Executive Summary
Introduction
Literature review
Statement of Problem
Executive Summary
As we know paper meets the basic needs for modern society by contributing to
Mumbai. The Companys object is to manufacture of paper, pulp and other raw
wrapping papers etc. The company is one Indias premier paper manufacturers
and also manufacturers optical fiber cables and jelly filled telecom cables to
cater to the requirements of the countries telecom sector. West coast has won 13
and other organizations. It has also been awarded ISO 9001: 1994 certification
consistency.
know as well as to show the financial soundness i.e. position and operation of
the company. The Financial analysis of this report will show the Strength and
and profitability of the firm with the help of Ratio Analysis. Ratio Analysis is
widely used to analyze the solvency, liquidity, and profitability of the firm.
Interpretations are drawn through the sources of primary and secondary data.
Graphs, diagrams, tabulation methods are used to analyze and interpret the data
collected.
improve its liquidity and profitability position. However turnover ratios and
OBJECTIVES OF STUDIES
INTRODUCTION
When we observed the financial statements comprising the balance sheet and the
profit and loss account is that they do not give all the information regarding the
financial operation of a firm, they provide some extremely useful information to the
extent the balance sheet shows the financial position on a particular date in terms of
structure of assets, liabilities and owners equity and profit and loss account shows
the result of operation during the year. Thus the financial statements will provide a
order to learnt about the firm from a careful examination of its financial statements
Meaning:
ratios are used as a yardstick for evaluating the financial condition & performance
of a firm.
The idea of ratio analysis was introduced by Alexander Wall for the first time
in 1919. Ratios are quantitative relationship between two or more variables taken
from financial statements. This relationship can be expressed as (i) Percentages (ii)
statement so that the strengths & weaknesses of a firm as well as its historical
other. For example current assets and current liabilities, capital and long term debt,
Whole taking managerial decision the ratio of such items reveal the
shareholders, management, and all other people who deal with company.
1. Analyze financial statement: Ratio analysis the important tool available for
analyzing the financial statement i.e. profit and loss account of balance sheet.
Ratio tells the whole story of changes in the financial condition of the business.
firm comparison. Ratio highlights the factors associated with successful and
unsuccessful firms. They also reveal strong firms and weak firms over-valued
comparison of the performance of the different divisions of the firm. The ratios
are helpful in deciding about their efficiency or otherwise in the past and likely
period of time a firm or industry develops certain norms that may indicate
easily evaluated with the help of various accounting ratios like current ratio,
liquid ratio, debt equity ratio and net profit ratio etc. such an evaluation enables
business.
presented in balance sheet and profit and loss account is simplified, summarized
understandable for example gross profit ratio, net profit ratio, operating ratio
etc.
the business only when they are compared with the past results of the business
provides a glimpse of the past performance and forecasts for future may not be
correct since several other factors like market conditions, management policies,
suffer from number of limitation, the ratios derived there from, therefore, are
also subject to those limitations. For example, non financial changes though
important for the business are not revealed by the financial statements. If the
the future profitability of the company but this cannot be judge by having a
has choice about the accounting policies. Different accounting policies may be
of deferred revenue expenditure, etc. The comparison of one firm with another
on the basis of ratio analysis without taking into account the fact of companies
3. Ratios alone are not adequate: Ratios are only indicators; they cannot be
taken as final regarding good or bad financial position of the business. Other
things have also to be seen. The value of a ratio should not be regarded as good
4. No fixed standards: No fixed standards can be laid down for ideal ratios.
are twice the current liabilities. However, in case of those concerns which have
adequate arrangements with their bankers for providing funds when they
Financial analysis is an individual matter and value for a ratio which is perfectly
acceptable for one company or one industry may not be at all acceptable in case
of another.
5. Ratios are a composite of many figures: Some cover a time period, others
are at an instant of time while still others are only averages. A balance sheet
figure shows the balance of the account at one moment of one day.
Standard of Comparison
Time series analysis: When financial ratios over a period of time are
one firm with some selected firms in the same industry at the same point in
the firm.
of a firm, its ratio may be compared with average ratios of the industry of which
the firm is a member. This sort of analysis, known as the industry analysis, helps
to ascertain the financial standing and capability of the firm vis--vis other firm
in the industry. Industry ratios are important standard in view of the fact that
each industry has its characteristics which influence the financial and operating
relationships.
Pro Forma Analysis: Sometimes future ratios are used as the standard of
comparison. Future ratios can be developed from the projected or pro forma,
financial statements. The comparison of current or past ratios with future ratios
shows the firms relative strengths and weakness in the past and the future.
years. It gives an indication of the direction of change and reflects whether the
over a time.
CLASSIFICATION OF RATIOS:
Ratio can be classified into different categories depending upon the basis of
classification.
TRADITIONAL CLASSIFICATION:
statement to which the determinants of a ratio belong. On this basis the ratio could
be classified as,
Composite ratios
However the above basis of classification has been found to be crude &
unsuitable because analysis of balance sheet & income statement cannot be done in
and solvency of the business. In order that ratio serves as a tool for financial
analysis,
1) Liquidity ratio
3) Turnover ratio
4) Profitability ratio
In this project, it considered all the following ratios for WCPM ltd
Dandeli for calculation. To know the reason for decline in profits and give
suggestion to overcome the problems. This also includes the theoretical aspects
1. Current Ratio
2. Quick Ratio
1. Debt Ratio
3. Proprietary Ratio
a. Return On Investment
b. Return on Equity
LITERATURE REVIEW
Marketing Reports, the Indian paper industry is already growing at 5 per cent
compared to the 3 per cent annual growth rate in the rest of the world. Other
sources such as the IPP Star Industry Survey of the Indian Printing Industry project
even higher growth rates for paper consumption in India.The paper industry is
consolidation and restructuring measures. The strategies of the major Indian players
JK Paper
JK Paper Ltd has reported an 8 per cent increase in its net profit at Rs 8.65 crore for
the companys third quarter ending March 31 against Rs 8.01 crore in the
corresponding period last year. The companys total income grew by 17.77 per cent
BILT
Ballarpur Industries Ltd in April 2006 reported 27 per cent increase in consolidated
profit after tax for the third quarter ended March 2006. The companys profit after
tax for the quarter under review stood at Rs 56.06 crore as against Rs 44.21 crore in
the corresponding quarter in the previous financial year, an increase of 26.8 per
cent. The consolidated revenue during the quarter stood at Rs 468.39 crore as
against Rs 393.02 crore in the same period last year, up 19.18 per cent.
AP Paper
Mills (AAPM) with a price target of Rs 224. APPM is already showing positive
results of its on-going Rs 635 crore expansion program begun in Q1of FY05. The
expansion will enable the company to double its EBTIA margins to around 26.2 per
cent in FY08. It is expected that a good increase in margins will result in a CAGR
growth of 38 per cent in profit after tax from FY05 to FY08. Sales growth of 15.2
per cent, improved return ratios on capital employed of 14.7 per cent, and return on
During the year under review, the company earned a net profit of Rs 42.73 crore on
a turnover of about Rs 525 crore, when its total production touched around
1,76,000 tons of writing and printing paper, and duplex board. Of the total
production, duplex board would be about 67,000 tons. Last year, it produced about
1,73,000 tons, including duplex board of the same quantity. (Source: www. Indiainfoline.com)
Raw Materials
Raw materials account for nearly 40 to 50% of the total cost of production for
paper. The cellulose fibre sourced from softwoods, bamboo, agro-residues or from
paper industry is the increased cost of production. The cost of capital, coal and
power make the Indian paper 25% to 30 % costlier than the paper produced
in other countries.
Cost of production
86.5
Raw Material
48.8
Wages
6.8
Other Costs
8.3
Selling Cost
5.4
Administrative
8.9
Operating Profit
-0.8
Impact Analysis
The impact on the paper sector has been marginal. There has been no change in
customs duty of newsprint and paper & paperboards. The excise duty on the
16% and would affect their bottomlines. The impact of imposition of 7.5% MAT
Courtesy: Indiainfoline
Management Problem:
Company wants to know the reason for decline of profit for last 5 years,
Research Problem:
To study financial performance of West Coast Paper Mills Limited and find
The purpose of the study is to find out the financial performance of the firm for
last 5 years through ratio analysis and their by suggest the company to take better
Scope of the study is limited to financial aspects of West Coast Paper Mills Ltd
Dandeli.
Industry profile
Organization profile
Organization chart
INDUSTRY PROFILE
Paper History
Paper has a long history beginning with the ancient Egyptians and continuing to
the present day. For thousands of years, hand made methods dominated and then,
during the 19th century, paper production became industrialized. Originally intended
purely for writing and printing purposes, a wide variety of paper grades and uses
3200 BC
Paper derives its name from papyrus the material used by ancient Egyptians,
Greeks and Romans. Papyrus, however, is only one of the predecessors of paper
that together are known by the generic term tapa and are made mostly from the
105 AD
Chinese invented the paper making from textile waste using rags. Later Chinese
paper, and paper protected against ravages by insects, but they had great problems
satisfying the growing demands for paper for governmental administration. They
14th century
In the course of rapid expansion of trade, more and more merchants dealt in the
commodity called paper that was growing in importance for public and
intellectual life.
1980 0nwards
GLOBAL OVERVIEW:
A majority of global market for paper & paperboard was dominated by North
America (23 percent), Western Europe (16 percent), & Asia (33 percent). In the
global paper consumption was estimated at 360 mn tones 2004. Writing & printing
During this period, India has also emerged as the second most preferred
US US India
Mexico India US
Poland UK UK
Germany Germany
India France
UK Australia
In industrialized countries, like in the United States (322 kilograms per capita
per year), Western Europe (around 220 kilograms per capita of the per year).
Industrialized nations, consume 87 percent of the worlds printing & writing papers.
few years.
principal markets are China, Japan, India, Malaysia, Singapore, and Thailand. The
Malaysia is second with 101kgs. Interestingly the market growth rates are varying
by grades.
The first paper mill in India was set up at Sreerampur, West Bengal, in the
year1812. India is currently the 15th largest paper producing country. The paper
secondary fibre, bast fibres and market pulp). Their contribution in the
There are, at present, about 515 units engaged in the manufacture of paper and
POSITION:
The Indian paper industry is the fifteenth largest in the world in terms of
The total capacity of the Indian paper industry was estimated at 6.1 mn TPA
(excluding newsprint).
GLOBAL SHARE:
India accounted for 4.7 per cent of the Asian and 1.5 per cent of the global paper
consumption.
EMPLOYMENT:
The industry provided jobs for more than 1.3 mn people, contributing about
CONSUMPTION:
Indias per capita consumption was around the lowest among developing nations
GROWTH:
The Indian paper industry demonstrated secular annual volume growth at about
six per cent over the last five years, broadly mirroring the Indian GDP growth.
INDUSTRY CHARACTERISTICS
CYCLICAL:
FRAGMENTED:
There are about 600 paper mills in India with installed capacities ranging from
The Indian paper industry generated a return of only about 11 per cent on its
CLASSIFICATION:
Paper manufacturers derive their raw material from wood, waste paper, and
agricultural sources. A majority of the wood- based producers are large players
while most medium and small players are based on recycled fiber or agro-based
raw materials.
ENVIROMENT UNFRIENDLY:
The perception is that the paper industry destroys the green cover in its pursuit of
raw material, depletes coal reserves to generate power, and pollutes natural water
resources through the release of harmful chemicals (chlorine and compounds). The
for four years, which is felled in the fifth and simultaneously replenished.
PRODUCT CLASSIFICATION
Paper is classified into two heads (based on its end use) writing/printing,
industrial and specialty grades. The industrial variety accounts for high volumes
and holds the potential for above- average growth; the writing/printing category
provides high margins; specialized grades provide increasing volumes and high
realization.
subdivided into Duplex Board with Grey Back, White Board and MG
Poster/ Board
meet part of its raw material needs the industry has to rely on imported wood pulp
COMPANY PRODUCTION
(TONNES) 2004
Ballarpur Industries Limited 375000
Tamilnadu 233000
Newsprint & Paper Limited
J K Paper Limited 127000
The West Coast Paper Mill Limited 163714
The Andhra Pradesh Paper Mills 157600
Limited
The Sirpur Paper Mills Limited 83550
Star Paper Mills Ltd 67875
Rama Newsprint 138000
Hindustan Paper Corporation Ltd 320113
Maplitho (WPP) BILT, JK Paper, TNPL, AP Use din copier and printers.
Paper Fastest growing sub segment
in WPP
Coated (WPP) BILT, JK Paper Best quality paper used in
catalogues etc.
Second fastest growing sub
segment in WPP
Bonds (WPP) BILT, JK Paper Smallest and slowest growing
sub segment in WPP
Kraft (industrial) ITC, Star Paper, Used for corrugated boxes and
Seshasayee Paper carry bags
Duplex (industrial) ITC, West Coast, Sirpur Used for small cartons in retail
Consumption
. The scope for growth in consumption is considerable when compared with the
COMPANY PROFILE
The Company was promoted by Shree Digvijay Cement Company Limited, Sikka,
Sikka,
Gujarat State in 1955 and located at Dandeli in Karnataka. The Company was
of paper, pulp and other raw materials. The Company manufactures printing papers,
This Mill is located at Dandeli in the middest of forest area of Uttar Kannada
Pune highway No.4 31kms from Alnavar railway station on Miraj Bangalore
Network.
In 1956 the factory started with an authorized capital of Rs.5 crore and the trial
production commenced with effect from 18th November 1958. Shri Morarji Desai,
Hon. Finance Minister, Union Government has inaugurated the factory on 19th May
The availability of basic raw material like Bamboo and the wood in abundance
and the availability of water in al seasons from the Kali River and the railway link
Bangur- Somani Groups promoted the West Coast Paper Mills Ltd. It is one of the
renounced and reputed companies in the paper industry. It is one of the large- scale
companies in India.
Commencement of 16-5-1959
commercial Production
The mill location was opted as the most suitable and advantageous, Dandeli being
situated in the heart of thick forests on the bank of river Kali. The prospects of
continued supply of forest-based raw materials on the assurance of the then State
and vicinity of rail and road linkages were the major factors that weighed in favour
of Dandeli.
The Company was granted license in December 1964 for 45,000 MT/P.A.
increase the production to 45,000 MT/P.A. The company also implemented the
the license capacity was re-endorsed for 69,000 MT/P.A. in November 1991 on the
basis of actual production. The Paper Industry has been de-licensed from July 1997.
To excel in servicing the growing demands of the paper and paper products
worldwide and enhance the shareholder value with consistent and sustained
performance
OBJECTIVES
quality.
CORPORATE INFORMATION
Registered office
Corporate office
Zonal Offices
QUALITY POLICY
ENVIRONMENTAL POLICY
WCPM is committed to
Recycle critical resources like water, lime, mud and pulp mill fibrous
solid waste.
power.
adopting
environment.
group activities.
TECHNICAL PROCESS
The mill is based on conventional Kraft process using wood as the main raw
material. The wood is Casuarinas, Eucalyptus, Subabul and Acacia. Wood are
chipped in Chippers and fed to digesters for cooking in which cooking chemicals
are added. After cooking the pulp is washed, screened, cleaned, bleached, and
stored. The company has two old streams of Brown Stock Washers and of bleach
plants. 96-95% of chemicals used for cooking process are recovered in the recovery
plant and in the process of this recovery substantial steam is also generated.
The pulp is refined in the Stock Preparation section and treated with sizing
chemicals, dyes and loading materials before being transferred to the Paper
Machine section for manufacturing paper. The company has three machines, which
are of standard design consisting of wire part, press part, and dryer section. The
company has fully equipped finishing and converting sections for rewinding,
Board).
quantity of mill made pulp is also used in top layer to improve the quality and to
The company has gone for process automation and installed Basis weight and
ORGANISATION CULTURE
The West Coast Paper Mills Limited has many value and aspirations such as:
5. The employee/ manager should not hesitate to the risks for the
organizations sake.
8. The interests of others must be given importance than the interest of self in
organization.
MARKET LEADER
1. Leader in MICR cheque paper in India with a market share of about 70 percent.
SWOT analysis:
STRENGTHS OPPORTUNITIES
Know how in wood pulping and Low labor cost and export potential
application
WEAKNESS THREATS
fibres
In the present era of globalization along with projected and sustainable growth of
of the day. The development that meets the needs of the present without
compromising ability, needs and expectations of future generation shall become the
bench mark for a sustained growth. Constant efforts are to be made with efficient
fiber and energy management system to further strengthen and usher in the realm of
The company keeping in view the availability of raw materials in future and its
vision, has embarked upon the expansion and modernization programme with an
outlay of Rs.1100 crore for increased production facilities in its existing mills at
capacity of the plant shall be increased from present production by 1, 26,000 TPA.
The programme will be funded by term loan of Rs. 725 Crores from banks and
institutions and Equity/ Internal accruals of Rs. 375 Crores, totaling to Rs.1100
Crores.
a) Pulp Mill
b) Chemical Recovery
c) Paper Machine
d) Utilities
Complete fiber line of 650 TPD bleached pulp capacity comprising of wood
chipper, chip screen, chip silo, modified batch cooking system, brown stock
New paper machine comprising continuous stock preparation, QCS & DCS
etc.
Power plant comprising two boilers and one turbine to meet additional
The production capacity will go upto 3,00,000 TPA after completion of the said
MILESTONES
YEAR
1955: Promotion of West Coast Paper Mill Limited
Government of India
assured supply of Bamboo from 1989. The Company develops a new technology
that eliminates the need of bamboo in paper making. Recipient of the National
programme of rebuilding of paper machine adopting state of the art technology and
installing modern machinery for the manufacture of value added speciality paper.
develop a new product light weight coated Duplex Board through the use of eco-
1998: Commissioning of a 250 TDP bleach plant to make high bright paper.
Commissioning of one 3.8 MW capacity multi-fuel based Power generating set for
1999: Commissioning of one 4.0 MW Multi-fuel based power generating set with a
2002: Installation of a 100 TPD Duplex Board Machine and 350 TPD Brown Stock
Washing equipments.
SHEER LONGEVITY
West Coast has succeeded and survived across five decades. This has created one of
the most significant industry strength. This comprises rich goodwill, process and
business.
Product mix
West Coast makes al kind of writing, printing and duplex board paper varieties.
Its rich understanding of customer needs has translated into the production of
around 100 kinds of paper. This wide choice de-risks the companys revenues from
comprehensive range makes the company a virtual one-stop shop for consumer
needs .
State Bank of India, Bank of Baroda, Central Bank of India, Syndicate Bank
Canara Bank, Punjab & Sindh Bank, Corporation Bank, Dena Bank, Indian
The company has been certified the ISO 14001 Environmental Management
The company has embarked upon prepatory phase for getting certified to
WCPM sponsoring and supporting of Dandeli Education society, which imparts quality
education to thousands of pupils and students in around Dandeli from the pre- primary
adequate civic facilities and amenities such as roads, lights, water supply, shopping
Rural health services provided to the surrounding needy people of the villages with
The company has also taken up the responsibility of providing drinking water supply to
In addition to these, the Company continues to fund and support Community and rural
1. ITC Bhadrachalam
2. Ballarpur Industries
4. JK Paper Industries
The pay will be given 30 days period for the payment without interest
If the party makes the payment in 15 days then the company will give 3%
cash discount
If the party makes the payment within 21-30 days then there is no cash
If the party makes the payment within 30 days then the company will
provide 15 days grace period for the payment by charging 21% of interest
If the party does not make the payment in 45 days then the company will
decision making
country
timely allocation
Service Ltd.
Technical General
(President ) (President)
Stores Stores account department Deputy General Manager Paper machine Personal
(G.M) Manager
Shift in charge
Workers
Workers
Organizational Chart
Workers
A Study Of Financial Performance Based On RATIOS
(G.M)
Chemical recovery
(G.M)
Converting
(G.M)
Finishing
(G.M)
Stock Preparation
(G.M)
ACCOUNTS DEPARTMENT
Asst. Vice President
A/Cs and Finance
Managers A/Cs
Accounts Assistant
Methodology:
Methodology:
Finance.
Selection of data: From the Annual Reports of the WCPM LTD DANDELI
Period: The Study covers a period of five years data from 2001-02, 2002-
Accounting Ratios.
ANALYTICAL TECHNIQUE:
through Balance sheet, Profit and Loss A/c and interactions with
Management.
The standard for the ratios are suitably modified to prudently reflect the
company.
Findings
Suggestion
Conclusion
1) Liquidity ratios
Liquidity ratio means ability of the firm to meet its current obligation. These ratios
are also termed as working capital ratio or short term solvency ratio. Liquidity
ratios establishing a relationship between cash and other current assets to current
The most common ratios which indicate the extent of liquidity or lack of
it are: (i) Current ratio (ii) quick ratio. Other ratios include cash ratio, interval
Current ratio: This ratio is an indicator of the firms commitment to meet its short-
Current assets
Current liabilities
An ideal current ratio is 2:1. Current assets means those assets which
can, in the ordinary course of business, be converted into cash within a short period
of time, normally not exceeding one year, and include cash and bank balances,
and finished goods, debtors net of provision for bad and doubtful debts, bills
receivable, and pre-paid expenses. The current liabilities defined as liabilities which
year, consist of trade creditors, bills payable, bank credit, and provision for
TABLE-1
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Current Assets 18025.56 16581.26 16791.44 22843.32 20911.42
Note: Bank borrowings from secured loan against current assets (inventories and
GRAPH-1
Interpretation: The current ratio of last five years is less than ideal ratio 3:1, i.e.
fluctuating. This indicates that firms commitment to meet its short liabilities was
not so good. In 2001-02 and 2004-05 the current ratios are good compare to 2002-
and current liabilities. An asset is liquid if it can be converted into cash immediately
or reasonably soon without a loss of value. Cash is the most liquid assets. Other
assets which are considered to be relatively liquid and included in quick assets are
require some time for realizing into cash; their Value also has a tendency to
fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.
financial condition.
Note: Bank borrowings from secured loan against current assets (inventories and
GRAPH-2
Interpretation:
is also fluctuating
2002-03 and 2003-04 where ratio is 0.5. But it is increasing in 2004-05 and 2005-
06. Still overall the quick ratio is not satisfactory, means liquidity position of the
Cash ratio or Absolute liquid ratio or super quick ratio: This ratio is calculated
by dividing the super quick assets by the current liabilities of a firm. The super
GRAPH-3
decline to 6%, where as in 2003-04 and 2004-05 it remains 4%. But in 2005-06 it
increase to 10%. Overall the liquidity position is not good, or indicates that there is
a poor liquidity position of the company and there is poor firms commitment to
Net Working Capital Ratio: The difference between current assets and current
liabilities excluding short term borrowing is called net working capital or net
capital measures the firms potential reservoir of funds. It can be related to Net
assets.
TABLE-4
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
GRAPH-4
Interpretation:
Interpretation: This ratio also fluctuating, overall this ratio is declining only. In
2001-02 38% of total net assets, but in 2002-03 and 2003-04 it declining to
The second category of financial ratio is leverage or capital structure ratio. The
through light on the long-term solvency of a firm as its reflected in its ability to
assure the long term creditors with regard to: (i) Periodic payment of interest
during the period of loan and (ii) Repayment of principal on maturity or in pre-
determined installments at due dates. There are two different, but mutually
dependent and inter-related, types of leverage ratios. First ratio which are based
on the relationship between borrowed funds and owners capital. These ratios
computed from the balance sheet and have many variations such as: Debt equity
Debt Ratio: It expresses out side liabilities i.e. both long -term and short-term in
It is calculated as follows:
Total Debt
= ______________
Capital Employed
Generally creditors will prefer low debt ratio, since lower the ratio, higher the
To magnify earnings or
creditors may reluctant to lend the firm more money unless equity base is
increased.
NOTE:
In WCPM Ltd Dandeli, they are considering the following items for calculation.
TABLE-5
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
TD 16042.94 17552.57 20105.94 22922.02 16587.53
+Value of lease
Capital Employed 29502.27 34155.83 39019.03 43767.37 38831.03
(TD+VL+NW)
Debt ratio 0.54 0.51 0.52 0.52 0.43
NOTE: TD= Total Debt, VL= Present Value of lease, NW= Net Worth
GRAPH-5
total capital employed but in 2005-06 it is only 43%. It indicates that the companys
reliance on debt is decreased year by year. This shows that the company has less
Debt equity ratio: The relationship between borrowed funds and owners capital is
shown by the debt equity ratios. These ratios reflect the relative claims of creditors
and shareholders against the assets of the firm. Alternatively, this ratio indicates the
When a company obtains the use of fixed assets under long term lease
TABLE-6
(Amount in Lakhs)
Year 2201-02 2002-03 2003-04 2004-05 2005-06
TD+VL 16042.94 17552.57 20105.94 22922.02 16587.53
NW+DTL 13459.33 16603.26 18913.09 20845.35 22243.50
DE ratio 1.19 1.06 1.06 1.1 0.75
TD= Total Debt, VL= Present Value of lease, DTL= Deferred Tax Liability,
Interpretation: The debt proportion declining. In 2001-02 the debt is 1.19 rupees
as compare to 1 rupee in equities i.e. debt proportions are more than equities. In
2002-03 and 2003-04 the debt ratio are same, it is decline to 1.06, in 2004-05 it
increase to 1.1 times. In 2005-06 it declined to 0.75 i.e. 0.75 paisa as debt in
total capital employed. The WCPM Ltd Dandeli depends more on internal sources
than on external sources i.e. it indicates that company depends upon insiders i.e. on
shareholders fund & and it also indicates that company is having sound financial
position.
assets. This is called the proprietary ratio. The ratio indicates the proportion of total
Proprietors fund
Total Assets
TABLE-7
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Proprietors fund 13459.33 16603.26 18913.09 20845.35 22243.5
Total Assets 34521.95 40676.57 44941.06 49054.66 44841.56
Proprietary Ratio 0.39 0.41 0.42 0.43 0.5
GRAPH-7
Interpretation: The proprietary ratio is increasing from last five years i.e. in 2001-
ratios are computed from information available in the profit and loss account. The
soundness of a firm, from the view point of long-term creditors, lies in its ability to
service their claims. The interest coverage ratio shows the number of times the
interest charges covered by funds that are ordinarily available for their payment.
Since taxes are computed after interest, interest coverage is calculated in relation to
EBDIT
Interest Coverage Ratio=______________________
TABLE-8
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
EBDIT 7494.75 8139.12 7377.11 7387.46 8710.49
Interest + Lease 2560.45 1915.33 1320.05 1738.65 1788.06
Charged
Ratio 2.93 4.25 5.59 4.25 4.87
Note: The West Coast Paper Mills Ltd Dandeli also paying lease rental, therefore
GRAPH-8
Interpretation: In 2001-02 the coverage ratio is very low i.e. 2.93, in 2002-
3) Turnover ratio
Funds of creditors and owners are invested in various assets to generate sales
and profits. The better the management of assets, the larger the amount of sales.
Turnover ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called Activity ratios.
Turnover ratios indicate the speed with which assets are being converted or
Inventory Turnover ratio: This ratio indicates the number of times inventory is
replaced during the year. It measures the relationship between the cost of goods
levels of raw material inventory and work in process inventory held by the firm on
an average. The raw material inventory should be related to material consumed, and
Material Consumed
Raw material turnover ratio = Average raw material inventory
Cost of production
Work in process turnover =
Average work in process
exceed 2-4 months, consumption of the year. The finished goods should not exceed
2-3 months, sales and for WIP should not exceed15-30 days, cost of sales.
TABLE-9(i)
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Material Consumed 10867.29 11027.23 13516.12 18077.88 20107.49
Avg R.M Inventory 1972.53 2268.02 2580.4 3529.59 4093.24
Turnover Ratio
Interpretation: The ratios are fluctuating, in 2001-02 the ratio is 5.51 and holding
of raw material increases. It is good to the firm because they are purchasing raw
material more to store it, therefore holding period of raw material is increasing and
it leads to increase the sales of the firm. According to general guidelines the ratios
are good
TABLE-9 (ii)
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Cost of Production 28074.65 32650.25 36427.4 41252.43 46709.73
Avg. Work in Progress 125.25 195.48 219.99 449.6 690.34
W.I.P.T.Ratio 224.15 167.02 168.59 91.75 67.66
W.I.P. Holding period 1.63 2.19 2.17 3.98 5.39
(Days) (39hrs) (52hrs) (52 hrs) (96 hrs) (130hrs)
GRAPH- 9(ii)
Interpretation: The ratio is decreasing continuously, i.e. 224 to 67.66. i.e. work in
good for firm because the holding period is increasing means their efficiency in
to sales
Cost of Goods sold = Cost of Production + Opening Stock of Finished Goods Less
TABLE-9(iii)
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Cost of goods sold 30257.54 33027.72 36209.34 39597.68 47878.38
Holding period 33 22 20 27 24
(days)
GRAPH-9 (iii)
Debtors Turnover Ratio: Debtors turnover is found out by dividing credit sales by
average debtors. There are three ratios to judge the quality or liquidity of debtors.
Debtor turnover indicates the number of times debtors turnover each year.
Credit sales
Debtors turnover =
Average debtors
(b) Collection period: The average number of days for which debtors remain
365
Average collection period =
Debtors turnover
(c) Aging schedule: the average collection period measures the quality of debtors in
an aggregative way. Through aging schedule breaks down the debtors according to
NOTE:
1) Net Sales = sales --- Exercise Duty --- Inter Division Transfer
But From 2004-05 the Company discontinued Inter Divisions Transfer as per ICAI
AS-9
Opening + Closing
2) AVERAGE DEBTORS = _______________
2
TABLE -10
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Credit Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Average debtors 4654.92 4526.79 4025.61 4002.42 3918.43
D.T.R 7.51 8.69 12.79 12 13.22
Debtors Collection 49 42 34 30 28
Period (days)
Note: D.T.R= Debtors Turnover Ratio
GRAPH-10
AGING schedule
Interpretation: The ratios are increasing year by year. In 2001-02 7.51 where in
2005-06 it increases to 13.22. Collection period of WCPM is improving year by
year i.e. days are decreasing, i.e. from 49 days to only 28 days. It shows the
payments of debtors are very prompt. Through aging schedule the collection period
of within 6 month is decreasing and over 6 month collection period goes on
increasing.
speed with which the payments for credit purchases are made to the creditors. The
Credit Purchase
= ____________________
Average creditors
A Higher creditors turnover ratio or Lower credit period enjoyed ratio. Signifies
that the creditors are being paid promptly thus enhancing the credit worthiness of
the company.
TABLE- 11
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Credit purchase 20978.63 23217.25 26950.94 34646.41 35296.21
Average Creditors 7077.34 7387.52 8126.72 8359.19 8618.05
C.T.R 2.96 3.14 3.32 4.14 4.1
Creditors Payment 123 116 110 88 89
period in days
Note: C.T.R= Creditors Turnover ratio
Assumption:
parts, chemicals, coal and oil, assumed that the consumption of above
GRAPH-11
Interpretation: The ratios are increasing. In 2001-02 2.96 times and now it
increase to 4.1 times. The creditors payment period is decreasing i.e. in 2001-02 is
signifies the creditors are being paid promptly. It shows companies are credit
worthiness.
firm should manage its assets efficiently to maximize sales. The relationship
between sales and assets is called asset turnover. Several asset turnover ratios can
be calculated.
Net Sales
Net assets turnover =
Net assets
Net assets=Net fixed assets + Net current assets (Current Assets less Current
Liabilities)
TABLE-12
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Net Assets 26735.97 32002.69 34093.22 39292.38 34226.39
Net Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Net Assets Turnover 1.31 1.23 1.27 1.22 1.51
Ratio
GRAPH-12
Interpretation: The ratios are fluctuating. In 2001-02 the ratio is 1.31 and in 2002-
However in 2005-06 it increases to 1.51. I.e. one Rupee of investment they are
Net Sales
Total assets turnover =
Total assets
TABLE-13
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Total Assets 34521.95 40676.57 43681.31 49054.66 44841.56
Total Assets turnover 1.01 0.97 0.99 0.96 1.16
Ratio
GRAPH-13
Net Sales
Fixed assets turnover =
Net fixed assets
Net Sales
Current assets turnover =
Current assets
TABLE-14
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Fixed Assets 16496.39 24095.31 26889.86 26211.34 23930.14
F.A.T.R 2.12 1.63 1.61 1.83 2.17
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-14
TABLE-15
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Current Assets 18025.56 16581.26 16791.45 22843.32 20911.42
C.A.T.R 1.94 2.37 2.57 2.1 2.48
Note: C.A.T.R= Current Assets Turnover Ratio
GRAPH-15
making better efficiency in utilization of current assets. The reciprocal of the ratio
of 5 years are 0.52, 0.42, 0.39, 0.48 and 0.40 respectively. It means a generating a
sale of one Rupee, the company needs 0.52, 0.42, 0.39, 0.48, 0.40 paisa
(net working capital) to sales. This ratio indicates the efficiency or inefficiency in
Net Sales
TABLE-15
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Net Working Capital 10239.58 7907.38 7203.36 13081.04 10296.25
GRAPH-15
Interpretation: The ratios are fluctuating in 2001-02 the ratio is 3.41 times, in
3.67.And in 2005-06 it become 5.03. Overall this ratio indicates that working
capital has been effectively utilized in making sales except in 2004-05 and in 2001-
4) Profitability Ratio
INTRODUCTION: A company should earn profit to survive and grow over a long
period of time. Profit is the ultimate output of company and company will have no
time (usually one year). Profit is the ultimate output of a company, and it will
of the company. Besides management of the company, creditors and owners also
interested in the profitability of the firm. Creditors want to get interest and
their investment. Generally, two major types of profitability ratios are calculated:
MANAGEMENT
CREDITORS
OWNERS
The profitability ratios based on sales are an important indicator of the operational
sales. This ratio indicates the average spread between the cost of good sold and the
sales revenue.
Gross profit
Gross profit ratio= * 100
Net Sales
TABLE-16
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Gross profit 4700.97 6323.84 6955.96 8165.35 3934.05
Gross Profit Ratio 13.45% 16.07% 16.11% 17% 7.59%
GRAPH-16
products. This ratio is the overall measure of the firms ability to turn each rupee
Net profit
Net profit ratio = * 100
Net Sales
TABLE-17
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Profit after tax 3186.47 3604.18 3234.06 3066.1 3202.94
Net profit ratio 9.12% 9.16% 7.5% 6.38% 6.18%
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-17
goes on decreasing
except in 2002-03. In
the profit margin (EBIT to sales) ratio. This ratio is computed by dividing operating
TABLE-18
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Raw material consumed 10867.29 11027.23 13516.12 18077.88 20107.49
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Raw material 31% 28% 31% 38% 39%
Consumption ratio
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-18
Interpretation: The Ratios are goes on increasing. In 2001-02 the ratio is 31%, but
in 2005-06 it increase to 39%, due to high cost spend on acquiring wood i.e. they
TABLE-19
( Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Manufacturing Expenses 11383.54 14102.38 15460.52 16626.84 17322.83
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Ratio 32.56% 35.84% 35.82% 34.62% 33.43%
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-19
Interpretation: The ratio of last five years is fluctuating year by year, but overall it
TABLE-20
GRAPH-20
Interpretation: The ratio goes on decreasing from last five years. But in 2005-06
it increases from 5.16% to 5.33%. It is good to the business. They are maintaining
properly.
Salaries to employee
(iv) Salaries to employee = * 100
Sales
TABLE-21
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Expenses
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-21
In 2001-02 the sales of one rupee 10.83% of that spent on sales, but it declines to
TABLE-22
( Amount in Lakhs)
GRAPH-22
Interpretation: The
of sales, in 2002-03 it
only and it shows in 100 rupee of sales 92.41 rupees spent for expenses, only 7.59
EBIT
= ________ * 100
Net Sales
TABLE-23
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
EBIT + lease charge 6285.99 6316.58 5688.61 5495.1 5015.4
Net Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Operating Profit Ratio 17.98% 16.05% 13.17% 11.44% 9.68%
GRAPH-23
means for 100 Rupees of sale the operating profit is Rupees 9.68.The ratio are
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Profit after Tax 3186.47 3604.18 3234.06 3066.1 3202.94
Capital employed 29502.27 34155.83 39019.03 43767.37 38831.03
Return on Investment 10.8% 8.97% 8.29% 7.01% 8.25%
ratio
SOURCE: ANNUAL REPORTS OF COMPANY
Interpretation: The ROI ratio goes on declining. In 2001-02 the ratio was
Overall the ratios are declining i.e. 100 Rupee of investment the return is Rs 8.25,
means the company had not use the capital employed efficiently.
profits. The rate of dividend is not fixed; the earnings may be distributed to
PAT
Return on equity =
NW
Return on equity indicates how well the firm has used the
resources of owners. The shareholders equity or net worth will include paid up
share capital, share premium and reserves and Surplus less accumulated losses. Net
worth can also be found by subtracting total liabilities from total assets.
Return on Equity:
TABLE-25
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Profit after Tax 3186.47 3604.18 2844.17 3066.1 3202.94
Net Worth 13459.33 16603.26 18913.09 20845.35 22243.50
Return on Equity Ratio 23.67% 21.71% 15% 14.71% 14.40%
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-24
14.40%. It means 100 Rupees of Share holders fund 0nly Rupees 14.40
investment can also be measured in many other ways. One such measure is to
calculate the earning per share. The earnings per share is calculated by dividing the
profit after taxes by the total number of common (ordinary) shares outstanding.
how much is paid as dividend and how much is retained in the business. But as a
TABLE-26
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Profit after Tax 3186.47 3604.18 2844.17 3066.1 3202.94
Number of equity share 89.407 89.407 89.407 89.407 89.407
Earning per share 36 40 32 34 36
GRAPH-26
Dividend per share (DPS): The net profits after taxes belong to shareholders. But
the income which they really receive is the amount of earnings distributed as cash
TABLE-27
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Earnings Paid to 581.14 759.96 894.07 1341.10 1341.10
shareholders
Number of equity shares 89.407 89.407 89.407 89.407 89.407
outstanding
Dividend per Share 6.50 8.50 10 15 15
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-27
increase to Rs 8.5 and in 200304 it increase to Rs 10. In 2004-05 and 2005-06 DPS
Dividend pay out ratio: The dividend pay out ratio is DPS divided by the EPS.
TABLE-28
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Earning per share 36 40 32 34 36
Dividend per Share 6.50 8.50 10 15 15
Dividend Payout ratio 18.05% 21.25% 31.25% 44.12% 41.67%
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-28
2001-02 the dividend payout ratio is 18.05%, in 2002-03 the ratio is 21.25%, in
it decrease to 41.67%. It means out of Rupees 100 earning 41.67 Rupees is given as
dividend and remaining 58.33 Rupees as retained in the business for future
requirement.
FINDINGS
companys point of view. It shows that it is not good position to meet the
2. The liquidity ratio is not according to standard ratio (1:1) and it is not good
from companys point of view. The ratio in the year 2005-06 is 0.63.
3. The cash ratio is also low in all 5 years. When compared to standard ratio
(0.5:1) and it shows that there is poor firms commitment to meet its short
term liabilities. The company should depend upon bank borrowing only.
The ratio in the year is 2005-06 is 0.1 i.e. 10% of current liabilities.
4. The debt ratio and Debt equity ratio both are showing decreasing trend in all
sources, a more internal funds means the shareholders fund, it shows that
the company s financially strong (i.e., a low debt company). Debt ratio in
becoming financially strong and indicates how much share funds are
invested in total assets of a firm. It also shows that the balanced risk on both
parties. The ratio in the year 2005-06 is 0.5, i.e. 1 Rupee of Total Assets
6. The Coverage ratio shows improving and still they have to improve their
ratio. It shows the WCPM paying more interest from last years.
7. The inventory turnover ratios are good according to the general guidelines.
But from time series analysis the ratios are decreasing i.e. holding periods
8. The debtor turnover ratio is good. It shows the collection of debtors is very
companys point of view they are not taking credit benefits provided by
creditors.
10. In the year 2005-06 Net Assets turnover ratio 1.51 , Total Assets turnover
ratio is1.16, Fixed Assets turnover ratio is 2.17, Current Assets turnover
ratio is 2.48. it shows assets are properly utilized i.e. optimum utilization of
resources. But compare to current assets fixed assets are not efficiently
used.
11. It shows working capital is increasing. It shows that they are effectively
12. It shows Gross Profits are declining due to firms inability to purchase raw
13. It Shows net profit are declining due to heavy increase in cost of raw
expenses, and cost of goods sold expenses are increasing, due to increase in
cost of input. The operating profits are declining due to above reason.
of total capital employed. Overall the ratios are declining i.e. 100 Rupee of
investment the return is Rs 8.25, means the company had not use the capital
employed efficiently.
16. It shows return on equity also declining due to high cost of production .In
18. It shows dividend pay out increasing It means out of Rupees 100 earning
SUGGESTION
CONCLUSION
The WCPM Ltd is a high capital invested company but with the low
industry.
shareholders funds.
BALANCE SHEET
Application of funds
Fixed Assets
Gross block 22721.96 28468.78 35761.40 36820.89 37848.82
Depreciation 8521.47 9806.45 11478.99 13077.50 15110.52
Net Block 14200.49 18662.33 24282.41 23743.39 22738.30
Capital Work In 122.53 2212.66 87.74 598.59 10.73
Progress
14323.02 20874.99 24370.16 24341.98 22749.03
Assets taken on lease 2173.37
Gross Block 8654.82 8654.82 8654.82 8654.82
Depreciation 5434.50 6135.12 6785.46 7473.71
Net Block 2173.37 3220.32 2519.698 1869.36 1181.11
16496.39 24095.31 26889.86 26211.34 23930.14
Investments 2766.31 2153.14 4925.81 4474.99 4604.64
Current Assets, Loans,
Advances and Deposit
Inventories 8622.12 9343.00 9581.05 13810.19 11214.67
Sundry Debtors 5010.89 4042.69 4008.53 3996.30 3840.56
(Amount in Lakhs)
For the year ended 31st 2001-02 2002-03 2003-04 2004-05 2005-06
March
Income
Sales 47693.23 51858.44 57728.10 54989.64 59515.15
Income from lease 248.07 108.19 67.52 0.14 0.12
Other income 490.13 277.85 440.53 457.38 1586.73
Total 48431.43 52244.48 58236.15 55447.16 61102.00
EXPENDITURE
Raw Material coast 10781.42 10972.62 13521.70 17613.09 20090.79
Inter division transfer 7309.33 6778.86 8326.40 __ __
Manufacturing 11383.54 14102.38 15460.52 16626.84 17322.83
expenses
Payment to Employee 3785.54 3783.39 4616.28 4382.39 4509.94
Administrative 3404.16 3881.93 3697.57 3358.54 3606.02
expenses
Excise duty 5425.39 5728.02 6236.40 6956.61 7702.72
Interest and financing 14077.59 773.48 320.23 860.88 947.28
Bibliography
BIBLIOGRAPHY
I.M. Pandey
S.N. Maheshwari
WEB SITE:
www.westcoastpaper.com
www.answers.com
www.indianinfoline.com
www.idbicapital.com