Professional Documents
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ACCA 500
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MEMORANDUM
TO: Professor, Rod Monger.
DATE: 06/26/2017
The scope of the current document called ratio analysis is to practically work on subject stated.
Practical work and real world ration calculation, analysis would give in depth involvement, understanding and clear
picture of how these information are used by decision makers and how important they are.
To make the presentation realistic, practical and real-world, companies from same industry and same region
were selected and requested for approval. When approved, input data was collected from companies official websites.
The concerned companies were:
1. Ultratech Cements
2. Shree Cements
Both companies are publicly traded, registered in India & producing cements. Ratio calculations and analysis is
for 3 years, covering financial years 2012, 2013 and 2014 for both companies. Both companies financial reports for
the mentioned years are available at their official website:
Very few Information not available at the official websites of the companies were derived from other sources
such as http://economictimes.indiatimes.com/shree-cements-ltd/profitandlose/companyid-13129.cms ,
moneycontrol.com and some other sources.
One of the important factor to consider when analyzing these ratios, is that Indian economy was not doing
well post 2011. Therefore these companies economic performance was also negatively affected.
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To make the presentation understandable and summarized, in first step input data needed for ratio calculations
was collected and summarized in a table as follow:
# Components/Ratios
Shree Cements UltraTech Cements
Note: Figure provided are in Indian rupees and in crores (1croe =10 million or 100 lakhs, except items 22-24)
In 2nd step following ratios are calculated using the input data:
1. Profitability ratios
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2. Asset turnover ratios
3. Liquidity ratios
4. Solvency ratios
5. Market ratio
Analysis Method:
Since industry average for Indian cement industry was limited and very few average ratios were
available, methods of comparing companies financial data across the time means fiscal years 2012-2014 (Horizontal
Analysis) & comparison among the two companies selected for the purpose were used.
To make the presentation easily understandable, visual and illustrative graphs are used to present the
information on yearly basis for each company side by side. The graphs are organized a way that can show how
companys been doing for a specific ratio during the 3 years period, on the hand how one companys performance
been vs another during a specific financial/fiscal year.
Vertical analysis of the data was not considered for all ratios due to limited scope, time and contents.
In case if vertical analysis had been done, there was need to compare or analyze the following information:
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Profitability Ratios
1. Return on Equity: Formula: ROE = Net income / average Stock holders equity
2. Return on Assets, Formula: Return on Assets = Net income / Average Total Assets
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6. Earnings Quality: Formula: Cash Flows from Operating Activities / Net Income
7. Total Assets Turnover: Formula: Net Sales Revenue / Average Total Assets
8. Fixed Asset Turnover: Formula: Net Sales Revenue / Average Net Fixed Assets
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Liquidity Ratios
12. Quick ratio: Formula: Cash & Cash Equivalents + Net AR + Marketable Securities/Current Liabilities
13. Cash ratio: Formula Cash & Cash Equivalents / Current Liabilities
Solvency Ratios
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15. Cash coverage ratio: Formula Cash Flows from Operating Activities / Interest Paid
Market Ratios
17. Price/Earnings (P/E) ratio: Formula: Market Price per Share/Earnings per Share
18. Dividends yield ratio: Formula: Dividends per Share / Market Price per Share
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