Northspread
Formula sheet/NISM Series XV: Research Analyst/Company Analysis - Financial Analysis
[ COMPANY ANALYSIS - FINANCIAL ANALYSIS ]

Leverage & Solvency Ratios

Debt−to−Equity(D/E)Ratio=Total Adjusted DebtNet WorthDebt-to-Equity (D/E) Ratio = \dfrac{\text{Total Adjusted Debt}}{\text{Net Worth}}
Interest Coverage Ratio=EBIT/Finance Cost(Interest Expense)\text{Interest Coverage Ratio} = EBIT / \text{Finance Cost} (\text{Interest Expense})
Debt-to-Asset Ratio=Total DebtTotal Assets\text{Debt-to-Asset Ratio} = \dfrac{\text{Total Debt}}{\text{Total Assets}}
Variables

Conservative Benchmark: D/E ≤ 1.0x; Interest Coverage ≥ 3.0x. Coverage < 1.0x indicates severe default distress.

Worked examples
Complete Waterfall Income Statement and Margins

Bharat Consumer Ltd reports Revenue of Rs 5,000 Cr for FY2026. Operating expenses include Raw Materials Rs 1,800 Cr, Employee Costs Rs 600 Cr, and Other Operating Overhead Rs 800 Cr. Depreciation is Rs 300 Cr, Finance Cost is Rs 150 Cr, Finance Income is Rs 50 Cr, and Corporate Tax rate is 25%. Compute EBITDA, EBIT, PBT, PAT, and EBITDA/PAT Margins.

Return on Equity (ROE) and ROCE (Pre- & Post-Tax)

Continuing from Problem 13: Bharat Consumer Ltd has Opening Net Worth of Rs 4,000 Cr and Closing Net Worth of Rs 4,400 Cr. Total Debt is Rs 1,200 Cr (constant). Total Assets are Rs 6,500 Cr. Calculate ROE, Pre-Tax ROCE, and Post-Tax ROCE.

Solvency & Coverage Ratios

Delta Infra Ltd has Total Debt of Rs 3,600 Cr, Net Worth of Rs 2,400 Cr, EBIT of Rs 480 Cr, and Annual Finance Interest Cost of Rs 320 Cr. Calculate the Debt-to-Equity (D/E) Ratio and Interest Coverage Ratio. Evaluate financial risk.

3-Factor DuPont Analysis Diagnostic Comparison

Analyze two retail firms: Alpha Mart (Net Profit Margin 4%, Asset Turnover 3.0x, Equity Multiplier 2.5x) and Beta Luxury (Net Profit Margin 16%, Asset Turnover 0.8x, Equity Multiplier 1.25x). Calculate ROE for both and identify their business drivers.