URBAN APPAREL CO.

LIMITED
2019-2021

Financial Analysis Report

 Urban Apparel Co. Limited
Ratio Analysis- Two Years Comparison
Liquidity Ratios 2019-20 2020 -21 Variance%
Current Ratio 2.67 3.25 22
Quick Ratio 1.17 1.65 42
Inventory to Working Capital 0.67 0.58 -13
Sales to Working Capital 2.33 1.33 -43
Accounts Receivable to WC 0.36 0.34 -3
Cash Ratio 0.18 0.07 -61

Activity Ratios
Accounts Receivable Turnover 6.54 3.86 -41
Days Sales in Receivables 55.80 94.67 70
Inventory Turnover 1.70 1.42 -16
Days Cost of Sales in Inventory 215.24 257.74 20
Accounts Payable Turnover 3.29 2.99 -9
Days Cost of Sales in Payables 110.95 122.18 10
Fixed Asset Turnover 3.25 2.10 -35

Leverage Ratios
Debt to Total Assets 0.51 0.50 -2
Debt to Equity 1.02 0.99 -3
Equity Ratio 2.02 1.99 -2
Interest Coverage 2.18 -2.45 -213
Book Value per Share 107.36 99.47 -7

Profitability Ratios
Gross Profit Margin 0.52 0.42 -19
Net Profit Margin 0.06 -0.11 -299
Return on Assets 0.05 -0.06 -228
Return on Equity 0.10 -0.13 -226
Earnings per Share 10.84 -8.85 -182
 Urban Apparel Co. Limited
Detailed Ratio Analysis- Two Years Comparison
1. LIQUIDITY RATIOS
Liquidity ratios are financial ratios that assess a company's ability to meet its
short-term obligations and measure its overall liquidity or cash position. These
ratios provide insights into a company's ability to generate cash, manage its
current liabilities, and cover immediate financial needs

 Current Ratio
Current Ratio = Current Assets / Current Liabilities
The current Ratio is a financial ratio that measures the ability of a company to
meet its short-term obligations by comparing its current assets to its current
liabilities. It provides insights into the company's liquidity position and its
capacity to cover its immediate payment obligations . A higher number is
preferred because it indicates a strong ability to service short-term obligations
The current ratio for Urban Apparel Co. Limited is 3.25, which
compared to the baseline of 2.67 indicates the company's ability to service
short-term obligations is satisfactory. However, the value of the quick ratio will
provide a clearer indication of the company's success in this area.

 Quick Ratio or Acid Test Ratio

Quick Ratio = (Cash + Cash Equivalents + Short-Term Investments +
Accounts Receivable) /Current Liabilities
While a quick ratio of 1 or higher is generally considered healthy, it's important
to consider industry norms, historical trends, and company-specific factors
when interpreting the quick ratio.
The quick ratio for Urban Apparel Co. Limited is 1.65, which
compared to the baseline of 1.17 indicates the company's ability to service
short-term obligations is favourable.
  Inventory to Working Capital
Inventory / (Current Assets - Current Liabilities)
This ratio measures the dependency of working capital on inventory. A lower
number for this ratio is preferred indicating that a company has a satisfactory
level of working capital and inventory makes up a reasonable portion of current
assets.
The inventory to working capital ratio for Urban Apparel Co.
Limited is 0.67, which compared to the baseline of 0.58 indicates this ratio is in
line with company goals.

 Sales to Working Capital

Sales / (Current Assets - Current Liabilities)
This ratio measures a company's ability to finance current operations. Working
capital (current assets - current liabilities) is another measure of liquidity and
the ability to cover short-term obligations. This ratio relates the ability of a
company to generate sales using its working capital to determine how
efficiently working capital is being used. In general, a lower number is preferred
because it indicates a company has a satisfactory level of working capital.
However, an exceptionally low number may indicate inadequate sales levels are
being generated.
The sales to working capital ratio for Urban Apparel Co.
Limited is 1.33, which compared to the baseline of 2.33 reveals that the
company's level of working capital is strong. The company may want to make
an effort to generate additional sales using the available working capital.

 Accounts Receivable to Working Capital

Trade Accounts Receivable / (Current Assets - Current Liabilities)
This ratio measures the dependency of working capital on the collection of
receivables. A lower number for this ratio is preferred, indicating that a
company has a satisfactory level of working capital and accounts receivable
makes up an appropriate portion of current assets.
The accounts receivable to working capital ratio for Urban
Apparel Co. Limited is 0.34, which compared to the baseline of 0.36 indicates
that the company's performance is sufficient in this area.
  Cash Ratio
Cash Ratio = (Cash + Cash Equivalents) / Current Liabilities
The Cash Ratio is a financial ratio that measures a company's ability to cover its
short-term obligations using only its cash and cash equivalents. It provides
insights into the company's immediate liquidity position and its ability to pay
off its current liabilities without relying on other assets . Creditors prefer a
higher crash ratio as it indicates the company can easily pay off its debt. There
is no ideal figure but a ratio between 0.5 to 1 is usually preferred. As with the
current and quick ratios, too high of a cash ratio indicates that the company is
holding onto too much cash instead of utilizing its excess cash to invest in
generating returns or growth
The Cash ratio for Urban Apparel Co. Limited is 0.07, which
compared to the baseline of 0.18 indicates that the company's performance is
sufficient in this area but slightly needs to be improved.
2. ACTIVITY RATIOS
Activity ratios provide a useful gauge of a company's operations by
determining, for example, the average number of days it takes to collect on
customer accounts and the average number of days to pay vendors. A key point
to keep in mind when evaluating these ratios is that seasonal fluctuations are
not necessarily reflected in the numbers that are derived from these
calculations based on an account balance on one single day.
 Accounts Receivable Turnover
Sales / Trade Receivable
This ratio measures the number of times receivables turn over in a year and
reveals how successful a company is in collecting its outstanding receivables. A
higher number is preferred because it indicates a shorter time between sales
and cash collection.
The accounts receivable turnover for Urban Apparel Co. Limited
is 3.86, which compared to the baseline of 6.54 suggests that company's
performance is sufficient and improving in this area.
  Days Sales in Receivables
365 days/Accounts receivable Turnover
This ratio measures the average number of days a company's receivables are
outstanding. A lower number of days is desired. An increase in the number of
days receivables are outstanding indicates an increased possibility of late
payment by customers
The days sales in receivables for Urban Apparel Co. Limited is
94.67 days as compared to previous year of 55.80 days shows performance is
not up to mark.
 Inventory Turnover Ratio
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
The inventory turnover ratio measures how many times a business sells and
replaces its stock of goods in a given period of time.
The Inventory turnover for Urban Apparel Co. Limited is 1.42,
which compared to the baseline of 1.70 suggests that company's performance
is sufficient.
 Days Cost of Sales in Inventory
365 / Inventory Turnover Ratio
It takes the company X days on average to sell an entire stock of inventory.
 Accounts Payable Turnover Ratio
Total Purchases / Average Accounts Payable
Accounts Payable Turnover Ratio is a financial metric that measures how
efficiently a company manages its accounts payable by paying its suppliers and
vendors. It assesses the frequency with which a company pays off its creditors
during a specific period. A higher Accounts Payable Turnover Ratio indicates
that the company pays off its creditors more frequently.
The Accounts Payable turnover ratio for Urban Apparel Co.
Limited is 2.99, which compared to the baseline of 3.29 suggests that
company's performance is sufficient.
  Days Cost of Sales in Payables
365 days/Accounts Payable Turnover ratio
A lower Days Payable Outstanding indicates that the company pays its suppliers
and vendors more quickly, which can be a sign of strong cash flow management
or favourable payment terms negotiated with creditors.
 Fixed Asset Turnover Ratio
Net Sales / Average Total Asset
This ratio measures a company's ability to effectively utilize its fixed assets to
generate sales. A higher number is desired, indicating that a company
productively uses its fixed assets to produce sales
Sales to net fixed assets for Urban Apparel Co. Limited is 2.10,
which compared to the baseline of 3.25 indicates the company is not making
use of its fixed assets to effectively generate sales.
3. LEVERAGE RATIOS
 Debt to Total Assets

Total Liabilities / Total Assets

This ratio measures what proportion of debt a company is carrying relative to

its assets. A ratio value greater than one indicates a company has more debt
than assets. Naturally, companies and creditors prefer a lower number.
The debt to total assets ratio for Urban Apparel Co. Limited is 0.50,
which compared to the baseline of 0.51 indicates the company should be able
to withstand losses without harming creditor interests or could obtain
additional financing if desired.
 Debt to Equity Ratio
Total Debt / Total Equity
Total Debt: It represents the sum of a company's short-term and long-term
debt obligations.
Total Equity: It includes the company's shareholders' equity or net worth,
which represents the residual interest in the company's assets after deducting
liabilities
The Debt to equity ratio for Urban Apparel Co. Limited is 0.99,
which compared to the baseline of 1.02 suggests that company's performance
is improved that base year.
 Equity Ratio
Equity Ratio = Shareholders' Equity / Total Assets
The equity ratio is the complement of the debt ratio. It represents the
proportion of a company's assets financed by equity. A higher equity ratio
suggests a lower level of financial risk, as it indicates a larger portion of the
company's assets is funded by shareholders' equity
The Equity ratio for Urban Apparel Co. Limited is 1.99, which
compared to the baseline of 2.02 suggests that company's performance is
sufficient.

 Interest Coverage Ratio

EBIT (Earnings Before Interest and Taxes) / Interest Expenses

This ratio measures a company's ability to meet interest payments. A higher

number is preferred, suggesting a company can easily meet interest obligations
and can potentially take on additional debt. Note that this particular ratio uses
earnings before interest and taxes because this is the income amount available
to cover interest.
The times interest coverage ratio for Urban Apparel Co.
Limited is -2.45, which compared to the baseline of 2.18 indicates the
company's interest coverage was becoming worse.

4. LIQUIDITY RATIOS

Profitability ratios are financial metrics used to evaluate a company's ability to

generate profits from its operations. These ratios provide insights into the
company's profitability and efficiency in utilizing its resources
  Gross Profit Margin

(Gross Profit / Revenue) x 100

Gross profit margin is a financial ratio that measures the profitability of a

company's core operations by assessing the percentage of revenue left after
deducting the direct costs associated with producing or delivering goods or
services. It represents the portion of sales revenue that remains as gross profit.
The Gross profit margin ratio for Urban Apparel Co.
Limited is 0.42, which compared to the baseline of 0.52 indicates the
company's Gross profit was reduces as compared to previous year.

 Net Profit Margin

Net Profit / Revenue) x 100

Net profit margin is a financial ratio that measures the profitability of a

company by evaluating the percentage of revenue that remains as net profit
after accounting for all expenses, including operating expenses, interest, taxes,
and other non-operating costs
The Net profit margin ratio for Urban Apparel Co.
Limited is -0.11, which compared to the baseline of 0.06 indicates the
company's Net profit was reduces as compared to previous year. Covid impact
had on company’s profit as it ruined its overall profitability.

 Return on Assets (ROA)

Net Income / Average Total Assets

Return on Assets (ROA) is a financial ratio that measures a company's

profitability in relation to its total assets. It indicates how effectively a company
utilizes its assets to generate profits.
 The Return on Assets ratio for Urban Apparel Co. Limited
is -0.06, which compared to the baseline of 0.05 indicates the company's net
Income was reduces as compared to previous year. Covid impact had on
company’s profit as it ruined its overall profitability.

 Return on Equity

(Net Income / Average Shareholders Equity) x 100

ROE measures a company's profitability by calculating the return generated on

the shareholders equity. It evaluates how efficiently a company generates
profits from the capital invested by its shareholders. A higher ROE suggests that
the company is effectively employing its resources, managing its assets, and
generating higher returns for its shareholders. It reflects strong profitability and
is often seen as a positive indicator of a company's financial performance.
The Return on Equity ratio for Urban Apparel Co.
Limited is -0.13, which compared to the baseline of 0.10 indicates the
company's net Income was reduces as compared to previous year. And return
to shareholders was reduced as ruined as compared to previous year. Covid
impact had on company’s profit as it ruined its overall profitability.

 Earnings per Share (EPS)

Earnings attributable to Equity Shareholders / Average Outstanding

Shares
A higher EPS indicates that a company is generating more earnings per
outstanding share of common stock. A lower EPS indicates that a company is
generating lower earnings per outstanding share of common stock.
The Earnings per share ratio for Urban Apparel Co.
Limited is -8.85, which compared to the baseline of 10.84 indicates the
earnings to shareholders was reduces as compared to previous year. Covid
impact had on company’s profit as it ruined its overall profitability.
Balance Sheet Analysis:
Shareholders' Fund:
Share Capital: The share capital has seen minor increases over the years,
indicating a relatively stable equity base.

Reserves & Surplus: Reserves and surplus have grown significantly until 2018-
2019 but saw a decrease in 2020-2021.

Net Worth: The net worth of the company has generally been increasing but
experienced a slight drop in 2020-2021.

Non-Current Liabilities:

Long-term Borrowings: Long-term borrowings have been minimal in the past

and reduced to zero in recent years.

Deferred Tax Liabilities: Deferred tax liabilities increased significantly in 2019-

2020 and 2020-2021.

Other Non-Current Liabilities: Other non-current liabilities increased notably in

2019-2020 and 2020-2021.

Long-term Provisions: Long-term provisions have increased significantly in

recent years.

Current Liabilities:

Short-term Borrowings: Short-term borrowings increased in 2020-2021.

Trade Payables: Trade payables have remained relatively stable over the years.

Other Current Liabilities: Other current liabilities increased significantly in

2020-2021.

Short-term Provisions: Short-term provisions increased substantially in 2020-

2021.
Non-Current Assets:

Fixed Assets: Fixed assets have shown consistent growth, particularly in 2019-
2020 and 2020-2021.

Non-Current Investment: Non-current investments were present in earlier

years but are not listed in recent years.

Deferred Tax Assets: Deferred tax assets increased significantly in 2019-2020

and 2020-2021.

Long-term Loans & Advances: Long-term loans and advances increased notably
in recent years.

Current Assets:

Current Investment: Current investments have increased significantly in recent

years.

Inventories: Inventories have shown steady growth, with a decrease in 2020-

2021.

Trade Receivables: Trade receivables have remained relatively stable.

Cash & Cash Equivalents: Cash and cash equivalents have been somewhat
stable.

Recommendations:

Based on the provided balance sheet data and the scenario, here are some
recommendations:

Strengthen Equity Base: Given the decrease in reserves and surplus, consider
strategies to strengthen the equity base, such as retaining more earnings or
attracting additional investments.
Manage Liabilities: Carefully manage long-term borrowings and monitor the
increase in deferred tax liabilities. Consider refinancing options for long-term
borrowings if needed.

Control Provisions: Evaluate the need for such a significant increase in long-
term provisions and short-term provisions. Ensure these provisions are aligned
with the company's financial position.

Working Capital Management: Implement effective working capital

management practices to optimize short-term borrowings, trade payables, and
other current liabilities.

Asset Optimization: Continue investing in fixed assets cautiously, considering

the company's growth prospects. Monitor and manage non-current assets and
investments.

Cash Flow Management: Focus on maintaining a healthy cash position and

efficiently utilize cash and cash equivalents.

Debt Management: If necessary, explore options to reduce short-term

borrowings and manage interest costs effectively.

Risk Assessment: Assess and manage the risks associated with the significant
increase in deferred tax liabilities.

Inventory Management: Streamline inventory management to prevent

excessive accumulation and improve liquidity.

Financial Reporting: Ensure accurate financial reporting and consider

conducting regular audits to maintain transparency and compliance.
Profit and Loss Analysis

Revenue Analysis:

Revenue from Sale of Products: The revenue from the sale of products has
been consistently increasing from 7.11 billion INR in 2016-2017 to 11.48 billion
INR in 2018-2019. However, there is significant drop of revenue for 2019-2020
and 2020-2021.

Other Operating Revenues: Other operating revenues have also shown a slight
increase over the years, reaching 790,000 INR in 2018-2019.

Total Revenue from Operations: Total revenue from operations has been
growing steadily until 2018-2019, but there is a significant drop to 6.36 billion
INR in 2020-2021.

Other Income: Other income has shown substantial growth, increasing from
19.41 million INR in 2016-2017 to 489.89 million INR in 2020-2021.

Expense Analysis:

Cost of Materials Consumed: The cost of materials consumed has also been
increasing, reaching 4.51 billion INR in 2018-2019.

Employee Benefit Expense: Employee benefit expenses have been consistently

high, with a slight increase over the years.

Other Expenses: Other expenses have shown a decreasing trend from 3.49
billion INR in 2016-2017 to 2.39 billion INR in 2020-2021.

Profitability Analysis:

EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization has

varied significantly over the years, with a very low figure in 2020-2021 (24.4
million INR).
EBITDA %: The EBITDA percentage shows a significant drop in 2020-2021,
indicating lower profitability.

Finance Costs: Finance costs have increased substantially in 2020-2021,

indicating increased borrowing or interest expenses.

Total Depreciation, Depletion, and Amortization Expense: This expense has also
increased significantly over the years.

Profit/Loss Analysis:

Profit before Tax: There is a significant drop in profit before tax in 2020-2021,
reaching -769.38 million INR, indicating a substantial loss.

Tax Expense: The Company had a negative current tax in 2019-2020, which
means it received a tax refund.

Profit/(Loss): The company incurred losses in 2020-2021, which is a concerning

sign.

Recommendations:

Based on the provided data and the scenario, here are some
recommendations:

Revenue Diversification: The Company should explore opportunities to diversify

its revenue streams, especially in the face of declining product sales.

Cost Control: It's essential to control costs, especially the cost of materials
consumed, to improve profitability.

Review Expenses: Continuously review and optimize employee benefits and

other expenses to maintain financial health.

Debt Management: Given the increasing finance costs, the company should
carefully manage its debt and consider refinancing options if necessary.

Investment in New Products/Services: Consider investing in new products or

services that align with market trends and demand to revive revenue growth.
Tax Planning: Carefully manage tax planning to avoid unexpected negative tax
figures, and ensure compliance with tax regulations.

Cash Flow Management: Focus on improving cash flow management to sustain

operations during periods of lower profitability.

Investor Communication: If the company is publicly traded, communicate the

financial situation transparently to shareholders and investors
Cash Flow Analysis

Cash Flows from Operating Activities:

Profit before Tax: There was a significant decrease in profit before tax in 2020-
2021, resulting in a loss.

Adjustments for Reconciliation: The adjustments for reconciliation include

various non-cash and operating items that impact the cash flows from
operating activities. Notable items include depreciation and amortization
expenses, provisions, and share-based payments.

Net Cash Flows from Operations: The net cash flows from operating activities
have been positive over the years, except for 2020-2021 when there was a
substantial decrease, primarily due to the significant adjustments for
reconciliation.

Cash Flows from Investing Activities:

Capital Expenditure: The purchase of property, plant, and equipment and

intangible assets were significant in 2020-2021. This suggests that the company
made substantial investments in its assets during that period.

Proceeds from Sales of Assets: The Company received some proceeds from the
sale of property, plant, and equipment.

Interest Received: Interest received increased over the years.

Other Inflows/Outflows: There were significant other outflows in 2018-2019,

primarily related to cash payments for investments.

Net Cash Flows from Investing Activities: The net cash flows from investing
activities were negative, reflecting the company's investment in assets.

Cash Flows from Financing Activities:

Issuance of Shares: The Company issued shares in 2018-2019, raising significant
capital.

Proceeds from Borrowings: Short-term borrowings increased in 2020-2021.

Repayments of Borrowings: Repayments of borrowings were made in various

years.

Payments of Lease Liabilities: Payments of lease liabilities increased

substantially in 2020-2021.

Interest Paid: Interest paid has remained relatively stable.

Net Cash Flows from Financing Activities: The net cash flows from financing
activities were negative, primarily due to repayments of borrowings and lease
payments.

Recommendations:

Based on the provided cash flow statement data and the scenario, here are
some recommendations:

Cost Control: Given the decrease in profit before tax and the significant
adjustments for reconciliation, it's crucial to control costs and improve
operational efficiency.

Asset Investment: Carefully evaluate the need for capital expenditures and
ensure that investments in property, plant, and equipment are aligned with the
company's growth strategy and future cash flow expectations.

Cash Flow Forecasting: Develop robust cash flow forecasting to anticipate

future cash needs and manage liquidity effectively.

Debt Management: Monitor and manage short-term borrowings to ensure they

do not strain liquidity. Consider refinancing options if interest rates are
favourable.

Working Capital Management: Efficiently manage working capital components,

such as inventories, trade payables, and trade receivables, to optimize cash
flows.
Diversify Funding Sources: Explore options for diversifying funding sources,
such as equity issuance, to strengthen the company's financial position.

Tax Planning: Implement effective tax planning strategies to minimize cash

outflows related to income taxes.

Lease Management: Continuously monitor and manage lease payments to

avoid excessive cash outflows.

Dividend Policy: Review the company's dividend policy to ensure it aligns with
the current financial situation.

Risk Assessment: Assess and manage risks associated with cash flow
fluctuations and potential liquidity issues.
Analysis of Quarterly Financial Data

Revenue Analysis:

Revenue from the sale of products and/or services has generally shown an
increasing trend from Q1 2017-2018 to Q4 2021-2022. However, there were
fluctuations during this period.

Other Income:

Other income has varied from quarter to quarter. There is a noticeable increase
in other income in Q2 and Q3 of 2020-2021 and Q3 of 2021-2022.
Expenses Analysis:

Cost of materials consumed has increased over the years, which is expected as
revenue increased.

There are significant fluctuations in the changes in inventories of finished

goods, work in progress, and stock in trade. These fluctuations might be due to
changes in inventory management practices.

Employee benefit expenses have also increased over time.

Other expenses have shown fluctuations but have generally increased.

EBITDA (Earnings before Interest, Tax, Depreciation, and Amortization) shows

variations between quarters. There is a negative EBITDA in several quarters,
indicating operating losses.

Finance costs vary across quarters but seem to be relatively stable compared to
other expenses.

Profit Analysis:
Profit before tax varies significantly across quarters. Some quarters show
profits, while others show losses. There is a notable loss in Q2 and Q3 of 2020-
2021.

Tax Expense:

Tax expenses have varied from quarter to quarter, reflecting the company's
profitability in those periods.
Overall Financial Performance:

The company has experienced fluctuations in its financial performance over the
quarters, with periods of both profitability and losses.

The negative EBITDA and losses in some quarters should be a concern, and the
company should analyse the reasons behind these losses and take necessary
corrective actions.

The company's ability to manage its expenses and improve EBITDA will be
crucial for sustaining profitability.

Additionally, the significant fluctuations in other income should be investigated

to understand the nature of these income sources and whether they can be
relied upon consistently.
CRISIL Rating Analysis

 On 30/10/2021, CRISIL retained the A+ / A1+ rating with a negative

outlook for both Long Term and Short Term.

 On 17/07/2020, CRISIL retained the A+ / A1+ rating with a negative

outlook for both Long Term and Short Term.

 On 24/05/2019, CRISIL retained the A+ / A1+ rating with a stable

outlook for both Long Term and Short Term
.
 On 25/04/2019, CRISIL retained the A+ / A1+ rating with a stable
outlook for both Long Term and Short Term.

 On 31/03/2018, CRISIL upgraded the A+ / A1+ rating with a stable

outlook for both Long Term and Short Term.

 On 08/12/2016, CRISIL upgraded the A / A1 rating with a stable outlook

for both Long Term and Short Term.

 On 10/11/2015, CRISIL upgraded the BBB+ / A2 rating with no specified

outlook for both Long Term and Short Term.

 On 10/10/2014, CRISIL retained the BBB / A3+ rating with no specified

outlook for both Long Term and Short Term.

 On 23/07/2013, CRISIL retained the BBB / A3+ rating with no specified

outlook for both Long Term and Short Term.