Long Term Investments

Investment for a period of 3-10 years is referred to as long-term investment. To

analyse the risk associated with investing in the company, ratios used are
Debt/Equity ratio and Interest coverage ratio. This is required to know whether the
company will be able to meet its long term obligations and pay expenses on its
debt. For analysis of return from the stock, ratios used are Dividend per share (DPS),
Dividend yield, Return on equity (RoE) and Return on Capital expenditure (RoCE).
Therefore, the ratios can be categorized as follows:Risk
Debt/Equity Ratio
Interest Coverage Ratio

Return
Dividend per share (DPS)
Dividend Yield
Return on Equity (ROE)
Return on Capital Expenditure (ROCE)

Interest Coverage Ratio (ICR)

It is used to determine how easily a company can pay interest expense on
outstanding debt. The lower the interest coverage ratio, the higher the

company's debt burden and the greater the possibility of bankruptcy or

default. As a general thumb rule, investors generally prefer an ICR value of
above 1.5
Company
Jet Airways
Spicejet
Indigo

2015
-1.05

2014
-2.68
-6.08
4.84
9

2013
0.57
-1.67
18.08
1

2012
-0.29
11.04
2.457

2011
1.04
5.24
16.88
2

Jet Airways and Spicejet have negative values as both these companies have
reported losses in the corresponding years. On the other hand, Indigo has a high ICR
value and signifies the companys secure position in terms of its ability to pay its
interest expenses.