Ratios Interpretation of Maruti Suzuki Current Ratio

RATIOS INTERPRETATION OF MARUTI SUZUKI
Current ratio
It shows the firm’s ability to cover its current liabilities with its current
assets.
Current Ratio = current assets/current liabilities
Quick Ratio
It Shows the firm’s ability to meet current liabilities with its most liquid
assets.
Quick Ratio = (current assets–inventory)/ current liabilities
Interpretation
Comparing the current ratios of Maruti with over the period of time from
2014 to 2018 shows that the company is not in a better position to pay its
bills or liabilities. This shows additional profitability. Also its quick ratio is
decreasing with not and far better which states that company follows a
conservative policy and liquidity of the company.This indicates that may
have problem in meeting short term obligation.
Inventory Turnover Ratio

A ratio showing how many times a company's inventory is sold and
replaced over a period.Inventory Turnover Ratio = Cost of goods
sold/Average Inventory
Interpretation
We can see that the inventory turnover ratio for Maruti Suzuki is much
higher in starting i.e in 2014 then it decreases gradually then it again
increases in 2018. This means that the sales are very strong in case of
Maruti.
AR Turnover Ratio
The receivables turnover ratio is an activity ratio, measuring how efficiently
a firm uses its assets.A/R Turnover = Net Credit Sales/Average A
Interpretation
The AR turnover ratio of Maruti Suzuki is much higher initially in 2014 then
it decreases in 2018 which mean that Maruti Suzuki operates more or less
in cash basis.
Dividend per Share:

Dividends per share are the amount of dividends that apublicly-traded
company pays per share of common stock, over their reporting periodthat
they have issued. The remainder of the company's net income, which is not
paidout as dividends, is retained by the company for growth and is known
as retained earnings.Dividends Paid /Shares Outstanding Common Stock =
Dividends per Share
Interpretation
For Maruti Suzuki this value is going up every year from the year 2014 to
2018 which gives a signal to the investors that the company is doing well
financially. If it goes down then it could mean that the investors are selling
shares out of fear which is not the case of maruti.
Cash earnings per share (cash EPS)
Commonly called operating cash flow, is a financial performance measure

comparing cash flow to the number of shares outstanding. Cash EPS
differs from the more popular net profit measure, Earnings per share (EPS),
which compares net income on a per share basis.
Interpretation
Maruti Suzuki has higher cash EPS from year 2014 TO 2018 which shows
it is performing better over a period.
Profit Margin
Profit margin, net margin, net profit margin or net profit ratio all refer to a
measure of profitability.It is calculated by finding the net profit as a
percentage of the revenue. The profit margin is mostly used for internal
comparison. A low profit margin indicates a low margin of safety: higher risk
that a decline in sales will erase profits and result in a net loss, or a
negative margin.
Profit Margin = Net Profit/Sales
Interpretation
The ratio as seen is increasing from year 2014 to 2018 which implies that
the revenue generated is higher than the cost involved the profitability has
been increase and shows higher revenue than costs incurred.
Return on Equity
Return on equity (ROE) measures the rate of return on the ownership

interest (shareholders' equity) of the common stock owners. It measures a
firm's efficiency at generating profits from every unit of shareholders' equity
(also known as net assetsor assets minus liabilities)
ROE= Net Income/Average Shareholders’Equity
Interpretation
The ROE is the money raised from the shareholders. Maruti has increased
in the ROE percentage from the year 2014 to 2018. It has improved to
invest money to generate income out of shareholders equity.
Return on capital employed (ROCE)
ROCE compares earnings with capital invested in the company. It is similar

to Return on Assets(ROA), but takes into account sources
of financing.NOPAT is equal to EBIT * (1 - tax) -- the return on the capital
employed should bemeasured in after tax terms.
ROCE = EBIT/Capital Employed
Interpretation
Return on Capital Employed ratio indicates whether the company is earning
sufficient revenues and profits in order to make the best use of its capital
assets. The ratio is increasing from 2014 to 2018 which shows
that company have control over the assets as indicated in profit margin too.
Return on assets (ROA)
The return on assets (ROA) percentage shows how profitable a company's

assets are in generating revenue.
ROA = Net Income/Total Assets
Interpretation
The ROA is increasing since 2014 till date which depicts that Maruti is
utilising its assets very efficiently. It is investing in assets to generate
income.
Debt-to-Equity Ratio
It indicates what portion of equity and debt the company is using to finance
its assets.
Debt-to-Equity ratio = Total Debt/Shareholders Equity
Interpretation
For Maruti Suzuki seeing from 2014 to 2018 it can be noted that the Total
Debt has decreased and Total shareholders’ equity has increased so this
can be seen that the financing done by Maruti Suzuki is mostly through
equity than debt from 2007 till 2011. The D/E ratio has drastically
decreased thus it can show that they are not expanding but financing for
existing units.
Proprietary ratio (also known as net worth ratio or equity ratio)
It is used to evaluate the soundness of the capital structure of a company. It

is computed by dividing the stockholders’ equity by total assets.
Formula:
Interpretation
In case of Maruti Suzuki it can seen its ratio is increasing from the year
2014 to 2018 which company is not taking full advantage of debt financing
for its operations that is also not a good sign for the stockholders
CONCLUSION
Thus Maruti Suzuki has good liquidity, leverage ratios, low debt
appetite, high efficiency, low profitability and high earnings per share
Maruti is conservative and low geared.

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RATIOS INTERPRETATION OF MARUTI SUZUKI

Current Ratio = current assets/current liabilities

Inventory Turnover Ratio

Dividend per Share:

Cash earnings per share (cash EPS)

Commonly called operating cash flow, is a financial performance measure

Profit Margin = Net Profit/Sales

Return on equity (ROE) measures the rate of return on the ownership

ROE= Net Income/Average Shareholders’Equity

Return on capital employed (ROCE)

ROCE compares earnings with capital invested in the company. It is similar

ROCE = EBIT/Capital Employed

Return on assets (ROA)

The return on assets (ROA) percentage shows how profitable a company's

ROA = Net Income/Total Assets

Debt-to-Equity ratio = Total Debt/Shareholders Equity

Proprietary ratio (also known as net worth ratio or equity ratio)

It is used to evaluate the soundness of the capital structure of a company. It

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