Larsen And Toubro Ratio Analysis
Following are the analysis’ of the ratios:
Current Ratio:
Current Ratio is calculated by dividing total current assets by total current liabilities.
“The current ratio measures the ability of a company to cover its short-term liabilities with its current assets.” (Wohlner, Investopedia)
Acceptable Current Ratios, even though they differ from industry to industry, usually fall between the ranges of 1.5% to 3%. This means that is it a healthy business, with a good short-term financial strength. A current ratio of 1 or greater means that a company is well endowed to be able to clear its short-term liabilities. And, a current ratio of less than 1 could mean financial difficulty for the company to clear its short term liabilities.
Current Ratio of Larsen and Toubro: 1.445611 …show more content…
The operating profit margin for this company is high, which means that there is a lot of revenue left over after deducting the variable costs.
Net Profit Margin:
This ratio, i.e. net profit margin, is the percentage of revenue of a company that is left over after all the expense has been deducted from the sales account. This shows the profit that a company can take out from its total sales. It is calculated by dividing Net Profit after Taxes by sales. The ideal ratio for this margin is high.
Net Profit Margin of Larsen and Toubro: 0.04
Analysis: Unfavourable. The ratio for this margin is very low; this means that there isn’t a lot of revenue left over after the expenses are subtracted from sales. This means that there is less net profit in this company.
Return on Asset:
“This ratio indicates how profitable a company is relative to its total assets.” (Loth, Investopedia)
One can determine how well a company is putting its assets to use by analyzing this ratio. The ideal ratio for Return on Asset is supposed to be high. It is calculated by dividing net profit by total assets.
Return on Asset of Larsen and Toubro:
Current Ratio:
Current Ratio is calculated by dividing total current assets by total current liabilities.
“The current ratio measures the ability of a company to cover its short-term liabilities with its current assets.” (Wohlner, Investopedia)
Acceptable Current Ratios, even though they differ from industry to industry, usually fall between the ranges of 1.5% to 3%. This means that is it a healthy business, with a good short-term financial strength. A current ratio of 1 or greater means that a company is well endowed to be able to clear its short-term liabilities. And, a current ratio of less than 1 could mean financial difficulty for the company to clear its short term liabilities.
Current Ratio of Larsen and Toubro: 1.445611 …show more content…
The operating profit margin for this company is high, which means that there is a lot of revenue left over after deducting the variable costs.
Net Profit Margin:
This ratio, i.e. net profit margin, is the percentage of revenue of a company that is left over after all the expense has been deducted from the sales account. This shows the profit that a company can take out from its total sales. It is calculated by dividing Net Profit after Taxes by sales. The ideal ratio for this margin is high.
Net Profit Margin of Larsen and Toubro: 0.04
Analysis: Unfavourable. The ratio for this margin is very low; this means that there isn’t a lot of revenue left over after the expenses are subtracted from sales. This means that there is less net profit in this company.
Return on Asset:
“This ratio indicates how profitable a company is relative to its total assets.” (Loth, Investopedia)
One can determine how well a company is putting its assets to use by analyzing this ratio. The ideal ratio for Return on Asset is supposed to be high. It is calculated by dividing net profit by total assets.
Return on Asset of Larsen and Toubro: