Heritage Foods Case Study
1 .Calculation of working capital:
Size of current assets and liabilities and Net working capital of Heritage Foods (India) Limited during the period 2011-12 to 2015-16 (All amounts are in millions)
Year Current Assets Current Liabilities Net W.C
2011-12 1467.094 2175.69 -708.59
2012-13 1466.915 2005.004 -538.089
2013-14 1872.555 2410.804 -538.249
2014-15 2136.183 2466.928 -330.745
2015-16 2279.509 2344.395 -64.886
Interpretation:
It is evident that current assets are increasing continuously from the financial year 2013-14 to 2015-16 and the current liabilities are fluctuating every year i.e., increasing and decreasing.
Net working capital shows that company is not maintaining the sufficient …show more content…
The records are evident that the company will maintain adequate working capital in coming years.
Liquidity position of the company is not sufficient to meet the current obligations.
LIQUIDITY RATIO/SOLVENCY RATIOS:
The liquidity ratio measure the liquidity of the firm and its ability to meet its maturing short term obligations.
1. CURRENT RATIO:
It is the ratio of the current assets to current liabilities. This ratio is used to know the company’s ability to meet its current obligations by using current assets. The standard norm for the current ratio is 2:1
Current ratio = current Assets / Current liabilities.
Table showing current ratio of Heritage Foods (India) Limited during the period 2011-12 to 2015-16 (All amounts are in millions)
Year Current Assets Current Liabilities Ratio
2011-12 1467.094 2175.69 …show more content…
Depletion of working capital for allocation of funds for operation generate high sales every year.
2. Debtors turn over ratios:
Table shows Debtors Turnover Ratio of Heritage Foods (India) Limited. during 2011-2012 to 2015-16.
Debtors turnover which measures whether the amount tied up in debtors is reasonable and whether it has sufficient in converting debtors into cash. Credit Sales
DTR = ------------ Avg. debtors The higher ratio, better the performance.
(All amounts are in millions)
Year Net Credit Sales Avg. Debt Ratio
2011-12 13934.06 128.21 108.6
2012-13 16018.13 131.38 121.9
2013-14 17220.40 158.42 108.69
2014-15 20729.67 204.2 101.5
2015-16 23805.80 265.11 89.79
Interpretation:
From the above table, it is observed that the Heritage Foods (India) Limited debtor’s turnover ratio shows a good sign. The company noted maximum DTR of 121.9 times in the year
Size of current assets and liabilities and Net working capital of Heritage Foods (India) Limited during the period 2011-12 to 2015-16 (All amounts are in millions)
Year Current Assets Current Liabilities Net W.C
2011-12 1467.094 2175.69 -708.59
2012-13 1466.915 2005.004 -538.089
2013-14 1872.555 2410.804 -538.249
2014-15 2136.183 2466.928 -330.745
2015-16 2279.509 2344.395 -64.886
Interpretation:
It is evident that current assets are increasing continuously from the financial year 2013-14 to 2015-16 and the current liabilities are fluctuating every year i.e., increasing and decreasing.
Net working capital shows that company is not maintaining the sufficient …show more content…
The records are evident that the company will maintain adequate working capital in coming years.
Liquidity position of the company is not sufficient to meet the current obligations.
LIQUIDITY RATIO/SOLVENCY RATIOS:
The liquidity ratio measure the liquidity of the firm and its ability to meet its maturing short term obligations.
1. CURRENT RATIO:
It is the ratio of the current assets to current liabilities. This ratio is used to know the company’s ability to meet its current obligations by using current assets. The standard norm for the current ratio is 2:1
Current ratio = current Assets / Current liabilities.
Table showing current ratio of Heritage Foods (India) Limited during the period 2011-12 to 2015-16 (All amounts are in millions)
Year Current Assets Current Liabilities Ratio
2011-12 1467.094 2175.69 …show more content…
Depletion of working capital for allocation of funds for operation generate high sales every year.
2. Debtors turn over ratios:
Table shows Debtors Turnover Ratio of Heritage Foods (India) Limited. during 2011-2012 to 2015-16.
Debtors turnover which measures whether the amount tied up in debtors is reasonable and whether it has sufficient in converting debtors into cash. Credit Sales
DTR = ------------ Avg. debtors The higher ratio, better the performance.
(All amounts are in millions)
Year Net Credit Sales Avg. Debt Ratio
2011-12 13934.06 128.21 108.6
2012-13 16018.13 131.38 121.9
2013-14 17220.40 158.42 108.69
2014-15 20729.67 204.2 101.5
2015-16 23805.80 265.11 89.79
Interpretation:
From the above table, it is observed that the Heritage Foods (India) Limited debtor’s turnover ratio shows a good sign. The company noted maximum DTR of 121.9 times in the year