Ratio Analysis Of Hero

Honda
Shanil Mall
Dheeraj
Manish
Manish
Sidhartha Raghuvanshi
 Profitability Ratio
Gross Profit Ratio = (Gross Profit/Net sales) x 100
Significance-
An increase in the percentage may be due to an increase in sale price
of goods without corresponding in the cost of goods sold, decrease
in cost of goods sold without corresponding decrease in sale price of
goods, omissions of purchases, inflation of sales figures or opening
stock valuation is lower than the closing stock.
A decrease in the percentage may be due to decrease in the sale of
goods without corresponding decrease in the cost of goods sold, an
increase in the cost of goods sold without corresponding increase in
the sale price, omissions of sales, valuation of a closing stock at a
lower figure, or opening stock valuation is higher than the closing
stock
 Profitability Ratio
Gross Profit Ratio
Year – GP ratio
2006 – 16.35 %
2007 – 12.85 %
2008 – 11.67 %
2009 – 12.75 %
2010 – 15.66 %
 Profitability Ratio
Net Profit Ratio=(Net profit/Net Sales) x 100
This ratio indicates the profitability and efficiency of
the business.
Year – NP ratio
2006 – 11.14 %
2007 – 8.66 %
2008 – 9.35 %
2009 – 10.39 %
2010 – 14.14 %
 Profit in relation to fund
Return on investment or Return on capital employed
= (Profit before tax, interest and dividend/Avg Capital Employed) x 100

• It shows overall profitability of the business

• It helps in evaluating and controlling capital expenditure
projects
• It helps in profit Planning
• Comparison of the relative profitability of various
departments
• It determines whether an alternative use of capital has been
justified
Profit in relation to fund
Return on capital employed
Year – RCE
2006 – 79.3 %
2007 – 57.95 %
2008 – 55.05 %
2009 – 56.44 %
2010 – 81.04 %
 Market Capitalization
Earning Per share = (profit after tax and interest /
number of shares outstanding)
Year – Earning Per share
2006 – 48.64
2007 – 42.96
2008 – 48.47
2009 - 64.19
2010 – 111.17
 Market Capitalization
Dividend per share = (Profit after interest and
tax/total dividend)
Year – D/S
2006 – 20.00
2007 – 17.00
2008 – 19.00
2009 – 20.00
2010 – 110.00
 Liquidity Ratio
Current Ratio=Current Assets/Current Liabilities
Significance-
For every Re.1 of current liability , there are CR times
the current assets
Indicates the ability of a business to meet its maturing
current obligations
 Liquidity Ratio
Current Ratio
Year – CR
2006 – 0.49
2007 – 0.57
2008 – 0.48
2009 – 0.46
2010 - 0.58
 Liquidity Ratio
Quick Ratio=(Liquid Assets/Liquid Liabilities)
Significance-
It is a more rigorous test of liquidity than current ratio
because it eliminates inventories as apart of current
assets.
 Liquidity Ratio
Quick Ratio
Year – Quick Ratio
2006 – 0.35
2007 – 0.40
2008 – 0.32
2009 – 0.31
2010 – 0.49
Long Term Solvency Ratio
Debt Equity Ratio = (External Equity/Internal Equity)
Meaning- This ratio relates creditor`s claims on assets
to the owners recorded claims in order to measure the
firm`s obligations to creditors in relation to funds
provided by the owners.
Significance- The purpose is to reach an idea of the
amount of capital supplied by the owners to the firm
and of “asset cushion” available to creditors in
liquidation.
Analysis of short-term financial position
Long Term Solvency Ratio
Debt equity Ratio-
Year – DE ratio
2006 – 0.09
2007 – 0.07
2008 – 0.04
2009 – 0.02
2010 – 0.02
Long Term Solvency Ratio
Interest Coverage Ratio=(Net profit before
interest on long term loan and debentures/total
interest on long term loan & debentures)
Significance-
The ratio gives an idea of the extent to which a firm`s
earning may contract before it is unable to meet
interest payments out of current earnings.
 Long Term Solvency Ratio
Interest Coverage Ratio
Year – Interest Cover
2006 – 453.39
2007 – 711.75
2008 – 648.15
2009 – 664.40
2010 - -136.33
Activity / Turnover Ratio
Debtors Turnover ratio=(Trade Debtors/Sales per day)
It shows how many day`s credit is outstanding by debtors.

Year – DT ratio
2006 – 70.26
2007 – 40.11
2008 – 32.70
2009 – 55.10
2010 – 122.14
Thank
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