Time Line Analysis of Different Industries

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CURRENT RATIO:

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the total assets of a company (both liquid and illiquid) relative to that company’s total liabilities. The optimum current ratio though depend on the industry.

2015/03

2014/03

2013/03

2012/03

2011/03

CURRENT RATIO

2.40

2.44

2.22

2.31

2.16

As we see Amara Raja has a high current ratio over the years. This is a company that rarely uses debt and hence we know that all the cash obligations will be met by the company. This tells you that the company is in a healthy state. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into case. Although having a high current ratio is good, but if it’s too high it might suggest that the company isn’t using its current assets well and has working capital problems.

QUICK RATIO:

The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets. It is also known as the acid test ratio. It is a more conservative ratio since it mostly deals with cash and marketable securities. It gives a clearer view on the financial position of company.

2015/03

2014/03

2013/03

2012/03

2011/03

QUICK RATIO

1.61

1.73

1.70

1.66

1.32

We see the quick ratio is fluctuating a little bit, although Amara Raja is in a very healthy position. Increasing CA would mean longer days in account receivables but we see here that the DSO has constant at around 44 days. Hence it tells you that the company is in good health and will meet short term debt obligation or is efficient in employing its working capital strategy.

CURRENT ASSETS TO TOTAL ASSETS:

It indicates the extent of total funds invested for the purpose of working capital and throws light on the importance of current assets of a firm. It should be worthwhile to observe that how much of that portion of total assets is occupied by the current assets, as current assets are essentially involved in forming working capital and also take an active part in increasing liquidity.

2015/03

2014/03

2013/03

2012/03

2011/03

CURRENT ASSETS/TOTAL ASSETS

0.70

0.77

1.06

1.02

0.97

Amara Raja has a high CATA ratio which means it utilizes a lot of current assets and gives us an idea about the working capital. One of the reasons for high CATA is lack of debt in company. In some years the company has more current asset than fixed assets. It is good to have a high CATA ratio.

WORKING CAPITAL TO SALES:

Working capital as a percentage of sales tells a business how much of every sales unit must go toward meeting operational expenses and short-term debt obligations. It also indicates the firm's ability to finance additional sales without incurring additional debt. Again this value also industry specific.

2015/03

2014/03

2013/03

2012/03

2011/03

WORKING CAPITAL TO SALES

0.18

0.20

0.23

0.23

0.22

This means that of every rupee earned in sales only about 0.20 rupees is needed in the working capital. This is a good ratio which means that they can easily meet short term debt obligations. Although a very low ratio would indicate that it does not utilize much working capital to finance more sales. In case of Amara Raja we see that they have a conservative structure, but that is comparable to main rivals EXIDE and lesser than that of battery industry.

ASAHI GLASS INDIA LTD.

Ratio Analysis:

DSO: Days Sale Outstanding

It is a measure of the average number of days that a company takes to collect revenue after a sale has been made.

2015/03

2014/03

2013/03

2012/03

2011/03

DSO

66.51

66.65

64.56

61.12

50.44

We see that the DSO is relatively constant over the past 4 years, between 60-67 days. Though this is not a very good sign as it takes more than 2 months for Asahi to recover the costs incurred, but it is not doing very bad either. Consistency