financial management mid term kirti,shailja

8/11/2019 Financial Management Mid Term Kirti,Shailja

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Financial

ManagementAnalysis of Financial Statement (Ratio Analysis)

for the year 2013-2014 of

Future Retail

Mid Semester Presentation, Semester-III, Master of Fashion Management, NIFT, Kolkata

Durgesh Nandini, Indranil Saha, Kirti Dhingra,

Savita Rani, Shailja Jajodia



2



Objective

• To interpret the financial report of

Future Retail for the financial year

2013-2014

3



Limitations &Considerations

• The previous period accounts comprise of financial

performance of Pantaloons Fashion Business

• The previous period of accounts was for eighteenmonths period, whereas the current financial period is

of fifteen months period

• All the amounts are in Indian Rupees

• All figures given are in crores

4



FUTURE RETAIL5



RATIO ANALYSISA form of Financial Statement Analysis that is used toobtain a quick indication of a firm's financial performancein several key areas#

7

#Source: Ratio Analysis; www.prenhall.com/divisions/bp/app/cfl/RA/RatioAnalysis.html



LIQUIDITY RATIO

• Current Ratio

• Quick Ratio

• Super Quick Ratio

• Stock Turnover Ratio

• Debtor Turnover Ratio

• Creditor Turnover Ratio 8

Short Term Capability of the Company to Meet Short Term Obligations



Current Ratio

=Current Assets#/Current

Liabilities

Calculation

2013-2014 2012-2013

4925.01/3746.53

= 1.314533261.59/6876

.84=4.836~4

Interpretation

•For every one rupee ofcurrent liability , Future

Retail has Rs.1.3145 of

currents assets to meet

them in the current year

• For every one rupee of

current liability , Future

Retail has Rs.4 of

currents assets to meet

them in the previous year

# Also known as Gross Working Capital; Net Working Capital=GWC-CL=1178.48

9



Quick Ratio=Quick Assets/Current Liabilities

Calculation Interpretation

•

For every one rupee ofCurrent Liability, FutureRetail has Rs.0.0085 ofQuick Assets in the currentyear


current liability, FutureGroup has Rs.0.015 ofQuick Assets in the previousyear

10

2013-2014 2012-2013

32.18/3746.53

= 0.0085106.6/6876.8

4=0.015



Super Quick Ratio

=Super Quick Assets/Super Quick

Liabilities=Cash in hand + Investment/Current

Liability – BO


•

For every one rupee ofcurrent liability, FutureGroup has Rs.0.0141 ofSuper Quick Assets in thecurrent year


current liability, FutureGroup has Rs.0.015 ofSuper Quick Assets in the

previous year

11

2013-2014 2012-2013

32.18+20.92/3

746.53

=0.0141

106.6/6876.84

=0.015



Stock Turnover Ratio=COGS#/Average Stock


•Future Retail replenishes itsstocks 5 times in an financial

year in the current year

• Future Retail replenishes its

stocks 9 times in an financialyear in the previous year

• Higher the STR shows more

the sale of goods, good for the

company

12

#COGS=Net Sales-Gross Profit; Net Sales= Gross Sales-Returns

2013-2014 2012-2013

11336.16/2140.2

4 + 3113.29/2

= 5 times

27105.11/2957.9

9

=9 times



Stock Holding Period= 12/ STR


•

Every 3 months FutureRetail revolves its stock inthe current year

• Every 2 months FutureRetail revolves it stock inthe previous year

• Lower the stock holding period, better for thecompany

13

2013-2014 2012-2013

=12/5

=2.4~3

12/9

=1.3~2



Debtor Turnover

Ratio=Net Creditsales/Average Debtors


•On an average Future Retailhas its debtors paying 48 times

in the current year

• On an average Future Retail

has its debtors paying 20 timesin the previous year

• Higher the DTR, better for the

company

14

2013-2014 2012-2013=11336.16/165.0

1+313.98/2

=47.3 ~ 48

27105.11/1371.7

0

=19.76~ 20



Debt Collection Period=12/DTR


•

Every 8 days Future Retailcollects the money back fromits debtors in the current year

• Every 18 days Future Retailcollects money backs from itsdebtors in the previous year

• lower the debt collection period, better for the company

15

2013-2014 2012-2013

=12/47.3

=0.25 Months

=7.5 Days ~ 8

Days

=12/19.76

=0.60Months

=18.4 Days

~ 18Days



Creditor Turnover Ratio

=Net Credit Purchases/Average

Creditors


•On an Average Future Retail

pays 9 times to its creditors in

the current year

• On an average Future Retail

pays 11 times to its creditorsin the previous year

• Lower the creditor turnover

ratio, good for the company

16

2013-2014 2012-2013=8498.87/810.02

+1224.02/2

=8.35663 ~ 9

27132.94/99.86+

4884.61/2

=10.8~11



Credit Payment Period=12/CTR


•

Every 2 months Futuregroup has to pay back themoney to its creditors in thecurrent year

• Every 1 month Future Retailhas to pay back to its

creditors in the previousyear

• Creditor payment periodshould be higher

17

2013-2014 2012-2013

=12/8.35663

=1.435 ~ 2

12/10.88

=1.10~1



CAPITAL STRUCTURE RATIO

• Debt-Equity Ratio

• Debt-Capital Ratio

• Coverage Ratio

• Interest Coverage Ratio

• Dividend Coverage Ratio

18

Long Term Capability of the Company to Meet Long Term Obligations

Ability of the company to pay back the principal

Ability of the company to pay back theinterest/dividend



Debt EquityRatio=Debt/Equity


•For Rs.1.93 of Debt, FutureRetail has Rupee 1 of Equity

• Since the Debt is more than

equity:• Less control over the investors

• Less decision making abilities

• Reduced credit worthiness

19

2013-2014 2012-2013

1.93 0.96



Interest CoverageRatio=EBIT/Interest


•

Future Retail is able to meet itsinterest payments one time over

• The lower the ratio, the more the

company is burdened by debtexpense

• The company is not generating

sufficient revenues to satisfyinterest expenses

20

2013-2014 2012-2013374.95/373.68

=1.0031.07



Dividend CoverageRatio=PAT/Dividend


•The company is retaining ahigher portion of its earnings

to meet its financing

requirements which may

result in higher dividend

payouts in the future

21

2013-2014 2012-20131.27/0.41

=3.0984.36



PROFITABILITY RATIO

• Profitability shows the overall efficiency of the company

• Profitability ratios are the measure of its overall efficiency

and performance

22

fi bili



ProfitabilityRatios

In Relation with

Sales

Gross ProfitMargin

Operating ProfitMargin

Net Profit

Margin

In Relation with

Expenses

COGS Ratio

OperatingExpenses Ratio

In Relation with

Investment

Return onInvestment

Ratios

ROA

ROCE

ROE 23



Profitability in Terms ofSales

Ratios that show margins; represent the firm's ability

to translate sales into profits.

• Gross profit margin

• Operating profit margin

• Net profit margin

24



Gross Profit Margin=Gross Profit/Net Sales x100%


•

For every rupee in sales,company earned 25%

profit but Spent 75% to

make it

25

2013-2014 2012-2013=2838.51/11336

.16 x100%

=25%



Operating Profit Margin=EBIT/Net Sales x100%


• Out of every rupee Future

Retail made in sales, it

spent 3.3% on Expenses

26

2013-2014 2012-2013=374.95/11336.

16 x100%

= 3.3%



Net Profit Margin=Net Profit/Net Sales


•

There is only 0.0112% profit earned by the

company after

consideration of all

expenses including taxes

interest, and depreciation

27

2013-2014 2012-2013=1.27/11336.16

x 100%= 0.0112%



Profitability in Terms ofExpenses

• COGS Ratio

• Operating Expenses Ratio

28



COGS Ratio=COGS/Sales x100%


•

74.96% share of sales isconsumed by cost of

goods sold.

29

2013-2014 2012-20138497.65/11336.

16x100=74.96%



Operating Expenses Ratio

=Operating expenses/netsales x100


•

21.73% of income is being spent on

maintenance and

operational expenses.

30

2013-2014 2012-2013

=2463.56/113

36.16 x100%

= 21.73%



Profitability in Terms ofInvestment

Ratios that show returns represent the firm's

ability to measure the overall efficiency of thefirm in generating returns for its shareholders.

• Return on Assets

• Return on Equity

• Return on Capital Employed

31



Return on Assets=PAT/Avg.Total Assets x100%


•

0.013% earnings weregenerated from invested

capital (assets)

32

2013-2014 2012-2013=1.27/9976.25

5x100

= 0.013 %



Return on Equity=PAT/Avg. Equity


•

0.0386% equity shareinvested in the firm

33

2013-2014 2012-2013=1.27/3287.1

x100%

= 0.0386%



Return on Capital Employed=PAT/Employed capital x 100%


•

0.013% will be returnedon capital employed

34

2013-2014 2012-2013= 1.27/9519.59

x100

= 0.013%



ACTIVITY RATIO

• Capital Turnover Ratio

• Working Capital Turnover Ratio

• Asset Turnover Ratio

• Current Asset Turnover Ratio

• Fixed Asset Turnover Ratio35



Capital Turnover Ratio=COGS/Total Capital


• It shows how well a

company uses its

stockholders equity to

generate revenue.

• The higher the ratio, the

more efficiently thecompany is using its

Capital

36

2013-2014 2012-20138497.65/4632

= 1.83 times1.26 times



Working Capital Turnover Ratio

=COGS/Working Capital


•

It measures how well a companyis utilizing its working capital to

support a given level of sales.

• Higher CTOR indicates

management is being highly

efficient in utilising its working

capital

37

2013-2014 2012-2013=8497.65/4611.0

3

= 1.84 times

0.04 times



Total Asset TurnoverRatio=COGS/Total Assets


•

It measures the ability of thecompany to use its assets to

efficiently generate sales

• Higher ATOR is favorable for

the company because it

shows how efficiently the

company uses its assets

38

2013-2014 2012-2013=8497.65/6024.5

8

= 1.4104 times

1.09 times



Current Assets Turnover Ratio

=COGS/Current Assets


•It indicates that the currentassets are turned over in

the form of sales more

number of times.

• Higher CATR indicates

the capability of the

organization to achieve

maximum sales.

39

2013-2014 2012-2013= 8497.65/

4925.01

= 1.72 times

0.035 times



Fixed Asset Turnover Ratio=COGS/Fixed Asset

Calculation Interpretation• It measures the company’s

ability to generate net salesfrom fixed assets

investment.

• Higher FATR shows the

company has been moreefficient in using the

investment in FA to generate

revenues.

40

2013-2014 2012-2013=8497.65/4340.24

= 1.95 times2.59 times



INTEGRATED RATIO

• Earning Power of the Company

• Return on Asset

41



Return on Asset

ROA

Net MarginRatio

PAT/Sales

AssetTurnover

Ratio

Sales/Asset

42

PAT/Assets



Return on Asset

=NM Ratio*Asset TurnoverRatio


•

0.013% earnings weregenerated from

invested capital

(assets)

43

2013-2014 2012-20130.0112*1.136

=0.013


http://slidepdf.com/reader/full/financial-management-mid-term-kirtishailja 44/46Conclusion

• The Company’s Sales and Other Operating Income has increased

from Rs.6,987.73 Crores to Rs.11,577.44 Crores with YOY growth

of 98.82%

• Store Sales growth of 5.8%

• Profit after Tax is Rs.1.27 Crores as compared to Rs.288.32 Crores

during the previous financial period

• The Company’s Basic Earnings per Share (EPS) has reduced from

Rs.12.08 to Rs.0.12 per share

• Interest & Financial charges outflow has increased from Rs.460.41

Crores in previous period to Rs.692.54 Crores 44



Reference

• Chandra, P. (2013). Financial Management.

• www.futureretail.com/annualfinancial_report_2013-

14.pdf (7TH SEPTEMBER, 2014, 9:57 PM)

45

http://www.futureretail.com/annualfinancial_report_2013-14.pdf







THANK YOU

46

financial management mid term kirti,shailja

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