Financial

Management
Analysis of Financial Statement (Ratio Analysis)
for the year 2013-2014 of
Future Retail
Mid Semester Presentation, Semester-III, Master of Fashion Management, NIFT, Kolkata
Durgesh Nandini, Indranil Saha, Kirti Dhingra,
Savita Rani, Shailja Jajodia

2
Objective
To interpret the financial report of
Future Retail for the financial year
2013-2014
3
Limitations &
Considerations

The previous period accounts comprise of financial
performance of Pantaloons Fashion Business
The previous period of accounts was for eighteen
months period, whereas the current financial period is
of fifteen months period

All the amounts are in Indian Rupees
All figures given are in crores


4
FUTURE RETAIL
5
Introduction
Focusing on hypermarket, electronics and home
businesses
Enhancing profitability through higher efficiencies of its
existing network
Expanded its presence across its formats in existing and
new cities with the aim of increasing productivity and
profitability
The focus is on increasing footfalls, customer ticket sizes
and sales of high margin categories
6
RATIO ANALYSIS
A form of Financial Statement Analysis that is used to
obtain a quick indication of a firm's financial performance
in several key areas
#
7
#Source: Ratio Analysis; www.prenhall.com/divisions/bp/app/cfl/RA/RatioAnalysis.html
LIQUIDITY RATIO
Current Ratio
Quick Ratio
Super Quick Ratio
Stock Turnover Ratio
Debtor Turnover Ratio
Creditor Turnover Ratio
8
Short Term Capability of the Company to Meet Short Term Obligations
Current Ratio
=Current Assets
#
/Current
Liabilities
Calculation
2013-2014 2012-2013
4925.01/3746.53
= 1.3145
33261.59/6876
.84=4.836~4
Interpretation
For every one rupee of
current liability , Future
Retail has Rs.1.3145 of
currents assets to meet
them in the current year
For every one rupee of
current liability , Future
Retail has Rs.4 of
currents assets to meet
them in the previous year


# Also known as Gross Working Capital; Net Working Capital=GWC-CL=1178.48
9
Quick Ratio=Quick
Assets/Current Liabilities
Calculation Interpretation
For every one rupee of
Current Liability, Future
Retail has Rs.0.0085 of
Quick Assets in the current
year
For every one rupee of
current liability, Future
Group has Rs.0.015 of
Quick Assets in the previous
year


10
2013-2014 2012-2013
32.18/3746.53
= 0.0085
106.6/6876.8
4=0.015
Super Quick Ratio
=Super Quick Assets/Super Quick
Liabilities
=Cash in hand + Investment/Current
LiabilityBO
Calculation Interpretation
For every one rupee of
current liability, Future
Group has Rs.0.0141 of
Super Quick Assets in the
current year
For every one rupee of
current liability, Future
Group has Rs.0.015 of
Super Quick Assets in the
previous year


11
2013-2014 2012-2013
32.18+20.92/3
746.53
=0.0141
106.6/6876.84
=0.015

Stock Turnover Ratio=
COGS
#
/Average Stock
Calculation




Interpretation
Future Retail replenishes its
stocks 5 times in an financial
year in the current year
Future Retail replenishes its
stocks 9 times in an financial
year in the previous year
Higher the STR shows more
the sale of goods, good for the
company

12
#COGS=Net Sales-Gross Profit; Net Sales= Gross Sales-Returns
2013-2014 2012-2013
11336.16/2140.2
4 + 3113.29/2
= 5 times
27105.11/2957.9
9
=9 times
Stock Holding Period
= 12/ STR
Calculation

Interpretation
Every 3 months Future
Retail revolves its stock in
the current year
Every 2 months Future
Retail revolves it stock in
the previous year

Lower the stock holding
period, better for the
company
13
2013-2014 2012-2013
=12/5
=2.4~3
12/9
=1.3~2
Debtor Turnover
Ratio=Net Credit
sales/Average Debtors
Calculation

Interpretation
On an average Future Retail
has its debtors paying 48 times
in the current year
On an average Future Retail
has its debtors paying 20 times
in the previous year
Higher the DTR, better for the
company
14
2013-2014 2012-2013
=11336.16/165.0
1+313.98/2
=47.3 ~ 48
27105.11/1371.7
0
=19.76~ 20
Debt Collection Period
=12/DTR
Calculation

Interpretation
Every 8 days Future Retail
collects the money back from
its debtors in the current year
Every 18 days Future Retail
collects money backs from its
debtors in the previous year
lower the debt collection
period, better for the company
15
2013-2014 2012-2013
=12/47.3
=0.25 Months
=7.5 Days ~ 8
Days
=12/19.76
=0.60Months
=18.4 Days
~ 18Days
Creditor Turnover Ratio
=Net Credit Purchases/Average
Creditors
Calculation Interpretation
On an Average Future Retail
pays 9 times to its creditors in
the current year
On an average Future Retail
pays 11 times to its creditors
in the previous year
Lower the creditor turnover
ratio, good for the company
16
2013-2014 2012-2013
=8498.87/810.02
+1224.02/2
=8.35663 ~ 9
27132.94/99.86+
4884.61/2
=10.8~11
Credit Payment Period
=12/CTR
Calculation

Interpretation
Every 2 months Future
group has to pay back the
money to its creditors in the
current year
Every 1 month Future Retail
has to pay back to its
creditors in the previous
year
Creditor payment period
should be higher
17
2013-2014 2012-2013
=12/8.35663
=1.435 ~ 2
12/10.88
=1.10~1
CAPITAL STRUCTURE RATIO
Debt-Equity Ratio
Debt-Capital Ratio
Coverage Ratio
Interest Coverage Ratio
Dividend Coverage Ratio
18
Long Term Capability of the Company to Meet Long Term Obligations
Ability of the company to pay back the principal
Ability of the company to pay back the
interest/dividend
Debt Equity
Ratio=Debt/Equity
Calculation Interpretation
For Rs.1.93 of Debt, Future
Retail has Rupee 1 of Equity

Since the Debt is more than
equity:
Less control over the investors
Less decision making abilities
Reduced credit worthiness
19
2013-2014 2012-2013
1.93
0.96
Interest Coverage
Ratio=EBIT/Interest
Calculation Interpretation
Future Retail is able to meet its
interest payments one time over

The lower the ratio, the more the
company is burdened by debt
expense

The company is not generating
sufficient revenues to satisfy
interest expenses
20
2013-2014 2012-2013
374.95/373.68
=1.003

1.07
Dividend Coverage
Ratio=PAT/Dividend
Calculation Interpretation
The company is retaining a
higher portion of its earnings
to meet its financing
requirements which may
result in higher dividend
payouts in the future
21
2013-2014 2012-2013
1.27/0.41
=3.098

4.36
PROFITABILITY RATIO
Profitability shows the overall efficiency of the company
Profitability ratios are the measure of its overall efficiency
and performance
22
Profitability
Ratios
In Relation with
Sales
Gross Profit
Margin
Operating Profit
Margin
Net Profit
Margin
In Relation with
Expenses
COGS Ratio
Operating
Expenses Ratio
In Relation with
Investment
Return on
Investment
Ratios
ROA
ROCE
ROE
23
Profitability in Terms of
Sales
Ratios that show margins; represent the firm's ability
to translate sales into profits.
Gross profit margin
Operating profit margin
Net profit margin

24
Gross Profit Margin
=Gross Profit/Net Sales x100%
Calculation Interpretation
For every rupee in sales,
company earned 25%
profit but Spent 75% to
make it
25
2013-2014 2012-2013
=2838.51/11336
.16 x100%
=25%
Operating Profit Margin
=EBIT/Net Sales x100%
Calculation


Interpretation
Out of every rupee Future
Retail made in sales, it
spent 3.3% on Expenses


26
2013-2014 2012-2013
=374.95/11336.
16 x100%
= 3.3%
Net Profit Margin
=Net Profit/Net Sales
Calculation Interpretation
There is only 0.0112%
profit earned by the
company after
consideration of all
expenses including taxes
interest, and depreciation
27
2013-2014 2012-2013
=1.27/11336.16
x 100%
= 0.0112%
Profitability in Terms of
Expenses
COGS Ratio
Operating Expenses Ratio
28
COGS Ratio
=COGS/Sales x100%
Calculation

Interpretation
74.96% share of sales is
consumed by cost of
goods sold.
29
2013-2014 2012-2013
8497.65/11336.
16x100
=74.96%
Operating Expenses Ratio
=Operating expenses/net
sales x100
Calculation


Interpretation
21.73% of income is
being spent on
maintenance and
operational expenses.
30
2013-2014 2012-2013
=2463.56/113
36.16 x100%
= 21.73%
Profitability in Terms of
Investment
Ratios that show returns represent the firm's
ability to measure the overall efficiency of the
firm in generating returns for its shareholders.
Return on Assets
Return on Equity
Return on Capital Employed
31
Return on Assets=PAT/Avg.
Total Assets x100%
Calculation

Interpretation
0.013% earnings were
generated from invested
capital (assets)
32
2013-2014 2012-2013
=1.27/9976.25
5x100
= 0.013 %
Return on Equity=
PAT/Avg. Equity
Calculation

Interpretation
0.0386% equity share
invested in the firm

33
2013-2014 2012-2013
=1.27/3287.1
x100%
= 0.0386%
Return on Capital Employed
=PAT/Employed capital x 100%
Calculation

Interpretation
0.013% will be returned
on capital employed

34
2013-2014 2012-2013
= 1.27/9519.59
x100
= 0.013%
ACTIVITY RATIO
Capital Turnover Ratio
Working Capital Turnover Ratio
Asset Turnover Ratio
Current Asset Turnover Ratio
Fixed Asset Turnover Ratio
35
Capital Turnover Ratio
=COGS/Total Capital
Calculation Interpretation
It shows how well a
company uses its
stockholders equity to
generate revenue.
The higher the ratio, the
more efficiently the
company is using its
Capital
36
2013-2014 2012-2013
8497.65/4632
= 1.83 times
1.26 times
Working Capital Turnover Ratio
=COGS/Working Capital
Calculation Interpretation
It measures how well a company
is utilizing its working capital to
support a given level of sales.
Higher CTOR indicates
management is being highly
efficient in utilising its working
capital
37
2013-2014 2012-2013
=8497.65/4611.0
3
= 1.84 times
0.04 times

Total Asset Turnover
Ratio=COGS/Total Assets
Calculation




Interpretation
It measures the ability of the
company to use its assets to
efficiently generate sales
Higher ATOR is favorable for
the company because it
shows how efficiently the
company uses its assets

38
2013-2014 2012-2013
=8497.65/6024.5
8
= 1.4104 times
1.09 times
Current Assets Turnover Ratio
=COGS/Current Assets
Calculation


Interpretation
It indicates that the current
assets are turned over in
the form of sales more
number of times.
Higher CATR indicates
the capability of the
organization to achieve
maximum sales.
39
2013-2014 2012-2013
= 8497.65/
4925.01
= 1.72 times
0.035 times
Fixed Asset Turnover Ratio
=COGS/Fixed Asset
Calculation Interpretation
It measures the companys
ability to generate net sales
from fixed assets
investment.
Higher FATR shows the
company has been more
efficient in using the
investment in FA to generate
revenues.
40
2013-2014 2012-2013
=8497.65/4340.24
= 1.95 times
2.59 times
INTEGRATED RATIO
Earning Power of the Company
Return on Asset
41
Return on Asset
ROA
Net Margin
Ratio
PAT/Sales
Asset
Turnover
Ratio
Sales/Asset
42
PAT/Assets
Return on Asset
=NM Ratio*Asset Turnover
Ratio
Calculation Interpretation
0.013% earnings were
generated from
invested capital
(assets)
43
2013-2014 2012-2013
0.0112*1.136
=0.013
Conclusion
The Companys Sales and Other Operating Income has increased
from Rs.6,987.73 Crores to Rs.11,577.44 Crores with YOY growth
of 98.82%

Store Sales growth of 5.8%

Profit after Tax is Rs.1.27 Crores as compared to Rs.288.32 Crores
during the previous financial period

The Companys Basic Earnings per Share (EPS) has reduced from
Rs.12.08 to Rs.0.12 per share

Interest & Financial charges outflow has increased from Rs.460.41
Crores in previous period to Rs.692.54 Crores

44
Reference
Chandra, P. (2013). Financial Management.

www.futureretail.com/annualfinancial_report_2013-
14.pdf (7
TH
SEPTEMBER, 2014, 9:57 PM)
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THANK YOU
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