Post Graduate Programme in Management

2021-2023

Financial Reporting and Analysis

Term: I

Analysing financial ratios for Force Motors Ltd and SML Isuzu Ltd

Saranya V S - 2101056
 Force Motors Ltd.
Industry
  2021 2020 Average Interpretations on financial health
2021

Profitability Ratios
The firm’s gross profit is showing above the industry
average, which tells us that the firm is cost efficient and
Gross
is generating more revenues than from its trade than its
profit 1.47 1.07 0.97
peers. We can also see that the profits have also
margin (%)
increased from previous year's values which is a good
sign.
The firm’s net profit is (-ve implying a loss ) showing
way below the industry average, which tells us that the
overall performance and revenue generation is less for
Net Profit
-5.63 1.89 -4.53 the company that its peers. We can also see that the
margin (%)
losses have increased as compared to last year, which
can be attributed to COVID pandemic imposed
restrictions.
Return on assets is higher than the industry average,
which shows that the profitability of assets is good. But
Return on
-3.55 1.96 -5.93 the returns have reduced compared to previous year,
assets (%)
which may be to attributed to COVID induced
restrictions.
The ROE is on the higher side than the industry avg. This
shows that investors have improved in their earnings.
Return on
-5.83 2.98 -10.71 There is a drop in the value compared to previous years
equity (%)
but still the drop is not that significant and does not
make the company not worth investing further.
Turnover Ratios
The inventory movement is lower than the industry avg.
Inventory
3.56 5.58 9.58 and also has reduced from previous year and shows
Turnover
that firm is not that efficient at its inventory movement.
The asset utilisation of the firm is a bit lower than the
industry. Also, there is decrease in the asset turnover
Total Asset
0.63 1.04 1.31 from previous year. This shows that the company is not
Turnover
utilising its assets efficiently and generating revenues
from them.
The company is not able to encash its receivables way
Days 19.8 earlier than its peers in the industry. This has increased
27.06 23.63
Receivable 6 for the company from last year, but that may account
majorly due to pandemic.
Liquidity Ratios
Company’s ability to pay off its short-term liabilities is
Current higher than the industry average. The figure is not ideal
1 1.12 0.67
Ratio and took a dip as compared to last year. Still, it is still
not a red flag.
The company is unable to pay its current obligations
more easily than the industry and hence has lower
Quick Ratio 0.36 0.52 0.45
liquidity. The figure is not ideal and took a dip as
compared to last year.
Solvency Ratios
 The firm has low Debt equity ratio than the industry
Debt to
avg. Which indicates the company majorly operates on
Equity 0.35 0.16 0.79
capital raised through equity, this also is beneficial and
Ratio
a good sign for the company.
The ICR for the company is quite low, compare to
Interest industry as well as the ideal amount of 2. The value has
Coverage -4.82 2.79 -0.11 also deteriorated compared to previous year. This
Ratio means the company may face problems in paying its
interest liabilities.

Interpretation: Based on the Financial Ratios Analysis the company is doing

pretty decent as compared to Industry and was also able to enhance its
performance from the past year.

SML Isuzu Ltd.

Industry
  2021 2020 Average Interpretations on Financial Health
2021

Profitability Ratios
The firm’s gross profit is showing below the industry
Gross average, which tells us that the firm isless cost efficient and
profit 0.95 0.48 1.07 is generating less revenues than from its trade than its
margin (%) peers. We see that the profits have also increased from
previous year's values which is a good sign.

The firm’s net profit (-ve implying a loss ) is showing way

below the industry average, which tells us that the overall
Net Profit - performance and revenue generation is worse for the
-1.8 -4.53
margin (%) 22.04 company that its peers. We can also see that the losses
have amplified as compared to last year, which can be
attributed to the COVID pandemic imposed restrictions.

Return on assets is also very less than the industry average,

Return on -
-2.17 -5.93 and has also worsened compared to previous year, which
assets (%) 16.43
shows that the profitability of assets is very poor.

The ROE is on the lower side than the industry avg and even
Return on - the previous year's metric. This shows that investors took a
-5.28 -10.71
equity (%) 41.69 big dip in their earnings, the drop is also significant and thus
questions if the company is worth investing further.

Turnover Ratios
The inventory movement is way lower that the industry
Inventory -
3.45 9.58 avg. and previous year's metric and shows that firm is
Turnover 31.02
inefficient at its inventory movement.
The asset utilisation of the firm is a bit lower than the
Total Asset industry. The asset turnover went down from previous year.
0.75 1.21 1.31
Turnover This shows that the company is not utilising its assets
efficiently to generate revenues from them.
 The company is able to encash its receivables almost at the
Days same period as its peers in the industry. This has decreased
23.71 29.33 23.63
Receivable for the company from last year, which may be seen as a
sign of improvement.
Liquidity Ratios
Company’s ability to pay off its short-term liabilities is
Current higher than the industry average. The figure is not ideal and
0.82 1.2 0.67
Ratio took a dip as compared to last year. Still, it is still not a red
flag.

The company is unable to pay its current obligations more

Quick
0.23 0.36 0.45 easily than the industry and hence has lower liquidity. The
Ratio
figure is not ideal and took a dip as compared to last year.

Solvency Ratios
The firm has a higher Debt equity ratio than the industry
Debt to
avg and the previous year's metric. Which indicates the
Equity 0.99 0.45 0.79
company majorly operates on capital raised through debt,
Ratio
which is a not good sign for the company.

The ICR for the company is quite low, compare to industry

Interest
as well as the ideal amount of 2. The value has also
Coverage -4.71 -1.62 -0.11
deteriorated from previous year's metric. This means the
Ratio
company may face problems in paying its interest liabilities.

Interpretation: Based on the Financial Ratios Analysis the company is doing

worse as compared to Industry and also its performance deteriorated from the
past year.

Source for financial ratios:

http://www.acekp.in.libraryiimtrichy.remotexs.in/company-vs-industry/100033

http://www.acekp.in.libraryiimtrichy.remotexs.in/company-vs-industry/105192

Important Ratios Calculations: