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LIQUIDITY RATIOS :: Current ratio of Ht. Leela : As per the rule of thumb says that the current ratio should be at least 2 that is the current assets should meet current liabilities at least twice. Now, by seeing the current ratios of Hotel Leela from 2005 to 2008 we can easily examine that there is decreasing trend . CUREENT RATIO(HT.LEELA) 0 1 2 3 4 Mar '05 Mar '06 Mar '07 Mar '08 FY 2005-08 Series1 As we can observe that the firm was having a high current ratio in FY05, that is 3.34 which was higher than the standard. This figure can be explained with the fact that the firm was trading with less current liabilities in its books, as we compare the current liabilities of FY08 with FY05, its 25.5% of the current liabilities in FY08 . In FY06 also, it had a strong liquid figure with a substantial increase in fixed deposits and short term loans and advances, though there was an increase in current liabilities by 79% from FY05 but it was not sufficient to curb the high current ratio i.e. 2.98 still way above the standards. In FY07, the current ratio was corrected with a quantum dip, it was 59.6% less than in FY05. This major correction was experienced with further more introduction of current liabilities which increased with 71.6% compared with FY06 and with the substancial removal of the funds locked up in the fixed deposits and reduction of short term loans and advances . The firm was having a weakest current ratio as compared with the others i.e. 1.35, it just managed to sweep through its current liabilities. In FY08, the current ratio showed an improving positive sign and the firm managed to attain a respectful liquidity front, close to the standards i.e. 1.96. This can be explained by Mar '05 Mar '06 Mar '07 Mar '08 3.341514 2.985413 1.350379 1.962885
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again substantial increase in the fixed deposits which contributed a 48.3% to the total current assets and a reduced rate of increase in current liabilities i.e. only 27.6% as compared with FY07. COMPARISON OF CURRENT RATIO WITH INDUSTRY AND E.I.H Mar '05 Mar '06 Mar '07 Mar '08 industry 1.882463 1.871993 1.256877 1.524079 ht leela 3.341514 2.985413 1.350379 1.962885 eih 1.130369 1.172125 1.073696 0.990609 CURRENT RATIO (Industry vs ht.leela vs e.i.h) 0 0.5 1 1.5 2 2.5 3 3.5 4 Mar '05 Mar '06 Mar '07 Mar '08 FY-2005-08 current ratio industry ht leela eih As we can observe from the above chart that Hotel Leela has always been an outperformer in
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This note was uploaded on 11/15/2011 for the course ACCOUNTS 231 taught by Professor Majidkhan during the Winter '11 term at IIPM.

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