CORPORATE ACCOUNTING

PROJECT

Project Topic:Financial Ratios of

Bosch Limited

Instructor: Prof.Debasis Rout

SUBMITTED BY:
Nishu Bhushan
15BBALLB035
NATIONAL LAW UNIVERSITY ODISHA

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Contents

TABLE OF CONTENT

TABLE OF CONTENT.............................................................................................................2
RATIOS.....................................................................................................................................3
NOTES.......................................................................................................................................4
ANALYSIS................................................................................................................................7
I. NOTE 1: Current Ratio...................................................................................................7
NOTE 2: Finance Charge Coverage......................................................................................7
NOTE 3:Long Term Fund to Total Assets.............................................................................7
NOTE 4:Gross Profit Ratio....................................................................................................8
NOTE 5:-Net Profit Ratio......................................................................................................9
NOTE 6: Return on Capital Employed..................................................................................9
NOTE 7: Dividend Payout Ratio...........................................................................................9
NOTE 8:Working Capital Turnover .....................................................................................9
NOTE 9: Asset Turnover ratio.............................................................................................10
Note 10: Return on Equity ..................................................................................................10
Note 11: Debtors' Turnover Ratio…………………………………………………………10
Note 12: Creditors' Turnover
Ratio………………………………………………………...10

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 RATIOS

No. Particulars Formula Note 2015-16 2014-15

1 Current Ratio Current Assets/Current liabilities 1 2.11 2.323

2 Finance Charge Net. Operating Cash Flow /Finance 2 315.6 97.64

Coverage Charge

3 Dividend Coverage (Operating Cash Flow – Finance 3 4.95 8.002

Charge)/(Interim Dividend + Final
Dividend)

4 Gross Profit Ratio Gross Profit/Sales*100 4 35.1% 33.9%

5 Net Profit Ratio Net Profit/Sales*100 5 11.3% 15.4%

6 Return on Capital Net Profit + Interest * (1- Effective Tax 6 18.7% 19.9%
Employed Rate)/Average Capital Employed *100

7 Dividend Pay Out Ratio Dividend/Net Profit*100 7 21.4% 19.95%

8 Working Capital Revenue from sale of goods and 8 3.31 3.478

Turnover Ratio services/Average working Capital

9 Asset Turn Over Ratio Asset Turn Over Ratio= Total Revenue/ 9 1.002 1.21
Average Assets

10 Return on Equity Net profit/ Average Equity* 100 10 15.95% 18.2%

11 Debtors’ Turnover Credit Sales/ Average Debtors 11 8.16 9.88

Ratio

12 Creditor’s Turnover Credit Purchases/Average Creditors 12 1.86 2.20

Ratio

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 NOTES

Note 1: Current Ratio

Current Ratio = Current Assets/Current liabilities

Particulars/ FY 2015-16 2014-15

Current Assets (in 58435 59265
millions)
Current Liability( in 27630 25511
millions)
Current Ratio 2.11 2.323

Note 2: Finance Charge Coverage

Finance Charge Coverage = Net Operating Cash Flow /Finance Charge

Particulars/ FY 2015-16 2014-15

Net. Operating 13259 13963
Cash Flow( In
crores)
Finance charge 42 143
( In crores)
Finance Charge 315.69 97.64
Coverage

Note 3: Dividend Coverage

(Operating Cash Flow – Finance Charge)/(Interim Dividend + Final Dividend)
Particulars/ FY 2015-16 2014-2015
Operating Cash 13259 13963
Flow
Finance Charge 42 143
Interim Dividend 2669 1727

Dividend Coverage 4.95 8.002

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Note 4: Gross Profit Ratio
Gross Profit Ratio = Gross Profit/ Sales *100

Particulars/ FY 2015-16 2014-15

Sales 102140 117414

Gross Profit 35843 39823

Gross Profit Ratio 35.1 33.9

Note 5: Net Profit Ratio

Net Profit Ratio = Net Profit/total revenue *100
Net Profit = Profit after Tax (Given in the Balance Sheet)
Particulars/ FY 2015-16 2014-15
Total Revenue 109954 126508

Net Profit 12459 19559

Net Profit Ratio 11.3 15.4

Note 6: Return on Capital Employed

Net Profit + Interest/Average Capital Employed
Particulars/ FY 2015-16 2014-15
Net Profit 12459 13377

Interest 3073 3179

Average Capital 83102 83102
Employed
Ratio 0.187 0.199

Note 7: Dividend Pay Out Ratio

Dividend/Net Profit*100
Particulars/ FY 2015-16 2014-15

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 Dividend 2669 2669

Net Profit 12459 13377

Dividend Pay Out 21.4 19.95

Note 8: Working Capital Turnover Ratio

Revenue from sale of goods and services/Average working Capital
Particulars/ FY 2015-16 2014-15
Revenue from sale 102104 117414
of goods and
services
Average working 30805 33754
Capital
Working Capital 3.31 3.478
Turnover Ratio

Note 9: Asset Turn Over Ratio

Asset Turn Over Ratio= Total Revenue/ Average Assets
Particulars/ FY 2015-16 2014-15
Total Revenue 109954 126508
Average Assets 109672 104308
Turnover ratio 1.002 1.21

Note 10: Return on Equity

Return on Equity = Net profit/ Average Equity* 100

Particulars/FY 2015-16 2014-15

Net Profit 12459 13377

Average Equity 78179 73470

Return on Equity ratio 15.95 18.2

Note 11: Debtors’ Turnover Ratio

Debtors’ Turnover Ratio= Credit Sales/ Average Debtors’

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 Particulars/FY 2015-16 2014-15

Credit Sales 102140 117414

Average Debtor 12519.5 11877

Debtors’ Turnover Ratio 8.16 9.88

Note 12: Creditors’ Turnover Ratio

Creditors’ Turnover Ratio= Credit Purchases/Average Creditors

Particulars/FY 2015-16 2014-15

Credit Purchases 23455 26520

Average Creditors 12597.5 12066

Creditors’ Turnover Ratio 1.86 2.20

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 ANALYSIS

I. NOTE 1: CURRENT RATIO

It is the liquidity ratio that measures a company's ability to pay short-term obligations. The
Company’s Current Ratio had a downward where it decreased from 2.323 to 2.11. This is
below the required ratio of 1.33. The ratio needs to improve as this is one of the components
that determine the credit rating of a company. This downward trend is because the assets of
the company have decreased considerably faster that is from 59265 to 58435 in comparison
to the liabilities of the company that is 25511 to 27630.

NOTE 2: FINANCE CHARGE COVERAGE

It is the ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest
and leases. The Company’s Finance Charge Ratio had an upward trend from 97.64 to 315.69.
The Company is healthy in terms of Finance Charge Coverage. Banks would be readily
available to give Loans for satisfying the operations of the Company. The upward trend is
because of decline in net flow from operating activities that is from 13963 to 13259 and the
finance cover has decreased from 143 to 42.

NOTE 3: DIVIDEND COVERAGE

Dividend coverage ratio indicates the capacity of an organization to pay dividends out of
profit attributable to the shareholder. The best suited level of dividend coverage ratio is 3. In
this case the ratio has declined from 8.002 to 4.95. Although there is a huge decrease but the
company is still in a stable position and has the capability to pay dividends to its
shareholders.

NOTE 4:GROSS PROFIT RATIO

It is ratio is a profitability ratio that shows the relationship between gross profit and total net
sales revenue. It is a tool to evaluate the operational performance of the business. The Gross
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Profit marginally went up from 0.339 to 0.351, resulting in change in company’s operational
finances. Gross profit is very important for any business. It should not be sufficient to cover
all expenses and provide for profit. The gross ratio is increasing because the gross profit is
increasing from 39823 to 35843 however there is no sufficient increase in sales.

NOTE 5:-NET PROFIT RATIO

It 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.  It is used to
judge performance over time. It is also used to compare the results of a business with its
competitors. The Net Profit Ratio of the Company remained at 0113 for the present Financial
Year. Whereas it was 0.154 in previous. This downfall is because of substantive drop in net
profit of the company that is from 19559 to 12459.

NOTE 6: RETURN ON CAPITAL EMPLOYED

Return on capital employed is a financial ratio that measures a company’s profitability and
the efficiency with which its capital is employed. In this case the ratio has marginally
declined from 0.199 to 0.187. This needs to improve. It has happened because the net
profitability has decreased from 13377 to 12459.

NOTE 7: Dividend Payout Ratio

The dividend payout ratio provides an indication of how much money a company is retuning
to shareholders, versus how much money it is keeping on hand to reinvest in growth, payoff
debt or add to cash reserves. The ratio has increased from 19.95% to 21.4 %. This shows that
the company is sharing more profit with the shareholders than it was doing before.

NOTE 8: WORKING CAPITAL TURNOVER RATIO

The working capital turnover ratio measures how well a company is utilizing its working
capital for supporting a given level of sales. In this case the ratio has marginally decreased

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from 3.478 to 3.31. This shows that the management of the company has become less
efficient in using the company’s short term assests.

NOTE 9: ASSET TURN OVER RATIO

Asset turnover ratio is the ratio of the value of a company’s  sales or revenues generated

relative to the value of its  assets. The Asset Turnover ratio can often be used as
an indicator of the efficiency with which a company is deploying its assets in generating
revenue. The ratio decreased from 1.002 to 1.21 in the present financial year. This is because
of rise in assets.

NOTE 10: RETURN ON EQUITY

Return on equity measures a corporation’s profitability by revealing how much profit

company generates with the money shareholders have invested. In the given case the ratio has
decreased from 18.2 to 15.95. It shows that the company’s management is becoming less
proficient in managing the funds received from the shareholders.

NOTE 11: DEBTORS’ TURNOVER RATIO

It is an accounting measure that is used to quantify a firm’s effectiveness in extending credit

and in collecting debts on that credit. In the present case the ratio has decreased from 9.88 to
8.16. This shows an inefficiency on part of the company to get the debt back and also a lower
capacity than before in extending the credit.

NOTE 12: CREDITORS’ TURNOVER RATIO

The creditors’ turnover ratio is a short term liquidity measure used to quantify the rate at
which a company pays off its supplier. The ratio has declined from 2.20 to 1.86 this shows
lower ability on part of the company to pay off its debt to the creditors than the previous year.

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