Financial Ratio Analysis of ITC Ltd
(2023–24 vs 2024–25)
Introduction
This project analyses the financial performance of ITC Ltd for the financial years 2023–24
and 2024–25.
Twelve standard ratios prescribed in the Class 12 CBSE curriculum have been calculated
using data from the Consolidated Balance Sheet and Statement of Profit & Loss of the
company.
The ratios are grouped into four categories:
1. Liquidity Ratios
2. Solvency Ratios
3. Activity Ratios
4. Profitability Ratios
Formulas Used
Liquidity Ratios
1. Current Ratio = Current Assets ÷ Current Liabilities
2. Quick Ratio = (Current Assets – Inventory) ÷ Current Liabilities
Solvency Ratios
3. Debt-Equity Ratio = Debt ÷ Equity
4. Total Assets to Debt Ratio = Total Assets ÷ Debt
5. Proprietary Ratio = Shareholders’ Funds ÷ Total Assets
6. Interest Coverage Ratio = EBIT ÷ Interest
Activity Ratios
7. Inventory Turnover Ratio = Net Revenue from Operations ÷ Average Inventory
8. Debtors Turnover Ratio = Net Revenue from Operations ÷ Average Trade Receivables
9. Creditors Turnover Ratio = Net Credit Purchases ÷ Average Trade Payables (Not
available due to lack of purchase data)
10. Working Capital Turnover Ratio = Net Revenue from Operations ÷ Working Capital
Profitability Ratios
11. Gross Profit Ratio = Gross Profit ÷ Net Revenue × 100
12. Net Profit Ratio = Net Profit ÷ Net Revenue × 100
Calculated Ratios
Ratio 2023–2 2024–2
4 5
Current Ratio 3.00 3.06
Quick Ratio 1.97 1.97
Debt-Equity Ratio 0.23 0.25
Total Assets to Debt Ratio 5.42 4.98
Proprietary Ratio 0.82 0.80
Interest Coverage Ratio 234.72 242.54
Inventory Turnover Ratio 4.53 4.76
Debtors Turnover Ratio 15.42 16.22
Creditors Turnover Ratio N/A N/A
Working Capital Turnover Ratio 2.46 2.40
Gross Profit Ratio (%) 52.39% 52.80%
Net Profit Ratio (%) 27.81% 27.48%
Analysis
1. Liquidity
○ Both Current Ratio (~3.0) and Quick Ratio (~2.0) show strong liquidity.
○ ITC can easily meet its short-term obligations.
2. Solvency
○ Debt-Equity Ratio rose from 0.23 to 0.25.
○ Proprietary Ratio dipped slightly, showing marginal reliance on debt but still
equity-heavy.
○ Interest Coverage Ratio improved, indicating ample ability to cover interest
expenses.
3. Activity
○ Inventory Turnover and Debtors Turnover improved, showing stronger sales
and efficient collection.
○ Working Capital Turnover dipped slightly, hinting at lower efficiency in using
excess liquidity.
4. Profitability
○ Gross Profit Margin improved marginally (52.39% → 52.80%).
○ Net Profit Margin slipped a little (27.81% → 27.48%), likely due to higher
expenses.
5. Overall
○ ITC remains a financially stable and profitable company with excellent
liquidity, strong profitability, and efficient operations.
○ Slight increase in debt and minor decline in net margin are not alarming but
worth monitoring.
Conclusion
The ratio analysis shows that ITC Ltd is in a strong financial position.
It enjoys robust liquidity, consistent profitability, and operational efficiency. While the reliance
on debt has increased marginally, the company’s high equity base and excellent interest
coverage ensure long-term solvency. Overall, ITC continues to be one of India’s most
financially secure and profitable enterprises.
