Solution Manual for Principles of Corporate Finance 14th Edition by Richard B...
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Ratio analysis of rani ltd
1. RATIO ANALYSIS OF RANI LTD.
Prepared For : BOD (Raja Ltd)
Prepared By : Management Accountant
2. STRUCTURE
⢠Background
⢠Profitability of the company
⢠Liquidity position
⢠Efficiency indicators
⢠Investment perspective
⢠Trends of ratios & percentages
⢠Suggestions
⢠Conclusion
⢠Questions & Answers
3. BACKGROUND
⢠Current economic situation
⢠Nature & type of company
⢠Data limitations
4. PROFITABILITY OF RANI LTD
⢠Increase in sales
⢠Increase in cost of sales
⢠Falling net profit margin
25000
20000
15000
10000
5000
0
2012 2011 2010
Sales 20440 19467 18540
Cost Of Sales 12247 10650 10753
Net Profit 2132 2650 2578
5. LIQUIDITY POSITION
⢠Increase in current ratio
⢠Quick ratio at alarming rate
⢠Mismanagement of working capital
2
1.5
1
0.5
0
2012 2011 2010
Current Ratio 1.43 1.21 1.26
Quick Ratio 0.64 0.56 0.57
8. TRENDS OF RATIOS
⢠Current Ratio ⢠Net Profit Margin
⢠Quick Ratio ⢠Gross Profit
⢠Working Capital ⢠Return on Assets
⢠Receivable Turnover ⢠ROCE
⢠Inventory Turnover ⢠ROSE
⢠Operating Cycles ⢠EPS
⢠Sales
⢠Cost of Sales
⢠Dividend Per Share
9. CONCLUSION
⢠Unsecure financial position
⢠Deteriorating results
⢠Acute working capital management
problem
⢠Overtrading
⢠Declining Profits
⢠Increasing Cash conversion cycle
10. SUGGESTION
⢠Comparison with other companies
⢠Improving the average collection
period for trade debtors
⢠Improving the Inventory turnover
⢠Avoiding unnecessary overtrading
⢠Working capital management policy
⢠Acquisition of synergies