1. Current Ratio: Current Ratio=7,158.202,790.10=2.56Current Ratio=2,790.107,158.

20
=2.56

2. Quick Ratio:
Quick Ratio=7,158.20−1,782.402,790.10=5,375.802,790.10≈1.92Quick Ratio=2
,790.107,158.20−1,782.40=2,790.105,375.80≈1.92

3. Debt-Equity Ratio: Debt-Equity Ratio=4,822.6013,639.40≈0.35Debt-

Equity Ratio=13,639.404,822.60≈0.35

4. Interest Coverage Ratio:

Interest Coverage Ratio=1,965.80278.20≈7.07Interest Coverage Ratio=278.201,965
.80≈7.07

5. Capital Gearing Ratio:

Capital Gearing Ratio=4,923.4013,639.40≈0.36Capital Gearing Ratio=13,639.404,9
23.40≈0.36

6. Stock Turnover Ratio:

Stock Turnover Ratio=4,850.30(1,782.40+1,926.30)/2≈2.70Stock Turnover Rati
o=(1,782.40+1,926.30)/24,850.30≈2.70

7. Debt Turnover Ratio:

Debt Turnover Ratio=8,731.60(4,822.60+2,536.20)/2≈1.46Debt Turnover Ratio
=(4,822.60+2,536.20)/28,731.60≈1.46

8. Fixed Assets Turnover Ratio:

Fixed Assets Turnover Ratio=8,731.604,923.40≈1.77Fixed Assets Turnover Rat
io=4,923.408,731.60≈1.77

9. Gross Profit Ratio:

Gross Profit Ratio=3,881.308,731.60×100≈44.46%Gross Profit Ratio=8,731.603,88
1.30×100≈44.46%

10. Net Profit Ratio:

Net Profit Ratio=1,529.208,731.60×100≈17.51%Net Profit Ratio=8,731.601,529.20
×100≈17.51%
### Interpretation of Ratios:

1. **Current Ratio (2.56)**:

- Interpretation: The current assets are 2.56 times the current liabilities, indicating a
strong ability to cover short-term obligations.

2. **Quick Ratio (1.92)**:

- Interpretation: The quick assets (excluding inventory) are 1.92 times the current
liabilities, suggesting good liquidity even without relying on inventory.

3. **Debt-Equity Ratio (0.35)**:

- Interpretation: Debt is 35% of equity, indicating a conservative capital structure with

low reliance on debt financing.

4. **Interest Coverage Ratio (7.07)**:

- Interpretation: Operating income is 7.07 times the interest expense, showing ample
earnings to cover interest payments.

5. **Capital Gearing Ratio (0.36)**:

- Interpretation: Equity is 36% of total capital, indicating a balanced capital structure

with moderate reliance on equity financing.

6. **Stock Turnover Ratio (2.70)**:

 - Interpretation: Inventory is turning over approximately 2.7 times in the period,
reflecting efficient management of inventory.

7. **Debt Turnover Ratio (1.46)**:

- Interpretation: Sales are 1.46 times the average debt, indicating effective utilization
of debt to generate revenue.

8. **Fixed Assets Turnover Ratio (1.77)**:

- Interpretation: Fixed assets are generating revenue 1.77 times their value, showing
good asset utilization.

9. **Gross Profit Ratio (44.46%)**:

- Interpretation: Gross profit represents 44.46% of sales revenue, indicating a healthy

margin after accounting for the cost of goods sold.

10. **Net Profit Ratio (17.51%)**:

- Interpretation: Net profit is 17.51% of total revenue, showing the portion of sales
that translates into profit after all expenses.

### Suggestions based on Ratios:

1. **Current Ratio and Quick Ratio**:

- Maintain efficient management of current assets to sustain liquidity. Monitor

inventory levels to optimize the quick ratio.
2. **Debt-Equity Ratio and Capital Gearing Ratio**:

- Continue with the conservative approach to debt financing, but evaluate

opportunities to leverage debt for strategic growth.

3. **Interest Coverage Ratio**:

- Ensure operating income remains robust to comfortably cover interest expenses.

Monitor profitability to sustain this ratio.

4. **Stock Turnover Ratio and Fixed Assets Turnover Ratio**:

- Fine-tune inventory and fixed asset management to optimize turnover rates and
enhance revenue generation efficiency.

5. **Gross Profit Ratio and Net Profit Ratio**:

- Focus on cost control measures to sustain or improve profit margins. Regularly

review pricing strategies and cost structures.

Regular monitoring and proactive adjustments based on these ratios will contribute to
financial stability and performance improvement. Adjust strategies as needed to align
with business goals and market conditions.

Interpretation:

 The calculated financial ratios for Zydus Lifesciences indicate healthy liquidity
(current ratio and quick ratio), moderate debt levels (debt-equity ratio and
interest coverage ratio), efficient utilization of assets (stock turnover ratio and
fixed assets turnover ratio), and profitability (gross profit ratio and net profit
ratio).
 These ratios provide insights into the company's financial performance, efficiency, and
ability to manage its operations and financial obligations. It's important to compare
these ratios over time and with industry benchmarks for a comprehensive analysis of
Zydus Lifesciences' financial position.

March 23

March 22

Calculations:

1. Current Ratio: Current Ratio=6,837.404,027.90≈1.70Current Ratio=4,027.906,837.40

≈1.70
2. Quick Ratio (Acid-Test Ratio):
Quick Ratio=6,837.40−1,926.304,027.90=4,911.104,027.90≈1.22Quick Ratio=4
,027.906,837.40−1,926.30=4,027.904,911.10≈1.22
3. Debt-Equity Ratio: Debt-Equity Ratio=4,027.9013,240.50≈0.30Debt-
Equity Ratio=13,240.504,027.90≈0.30
4. Interest Coverage Ratio:
Interest Coverage Ratio=1,618.10134.90≈11.99Interest Coverage Ratio=134.901,6
18.10≈11.99
5. Capital Gearing Ratio:
Capital Gearing Ratio=4,719.9013,240.50≈0.36Capital Gearing Ratio=13,240.504,7
19.90≈0.36
6. Stock Turnover Ratio:
Stock Turnover Ratio=2,917.10(1,926.30+1,780.00)/2≈1.64Stock Turnover Rati
o=(1,926.30+1,780.00)/22,917.10≈1.64
7. Debt Turnover Ratio:
Debt Turnover Ratio=7,590.00(4,027.90+2,536.20)/2≈1.80Debt Turnover Ratio
=(4,027.90+2,536.20)/27,590.00≈1.80
8. Fixed Assets Turnover Ratio:
Fixed Assets Turnover Ratio=7,590.004,719.90≈1.61Fixed Assets Turnover Rat
io=4,719.907,590.00≈1.61
9. Gross Profit Ratio:
Gross Profit Ratio=4,672.907,590.00×100≈61.60%Gross Profit Ratio=7,590.004,67
2.90×100≈61.60%
10. Net Profit Ratio:
Net Profit Ratio=857.907,590.00×100≈11.30%Net Profit Ratio=7,590.00857.90
×100≈11.30%

Interpretation:

 Current Ratio: Indicates the company's ability to meet short-term obligations

with its short-term assets. A ratio of 1.70 suggests that Zydus Lifesciences has
sufficient current assets to cover its current liabilities.
 Quick Ratio: Shows the company's ability to cover immediate liabilities without
relying on the sale of inventories. A quick ratio of 1.22 is generally considered
acceptable for most industries.
 Debt-Equity Ratio: Reflects the proportion of debt financing relative to
shareholders' equity. A ratio of 0.30 indicates a moderate level of debt compared
to equity.
 Interest Coverage Ratio: Indicates the company's ability to cover interest
expenses with its operating income. An interest coverage ratio of 11.99 suggests
strong coverage.
 Capital Gearing Ratio: Measures the proportion of fixed assets financed by
shareholders' funds. A ratio of 0.36 indicates a moderate gearing level.
 Stock Turnover Ratio: Shows how efficiently the company manages its
inventory. A ratio of 1.64 suggests that inventory turnover is moderate.
 Debt Turnover Ratio: Indicates how efficiently the company uses debt to
generate sales. A ratio of 1.80 suggests that debt turnover is efficient.
 Fixed Assets Turnover Ratio: Reflects how efficiently the company utilizes its
fixed assets to generate revenue. A ratio of 1.61 suggests moderate efficiency.
 Gross Profit Ratio: Measures the profitability of sales after deducting the cost of
goods sold. A gross profit ratio of 61.60% indicates strong profitability at the
gross level.
 Net Profit Ratio: Shows the percentage of net profit earned on total revenue. A
net profit ratio of 11.30% indicates the company's overall profitability after
accounting for all expenses.

Overall Suggestions for Improving Financial Ratios:

1. **Current Ratio (1.70)** and **Quick Ratio (1.22)**:

 - Increase liquidity by managing current assets more efficiently. Consider
reducing excess inventory and improving collections on receivables.

2. **Debt-Equity Ratio (0.30)** and **Capital Gearing Ratio (0.36)**:

- Maintain a healthy balance between debt and equity. Explore opportunities to

reduce debt and increase equity through retained earnings or equity financing.

3. **Interest Coverage Ratio (11.99)**:

- Continue generating sufficient operating income to comfortably cover interest

expenses. Focus on enhancing profitability to sustain this ratio.

4. **Stock Turnover Ratio (1.64)** and **Fixed Assets Turnover Ratio (1.61)**:

- Optimize inventory and fixed asset utilization to increase turnover ratios.

Streamline operations and reduce idle assets to boost efficiency.

5. **Debt Turnover Ratio (1.80)**:

- Evaluate debt management practices to enhance sales generated from debt

financing. Aim for improved efficiency in utilizing debt for revenue generation.

6. **Gross Profit Ratio (61.60%)** and **Net Profit Ratio (11.30%)**:

- Implement cost-saving measures to increase profit margins. Review pricing

strategies, reduce production costs, and enhance overall operational efficiency.
 Overall, focus on enhancing liquidity, optimizing asset utilization, and improving
profitability to achieve a stronger financial position and performance. Regularly
monitor these ratios and adjust strategies accordingly to drive sustainable growth
and financial health.

These financial ratios provide insights into Zydus Lifesciences' financial performance,
efficiency, and profitability for the fiscal year ending in March 2022. Comparing these
ratios with industry benchmarks and historical trends can help assess the company's
financial health and performance over time.

Dr. reddy

March 23

1. Current Ratio:

The current ratio measures the company's ability to cover short-term liabilities with its
short-term assets.
Current Ratio=Total Current AssetsTotal Current LiabilitiesCurrent Ratio=Total C
urrent LiabilitiesTotal Current Assets

From the balance sheet:

 Total Current Assets = ₹13,788.30 Cr

 Total Current Liabilities = ₹4,439.70 Cr

Current Ratio=13,788.304,439.70≈3.10Current Ratio=4,439.7013,788.30≈3.10

2. Quick Ratio (Acid-Test Ratio):

The quick ratio assesses the company's ability to meet short-term liabilities with its most
liquid assets.
Quick Ratio=Total Current Assets−InventoriesTotal Current LiabilitiesQuick R
atio=Total Current LiabilitiesTotal Current Assets−Inventories

From the balance sheet:

 Inventories = ₹3,043.00 Cr
Quick Ratio=13,788.30−3,043.004,439.70≈2.44Quick Ratio=4,439.7013,788.30−3,043.
00≈2.44

3. Debt-Equity Ratio:

The debt-equity ratio measures the proportion of debt used to finance the company's
assets relative to shareholders' equity. Debt-
Equity Ratio=Total DebtShareholders’ EquityDebt-Equity Ratio=Shareholders’ Equity
Total Debt

From the balance sheet:

 Total Debt (Total Non-Current Liabilities) = ₹460.90 Cr

 Shareholders' Equity = ₹20,474.20 Cr

Debt-Equity Ratio=460.9020,474.20≈0.0225Debt-Equity Ratio=20,474.20460.90

≈0.0225

4. Interest Coverage Ratio:

The interest coverage ratio measures the company's ability to cover interest expenses
with its operating profits.
Interest Coverage Ratio=Profit Before Interest and Tax (PBIT)Interest ExpenseI
nterest Coverage Ratio=Interest ExpenseProfit Before Interest and Tax (PBIT)

From the income statement:

 PBIT = ₹3,866.00 Cr
 Interest Expense = ₹16.90 Cr

Interest Coverage Ratio=3,866.0016.90≈229.05Interest Coverage Ratio=16.903,86

6.00≈229.05

5. Capital Gearing Ratio:

Capital Gearing Ratio=Long Term BorrowingsShareholders’ Funds + Long Ter

m BorrowingsCapital Gearing Ratio=Shareholders’ Funds + Long Term BorrowingsLong Term Bo
rrowings

 Long Term Borrowings (March '23) = ₹3,771.00 Cr

  Shareholders' Funds (March '23) = ₹13,639.40 Cr

Capital Gearing Ratio=3,771.0013,639.40+3,771.00≈0.22Capital Gearing Ratio

=13,639.40+3,771.003,771.00≈0.22

1. Stock Turnover Ratio:

Stock Turnover Ratio=Cost of Goods Sold (COGS)Average InventoryStock Tur

nover Ratio=Average InventoryCost of Goods Sold (COGS)

 Cost of Goods Sold (COGS) (March '23) = Total Sales - Gross Profit

 Total Sales (Net Sales/Income from Operations) = ₹16,298.90 Cr

 Gross Profit = Net Sales - Cost of Goods Sold = ₹16,298.90 Cr - ₹(16,298.90 Cr -
₹3,291.60 Cr) = ₹16,298.90 Cr

 Average Inventory = (Opening Inventory + Closing Inventory) / 2

 Opening Inventory (March '23) = ₹3,043.00 Cr

 Closing Inventory (March '23) = ₹3,043.00 Cr

Stock Turnover Ratio=16,298.90(3,043.00+3,043.00)/

2≈16,298.903,043.00≈5.36Stock Turnover Ratio=(3,043.00+3,043.00)/216,298.90
≈3,043.0016,298.90≈5.36

2. Debt Turnover Ratio:

Debt Turnover Ratio=Net SalesAverage Total DebtDebt Turnover Ratio=Average

Total DebtNet Sales

 Average Total Debt = (Total Non-Current Liabilities + Total Current Liabilities) /

2
 Total Non-Current Liabilities (March '23) = ₹460.90 Cr
 Total Current Liabilities (March '23) = ₹4,439.70 Cr

Average Total Debt=460.90+4,439.702=4,900.602=₹2,450.30��Average Tot

al Debt=2460.90+4,439.70=24,900.60=₹2,450.30Cr

Debt Turnover Ratio=16,298.902,450.30≈6.65Debt Turnover Ratio=2,450.3016,298.

90≈6.65
3. Fixed Assets Turnover Ratio:

Fixed Assets Turnover Ratio=Net SalesAverage Fixed AssetsFixed Assets Turn

over Ratio=Average Fixed AssetsNet Sales

 Average Fixed Assets = (Total Non-Current Assets) / 2

 Total Non-Current Assets (March '23) = ₹11,586.50 Cr

Average Fixed Assets=11,586.502=₹5,793.25��Average Fixed Assets=211,586

.50=₹5,793.25Cr

Fixed Assets Turnover Ratio=16,298.905,793.25≈2.81Fixed Assets Turnover R

atio=5,793.2516,298.90≈2.81

4. Gross Profit Ratio:

Gross Profit Ratio=Gross ProfitNet SalesGross Profit Ratio=Net SalesGross Profit

 Gross Profit (March '23) = ₹3,291.60 Cr

Gross Profit Ratio=3,291.6016,298.90≈0.202 or 20.2%Gross Profit Ratio=16,298.

903,291.60≈0.202 or 20.2%

5. Net Profit Ratio:

Net Profit Ratio=Net Profit After TaxNet SalesNet Profit Ratio=Net SalesNet Profit Af
ter Tax

 Net Profit After Tax (March '23) = ₹2,612.80 Cr

Net Profit Ratio=2,612.8016,298.90≈0.160 or 16.0%Net Profit Ratio=16,298.902,61

2.80≈0.160 or 16.0%

### Interpretation of Ratios:

1. **Current Ratio (3.10)**:

- Interpretation: The company has ₹3.10 of current assets for every ₹1 of current liabilities, indicating a
strong ability to cover short-term obligations.
2. **Quick Ratio (2.44)**:

- Interpretation: The quick assets (excluding inventory) are sufficient to cover short-term liabilities,
showing good liquidity even after considering inventory.

3. **Debt-Equity Ratio (0.0225)**:

- Interpretation: Debt is a very small portion relative to shareholders' equity, suggesting a conservative
capital structure with low debt leverage.

4. **Interest Coverage Ratio (229.05)**:

- Interpretation: The company's earnings are significantly higher than its interest expenses,
demonstrating a strong ability to cover interest payments.

5. **Capital Gearing Ratio (0.22)**:

- Interpretation: Long-term borrowings represent a moderate portion of shareholders' funds,

indicating a balanced capital structure.

6. **Stock Turnover Ratio (5.36)**:

- Interpretation: Inventory is turning over 5.36 times a year, indicating efficient management of
inventory levels.

7. **Debt Turnover Ratio (6.65)**:

- Interpretation: Sales generated per unit of average total debt are relatively high, indicating effective
utilization of debt to drive revenue.

8. **Fixed Assets Turnover Ratio (2.81)**:

- Interpretation: Fixed assets are generating sales revenue 2.81 times their value on average, showing
efficient use of fixed assets.

9. **Gross Profit Ratio (20.2%)**:

- Interpretation: Gross profit margin represents 20.2% of sales revenue, indicating the profitability of
core operations after accounting for cost of goods sold.
10. **Net Profit Ratio (16.0%)**:

- Interpretation: Net profit margin represents 16.0% of sales revenue, showing the profitability of the
company after all expenses including taxes.

### Suggestions based on Ratios:

1. **Enhance Liquidity**:

- Maintain or increase current assets to ensure liquidity remains strong.

2. **Manage Debt Levels**:

- Continue with the conservative debt approach to maintain a low debt-to-equity ratio.

3. **Optimize Asset Utilization**:

- Focus on efficient use of inventory and fixed assets to further improve turnover ratios.

4. **Cost Control Measures**:

- Implement strategies to improve gross profit margin by reducing production costs or negotiating
better terms with suppliers.

5. **Sustain Profitability**:

- Continue efforts to maintain or increase net profit margin through effective cost management and
revenue enhancement initiatives.

6. **Monitor Capital Structure**:

- Regularly review the capital gearing ratio to ensure a balanced financial structure and optimal use of
borrowed funds.

7. **Cash Flow Management**:

 - Maintain a strong interest coverage ratio to ensure the company's ability to meet interest obligations
comfortably.

8. **Investment Decisions**:

- Use the insights from these ratios to guide investment decisions and operational improvements
aimed at enhancing overall financial performance.

Implementing these suggestions will contribute to sustaining financial health and supporting growth
objectives for the company. Regular monitoring and adjustments based on changing market conditions
will be essential to maintaining positive financial outcomes.

For march 22

1. Current Ratio:

Current Ratio=Current AssetsCurrent LiabilitiesCurrent Ratio=Current LiabilitiesCurre

nt Assets

 Current Assets (March '22) = ₹13,483.60 Cr

 Current Liabilities (March '22) = ₹6,045.10 Cr

Current Ratio=13,483.606,045.10≈2.23Current Ratio=6,045.1013,483.60≈2.23

2. Quick Ratio (Acid-Test Ratio):

Quick Ratio=Current Assets−InventoriesCurrent LiabilitiesQuick Ratio=Current Li

abilitiesCurrent Assets−Inventories

 Inventories (March '22) = ₹3,347.80 Cr

Quick Ratio=13,483.60−3,347.806,045.10≈10,135.806,045.10≈1.68Quick Ratio

=6,045.1013,483.60−3,347.80≈6,045.1010,135.80≈1.68

3. Debt-Equity Ratio:

Debt-Equity Ratio=Total DebtShareholders’ EquityDebt-Equity Ratio

=Shareholders’ EquityTotal Debt
  Total Debt (March '22) = ₹460.90 Cr (Non-Current Liabilities) + ₹4,439.70 Cr
(Current Liabilities) = ₹4,900.60 Cr
 Shareholders' Equity (March '22) = ₹18,336.20 Cr (Shareholders' Funds)

Debt-Equity Ratio=4,900.6018,336.20≈0.267 or 26.7%Debt-Equity Ratio

=18,336.204,900.60≈0.267 or 26.7%

4. Interest Coverage Ratio:

Interest Coverage Ratio=Profit Before Interest and Tax (PBIT)Interest ExpenseI

nterest Coverage Ratio=Interest ExpenseProfit Before Interest and Tax (PBIT)

 Profit Before Interest and Tax (PBIT) (March '22) = ₹1,483.20 Cr

 Interest Expense (March '22) = ₹134.90 Cr

Interest Coverage Ratio=1,483.20134.90≈10.99Interest Coverage Ratio=134.901,4

83.20≈10.99

5. Capital Gearing Ratio:

Capital Gearing Ratio=Fixed Interest Bearing CapitalEquity Share Capital + Re

serves and SurplusCapital Gearing Ratio=Equity Share Capital + Reserves and SurplusFixed Inte
rest Bearing Capital

 Fixed Interest Bearing Capital (March '22) = ₹460.90 Cr (Non-Current Liabilities)

 Equity Share Capital (March '22) = ₹83.30 Cr
 Reserves and Surplus (March '22) = ₹18,253.00 Cr

Capital Gearing Ratio=460.9083.30+18,253.00≈460.9018,336.30≈0.0251 or 2.5

1%Capital Gearing Ratio=83.30+18,253.00460.90≈18,336.30460.90≈0.0251 or 2.51%

6. Stock Turnover Ratio:

Stock Turnover Ratio=Cost of Goods Sold (COGS)Average InventoryStock Tur

nover Ratio=Average InventoryCost of Goods Sold (COGS)

 Cost of Goods Sold (COGS) (March '22) = Total Sales - Gross Profit

 Total Sales (Net Sales/Income from Operations) = ₹14,315.30 Cr

 Gross Profit = ₹1,779.80 Cr
  Average Inventory = (Opening Inventory + Closing Inventory) / 2

 Opening Inventory (March '22) = ₹3,347.80 Cr

 Closing Inventory (March '22) = ₹3,347.80 Cr

Stock Turnover Ratio=14,315.30−1,779.803,347.80≈12,535.503,347.80≈3.74St

ock Turnover Ratio=3,347.8014,315.30−1,779.80≈3,347.8012,535.50≈3.74

7. Debt Turnover Ratio:

Debt Turnover Ratio=Net SalesAverage Total DebtDebt Turnover Ratio=Average

Total DebtNet Sales

 Average Total Debt = (Total Non-Current Liabilities + Total Current Liabilities) /

2
 Total Non-Current Liabilities (March '22) = ₹460.90 Cr
 Total Current Liabilities (March '22) = ₹6,045.10 Cr

Average Total Debt=460.90+6,045.102=6,506.002=₹3,253.00��Average Tot

al Debt=2460.90+6,045.10=26,506.00=₹3,253.00Cr

Debt Turnover Ratio=14,315.303,253.00≈4.40Debt Turnover Ratio=3,253.0014,315.

30≈4.40

8. Fixed Assets Turnover Ratio:

Fixed Assets Turnover Ratio=Net SalesAverage Fixed AssetsFixed Assets Turn

over Ratio=Average Fixed AssetsNet Sales

 Average Fixed Assets = (Total Non-Current Assets) / 2

 Total Non-Current Assets (March '22) = ₹11,012.00 Cr

Average Fixed Assets=11,012.002=₹5,506.00��Average Fixed Assets=211,012

.00=₹5,506.00Cr

Fixed Assets Turnover Ratio=14,315.305,506.00≈2.60Fixed Assets Turnover R

atio=5,506.0014,315.30≈2.60

9. Gross Profit Ratio:

Gross Profit Ratio=Gross ProfitNet SalesGross Profit Ratio=Net SalesGross Profit

 Gross Profit (March '22) = ₹1,779.80 Cr

Gross Profit Ratio=1,779.8014,315.30≈0.124 or 12.4%Gross Profit Ratio=14,315.

301,779.80≈0.124 or 12.4%

10. Net Profit Ratio:

Net Profit Ratio=Net Profit After TaxNet SalesNet Profit Ratio=Net SalesNet Profit Af
ter Tax

 Net Profit After Tax (March '22) = ₹1,623.20 Cr

Net Profit Ratio=1,623.2014,315.30≈0.113 or 11.3%Net Profit Ratio=14,315.301,62

3.20≈0.113 or 11.3%

### Interpretation of Ratios:

1. **Current Ratio (2.23)**:

- Interpretation: The company has ₹2.23 of current assets for every ₹1 of current liabilities, indicating a
strong ability to cover short-term obligations.

2. **Quick Ratio (1.68)**:

- Interpretation: The quick assets (excluding inventory) are sufficient to cover short-term liabilities,
showing good liquidity even after considering inventory.

3. **Debt-Equity Ratio (26.7%)**:

- Interpretation: Debt represents 26.7% of the shareholders' equity, indicating a moderate level of
debt financing relative to equity.

4. **Interest Coverage Ratio (10.99)**:

- Interpretation: The company's earnings are nearly 11 times higher than its interest expenses,
demonstrating a strong ability to cover interest payments.
5. **Capital Gearing Ratio (2.51%)**:

- Interpretation: Fixed interest-bearing capital is 2.51% of equity capital and reserves, indicating a low
dependence on borrowed funds.

6. **Stock Turnover Ratio (3.74)**:

- Interpretation: Inventory is turning over approximately 3.74 times a year, reflecting efficient
management of inventory.

7. **Debt Turnover Ratio (4.40)**:

- Interpretation: Sales generated per unit of average total debt are relatively high, indicating effective
utilization of debt to drive revenue.

8. **Fixed Assets Turnover Ratio (2.60)**:

- Interpretation: Fixed assets are generating sales revenue 2.60 times their value on average, showing
efficient use of fixed assets.

9. **Gross Profit Ratio (12.4%)**:

- Interpretation: Gross profit margin represents 12.4% of sales revenue, indicating the profitability of
core operations after accounting for cost of goods sold.

10. **Net Profit Ratio (11.3%)**:

- Interpretation: Net profit margin represents 11.3% of sales revenue, showing the profitability of the
company after all expenses including taxes.

### Suggestions based on Ratios:

1. **Maintain Liquidity**:

- Continue to manage current assets efficiently to sustain a healthy current ratio and quick ratio.

2. **Debt Management**:
 - Monitor debt levels and aim to keep the debt-equity ratio at a manageable level to avoid over-
leveraging.

3. **Optimize Inventory**:

- Focus on inventory management to further improve the stock turnover ratio and reduce carrying
costs.

4. **Cost Control Measures**:

- Implement strategies to enhance gross profit margin by reducing production costs and negotiating
better supplier terms.

5. **Enhance Profitability**:

- Explore opportunities to increase net profit margin through operational efficiencies and revenue
growth initiatives.

6. **Asset Utilization**:

- Maintain focus on utilizing fixed assets effectively to drive higher sales turnover and improve overall
business efficiency.

7. **Capital Structure**:

- Continue to monitor the capital gearing ratio and ensure a balanced mix of equity and debt financing
to support growth without excessive financial risk.

Implementing these suggestions will contribute to sustaining financial health, improving operational
efficiency, and supporting long-term growth objectives for the company. Regular monitoring and
adjustments based on market conditions will be crucial to maintaining positive financial performance.

Overall Recommendations:

1. Liquidity Management:
  Both companies should focus on maintaining healthy liquidity ratios (current ratio
and quick ratio) to ensure they can meet short-term obligations comfortably.
They should optimize current assets and manage liabilities efficiently.

2. Debt Management:

 Monitor and manage debt levels effectively to maintain reasonable debt-equity

ratios. Both companies should aim for a balanced capital structure to avoid
excessive reliance on debt financing.

3. Profitability Enhancement:

 Implement cost control measures and operational efficiencies to improve gross

profit margins. Enhance net profit margins through effective revenue
management and cost reduction strategies.

4. Asset Utilization:

 Optimize asset turnover ratios, such as stock turnover and fixed assets turnover,
to maximize the utilization of resources and enhance overall efficiency.

5. Financial Risk Assessment:

 Regularly assess and manage financial risks associated with capital gearing ratios
to ensure sustainable growth and financial stability.