Now organise the observations. The goal is not a verdict on whether to invest, but a clear, reasoned understanding of what the numbers show and what still needs explaining.
Work through the calculations
- Return on equity (ROE), FY24
- Net profit ÷ shareholders' equity = ₹110 crore ÷ ₹610 crore = 18.0%
- Earnings per share (EPS), FY24
- Net profit ÷ shares = ₹110 crore ÷ 11 crore shares = ₹10.0
- Price-to-earnings (P/E), FY24
- Share price ÷ EPS = ₹150 ÷ ₹10 = 15
- Debt-to-equity, FY24
- Total debt ÷ shareholders' equity = ₹900 crore ÷ ₹610 crore = 1.48
Case study: ABC Manufacturing
A fictional company with three years of numbers. Investigate it yourself before revealing each answer.
| ₹ crore | FY22 | FY23 | FY24 |
|---|---|---|---|
| Revenue | 1,000 | 1,200 | 1,350 |
| Net profit | 90 | 110 | 120 |
| Total debt | 300 | 420 | 600 |
| Cash | 80 | 70 | 60 |
| Receivables | 150 | 210 | 300 |
| Operating cash flow | 110 | 95 | 60 |
| Shareholders' equity | 500 | 560 | 610 |
Shares outstanding
12 crore
Share price
₹150
Market capitalisation
₹1,800 Cr
EPS ≈ ₹10
What happened to revenue?
Is profit growing?
What happened to debt?
What happened to cash flow?
What is the company's ROE?
What is the P/E?
What risks should be investigated?
There is deliberately no buy/sell conclusion. The goal is to practise asking the right questions and doing the arithmetic, not to be told what to do.
| Observation | What the numbers show | What is worth investigating |
|---|---|---|
| Revenue | Grew from ₹1,000 to ₹1,500 crore, about 50% | Whether growth came from selling more or from heavy discounting |
| Profit versus cash | Net profit rose ₹80 to ₹110 crore, but operating cash flow fell from ₹90 to −₹20 crore | Why cash is not following profit — are receivables building up? |
| Debt | Debt rose ₹300 to ₹900 crore; debt-to-equity rose 0.60 to 1.48 | Whether interest can be paid comfortably if the business slows |
| Margins | Net margin slipped from 8.0% to 7.3% | Which costs are rising faster than revenue |
| Cash cushion | Cash fell from ₹120 to ₹30 crore | How the company would manage if lenders became cautious |
| Shares | Share count rose from 10 to 11 crore (dilution) | Why new shares were issued and what the money funded |
Observations from ABC's numbers, and the questions they raise.
Any one of these on its own can have an innocent explanation. It is the combination — rising profit, falling cash, rising debt and a thinner margin — that makes these numbers worth studying carefully.
Where the analysis ends
This lesson deliberately stops at understanding. It offers no view on whether the shares are attractive and no price target. This process describes the business; it does not tell anyone what to do.
You reached these observations by calculating and comparing, not by guessing. That is exactly the skill this course is building — and it is a skill you can apply to any company.