9-Data Analysis and Interpretation
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Transcript of 9-Data Analysis and Interpretation
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Data Analysis and Interpretation
For a research, researcher may depend either on primary data or secondary data. Primary data is
usually collected with the help of questionnaires and schedules and secondary data is collected
from published annual reports of the company.
In the present study most of the information is collected from balance sheet and profit and loss
account of the company period of five years starting from 2007-2011. The data received from the
company is shown in the appendices.
Besides some information are collected through discussion with company executives and
collecting information using questionnaire. The questionnaire is also shown in the appendices.
Financial analysis is the process of identifying the financial strengths and weaknesses of the firm
by properly establishing relationship between the items of the balance sheet and the profit and
loss account. There are mainly two techniques used in analyzing financial statement, such asratio analysis and schedule of changes in working capital.
Ratio Analysis
Liquidity Ratios
1. Current Ratio:-Current ratio shows the relationship between current assets and current liabilities.
Current ratio = Current AssetsCurrent Liabilities
Table No: 3.1
Year Current Assets
(Rupees in Millions)
Current Liabilities
(Rupees in Millions)
Current Ratio
(Times)
2007 10346.3 5975.56 1.73
2008 11258 6589.1 1.70
2009 10407.01 5557.55 1.87
2010 12203.12 8689.48 1.40
2011 18208.07 12219.16 1.49
Source: Company Annual Report
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Chart No: 3.1
InterpretationThe chart shows the relationship between current assets to current liabilities. The ideal current
ratio is 2:1. It indicates firms ability to cover current liabilities over current assets. The abovetable and chart exhibits the current ratio of the company. In 2007, the ratio was 1.73 but in 2008,
the ratio decreased to 1.70. By the end of 2009 the ratio increased to 1.87 then again decreased to
1.40 in 2010. In 2011 the ratio increased to 1.49. So the ratio is fluctuating in nature.
2. Liquid RatioLiquid ratio shows the relationship between liquid assets and current liabilities. Liquidassets include those assets which can be easily converted into cash
Liquid Ratio = Liquid Assets
Current Liabilities
Table No: 3.2
Year Liquid Assets
(Rs in Millions)
Current Liabilities
(Rs in Millions)
Liquid Ratio
2007 5826.79 5975.56 0.975
2008 6125.09 6589.1 0.929
2009 6236.54 5557.55 1.122
2010 6675.84 8689.48 0.7682011 6844.73 12219.56 0.560
Source: Company Annual Report
0
0.5
1
1.5
2
2007 2008 2009 2010 2011
Current Ratio
Current Ratio
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Chart No: 3.2
Interpretation
The ratio shows the liquidity position of the company. The ratio is a more conservative ratio i.e.,it measures the companys ability to meet current contingencies with only those assets that can
be readily liquidated. The standard ratio is 1:1 this means that there is not any liquidity problemin the organization. While checking the above table and chart, we can say that the liquid ratio of
the firm is relatively sound except in 2011 because it is comparatively low.
3. Sales to Current Assets ratio:It shows the productivity of the companys current assets. It is the relation between sales
and current assets.
Sales to Current Asset ratio= Sales
Current Asset
0
0.2
0.4
0.6
0.8
1
1.2
2007 2008 2009 2010 2011
Liquid Ratio
Liquid Ratio
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Table 3.3
Year Sales
(Rs in Millions)
Current Assets
(Rs in Millions)
Ratio
2007 37743.43 10346.3 3.64
2008 42469.83 11258 3.77
2009 45496.32 10407.01 4.37
2010 54256.38 12203.12 4.45
2011 60009.56 18208.07 3.29
Source: Company Annual Report
Chart 3.3
InterpretationFrom the above table and chart, it is seen that the sales to current assets is showing andincreasing trend from 2007 to 2010. In 2011 it decreased to 3.29 due to issues related to labor.
0
1
2
3
4
5
20072008
20092010
2011
Sales to Current Assets ratio
Sales to Current Assets ratio
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Turnover Ratios
4. Debtors Turnover Ratio:This ratio indicates the number of times that the firms average accounts receivablesbalances passes through sales during the year under consideration. This ratio shows theextend of trade credit granted and their efficiency in this collection of debts.
Debtors Turnover Ratio = SalesDebtors
Table No: 3.4
Year Sales
(Rs in Millions)
Debtors
(Rs in Millions)
Ratio
2007 37743.43 1890.995 19.952008 42469.83 1790.94 23.71
2009 45496.32 1212.085 37.53
2010 54256.38 1124.135 48.26
2011 60009.56 1709.115 35.11
Source: Company Annual Report
Chart No: 3.4
0
10
20
30
40
50
60
2007 2008 2009 2010 2011
Debtors Turnover Ratio
Debtors Turnover Ratio
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InterpretationDebtors turnover ratio shows the relationship between sales and debtors. It measures how
fast the firm collects debts. From the above analysis it is clear that ratio shows an
increasing trend till 2010 later on it shows a decreasing trend.
5. Debt Collection Period:-The average collection period determines how much the company is efficient in
collecting the debtors. In other words, it is the ratio which indicates the extent to which
have been collected in time.
Debt Collection period = 365
Debtors Turnover ratio
Table 3.5
Year Days Debtors Turnover Ratio Debt Collection Period2007 360 19.95 18
2008 360 23.71 15
2009 360 37.53 10
2010 360 48.26 7
2011 360 35.11 10
Source: Company Annual Report
Chart 3.5
0
20
40
60
20072008
20092010
2011
Debt Collection Period
Debt Collection Period
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InterpretationA shorter collection period indicates prompt receipt and vice versa and the trend is
satisfactory. The period is higher in the initial time but eventually it started decreasing.
Again it increased in last year i.e. 10 days.
6. Creditors Turnover Ratio:-Creditors turnover ratio indicates the number of items the accounts payable rotate in ayear.
Creditors Turnover ratio = Purchase
Creditors
Table No: 3.6
Year Purchase
(Rs in Millions)
Creditors
(Rs in Millions)
Credit Turnover
Ratio
2007 22580.31 3581.235 6.31
2008 23849.6 4447.865 5.36
2009 27946.64 4552.815 6.14
2010 30449.67 5025.815 6.06
2011 40696.2 6922.805 5.88
Source: Company Annual Report
Chart No: 3.6
4.8
5
5.2
5.4
5.6
5.8
6
6.2
6.4
2007 2008 2009 2010 2011
Creditors Turnover Ratio
Creditors Turnover Ratio
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InterpretationThe creditors turnover ratio indicates the promptness in making payment of creditpurchases. The ratio signifies that the creditors are being paid promptly, thus enhancing
the credit worthiness of the company.
7. Debt Payment Period:-The average payment period determines how much the company is efficient in paying the
creditors. In other words, it is the ratio which indicates the extent to which have been paidin time.
Debt Payment Period = 360
Creditors Turnover Ratio
Table No: 3.7
Source: Company Annual Report
Chart No: 3.7
52
54
56
58
60
62
64
66
68
2007 2008 2009 2010 2011
Debt Payment Period
Debt Payment Period
Year Days Creditors Turnover Ratio Debt payment Period
2007 360 6.31 57
2008 360 5.36 67
2009 360 6.14 58
2010 360 6.06 59
2011 360 5.88 61
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Interpretation
The above table and chart reveals that the inventory turnover ratio is higher in 2009 and
the lowest in the year 2011. This is indicating the speed with which the inventory is sold
by the firm. From 2009 onwards the ratio is decreasing due to labor issues which lead to
less production.
9. Stock Conversion Period:-Inventory conversion period or the stock velocity shows the duration taken by the
company to convert its stock to sales or debtors.
Inventory Conversion Period = 360
Stock Turnover Ratio
Table No: 3.9
Year Days Stock Turnover Ratio Stock Conversion Period
2007 360 4.934450569 73
2008 360 4.042003464 89
2009 360 6.931851806 52
2010 360 5.26350393 68
2011 360 3.067772328 117
Source: Company Annual Report
Chart No: 3.9
0
20
40
60
80
100
120
2007 2008 2009 2010 2011
Stock Conversion Period
Stock Conversion Period
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Interpretation:
From the above table and chart, it is clear that the firm takes lesser time to convert its
inventory to sales or debtors. The period of holding the inventory should be reduced in
order to convert stock to sales quickly. In 2009, it was 52 days and in the coming years
also the fluctuation is high. And in 2011 it was increased to 117 days from 68 days in
2010.
10.Fixed Assets Turnover Ratio:This ratio measures a companys ability to generate sales from fixed assets. A higher
fixed asset turnover ratio shows that the company has been more effective in using the
investment in fixed asset to generate revenue.
Fixed Assets Turnover Ratio = Net Sales
Fixed Assets
Table No: 3.10
Year Sales
(Rs in Millions)
Fixed Assets
(Rs in Millions)
Fixed Assets Turnover
Ratio
2007 37743.43 14925.12 2.53
2008 42469.83 15697.79 2.71
2009 45496.32 18379.96 2.48
2010 54256.38 24141.7 2.25
2011 60009.56 32991.27 1.82Source: Company Annual Report
Chart No: 3.10
0
0.5
1
1.5
2
2.5
3
2007 2008 2009 2010 2011
Fixed Assets Turnover Ratio
Fixed Assets Turnover Ratio
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Interpretation:
The above chart and table exhibits the fixed assets turnover ratio of the company. It is
showing a permanent trend with slight variations. From 2007 to 2010, the fluctuation is
very less. But in 2010 the fluctuation is comparatively high.
11.Working Capital Turnover Ratio:Working capital turnover ratio shows the amount of cash required to maintain a certain
level of sales, i.e. how many times the working capital is resolved to generate sales.
Working capital Turnover Ratio = Net Sales
Working capital
Table No: 3.11
Year Sales
(Rs in
Millions)
Net Working Capital Working capital
Turnover Ratio
2007 37743.43 5836.2 6.47
2008 42469.83 6280.61 6.76
2009 45496.32 6071.53 7.49
2010 54256.38 7121.88 7.62
2011 60009.56 10452.87 5.74Source: Company Annual Report
Chart No: 3.11
0
1
2
3
4
5
6
7
8
2007 2008 2009 2010 2011
Working Capital Turnover Ratio
Working Capital Turnover
Ratio
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Interpretation:
From the above tables and chart, it can be observed that the working capital turnover ratio
of the company is showing an increasing trend till 2010 from 2007 onwards. In 2011, it
was decreased to 5.74. But the volume of working capital is showing an increasing trend
by avoiding the decline in 2009 and the ratio is high in 2009 due to consistent growth of
sale.
12.Cash Turnover Ratio:This ratio indicates a firms efficiency in its use of cash for the generation of sales
revenue.
Cash Turnover Ratio = Sales
Cash
Table No: 3.12
Year Sales
(Rs in Millions)
Cash
(Rs in Millions)
Cash Turnover Ratio
2007 37743.43 1720.02 21.94
2008 42469.83 2658.53 15.97
2009 45496.32 3405.98 13.36
2010 54526.38 2588.28 20.96
2011 60009.56 1412.63 42.48Source: Company Annual Report
Chart No: 3.12
0
10
20
30
40
50
2007 20082009
20102011
Cash Turnover Ratio
Cash Turnover Ratio
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Interpretation:
From the above chart and table we can understand that the cash turnover ratio shows a
decreasing trend till 2009 after that it is an increasing trend which means effective use of
cash for generating sales revenue.
13.Cash Holding Period:-It is the period during which cash is kept idle in the organization. It is calculated by
dividing number of days with the cash turnover ratio.
Cash holding Period = 360
Cash Turnover Ratio
Table No: 3.13
Year Days Cash Turnover Ratio Cash Holding Period2007 360 21.94 16
2008 360 15.97 23
2009 360 13.36 27
2010 360 20.96 17
2011 360 42.48 8
Source: Company Annual Report
Chart No: 3.13
Interpretation:
Cash holding period is showing a declining trend from 2009 onwards so the cash volume
in the hand is less in those years.
0
5
10
15
20
25
30
2007 2008 2009 2010 2011
Cash Holding Period
Cash Holding Period
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WORKING CAPITAL ANALYSIS
Statement showing the schedule of Changes in Working capital for the year
2007 & 2008
Table No: 3.14
Particulars 2007
(Rs in Millions)
2008
(Rs in Millions)
Increase Decrease
CURRENT ASSETS
Inventories 4519.49 5132.91 613.42 Nil
Sundry Debtors 2030.55 1551.33 Nil 479.22
Cash and Bank 1720.02 2658.53 938.51 Nil
Other Current Assets 139.14 128.39 Nil 10.75
Loans and Advances 1937.10 1786.84 Nil 150.26
(A) 10346.30 11258CURRENT LIABILITIES
Liabilities 5422.01 5658.25 Nil 236.24
Provisions 553.75 930.85 Nil 377.10
(B) 5975.76 6589.10
WC (A-B) 4370.54 4668.90
Increasing in WC 298.36 298.36
TOTAL 4668.90 4668.90 1551.95 1551.95
Source: Company Annual Report
Interpretation:
While analyzing the above statement, the current assets are more than current liability.
Inventories, cash and bank shows an increase. But in the same case other current assets
including debtors, loans and advance shows a decrease. Increase in cash and bank shows
the company has enough cash for day to day management.
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WORKING CAPITAL ANALYSIS
Statement showing the Schedule of changes in Working Capital for the year
2008 and 2009
Table No: 3.15
Particulars 2008
(Rs in Millions)
2009
(Rs in Millions)
Increase Decrease
CURRENT ASSETS
Inventories 5132.91 4170.47 Nil 962.44
Sundry Debtors 1551.33 872.84 Nil 678.49
Cash and Bank 2658.53 3405.98 747.45 Nil
Other Current Assets 128.39 5.03 Nil 123.36
Loans and Advances 1786.84 1952.69 165.85 Nil(A) 11258 10407.01CURRENT LIABILITIES
Liabilities 5658.25 4601.22 1057.03 Nil
Provisions 930.85 956.28 Nil 25.43
(B) 6589.10 5557.50
WC (A-B) 4668.90 4849.51
Increasing in WC 180.61 180.61
TOTAL 4668.90 1970.33 1970.33
Source: Company Annual Report
Interpretation:
While evaluating the above statement, it is found that the volume of cash is increasing as
well as the liabilities. Decrease in inventories and debtors shows that the improper
utilization of current assets. As far as the firm is concerned they have cash and bank
balance to do the day to day activities of the business. The provision is also increased to
Rs. 25.43 million.
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WORKING CAPITAL ANALYSIS
Statement showing the Schedule of changes in Working Capital for the year
2009 and 2010
Table No: 3.16
Particulars 2009
(Rs in Millions)
2010
(Rs in Millions)
Increase Decrease
CURRENT ASSETS
Inventories 4170.47 5527.28 1356.81 Nil
Sundry Debtors 872.84 1375.43 502.59 Nil
Cash and Bank 3405.98 2588.28 Nil 817.7
Other Current Assets 5.03 44.18 39.15 NilLoans and Advances 1952.69 2667.95 715.26 Nil
(A) 10407.01 12203.12CURRENT LIABILITIES
Liabilities 4601.22 6904.60 Nil 2305.38
Provisions 956.28 1748.88 Nil 792.6
(B) 5557.50 8689.48
WC (A-B) 4849.51 3513.64
Decrease in WC 1335.87 1335.87
TOTAL 4849.51 4849.51 3949.68 3949.68
Source: Company Annual Report
Interpretation:
While analyzing the above statement, almost all the current assets are increasing except
cash and bank balance due to increase in current liabilities. From this we can understand
that the liability s high in 2010
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WORKING CAPITAL ANALYSIS
Statement showing the Schedule of changes in Working Capital for the year
2010 and 2011.
Table No: 3.17
Particulars 2010
(Rs in Millions)
2011
(Rs in Millions)
Increase Decrease
CURRENT ASSETS
Inventories 5527.28 11363.34 5836.06 Nil
Sundry Debtors 1375.43 2042.82 667.37 Nil
Cash and Bank 2588.28 1412.63 Nil 1175.65Other Current Assets 44.18 Nil 44.18
Loans and Advances 2667.95 3389.30 721.35 Nil
(A) 12203.12 18208.07CURRENT LIABILITIES
Liabilities 6904.60 10290.48 Nil 3385.88
Provisions 1748.88 1929.08 Nil 144.2
(B) 8689.48 12219.56
WC (A-B) 3513.64 5988.51
Increasing in WC 2472.87
TOTAL 5988.51 5988.51 7224.78 7224.78
Source: Company Annual Report
Interpretation:
While considering the above statement, current assets are more than current liabilities. In
2010, Inventories and sundry debtors have increased. That mean the company has
properly utilized its current assets. But the cash and bank balances have decreased; this
means that the company has not properly used the cash for day to day management. Both
liabilities and provisions are increased.