1.

Liquidity Ratios

1.1: Current Ratio: Current Ratio is a liquidity ratio that measures company's ability to pay its debt
over the next 12 months or its business cycle. The higher the current ratio is, the more capable the
company is to pay its obligations. Current ratio gives an idea of company's operating efficiency. A
high ratio indicates "safe" liquidity, but also it can be a signal that the company has problems getting
paid on its receivable or have long inventory turnover, both symptoms that the company may not be
efficiently using its current assets.
=
Time Series

1.17

1.19

1.2

1.75

Apex
1.75
1.20
1.19
1.17

1.71

1.49

1.5

1.47

Bata
1.47
1.49
1.62
1.71
1.62

Year
2011
2012
2013
2014
1

0.5
0

BATA

2011

2012

2013

APEX

2014

Both the companies have acceptable current ratio. Liquidity of Bata increases gradually & liquidity of Apex
decreases which is means liquidity of Apex is decreasing.

1
0
Bata

Apex
1.17

2014

Apex

Average
1.44
1.44

Bata
1.71

1.17

Year
2014

1.71

Cross sectional

Average

In 2014 Bata has a current ratio significantly higher than Apex giving it more capability to pay its
obligations.
1

1.2: Quick Ratio: Quick Ratio is an indicator of company's short-term liquidity. It measures the
ability to use its quick assets to pay its current liabilities. Ideally, quick ratio should be 1:1. A quick
ratio higher than 1:1 indicates that the business can meet its current financial obligations with the
available quick funds on hand. If quick ratio is higher, company may keep too much cash on hand or
have a problem collecting its accounts receivable. A quick ratio lower than 1:1 may indicate that the
company relies too much on inventory or other assets to pay its short-term liabilities.

Many lenders are interested in this ratio because it does not include inventory, which may or may not
be easily converted into cash.

0.71

0.82

Apex
0.82
0.53
0.48
0.42

BATA

2011

2012

2013

0.42

0.48

0.53

0.5

0.54

Bata
0.51
0.54
0.63
0.71
0.63

Year
2011
2012
2013
2014
0.51

Time series

APEX

2014

Quick ratio of Bata increases gradually where quick ratio of Apex decreases. Bata is at a better position.

Apex

0.71

0.5
0

Bata

0.42

2014

Apex

Average

0.56
0.56

2014

Bata

0.42

Year

0.71

Cross sectional

Average

In 2014 Bata has significantly better quick ratio than Apex. So, Bata is preferable to the creditors among the
two companies.

2. Activity Ratios:

2.1. Accounts receivables turnover: Receivables Turnover Ratio is one of the efficiency ratios and
measures the number of times receivables are collected, on average, during the fiscal year. A high
receivables turnover ratio implies either that the company operates on a cash basis or that its
extension of credit and collection of accounts receivable are efficient. Also, a high ratio reflects a
short lapse of time between sales and the collection of cash, while a low number means collection
takes longer. The lower the ratio is the longer receivables are being held and the risk to not be
collected increases. A low receivables turnover ratio implies that the company should re-assess its
credit policies in order to ensure the timely collection of credit sales that is not earning interest for
the firm.
=

2011

Apex
9.96
12.30
11.35
8.85

2012

2013

8.85

12.3

11.35

26.7

BATA

17.73

20

18.09

40

Bata
34.88
26.70
18.09
17.73

9.96

Year
2011
2012
2013
2014
34.88

Time series

APEX

2014

Accounts receivables turnover ratio of Bata decreases gradually which is a bad sign but it still has
better accounts receivable turnover than Apex.

10

0
Bata

Apex
8.85

2014

Apex

Average
13.29
13.29

20

Bata
17.73

8.85

Year
2014

17.73

Cross sectional

Average

In 2014 Bata has a significantly higher accounts receivable turnover than Apex which ensures Bata a
better position.

2.2. Average collection period: Average Collection Period represents the average number of days it
takes the company to convert receivables into cash. Lower is better.
=

BATA

2011

41.24

32.16

29.68

10.47

13.67

50

Apex
36.64
29.68
32.16
41.24
36.64

Bata
10.47
13.67
20.18
20.58
20.58

Year
2011
2012
2013
2014

20.18

Time series

2012

2013

APEX

2014

Average collection period of Bata is increased (bad sign) where average collection period of Apex
decreased then again increased.

0
Bata

Apex
41.24

2014

Apex

Average
30.91
30.91

50

Bata
20.58

41.24

Year
2014

20.58

Cross sectional

Average

In 2014 Bata has significantly lower average collection period which means it collects its receivable
more efficiently than Apex.

2.3. Accounts payable turnover: Since the accounts payable turnover ratio indicates how quickly a
company pays off its vendors, it is used by supplies and creditors to help decide whether or not to
grant credit to a business. As with most liquidity ratios, a higher ratio is almost always more
favorable than a lower ratio. A higher ratio shows suppliers and creditors that the company pays its
bills frequently and regularly. It also implies that new vendors will get paid back quickly. A high
turnover ratio can be used to negotiate favorable credit terms in the future.
70%

Accounts payable turnover(Bata) =

Accounts payable turnover(Apex 2011,12,13) =

70%

Accounts payable turnover(Apex 2014) =

2012

2013

4.49

3.92

3.76

BATA

2011

Apex
3.49
3.76
3.92
4.49
3.49

7.38

6.58

10

Bata
7.33
9.34
7.38
6.58
9.34

Year
2011
2012
2013
2014
7.33

Time series

70%
&

APEX

2014

Accounts payable turnover of Bata is decreasing accounts payable turnover of Apex is increasing,
which is a good sign for Apex and means that Apex is trying to pay its creditors more frequently than
the previous year.
Cross sectional

0
Bata

2014

Apex

Average
5.53
5.53

Apex
4.49
4.49

10

Bata
6.58
6.58

Year
2014

Average

Accounts payable turnover of Bata is higher than Apex and industry average which means creditors
and suppliers would prefer Bata over Apex.
5

2.4. Average payment period: Average payment period means the average period taken by the
company in making payments to its creditors. A shorter payment period indicates prompt payments
to creditors. Like accounts payable turnover ratio, average payment period also indicates the
creditworthiness of the company. But a very short payment period may be an indication that the
company is not taking full advantage of the credit terms allowed by suppliers.
365

=
Bata
49.78
39.09
49.48
55.47

BATA

2011

2012

2013

81.28

93.1

97.01

49.48

50

39.09

100

49.78

150

Apex
104.67
97.01
93.10
81.28
104.67

Year
2011
2012
2013
2014

55.47

Time series

APEX

2014

Apex is improving by reducing its average payment period.

Cross sectional

50
0

Bata

2014

Apex

Average
68.37
68.37

Apex
81.28
81.28

100

Bata
55.47
55.47

Year
2014

Average

In 2014 average payment period of Bata is lower. So creditors will prefer Bata.

2.5. Inventory turnover: Inventory Turnover Ratio is one of the efficiency ratios and measures the
number of times, on average, the inventory is sold and replaced during the fiscal year. Inventory
Turnover Ratio measures company's efficiency in turning its inventory into sales. Its purpose is to
measure the liquidity of the inventory. Low inventory turnover ratio is a signal of inefficiency. It implies
either poor sales or excess inventory. A low turnover rate can indicate poor liquidity, possible
overstocking, and obsolescence. High inventory turnover ratio implies either strong sales or ineffective
buying (the company buys too often in small quantities, therefore the buying price is higher).A high
inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate
inventory levels, which may lead to a loss in business.

BATA

2011

1.54

2.09

2.44

2.88

Apex
2.88
2.44
2.09
1.54

2.29

2.5

Bata
2.44
2.50
2.24
2.29
2.24

Year
2011
2012
2013
2014
2.44

Time series

APEX

2012

2013

2014

Bata has a stable Inventory turnover ratio but Apex has a decreasing inventory ratio which implies,
either apex is losing sales or has excess inventory.
Cross sectional

Average
1.91
1.91

Apex
1.54
1.54

Bata
2.29
2.29

Year
2014

1
0
Bata

2014

Apex

Average

Bata has a higher inventory turnover ratio, which means Bata turns its inventory into sales more
frequently.

2.6. Average age of inventory: Average age of inventory ratio is the time a company takes to turn
its inventory into sales.
365

BATA

2011

237.28

174.51

126.83

100
0

Apex
126.83
149.61
174.51
237.28
149.61

159.35

200

149.56

300

Bata
149.56
146.11
162.89
159.35
162.89

Year
2011
2012
2013
2014
146.11

Time series

2012

2013

APEX

2014

The higher a firm's average age of inventory, the greater its exposure to obsolescence risk. Bata has a
steady average age of inventory where average age of inventory of Apex has an increasing trend
which makes Apex more prone to obsolescence risk gradually every year or suggests that Apex is
losing sales.
Cross sectional

200

159.36

237.28

Average

198.32

198.32

300

Apex

237.28

2014

Bata
159.36

Year

100

0
Bata

2014

Apex

Average

As footwear industry has a higher rate of obsolescence risk, and Bata holds better position in 2014.

2.7. Total asset turnover: It reveals how much revenue the company is generating from each
dollar's worth of assets -- everything from buildings and equipment to cash in the bank, accounts
receivable and inventories. If the company's asset turnover ratio is declining over time but revenue is
consistent or even increasing, it could be a sign that the company "overinvested" in assets. It might
mean the company added capacity in fixed assets -- more equipment or vehicles -- that isn't being
used. Or perhaps it has assets that are doing nothing, such as cash sitting in the bank or inventory that
isn't selling. On the other hand, if the ratio is increasing over time, it could mean the company is
simply becoming efficient, or it could mean its stretching its capacity to its limits and it needs to
invest to grow.
=

1.71

0.94

1.14

1.19

1.32

1.5

Apex
1.32
1.19
1.14
0.94

1.65

Bata
1.87
1.86
1.71
1.65
1.86

Year
2011
2012
2013
2014
1.87

Time series

0.5
0

BATA

2011

2012

2013

APEX

2014

Both company has a declining asset turnover ratio and increasing revenue which suggests that both
company overinvested in assets or their inventory is not selling like it did in the past.
Cross sectional

1.65

0.94

Average

1.29
1.29

1.5

Apex

0.94

2014

Bata
1.65

Year

0.5
0

Bata

2014

Apex

Average

Asset turnover ratio of Bata implies that it uses its assets more efficiently than Apex.
9

2.8. Fixed asset turnover: The fixed asset turnover ratio compares net sales to net fixed assets. A

High ratio indicates that a business is: Doing an effective job of generating sales with a relatively
small amount of fixed assets. Outsourcing work to avoid investing in fixed assets. Selling off
excess fixed asset capacity.
A low ratio indicates that a business: Overinvested in fixed assets. Needs to issue new products to
revive its sales. Has made a large investment in fixed assets, with a time delay before the new
assets start generating revenues.
=

Apex
5.03
4.62
5.08
4.75

4.75

5.08

4.62

5.03

6.76

7.28

10

Bata
7.79
7.28
7.53
6.76
7.53

Year
2011
2012
2013
2014
7.79

Time series

4
2
0

BATA

2011

2012

2013

APEX

2014

Fixed asset Turnover of Bata decreased, then rose and then decreased again. Fixed asset turnover of
Apex follows the same trend too. It implies that sales of both company is decreasing or their fixed
asset is increasing.
Cross sectional

0
Bata

2014

Apex

Average
5.75
5.75

Apex
4.75
4.75

10

Bata
6.76
6.76

Year
2014

Average

In 2014 Bata has a higher fixed asset turnover than Apex which means, Bata has higher sales
compared to fixed assets or lower fixed assets compared to sales. Bata is preferable.
10

3.Solvency Ratios

3.1. Debt ratio: Debt ratio is a solvency ratio that measures a firm's total liabilities as a percentage of
its total assets. In a sense, the debt ratio shows a company's ability to pay off its liabilities with its
assets. In other words, this shows how many assets the company must sell in order to pay off all of
its liabilities. This ratio measures the financial leverage of a company. Companies with higher levels
of liabilities compared with assets are considered highly leveraged and more risky for lenders. A
lower debt ratio usually implies a more stable business with the potential of longevity because a
company with lower ratio also has lower overall debt. Each industry has its own benchmarks for
debt, but .5 is reasonable ratio. Companies with higher debt ratios are better off looking to equity
financing to grow their operations.
=

0%
2011

78%

74%

72%

53%

48%

50%

Apex
72%
72%
74%
78%

51%

100%

Bata
56%
53%
51%
48%
72%

Year
2011
2012
2013
2014
56%

Time series

BATA

2012

2013

APEX

2014

Bata decreased its Debt ratio every year. On the other hand debt ratio of Apex has a increasing
tendency which implies, Bata is becoming less risky & Apex is becoming more risky for lenders.
Cross sectional

60%
40%

Average
63%
63%

80%

Apex
78%
78%

100%

Bata
48%

48%

Year
2014

20%

0%
Bata

2014

Apex

Average

In 2014 Bata has a lower debt ratio than Apex. Lenders will prefer Bata for lending.
11

3.2. Debt equity ratio: A ratio of 1 or 1: 1 means that creditors and stockholders equally contribute
to the assets of the business.
A less than 1 ratio indicates that the portion of assets provided by stockholders is greater than the
portion of assets provided by creditors and a greater than 1 ratio indicates that the portion of assets
provided by creditors is greater than the portion of assets provided by stockholders.

Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the indication of
greater protection to their money. But stockholders like to get benefit from the funds provided by the
creditors therefore they would like a high debt to equity ratio.

Bata
1.27
1.15
1.04
0.91
2.54

1.15

1.04

1.27

2.57

Apex
2.54
2.57
2.84
3.63
3.63

Year
2011
2012
2013
2014

0.91

Time series

2.84

BATA

2011

2012

2013

APEX

2014

With decreasing debt-equity ratio Bata is becoming less risky & with increasing debt-equity ratio
Apex is becoming more risky.
Cross sectional

Average
2.27

0.91

3
2

Apex
3.63

2.27

Bata
0.91

3.63

Year
2014

0
Bata

2014

Apex

Average

In 2014, a debt-equity ratio of 3.63 makes apex very risky for creditors. So, creditors will prefer Bata
But stockholders may prefer Apex.

12

3.3. Times interest earned: The times interest ratio is considered a solvency ratio because it
measures a firm's ability to make interest and debt service payments. Since these interest payments
are usually made on a long-term basis, they are often treated as an ongoing, fixed expense. As with
most fixed expenses, if the company can't make the payments, it could go bankrupt and cease to
exist. The times interest ratio is stated in numbers as opposed to a percentage. The ratio indicates
how many times a company could pay the interest with its before tax income, so obviously the
larger ratios are considered more favorable than smaller ratios. Creditors would favor a company
with a much higher times interest ratio because it shows the company can afford to pay its interest
payments when they come due.
=
+

200

Apex
1.74
1.64
1.81
1.56

206.6

250

Bata
38.42
219.76
191.69
206.60
191.69

Year
2011
2012
2013
2014
219.76

Time series

1.81

1.56

1.64

50

1.74

100

38.42

150

BATA

2011

2012

2013

APEX

2014

Bata has a increasing trend of times interest earned while times interest earned of Apex is not
satisfactory. Which makes Apex more risky to lenders. Which also means Apex has a very high debt.
Cross sectional

200

Apex
1.56

1.56

100

Average
104.08
104.08

300

Bata
206.60
206.6

Year
2014

0
Bata

2014

Apex

Average

In 2014 Bata has a very high times interest earned ratio which makes Bata preferable to lenders.
13

4. Profitability ratios

4.1. Gross profit margin: The ideal level of gross profit margin depends on the industries, how long
the business has been established and other factors. A company with a high gross margin ratios mean
that the company will have more money to pay operating expenses like salaries, utilities, and rent.
Since this ratio measures the profits from selling inventory, it also measures the percentage of sales
that can be used to help fund other parts of the business. High ratios can be achieved by two ways.
One way is to buy inventory very cheap. The second way is to sell products at a higher price.
=
Apex
0.14
0.16
0.16
0.16

39%

0%

BATA

2011

2012

2013

16%

14%

20%

16%

16%

40%

36%

60%

Bata
0.36
0.36
0.38
0.39
38%

Year
2011
2012
2013
2014
36%

Time series

APEX

2014

Both the companies have a increasing trend of gross profit margin which means both company is
achieving greater capability of paying operating expenses every year.

Year
2014

Bata
0.39

40%

39%

Cross sectional

50%

Average
0.27

27%

30%

Apex
0.16

16%

20%
10%

0%
Bata

2014

Apex

Average

In 2014 Bata has much higher gross profit margin. Bata is preferable.

14

4.2. Net profit margin: The profit margin ratio is a profitability ratio that measures the amount of
net income earned with each dollar of sales generated by comparing the net income and net sales of a
company. Creditors and investors use this ratio to measure how effectively a company can convert
sales into net income. Investors want to make sure profits are high enough to distribute dividends.
This ratio also indirectly measures how well a company manages its expenses relative to its net sales.
That is why companies strive to achieve higher ratios. They can do this by either generating more
revenues why keeping expenses constant or keep revenues constant and lower expenses.
Since most of the time generating additional revenues is much more difficult than cutting expenses,
managers generally tend to reduce spending budgets to improve their profit ratio.
=
Apex
0.03
0.03
0.02
0.02

9%

3%

BATA

2011

2012

2013

2%

0%

3%

5%

2%

10%

9%

15%

Bata
0.09
0.09
0.10
0.09
10%

Year
2011
2012
2013
2014
9%

Time series

APEX

2014

Both the companies have somewhat constant net profit margin. They can reduce expenses
To achieve higher net profit margin.
Cross sectional

Apex
0.02

Average
0.05

5%

10%

Bata
0.09
9%

Year
2014

2%

5%
0%
Bata

2014

Apex

Average

In 2014 Bata has significantly higher net profit margin which means Bata has more money to pay
dividends. So investors will prefer Bata.
15

4.3. Return on assets: Return on Assets (ROA) is an indicator of how profitable company's assets
are in generating profit. Return on Assets shows how many dollars of earnings result from each
dollar of assets the company controls. The higher return on assets is, the better, because the company
is earning more money on its assets.
A low return on assets compared with the industry average indicates inefficient use of company's
assets.
=

12%

10%

11%

10%

12%

14%

15%

Apex
0.10
0.12
0.12
0.11

18%

20%

Bata
0.16
0.17
0.18
0.14
17%

Year
2011
2012
2013
2014
16%

Time series

5%
0%

BATA

2011

2012

2013

APEX

2014

Both companys return on assets decreased in 2014 than 2013 which is a bad trend.
Cross sectional

Average
0.12
12%

10%

Apex
0.11
11%

15%

Bata
0.14
14%

Year
2014

5%
0%
Bata

2014

Apex

Average

Bata has higher return on assets meaning its using its assets more efficiently to generate net profit.

16

4.4. Return on equity: Return on Equity shows how many dollars of earnings result from each
dollar of equity. ROE is an indicator of how effective management is at using equity financing to
fund operations and grow the company.
=

10%

0%

BATA

2011

2012

2013

8%

11%

13%

20%

11%

27%

30%

Apex
0.13
0.11
0.11
0.08

36%

40%

Bata
0.37
0.36
0.36
0.27
36%

Year
2011
2012
2013
2014
37%

Time series

APEX

2014

Both the company has decreasing trend of return on equity which means net income is decreasing for
both companies.
Cross sectional

30%

Bata
0.27

Apex
0.08

Average
0.17

27%

Year
2014

17%

20%
8%

10%

0%
Bata

2014

Apex

Average

Bata is at a better position having higher return on equity ratio.

17

5. Market ratios:

5.1. EPS: Earnings per share (EPS) ratio measures how many dollars of net income have been
earned by each share of common stock. It is computed by dividing net income by the number of
shares of common stock outstanding during the period. It is a popular measure of overall
profitability of the company. EPS figure is very important for actual and potential common
stockholders because the payment of dividend and increase in the value of stock in future largely
depends on the earnings of the company. EPS is the most widely quoted and relied figure by
investors. A higher EPS is the sign of higher earnings, strong financial position and, therefore, a
reliable company to invest money.
=

BATA

2011

2012

2013

18.05

20
0

23.61

23.01

23.2

40

Apex
23.20
23.01
23.61
18.05

51.22

60

49.12

80

Bata
42.44
49.12
59.44
51.22
59.44

Year
2011
2012
2013
2014
42.44

Time series

APEX

2014

Both the company experienced a fall in EPS in 2014 which may indicate either bad economic
condition or both company had an increase in expenses.
Cross sectional

Average
34.63
34.63

40

Apex
18.05

18.05

60

Bata
51.22
51.22

Year
2014

20
0
Bata

2014

Apex

Average

In 2014 Bata has higher EPS which means Bata has stronger financial position than Apex and is
more reliable for investing.
18

5.2. P/E ratio: The price earnings ratio, often called the P/E ratio or price to earnings ratio, is a
market prospect ratio that calculates the market value of a stock relative to its earnings by comparing
the market price per share by the earnings per share. In other words, the price earnings ratio shows
what the market is willing to pay for a stock based on its current earnings. Investors use this ratio to
decide what multiple of earnings a share is worth. In other words, how many times earnings they are
willing to pay. Investors often use this ratio to evaluate what a stock's fair market value should be by
predicting future earnings per share. Companies with higher future earnings are usually expected to
issue higher dividends.
A company with a high P/E ratio usually indicated positive future performance and investors are
willing to pay more for this company's shares. A company with a lower ratio, on the other hand, is
usually an indication of poor current and future performance. This could prove to be a poor
investment.

Bata
14.14
10.91
11.61
22.88

11.61

BATA

2011

10.04

10.91

10

14.14

20

22.88

30

Apex
12.74
10.04
17.63
24.57
24.57

Year
2011
2012
2013
2014

12.74

Time series

17.63

2012

2013

APEX

2014

After a fall in 2012 both the companies have seen increasing price-earnings ratio which means both
the company are expected to earn more and issue higher dividend than past.
Cross sectional

23
22

Bata

2014

Apex

19

Average
23.72
23.72

24

Apex
24.57
24.57

25

Bata
22.88

22.88

Year
2014

Average

In 2014 Apex has higher price-earnings ratio than Bata which means Apex is a fast-growing
company and its expected to generate higher future income and issue higher dividend. So Apex is
preferable to investors than Bata.
5.3. DPS: Dividend per share ratio is self-explanatory. It tells how much dividend a company
provides to its investors for every share. Dividends per share may be used by individuals who are
evaluating various stocks to invest in and prefer companies who pay more dividends.
Year
2011
2012
2013
2014

4.5

5.5

28

10

5.5

20

Apex
4.50
5.00
5.50
5.50

30

30

25

40

Bata
25.00
27.50
30.00
28.00
27.5

Time series

BATA

2011

2012

2013

APEX

2014

After continuous increase Bata had a fall in DPS in 2014. Apex on the other hand issued a fairly
stable amount of dividend per share from 2011-14.
Cross sectional

Apex
5.50

Average
16.75
16.75

30

Bata
28.00
28

Year
2014
20

5.5

10
0

Bata

2014

Apex

Average

In year 2014 Bata issued Dividend per share much higher than Apex. So Bata is preferable.

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Recommendation
All the Liquidity, Activity, Solvency, Profitability & Market ratios tell us
that among Bata & Apex, Bata is the more liquid, solvent, reliable, stable
and profitable company. It pays higher dividend than Apex. So investors
should invest in stocks of Bata.
What Apex can do to improve
1.
2.
3.
4.
5.
6.
7.
8.

Decrease its inventory.

Increase accounts receivable collection frequency.
Decrease its average payment period towards market average.
Apex has an increasing average age of inventory, which should be decreased
towards market average.
Increase its sales to increase total asset turnover & fixed asset turnover.
Decrease liabilities or increase total assets to decrease debt ratio.
Decrease total liabilities or increase stockholders equity to bring down debtequity ratio to 1.
Increase sales and decrease expenses to achieve
higher EBIT so that times interest earned can be increased.
Higher gross profit margin, net profit margin, return on asset & return on
equity.

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