Financial Statement Analysis of GoodLuck Ltd.

A Comprehensive Ratio Analysis from the Perspective of Different Stakeholders

THE BACKSTORY

Company Profile

GoodLuck Ltd. is a medium-sized manufacturing company producing engineering components for domestic and industrial customers. Over the past few years, it has expanded production capacity by investing in new machinery and infrastructure. Sales have grown steadily — but the Board of Directors wants to know one thing: is the company actually using its resources efficiently?

As at 31st March 2026, the Board is weighing four big decisions, and has appointed a Financial Consultant to guide them with hard numbers:

• Apply for additional working capital finance from a commercial bank
• Attract new investors for future expansion
• Review its dividend policy
• Evaluate the company’s operational efficiency

Why these matters Ratio analysis turns a static Balance Sheet into a diagnostic tool — it tells lenders whether the company can repay investors whether it can grow, and tells management where cash is quietly getting stuck.

THE NUMBERS BEHIND THE STORY

Balance Sheet as at 31st March 2026

Liabilities	₹	Assets	₹
6% Preference Share Capital	1,50,000	Goodwill	20,000
Equity Share Capital	2,50,000	Land & Building	2,50,000
General Reserve	20,000	Machinery	1,75,000
Profit & Loss Account	15,000	Furniture	10,000
5% Debentures	1,00,000	Stock	90,000
Sundry Creditors	28,000	Sundry Debtors	21,000
Bills Payable	12,000	Cash at Bank	5,000
		Preliminary Expenses	4,000
Total	5,75,000	Total	5,75,000

Additional information: Total Sales ₹4,00,000  •  Credit Sales = 20% of Total Sales  •  Gross Profit ₹80,000  •  Net Profit (after tax) ₹20,000

AT A GLANCE

The Ratio Analysis Scorecard

Twelve ratios, four lenses, one clear picture. Here’s how GoodLuck Ltd. scores across liquidity, solvency, profitability and efficiency:

CAN IT PAY ITS BILLS?

1. Liquidity Analysis

Liquidity ratios test whether GoodLuck Ltd. can meet its short-term obligations without breaking a sweat. The headline number looks great — but there’s a catch hiding underneath it.

Ratio	Formula	Calculation	Result	Ideal	Status
Current Ratio	Current Assets ÷ Current Liabilities	1,16,000 ÷ 40,000	2.90 : 1	2 : 1	Excellent
Quick Ratio	(Current Assets − Inventory) ÷ Current Liabilities	(1,16,000−90,000) ÷ 40,000	0.65 : 1	1 : 1	Weak
Working Capital	Current Assets − Current Liabilities	1,16,000 − 40,000	₹76,000	Positive	Good

Current Ratio comfortably beats the benchmark, but Quick Ratio reveals inventory is doing the heavy lifting.

Consultant’s take The Current Ratio suggests excellent short-term solvency and adequate working capital for daily operations. But the Quick Ratio tells a different story: strip out inventory, and immediate liquidity is weak — a large share of current assets is tied up in stock rather than cash or receivables.

IS IT BUILT ON SOLID GROUND?

2. Solvency & Capital Structure

Solvency ratios look past this year and into the long run — how much of the company is funded by owners versus outside lenders, and can it survive a downturn?

Ratio	Formula	Calculation	Result	Ideal	Status
Debt–Equity Ratio	Outside Liabilities ÷ Shareholders’ Funds	1,40,000 ÷ 4,35,000	0.32 : 1	1 : 1	Excellent
Proprietary Ratio	Shareholders’ Funds ÷ Total Assets	4,35,000 ÷ 5,75,000	75.7%	Above 50%	Excellent
Fixed Assets Ratio	Fixed Assets ÷ Long-term Funds	4,55,000 ÷ 5,35,000	0.85	Below 1	Good

Low leverage, high owner-funding, and fixed assets comfortably covered by long-term funds.

Consultant’s take GoodLuck Ltd. leans very little on outside borrowings and finances a large share of its assets from owners’ funds — a strong capital structure that should reassure both bankers and prospective investors. Long-term funds are more than sufficient to finance fixed assets without relying on short-term borrowings.

IS IT ACTUALLY MAKING MONEY?

3. Profitability

Margins reveal how much of every rupee of sales survives the trip from revenue to profit.

Ratio	Formula	Calculation	Result	Ideal	Status
Gross Profit Ratio	Gross Profit ÷ Net Sales × 100	80,000 ÷ 4,00,000 × 100	20%	Higher is better	Good
Net Profit Ratio	Net Profit ÷ Net Sales × 100	20,000 ÷ 4,00,000 × 100	5%	Higher is better	Average

A healthy 20% gross margin shrinks to just 5% at the net level.

Consultant’s take The 20% gross margin points to efficient production and pricing. But by the time operating expenses, interest and tax are paid, only 5% is left on the table — a sign that cost control below the gross-profit line deserves closer attention.

IS IT USING ITS ASSETS WELL?

4. Efficiency

Efficiency ratios show how hard GoodLuck Ltd.’s assets, stock and receivables are working for it — and this is where the biggest red flags show up.

Ratio	Formula	Calculation	Result	Ideal	Status
Stock Turnover Ratio	Cost of Goods Sold ÷ Average Inventory	3,20,000 ÷ 90,000	3.56x	6–8 times	Poor
Debtors Turnover Ratio	Credit Sales ÷ Average Debtors	80,000 ÷ 21,000	3.81x	Higher is better	Average
Average Collection Period	365 Days ÷ Debtors Turnover	365 ÷ 3.81	96 Days	30–60 days	Poor
Asset Turnover Ratio	Net Sales ÷ Total Assets	4,00,000 ÷ 5,75,000	0.70x	Higher is better	Average

Inventory turns slowly, customers take 96 days to pay, and total assets aren’t fully pulling their weight.

Consultant’s take Slow inventory movement suggests excess stock and higher carrying costs. Customers take far longer than the ideal 30–60 days to pay, straining liquidity and cash management. Together with modest asset turnover, this points to operational efficiency — not solvency — as GoodLuck Ltd.’s real challenge.

THE BOTTOM LINE

Consultant’s Final Opinion

From an overall financial perspective, GoodLuck Ltd. is a financially sound company with a strong capital structure, healthy liquidity, and low financial risk. These strengths make it attractive to banks, lenders, and long-term investors.

However, operational efficiency requires improvement. Excess inventory, slow collection from debtors, and underutilisation of assets are affecting profitability and cash conversion.

Recommendation If management focuses on improving working capital management, inventory control, and receivables collection, GoodLuck Ltd. will be better positioned to enhance profitability, strengthen cash flows, and create greater value for shareholders.

Prof. Dr. Sujit Dutta

Financial Statement Analysis of GoodLuck Ltd. — Ratio Analysis Report