Financial Statement Analysis of

Godrej India ltd.

GROSS PROFIT RATIO(gross profit/net sales*100)
This ratio is used to analyses how efficiently the company is using its raw
materials, labor and manufacturing-related fixed assets to generate profits. A higher
gross profit ratio means a favorable profit indicator. A manufacturing company has
a higher gross profit ratio.
Godrej India limited is earning a gross profit ratio of 40, 37, 40, 52, and 34% for
the year ending March 2015 to march 2011 respectively. This shows that the
company is earning and the production efficiency is the most at 52% in march
2012(year ending) and it was least at 34 for the year march 2011(year ending)
whereas in march 2013 it had a GP ratio of 40% which shows that the company has
an average GP ratio of 41which shows that it is not too much deviating in other
words it is consistent in earning gross profit and the investments decisions are not
affected in this case.
gross profit margin

40.37415 37.958
88
68

40.404
68

52.510
47

34.18
88

NET PROFIT RATIO (net profit/net sales*100)

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have
been deducted from sales, and income taxes recognized. As such, it is one of the
best measures of the overall results of a firm, especially when combined with an
evaluation of how well it is using its working capital. The measure is commonly
reported on a trend line, to judge performance over time. It is also used to compare
the results of a business with its competitors. This ratio also shows that how much

the company has spent on indirect expenses by seeing the difference between gross
profit and net profit. The mean net profit ratio is 14% with a highest of 16% in
March 2012 and lowest in the preceding year march 2011 with 12% the ratio also
shows the company has been spending a considerable amount of indirect expenses
but the investment decisions are not affected because the ratio is consistent.
Net Profit Margin
(%)

13.19450 15.438
51
05

13.805
19

16.292
99

12.09
95

Return on capital employed

ROCE = Earnings before Interest and Tax (EBIT) / Capital Employed
ROCE is especially useful when comparing the performance of companies in
capital-intensive sectors such as utilities and telecoms. This is because unlike
return on equity (ROE), which only analyzes profitability related to a companys
common equity, ROCE considers debt and other liabilities as well. This provides a
better indication of financial performance for companies with significant debt.
We can see that the best year to invest in this company is March 11-12 where the
ROCE is 43 and in the year march 11 it was the least year of investment the overall
its mean ratio is 25 and standard deviation is 10.77 which is very high and
investing in this company is very much risky.
Return On Capital
Employed (%)

18.49

19.24

17.58

43.11

27.4

Return on net worth

This share reveals that how much profit the company is earning with the money of
equity shareholders. This ratio is not as good as roce as it does not considers the
other liabilities.
The best point of investment was for the year ending March 2012 where return on
net worth was 35.57 and the worst case was March 2015 with 24.02. Over the

years from March 2012 the performance has gone down though as we stated earlier
the performance is not affected by this as the other liabilities are not considered.
Return On Net Worth
(%)

24.02

25.81

29.83

35.57

30.56

CURRENT RATIO (CURRENT ASSET/CURRENT LIABILITY)

Current ratio, also known as liquidity ratio and working capital ratio, shows the
proportion of current assets of a business in relation to its current liabilities.
Current ratio must be analyzed over a period of time. Increase in current ratio over
a period of time may suggest improved liquidity of the company or a more
conservative approach to working capital management. A decreasing trend in the
current ratio may suggest a deteriorating liquidity position of the business or a
leaner working capital cycle of the company through the adoption of more efficient
management practices. Time period analyses of the current ratio must also consider
seasonal fluctuations.
The trend shows that for the year ending march15, 14, 13 the current ratio is more
than 1 that is it is showing that the current asset is more than current liability and
the working capital is positive which means the company can meet its short term
liabilities where as for the year ending march12, 11 it is failing to
Current Ratio

1.230501 1.2756 1.1624 0.8534 0.964

16
71
43
33
73
Meet its short term liabilities as the current ratio is less than 1.

Quick ratio
A stringent indicator that determines whether a firm has enough short-term assets
to cover its immediate liabilities without selling inventory. The acid-test ratio is far
more strenuous than the working capital ratio, primarily because the working
capital ratio allows for the inclusion of inventory assets.

For all the five years quick ratio is less than 1 which means that the company in the
first 3 years is totally depended upon inventory for paying its liability and in all
five cases its shows that smooth running of the company is challenged. The ratio
from march 2015 to 2011 as follows(respectively)
Quick Ratio

0.743308 0.7483
07
25

0.649
97

0.3478
12

0.3996
84

Debt-equity ratio(capital gearing ratio)(long term debts/equity)

A measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders' equity. It indicates what proportion of equity and debt
the company is using to finance its assets. Ratio from March 15 to 11.
Debt Equity Ratio

0.58815
77

0.5555
74

1.1624
54

0.038
62

0.4896
71

For the first and last two years the ratio is below 1 which means that the company
is financed by equity to a greater extent which means that the company is not
growing because when a company is running at a lower profit than the company
switches over to equity it also creates dilution of ownership whereas it is just the
opposite when it comes to march 2013 where it is more than one which means the
company is depended on debt as its return is more than interest.

Stock turnover ratio (cogs/avg stock)

The inventory turnover formula or stock turnover ratio is the rate at which
inventory is used over a measurement period. Inventory turnover is typically
measured on a trend line or in comparison to the industry average to judge how
well a company is performing in this area. It is of use to those organizations that
have a large investment in inventory, to judge whether this investment is changing
in comparison to sales.
Inventory Turnover
Ratio

4.173118 4.9357
51
17

6.6893
67

5.0821
22

10.975
38

Here the inventory turnover ratio is very high which means the stock is kept very
tight and in March 11 it is the highest. The ratio also shows how many times the
stock is converted in to cash in a year. In that case the company is performing fine.

Debtors turnover ratio (net credit sales/average debtors)

This ratio shows how efficient a company is at collecting its credit sales from
customers.
Debtors Turnover
Ratio

10.17128 10.432
25
51

14.385
78

24.315
52

40.996
65

From the ratio we can see that in march 2011 the company is most capable of
collecting debts as it has collected its debts around 41 times in a year and it was
least efficient in collecting
Debtors in March 2015 which was 10.17 times.

Creditors turnover ratio (Net credit purchase/average creditors)

This ratio shows how efficient the company is in paying its creditors.

Creditors Turnover Ratio

0.0899162
8

0.12407
4

0.15115
6

A short-term liquidity measure used to quantify the rate at which a company pays
off its suppliers. Accounts payable turnover ratio is calculated by taking the total
purchases made from suppliers and dividing it by the average accounts payable
amount during the same period.
From the above data we can see that the company is not that efficient in paying its
creditors thus the companys liquidity is challenged.
Interest coverage ratio (ebit/interest)(march15-11)
Interest coverage
Ratio

15.2234
99

16.82
23

14.382
51

42.066
67

13.183
47

From the above data we can see that the company can pay its interest on its debt at
an average of 20 times in a year. In March 2012 the ratio was highest because the
company was successful in paying its debt 42 times. Overall the company is
working fine with respect to this ratio.

Asset turnover ratio

The amount of sales or revenues generated per dollar of assets. The Asset Turnover
ratio is an indicator of the efficiency with which a company is deploying its assets.
Asset Turnover = Sales or Revenues/Total Assets
Generally speaking, the higher the ratio, the better it is, since it implies the
company is generating more revenues per dollar of assets. But since this ratio
varies widely from one industry to the next, comparisons are only meaningful
when they are made for different companies in the same sector.
Asset Turnover Ratio

1.1711343 1.08924 0.99940 1.91006 1.63503

The mean asset turnover ratio is 1.36 which means that the company is generating
1.36 rupees per 1 rupee of asset. The company has not been successful in keeping
this ratio high as the ideal ratio is 2.
In March 13 the ratio was the least with less than 1.

Dividend payout ratio

The dividend payout ratio measures the percentage of net income that is distributed
to shareholders in the form of dividends during the year. In other words, this ratio
shows the portion of profits the company decides to keep to fund operations and
the portion of profits that is given to its shareholders.
Dividend Payout Ratio
Net Profit

24.9

25.04

38.2

43.86

69.54

The mean payout ratio is 40.308 and the highest is 69.54 the company paid a good
percentage of its dividend here which is very good for shareholders but it is
retaining less so bad for the companys growth but as the company proceeded year
after year its payout ratio decreased and retention ratio increased which shows a
growth of the company and in march 15 the ratio was 24.9(the lowest).

Dividend yield ratio

A financial ratio that shows how much a company pays out in dividends each year
relative to its share price. In the absence of any capital gains, the dividend yield is
the return on investment for a stock. Dividend yield is calculated as follows:

dividend yield ratio

5%

4.80% 3.98% 2.92% 5.09%

From the above table we can see that dividend occupies around 5, 4.8, 3.98, 2.92,
and 5.09% of market price of share.
The investor who wants cash flows from his money invested in equity would want
this ratio to be high from the table we can see that the ideal time for that was in the
first and last year.

Price earnings ratio (Market Value per Share / Earnings per Share
(EPS))
A valuation ratio of a company's current share price compared to its per-share
earnings.

pe ratio

22.46

12.54 21.83 21.11 21.42

From the above figures we can say that in march 2015 investors having a mentality
of long-term investments who think of future growth would invest in this period as
the PE ratio is highest at 22.46.The company has done well since march 14 where
it was the lowest.

THE DATAS ARE GIVEN IN ORDER OF MARCH 15,14,13,12,11

CONCLUSION
Thus we infer that the liquidity of the company is not up to the mark as the
working capital is negative in some cases. The PE ratio shows that the company is
growing and now the company is not paying enough dividend to shareholders
rather it is retaining for growth. The turnover ratios shows a good reflection of the
company and a considerable amount of share is being done in indirect expenses
which is inferred from the difference between gross profit ratio and net profit ratio.