Premium Essay

Inter Company Financial Ratio Analysis

In: Business and Management

Submitted By smartmansi
Words 641
Pages 3
Inter Company Analysis

Britannia can be compared with its competitor on the basis of various ratios as mentioned below

Current Ratio

Britannia has a current ratio of 1.054 in comparison to HUL which has a current ratio of of 0.79.The high current ratio mainly is because of a more than proportionate increase of the Current Assets when compared to the Current Liabilities.

Debt Equity Ratio

There is a stark comparison between the two companies in terms of funding. While HUL funds its operations from lower and lower loans every year, Britannia increasingly funds its operations through more and more debt, possibly due to lesser cost of debt. This is visible in the DER of HUL at 0.07 and 1.084 of Britannia.

Interest Coverage Ratio

The interest coverage ratio is a measurement of the number of times a company could make its interest payments with its earnings before interest and taxes. Lower the ratio, higher is the company’s debt burden. This is measured as the ratio between the profit before interest and taxes to the interest amount paid that year.

The ICR of Britannia has improved over last year from 20.77 to 29.62.But in case of HUL there has been a drastic improvement .ICR has rose from 122.22 to 409.36.

Earning Per Share

Over last one year, EPS has declined for Britannia due to drastic decline in profits, and hence the EPS has fallen from Rs 75.51 to Rs 48.77.However in case of HUL the EPS has declined due to slight increase in the number of shares and decrease in the net profits.

PBIT to Sales

The ratio between the profit before interest and taxes (equal to the operating income, in our case) to that of the sales for the given period during which the profit has been earned is a measure of the profitability of the company for that period.

PBIT to Sales ratio has dropped in case of Britannia from 7.53% to 3.6%.The ratio has risen in...

Similar Documents

Premium Essay

Ratio and Financial Statement Analysis

...FINANCIAL DECISION MAKING FOR MANAGERS: Ratio And Financial Statement Analysis NAME: JAMES B. TAYLOR DATE: 04/09/2015 Table of Content I. Executive Summary.....................................................................................3 II. Introduction..................................................................................................4 III. Financial statements tools and techniques...................................................4 IV. Exhibits…………………………………………………………………...10 V. Analysis of Results.....................................................................................11 VI. Recommendations……………………………….......................................13 VII. Conclusions……………………………………………………………….13 VIII. References………………………………………………………………...14 Executive summary This paper is focused to assess financial health of a business firm. I have chosen one of the leading retail companies in the country (Higgins, 2011). This paper will carry out a financial analysis on Hamster Limited in order to have a comprehensive assessment about its financial health analysis. This paper will analyze and assess the financial environment in which the company operated. Through a comprehensive analysis, my objective is to understand the influence of financial factors in the firm and its decision making. I will evaluate different ratios to acknowledge their impact on Hamsters performance over the few years....

Words: 2513 - Pages: 11

Premium Essay

Accounting in Sit

...Table of Contents 1.0 Introduction 3 2.0 The major components of Sugar Investment Trust (SIT) annual report: 3 3.0 The Five potential users 5 4.0 How useful are companies’ annual reports in addressing the needs of users of accounts? 6 5.0 Company’s Corporate Social Responsibility (CSR) 8 6.0 To what extent does the regulatory framework govern the preparation of an Annual Report? 9 7.0 To what extent reported profit figures can mislead users of accounts? 10 8.0 Cash flow statements 11 9.0 Accounting Ratios and Cash Flow Statement Analysis 11 10. Cash Flow Statement Analysis 14 11. Criticism of traditional financial accounting and problems encountered in inter-firm comparison. 14 12. Contribution list 16 13. References 16 1.0 Introduction T he Sugar Investment Trust (SIT) is a body corporate established under an Act of Parliament in 1994 which operates as a company under the Companies Act 2001. It is the largest shareholder based public company in Mauritius with more than 40,000 members. It has more than 55,000 shareholders.  The foundation of Sugar Investment Trust (SIT) constitutes a landmark in the Mauritian history. It was set up primarily as a participation scheme in the sugar industry but it has become a model of economic democratisation in the country. It provides a forum for participation of planters and workers at corporate decision making level of sugar milling companies and as equity participation....

Words: 4659 - Pages: 19

Premium Essay

Financial Analysis

...Financial Analysis I think that when it comes down to it PepsiCo and Coca Cola are companies that been around for a very long time and have established relationships with their brands with consumers all over the world. The purpose of this paper is to help breakdown both companies by explaining both financial positions along with showing their strengths. Listed below in this paper are going to be examples that show vertical, horizontal and ratio analysis. The calculations that have been conducted which are listed below are basically intended as a visual to help show which company may appear more secure. Along with that I will provide some recommendations that may seem to help improve the growth of each company. There are a few tools that are used to help evaluate financial statements and that are quite used often in accounting and those tools are Horizontal Analysis, Vertical Analysis and Ratio Analysis. In the preliminary calculation which will be the Vertical Analysis which is often defined as “common size. When it comes down to it this analysis objective is to basically assess the company’s financial statements by assigning certain percent from the base amount to each item of financial statements; this type of evaluation is often used for inter-and intra-company needs according to (Weygandt, Kimmel, Kieso, 2008)....

Words: 2284 - Pages: 10

Premium Essay

Caterpillar Financial Analysis

...(CAT) 12/05/2011 Executive Summary The project conducts an in-depth financial analysis of Caterpiller Inc. (CAT). The use of various analytical tools, the assignment covered major fundamental parameters relating the company and its stock. The analysis consisted of stock reporting analysis, ratio analysis, duo point analysis, weekly return analysis and the analysis of cost of equity. The stock reporting analysis part of the project analyzed the stock selected with respect to the market Index. For the purpose of analysis the prices of both stock and index were downloaded for the period beginning 15-Jan-2009 till 15-Nov-2011. Ratio analysis had been used as the primary tool for evaluating the performance of the company. The ratio analysis helps in analyzing the probable casual relationships among different items after analyzing the past results. These ratios are derived after analyzing the past results and helps management to prepare budgets, to formulate policy and to prepare future plan. Ratio analysis also helps in making inter firm comparison and also comparisons between different divisions of the company. The required rate of return of CAT is calculated with the help of CAPM model. The model explains the relationship between the systematic risk associated with a stock and its expected return. In this model a stock’s expected return is the risk free rate of return (generally return on Govt....

Words: 1496 - Pages: 6

Premium Essay

Financial Analysis

...FINANCIAL STATEMENT ANALYSIS: A TOOL FOR PERFORMANCE EVALUATION A Case Study of Oceanic Bank By IBRAHIM UMAR PGA/09/07766 M.Sc. Assignment Submitted to Dr. M.I. Kida CNA Department of Accountancy University of Maiduguri 2Financial Statement Analysis: A Tool for Performance Evaluation Jan. 2010 3Financial Statement Analysis: A Tool for Performance Evaluation ABSTRACT Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, trend analysis and ratios analysis....

Words: 5278 - Pages: 22

Premium Essay

Kudler Foods

...Kudler Fine Foods Financials Kudler Fine Foods Financials Kudler Fine Foods is a local San Diego retailer of specialty food items with three upscale stores in La Jolla, Del Mar, and Encinitas. They provide the finest domestic and imported food items at reasonable prices. The store’s founder, Kathy Kudler, built the enterprise based on her vision of selecting and purchasing only the finest of products, offering customers a delightful and pleasing shopping experience, and becoming a purveyor of choice for customers seeking to purchase the best epicurean. The members of Team C learning team analyzed the financial statements of Kudler Fine Foods by making comparisons at the intra-company level, industry averages, and with other competing companies (inter-company basis). Team C used horizontal analysis, vertical analysis, and ratio analysis to assess the significance of Kudler’s financial data. Team C presents the numerical data below, followed by the analysis of the financial statements....

Words: 1781 - Pages: 8

Premium Essay

Ratio Analysis

...(c) Interpretation or Analysis of ratios by trend. (d) Interpretations or Analysis by inter-firm comparison. Principles of Ratio Selection The following principles should be considered before selecting the ratio: 234 A Textbook of Financial Cost and Management AccounQd~ (1) (2) (3) (4) (5) (6) Ratio should be logically inter-related. Pseudo ratios should be avoided. Ratio must measure a material factor of business....

Words: 5184 - Pages: 21

Premium Essay

Finance

...The project mainly focuses in detail the Financial Ratios and also understanding of the working capital management of IRCTC. This report will analysis and describe different ratios and how it manages its working capital. “It is meaningless to financially analyse a company without understanding the context and environment in which it operates”. As IRCTC has its monopoly in Indian Railways, so we will take a close look to intra firm analysis. A ratio is an arithmetical relationship between two figures. Financial ratio analysis is a study of ratios between various items or groups of items in financial statements. Ratios can be classified according to statements mainly they are profit and loss ratios or income statement ratios, balance sheet ratios or position statement ratios, mixed ratio or inter statement ratios The ratios are calculated with the help of Annual report of IRCTC provided by the company; the data of last five financial years has been used for that. The project begins with the discussion about the scenario of Indian Railway and role of IRCTC in that. The project then describes the main concept- Ratios and their analysis by determining that why the ratios have changed, which can be due to the change in the accounting policies without a material change in the firm’s performance....

Words: 523 - Pages: 3

Premium Essay

Accounting Information

...Amran Hossan** Management accounting is concerned with gathering and reporting internal financial information to facilitate decision-making process. As management accounting is not required to conform to national accounting standards, it allows business to customize the management accounting techniques as per demand of company. As a process of this customization, some advanced quantitative as well as number of qualitative techniques accompany with the traditional techniques, have been emerged to cater the information need in decision making. This study attempts to measure the significance of management accounting techniques in decision making of the selected manufacturing organizations in Bangladesh. In doing so, a total of 74 manufacturing organizations have been surveyed with a structured questionnaire by using 5 point Likert Scale measurement from different categories of manufacturing organizations. Findings reveal that cash flow statement analysis, ratio analysis, budgetary control, CVP analysis, variance analysis and fund flow analysis have been frequently high-ranking techniques. Secondly, the authors have recognized five factors to calculate the variability in decision-making with the help of rotated component matrix which shows that 75.125 % of the total variability has found in the usage of management accounting techniques....

Words: 6527 - Pages: 27

Free Essay

Working Capital Management in Textile Industries

...Financial statements are spread and analyzed, with appropriate ratios and flows calculated as an aid in the customer evaluation. As an important first step in internal analysis, the financial statements are examined for validity and general correctness. After the statement has been accepted as valid and reasonably accurate, ratios are calculated and the figures analyzed. Internal analysis calls for an...

Words: 13940 - Pages: 56

Premium Essay

Ratio

...It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “ so many times”. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. MEANING OF RATIO ANALYSIS: Ratio analysis is the method or process by which the relationship of items or...

Words: 12924 - Pages: 52

Premium Essay

Horizontal, Vertical, Ratio Checkpoint

...ointThe three tools of financial statement analysis and functions are the horizontal, vertical, and ratio analysis. The horizontal ratio also called the trend ratio, evaluates financial statements and data over a certain period of time. It is mainly used in intra- company comparisons. The purpose of this is to determine the decrease or increase that took place. The vertical analysis also called the common- size analysis, evaluates the financial statement data by expressing each item as a base amount or a percentage in the financial statements. It is used in both inter- and intra- company comparisons. The ratio analysis expresses the relationships among selected items of financial statement data, which is used in all three types of comparisons. So the current ratio for 2004 would be $8639 which is the total assets divided by $6752 the total liabilities, which is equal to 1.28% For 2005 it’s the same scenario divide the current assets $10454 by $9406, (total liabilities) equal to 1.11% The two measures of vertical analysis is current assets or $10,454 $31,727 = 33% (Divide the two to get this amount.) The two measures of horizontal analyses are current assets in 2005- $10,454 Divided by Current assets in 2004- $8,639 = 121% or a 21% increase from 2004 to 2005. Current liabilities in 2005 are $9,406. Divide that by current liabilities in 2004 or $6752 which equals 139% or 39% increase from 04 to 05....

Words: 376 - Pages: 2

Premium Essay

Finance Paper

...Financial Management Essay Benjamin Gray University of Maryland University College 7/31/16 Executive Summary The function of this essay is to examine why ratio and financial statement analysis are useful to any corporations. The ratio analysis is a useful tool for managers and investors that would like to evaluate the company’s financial health. By using this analysis companies are able to identify opportunities for growth and areas of weakness to determine where corporations can put in place corrective measures in order to rectify their areas of weakness.  Financial statements are used in order to predict trends of cash flow within the business as well as predict the potential of a business and if they are capable of financial growth. Ratio analysis allows companies to analyze the future revenue of a company’s profit or a company’s loss.   This paper will examine the benefits and limitations of ratio analysis, explain what factors impact the meaningfulness of such measures and what new practices or theories may be emerging regarding the application of ratio and financial statement. The paper concludes that ratio and financial statements is an essential tool used in analyzing a company’s profit. Close your eyes and think about all of the products you have consumed today....

Words: 1302 - Pages: 6

Premium Essay

Reasrch Paper

...Raju Sharma COMPARING AND ANALYZING FINANCIAL STATEMENTS TO MAKE AN INVESTMENT DECISION Case Study of Automotive Industry Business Economics and Tourism 2012 1 VAASAN AMMATTIKORKEAKOULU UNIVERSITY OF APPLIED SCIENCES Bachelor of Business Administration ABSTRACT Author Title Raju Sharma Comparing and Analyzing Financial Statements to Make an Investment Decision: Case Study of Automotive Industry. Year 2012 Language English Pages 72 + 5 Appendices Name of Supervisor Jukka Paldanius The purpose of the thesis was to evaluate and compare the financial statements of different companies to rate their performances. The emphasis was to be able to choose among several companies the best one to invest in. The aim of the study was met by comparing the risk of different companies, their rate of return, future trends and their strengths and weaknesses. In the theoretical section of the thesis different factors affecting the capital market were discussed, with the focus being on the risks of an investment. Basic financial statements and ratios were discussed briefly. Next cross sectional and time series techniques to compare the financial statements and ratios were revealed. Most of the information from the theories was later on used in the empirical part of the thesis. In the empirical study, initially the financial statements of different companies were taken to compute the ratios, risk, average return, to make trends and common size statements....

Words: 20085 - Pages: 81

Premium Essay

Hul Analysis

...COMPANY PROFILE • The Indian FMCG sector…………………………. • ITC profile………………………………………... • HUL profile………………………………………. INTRODUCTION • Financial Analysis………………………………... • Ratio Analysis……………………………………. ANALYSIS & INTERPRETATION Inter Company Analysis…………………………… FINDINGS & CONCLUSION…………………………... RECOMMENDATIONS……………………………………. .. BIBLIOGRAPHY………………………………………... PREFACE The project assigned to me was to study the financial health of...

Words: 6012 - Pages: 25