Fundamental Analysis

1. Liquidity Ratios
Liquidity ratios are the ratios which define the company’s ability to liquidate whenever
require to fulfill short term obligations.
Following are the liquidity ratios:
Current Ratio:
Current ratio is defined as the ratio of current assets and current liabilities of the
company. This ratio tells us the company’s ability to pay the current liabilities within the
span of one year with the help of current assets.
Current Ratio = Current Assets
Current Liabilities
Quick Ratio:
Quick Ratio is similar to current ratio, but instead of current asset, quick assets value is
used, which is nothing but the assets which can be liquidated at instance.
Quick Assets= Current assets – inventory- prepaid expenses.
Quick Ratio = Quick Assets
Current Liabilities

Liquidity Ratios of GNFC

Current Ratio of GNFC is moderately increasing year-on-year, with the latest current
ratio of 3.61.

Even the quick ratios of the company are constantly increasing which is very good sign
for the company’s fundamentals.
 Liquidity Ratios
4
3.57 3.61
3.5

3 2.89
2.73
2.43
2.5
2.03
2 1.78
1.62 1.51
1.5
1.21
1

0.5

0
2018 2019 2020 2021 2022

Current Ratio Quick Ratio

As we can see from the above graph, the current ratios and quick ratios of GNFC for the
past 5 years are above 1.5 which is a very good sign for the company.

For all the remaining ratios, refer to excel file.

Liquidity Ratios of Chambal Fertilizers

Current ratio of Chambal Fertilizers gradually increased from 2018-2021, but there was a
drop in current ratios in 2022.
Similarly, quick ratio has also dropped in March 2022, when compared with March 2021
with 1.54 in 2021 and 0.77 in 2022.
Refer the below graph for better understanding.

Liquidty Ratios
2.5
2.06
2
1.59
1.5
1.54
1.18 1.1
1.02
1
0.93 0.93
0.81 0.77
0.5

0
2018 2019 2020 2021 2022

Current Ratio Quick Ratio

Liquidity Ratios of Madras Fertilizers Limited
Current ratio of Madras Fertilizers is decline and at the all-time low. This is a very serious
issue. Madras Fertilizers Limited has a current ratio of less than 1 which means that the
company is having more current liabilities than current assets.
Quick Ratio is also alarmingly low and company need to make some fundamental
changes to be able to make positive working capital.
Refer the graph below.

Liquidity Ratios
0.7
0.64
0.6 0.58
0.52
0.5
0.5
0.44
0.42
0.4 0.38

0.29
0.3

0.2

0.1

0
2018 2019 2020 2021 2022

Current Ratio Quick Ratio

Comparison of Current Ratios of all three Companies:

 Current Ratios
4
3.57 3.61
3.5
3
2.43
2.5
2.03 2.06
2 1.78
1.59
1.5 1.18
1.02 1.1
1
0.5 0.64 0.58 0.5 0.42
0
2018 2019 2020 2021 2022

GNFC Chambal Fertilizers Madras Fertilizers

With respect to the above graph, we can conclude that GNFC has a really good current
ratio when compared with other two companies followed by Chambal Fertilizers.
Madras Fertilizers has very low current ratio. Madras Fertilizers needs to make
fundamental changes to improve and perform better in future.

2. Activity Ratios
Activity ratio is a ratio which indicates how efficient the company is leveraging its assets
to generate cash.
Activity ratios:
Debtors Turnover Ratio:
Debtors turnover ratio or the accounts receivable turnover ratio indicates the number of
times debtors are paying the debts in a year.
Debtor Turnover Ratio = Net Credit Sales
Average Accounts Receivable

Creditors Turnover Ratio:

This ratio indicates the number of times the company is paying its debts in a year. It is
also called as Accounts Payable Ratio.
Creditors Turnover Ratio = Net Credit Purchases
Average Accounts Payable
Inventory Turnover Ratio:
Inventory turnover ratio indicates that how many times does the inventory is converted
into finished goods relative to its cost of goods sold.
Inventory Turnover Ratio= Cost of Goods Sold (COGS)
Average Inventory
For all the remaining ratios, refer to excel file.

Activity Ratios of GNFC

The Activity Ratios of GNFC when compared with past years, is gradually increasing
which states that GNFC’s activities well managed and it is able to turnover its inventory
or assets into cash quickly.
Debtor Turnover Ratio is increasing Year-on-Year basis which tell us that in March 2018,
the debtors were paying only 5 times in a year whereas this ratio has increased to 15.23
time in March 2022.
Even the payment to creditor is also good and stands at 7.53 times in the year 2022.
Inventory Turnover Ratio is also good with the average inventory turnover of 5.23 for
the past 5 years.

Activity Ratios of Chambal Fertilizers:

The Debtor turnover ratio of Chambal Fertilizers increased drastically in the year 2022.
The Debtor-Turnover Ratio was at around 3.48 in 2021 and it jumped to 9.66 times in
the year 2022.
Creditors turnover ratio of Chambal Fertilizers is not following and trend and has been
up and down every year. The Creditor turnover Ratio is higher than the Debtor Turnover
Ratio which means the company is pay off its debts even more times than that of the
accounts receivables.
Even the Inventory turnover ratio lower than the previous year. This states that the
company is finding it hard to turn its inventory to cash in 2022 when comparing to 2021.

Activity Ratios of Madras Fertilizers:

Activity ratios of Madras Fertilizers were really good in the year 2018. Even though there
is negligible change in creditors turnover ratio but, the Debtor Turnover ratio has fallen
drastically to 8.91 in 2021 from 32.64 in 2020. This is not a good change.
Inventory Turnover ratio is also below par with 5.04-times inventory turnover in the
financial 2022.
 Graph comparing important activity ratios of three companies:

Debtors Turnover Ratio

80 Creditors Turnover Ratio
67.41
1870
1660 15.35
50.78
1450 12.82
1240
10.36 32.64
1030 8.95
8 7.53 7.53
20 6.32
6 4.89 8.91
10
4 4.9 4.5
0
2 2018
2.74 2019
2.6 2020 2021 2022
0
2018 GNFC
2019 Chambal Fertilizers
2020 Madras
2021 Fertilizers 2022

GNFC Chambal Fertilizers Madras Fertilizers

Inventory Turnover Ratio

12

10 9.65

8 7.61 7.53
6.62
6 5.44 5.44 5.04
4.83 6.18
5.8
4 4.66 4.26
2

0
2018 2019 2020 2021 2022

GNFC Chambal Fertilizers Madras Fertilizers

Even though the debtor turnover ratio line of Madras Fertilizers is higher than the other
two, the trend is declining which is not a good sign for the company. Creditors turnover
ratios are almost constant for all the companies. Inventory turnover ratio of all the three
companies is almost same.

3. Leverage Ratios:
Leverage ratios are the financial ratios which are used to find out how much capital is
coming in the form of debt or loans and analyze the ability of the company to fulfill its
financial obligations.

Leverage Ratios are as follows:

Debt to Equity Ratio:
Debt to equity ratio is used to analyze the company’s debt with respect to the
shareholders equity which in nothing but (total assets – total liabilities).
Debt to Equity Ratio = Total Debt/Liabilities
Shareholder’s Equity

Total Debt Ratio:

Total Debt Ratio is the ratio of total debts or liabilities of the company divided by total
assets of the company. This ratio helps us to understand the company’s financial
position with respect to its liabilities.
Total Debt Ratio = Total Debt/ Liabilities
Total Assets

For all the remaining ratios, refer to excel file.

Leverage Ratios of GNFC:

Debt to Equity Ratio of the company is below 0.5 throughout the last 5 years which
means that the liabilities when compared with the shareholder’s equity, is very low.
Total debt ratio is also below 0.5 which signifies that the company’s assets are more
than the twice of its total liabilities.
 Leverage Ratios of GNFC
0.4 0.3785 0.3739
0.35 0.3373
0.3437
0.3 0.2791
0.3046
0.2566
0.25
0.2525
0.2 0.22654

0.15 0.1742

0.1

0.05

0
2018 2019 2020 2021 2022

Debt to Equity Ratio Total Debt Ratio

Leverage Ratios of Chambal Fertilizers:

Leverage ratios of Chambal Fertilizers, i.e., Debt to equity ratio and Total Debt Ratio
were very high in the year 2018. But the company has seen gradual decrease in the
value of these ratios which show us that the company is performing well in the past few
years.
Debt to equity ratio decreased from 1.16 in 2018 to 0.48 in 2022. Total Debt ratio was at
0.693 and this reduced to 0.52.
 Leverage Ratios of Chambal Fertilizers
1.4 1.3062

1.2 1.164
1.023
1

0.8
0.76595 0.7311 0.6452
0.6 0.6933
0.48969
0.5247
0.4 0.4825

0.2

0
218 2019 2020 2021 2022

Debt to Equity Ratio Total Debt Ratio

Leverage Ratios of Madras Fertilizers:

Shareholder’s Equity of Madras Fertilizers is in negative, which means that the liabilities
are higher than the assets. Due to this, the debt-to-equity ratio is in negative. And due to
this difference between assets and liabilities the total debt ratio is almost more than 1.5
which is serious concern for the company’s fundamentals.

Leverage Ratios of Madras Fertilizers

1.8 0

1.6
-0.05
1.4
-0.1
1.2

1 -0.15

0.8 -0.2
0.6
-0.25
0.4
-0.3
0.2

0 -0.35
2018 2019 2020 2021 2022

Total Debt Ratio Debt to Equity Ratio

Comparison of Debt-to-Equity Ratio of three companies is given below:

 Debt to Equity Ratios
1.4 1.3062

1.2 1.1648
1.023
1

0.8
0.6452
0.6 0.4896
0.4 0.3437 0.3046
0.2525 0.2265
0.1742
0.2

0
2018 2019 2020 2021 2022
-0.2 -0.09806
-0.1513
-0.2082
-0.4 -0.2908

GNFC Chambal Fertilizers Madras Fertilizers

4. Profitability Ratios
The ratios which are used to assess the capacity of the company in terms of the profits
are called as profitability ratios. The company’s ability to generate profit from its
functions is determined by profitability ratios.
Following are the profitability ratios:
Gross Profit Margin:
Gross profit margin is the rate of gross profit when compared with the sales of the
company. It is denoted in percentage.
Gross Profit Margin = Gross Profit * 100
Net Sales
Operating Profit Margin:
Operating profit margin is the calculated by dividing Operating Profits with net sales. It is
also denoted in percentage.
Operating Profit Margin = Operating Margin Profits *100
Net Sales
Net Profit Margin:
Net Profit Margin = Net Income * 100
Sales
Return on Assets:
Return on Assets (ROA) = Net Income *100
Total Assets

Return on Equity:
Return on Equity (ROE) = Reported Net Profit
Total Common Equity

Profitability Ratios of GNFC:

GNFC has been consistently making profits and even though the gross profit margin
decreased compared to 2020, it is still making good profit margins. Operating Margin
has increased drastically. This is because the increase in operating profits is very low
when compared with the increase in net revenue or income. This decrease in the rat of
operating profits led to increase in net profits margin as well.
Return on Asset and Return on Equity is also good.

Profitability Ratios of GNFC

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2018 2019 2020 2021 2022

Gross Profit Margin Operating Profit Margin Net Profit Margin

Profitability Ratios of Chambal Fertilizers:

By using profitability ratios, we can see that the gross profit margin of Chambal
Fertilizers Limited is at par when compared with GNFC, but due to high operating
expenses the operating profit margin has fell down. Which in-turn resulted in reduction
in net profit margin as well.
Return on Assets (ROA) and Return on Equity (ROE) are at good levels but when
compared with GNFC these ratios are a little low.

Profitability Ratios of Chambal Fertilizers

45.00%

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2018 2019 2020 2021 2022

Gross Profit Margin Operating Profit Margin Net Income Margin

Profitability Ratios of Madras Fertilizers:

Madras Fertilizers Limited is making good gross profit margin over the past 5 years but
due to high operating expenses, it is operating in losses. Latest gross profit margin of
Madras Fertilizers Limited is high at around 40% of the total revenue, but operating
profit is at 6.174%.
Even the return on assets and Return on Equity are very low when compared with its
competitors, GNFC and Chambal Fertilizer.

Profitability Ratios of Madras Fertilizers

50.00%

39.95%
40.00%

30.00%

20.00% 16.27%
14.07% 15.30%

10.00% 7.55% 6.17%

5.32% 5.37%

0.00%
2018 2019 2020 2021 2022

-10.00%

-20.00%

Gross Profit Margin Operating Profit Margin Net Income Margin

COMPARISON OF NET PROFIT MARGIN OF THREE COMPANIES:

Net Income Margin of Three Companies

25.00%
19.79%
20.00%

15.00% 13.44% 12.72% 13.59%

9.84% 13.01%
10.00%
10.05% 9.75%
5.00% 6.61% 5.85%
0.19%
0.00%
-2.77%
2018 2019 2020 2021 2022
-5.00%
-8.15%
-10.58%
-10.00%

-15.00%

GNFC Chambal Fertilizers Madras Fertilizers