CHAPTER 5. Liquidity AnALysis. of Sample Real. EstatE CompaniEs

CHAPTER 5 Liquidity AnALysis of Sample Real EstatE CompaniEs 150

MEANING The ability of a company to meet the short and long term obligations is known as Liquidity. The maturity period of Short term means one accounting year.it also shows the operating cycle: Buying, manufacturing, selling, and collecting. Liquidity generally involves conversion of assets into cash during normal courses of business.it means to fulfill the current liability normally within a year with an uninterrupted flow of cash as and when due and payable and also the ensure money for day to day business operations. The conversion of cash should be done with a high speed to convert it within a year for the timely payment may be made to outsiders that is interest, dividend etc. There might be a risk in the total current assets available and the ready cash to pay current debt due to the blockage of a major part of current assets in inventories and credit sale. This may also happen because of the losses on accounts of bad debts and fall in the inventories value. SCOPE OF LIQUIDITY 1. A sick or bankrupt company refers to a company which cannot pay and honour the moral requirements of creditors, supplier of credit, services and goods. 2. The company s reputation may also be affected if it is incapable to meet the short term liability.. 3. Loss of incentives provided by the creditors, services and good may occur in case there is a deficiency of cash or liquid assets. This may increase the cost of goods at high price, which affects the business s profit. 151

PARTIESS INTERESTED IN THE LIQUIDITY OF A COMPANY Liquidity is very important factor for the soundness of a company. It reflects general paying capacity of a company. The following parties are directly affected by liquidity so they are interested to know the position of liquidity of the company- 1. Supplier of good will check the liquidity of the company before selling goods on credit. 2. Employees are also having interest in the liquidity to know whether the company can meet its employees related obligations: salary, pension, provident fund etc. 3. Shareholders are interested in understanding the liquidity due to its huge impact on the profitability. Shareholders may not like high liquidity as profitability and liquidity are inversely related. However, shareholders are also aware that non-liquidity will deprive the company from getting incentives from the suppliers, creditors, and bankers. Liquidity and Business Decisions It is a necessity for the firms to have a concern about the activities going in, have an access to meet its obligations and must remain liquid as per the requirement. The liquidity position could be understood by analyzing the financial statement of a company. Following financial items are required to understand the liquidity position of a company; 1. Current Assets 2. Current Liabilities Financing decision or investment decision helps to examine the liquidity position of a company. The financial investment of a company can be done through different ways of current and long term sources. In all, company invest s all its 152

money by short term or long term sources or in current or non current assets. Some of the relevant business strategies are as follows: Financing the current assets by current sources Financing the current assets by the long term sources Financing non-current assets by the short term sources Financing non-current assets by long term sources The balance sheet or The working capital of a company can also be used to get an idea for the above points mentioned. LIQUIDITY MANAGEMENT The importance of liquidity management is reflected in the fact that financial managers spend a great deal of time in managing current assets and current liabilities. The key issues in liquidity management are as to how much must be invested in each component of liquidity management and how to manage these components effectively and efficiently. The unique characterstics and the investment level of each asset may vary time to time. This makes both the investment decisions and the management of liquidity complicated. Monitoring these assets is necessary to maintain their optimal levels. The important aspect for the success of any company is the proper management of liquidity. The larger the scale of management of liquidity the more it determines the success of the operation of concern. Constant check of the maintanance is required for the appropriate working of the various capital accounts. Shortage of liquidity, poor management, absence of management skills are the common reasons for the failure of any company. Many aspects of liquidity make it important for a financial manager as it maintaines the management and also helps in increasing the Profitability of Concern. DETERMINANT OF LIQUID CAPITAL The amount of liquidity capital needed by an enterprises is undetermined. The liquidity capital is influenced by a large number of Factors of concern. Each of them have their own importance. Therefore an analysis of the relevant factor 153

should be made in order to determine the total requirements in liquid capital, the influencing liquid capital needs are described below; 1. Size of Business The liquid capital requirements of the company are closely related to the size of its business and activity. Public utilities have very little need for current assets because of cash dealing. They have to invest abundantly in fixed assets. In these cases no funds will be tied up in accounts receivables and inventories. On the other hand, trading and financial firms have a very little investment in fixed assets but they required large amount to be invested in liquid capital. The industrial units besides large investment in fixed assets also need a large amount of liquid capital through it varies from industry to industry because of lack of uniformity in the assets structure of different companies. The size of business also has been an important bearing on its liquid capital needs. The size may be measured in terms of the scale of Operation. A Concern with larger scale of operation will need more liquid capital than a small industry. 2. Business Cycle Fluctuation Business enterprises usually experience fluctuations in demand for their product and services because of changes in economic conditions. In view of this liquid capital requirements of enterprises are affected. When there is an upward swing in economy, sales will increase and correspondingly the firm's investment in liquid capital will also increase. Under a business boom, extra investment in fixed assets may be made by some concerns to increase their production capacity. This act of the concerns will need further addition to the liquid capital. 3. Growth and Expansion of Business As a general Rule, when a firm is growing continuously, then there is a need of increasing amount of fund both for fixed and liquid capital. But it is difficult to precisely determine the relationship between the volumes of the turnover of the liquid capital requirement. According to V. E. Ramamoorthy, " The critical fact, however, is that the need for increased working capital funds does not follow but proceeds the growth in business activities." 154

4. Credit Policy Credit policy and billing cycles of the enterprises also determine the requirements of liquid capital. An organization which has got efficient debts collection machinery and offers strict terms for credit, may require a lesser amount of liquid capital. The credit terms granted to the customers may depend upon the norms of the company to which the enterprises belong. "In order to ensure that unnecessary funds are not tied up in book debts, the enterprise should follow a rationalized credit policy based on credit standing of the customers and other relevant factors." 5. Availability of Credit A firm with readily available credit from banks and suppliers will be able to get by with less liquid capital than a firm without such a facility. 6. Manufacturing Times Time taken in manufacturing also affects the size of liquid capital. If the time is longer, the size of liquid capital is bound to be large. Moreover, the amount of liquid capital depends upon inventory turnover and the unit cost of the goods that are sold. 7. Speed of Production Cycles Need for liquid capital of enterprises must be assessed in the light of the level of production proposed to be carried out and the Speed of production cycle. A firm can manage its affairs with little cash in reserve. If the circulation of liquid capital is normal, than at any time if something goes wrong with this circulation, additional funds will have to be provided for. 8. Volume of Sales This is the most important factor to determine the size and components of liquid capital. A firm maintains current assets because they are needed to support the operational activities that culminate in sales. The volume of sales and size of liquid capital are directly related to each other, with the increase in the volume of 155

the sales, there is increase in the required investment in liquid capital in the form of inventory and receivables. 9. Liquidity and Profitability If a firm desires to take a greater risk for bigger gains or losses, it reduced the size of its liquid capital in relation to its sales. If it is interested in improving its liquidity, it increases the level of its liquid capital. However, this policy is likely to result in a reduction of sales volume and therefore, of profitability. A firm, therefore, should choose between liquidity and profitability and decide about its liquid capital need accordingly. 10. Seasonal Fluctuation in Sales Seasonal fluctuation in sales affected the level of variable liquid capital. Although, the demand for products may be of a seasonal nature, yet inventories have got to be purchased during certain season only. The size of liquid capital is in one period may therefore, be higher than that in the others. 11. Other Factors In addition to the above consideration, there are a number of other factors affecting the amount of liquid capital. The absence of coordination in the policies of production and distribution of goods in enterprises result in higher demand for liquid capital. Secondly, the absence of specialization in the product mix on distribution thereof may enhance the need of liquid capital for a concern, as it will have to maintain an elaborate organization both for production and marketing. Thirdly, if means of transport and communication in a country are not well developed, the enterprises may face great demand for working capital in order to maintain huge inventory of raw materials and other accessories. Liquidity Ratios Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. These ratios measure the ability of a company to pay off its short-term liabilities when they fall due.in a nutshell, a company's liquidity 156

is its ability to meet its near-term obligations, and it is a major measure of financial health. Investors often take a close look at liquidity ratios when performing fundamental analysis on a firm. Since a company that is consistently having trouble meeting its short-term debt is at a higher risk of bankruptcy. Liquidity ratios are a good measure of whether a company will be able to comfortably continue as a going concern. The liquidity ratios are a result of dividing cash and other liquid assets by the short term borrowings and current liabilities. They show the number of times the short term debt obligations are covered by the cash and liquid assets. If the value is greater than 1, it means the short term obligations are fully covered. In other words, the liquidity ratios focus on the solvency of the business. A business that finds that it does not have the cash to settle its debts becomes insolvent. Generally, the higher the liquidity ratios, the higher the margin of safety that the company posses to meet its current liabilities. Liquidity ratios greater than 1 indicate that the company is in good financial health and it is less likely fall into financial difficulties. Most common examples of liquidity ratios include current ratio, acid test ratio (also known as quick ratio), cash ratio and working capital ratio. Different assets are considered to be relevant by different analysts. Some analysts consider only the cash and cash equivalents as relevant assets because they are most likely to be used to meet short term liabilities in an emergency. Some analysts consider the debtors and trade receivables also as relevant assets in addition to cash and cash equivalents. The value of inventory is also considered as relevant asset for calculations of liquidity ratios by some analysts. The concept of cash cycle is also important for better understanding of liquidity ratios. The cash continuously cycles through the operations of a company. A company s cash is usually tied up in the finished goods, the raw materials, and trade debtors. It is not until the inventory is sold, sales invoices raised, and the debtors make payments that the company receives cash. The cash tied up in the 157

cash cycle is known as working capital, and liquidity ratios try to measure the balance between current assets and current liabilities. A company must possess the ability to release cash from cash cycle to meet its financial obligations when the creditors seek payment. In other words, a company should posses the ability to translate its short term assets into cash. The liquidity ratios attempt to measure this ability of a company. Liquidity of a company can be measured through several ratios. Here the following important ratios have been used to analyze liquidity of the sample units of Real Estate Sector. 1. Current ratio The current ratio is balance-sheet financial performance measure of company liquidity. The current ratio indicates a company's ability to meet short-term debt obligations. The current ratio measures whether or not a firm has enough resources to pay its debts over the next 12 months. Potential creditors use this ratio in determining whether or not to make short-term loans. The current ratio can also give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. The current ratio is also known as the working capital ratio The current ratio is the most basic liquidity test. It signifies a company's ability to meet its short-term liabilities with its short-term assets. The current ratio (also called the working capital ratio) is a measure of the solvency or liquidity of your business. It tells you whether your business has enough current assets to meet its short term financial obligations (current liabilities) as they become due. The formula used to calculate the current ratio is: Current ratio = current assets current liabilities The higher current ratio shows the better capacity of the company to meet short term financial commitments. A current ratio of 2:1 means the business has current assets of $2 for every $1 of current liabilities, is regarded as desirable for 158

a healthy business. However, the circumstances of every industry or business are different so consider how your business operates and set an appropriate ratio. As a general rule, try to achieve a current ratio above 1:1 and as close to 2:1 as possible. A current ratio of around 1.7-2.0 is pretty encouraging for a business. It suggests that the business has enough cash to be able to pay its debts, but not too much finance tied up in current assets which could be reinvested or distributed to shareholders. A low current ratio, less than 1.0-1.5 might suggest that the business is not well placed to pay its debts. It might be required to raise extra finance or extend the time it takes to pay creditors. A current ratio that is too high may indicate investment in current assets that could otherwise be used to produce income. A current ratio that is too low means there may not be enough current assets to meet short term financial obligations when they are due. The higher the ratio, the more liquid the company is. Commonly acceptable current ratio is 2; it's a comfortable financial position for most enterprises. Acceptable current ratios vary from industry to industry. For most industrial companies, 1.5 may be an acceptable current ratio. Low values for the current ratio (values less than 1) indicate that a firm may have difficulty meeting current obligations. However, an investor should also take note of a company's operating cash flow in order to get a better sense of its liquidity. A low current ratio can often be supported by a strong operating cash flow. If the current ratio of a company is very high(much more than 2), then the company may not be using its current assets or its short-term financing facilities efficiently. This may also indicate problems in working capital management. All other things being equal, creditors consider a high current ratio to be better than a low current ratio, because a high current ratio means that the company is more likely to meet its liabilities which are due over the next 12 months. 159

2. Quick Ratio The term Quick ratio is also known as Acid-test ratio and Liquid ratio. The most basic definition of quick ratio is that, it measures current (short term) liquidity and position of the company. To do the analysis accountants weight current assets of the company against the current liabilities which result in the ratio that highlights the liquidity of the company. This concept is important as if the company s financial statements (income statement, balance sheet) get through the analysis of the acid-test ratio, then the short term debts can be paid by the company. The quick ratio is a liquidity ratio that is more refined and more stringent than the current ratio. Instead of using current assets in the numerator, the quick ratio uses a figure that focuses on the most liquid assets. The main asset left out is inventory, which can be hard to liquidate at market value in a timely fashion. The quick ratio is more conservative than the current ratio and focuses on cash, shortterm investments and accounts receivable. The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets (near cash or quick assets). Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. Quick ratio is viewed as a sign of a company's financial strength or weakness; it gives information about a company s short term liquidity. The ratio tells creditors how much of the company's short term debt can be met by selling all the company's liquid assets at very short notice. The quick ratio is a measure of the liquidity of your business. It measures the level of all assets that can be quickly convertible into cash and used to meet short term liabilities. The quick ratio provides a more conservative measure than the current ratio because it excludes inventory. The quick ratio is a tougher test of liquidity than the current ratio. It eliminates certain current assets such as inventory and prepaid expenses that may be more difficult to convert to cash. Like the current ratio, having a quick ratio above one means a company should have little problem with liquidity. The higher the ratio, 160

the more liquid it is, and the better able the company will be to ride out any downturn in its business. The quick ratio may be calculated as under: Quick ratio = Liquid Assets / Current Liabilities Liquid Assets includes: Cash + Accounts Receivable + Short-Term or Marketable Securities And Current Liability will be taken as earlier taken in Current Ratio. In other words, Calculating liquid assets inventories and prepaid expenses are deducted as less liquid from all current assets. All of those variables are shown on the balance sheet (statement of financial position). Norms and Limits of Liquid Ratio: The higher quick ratio shows the better refined position of the company. A company with a quick ratio of less than one cannot currently pay back its current liabilities; it's the bad sign for investors and partners. The optimal quick ratio is 1:1 or higher, which means that current liabilities can be met from current assets without the need to sell inventory. If the value of the Quick ratio is less than 1, then it is said that such a company is not stable and may face difficulty is paying off their debts (short term). In order to clear the short term debts they probably would need to sell some of their assets. But such an option affects the overall position of the company because the company owns very little assets. The biggest advantage of Quick ratio is that it helps the company in understanding the end results very feasibly. The only major issue with the Quick ratio is its dependence of the accounts receivable and current liabilities which can cause trouble. If due to any dispute the contract with the creditor or debtors gets messed up whole of the process gets 161

unbalanced. And also, a minor mistake in the calculation can just destroy and conclude misleading outcomes. 3. Cash Ratio Cash ratio (also called cash asset ratio) is the ratio of a company's cash and cash equivalent assets to its total liabilities. Cash ratio is a refinement of quick ratio and indicates the extent to which readily available funds can pay off current liabilities. Potential creditors use this ratio as a measure of a company's liquidity and how easily it can service debt and cover short-term liabilities. Cash ratio is the most stringent and conservative of the three liquidity ratios (current, quick and cash ratio). It only looks at the company's most liquid shortterm assets that is cash and cash equivalents, which can be most easily used to pay off current obligations. Cash ratio is a refinement of quick ratio and indicates the extent to which readily available funds can pay off current liabilities. Potential creditors use this ratio as a measure of a company's liquidity and how easily it can service debt and cover short-term liabilities. As the name implies, this ratio is simply the ratio of cash and equivalents compared to current liabilities. This ratio looks only at assets that can be most easily used to pay off short-term debt, and it disregards receivables and shortterm investments. It only measures the ability of a firm's cash, along with investments that are easily converted into cash, to pay its short-term obligations The argument for using the cash ratio is that receivables and short-term investments often cannot be liquidated in a timely manner. Receivables can be sold, or monetized, but the firm will not be able to get the full value of the receivables sold. Keep in mind that, due to their high liquidity, short-term Treasuries are considered cash equivalents, not short-term investments. The formula for the cash ratio is as follows: 162

Cash Ratio = Cash & Equivalents Current Liabilities Cash and equivalent includes: Cash, Short-Term Securities and Marketable Securities. Current liabilities are same as taken in Current and Quick Ratio. Along with the quick ratio, a higher cash ratio generally means the company is in better financial shape. Cash ratio is not as popular in financial analysis as current or quick ratios, its usefulness is limited. There is no common norm for cash ratio. In some countries a cash ratio of not less than 0.2 is considered as acceptable. But ratio that is too high may show poor asset utilization for a company holding large amounts of cash on its balance sheet. LIQUIDITY ANALYSIS OF SAMPLE UNITS OF REAL ESTATE Table 5.1 Current Ratio Company Name/Years 2008 2009 2010 2011 2012 Anant Raj 7.28 11.31 12.8 18.65 5.85 DLF 2.34 2.96 5.03 3.51 1.74 Sun tek Realty 2.51 10.69 6.76 6.16 1.28 HDIL 8.98 8.39 8.32 7.32 2.39 India bulls real 4.9 110.27 92.28 129.21 6.64 As observed from the table that the Current Ratio of Anant Raj Company is highest in the year 2011 i.e. 18.65 and lowest in the year 2012 which is 5.85. Anant Raj showed a positive increase in the ratio till 2011 and then a slight decrease in 2012. 163

The Current Ratio of DLF is highest in the year 2010 which is 5.03 and lowest in the year 2012 that is 1.74. The Current Ratio of Sun Tek Realty is highest in the year 2009 which is 10.69 and lowest in the year 2012 that is 1.28. HDIL has shown a negative trend all over the assessment years. The Current Ratio of Housing Development Infrastructure Ltd. is highest in the year 2008 which is 8.98 and lowest in the year 2012 which is 2.39. India Bull Real shows the fluctuating trend towards Current Ratio from 2008 to 2012. The Current Ratio of India Bulls Real is highest in the year 2011 which is 129.21 and lowest in the year 2008 which is 4.9. The diagram below is showing the Current Ratio of the selected companies for the assessment years. Diagram 5.1 Current Ratio 140 120 100 80 60 40 20 Anant Raj DLF Sun tek Realty HDIL India bulls real 0 2007 2008 2009 2010 2011 2012 164

Table 5.2 Percentage Change in Current Ratio Company Name/Years 2008-09 2009-10 2010-11 2011-12 Anant Raj 55% 13% 46% -69% DLF 26% 70% -30% -50% Sun tek Realty 326% -37% -9% -79% HDIL -7% -1% -12% -67% India bulls real 2150% -16% 40% -95% The growth (the increase/decrease over the period) rate of the companies for Current Ratio can be seen through the above table. The Anant Raj Company has shown a growth rate of 55% from 2008 to 2009, 13% from 2009 to 2010, 46% between 2010-11 and -69% between 2011-12. The DLFCompany has shown a growth rate of 26% from 2008 to 2009, 70% from 2009 to 2010, -30% between 2010-11 and -50% between 2011-12. The Sun Tek RealtyCompany has shown a growth rate of 326% from 2008 to 2009, -37% from 2009 to 2010, -9% between 2010-11 and 79% between 2011-12. The HDILCompany has shown a growth rate of -7% from 2008 to 2009, -1% from 2009 to 2010, -12% between 2010-11 and -67% between 2011-12. The India Bulls RealCompany has shown a growth rate of 2150% from 2008 to 2009, -16% from 2009 to 2010, 40% between 2010-11 and -95% between 2011-12. 165

Diagram 5.2 Change in Current Ratio 2500% 2000% 1500% 1000% 500% Anant Raj DLF Sun tek Realty HDIL India bulls real 0% -500% 2007-08 2008-09 2009-10 2010-11 2011-12 Table 5.3 Geometric Mean of Change in Current Ratio Company Name/Years Geometric Mean Ranks Anant Raj 23.878 2 DLF 0.092 5 Sun tek Realty 3.178 4 HDIL 3.537 3 India bulls real 29.189 1 166

Diagram 5.3 Geometric Mean of Change in Current Ratio 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0.000 Anant Raj DLF Sun tek Realty Geometric Mean HDIL India bulls real Geometric Mean To see the average change in terms of percentage in Current Ratio we can see the values of Geometric Mean of the following companies for the selected years. According to the values India Bulls Real is showing the maximum Geometric Mean i.e. 29.189 followed by Anant Raj 23.878, HDIL3.537,SunTek Realty 3.178, DLF0.092. On the basis of the data the liquidity of India bull real is maximum followed by Anant Raj, HDIL, Sun Tek Realty and DLF. Although in spite of being at last the current liquidity of DLF is 2, which is a good position for a company. IF current ratio is more than one then it is a good position. The India bull real is showing a very high current ratio. A high current ratio is a good indicator of liquidity but very high ratio can be because of unused capital, which is not a good situation for any company. It shows that a lot of fund is unused, which hinders the growth of the company. 167

Table 5.4 Quick Ratio Company Name/Years 2008 2009 2010 2011 2012 Anant Raj 7.88 11.23 12.72 13.45 5.65 DLF 3.28 3.83 3.56 2.49 1.74 Sun tek Realty 48.98 7.18 4.77 4.48 3.04 HDIL 1.3 1.25 1.79 2.33 1.09 India bulls real 4.9 110.26 92.27 128.87 9.14 As observed from the table that the Quick Ratio of Anant Raj Company is highest in the year 2011 i.e. 13.45 and lowest in the year 2012 which is 5.65. Anant Raj showed a positive increase in the ratio till 2011 and then a slight decrease in 2012. The Quick Ratio Current Ratio of DLF is highest in the year 2009 which is 3.83 and lowest in the year 2012 that is 1.74. The positive point about this company is that there is no negative value in any year which is a good sign. The Quick Ratio of Sun Tek Realty is highest in the year 2008 which is 48.98 and lowest in the year 2012 that is 3.04. It has not shown any negative ratio in any year. The Quick Ratio of Housing Development Infrastructure Ltd. is highest in the year 2011 which is 2.33 and lowest in the year 2008 which is 1.3. India Bull Real shows the fluctuating trend towards Quick Ratio from 2008 to 2012. The Quick Ratio of India Bulls Real is highest in the year 2011 which is 128.87 and lowest in the year 2008 which is 4.9. The diagram below is showing the Quick Ratio of the selected companies for the assessment years. 168

Diagram 5.4 Quick Ratio 140 120 100 80 60 40 20 Anant Raj DLF Sun tek Realty HDIL India bulls real 0 2007 2008 2009 2010 2011 2012 Table 5.5 Change in Quick Ratio Company Name/Years 2008-09 2009-10 2010-11 2011-12 Anant Raj 43% 13% 6% -58% DLF 17% -7% -30% -30% Sun tek Realty -85% -34% -6% -32% HDIL -4% 43% 30% -53% India bulls real 2150% -16% 40% -93% The growth (the increase/decrease over the period) rate of the companies for Quick Ratio can be seen through the above table. The Anant Raj Company has shown a growth rate of 43% from 2008 to 2009, 13% from 2009 to 2010, 6% between 2010-11 and -58% between 2011-12. The DLFCompany has shown a growth rate of 17% from 2008 to 2009, -7% from 2009 to 2010, -30% between 2010-11 and -30% between 2011-12. The Sun Tek RealtyCompany has shown a growth rate of -85% from 2008 to 2009, -34% from 169

2009 to 2010, -6% between 2010-11 and -32% between 2011-12. The HDILCompany has shown a growth rate of -4% from 2008 to 2009, 43% from 2009 to 2010, 30% between 2010-11 and -53% between 2011-12. The India Bulls RealCompany has shown a growth rate of 2150% from 2008 to 2009, -16% from 2009 to 2010, 40% between the years 2010-11 and -93% from 2011-12. Diagram 5.5 Change in Quick Ratio 4000% 4000% 3500% 3500% 3000% 3000% 2500% 2500% 2000% 2000% 1500% 1500% 1000% 1000% 500% 500% 0% 0% -500% -500% 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 Anant Raj Anant Raj DLF DLF Sun tek Realty Sun tek Realty HDIL HDIL India bulls real India bulls real Table 5.6 Geometric Mean of Change in Quick Ratio Company Name/Years Rank Geometric Mean Anant Raj 24.030 2 DLF 5.142 5 Sun tek Realty 18.619 3 HDIL 12.307 4 India bulls real 38.182 1 170

Diagram 5.6 Geometric Mean of Change in Quick Ratio 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0.000 Anant Raj DLF Sun tek Realty Geometric Mean HDIL India bulls real Geometric Mean To see the average change in terms of percentage in Quick Ratio we can see the values of Geometric Mean of the following companies for the selected years. According to the values India Bulls Real is showing the maximum Geometric Mean i.e. 38.182 followed by Anant Raj 24.030, Sun Tek Realty 18.619, HDIL 12.307 and DLF 5.142. On the basis of the data the liquidity of India bull real is maximum followed by Anant Raj, SunTek Realty, HDIL and DLF. Table 5.7 Cash Ratio Company Name/Years 2008 2009 2010 2011 2012 Anant Raj 0.12 4.49 4.25 2.12 0.42 DLF 0.38 0.03 0.02 0.02 0.04 Sun Tek Realty 12.44 0.05 0.57 0.02 0.04 HDIL 0.04 0.04 0.37 0.01 0.06 India bull real 1.02 0.49 0.01 1.36 0.07 171

As observed from the table that the Cash Ratio of Anant Raj Company is highest in the year 2009 i.e. 4.492 and lowest in the year 2008 which is 0.120. The Cash Ratio Current Ratio of DLF is highest in the year 2008 which is 0.38 and lowest in the year 2010 that is 0.018. The positive point about this company is that there is no negative value in any year which is a good sign. The Cash Ratio of Sun Tek Realty is highest in the year 2008 which is 12.44 and lowest in the year 2011 that is 0.01. It has not shown any negative ratio in any year. The Cash Ratio of Housing Development Infrastructure Ltd. is highest in the year 2010 which is 0.36 and lowest in the year 2011 which is 0.01. India Bull Real shows the fluctuating trend towards Cash Ratio from 2008 to 2012. The Cash Ratio of India Bulls Real is highest in the year 2011 which is 1.3 and lowest in the year 2010 which is 0.01. The diagram below is showing the Cash Ratio of the selected companies for the assessment years. Diagram 5.7 Cash Ratio 14.00 12.00 10.00 8.00 6.00 4.00 2.00 Anant Raj DLF Sun Tek Realty HDIL India bull real 0.00 2008 2009 2010 2011 2012 172

Table 5.8 Change in Cash Ratio Company Name/Years 2008-09 2009-10 2010-11 2011-12 Anant Raj 3633% -5% -50% -80% DLF -92% -39% 34% 64% Sun tek Realty -100% 1154% -97% 177% HDIL -7% 908% -96% 301% India bulls real -52% -98% 12291% -95% The growth (the increase/decrease over the period) rate of the companies for Cash Ratio can be seen through the above table. The Anant Raj Company has shown a growth rate of 3633% from 2008 to 2009, - 5% from 2009 to 2010, -50% between the years 2010-11 and -80% between 2011-12. The DLF Company has shown a growth rate of -92% from 2008 to 2009, -39% from 2009 to 2010, 34% between the years 2010-11 and 64% between 2011-12. The Sun Tek Realty Company has shown a growth rate of -100% from 2008 to 2009, 1154% from 2009 to 2010, -97% between the years 2010-11 and 177% between 2011-12. The HDIL Company has shown a growth rate of -7% from 2008 to 2009, 908% from 2009 to 2010, -96% between the years 2010-11 and 301% between 2011-12. The India Bulls Real Company has shown a growth rate of -52% from 2008 to 2009, -98% from 2009 to 2010, 12291% between the years 2010-11 and -95% from 2011-12. 173

Diagram 5.8 Change in Cash Ratio 14000% 12000% 10000% 8000% 6000% 4000% 2008-09 2009-10 2010-11 2011-12 2000% 0% -2000% Anant Raj DLF Sun tek Realty HDIL India bulls real Table 5.9 Geometric Mean of Change in Cash Ratio Company Name/Years Rank Geometric Mean Anant Raj 37.229 1 DLF -42.774 3 Sun tek Realty -68.050 5 HDIL 10.736 2 India bulls real -50.616 4 174

Diagram 5.9 Geometric Mean of Change in Cash Ratio 60.000 Geometric Mean 40.000 20.000 0.000-20.000 Anant Raj DLF Sun tek Realty HDIL India bulls real Geometric Mean -40.000-60.000-80.000 To see the average change in terms of percentage in Cash Ratio we can see the values of Geometric Mean of the following companies for the selected years. According to the values Anant Raj is showing the maximum Geometric Mean i.e. 37.229 followed by HDIL 10.736, DLF-42.774, India Bulls Real -50.616 and Sun Tek Realty -68.050. 175

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