Post on 02-Jun-2018
transcript
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 1/46
Financial
ManagementAnalysis of Financial Statement (Ratio Analysis)
for the year 2013-2014 of
Future Retail
Mid Semester Presentation, Semester-III, Master of Fashion Management, NIFT, Kolkata
Durgesh Nandini, Indranil Saha, Kirti Dhingra,
Savita Rani, Shailja Jajodia
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 2/46
2
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 3/46
Objective
• To interpret the financial report of
Future Retail for the financial year
2013-2014
3
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 4/46
Limitations &Considerations
• The previous period accounts comprise of financial
performance of Pantaloons Fashion Business
• The previous period of accounts was for eighteenmonths period, whereas the current financial period is
of fifteen months period
• All the amounts are in Indian Rupees
• All figures given are in crores
4
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 5/46
FUTURE RETAIL5
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 6/46
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 7/46
RATIO ANALYSISA form of Financial Statement Analysis that is used toobtain a quick indication of a firm's financial performancein several key areas#
7
#Source: Ratio Analysis; www.prenhall.com/divisions/bp/app/cfl/RA/RatioAnalysis.html
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 8/46
LIQUIDITY RATIO
• Current Ratio
• Quick Ratio
• Super Quick Ratio
• Stock Turnover Ratio
• Debtor Turnover Ratio
• Creditor Turnover Ratio 8
Short Term Capability of the Company to Meet Short Term Obligations
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 9/46
Current Ratio
=Current Assets#/Current
Liabilities
Calculation
2013-2014 2012-2013
4925.01/3746.53
= 1.314533261.59/6876
.84=4.836~4
Interpretation
•For every one rupee ofcurrent liability , Future
Retail has Rs.1.3145 of
currents assets to meet
them in the current year
• For every one rupee of
current liability , Future
Retail has Rs.4 of
currents assets to meet
them in the previous year
# Also known as Gross Working Capital; Net Working Capital=GWC-CL=1178.48
9
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 10/46
Quick Ratio=Quick Assets/Current Liabilities
Calculation Interpretation
•
For every one rupee ofCurrent Liability, FutureRetail has Rs.0.0085 ofQuick Assets in the currentyear
• For every one rupee of
current liability, FutureGroup has Rs.0.015 ofQuick Assets in the previousyear
10
2013-2014 2012-2013
32.18/3746.53
= 0.0085106.6/6876.8
4=0.015
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 11/46
Super Quick Ratio
=Super Quick Assets/Super Quick
Liabilities=Cash in hand + Investment/Current
Liability – BO
Calculation Interpretation
•
For every one rupee ofcurrent liability, FutureGroup has Rs.0.0141 ofSuper Quick Assets in thecurrent year
• For every one rupee of
current liability, FutureGroup has Rs.0.015 ofSuper Quick Assets in the
previous year
11
2013-2014 2012-2013
32.18+20.92/3
746.53
=0.0141
106.6/6876.84
=0.015
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 12/46
Stock Turnover Ratio=COGS#/Average Stock
Calculation Interpretation
•Future Retail replenishes itsstocks 5 times in an financial
year in the current year
• Future Retail replenishes its
stocks 9 times in an financialyear in the previous year
• Higher the STR shows more
the sale of goods, good for the
company
12
#COGS=Net Sales-Gross Profit; Net Sales= Gross Sales-Returns
2013-2014 2012-2013
11336.16/2140.2
4 + 3113.29/2
= 5 times
27105.11/2957.9
9
=9 times
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 13/46
Stock Holding Period= 12/ STR
Calculation Interpretation
•
Every 3 months FutureRetail revolves its stock inthe current year
• Every 2 months FutureRetail revolves it stock inthe previous year
• Lower the stock holding period, better for thecompany
13
2013-2014 2012-2013
=12/5
=2.4~3
12/9
=1.3~2
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 14/46
Debtor Turnover
Ratio=Net Creditsales/Average Debtors
Calculation Interpretation
•On an average Future Retailhas its debtors paying 48 times
in the current year
• On an average Future Retail
has its debtors paying 20 timesin the previous year
• Higher the DTR, better for the
company
14
2013-2014 2012-2013=11336.16/165.0
1+313.98/2
=47.3 ~ 48
27105.11/1371.7
0
=19.76~ 20
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 15/46
Debt Collection Period=12/DTR
Calculation Interpretation
•
Every 8 days Future Retailcollects the money back fromits debtors in the current year
• Every 18 days Future Retailcollects money backs from itsdebtors in the previous year
• lower the debt collection period, better for the company
15
2013-2014 2012-2013
=12/47.3
=0.25 Months
=7.5 Days ~ 8
Days
=12/19.76
=0.60Months
=18.4 Days
~ 18Days
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 16/46
Creditor Turnover Ratio
=Net Credit Purchases/Average
Creditors
Calculation Interpretation
•On an Average Future Retail
pays 9 times to its creditors in
the current year
• On an average Future Retail
pays 11 times to its creditorsin the previous year
• Lower the creditor turnover
ratio, good for the company
16
2013-2014 2012-2013=8498.87/810.02
+1224.02/2
=8.35663 ~ 9
27132.94/99.86+
4884.61/2
=10.8~11
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 17/46
Credit Payment Period=12/CTR
Calculation Interpretation
•
Every 2 months Futuregroup has to pay back themoney to its creditors in thecurrent year
• Every 1 month Future Retailhas to pay back to its
creditors in the previousyear
• Creditor payment periodshould be higher
17
2013-2014 2012-2013
=12/8.35663
=1.435 ~ 2
12/10.88
=1.10~1
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 18/46
CAPITAL STRUCTURE RATIO
• Debt-Equity Ratio
• Debt-Capital Ratio
• Coverage Ratio
• Interest Coverage Ratio
• Dividend Coverage Ratio
18
Long Term Capability of the Company to Meet Long Term Obligations
Ability of the company to pay back the principal
Ability of the company to pay back theinterest/dividend
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 19/46
Debt EquityRatio=Debt/Equity
Calculation Interpretation
•For Rs.1.93 of Debt, FutureRetail has Rupee 1 of Equity
• Since the Debt is more than
equity:• Less control over the investors
• Less decision making abilities
• Reduced credit worthiness
19
2013-2014 2012-2013
1.93 0.96
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 20/46
Interest CoverageRatio=EBIT/Interest
Calculation Interpretation
•
Future Retail is able to meet itsinterest payments one time over
• The lower the ratio, the more the
company is burdened by debtexpense
• The company is not generating
sufficient revenues to satisfyinterest expenses
20
2013-2014 2012-2013374.95/373.68
=1.0031.07
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 21/46
Dividend CoverageRatio=PAT/Dividend
Calculation Interpretation
•The company is retaining ahigher portion of its earnings
to meet its financing
requirements which may
result in higher dividend
payouts in the future
21
2013-2014 2012-20131.27/0.41
=3.0984.36
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 22/46
PROFITABILITY RATIO
• Profitability shows the overall efficiency of the company
• Profitability ratios are the measure of its overall efficiency
and performance
22
fi bili
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 23/46
ProfitabilityRatios
In Relation with
Sales
Gross ProfitMargin
Operating ProfitMargin
Net Profit
Margin
In Relation with
Expenses
COGS Ratio
OperatingExpenses Ratio
In Relation with
Investment
Return onInvestment
Ratios
ROA
ROCE
ROE 23
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 24/46
Profitability in Terms ofSales
Ratios that show margins; represent the firm's ability
to translate sales into profits.
• Gross profit margin
• Operating profit margin
• Net profit margin
24
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 25/46
Gross Profit Margin=Gross Profit/Net Sales x100%
Calculation Interpretation
•
For every rupee in sales,company earned 25%
profit but Spent 75% to
make it
25
2013-2014 2012-2013=2838.51/11336
.16 x100%
=25%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 26/46
Operating Profit Margin=EBIT/Net Sales x100%
Calculation Interpretation
• Out of every rupee Future
Retail made in sales, it
spent 3.3% on Expenses
26
2013-2014 2012-2013=374.95/11336.
16 x100%
= 3.3%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 27/46
Net Profit Margin=Net Profit/Net Sales
Calculation Interpretation
•
There is only 0.0112% profit earned by the
company after
consideration of all
expenses including taxes
interest, and depreciation
27
2013-2014 2012-2013=1.27/11336.16
x 100%= 0.0112%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 28/46
Profitability in Terms ofExpenses
• COGS Ratio
• Operating Expenses Ratio
28
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 29/46
COGS Ratio=COGS/Sales x100%
Calculation Interpretation
•
74.96% share of sales isconsumed by cost of
goods sold.
29
2013-2014 2012-20138497.65/11336.
16x100=74.96%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 30/46
Operating Expenses Ratio
=Operating expenses/netsales x100
Calculation Interpretation
•
21.73% of income is being spent on
maintenance and
operational expenses.
30
2013-2014 2012-2013
=2463.56/113
36.16 x100%
= 21.73%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 31/46
Profitability in Terms ofInvestment
Ratios that show returns represent the firm's
ability to measure the overall efficiency of thefirm in generating returns for its shareholders.
• Return on Assets
• Return on Equity
• Return on Capital Employed
31
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 32/46
Return on Assets=PAT/Avg.Total Assets x100%
Calculation Interpretation
•
0.013% earnings weregenerated from invested
capital (assets)
32
2013-2014 2012-2013=1.27/9976.25
5x100
= 0.013 %
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 33/46
Return on Equity=PAT/Avg. Equity
Calculation Interpretation
•
0.0386% equity shareinvested in the firm
33
2013-2014 2012-2013=1.27/3287.1
x100%
= 0.0386%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 34/46
Return on Capital Employed=PAT/Employed capital x 100%
Calculation Interpretation
•
0.013% will be returnedon capital employed
34
2013-2014 2012-2013= 1.27/9519.59
x100
= 0.013%
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 35/46
ACTIVITY RATIO
• Capital Turnover Ratio
• Working Capital Turnover Ratio
• Asset Turnover Ratio
• Current Asset Turnover Ratio
• Fixed Asset Turnover Ratio35
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 36/46
Capital Turnover Ratio=COGS/Total Capital
Calculation Interpretation
• It shows how well a
company uses its
stockholders equity to
generate revenue.
• The higher the ratio, the
more efficiently thecompany is using its
Capital
36
2013-2014 2012-20138497.65/4632
= 1.83 times1.26 times
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 37/46
Working Capital Turnover Ratio
=COGS/Working Capital
Calculation Interpretation
•
It measures how well a companyis utilizing its working capital to
support a given level of sales.
• Higher CTOR indicates
management is being highly
efficient in utilising its working
capital
37
2013-2014 2012-2013=8497.65/4611.0
3
= 1.84 times
0.04 times
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 38/46
Total Asset TurnoverRatio=COGS/Total Assets
Calculation Interpretation
•
It measures the ability of thecompany to use its assets to
efficiently generate sales
• Higher ATOR is favorable for
the company because it
shows how efficiently the
company uses its assets
38
2013-2014 2012-2013=8497.65/6024.5
8
= 1.4104 times
1.09 times
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 39/46
Current Assets Turnover Ratio
=COGS/Current Assets
Calculation Interpretation
•It indicates that the currentassets are turned over in
the form of sales more
number of times.
• Higher CATR indicates
the capability of the
organization to achieve
maximum sales.
39
2013-2014 2012-2013= 8497.65/
4925.01
= 1.72 times
0.035 times
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 40/46
Fixed Asset Turnover Ratio=COGS/Fixed Asset
Calculation Interpretation• It measures the company’s
ability to generate net salesfrom fixed assets
investment.
• Higher FATR shows the
company has been moreefficient in using the
investment in FA to generate
revenues.
40
2013-2014 2012-2013=8497.65/4340.24
= 1.95 times2.59 times
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 41/46
INTEGRATED RATIO
• Earning Power of the Company
• Return on Asset
41
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 42/46
Return on Asset
ROA
Net MarginRatio
PAT/Sales
AssetTurnover
Ratio
Sales/Asset
42
PAT/Assets
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 43/46
Return on Asset
=NM Ratio*Asset TurnoverRatio
Calculation Interpretation
•
0.013% earnings weregenerated from
invested capital
(assets)
43
2013-2014 2012-20130.0112*1.136
=0.013
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 44/46Conclusion
• The Company’s Sales and Other Operating Income has increased
from Rs.6,987.73 Crores to Rs.11,577.44 Crores with YOY growth
of 98.82%
• Store Sales growth of 5.8%
• Profit after Tax is Rs.1.27 Crores as compared to Rs.288.32 Crores
during the previous financial period
• The Company’s Basic Earnings per Share (EPS) has reduced from
Rs.12.08 to Rs.0.12 per share
• Interest & Financial charges outflow has increased from Rs.460.41
Crores in previous period to Rs.692.54 Crores 44
8/11/2019 Financial Management Mid Term Kirti,Shailja
http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 45/46
Reference
• Chandra, P. (2013). Financial Management.
• www.futureretail.com/annualfinancial_report_2013-
14.pdf (7TH SEPTEMBER, 2014, 9:57 PM)
45