 Namaste. In last few sessions, we are discussing the case of shipping corporation of India. We have seen how to do horizontal analysis by preparing a comparative statement where we compare the current figures with last year. Then we have also seen how to prepare a common size statement to go for vertical analysis where we convert all figures into percentages of 100 and then we can compare either with the same company in earlier years or we can compare across different players in the peer group. So within the same industry who are the competitors and how their balance sheet or P&L looks like, it can also be compared with industry average or with the particular segment in case of a broader companies. So I am requesting you to study your own company once again and compare it with their other peers. You can go to websites like money control where they will give you all the data in the balance sheet in the Excel format. Now let us go to one more analysis in today's session. So here again, we have got the data for shipping corporation but now it is a long term data. It is a 5 year data. In earlier sessions we only compare 16 and 17, today we will compare 5 years figures. So what we are going to calculate is known as trend analysis. So we will take March 13 figure as 100 and compare other figures as a percentage to that base. So we will know over the period how is the moment. This is known as trend analysis. We can also calculate CAGR cumulative growth rates but right now we will just do the trend. So we have just seen how to calculate it. We have taken the base as 100. So that is a figure for March 13. So March 14 figure is calculated as E7 upon F7. Now for March 15, it is D7 upon F7, are you getting me? So March 16, C7 upon F7 and for the March 17, we will compare the current figure that is March 17 figure with March 13 figure. So if you look at the revenue trends, you will realize that March 17 what was 100 is more or less up and down and it is at the same position. It slightly went down and now it has slightly increased, sorry this is for reserves and surplus. Now I will just hide this. So we can also do it for share capital although it would not make much sense because share capital is unchanged, converting it into percentage. So share capital is same 100% in each year. For other figures like reserves, reserves have also not changed much. In the first 2 years the company that is in earlier years the company was in loss. I think this also got converted into percentage, it is not changing but we will leave it. So are you getting me? So company was reducing its reserves, now its reserves are slightly increased and again they are slightly decreasing. Look at trends in borrowings, you will realize that borrowings are slowly going down from 100, company is systematically repaying its long term borrowings and becoming relatively debt free. Short term borrowings earlier it went up then it went down, now they have again gone up. Trade payables were slowly going up down, again they have increased substantially. If you look at the trends of total current liabilities it shows slightly rising trend which is worrisome because their revenue is more or less constant. So no reason for that to go up. Tangible assets are again more or less constant, capital WIPC you can see in one of the years the capital WIPC was high, maybe they were in the process of building new ship now again it has gone down. Total non-current assets have shown a significant rise in the current year. If we look at current assets you will realize that current investments are slowly going down. Perhaps they are disposing of their investments, inventory is anyway a very small amount but the trade receivables are slowly going down because their business is also shrinking. Cash and cash equivalent is more or less constant it had gone down in one of the years short term loans and advances had short up in between they went down that again they have bit increased. So this needs to be investigated and if you look at total assets there is somewhat shrinking of total assets over the period of time. So like this in trend what is done is for the earliest year we take as 100 and over the years we go for the comparison. Now let us do it for P&L items it might make more sense for P&L items to you. So we have already seen the P&L earlier. So let us hide the figures or maybe I will keep one year figures. Now if you look at the revenue you will realize that first three years it was constant but in last two years there is a fall. Other income anyway it is a small amount but it is slowly going down because their investments are also getting disposed of perhaps. Operating and direct expenses they are going down because the revenue itself is going down there is a fall in the operating and other expenses it is a positive sign because you can see more fall than the fall in the revenue. Employee expenses are more or less constant, finance cost is also not changed much actually should have substantially reduced because they are repaying their loans compared to earlier years depreciation figures are going down perhaps because their assets are becoming older, other expenses anyway negligible amount. If you look at the profit now there is a significant fall in the profit over the period of time tax total taxes earlier went up now they have gone down and the final figure reported net profit is also showing a reduction which is not a very positive sign. So this is how the trend is calculated the purpose of trend is having a long term perspective instead of just looking at two or three years will it will be take a long term perspective but we have to keep in mind that industry should be reasonably stable for a long term perspective and that for that company also there should not be major changes. So for a company like shipping corporation it is good because there has not been major changes either in their assets or in their revenue model getting it. Now with this we will go to major form of analysis that is known as ratio analysis. Now this is the data for Havels limited this is a consumer goods manufacturing company I will request you to keep your ratio sheet ready because we will be calculating various ratios I will just show you the sheet which has been shared with you but if you are not having it we will just have a look kind of revision for you please keep that sheet ready because we can readily calculate the ratios. Now for liquidity ratio we have discussed earlier cash current and quick ratio that is current assets by current liabilities and quick assets by quick liabilities this ratio in this sheet has been slightly tweaked here we have gone for quick ratio upon current liabilities which is a more conservative measure. There can also be a ratio called as cash ratio where we are calculating cash plus cash equivalent as a percentage of current liabilities. Now this is even more conservative we want to know how much cash we have for repayment of current liabilities. One more ratio related to liquidity is inventory to net working capital inventory upon working capital working capital is C A minus C L. Now is it good to have higher ratio or lower ratio for inventory to net working capital? Higher ratio will mean that their working capital is relatively illiquid because inventory is not so liquid asset for other as ratios like current and quick ratio higher ratio is normally good from liquidity viewpoint although it will have a negative impact on profitability if we have too higher ratio. Next ratios are profitability ratios very simple to understand because denominator is always total operating revenue and we take the respective profit in the numerator right now EBITDA has been taken I hope you have heard about this term EBITDA this is earning before interest depreciation and amortization this term is very much popular in US and often used by analysts to know the cash profit generated by the business. So here we have calculated it as a percentage of sales then EBIT or PBIT this is the operating revenue profit as a percentage of sales before interest and taxes the net profit margin we have also discussed about return ratios of them ROI is perhaps the most important that is EBIT upon capital employed it can be done at a company level or at a project level also then ROTA that is written on total assets ROE EPS which is very important for shareholders this particular ratio we had not discussed earlier that is known as EVA economic value added in EVA we take no-pat or net profit net operating profit but we reduce taxes so net operating profit after tax and we reduce the charge for the capital. So capital into cost of capital because you will have to compensate the capital in the form of interest or dividend we calculate a weighted average rate of cost of capital and apply it on all the capital here the capital does not refer only to equity but the total capital employed. So no-pat minus capital into cost of capital gives you another major of profitability known as EVA. So we will not necessarily go for all the ratios but keep the sheet ready now the next type of ratios are activity ratios we have discussed them extensively so I will not repeat but these are the formulas in short it is also given where to find these items you remember return ratios and turnover ratios are composite one figure is from P and L other figure is from balance sheet. Next are leverage ratios the most popular being debt to equity or debt equity ratio you can also go for debt to asset ratio interest coverage ratio and the last 3 ratios are particularly useful for shareholders which are in the form of PE ratio dividend yield and so on I think dividend yield we have not discussed. So dividend yield refers to DPS or dividend per share divided by market price. Now from investor angle it seeks to find out what percentage of return does the dividend give that is why it is called as dividend yield. Dividend payout ratio is DPS upon EPS. So we come to know what percentage of their earning is being distributed by way of dividend higher is good or lower is good not necessarily higher will mean that companies shareholders are getting more cash dividend lower will mean that company is investing that amount and is more of a growth oriented company. So according to stage of industry and company companies have to decide the payout ratio many times companies try to keep it constant ok. So this was a summary sheet for various ratios now let us go to actual figures for Havels and try to calculate the important ratios. Now we have got balance sheet and P and L both so that we can calculate the composite ratios as well first try to have a view in the balance sheet. So you can see the capital is constant there is a gradual rise in reserves so company must be a profit making company their long term borrowings they have repaid and have become a zero debt company now short term borrowings are also repaid completely trade payables are nearly constant current liabilities other current liabilities are somewhat increasing tangible assets have slightly gone up so company is investing something their non-current investments had doubled earlier it has gone down now cash and cash equivalents has gone up. Now you do not have to look at every figure but we just had a overall look at the balance sheet now let us try to calculate a few important ratios. So if we start with liquidity in liquidity what ratio you would like to calculate can somebody suggest what is the important ratio in liquidity I think most of you know current ratio is the most important ratio and the formula is CA that is total current assets upon current liabilities. So let us try to calculate the current ratio this is CA divided so we are taking total current assets divided by total current liabilities. So we get 1.88 I am just reducing the unwanted decimals so over a period of 3 years you can see there is a gradual rise in current asset is it a good sign normally yes because we know standard ratio is to 2 is to 1 and slight increase in the ratio in their case and we are trying to go to the standard ratio. Any other important liquidity ratio sometimes you know that we calculate quick ratio now how will you calculate quick ratio sorry this was CR current ratio now we will go for quick ratio what is the formula we take trade receivables cash cash equivalents short term loans and advances and other current assets in other words normally we can say it is total current assets minus inventories in the numerator. So please try to calculate along with me we will put this in bracket current assets minus inventory people can use variety of ratios and there can be slight difference in the formulas and divided by quick liabilities quick liabilities are more or less same as current liabilities except we did a bank overdraft right now you can see there is no short term borrowing as such so we will take total current liabilities. So we are getting 1.2 so it has improved from 0.81 then to 0.6 and now 1.26 is it a good sign I think yes we have seen that normally the standard ratio is 1 is to 1. So they are somewhere around it the liquidity position seems to be comfortable so these were the ratios which we have calculated only based on balance sheet. So they are also known as balance sheet ratios now what is what are the other balance sheet ratios we can also comment on their capital structure or it is known as gearing or leverage. So the most popular ratio is debt equity ratio what is the formula of debt equity ratio do you remember it is the long term borrowings divided by the shareholders fund debt upon equity. So ratio was 0.06 and it has become 0 now is it good sign yes from a stability viewpoint because they are slowly repaying their debt anyway even earlier the debts were not very high they were only 6 percent but now even they are repaid some people instead of long term borrowing take long term plus short term borrowing that is total borrowing in the numerator even in that case the amount is 0. So this is known as debt equity ratio now let us go to their profit and loss account. So in P and L what ratios can be calculated one typical ratios one typical ratio which we can calculate is net profit ratio or variety of profitability ratios. So let us go to their net profit or profit for the period which is 715 so NP ratio profit upon sales now always the question is which figures to take because you have got revenue from operation less excise revenue from operations net other operating revenue total operating revenue and total revenue. Similarly since it is a net profit after tax after everything it does make sense to take either total revenue or total operating revenue any of the figures are reasonable but total revenue makes more sense. So you are getting 0.12 we will convert it into percent so around 13 percent. So you can see there was a rise in net profit as a percentage also it has increased from 10 percent to 13 percent is it a good sign definitely because higher profitability is always advantages. We can also calculate the profitability at different level particularly profit before tax this is known as NP BT ratio. So from 12 percent to 17 percent see NP 80 we respond to be less because this is before tax and we will take one more that is known as operating profit. Now you see you have revenue and you have got total expenses they have not calculated any operating profit but usually if we add back depreciation and finance cost we will get PBIT profit before interest and tax or we can also calculate PB DIT to know the cash profits. So what we will do here is we will calculate this is profit before depreciation and tax this is also the cash profit for the business this is also popularly known as EBITDA. Now we are comparing with operating revenue so you can see they have a very stable EBITDA around 15 percent because their sales have increased their profits have increased a bit but otherwise as a percentage it remains constant. So we have now calculated both balance sheet and profitability PNL ratios now we will also go for calculation of return ratios etc but in the next session. Namaste. Thank you.