Financial Performance Analysis Report (2020-

2024)
First you can ask why ratio analysis is useful for analyzing the financial
performance of a company, it is a crucial tool in financial analysis that helps
businesses to assess their performance and financial health in the status
quo. This tool will crunch and munch income statement, balance sheet and
cashflow and provide valuable insights which are further useful to make
informed decisions. It identifies the strengths and weaknesses of the
company and helps in setting realistic goals.

And this part of the Report presents a comprehensive financial analysis of

Trent Ltd., over the last five years (2020-24), using financial ratios to assess
its profitability, efficiency, liquidity, and solvency. These ratios help investors
understand the health of a company, fluctuations and facilitate investors to
take decisions about investments.

1. Profitability Ratios:

Profitability ratios measure the company’s ability to generate profits from its
operations and show how well the company is converting sales into profit.

 Operating Profit Margin:

o Improved from 15.6% in 2020 to 15.53% in 2024, with a dip

in 2021(might be because of COVID-19). The company has
become more efficient at managing its operating expenses over
the years.

o This shows the company can cut its costs by increasing sales
efficiency and indicates that it retains more money over the
years.

 Gross Profit Margin:

o The gross margin remained relatively stable, from 51.19% in

2020 to 55.7% in 2024 because of the COGS factor in the gross
profit margin

o A consistent gross margin indicates the company is effectively

managing its production costs relative to sales.

 Net Profit Margin:

 o The net profit margin increased from 4.4% in 2020 to 11.01%
in 2024.

o The negative margin in 2021 shows that the company was

struggling to cover all its costs because of the pandemic period,
but recovery over the next few years shows improved financial
health and profitability.

 Return on Investment (ROI):

o Increased from 8.93% in 2020 to 37.89% in 2024.

o This indicates that the company has significantly improved its

ability to generate profits from its investments, a very positive
sign for long-term investors. It can arouse interest for the
investors who are intrigued towards long-term stability in their
investment.

 Return on Equity (ROE):

o It uplifted from 6.42% in 2020 to 33.51% in 2024.

o A rising ROE is a good sign for investors, indicating the company

is using their shareholders fund efficiently to enhance
companies’ returns. The negative ROE in 2021 reflects a rough
period, but the recovery is very strong. Because TATA is known
for its loyalty, they retained their shareholders trust by showing
upliftment from a negative ROE in 2021 to 33.51% ROE in 2024

2. Efficiency Ratios:

Efficiency ratios assess how effectively the company uses its assets and
liabilities in operations. This ratio reflects the company’s efficiency with
respect to their resource utilization.

 Total Asset Turnover:

o This ratio measures how efficiently the company uses its assets
to generate sales. And it improved from 0.63 in 2020 to 1.73 in
2024.

o The higher the Asset turnover, the higher the operational

efficiency and these ratios show that the company is generating
more revenue from each dollar of asset.
  Inventory Turnover Ratio:

o Increased from 5.73 in 2020 to 7.82 in 2024.

o The higher ratio indicates that the company is managing its

inventory well, reducing excess stock, and selling products at a
faster rate. This represents expedite in cashflow.

 Debtors’ Turnover Ratio:

o This measures how efficiently the company collects its

receivables. It declined from a high of 251.85 in
2022 to 151.39 in 2024.

o Although the ratio is still high, the decline suggests the company
is taking longer time to collect payments from customers, which
can harm cash flow.

3. Liquidity Ratios:

Liquidity ratios indicate the company’s ability to meet short-term obligations

(1 year).

 Current Ratio:

o It indicates the company’s ability to pay off short-term

obligations. It decreased from 3.50 in 2020 to 2.01 in 2024.

o Even though the company can cover its short-term liability,

downward trend suggests fall in their liquidity which might grab
the attention of Investor in negative terms.

 Quick Ratio:

o The quick ratio is a more familiar measure to current ration, as it

excludes inventory and focuses only on the most liquid assets.
And it decreased from 3.28 in 2020 to 0.99 in 2024.

o A ratio below 1 indicates that the company might struggle to

cover its instant liabilities without selling inventory.

4. Solvency Ratios:

Solvency ratios assess the company’s ability to meet its long-term

obligations.
  Equity to Total Funds Ratio:

o This ratio shows the proportion of the company’s total funds that
are provided by shareholders’ equity. And it increased
from 43.37% in 2020 to 56.8% in 2024.

o This indicates that the company’s maximum portion of funds are

from equity and reduces the risk segment by reducing its debt
proportion.

 Capital Gearing Ratio:

o This ratio shows the proportion of fixed charge bearing capital to

equity funds. And it declined from 1.06 in 2020 to 0.33 in
2024.

o This indicates the extent of leverage enjoyed by equity

shareholders.

 Fixed Asset to Long-Term Fund Ratio:

o This ratio measures how much of the company’s long-term funds

are being used to finance fixed assets. And there is a decline
from 0.55 in 2020 to 0.48 in 2024.

o A decline suggests that the company is using its long-term funds

more efficiently and allocating more resources toward working
capital and productive assets.

Trend Analysis Report (2020-2024)

This trend analysis aims to provide a summary of the fluctuations in the
company’s key financial ratios over the financial years. By examining the
trends, we can assess whether the company’s financial health

Financial Ratios 2024 2023 2022 2021 2020

Operating Profit Margin (%) 15.53% 13.03% 12.76% 6.63% 15.60%
Profit Before Interest and Tax Margin (%)
Profitability 17.10% 10.17% 9.13% 4.44% 12.66%
Gross Profit Margin (%) 55.71% 57.29% 56.72% 50.35% 51.19%
Net Profit Margin (%) 11.02% 4.38% 2.24% -2.89% 4.40%
 Return On Investment (%) 37.89% 12.11% 5.85% 2.34% 8.93%
Return on Equity (%) 33.51% 13.92% 4.26% -3.23% 6.42%
Return on Assets (%) 19.03% 4.47% 1.30% -1.31% 2.78%
₹ ₹ ₹ ₹ ₹
Earnings per Share
29.36 12.51 2.98 4.11 3.53
2.017457 2.17351 2.72929 1.86754 3.49592
Current Ratio
36 32 83 76 63
0.990690 0.92928 1.40130 1.29745 2.24854
Quick Ratio
7 57 08 56 8
0.659973 0.57774 0.93763 1.00091 1.72446
Cash Ratio
92 37 87 82 49
0.373103 1.66619 1.97234 1.13045 1.06828
Debt Equity Ratio
98 02 77 23 61
8.735412 3.60644 2.36805 1.49804 2.80089
Interest Cover
1 06 15 95 5
0.567981 0.32116 0.30597 0.40411 0.43366
Equity to Total Funds Ratios
29 32 9 24 24
0.333760 1.64349 1.96335 1.12440 1.06066
Capital Gearing Ratio
27 7 45 82 06
0.567981 0.32116 0.30597 0.40411 0.43366
Proprietary Ratios
29 32 9 24 24
0.487800 0.67065 0.68008 0.63791 0.55569
Fixed Asset to Long Term Fund Ratio
88 53 4 71 87
8.153911 1.90585 0.96469 0.99165 1.36645
Capital Turnover Ratio
54 44 59 89 62
7.818838 6.05514 5.18336 6.05280 5.73531
Inventory Turnover Ratio
34 41 44 24 2
151.3960 239.663 251.848 124.841 203.620
Debtors Turnover Ratio
12 27 82 6 33
4.676011 1.79116 0.94412 0.82720 1.27478
Fixed Assets Turnover Ratio
05 72 12 34 64
1.727944 1.01985 0.58219 0.45301 0.63304
Total Assets Turnover Ratio
99 89 11 93 57
7.890377 6.42001 3.98051 3.97748 2.86631
Working capital Turnover Ratio
33 87 34 16 2
Exhibit 1: Financial ratios of Trent Ltd. over the last 5 years (2020-24)

1. Profitability Ratios Trend

 Operating Profi t
18.00%
16.00%
15.53% Margin(%) 15.60%
Net Profi t
11.02%
12.00%
13.03% 10.00%
14.00% 12.76%
Margin(%)
12.00% 8.00%
10.00% 6.00% 4.38% 4.40%
8.00% 6.63% 4.00% 2.24%
6.00% 2.00%
4.00%
0.00%
2.00% -2.89%
-2.00%
0.00%
2024 2023 2022 2021 -4.00%
2020

2. Efficiency Ratios Trend:

Inventory Turnover Ratio

10
8
6
4
2
0
2024 2023 2022 2021 2020

Debtors Turnover Ratio

300
250
200
150
100
50
0
2024 2023 2022 2021 2020

3. Liquidity Ratios Trend:

 Current Ratio
4

3.5

2.5

1.5

0.5

0
2024 2023 2022 2021 2020

Cash Ratio
2 1.7244648
1.8 7573624
1.6
1.4 1.0009182
0.9376386
1.2 3698499
0.6599739 86969164
1 0.5777436
0.8 20997489 51620688
0.6
0.4
0.2
0
2024 2023 2022 2021 2020

4. Solvency Ratios Trend:

 Fixed Asset to Long Term Fund Ratio
0.8 0.6706552 0.6800839
0.6379171
96399885 92708451
0.7 39821971 0.5556987
0.6 0.4878008 07970428
76987645
0.5
0.4
0.3
0.2
0.1
0
2024 2023 2022 2021 2020

Capital Gearing Ratio

2.5
1.9633544839
2555
2 1.6434969890
0786
1.5 1.1244082437 1.0606606254
3225 5016
1

0.3337602698
0.5 30422

0
2024 2023 2022 2021 2020

Trend Analysis of Trent Ltd.'s Income Statement (2020-2024)

2020 2021 2022 2023 2024

3,789.4 2,831.5 4,892.4 13,334.0
Sales Turnover 8,928.86
2 7 0 6
3,011.9 2,258.7 4,362.9 10,617.6
Total Expenses 7,659.68
1 0 9 9
Proportions 79.48% 79.77% 89.18% 85.79% 79.63%
Operating Profit 543.96 171.9 573.87 1,073.65 1,922.13
Proportions 14.35% 6.07% 11.73% 12.02% 14.42%
Other Income 144.5 200.59 147.77 257.92 865.34
Proportions 3.81% 7.08% 3.02% 2.89% 6.49%
Interest 245.8 248.65 304.74 369.22 319.1
Proportions 6.49% 8.78% 6.23% 4.14% 2.39%
Depreciation 247.24 257.3 310.82 493.69 671.11
 Proportions 6.52% 9.09% 6.35% 5.53% 5.03%
Profit Before Tax 195.42 -133.46 106.08 468.66 1,797.26
Proportions 5.16% -4.71% 2.17% 5.25% 13.48%
Tax 59.01 -23.69 76.62 158.44 443.37
Proportions 1.56% -0.84% 1.57% 1.77% 3.33%
Reported Net
153.21 -74.81 100.69 361.22 1,363.23
Profit
Exhibit 2: Vertical Analysis of Trent Ltd.’s Income Statement

1. Sales Turnover:

 Sales turnover multiplied significantly over the five-year period, with a

particularly strong increase from 2021 to 2024, indicating recovery and
expansion period from pandemic. This growth took place because of
insights which they got from Lifestyle fashion brand- Zudio and
WestSide.

2. Total Expenses:

 From ₹3,011.91 crores (2020) to ₹10,617.69 crores (2024). Trent Ltd.

has maintained its cost structure efficiently, especially in 2024 when
the proportion of expenses to sales declined. Since, direct to customers
channel where Trent launched more outlets for their lifestyle brands
which further helped them to retain loyal customers.

 suggests Trent Ltd. generated significant income from non-core

activities, contributing positively to the overall financial performance.

3. Interest:

 From ₹245.8 crores (2020) to ₹319.1 crores (2024). The declining

interest expense proportion reflects Trent Ltd.'s ability to reduce its
cost of debt over time, possibly by minimizing their debt obligation
over the Equity.

4. Profit Before Tax (PBT):

 2020: ₹195.42 crores; 2024: ₹1,797.26 crores. The 2021 negative PBT
points to a difficult year, most likely brought on by the COVID-19
pandemic. The company’s robust culture rebounded the decline stage
by appreciating their company numbers over past 3 years.

5. Tax:

 From ₹59.01 crores (2020) to ₹443.37 crores (2024). The low tax
proportion in prior years and negative tax in 2021 could indicate tax
 credits, losses, or government relief during the pandemic. Additionally,
a higher tax share in FY 2024 indicates that the company's profit
valuation has increased, which further illustrates its operational
effectiveness.

6. Reported Net Profit:

 From ₹153.21 crores (2020) to ₹1,363.23 crores (2024). The company

managed to drive profitability despite external challenges, robust
strategic decision-making because of Trent Ltd has store expansion,
digital initiatives, and diversified brand portfolio serving to various

Net Sales( IN cr)

12,375.1
14,000.00 1
12,000.00
10,000.00 8,242.02
8,000.00
6,000.00 4,498.02
3,485.98
4,000.00 2,592.96
2,000.00
0.00
2024 2023 2022 2021 2020
consumer segment.
 Reported Net Profi t( in cr)
1,600.00
1363.23
1,400.00
1,200.00
1,000.00
800.00
600.00
361.22
400.00
100.69 153.21
200.00
0.00 -74.81
2024 2023 2022 2021 2020
-200.00

Trend Analysis of Trent Ltd.'s Cashflow (2020-2024)

Net Cash From Operating Activities(in

cr)
1600
1348.39
1400
1200
1000
800 662.84
600 413.27 368.59
400
149.21
200
0
2024 2023 2022 2021 2020

Closing Cash & Cash Equivalents( in

300 283.53 cr)
250

200

150

100 76.15 71.51 64.07

44.06
50

0
2024 2023 2022 2021 2020
Trend Analysis of Trent Ltd.'s Assets (2020-2024)

Particulars 2020 2021 2022 2023 2024

Capital Work-In-
23.32 107.98 104.72 101.72 223.78
Progress
Proportions 0.42% 1.89% 1.36% 1.26% 3.12%
2,734.5 3,134.6 4,764.2 4,601.4 2,646.5
Fixed Assets
6 1 4 8 1
Proportions 49.66% 54.77% 61.66% 56.94% 36.95%
Other Non-Current
192.82 225.08 265.26 353.04 625.85
Assets
Proportions 3.50% 3.93% 3.43% 4.37% 8.74%
Current Investments 778.87 670.66 526.33 545.74 719.77
Proportions 14.14% 11.72% 6.81% 6.75% 10.05%
1,703.4 1,403.3 1,783.4 2,377.7 3,109.8
Total Current Assets
6 5 6 8 5
Proportions 30.93% 24.52% 23.08% 29.42% 43.42%
5,506.6 5,723.7 7,726.0 8,081.5 7,161.7
Total Assets
8 3 2 3 5
Exhibit 3: Vertical Analysis of Trent Ltd.’s Assets

1. Fixed Assets:

 From ₹2,734.56 crores (2020) to ₹2,646.51 crores (2024)

 The growth in fixed assets up to 2022 signals investment in company’s

capital in property, plant, and equipment. However, the decline in 2024
may indicate asset disposals, depreciation, or a shift in investment
strategy to online platform.

2. Current Assets:

 From ₹1,703.46 crores (2020) to ₹3,109.85 crores (2024). The sharp

rise in current assets shows that the company’s focus on short-term
financial flexibility. This includes cash, inventory, and accounts
receivable for day-to-day operations. The company has been focusing
on their enhancement to meet short-term obligations and maintain
liquidity.

Trend Analysis of Trent Ltd.'s Liabilities (2020-2024)

Particulars 2020 2021 2022 2023 2024

Equity Share Capital 35.55 35.55 35.55 35.55 35.55
Proportions 0.65% 0.62% 0.46% 0.44% 0.50%
Reserves and Surplus 2,352.49 2,277.48 2,328.45 2,559.94 4,032.19
Proportions 42.72% 39.79% 30.14% 31.68% 56.30%
 Long Term Borrowings 299.74 0 497.38 497.95 498.56
Proportions 5.44% 0.00% 6.44% 6.16% 6.96%
Other Long-Term
2,233.16 2,600.79 4,143.99 3,767.73 859.09
Liabilities
Proportions 40.55% 45.44% 53.64% 46.62% 12.00%
Total Capital and
5,506.68 5,723.73 7,726.02 8,081.53 7,161.75
Liabilities
Exhibit 4: Vertical Analysis of Trent Ltd.’s Liabilities

1. Equity Share Capital:

 ₹35.55 crores (constant from 2020 to 2024). But the proportion of

equity share capital in total liabilities declined from 0.65% in 2020 to
0.44% in 2023, indicating a shift in the company’s capital structure.

2. Long-Term Borrowings:

 From ₹299.74 crores (2020) to ₹498.56 crores (2024). The fluctuation

in borrowings indicates a phase of debt reduction or repayment in
2021, followed by a resurgence in debt utilization from 2022 onwards.
This depicts companies’ investment strategy, in Mar 2024 quarter,
Westside added 12 stores and Zudio added newly 86 stores to their
outlets. Trent plans to push their retail globally after acing in India.

Overview:

 Positives:
If the profits are considered, then the profitability of the company
has improved significantly, reflected by increased margins, return
on equity, and return on investment. This would mean that the
business earns money and transfers it to investors with productivity.
Better efficiency in the operations occurs as it enhances its
capability to deal with assets and inventory. Its performance over
the years has encouraged investors to invest for long-term growth.
 Negatives:
The company’s liquidity ratios are declining, indicating potential
short-term financial challenges. If the quick ratio falls further, the
company may face difficulty meeting its immediate obligations.

Recommendation:
For long-term investors, this company presents a strong opportunity given
its growing profitability and efficiency. However, given the liquidity
concerns, investors should be cautious and closely monitor how the
company manages its short-term obligations. Investing in this company
results in growth but my suggestion for investors to diversify their
investment to mitigate the risk by keeping an eye on companies’ short-term
obligation.

Areas for Improvement:

1. Liquidity Management:
The company should work on improving its liquidity by either
increasing cash reserves or reducing short-term liabilities. This can
help them to face short-term obligations

2. Receivables Collection:
The company should revamp their debt collection strategy to ensure
timely collection from debtors, improving the cash flow situation. This
will help sustain the business’s liquidity position.