MANAGEMENT ACCOUNTING
NAME: NIMISHA DARAK
ROLL NO: HTBC0445
DIVISION: D
TOPIC: RATIO ANALYSIS
COMPANY NAME: DOLAR INDUSTRIES LIMITED
INTRODUCTION
Dollar Industries has become one of the leading brands in the hosiery sector with an enviable
15% market share and a good percentage in textile exports of the total production in the Indian
hosiery market. It has also made its noticeable presence in social media and e-commerce
platforms. Dollar has established its presence across 29 states in India, with its sole aim to bring
fashionable wear at affordable prices to every Indian today. Not only that, our products today
has gone beyond the boundaries of the country and has emerged as the highest selling Indian
innerwear brand in the UAE and the Middle East marking its presence in places like Oman,
Basra, Jordan, Qatar, Kuwait, Bahrain, Yemen, Iraq, Uzbekistan, Myanmar, Nepal and Africa.
Having fused its position in Gulf countries the company is now assertively looking at the rest of
the world with collections that promise to delineate the string. Dollar products have today gone
beyond the boundaries of the country. Having consolidated its position in Gulf countries the
company is now aggressively looking at the rest of the world with collections that promise to
redefine evolution. Today we are the first Indian innerwear company with fully Integrated
Manufacturing unit. This state-of-art New Processing division in SIPCOT, near Tirupur is
equipped with the Latest Processing Technology and the Top Most Finishing Range to produce
finished raw material dyed in any possible color. (The annual turnover of Dollar Industries in FY
2016 - 17 stood at Rs 906 crore compared to Rs.830 crore in FY 2015-16. The Company’s
annual growth rate is averaging more than 15% year-on-year basis. The export revenue of the
Company stood at Rs 75.93 crore in FY 2016-17 compared to Rs.69.34 crore in FY 2015-16, an
increase in 9.50%.)
Published balance sheet of Dollar Industries Limited
Published profit and loss statement of Dollar Industries Limited
REVENUE STATEMENT RATIOS
1) OPERATING PROFIT RATIO - OPERATING PROFIT / NET SALES * 100
Where, Operating profit = Net profit + Non-operating expenses – Non-operating incomes.
Operating profit ratio = 14587.18 / 135032.14 * 100
= 10.81%
2) STOCK TURNOVER RATIO - COST OF GOODS SOLD / AVERAGE INVENTORY
= 135032.14/40457.815
= 3.34 times
BALANCE SHEET RATIOS
1) QUICK RATIO – QUICK ASSETS/ QUICK LIABILITIES
Where, quick assests = current assets – inventory – prepaid expenses. And Quick
Liabilities = All Current Liabilities – Bank Overdraft – Cash Credit.
Quick Assets = 94185.19 – 47520.93 = 46664.26
Quick liabilities = 42870.79
Quck ratio = 46664.26/42870.79 = 1.08:1
2) CAPITAL GEARING RATIO – PREFERENCE SHARE CAPITAL+ DEBENTURES +
OTHER BORROWED FUNDS / EQUITY SHARE CAPITAL + RESERVES &
SURPLUS – LOSSES* 100
= 69.84 + 20497.12 / 67581.93 *100
= 30.44%
Combined Ratios
1) Return on Proprietary’s Funds = Net Profit After Taxes * 100
Net Worth
=14587.18 /67581.93*100
= 21.58%
2) RETURN ON EQUITY SHAREHOLDERS’ FUND = NET INCOME /
SHAREHOLDERS EQUITY
= 14587.18 / 1134.32
= 12.86
Interpretation
1) Operating Profit Ratio
A high, low or good operating margin ratio depends on the company’s past performance, the
industry to which it belongs, and competitors belonging to similar industries. When a company’s
operating profit ratio outperforms the industry average, it is considered to have a competitive
advantage, implying that it is more successful than similar businesses. While the typical margin
varies by industry, businesses can gain a competitive advantage by boosting sales or cutting
expenses-or both-in general. While evaluating the operating margin of a company, it is
imperative to first understand the industry trends over the years.
The operating margin can be increased by boosting revenue or sales and by lowering expenses.
The expenses comprise the cost of goods sold and other operating expenses. Hence, lowering
these expenses would lead to a higher operating profit and margin.
2) Stock Turnover Ratio
The higher the stock turnover ratio, the better it is, and it means the company sells that
product very quickly, and demand also exists for that product. A higher ratio may also mean
that the company is missing sales opportunities as it’s not carrying adequate stock. It might
also mean that the company is frequently purchasing. It can also put the business in difficulty
if prices from the suppliers’ end rise.
When the stock turnover is low, it would mean outdated inventory or slow-moving goods. It can
be a signal toward inefficient working capital management. Nevertheless, it can be a strategy of
stock building done knowingly.
3) Quick Ratio
A quick ratio of 1 or above indicates that the company has sufficient liquid assets to
satisfy its short-term obligations. An extremely high quick ratio, on the other hand, isn’t
always a good sign. This is because a very high ratio could indicate that the company is
resting on a significant amount of cash.
4) CAPITAL GEARING RATIO
Companies with high levels of capital gearing will have a larger amount of debt relative
to their equity value. The gearing ratio is a measure of financial risk and expresses the
amount of a company's debt in terms of its equity. A company with a gearing ratio of 2.0
would have twice as much debt as equity.
5) Return on Proprietary Funds
The return on shareholders’ equity ratio shows how much money is returned to the
owners as a percentage of the money they have invested or retained in the company. It is
one of five calculations used to measure profitability
The higher the percentage, the more money is being returned to investors. This ratio helps
business owners and financing professionals determine a company’s financial health.
The return on shareholders’ equity ratio is typically used to track a company’s performance over
time or to compare businesses within the same industry.
6) Return on equity shareholder’s fund
It is calculated by dividing a company’s earnings after taxes (EAT) by the total
shareholders’ equity, and multiplying the result by 100%.
The higher the percentage, the more money is being returned to investors. This ratio helps
business owners and financing professionals determine a company’s financial health.
The return on shareholders’ equity ratio is typically used to track a company’s
performance over time or to compare businesses within the same industry.
