BRITANNIA INDUSTRIES

-Akshay Dixit, 12
-Ankit Bahl, 23
-Asav Solanki, 35
-Dinesh Kumar, 55
LIQUIDITY RATIOS

Current ratio = current assets/ current liabilities

March’06 March’07 March’08 March’09 March’10

Current ratio 0.95 1.22 1.45 1.18 0.94

• The current ratio is an indication of a firm's market liquidity and ability to meet
creditor's demands.
• The current ratio is a financial ratio that measures whether or not a firm has enough
resources to pay its debts over the next 12 months. It compares a firm's current assets to its
current liabilities.
• If current liabilities exceed current assets (the current ratio is below 1), then the
company may have problems meeting its short-term obligations.
• If the current ratio is too high, then the company may not be efficiently using its current
assets or its short-term financing facilities.
LIQUIDITY RATIO – CURRENT RATIO

2.5

1.5 Britannia
GSK Con
1

0.5

0
March '06 March '07 March '08 March '09 march '10
LIQUIDITY RATIOS

Acid-test ratio = Quick assets/ current liabilities

March’06 March’07 March’08 March’09 March’10

Current ratio 0.17 0.32 0.33 0.31 0.16

• Acid Test ratio measures the ability of a company to use its near cash or quick
assets to immediately extinguish or retire its current liabilities. Quick assets include
those current assets that presumably can be quickly converted to cash at close to their
book values. A company with a Quick Ratio of less than 1, can not currently pay back
their current liabilities.
• Generally, the acid test ratio should be 1:1 or better, however this varies widely by
industry. In general, the higher the ratio, the greater the company's liquidity (i.e., the
better able to meet current obligations using liquid assets).
LIQUIDITY RATIO – ACID TEST

2
1.8
1.6
1.4
1.2
1 Britannia
GSK Con
0.8
0.6
0.4
0.2
0
March '06 March '07 March '08 March '09 March '10
LEVERAGE

Debt equity ratio =debt/equity

March’06 March’07 March’08 March’09 March’10
Debt asset
ratio 0.39 0.20 4.4 1.05 17.98

• Debt Ratio is a financial ratio that indicates the percentage of a company's assets that
are provided via debt.
• It is the ratio of total debt (the sum of current liabilities and long-term liabilities) and
total assets (the sum of current assets, fixed assets, and other assets such as 'goodwill').
• If the ratio is less than 0.5, most of the company's assets are financed through equity.
If the ratio is greater than 0.5, most of the company's assets are financed through debt.
• Companies with high debt/asset ratios are said to be "highly leveraged"
LEVERAGE RATIO – DEBT EQUITY

20
18
16
14
12
10 GSK Con
8
6
4
2
0
March '06 March '07 March '08 March '09 March '10
LEVERAGE RATIO

Profit before interest

and taxes
Interest coverage ratio =
Interest
March’06 March’07 March’08 March’09 March’10
Interest 39.59 14.04 22.95 13.87 17.9
coverage ratio

• A Interest coverage ratio is used to determine how easily a company can pay interest
on outstanding debt
• The lower the ratio, the more the company is burdened by debt expense. When a
company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may
be questionable. An interest coverage ratio below 1 indicates the company is not
generating sufficient revenues to satisfy interest expenses.
LEVERAGE RATIO – INTEREST COVERAGE

90
80
70
60
50
Britannia
40 GSK Con
30
20
10
0
March '06 March '07 March '08 March '09 March '10
LEVERAGE RATIO

Profit before interest and

taxes+ depreciation
Fixed charges =
coverage ratio Repayment of loans
Interest+
1- Tax rate

March’06 March’07 March’08 March’09 March’10

Fixed charges 42.14 16.22 26.34 15.52 29.41
coverage ratio
LEVERAGE RATIO – FCCR

70

60

50

40
Britannia
30 GSK Con

20

10

0
March '06 March '07 March '08 March '09 March '10
LEVERAGE RATIO

Average sundry debtors

Average collection
=
period Average daily credit sales

March’0 March’07 March’08 March’09 March’10

6
Average 4.44 4.75 6.53 5.81 4.23
collection period

• The approximate amount of time that it takes for a business to receive payments owed, in
terms of receivables, from its customers and clients.
• Most businesses allow customers to purchase goods or services via credit, but one of the
problems with extending credit is not knowing when the customer will make cash
payments. Therefore, possessing a lower average collection period is seen as optimal,
because this means that it does not take a company very long to turn its receivables into
cash. Ultimately, every business needs cash to pay off its own expenses.
LEVERAGE RATIO

Average Collection Period

7

4 Average Collection Period

3

0
March '06 March '07 March '08 March '09 March '10
LEVERAGE RATIO

Net sales
Fixed asset turnover
=
Net average fixed assets

March’0 March’07 March’08 March’09 March’10

6
Fixed asset 3.95 4.24 4.29
turnover 3.24 3.92

• Asset turnover is a financial ratio that measures the efficiency of a company's use of its
assets in generating sales revenue or sales income to the company.
• The fixed-asset turnover ratio measures a company's ability to generate net sales from
fixed-asset investments - specifically property, plant and equipment (PP&E) - net of
depreciation. A higher fixed-asset turnover ratio shows that the company has been more
effective in using the investment in fixed assets to generate revenues.
LEVERAGE RATIO

5
4.5
4
3.5
3
2.5 Britannia
GSK Con
2
1.5
1
0.5
0
March '06 March '07 March '08 March '09 March '10
LEVERAGE RATIO

Total assets turnover = Net sales

Average total assets

March’0 March’07 March’08 March’09 March’10

6
Total assets
turnover 3.06 3.54 3.01 3.66 4.11

• Asset turnover is a financial ratio that measures the efficiency of a company's use of its
assets in generating sales revenue or sales income to the company.
• Average Total Assets is the value of "Total assets" from the company's balance sheet in
the beginning and the end of the fiscal period divided by 2
LEVERAGE RATIO

4.5
4
3.5
3
2.5
Britannia
2 GSK Con
1.5
1
0.5
0
March '06 March '07 March '08 March '09 March '10
 PROFITABILITY RATIOS

Gross Profit Margin = Gross profit/Net Sales

year March’06 March’07 March’08 March’09 March’10

Gross Profit
Margin 11.72 5.85 8.97 7.20 5.99

• The gross profit margin ratio (or gross margin ratio) provides clues to the
company's pricing, cost structure and production efficiency.
• A decreasing gross profit margin ratio (or gross margin ratio) indicates that low
amount of earnings, required to pay fixed costs and profits, are being generated from
revenues. Also, the business is unable to control its production costs.
PROFITABILITY RATIOS

30

25

20

15 GSK Con
Britannia
10

0
2006 2007 2008 2009 2010
 PROFITABILITY RATIOS

(Earnings before interest, taxes,

EBITDA Margin = depreciation and amortization)
Net Sales
year March’06 March’07 March’08 March’09 March’10

EBITDA
Margin 13.02 6.83 9.75 8.21 4.70

• All interest, tax, depreciation and amortization entries in the income statement are
reversed out from the bottom-line net income.
• EBITDA differs from the operating cash flow in a cash flow statement primarily by
excluding payments for taxes or interest as well as changes in working capital. EBITDA
also differs from free cash flow because it excludes cash requirements for replacing
capital assets
• EBITDA margin measures the extent to which cash operating expenses use up
revenue
 EBITDA Margin
14

12

10

8
EBITDA Margin

0
March '06 March '07 March '08 March '09 March '10
 PROFITABILITY RATIOS

Net Profit
Net Profit Margin = Net Sales
year March’06 March’07 March’08 March’09 March’10

Net Profit
Margin 8.54 4.89 7.38 5.79 3.42

• Profit margin is an indicator of a company's pricing policies and its ability to control
costs. Differences in competitive strategy and product mix cause the profit margin to
vary among different companies
• A low profit margin indicates a low margin of safety: higher risk that a decline in
sales will erase profits and result in a net loss.
 14

12

10

8
Britannia
GSK Con
6

0
March '06 March '07 March '08 March '09 March '10
PROFITABILITY RATIOS

Return on assets =
Net Profit
Average total assets
Year March’06 March’07 March’08 March’09 March’10

Return on
assets
0.262 0.182 0.257 0.211 0.139

• Return on assets gives an indication of the capital intensity of the company, which
will depend on the industry; companies that require large initial investments will
generally have lower return on assets.
• Return on assets is an indicator of how profitable a company is before leverage,
and is compared with companies in the same industry. Since the figure for total assets
of the company depends on the carrying value of the assets, some caution is required
for companies whose carrying value may not correspond to the actual market value.
 0.3

0.25

0.2

0.15 Britannia
GSK Con

0.1

0.05

0
March '06 March '07 March '08 March '09 March '10
 VALUATION

Market Value per share

Market Value to Book Value =
Ratio Book value per share
year March’06 March’07 March’08 March’09 March’10

Market
Value to
Book Value
Ratio 7.59 4.72 4.15 4.05 9.69

• A higher P/B ratio implies that investors expect management to create more value
from a given set of assets, all else equal (and/or that the market value of the firm's assets
is significantly higher than their accounting value).
• This ratio also gives some idea of whether an investor is paying too much for what
would be left if the company went bankrupt immediately.
• P/B ratios do not, however, directly provide any information on the ability of the
firm to generate profits or cash for shareholders.
 Market Value to Book Value Ratio
12

10

8
Market Value to Book
6 Value Ratio

0
March '06 March '07 March '08 March '09 March '10
DU POINT ANALYSIS

Net Profit
Return on Assets =
(ROA) Average Total Assets
year March’06 March’07 March’08 March’09 March’10

ROA
26 17 22 21.5 14

Du point breaks the ROA into two different parts,

NPM and TATR. The NPM ratio gives the
operating efficiency and the TATR ratio gives the
asset use efficiency
 Return on Assets
30

25

20

Return on Assets
15

10

0
March '06 March '07 March '08 March '09 March '10
 FOR YEAR 2010
Net sales = 3401
Net Profit = 116.51
NPM= 3.38% Total cost = 3284.49
Net sales = 3401
Return on = 14 %
total Assets

TATR = 4.15 Net sales = 3401

Average total Assets =825

THANK YOU!!!