4.

RATIO ANALYSIS
05.1. Operating Result (Profitability)
2013

2012

2011

2010

2009

Gross profit margin

Operating Profit Margin
Net Profit Margin
Return on Capital Employed

55%
10%
11%
12%

57%
12%
15%
11%

56%
11%
11%
11%

55%
2%
1%
1%

58%
15%
17%
19%

05.1.1 Gross Profit Margin

The gross profit margin ratio is used as one indicator of an organizations financial
health. It shows how efficiently a business is using its materials and labour in the
production process and gives an indication of the pricing, cost structure, and production
efficiency of the business. The higher the gross profit margin ratio the better.
Year 2013

Gross Profit Margin=

(Figures are in Millions)

Gross Profit
2380
100=
100
Revenue
4072

= 58%
The organizations gross profit margin in year 2013 is 58%. It means that for every
rupee that the organization earns on widgets, it really has only Rs.0.58 at the end of the
day. As the percentage has been increased throughout the years indicates more money is
left over for other operating expenses and net profit.
05.1.2 Operating Profit Margin

Operating margin is a measurement of what proportion of a Organization's revenue is

left over after paying for variable costs of production such as wages, raw materials, etc.
A healthy operating margin is required for a company to be able to pay for its fixed
costs, such as interest on debt. This is also used to measure a company's pricing strategy
and operating efficiency.
Year 2013

(Figures are in Millions)

Operating Profit Margin=

Earningsbefore InterestTax
100
Revenue

608
100
4072

= 15%
The percentage has increased from 10% to 15% from year 2012 to 2013 which is a
favorable indicator of profitability.
05.1.3 Net Profit Margin
The net profit margin ratio shows the proportion of every rupee of revenue that is left
after all expenses have been paid, and remains as net profit.

Net Profit Margin=

Net Profit
689
100=
100
Revenue
4072

= 17%
Increase in the ratio from 11% to 17% demonstrates the effectiveness of the businesss
at converting sales into profit.

4.1.4

Return on Capital Employed

Return on capital employed is a profitability ratio that measures how efficiently a

company can generate profits from its capital employed by comparing net operating
profit to capital employed. In other words, return on capital employed shows
investors how many Rupees in profits each Rupee of capital employed generates.

Returnon Capital Emplyed=

Earnings befor e Interest Tax

100
Capital Employed

608
100
3241

= 19%
In this organization, the ROCE has been increased gradually throughout the years.
ROCE has been increased from 12% to 19% from year 2012 to year 2013 which
indicate more efficient use of capital. In general, investors tend to favor companies with
stable and rising ROCE numbers.
05.2. Financial Position (Financial Risk)
Risk of having gaps in Internal Control environment (Systems, Processes, and
People) and corporate governance (Risk of fraud, malpractice, misuse, or theft of
assets and resources of the Hospital).
Risk of poor investment decisions, (invest in right technology and right areas
that have potential for growth and profits) Investment concentration risk,
investment strategy not in line with the corporate strategy.
Risk of not selecting the best funding option for business requirements.
5.3 Liquidity & Debt Ratios
3

2013

2012

2011

2010

2009

Current Ratio

2.44

3.11

2.67

1.77

1.15

Quick Ratio

2.19

2.78

2.31

1.57

0.98

Gearing ratio

N/A

N/A

N/A

0.82

2.63

Interest Cover

N/A

N/A

261.19 45.75

2.49

6.3.1 Current Ratio

The ratio is mainly used to give an idea of the company's ability to pay back its shortterm liabilities (debt and payables) with its short-term assets (cash, inventory,
receivables).
Year 2013

(Figures are in Millions)

Current Ratio=

Current Assets
1696
=
=2.44
Current Liabilities 696

The higher the current ratio, the more capable the company is of paying its obligations.
As the ratio is above 1 indicates that the company is able to pay off its obligations if
they came due at that point.
6.3.2 Quick Ratio
An indicator of a companys short-term liquidity. The quick ratio measures a companys
ability to meet its short-term obligations with its most liquid assets.

Quick Ratio=

Current AssetsInventory 1696176

=
=2.19
Current Liabilities
696

The quick ratio measures the Rupee amount of liquid assets available for each Rupee of
current liabilities. Thus, a quick ratio of 2.19 means that a company has Rs.2.19 of
liquid assets available to cover each Rs.1.00 of current liabilities. The liquidity has been
decreased in year 2013.
6.4 Efficiency Ratios
Efficiency Ratios are typically used to analyze how well a company uses its assets and
liabilities internally. These ratios are used by management to help improve the company
as well as outside investors and creditors looking at the operations of profitability of the
company.
2013

2012

2011

2010

Working Capital Ratio

2.44

3.11

2.68

1.77

Asset Turn Over Ratio

0.86

0.81

0.76

0.78

6.4.1 Working Capital Ratio

Year 2013

(Figures are in Millions)

Working Capital Ratio=

Current Assets
1696
=
Current Liabilities 695

=2.44

The working capital ratio is a efficiency ratio that measures a firm's ability to pay off its
current liabilities with current assets. The working capital ratio is important to creditors
because it shows the liquidity of the company.
5

Higher the ratio more favorable. A ratio above 1 shows outsiders that the company can
pay all of its current liabilities and still have current assets left over or positive working
capital.

6.4.2 Asset Turnover Ratio

Asset Turnover Ratio=

Net Sales
4072
=
Average Total Assets 4733.5

= 0.86
The asset turnover ratio is an efficiency ratio that measures a company's ability to
generate sales from its assets by comparing net sales with average total assets. In other
words, this ratio shows how efficiently a company can use its assets to generate sales.
Increasing of the ratio indicates a favorable sign.

6.5 Investors Ratios

2013

2012

2011

2010

2009

Dividend per share

Rs. 2.00

0.50

N/A

N/A

N/A

Dividend Pay Out

65%

29%

N/A

N/A

N/A

Earnings per share

Rs. 3.08

1.73

1.96

1.29

0.04

Net Assets Per share

Rs. 18.08

16.22 14.99 12.28 8.97

6.5.1 Dividend per share

Dividend per Share ( DPS ) =

Total Dividends
447,464,338
=
No . of issued Ordinary Shares 223,732,169

= Rs.2.00
Dividends are a form of profit distribution to the shareholder. Having a growing
dividend per share from Rs.0.50 to Rs.2.00 is a favorable indicator for investors.
6.5.2 Dividend Payout

Dividend Payout Ratio=

Dividend Per Share

2.00
100=
100
Earnings Per Share
3.08

= 65%
The payout ratio provides an idea of how well earnings support the dividend payments.
More mature companies tend to have a higher payout ratio. The Dividend Pay Out ratio
has been increased from 29% to 65% is a favorable indicator of the organization.

6.5.3 Earnings Per Share

Earnings Per Share=

Net Profit After Tax

689,771,122
=
No . of Issued Ordinary Shares 223,732,169

= Rs.3.08
Earnings Per Share is generally considered to be the single most important variable in
determining a share's price. It is also a major component used to calculate the price-to-

earnings valuation ratio. Increase in the EPS from Rs. 1.73 to Rs.3.08 is a favorable
situation for the organization.
6.5.4 Net Assets Per Share

Net Assets Per Share=

Net Assets Per Share 4,046,829,578

=
No . of Shares issued
223,732,169

=18.08
Increase in the value over the past years is a favorable indicator.
6.5.5 PE Ratio

PE Ratio

PE Ratio=

2013

2012

13.15

22.66

Market Value Per Share 40.50

=
Earnings Per Share
3.08

= 13.15
PE Ratio has been decreased from year 2012 to year 2013. PE Ratio of 13.15, interprets
that an investor is willing to pay Rs.13.15 for Rs,1.00 of current earnings.
This higher P/E ratio might mean that investors will expect higher earnings growth in
the future compared to the overall market. The P/E ratio is only one valuation measure,
however, and investors would have to dig deeper before making any investment
decisions.

5. FUTURE PROSPECTS (THRETS AND OPPORTUNITIS)

5.1

5.2

Threats
Adverse changes in reimbursement or regulations
Economic shifts
Loss of key staff or associates
Increased competition
Shifts in market demand or referral sources
Opportunities
Changes in population profile or need
A market vacated by competitors
Availability of new technology
Competitor vulnerabilities
Lack of dominant competition
New market segment that offer improve profit
New vertical, horizontal, or niche markets