Chapter-5 Data Analysis & Interpretation
CHAPTER 5 DATA ANALYSIS AND INTERPRETATION Ratio Analysis - Meaning of Ratio (A) Return on Investment Ratios 5.1 Return on Capital Employed Ratio 5.2 Return on Long-Term Fund Ratio 5.3 Return on Assets Ratio 5.4 Return on Shareholder s Fund Ratio ( B ) Profitability Ratios 5.5 Gross Profit Ratio 5.6 Net Profit Ratio 5.7 Operating Profit Ratio ( C ) Liquidity Ratios 5.8 Current Ratio 5.9 Quick Ratio ( D ) Leverage Ratios 5.10 Debt Equity Ratio 5.11 Long Term Debt Equity Ratio 5.12 Total Debt to Owner's Fund Ratio ( E ) Activity or Efficiency Ratio 5.13 Total Assets Turnover Ratio 5.14 Fixed Assets Turnover Ratio 5.15 Inventory Turnover Ratio 5.16 Debtors Turnover Ratio 5.17 Working Capital Turnover Ratio Chapter-5 Data Analysis and Interpretation Page 169
( F ) Overall Financial Performance Analysis 5.18 Overall ROI Performance Analysis 5.19 Overall Profitability Performance Analysis 5.20 Overall Liquidity Performance Analysis 5.21 Overall Leverage Performance Analysis 5.22 Overall Efficiency Performance Analysis 5.23 Overall Financial Performance Analysis (Company Wise) 5.24 Overall Financial Performance Analysis (Ratio Wise) 5.25 Overall Hypothesis Result Analysis CONCLUSION REFERENCES Chapter-5 Data Analysis and Interpretation Page 170
INTRODUCTION Ratio analysis is one of the most powerful tools of financial analysis. It is most important techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of the firm. Analysis and interpretation of various accounting ratios gives a skilled and experienced analyst a better understanding of the financial condition and performance of the firm than what it could have obtained only through a perusal of financial statements. It has been described here under. A. Return on Investment Ratios B. Profitability Ratios C. Liquidity Ratios D. Leverage Ratio E. Activity or Efficiency Ratios F. Overall Financial Performance Analysis A. RETURN ON INVESTMENTRATIOS The return on investment (ROI) is a very useful technique to measure the profitability of all financial resources employed in the business enterprises assets. ROI reveals a vital indication of the profitability in terms of employment of capital in the business. In other words this ratio measure the earning power profit output with the capital input. This rate is the end profit of a series of quantitative variables representing different interconnected and interdependent factor s of business operations. ROI is computed by multiplying profit margin ratio and assets turnover ratio. ROI is totally free from all the weakness that contained as assets turn over ignores the profitability of the business on sales while profit margin does not consider the utilization of the assets of the business. Thus, ROI represent the relationship between net profit and assets of the business. Chapter-5 Data Analysis and Interpretation Page 171
5.1 RETURN ON NET CAPITAL EMPLOYED RATIO The return on net capital employed is a guide to compare the profitability of business. It is also an indication of proper utilization of net capital employed towards achieving desirable profits. Net capital employed is the total of fixed assets plus current assets minus current liability. The only differences between the gross capital employed and net capital employed is that current liabilities are deducted from the gross capital employed. Return on net capital employed has been computed by dividing the net profit before interest and taxes by the net capital employed. Return on net capital employed is calculated on the basis of following formula, Sr. No TABLE-5.1 Return on Net Capital Employed Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL 43.88 12.61 (31.27) 977.60 2 HUTCHISON ESSAR -19.34 6.55 25.89 670.29 3 HINDALCO INDUSTRIES 15.53 9.25 (6.28) 39.40 4 RANBAXY LABORATORIES 12.42 13.87 1.45 2.11 5 ONGC 35.30 23.71 (11.59) 134.26 6 TATA TELESERVICES -14.00-2.09 11.90 141.66 7 HDFC BANK 8.82 10.98 2.17 4.70 8 TATA MOTORS 27.01 16.72 (10.29) 105.78 9 STERLITE INDUSTRIES 31.46 16.70 (14.76) 217.93 10 SUZLON ENERGY 28.59 6.98 (21.61) 466.99 (54.38) 2956.68 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 172
RATIO (%) Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.1 Return on Net Capital Employed Ratio Before and After M & A in Selected Units 100.00 Return on Long Term Fund Ratio 80.00 60.00 40.00 20.00 0.00-20.00-40.00 Before M & A After M & A INTERPRETATION The above table no. 5.1 indicates the return on Net capital employed ratio in selected units, before and after merger and acquisitions. Moreover, Tata Steel shows the highest 43.88% and H u c h i s o n E s s a r a n d T a t a T e l e s e r v i c e s shows the least p e r c e n t a g e of return on capital employed by 19.34% and 14% and rest of all Industry shows an average return on net capital employed before mergers and acquisitions. Besides this, after mergers and acquisitions the performance of H u c h i s o n E s s a r, R a n b ax y La b o r at o r i es, T at a T el es e r v i c es an d H D FC B an k and h av e been increased by 25.86%, 1.45%, 11.90%, and 2.17% respectively. However r e s t o f all six sample units has decline growth rate on return on net capital employed. So, the researcher can conclude that after mergers and acquisitions the financial performance of sample units was not improved. Chapter-5 Data Analysis and Interpretation Page 173
Calculation of T Test Table 5.1 (a) Analysis of T - Test in Selected Units Return on Net Capital Employed Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10-5.44 5.23 n-1 10-1 9-1.04 2.262 H0 H0 = There is no significant difference in means score of Return on Net Capital Employed ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Return on Net Capital Employed ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is -1.04 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 174
5.2 RETURN ON LONG TERM FUND RATIO This ratio establishes the relationship between net profit and the long term funds. The term long-term funds refer to the total investment made in business for long term. It is calculated by dividing Earnings before Interest & Tax (EBIT) by the total long-term funds. Return on longterm funds is calculated on the basis of following formula, TABLE-5.2 Return on Long Term Fund Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Sr. No Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL 44.82 12.82 (32.00) 1023.94 2 HUTCHISON ESSAR 13.22 19.18 5.96 35.52 3 HINDALCO INDUSTRIES 16.60 11.23 (5.37) 28.80 4 RANBAXY LABORATORIES 14.82 20.43 5.62 31.53 5 ONGC 35.35 27.40 (7.96) 63.31 6 TATA TELESERVICES -18.95-5.70 13.25 175.67 7 HDFC BANK 67.24 76.37 9.13 83.32 8 TATA MOTORS 29.28 22.41 (6.87) 47.20 9 STERLITE INDUSTRIES 36.66 19.07 (17.59) 309.23 10 SUZLON ENERGY LTD 31.49 8.75 (22.74) 517.06 (58.56) 3429.23 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 175
RATIO (%) Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.2 Return on Long Term Fund Ratio Before and After M & A in Selected Units 100.00 80.00 Return on Long Term Fund Ratio 60.00 40.00 20.00 0.00-20.00-40.00 Before M & A After M & A INTERPRETATION The above table no 5.2 shows the return on long-term funds ratio in selected 10 units, before and after mergers and acquisitions. The highest return on long-term funds is in the HDFC Bank by 67.24% and Tata Tele services shows the lowest -18.95%, before mergers and acquisitions. Moreover, Tata Steel, Hutchison Essar, Hindalco, Ranbaxy Laboratories, ONGC, Tata Motors, Sterlite Industry and Suzlon Energy show on an average 27% return on long-term funds during pre mergers and acquisitions. But after mergers and acquisitions, HDFC Bank shows the highest 76.37% of return on long-term funds. After mergers and acquisitions the performance of 4 units Hutchison Essar, Ranbaxy Laboratories, Tata Tele Services and HDFC Bank has been increased by 5.96%, 5.62%, 13.25% and 9.13% respectively. And the remaining 6 units show the decline growth rate on return on long-term funds ratio after mergers and acquisitions including sharp decline in TATA steel by 32%. So, the researcher can conclude that, the profitability of 4 units is increased and 6 units are decreased after mergers and acquisitions. Chapter-5 Data Analysis and Interpretation Page 176
Calculation of T Test Table 5.2 (a) Analysis of T - Test in Selected Units Return on Long Term Fund Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10-5.86 4.68 n-1 10-1 9-1.25 2.262 H0 H0 = There would be no significant difference in means score of Return on Long Term Fund ratio in selected units, before and after Mergers and Acquisitions. H1 = There would be significant difference means score of Return on Long Term Fund ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of Tc is -1.25 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 177
5.3 RETURN ON ASSETS RATIO This ratio establishes the relationship between net profit after tax and the Total Assets. The term total assets refer to the total investment made in business for assets. It is calculated by dividing Net Profit After Tax (PAT) by the total Assets. Return on Total Assets is calculated on the basis of following formula, TABLE-5.3 Return on Assets Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Sr. No Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL 144.18 351.10 206.92 42816.16 2 HUTCHISON ESSAR -16.82 4.67 21.49 461.82 3 HINDALCO INDUSTRIES 558.20 132.28 (425.92) 181409.55 4 RANBAXY LABORATORIES 86.27 94.91 8.65 74.74 5 ONGC 338.15 228.61 (109.54) 11999.89 6 TATA TELESERVICES 0.33-4.83 (5.16) 26.58 7 HDFC BANK 186.36 330.03 143.68 20643.66 8 TATA MOTORS 145.82 157.54 11.72 137.39 9 STERLITE INDUSTRIES 335.40 265.56 (69.85) 4878.32 10 SUZLON ENERGY 112.72 43.04 (69.69) 4856.32 (287.70) 267304.44 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 178
Ratio (%) Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.3 Return on Assets Ratio Before and After M & A in Selected Units 600.00 500.00 400.00 Return on Assets Ratio 300.00 200.00 100.00 0.00-100.00 Before M & A After M & A INTERPRETATION The above table no 5.3 shows the return on Assets ratio in selected 10 units, before and after mergers and acquisitions. The highest return on Assets is in the Hindalco Industry by 558.20 % Hutchison Essar Shows the lowest -16.82 %, before mergers and acquisitions. Moreover, Rest of the units shows an average return on Assets during pre mergers and acquisitions. But after mergers and acquisitions, Tata Tele Services shows the highest 351.10 % of return on Assets. After mergers and acquisitions the performance of 5 units Tata steel, Hutchison Essar, Ranbaxy Laboratories, HDFC Bank and Tata Motors have been increased by 206.92%, 21.49%, 8.65%, 143.68% and 11.72% respectively. And the remaining 5 units show the decline growth rate on return on Assets ratio after mergers and acquisitions including sharp decline in Hindalco Industries by -425.92 %. So, the researcher can conclude that, the profitability of 5 units is increased and 5 units is decreased after mergers and acquisitions. Chapter-5 Data Analysis and Interpretation Page 179
Calculation of T Test Table 5.3 (a) Analysis of T - Test in Selected Units Return on Assets Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10-28.77 53.65 n-1 10-1 9-0.54 2.262 H0 H0 = There is no significant difference in means score of Return on Assets ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Return on Assets ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is -0.54 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 180
5.4 RETURN ON SHAREHOLDERS FUND RATIO Return on share holder s fund is known as RETURN ON NET WORTH. The return on net worth indicates the profitability of the owner s Investment. As we know that every business is established with a view to getting return in the form of profit on the amount invested. So, there should be a minimum of return on investment. The term net worth or share holder s funds includes (a) Equity Share Capital (b) Preference share capital (c) Reserve and Surplus less accumulated losses It is useful in the sense it measures the residue income which really belongs to the owner s who bear the business fists and financial risks. This ratio is thus of great interest to the present as well as prospective share holders and also of great concern of management. A higher ratio indicates the better utilization of owner s funds higher productivity, favorable business conditions and proper use on trading on equity or vice versa. The return on net worth can be improved by making best use of borrowed funds as the outside financiers are paid interest at a fixed rate only and it also reduces the tax liability. Whenever earning realized by making use of borrowed funds are at a higher rate then, the cost of these funds and savings thus affected the profit or the business will invariably increase which will result increase of the return on net worth. The return on share holder s fund is calculated on the basis of following formula. Chapter-5 Data Analysis and Interpretation Page 181
Ratio (%) Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies TABLE-5.4 Return on Shareholders Fund Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Sr. No Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL 42.54 18.92 (23.61) 557.57 2 HUTCHISON ESSAR 0.00 0.00 0.00 0.00 3 HINDALCO INDUSTRIES 15.97 10.89 (5.08) 25.81 4 RANBAXY LABORATORIES 21.60-15.49 (37.10) 1376.15 5 ONGC 25.71 18.13 (7.58) 57.41 6 TATA TELESERVICES 261.01 32.47 (228.54) 52232.36 7 HDFC BANK 17.16 16.18 (0.98) 0.96 8 TATA MOTORS 28.39 19.63 (8.76) 76.71 9 STERLITE INDUSTRIES 28.98 11.65 (17.33) 300.24 10 SUZLON ENERGY 37.58-5.83 (43.42) 1885.04 (372.39) 56512.26 (Source: Annual reports of the selected units and EMIS database website.) CHART 5.4 Return on Shareholders Fund Ratio Before and After M & A in Selected Units 300.00 Return on Shareholder's Fund 250.00 200.00 150.00 100.00 50.00 0.00-50.00 Before M & A After M & A Chapter-5 Data Analysis and Interpretation Page 182
INTERPRETATION The table no. 5.4 shows the data regarding return on share holders funds ratio in selected 10 units during before and after mergers and acquisitions. The Tata Tele Services shows the highest 261.01% and the Hindalco Industry Shows the lowest 15.97 % before mergers and acquisitions. And remaining units show on an average 29% return on share holders funds during before mergers and acquisitions. After mergers and acquisitions Tata Chemical Ltd. Shows the highest return by 19.62%. After mergers and acquisitions the performance of all 10 units has been with decreasing growth rate including the sharp declining in Tata Tele Services by -228.54%. All the 10 sample units show decline growth rate on share holders funds ratio. So, the researcher can conclude that, after mergers and acquisitions the financial performance of sample units was decreased. Calculation of T Test Table 5.4 (a) Analysis of T - Test in Selected Units Return on Shareholders Fund Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10-37.24 21.77 n-1 10-1 9-1.71 2.262 H0 H0 = H1 = There is no significant difference in means score of Return Shareholders Fund ratio in selected units, before and after Mergers and Acquisitions. There is significant difference means score of Return on Shareholders Fund ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is -1.71while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 183
B. PROFITABILITY RATIO The word profitability is a modulation of two word s profit and ability. It means the profit making ability of the organization. Profits are the soul of the business without which it cannot survive longer period. Profitability indicates the capacity of managements to generate surplus in the process of business operations. A lower profitability may arise due to the lack of control over expenses. The purpose of the study and analysis of profitability ratios are helping to assess the adequacy of profit earned by the company and also to discover whether profitability is increasing or declining. The profitability of the firm is the net result of a large number of policies and decisions. The profitability ratio is shows the combined effects of liquidity, asset management and debt management on operating result. The major profitability ratios are as follow: 5. Gross Profit Ratio 6. Net Profit Ratio 7. Operating Profit Ratio 5.5 GROSS PROFIT RATIO Gross profit ratio shows relationship of gross profit to net sales. Gross profit is arrived at by deducting cost of goods sold from net sales. Expenses generally charged to profit and loss account are not included in the cost of goods sold. This is obtained by dividing the amount of gross profit by sales and is expressed as a percentage. Gross profit ratio is expressed as follows: This ratio is important to determine general profitability since it is expected that the ratio would be quite high so as to cover not only the remaining costs but also to allow proper returns to owners. Chapter-5 Data Analysis and Interpretation Page 184
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies TABLE-5.5 Gross Profit Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Diff Before After Diff Sr. Square Name of the Companies M & A M & A ( D = No d (D² (X) (Y) Y - X ) ) 1 TATA STEEL LTD 29.11 8.01 (21.09) 444.98 2 HUTCHISON ESSAR 41.84 34.79 (7.05) 49.65 3 HINDALCO INDUSTRIES 17.47 6.63 (10.84) 117.52 4 RANBAXY LABORATORIES 9.95 9.39 (0.56) 0.31 5 ONGC 29.18 28.04 (1.13) 1.28 6 TATA TELESERVICES -3.52-4.95 (1.43) 2.04 7 HDFC BANK 17.71 23.85 6.14 37.68 8 TATA MOTORS 10.11 6.73 (3.37) 11.38 9 STERLITE INDUSTRIES 23.56 21.10 (2.47) 6.08 10 SUZLON ENERGY 19.59 6.13 (13.46) 181.21 (55.26) 852.13 (Source: Annual reports of the selected units and EMIS database website.) CHART 5.5 Gross Profit Ratio Before and After M & A in Selected Units 50.00 Gross Profit Ratio 40.00 30.00 20.00 10.00 0.00-10.00 Before M & A After M & A Chapter-5 Data Analysis and Interpretation Page 185
INTERPRETATION The above table no. 5.5 shows the gross profit ratio in selected units, before and after mergers and acquisitions. The highest gross profit ratio is in the Hutchison Essar by 41.84% and Tata Tele Services shows the lowest -3.52%, before mergers and acquisitions. Moreover, Tata Steel, Hindalco Industry, Ranbaxy Laboratories, ONGC, HDFC Bank, Tata Motors, Sterlite Industry and Suzlon Energy show on an average 20% Gross Profit Ratio during pre mergers and acquisitions. After mergers and acquisitions, HDFC Bank shows the highest 23.85% of gross profit ratio and Tata Tele Services shows the lowest -4.95%. Besides this, after mergers and acquisitions the performance of rest of the companies like Tata Steel, Hutchison Essar, Hindalco Industry, Ranbaxy ONGC, Tata Motors, Sterlite Industry and Suzlon has been decreased by 21.09%, 7.05%, 10.84%, 0.56%1.13%, 3.37%, 2.47%and 13.46% respectively. So, the researcher can conclude that after mergers and acquisitions the financial performance of sample units was not improved. Calculation of T Test Table 5.5 (a) Analysis of T - Test in Selected Units Gross Profit Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10-5.53 2.46 n-1 10-1 9-2.24 2.262 H0 H0 = H1 = There is no significant difference in means score of Gross Profit ratio in selected units, before and after Mergers and Acquisitions. There is significant difference means score of Gross Profit ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is -2.24 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 186
5.6 NET PROFIT RATIO This ratio indicates the portion of sales which is left to the proprietor after all costs, charges and expenses have been deducted. This is ratio of net income or profit after taxes to sales. The ratio is very used a measure of overa ll profitability. Net profit ratio focuses on the non-operating activities. Net profit ratio is calculated on the basis of following formula, It indicates the net margin earned in a sale of `100. Net profit is arrived at from gross profit after deducting administration, selling and distribution expenses; non-operating incomes, such as dividends received and non-operating expenses are ignored, since they do not affect efficiency of operations. Sr. No TABLE-5.6 Net Profit Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL LTD 18.81 4.47 (14.34) 205.64 2 HUTCHISON ESSAR -47.99 15.62 63.61 4045.72 3 HINDALCO INDUSTRIES 12.35 3.72 (8.62) 74.35 4 RANBAXY LABORATORIES 9.36-1.60 (10.96) 120.15 5 ONGC 20.40 16.81 (3.59) 12.92 6 TATA TELESERVICES -46.31-12.85 33.46 1119.84 7 HDFC BANK 14.82 16.12 1.30 1.70 8 TATA MOTORS 6.89 4.05 (2.84) 8.08 9 STERLITE INDUSTRIES 11.82 14.15 2.33 5.41 10 SUZLON ENERGY 18.21-1.19 (19.40) 376.20 40.94 5970 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 187
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.6 Net Profit Ratio Before and After M & A in Selected Units 30.00 Net Profit Ratio 20.00 10.00 0.00-10.00-20.00-30.00-40.00-50.00-60.00 Before M & A After M & A INTERPRETATION The table no. 5.6 shows the data regarding net profit ratio in selected 10 units during before and after mergers and acquisitions. The ONGC shows the highest 20.40% and the Hutchison Essar Shows the lowest -47.99% before mergers and acquisitions. And remaining units like Tata Steel, Hindalco Industry, Ranbaxy Laboratories, HDFC Bank, Tata Motors, Sterlite Industry and Suzlon Energy show on an average 13% net profit ratio, before mergers and acquisitions. After mergers and acquisitions ONGC shows the highest 16.81%. After mergers and acquisitions the financial performance of Hutchison Essar, Tata Tele Services, HDFC Bank and Sterlite Industry has been increased by 63.61%, 33.46%, 1.30% and 2.33% respectively. However 6 sample units show the decline growth rate of net profit ratio. So, the researcher can conclude that after mergers and acquisitions the financial performance of sample units was not improved. Chapter-5 Data Analysis and Interpretation Page 188
Calculation of T Test Table 5.6 (a) Analysis of T - Test in Selected Units Net Profit Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10 4.09 8.03 n-1 10-1 9 0.51 2.262 H0 H0 = There is no significant difference in means score of Net Profit ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Return on Net Profit ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is 0.51 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 189
5.7 OPERATING PROFIT RATIO This ratio indicates the relationship between operating profit and net sales. Operating cost is the total cost of goods sold and all other operating expenses. i.e. administrative expenses and selling and distribution expenses. Operating profit ratio is calculated on the basis of following formula: A comparison of the operating ratio would indicate whether the cost content is high or low in the figure of sales. If the annual comparison shows that the sales have increased, the management would be naturally interested and concerned to know as to which element of the cost has gone up. It is, therefore, necessary to break up the operating ratio into various cost ratios. The major components of cost are: material, labor and overheads. Generally all these ratios are expressed in terms of percentage. They total up to the Operating Ratio. This, deducted from 100 will be equal to the Net Profit Ratio. Sr. No TABLE-5.7 Operating Profit Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL LTD 33.78 11.52 (22.26) 495.57 2 HUTCHISON ESSAR -47.99 20.04 68.03 4628.63 3 HINDALCO INDUSTRIES 23.86 10.76 (13.10) 171.52 4 RANBAXY LABORATORIES 12.15 13.33 1.18 1.39 5 ONGC 43.61 38.74 (4.86) 23.65 6 TATA TELESERVICES 7.57 19.72 12.15 147.67 7 HDFC BANK 20.56 26.21 5.65 31.92 8 TATA MOTORS 12.75 10.52 (2.23) 4.96 9 STERLITE INDUSTRIES 27.64 24.65 (2.99) 8.91 10 SUZLON ENERGY 21.59 8.98 (12.61) 158.96 28.97 5673.17 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 190
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.7 Operating Profit Ratio Before and After M & A in Selected Units 60.00 Opeating Profit Ratio 40.00 20.00 0.00-20.00-40.00-60.00 Before M & A After M & A INTERPRETATION The table no. 5.7 shows the operating profit ratio in selected units before and after mergers and acquisitions. The ONGC shows the highest 43.61% and the Hutchison Essar Shows the lowest -47.99% before mergers and acquisitions. And remaining units like Tata Steel, Hindalco Industry, Ranbaxy Laboratories, Tata Tele Services, HDFC Bank, Tata Motos, Sterlite Industry and Suzlon Energy show on an average 20% operating profit ratio, before mergers and acquisitions. After mergers and acquisitions ONGC shows the highest 38.74% and Suzlon Energy shows the lowest 8.98%. After mergers and acquisitions the performance of 4 units Hutchison Essar, Ranbaxy Laboratories, Tata Tele Services and HDFC Bank has been increased by 68.03%, 1.18%, 12.15% and 5.65% respectively. And the remaining 6 units show the decline growth rate on return for operating profit ratio. So, the researcher can conclude that, the profitability of 4 units is increased and 6 units are decreased after mergers and acquisitions. Chapter-5 Data Analysis and Interpretation Page 191
Calculation of T Test Table 5.7 (a) Analysis of T - Test in Selected Units Operating Profit Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10 2.90 7.88 n-1 10-1 9 0.37 2.262 H0 H0 = There is no significant difference in means score of Return on Operating Profit ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Return on Operating Profit ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is 0.37 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 192
C. LIQUIDITY RATIOS These ratios are calculated to judge the financial position of the organization from short-term point of view. A firm s ability to pay its debts can be measure partly through the use of liquidity ratio. Short term liquidity involves the relationship between current assets and current liabilities. Through the liquidity ratio can be examined whether the organization is liquid enough to meet its current liabilities. Liquidity ratio is calculated to determine the short-term solvency of the business. It is extremely essential for a firm to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligation. In fact analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements but liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and also that it does not have excess liquidity. The failure of a company to met its obligation due to lack of sufficient liquidity, will result in a poor credit worthiness, loss of creditors confidence or even in legal tangles resulting in the closure of the business unit. A very high degree of liquidity is also bad; idle assets earn nothing. The firm s funds will be unnecessarily tied up in current assets7. Therefore it is necessary to strike a proper balance between high liquidity and lack of liquidity. Following ratios have been selected by the researcher for the study of liquidity position of the selected units: These ratios are calculated to judge the financial position of the organization from short- 8. Current Ratio 9. Quick Ratio Chapter-5 Data Analysis and Interpretation Page 193
5.8 CURRENT RATIO This ratio is an indication of the firm s commitment to meet its shortterm liabilities. Current ratio is a ratio of the firm s total current assets and its total current liabilities. Current assets include inventory, sundry debtors, cash and bank, loan and advances. Current liability includes creditors, bills payable, accrued expenses, tax liability but not short term bank loans and other loans. A low ratio indicates that a firm may not be able to pay its future obligations in time, particularly if condition change causing a slowdown in cash collection. A high ratio may indicate an excessive amount of current assets and management s failure to utilize the firm s resources properly. Current ratio is calculated on the basis of following formula for the present study. Current assets are those assets which can be converted into cash in the shortrun or within one year. Likewise, current liabilities are those which are to be paid off in the short run. Current assets normally include cash in hand or at bank, inventories, sundry debtors, loans and advances, marketable securities, pre-paid expenses, etc. while current liabilities consist of sundry creditors, bills payable, outstanding and accrued expenses, provisions for taxation, proposed and un-claimed dividend, bank overdraft etc. Current ratio indicates the firms commitment to meet its short-term obligations. It is a measure of testing short-term solvency or in other words, it is an index of the short-term financial stability of an enterprise because it shows the margin available after paying off current liabilities. Generally 2:1 ratio is considered ideal for a concern. If the current assets are two times of the current liabilities, there will be no adverse effect on the business operations when the payment of liabilities is made. In fact a ratio much higher than 2:1 may be unsatisfactory from the angle of profitability, though satisfactory from the point view of short term solvency. A high current ratio may be taken as adverse on account of the following reasons: The stock might be piling up because of poor sales. Chapter-5 Data Analysis and Interpretation Page 194
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies The amount might be looked up in debtors due to slack collection policy. The cash or bank balances might be lying idle because of no proper investment. Sr. No TABLE-5.8 Current Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Name of the Companies Before M & A (X) After M&A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL LTD 0.78 1.38 (0.60) 0.36 2 HUTCHISON ESSAR 0.49 0.57 (0.08) 0.01 3 HINDALCO INDUSTRIES 1.07 0.83 0.24 0.06 4 RANBAXY LABORATORIES 1.31 1.18 0.13 0.02 5 ONGC 1.21 0.84 0.37 0.14 6 TATA TELESERVICES 0.28 0.24 0.04 0.00 7 HDFC BANK 0.05 0.05 (0.01) 0.00 8 TATA MOTORS 0.99 0.68 0.31 0.09 9 STERLITE INDUSTRIES 1.02 1.24 (0.23) 0.05 10 SUZLON ENERGY 1.91 1.19 0.72 0.52 (0.60) 0.36 (Source: Annual reports of the selected units and EMIS database website.) CHART 5.8 Current Ratio Before and After M & A in Selected Units 2.50 Current Ratio 2.00 1.50 1.00 0.50 0.00 Before M & A After M & A Chapter-5 Data Analysis and Interpretation Page 195
INTERPRETATION The above table no.5.8 shows the current ratio in selected units, before and after mergers and acquisitions. The highest current ratio is in the Suzlon Energy by 1.91 and the lowest is in the HDFC Bank by 0.05, before mergers and acquisitions. Moreover, Tata Steel, Hutchison Essar, Hindalco Industry, Ranbaxi Laboratories, ONGC, Tata Tele Services, Tata Motors and Sterlite Industry show an average current Ratio during pre mergers and acquisitions. After mergers and acquisitions, Sterlite Industry shows the highest current ratio with 1.24. Besides this, after mergers and acquisitions the current ratio is decreased except Tata Steel, Huchison Essar, and Sterlite Industries. So, the researcher can conclude that after mergers and acquisitions the liquidity position of sample units is not improved. Calculation of T Test Table 5.8 (a) Analysis of T - Test in Selected Units Current Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10-0.09 0.11 n-1 10-1 9-0.80 2.262 H0 H0 = There is no significant difference in means score of Current ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Current ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is -0.80 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 196
5.9 QUICK RATIO Liquid ratio or quick ratio, it is more rigorous test of liquidity than current ratio. Two determinant of current ratio, as a measure of liquidity, are current assets and current liabilities. Current assets include inventory which is not easily convertible into cash within a short period. Liquid ratio may define as the relationship between liquid assets and current liabilities. Usually a high liquid ratio is an indication that the firm has liquidity and ability to meet current or liquid liabilities in time and on the other hands a low quick or liquid ratio represents that the firm liquidity position is not good. Liquid ratio is calculated on the basis of following formula. Sr. No TABLE-5.9 Quick Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL LTD 0.403 0.856 0.453 0.205 2 HUTCHISON ESSAR 0.470 0.416 (0.054) 0.003 3 HINDALCO INDUSTRIES 0.663 0.530 (0.133) 0.018 4 RANBAXY LABORATORIES 1.148 1.192 0.045 0.002 5 ONGC 1.050 0.834 (0.216) 0.047 6 TATA TELESERVICES 0.360 0.528 0.168 0.028 7 HDFC BANK 4.595 6.648 2.053 4.215 8 TATA MOTORS 0.890 0.702 (0.188) 0.035 9 STERLITE INDUSTRIES 1.013 1.918 0.905 0.819 10 SUZLON ENERGY 1.573 1.240 (0.333) 0.111 2. 699 5.483 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 197
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.9 Quick Ratio Before and After M & A in Selected Units 7.000 Quick Ratio 6.000 5.000 4.000 3.000 2.000 1.000 0.000 Before M & A After M & A INTERPRETATION The above table no 5.9 shows the quick ratio in selected units, before and after mergers and acquisitions. The highest quick ratio is in the HDFC Bank by 4.595 and the lowest is in the Tata Tele Services by 0.36, before mergers and acquisitions. Moreover, Tata Steel, Hutchison Essar, Hindalco Industries, Ranbaxy Laboratories, ONGC, Tata Motors, Sterlite Indutries and Suzlon Energy show on an average 0.901 quick ratio during pre mergers and acquisitions. After mergers and acquisitions, HDFC Bank shows the highest quick ratio with 6.648. Besides this, after mergers and acquisitions the quick ratio is decreased in 5 sample units and increased in remaining 5 units. Chapter-5 Data Analysis and Interpretation Page 198
Calculation of T Test Table 5.9 (a) Analysis of T - Test in Selected Units Quick Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10 0.27 0.23 n-1 10-1 9 1.17 2.262 H0 H0 = H1 = There is no significant difference in means score of Quick ratio in selected units, before and after Mergers and Acquisitions. There is significant difference means score of Quick ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is 1.17 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 199
D. LEVERAGE RATIOS A firm s ability to pay its debts can be measure partly through the use of liquidity ratio. Short term liquidity involves the relationship between current assets and current liabilities. Through the liquidity ratio can be examined whether the organization is liquid enough to meet its current liabilities. Liquidity ratio is calculated to determine the short-term solvency of the business. It is extremely essential for a firm to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligation. In fact analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements but liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and also that it does not have excess liquidity. The failure of a company to met its obligation due to lack of sufficient liquidity, will result in a poor credit worthiness, loss of creditors confidence or even in legal tangles resulting in the closure of the business unit. A very high degree of liquidity is also bad; idle assets earn nothing. The firm s funds will be unnecessarily tied up in current assets7. Therefore it is necessary to strike a proper balance between high liquidity and lack of liquidity. Following ratios have been selected by the researcher for the study of liquidity and leverage position of the selected units: Long-term Solvency Ratios (Leverage or Capital Structure Ratios) 10. Debt-Equity Ratio 11. Long Term Debt Equity Ratio 12. Total Debt to Owner s Fund Ratio Chapter-5 Data Analysis and Interpretation Page 200
5.10 DEBT EQUITY RATIO Debt-equity ratio is the relation between borrowed funds and owners capital in a firm, it is also known as external-internal equity ratio. The debt-equity ratio is used to ascertain the soundness of long-term financial policies of the business. Debt means long-term loans i.e. debentures or long-term loans from financial institutions. Equity means shareholders funds i.e., preference share capital, equity share capital, reserves less loss and fictitious assets like preliminary expenses. It is calculated in the following ways: The main purpose of this ratio is to determine the relative stakes of outsiders and shareholders. TABLE-5.10 Debt-Equity Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Sr. No Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL LTD 0.51 2.03 1.52 2.30 2 HUTCHISON ESSAR 0.20 0.33 0.13 0.02 3 HINDALCO INDUSTRIES 0.62 1.42 0.79 0.63 4 RANBAXY LABORATORIES 1.05 1.24 0.19 0.04 5 ONGC 0.16 0.16 (0.01) 0.00 6 TATA TELESERVICES 2.64 0.00 (2.64) 6.97 7 HDFC BANK 0.00 0.00 0.00 0.00 8 TATA MOTORS 0.65 2.99 2.34 5.49 9 STERLITE INDUSTRIES 1.35 0.28 (1.07) 1.14 10 SUZLON ENERGY 0.50 1.78 1.28 1.64 2. 54 18.23 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 201
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.10 Debt Equity Ratio Before and After M & A in Selected Units 3.50 Debt Equity Ratio 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Before M & A After M & A INTERPRETATION The above table no 5.10 shows the Debt-Equity ratio in selected units, before and after mergers and acquisitions. The highest Debt-Equity Ratio is in the Tata Tele Services by 2.64 and the lowest is in the ONGC by 0.16, before mergers and acquisitions. Moreover, Tata Steel, Hutchison Essar, Hindalco Industries, Ranbaxy Laboratories, HDFC Bank, Tata Motors, Sterlite Indutries and Suzlon Energy show on an average 0.61 Debt-Equity ratio during pre mergers and acquisitions. After mergers and acquisitions, Tata Motors increased by highest 2.34 and Tata Tele Services is Decreased by highest -2.64. Besides this, One sample unit HDFC Bank has no debt-equity Ratio and after mergers and acquisitions the Debt-Equity Ratio is decreased in 3 sample units and increased in remaining 6 units. Chapter-5 Data Analysis and Interpretation Page 202
Calculation of T Test Table 5.10 (a) Analysis of T - Test in Selected Units Debt-Equity Ratio n Mean (D) S.D. (σ) d.f. Tc Tt Result 10 0.26 0.44 n-1 10-1 9 0.58 2.262 H0 H0 = There is no significant difference in means score of Debt-Equity ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Debt-Equity ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is 0.58 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 203
5.11 LONG TERM DEBT EQUITY RATIO The debt-equity ratio is determined to ascertain to soundness of the long-term financial policies of the company. It is also known as external-internal equity ratios. It may be calculated as follows. It indicates the proportion between shareholder funds and the total long term borrowed funds. This ratio may be taken as ideal if it is 1. In other words the investor may take debt-equity ratio as quite satisfactory if shareholder s funds are equal to borrowed funds. TABLE-5.11 Long Term Debt-Equity Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Sr. No Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y X ) Diff Squared (D² ) 1 TATA STEEL LTD 0.48 2.03 1.54 2.39 2 HUTCHISON ESSAR 1.48 0.33 (1.15) 1.31 3 HINDALCO INDUSTRIES 0.52 1.42 0.89 0.80 4 RANBAXY LABORATORIES 0.67 1.24 0.57 0.33 5 ONGC 0.16 0.16 (0.01) 0.00 6 TATA TELESERVICES 2.59 0.00 (2.59) 6.68 7 HDFC BANK 0.00 0.00 0.00 0.00 8 TATA MOTORS 0.50 2.99 2.49 6.19 9 STERLITE INDUSTRIES 1.10 0.28 (0.83) 0.68 10 SUZLON ENERGY 0.39 1.78 1.39 1.94 2.33 20.32 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 204
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.11 Long Term Debt-Equity Ratio Before and After M & A in Selected Units 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Long Term Debt Equity Ratio Before M & A After M & A INTERPRETATION The above table no.5.11 shows the data regarding long-term debt to equity ratio in selected 10 units, before and after mergers and acquisitions. It shows that Tata Tele Services shows the highest ratio by 2.59 and ONGC shows the lowest ratio by 0.16 before mergers and acquisitions. while HDFC Bank has no Long Term Debt Equity Ratio. The remaining 7 units like Tata Steel, Hutchison Essar, Hindalco Industries, Ranbaxy Laboratories, Tata Motors, Sterlite Indusries and Suzlon Energy show on an average ratio by 0.74 before mergers and acquisitions. After mergers and acquisitions Tata Motors shows the highest ratio by 2.99 and Tata Tele Services shows the lowest ratio by 0.00. After mergers and acquisitions long-term Debt Equity Ratio increased in all the sample units except Hutchison Essar, ONGC, Tata Tele Services and Sterlite Industries. Tata Motors Increased Highest by 2.49 after mergers and acquisitions. So, the researcher can conclude that after mergers and acquisitions the long-term funds is increased in compare to equity share capital. Chapter-5 Data Analysis and Interpretation Page 205
Calculation of T Test Table 5.11 (a) Analysis of T - Test in Selected Units Long Term Debt-Equity Ratio n Mean (D) S.D.(σ) d.f. Tc Tt Result 10 0.23 0.47 n-1 10-1 9 0.50 2.262 H0 H0 = There is no significant difference in means score of Long Term Debt-Equity ratio in selected units, before and after Mergers and Acquisitions. H1 = There is significant difference means score of Long Term Debt-Equity ratio in selected units, before and after merger and acquisition. 5% level of significance table value Tt = 2.262 The calculated value of T is 0.50 while table value of T is 2.262. Thus, The calculated value of t is less than the table value of t. The Null Hypothesis is accepted. The results are as per the expectation. Chapter-5 Data Analysis and Interpretation Page 206
5.12 TOTAL DEBT TO OWNER S FUND RATIO Several debt ratios may be used to analysis the long term solvency of a firm. The firm may be interested in knowing the proportion of the interest bearing debt in capital structure. It may therefore compute debt ratio by dividing total debt by equity. Total debt will include short and long term borrowings firm financial institutions bonds, debentures, deferred payment arrangements for buying capital equipments and bank borrowings public deposits and any other interest-bearing loan. Equity includes equity share capital & surplus. A low debt-equity ratio implies a greater claim of owners than creditors from the point of view of creditors. It represents satisfactory situations since a high proportion of equity provides a larger margin of safety for them. The higher debt equity ratio, the larger the share holder s earning when the cost of debt is less that the firm s overall ratio of return on investment thus, there is need to strike a proper balance between the use of debt and equity. The ratio has been computed as follows. Sr. No TABLE-5.12 Total Debt to Shareholders Fund Ratio in Selected Units (Before 5 years and After 5 years of M & A ) Name of the Companies Before M & A (X) After M & A (Y) Diff ( D = Y - X ) Diff Squared (D² ) 1 TATA STEEL LTD 0.51 2.03 1.52 2.30 2 HUTCHISON ESSAR 32.60 42.33 9.73 94.67 3 HINDALCO INDUSTRIES 0.62 1.41 0.78 0.61 4 RANBAXY LABORATORIES 1.05 1.24 0.19 0.04 5 ONGC 0.16 0.16 (0.01) 0.00 6 TATA TELESERVICES 2.64 0.00 (2.64) 6.97 7 HDFC BANK 10.51 8.37 (2.14) 4.58 8 TATA MOTORS 0.65 2.99 2.34 5.49 9 STERLITE INDUSTRIES 1.35 0.28 (1.07) 1.14 10 SUZLON ENERGY LTD 0.50 1.80 1.29 1.67 10 117.47 (Source: Annual reports of the selected units and EMIS database website.) Chapter-5 Data Analysis and Interpretation Page 207
Ratio Financial Performance Before and After Mergers and Acquisitions of the Selected Indian Companies CHART 5.12 Total Debt to Shareholders Fund Ratio Before and After M & A in Selected Units Total Debt to Shareholders' Fund Ratio 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Before M & A After M & A INTERPRETATION The above table no.5.12 shows the data regarding total debt to Shareholders' Fund ratio in selected 10 units, before and after mergers and acquisitions. It shows that Hutchison Essar shows the highest ratio by 32.62 and ONGC shows the lowest ratio by 0.16 before mergers and acquisitions. While Tata Steel, Hindalco Industries, Ranbaxy Laboratories, Tata Tele Services, HDFC Bank, Tata Motors, Sterlite Industry and Suzlon Energy show on an average ratio by 2.23 during before mergers and acquisitions. After mergers and acquisitions Hutchison Essar shows the highest ratio by 42.33 and Tata Tele Services shows the lowest ratio by 0.00. After mergers and acquisitions total debts is increased in 6units of the sample except the 4 units like ONGC, Tata Tele Services, HDFC Bank and Sterlite Industries. So, the researcher can conclude that after mergers and acquisitions the total debt funds is increased in compare to Shareholders' Fund. Chapter-5 Data Analysis and Interpretation Page 208