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Fundamental Analysis

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  • Common-Size Ratio Analysis

Common-Size Ratio Analysis

  • Posted by Trading Campus
  • Date October 30, 2017
  • Comments 33 comments
ratio analysis

Ratio Analysis

Ratios allow investor or analyst to asses and analyse the financial health of a company, its strength and weakness, in terms of such measures as liquidity, performance, profitability, leverage, growth and valuation, on an absolute basis and by comparison with other companies in its industry or industry standard.

The power of ratios comes from comparing them to relative ratios representing:

  • the general economy,
  • the firm’s industry,
  • firm’s major competitors,
  • Firm’s own past performance records.

There are two common type of analysis done using ratio:

  • Trend Analysis
  • Cross-sectional Analysis

Trend Analysis

Trend analysis is done by comparing the company’s ratio over its historical time period and it identifies trend that might indicate financial performance deterioration or improvement.

Britannia Industries

balance sheet

A common size statement normalize balance sheet and income statement and allows the investor to make easier comparison of different sized companies.

A common size balance sheet express all balance sheet account as % of total assets.

ratio analysis

However if we analyse the trend of movement in the balance sheet, non-current assets which are investments in financial assets have increased previous year and  tangible asset such as property, plant and equipment has been reduced with respect to time and average. Although there has been a rise in inventories and receivable this year, they are at level to their historic averages.

ratio analysis financial statement

The trend in liabilities is turning down and Britannia industries is seeing a strong rise in trend of reserves and surplus. Both situation are signalling efficiency of resource management by the company.

A common size income statement expresses all income statement accounts as % of Sales.

common size income statement

Although the trend in expense has been rising year on year but with respect to sales the expenses are in a declining trend signifying that the company’s management is keeping cost under check and managing its inventories and other cost effectively.

The benefit of using common size statement is that raw numbers usually hide relevant information that percentages frequently unveil. Common size income statement are especially useful in studying trends in costs and profit margins.

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October 30, 2017

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Financial Ratio Analysis : List of Financial Ratios
October 30, 2017

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Company Summary

Bajaj Electricals Limited is engaged in engineering and projects; power distribution, illumination and consumer durables businesses.

It has a range of domestic and kitchen appliances comprising water heaters, room heaters, coolers, irons, mixers, induction cookers, toasters, kettles, microwave, rice cookers, gas stoves, non-electrical kitchen aids and pressure cookers.

It offers ceiling, table, pedestal, wall, fresh air and industrial fans, and lighting solutions, such as light sources, light emitting diode-based lighting products, domestic luminaires, torches and lanterns.

Key Highlights of Company Business

Segments and Products

The Company's business segments consist of

  1. Lighting;
  2. Consumer Durables;
  3. Engineering & Projects,

The Lighting segment includes lamps, tubes and luminaries.

The Consumer Durables segment includes appliances and fans.

The Engineering & Projects segment includes transmission line towers, telecommunications towers, highmast, poles and special projects.

The Others segment includes diecasting and wind energy.

Financial Performance

Financial Ratios

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