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