CURRENT RATIO:

This ratio defines the relationship between current assets and liabilities of the
company. The long run assets and liabilities are not considered in this case. It is
also called the Working Capital Ratio.
Current Ratio = Current Assets
Current Liabilities
Mar13 Mar12 Mar11 Mar10 Mar09
0.98 1.81 1.14 1.23 0.98

The thumb rule: The current assets should be twice that of the current liabilities,
only then realization from current assets will be adequate to pay for the current
liabilities in time.
INTERPRETATION -: The current ratio has deteriorated over the previous
year. Since it has reduced to 0.98 it is reasonable enough to say that the
company cant meet its short term liabilities using its current assets on time.




LIQUID RATIO/ ACID TEST RATIO/ QUICK RATIO:
Quick ratio may be defined as a relationship between quick/ liquid assets and
current liabilities. This is computed to assess the short term liquidity of the
enterprise.
Liquidity Ratio = Liquid Assets*
Current Liabilities
*Liquid Assets: Current Assets Stock Prepaid Expenses

Mar13 Mar12 Mar11 Mar10 Mar09
0.89 .74 1.26 1.28 0.78


The thumb rule: 1:1 is an accepted standard, since for every rupee of current
liabilities, there is a rupee of quick assets.
INTERPRETATION:- The quick ratio has increased from .74 to .89. The ideal
ratio is 1:1, increase in quick ratio means that the company is using quick funds
(liquid assets) in hand to meet its current obligations.



STOCK TURNOVER RATIO:
Also called Inventory Turnover Ratio it establishes the relationship between
the cost of goods sold i.e. Cost Of Revenue from Operations and the average
amount of Inventory carried during that period.
Inventory Turnover Ratio = Cost of goods sold
Average inventory
Inventory Conversion Period = 365/ Inventory Turnover Ratio
Mar13 Mar12 Mar11 Mar10 Mar09
0.99 .90 1.56 1.72 1.62

NOTE : In the absence of information inventory turnover ratio can be calculated
as:-
Inventory Turnover Ratio = Sales / Inventory

Thumb Rule : A high ratio represents that more sales are being produced by a
rupee of investment in inventories
Analysis- Inventory Turnover Ratio is .99 which indicates better liquidity because
stock gets converted into sales quickly. However the ratio should have been higher
as it was between 2009- 2011.

DEBTOR TURNOVER RATIO
It is also called the Trade Receivables Turnover Ratio .It establishes the relation
between net credit sales and average trade receivables i.e. debtors and bills
receivable of the year.
Debtor Turnover Ratio = Net Credit Sales
Average Debtors
Trade Debtors include: Debtors +B/R +account receivables
Average Collection Period/ Debtor days= 365 / DTR
Average Debtors= (Opening+ Closing Debtors and Trade Receivables)/2

Average collection period= 365/DTR
Mar13 Mar12 Mar11 Mar10 Mar09
4.43 7.45 5.32 3.98 5.98

NOTE: Debtor should always be taken at gross value i.e. no provision for Bad
& Doubtful debts are deducted from them.
Thumb Rule: A lower ratio shows inefficiency in collection and more
investment in debtors than required.
Analysis- Debtor turnover ratio is very low (1.87 times) which indicates
inefficient management of debtors or less liquid debtors. The average collection
period is 195 days. It means the company should reassess its credit policies in
order to ensure timely collection of sales (cash from debtors) and reduce the
risk of bad debts.

TOTAL ASSET TURNOVER RATIO
It can be defined by the following formula:

Total Asset Turnover Ratio = Net Sales
Total Assets

Mar13 Mar12 Mar11 Mar10 Mar09
.49 .45 .51 .50 .61

Thumb Rule / Interpretation: If a company can generate more sales with fewer
assets it has a higher turnover ratio which tells it is a good company because it is
using its assets efficiently. A lower turnover ratio tells that the company is not
using its assets optimally.
Analysis- The total assets turnover ratio has increased from the previous year, this
means that the firm is utilizing its assets (especially fixed assets)- its asset base
efficiently to generate revenue, it is good for the company.

DEBT EQUITY RATIO
It is defined as the measure of a company's financial leverage calculated by
dividing its total liabilities by stockholders' equity. It indicates what proportion of
equity and debt the company is using to finance its assets.
Debt Equity ratio = Debt / Equity
Debt: All external long term liabilities
Equity: Share Capital + Reserves and Surplus- Accumulated Losses
Mar13 Mar12 Mar11 Mar10 Mar09
1.03 .97 1.08 1.07 1.16








OPERATING RATIO
This is the ratio depicting the relationship between the Operating Profit and the Net
Sales.
Operating Ratio: Operating Costs * 100
Net Sales
NOTE : Operating costs = Cost of goods sold + Operating expenses
Operating Expenses are: Administrative and office expenses + Selling and
distribution expenses
= (47952.40+2091.08)/60873.26
= 0.82
For year 2012-2013= 0.82
For year 2011-2012= 0.81
Analysis- The operating ratio has marginally increased, even though the selling,
distribution expenses have decreased, but COGS has increased hence increase in
the ratio. Increase in operating ratio is not good for the company. Smaller the ratio,
the greater the organizations ability to generate profit if revenues decrease. But the
increase is marginal so there isnt much a matter of concern, but the firm should
keep a check on its operating costs.


RETURN ON CAPITAL EMPLOYED (ROCE)
It is the financial ratio that measures a company's profitability and the efficiency
with which its capital is employed. Return on Capital Employed (ROCE) is
calculated as:
Return on Capital Employed= Profit before interest & tax * 100
Capital Employed
NOTE: Capital employed = (Equity Share Capital + Preference Share Capital +
Reserves and Surplus + long Loans + debentures) fictitious Assets like
preliminary expenses
Profits before tax = 6711.15
Interest paid = 856.39
Share capital = 123.08
Reserves and surplus = 29019.64
Long term borrowings =7271.03
Therefore ROCE = 6711.15+856.39/123.08+29019.64+7271.03*100 = 20% ( For
2012-2013)
Thumb Rule / Interpretation: A higher ROCE shows efficient use of capital. ROCE
should be higher than the companys capital cost else it shows that the company is
not employing its capital effectively and is not generating shareholder value.

INTEREST COVERAGE RATIO
This is defined as the ratio used to determine how easily a company can pay
interest on outstanding debt. The interest coverage ratio is calculated by dividing a
company's earnings before interest and taxes (EBIT) of one period by the
company's interest expenses of the same period:
Interest Coverage ratio = Net profit (before interest, dep and tax)
Interest
= 6711.15 +916.30/916.30
=8.32
For year 2012-2013 = 8.32
For year 2011-2012 = 11.44