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2010-2011 2006-07
Retrun on Networth
20.96 30.24
Impact of leverageLeverage or financialrisk
3.98 6.67 1.18 1.27
Return on Investment
15.38 17.26
Asset Turnover Ratio Profit Margin
1.51 1.49 10.16 11.56
Fixed Asset TO Current Asset TO Raw Material to Sales
3.43 2.84 1.75 1.99 60.01 59.49
Current Ratio Inventory TO Converstion cost to sales
2.84 2.71 5.01 6.59 17.44 19.00
Debtors TO Interest to Sales
4.43 4.59 3.80 2.63
Collection Days
82 80
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Aarti Industries Ltd
Aarti Industries Ltd is an India-based company. The company is
in the process of
commissioning their upgraded Hydrogenation Technology
facilities, which would be put to
commercial use during the year financial 2010-11.The company
plans to increase their
capacities and range of products to cater to the growing demand
of the FMCG sector. They
are in the process of setting up a new unit at Pithampur in
Madhya Pradesh for manufacturing
Surfactants, Personal Care and Oral care products. We have
analysed for the financial year
2005-06 and 2010-2011 in the following way:Ratios:
a) ROI has reduced by 10.89% (17.26 to 15.38). This decrease is
because of the increasein total assets in 2011.
Asset Management:
2010-2011 2005-2006
Fixed Asset Turnover Ratio 3.43 2.84
Asset Turnover Ratio 1.51 1.49
Current Asset Turnover Ratio 1.75 1.99
Loans taken have increased by 107.25% but the investments had
reduced by 24.17% and
Plant and machinery has increased by 91.96%. From the Directors
report: During the year,
the Company had undertaken significant expansion and up
gradation projects to improve,
enhance and diversify its range of products. They have also
completed the process of up-
gradation of its Hydrogenation Technology. The increase in total
assets could be due to this.
b) Leverage Management :
Leverage or financial risk ratio is 1.18. The allowable value is
0.5. Its an alarm for the
shareholders. This is too high and risky for anyone to invest in
the company. This could be
explained by the fact that loans have increased by 107.25% and
total Debt: (secured and
unsecured loans) increased by 75.18%. Dupont report shows that
the ratio has reduced
compared to the value in 2005-2006.
c) Liquidity:
Current Ratio: Increased from 2.71 to 2.84.This ratio indicates
that even if there is delay in
collections, current liabilities can still be met. Leverage
Ratio is high but the shareholders
funds has increased by 88.55% and loans has increased by
107.25%. This could be because of
high current ratio which assures them that their payments will
be made on time.
