Financial Project
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Financial Project Current Ratio 1) Concept: what are current assets and liability? Explain in detail. 2) Formula 3) Computation of ratio for 3 years in a table. Table 1
Particulars Current assets Current Liability Ratio
2006-07
2007-08
2008-09
4) Analysis: Ideal ratio, which trend is emerging, reasons for the trend etc. (Note: The above points are to be written for the ratios along with proper explanation and table.) Quick Ratio/ Acid Test Ratio: Current Assets-Investments/ Current Liability Include bank overdraft in current liability. Leverage Ratios: Fixed Interest Coverage Ratio: EBIT/INTEREST Commission, Bank Charges, Guarantee charges are excluded from interests. Analysis: amount of profits available for paying interests. Higher the ratio better the interest paying capacity. Debt-equity ratio Debt: All loans (secured, unsecured, directors, shareholders) Net worth= Equity shares + Reserves & Surplus- Fictitious Assets. Take net amount of calls in advances and calls in arrears. Don’t consider notes under the schedule. Capital Employed to Net Worth Ratio: Cap. Employed= Equity share capital+ Preference Share capital + Long term loansFictitious assets. Valuation Ratios:
Dividend Yield Ratio: DYR = DPS/Average MPS. Dividend: include share interim dividend & final dividend. If proposed dividend is given, include it. Dividend tax is excluded. Number of issued shares: Share price on BSE. Average MPS: Highest price of shares on BSE for entire 12 months + Lowest price of shares on BSE for 12 Months/2 Dividend Payout Ratio DPR = DPS/EPS Consider only the basic EPS. Return on Shareholders’ Funds RoShF= PAT/Shareholders’ Funds. Shareholders’ funds= Equity share capital + Reserves & Surplus. Analyses: return should be good not only from capital viewpoint but also from R & S viewpoint. Higher the return better it is. Bcoz we consider shareholders’ funds, we are also considering the profit earned on R & S. ROCE: ROCE = PAT+ Total capital employed Total capital employed: Equity share capital+ Preference Share capital + Long term loans-Fictitious assets. Analysis: It helps to analyze the cost of capital. It gives an indication of over or under capitalization. It helps in analyzing the dividend.
Particulars Current assets Current Liability Ratio
2006-07
2007-08
2008-09
4) Analysis: Ideal ratio, which trend is emerging, reasons for the trend etc. (Note: The above points are to be written for the ratios along with proper explanation and table.) Quick Ratio/ Acid Test Ratio: Current Assets-Investments/ Current Liability Include bank overdraft in current liability. Leverage Ratios: Fixed Interest Coverage Ratio: EBIT/INTEREST Commission, Bank Charges, Guarantee charges are excluded from interests. Analysis: amount of profits available for paying interests. Higher the ratio better the interest paying capacity. Debt-equity ratio Debt: All loans (secured, unsecured, directors, shareholders) Net worth= Equity shares + Reserves & Surplus- Fictitious Assets. Take net amount of calls in advances and calls in arrears. Don’t consider notes under the schedule. Capital Employed to Net Worth Ratio: Cap. Employed= Equity share capital+ Preference Share capital + Long term loansFictitious assets. Valuation Ratios:
Dividend Yield Ratio: DYR = DPS/Average MPS. Dividend: include share interim dividend & final dividend. If proposed dividend is given, include it. Dividend tax is excluded. Number of issued shares: Share price on BSE. Average MPS: Highest price of shares on BSE for entire 12 months + Lowest price of shares on BSE for 12 Months/2 Dividend Payout Ratio DPR = DPS/EPS Consider only the basic EPS. Return on Shareholders’ Funds RoShF= PAT/Shareholders’ Funds. Shareholders’ funds= Equity share capital + Reserves & Surplus. Analyses: return should be good not only from capital viewpoint but also from R & S viewpoint. Higher the return better it is. Bcoz we consider shareholders’ funds, we are also considering the profit earned on R & S. ROCE: ROCE = PAT+ Total capital employed Total capital employed: Equity share capital+ Preference Share capital + Long term loans-Fictitious assets. Analysis: It helps to analyze the cost of capital. It gives an indication of over or under capitalization. It helps in analyzing the dividend.
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