Adani Power Ratio Analysis
1. CURRENT RATIO
The current ratio measures a company’s ability to pay its short term obligations. The current ratio of Adani Power Ltd. has increased over the past three years.
The Current ratio of Adani Power is constantly below 1, meaning that the current liabilities are more than the current assets. This suggests that the company would be unable to pay off its obligations if they came due at that point.
This indicates that the company is not in good financial health.
2. ACID – TEST RATIO
The acid-test ratio is a strong indicator of whether a firm has sufficient short-term assets to cover its immediate liabilities. Just as the current ratio the acid test ratio of Adani Power has increased over the past 3 years.
The …show more content…
3. DEBT TO EQUITY RATIO
The debt to equity ratio is used to measure a company’s financial leverage. Over the past 3 years the debt to equity ratio of Adani Power has decreased. This indicates that Adani has decreased its reliance on external borrowings and has relied more on the shareholders’ funds.
4. DEBT TO ASSET RATIO
The debt to asset ratio is measures the proportion of debt with respect to the total assets of a company. The debt to asset ratio of Adani has decreased over the 3 years.
The total asset base of Adani Power has increased from 38779.10 Crore to 42045.11 Crore whereas the Long term debt has been reduced from 17603.16 Crore to 14801.12 this has led to decrease in the debt to asset ratio of Adani.
INTEREST COVERAGE RATIO
The Interest Coverage ratio measures the ability of the company to pay the interest on its current obligations. It shows whether the company shall be able to meet its interest dues. The ICR of Adani has increased by a very small margin in 2015-16 as compared to 2014-15.
The EBIT has increased as well as the interest expenses / finance costs have increased. This is the reason for the rise in ICR.
C. TURNOVER RATIOS
The turnover ratios are the ratios wherein an amount of income statement is divided by an asset or a group of