The western india plywoods ltd project report

The creditor’s turnover ratio of WIP shows a fluctuating tendency It is highest in the year2016 that is 6.89. High ratios indicate the prompt payment to suppliers for the goods purchased on credit, on the contrary a low ratio is a sign of delayed payment A high ratiosreceptable but the company should enjoy taking full advantage of credit period allowed bythe creditors.

The receivable turnover ratio tells how efficient a company is in gathering its credit sales from customers. It indicates the number of times the average receivables are turned in each year. The higher ratio shows the efficient management of debtors. Receivable turnover ratio can be said as a liquidity ratio, because it points out if the companies are liquid, faster they can convert their receivables into cash.

This ratio indicates the number of times the debtors are turned over during a year. The analysis shows a decreasing tendency from 2014. The trend of debtors’ turnover ratio is satisfactory. From the table it is clear that the debtors are increasing gradually in respect of increase in sales.

Assets turnover ratio relates a company’s assets to its sales. It is an efficiency ratio that tells how efficiently a company uses its assets to generate revenue.

The Total assets turnover ratio is high in the year 2017 and less in the year 2015. The asset turnover ratio will be high if it can generate more sales with fewer assets which state the company using its assets at its optimum level. On the contrary low asset turnover ratio tells that the company is not taking the full advantage of assets.

5. 
   Fixed Asset Turnover Ratio
   

Fixed Asset Turnover Ratio= Cost of Sales / Net Fixed Asset

The fixed asset turnover ratio shows a constant increasing tendency. Trend of these ratios indicate a better utilization of fixed assets in generating revenue. Moreover, the company's fixed asset shows decreasing tendency. It is not favourable to the company.

6. 
   Working Capital Turnover Ratio
   

The ratio shows a decreasing trend. The highest ratio is in the year 2016. The present

Ratio is 4.41; it is because of decrease in sales and increasing in working capital.

4. PROFITABILITY RATIO

a) Gross Profit Ratio

Gross profit ratio measures the relationship of gross profit to net sales and it is represented as a cost centre. It is calculated by dividing the gross profit by net sales it is expressed in percentage as follows:

GROSS PROFIT RATIO=GROSS PROFIT/NET SALES x 100

Gross profit sales-cost of goods sold

From the above table it seems that the gross profit ratio of the company is not stable. It is fluctuating throughout the last five years. In the year 2014 there is a high gross profit ratio of 7.40, then it starts decreasing and in 2018 it reached 3.22.A consistent increase in gross profit ratio over the past years is the indication of continuous improvement. So company has to focus on minimizing the cost of production.

Net profit ratio is the ratio of net profit relative to net sales. Net profit is the income before paying tax. Thus, incomes such as interest on investments outside the business profit on sale of fixed assets and losses on sales of fixed assets are excluded.

The net profit ratio shows a decreasing tendency. From the table it is clear that the net profit ratio is favourable only in the year 2014 Then it got declined and reaches 2.13 in the year 2018.

Operating cost ratio is computed by dividing the operating expenses by sales. This ratio is used to calculate operational efficiency of the business. This ratio helps to analyse whether operating cost element is more or less in proportion to sales.

The operating ratio of the company is fluctuating. In the first three years it is increasing. Then in succeeding years it shows a declining trend later again hiked up. It shows the operational efficiency of the company is not stable.

Operating profit is computed by dividing the operating profit by the sales of the company. This ratio helps the management to determine the ability of the management in running the business.

Operating profit of the company shows a decreasing trend. The ratio is high in the year 2015 and less in the year 2016. The ability of the management to run the business is less.

Earnings per share are a common measure of profitability, It tells the amount of net income in proportion to the share of stock outstanding This ratio is also called as net income per share.

The company's earnings per share show a fluctuating tendency. Over the past five years EPS shows a decreasing trend. Number of equity shares is constant for every year the profit left after paying tax and preference dividend is decreasing year by year. The EPS is less in the year 2015 that is 1.73.

This ratio is used to analyse company's financial performance. It measures company's EBIT relative to its net total assets. This ratio measures company's ability to generate earnings before interest and taxes. Investors analyses this ratio before investing in a company as it shows how effectively its asset generates revenue.