CHAPTER - I

INTRODUCTION AND DESIGN OF STUDY

1.1 INTRODUCTION TO THE STUDY
The uncertainty in the future is known as the risk. The chance of the return on the
investment in the business is very highly uncertain. No business concern can give surety of
profit. I n every business activities there will be risks, these risks can create financial loss to the
company so we can say that all the risks are financial risks. The uncertainty can be seeing in
purchase, production, labor, finance, sales...
The managers are concentrating more on the risk management strategies because the
most critical decisions of the enterprises are very closely related to finance and an understanding
of the theory of financial risk management strategies provide them with conceptual and
analytical insights to make those decisions successfully. The fact is that the business needs a risk
free environment to make more profit.
MEANING OF FINANCIAL RISKS
In common all risks in the business are financial risks. That uncertainty in the business
that causes financial losses to the company is known as financial risks. These risks can be
measured in monitory terms. Risk management strategies are applicable to any type of business.
But the fact is that according to the nature of the business the strategies will differ. We can find
out some common characteristics in the strategies because the whole strategies are related with
reducing the risk
FINANCIAL STRATEGY
In order to manage the risks the management will adopt some financial strategies. These
financial strategies are related to the availability, usage, and management of the funds in the
most prescribed way in order to avoid the uncertainty. So the relevance of the risk management
is very high in the business. Under this head we can place the risk management strategy.

WHEN RISING OF FUNDS
Plans and policies related to the sources of funds deal with financing or capital-mix
decisions. Plans and policies have to be made for the following major factors:-
Capital structure; procurement of capital and working capital borrowings; reserves and
surplus as of funds; and the relationship with lenders, banks, and financial institutions. These
plans and policies are important since they determine how financial resources will be made
implementation of risk management strategies.
WHEN USING FUNDS
Usage of funds deal with investment or asset-mix decisions. The important factors that
relevant there are
Capital investment, fixed asset acquisition, current asset, loans and advances, dividend
decisions, and the relationship with shareholders. Usage of funds is important since it relates to
the efficiency and effectiveness of resource utilization in the process of risk avoidance. If the
plans and policies are not clear there will be loss to the company as the miss utilization or the
underutilization of the resources.
MANAGEMENT OF THE FUNDS
The management of the funds important area in risk management strategy. It basically
deals with the decisions related to the systemic aspects of the financial management strategies.
The major factors for which plans and policies related to the management of funds have to be
made are
The systems of finance, accounting, and budgeting, management control system, cash,
credit, cost control and reduction, and tax planning and advantages.
The management of funds can play a pivotal role in risk management as it aims at the
conservation and optimum utilization of funs objectives which are central to any strategic action.
Organizations which implement risk management strategies can not rigors of the proper
management of the funds. In fact, good management of funds often creates the difference
between a strategically successful and UN successful company.
Financial plans and policies, however, present a dilemma before a management. The
priorities of the management may often conflict with those of share holders. It is the
responsibility of the strategists to minimize such conflict.
Risk management strategies also address the following issues.
1. How, where and when the business will obtain funds, the timing of share issues and the
determination of the share issue prices
2. Best possible use of financial resources
3. Gearing of the firm
4. How to maximize the market valuation of the firm
5. What to do with the accumulated cash
6. Long-term financial planning for business expansion
7. Capital structure of the firm
8. Extended to which internally generated profits are reinvested within the company
9. Choice of financial criteria for selecting major capital investments
Successful risk management strategy will enable to
1. Replace capital assets when necessary
2. Cover loan and debenture interests as this falls due and repay the capital on maturity,
3. Build up sufficient reserves to meet contingencies,
4. Facilitates long term growth, and
5. Ensure that funds are available at the right time and at the lowest cost


MAINTAIN GOOD CAPITAL STRUCTURE
A public limited company can finance expansion in several ways - shares, debentures or
other loans or through retained profits. Shares have the advantage that dividends need not paid in
loss-making periods. However outsiders gain votes as has shares are issued that existing majority
shareholders may lose control. Debenture financing involves no loss of control as debenture
holders have no votes. But the risk of liquidation is higher because debenture interest must be
paid in full, on time, regardless of current financial circumstances.
Against this background, company sometimes prefers to finance themselves entirely, by
plugging back their own profits. There are no interest payments on retained earnings but the
danger is that while the value of a business goes up as profits are ploughed back, market prices
of the company's share may fall since high retention of profits necessarily reduces dividends.
Shareholders find no interest in buying shares of companies that do not pay good dividends.
Factors in capital structure selection
1. The friskiness of the markets in which the business operates
2. Estimates of future profits and capital requirements
3. Attitudes of senior managers and major share holders
4. Tax considerations
5. The extend of the need for flexibility
GEARING OF THE FIRM
A critical risk management strategy is the ratio of the company's borrowing to its total
share capital. This is known as the gearing of the business.
Companies that borrow heavily relative to their share capital are said to be highly geared
and vice versa. Lenders impose on borrowing companies a contractual restriction on the latter's
ability to borrow from other sources. This ensures that the lender has first claim on borrowing
company's asset if it goes into liquidation and there will be no other lender with claims on the
failed business funds.
WHEN FINANCING THE BUSINESS
Firms requirement for financial capital may be divided into two categories- fixed capital
and working capital. The source of business finance should be related to the purpose for which it
is required. Short-term finance should be used to bridge short-term deficits; long-term finance
should be used for purchasing long lived capital assets.
Factors considered avoiding risks in selection of source of funds
1. Cost and flexibility
2. How quickly the funds are required
3. Extent of business assets that can be offered as security of loans
4. Repayment periods
5. Levels of risks associated with the company's operations
WHEN ISSUING SHARES
Public limited companies wishing to raise money by share issue will normally do so
through the new issues market" which consists of institutions that specialize in the sale of new
shares although other methods are available. First the company will consult a merchant bank for
advice on
1. The timing of the issue
2. An appropriate issue price
3. How best to underwrite the flotation
USE OF VENTURE CAPITAL
With venture capital financing, an outside body- a merchant bank- takes shares in a
business in order to inject capital, then takes an agreed proportion of the profits for a specified
period and sells the shares back to the company at a predetermined future date at an agreed in the
initial contract. Venture capitalists are looking to invest in sound businesses that wish to expand
rapidly.
FORWARD EXCHANGE
Firms which import goods from foreign suppliers have to pay their bills in the currencies of
the foreign suppliers' countries which means that the importer must run the risk of depreciation
in its country's currency between the moment an order is placed and when the resulting debt has
to be settled. A depreciation in the exchange rate means that more units of domestic currency
have to be spend in order to purchase a given amount of foreign currency. Similar risks apply to
an exporting firm involving its foreign customers in the currencies of the latter's own countries.

1.2 SCOPE OF THE STUDY
This study analyzes the risk of Amaravathi Sri Venkatesa Paper Mills Pvt ltd for five year
between2008-2009 to 2012-2013. This study will give highlights of Amaravathi Sri Venkatesa
Paper Mill Ltd. This study also brings to time lights the areas whereAmaravathi Sri Venkatesa
Paper Mill Ltd Sales and service should improve to increase efficiency of its assets and funds
employed.




















1.3 OBJECTIVES OF THE STUDY
To identify the credit risk and control them
To measure the extent and sources of exposure
To find each position a cost of capital appropriate to its risk
To provide information on the firms financial integrity to borrowers and
outside parties
To evaluate the performance of company in light of the risk taken to achieve
profits.


















1.4 LIMITATION OF THE STUDY

The data were collected from secondary sources only.
Applications and analysis will differ.
Interpretations made by every person will also differ.
The present study is purely based on the organization. The validity of inference highly
depends on the validity of the data.



















CHAPTER II
REVIEW OF LITERATURE
A risk assessment can only identify the probability of harm, assess the impact of it on key
individuals, and pose intervention strategies which may diminish the risk or reduce the harm.
Assessments cannot prevent risk (Hope and Sparks, 2000: 137).
The Report of the 21
set
Century Social Work Review (Changing Lives) acknowledged
social works expertise in professional risk assessment and management and yet saw as a
challenge the increasing risk aversion mentality within the profession which constrains both
workers and users alike: Many of the people who responded to our survey spoke of working in a
climate of fear, hoping that nothing would go wrong that would open them up to media
vilification (Scottish Executive, 2006: 52). Media coverage of failures in risk assessment and
management, coupled with growing pressures for organizational accountability, risk
minimization and public safety have increasingly limited the role of the social worker. And yet a
key role of the social worker is to identify and assess not only a clients need for protection from
self or others but also public and professional safety more generally.
Changing Livesencourages the involvement of users in those assessments of risk. Whilst
user involvement in risk assessment in social work is an innovative and welcomed development,
when coupled with the need for social workers to be accountable for effective risk management,
it nevertheless becomes one of the professions biggest challenges, as the Review has
highlighted. Clear channels of accountability need to be placed within a framework of
professional autonomy, whilst the overall service is expected to be underpinned by sound and
robust evidence-basedapproaches to risk assessment and management in an otherwise risk-averse
society. In order to inform and develop these aspirations in Scotland, this paper proposes an
international review of the literature within predominantly English-speaking countries about risk
assessment in social work. It is hoped that such a review will draw out the main issues inherent
in identifying risk within and between vulnerable groups, identify good practice and highlight the
implications for policy and practice in Scotland as recommended in the Report of the 21
set
Century Social Work Review.


The main aim of the literature review is to better understand effective social work
practice which adheres to the following principles relating to risk assessment based on sound
evidence and analysis:
- Tools and other approaches to risk assessment which inform rather than replace professional
judgment;
- Clear accountability frameworks which enable professional autonomy;
- A common inter-agency understanding and language of risk assessment;
- Agreed inter-agency protocols for information sharing on risk;
- Risk assessment approaches that are integral to the overall management and minimization of
risk.








CHAPTER III
3.1RESEARCH METHODOLOGY
RESEARCH DESIGN
Research design is a statement or specification of procedure for collecting and analyzing
the information required for the selection of some specification problem it provides a scientific a
framework for conducting sources research investigation.
Types of Research
The researcher took up on analytical research for his project analyzes the financial
statement It., balance sheet of Maniranjan Diesel Sales and Service pvt.ltd.
Method of data collection
The main source of data includes secondary data. Secondary data are based on the five
years annual reports from 2004-05 to 2008-09. It also concern the data available in the
magazines, journals, websites and other sources
Analytical Designs
o Ratio Analysis
o Mean
o Standard deviation
o Coefficient variation
o Trend Analysis
MEANING OF MEAN
In statistics, the mean is the mathematical average of a set of numbers. The average is
calculated by adding up two or more scores and dividing the total by the number of scores.
Mean =X
N


MEANING OF STANDARD DEVIATION

Standard deviation is a number that tells you approximately how far the values in a data
set deviate from the mean (the average). The larger the standard deviation, the larger the
deviation.The smaller the standard deviation, the smaller the deviation. If all of the values are
equal, the standard deviation is equal to zero.

X - X
2

N

MEANING OF COFFICIENT VARIATION
A statistical measure of the dispersion of data points in a data series around the mean. It is
calculated as


The coefficient of variation represents the ratio of the standard deviation to the mean, and it is a
useful statistic for comparing the degree of variation from one data series to another, even if the
means are drastically different from each other.

RATIO ANALYSIS
Fundamental Analysis has a very broad scope. One aspect looks at the general
(qualitative) factors of a company. The other side considers tangible and measurable factors
(quantitative). This means crunching and analyzing numbers from the financial statements. If
used in conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years, other
companies, the industry, or even the economy in general. Ratios look at the relationships
between individual values and relate them to how a company has performed in the past, and
might perform in the future.
MEANING OF RATIO
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is
an expression relating one number to another. It is simply the quotient of two numbers. It can be
expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many
times. As accounting ratio is an expression relating two figures or accounts or two sets of
account heads or group contain in the financial statements.
MEANING OF RATIO ANALYSIS
Ratio analysis is the method or process by which the relationship of items or group of
items in the financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the
financial health and profitability of business enterprises. Ratio analysis can be used both in trend
and static analysis. There are several ratios at the disposal of an annalist but their group of ratio
he would prefer depends on the purpose and the objective of analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we will
focus on a technique, which is easy to use. It can provide you with a valuable investment
analysis tool.
This technique is called cross-sectional analysis. Cross-sectional analysis compares
financial ratios of several companies from the same industry. Ratio analysis can provide valuable
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage. By comparing the leverage ratios of two companies,
you can determine which company uses greater debt in the conduct of its business. A company
whose leverage ratio is higher than a competitor's has more debt per equity. You can use this
information to make a judgment as to which company is a better investment risk.However, you
must be careful not to place too much importance on one ratio. You obtain a better indication of
the direction in which a company is moving when several ratios are taken as a group.














CHAPTER IV
ANALYSIS AND INTERPRETATION
4.1 OPERATING RATIO
Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is
generally expressed in percentage.
The two basic components for the calculation of operating ratio are operating cost (cost
of goods sold plus operating expenses) and net sales. Operating expenses normally include (a)
administrative and office expenses and (b) selling and distribution expenses. Financial charges
such as interest, provision for taxation etc. are generally excluded from operating expenses.
Formula of operating ratio:

Operating Cost
Operating Ratio = __________________ 100
Net sales




TABLE 4.1 OPERATING RATIO
YEAR OPERATING
COST
(Rs in thousand)
NET SALES
(Rs in thousand)

RATIO
%
2008-2009 1801.13 7660.11 23.5
2009-2010 1609.99 7361.81 21.8
2010-2011 1791.17 9184.31 19.5
2011-2012 1745.36 9638.57 18.1
2012-2013 1767.59 9282.77 19.0
Sources: Annual Report
INFERENCE
Operating ratio shows the operational efficiency of the business. Lower operating ratio
shows higher operating profit. Higher operating risk in the year of 2008-2009 the rate was 23.5.
Later that year by year ratio is decrease gradually. That is in the year of 2009-2010 the
ratio was 21.8 and during the year of 2010-2011 the ratio is decreased by 19.5.
During the year of 2011-2012 the rate was decreased by 18.1 and it is increased by 19.0
in the year of 2012-2013. Last year Operating risk is increased by .99 Due to Lack performance
of employees.
Each and every year risk that is ratio value is reduced all the year except 2012-2013.



CHART 4.1
OPERATING RATIO








0
5
10
15
20
25
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
OPERATING RATIO
OPERATING RATIO

4.2 EXPENSE RATIO
Expense ratios indicate the relationship of various expenses to net sales. The operating
ratioreveals the average total variations in expenses. But some of the expenses may be increasing
while some may be falling. Hence, expense ratios are calculated by dividing each item of
expenses or group of expense with the net sales to analyze the cause of variation of the operating
ratio.
The ratio can be calculated for individual items of expense or a group of items of a
particular type of expense like cost of sales ratio, administrative expense ratio, selling expense
ratio, materials consumed ratio, etc. The lower the operating ratio, the larger is the profitability
and higher the operating ratio, lower is the profitability.
While interpreting expense ratio, it must be remembered that for a fixed expense like
rent, the ratio will fall if the sales increase and for a variable expense, the ratio in proportion to
sales shall remain nearly the same.
Formula of Expense Ratio
Following formula is used for the calculation of expense ratio:
Particular expense
Particular Expense = ____________________ 100
Net sales
TABLE 4.2
EXPENSE RATIO

YEAR EXPENSE
(Rs in thousand)
NET SALES
(Rs in thousand)
RATIO
%
2008-2009 7231.31 7660.11 9.44
2009-2010 67766.11 7361.81 9.19
2010-2011 8519.62 9184.31 9.27
2011-2012 8743.65 9638.57 9.07
2012-2013 8356.67 9282.77 9.00
Sources: Annual Report
INFERENCE:-
From above the table shows that the ratio was decreased each and every year it indicates
all the year individual expenses also decreased and also increased sales volume.
In the Year of 2008-2009 the ratio is 9.44 it is very high expenses of the company.
During the year of 2009-2010 the ratio decreased by 9.19. And in the year of 2010-2011 the ratio
value is 9.27.
Later on that during the Year of 2011-2012 the rate value is 9.07 and it was decreased in
the year of 2012-2013 the rate value is 9.00.Every year the expense is gradually decreased. So it
indicates low risk of expense.
Finally the risk level of expenses decreased each and every year. It indicates that better
performance of the company and handle the good strategy to reduce the expenses.
Risk measured tools also indicates that low level cost spend to individual expenses.


CHART 4.2
EXPENSE RATIOS









8.7
8.8
8.9
9
9.1
9.2
9.3
9.4
9.5
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
EXPENSE RATIO
EXPENSE RATIO



4.3 AVERAGE COLLECTION PERIOD RATIOS
The Debtors / Receivable Turnover ratio when calculated in terms of days is known as
Average Collection Period or Debtors Collection Period Ratio. The average collection period
ratio represents the average number of days for which a firm has to wait before its debtors are
converted into cash.
Formula of Average Collection Period:
Following formula is used to calculate average collection period:
[(Trade Debtors No. of Working Days) / Net Credit Sales]
Or
Average Account Receivables/ Net Credit Sales]
* Debtors and bills receivables are added.
*For calculating this ratio usually the number of working days in a year is assumed to be 360.
TABLE 4.3AVERAGE COLLECTION PERIOD RATIOS
YEAR AVERAGE
ACCOUNTS
RECEIVABLES
CREDIT SALES

RATIO
2008-2009 752.76 7660.11 10
2009-2010 605.08 7361.81 8.2
2010-2011 592.25 9184.81 6.4
2011-2012 684.66 9638.57 7.1
2012-2013 739.17 9282.77 8
Sources: Annual Report
INFERENCE:-
This ratio measures the quality of debtors. A short collection period implies prompt payment
by debtors. From above the table shows that in the year of 2008-2009 the ratio is 10 this is long
time of comparatively other year.
The ratio was decreased by 8.2 in the year of 2009-2010. In this year ratio value is reduced to
past year and 2010-2011 the ratio value is 6.4 it is very low collection period of this company.
In the year of 2011-2012 the rate value is 7.1 it is increased comparatively previous year and
2012-2013 in the year of ratio value is 8 in this year debtors quality is reduced.
Risk measured tools also indicates that average quality level of risk occur in that company.
CHART 4.3
AVERAGE COLLECTION PERIOD RATIOS








0
1
2
3
4
5
6
7
8
9
10
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
AVERAGE COLLECTION PERIOD RATIO
AVERAGE COLLECTION
PERIOD RATIO
4.4 DEBTORS TURNOVER RATIO / ACCOUNTS RECEIVABLE
TURNOVER RATIO
Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt
collection of a firm. In simple words it indicates the number of times average debtors
(receivable) are turned over during a year.
The two basic components of accounts receivable turnover ratio are net credit annual
sales and average trade debtors. The trade debtors for the purpose of this ratio include the
amount of Trade Debtors & Bills Receivables. The average receivables are found by adding the
opening receivables and closing balance of receivables and dividing the total by two. It should be
noted that provision for bad and doubtful debts should not be deducted since this may give an
impression that some amount of receivables has been collected. But when the information about
opening and closing balances of trade debtors and credit sales is not available, then the debtors
turnover ratio can be calculated by dividing the total sales by the balance of debtors (inclusive of
bills receivables) given. and formula can be written as follows.
Formula of Debtors Turnover Ratio:
[Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors]
Or
[Debtors Turnover Ratio = Total Sales / Debtors]






TABLE 4.4DEBTORS TURNOVER RATIO | ACCOUNTS RECEIVABLE TURNOVER
RATIOS
(Rs in Thousands)
YEAR TOTAL SALES
(Rs in thousand)
DEBTORS
(Rs in thousand)
RATI0S
%
2008-2009 7660.11 752.16 10.18
2009-2010 7361.81 605.08 12.16
2010-2011 9184.31 592.25 16
2011-2012 9638.57 684.06 14.09
2012-2013 9282.77 739.17 12.55
Sources: Annual Report
INFERENCE:-
Debtors turnover ratio indicates the number of times the debtors are turned over a year.
From above the table shows that the ratio was increased by 16 in the year of 2010-2011.The ratio
was decreased by 10.18 in the year of 2008-2009.
Starting year the ratio value is average level and it is increased to next year 2009-2010
the rate value is 12.16.
In the year of 2010-2011 the rate value is very high comparatively other years. In this
year only debtor turnover has been too increased.
Risk measured tools also indicates that low level of debtor turnover risk occur in that
company.


CHART 4.4
DEBTORS TURNOVER RATIO | ACCOUNTS RECEIVABLE TURNOVER
RATIOS







0
2
4
6
8
10
12
14
16
DEBTOR TURNOVER RATI0
DEBTOR TURNOVER RATI0

4.5 WORKING CAPITAL TURNOVER RATIO
Working capital turnover ratio indicates the velocity of the utilization of net working
capital. This ratio represents the number of times the working capital is turned over in the course
of year and is calculated as follows:
The two components of the ratio are cost of sales and the net working capital. If the
information about cost of sales is not available the figure of sales may be taken as the numerator.
Net working capital is found by deduction from the total of the current assets the total of the
current liabilities.
Formula of Working Capital Turnover Ratio:
Following formula is used to calculate working capital turnover ratio
[Working Capital Turnover Ratio = Cost of Sales / Net Working Capital]









TABLE 4.5
WORKING CAPITAL TURNOVER RATIOS








YEAR


NET SALES
(Rs in Thousands)
NET WORKING CAPITAL
(Rs in Thousands)
RATIOS
%
2008-2009 7646.85 496.2 15.41
2009-2010 7383.25 680.09 10.85
2010-2011 9248.60 330.54 27.98
2011-2012 9565.01 534.33 17.90
2012-2013 9383.57 1436.61 6.53
Source: Annual Report
INFERENCE
From above the table shows that the rate is increased by 27.9 in the year of 2010-2011.
The ratio is decreased by 6.53 in the year of 2012-2013. It indicates comparatively last year poor
utilization of Working capital.
A high ratio indicates efficient utilization of working capital and a low ratio indicates
otherwise. But a very high working capital turnover ratio may also mean lack of sufficient
working capital which is not a good situation.
Initial year the ratio was 15.41 and next year it was decreased by 10.85 and also in the
year of 2011-2012 the rate was decreased by 17.90.
And finally in the year of 2012-2013 the rate was decreased by 6.53 it indicates that
sufficient working capital available in that company during the year of 2012-2013.
CHART 4.5WORKING CAPITAL TURNOVER RATIO

0
5
10
15
20
25
30
2008-
2009
2009-
2010
2010-
2011
2011-
2012
2012-
2013
YEAR WORKING CAPITAL RATIO RATIO
YEAR WORKING CAPITAL
RATIO RATIO
4.6RETURN ON CAPITAL EMPLOYED
Capital employed and operating profits are the main items. Capital employed may be
defined in a number of ways. However, two widely accepted definitions are "gross capital
employed" and "net capital employed". Gross capital employed usually means the total assets,
fixed as well as current, used in business, while net capital employed refers to total assets minus
liabilities. On the other hand, it refers to total of capital, capital reserves, revenue reserves
(including profit and loss account balance), debentures and long term loans.
Formula of return on capital employed ratio:
[Return on Capital Employed= (Adjusted net profits*/Capital employed) 100]
Net profit before interest and tax minus income from investments.
Gross capital employed = Fixed assets + Investments + Current assets
Net capital employed = Fixed assets + Investments + Working capital*.
Working capital = current assets current liabilities.
TABLE 4.6RETURNS ON CAPITAL EMPLOYED
(Rs in Thousands)
YEAR NET PROFIT
(Rs in Thousands)
CAPITAL
EMPLOYED
(Rs in Thousands)
RATIOS
%
2008-2009 54.45 3623.17
1.2
2009-2010 162.82 3844.64
2.3
2010-2011 92.41 3974.8
3.6
2011-2012 181.80 4923.49
2.8
2012-2013 310.77 7078.46
4.7
Sources: Annual Report
INFERENCE:-
The ratio can be found for a number of years so as to find a trend as to whether the
profitability of the company is improving or otherwise same position. From above the table
shows that the rate was increased by 4.3 in the year of 2012-2013. The ratio is decreased by 1.5
in the year of 2008-2009. Last year good return capital.
It is starting year very low level of capital employed and it was increased in the year 2010-
2011 and straight opposite position of the rate value is 2.3 in the year of 2010-2011.
In this ratio next two years that is 2011-2012 to 2012-2013 for both year rate values is
gradually increased.
Risk measured tools also indicates that average level of capital employed in that company.
CHART 4.6 RETURNS ON CAPITAL EMPLOYED








0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
RETURN ON CAPITAL EMPLOYED
RETURN ON CAPITAL
EMPLOYED
4.7 CURRENT ASSETS TO PROPRIETOR'S FUND RATIO
Current Assets to Proprietors' Fund Ratio establish the relationship between current assets
and shareholder's funds. The purpose of this ratio is to calculate the percentage of
shareholdersfunds invested in current assets.
Formula:
Current Assets to Proprietors Funds = Current Assets / Proprietor's Funds















TABLE 4.7CURRENT ASSETS TO PROPRIETOR'S FUND RATIO

YEAR CURRENT
ASSETS
(Rs in Thousands)
PROPRIETOR'S
FUNDS
(Rs in Thousands)
RATIOS
%
2008-2009 1992.23 1198.39 1.6
2009-2010 2369.75 1337.73 1.7
2010-2011 2661.27 1231.07 2.1
2011-2012 3124.27 1377.38 2.3
2012-2013 3933.25 1722.85 2.2
Source: Annual Report
INFERENCE:-
From above the table shows that the rate was increased by 2.3 in the year of 2011-2012. The
decreased in the year by 1.6 in the year of 2008-2009.Company using for Current Asset each and
every will be increased. Proprietor funds value also increased all the year.
The rate value is 1.6 in the year of 2008-2009 due to lack of Proprietors funds and high level of
current assets.
In the year of 2009-2010 the ratio value is increased by 1.7 this has to increased current
assets value.
In the year of 2011-2012 the ratio value is increased by 2.3 in this year comparatively
previous year Proprietors funds has to add.
Risk measured tools also indicates that danger level of capital employed in that company.
CHART 3.7CURRENT ASSETS TO PROPRIETOR'S FUND RATIO











0
0.5
1
1.5
2
2.5
CURRENT ASSETS TO PROPRIETOR'S FUND RATIO
CURRENT ASSETS TO
PROPRIETOR'S FUND RATIO
4.8 PROPRIETORS RATIO
Proprietary ratio is a test of financial & credit strength of the business. It relates
shareholders fund to total assets. This ratio determines the long term or ultimate solvency of the
company.
In other words, Proprietary ratio determines as to what extent the owners interest &
expectations are fulfilled from the total investment made in the business operation.
Proprietary ratio compares the proprietor fund with total liabilities. It is usually
expressed in the form of percentage. Total assets also know it as net worth.

Formula:

Shareholders fund
Proprietary ratio = OR
Total Assets


Shareholders fund

Proprietary ratio =
Fixed assets + current liabilities



TABLE 4.8PROPRIETARY RATIO
YEAR
SHAREHOLDERS
FUNDS
TOTAL ASSETS RATIO
2008-2009 1198.39 3686.82 0.32
2009-2010 1337.73 4387.57 0.30
2010-2011 1231.07 4278.11 0.28
2011-2012 1377.38 5142.21 0.26
2012-2013 1722.85 7200.58 0.23
Sources: Annual Report
INFERENCE:-
From above the table shows that Proprietary Ratio 2008-2009 during this period it was
0.32.Later it was decreased year by year. During the period of 2012-2013 it was 0.23. It shows
that shareholders usage of fund year by year was less.
Higher level of ratio is 0.32 in the year of 2008-2009 and later it was decreased all the years.
The reason was assets usage is very less and shareholders funds value is increased. 2010-2011
the rate was decreased by 0.28 due to increase the assets value and decreased the shareholders
funds value.
In the year of 2012-2013 the ratio value is 0.23 8 in this year only increased for both
shareholders funds value and total asset value.


CHART 4.8PROPRIETARY RATIO












0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
PROPRIETARY RATIO
PROPRIETARY RATIO
4.9 CAPITAL GEARING RATIO
Gearing means the process of increasing the equity shareholders return through the use of
debt. Equity shareholders earn more when the rate of the return on total capital is more than the
rate of interest on debts. This is also known as leverage or trading on equity. The Capital-gearing
ratio shows the relationship between two types of capital viz: - equity capital & preference
capital & long term borrowings. It is expressed as a pure ratio.

Formula:
Preference capital+ secured loan
Capital gearing ratio =
Equity capital & reserve & surplus
Capital gearing ratio indicates the proportion of debt & equity in the financing of assets
of a concern.










TABLE 4.9CAPITAL GEARING RATIO

YEAR EQUITY CAPITAL
(Rs In thousands)
FIXED INTEREST
(Rs In thousands)
RATIOS
%
2008-2009 209.26 277.36 0.75
2009-2010 209.26 298.72 0.70
2010-2011 209.26 297.91 0.70
2011-2012 209.26 275.11 0.76
2012-2013 240.10 324.27 0.74
Source: Annual Report
INFERENCE
From above the table shows that capital gearing ratio of 2009-2010 to 2010-2011 in the
year 0.70. The ratio decreased due to amount of fund, in the year 2011-2012 the ratio increased
from 0.70 to 0.76 due to high loans.
In the year of 2008-2009 the rate was 0.75 and 2009-2010 the rate was 0.70 it is decreased
comparatively previous year.
In the year of 2010-2011 the rate was 0.70 and during the year of 2011-2012 the rate was
0.76.
Risk measured tools also indicates that average level of capital gearing in that company.
CHART 4.9CAPITAL GEARING RATIO
0.67
0.68
0.69
0.7
0.71
0.72
0.73
0.74
0.75
0.76
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
CAPITAL GEARING RATIO
CAPITAL GEARING RATIO
4.10INVENTORY OR STOCK TURNOVER RATIO (ITR)
ITR refers to the number of times the inventory is sold and replaced during the
accounting period.

Formula:
Net sales
Stock Turnover Ratio =
Average stock

ITR reflects the efficiency of inventory management. The higher the ratio, the more
efficient is the management of inventories, and vice versa. However, a high inventory turnover
may also result from a low level of inventory, which may lead to frequent stock outs and loss of
sales and customer goodwill. For calculating ITR, the average of inventories at the beginning and
the end of the year is taken. In general, averages may be used when a flow figure (in this case,
cost of goods sold) is related to a stock figure (inventories).

TABLE 4.10INVENTORY OR STOCK TURNOVER RATIO (ITR)

YEAR

NET SALES
(Rs in thousands)
AVERAGE INVENTORY
(Rs in thousands)
RATIOS
%
2008-2009
7660.11 690.59 11.09
2009-2010
7361.81 1300.97 5.65
2010-2011
9184.57 1652.19 5.5
2011-2012
9638.57 1899.73 5.07
2012-2013
9282.77 1888.78 4.91
Source: Annual Report
INFERENCE
In 2008-2009 the Inventory Turnover Ratio was 11.09 and it has decreased to 4.91 during
the period of 2012-2013. This shows a low capacity of company to use of it inventory. So
company should maintain a favorable ratio of inventory to maintain company efficiency.
In the year of 2009-2010 the ratio was 5.65 and during the period of 2010-2011 the ratio
was 5.5 it is increased gradually.
In the year of 2011-2012 the year of 5.07 it is increased by previous year.
Risk measured tools also indicates that average level of Inventory in that company.

CHART 4.10INVENTORIES OR STOCK TURNOVER RATIO (ITR)











0
2
4
6
8
10
12
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
INVENTORY OR STOCK TURNOVER RATIO
INVENTORY OR STOCK
TURNOVER RATIO
3.11 TREND ANALYSIS

In trend analysis, the method of least square is used for this study.
The straight line (trend) equation is y = a+bx

The normal equation are Y = Na+bx
XY = ax + bX
2

For X = 0, we have
a = Y / N
b = XY / X











TABLE 3.11TREND ANALYSIS FOR DIRECT MATERIAL
YEAR DIRECT MATERIAL
(Y)
(X) (X)2 XY TREND VALUE
2008-2009 5369.89 -2 4 -10739.78 5289.51
2009-2010 5118.15 -1 1 -5118.15 5707.45
2010-2011 6666.52 0 0 0 6125.39
2011-2012 6907.43 1 1 6907.43 6543.33
2012-2013 6564.97 2 4 13129.94 6961.27
TOTAL 30626.96 0 10 4179.44
Source: Annual report
LET X=x=2010-2011
The straight line (trend) equation is Y= a+bx
For =x=0, we have
A=Y/ N=30626.96/5
=6125.39
And b=XY / X
2
=4179.44/10
=417.94
Example:-The expected value for 2009-2010 is Y= a+bX
=6125.39+ (417.94*3) = Rs.7379.2
PROJECTED TREND FOR NEXT FIVE YEARS
(Rs in thousands)
YEAR
TREND VALUE
(Rs in thousands)

2013-2014 7379.21
2014-2015 7797.15
2015-2016 8215.09
2016-2017 8633.03
2017-2018 9050.97
Source: Calculated value
INFERENCE:-:
The above table represents the trend value for direct material for five years.
It is found that expected amount of direct material for the year 2013-2014 to 2017-2018
has been in the increased manner.
In the year of 2008-2009 the trend value was 5289.51. Later it was increased all the
years.
Raw material value is not constant every year it has been changed.
The forecasting expatiation five years raw material trend value is also increased each and
every year.
This company run for future very well and profitability one.

CHART 4.11TREND ANALYSES FOR DIRECT MATERIAL

0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TREND VALUE
TREND VALUE
TABLE 4.12TREND ANALYSIS FOR DIRECT LABOUR
(Rs in thousands)
YEAR DIRECT LABOUR(Y) (X) (X)
2
XY TREND
VALUE
2008-2009 477.85 -2 4 -955.7 234.69
2009-2010 311.89 -1 1 -311.89 289.24
2010-2011 263.81 0 0 0 343.81
2011-2012 282.93 1 1 282.93 398.38
2012-2013 382.60 2 4 1530.4 452.95
TOTAL 1719.80 0 10 545.74
Source: Annual report of Amaravathi Sri Venkatesa Paper Mills Pvt Ltd
LET X=x=2010-2011
The straight line (trend) equation is Y=a+bx
For =x=0, we have
A=Y/ N=1719.08/5 =343.81
And b=XY / X
2
=545.74/10 =54.57
Example:-The expected value for 2009-2010 is Y=a+bX
=343.81+ (54.57*3)
= Rs.507.52
PROJECTED TREND FOR NEXT FIVE YEARS
(Rs in thousands)
YEAR TREND VALUE
(Rs in thousands)
2013-2014
507.52
2014-2015
562.09
2015-2016
616.66
2016-2017
671.23
2017-2018
725.8
INFERENCE
The above table represents the trend value for direct labour for five years.
It is found that expected amount of direct material for the year 2013-2014 to 2017-2018
has been in the increased manner.
In the year of 2008-2009 the trend value is 234.69. Later it was increased all the years of
labours trend value.
The forecasting expatiation five years raw material trend value is also increased each and
every year.
This company run for future very well and profitability one.

CHART 4.12TREND ANALYSIS FOR DIRECT LABOUR


0
100
200
300
400
500
600
700
800
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TREND VALUE
TREND VALUE
TABLE 4.13TREND ANALYSIS FOR DIRECT EXPENSES
(Rs in thousands)
YEAR

DIRECT
EXPENSES
(Y)

(X) (X)
2
XY TREND
VALUE
2008-2009 1323.28 -2 4 -2646.56 1264.5
2009-2010 1105.15 -1 1 -1105.15 1312.57
2010-2011 1527.36 0 0 0 1360.64
2011-2012 1462.43 1 1 1462.43 1408.71
2012-2013 1384.99 2 4 2769.98 1456.78
TOTAL 6803.21 0 10 480.7
Source: Annual report of Amaravathi Sri Venkatesa Paper Mills Pvt Ltd
LET X=x=2010-2011
The straight line (trend) equation is Y=a+bx
For =x=0, we have
A=Y/ N=6803.2/5
=1360.64
And b=XY / X
2
=480.7/10 =48.07
Example:-The expected value for 2009-2010 is Y=a+bX
=1360.64+ (48.07*3)=Rs.1504.85
PROJECTED TREND FOR NEXT FIVE YEARS
(Rs in thousands)
YEAR TREND VALUE
(Rs in thousands)
2013-2014 1504.85
2014-2015 1552.92
2015-2016
1600.99
2016-2017
1649.06
2017-2018
1697.13
INFERENCE
The above table represents the trend value for direct expenses for five years.
It is found that expected amount of direct material for the year 2013-2014to 2017-2018
has been in the increased manner.
In the year of 2008-2009 the trend value is 1264.5. Later it was increased all the years of
direct expenses trend value.
The forecasting expatiation five years raw material trend value is also increased each and
every year.
This company run for future very well and profitability one.


CHART 4.13TREND ANALYSIS FOR DIRECT EXPENSES









1400
1450
1500
1550
1600
1650
1700
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TREND VALUE
TREND VALUE
TABLE 4.14TREND ANALYSIS FOR ADMINISTRATION OVERHEAD
YEAR ADMINISTRATION
OVERHEAD (Y)

(Y)
(X) (X)
2
XY TREND
VALUE
2008-2009 111.61 -2 4 -223.22 95.23
2009-2010 88.83 -1 1 -88,83 98.69
2010-2011 80.42 0 0 0 101.15
2011-2012 103.94 1 1 103.94 104.61
2012-2013 121.39 2 4 242.78 108.07
TOTAL 505.78 0 10 34.67
Source: Annual report of Amaravathi Sri Venkatesa Paper Mills Pvt Ltd
LET X=x=2010-2011
The straight line (trend) equation is Y=a+bx
For =x=0, we have
A=Y/ N=505.78/5
=101.15
And b=XY / X
2
=34.67/10
=3.46
Example:-The expected value for 2009-2010 is Y=a+bX
=101.15+ (3.46*3)
= Rs.111.53

PROJECTED TREND FOR NEXT FIVE YEARS
(Rs in thousands)
YEAR TREND VALUE
(Rs in thousands)
2013-2014
111.53
2014-2015
114.99
2015-2016
118.45
2016-2017
121.91
2017-2018
125.37
INFERENCE
The above table represents the trend value for administration overhead for five years.
It is found that expected amount of direct material for the year 2013-2014 to 2017-2018
has been in the increased manner.
In the year of 2008-2009 the trend value is 95.2. Later it was increased all the years of
direct expenses trend value.
The forecasting expatiation five years raw material trend value is also increased each and
every year.
This company run for future very well and profitability one.



CHART 4.14TREND ANALYSIS FOR ADMINISTRATION OVERHEAD





100
105
110
115
120
125
130
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TREND VALUE
TREND VALUE
TABLE 4.15TREND ANALYSIS FOR SELLING AND DISTRIBUTION OVERHEAD
YEAR SELLING AND
DISTRIBUTION
OVERHEAD(Y)
OVERHEAD
(Y)
(X) (X)
2
XY TREND
VALUE
2008-2009 164.95

-2 4 -329.9 164.01
2009-2010 148.72 -1 1 -148.72 169.01
2010-2011 190.99 0 0 0 170.37
2011-2012 183.95 1 1 183.95 173.55
2012-2013 163.24 2 4 326.48 176.73
TOTAL 851.85 0 10 31.18
Source: Annual report of Amaravathi Sri Venkatesa Paper Mills Pvt Ltd
LET X=x=2010-2011
The straight line (trend) equation is Y=a+bx
For =x=0, we have
A=Y/ N=851.85/5
=170.37
And b=XY / X
2
=31.81/1O =3.18
Example:-The expected value for 2009-2010 is Y=a+bX
=170.37+ (3.18*3)= Rs.179.91
PROJECTED TREND FOR NEXT FIVE YEARS
(Rs in thousands)
YEAR TREND VALUE
(Rs in thousands)
2013-2014 179.91
2014-2015 183.09
2015-2016 186.27
2016-2017 189.45
2017-2018 192.63
INFERENCE
The above table represents the trend value for selling and distribution overhead for five
years.
It is found that expected amount of direct material for the year 2013-2014 to 2017-2018
has been in the increased manner.
In the year of 2008-2009 the trend value is 164.01. Later it was increased all the years of
direct expenses trend value.
The forecasting expatiation five years raw material trend value is also increased each and
every year.
This company run for future very well and profitability one.

CHART 4.15TREND ANALYSIS FOR SELLING AND DISTRIBUTION OVERHEAD






172
174
176
178
180
182
184
186
188
190
192
194
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TREND VALUE
TREND VALUE
TABLE 4.16TREND ANALYSIS FOR TOTAL COST
YEAR TOTAL COST
(Y)


(X) (X)
2
XY TREND
VALUE

2008-2009 7697.58 -2 4 -15395.16 561.58
2009-2010 6965.68 -1 1 -6965.68 4375.81
2010-2011 8729.1 0 0 0 8190.04
2011-2012 8940.69 1 1 8940.69 12004.23
2012-2013 8617.19 2 4 17234.38 15818.46
TOTAL 40950.24 0 10 3814.23
Source: Annual report of Amaravathi Sri Venkatesa Paper Mills Pvt Ltd
LET X=x=2010-2011
The straight line (trend) equation is Y=a+bx
For =x=0, we have
A=Y/ N=40950/5
=8190.04
And b=XY / X
2
=3814.23/10
=381.42
Example:-The expected value for 2009-2010 is Y=a+bX
=8190.04+ (3814.23*3) = Rs. 19632.69

PROJECTED TREND FOR NEXT FIVE YEARS
(Rs in thousands)
YEAR TREND VALUE
(Rs in thousands)
2013-2014
19632.69
2014-2015
23446.92
2015-2016
27261.15
2016-2017
31075.38
2017-2018
34889.61
INFERENCE
The above table represents the trend value for Total cost five years.
It is found that expected amount of direct material for the year 2013-2014 to 2017-2018
has been in the increased manner.
In the year of 2008-2009 the trend value is 561.58. Later it was increased all the years of
direct expenses trend value.
The forecasting expatiation five years raw material trend value is also increased each and
every year.
This company run for future very well and profitability one.


CHART 4.16TREND ANALYSIS FOR TOTAL COST












0
5000
10000
15000
20000
25000
30000
35000
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TREND VALUE
TREND VALUE
CHAPTER V
FINDINGS, RECOMMENDATION AND CONCLUSION

5.1 FINDINGS

From the table of Operation Ratio Higher operating risk in the year of 2008-2009 the rate was
23.5. During the year of 2012-2013 the ratio is decreased by 19.0.
Found the table from Expense ratio increased by 9.44 in the year 0f 2004-2005.Decreased by
9.00 in the year 2004-2005.
Referred the Average collection period ratio increased by 10 in the year of 2004-
2005.Decreased by 6.4 in the year of 2006-2007.
It taken the table Debtors turnover ratio increased by 16 in the year of 2006-2007.Decreased by
10.18 in the year of 2004-2005.
It extract from Working capital Turnover ratio is increased by 27.5 in the year of 2006-
2007.Decreased by 6.53 in the year of 2008-2009.
To found Return on Capital Employed ratio increased by 4.3 in the year of 2008-
2009.Decreased by 1.5 in the year of 2004-2005.
From the table is an extracted Current asset to proprietor's fund ratio the rate was increased by
2.3 in the year of 2007-2008. The is decreased in the year by 1.6 in the year of 2004-2005.
From the table referred Inventory Turnover Ratio was increased by 11.09 in the year of 2004-
2005. It is decreased by 5.5 in the year of 2006-2007.

From the table taken Capital Gearing Ratio was increased by 0.76 in the year of 2007-2008. It is
decreased by 0.70 in the year of 2005-2006 to 2007-2008.

From the table found Proprietary Ratio was increased by 0.32 in the year of 2004-2005. And
during the period of 2008-2009 proprietary Ratio decreased by0.23.

The statistical tools of trend analysis has been shown that (Direct Material, Direct Labour,
Administration Overhead, Selling and Distribution Overhead, Direct Expenses, and Total Cost).
All are increased in next five years. (i.e.) 2009-2010 to 2013-2014.

From the tableDirect material Trend analysis in the year of 2012-2013 the trend value is
9050.97. It is increased comparatively previous year.

From the tableDirect referred LabourTrend analysis in the year of 2012-2013 the trend value is
725.8. It is increased comparatively previous year.

From the tableextract Administritation overhead Trend analysis in the year of 2012-2013 the
trend value is 1697.13. It is increased comparatively previous year.

From the tableReferred Selling and Distribution overhead Trend analysis in the year of 2012-
2013 the trend value is 192.63. It is increased comparatively previous year.

From the tablefound Direct expenses Trend analysis in the year of 2012-2013 the trend value is
192.63. It is increased comparatively previous year.

From the tablefound Total cost Trend analysis in the year of 2012-2013 the trend value is
34889.61. It is increased comparatively previous year.








5.2 SUGGESTION

This company must have to increase the inventory level based on that they have to increaseboth
the sales and profitability also.

Company owners try to gain benefit of maintaining control investment is more in the Business.
And also must have to reduce the credit risk level of the company.

Try to increase the Proprietors funds that will helps to reduce the greater risk of payment to the
creditors.
Maintenance of proper records and physical verification of the assets by the management is
necessary.
To avoid risk on inventory the company maintains records of the inventory, and periodic
physical verification is also necessary.
To avoid risk on the labour make long term settlement with labour unions. Maintenance of
continuous cordial industrial relation with the employees.
This company must have to maintain cordial relationship between field officers and clients.
The monitoring of employees behavior periodically is essential

First analysis about the clients behavior. Capacity of clients to repay amount means to pay to
loans and motivated to the clients.
Make the clients to feel our service apart from profit making.

By increasing the bank balance, the company can improve the liquid ratio.

Net working capital should be increased.

4.3 CONCLUSION
From the analysis it is concluded that the Amaravathi Sri Venkatesa paper mills (Pvt) Limited.
Have satisfactory level of risk management ability. Only with limited number of capital it still in
the market.
The sales volume is increasing at a decreasing rate. The business has good strategic control
point.
Also the company should be able to revise their strategy.
The have the good knowledge that the customers are the king of the market. The always analyses
the whole business environment.
The company should control the credit to the customer it will reduce the risk of the company.
The time gap between the client and company is very high. So the company would make it as
less.
Company must reduce operational risk, because it will affects the labourefficiency of the
company.



REFERENCES
BOOKS:
1. Financial Management, S.N Maheswari
2. Principles of Management Accounting, S.N Maheswari
3. Management and Cost Accounting, Charlest. Horn green, AlnoorBhimani,
SrikantM.Datar. George foster
4. Managing Financial information, David davies.
5. Management Accounting, Terry lucey.
6. Kothari C.R. Research Methodology, VishwaPrakashan, New Delhi, 1997.

7. Khan M.Y and Jain P.K Financial Management Tata MsGraw-Hill Publishing
company, New Delhi,1993.

8. Gupta S.P, Statistical Methods, Sultan Chand and Sons publishers, New Delhi, 1996.

WEBSITE.
www.Maniranjan.Com
www.managemetparadise.com
www.financialterms.com



ANNUAL REPORTOF AMARAVATHI SRI VENKATESA PAPER MILLS PVT LTD
MADATHUKULAM