Summary: Ratio Analysis

Ratio Analysis : The following is the detailed ratio analysis of Hero motor corporation as follows
Profitability Ratios: profitability ratios are calculated to measure Company’s performance by analyzing results obtained through ratio analysis. Purpose is to assess the adequacy of profits earned by the company and to discover whether profitability is increasing or declining
Gross Profit Ratio: Gross profit is very important for any business. It should be sufficient to cover all expenses and provide for profit. Higher the ratio the better the profitability
The ratio assumes great importance to financers of the company as it reveals the cash availability of the firm for payment of interest taxes and to cover fixed expenses , dividends and building

It is used to measure a company's pricing strategy and operating efficiency of a firm .During the last four years Operating profit ratio is highest in FY 2015-16 at 21.06% and the Company has posted highest profit in that year . Thus, this financial year can be termed as the best year for the company in terms of operating profit ratio for the last four years .This ratio has increased gradually in the years thereby indicating increased operating profit Company’s operating margins increased from 18 to 21% margin during the same period. Operating EBITDA increased by 17.5% At 22.4% of net sales and other operating income, the operating EBITDA margin. Operating profits grew by 17.9% The Company’s operating profit (PBT before other income) also increased due to increased sales and increased operating efficiency .
. However this ratio slowed down in the 2013-14 recording the lowest of 13.04% because during the year in review, the Company profitability was affected.
Profit before tax (PBT) reduced by 11.8%.. This was on account of three factors: higher depreciation partly due to changes in rates specified under the Companies Act, 2013; lower non-operating income from Bajaj Auto’s surplus funds as, for post tax yield maximisation, long-term investments were preferred albeit postponement of income

This ratio denotes the speed at which the inventory will be converted into sales, thereby contributing for the profits of the concern. If the ratio was higher then it would have indicated that finished stock is rapidly turned over. A lower means that there is accumulation of obsolete stock or the carrying of too much stock. The stock turnover ratio in case of Bajaj has increased significantly from 27% to 33% with the highest recorded in the year 2015-16 of 33.35% because Net sales grew by 5.4% to H 22,253 crore. Total operating income (net sales plus other operating income) increased by 5.3% to H .Operating earnings before interest, tax, depreciation and amortisation (EBITDA) increased by