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    Financial Health Analysis

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    Ashutosh Singh
    This document discusses key financial ratios used to assess the financial health of a company compared to its industry peers over time. It identifies four important categories of ratios: 1) profitability, 2) liquidity, 3) leverage, and 4) cash flow. Typical analysis involves calculating these ratios, developing a score, and comparing scores over time to identify trends. Comparing a company's scores to its peers and industry can indicate whether its financial position is improving or deteriorating.

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    Financial Health Analysis

    Uploaded by

    Ashutosh Singh
    25 views8 pages
    This document discusses key financial ratios used to assess the financial health of a company compared to its industry peers over time. It identifies four important categories of ratios: 1) profitability, 2) liquidity, 3) leverage, and 4) cash flow. Typical analysis involves calculating these ratios, developing a score, and comparing scores over time to identify trends. Comparing a company's scores to its peers and industry can indicate whether its financial position is improving or deteriorating.

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    Financial Health Analysis

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    This document discusses key financial ratios used to assess the financial health of a company compared to its industry peers over time. It identifies four important categories of ratios: 1) profitability, 2) liquidity, 3) leverage, and 4) cash flow. Typical analysis involves calculating these ratios, developing a score, and comparing scores over time to identify trends. Comparing a company's scores to its peers and industry can indicate whether its financial position is improving or deteriorating.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    25 views8 pages

    Financial Health Analysis

    Uploaded by

    Ashutosh Singh
    This document discusses key financial ratios used to assess the financial health of a company compared to its industry peers over time. It identifies four important categories of ratios: 1) profitability, 2) liquidity, 3) leverage, and 4) cash flow. Typical analysis involves calculating these ratios, developing a score, and comparing scores over time to identify trends. Comparing a company's scores to its peers and industry can indicate whether its financial position is improving or deteriorating.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Assessing the Financial Health of a Company

    Key principle: Analyze the financial performance of the firm with respect to the industry (or its peers)
    Trend over time

    Four important categories of ratios are typically analyzed:

    1) Profitability ratio Gross profit margin, Net profit margin, EBITDA margin, ROA, ROE
    2) Liquidity ratio Current ratio, quick ratio
    3) Leverate ratio Debt/ Equity
    4) Cashflow ratio CFO/ Current liabilities

    Typical approach: analyze the key ratios and develop a score

    The score can also be compared over time (historically) to decipher the trend and see if things are improving or getting worse o
    are improving or getting worse over time
    CMIE Expr CMIE Expr

    Annual Finance Standalone Annual Finance Standalone


    Rs. Million Rs. Million
    L L
    Company Name Total assets Total liabilities
    1 Ashok Leyland Ltd. 134469.9 134469.9
    2 Eicher Motors Ltd. 34270.6 34270.6
    3 Force Motors Ltd. 24056 24056
    4 S M L Isuzu Ltd. 8137.9 8137.9
    5 Tata Motors Ltd. 573744.6 573744.6
    CMIE Expr CMIE Expr

    Annual Finance Standalone Annual Finance Standalone


    Rs. Million Rs. Million
    L L
    Total income Total expenses
    208487.3 206056.8
    71753.4 59987.1
    35566.2 34423.9
    13134.9 13149.9
    488681.1 486109.4
    CMIE Expr CMIE Expr

    Annual Finance Standalone Annual Finance Standalone


    Rs. Million Rs. Million
    L L
    Current assets (incl. short term investments, loans & advances) Current liabilities & provisions
    52991.2 52183.5
    11752.4 11968
    13143.7 8143.6
    5116.6 3403.6
    113039.5 183491
    CMIE Expr CMIE Expr CMIE Expr

    Annual Finance Standalone Annual Finance Standalone Annual Finance Standalone


    Rs. Million Rs. Million Rs. Million
    L L L
    Total capital Reserves and funds Net cash flow from operating activities
    2845.9 52295.6 16755.9
    271.6 21236.2 14647.1
    131.8 14672.7 2632.4
    144.8 3256.4 -117.6
    6791.8 216889 23461.8
    Data Manipulation
    Transpose the Prowess Data (using Vlookup)
    Index
    1 2
    Index Ashok Leyland Ltd. Eicher Motors Ltd.
    3 Total assets 134469.9 34270.6
    4 Total liabilities 134469.9 34270.6
    5 Total income 208487.3 71753.4
    6 Total expenses 206056.8 59987.1
    7 Current assets 52991.2 11752.4
    8 Current liabilities & provisions 52183.5 11968
    9 Total capital 2845.9 271.6
    10 Reserves and funds 52295.6 21236.2
    11 Net cash flow from operating activities 16755.9 14647.1

    Calculation of Ratios
    Actual ratios
    Ashok Leyland Ltd. Eicher Motors Ltd.
    1) Profitability ratio 1.2% 16.4%
    2) Liquidity ratio 1.0154780726 0.9819852941
    3) Leverage ratio 1.4386333342 0.5934033234
    4) Cashflow ratio 0.3210957487 1.2238552807

    Calculation of Normalized Scores


    Normalized Score Max score = 10
    Ashok Leyland Ltd. Eicher Motors Ltd.
    1) Profitability ratio 0.40 10.00
    2) Liquidity ratio 4.00 3.67
    3) Leverage ratio 1.30 10.00
    4) Cashflow ratio 1.76 10.00

    Overall Score 1.87 8.42

    Commentary:
    We can see from the Overall Score that Eicher Motors seems to be doing very well and Tata Motors is clearly not d

    Recommended Extensions to the Analysis (which you should do)


    Trend Analysis over past 5 years
    Overall score
    2012 2013
    Ashok Leyland Ltd.
    Eicher Motors Ltd.
    Force Motors Ltd.
    Tata Motors Ltd.
    3 5 4
    Force Motors Ltd. Tata Motors Ltd. S M L Isuzu Ltd.
    24056 573744.6 8137.9
    24056 573744.6 8137.9
    35566.2 488681.1 13134.9
    34423.9 486109.4 13149.9
    13143.7 113039.5 5116.6
    8143.6 183491 3403.6
    131.8 6791.8 144.8
    14672.7 216889 3256.4
    2632.4 23461.8 -117.6

    0 10

    Force Motors Ltd. Tata Motors Ltd. Average Minimum Maximum S M L Isuzu Ltd.
    3.2% 0.5% 5.3% 0.5% 16.4% -0.1%
    1.6139913552 0.6160492885 105.7% 61.6% 161.4% 1.5032906334
    0.6249113445 1.5650149678 105.5% 59.3% 156.5% 1.3926555333
    0.3232477037 0.1278634919 49.9% 12.8% 122.4% -0.0345516512

    Force Motors Ltd. Tata Motors Ltd. Weight


    1.69 - 25%
    10.00 - 25%
    9.68 - 25%
    1.78 - 25%

    5.79 -

    ry well and Tata Motors is clearly not doing well at all.

    2014 2015 2016


    1.87
    8.42
    5.79
    -

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