An Analysis of the Financial Statement of Godrej

India ltd.

Submitted By: Group No. 07

Somnath Bhaduri:
Rithesh Dhundhuani:
Ishan Arora:
Manish Sharma:

116/2015
xxx/2015
112/2015
xxx/2015

1. GROSS PROFIT RATIO(gross profit/net sales*100)

This ratio is used to analysie how efficiently the company is using its raw
materials, labour and manufacturing-related fixed assets to generate profits. A
higher gross profit ratio means a favourable profit indicator. A manufacturing
company has a higher gross profit ratio.
Godrej India limited is earning a gross profit ratio of 43,42,40,38,43% for the year
ending march 2015 to march 2011 respectively. This shows that the company is
earning and the production efficiency is the most at 43% in march 2015(year
ending) and it was least at 38 for the preceding year march 2011(year ending)
whereas in march 2015 it had a GP ratio of 43% which shows that the company has
an average GP ratio of 41.2% which shows that it is not to much deviating in other
words it is consistent in earning gross profit and the investments decisions are not
affected in this case.
gross profit margin

42.98%

42.37%

40.37%

37.96% 43.02%

2. NET PROFIT RATIO(net profit/net sales*100)

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have
been deducted from sales, and income taxes recognized. As such, it is one of the
best measures of the overall results of a firm, especially when combined with an
evaluation of how well it is using its working capital. The measure is commonly
reported on a trend line, to judge performance over time. It is also used to compare
the results of a business with its competitors. This ratio also shows that how much
the company has spent on indirect expenses by seeing the difference between gross
profit and net profit. The highest of 12.82% in march 2011 and lowest in march
2014 with 9.92% the ratio also shows the company has been spending a
considerable amount of indirect expenses but the investment decisions are not
affected because the ratio is consistent.

Net Profit Margin(%)

11.17%

9.92%

10.41%

10.82% 12.82%

3. Return on capital employed

ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed
ROCE is especially useful when comparing the performance of companies in
capital-intensive sectors such as utilities and telecoms. This is because unlike
return on equity (ROE), which only analyzes profitability related to a companys
common equity, ROCE considers debt and other liabilities as well. This provides a
better indication of financial performance for companies with significant debt.
We can see that the best year to invest in this company is march 11-12 where the
roce is 36.17% and in the year march 15 it was the least year of investment.
Return On Capital Employed(%)

31.61
% 35.99% 33.18% 34.99% 36.17%

4. Return on net worth

This share reveals that how much profit the company is earning with the money of
equity shareholders. This ratio is not as good as Roce as it does not considers the
other liabilities.
The best point of investment was for the year ending march 2011 where return on
net worth was 27.45% and the worst case was march 2012 with 18.70%.
Return On Net Worth(%)

21.44% 19.97% 20.14% 18.70% 27.45%

5. CURRENT RATIO(CURRENT ASSET/CURRENT LIABILITY)

Current ratio, also known as liquidity ratio and working capital ratio, shows the
proportion of current assets of a business in relation to its current liabilities.

Current ratio must be analyzed over a period of time. Increase in current ratio over
a period of time may suggest improved liquidity of the company or a more
conservative approach to working capital management. A decreasing trend in the
current ratio may suggest a deteriorating liquidity position of the business or a
leaner working capital cycle of the company through the adoption of more efficient

management practices. Time period analyses of the current ratio must also consider
seasonal fluctuations.
The trend shows that for the year ending march15,13,12 the current ratio is more
than 1 that is it is showing that the current asset is more than current liability and
the working capital is positive which means the company can meet its short term
liabilities where as for the year ending march14,11 it is failing to
1.16628 0.9824 1.2305 1.2756
5
45
01
71
meet its short term liabilities as the current ratio is less than 1.
Current Ratio

0.8281
96

6. Quick ratio
A stringent indicator that determines whether a firm has enough short-term assets
to cover its immediate liabilities without selling inventory. The acid-test ratio is far
more strenuous than the working capital ratio, primarily because the working
capital ratio allows for the inclusion of inventory assets.
For all the five years quick ratio is less than 1 which means that the company in the
first 3 years is totally depended upon inventory for paying its liability and in all
five cases its shows that smooth running of the company is challenged. The ratio
from march 2015 to 2011 as follows(respectively)
Quick Ratio
0.715134

0.55688
5

0.74330
8

0.74832
5

0.48171

7. Debt-equity ratio(capital gearing ratio)(long term debts/equity)

A measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders' equity. It indicates what proportion of equity and debt
the company is using to finance its assets. Ratio from march 15 to 11
Debt Equity Ratio

0.503328

0.45074
2

0.58815
8

0.55557
4

0.85137
6

For the first and last two years the ratio is below 1 which means that the company
is financed by equity to a greater extent which means that the company is not
growing because when a company is running at a lower profit than the company
switches over to equity it also creates dilution of ownership.

8. Stock turnover ratio(cogs/avg stock)

The inventory turnover formula or stock turnover ratio is the rate at which
inventory is used over a measurement period. Inventory turnover is typically
measured on a trend line or in comparison to the industry average to judge how
well a company is performing in this area. It is of use to those organizations that
have a large investment in inventory, to judge whether this investment is changing
in comparison to sales.
Inventory Turnover Ratio

4.382396

4.115282

4.173119

4.935798

9.578753

Here the inventory turnover ratio is very high which means the stock is kept very
tight and in march 2011 it is the highest. The ratio also shows how many times the
stock is converted in to cash in a year. In that case the company is performing fine.

9. Debtors turnover ratio(net credit sales/average debtors)

This ratio shows how efficient a company is at collecting its credit sales from
customers.
Debtors Turnover Ratio

10.92

10.56

10.67

11.36

15.38

From the ratio we can see that in march 2011 the company is most capable of
collecting debts as it has collected its debts around 15.38 times in a year and it was
least efficient in collecting

Debtors in march 2014 which was 10.56 times.

10. Interest coverage ratio(EBIT/interest)(march15-11)

Interest coverage Ratio

13.468
5

10.5899
2

14.2293
1

15.8435
6

15.9615

From the above data we can see that the company can pay its interest on its debt at
an average of 14.01 times in a year. In march 2011 the ratio was highest because
the company was successful in paying its debt 15.96 times. Overall the company is
working fine with retain this ratio.

11. Asset turnover ratio

The amount of sales or revenues generated per dollar of assets. The Asset Turnover
ratio is an indicator of the efficiency with which a company is deploying its assets.
Asset Turnover = Sales or Revenues/Total Assets
Generally speaking, the higher the ratio, the better it is, since it implies the
company is generating more revenues per dollar of assets. But since this ratio
varies widely from one industry to the next, comparisons are only meaningful
when they are made for different companies in the same sector.
Asset Turnover Ratio
1.347249

1.36406
7

1.36035
6

1.39155

2.39967
8

The mean asset turnover ratio is 1.57 which means that the company is generating
1.57 rupees per 1 rupee of asset. The company has not been successful in keeping
this ratio high as the ideal ratio is 2.

12. Dividend payout ratio

The dividend payout ratio measures the percentage of net income that is distributed
to shareholders in the form of dividends during the year. In other words, this ratio
shows the portion of profits the company decides to keep to fund operations and
the portion of profits that is given to its shareholders.
Dividend Payout Ratio Net Profit

24.69

27.51

24.9

25.04

The mean payout ratio is 28.06 and the highest is 38.20 the company paid a good
percentage of its dividend here which is very good for shareholders but it is
retaining less so bad for the companys growth but as the company proceeded year
after year its payout ratio decreased and retention ratio increased which shows a
growth of the company and in march 2015 the ratio was 24.69(the lowest).

13. Price earning ratio(Market Value per Share / Earnings per Share (EPS))
A valuation ratio of a company's current share price compared to its per-share
earnings.
PE ratio

39.060
04

38.501
34

33.262
08

21.492
84

22.687
77

From the above figures we can say that in march 2015 investors having a mentality
of longterm investments who think of future growth would invest in this period as
the PE ratio is highest at 39.06.The company has done well from march 13.
THE DATAS ARE GIVEN IN ORDER OF MARCH 15, 14, 13,12,11
CONCLUSION

Thus we infer that the liquidity of the company is not upto the mark as the working
capital is negative in some cases. The PE ratio shows that the company is growing
and now the company is not paying enough dividend to shareholders rather it is

38.2

retaining for growth. The turnover ratios shows a good reflection of the company
and a considerable amount of share is being done in indirect expenses which is
inferred from the difference between gross profit ratio and net profit ratio.