0.28
B=9598.33/5713.92
= 1.69
C=362.50*9.59Cr/
5713.92Cr
=0.62
D= (3506.67-2587.03)/
5713.92
=0.16
E=(2652.58/5713.92)
=0.5
Z=0.28*3.3+1.69*.99+0.6
2*0.6+0.16*1.2+0.5*1.4
3.86