Ratio

Analysis Of
Hero Moto Corp (Two-wheeler)
 Liquidity Ratios

Current Ratio
The ratio indicates a company’s ability to pay its current liabilities from its current
assets.

Inventory Turnover
It is an efficiency ratio that show how manager are using the inventory as compare
to cost of goods sold with inventory for a period.
Inventory Turnover = Cost ofGoods Sold
Inventory
Years COGS Inventory Ratio
2018-19 23346.10 1072.37 21.770
2017-18 21857.79 823.58 26.539

The ratio increased from 3.715 in 2017-18 to 4.146 in year 2018-19 it means that
the company is efficiently using its assets to generate sale.
PROFITABILITY RATIO
kj
 Ratio Analysis
of
TATA Motors (Four-Wheeler)

Liquidity Ratios
Current Ratio
The current ratio indicates a company's ability to pay its current liabilities from its
current assets. This ratio is one used to quickly measure the liquidity of a
company.

Year Current Assets Current Current Ratio

Liabilities
2017-18 123431.16 145457.43 0.848
2018-19 135972.844 143219.47 0.949

If current liabilities exceed current assets the current ratio will be less than 1. A
current ratio of less than 1 indicates that the company may have problems meeting
its short-term obligations.

Quick or Acid Test Ratio

The purpose of this ratio is to measure how well a company can meet its short-term
obligations with its most liquid assets.

Year Current Inventory Quick/Acid

Assets Current Test Ratio
Liabilities
2017-18 123431.16 145457.43 39013.73 0.84830
2018-19 135972.844 143219.47 42137.63 0.655
A company that has a quick ratio of less than 1 may not be able to fully pay off its
current liabilities in the short term.

Super Cash Ratio

It is called super quick or cash ratio because unlike other liquidity ratios it only
takes into account “super quick assets”.
Super quick assets strictly include cash & marketable securities (since they can
almost instantly be converted to cash)

Year Cash Current Liabilities Super Cash

Ratio
2017-18 21559.80 145457.43 0.14
2018-19 14716.75 143219.47 0.10

Du Pont Analysis

Return on Assets

Return on assets (ROA) is an indicator of how profitable a company is relative to

its total assets.

ROA = Net profit Margin * Assets Turnover

Year Net profit Net Profit Assets Return On

Margin Turnover Assets(ROA)
2017-18 4169.55 -1. 75% 1.82 59.40
2018-19 10533.19 2.91% 1.54 65.26
Higher ROA indicates more asset efficiency.

Return on Equity

ROE is a measure of how well a company uses investments to generate earnings

growth.

ROE = Net profit Margin * Assets Turnover*Financial leverage

Year Net profit Assets Financial Return On

Margin Turnover leverage Equity(ROE)
2017-18 -1. 57% 1.82 16.43 4.84
2018-19 2.91% 1.54 13.83 11.07

Turnover Ratios

Inventory Turnover Ratio

Inventory iTurnover iRatio iindicates ithat ihow iquickly ithe iinventory iin ithe i
iorganization iis isold. iA ihigh iITR iratio iis igood ifrom ithe ipoint iof iliquidity
iof ithe iorganization iand iviceversa. iA ilow iratio iimplies ithat iinventory idoes
inot iget isold iquickly iand istays ion ithe ishelf ior iin ithe iwarehouse ifor ia
icomparatively ilong itime. i

Year COGS Avg Inventory Inventor

(Rs. In Crores) (Rs. In Crores) Turnover Ratio
 2017-18 173371.19 42137.63 4.671
2018-19 182254.45 39013.73 4114
Ratio increases from 4.114 to 4.671 which implies that there is either strong sales
or insufficient inventory, sometimes a low inventory turnover rate is a good to
have.

Current Assets Turnover Ratio

The iasset iturnover iratio iproves ito ibe ian ieffective iratio ithat imeasures ia
icompany’s iability ito igenerate isales ifrom iits iassets iby icomparing inet isales iwith
iaverage itotal iassets. iIn iother iwords, ithis iratio ishows ihow iefficiently ia icompany
ican iuse iits iassets ito igenerate isales.
This iratio imeasures ihow iefficiently ia ifirm iuses iits iassets ito igenerate isales, iso ia
ihigher iratio iis ialways imore ifavorable. iHigher iturnover iratios imean ithe icompany
iis iusing iits iassets imore iefficiently. iLower iratios imean ithat ithe icompany iisn’t
iusing iits iassets iefficiently iand imost ilikely ihave imanagement ior iproduction
iproblems.

Year Sales Avg Current Asset Inventory

(In Crores) (In Crores) Turnover Ratio
2017-18 289386.25 13572.84 2.1282
2018-19 299190.59 123431.16 2.423

The increasing Current Asset ratio implies that the company is efficiently using its
asset to generate sales.

Debtors Turnover Ratio

This ratio indicates the number of times the receivable are turned over in a year in
relation to sales. It shows, how quickly receivables are converted into cash and
cash equivalents and thus, shows the efficiency in collection of amounts due

Year Sales Avg Inventory Inventory

 (In Crores) (Rs. In) Turnover Ratio
2018-19 289386.25 19893.30 14.54
2017-18 299190.59 18996.17 15.75
From 14.54 (2017-18) turnover of receivable increased by 15.75 (2018-19) it
indicates that the company is more effectively processing credit.

Capital Structure Ratio

Debt-Equity Ratio

This ratio tells the relative proportion of shareholders' equity and debt used to
finance a company's assets.

Years Long-Term Debt Equity Ratio

2018-19 38747.11 22,162.52 1.74 :1
2017-18 30941.87 20,170.98 1.93 :1

Debt to Asset Ratio

It tells the company’s financial leverage. It tells you the percentage of a company's
total assets that were financed by Creditors.
Years Long-Term Debt Total Assets Ratio
2018-19 38747.11 60,909.63 0.63 :1
2017-18 30941.87 59212.50 0.52 :1

Total Outside Liabilities to Net Worth

This ratio gives an accurate picture of the business reliance on debt.

Years Total Outside Net Worth Ratio

Liabilities
2018-19 15,806.30 22,162.52 0.71 :1
2017-18 14,822.37 20,170.98 0.73 :1

Total Outside Liabilities to Net Assets

Years Total Outside Net Assets Ratio

Liabilities
2018-19 15,806.30 60,909.63 0.26 :1
2017-18 14,822.37 59212.50 0.25 :1
Profitability iRatios
Profitability iratios iare ifinancial imetrics iused iby ianalysts iand iinvestors ito imeasure iand
ievaluate ithe iability iof ia icompany ito igenerate iincome i(profit) irelative ito irevenue,
ibalance isheet iassets, ioperating icosts, iand ishareholders’ iequity iduring ia ispecific iperiod
iof itime. iThey ishow ihow iwell ia icompany iutilizes iits iassets ito iproduce iprofit iand ivalue
ito ishareholders.

A ihigher iratio ior ivalue iusually imeans ithe ibusiness iis iperforming iwell iby igenerating
irevenues, iprofits, iand icash iflow.

iGross iMargin iRatio

The igross imargin iratio iis ia ipercentage iresulting ifrom idividing ithe iamount iof ia
icompany's igross iprofit iby ithe iamount iof iits inet isales. i(The igross imargin iratio iis ialso
iknown ias ithe igross iprofit imargin ior ithe igross iprofit ipercentage ior isimply ithe igross
imargin.)
Companies ishould ibe icontinuously imonitoring iits igross imargin iratio ito ibe icertain iit iis
isufficient ito icover iits iselling, igeneral iand iadministrative iexpenses, iinterest iexpense, iand
ito iearn ia iprofit.

Year Sales-COGS Sales Gross iMargin iRatio

2017-18 118969.45 292,340.64 40.7 i%

2018-19 119683.95 301,938.40 39.64 i%

Net iProfit iMargin

The inet iprofit imargin iis iequal ito ihow imuch inet iincome ior iprofit iis igenerated ias ia
ipercentage iof irevenue. iNet iprofit imargin iis ithe iratio iof inet iprofits ito irevenues ifor ia
icompany ior ibusiness isegment. iNet iprofit imargin iis itypically iexpressed ias ia ipercentage
ibut ican ialso ibe irepresented iin idecimal iform. iThe inet iprofit imargin iillustrates ihow
imuch iof ieach idollar iin irevenue icollected iby ia icompany itranslates iinto iprofit.

Net iincome iis ialso icalled ithe ibottom iline ifor ia icompany ior ithe inet iprofit. iNet iprofit
imargin iis ialso icalled inet imargin. iThe iterm inet iprofits iis iequivalent ito inet iincome ion
ithe iincome istatement, iand ione ican iuse ithe iterms iinterchangeably.
 Year Profit iAfter iTax i i i i i i i i i i i iSales Net iProfit iMargin

2017-18 6,813.10 292,340.64 2.33 i%

2018-19 (28,933.70) 301,938.40 -9.59 i%

iExpense iRatio i
The iexpense iratio i(ER), ialso isometimes iknown ias ithe imanagement iexpense iratio i(MER),
imeasures ihow imuch iof ia ifund's iassets iare iused ifor iadministrative iand iother ioperating
iexpenses. iAn iexpense iratio iis idetermined iby idividing ia ifund's ioperating iexpenses iby
ithe iaverage idollar ivalue iof iits iassets iunder imanagement i(AUM). iOperating iexpenses
ireduce ithe ifund's iassets, ithereby ireducing ithe ireturn ito iinvestors.

Year Expenses i i i i i i i i i i i i iSales Expense iRatio

2017-18 287,118.34 292,340.64 98.21 i%

2018-19 306,623.30 301,938.40 101.55 i%

Return iOnCapital iEmployed i– iROCE

Return ion icapital iemployed i(ROCE) iis ia ifinancial iratio ithat imeasures ia icompany's
iprofitability iand ithe iefficiency iwith iwhich iits icapital iis iused. iIn iother iwords, ithe iratio
imeasures ihow iwell ia icompany iis igenerating iprofits ifrom iits icapital. iThe iROCE iratio iis
iconsidered ian iimportant iprofitability iratio iand iis iused ioften iby iinvestors iwhen
iscreening ifor isuitable iinvestment icandidates.

Year i i i i i i i i i i i iEBIT Net iAssets i i i i i i i i i iROCE

iRatio

2017-18 9,179.89 i (7246.63) -126.68 i%

2018-19 (1,719.59) (22026.27) 77.94 i%

Return ion iEquity iratio

The ireturn ion iequity iratio ior iROE iis ia iprofitability iratio ithat imeasures ithe iability iof ia
ifirm ito igenerate iprofits ifrom iits ishareholders iinvestments iin ithe icompany. iIn iother
iwords, ithe ireturn ion iequity iratio ishows ihow imuch iprofit ieach idollar iof icommon
istockholders’ iequity igenerates.

So, ia ireturn ion i1 imeans ithat ievery idollar iof icommon istockholders’ iequity igenerates i1
idollar iof inet iincome. iThis iis ian iimportant imeasurement ifor ipotential iinvestors ibecause
ithey iwant ito isee ihow iefficiently ia icompany iwill iuse itheir imoney ito igenerate inet
iincome.

ROE iis ialso ian iindicator iof ihow ieffective imanagement iis iat iusing iequity ifinancing ito
ifund ioperations iand igrow ithe icompany.

Year Profit iAfter iTax Net iWorth Return ion iEquity

iRatio

2017-18 6,813.10 (7246.63) -94.01 i%

2018-19 (28,933.70) (22026.27) 131.35 i%

Earnings iPer iShare i

Earnings iper ishare i(EPS) iis icalculated ias ia icompany's iprofit idivided iby ithe ioutstanding
ishares iof iits icommon istock. iThe iresulting inumber iserves ias ian iindicator iof ia
icompany's iprofitability. iIt iis icommon ifor ia icompany ito ireport iEPS ithat iis iadjusted ifor
iextraordinary iitems iand ipotential ishare idilution. iThe ihigher ia icompany's iEPS, ithe imore
iprofitable iit iis iconsidered.

2017-18: i26.45

1018-19: i(84.89)

iDividends iper ishare

The iterm idividends iper ishare i(DPS) irefers ito ithe itotal idividend ia icompany ipays iout
iover ia i12-month iperiod, idivided iby ithe itotal inumber iof ioutstanding ishares. iA icompany
iuses ithis icalculation ito ishare iprofits iwith iits ishareholders. iDPS ican iindicate ihow
iprofitable ia icompany iis iover ia ifiscal iperiod.

DPS ican itell ian iinvestor iabout ithe icompany's ipast ifinancial ihealth iand iits icurrent
ifinancial istability. I

Year i i i i i i iDividend i No. iof iShares Dividends iper ishare

iOutstanding
2017-18 679.22

2018-19 679.22