PROFITABILITY RATIOS

PROFITABILITY RATIOS - PROFITABILITY RATIOS Gross profit...

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PROFITABILITY RATIOS :: Gross profit ratio of Ht. Leela : MAR'05 MAR'06 MAR'07 MAR'08 ht. leela 58.85699 61.93608 61.74447 59.38241 Gross Profit Ratio 57 58 59 60 61 62 63 MAR'05 MAR'06 MAR'07 MAR'08 FY 2005-08 G.P. ratio ht. leela As we can observe from the above chart that the gross profit ratio of ht. leela has shown a more over a sluggish growth from 58.8% of net sales in FY05 to 59.4% of net sales in FY08. This sluggish growth in gross profit ratio can be explained from the fact that as the net sales heavily increased by 100.5% from FY05 to FY08 but on the other hand the cost of goods sold also increased in a similar weight that is by 97.91% from FY05 to FY08. Net sales vs. Cost of goods sold 0 100 200 300 400 500 600 Mar '05 Mar '06 Mar '07 Mar '08 FY 2005-08 -----In Rs. cr------ net sales cost of goods sold This can be seen in the chart above that is, the cost of goods sold were increasing proportionately with the increase in the net sales, therefore leaving us with a sluggish growth rate of gross profit ratio from FY05 to FY08. But the positive point here is that in spite of such increasing rate of cost of goods the firm managed in maintaining the levels of gross profit ratio, with proportionately increasing the growth in net sales . COMPARISON WITH INDUSTRY AND E.I.H:
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MAR'05 MAR'06 MAR'07 MAR'08 industry 47.4750 7 53.47682 56.7524 57.1151 ht leela 58.85699 61.93608 61.74447 59.38241 Eih 44.48683 51.213 53.51822 53.84167 Gross Profit Ratio (Industry vs Ht. leela vs. e.i.h) 0 10 20 30 40 50 60 70 MAR'05 MAR'06 MAR'07 MAR'08 FY 2005-08 Gross Profit Ratio industry ht leela eih As we can observe from the chart above that ht. leela has always performed with higher gross profit ratios as compared with the industrial standards as well as with its peer (e.i.h). Despite of suffering with the highest growth rate in cost of goods sold, it has able to generate sufficient growth rate in nets sales to maintain its high gross profit ratio in the industry. This is a positive sign for ht. leela in case of general profitability position as it maintain its high gross profit margins from FY05 to FY06. Operating Ratio of Ht. Leela : MAR'05 MAR'06 MAR'07 MAR'08 ht. leela 53.18478 50.17587 50.07089 53.86529
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Operating Ratio 48 49 50 51 52 53 54 55 MAR'05 MAR'06 MAR'07 MAR'08 FY 2005-08 Operating ratio ht. leela As we can observe from the chart that the operating ratio showed a decreasing trend from 53.18% of net sales in FY05 to 50.07% of net sales in FY07. This can be explained from the fact that the operating cost (c.o.g.s + operating expenses) increased by 39.69% and the net sales increased by 48.37%, which was higher than the change in operating cost. But the curve showed an upward trend from 50.07% of net sales in FY07 to 53.86% of net sales in FY08. This can be explained from the fact that the operating expenses increased by 45.35% and the net sales increased by a lesser percentage that is, 35.11% only. And cumulatively, if we observe the operating expenses from FY05 to FY08 it just increased by only 1.28% which is just a marginal change. This represents the efficiency of controlling the operating expenses by the firm and is a positive sign for its general profitability position.
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