RATIO

ANALYSIS
 48
ROHAN KULKARNI
40
AKSHAYE KAPSE
RAVI JESWANI
37
12
DEVENDRA BELANI
HIMANSHU ANAND
05
SAKET AMBEKAR
04
Group Members
COMPANY PROFILE OF
NTPC
Indias largest power company, NTPC
was set up in 1975 to accelerate
power development in India. NTPC is
emerging as a diversified power
major with presence in the entire
value chain of the power generation
business.
 NTPC
Apart from power generation, which
is the mainstay of the company,
NTPC has already ventured into
consultancy, power trading, ash
utilisation and coal mining. NTPC
ranked 317th in the 2009, Forbes
Global 2000 ranking of the Worlds
biggest companies.
Growth
Market Capacity
 Ratio Analysis
Ratio analysis is one of the
techniques of financial analysis to
evaluate the financial condition and
performance of a business concern.
Simply, ratio means the comparison
of one figure to other relevant figure
or figures.
 Ratio Analysis
According to Myers , "Ratio analysis
of financial statements is a study of
relationship among various financial
factors in a business as disclosed by
a single set of statements and a
study of trend of these factors as
shown in a series of statements."
Profitability ratios
 Gross profit ratio (GP
ratio)

Gross profit ratio = Gross Profit

*100
Net Sales
 Gross Profit Ratio
GP Ratio ( in %)
Compan
NTPC 35
y 31.15
Gross Gp Ratio 30 26.91
25.24
F.Y. Net Sales 25
Profit ( in %)
20
2007-08 11,540.90 37,050.10 31.15 15
10
2008-09 10,583.60 41,923.80 25.24 5
0
2009-10 12,466.10 46,322.60 26.91 2007-08 2008-09 2009-10

GP Ratio ( in %)

In 08-09 the G.P. Ratio has declined drastically (591bps)

indicating sudden increase in cost of production.
In 09-10 Co. has managed to control its cost which can
be seen by increase in the gross margin (167 bps).
 Net Profit Ratio

Net profit ratio = Net Profit

*100
Net Sales
 Net Profit Ratio
NP Ratio ( in %)
Company NTPC 20.5
20.01
NpRatio(in 20
F.Y. NetProfit NetSales 19.56
%) 19.5

2007-08 7414.8 37050.1 20.01 19 18.84

2008-09 8201.3 41923.8 19.56 18.5

2009-10 8728.1 46322.6 18.84 18

2007-08 2008-09 2009-10

NP Ratio ( in %)

NTPC is able to increase its net profit from 2007-08 to

2009-10 but is not increased proportionately as
compared to increase in Net sales from 2007-08 to
2009-10 and thus Net profit ratio has a decreasing
trend

 Operating Ratio

Operating ratio = Cost of good sold+

Operating expenses *100
Net Sales
 Operating Ratio
Operating Ratio ( in %)
Company NTPC
76
74.88
Operating 75
Operating 74 73.36
F.Y. NetSales Ratio(in
Cost 73
%) 72
71
2007-08 25550.1 37050.1 68.96 70 68.96
69
2008-09 31391.6 41923.8 74.88
68
67
66
2009-10 33980.1 46322.6 73.36 2007-08 2008-09 2009-10

Operating Ratio ( in %)

Increase in 08-09 (592 bps) and slight decrease in

09-10 (152 bps).

NTPC is not able control their operational cost and

thus their operational ratio is increasing from 07-08
to 09-10.
 Return On Shareholders
Investment Ratio

Return on
shareholders = Net profit after tax - Preference
dividend *100
investment Share holder's fund
 Return On Shareholders
Investment Ratio
Ratio ( in %)
Company NTPC 14.1

14 13.98
Shareholder's 13.9
F.Y. NPAT Ratio(in%)
Fund 13.9

13.8
2007-08 7414.8 54267.4 13.66
13.7 13.66
2008-09 8201.3 58994.9 13.9 13.6
2009-10 8728.1 62437.5 13.98 13.5
2007-08 2008-09 2009-10

Ratio ( in %)

NPTCs return on shareholders investment is

more or less same for last 3 years.
Overall efficiency is increasing.
 Return on Equity Capital
(ROEC) Ratio

Net profit after tax - Preference dividend

*100
Return on Equity Capital = Equity share
capital
 Return on Equity Capital (ROEC)
Ratio
ROEC Ratio (in %)
Company NTPC 110
105.85
Equity
ROECRatio 105
F.Y. NPAT Share
(in%) 99.46
Capital 100

2007-08 7414.8 8245.5 89.93

95
89.93
90
2008-09 8201.3 8245.5 99.46
85
2009-10 8728.1 8245.5 105.85 80
2007-08 2008-09 2009-10

ROEC Ratio (in %)

ROEC ratio has increasing trend in 08-09 (953 bps)

and in 09-10 (639bps).
Investors are getting good returns suggest increase
in the profitability.
Earnings per Share (EPS)
Ratio

Earnings per Share= Net profit after tax -

Preference dividend *100
No. of Equity share
 Earnings per Share (EPS)
Ratio
EPS Ratio (in %)
Company NTPC 110
105.85
105
No.ofEquity EPSRatio
F.Y. NPAT 100
99.46
Shares (in%)
95
89.93
2007-08 7414.8 8245.5 89.93 90
85
2008-09 8201.3 8245.5 99.46 80
2009-10 2007-08 2008-09 2009-10
8728.1 8245.5 105.85
EPS Ratio (in %)

Increasing trend in 08-09 (953 bps) in 09-10 (639)

Suggests increase in the profitability
 Price Earnings Ratio (PE
Ratio)

Market price per equity share *100

Price Earnings Ratio = Earning per share
 Price Earnings Ratio (PE
Ratio)
PE Ratio (in %)
Company NTPC 25 23.69
20.13 19.21
MarketPrice PERatio 20
F.Y. EPS
Share (in%) 15

2007-08 181 8.99 20.13 10

5
2008-09 235.7 9.95 23.69 0
2009-10 203.47 10.59 19.21 2007-08 2008-09 2009-10
PE Ratio (in %)

NTPC shares has potential increase in the market

price
 DUO POINT ANALYIS
Rate of
Return of
Investment

Net Profit
as Investment
Percentage turnover
of Sales

Net Sales Total

Profit Sales
assets
0.09
0.09
0.09
0.08
0.08
0.08
2007-08 2008-09 2009-10
Liquidity ratios
 Current Ratio

Current Assets
Current Ratio = Current
Liability
 Current Ratio
Company NTPC
Current Ratio
3.3
3.22
Current Current 3.2
F.Y. CurrentRatio
Assets Liabilities 3.1
3
2.89
2007-08 2.9 2.86
25548.8 7929.9 3.22
2.8
2008-09 2.7
30925.3 10688.6 2.89
2.6
2009-10 2007-08 2008-09 2009-10
30815.7 10758.1 2.86
Current Ratio (In %)
The NTPC has achieved the current ratio of 3.22, 2.89
& 2.86 during the years 07-08, 08-09, 09-10
respectively.
NTPC may have adapted aggressive working capital
policy. The NTPC has high liquidity because of high
value of current ratio and also can easily fulfill the
short term liability.
 Quick Ratio

Quick Assets
Liquidity Ratio = Current
Liability
 Quick Ratio
Company NTPC
Quick Ratio
2.7
2.59
F.Y. QuickRatio 2.6
2.5
2.5
2.4
2007-08 2.16 2.3
2.2 2.16
2008-09 2.59 2.1
2
2009-10 2.5 1.9
2007-08 2008-09 2009-10

Quick Ratio

NTPCs quick ratio lies between 2 times to 3 times

from 07-08 to 09-10 which means very high short
term liquidity position.
The company can easily pay its liabilities
Leverage Ratios
 Debt -to- Equity Ratio

Debt
Debt to Equity Ratio = Equity
 Debt -to- Equity Ratio
D/E Ratio
Company NTPC 0.7
0.59 0.61
0.6
0.5
F.Y. Debt Equity D/ERatio 0.5
0.4
2007-08 0.3
27190.6 54267.4 0.5
0.2
2008-09 0.1
34567.8 58994.9 0.59
0
2009-10 2007-08 2008-09 2009-10
37797 62437.5 0.61
D/E Ratio

NTPCs debt- equity ratio there is more or less no

changes in the from 2007-08 to 2009-10
More of owners funds are invested and the less
funds ae borrowed.
Activity Ratios
Inventory Turnover Ratio

Cost Of Good Sold

Inventory Turnover ratio =
_____________________
Average inventory at cost
Inventory Turnover Ratio
Inventory Turnover Ratio
Company NTPC
40
33.59
35
InventoryTurnover 28.21
F.Y. 30
Ratio 25
20
13.99
15
2007-08 33.59
10
5
2008-09 28.21 0
2007-08 2008-09 2009-10
2009-10 13.99
Inventory Turnover Ratio

NTPCs Inventory turnover ratio was very high in

2008 i.e. 33.59 and it has decreased to 13.99 in
2010.
Indicates inefficient management of inventory or
investment in inventory is lowered.
 Debtors Turnover Ratio

Net Credit Sales

Debtors turnover Ratio =
__________________
Average Trade Debtor
 Debtors Turnover Ratio
Company NTPC Debtors Turnover Ratio
20 17.52
DebtorsTurnover
F.Y. 15
Ratio 12.78

10 9.06

2007-08 17.52
5
2008-09 12.78 0
2007-08 2008-09 2009-10
2009-10 9.06
Debtors Turnover Ratio

NTPSs debtors turnover ratio is more decrease

from 17.52% in 2007-08 to 9.06% in 2009-10
It shows that NTPCs efficiency to convert its
debtors into liquid is decreasing.
Working Capital Turnover
Ratio

Cost Of Sales
Working Capital turnover Ratio =
_________________
Net Working Capital
 Working Capital Turnover
Ratio
Ratio
Company NTPC
2.4
2.31
NetWokring 2.3
F.Y. CostofSales Ratio
Capital
2.2
2.1
2.07
2007-08 37050.1 17618.9 2.1
2.1

2
2008-09 41923.8 20236.7 2.07 1.9
2007-08 2008-09 2009-10
2009-10 46322.6 20057.6 2.31 Ratio

Working capital turnover ratio of NTPC is more or less

same for last 3 years between the range of 2.10 times
to 2.31 from 2007-08 to 2009-10.

Indicates the efficient utilization of working capital

 Fixed Assets Turnover
Ratio

Cost Of Sales
Fixed Assets turnover Ratio =
______________
Net Fixed Assets
 Fixed Assets Turnover
Ratio
Ratio
Company NTPC 0.71
0.7
F.Y. Ratio 0.7
0.69
0.69
2007-08 0.7 0.68
0.67
0.67
2008-09 0.67 0.66
0.65
2009-10 0.69 2007-08 2008-09 2009-10
Ratio

NTPCs ratio is more or less between 0.67 to 0.70

from 2008 to 2010.
Indicates Efficiency and the profit earning capacity is
high.
 Key Findings
NTPC is a key organization in India as far as the
supply of power is concerned.
The financial health of NTPC is sound enough and it
appears positive in accordance with its balance sheet
and profit & loss A/c.
Gross profit ratios and Net Profit ratios are
decreasing from 2007 to 2010 due to more increase
in operational cost as compared to Net Sales
Ntpcs current ratio is very good which shows highly
liquidity available
NTPCs ability to convert the debtors in liquid has
highly come down compare to last two years.
 Suggestions
firm should efficiently manage its operational activity so
that operational cost is controlled or maintained with
increase in Net Sales and thus will lead to increase in
gross profit ratio and net profit ratio.
NTPCs more funds are blocked in current asset leading
to high current asset ratio.Instead the funds to more
used in operational activity to increase productivity
NTPC should tighten the debt collection efforts and
should reduce the amount tied up in debtors.
NTPC is more traditionally financed with low debt and
more of equity financing, so in future debt should be
preferred for financing to bring the ratio close to the
ideal ratio of 1:1.
Thank
You