Ashok Leyland

Mar 19 Mar-18 Mar-17 Mar-16

DOL 1.6970 0.6885 3.6405 0.7992

DFL 2.6156 0.8551 118.9704 3.768

DCL 4.4386 0.5887 433.1079 5.899

Interest Coverage 136.29 18.08 11.71 8.67

Ratio

DE Ratio 0.039 0.053 0.194 0.167

Remarks

DOL is the percentage change in ebit by percentage change in

sales,Dol is increasing in 2019 compared to 2018 , As the sales have
increased, but operating expenses has decreased, which leads to
greater change in ebit. ,so ebit has more compounding effect on it.The
risk of a company was minimised in the financial year 2018 due to
decrease in proportion of fixed costs to variable costs. Presently the
operating leverage is within the industry standard.

Since the company has reached maturity it does not invest too much
in fixed assets and hence the debt is low compared to equity i.e. the
company can sustain itself through equityThe sudden increase in EPS
in 2017 lead to a spike in the financial leverage which signifies that
proportionately the financial risk of a company has also increased.
Moreover the bottomline has not improved to that extent.

Degree of operating leverage x Degree of financial leverage

The combined leverage increases in synchronisation with the above

two.The overall risk of the company was significantly lowered in the
financial year 2018 which is a good sign but it has increased in 2019
though it is still within the industry standards.

ICR=EBIT/interest expenses

The perfect interest cover ratio is about 1.5. The high

estimations of interest coverage ratios show that the
organization is in good financial health.

Debt-Equity Ratio

The ideal debt to equity ratio is 1-1.5. Since the auto

industry is capital intensive it can have a D/E ratio
higher than 2. The low estimations of obligation to
value shows that the organization is supporting itself on
high estimations of value and has low obligation.