Académique Documents
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Prepared By:
Divyesh Chadotra(119021)
Chandan Bhagat (119012)
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Proprietary Fund Ratio: Proprietary ratio (also known as Equity Ratio or Net
worth to total assets or shareholder equity to total equity). Establishes
relationship between proprietor's funds to total resources of the unit. Where
proprietor's funds refer to Equity share capital and Reserves, surpluses and Tot
resources refer to total assets.
Bata India: A Proprietary Ratio of 1.42 shows that the company has 1.42 units
of shareholder’s fund for each unit of total asset in other words we can say
142% of total assets of the company are financed by proprietors’ funds.
Relaxo Footwear:A Proprietary Ratio of 0.688 shows that the company has
0.688 units of shareholder’s fund for each unit of total asset in other words we
can say 68% of total assets of the company are financed by proprietors’ funds.
Comparison: Comparing both the companies, we can say that Bata has more
proprietary funds in compare to Relaxo so we can infer that creditors are in
comfort as Bata has more than 75% of proprietary fund which is ideal for any
company
Profitability Ratios:
1.Gross Profit Ratio: Gross profit ratio (GP ratio) is a profitability ratio that shows the
relationship between gross profit and total net sales revenue
Bata India: Bata shown the 51.74% Gross profit on the basis of net sales, There
is no norm or standard to interpret gross profit ratio (GP ratio). Generally, a
higher ratio is considered better.
Relaxo: Relaxo shown the 44.36 Gross profit on the basis of net sales, There is
no norm or standard to interpret gross profit ratio (GP ratio). Generally, a
higher ratio is considered better.
Operating Profit Ratio: The operating ratio shows the efficiency of a company's
management by comparing the total operating expense of a company to net
sales.
Operating Profit=EBIT/Sales*100
477.06/2931.10*100 =16.27 324.31/2292.08*100 =14.14
Bata India Analysis: Bata shows 16.27% Operating profit on the basis of sales
this shows the efficiency of management .
Relaxo Footwear: Relaxo shows 14.14% operating profit on the basis of sales
which is lower than Bata, this shows Bata has more efficiency than Relaxo
Footwear in Management.
Bata India Analysis: Bata has 13.32% return on Asset that means company has
earned return of 13.32% on the investment of assets.
Relaxo Footwear Analysis: Relaxo has 10.93% Return on Asset that means
company has earned return of 10.93% on their invested assets.
Comparison: Bata has earned more return on their total Asset in compared to
Relaxo it shows that Bata is working more efficiently than Relaxo footwear.
Bata India Analysis: Bata has reported 11.25% profit on the basis of net sales
Relaxo footwear: Relaxo has reported 7.6% profit on the basis of net sales
Comparison: Bata has shown more profit on the basis of net sales in compare
to Relaxo which shows Bata has more profitability than Relaxo
Asset Turnover Ratio: measures the efficiency with which a company uses its
assets to produce sales.
Comparison: Relaxo has 1.428 asset turnover ratio than of Bata 1.181 this
shows Relaxo is using its assets better than Bata to generate the sales.
Comparison: Bata has shown 18.64% of Operating profit more than Relaxo of
14.71%, This shows that Bata has more operating efficiency than Relaxo
footwear.
Interest coverage Ratio: evaluates the number of times a company is able to
pay the interest expenses on its debt with its operating income.
Bata India Analysis: Bata India has excellent interest coverage ratio, ideally 2 is
the minimum requirement but due to low interest payment in Bata India that
is why the ratio is very high.
Relaxo Footwear Analysis: Relaxo also has excellent interest coverage ratio as
the interest payment is too low in Relaxo.
Comparison: Bata has more excellent coverage ratio than Relaxo but both are
having excellent coverage.
Cash Coverage Ratio: The cash coverage ratio, which is used to compare the
company’s cash balance to its annual interest expense.
Bata India Analysis: Ideal Cash coverage ratio is 1:1 but bata has excellent
250.44 times than the ideal coverage ratio
Relaxo Footwear: Relaxo is having 0.32 times than the idea ratio of 1:1 this
shows company does not have enough cash balance to pay it annual interest
payments
Liquidity Ratios:
Bata India Analysis: Bata India has current ratio of 2.92:1 , this shows company
has sufficient current assets to pay its current liabilities, the ideal ratio is 1:1 or
1.2:1
Relaxo Footwear: Relaxo footwear has current ratio of 1.58:1 that shows
company has sufficient amount of current asset to repay its current liabilities
as per the ideal ratio of 1:1 or 1.2:1
Bata India Analysis: Bata has 1.59:1 more than ideal quick ratio of 1:1 or
higher, it shows company has sufficient cash or cash equivalent assets to replay
its short term obligations
Relaxo Analysis: Relaxo has 0.70:1 less than the ideal quick ratio of 1:1, it
shows company has no sufficient liquid funds to repay its short term liabilities.
Bata India Analysis: Bata India has retained 84.40% of its total profit, it shows
that they reinvested their profit in the company rather than being paid out to
the investors.
Relaxo Footwear Analysis : Relaxo has retained 89.72% of its total profit, it
shows that they reinvested their profit in the company rather than being paid
out to the investors.
Bata India Analysis: Bata India shows that they have 0.18 Rs for every 1 Rs to
discharge its long term fund obligation, the ideal ratio is around 0.67.
Relaxo Footwear : Relaxo Shows that they have 0.71 Rs for every 1 Rs of long
term funds to discharge the long term fund repayment obligations, the ideal
ratio is 0.67 this shows Relaxo have the sufficient fund to repay their long term
obligations.
Comparison: From the above calculation it is clear that Bata has no sufficient
fund as per ideal ratio where as Relaxo footwear has the sufficient funds, so we
can conclude that Relaxo is in good position in terms of Net Fixed assets to
long term fund in compared to Bata.