Question

Ratios	ned	STD	Fun	Sub
Cost to income	56%	57%	50%	59%
Operating profit ratio	34,16%	32,6%	39,39%	21,21%
Net profit ratio	25,55%	25%	30,52%	15,61%
Earnings per share ratio	27,12	17,23	0,29	16,69
Dividend pay out ratio	50,5%	25,35%	55,12%	32,18%
Earnings per equity share	27,12	17,23	0,29	16,69
Divide the yield ratio	5,95%	5,5%	5,8%	5,2%
Price earning ratio	3,1%	1,24%	2,24%	2,62%

Discuss and analyze each ratio comparing Ned to its competitors

Answer 1

• Cost to income ratio is used to measure the cost of running a company in relation to the operating income.It is calculated by dividing the operating cost by operating income.If the ratio is low , it means that the company is profitable.

In the above question,when we compare ned with sub it can be seen that the cost to income ratio of ned is 56% indicating that they are more profitable than sub.But when ned is compared with fun, is it found that fun is a better company than ned.

• Operating profit ratio indicates the percentage of profit a company produce from its operations.It determines the relationship between operating profits and sales.

Operating profit ratio =(operating profit/sales)*100

The operating profit ratio of ned is 34.16%.Comparing it with the competitors,it is seen that Fun is having the highest ratio of 39.39%.A high operating profit ratio indicates that the company is well managed.

• Net profit ratio is also known as net profit margin.It expresses the percentage of net profit earned for every unit of sales.It is calculated by diving net profit by net sales for a specific period.It shows the overall profitability of the business.

Net profit ratio=(net profit/net sales)*100

net profit ratio of ned is 25.55%.It is clearly seen that Fun is having the highest net profit ratio indicating that they are earning more profit than the rest. ned is earning more profit than Sub and STD.

• Earnings per share ratio is calculated to find the profit of a company per share. EPS indicates the money earned by a company for each share of its stock.Higher EPS means the company is earning more profit and hence it will have more value ,and because of the same the investors will pay more.

EPS=Net profit after interest,tax and dividend/number of shares

In the given table it is found that ned have high EPS which means that they are earning more profit from the share.They have more potential to pay dividends to its investors.Fun is having low a EPS.

• Dividend payout ratio is the percentage of net income that is distributed to the shareholders as dividends in a particular year.It is the amount of dividends paid to the shareholders.A higher ratio indicates that the company is paying dividends to the shareholders while a lower ratio means that the company is reinvesting.

When we compare ned and fun it is clear that Fun is having high dividend payout ratio.But ned is better than STD and sub in paying the dividends to its shareholders.

• Earning per equity share is the same as earning per share(EPS).
• Dividend yield ratio is the percentage of market price of a share the company pays annually to its shareholders.

Dividend yield ratio= Dividend per share / Market value per share

Compared to the competitors.it is found that ned is having more dividend yield ratio indicating that the company is earning more income.

• Price earning ratio is also known as P/E ratio. It shows the relationship between the market price of a share and its earnings.It helps the investors to decide whether the shares are fairly priced or not.A high price earning ratio indicates that the stock is over valued.

Price earning ratio = Market price per share / Earnings per equity share

In the table Ned is having high P/E ratio.In this case the company's stock is over valued or we can say that the investors are expecting high growth rate in the future.