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DATA ANALYSIS
Every company has to have a balanced capital structure; means there should be balance of equity
and debt in the companys capital formation. Traditionally, firms have looked at certain ratios to
assess whether they have a satisfactory capital structure. The commonly used ratios are:
Interest coverage ratio
Cash flow coverage ratio
Debt service coverage ratio and
Fixed asset coverage ratio

ICR

CFCR =

Earnings before interest and taxes

Interest on debt

EBIT + Deprication + Other non-cash charges

Interest on debt + Loan repayment instalment/(1-t)

DSCR =

(PATi +DEPi + INTi +Li)

( INTi + LRI ii)

FACR =

Fixed assets
Term loans

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1. Here, company has earned gross profit (PBITDA) ` 1523(in laks).And the depriciation
amount given in the balace sheet is ` 593.52,this amount would be deducted from the
PBITDA .it would be ` 929.6 (PBIT).The interest on debt is ` 1036.32

ICR =

Earnings before interest and taxes

Interest on debt

929.6
1036.32
4.84

company is capable to repay its debt 5 time from the profit.it suggests that company has very
good capital strucutre and it could take more DEBT in future. Company has very good working
capital it can be used as repayment.

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Particulars

2006-2007

2007-2008

Equity Ratio:

Particulars

2007-08

2006-07

Net Worth
Total Capital Employed

80,577.34
1,17,057.02

61,315.16
89,140.89

Ratio (In Times)( Net Worth/ Total

Capital Employed)

0.69

0.69

Series 1
5
4.5
4
3.5
3
2.5

Series 1

2
1.5
1
0.5
0
Category 1

Category 2

Category 3

Category 4

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Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate

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Rs in lakhs
Year
DPS(Rs)
Book Value(Rs.)
Payout (%)
Retention Ratio
PBT
PAT
Preference Dividend
Equity
Reserves
P & L Account(Dr Balance)
Equity Shareholder Fund
ROE
Growth Rate (%)
Cost of Equity (%)
Interest
Total Debt
Cost of Debt (%)
PBIT
Capital Employed
ROI (%)

2006
10.00
203.37
26.11
0.7398
1634.44
1039.19
0
271.35
5246.96
0
5518.31
0.19
14.06
18.98
203.57
3206.56
6.35
1838.01
10066.63
18.26

2007
13.00
239.21
25.61
0.7439
2166.03
1377.28
0
271.35
6219.60
0
6490.95
0.21
15.62
21.05
258.57
4384.93
5.90
2424.60
12177.64
19.91

2008

2009

2010

6.00
258.27
23.00
0.77
1091.90
707.65
0
271.35
6736.77
0
7008.12
0.10
7.70
10.02
280.77
3342.72
8.40
2142.50
11690.60
18.33

4.00
270.22
24.97
0.7503
358.31
451.31
0
271.35
7061.09
0
7332.44
0.06
4.50
5.98
235.43
2271.97
10.36
1260.79
10896.17
11.57

4.00
235.23
24.26
0.7574
767.12
617.12
0
393.46
8861.68
0
9255.14
0.07
7.00
8.70
219.44
2970.13
7.39
1742.56
13550.03
12.86

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Weighted Average Cost of Capital
Year

Source
Equity
Debt
Year

Source
Equity
Debt
Year

Source
Equity
Debt
Year

Source
Equity
Debt
Year

Source
Equity
Debt

2005 - 2006

Amount
271.35
3206.56
3477.91

Proportion(%)
7.80
92.20
100.00

Cost(%)
18.98
6.35

Weighted
Cost(%)
1.48
5.85
7.33

2006 2007

Amount
271.35
4384.93
4656.28

Proportion(%)
5.83
94.17
100.00

Cost(%)
21.05
5.90

Weighted
Cost(%)
1.23
5.56
6.79

2007 2008

Amount
271.35
3342.72
3614.07

Proportion(%)
7.51
92.49
100.61

Cost(%)
10.02
8.40

Weighted
Cost(%)
0.75
7.77
8.52

2008 2009

Amount
271.35
2271.97
2543.32

Proportion(%)
10.67
89.33
101.27

Cost(%)
5.98
10.36

Weighted
Cost(%)
0.64
9.25
9.89

2009 2010

Amount
393.46
2970.13
3363.59

Proportion(%)
11.70
88.30
100.00

Cost(%)
8.70
7.39

Weighted
Cost(%)
1.02
6.53
7.55

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Year

WACC (%)

ROI (%)

Difference

2005-06

7.33

18.26

10.93

2006-07

6.79

19.91

13.12

2007-08

8.52

18.33

9.81

2008-09

9.89

11.57

1.68

2009-10

7.55

12.86

5.31

25

20

15
WACC (%)
ROI (%)

10

0
2005-06

2006-07

2007-08

2008-09

2009-10

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Difference
14
12
10
8
Difference

6
4
2
0
2005-06

2006-07

2007-08

2008-09

2009-10

INTERPRETATION
Financial performance of a company is satisfactory and attaining good return's of the capital employed
even in peak stage as WACC is less than ROI about ...