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RATIO ANALYSIS OF RANI LTD.
Prepared For : BOD (Raja Ltd)
Prepared By : Management Accountant
STRUCTURE

 ?   Background
 ?   Profitability of the company
 ?   Liquidity position
 ?   Efficiency indicators
 ?   Investment perspective
 ?   Trends of ratios & percentages
 ?   Suggestions
 ?   Conclusion
 ?   Questions & Answers
BACKGROUND

 ? Current economic situation
 ? Nature & type of company
 ? Data limitations
PROFITABILITY OF RANI LTD

 ? Increase in sales
 ? Increase in cost of sales
 ? Falling net profit margin
              25000

              20000

              15000

              10000

               5000

                   0
                       2012    2011    2010
      Sales            20440   19467   18540
      Cost Of Sales    12247   10650   10753
      Net Profit       2132    2650    2578
LIQUIDITY POSITION

 ? Increase in current ratio
 ? Quick ratio at alarming rate
 ? Mismanagement of working capital
               2
             1.5
               1
             0.5
               0
                     2012   2011   2010
     Current Ratio   1.43   1.21   1.26
     Quick Ratio     0.64   0.56   0.57
EFFICIENCY INDICATORS

 ? Receivable collection period
 ? Huge amount of inventory
 ? Increase in operating cycle
                  160
                  140
                  120
                  100
                   80
                   60
                   40
                   20
                    0
                         2012   2011   2010
    Operating Cycle      138    100     90
    Inventory Turnover   100     77     84
    ReceivableTurnover    49     35     14
INVESTMENT PERSPECTIVE

 ? Earning per share
 ? Dividend per share
TRENDS OF RATIOS

?   Current Ratio         ?   Net Profit Margin
?   Quick Ratio           ?   Gross Profit
?   Working Capital       ?   Return on Assets
?   Receivable Turnover   ?   ROCE
?   Inventory Turnover    ?   ROSE
?   Operating Cycles      ?   EPS
?   Sales
?   Cost of Sales
?   Dividend Per Share
CONCLUSION

 ? Unsecure financial position
 ? Deteriorating results
 ? Acute working capital management
   problem
 ? Overtrading
 ? Declining Profits
 ? Increasing Cash conversion cycle
SUGGESTION

 ? Comparison with other companies
 ? Improving the average collection
   period for trade debtors
 ? Improving the Inventory turnover
 ? Avoiding unnecessary overtrading
 ? Working capital management policy
 ? Acquisition of synergies
THANK YOU
QUESTIONS & ANSWERS
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Ratio analysis of rani ltd

  • 1. RATIO ANALYSIS OF RANI LTD. Prepared For : BOD (Raja Ltd) Prepared By : Management Accountant
  • 2. STRUCTURE ? Background ? Profitability of the company ? Liquidity position ? Efficiency indicators ? Investment perspective ? Trends of ratios & percentages ? Suggestions ? Conclusion ? Questions & Answers
  • 3. BACKGROUND ? Current economic situation ? Nature & type of company ? Data limitations
  • 4. PROFITABILITY OF RANI LTD ? Increase in sales ? Increase in cost of sales ? Falling net profit margin 25000 20000 15000 10000 5000 0 2012 2011 2010 Sales 20440 19467 18540 Cost Of Sales 12247 10650 10753 Net Profit 2132 2650 2578
  • 5. LIQUIDITY POSITION ? Increase in current ratio ? Quick ratio at alarming rate ? Mismanagement of working capital 2 1.5 1 0.5 0 2012 2011 2010 Current Ratio 1.43 1.21 1.26 Quick Ratio 0.64 0.56 0.57
  • 6. EFFICIENCY INDICATORS ? Receivable collection period ? Huge amount of inventory ? Increase in operating cycle 160 140 120 100 80 60 40 20 0 2012 2011 2010 Operating Cycle 138 100 90 Inventory Turnover 100 77 84 ReceivableTurnover 49 35 14
  • 7. INVESTMENT PERSPECTIVE ? Earning per share ? Dividend per share
  • 8. TRENDS OF RATIOS ? Current Ratio ? Net Profit Margin ? Quick Ratio ? Gross Profit ? Working Capital ? Return on Assets ? Receivable Turnover ? ROCE ? Inventory Turnover ? ROSE ? Operating Cycles ? EPS ? Sales ? Cost of Sales ? Dividend Per Share
  • 9. CONCLUSION ? Unsecure financial position ? Deteriorating results ? Acute working capital management problem ? Overtrading ? Declining Profits ? Increasing Cash conversion cycle
  • 10. SUGGESTION ? Comparison with other companies ? Improving the average collection period for trade debtors ? Improving the Inventory turnover ? Avoiding unnecessary overtrading ? Working capital management policy ? Acquisition of synergies