A study on Analysis of Financial Statements of Bharti Airtel

A study on Analysis of Financial Statements of Bharti Airtel

1.1

Finance:-

Financial management is that managerial activity which is concerned with the planning and control of firm‟s financial resources. As a separate activity or discipline it is of recent origin. It was a branch of economics till 1890 still today it has no unique body of knowledge of its own and draws heavily on economics for its theoretical concepts. The subject of financial management is of immense interest to both academicians and practicing managers. It is of great interest to academicians, because the subject is still developing and are still certain areas where controversies exist for which no enormous solution have been reached as yet. The most crucial decision of the firm are those which relate to finance and an understanding of the theory of financial management provides than with conceptual and analytical insights to make those decisions skillfully.

1.2

Meaning Of Finance:-

Finance is rightly been termed as „master key‟ providing accretes to are sources required for running business activities. Finance is the management of monetary affairs of a company.

1.3

Definition of Finance:-

Ray G Jones and Dean Dudely observe that the word finance come indirectly from Latin word “Finis”. In simple words “Finance is economics and Accounting”. Economics is proper utilization of scare resources and accounting Economics is proper utilization of scarce resources and Accounting is keeping a record or tract of things. Kenneth Ridgeley and Ronald Bums Accent, “Financing is the process of organizing the flow of funds so that a business can carry out its objectives in the most efficient manner of meeting its obligation as they are due”

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A study on Analysis of Financial Statements of Bharti Airtel

1.4

Scope Of Finance:-

What is finance? What are firm‟s financial activities? How are they related to firm‟s other activities? There exists an inseparable relation between finance on one hand and on the other. Almost all kinds of business activities directly or indirectly involved the acquisition and use of funds. E.g.: recruitment and promotion of employees, buying of machines, advertising, sales promotion activities requires outlay of cash and therefore affect financial resources.

Finance functions or decision includes investment decision,

finance decision, dividend decision, and liquidity decision. A firm performs functions simultaneously and continuously in the normal course of business. They do not necessarily occur in a sequence. Finance functions call for skillful planning control and execution of firm‟s attitudes.

1.5

Functions Of Finance:-

There are three major functions of finance: a)

Investment decision

b)

Financing decision

c)

Dividend decision. a) Investment decision:

Investment decision relates to selection of asset in which funds will be inverted by a firm. The assets that can be acquired by a firm may be long term asset and short term assets. b) Financing decision: Financing decision is concerned with financing mix or capital structure the mix of department and equity is known as capital structure. Determination of the proportion of equity and debt is the main issue in financing to share holders and also financial risk. 2|Page S. R. Luthra Institute Of Management

A study on Analysis of Financial Statements of Bharti Airtel

c)

Dividend decision:

A firm may distribute its profits or retain the balance with it the decision depends upon the preference of the shareholders and investment opportunities available to the firm. Dividend decision has a strong influence on the market price of share. Therefore, the dividend policy is too determined in terms of its impact on shareholders‟ value. The optimum dividend policy is one. Which maximize the value of shares and wealth of shareholders the financial manager should determine the optimum payout ratio that is the proportion of net profit to be paid out to shareholders? The financial manager should also consider those factors. This determines the dividend policy in practice.

1.6

Financial Management:-

Financial management is a part of managerial activity, which is mainly concerned with the planning, and controlling of financial resources of a firm. Prof Solomon defines “Financial management is concerned with efficient use of an important economic resource is capital funds.

1.7

Importance Of Financial Management:-

Financial management is that managerial activity which is concerned with the planning and control of firm‟s financial resources. As a separate activity or discipline it is of recent origin. It was a branch of economics till 1890 still today it has no unique body of knowledge of its own and draws heavily on economics for its theoretical concepts. The subject of financial management is of immense interest to both academicians and practicing managers. It is of great interest to academicians, because the subject is still developing and are still certain areas where controversies exist for which no enormous solution have been reached as yet. The most crucial decision of the firm are those which relate to finance and an understanding of the theory of financial management provides than with conceptual and analytical insights to make those decisions skillfully. 3|Page S. R. Luthra Institute Of Management

A study on Analysis of Financial Statements of Bharti Airtel

1.8

Objectives Of Financial Management:-

The term objective reforms to a goal or decision criterion for taking financial decisions. There are two objectives: a)

Profit maximization

b)

Wealth maximization

a)

PROFIT MAXIMIZATION:

The term profit maximization is deep rooted in the economic theory. It is needed that when pursue the policy of maximizing profits society‟s resources are efficiently utilized. The firms should undertake those actions that would pursue profits and drop those actions that would decrease profits. The financial decisions should be oriented to the maximization of profits. Profits provides yardstick for measuring the economic performance of firms. It makes allocation of resources to profitable and desirable areas. It also ensures maximum social welfare. On these grounds profit maximization serves as criteria for financial decision. b)

WEALTH MAXIMISATION:

Wealth maximization or value maximization or net present Value maximization provides an appropriate and operationally feasible decision criterion for financial management decisions. It provides an unambiguous measure of what financial management should seek to maximize in making investment and financing decisions.

It satisfies the three requirements of a

suitable criterion namely precise, time value of money and quality of benefits. In wealth maximization criterion the benefits associated with assets are measured in terms of cash flows rather than accounting profits. The cash flows are a precise concept with definite meaning. It overcomes the deficiencies associated with accounting profits.

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A study on Analysis of Financial Statements of Bharti Airtel

Research Design:Research design of study is a conceptual structure a sketch or plan laid out for conducting the study. It is considered as a blue print of the final copy of the project where it shows the activities undertaken while doing the study. It constitutes the steps taken beginning with of collection of clarifying it. Analyzing, interpreting, processing and finally putting it is an actual form.

2.1

Objectives of the Study:-

1.

To ascertain the overall profitability of the company.

2.

To analyze trends on the basis of ratios for consecutive 4 years.

3.

To gain insight as to how a financial statement can be use to predict future.

4.

To analyze working capital funds with the help of ratios.

2.2

Scope of Study:-

The scope of the study is limited to Bharti Airtel and is an attempt to find out the financial position during past 4 years from the Annual report of the company with special reference to financial analysis.

2.3 Methodology:No series assumptions so far were made as to limit the usefulness of the study was made at any stage. However the following assumptions were made – A study period of four years (2008-2011) Objectives of the study and the research design as agreed upon by the company and the researcher are sufficient, accurate and correct portray true state affairs of Ratio analysis of the company. Published information from the company is accurate and true.

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A study on Analysis of Financial Statements of Bharti Airtel

2.4 Research Design:Research design means a search of facts, answers to question and solution to problems. The data are analyzed through ratio analysis common size balance sheet, comparative balance sheet and fund flow analysis. It is a prospective investigation. Research is a systematic logical study of an issue or problem through scientific method. It is a systematic and objective analysis and recording of controlled observation that may lead to the development of generalization, principles, resulting in prediction and possibly ultimate control of events there are various designs, which are descriptive and helpful for analytical research.

2.5 Data Source:This study makes extensive use of secondary data collected in the forms of annual reports. The nature of secondary data collected was both qualitative and quantitative in nature. Considering the above plan, research plan for the study is essentially a combination of qualitative and quantitative aspects. The secondary sources of data can be divided in to mainly two parts.

Internal 

Accounting section



Finance section



HRD department



Miscellaneous records

External 

Information for published materials like,



Annual reports of the company



Balance sheets and profit and loss accounts



Magazines

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A study on Analysis of Financial Statements of Bharti Airtel

There was also primary data, which was through discussions held with the concerned company officials from finance department. The primary data was obtained through survey method i.e. personal interview method.

2.6

Techniques of Analysis:-

The data are analyzed through ratio analysis common size balance sheet, comparative balance sheet and fund flow analysis.

2.7

Limitations Of The Study:-

1.

The study is limited to Bharti Airtel and the finding need not apply in similar sense to other firms.

2.

The inferences that have been framed only on the basis of financial statement.

3.

Based on the limited information it is not possible to arrive at a proper conclusion.

4.

Limitations of Financial analysis.

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A study on Analysis of Financial Statements of Bharti Airtel

3.1 HISTORY AND BACKGROUND OF THE COMPANY:Sunil Bharti Mittal founded the Bharti Group. In 1983, Sunil Mittal was into an agreement with Germany's Siemens to manufacture the company's push-button telephone models for the Indian market. In 1986, Sunil Bharti Mittal incorporated Bharti Telecom Limited (BTL) and his company became the first in India to offer push-button telephones, establishing the basis of Bharti Enterprises. This first-mover advantage allowed Sunil Mittal to expand his manufacturing capacity elsewhere in the telecommunications market. By the early 1990s, Sunil Mittal had also launched the country's first fax machines and its first cordless telephones. In 1992, Sunil Mittal won a bid to build a cellular phone network in Delhi. In 1995, Sunil Mittal incorporated the cellular operations as Bharti Tele-Ventures and launched service in Delhi. In 1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquired control of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In 2000, Bharti acquired control of Sky cell Communications, in Chennai. In 2001, the company acquired control of Spice Cell in Calcutta. Bharti Enterprises went public in 2002, and the company was listed on Bombay Stock Exchange and National Stock Exchange of India. In 2003, the cellular phone operations were rebranded under the single Airtel brand. In 2004, Bharti acquired control of Hexagon and entered Rajasthan. In 2005, Bharti extended its network to Andaman and Nicobar.‟2009; Airtel launched its first international mobile network in Sri Lanka. In 2010, Airtel began operating in Bangladesh. Today, Airtel is the largest cellular service provider in India and fifth largest in the world.

3.2 Type of Organizational Structure:The organizational structure that existed till recently concentrated on the hierarchy of the operations (not services) inside the company as a whole. The structure depicts the corresponding operation/region of different in-charges and hence it didn't hold anyone responsible for each of its services. So, the company found it better to restructure its organizational chart and it came into implementation from 1 August. The transformed organizational structure will have two distinct Customer Business Units (CBU) with clear 8|Page S. R. Luthra Institute Of Management

A study on Analysis of Financial Statements of Bharti Airtel

focus on B2C (Business to Customer) and B2B (Business to Business) segments. Bharti Airtel's B2C business unit will comprehensively service the retail consumers, homes and small offices, by combining the erstwhile business units – Mobile, Telemedia, Digital TV, and other emerging businesses (like M-commerce, M-health, M-advertising etc.). The B2C organization will consist of Consumer Business and Market Operations.

3.3 BOARD OF DIRECTORS:Sunil Bharti Mittal

Chairman and Managing Director

Ajay Lal

Non Executive Director

Chua Sock Koong

Non Executive Director

Lord Evan Mervyn Davies

Non Executive Director

N Kumar

Non Executive Director

Pulak Prasad

Non Executive Director

Rakesh Bharti Mittal

Non Executive Director

Tan Yong Choo

Non Executive Director

Manoj Kohli

Joint Managing Director and CEO

Akhil Gupta

Non Executive Director

Craig Ehrlich

Non Executive Director

Hui Weng Cheong

Non Executive Director

Nikesh Arora

Non Executive Director

Rajan Bharti Mittal

Non Executive Director

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A study on Analysis of Financial Statements of Bharti Airtel

Salim Ahmed Salim

Non Executive Director

Tsun-Yan Hsieh

Non Executive Director

3.4 AWARDS AND ACHIVEMENTS:Airtel has won the „Most Preferred Cellular Service Provider Brand‟ award at the CNBC Awaaz Consumer Awards in Mumbai. This is 6th year in a row that Airtel has won the award in this category. This year, the awards were based on an exhaustive consumer survey done by The Nielsen Company. Over 3,000 consumers, spanning 19 cities and 16 states in India, rated brands across different categories to choose brands which delivered true value for money. Bharti Airtel has received the prestigious Business world-FICCI-SEDF Corporate Social Responsibility Award 2009-2010. The FICCI Socio Economic Development Foundation (FICCI-SEDF) and Business world CSR award was instituted in 1999 to recognize exemplary responsible business practices by the Indian industry.

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A study on Analysis of Financial Statements of Bharti Airtel

Financial Analysis: Financial analysis is the analysis of financial statement of a Company to assess its financial health and soundness of its management. „Financial Statement Analysis‟ involves a study of the financial statements of a company to ascertain its prevailing state of affairs and the reasons thereof. Such a study would enable the public and the investors to ascertain whether one company is more profitable than the other and also to state the causes and factors that are probably responsible.

Ratio Analysis:Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two mathematical expressions as relationship between two or more things”. In financial analysis, a ratio is used as a bench mark for evaluating the financial position and performance of a firm.

The absolute accounting figures

reported in the financial statement do not provide a meaningful understanding of the performance and financial position of a firm.

An accounting figure conveys

meaningful message when it is related to some other relevant information.

For

example Rs 5 corer net profit may look impressive but the firm‟s performance can be said to be good or bad only when the net profit figure is related to firm‟s investments. The relationship between two accounting figures expressed mathematically is known as financial ratio. A ratio quantitative relationship, which can be in turn used to make a qualitative judgment.

Classification of Ratios:Ratios may be classified in a number of ways keeping in view the particular purpose. Ratios indicating profitability are calculated on the basis of the profit and loss account; those indicating financial position are computed on the basis of balance sheet. This classification is rather crude and unsuitable to determine the profitability 11 | P a g e S. R. Luthra Institute Of Management

A study on Analysis of Financial Statements of Bharti Airtel

and financial position of business. To achieve these purpose ratios may be classified as 1.

Liquidity Ratios

2.

Return On Investments Ratios

3.

Solvency Ratios

4.

Efficiency or Turnover Ratios

5.

Profitability Ratios

6.

Capital Market Ratios

Liquidity Ratios:i.

Current Ratio

ii.

Quick or Acid Test Ratio

iii.

Debtors Ratio

iv.

Debtors Turnover Ratio

v.

Creditors Ratio

vi.

Creditors Turnover Ratio

vii.

Inventory Holding Period

viii. Inventory Turnover Ratio

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A study on Analysis of Financial Statements of Bharti Airtel

4.1

Current Ratio (Working Capital Ratio) =

Current Assets Current Liabilities

Table: 4.1 Current Ratio (2008 to 2012)

YEAR

CURRENT ASSETS

(Rs in CRS.)

CURRENT LIABILITIES

RATIO

2007-08

8439.39

14362.33

0.59

2008-09

10466.63

14466.89

0.73

2009-10

10021.39

13638.30

0.73

2010-11

13730.10

16732.40

0.82

2011-12

23957.90

17842.70

1.34

Analysis: The current ratio of the company for the year 2007-08 is 0.59, 2008-09 is 0.73, 2009-10 is 0.73, 2010-11 is 0.82 and 2011-12 is 1.34, the current ratio has increased by 23.73% in the year 2008-09, and in 2009-10 it remains constant. There was increase positive value is found by 12.33% in year 2010-11 and increased by 63.41% in the year 2011-12.

Interpretation: From the above table we can indicate that the current assets are very less compared to current liability of the company. The company doesn‟t have enough current assets in meeting their liabilities. So, the company can‟t meet immediate emergencies. The company needs to increase current assets in order to meet its short-term obligation. We can conclude that the ratio isn‟t favorable as the current asset is less than the current liabilities.

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A study on Analysis of Financial Statements of Bharti Airtel

4.2 Quick (Acid Test or Liquid) Ratio: =

Quick Assets Current Liabilities

Table: 4.2 Quick Ratio (2008 to 2012)

YEAR

QUICK ASSETS

(Rs in CRS.)

CURRENT LIABILITIES

RATIO

2007-08

8382.53

14362.33

0.58

2008-09

10404.48

14466.89

0.72

2009-10

9994.15

13638.30

0.73

2010-11

13695.70

16732.40

0.82

2011-12

22866.90

17842.70

1.28

Analysis: The quick ratio of the company for the year 2007-08 is 0.58, 2008-09 is 0.72, 2009-10 is 0.72, 2010-11 is 0.82, and 2011-12 is 1.28. The quick ratio has increased by 24.14 % in the year 2008-09 and the year 2009-10 is increased by 1.39% there is increased positive value is found by 12.33% for the year 2010-11 and increased by 56.10% in the year 2011-12.

Interpretation: As per as quick ratio is concern whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Here, Bharti Airtel review that in 2008-09 increase their assets and then after very small percentage increase. That point of Time it has not enough asset to cover its liabilities. Company ideal ratio is 1.5 so is below the ratio. This is not good for company should be improving that point.

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A study on Analysis of Financial Statements of Bharti Airtel

4.3

Debtors Turnover Ratio =

Credit Sales Avg. Debtors

Table: 4.3 Debtors Turnover Ratio (2008 to 2012)

YEAR

CREDIT SALES

(Rs in CRS.)

AVG. DEBTORS

RATIO

DAYs

2007-08

25761.11

2097.49

12.28

30

2008-09

34048.32

1515.76

22.46

16

2009-10

35609.54

2327.52

15.30

24

2010-11

38015.80

2240.39

16.97

23

2011-12

41,603.80

2134.50

18.45

18

Analysis: The debtors turnover ratio of the company for the year 2007-08 is 12.28 times, 2008-09 is 22.46 times, 2009-10 is 15.30 times, 2010-11 is 16.97 times, and 2011-12 is 18.45 times the debtors turnover ratio has increased by 82.90% in the year 2008-09, and in 2009-10 it decreased by 31.88%. There was increase positive value is found by 10.92% in year 2010-11 and increased by 8.72% in the year 2011-12.

Interpretation: Higher turnover signifies speedy and effective collection. Lower turnover indicates sluggish and inefficient collection leading to the doubts that receivables might contain significant doubtful debts. Receivables collection period is expressed in number of days. Here the company in 1st year 1month to collection & after decline then after increase. Company does not maintain lower collection period.

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A study on Analysis of Financial Statements of Bharti Airtel

Return On Investments Ratios:i.

Return On Net Worth

ii.

Earnings Per Share (EPS)

iii.

Cash Earnings Per Share (CEPS)

iv.

Return On Capital Employed

4.4 Return on Net Worth PAT – Preference Dividend Net Worth Table: 4.4 Return On Net Worth (2008 to 2012)

YEAR

PAT – PREFERENCE DIVIDEND

x 100 (RS IN CRS.)

NET WORTH

RATIO

2007-08

6244.19

20241.49

30.85

2008-09

7743.84

27643.97

28.01

2009-10

9426.15

36737.18

25.66

2010-11

7716.90

44111.60

17.49

2011-12

5266.00

49429.60

10.65

Analysis: The return on net worth of the company for the year 2007-08 is 30.85, 2008-09 is 28.01, and 2009-10 is 25.66, 2010-11 is 17.49, and 2011-12 is 10.65. The return on net worth has decreased by 9.21% in the year 2008-09, and decreased by 8.39% in the year 2009-10 and again decreased by 31.84% in the year 2010-11 and again decreased by 39.11% in the year.

Interpretation: As per as net worth ratio states the return that shareholders could receive on their investment in a company. Here the company continuous declines year by year this not well for company. But actually is right because bank rate is low like 12 % is good for investors.

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A study on Analysis of Financial Statements of Bharti Airtel

4.5 .09 PAT No. Equity Shares Table: 4.5 Earnings Per Share (2008 to 2011)

(RS IN CRS.)

NO. OF EQUITY SHARES

YEAR

PAT

RATIO

2007-08

6244.19

189.79

32.90

2008-09

7743.84

189.82

40.79

2009-10

9426.15

379.75

24.82

2010-11

7716.90

379.75

20.32

2011-12

5266.00

379.75

13.87

Analysis: The earnings per share of the company for the year 2007-08 is 32.90, 2008-09 is 40.79, and 2009-10 is 24.82, 2010-11 is 20.32, and 2011-12 is 13.87. The earnings per share has increased by 23.98% in the year 2008-09, and decreased by 39.15% in the year 2009-10 and again decreased by 18.13% in the year 2010-11 and again decreased by 31.74% in the year 2011-12.

Interpretation: As per as EPS ratio is concern the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company‟s

profitability. Here the company shows high profitability so it is good for

company as well as investor.

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A study on Analysis of Financial Statements of Bharti Airtel

4.6 Return on Capital Employed PBIT Capital Employed Table: 4.6 Earnings Per Share (2008 to 2011)

YEAR

PBIT

(RS IN CRS.)

CAPITAL EMPLOYED

RATIO

2007-08

9450.20

56009.10

16.87

2008-09

11194.72

41776.10

26.80

2009-10

8747.65

35357.53

24.74

2010-11

7599.87

26811.63

28.35

2011-12

7514.80

11565.07

0.64

Analysis: The return on capital employed of the company for the year 2007-08 is 16.87, 2008-09 is 26.80, and 2009-10 is 24.74, 2010-11 is 28.35 and 2011-12 is 0.64. The return on capital employed has increased by 58.87% in the year 2008-09, and decreased by 7.69% in the year 2009-10 and increased by 14.59% in the year 2010-11 and again decreased by 97.74% in the year.

Interpretation: It is expressed as a percentage and can be very revealing about the industry a company operates in, the skills of the management and occasionally the general business climate. Here, the company continuous increases efficiency. It is good for the company.

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A study on Analysis of Financial Statements of Bharti Airtel

Solvency Ratios:i.

Net Asset Value (NAV)

ii.

Debt Equity Ratio

iii.

Int. Coverage Ratio

iv.

Debt Service Coverage Ratio

v.

Proprietary Ratio

vi.

Total Assets to Debt Ratio

vii.

Liabilities to Equity Ratio

4.7 Net Asset Value Net Worth No. Equity Share Table: 4.7 Net Asset Value (2008 to 2012)

YEAR

NET WORTH

(RS IN CRS.)

NO. OF EQUITY SHARES

RATIO

2007-08

20241.49

189.79

106.65

2008-09

27643.97

189.82

145.63

2009-10

36737.18

379.75

96.74

2010-11

44111.60

379.75

116.16

2011-12

49429.60

379.75

130.16

Analysis: The return on net asset value of the company for the year 2007-08 is 106.65, 2008-09 is 145.63, and 2009-10 is 96.74, 2010-11 is 116.16, and 2011-12 is 130.16. The net asset value has increased by 36.55% in the year 2008-09, and decreased by 33.57% in the year 2009-10 and again increased by 20.01% in the year 2010-11, and again increased by 12.05% in the year 2011-12.

Interpretation: The net asset value in companies is the book value deducting liabilities and intangible assets from the total assets. For companies, the net asset value is always used

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A study on Analysis of Financial Statements of Bharti Airtel

in market book ratio or price book ratio to compare the net asset value of the company with its market value. Here condition of company is good due to high profitability.

4.8 Debt Equity Ratio Long Term Debt Share Holder Fund Table: 4.8 Debt Equity Ratio (2008 to 2012)

(RS IN CRS.)

LONG TERM DEBT

SHARE HOLDER FUND

RATIO

2007-08

6570.43

20241.49

0.32

2008-09

7713.65

27643.97

0.29

2009-10

5038.92

36737.18

0.14

2010-11

11897.50

44111.60

0.27

2011-12

14129.40

49429.60

0.28

YEAR

Analysis: The debt equity ratio of the company for the year 2007-08 is 0.32, 2008-09 is 0.29, and 2009-10 is 0.14, 2010-11 is 0.27, and 2011-12 is 0.28. The debt equity ratio has decreased by 9.38% in the year 2008-09, and decreased by 51.72% in the year 2009-10, increased by 92.29% in the year 2010-11 and again increased by 3.70% in the year 2011-12.

Interpretation: A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Here the company ratio so good in the current situation as to the previous years. This is good for the company.

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A study on Analysis of Financial Statements of Bharti Airtel

4.9 Proprietary Ratio Proprietary Fund Total Asset Table: 4.9 Proprietary Ratio (2008 to 2012)

YEAR

PROPRIETARY FUND

(RS IN CRS.)

TOTAL ASSET

RATIO

2007-08

20241.49

26811.84

0.75

2008-09

27643.97

35357.62

0.78

2009-10

36737.18

41776.12

0.88

2010-11

44111.60

56009.10

0.79

2011-12

49429.60

63559.00

0.78

Analysis: The proprietary ratio of the company for the year 2007-08 is 0.75, 2008-09 is 0.78, and 2009-10 is 0.88, 2010-11 is 0.79, and 2011-12 is 0.78. The proprietary ratio has increased by 4.00% in the year 2008-09, and increased by 11.54% in the year 2009-10 and decreased by 10.23% in the year 2010-11 and again decreased by 1.27% in the year 2011-12.

Interpretation: Proprietary Ratio refers to a ratio which helps the creditors of the company in seeing that their capital or loans which the creditors have given to the company are safe. Ideal ratio is