Seri

al
No
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2
3
4
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2
3
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2
1
2
3
4
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2
3
4
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2
3
4
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Ratios
Liquidity Ratios
Current Ratio
Quick (Acid-Test) Ratio
Cash Ratio
NWC to Total Assets
Long-term Solvency Ratios
Total Debt Ratio
Debt/Equity
Long-term debt ratio
Coverage Ratios
Times Interest Earned
Cash Coverage
Inventory & Accounts
Receivable

Inventory Turnover Ratio

Average Age of Inventory
Account Receivable Turnover
Ratio
Average Collection Period
Accounts Payable &
Working Capital
Accounts Payable Turnover
Ratio
Average Payment Period
Working Capital Turnover Ratio
Total Assets Turnover Ratio
Profitability Ratios
Gross Profit Ratio
Net Profit Ratio
Operating Profit Ratio
Expense Ratio
Profitability & Market
Ratios
Earnings per Share
Return on Total Assets
Return on Equity
Market Ratios
Price Earning Ratio
Market to Book Value Ratio

2011

2010

0.91 times
0.37 times
6.3 times
0.04 times

0.82 times
0.40 times
0.01times
0.09 times

0.65
0.99
0.09

0.65
0.72
0.41

1.25
1.5

0.10
0.31

5.1
71days
19.6
18days

5.8
62days
18.3
19days

1.4
257days
33.7
1.60

1.5
240days
14.0
1.79

13%
5.04%
6.02%
1.01%

17.1%
5.95%
7.06%
1.03%

16.35%
1.96%
1.63%

13.08%
1.01%
1.30%

Rs 0.69
Rs 0.23

Rs 0.69
Rs 0.26

Ratios Analysis
Liquidity Ratios
1. Current Ratio Interpretation:
In 2010, the firms ability to cover its current liabilities with its current assets was 0.82. In
2011, the ratio goes up to 0.91 as compared to 2010, which means that the company has the
ability to pay its liabilities, as the definition says that higher the ratio, greater the ability of the
firm to pay its bills. This tells that Reliance Weaving Mills limited is improving their liquidity
and efficiency, because their current ratio is improving.
2. Quick (Acid-Test) Ratio Interpretation:
According to the definition of Acid Test Ratio, the company should have the ability to pay its
liabilities through its most liquid assets. The table shows that in 2010, the firm has the ratio
0.40. Then we observe a slight down in 2011 ratio 0.37. So we can figure out from the ratios
that Reliance Weaving Mills limited still cannot pay its debts without its inventory.
3. Cash Ratio Interpretation:
The increased in Cash reflects that more money has been invested in the business and the
production has decreased.
4. NWC to Total Assets Interpretation:
The ratio is supposed to be high. Here we can see that the Reliance Weaving Mills limited
total asset turnover ratio in 2010 was 0.09, which means that the company generated more
revenue of asset investment. The ratio then comes slightly down in 2011.
Long-term Solvency Ratios
1. Total Debt Ratio Interpretation:
The ratio shows the companys ability to cover its debts through its total assets. The ratio was
0.65% in 2010, almost equal in 2011 is 0.65%.
2. Debt/Equity Ratio Interpretation :
In 2010 Reliance Weaving Mills limited has a ratio of 0.10 which is a small increase from
2011 when their ratio was 1.25. This means that they have a comfortable coverage of interest,
and that the coverage has increased from the previous year.
3. Long-term debt ratio Interpretation :
Long term debt ratio slightly decease in 2011 is 0.09 in 2010 long term debt ratio is 0.41.

Coverage Ratios
1. Times Interest Earned Interpretation:
The Interest Liabilities and EBIT have increased due to substantial Increase in the production
and overall business.
Inventory & Accounts Receivable
1. Inventory Turnover Ratio Interpretation:
The Reliance Weaving Mills limited Inventory turnover ratios deteriorated from 2010 to
2011, which means that its ability to sell inventory has relatively come down. In 2011
Reliance Weaving Mills limited had a ratio of 5.1 and in 2010 has a ratio of 5.8.
2. Average Age of Inventory Interpretation:
The ability of the firm of Average Age of Inventory in the specific time. Here in the year 2010
the turnover in days was almost 62, but the Average Age of Inventory decrease in the year
2011 and the Average Age of Inventory of approximately 71 days.
3. Account Receivable Turnover Ratio Interpretation:
The Reliance Weaving Mills limited Receivable Turnover ratios deteriorated from 2010 to
2011, which means has relatively come up. In 2011 Reliance Weaving Mills limited had a
ratio of 19.6 and in 2010 has a ratio of 18.3.
4. Average Collection Period Interpretation:
The ability of the firm of collecting the receivables in the specific time. Here in the year 2010
the turnover in days was almost 19, but the collection days decrease in the year 2011 and the
collection period of approximately 18 days.
Accounts Payable & Working Capital
1. Accounts Payable Turnover Ratio Interpretation:
The Reliance Weaving Mills limited Payable Turnover ratios deteriorated from 2010 to 2011,
which means has relatively come up. In 2011 Reliance Weaving Mills limited had a ratio of
1.5 and in 2010 has a ratio of 1.4.
2. Average Payment Period Interpretation:
Reliance Weaving Mills limited average period for payment has increase to 257 days in 2010
which was 240 days in 2011. This reduction in average payment period shows that how
efficiently company is paying back their creditors and also assuring that payments are being
made in a prompt manner by Reliance Weaving Mills limited to its creditors. This period
should remain low as much as possible.
3. Working Capital Turnover Ratio Interpretation:

Working capital Turnover Ratio Reliance Weaving Mills limited capital will be improve than
last year 2010 is 14.0% improvement in 2011 is 33.7 % of capital Turnover Ratio.

4. Total Assets Turnover Ratio Interpretation:

The ratio is supposed to be high. Here we can see that the Reliance Weaving Mills limited
companys total asset turnover ratio in 2010 was 1.79, which means that the company
generated more revenue of asset investment. The ratio then comes slightly down in 2011.
Profitability Ratios
1. Gross Profit Ratio Interpretation:
The ratio should be low according to the definition. Because low the ratio, low will be the
firms ability to produce goods and services at high cost with low sales. Here in this table
there is large difference between the ratios in two years, but its still low, which means it is
unfavorable.
2. Net Profit Ratio Interpretation:
According to the definition, low the ratio, low will be the firms ability to pay its taxes. In the
year 2010, the margin was little low but in 2011 the margin decreases by 5.04%.
3. Operating Profit Ratio Interpretation:
Reliance Weaving Mills limited operating profit margin has decreased in 2011 than the
margin in 2010 by approximately 7.06%. This decrease in Operating Profit Marin is mainly
due to growth of net revenue, good cost control and weak productivity in company in 2011.
4. Expense Ratio Interpretation:
Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 1.03%,1.01%, and of respective sales in the last two consecutive years. The
overall tendency of the cost of sales is increasing.
Profitability & Market Ratios
1. Earnings per Share Interpretation :
The Profit on Share has increased by Rs16.35% per Share. This shows a Positive trend in the
Company and the production and sales comparing to last year have increased manifolds.
2. Return on Total Assets Interpretation:
The increase in Return on Assets indicates that the company is generating high profits from
all of its resources in the year 2011 as compared to the year 2010. The low of this ratio is, the
negative for the company.
3. Return on Equity Interpretation:
The ratio should be higher. Here starting from 2010, the ratio was 1.30 % and goes up in 2011
to 1.63%. This increase in Return on Equity is a good thing for stockholders and indicates

that is Reliance Weaving Mills limited using the equity provided by stockholders during this
specific year effectively and using it to generate more equity for the owners.

Market Ratios
1. Price Earnings Ratio Interpretation:
Price earnings ratio is equal in both years 2010 and 2011 as same 0.69.
2. Market to Book Value Ratio Interpretation:
We can say that Reliance Weaving Mills limited future prospects are being viewed favorably
by investors. Because still, investors are willing to pay more for stocks than their accounting
book value as M/B ratios fluctuation is negligible in 2011 against 2010.