Acm
- 3. PROFIBILITY RATIOS AND THEIR COMPUTAION Presented By: Saiyam Jain 142048
- 4. Ratio analysis is the process of determining and interpreting numerical relationship based on financial statements. It is the technique of interpretation of financial statements with the help of accounting ratios derived from the balance sheet and profit and loss account.
- 5. Profitability ratios indicate the profit earning capacity of a business. Profitability ratios are calculated either in relation to sales or in relation to investments. Profitability ratios can be classified into two categories. a) General Profitability Ratios. b) Overall Profitability Ratios.
- 6. Gross profit ratio. Net profit ratio. Operating profit ratio. Return on Total Assets Earning per share Dividend per share
- 7. Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%)
- 8. Gross Profit Margin Sales --- Cost of goods sold * 100 Sales Net Profit Margin Net profit before Interest and tax * 100 Sales Return on Total Assets Net Profit after Tax * 100 Total Assets
- 9. Earning Per Share Net Profit after Tax and Preference Dividend No. of Equities Dividend Per Share Dividend Percentage * Face value 100 Operating Profit Margin Cost Of Goods Sold + Operating Expenses * 100 Net Sales
- 10. SALES 80,00,000 LESS : COST OF GOODS SOLD 64,00,000 GROSS PROFIT MARGIN 16,00,000 LESS : DEPRECIATION 1,50,000 SELLING EXP. 2,50,000 4,00,000 PROFIT BEFORE INTEREST AND TAX 12,00,000 LESS : INTEREST 3,00,000 PROFIT BEFORE TAX 9,00,000 LESS : TAX @ 40%
- 11. GROSS PROFIT = SALES – COST OF GOODS SOLD * 100 SALES = 16,00,000 * 100 = 20% 80,00,000 Net Profit Margin = Net profit before Interest and tax * 100 Sales =12,00,000 * 100 = 15% 80,00,000
- 12. Operating Profit Margin = Cost Of Goods Sold + Operating Expenses * 100 Net Sales = 64,00,000 * 100 = 80% 80,00,000 Return on Total Assets = Net Profit after Tax * 100 Total Assets = _5,40,000 *100 = 6.75% 80,00,000
- 13. COMPANY RATIO GODREJ IDEA NTPC RAYMOND S COAL INDIA GROSS PROFIT% 5.14 12.10 18.93 5.81 -130.73 NET PROFIT% 8.00 6.45 14.69 3.87 91.49 RETURN ON TOTAL ASSETS 42.78 46.95 104.08 179.34 26.04 OPERATING PROFIT % 6.83 27.78 24.68 11.05 -128.69 DIVIDEND PER SHARE 1.75 0.40 5.75 2 29.00 EARNING PER SHARE 3.57 5.09 13.31 14.36 23.76
- 14. ADVANTAGES DISADVANTAGES •It simplifies the financial statements. •It helps in comparing companies of different size with each other. •Different companies operate in different industries each having different environmental conditions such as regulation, market structure, etc. •Ratio analysis explains relationships between past information