1.

INTRODUCTION
1.1 INTRODUCTION
Financial Management is the specific area of finance dealing with the financial decision
corporations make, and the tools and analysis used to make the decisions. The discipline
as a whole may be divided between long-term and short-term decisions and techniques.
Both share the same goal of enhancing firm value by ensuring that return on capital
exceeds cost of capital, without taking excessive financial risks.
The term financial performance analysis also known as analysis and interpretation of
financial statements , refers to the process of determining financial strength and
weaknesses of the firm by establishing strategic relationship between the items of the
balance sheet , profit and loss account and other operative data. Financial performance
analysis is a process of evaluating the relationship between component parts of a
financial statement to obtain a better understanding of a firms position and performance.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. Financial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so that
forecast may be made of the future earnings, ability to pay interest and debt maturities
(both current and long term) and profitability of a sound divided policy.
Financial performance refers to the act of performing financial activity. In broader sense,
financial performance refers to the degree to which financial objectives being or has been
accomplished. It is the process of measuring the results of a firm's policies and operations
in monetary terms. It is used to measure firm's overall financial health over a given
period of time and can also be used to compare similar firms across the same industry or
to compare industries or sectors in aggregation.
Capital investment decisions comprise the long-term choices about which projects
receive investment, whether to finance that investment with equity or debt, and when or
whether to pay dividends to shareholders. Short-term corporate finance decisions are
called working capital management and deal with balance of current assets and current

liabilities by managing cash, inventories, and short-term borrowings and lending (e.g., the
credit terms extended to customers). Corporate finance is closely related to managerial
finance, which is slightly broader in scope, describing the financial techniques available
to all forms of business enterprise, corporate or not.
1.2 PROBLEM STATEMENT
The financial statement analysis measures the changes in the financial performance of the
company. Companys financial conditions are changing from year to year, which affect
the profitability position of the company.
1.3. OBJECTIVES OF THE STUDY
1. To determine the Profitability and Liquidity position of the firm
2. To analyze the capital structure of the company with the help of Leverage ratio.
3. To know the working capital position of the firm
4. To offer appropriate suggestions for the better performance of the organization.
1.4.

METHODOLOGY

The study carried out on the various data provided by the company and data collected
from the published report. The methodology adopted in this study is ratio analysis, trend
analysis and correlation. The technique of trend analysis of financial statement has been
used to examine the growth trend of A.J Hospital and Research Centre. The ratio analysis
is conducted to know the financial performance, liquidity and solvency position of the
company.
1.5.

SOURCES OF DATA:

Primary Data:
Some specific details with regard to financial statements were collected by interviewing
various finance staffs and collecting information from the Finance manager.
Secondary Data:
1. Most of the calculations are made on the financial statements of the company.
2. Standard texts and referred books to gain information regarding theoretical
aspects.

1.6.

PERIOD OF STUDY

The study was carried out by analyzing the financial statements of 4 years i.e. from 20112014. And the period of study was for 45 days i.e. from 1st July 2015 to 15th August 2015.
1.7 HYPOTHESIS
Hypothesis is a statement which we frame and which needs to be tested further and
whose authenticity is not verified. For the study two hypotheses were framed regarding
working capital position and association between current assets and currents liabilities.
H0= There is no significant association between shareholders funds and total
assets
H1= There is a significant association between shareholders funds and total
assets.
1.7.

LIMITATIONS OF THE STUDY

The study provides an insight into the financial and other aspects of A.J Hospital and
Research Centre. But every study will be bound with certain limitations. The major
limitation of the study is as follows:

Time is an important limitation. The whole study was conducted in a period of 30

days, which is not sufficient to carry out proper interpretation and analysis.
The financial data was available only for 4 years with which one cannot make an

appropriate decision about the life of the business

The study may also be effected from the limitations of ratio analysis

2. THEORYTHICAL FRAMEWORK
2.1
LITERATURE REVIEW
1. An analysis on profitability position of selected steel industries in India, a
research paper by K S Kavitha

The research paper found that, the iron and steel industry in the country has experienced a
sustainable growth since the independence of the country. The study objective was to
analyze the profitability of the selected steel industries. The researcher used ratio analysis
and identified that there is no relationship between solvency and profitability of the
company.
2. A comparative study of financial performance of Tata and SAIL steel by Dr.
VivekSingla, assistant professor DIMT Haryana in 2010.
The study analyzed the financial performance of the two industries and suggested that
efficient management in finance is very important for the success of an enterprise. The
subject matter of financial performance is changing rapidly. In present time greater
importance is gave to financial performance. The analyzing financial performance helps
the manager to identify trends, which are used for the decision making.
3. MabweKumbirai and Robert Webb, A financial Ratio Analysis of Commercial
Banks Performance in 2010.
This paper investigates the performance of commercial banking sector for the period
2005- 2009. Financial ratios are employed to measure the profitability, liquidity and
Credit quality performance of five large commercial banks. The study found that overall
bank performance increased considerably in the first two years of the analysis.
4. The analysis of financial performance on paper industry in Andhra Pradesh,
journal from Finance India
The article says that, the paper industry is growing well in the state. Finance should be
effectively managed and it key for the success of every organization. The financial
statement analysis helps to take important decisions.

5. A research paper of liquidity trend in Indian steel industry: a comparative study

of SAIL and TISCO by S C Bardia in 2006.
4

This article represents a comparative study of liquidity trends of SAIL and TISCO. It
provides a basis of judge whether the liquidity policy pursued by the companies are
satisfactory the statically methods such as index numbers, time series analysis, regression
and chi square test have been employed in the study to examine the liquidity position of
the both industry.
6. A study of the profitability and financial position of IT companies in India by Dr.
Sundaram in 2009
The study suggests that, the financial statement provides information about the financial
position of an enterprise that is useful of a wide range of users in making economic
decisions. Ratio analysis is a widely used tool for financial statement analysis.
7.

Indian journal of finance, impact of disinvestment on financial performance of

public sector undertakings. Article by Prof Sultan Singh in 2009.

The article summarized that, it is considered as a safe margin of short term solvency due
to the fact that if the current assert are reduced to half, even then the current liabilities can
be easily paid.
8.

Research report on financial statement analysis of reliance industries by

Babubansari Das, Professor National Institute of Technology and Management
in 2009

The study is conducted for the financial statement analysis of Reliance industry in 2009.
The study suggested that the company should maintain low liquidity to achieve high
profitability. The liquidity means ability of a company to meet its current obligations and
when these become due. The researcher advised that the company should improve the
liquidity position and manage the profitability.
9.

Comparative financial performance analysis of Indian farmers Cooperative

limited by DeepaliKapoor and ShilpiSinghal.

The study says that, in the globalized economy competition is found all over the world.
To remain competitive and grow profitability, it is essential that every business entity
achieve its financial goal. Financial analysis is mainly done to compare growth,
profitability and financial soundness of the respective company by diagnosing the
information contained in the financial statement.
10. Analysis and use of financial statement, delta publishing company in 2003
Analysis of financial statement focus on data provided in external reports and plus
supplementary information provided by the management. The analysis should identify
major trends and relationships. Financial statement are merely summarizes of detailed
financial information. The uses of financial statement analysis are investors, creditors
and government agencies.
11. Liquidity management and tradeoff between liquidity, risk and profitability an
empirical study, P. Sasikala, Indian journal of finance in 2012.
The study suggested, current ratio indicates the extend soundness of the current financial
position of the company and the dirge of safety and security for the creditors. It also says
that the excessive liquidity may lead to lower the profitability. So negative association
between liquidity and profitability can be controlled through skillful liquidity
management.

12. Ratio analysis of Wipro by RaghviSreenivasan in 2011

The study found that, ratio analysis is one of the techniques of financial analysis to
evaluate the financial condition and performance of a business concern. The ratio means
comparison of one figure to another figure. The ratio analysis helps analyst to work out
the profitability and solvency. The ratio analysis also helps the manger to know the
operational efficiency and they can forecast the future of the company.

13 Analysis and interpretation of financial statement of Dell and HP computers, in

2010 a research paper by Sudip Das.
The study interpreted that, the financial statement are formal records of a business which
provides an overview of business condition in both short and long term and gives
accurate picture of companys condition and operating result in a condensed form.

2.2

TOOLS FOR ANALYSIS

Ratio analysis, trend analysis and correlation were used to study the liquidity,
profitability, general trends in the growth of the company and working capital position of
the firm.
2.2.1

RATIO ANALYSIS

The term Ratio refers to the numerical and quantitative relationship between two
items or variables. This relationship can be exposed as

Percentages
Fractions
Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial
statements. So that the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined. Ratio reflects a
quantitative relationship helps to form a quantitative judgment.

2.2.1.1

STEPS IN RATIO ANALYSIS

The first task of the financial analysis is to select the information relevant to the
decision under consideration from the statements and calculates appropriate
ratios.

To compare the calculated ratios with the ratios of the same firm relating to the
pas6t or with the industry ratios. It facilitates in assessing success or failure of the

firm.
Third step is to interpretation, drawing of inferences and report writing
conclusions are drawn after comparison in the shape of report or recommended

courses of action.

2.2.1.2
BASIS OR STANDARDS OF COMPARISON
Ratios are relative figures reflecting the relation between variables. They enable
analyst to draw conclusions regarding financial operations. They use of ratios as a tool of
financial analysis involves the comparison with related facts. This is the basis of ratio
analysis. The basis of ratio analysis is of four types.

Past ratios, calculated from past financial statements of the firm.

Competitors ratio, of the some most progressive and successful competitor firm

at the same point of time.

Industry ratio, the industry ratios to which the firm belongs to
Projected ratios, ratios of the future developed from the projected orpro forma
financial statements

2.2.1.3

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It

is the process of establishing and interpreting various ratios for helping in making certain
decisions. It is only a means of understanding of financial strengths and weaknesses of a
firm. There are a number of ratios which can be calculated from the information given in
the financial statements, but the analyst has to select the appropriate data and calculate
only a few appropriate ratios. The following are the four steps involved in the ratio
analysis.
1. Selection of relevant data from the financial statements depending upon the
objective of the analysis.
2. Calculation of appropriate ratios from the above data.
3. Comparison of the calculated ratios with the ratios of the same firm in the past, or
the ratios developed from projected financial statements or the ratios of some

other firms or the comparison with ratios of the industry to which the firm
belongs.
4.
2.2.1.4

INTERPRETATION OF THE RATIOS

The interpretation of ratios is an important factor. The inherent limitations of ratio

analysis should be kept in mind while interpreting them. The impact of factors such as
price level changes, change in accounting policies, window dressing etc., should also be
kept in mind when attempting to interpret ratios. The interpretation of ratios can be made
in the following ways.
Single absolute ratio
Group of ratios
Historical comparison
Projected ratios
Inter-firm comparison

2.2.1.5
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS
The calculation of ratios may not be a difficult task but their use is not easy.
Following guidelines or factors may be kept in mind while interpreting various ratios

Accuracy of financial statements

Objective or purpose of analysis
Selection of ratios
Use of standards
Caliber of the analysis

2.2.1.6
IMPORTANCE OF RATIO ANALYSIS
Aid to measure general efficiency
Aid to measure financial solvency
Aid in forecasting and planning
Facilitate decision making
Aid in corrective action
Aid in intra-firm comparison
Act as a good communication
Evaluation of efficiency
Effective tool
2.2.1.7
LIMITATIONS OF RATIO ANALYSIS
Differences in definitions
9

Limitations of accounting records

Lack of proper standards
No allowances for price level changes
Changes in accounting procedures
Quantitative factors are ignored
Limited use of single ratio
Background is over looked
Limited use
Personal bias

2.2.1.8

CLASSIFICATIONS OF RATIOS

The use of ratio analysis is not confined to financial manager only. There are different
parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Various accounting ratios can be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios
1. Traditional Classification
It includes the following.

Balance sheet (or) position statement ratio: They deal with the relationship
between two balance sheet items, e.g. the ratio of current assets to current

liabilities etc., both the items must, however, pertain to the same balance sheet.
Profit & loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit & loss account items, e.g. the ratio of gross profit

to sales etc.,
Composite (or) inter statement ratios: These ratios exhibit the relation between a
profit & loss account or income statement item and a balance sheet items, e.g.

stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification

10

These include liquidity ratios, long term solvency and leverage ratios, activity ratios
and profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and
secondary ratios. The primary ratio is one, which is of the prime importance to a concern.
The other ratios that support the primary ratio are called secondary ratios.
2.2.1.9

IN THE VIEW OF FUNCTIONAL CLASSIFICATION, THE

RATIOS ARE
Liquidity Ratio
Leverage Ratio
Activity Ratio
Profitability Ratio
Market Test Ratio

2.2.1.9.1

LIQUIDITY RATIOS

The term liquidity refers to the firms ability to meet its current liabilities when they
become due. It measures the capacity of a firm to meet its short term liabilities out of the short
term resources. The ratio which reflects the short term solvency of a business unit is current
ratio and quick ratio.
CURRENT RATIO
Current Ratio shows the relationship between total current Assets and total current Liabilities.
This Ratio is an indication of the Firms Commitment to meet in short term Liabilities.
It is expressed as follows:
Current Ratio =

Current Assets
Current Liabilities

Current Asset means cash or the assets which can intend to be converted into cash during the
ordinary course of business usually within a period of one year. Current Liabilities means
11

Liabilities payable with a year time either out of existing current Assets or by creation of new
current Liabilities.
An ideal current ratio is 2. The ratio of 2 is considered as a safe margin of solvency. A very
high current ratio is also not desirable since it means less efficient use of funds. This is
because a high current ratio means excessive dependence on long term source of rising funds.
Long term liabilities are costlier than current liabilities and therefore, this will result in
considerably lowering down the probability of the concern.
LIQUID RATIO/QUICK RATIO
Liquid ratio or quick ratio is the ratio of liquid assets to liquid liabilities. Liquid ratio is
considered to be superior to current ratio in testing the liquidity position of a firm. Liquid
assets mean current assets minus stock and prepaid expenses. Liquid liabilities mean current
liabilities minus bank overdraft. It is the measure of instant debt paying ability of the business
enterprise. It is also called acid test ratio.
The liquid ratio may be expressed as:
Liquid Ratio=

Liquid Assets
Liquid Liabilities

Liquid ratio is considered to be the superior to current ratio in testing the liquidity position of
a firm. It is an improvement of current ratio because in the calculation of quick ratio, the
weakness of current ratio is overcome. When used in conjunction with current ratio, the liquid
ratio gives a better picture of the firms liquidity. Liquid ratio is great importance to banks and
financial institutions.
CASH RATIO
The cash ratio is the most stringent and conservative of the liquidity ratios. Most firms do not
use the cash ratio as a measure of liquidity because it is so conservative. If a company wants

12

to use the very most stringent measure of liquidity for its financial ratio analysis, then the cash
ratio is appropriate.
Cash Position Ratio=

Cash
Current Liabilities

We can see that, unlike the current ratio, the cash ratio does not include inventory or accounts
receivable in the numerator of the equation. When using the cash ratio to measure liquidity,
the firm does not want to consider these two accounts off the balance sheet because you have
to sell inventory and customers have to pay accounts receivables in order to give the firm
enough liquidity to pay short-term debts. Even using the quick ratio, the firm still has to
liquidate accounts receivable to pay short-term debt. Leaving out these two accounts from the
cash ratio formula is what makes it the most conservative measure of firm liquidity.
Companies cannot reasonably assume that the cash ratio can be 1:1. That is a ratio that they
hope for, certainly, for the current ratio and probably for the quick ratio. For the cash ratio, a
ratio of 1:1 would likely mean that the company is holding too much cash and, thus, losing
valuable interest income on its money. It is to be expected that the cash ratio will be less than
1:1. What the cash ratio should be is dependent on the company, the business, the industry,
and the economy at large
2.2.1.9.2

LEVERAGE RATIOS (SOLVENCY RATIOS)

These are ratios which measure the relative interest of the owners and the creditors as
against the owners. They indicate the long term financial position of a concern. These ratios
are useful to the long term creditors, owners and the management.
DEBT EQUITY RATIO
Debt to equity ratio is the most important ratio to test the solvency of the firm. This ratio
indicates the relative proportion of debt and equity in financing the assets of a firm. In short, it
expresses the relationship between debt (external equity) and equity (internal equity). So this

13

ratio is also known as External-Internal Equity Ratio. Debt Equity ratio is sometimes referred
to as Security ratio.
Debt-equity ratio is of particular importance to long term creditors. It indicates the degree
of protection the creditors have. A high ratio indicates safety to the creditors and a low
ratio shows greater risk to the creditors. This ratio shows the relative Contributions of
creditors and owners of business in its financing. It indicates the extent to which the
company depends upon outsiders for its existence .In short, debt-equity ratio is very
useful for analyzing long term financial condition of a company.
This ratio expresses the relationship between long term debt and equity. It is computed as
follows:
LongTerm Debt Equity Raio=

LongTerm Debt
Equity

The standard or ideal debt-equity ratio is l: 1.This means the funds provided by outsiders and
shareholders must be equal. Some experts suggest 2: I as standard ratio. However, lower the
ratio better it is. A debt -equity ratio of 2: l is the norm accepted by private sector enterprises.
For public sector enterprises a debt-equity ratio of l: 1 is expected to be maintained.
SOLVENCY / TOTAL ASSET TO TOTAL DEBT RATIO
This ratio expresses the relationship between total assets and total liabilities of a business. It
measures the solvency of the business. That is why this ratio is called solvency ratio. This
ratio is generally expressed as a proportion. The following formula is used for computing
solvency ratio:
Solvency ratio=

Total Assets
Total Debt

The main objective of solvency ratio is to test or reassure the solvency of a firm. The term
solvencymeans the ability of firm to pay the outside liabilities. (Both long term and short
term) out of total assets.Ifthe total assets are more than outside liabilities, the firm is treated as

14

solvent. This means there is no difficulty in paying off its outside liabilities out of the assets
because the assets are more than outside liabilities for the solvency ratio, standard is not fixed.
Generally, higher the solvency ratio, the stronger is its financial position and vice versa.
PROPRIETARY RATIO
It is the ratio which expresses the relationship between net worth and total asset. This ratio
shows how much funds have been contributed by the shareholders in the total assets of the
firm. In other words, it shows the extent to which the shareholders own the business.
Proprietary ratio is also known as equity ratio or net worth ratio.
It is expressed as:
Proprietary Ratio=

Shareholders ' Fund

x 100
Total Assets

This ratio shows the general financial health of the firm. It is of great importance to creditors.
It helps to find out the proportion of shareholders fund in the total assets of the business. A
high ratio indicates safety to the creditors and a low ratio shows greater risk to the creditors. A
high ratio indicates that the firm is less dependent on creditors for its working capital.
Therefore, a higher proprietary ratio indicates a sound financial position.

FIXED ASSETS TO NET WORTH RATIO

This ratio establishes the relationship between fixed assets and proprietors fund. It is
calculated as follows:
Assets Net Worthratio=

Assets
Proprieto r ' s Fund

15

This ratio is calculated for the purpose of knowing the extent of proprietors in funds invested
fixed assets. There is no 'rule of thumb to interpret this ratio. But 0.60 to 0.65 (60 to 65%) is
considered to be satisfactory in case of industrial undertakings.
This ratio indicates the extent to which shareholders funds are invested in the fixed assets.
Generally, the fixed assets should be purchased out of shareholders funds. If the ratio is less
than 1 (or 100%) it will mean that all fixed assets are purchased out of proprietors fund and a
part of proprietors fund is invested in working capital. If the ratio is more than 1, it will mean
that outsiders funds have been used to acquire a part of fixed assets.

CAPITAL GEARING RATIO

This is one of the important ratios used to, analyses the capital structure of a company. The
term capital gearing or leverage refers to the proportion between fixed income bearing funds
and equity shareholders' funds. Fixed income bearing funds include debentures, other long
term loans and preference share capital. Equity shareholdersfunds include equity capital and
all reserves and surpluses that belong to equity shareholders. Preference shares carry a fixed
rate of dividend, while debentures and other long term loans carry affixed rate of interest.
Capital Gearing Ratio=

Income Bearing Funds

'
Equity Shareholders Funds

Capital gearingrevealsthe company's capital structure. This ratio is important not only to the
company but also to investors. The capital gearing ratio may affect the company's dividend
policy, building up of reserves etc... This ratio shows the effects of the use of fixed interest/
dividend bearing funds on the profits available to equity shareholders. Company would be
highly geared if the proportion of preference capital and debentures is high (i.e. the equity
capital is less) and a company is said to be low geared if the proportion of preference capital
and debenture is low (i.e., the equity capital is high).
INTEREST COVERAGE RATIO

16

On borrowed funds, the borrowing firm is required to pay interest regularly. The lenders or
lending institutions are interested in finding out whether the firm would earn sufficient profits
to pay interest periodically. Interest coverage ratio is computed for this purpose. This ratio
measures the capacity of the firm to pay interest on loans and debentures regularly. It
establishes the relationship between operating profit and interest charges. It is calculated as
follows:
Interest Coverage Ratio=

Profit Before Interest Tax

Interest

The purpose of calculating this ratio is to measure the capacity of the firm to pay the interest
on loan and debentures regularly. This ratio is very important for the long term creditors. It
shows how many times the interest charges are covered by the earnings. It indicates the ability
of the company to make payment of interest to creditors. It reflects the financial strength of a
company.
The standard for interest coverage ratio is 6 to 7 times. The higher the ratio, the stronger is the
ability of a company to pay interest. But too high a ratio may imply unused debt capacity. A
low ratio may indicate excessive use of debt and the inability to offer assured payment of
interest to creditors. This may affect the solvency of the firm.
2.2.1.9.3

ACTIVITY RATIOS

Activity ratio shows how efficiently a firm used its available resources or assets. These ratios
are also known as efficiency ratios or performance ratio or asset utilization ratios. These ratios
indicate the speed with which the resources are turnover or converted into sales. That is why
these ratios are called turnover ratios. Higher turnover ratios mean better use of resources.
FIXED ASSETS TURNOVER RATIO
Fixed Asset Turnover Ratio shows that relationship between Sales and Fixed Assets. This
ratio measures the efficiency with which a firm is utilizing its fixed assets on generalizing
sales. Generally a standard or ideal ratio is 5 times. For this ratio the term fixed assets means

17

the depreciated value of fixed assets. I.e. the amount of depreciation is to be deducted from
the value of fixed assets.
The formula is:
Asset TurnoverRatio=

Net Sales
Assets

The ratio measures the efficiency in the utilization of fixed assets. A high ratio reflects
overtrading. On the other hand, a lower ratio indicates idle capacity and excessive investments
in fixed assets.

INVENTORY TURNOVER RATIO

Inventory or stock turnover ratio shows the relationship between cost of goods sold and
average inventory or stock. It is also called merchandise turnover ratio. It is obtained by
dividing cost of goods sold by average stock. It indicates the number of times the stock is
turned over or converted into sales. Stock turnover ratio is computed by the following
formula:
Inventory TurnoverRatio=

Cost of Goods Sold

Average Stock

Inventory turnover ratio is a measure of liquidity of inventory. This ratio measures how
quickly

inventory

is

sold.

It

can

be

used

to

test

the

efficiency

in

inventorymanagement.Generallyaratio of 8 times is considered satisfactory. However, for a

meaningful analysis, the ratio should be compared with similar ratio in the previous year or
with the ratios of other similar firms. A high turnover ratio (or shorter inventory period)
indicates that inventory is sold fast. It is an indication of good inventory management. On the
other hand, a low turnover ratio (or longer inventory period) reflects over investment in
inventories, accumulation of huge stock dull business etc.

18

WORKING CAPITAL TURNOVER RATIO

Current assets will change with change in sales. This means working capital is related with
sales. The relation between sales and working capital is called working capital turnover ratio.
This ratio shows how many times the working capital is turned over (i.e., rotated) to produce
sales. Working capital turnover ratio is computed by the following formula:
Working Capital TurnoverRatio=

Net Sales
Working Capital

Working capital turnover ratio indicates whether working capital is effectively utilized in
making sales. It measures the efficiency in working capital management. The standard or
ideal working capital turnover ratio is 7 to 8 times.
Generally higher the ratio the better is the utilization of working capital. This means a lower
investment in working capital has generated more volume of sales. But a very high ratio
indicates overtrading. This means there is inadequacy of working capital to support the
increasing volume of sales. A low ratio indicates under trading i.e., working capital is not
effectively utilized in generating sales.
DEBTORS TURNOVER RATIO
Debtors turnover ratio explains the relationship between cost of goods sold and average
debtors including bills receivable. This ratio shows how quickly debtors are realized or
converted into cash. It indicates how efficiently the firm collects cash from debtors. Debtors
turnover ratio is also known asreceivablesturnoverratio. Forcalculatingdebtors turnover ratio
the following formula is used:
Debtors TurnoverRatio=

Cost of Goods Sold

Average Debtors

Debtors turnover ratio shows how quickly debtors are converted into cash. It indicates the
liquidity or quality of debtors. This ratio helps to evaluate the credit collection or credit policy

19

of a firm. In short, the debtors turnover ratio helps to measure the efficiency in management
of debtors
For debtors turnover ratio, standard is not fixed. It is very difficult to establish a standard
debtors turnover ratio. This is because it depends upon a number of factors such as the
seasonal nature of the business, nature of industry credit policy, of the firm etc. Generally, a
turnover ratio of 7 may be taken as satisfactory.Ahigher debtors turnover ratio shows the
efficiency in collection from debtors i.e., debtors are collected more promptly. On the other
hand, a lower turnover ratio indicates inefficiency of management in collecting debtors i.e.,
payments by debtors are delayed.

DEBT COLLECTION PERIOD / AVERAGE COLLECTION PERIOD

This ratio is related with and dependent upon debtors turnover ratio. Average collection
period means the number of days or months for which debtors and B/R remainoutstanding. In
short, it refers to debtors turnover ratio expressed in days or months. It is computed by using
following formulae:
Debt Collection Period=

365
Debtors Turnover Ratio

Generally, collection period of45 days may be taken as satisfactory.Ashorter collection period
shows the efficiency in collection from debtors i.e., debtors are collected more promptly. On
the other hand, a longer collection period indicates inefficiency of management in collecting
debtors i.e., payments by debtors are delayed.

20

CREDITORS TURNOVER RATIO

Creditors turnover ratio shows the relationship between net credit purchase and average
creditors including bills payable. This ratio indicates the number of times the creditors are
paid. Creditors turnover ratio is also called payables turnover ratio. It is computed by the
following formula.
CreditorsTurnover Ratio=

Cost of Goods Sold

Average Creditors

The creditors turnover ratio indicates the number of times the creditors are paid in a year.
This ratio helps to know whether the firm is enjoying actually the credit period promised by
creditors or suppliers. If the firm enjoys a higher turnover ratio, it means early payment to
creditors and the firm is not taking the full advantage of credit allowed by creditors. If the
turnover ratio is lower, it means payments to creditors are delayed. Thus, the creditors
turnover ratio is useful both to the firm and the creditors.

DEBT PAYMENT PERIOD / AVERAGE PAYMENT PERIOD

This ratio is related with and dependent upon creditors turnover ratio. Average payment
period means the credit period enjoyed by the firm in paying creditors. In short, it means
creditors turnover ratio expressed in days or months. It computed by following formulae:
Debt Payment Period=

365
Creditors Turnover Ratio

If the firm enjoys a lower credit period, it means early payment to creditors and the firm is not
taking the full advantage of credit allowed by creditors. If longer credit period means
payments to creditors are delayed.

21

2.2.1.9.4

PROFITABILITY RATIOS

The term profitabilityrefers to the ability of a firm to earn maximum profit from best
utilizationof its resources. The profitability ofa firm can be easily measured by its profitability
ratios. Profitability ratios measure the ability of the firm to earn an adequate return on sales.
Total assets and invested capital. There are two types of profitability ratios. First, profitability
ratios based on sales and second, profitability ratios based on investment.
Profitability Ratios based on Salesare general profitability ratios. These are
calculated on the basis of sales. Important general portability ratios are gross profit ratio, net
profit ratio, operating ratio, expenses ratios etc.Profitability Ratios based on Investmentis
overall profitability ratios. These ratios are computed on the basis of investment in business.
Important overall profitability ratios are return on investment return on shareholders, fund,
return on equity capital, return on total asset etc.
GROSS PROFIT RATIO
This is the ratio of gross profit to sales expressed as a percentage. It is also known as gross
margin. It is calculated as follows:
Gross Profit Ratio=

Gross Profit
X 100
Net Sales

Gross profit ratio is one ofthemostwidely used ratios. This is more useful in wholesale and
retail trading concerns. It indicates the efficiency ofproduction or trading operations. In
otherwords, this ratio measures the margin of profitavailable on sales. It is useful in fixing the
price oftheproducts.The ideal ratio is 20% to 25%.

RETURN ON INVESTMENT (ROI)

When a firm invests money in a business, it naturally expects adequate return on its
investment. Therefore, the firm wants to know how much profit is earning on its investment.

22

It is for knowing this, ROI is computed. ROI measures the overall profitability. It establishes
the relationship between profit or return and investment. It is also called accounting
rateofreturn.It is computed as follows:
ROI=

Profit Before Interest Tax

X 100
Net Capital Employed

The objective of computing ROI is to know how much profit is earning on capital employed'
In other words, the purpose is to know how efficiently the capital employed-in business is
utilized. It is used as a basis for various managerial decisions like expansion and
diversification of activities. It is very important in capital budgeting. It shows how efficiently
the resources invested in in the business are being used. It is useful in evaluating and
controlling decisions. The higher the ROI grater is the overall profitability and the efficient
use of capital employed.
RETURN ON SHAREHOLDERS FUND
It measures the profitability from the shareholders point of view. It is calculated as follows:
Return On Shareholders Fund=

Net Profit After Interest Tax

X 100
Shareholders Fund

This ratio indicates how effectively the shareholders' funds have been utilized by the
company. It is an index to know whether the owners are getting a satisfactory rate of return on
their investment. A higher ratio indicates better utilization of owners funds and higher
productivity.

2.2.1.9.5

MARKET TEST RATIOS

Market test ratios are used for evaluating the shares and stocks which are traded in the market.
The value ofshares in the stock exchange depends upon a number of factors like book value of
share, this ratio is related with and dependent upon creditors turnover ratio. Average payment

23

period means the credit period enjoyed by the firm in paying creditors. In short, it means
creditors turnover ratio expressed in days or months. It computed by following formulae:
Debt Payment Period=

365
Creditors Turnover Ratio

If the firm enjoys a lower credit period, it means early payment to creditors and the firm is not
taking the full advantage of credit allowed by creditors. If longer credit period means
payments to creditors are delayed.
2.2.1.9.6

PROFITABILITY RATIOS

The term profitabilityrefers to the ability of a firm to earn maximum profit from best
utilizationof its resources. The profitability ofa firm can be easily measured by its profitability
ratios. Profitability ratios measure the ability of the firm to earn an adequate return on sales.
Total assets and invested capital. There are two types of profitability ratios. First, profitability
ratios based on sales and second, profitability ratios based on investment.
Profitability Ratios based on Salesare general profitability ratios. These are calculated on
the basis of sales. Important general portability ratios are gross profit ratio, net profit ratio,
operating ratio, expenses ratios etc.Profitability Ratios based on Investmentis overall
profitability ratios. These ratios are computed on the basis of investment in business.
Important overall profitability ratios are return on investment return on shareholders, fund,
return on equity capital, return on total asset etc.
GROSS PROFIT RATIO
This is the ratio of gross profit to sales expressed as a percentage. It is also known as gross
margin. It is calculated as follows:
Gross Profit Ratio=

Gross Profit
X 100
Net Sales

24

Gross profit ratio is one of the mostwidely used ratios. This is more useful in wholesale and
retail trading concerns. It indicates the efficiency ofproduction or trading operations. In
otherwordfuture profitability ofthecompany and return on equity shares etc. Important market
test ratios include Earnings per share, Dividend per share, Dividend payout ratio, Price
earnings ratio etc.

EARNINGS PER SHARE (EPS)

This ratio indicates the profits available to equity shareholders per share basis. It is calculated
by dividing the earnings (profits) available to equity shareholders by the number of equity
shares issued.
Net Profit available

EPS= equity shareholders

Number of equity shares
EPS measures the profitability of the company from the equity shareholders' point of view. It
helps to determine the market price of equity shares; If EPS is higher, market value of equity
share will be higher in the stock exchange. This ratio should be compared with that of similar
companies and with that of industry average.
2.2.2

TREND ANALYSIS

Trend analysis is the process of comparing business data over time to identify any consistent
results or trends. After that the business can develop a strategy to respond to these trends in
line with the business goals. Trend analysis can be defined as index numbers of the
movements of the various financial items in the financial statements for a number of periods.
Trend analysis helps understand how a business has performed and predict where current
business operations and practices will take the business.
Trend analysis is helps to improve business by:

25

Identifying areas where the business is performing well so the business can duplicate

success

Identifying areas where the business is underperforming

Providing guidelines take effective decision.

2.2.3

CORRELATION

In statistics, dependence is any statistical relationship between two random variables or two
sets of data. Correlation refers to any of a broad class of statistical relationships involving
dependence. Correlations are useful because they can indicate a predictive relationship that
can be exploited in practice. Formally, dependence refers to any situation in which random
variables do not satisfy a mathematical condition of probabilistic independence. In loose
usage, correlation can refer to any departure of two or more random variables from
independence, but technically it refers to any of several more specialized types of relationship
between mean values. There are several correlation coefficients, often denoted or r,
measuring the degree of correlation. The most common of these is the Pearson correlation
coefficient, which is sensitive only to a linear relationship between two variables (which may
exist even if one is a nonlinear function of the other).

3. INDUSTRY PROFILE
3.1.

THE GLOBAL HOSPITAL INDUSTRY

Globally, healthcare industry is on a high-growth trajectory, with strong emphasis on the

Asian and Middle Eastern markets Economic growth, corresponding increase in standard

26

of living, and aging population wi1l continue to create a greater demand for better
healthcare facilities globally Majority of healthcare facilities of late, are reducing bed
capacity to minimize cost, and to promote advanced, short-stay surgical methods. Major
emphasis on the US, the UK, Australia, European countries and Japan has been discussed
Healthcare delivery is becoming corporatized with the emergence of conglomerates
changing the rules of the game. Rising costs, expanding market demand, and increasing
customer satisfaction characterize healthcare in this decade and help redefine the roles of
patients, providers and payers Basically' healthcare organizations face a grooving
imbalance of supply and demand. On the demand side is a large population of aging
patients in deteriorating health who demand more services, pharmaceuticals and medical
breakthroughs. The supply side, however, is hampered by a shrinking pool of investment
capital, a shortage of willing caregivers, and aging physical plants straining under the
current volume of patients. Private hospitals are not restricting themselves to their
territorial borders alone Hospitals are also aggressively launching overseas marketing
initiatives, thereby creating a favorable business policy environment. In the private
sector, there is an increase in privatization of public sector units and networks in
healthcare inclusive of strategic link ups of reputable healthcare management companies
with foreign companies, foreign hospitals, medical centers and medical alliances between
business groups and medical institutions.
Geographical Share Global Healthcare Market: The major share of global healthcare
pie is occupied by USA, which is valued at US$4.98 trillion of the global healthcare
market, then followed by Europe, valued at US$2.87 trillion, Asia valued at US$1.53
trillion(16%) and Middle east/ Africa at US$0.19 (.2%) (Source: Cygnus research)
US: The healthcare reform is emerging as a major platform for the health sciences
industry in the US, which includes health providers, health plans, and life sciences
companies because these sectors are tightly linked members of the healthcare value
chain. The health sciences industry landscape is expected to continue shifting and
converging as a result of mergers and acquisitions, cross-sector alliances, Public-Private

27

Partnerships (PPP) and global initiatives. In addition, advancements in information

technology and increased information exchanges are enabling improvements across the
value chain.
UK: The UK mainly funds healthcare through national taxation and delivers services
through public providers. Coverage is available to 100% of the population. All legal
residents of the UK, European Economic Area and citizens of other countries with whom
the UK has reciprocal agreements, are covered under the UK National Health Service
(NHS). http:iliiphealthcare.wikispaces.com/
France: The French government provides a number of diverse and comprehensive
healthcare rights. For more than 96% of the population, medical care is either entirely
free or is reimbursed 100%. The French also have the right to choose among healthcare
providers, regardless of their income level. The health system consists of public and
private health services and medical insurance providers.
Germany: According to World Health Organization (WHO), Germany has an average of
358.40 physicians per 100,000 inhabitants (the US has 279and Canada has 229.1). For
"every 1,000 people, Germany has 2.3 practicing specialists compared with only 1.5 in
the UK. Medical facilities are equipped with the latest technology and the statutory health
insurance scheme provides nearly full cover for most medical treatments and medicines.
All citizens in Germany have access to medical facilities, irrespective of income or social
status.
Australia: The country offers both public and private health insurance, achieving
Universal coverage under a bifurcated healthcare system. Public insurance covers
approximately 75% of the population and private insurance covers the remaining 25%.
Healthcare expenditure are expect to rise from AU$103.6 billion in 2007-08 to
AU$120.83 billion in 2009-10, a CAGR followed by Europe, valued at US$2.87 trillion,
Asia valued at US$1.53 trillion(16%) and Middle east/ Africa at US$0.19 (.2%) (Source:
Cygnus research)

28

US: The healthcare reform is emerging as a major platform for the health sciences
industry in the US, which includes health providers, health plans, and life sciences
companies because these sectors are tightly linked members of the healthcare value
chain. The health sciences industry landscape is expected to continue shifting and
converging as a result of mergers and acquisitions, cross-sector alliances, Public-Private
Partnerships (PPP) and global initiatives. In addition, advancements in information
technology and increased information exchanges are enabling improvements across the
value chain.
UK: The UK mainly funds healthcare through national taxation and delivers services
through public providers. Coverage is available to 100% of the population. All legal
residents of the UK, European Economic Area and citizens of other countries with whom
the UK has reciprocal agreements, are covered under the UK National Health Service
(NHS). http:iliiphealthcare.wikispaces.com/
France: The French government provides a number of diverse and comprehensive
healthcare rights. For more than 96% of the population, medical care is either entirely
free or is reimbursed 100%. The French also have the right to choose among healthcare
providers, regardless of their income level. The health system consists of public and
private health services and medical insurance providers.
Germany: According to World Health Organization (WHO), Germany has an average of
358.40 physicians per 100,000 inhabitants (the US has 279and Canada has 229.1). For
"every 1,000 people, Germany has 2.3 practicing specialists compared with only 1.5 in
the UK. Medical facilities are equipped with the latest technology and the statutory health
insurance scheme provides nearly full cover for most medical treatments and medicines.
All citizens in Germany have access to medical facilities, irrespective of income or social
status.
Of 8%. In 2007-08, Australia spent 8.9% of GDP on health care, or in absolute term it
spent AU$4874 per capita.

29

Japan: Japan's universal National Health Insurance Plan, which was established in 1961,
provides all citizens with access to medical services, In contrast to other advanced
industrialized countries; a freedom of choice system of treatment has been established,
enabling individuals to choose their own medical service or practitioner, resulting in a
highly equitable healthcare system. Japan's healthcare industry has long been protected
by a range of regulatory and legal measures that have. Placed restrictions on private
sector participation. However, a series of deregulation measures have opened up the
management of medical institutions to the private sector, and the government is
beginning to approve the use of temporary workers in some sectors of the medical
services industry.
3.2.

INDIAN HOSPITAL INDUSTRY.

The health care eco system in India is at an infection point. While the outlook for the
healthcare industry is optimistic, there is a need to move towards an integrated healthcare
delivery system, which leverages technology and has the patient at its center' India being
a country with growing population, country's per capita healthcare expenditure has
increased at a CAGR of 10.3% from $43.1 in 2008 to $57.9 in 2011 and going forward
this figure is expected to rise to $88.7 by 2015. The Indian healthcare industry is all set to
grow to over USD 280 billion by 2020, which is a growth of over ten times from 2005.
This growth has been driven by several factors, including demographics, increase in
awareness levels and availability of medical care in India.
The factor behind the growth is raising incomes, easier access to high-quality healthcare
Facilities and greater awareness of personal health and hygiene. The country's healthcare
system is developing rapidly and it continues to expand its coverage, services and
spending in both the public as well as private sectors, it said. The private sector has
emerged as a vibrant force in India's healthcare industry' lending it both national and
international repute. Private Sector's share in healthcare delivery is expected to increase
from 66% in 2005 to 81% by 2015. Private sector's share in hospitals and hospital beds is
estimated at74% and 40%, respectively. There is substantial demand for high-quality and

30

specialty healthcare services in tier-II and tier-III cities. To encourage the private sector to
establish hospitals in these cities, government has relaxed the taxes on these hospitals for
the first 5 Years.
Impressive Growth Prospects
Indian healthcare sector, one of the fastest growing industry, is expected to advance at a
CAGR (Compound Annual Growth Rate) of 17 per cent during 201120 to reach
USD280 billion. There is immense scope for enhancing healthcare services penetration in
India, this presents ample opportunity for development of the healthcare industry
Strong Fundamentals
Rising income levels, ageing population, growing health awareness and changing attitude
towards preventive healthcare is expected to boost healthcare services demand in future
Cost Advantage
The low cost of medical services has resulted in a rise in the countrys medical tourism,
attracting patients from across the world. Moreover, India has emerged as a hub for R&D
activities for international players due to its relatively low cost of clinical research
Favorable Investment Environment
Conducive policies for encouraging FDI, tax benefits, favorable government policies
coupled with promising growth prospects have helped the industry attract private equity,
venture capitals and foreign players
3.3.
PRESENCE OF PRIVATE SECTOR IN INDIAN HOSPITAL SECTOR
The private sector has emerged as a vibrant force in Indias healthcare industry,

lending it both national and international repute

Private sectors share in healthcare delivery is expected to increase from 66 per

cent in 2005 to 81 per cent by 2015

In India, private healthcare accounts for almost 72 per cent of the countrys total
healthcare expenditure

31

Private sectors share in hospitals and hospital beds is estimated at 74 per cent and
40 per cent, respectively

Reason for fast pace in per capita healthcare expenditure

Per capita healthcare expenditure is estimated at a CAGR of 15.4 per cent during

200815E to USD88.7 by 2015

This is due to rising incomes, easier access to high-quality healthcare facilities

and greater awareness of personal health and hygiene

Greater penetration of health insurance aided the rise in healthcare spending, a

trend likely to intensify in the coming decade

3.4.
KEY PLAYERS IN INDIAN HEALTHCARE INDUSTRY
Apollo Hospitals Enterprise Ltd
Aravind Eye Hospitals
CARE Hospitals
Fortis Healthcare Ltd
Max Hospitals
Manipal Group of Hospitals
Columbia Asia
3.5.
NOTABLE TRENDS IN INDIAN HEALTHCARE SECTOR

Shift From Communicable To Lifestyle Diseases

With increasing urbanization and problems related to modern-day living in urban
settings, currently, about 50 per cent of spending on in-patient beds is for lifestyle
diseases; this has increased the demand for specialized care
Expansion to Tier-II and Tier-III Cities

There is substantial demand for high-quality and specialist healthcare services in

tier-II and tier-III cities

32

To encourage the private sector to establish hospitals in these cities, the

government has relaxed the taxes on these hospitals for the first five years

Management Contracts
Many healthcare players such as Fortis and Manipal Group are entering management
contracts to provide an additional revenue stream to hospitals
Emergence of Telemedicine

Telemedicine is a fast-emerging sector in India; many major hospitals (Apollo,

AIIMS, NarayanaHrudayalaya) have adopted telemedicine services and entered

into a number of PPPs

In 2012, the telemedicine market in India was valued at USD7.5 million, and is

expected to rise at a CAGR of 20 per cent, to USD18.7 million by 2017

Telemedicine can bridge the rural-urban divide in terms of medical facilities,
extending low-cost consultation and diagnosis facilities to the remotest of areas
via high-speed internet and telecommunication

Increasing Penetration of Health Insurance

Health insurance is gaining momentum in India; gross healthcare insurance

premium is USD2.9 billion in 2013 expanding at a CAGR of 26 per cent over

FY08-13
This trend is likely to continue, benefitting the countrys healthcare industry

Mobile-Based Health Delivery

Strong mobile technology infrastructure and launch of 4G is expected to drive

mobile health initiatives in the country

Currently, there are over 20 million health initiatives in the country for spreading

awareness about family planning and other ailments

Mobile health industry in India is expected to reach USD0.6 billion by 2017

Technological Initiatives

33

To standardize the quality of service delivery, control cost and enhance patient
engagement, healthcare providers are focusing on the technological aspect of
healthcare delivery
Digital Health Knowledge Resources, Electronic Medical Record, Mobile

Healthcare, Electronic Health Record, Hospital Information System and PRACTO

are some of the technologies gaining wide acceptance in the sector

Healthcare sectors spending on IT products and services is expected to rise from
USD53 billion in 2012 to USD57 billion in 2013

3.6.

PORTERS FIVE FORCES ANALYSIS

34

Competitive Rivalry

Increase in number of private players in the market has led to increased

competition
However number of hospital is still low compared to the requirement so there is
not much competition in the market

Threat of New Entrants

Big threat of new entrants in the industry

Number of players has increased considerably in recent times

35

Substitute Products
Customers may go for public hospitals which are inexpensive
Customers might go for E-Health

Bargaining Power of Suppliers

Bargaining power of suppliers in this industry is high because quality of products

and timely delivery matter and there are less number of quality suppliers

Bargaining Power of Customers

Bargaining power of customers is low because of trust and loyalty however

increase in number of options has given customers some bargaining power

COMPANY PROFILE
HISTORY

36

The trust is being a Family Trust was registered year 1991 the memory of the Late Laxmi
Shetty, who is President and Managing the Director of the Trust. The Trust is accorded of
linguistic minority trust by the Government of Karnataka.
The trust was promoting the body of the entire Medical, Para medical, Hospitality and
Management institution is Laxmi Memorial Education Trust (R.). The various institutions
managed by trust form well-knit and well co-ordinated support structure to create a
comprehensive health care and health management system.
MEMBERS OF THE TRUST

.Mr. A J Shetty
Mr. Prashanth Shetty
Dr. Prashanth Marla
Mrs. Sharada J.Shetty
Mrs. Arshida P Shetty
Dr. (Mrs.) Amitha P. Marla

Other institutions run by the trust (R.)

A. J. Hospital And Research Center

A. J. Institute of Medical Science
A. J. Institute of Dental Science
Laxmi Memorial College of Physiotherapy
Laxmi Memorial Institute of Nursing
Motimahal College of Hotel Management
Laxmi Memorial College of Hotel Management
A. J. Institute of Management (AJIM)
Laxmi Institute of Para Medical Science
Laxmi Memorial College of Hospital Administration

A. J. HOSPITAL RESEARCH CENTRE

A J Hospital and Research Centre coming to existence in the year 2011, with the
objective of providing world class health care facilities in Mangalore. It was Mr. A J

37

Shetty dreams to make the best of health care facilities available in the coastal region of
Karnataka. The Hospital is under the banner of Laxmi Memorial Education Trust (R)
which is successfully running many Educational Institutes in Mangalore.
A J Hospital and research Centre started with 350 Bed super-specialty hospital is now
810 Bed hospitals, also attached to A J Institute of Medical Science, specializing in more
than 30 major medical disciplines, embracing new technologies to offer high level heath
care that matches the best in the country. The hospital is supported a team of highly
qualified experience doctors, nursing and Para Medical Staff. A part from providing the
world class care, we are also giving free treatment to nearly 600 outpatients and
inpatients daily.
VISION
A J Hospital Research Centre is committed to bring Quality Medical Care of the highest
standard which in the reach of every individual. To realize this dream of Quality health
Care for All .We shall strive for excellence in medical services, health education and
research.
MISION

Achieve and compassionates attitude and Quality health care services

Provide comfortable a risk free environment for our patient
Bring quality health care within the financial reach of every individual
Attain excellence in medical education and research
Provide comfortable and safe working environment for our employees

QUALITY POLICY

Practice safe and ethical medicine

Deploy the best of medical technology and continuous training for improvement
Ensure transparency and accountability in health care delivery and billing
Provide employee satisfaction and cordial working atmosphere

38

SUPER SPECIALITIES
Cardio-thoracic and vascular surgery
Cardiology
Emergency and Critical Care Medicine
Endocrinology
Department of gastroenterology and hematology
Department of nephrology
Neurology and Nero-surgery
Nuclear medicine
Onco-surgery
Oncology
Department of Pediatric Critical Care
Pediatric Cardiology
Plastic, reconstructive and aesthetic surgery
Radio therapy
Urology, Andrology and transplant surgery

39

40

SPECIAL EQUIPMENTS

Bone densitometer
Brachytherapy
C T Scan 64 slice volume
Computerized navigation system
Digital Cath Lab
Digital X-ray Imaging Technics
EEG
ENMG
Echocardiogram
Gamma camera
Holmium Laser in Urology

4. DATA ANALYSIS AND INTERPRETATION

4.1 RAITO ANALYSIS
4.1.1. LIQUIDITY RAITO

41

4.1.1.1 CURRENT RAITO

TABLE 4.1: Table showing Current Ratio
YEAR
2012
2013
2014
2015

CURRENTASSETS
2,364,899
16,110,737
27,963,815
40,783,598

CURRENT LIABILITIES
129,921,222
105,110,639
117,808,930
81,631,120

RATIO
0.018:1
0.15:1
0.24:1
0.49:1

0.6
0.49

0.5
0.4
0.3

current ratio

0.2

0.24

0.15

0.1
0.02
0
2012

2013

2014

2015

CHART 4.1: Chart Showing Current Ratios

INTERPRETATION:
The current ratio with 2:1 (or) more is considered as satisfactory position of the firm.
Here the current liquid position of the organization is not up to the mark because the
current liability is more than current assets in all the 4 years. So company has to
concentrate on increasing current assets. Here cash components have increased as
deposits have been considerable increased but still the current ratio has not improved
because of increasing current liabilities.
4.1.1.2 QUICK RAITO
YEAR
2012
2013
2014

QUICK ASSETS
2,364,899
11,241,324
10,353,135

CURRENT LIABILITIES
129,921,222
105,110,639
117,808,930
42

RATIO
0.018:1
0.10:1
0.08:1

2015
28,398,383
TABLE NO 4.2: Showing Quick Ratios

81,631,120

0.34:1

0.35
0.3
0.25
0.2

0.34

0.15
0.1
0.1
0.05

0.08

0.02

0
2012

2013

2014

2015

CHART NO 4.2: Showing Quick Ratio

INTERPRETATION:
Whenever the standard Quick ratio is 1:1 or more than 1:1, then the financial position of
firm is considered good. Due to high current liabilities the Quick ratio of the firm is
below from standard. So the firm should focus on increasing quick assets.

4.1.1.3 CASH RAITO

YEAR
2012
2013
2014
2015

CASH AND CASH

EQUIVALENTS
2,364,899
9,591,196
8,213,963
22,989,702

43

CURRENT LIABILITIES

RATIO

129,921,222
105,110,639
117,808,930
81,631,120

0.018:1
0.09:1
0.06:1
0.28:1

TABLE NO4.3: Showing Cash Ratio

0.3

0.28

0.25
0.2
0.15
0.09

0.1

0.06
0.05
0.02
0
2012

2013

2014

2015

CHART NO4.3:Showing Cash Ratio

INTERPRETATION: Cash ratio shows the relationship between cash and cash
equivalents with current liabilities. The firms cash ratio position increased from .02 to
0.28 within 4 years. Still cash and cash equivalents are not satisfactory to pay current
liabilities.
4.1.2

LEVERAGE RATIOS (SOLVENCY RATIOS)

4.1.2.1 TOTAL DEBT EQUITY RATIO

YEAR
TOTAL DEBT
2012
129,921,222
2013
287,854,267
2014
252,705,216
2015
242,386,482
TABLE NO4.4: Showing Total Debt Equity Ratio

44

EQUITY
190,471,622
269,123,972
335,700,723
352,548,076

RATIO
0.68:1
1.06:1
0.75:1
0.68:1

1.2

1.06

1
0.8

0.75

0.68

0.68

0.6
0.4
0.2
0
2012

2013

2014

2015

CHART NO 4.4: Showing Total Debt Equity Ratio

INTERPRETATION:
Theideal total debt equity ratio is 1:1 in general. A high ratio indicates higher proportion
of debt content in the capital structure. This ratio shows dependence of debt financing
when compared with equity funding. The greater the dependency on debt fund more cash
goes out in the form of interest hence firms listed on stock exchange tend to issue new
equity shares when the interest rates are too high. From the analysis we can say that he
firm has a decent proportion of debt to equity. On an average 80% of the required funds
are raised by the way of long term funds.
4.1.2.2 SOLVENCY RATIO (TOTAL ASSET TO TOTAL DEBT)
YEAR
2012
2013
2014
2015

TOTAL ASSETS
TOTAL DEBT
323,392,844
129,921,222
561,078,239
287,854,267
588,405,939
252,705,216
594,934,558
242,386,482
TABLE NO 4.5: Showing Solvency Ratio or Total Asset to Total Debt Ratio

45

RATIO
2.48:1
1.94:1
2.32:1
2.45:1

2.48

2.32

2.5

2.45

1.94
2
1.5
1
0.5
0
2012

2013

2014

2015

CHART NO 4.5: Showing Solvency Ratio or Total Asset to Total Debt Ratio
INTERPRETATION:
The solvency ratio indicates the degree of solvency of business. Higher solvency ratio
indicates strong financial position. The firms solvency position is good which means
there is no difficulty in paying off firms outside liabilities out of the assets because the
assets are more than outside liabilities.

4.1.2.3 PROPRIETARY RATIO

YEAR
SHAREHOLDERS FUND
2012
188,993,244
2013
232,700,205
2014
319,506,914
2015
344,424,529
TABLE NO 4.6:Showing Proprietary Ratio

46

TOTAL ASSETS
323,392,844
561,078,239
588,405,939
594,934,558

RATIO
0.58:1
0.41:1
0.54:1
0.57:1

0.7
0.6

0.58
0.54

0.57

0.5
0.41
0.4
0.3
0.2
0.1
0
2012

2013

2014

2015

CHART NO 4.6:Showing Proprietary Ratios

INTERPRETATION:
The ideal standard Proprietary ratio is 0.5:1. Higher the ratio indicates the sound financial
position of the organization. Here the calculated ratio is satisfactory which shows the
long term financial position of the firm. Almost 50% of the firms total assets have been
financed by shareholders fund.

4.1.2.4 FIXED ASSETS TO NET WORTH RATIO

YEAR
FIXED ASSETS
PROPRIETORS FUND
2012
321,027,945
188,993,244
2013
535,716,264
232,700,205
2014
558,268,962
319,506,914
2015
550,350,924
344,424,529
TABLE NO 4.7:Showing Fixed Assets to Net worth Ratio

47

PERCENTAGE
169.86
230.22
174.73
159.79

230.22

250

200

174.73

169.86

159.79

150

100

50

0
2012

2013

2014

2015

CHART NO 4.7: Showing Fixed Assets to Net worth Ratio

INTERPRETATION:
A Fixed Assets to net worth ratio of 67% is considered good but in this case its excess
which indicates most of the portion of proprietors funds are used to purchase fixed assets
and the current assets are usually financed by loan funds. This indicates a greater risk to
creditors of the company. The firm should take immediate measures to reduce this as the
percentage has crossed 100 and above.
4.1.2.5 CAPITAL GEARING RATIO
YEA
R
2012
2013
2014
2015

FIXED INCOME BEARING

EQUITY SHAREHOLDERS FUND

FUNDS
4,920,000
185,551,622
187,663,628
264,203,972
176,566,286
294,030,723
202,425,362
310,878,076
TABLE NO 4.8: Showing Capital Gearing Ratio

48

PERCENTAGE
2.65
71.03
60.05
65.11

80
71.03
70
60.05

60
50
40
30
20
10

2.65

0
2012

2013

65.11
2015

2014

CHART NO 4.8: Showing Capital Gearing Ratios

INTERPRETATION:
TheCapital Gearing ratio refers to the proportion between fixed income bearing funds and
equity shareholders fund. A company would be highly geared if the proportion of
preference capital and debentures is high. Here the company gearing has improved when
compared to first year and is satisfactory. But the company should not allow the gearing
to go up in future as it may lead to pressure of interest payments.
4.1.2.6 INTEREST COVERAGE / SERVICE RATIO
YEA
R
2012
2013
2014
2015

PROFIT BEFORE INTEREST AND TAX

INTEREST

-1,478,378
-26,161,740
10,262,027
1,736,219
17,930,028
12,815,306
20,938,853
TABLE NO 4.9: Showing Interest Coverage or Service Ratio

49

TIMES
-2.55
0.10
0.61

1
0.61
0.5
0.1
0
2012

2013

2014

2015

-0.5
-1
-1.5
-2
-2.5
-2.55
-3

CHART NO 4.9:Showing Interest Coverage or Service Ratio

INTERPRETATION:
The Interest Coverage ratio shows the ability of the firm to make payment of interest to
creditors. In the year 2013 the debt-service coverage ratio of the firm goes negative
because of negative Profit before Interest and Tax (PBIT). In the year 2015 the ratio has
become 0.61. This position should be improved in future.

4.1.3

ACTIVITY RATIOS
4.1.3.1 FIXED ASSET TURNOVER RATIO

YEAR
NET SALES
NET FIXED ASSETS
2012
NIL
321,027,945
2013
22,791,576
535,716,264
2014
207,315,655
558,268,962
2015
243,901,868
550,350,924
TABLE NO 4.10:Showing Fixed Asset Turnover Ratio

50

TIMES
0.04
0.37
0.44

0.5
0.44

0.45
0.4

0.37

0.35
0.3
0.25
0.2
0.15
0.1
0.05

0.04

0
2012

2013

2014

2015

CHART NO 4.10:Showing Fixed Asset Turnover Ratio

INTERPRETATION:The Fixed Asset Turnover ratio establishes the relationship
between net sales and fixed assets. Higher ratio indicates better utilization of fixed assets
in generating sales. Here the ratio is comparatively low and this shows the
underutilization of fixed assets in generating sales.

4.1.3.2 INVENTORY TURNOVER RATIO

YEAR
COST OF GOODS SOLD
AVERAGE STOCK
2012
2013
11,964,865
48,69,413
2014
71,051,264
11,240,046.5
2015
78,071,837
14,997,947.5
TABLE NO 4.11:Showing Inventory Turnover Ratio

51

TIMES
4.88
1.9
2.3

6
5

4.88

4
3
2.3
1.9

2
1
0
2012

2013

2014

2015

CHART NO 4.11:Showing Inventory Turnover Ratios

INTERPRETATION:
The Inventory Turnover ratio measures how quickly inventory is sold. Generally a ratio
of 8 times is considered satisfactory. High turnover ratio indicates that inventory is sold
fast and indication of good inventory management.
4.1.3.3 WORKING CAPITAL TURNOVER RATIO
YEAR
NET SALES
WORKING CAPITAL
2012
NIL
-118,748,963
2013
22,791,576
-87,999,902
2014
207,315,655
-82,230,975
2015
243,901,868
-21,238,893
TABLE NO 4.1: Showing Working Capital Turnover Ratio

52

PERCENTAGE
-25.90
-252.11
-1148.37

-252.11

0
-25.9
2012

2013

2014

2015

-200
-400
-600
-800
-1000
-1200

-1148.37

-1400

CHART NO 4.12: Showing Working Capital Turnover Ratio

INTERPRETATION:The working capital turnover position of the firm is not at all
satisfactory. This shows inefficient use of working capital in the business. This is mainly
because current liabilities of the firm is raising and current assets are too low

4.1.3.4 DEBTORS TURNOVER RATIO

YEAR

COST OF GOODS SOLD

AVERAGE DEBTORS

2012
NIL
2013
11,964,865
682,821
2014
71,051,264
1,006,717
2015
78,071,837
2,951,590.5
TABLE NO 4.13:Showing Debtors Turnover Ratios

53

TIMES
17.52
70.57
26.45

80

70.57

70
60
50
40
30

26.45
17.52

20
10
0
2012

2013

2014

2015

CHART NO 4.13: Showing Debtors Turnover Ratios

INTERPRETATION:
The Debtors Turnover ratio indicates the velocity at which debtors are converted into
cash. It indicates the efficiency of the firms collection policies. Here the collection policy
of the firm is good and the firm is able to convert debtors into cash within a short period
of time.
4.1.3.4 DEBT COLLECTION PERIOD
YEAR
DEBTORS TURNOVER RATIO
2012
2013
365
17.52
2014
365
70.58
2015
365
26.45
TABLE NO 4.14: Showing Debt Collection Period

54

DAYS
20.83
5.17
13.79

25

20

15

10

20.83
13.79

5
5.17
0
2012

2013

2014

2015

CHART NO 4.14:Showing Debt Collection Period

INTERPRETATION:
Here the debt collection in days indicates that the debt collection policy of the firm is
good as the debt to company is collected within 30 days.

4.1.3.5 CREDITORS TURNOVER RATIO

YEAR
TOTAL PURCHASE
AVERAGE ACCOUNTS PAYABLES
2012
NIL
2013
16,834,278
9,055,234
2014
83,792,531
15,004,032.5
2015
72,846,372
20,900,066
TABLE NO 4.15:Showing Creditors Turnover Ratios

55

TIMES
1.85
5.58
3.48

6
5
4
3

5.58

2
1

3.48
1.85

0
2012

2013

2014

2015

CHART NO 4.15:Showing Creditors Turnover Ratios

INTERPRETATION:
The Creditors Turnover ratio indicates the credit period given to the company from its
creditors. It shows how many times in a year company payoff its creditors. Here the
companys creditors settlement policy is not up to the mark because of negative working
capital and so it takes long time to settle its creditors.

4.1.3.6 DEBT PAYMENT PERIOD

YEAR
CREDITORS TURN OVER RATIO
2012
365
2013
365
1.85
2014
365
5.58
2015
365
3.48
TABLE NO 4.16:Showing Debt Payment Period

56

DAYS
197.29
65.41
104.88

250

200

150

100

197.29

104.88

50
65.41
0
2012

2013

2014

2015

CHART NO 4.16:Showing Debt Payment Period

INTERPRETATION:
Here the payment to creditors is shows that the company pays its debt after so many days.
Here the number of days can be reduced because if the days are increasing it sends a
wrong signal to the stakeholders of the company.

4.1.4

PROFITABILITYRATIOS
4.1.4.1 GROSS PROFIT RATIO

YEAR
GROSS PROFIT
2012
2013
10,826,711
2014
136,264,391
2015
165,830,031
TABLE NO 4.17:Showing Gross Profit Ratios

57

NET SALES
NIL
22,791,576
207,315,655
243,901,868

PERCENTAGE
47.50
65.73
67.99

80
70

67.99

65.73

60
50

47.5

40
30
20
10
0
2012

2013

2014

2015

CHART NO 4.17:Showing Gross Profit Ratios

INTERPRETATION:
The Gross Profit ratio indicates how much rupees of sales are left over after cost of goods
sold. A ratio of 20% to 25% is considered as ideal. When comparing with 2013 to 2014
the ratio has increased from 47.5% to 67.99%. This is the sign of efficient management of
the firm. But as the ultimate results is loss there is lot of operating expenses. And these
expenses may be because the firm has just started its operations 4 years back
4.1.4.2 RETURN ON INVESTMENT
YEAR

PROFIT BEFORE INTEREST

AND TAX
2012
-1,478,378
2013
-26,161,740
2014
1,736,219
2015
12,815,306
TABLE NO 4.18:Showing Return on Investment

58

NET CAPITAL
EMPLOYED
193,471,622
446,716,362
468,423,847
509,503,402

PERCENTAGE
-0.76
-5.85
0.37
2.51

3
2
1

0.37

0
-1

2012
-0.76

2013

2014

2.51
2015

-2
-3
-4
-5
-6

-5.85

-7

CHART NO 4.18:Showing Return on Investment

INTERPRETATION:
The higher Return on Investment (ROI) is shows the overall profitability and more is the
efficient use of capital employed. Here the ROI of 2011 and 2012 are negative because of
negative Profit before Interest and Tax (PBIT). A negative ROI will add up pressure on
the firm as its already has financial cost which indicates interest to be paid.
4.1.4.3 RETURN ON SHAREHOLDERS FUND
YEAR

PROFIT AFTER INTEREST

SHAREHOLDERS

AND TAX
FUND
2012
-1,478,378
188,993,244
2013
-36,423,767
232,700,205
2014
-16,193,809
319,506,914
2015
-8,123,547
344,424,529
TABLE NO 4.19:Showing Return on Shareholders Fund

59

PERCENTAGE
-0.78
-15.65
-5.07
-2.36

-0.78
2012

2013

2014

2015

-2
-2.36

-4
-5.07

-6
-8
-10
-12
-14
-16

-15.65

-18

CHART NO 4.19:Showing Return on Shareholders Fund

INTERPRETATION:
The Return on Shareholders Fund ratio indicates how effectively the shareholders funds
have been utilized by the company. Here, all the 4 years have showed a negative ratio
because of negative Profit after Interest and Tax (PAIT) which means the owners of the
firm are not getting a satisfactory rate of return on their investment.
4.1.5

MARKET TEST RATIO

4.1.5.1 EARNINGS PER SHARE

YEAR

NET PROFIT AVAILABLE TO

EQUITY SHARE HOLDERS

2012
-1,478,378
2013
-38,433,835
2014
-18,233,162
2015
-10,273,330
TABLE NO 4.20:Showing Earnings per Share

60

NUMBERS OF EQUITY
SHARES
12,749,858
18,703,000
23,182,250
35,610,249

EPS
-0.12
-2.05
-0.79
-0.29

-0.12
2012

2013

2014

-0.29
2015

-0.79

-0.5

-1

-2.05

-1.5

-2

-2.5

TABLE NO 4.20:Showing Earnings per Share

INTERPRETATION:
EPS measures the profitability of the company from the equity shareholders point of
view. Here, the company not yet declared any dividends to its equity shareholders
because of lack of net profit. All the 4 years the firm was under net loss, due to this
reason the EPS of the firm is also negative. But comparing with the year 2013 the firm
reduces the EPS loss in the year 2015.
4.2 TREND ANALYSIS
4.2.1 TREND OF INCOME STATEMENT

Net Sales
(-) Cost Of Goods Sold
Gross Margin
(-) Selling And
Administration Expenses
(-) Other operating Expenses
Operating Income

AMOUNT
243,901,868
78,071,837
165,830,031

2015
PERCENTAGE
100%
32%
68%

AMOUNT
207,315,655
71,051,264
136,264,391

2014
PERCENTAGE
100%
34.27%
65.73%

4,015,883

1.65%

3,993,939

1.93%

153,858,486
7,955,662

63.08%
3.26%

131,961,433
309,019

63.65%
0.15%

61

(-) Interest Expenses

20,938,853
8.58%
(+) Other Income
4,859,644
2%
Income Before Tax
(8,123,547)
(3.33%)
Income Tax Expenditure
Nil
Nil
Net Income
(8,123,547)
(3.33%)
TABLE NO 4.21: Showing Trend of Income Statement

17,930,028
1,427,200
(16,193,809)
Nil
(16,193,809)

8.65%
0.69%
(7.81%)
Nil
(7.81%)

INTERPRETATION:
Cost of goods sold decreased from 34.27% of net sales in 2014 to 32% in 2015, which
resulted in a slight increase in gross margin from 65.73% to 68%. Selling and
administrative expenses decreased from 1.93% to 1.65%, while other operating expenses
decreased from 63.65% to 63.08%. Operating income increased from 0.15% to 3.26%.
Interest expense decreased slightly from 8.65% to 8.58% and other income increased
from 0.69% to 2%. Income before taxes are in negative figure because of huge other
operating expenses and it is reduced from 7.81% to 3.33% and there is no income tax
expenditure because of net loss, thus the net loss remain the same as income before tax.
This trend indicates that even though there is a gross profit margin of 65% on an average
still the company is not able to generate profits because of high operating expenses.
4.2.2 TREND OF BALANCE SHEET
AMOUNT
EQUITY AND LIABILITY
Share Holders Fund

2015
PERCENTAGE

2014
AMOUNT
PERCENTAGE

352,548,076

59.26%

335,700,723

57.05%

Long Term Borrowings

159,700,379

26.84%

134,545,648

22.87%

Long Term Provisions

1,054,983

0.18%

350,638

0.06%

19,608,629
20,847,301
41,150,191
24,999

3.29%
3.5%
6.92%
0.004%

7,614,140
20,952,831
89,239,240
2,719

1.29%
3.56%
15.17%
0.0004%

594,934,558

100%

588,405,939

100%

Non-Current Liabilities

Current Liabilities
Short Term Borrowings
Trade Payables
Other Current Liabilities
Short Term Provisions
TOTAL EQUITY AND
LIABILITY

62

ASSETS
Non-current Assets
Fixed Assets
Non-current Assets
Long Term Loans And
Advances
Other Non-current Assets
Current Assets
Inventories
Trade Receivables
Cash and Cash Equivalents
Short Term Loans and

550,350,924
10,000

92.5%
0.001%

558,268,962
10,000

94.88%
0.001%

3,786,620

0.64%

2,161,454

0.37%

3,416

0.0005%

1,708

0.0002%

12,385,215
4,572,568
22,989,702

2.1%
0.77%
3.86%

17,610,680
1,330,613
8,213,963

3%
0.22%
1.4%

597,120

0.10%

211,439
588,405,939

0.03%
100%

757,651
0.13%
Advances
Other Current Assets
78,462
0.013%
TOTAL ASSETS
594,934,558
100%
TABLE NO 4.22:Showing Trend of Balance sheet
INTERPRETATION:

Shareholders fund increased from 57.05% of shareholders equity in 2014 to 59.26% in

2015. Long term borrowings increased from 22.87% to 26.84% and long term provisions
are also slightly increased from 0.06% to 0.18%. Short term borrowings slightly
increased along with short term provisions, trade payables remains almost same in both
the years. Other current liabilities decreased from 15.17% to 6.92%.
Fixed assets cover 94.88% of total assets in 2013 and 92.5% in 2014. Non-current
investments, long term loans and advances and other non-current assets cover a small
portion of total assets. Trade receivables, cash and cash equivalents slightly increased
along with short term loans and advances and inventories and other current assets are
decreased.

63

4.2

CORRELATION
H0= There is no significant association between shareholders funds and total
assets
H1= There is a significant association between shareholders funds and total
assets.

SHAREHOLDERS FUND AND TOTAL ASSET

(AMOUNT IN CRORS)
YEAR

SHAREHOLDER
S FUND (x)

TOTAL
ASSETS
(y)

2012

18.89

32.34

2013

23.27

56.11

2014
2015

31.95
34.44

58.84
59.49

TOTAL

x = 108.55

y =206.78

dx

dy

[x-x]

[y-y]

8.2475
3.8675
4.8125
7.3025
dx =

dx

dy2

dxdy

-19.355

68.02

374.62

159.63

4.415

14.96

19.49

-17.07

7.145
7.795
dy =

23.16
53.33
dx=159.4

51.05
60.76
dy=505.9

34.38
56.92
dxdy=

0
0
7
2
TABLE NO 4.23:Showing Correlations between Shareholders Fund and Total Assets
x = 27.1375
64

233.86

y = 51.695
Correlation

(r )=

dxdy
(d x 2d y 2 )

159.47505.92
()
233.86

=0.82
Degrees of freedom = N-2 at 5% level of significance.
4-2 = 2
So critical value of r = 0.950
Since computed value of (r) is lower than the critical value of (r) accept the null
hypothesis and reject the alternative hypothesis. So it is statistically proved that there is
no positive correlation between Shareholders fund and total.

65

5. FINDINGS, SUGGESSTION AND CONCLUSION

5.1FINDINGS
1. The current liquid position of the organization is not up to the mark because the
current liability is more than current assets.
2. The calculated Total Debt Equity ratio for all 4 years is lower than standard,
which shows a lower proportion of debt content in capital structure.
3. The firms solvency position is good which means there is no difficulty in
paying off firms outside liabilities out of the assets because the assets are more
than outside liabilities.
4. The calculated Proprietary ratio is satisfactory which shows the healthy
financial position of the firm. Almost 50% of the firms total assets have been
procured with shareholders fund.
5. The Fixed Assets to Net Worth ratio is higher than standard which means
shareholders funds have been used to acquire a part of fixed assets.
6. The Fixed Asset Turnover ratio is comparatively low and this shows the
underutilization of fixed assets in generating sales.
7. The inventory turnover ratio is low, which means the firm is over investing in
inventories.
8. Comparing Gross Profit Ratio with 2012 to 2014 the ratio has increased from
47.5% to 67.99%. This is the sign of efficient management in the firm.
9. The ROI of 2011 and 2012 are negative because of negative Profit Before
Interest and Tax (PBIT).
10. All the 4 years have showed a negative Return on Shareholders Fund ratio
because of negative Profit after Interest and Tax (PAIT) which means the

66

owners of the firm are not getting a satisfactory rate of return on their
investment.

11. The company has not yet declared any dividends to its equity shareholders
because of lack of net profit. All the 4 years the firm is under net loss, due to
this reason the EPS of the firm is also negative.
12. Debt collection period is satisfactory in the company as on an average debts are
collected within 30 days.
13. Working capital position of the firm is not at all satisfactory because current
liabilities contain more trade payables, because of purchase of capital goods on
credit.

67

5.2SUGGESTIONS

As the Current Ratio in all the year is below standard the firm should take
measures to improve the Current Assets.
The quick ratio of the firm is below the standard mark, this create an imbalance
on the liquidity position of the firm to clear off its short term liabilities. Therefore
liquidity position of the firm should be improved.
Debt payment period has crossed 3 months on an average, which needs to be
rectified to maintaining good relationship with creditors.
The above analysis indicates that the much of the current assets are financed by
loaned funds, this increases the risk for creditors, and the Fixed Asset to Net
worth Ratio should be reduced.
Due to high current liabilities the Quick ratio of the firm is below from standard.
So the firm should give importance to increase its quick assets.

68

5.3CONCLUSION
The companys overallfinancial position is not satisfactory. Company has to give
more importance to reduce its current liability and increase working capital. But
considering the factor that, it is a new firm and the net losses of the company are
drastically reducing year by year. This is a positive signal and sign of well
performance of the management. But when we concentrate on expense, its
percentage is increasing year on year. But still the firm has enough of potential in
it so that the shareholders get enough of returns in future.

ANNEXURE:
69

AJ HOSPITAL AND RESEARCH CENTRE

COMBINED STATEMENT OF PROFIT AND LOSS FOR THE YEAR 2014 &2015
PARTICULARS

1
2
3
4

Revenue From Operations

Other Income

2.2
2.19

TOTAL REVENUE (1+2)

EXPENSES
(i) Purchase of Medicine and Consumables
(ii) Changes in Inventories of Medicines and
Consumables
(iii) Employee Benefit Expenses
(iv) Finance Cost

5
6
7

NOT

2.2
2.21
2.22
2.23

(v) Depreciation and Amortization Expenses

2.9

(vi) Other Expenses

2.24

FOR THE YEAR

FOR THE YEAR

ENDED MARCH 2015,

ENDED MARCH 2014,

AMOUNT (IN Rs)

AMOUNT (IN Rs)

243,901,868
4,859,644

207,315,655
1,427,200

248,761,512

208,742,855

72,846,372
5,225,465

83,792,531
-12,741,267

44,406,234
20,938,853
17,068,398

35,593,813
17,930,028
17,160,681

96,339,737

83,200,878

TOTAL EXPENSES
Profit/(Loss) Before Tax (3-4)

256,855,059
-8,123,547

224,936,664
-16,193,809

Tax Expenses

NIL

NIL

PROFIT/(LOSS) FOR THE YEAR

-8,123,547

-16,193,809

AJ HOSPITAL AND RESEARCH CENTRE

COMBINED BALANCE SHEET FOR THE YEAR 2014 &2015
PARTICULARS

NOT

AS AT 31ST MARCH

AS AT 31STMARCH

2015, AMOUNT (IN

2014, AMOUNT (IN Rs)

Rs)

70

A
1

EQUITY AND LIABILITY

Share Holders Fund
(a) Share Capital
(b) Reserve and Surplus
Non-current Liabilities
(a) Long Term Borrowings
(b) Long Term Provisions
Current Liabilities
(a) Short Term Borrowings
(b) Trade Payables
(c) Other Current Liabilities
(d) Short Term Provisions

2.1
2.2

2.3
2.4

2.5
2.6
2.7
2.8

TOTALLIABILITY
B
1

418,555,960
-66,007,884

393,585,060
-57,884,337

352,548,076

335,700,723

159,700,379
1,054,983

134,545,648
350,638

160,755,362

134,896,286

19,608,629
20,847,301
41,150,191
24,999

7,614,140
20,952,831
89,239,240
2,719

81,631,120
594,934,558

117,808,930
588,405,939

546,100,744
1,439,023
2,811,157

553,217,935
2,158,426
2,892,601

550,350,924

558,268,962

10,000
3,786,620
3,416

10,000
2,161,454
1,708

3,800,036

2,173,162

12,385,215
4,572,568
22,989,702
757,651
78,462

17,610,680
1,330,613
8,213,963
597,120
211,439

40,783,598
594,934,558

27,963,815
588,405,939

ASSETS
Non-current Assets
(a) Fixed Assets
(i)Tangible Assets
(ii) Intangible Assets
(iii) Capital Work-in-Progress

2.9
2.9
2.9

(b) Non-current Investment

(c) Long Term Loans And Advances
(d) Other Non-current Assets

2.10
2.11
2.12

Current Assets
(a) Inventories
(b) Trade Receivables
(c) Cash And Cash Equivalents
(d) Short Term Loans And Advances
(e) Other Current Assets

2.13
2.14
2.15
2.16
2.17

TOTAL ASSETS

71

AJ HOSPITAL AND RESEARCH CENTRE

COMBINED STATEMENT OF PROFIT AND LOSS FOR THE YEAR 2012&2013

PARTICULARS

1
2
3
4

Revenue From Operations

Other Income

NOTE

2..21
2.22

TOTAL REVENUE (1+2)

EXPENSES

FOR THE YEAR

FOR THE YEAR

ENDED MARCH

ENDED MARCH

2013, AMOUNT (IN

2012, AMOUNT (IN

Rs)

Rs)

22,791,576
537,246

NIL
NIL

23,328,822

NIL

(i) Purchase of Medicine and Consumables

(ii) Changes in Inventories of Medicines and

2.23
2.24

16,834,278

NIL

Consumables
(iii) Employee Benefit Expenses
(iv) Finance Cost
(v) Depreciation and Amortization Expenses
(vi) Other Expenses

-4,869,413

NIL

2.25
2.26
2.10&2.11
2.27

9,998,530
10,262,027
7,514,829
20,012,338

NIL
NIL
1,241
1,477,137

59,752,589
-36,423,767

1,478,378
-1,478,378

TOTAL EXPENSES
Profit/(Loss) Before Tax (3-4)

72

6
7

Tax Expenses

NIL

NIL

PROFIT/(LOSS) FOR THE YEAR

-36,423,767

-1,478,378

AJ HOSPITAL AND RESEARCH CENTRE

COMBINED BALANCE SHEET FOR THE YEAR 2012 &2013
PARTICULARS

A
1

2
3

NOT
E

AS AT 31ST MARCH
2013, AMOUNT (IN
Rs)

AS AT 31STMARCH
2012, AMOUNT (IN Rs)

EQUITY AND LIABILITY

Share Holders Fund
(a) Share Capital
(b) share Capital Pending Allotment
(c) Reserve and Surplus

2.1
2.2
2.3

191,950,000
118,864,500
-41,690,528

191,950,000
NIL
-1,478,378

Share application money pending allotment

Non-current Liabilities
(a) Long Term Borrowings

2.4

269,123,972
4,100,000

190,471,622
3,000,000

2.5

126,726,315

NIL

(b) Other Long Term liabilities

2.6

56,017,313

NIL

182,743,628

NIL

1,000,000
9,055,234
95,055,405

8,807,360
NIL
121,113,862

105,110,639
561,078,239

129,921,222
323,392,844

Current Liabilities
(a) Short Term Borrowings
(b) Trade Payables
(c) Other Current Liabilities

2.7
2.8
2.9

TOTAL LIABILITY

73

ASSETS

B
1

Non-current Assets
(a) Fixed Assets
(i)Tangible Assets
(ii) Intangible Assets
(iii) Capital Work-in-Progress

2.10
2.11
2.12

(b) Non-current Investment

(c) Long Term Loans And Advances
(d) Other Non-current Assets

2.13
2.14
2.15

Current Assets
(a) Inventories
(b) Trade Receivables
(c) Cash And Cash Equivalents
(d) Short Term Loans And Advances
(e) Other Current Assets

476,241,748
3,497,416
55,977,100

130,074,939
NIL
190,953,006

535,716,264

321,027,945

10,000
3,711,120
5,530,118

NIL
NIL
NIL

9,251,238

NIL

4,869,413
682,821
9,591,196
657,593
309,714

NIL
NIL
2,364,899
NIL
NIL

16,110,737
561,078,239

2,364,899
323,392,844

2.16
2.17
2.18
2.19
2.20

TOTAL ASSETS

BIBLIOGRAPHY:

Sudhindra Bhat. (2008). Financial Management Principles and Practice.(VOL II).

Excel Books. New Delhi

74

A Vinod. (2011). Management Accounting. Calicut University Central Co-

operative Stores Ltd. Kerala

T N Srivastava, Shailaja Rego. Statistics for Management. Tata McGraw-Hill

Publishing Company Limited. New Delhi

M Y Khan, P K Jain. Financial Management Text, Problems and Cases (VOL V).

Tata McGraw-Hill Publishing Company Limited. New Delhi

Dr. S N Maheshwari, Dr. S K Maheshwari, Sharad K Maheshwari. A Text Book of

Accounting for Managers. (VOL II). Vikas Publishing House Pvt Ltd.
www.ajhospitalandresearchcentre.com

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