2. 1. Current Ratio= Total current assets/ Total current
liabilities Increase in current ratio from 2007 to 2008 is due
to-short term investment (trading investment 20 lakhs and 4.8
crores) bharathi airtel.xlsx 2006 2007 2008 Airtel 0.4143 0.4204
0.7382 Idea 2.12 1.14 0.6 Bharti Enterprises
3. 2. Quick Ratio or Acid Test Ratio= (Total current assets-
Inventory- Prepaid expenses)/ Total current liabilities Increase in
quick ratio from 2007 to 2008 is due to short term investment
bharathi airtel.xlsx 2006 2007 2008 Airtel 0.2664 0.2723 0.5601
Idea 0.3425 0.95 0.285 Bharti Enterprises
4. 3. Super Quick Ratio= (Total current assets- Inventory-
Prepaid expenses- Bills receivable)/ Total current liabilties Same
as current ratio & super quick ratio bharathi airtel.xlsx 2006
2007 2008 Airtel 0.0847 0.1036 0.3781 Idea 0.2252 0.8808 0.2092
Bharti Enterprises
5. 4. Cash flow from operations Ratio= Cash flow from
operations/ Current liabilties Decrease in ratio from 2007 to 2008
is due to Increase in short term investment on account of negative
cash out flow from operations Unbilled receivables have increased
bharathi airtel.xlsx 2006 2007 2008 Airtel 0.6196 0.6694 0.3700
Idea 1.0627 0.7459 0.9531 Bharti Enterprises
6. 5. Debt Equity Ratio= Total liabilties/ Shareholders equity
Reason for decrease in ratio from 2006 to 2007 is due to Increase
in retained earnings bharathi airtel.xlsx 2006 2007 2008 Airtel
1.3463 1.1842 1.1382 Idea 1.2979 1.3828 1.8456 Bharti
Enterprises
7. 6. Debt to total Capital Ratio=Long term debt/ Permanent
Capital bharathi airtel.xlsx 2006 2007 2008 Airtel 0.2920 0.2499
0.2767 Idea 0.5063 0.4785 0.5648 Bharti Enterprises
8. 7. Debt to total Assets Ratio= Total debt/ Total Assets 2006
2007 2008 Airtel 0.5712 0.5389 0.5226 Idea 0.5648 0.5803 0.6455
Bharti Enterprises bharathi airtel.xlsx
9. 8. Proprietory Ratio= 100 x Proprietors fund/ Total Assets
Increase in proprietory ratio from 2006 to 2007 is due to the
increase in retained earning by more than 200% in 2007 while Total
assets increased by just 38% bharathi airtel.xlsx 2006 2007 2008
Airtel 42.43 45.50 45.92 Idea 43.51 41.96 34.94 Bharti
Enterprises
10. 9. Interest Coverage Ratio= EBIT/ Interest Increase in
coverage ratio from 2006 to 2007 is due to increase in EBIT by 81%
while interest expense was almost constant From 2007 to 2008 is due
to increase in EBIT by 55% and interest expense increased by 33%
bharathi airtel.xlsx 2006 2007 2008 Airtel 9.29 16.19 18.86 Idea
1.94 2.86 3.45 Bharti Enterprises
12. 11. Operating Profit Ratio= EBIT/ Net Sales Increase in
operating profit ratio is due to-Year on Year increase in EBIT was
more than Net Sales bharathi airtel.xlsx 2006 2007 2008 Airtel
0.2365 0.2661 0.2829 Idea 0.2308 0.2112 0.2254 Bharti
Enterprises
13. 12. Pre-tax Profit Ratio= EBT/ Net Sales Increase in
pre-tax profit ratio is due to- Year on Year increase in EBIT was
more than Net Sales bharathi airtel.xlsx 2006 2007 2008 Airtel
0.2110 0.2497 0.2679 Idea 0.1120 0.1375 0.1602 Bharti
Enterprises
14. 13. Net Profit Ratio= Net Profit (PAT)/ Net Sales 2006 2007
2008 Airtel 0.1941 0.2298 0.2479 Idea 0.0622 0.1144 0.1550 Bharti
Enterprises bharathi airtel.xlsx
15. 14. Returns on Assets (ROA)= 100 x (Net Profit after Tax+
Interest)/ Average total Assets Increase in ROA in 2007 is on
account of increase in Net profit by 91% whereas assets increased
by 36% bharathi airtel.xlsx 2006 2007 2008 Airtel 11.74% 15.31%
15.03% Idea 5.55% 7.47% 10.47% Bharti Enterprises
16. 15. Return on Capital Employed= EBIT/ Average total Capital
employed Increase in 2007 ROCE is due to increase in EBIT by
approximately 90% whereas Total capital employed increased by
approximately 50% only bharathi airtel.xlsx 2006 2007 2008 Airtel
0.1271 0.1665 0.1647 Idea 0.0709 0.0836 0.1075 Bharti
Enterprises
17. 16. Equity Multiplier= Total Assets/ Total Shareholders
Equity Decrease in Equity multiplier in 2007 is due to decrease in
total assets by 36% and increase in shareholders equity by 46%.
bharathi airtel.xlsx 2006 2007 2008 Airtel 2.3567 2.1976 2.1776
Idea 2.2979 2.3831 2.8589 Bharti Enterprises
18. 17. Return on Equity= PAT/ Total Shareholders Equity
Increase in ROE in 2007 is due to 91% increase in PAT while
shareholders equity has increased by 46% bharathi airtel.xlsx 2006
2007 2008 Airtel 0.2448 0.3140 0.3087 Idea 0.0442 0.1084 0.2108
Bharti Enterprises
19. 18. Asset Turnover Ratio= COGS/ Average Total Assets COGS
has increased in 2007 at a greater rate as compared to Total
assets. bharathi airtel.xlsx 2006 2007 2008 Airtel 0.3198 0.3603
0.3241 Idea 0.1546 0.2070 0.2481 Bharti Enterprises
20. 19. Fixed Assets Turnover Ratio = COGS/ Average Fixed
Assets 2006 2007 2008 Airtel 0.3756 0.4242 0.4269 Idea 0.2064
0.2667 0.2492 Bharti Enterprises bharathi airtel.xlsx
21. 20. Capital Turnover Ratio= COGS/ Average Capital Employed
2006 2007 2008 Airtel 0.3212 0.3625 0.3301 Idea 0.1546 0.2070
0.2492 Bharti Enterprises bharathi airtel.xlsx
23. Du Pont Analysis The return on investment (ROI) ratio is
used to evaluate how effectively assets are used. It measures the
combined effects of profit margins and asset turnover. ROI = NET
INCOME = NET INCOME * SALES . TOTAL ASSETS SALES TOTAL ASSETS
(PROFIT MARGIN) (ASSET TURNOVER) The return on equity (ROE) ratio
is a measure of the rate of return to stockholders. Decomposing the
ROE into various factors influencing company performance is often
called the Du Pont system ROE = NET INCOME = NET INCOME * SALES *
TOTAL ASSETS EQUITY SALES TOTAL ASSETS Bharti Enterprises
24. The Du Pont identity allows analysts to determine which of
the elements is dominant in any change of ROE High turnover
industries Certain types of retail establishments, may have very
low profit margins on sales, and relatively moderate leverage. In
contrast, they may have very high turnover. High margin industries
Industries such as fashion may derive a substantial portion of
their competitive advantage from selling at a higher margin, rather
than higher sales. High leverage industries The financial sector,
rely on high leverage to generate acceptable ROE.Bharti
Enterprises
31. Du Point Analysis Bharti Enterprises The return on
investment (ROI) ratio is used to evaluate how effectively assets
are used. It measures the combined effects of profit margins and
asset turnover. ROI = Net Income = Net Income * Sales . Total
Assets Sales Total Assets (Profit Margin) (Asset Turnover) The
return on equity (ROE) ratio is a measure of the rate of return to
stockholders. Decomposing the ROE into various factors influencing
company performance is often called the Du Pont system ROE = Net
Income = Net Income * Sales * Total Assets Equity Sales Total
Assets Equity (Profit margin) (Asset Turnover) (Equity
Multiplier)
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