FINANCIAL RATIOS

By-
Mahesh G Velpul
CURRENT RATIO
Meaning:-The current ratio is a liquidity ratio Current ratio
that measures whether a firm has enough 2.5
resources to meet its short term obligations.
Interpretation:
 The current ratio of hindalco has shown 2
some variability over the years but has
generally remained above 1.
 Chalco’s current ratio has been consistently
below from 2019-2023 1.5

 Nalco has maintained high current ratio

above 1.
 Vedanta’s current ratio has been fluctuating, 1

with the decrease in 2023.

Suggestion:
 Should aim to stabilize its current ratio. 0.5

 Explore strategies to optimize liquidity

management.
 Monitor working capital closely. 0
2019 2020 2021 2022 2023
 efficient inventory and receivables Hindalco Chalco Nalco Vedanta
 QUICK RATIO
Meaning: The quick ratio is an indicator of a company’s
Quick ratio
short term liquidity position and measures a company’s
ability to meet its short term obligations with its most liquid 1.8

assets.
Interpretation: 1.6

 The quick ratio fluctuated, peaking in 2020 at 1.179,

1.4
indicating varying liquidity but generally remaining
below 1.
1.2
 Chalco’s quick ratio improved slightly over the
years, reaching 0.61 in 2023, but still indicates
1
weak liquidity.
 Nalco has Maintained strong liquidity overall, with 0.8
the quick ratio consistently above 1, peaking at
1.56 in 2022. 0.6
 Vedanta Showed a slight improvement until 2022,
but experienced a sharp decline in 2023 to 0.52, 0.4
indicating reduced liquidity.
Suggestion: 0.2

 Enhance short-term liquidity management.

0
 Evaluate and optimize cash conversion cycle. 2019 2020 2021 2022 2023
 Implement measures to reduce dependency on Hindalco Chalco Nalco Vedanta
 DEBT TO EQUITY
Meaning: The debt to equity ratio is a financial ratio Debt to equity
indicating the relative preparation of shareholder’s 1.4
equity and debt used to finance a company’s asset.
Interpretation:
1.2
 In hindalco The ratio decreased from 2019 to 2023,
suggesting a reduction in debt relative to equity.
 in Chalco there was a notable increase in the ratio 1

in 2023,
 Nalco's debt-to-equity ratio is consistently at 0. 0.8

 Vedanta's debt-to-equity ratio has fluctuated over

the years and exceeded 1 in 2023. 0.6

Suggestion:
0.4
 Decreasing debt-to-equity ratio to improve
financial stability.
0.2
 Optimization of debt equity ratio.
 Diversification.
0
2019 2020 2021 2022 2023

Hindalco Chalco Nalco Vedanta

NET PROFIT MARGIN
Meaning: net profit margin measures how much Net profit margin
the net income or profit is generated as a 25.00%

percentage of revenue.

Interpretation: 20.00%
 Hindalco's net profit margin has fluctuated
over the years.
 Chalco‘s net profit margin has shown a 15.00%
steady increase over the years.
 Nalco's net profit margin has been volatile.
 Vedanta's net profit margin has remained
10.00%
relatively stable and high over the years.

Suggestion:
5.00%
 Considering the overall financial health.
 Consider Continuous monitoring and
adjusting in pricing strategies.
 Enhancing stability. 0.00%
2019 2020 2021 2022 2023

Hindalco Chalco Nalco Vedanta

 OPERATING PROFIT MARGIN
Meaning: The operating profit margin is a profitability Operating profit margin
or performance ratio that reflects the percentage of profit
35.00%
a company produces from its operations before
subtracting taxes and interest.
Interpretation: 30.00%

 Hindalco's operating profit margin fluctuated over

the years but generally remained at a moderate 25.00%
level.
 Chalco's operating profit margin showed 20.00%
fluctuations.
 Nalco's operating profit margin fluctuated but
15.00%
remained relatively high.
 Vedanta's operating profit margin fluctuated but
generally showed a positive trend. 10.00%

Suggestion: 5.00%

 Should aim to stabilize and potentially improve

margins. 0.00%
2019 2020 2021 2022 2023
 Sustainability.
Hindalco Chalco Nalco Vedanta
 RETURN ON EQUITY
Meaning: ROE is a financial ratio that measures a Return on equity
company’s profitability in relation to its shareholders
35.00%
equity.

30.00%
Interpretation:
 The Return-on-Equity (ROE) fluctuated over the
years for each company. 25.00%

 Hindalco showing a significant increase in 2022.

20.00%

Suggestion:
 Maintaining consistency. 15.00%
 optimizing the utilization of capital resources.
 Should remain vigilant of market trends and 10.00%
competitive pressures.
 Risk Management.
5.00%

0.00%
2019 2020 2021 2022 2023

Hindalco Chalco Nalco Vedanta

 INVENTORY TURN OVER IN DAYS
Meaning: inventory turnover in days refers to Inventory turnover in days
the amount of time passes from the day an 120
item purchased by a company until it is sold.
Interpretation:
100
 The inventory turnover days varied across
the years for each company.
 Hindalco showing a consistent trend. 80

Suggestion: 60

 Maintaining efficiency.
 Good relationships with suppliers.
40
 Forecasting.
 Product Mix Analysis.
20

0
2019 2020 2021 2022

Hindalco Chalco Nalco Vedanta

 ASSET TURNOVER RATIO
Meaning: It is the ratio between the value of a Asset turnover ratio
company’s sales or revenues and the value of 1.60
its assets.
1.40

Interpretation:
1.20
 Hindalco's asset turnover ratio has shown an
improving trend over the years.
1.00
 Chalco's asset turnover ratio peaked in 2021
before slightly declining.
0.80
 Nalco's asset turnover ratio remained relatively
stable over the years.
0.60
 Vedanta's asset turnover ratio has shown a
fluctuating pattern.
0.40
Suggestion:
 Focus on growth and maximize the utilization of 0.20

assets . 0.00
 Reducing lead times and inventory levels. 2019 2020 2021 2022 2023

 Asset management. Hindalco Chalco Nalco Vedanta

PRICE-TO-EARNING

Meaning: PE ratio is the proportion of a Price-to-earning

company’s share price to its company’s 90

earning per share. 80

Interpretation:
 Hindalco's price-to-earnings ratio fluctuated 70

but generally remained moderate.

60
 Chalco's price-to-earnings ratio showed
significant fluctuations. 50

 Nalco's price-to-earnings ratio varied but

40
generally remained low.
 Vedanta's price-to-earnings ratio fluctuated. 30

Suggestion: 20

 Earnings growth. 10
 Market Conditions.
 Investor Communication. 0
2019 2020 2021 2022 2023

-10

Hindalco Chalco Nalco Vedanta

PRICE-TO-BOOK
Meaning: P/B ratio is a financial ratio used to Price to book ratio
compare a company’s current market value to its 2

book value.
1.8
Interpretation:
 Hindalco's price-to-book ratio fluctuated 1.6
over the years but remained relatively low
compared to its peers. 1.4

 Chalco's price-to-book ratio showed

1.2
moderate fluctuations.
 Nalco's price-to-book ratio varied but 1
generally remained moderate.
 Vedanta's price-to-book ratio increased over 0.8

the years.
0.6
Suggestion:
 Debt Profile. 0.4

 Fundamental Analysis.
0.2

0
2019 2020 2021 2022

Hindalco Chalco Nalco Vedanta

 BOOK VALUE PER SHARE
Meaning: BVPS is the ratio available to common Book value per share
shareholders which is divided by the number of
400
outstanding shares.

350
Interpretation:
 Hindalco's book value per share showed 300
consistent growth over the years.
 Chalco's book value per share remained 250
relatively stable with minor fluctuations.
 Nalco's book value per share increased steadily 200
over the years.
 Vedanta's book value per share fluctuated. 150

Suggestion: 100

 should leverage this trend to enhance investor

confidence. 50

 Market Perception.
0
 Comparative Analysis. 2019 2020 2021 2022

Hindalco Chalco Nalco Vedanta



Thank You.