[Music] [Music] welcome students so we are in the process of discussing the ratio analysis is one of the important tool for the financial analysis or the financial statement analysis until my last part of discussion we were discussing the preparation of we were learning how to prepare the multi-step profitability statement and in that multi-step profitability statement we tried to find out the gross profit ratio with the net sales and then we found out that the gross profit ratio for the Grasim industries is very very very good is a wonderful ratio that gross profit is almost 50% and it's improving over the previous year so whatever the gross profit this company had in the previous year this means in the two thousand six and seven the prophet has gross profit has gone up by five percent in the say the year that is two thousand six and seven so this is the GP ratio we have calculated and now we will proceed further with the other in ratios in the multi-step income statement and in that multi-step income statement we will be talking about the other ratios and other components so we can take here the particulars we can take here the particulars then it is amount and then it is the ratio then it is amount and it is the ratio come out and it is the ratio here the ear is two thousand six and seven and here the amount here is two thousand five and six so these are the this multi-step income statement is continuing that after calculating the GP ratio now let's see how much is the how much are the other ratios and then what is the overall profitability position of the form so next item here we take after GPS so we'll write here as that I am continuing with the GP gross profit and the gross profit and the absolute amount of the gaas profit was four three zero two we are connecting that previous statement with this and it was four three zero two point three four and it is a ratio was fifty point zero 1 then it is two nine six five two nine six five point nine five and the ratio was forty four point five eight forty four point five eight so this is the GP ratio gross profit ratio and after this after this gross profit ratio we will be calculating the other ratio so let's take that now subtract the other expenses first so it is we'll be talking about the payment to employees how much payment is made to the employees payment made to the employees how much payment is made to the employees if you look at so looking at the payment made to the employees we will see here the information given and that is the payment made to employees and provisions here it is the schedule number eighteen four fifty nine point four zero corrodes so we'll be taking this item four fifty nine point four zero corrodes this is the four fifty nine point four zero corrodes and this is the five point three four percent that is the percentage of the net sales and it is 4:07 0. 64 and this is six point one three this is six point one three this is another one indirect expense head them is the selling and distribution and administrative expenses selling distribution and administrative expenses if you look at this head of expense selling administrative and distribution expenses then here we have this one five zero five point six nine so this is one five zero five point six nine and this ratio is seventeen point five zero so selling expenses are also quite high that is administrative and selling expenses they are also quite high and this is here it is one one eight one 0. 33 0.
33 and this walks out as seventeen point seven five seventeen point seven five so it means this cost is also going down if you look at the trend of the cost so in case of the employees also it has the ratio has come down from six point one three percent into the previous here to five point three four in that year two thousand six and seven and if you look at the next ratio selling and this head of experience selling and distribution and expenses and administrative expenses then it has come down from seventeen point seven five percent to seventeen point five percent so this is the selling and distribution expenses and then we have say we'll be talking about the next thing that is say will add into this la the other expenses plus means other than this this is a plus we will be talking about the other incomes will be taking here the other incomes because we will calculate the profit before depreciation interest and tax we will have to calculate the profit before PB di T so for calculating PV di t will be subtracting depreciation interest and texts after calculating the ratio up to that level so we are including the other incomes and other incomes are given here as one sixty eight point four nine in this year other incomes were one sixty eight point four nine so if you talk about the other incomes we will - now talk about the operating incomes will not be taking the non operating incomes will be calculating the operating incomes so what is the operating incomes let's see now we have the total income here other income is one sixty eight point four nine out of this will be taking the operating income only and if it other incomes include operating income of four zero 0. 2 four and three 0. 33 corrodes so we'll be adding this operating income and after that we'll be operating the adding that non operating incomes also so if you talk about the other incomes then it is that so we'll have to add this figure four zero point two four and this has to be added here for zero point 2 4 so this works out as positive part because it is income so zero point plus 0.
47 and here it is the plus previous year this income was thirty point three three so this is the plus 0. 45 so this is the four seven so other incomes operating incomes have been increased so first operating income was from the sales and then we calculated the GP and then we subtracted some indirect expenses and then adding some other operating incomes so now up to this part whatever the profit is coming that is the profit from the operating incomes that is the sales plus other incomes - direct expenses direct and indirect expenses but operating expenses so now we will be calculating at this level if you could talk about we'll be calculating the PV di t this is PV di T profit before depreciation interest and X and if you talk about the PV di t this works out as through three seven seven point four nine two three seven seven point four nine this is twenty seven point six four percent you can say as a ratio and it is one four zero seven point three one and hit is seventeen point seven five so it is now you see that the profit before depreciation interest and tax has gone up from 17 or 18 percent to roughly 27 plus percent so it means there is a increase of 10% in the profit before depreciation and dust and tax also so this is again it would increase and if you talk about the other parts then you see that it is the other things will be taking into account so first will be now taking the depreciation depreciation and amortization depreciation and amortisation so if you take the depreciation and amortization here what is the amount of the depreciation and amortization let's check that amount and that amount of depreciation and amortisation is profit for exceptional items here would be depreciation amortized it is a depreciation and amortization this is three 17. 9 one for the current year so it is three one seven three one seven point nine one and previous here it was a two nine one two nine one 0.
64 so it is 3. 7 three point seven here and it is four point three eight point three it is a depreciation and amortisation this amount said ratio the X depreciation figure is also going down over the years so depreciation expenditure non-cash expenses though it is but it is also going down over the years depending upon the methods or depreciation depreciation keep on changing now we can calculate the operating profit before interest and tax o ppit this is the operating profit before interest and tax so this the profit works out as two zero five nine two zero five nine point five eight and in the other case it is one one one five 0. 97 and here it is 23.
94 and it is sixteen point one 7o p bi t and now let us take the interest component interest is interest is the financial cost so how much is in interest component if you look at the interest here tipple one point eight four and then it in previous here it was one 03. 38 so it is point triple one point eight four and then it is 101 zero three one zero three point three eight one zero three point three eight so it means and the percentage of the interest component is one point three not a very big amount not a very big amount that interest component interest cost is which was one point five five in the previous year has come down to the 1. 30 in the current year it means and it is evident also because form has not borrowed more money from the external sources they are not depending much on the external sources they are not borrowed much money from the internal so external sources so yes the x term this interest burden has to be minimum now we talk add into this the other incomes other incomes and these other incomes will be non operating incomes we will have to calculate the operating incomes now and for calculating the non operating income the total non operating income becomes two 51.
52 how it becomes two 41. 5 two non-operating income we see that what is the non operating income here we have here the one head of the income is the interest and dividend income this is non operating income and next part of the there this income is the this this amount is one sixty eight point four nine and interest and dividend is this much and other incomes amount is how much other incomes amount is which is non operating so this is one sixty eight point four line and out of this we have to subtract the operating income which we have already taken into account so you see that the total and other incomes non operating is other incomes non operating is the interest and dividend income which is one hundred and thirteen point two seven one hundred and thirteen point two seven corrodes and other income is one sixty eight point four nine one sixty eight 0. 49 and out of this we have taken some that is the operating income which is included in the other incomes we have already taken that so we have to subtract it and that amount was that amount was here that is forty point two four so it is forty point two four we have to subtract so this is plus and this is minus forty point two four this is forty point to force if you take this into account so finally this income works out as this is one two forty one point five to two forty one point five two is going to be done on operating income to 41.
5 to so which we have to add here this is plus sign so it is 240 10. 5 two is the other income and this is the C ratio is two point eight one and here earlier it was one 189 0. 61 and this is the plus two point this is two point eight five so this is the other incomes that is non-operating we are adding so what else is left here now if you talk about then it is the profit you can call it as profit before exceptional incomes and tax profit before tax and ex extraordinary incomes or the exceptional incomes so this profit is going to be how much if you calculate this text then it is that we have added the other incomes so profit before tax and the exceptional income is two one eight nine point two six and two one eight nine point two six and it is one two zero one point nine zero so it is how much it is twenty five point twenty five point four five percent and this works out as eighteen point zero seven percent so this is the profit before exceptional incomes or extraordinary incomes and the X now we will be adding the income that is exceptional items plus exceptional income you can say exceptional income exceptional income in income is basically some miss once in a while it it's not a regular income it's not a regular source of income it's once in a while incomes so we'll be taking only the exceptional income here so we have to show it separately which is very less in this case which is thirty seven point how much it is 1 0 and this is plus we are doing so this is plus zero point four three zero point four three is the exceptional income here in this case it is it was very less in the previous here that is four point one three this is plus 0.
06 is that exceptional income we have taken and after taking this into account no nothing is left all expenses and incomes are taken into account and now we will have to calculate the PBT profit before tax so it is the profit before tax and if you calculate the profit before tax this works out as to do to stipple to six triple to six prefer profit before tax is a triple toe six point three six and then in the second case it is one two zero six one two zero six point zero three and this amount is twenty five point twenty five point eight eight and in this case it is eighteen point one three so this is the profit before tax and now we will be talking about the we'll be making the provisions for the text we'll have to make the provisions for the tax and if you make the provisions for the tax so we have to kind of the Texas current X and then the Deford X so we'll have to make that total provision for the tax so if we make the provision for the tax we will be finding out that what is the current tax and what is that so we will be making the provision for tax so it is provision for tax and when we talk about the provision for tax it is a current put a line here then it is the current tax and how much it is current taxes current income tax will see the caja which is the current income tax here current income taxes when we talk about the current income tax current income taxes corporate dividend tax general interion dividend appropriations then profit after tax so yeah Peruvian for the text profit for tax is this much triple - yes triple - six point three six and one two zero six point zero three is a profit of four texts now the provision for Texas that is the current text six nine to two point three eight and then we have the total provision made is six nine to two point three eight and previous it was three six nine point eight two but part of this provision one point eight three text is deferred so it means we will be paying the total text it is six ninety two point three eight minus one point eight three so total text will be this so provision for Texas current text if you talk about the current income tax so this is six ninety two point three eight six ninety two point three eight six nine two two point three eight and then this is eight point zero five big amount of text and in the second case it is three sixty nine three six nine 0. 8 0. 8 two three six nine point eight two it is five point five six this is the current text and now you have to add the defer text and if you talk about the defer text so it is how much is the deficits which part of the text is Deptford we have to add it back so it is plus one point eight three one point eight three and it is you call it as plus 0.
02 and in the second case it is plus twenty seven and it is how much plus zero point four one so this is the Deaf this part of the Texas Deford we made a total provision of six 92138 for the current and 1. 83 amount of the Texas deferred if you take into consideration the total income taxes we have paid is that is 190 so we'll say here the total tax paid total tax paid is how much this works out as 690 six ninety point five five and in the second case it is 342 342 0. 82 so if you calculate this as a ratio this is eight point zero three eight point zero three and in the second case it is five point one five this is the ratio we are calculating here so this is the income tax part sixty nine six ninety point five five and this works out as eight point zero three percent of the sale percent of the sales because sales is a common denominator and then we take the previous years which works out as so text component is also gone up because the profit has increased so text will be more so total income tax we have taken now the Pat profit after tax how much is the profit after tax for the firm or the net operating profit you can say that is the one five three five point eight one and eight sixty three point eight sixty three point two one so it is seventeen point eight five and twelve point nine eight twelve point nine eight is the profit after tax so it is almost eighteen percent you can say profit after tax for thus 2006 and 7 is 18 percent and previous edit was thirteen percent profit that is a profit after tax so this is the multi-step income statement which is including the detailed analysis detailed information and it's not only the absolute figures if you look at the profit and loss account its including only the absolute figures but we have calculated here the ratios also and all the issues easily show that where to exercise the control and how to cut the cost so if you look at that statement what we prepared in the previous lecture if you look at and we calculated the gross profit so in that we only took two or things into account one was the income from sales that is a net sales after excise duty and then we subtracted the manufacturing expense then we subtracted that material cost so if you look at the material cost that was about 30% not a big amount so there is hardly any chance to reduce the material cost but a manufacturing expenses yes the company has only tried to reduce it they have reduced both the expenses material also has been brought down in that sit here 2006 7 as compared to the previous year and manufacturing expenses also have been brought down significantly from about say twenty four percent to twenty one percent so three percent reduction is already exercised so in these two heads there is hardly any scope in that reduction of that further expense if it is possible the firm can try but they are not going to gain much but if you talk about and on the basis of that we have calculated that gross profit which is about say 50 percent and the current here and it was 45 percent in the previous year if you look at now the present analysis here this statement here so we will take into account that which head of the cost is considered as on the higher side we can think about that we should suggest to the form that it should be reduced now for example you talked about the employees payments employee payments are also coming down may be part of the temporary workers that number of the workers has been reduced so you see the cost has come down from 6.
30 into five point three four percent of the sales selling and distribution expenses the one had where the cost seems to be little on the higher side but it including is two including three things selling cost distribution cost and the administrative overheads but you see in the administrative overhead we generally include the employees expense also so if you have segregated the employees expense then what else is left in the administrative expenses stationary then some local color is that our office rent or some other kind of maintenance related expenses they could be so but there seems to be scope that yes selling and distribution and administrative expenses can be thought of that if there is any possibility they can be brought down there is a chance and if they are brought down profit build improve then we talked about the other incomes other operating incomes and they are quite good maybe some you can call it as some finished goods directly being sold in the market either other operating income so not a big chunk but yes and it is also going it was fought Co point for 5% 0. 45% and it has become 0.