Liquidity Ratio

What is Current Ratio? A liquidity ratio that measures a company's ability to pay short-term obligations. Also known as "liquidity ratio", "cash asset ratio" and "cash ratio" The Current Ratio formula is:

Current ratio of BAT in 2010: 8053871 6323404 =1.27

Current ratio of BAT in 2011: 11044355 9570645 =1.15 The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. Here we see that in 2010 BAT current ratio was 1.27 which means that against 1 tk liabilities BAT has 1.27 tk assets.It is good for BAT. In 2011 we see that the current ratio of BAT is 1.15 which is lower than the previous year. We assume that it could be happen because of increasing liabilities and decreasing assets.

What is Acid-Test Ratio? Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Acid-Test= Current Assets Inventories Current Liabilities

Acid-Test of BAT in 2010:

8053871-4366664 6323404 =0.5831

Acid-Test of BAT in 2010:

11044355-5373033 9570645 =0.59

Acid-Test Ratio: lower. Here we see that from 2010 to 2011 acid test ratio is decreasing and we can assume that Bat is dependable on their inventories. Cash ratio: The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can therefore determine if, and how quickly, the company can repay its short-term debt. A strong cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party.

The Cash Ratio formula is:

cash
Current liabilities

Cash ratio of BAT in 2010:

1343853 6323404 =0.2125

Cash ratio of BAT in 2011:

837393 9570645 =0.087

The Cash Ratio:Lower.BAT company has lower cash ratio.From 2010 to 2011 the ratio decreases.

Leverage Ratio:

Debt to 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.
Debt to equity = Total debt/ Shareholders Equity

Debt to equity of BAT in 2010:

7128724 6240709 =1.14

Debt to equity of BAT in 2011:

10509689 5911300 =1.77

Debt to equity: Higher. From 2010 to 2011 the ratio is increasing which means that total debt is

increasing or total equity is decreasing Debt to Total Assets

A metric used to measure a company's financial risk by determining how much of the company's assets have been financed by debt. Calculated by adding short-term and long-term debt and then dividing by the company's total assets

Debt to Total Assets = Total Debt Total assets

Debt to Total Assets of BAT in 2010:

7128724 13369433 =0.53

Debt to Total Assets of BAT in 2011:

10509689 16420989 =0.64

Debt to Total Assets:lower.From 2010 to 2011 the ratio is increasing which means that total debt is increasing or total assets is decreasing Equity multiplier
Like all debt management ratios, the equity multiplier is a way of examining how a company uses debt to finance its assets. Also known as the financial leverage ratio or leverage ratio.

Equity multiplier= Total assets/Total Equity

Equity multiplier of BAT in 2010:

13369433 6240709 =2.14

Equity multiplier of BAT in 2011:

16420989 5911300 =2.77

Equity multiplier:Lower.From 2010 to 2011 thae ratio is increasing which is very good. It means that companys assets is increasing and equity is decreasing Interest Coverage
A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period:

Interest Coverage = EBIT/Interest Expense

Interest Coverage of BAT in 2010:

4324718 16145 =267.86

Interest Coverage of BAT in 2011:

5282957 110687 =47.72

Interest Coverage: In 2010 Firms interest coverage ratio was higher but in 2011 it decreases. So we can say that in 2011 companys ability to pay outstanding debt is decreasing. Cash Coverage The cash coverage ratio is useful for determining the amount of cash available to pay for interest, and is expressed as a ratio of the cash available to the amount of interest to be paid. The ratio should be substantially greater than 1:1 Cash Coverage = EBIT+ Depreciation & Amortization/ Interest

Cash Coverage of BAT in 2010:

4324718+510667 16145 =299.49

Cash Coverage of BAT in 2011:

5282957+542619 110687 =9.68

Cash Coverage: In 2010 cash coverage was higher but in 2011 decreases.

Turnover Ratios
Receivable Turnover: An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Receivable Turnover= Sales/Account receivables

Receivable Turnover of BAT in 2010:

65986503 488053 =135.20

Receivable Turnover of BAT in 2011:

7535735 926842 =81.305

Receivable Turnover:Higher .From 2010 to 2011 Receivable Turnover ratio is decreases. Receivable Turnover in days: A popular variant of the receivables turnover ratio is to convert it into an Average Collection Period in terms of days. The Receivable turnover ratio is figured as "turnover times" and the Average collection period is in "days". Receivable Turnover in days= 365/ Receivable Turnover

Receivable Turnover in days in 2010:

365 135.20 =2.69

Receivable Turnover in days in 2011:

365 81.305 =4.48

Receivable Turnover: From 2010 to 2011 Receivable Turnover in days increases. Inventory Turnover: A ratio showing how many times a company's inventory is sold and replaced over a period Inventory Turnover = Cost of goods sold/ Inventory Inventory Turnover of BAT in 2010: : 13475693 4366664 =3.08

Inventory Turnover of BAT in 2011 :

13455535 5373033 =2.50

Inventory Turnover: From 2010 to 2011 inventory turnover is decreases. Inventory is moving at a slow pace in 2011 than in 2010. Inventory Turnover in days: Inventory represents the number of days it takes to sell the inventory on hand. Inventory Turnover in days =365/ Inventory Turnover

Inventory Turnover in days in 2010: :

365 3.08 =119 days

Inventory Turnover in days in 2011:

365 2.50 =146 days

Inventory Turnover: From 2010 to 2011 inventory turnover is increasing which means that in 2011 it takes more time to sell the inventory on hand

Capital Turnover: A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales.

Capital Turnover=Net Sales/ Total Assets

Capital Turnover of BAT in 2010:

20946040 13369433 =1.56

Capital Turnover of BAT in 2011:

23268861 16420989 =1.41

Capital Turnover: From 2010 to 2011 capital turnover is decreases which shows that BAT is generating sales from their assets is lower in 2011 than in 2010

Profitability Ratio
Net Profit Margin: Profit margin is very useful when comparing companies in similar

industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors Net Profit Margin=Net Profit after taxes/ Net Sales

Net Profit Margin of BAT in 2010:

2878589 20946040 =13.47%

Net Profit Margin of BAT in 2011:

2550591 23268861 =10.96%

Net Profit Margin: From 2010 to 2011 net profit margin decreases it means that sales than 2010 to 2011 is decreases. Return on Asset: An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Return on Asset = Net Profit after taxes/ Total Assets

Return On Assets of BAT in 2010:

2878589 13369433 =21.53%

Return On Assets of BAT in 2011:

2550591 16420989 =15.53%

Return On Assets:From 2010 to 2011 return on assets is decreases. It means in 2010 the company
is effectively converting the money it has to invest into net income which is decreases in 2011

Return On Equity: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Return on Equity= Net Profit after taxes/ Total Equity

Return On Equity of BAT in 2010:

2878589 5911300 =43.14

Return On Equity of BAT in 2011:

2550591 6240709 =46.12

Return on Equity: Return on equity increases from 2010 to 2011 which means that in 2011 the company generates more profit from the shareholders investment.