Liquidity and Credit Analysis

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FUNDAMENTAL ANALYSIS OF AIRTEL

Revenue or turnover or top line is income that a company receives from its
normal business activities. Revenue Growth is used to measure how fast a
company's business is expanding. The figure shows the annual rate of
increase/decrease in a company's revenue or sales growth in terms of
percentage change from the previous year.
An ideal company should have an steady upward trend. Year-over-year
performance is frequently used by investors seeking to gauge whether a
company's financial performance is improving or worsening.

Compound Annual Growth Rate of Bharti Airtel Ltd.

1 year
Revenue

6.66%

Net Income

87%

EPS Basic

85%

Liquidity and Credit Analysis
2012
2011
2010
Reported Net Profit

2014

2013

6,600.20 5,096.30 5,730.00 7,716.90 9,426.15

A
company's
total earnings (or profit).
Net income is
calculated
by
taking revenues and adjusting for the cost of doing business, depreciation,
interest, taxes and other expenses. This number is found on a company's income
statement and is an important measure of how profitable the company is over a
period of time. The measure is also used to calculate earnings per share.
Often referred to as "the bottom line" since net income is listed at the bottom
of the income statement.
Bharti Airtel has shown an increasing profit over the years. Although it has been
decreased from what it was in 2010 but a considerable rise has been observed in
2014 than 2013 and 2012.

Ratios
Current Ratio
Quick Ratio
Debt Equity Ratio
Long Term Debt Equity Ratio
Interest Cover
Dividend Payout Ratio Net Profit

Current

2014
0.93
0.98
0.13
0.11
7.42
10.90

2013
0.65
0.75
0.24
0.18

2012
1.02
1.37
0.29
0.17

2011
0.63
0.73
0.23
0.17

4.91
7.45

5.98
6.62

27.92
4.92

Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current
ratio below 1 indicates that the company may not be able to meet its obligations
in the short run. However, it is not always a matter of worry if this ratio
temporarily falls below 1 as many times companies squeeze out short term cash
sources to achieve a capital intensive plan with a longer term outlook.
Bharti Airtel’s average current ratio over the last 5 financial years has been 0.43
times which indicates that the Company has been facing liquidity problems to
meet
its
short
term
obligations.
Long Term Debt to Equity Ratio
Companies operating with high debt to equity on their balance sheets are
vulnerable to economic cycles. In times of slowdown in economy, companies
with high levels of debt find it increasingly difficult to service the interest on their
borrowings as profit margins decline. We believe that long term debt to equity
ratio higher than 0.6 - 0.8 could affect the business of a company and its results

ofoperation.
Bharti Airtel’s long term debt to equity ratio over the last 5 financial years has
been reducing which indicates that the Company is comfortably placed to meet
its obligations. Earlier in 2010, 2011, 2012 the debt equity ratio was higher and
then in 2014 it has been reduced to 0.13 which is good for the company as it
may not have difficulties in paying the debt because of less debt.
Interest Coverage Ratio
Interest coverage ratio indicates the comfort with which the company may be
able to service the interest expense (i.e. finance charges) on its outstanding
debt. Higher interest coverage ratio indicates that the company can easily meet
the interest expense pertaining to its debt obligations. In our view, interest
coverage ratio of below 1.5 should raise doubts about the company’s ability to
meet the expenses on its borrowings. Interest coverage ratio below 1 indicates
that the company is just not generating enough to service its debt obligations.
Bharti Airtel’s average interest coverage ratio over the last 5 financial years has
been 14.10 times which indicates that the company has been generating enough
for the shareholders after servicing its debt obligations.

Dividend Payout Ratio Net Profit
This ratio identifies the percentage of earnings (net income) per common share
allocated to paying cash dividends to shareholders. The dividend payout ratio is
an indicator of how well earnings support the dividend payment.
Here's how dividends "start" and "end." During a fiscal year quarter, a company's
board of directors declares a dividend. This event triggers the posting of a
current liability for "dividends payable." At the end of the quarter, net income is
credited to a company's retained earnings, and assuming there's sufficient cash
on hand and/or from current operating cash flow, the dividend is paid out. This
reduces cash, and the dividends payable liability is eliminated.
Bharti Airtel’s dividend payout ratio has been increasing over the years this
shows that company is regularly giving dividend to its shareholder. It means that
company is earning much profit above its retained earning so its giving to its
shareholder in the form of dividend.

FUNDAMENTAL ANALYSIS OF TATA STEEL

Compound Annual Growth Rate of Tata Steel Ltd.

1 year
Revenue

-6.13%

Net Income

-209%

EPS Basic

-220%

Liquidity and credit analysis
2013
2012
2011
Reported Net Profit

2015

6,439.12

6,412.19

5,062.97

2014

6,696.42

6,865.69

The net profit of the company is increasing over the years although it has not
shown a great rise but the downfall has also not been seen.

Current Ratio
Quick Ratio
Debt Equity Ratio
Long Term Debt Equity Ratio

0.62
0.27
0.39
0.39

0.57
0.32
0.43
0.43

0.86
0.61
0.47
0.47

The most important ratio is Net Profit Margin percentage or Net margin. It tells us
how much out of every sale TATASTEEL gets to keep after everything else has
been paid for. It is highly variable from one industry sector to another. An ideal
company has consistent profit margins.
Gross Profit Margin = ( Revenue - Cost of Revenue ) / Revenue
Net Profit Margin = Net Income / Revenue

0.93
0.69
0.45
0.45

From an investor's perspective, ROE is a key ratio. The ROE (after subtracting
preferred shares) tells common shareholders how effectively their money is
being employed. Ideal long term average ROE should be above 15%.
Average 2 year ROE of Tata Steel Ltd. : -3%

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