financial ratio analysis and suggestion and interpretation for them.ppt

ratio analysis

1. Financial ratios By- Mahesh G Velpul

2. Current ratio Meaning:-The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short term obligations . Interpretation: The current ratio of hindalco has shown some variability over the years but has generally remained above 1. Chalco’s current ratio has been consistently below from 2019-2023 Nalco has maintained high current ratio above 1. Vedanta’s current ratio has been fluctuating, with the decrease in 2023. Suggestion : S hould aim to stabilize its current ratio. Explore strategies to optimize liquidity management. Monitor working capital closely. efficient inventory and receivables management.

3. Quick ratio Meaning: The quick ratio is an indicator of a company’s short term liquidity position and measures a company’s ability to meet its short term obligations with its most liquid assets . Interpretation: The quick ratio fluctuated, peaking in 2020 at 1.179, indicating varying liquidity but generally remaining below 1 . Chalco’s quick ratio improved slightly over the years, reaching 0.61 in 2023, but still indicates weak liquidity. Nalco has Maintained strong liquidity overall, with the quick ratio consistently above 1, peaking at 1.56 in 2022. Vedanta Showed a slight improvement until 2022, but experienced a sharp decline in 2023 to 0.52, indicating reduced liquidity. Suggestion: Enhance short-term liquidity management . Evaluate and optimize cash conversion cycle. Implement measures to reduce dependency on short-term assets.

4. Debt to equity Meaning : The debt to equity ratio is a financial ratio indicating the relative preparation of shareholder’s equity and debt used to finance a company’s asset. Interpretation: In hindalco The ratio decreased from 2019 to 2023, suggesting a reduction in debt relative to equity . in Chalco there was a notable increase in the ratio in 2023, Nalco's debt-to-equity ratio is consistently at 0. Vedanta's debt-to-equity ratio has fluctuated over the years and exceeded 1 in 2023. Suggestion: D ecreasing debt-to-equity ratio to improve financial stability . Optimization of debt equity ratio. Diversification .

5. Net profit margin Meaning: net profit margin measures how much the net income or profit is generated as a percentage of revenue. Interpretation: Hindalco's net profit margin has fluctuated over the years. Chalco‘s net profit margin has shown a steady increase over the years. Nalco's net profit margin has been volatile. Vedanta's net profit margin has remained relatively stable and high over the years. Suggestion: Considering the overall financial health. Consider Continuous monitoring and adjusting in pricing strategies. Enhancing stability.

6. Operating Profit Margin Meaning: The operating profit margin is a profitability or performance ratio that reflects the percentage of profit a company produces from its operations before subtracting taxes and interest. Interpretation: Hindalco's operating profit margin fluctuated over the years but generally remained at a moderate level. Chalco's operating profit margin showed fluctuations. Nalco's operating profit margin fluctuated but remained relatively high. Vedanta's operating profit margin fluctuated but generally showed a positive trend. Suggestion: S hould aim to stabilize and potentially improve margins. Sustainability.

7. Return on equity M eaning: ROE is a financial ratio that measures a company’s profitability in relation to its shareholders equity. Interpretation: The Return-on-Equity (ROE) fluctuated over the years for each company. Hindalco showing a significant increase in 2022. Suggestion: M aintaining consistency. optimizing the utilization of capital resources. Should remain vigilant of market trends and competitive pressures. Risk Management.

8. Inventory turn over in days Meaning: inventory turnover in days refers to the amount of time passes from the day an item purchased by a company until it is sold. Interpretation: The inventory turnover days varied across the years for each company. Hindalco showing a consistent trend. Suggestion: Maintaining efficiency . Good relationships with suppliers. Forecasting. Product Mix Analysis.

9. Asset turnover ratio Meaning: It is the ratio between the value of a company’s sales or revenues and the value of its assets. I nterpretation: Hindalco's asset turnover ratio has shown an improving trend over the years. Chalco's asset turnover ratio peaked in 2021 before slightly declining. Nalco's asset turnover ratio remained relatively stable over the years. Vedanta's asset turnover ratio has shown a fluctuating pattern. Suggestion: Focus on growth and maximize the utilization of assets . R educing lead times and inventory levels. Asset management.

10. Price-to-earning Meaning: PE ratio is the proportion of a company’s share price to its company’s earning per share. Interpretation : Hindalco's price-to-earnings ratio fluctuated but generally remained moderate. Chalco's price-to-earnings ratio showed significant fluctuations. Nalco's price-to-earnings ratio varied but generally remained low. Vedanta's price-to-earnings ratio fluctuated. Suggestion: E arnings growth. Market Conditions. Investor Communication.

11. Price-to-book Meaning: P/B ratio is a financial ratio used to compare a company’s current market value to its book value. Interpretation: Hindalco's price-to-book ratio fluctuated over the years but remained relatively low compared to its peers. Chalco's price-to-book ratio showed moderate fluctuations. Nalco's price-to-book ratio varied but generally remained moderate. Vedanta's price-to-book ratio increased over the years. Suggestion: Debt Profile. Fundamental Analysis.

12. Book value per share Meaning: BVPS is the ratio available to common shareholders which is divided by the number of outstanding shares. Interpretation: Hindalco's book value per share showed consistent growth over the years. Chalco's book value per share remained relatively stable with minor fluctuations. Nalco's book value per share increased steadily over the years. Vedanta's book value per share fluctuated. Suggestion : should leverage this trend to enhance investor confidence . Market Perception. Comparative Analysis.

13. Thank You.