Question

using a public company, please give us at least 2 ratios from the most current set of financial statements. What did those ratios tell you (what do they measure)? Can you tell if the ratio is good or bad (what else might you need to look at or compare it to)?

Answer 1

We have picked the company State Bank of India.

We have picked Current Ratio I.e Current Asset/ Current liabilities. SBI current ratio is 0.37 as of 31.03.2017. Ideal. Current ratio is 2:1 but in case of public sector banks current ratio is generally low since these institutions do not have much current assets. However current ratio also tells about the bank's liquidity position which proves SBI has low liquidity and less cash to meet current obligations.

Another ratio is Debt to Equity ratio I.e borrowed funds to owners equity in the long term

This ratio shows the leverage position of firms.

DER of SBI as of 31.03.2017 was 0.06 whereas the benchmark level is 4:1 hence this ratio is fine. It also has further improved from 0.07 in 2016 FY to 0.06 which is another good sign for the shareholders that the bank is relying mostly on own capital for new projects rather than outside borrowing.