RATIO ANALYSISOF

COMPANY OVERVIEW• Type - Listed company

• Industry - Textiles Lifestyle & Retail

• Founded - 1925, Thane

• Headquarters - Mumbai, Maharashtra , India

• Key people - Gautam Singhania, Chairman & Managing Director

• Parent - Raymond Group

• Subsidiary companies – . ColorPlus Fashions Ltd. Raymond Luxury Cottons Ltd.

Silver Spark Apparel Ltd. J.K. Helene Curtis Ltd.

EverBlue Apparel Ltd. J.K. Investo Trade (India) Ltd.

Celebrations Apparel Ltd. JK Files (India) Ltd.

RATIO ANALYSIS• Ratio Analysis is the process of computing, determining and presenting the

relationship of related items and groups of items of the financial statements.

• Ratio Analysis is used to obtain a quick indication of a firm's financial performance in several key areas.

• Types – • Liquidity Ratios• Asset Management Ratios• Debt Management Ratios• Profitability Ratios• Market Value Ratios

LIQUIDITY RATIOS• It indicates the ability of the firm to pay off debts that are maturing

within a year.

• Types – • CURRENT RATIOIt indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.

• QUICK RATIOIt indicates the ability of the firm to pay off short-term obligations without relying on the sale of inventories.

CURRENT RATIO QUICK RATIO

2014-15 2015-161.37

1.38

1.39

1.4

1.41

1.42

1.43

1.44

1.45

1.46

1.45

1.4

2014-15 2015-160.81

0.815

0.82

0.825

0.83

0.835

0.832

0.819

ASSET MANAGEMENT RATIOS• It indicates how efficiently the firm is using its assets.

• Types – • INVENTORY TURNOVER RATIOIt indicates how many times the inventory is “turned over” during the year.

• DEBTORS TURNOVER RATIOIt indicates average number of times the firm has collected its receivables during the year.

• TOTAL ASSET TURNOVER RATIOIt indicates the ability of the firm to generate sales from its total assets.

2014-15 2015-164.35

4.4

4.45

4.5

4.55

4.6

4.65

4.7

4.64

4.45

2014-15 2015-165.1

5.2

5.3

5.4

5.5

5.6

5.7

5.8

5.9 5.82

5.37

2014-15 2015-161.09

1.1

1.11

1.12

1.13

1.14

1.15

1.161.15

1.11

INVENTORY TURNOVER RATIO DEBTORS TURNOVER RATIO

TOTAL ASSET TURNOVER RATIO

DEBT MANAGEMENT RATIOS• It indicates how the firm has financed its assets as well as the ability

of the firm to repay its long-term debt.

• Types – • DEBT TO EQUITY RATIOIt indicated how much assets are financed by debt and how much assets are financed by equity.

• TIMES-INTEREST-EARNED RATIOIt indicated the ability of the firm to meet its annual interest payments.

DEBT TO EQUITY RATIO TIMES-INTEREST-EARNED RATIO

2014-15 2015-161.92

1.94

1.96

1.98

2

2.02

2.04

2.06

2.08

1.98

2.07

2014-15 2015-161.82

1.84

1.86

1.88

1.9

1.92

1.94

1.96

1.98

1.87

1.96

PROFITABILITY RATIOS• It indicates how profitably the firm is operating and utilizing its assets.

• Types – • OPERATING MARGINIt indicates operating income per rupee of sales.

• PROFIT MARGINIt indicates net income per rupee of sales.

• BASIC EARNING POWERIt indicates the ability of the firm’s assets to generate operating income.

• RETURN ON EQUITYIt indicates the rate of return on common shareholders’ investment.

OPERATING MARGIN PROFIT MARGIN

2014-15 2015-165.60%

5.70%

5.80%

5.90%

6.00%

6.10%

6.20%

6.30%

6.40%

6.50%

6.38%

5.86%

2014-15 2015-160.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2.10%

1.63%

BASIC EARNING POWER RETURN ON EQUITY

2014-15 2015-160.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%7.32%

5.64%

2014-15 2015-166.00%

6.20%

6.40%

6.60%

6.80%

7.00%

7.20%

7.40%

7.60%

7.35%

6.50%

MARKET VALUE RATIOS• It indicates what investors think about the firm and its future

prospects.

• Types – • PRICE/EARNINGS RATIOThe amount investors will pay for ₹1 of current earnings.

• MARKET/BOOK RATIOIt indicates how investors regard the firm.

PRICE/EARNING RATIO MARKET/BOOK RATIO

2014-15 2015-1623

23.5

24

24.5

25

25.5

26

26.5

27

27.5

24.48

27.04

2014-15 2015-161.35

1.4

1.45

1.5

1.55

1.6

1.65

1.7

1.75

1.8

1.85

1.79

1.53

THE DuPONT EQUATION• It shows the relationships among profitability ratios, asset management and

debt management.

• Profit marginIt indicates the operating cost of the firm.It tells how much the firm earns on its sales.

• Total Asset TurnoverIt indicates the investments of the firm.It is a “multiplier” that tells how many times the profit margin is earned each year.

• Equity MultiplierIt indicates the financing cost of the firm.It tells the amount assets that are financed by debt and by equity.

DuPONT EQUATION

Profit Margin Total Assets Turnover Equity Multiplier Return on Equity0

1

2

3

4

5

6

7

8

2.1

1.15

3.02

7.32

1.63

1.11

3.11

5.64

2014-15 2015-16

CONCLUSION• Raymond should imply strict credit policy as they have incurred huge loss

due to bad debts this year.• The inventory management should be improved.• The marketing team of Raymond should improve the sales.• Raymond’s operating costs have increased i.e they are not working

efficiently and the expenditure on production is high as compared to previous year.• The decline in liquidity ratio shows that most of the assets that firm has

is stuck in inventory and the inventory turnover ratio is low. So there is again a possibility of bad debt.• Raymond has also taken a huge debt this year but at a very low interest

rate which is good on their part.

THANK YOU