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ANALYSES AND DATA INTERPRETATIONMASTER TABLE FOR WORKING CAPITAL:Particulars2008-092009-102010-112011-12
Cash2664116255642473138100028161490169
Raw-Materials518716903259073805327333090863670256062
Work-in-progress143577562124360115931207626448792
Finished-Goods38720950176510272915814718251093748619
Debtors43076543137961398990030483813855
TOTAL
990001865363771540551359020055015757497
Statement showing working capital on 2009
INTERPRETATION The above graph shows that current assets are Inventory, Dr, Cash & Bank and Loans& advances more than current liabilities which are short-term borrowing, trade paybles, other current liabilities, short-term provision. It shows that company is growing stage.
Statement showing working capital on 2010
SL NOPARTICULARS2010
ICurrent Assets
Inventories1725628265
Debtors13796139
Cash & Bank55642473
Loan & Advance261030560
ASub Total A2056097437
IICurrent Liabilities
Short-term borrowing1458847725
Trade paybles7098139
other current liabi22122852
Short-term provision22602332
BSub total B1510671048
IIINet working Cap A-B 545426389
INTERPRETATION The above graph shows that current assets are Inventory, Dr, Cash & Bank and Loans& advances more than current liabilities which are short-term borrowing, trade paybles, other current liabilities, short-term provision. But compare to last year 2009 Net working capital has decreased.
Statement showing working capital on 2011
SL NOPARTICULARS2011
ICurrent Assets
Inventories1240563436
Debtors89900304
Cash & Bank138100028
Loan & Advance584403148
ASub Total A2052966916
IICurrent Liabilities
Short-term borrowing681859399
Trade paybles131836764
other current liabi394407197
Short-term provision74344100
BSub total B1282447460
IIINet working CapA-B 770519456
INTERPRETATION The above graph shows that current assets are Inventory, Dr, Cash & Bank and Loans& advances more than current liabilities which are short-term borrowing, trade payable, other current liabilities, short-term provision. But compare to last year 2010 Net working capital has increased.
Statement showing working capital on 2012SL NOPARTICULARS2012
ICurrent Assets
Inventories2006814860
Debtors83813855
Cash & Bank161490169
Loan & Advance269447197
ASub Total A2521566081
IICurrent Liabilities
Short-term borrowing1092805003
Trade payables1764895986
other current liabilities648269883
Short-term provision56063551
BSub total B3562034423
IIINet working CapA-B -1040468342
INTERPRETATION The above graph shows that current assets are Inventory, Dr, Cash & Bank and Loans& advances less than current liabilities which are short-term borrowing, trade payable, other current liabilities, short-term provision. But compare to last year 2011 Net working capital has decreased. It indicates that company is not having favorable liquidity position. In fact, in 2012 the net working capital is negative indicating current liabilities are more than current assets, which is not a good sign of financial performance.
WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES
Table showing net working capital SPSC, ltd.
Sl NoParticular2009201020112012
ACurrent Assets1103920130205609743720529669162521566081
BCurrent Liabilities522492786151067104815462461363562034423
CWorking Capital (A-B)581427344545426389506720780-1040468342
Interpretation: The above table shows there is continuous decline in the working capital of the company from Rs.58.14 crores in 2009 to Rs.54.54 in 2010, Rs.50.67 in 2011. But, in view of sudden increase in current liabilities in the year 2012, the working capital is negative, which is not a good sign of solvency.
Ratio Analysis
1. Inventory turnovers ratio It indicate the efficiency of the firm in producing the selling its product. The ratio indicates how fast inventory is sold. A high ratio is good from viewpoint of liquidity and vice versa. A low ratio would signify that inventory does not sell and stay on the shelf or in warehouse for a long time.
Inventory Turnover Ratio = cost of goods sold Average Inventory
YearCost of goods soldAverage inventoryRatio
2008-0914930896107610741821.961818763
2009-10259073805312034213352.152810473
2010-11273330908614661289181.864303372
2011-12367025606218600631101.973188997
GRAPH
InterpretationThe above graph shows that inventory turnover ratio was more in the 2009-10 but declined in the year 2010-11 and 2011-12 which shows that the company is not managing its inventory effectively. This is considering higher inventory ratio indicates inventory getting sold quickly in terms of sales, which is a good sign of financial performance. But, since inventory turnover ration has been declining company needs to look at how to improve inventory management.
1) CURRENT ASSETSCURRENT RATIO = --------------------------------CURRENT LIABILITYCURRENT RATIO
Year2009201020112012
Current Assets1103920130205609743720529669162521566081
Current Liabilities822492786151067104815462461363562034423
Ratio1.3421639061.3610490781.3277102970.707900537
GRAPH
Interpretation
This ratio indicates the solvency of the company. It shows the proportion of current assets to current liabilities. Normally, it is expected that current ratio should be 2:1, indicating that current assets should be twice of current liabilities. As the current ratio is less than the ideal ratio, the solvency position of company is low. Also, in the year 2012 there has been major change in current liabilities resulting in a negative working capital which is not a good sign. The company has to initiate measures to bring down current liabilities or increase current assets to improve liquidity position of the company.
PROFITABILITY RATIO
GROSS PROFIT RATIO
GROSS PROFITGROSS PROFITRATIO = ------------------------ x 100 NET SALES
YEAR2009201020112012
GROSS PROFIT328925029429627773525924750653548927
NET SALES1836181577217943440037811538524052456123
RATIO17.9135349719.7128104913.9091073916.12723018
GRAPH
InterpretationThis ratio shows the margin left meeting the purchase and manufacturing costs. It measures the efficiency as well as pricing. High gross profit ratio means a high margin for covering other expenses like administrative, selling and distribution expenses. In 2010 gross profit ratio is more which decreased in 2011 and 2012. This indicates there is a marginal decline in profitability of the company.
NET PROFIT RATIO
NET PROFIT NET PROFIT = -------------------- X 100 NET SALES
YEAR2009201020112012
NET PROFIT39111451312142573380738033548927
NET SALES1836181577217943440037811538524052456123
RATIO2.1300426651.432218240.8941022060.827866508
GRAPH
Interpretation
This ratio shows the earning left for share-holders as percentage of net sales.It measures the overall efficiency of all the functions of business firm like production, administrative, selling, financing, pricing , tax management etc. Higher the ratio, better it is because it gives an idea of overall efficiency of the firm. As we see in above graph, the trend in this ratio is declining. The Net Profit Ratio of the company has declined from 2.13% in 2009 to 0.82% in 2012 which indicates the companys operational performance has declined.
WORKING CAPITAL TURNOVER RATIO
Cost of goods soldWORKING CAPITAL TURNOVER RATIO= ----------------------------------- Net working capital
YearCost of goods sold Net working capRatio
2008-09
14930896105814273442.567972809
2009-10
25907380535454263894.749931623
2010-11
27333090867705194563.547358947
2011-12
3670256062-1040468342-3.527503831
InterpretationThe above graph shows that working capital turnover ratio of the company was good in 2009-10 as compared to 2008-09. But, there is a marginal decline in the year 2010-11 where the ratio value is 3.54. However, in view of negative working capital in 2011-12, the ratio has changed significantly indicating lower financial performance.
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