CHAPTER –I

1.1.INTRODUCTION TO THE STUDY

Financial performance Analysis is the process of determining the operating & financial
characteristics of a firm from accounting data & financial statement. The goal of such analysis
is to determine efficiency & performance of the firm management, as reflected in the financial
records and reports. Its main aim is to measure the firms liquidity, profitability and other
indications that business is conducted in a rational and orderly way. The basic financial
statement
Of the various reports that the companies issue to their shareholder, the annual report is
by far the most important. Two types of information are given in this report, first there is a text
that describes the firms operating results during the past year and discusses new development
that will affect future operations. Second there are few basic financial statements –the income
statement, the balance sheet, the statement of retained earnings and the sources and uses of
funds statements.
The financial statement taken together give an accounting picture of the firm‟s
operation and financial positions
Financial performance analysis is the process of determining the significant operating
and financial characteristics of a firm accounting data. Financial performance analysis is the
judgemental process, which aims to evaluate the current and past financial positions and the
result for determining the best possible estimates and predictions about the future conditions.
Financial performance analysis is the process of identifying the final strength and
weakness of the firm by properly establishing relationships between the items of the balance
sheets and the profit and loss account. Financial analysis can be undertaken by the
management of the firms or by other parties outside the firm via owners, creditors, investors
and other. The nature of analysis will differ depending on the purpose of the analysis.

Financial performance analysis depends to a very large extend on the use of ratios.
Thus a direct examination of the magnitude of two related items is somewhat enlightening.
But the comparison is greatly facilitated by expressing the relationship as a ratio. Thus,
performance analysis of financial statement means such a treatment of the information
contained in the financial statement as to afford a full diagnosis of the profitability and
financial position of the firm concerned.
BALANCE SHEET:-

Balance Sheet, or Statement of Financial Position, is directly related to the income statement,
cash flow statement and statement of changes in equity. Assets, liabilities and equity balances
reported in the Balance Sheet at the period end consist of:
 Balances at the start of the period;
 The increase (or decrease) in net assets as a result of the net profit (or loss) reported in
the income statement;
 The increase (or decrease) in net assets as a result of the net gains (or losses) recognized
outside the income statement and directly in the statement of changes in equity (e.g.
revaluation surplus);
 The increase in net assets and equity arising from the issue of share capital as reported in
the statement of changes in equity;
 The decrease in net assets and equity arising from the payment of dividends as presented
in the statement of changes in equity;
 The change in composition of balances arising from inter balance sheet transactions not
included above (e.g. purchase of fixed assets, receipt of bank loan, etc).
 Accruals and Prepayments
 Receivables and Payables

CLASSIFICATION OF COMPONENTS:-
Statement of financial position consists of the following key elements:

ASSETS:-
An asset is something that an entity owns or controls in order to derive economic
benefits from its use. Assets must be classified in the balance sheet as current or non-current
depending on the duration over which the reporting entity expects to derive economic benefit
from its use. An asset which will deliver economic benefits to the entity over the long term is
classified as non-current whereas those assets that are expected to be realized within one year
from the reporting date are classified as current assets.
Assets are also classified in the statement of financial position on the basis of their nature:-

 Tangible & intangible: Non-current assets with physical substance are classified as
property, plant and equipment whereas assets without any physical substance are
classified as intangible assets. Goodwill is a type of an intangible asset.

 Inventories balance includes goods that are held for sale in the ordinary course of the
business. Inventories may include raw materials, finished goods and works in progress.

 Trade receivables include the amounts that are recoverable from customers upon credit
sales. Trade receivables are presented in the statement of financial position after the
deduction of allowance for bad debts.

 Cash and cash equivalents include cash in hand along with any short term investments
that are readily convertible into known amounts of cash.

LIABILITIES:-

A liability is an obligation that a business owes to someone and its settlement involves
the transfer of cash or other resources. Liabilities must be classified in the statement of
financial position as current or non-current depending on the duration over which the entity
intends to settle the liability. A liability which will be settled over the long term is classified as
non-current whereas those liabilities that are expected to be settled within one year from the
reporting date are classified as current liabilities.

Liabilities are also classified in the statement of financial position on the basis of their nature:

 Trade and other payables primarily include liabilities due to suppliers and contractors
for credit purchases. Sundry payables which are too insignificant to be presented
separately on the face of the balance sheet are also classified in this category.

 Short term borrowings typically include bank overdrafts and short term bank loans
with a repayment schedule of less than 12 months.

 Long-term borrowings comprise of loans which are to be repaid over a period that
exceeds one year.
EQUITY:-
Equity is what the business owes to its owners. Equity is derived by deducting total
liabilities from the total assets. It therefore represents the residual interest in the business that
belongs to the owners.

Equity is usually presented in the statement of financial position under the following
categories:

 Share capital represents the amount invested by the owners in the entity

 Retained Earnings comprises the total net profit or loss retained in the business after
distribution to the owners in the form of dividends.

 Revaluation Reserve contains the net surplus of any upward revaluation of property,
plant and equipment recognized directly in equity.

RATIONALE - WHY THE BALANCE SHEET ALWAYS BALANCES:-

The balance sheet is structured in a manner that the total assets of an entity equal to the
sum of liabilities and equity. This may lead you to wonder as to why the balance sheet must
always be in equilibrium.

Assets of an entity may be financed from internal sources (i.e. share capital and profits)
or from external credit (e.g. bank loan, trade creditors, etc.).

Since the total assets of a business must be equal to the amount of capital invested by
the owners (i.e. in the form of share capital and profits not withdrawn) and any borrowings,
the total assets of a business must equal to the sum of equity and liabilities.

This leads us to the Accounting Equation: Assets = Liabilities + Equity

PURPOSE & IMPORTANCE:-

Statement of financial position helps users of financial statements to assess the
financial health of an entity. When analyzed over several accounting periods, balance sheets
may assist in identifying underlying trends in the financial position of the entity. It is
particularly helpful in determining the state of the entity's liquidity risk, financial risk, credit
risk and business risk.
 When used in conjunction with other financial statements of the entity and the financial
statements of its competitors, balance sheet may help to identify relationships and trends
which are indicative of potential problems or areas for further improvement. Analysis of the
statement of financial position could therefore assist the users of financial statements to predict
the amount, timing and volatility of entity's future earnings.

INCOME STATEMENT:-
Income Statement, or Profit and Loss Statement, is directly linked to balance sheet,
cash flow statement and statement of changes in equity. The increase or decrease in net assets
of an entity arising from the profit or loss reported in the income statement is incorporated in
the balances reported in the balance sheet at the period end.

The profit and loss recognized in income statement is included in the cash flow
statement under the segment of cash flows from operation after adjustment of non-cash
transactions. Net profit or loss during the year is also presented in the statement of changes in
equity.

BASIS OF PREPARATION:-
Income statement is prepared on the accruals basis of accounting. This means that
income (including revenue) is recognized when it is earned rather than when receipts are
realized (although in many instances income may be earned and received in the same
accounting period).Conversely, expenses are recognized in the income statement when they
are incurred even if they are paid for in the previous or subsequent accounting periods.
Income statement does not report transactions with the owners of an entity.

Hence, dividends paid to ordinary shareholders are not presented as an expense in the
income statement and proceeds from the issuance of shares is not recognized as an income.
Transactions between the entity and its owners are accounted for separately in the statement of
changes in equity.
COMPONENTS:-
Income statement comprises of the following main elements:
REVENUE:-

Revenue includes income earned from the principal activities of an entity. So for
example, in case of a manufacturer of electronic appliances, revenue will comprise of the sales
from electronic appliance business. Conversely, if the same manufacturer earns interest on its
bank account, it shall not be classified as revenue but as other income.

COST OF SALES:-
Cost of sales represents the cost of goods sold or services rendered during an
accounting period. Hence, for a retailer, cost of sales will be the sum of inventory at the start
of the period and purchases during the period minus any closing inventory.

In case of a manufacturer however, cost of sales will also include production costs incurred in
the manufacture of goods during a period such as the cost of direct labour, direct material
consumption, depreciation of plant and machinery and factory overheads, etc. You may refer
to the article on cost of sales for an explanation of its calculation.

OTHER INCOME:-

Other income consists of income earned from activities that are not related to the entity's main
business. For example, other income of an entity that manufactures electronic appliances may
include:
 Gain on disposal of fixed assets
 Interest income on bank deposits
 Exchange gain on translation of a foreign currency bank account

DISTRIBUTION COST:-
Distribution cost includes expenses incurred in delivering goods from the business premises to
customers.
ADMINISTRATIVE EXPENSES:-

Administrative expenses generally comprise of costs relating to the management and

support functions within an organization that are not directly involved in the production and
supply of goods and services offered by the entity.

Examples of administrative expenses include:

 Salary cost of executive management
 Legal and professional charges
 Depreciation of head office building
 Rent expense of offices used for administration and management purposes
 Cost of functions / departments not directly involved in production such as finance
department, HR department and administration department

OTHER EXPENSES:-
This is essentially a residual category in which any expenses that are not suitably classifiable
elsewhere are included.

FINANCE CHARGES:-
Finance charges usually comprise of interest expense on loans and debentures. The
effect of present value adjustments of discounted provisions are also included in finance
charges (e.g. unwinding of discount on provision for decommissioning cost).

INCOME TAX:-
Income tax expense recognized during a period is generally comprised of the following three
elements:
 Current period's estimated tax charge
 Prior period tax adjustments
 Deferred tax expense
PRIOR PERIOD COMPARATIVES:-

Prior period financial information is presented alongside current period's financial

results to facilitate comparison of performance over a period. It is therefore important that
prior period comparative figures presented in the income statement relate to a similar period.
For example, if an organization is preparing income statement for the six months
ending 31 December 2013, comparative figures of prior period should relate to the six months
ending 31 December 2012.

PURPOSE & USE:-

Income Statement provides the basis for measuring performance of an entity over the course
of an accounting period.
Performance can be accessed from the income statement in terms of the following:-
 Change in sales revenue over the period and in comparison to industry growth
 Change in gross profit margin, operating profit margin and net profit margin over the
period
 Increase or decrease in net profit, operating profit and gross profit over the period
 Comparison of the entity's profitability with other organizations operating in similar
industries or sectors
Income statement also forms the basis of important financial evaluation of an entity when it is
analyzed in conjunction with information contained in other financial statements such as:
 Change in earnings per share over the period
 Analysis of working capital in comparison to similar income statement elements (e.g.
the ratio of receivables reported in the balance sheet to the credit sales reported in the
income statement, i.e. debtor turnover ratio)
 Analysis of interest cover and dividend cover ratios
STATEMENT OF CHANGES IN EQUITY:-
Statement of Changes in Equity is directly related to balance sheet and income
statement. Statement of changes in equity shows the movement in equity reserves as reported
in the entity's balance sheet at the start of the period and the end of the period. The statement
therefore includes the change in equity reserves arising from share capital issues and
redemptions, the payments of dividends, net profit or loss reported in the income statement
along with any gains or losses recognized directly in equity (e.g. revaluation surplus).

COMPONENTS:-
Following are the main elements of statement of changes in equity:

OPENING BALANCE:-
This represents the balance of shareholders' equity reserves at the start of the
comparative reporting period as reflected in the prior period's statement of financial position.
The opening balance is unadjusted in respect of the correction of prior period errors rectified
in the current period and also the effect of changes in accounting policy implemented during
the year as these are presented separately in the statement of changes in equity (see below).

EFFECT OF CHANGES IN ACCOUNTING POLICIES:-

Since changes in accounting policies are applied retrospectively, an adjustment is

required in stockholders' reserves at the start of the comparative reporting period to restate the
opening equity to the amount that would be arrived if the new accounting policy had always
been applied.

EFFECT OF CORRECTION OF PRIOR PERIOD ERROR:-

The effect of correction of prior period errors must be presented separately in the
statement of changes in equity as an adjustment to opening reserves. The effect of the
corrections may not be netted off against the opening balance of the equity reserves so that the
amounts presented in current period statement might be easily reconciled and traced from prior
period financial statements.
RESTATED BALANCE:-
This represents the equity attributable to stockholders at the start of the comparative
period after the adjustments in respect of changes in accounting policies and correction of
prior period errors as explained above.

CHANGES IN SHARE CAPITAL:-

Issue of further share capital during the period must be added in the statement of
changes in equity whereas redemption of shares must be deducted therefrom. The effects of
issue and redemption of shares must be presented separately for share capital reserve and share
premium reserve.

DIVIDENDS:-

Dividend payments issued or announced during the period must be deducted from shareholder
equity as they represent distribution of wealth attributable to stockholders.

INCOME / LOSS FOR THE PERIOD:-

This represents the profit or loss attributable to shareholders during the period as reported in
the income statement.

CHANGES IN REVALUATION RESERVE:-

Revaluation gains and losses recognized during the period must be presented in the
statement of changes in equity to the extent that they are recognized outside the income
statement. Revaluation gains recognized in income statement due to reversal of previous
impairment losses however shall not be presented separately in the statement of changes in
equity as they would already be incorporated in the profit or loss for the period.

OTHER GAINS & LOSSES:-

Any other gains and losses not recognized in the income statement may be presented in
the statement of changes in equity such as actuarial gains and losses arising from the
application of IAS 19 Employee Benefit.
CLOSING BALANCE:-
This represents the balance of shareholders' equity reserves at the end of the reporting
period as reflected in the statement of financial position.

PURPOSE & IMPORTANCE:-

Statement of changes in equity helps users of financial statement to identify the factors
that cause a change in the owners' equity over the accounting periods. Whereas movement in
shareholder reserves can be observed from the balance sheet, statement of changes in equity
discloses significant information about equity reserves that is not presented separately
elsewhere in the financial statements which may be useful in understanding the nature of
change in equity reserves.
Examples of such information include share capital issue and redemption during the
period, the effects of changes in accounting policies and correction of prior period errors,
gains and losses recognized outside income statement, dividends declared and bonus shares
issued during the period.

CASH FLOW STATEMENT:-

Statement of Cash Flows is primarily linked to balance sheet as it explains the effects
of change in cash and cash equivalents balance at the beginning and end of the reporting
period in terms of the cash flow impact of changes in the components of balance sheet
including assets, liabilities and equity reserves.
Cash flow statement therefore reflects the increase or decrease in cash flow arising from:
 Change in share capital reserves arising from share capital issues and redemption;
 Change in retained earnings as a result of net profit or loss recognized in the income
statement (after adjusting non-cash items) and dividend payments;
 Change in long term loans due to receipt or repayment of loans;
 Working capital changes as reflected in the increase or decrease in net current assets
recognized in the balance sheet;
 Change in noncurrent assets due to receipts and payments upon the acquisitions and
disposals of assets (i.e. investing activities)
BASIS OF PREPARATION
Statement of Cash Flows presents the movement in cash and cash equivalents over the period.
Cash and cash equivalents generally consist of the following:
 Cash in hand
 Cash at bank
 Short term investments that are highly liquid and involve very low risk of change in
value (therefore usually excludes investments in equity instruments)
 Bank overdrafts in cases where they comprise an integral element of the organization's
treasury management (e.g. where bank account is allowed to float between a positive
and negative balance (i.e. overdraft) as opposed to a bank overdraft facility specifically
negotiated for financing a shortfall in funds (in which case the related cash flows will
be classified under financing activities).
Statement of cash flows provides important insights about the liquidity and solvency of
a company which are vital for survival and growth of any organization. It also enables analysts
to use the information about historic cash flows to form projections of future cash flows of an
entity (e.g. in NPV analysis) on which to base their economic decisions. By summarizing key
changes in financial position during a period, cash flow statement serves to highlight priorities
of management.

For example, increase in capital expenditure and development costs may indicate a
higher increase in future revenue streams whereas a trend of excessive investment in short
term investments may suggest lack of viable long term investment opportunities. Furthermore,
comparison of the cash flows of different entities may better reveal the relative quality of their
earnings since cash flow information is more objective as opposed to the financial
performance reflected in income statement which is susceptible to significant variations
caused by the adoption of different accounting policies.

To be more specific, the analysis is undertaken to serve the following purposes (objectives):

 To assess the current profitability and operational efficiency of the firm as a whole as
well as its different departments so as to judge the financial health of the firm.
 To ascertain the relative importance of different components of the financial position
of the firm.
  To identify the reasons for change in the profitability/financial position of the firm.
 To judge the ability of the firm to repay its debt and assessing the short-term as well as
the long-term liquidity position of the firm. Through the analysis of financial
statements of various firms, an economist can judge the extent of concentration of
economic power and pitfalls in the financial policies pursued. The analysis also
provides the basis for many governmental actions relating to licensing, controls, fixing
of prices, ceiling on profits, dividend freeze, tax subsidy and other concessions to the
corporate sector. It also helps the management in self-appraisal and the shareholders
(owners) and others to judge the performance of the management.
FINANCIAL STATEMENT ANALYSIS IS USEFUL AND SIGNIFICANT TO
DIFFERENT USERS IN THE FOLLOWING WAYS:-

(A) FINANCE MANAGER:-

Financial statement analysis focuses on the facts and relationships related to
managerial performance, corporate efficiency, financial strengths and weaknesses and
creditworthiness of the company. A finance manager must be well-equipped with the different
tools of analysis to make rational decisions for the firm. The tools for analysis help in studying
accounting data so as to determine the continuity of the operating policies, investment value of
the business, credit ratings and testing the efficiency of operations. The techniques are equally
important in the area of financial control, enabling the finance manager to make constant
reviews of the actual financial operations of the firm to analyse the causes of major deviations,
which may help in corrective action wherever indicated.

(B) TOP MANAGEMENT:-

The importance of financial statement analysis is not limited to the finance manager
alone. Its scope of importance is quite broad who includes top management in general and the
other functional managers.

Management of the firm would be interested in every aspect of the financial analysis. It
is their overall responsibility to see that the resources of the firm are used most efficiently, and
that the firm’s financial condition is sound. Financial statement analysis helps the management
in measuring the success or otherwise of the company’s operations, appraising the individual’s
performance and evaluating the system of internal control.
(C)TRADE CREDITORS:-

A trade creditor, through an analysis of financial statements, appraises not only the
urgent ability of the company to meet its obligations, but also judges the probability of its
continued ability to meet all its financial obligations in future. Trade creditors are particularly
interested in the firm’s ability to meet their claims over a very short period of time. Their
analysis will, therefore, confine to the evaluation of the firm’s liquidity position.

(D)LENDERS:-

Suppliers of long-term debt are concerned with the firm’s long-term solvency and
survival. They analyse the firm’s profitability overtime, its ability to generate cash to be able
to pay interest and repay the principal and the relationship between various sources of funds
(capital structure relationships). Long-term tenders do analyse the historical financial
statements. But they place more emphasis on the firm’s projected financial statements to make
analysis about its future solvency and profitability.

(E)INVESTORS:-

Investors, who have invested their money in the firm’s shares, are interested about the
firm’s earnings. As such, they concentrate on the analysis of the firm’s present and future
profitability. They are also interested in the firm’s capital structure to ascertain its influences
on firm’s earning and risk. They also evaluate the efficiency of the management and determine
whether a change is needed or not. However, in some large companies, the shareholders’
interest is limited to decide whether to buy, sell or hold the shares.

(F)LABOUR UNIONS:-

Labour unions analyze the financial statements to assess whether it can presently
afford a wage increase and whether it can absorb a wage increase through increased
productivity or by raising the prices.

(G)OTHERS:-

The economists, researchers, etc. analyze the financial statements to study the present business
and economic conditions. The government agencies need it for price regulations, taxation and
other similar purposes.
 1.2. INDUSTRY PROFILE

Automotive Batteries Aftermarket in India provides insight into the automotive

batteries aftermarket and estimates its future growth. In this research, Frost & Sullivan's expert
analysts thoroughly examine the automotive battery markets by the following vehicle
segments: two and three wheelers, passenger cars, utility vehicles, light commercial vehicles,
medium commercial vehicles, and heavy commercial vehicles.

Market Overview

Organized Sector Set to Capture Market Share from Unorganized Sector Battery
Manufacturers as Growing Automotive Aftermarket Demands Novel, Cost-effective Products

Steady growth in the automotive batteries aftermarket in India is attributed to

burgeoning vehicle sales across all vehicle segments. As batteries are non-discretionary
replacement products, the demand for them is expected to rise significantly. High replacement
rates are also helping the momentum a great deal. However, rising raw material prices could
be a dampener for manufacturers. The battery industry is heavily dependant on lead, which
constitutes over 70 percent of the cost of inputs of a battery. In 2006, the automotive batteries
organized aftermarket stood at approximately 8.5 million units. While strict regulations on
legislations on recycling and smelting of lead have reined in the prospects of the unorganized
sector, it still accounts for a strong 58.1 percent of the total aftermarket.

"The Battery Management Handling Rules (BMHR), laid down by the Ministry of
Environment and Forests in May 2001, stipulates that at least 90 percent of sales of new
batteries by a company has to be collected from the market for organized smelting/recycling,"
notes the analyst of this research service. "The BMHR, if strictly enforced, will curb the
unorganized market to a considerable extent, as scrap batteries form a part of the raw material
for unorganized manufacturing and/or smelting." Trends also indicate a preference for
technologically advanced, maintenance-free batteries, and market participants are cashing in
on the opportunity and enhancing their product offerings, driving units in the aftermarket.

"This end-user gravitation toward longer lasting, high-performance batteries will be the
driving force behind the development of the organized sector," explains the analyst. "Battery
manufacturers are exploring more innovative measures to improve brand penetration." Price
remains the unique selling proposition (USP) for the unorganized sector. To compete with the
unorganized sector, organized sector participants must strive to enable more competitive price
points. Value-added features such as warranty and high product availability can help pique
end-user interest and curb the prospects of the unorganized sector. Original equipment
manufacturer (OEM) supply contracts serve as a benchmark for quality, which battery
manufacturers can exploit to leverage their position in the aftermarket.

Intense competition that characterizes the organized sector also underpins the need to
focus on product differentiation and innovative product positioning. With an array of battery
brand choices available to end users, organized sector participants must lay special emphasis
on wide geographic presence and cultivate customer care awareness to stay ahead of the
competition. Increasing presence in semi-urban and rural areas of the country, which account
for majority of unorganized sector volumes, is part of the strategy adopted by organized sector
battery manufacturers. Educating mechanics and providing better channel incentives can also
help navigate the tough road to better market share.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this
research:
By Vehicle Segment:
- Two and three wheelers
- Passenger cars
- Utility vehicles
- Commercial vehicles (light, medium, and heavy)
Automotive Battery is a type of rechargeable battery that supplies electric energy to an
automobile. An automotive SLI battery (Starting, Lighting, Ignition) powers the starter motor,
the lights, and the ignition system of a vehicle's engine.

Automotive SLI batteries are usually lead-acid type, and are made of six galvanic cells
in series to provide a 12-volt system. Each cell provides 2.1 volts for a total of 12.6 volts at
full charge. Heavy vehicles, such as highway trucks or tractors, often equipped with diesel
engines, may have two batteries in series for a 24-volt system or may have parallel strings of
batteries.

Lead-acid batteries are made up of plates of lead and separate plates of lead dioxide,
which are submerged into an electrolyte solution of about 38% sulfuric acid and 62% water.
This causes a chemical reaction that releases electrons, allowing them to flow through
conductors to produce electricity. As the battery discharges, the acid of the electrolyte reacts
with the materials of the plates, changing their surface to lead sulfate. When the battery is
recharged, the chemical reaction is reversed: the lead sulfate reforms into lead dioxide and
lead. With the plates restored to their original condition, the process may now be repeated.

Battery recycling of automotive batteries reduces the need for resources required for
manufacture of new batteries, diverts toxic lead from landfills, and prevents risk of improper
disposal.

The lead–acid battery was invented in 1859 by French physicist Gaston Planté and is the
oldest type of rechargeable battery. Despite having a very low energy-to-weight ratio and a
low energy-to-volume ratio, its ability to supply high surge currents means that the cells have
a relatively large power-to-weight ratio. These features, along with their low cost, makes it
attractive for use in motor vehicles to provide the high current required by automobile starter
motors.
As they are inexpensive compared to newer technologies, lead-acid batteries are widely used
even when surge current is not important and other designs could provide higher energy
densities. Large-format lead-acid designs are widely used for storage in backup power supplies
in cell phone towers, high-availability settings like hospitals, and stand-alone power systems.
For these roles, modified versions of the standard cell may be used to improve storage times
and reduce maintenance requirements. Gel-cells and absorbed glass-mat batteries are common
in these roles, collectively known as VRLA (valve-regulated lead-acid) batteries.
Lead–acid battery sales account for 40–45% of the value from batteries sold worldwide (1999,
not including China and Russia), a manufacturing market value of about US$15 billion
The French scientist Gautherot observed in 1801 that wires that had been used for electrolysis
experiments would themselves provide a small amount of "secondary" current after the main
battery had been disconnected. In 1859, Gaston Planté's lead-acid battery was the first battery
that could be recharged by passing a reverse current through it. Planté's first model consisted
of two lead sheets separated by rubber strips and rolled into a spiral. His batteries were first
used to power the lights in train carriages while stopped at a station. In 1881, Camille
Alphonse Faure invented an improved version that consisted of a lead grid lattice, into which a
lead oxide paste was pressed, forming a plate. This design was easier to mass-produce. An
early manufacturer (from 1886) of lead–acid batteries was Henri Tudor.
 1.3. COMPANY PROFILE

Exide Industries Ltd manufacturers lead acid storage batteries. The company is
engaged in manufacturing storage batteries from 2.5 ampere-hour to 20,400 ampere-hour. The
products manufactured by the company include automotive batteries, industrial batteries and
submarine batteries.

The company sells their products under EXIDE, SF, SONIC and Standard Furukawa
Brands. In the international market, the products are sold under DYNEX, INDEX and SONIC
brands. The company operates in two segments: lead acid storage batteries and solar lantern
and homelights. The company has six factories located all over India, two in Maharashtra, one
in West Bengal, two in Tamil Nadu and one in Haryana. Exide Industries Ltd was
incorporated on January 31, 1947 as Associated Battery Makers (Eastern) Ltd to purchase all
or any of the assets of the business of manufacturers, buyers and sellers of and dealers in and
repairers of electrical and chemical appliances and goods carried on by the Chloride Electric
Storage Company (India) Ltd in India.

 In the year 1947, the company incorporated Chloride International Ltd. In the year
1969, the company set up their second factory at Chinchwad, Pune.
 In August 2, 1972, the name of the company was changed to Chloride India Ltd. In the
year 1976, they established R&D centre at Kolkata.
 In the year 1981, the company set up third factory at Haldia, West Bengal.
 In October 12, 1988, the name of the company was again changed to Chloride
Industries Ltd.
 In the year 1994, the company made a technical collaboration with Shin Kobe Electric
Machinery Co. Ltd. of Japan, a subsidiary of the Hitachi Group.
 In August 25, 1995, the company changed their name to Exide Industries Ltd.
 In the year 1997, the company set up their fourth factory at Hosur, Tamil Nadu.
 In the year 1998, the company acquired the industrial/ manufacturing units of Standard
Batteries Ltd located at Taloja & Kanjurmarg (Maharashtra), Guindy (Tamilnadu) and
plant at Ahmednagar (Maharashtra) from Cosepa Fiscal Industries Ltd as a going
concern.
 In the year 1999, they acquired 51% shareholding in Caldyne Automatics Ltd.
 In the year 2000, the company acquired 100% stake in Chloride Batteries S E Asia Pte
Ltd, Singapore and 49% stake in Associated Battery Manufacturers (Ceylon) Ltd, Sri
Lanka.
 In the year 2003, the company commissioned a plant at Bawal, Haryana. Also, they
formed a new joint venture in UK, ESPEX Batteries Ltd, with 51% holding.
 In the year 2004, Associated Battery Manufacturers (Ceylon) Ltd, Sri Lanka became a
subsidiary consequent to acquiring further 12.50% equity holding.
 In the year 2005, the company made investment in 50% shareholding of ING Vysya
Life Insurance Company Ltd.
 In the year 2007, Caldyne Automatics Ltd became 100% subsidiary consequent to
acquiring the balance 49% shareholding. They made investment with 26%
shareholding in CEIL Motive Power Pty Ltd, a joint venture in Australia. Also, they
acquired 100% stake in Tandon Metals Ltd.
 In the year 2008, the company acquired 51% stake in Lead Age Alloys India Ltd.
During the year 2008-09, the company received an order for 5000 batteries for the
Singapore Taxi market amidst tough competition. Honda Japan selected the company
as an exclusive supplier initially for 2 years for VRLA MC battery. The company
entered into a technical collaboration with Changxing Noble Power Sourcing Co. Ltd.,
China for manufacture of Deep Cycling E-bike batteries for electric bicycles and
scooters. During the year 2009-10, the company divested their 26% shareholding in
Ceil Motive Power Pty Ltd, Australia (as associate company).
 In August 12, 2010, the company entered into an agreement for acquisition of
22,93,200 equity shares of Leadage Alloys India Ltd representing 49% of the shares in
the said company. The Company held 51% of the shares in Leadage Alloys India Ltd
and with this acquisition Leadage Alloys India Ltd will become a wholly owned
subsidiary of Exide Industries Ltd.
 In January 2012, the company entered into technical collaboration and assistance
agreements with East Penn Manufacturing Co. Inc. USA. Under these agreements, East
Penn will provide technical assistance and support for the manufacture of automotive,
motive power, standby, telecom, UPS, solar and traction batteries for Exide's various
plants in India. This technical assistance will include a wide range of activities
including the enhancement of processes for manufacturing, designs, quality control,
and procurement. The company has already launched Deep Cycling Electric Bike
 batteries for electric bicycles and scooters and is also in the process of developing
batteries for Stop-Start Micro Hybrid Vehicles in collaboration with The Furukawa
Battery Company Ltd, Japan. The company is also exploring the possibility of
developing and marketing Lithium-ion batteries for the Electric Vehicle Segment.
Since its inception in 1880, Exide remains the first and foremost battery brand in India.
Exide's journey dates back to as far as the 1880s when the automobile battery was at its
infancy and evolving to maturity step by step.
While the lead acid battery had been discovered in 1860, storage batteries began to be
produced by Mather & Platt in the 1880s. The batteries - or accumulators as they were then
called - followed a design in which Lead Chloride was the active material. Accordingly, the
new company was christened Chloride Electrical Storage Syndicate.
One of the critical ingredients in making the plates of such a battery was oxide. Having
perfected the technology, Chloride coined the brand name "Exide", a derivative acronym from
the term 'Excellent Oxide'.
After the USA emerged as a major automobile market, Chloride entered into a joint
venture with the Electrical Storage Battery Company of Philadelphia and began promoting the
'brand Exide'. As a result, both Chloride and brand Exide reached far-flung parts of the globe
(including British colonies) as part of the British Empire's industrialisation process.
Evolving into Excellence
 During World War I, Chloride engineers developed a lightweight, non-
spillage battery to operate thousands of airplane radio sets and
numerous radio stations.
 Over the years, Exide batteries contributed to many major developments
in exploration and communication.
 In 1934, an Exide deep-cycle battery was the sole source of electrical
power at a military base in Antarctica.
 Exide batteries also provided power for Piccard's balloon flight.

The Company was incorporated as Associated Battery Makers (Eastern) Ltd., on 31st
January, 1947 under the Companies Act, 1913 to purchase all or any of the assets of the
business of manufacturers, buyers and sellers of and dealers in and repairers of electrical and
chemical appliances and goods carried on by the Chloride Electric Storage Company (India)
Ltd, in India , since 1916 with a view thereto to enter into and carry into effect (either with or
without modification) an agreement which had already been prepared and was expressed to be
made between the Chloride Electric Storage Co (India) Ltd on the one part and the Company
of the other part. The name of the Company was changed to Chloride India Ltd on 2nd
August, 1972. The name of the Company was again changed to Chloride Industries Ltd. vide
fresh Certificate of Incorporation dated 12th October, 1988. The name of the Company was
further changed to Exide Industries Ltd. on 25th August, 1995.
The Company manufactures the widest range of storage batteries in the world from 2.5
Ah to 20,400 Ah capacity, covering the broadest spectrum of applications. The Company has
also recently forayed into manufacture and sale of Home UPS/Inverters. The Company has
seven battery manufacturing facilities strategically located across the country – three in
Maharashtra, two in West Bengal, one in Tamil Nadu and one in Haryana. In addition, the
Company also has two Home UPS/Inverter manufacturing facilities in Uttarakhand. The
Company’s predecessor carried on their operations as import house from 1916 under the name
Chloride Electrical Storage Company. Thereafter, the Company started manufacturing storage
batteries in the country and have grown to become one of the largest manufacturer and
exporter of batteries in the sub-continent today. Exide separated from its UK-based parent,
Chloride Group Plc., in 1989, after the latter divested its ownership in favour of a group of
Indian shareholders. The Company has grown steadily, modernized its manufacturing
processes and taken initiatives on the service front. Constant innovations have helped the
Company to produce the world’s largest range of industrial batteries extending from 2.5 Ah to
15000 Ah and covering various technology configurations.
 1.4. STATEMENT OF THE PROBLEM

 To access the financial performance of Exide industries Ltd.

 To collect and analyse financial statements of the firm (Exide industries Ltd. for year
2010 to 2014 and to study various terminologies used in it.
 Application of financial statement analysis tools for evaluating the performance the firm for
financial years 2010 to 2014
 1.5.OBJECTIVES OF STUDY

 To analyze the expenses and income over the years 2010-2014 through financial performance
analysis of Exide industries Ltd.
 To analyze and evaluate liquidity position of the company
 To analyze and evaluate profitability of the company.
 To evaluate the short term solvency of the company
 To know the business environment in which the firm is working.
 To understand the meaning and objectives of financial performance analysis.
 To know various tools for financial performance analysis and their uses.
 1.6.SCOPE OF THE STUDY

Scope of the study was taken to find out feed back of the company to study the financial
performance of Exide industries Ltd. from 2010-2014 by using the annual report of the company for
the five years. This study helps in the finding out how much they are earning per year and to find out
in which stage they are in now that is by profit or loss and leading or back.

This study will be helpful for the organization to find out the performance of the company
compared with other company. It also helps to find out the factors that make them retain a good
position. This study has aided the Salem branch also improving their performance.

It also includes study of accounting standards and accounting policies related to financial statements.

The scope of study includes:

Financial Statement Analysis:

 Significance & Objectives

 Tools such as
 Ratio Analysis,
 Liquidity/Profitability/Turnover/Leverage Ratios and their trends
 Limitations of financial statements analysis.
 1.7. LIMITATIONS OF THE STUDY

 The information is mainly secondary data obtained from the company and downloads
from the internet
 Time period of the study is limited
 This financial statement analysis of Exide industries Ltd is mainly based on its
financial statements only. With limited time period for completion this project, it was
not possible to consider each and every factor, which might have affected the depth
and the accuracy of the analysis.
 This financial statement analysis is applicable for the period of Financial Year 2008 to
2013 only and its extrapolation may or may not hold true for future forecasting of
performance of Exide industries Ltd
 CHAPTER-II

CONCEPTS AND REVIEW

2.1.CONCEPTS OF THE STUDY

Managers require Financial Statements to manage the affairs of the company by assessing
its financial performance and position and taking important business decisions. Shareholders
use Financial Statements to assess the risk and return of their investment in the company and
take investment decisions based on their analysis.

Prospective Investors need Financial Statements to assess the viability of investing in a

company. Investors may predict future dividends based on the profits disclosed in the
Financial Statements. Furthermore, risks associated with the investment may be gauged from
the Financial Statements. For instance, fluctuating profits indicate higher risk. Therefore,
Financial Statements provide a basis for the investment decisions of potential investors.
Financial Institutions (e.g. banks) use Financial Statements to decide whether to grant a loan
or credit to a business. Financial institutions assess the financial health of a business to
determine the probability of a bad loan. Any decision to lend must be supported by a sufficient
asset base and liquidity.

Suppliers need Financial Statements to assess the credit worthiness of a business and
ascertain whether to supply goods on credit. Suppliers need to know if they will be repaid.
Terms of credit are set according to the assessment of their customers' financial health.
Customers use Financial Statements to assess whether a supplier has the resources to ensure
the steady supply of goods in the future. This is especially vital where a customer is dependent
on a supplier for a specialized component. Employees use Financial Statements for assessing
the company's profitability and its consequence on their future remuneration and job security.

Competitors compare their performance with rival companies to learn and develop
strategies to improve their competitiveness. General Public may be interested in the effects of
a company on the economy, environment and the local community.
 Governments require Financial Statements to determine the correctness of tax declared
in the tax returns. Government also keeps track of economic progress through analysis of
Financial Statements of businesses from different sectors of the economy.

The financial planning process consists of the following six steps:

1. Establish and define the client-planner relationship.

The financial planner should clearly explain and document the services that he or she will
provide to you and define both his/her and your responsibilities during the financial planning
engagement. The financial planner should explain fully how he or she will be paid and by
whom. You and the planner should agree on how long the professional relationship should last
and on how decisions will be made.

2. Gather client data, including goals.

The financial planner should ask for information about your financial situation. You and the
planner should mutually define your personal and financial goals, understand your time frame
for results and discuss, if relevant, how you feel about risk. The financial planner should
gather all the necessary documents before giving you the advice you need.

3. Analyze and evaluate your financial status.

The financial planner should analyze your information to assess your current situation and
determine what you must do to meet your goals. Depending on what services you have asked
for, this could include analyzing your assets, liabilities and cash flow, current insurance
coverage, investments or tax strategies.

4. Develop and present financial planning recommendations and/or alternatives.

The financial planner should offer financial planning recommendations that address your
goals, based on the information you provide. The planner should go over the recommendations
with you to help you understand them so that you can make informed decisions. The planner
should also listen to your concerns and revise the recommendations as appropriate.

5. Implement the financial planning recommendations.

 You and the financial planner should agree on how the recommendations will be carried
out. The planner may carry out the recommendations or serve as your coach, coordinating the
process with you and other professionals such as attorneys, accountants or stockbrokers.

6. Monitor the financial planning recommendations.

You and the financial planner should agree on who will monitor your progress towards your
goals. If the planner is in charge of the process, he or she should report to you periodically to
review your situation and adjust the recommendations, if needed, as your life changes.

THE ANALYSIS OF FINANCIAL PERFORMANCE REPRESENTS THREE

MAJOR STEPS:

1. The first step involves the re-organization of the entire financial data contained the
financial statements. Therefore the financial statements are broke down into individual
components and re-grouped into few principle elements according to their resemblances and
affinities. Thus the balance sheet and profit and loss accounts are completely re-casted and
presented in the condensed form entirely different from their original shape. The second step is
the establishment of significant relationships between the individual components of balance
sheet and profit and loss account. This is done through the application tools of financial
analysis like Ratio analysis, Trend analysis, Common size balance sheet and comparative
Balance sheet.

2. Finally, the result obtained by means of application of financial tools is evaluated.

3. In brief financial analysis is the process of selection, relation and evaluation of financial
statements. The tools of analysis are used for determining the investment value of the
business, credit rating and for testing efficiency of operation.

Thus financial analysis helps to highlight the facts and relationships concerning managerial
performance, corporate efficiency, financial strength and weakness and credit worthiness of the
company.
Key Activities of Financial Management:

The three board activities financial management are:

1. Financial Analysis
2. Management of Firm’s asset structure
3. Management of the firm’ financial structure.

These activities are related to the balance sheet of the firm:

1. Financial analysis: This is Preliminary, Diagnostic, stage and will include a financial
analysis and review to determine the current financial performance and condition of the
business. An identifiable of any particular financial problems, risks, constraints or limitations.
An assessment of finance strength, weakness, opportunities and threats.

2. Financial decision – making: based on the findings of the review stage, financial decisions
and choices will have to be made.

3. Financial planning: The essence of financial planning is to ensure that the right amount of
funds is available at the right cost for the level of risk involved.

4. Financial control: The final stage of the process will require throughout the organization
2.2. REVIEW OF LITERATURE

Financial performance analysis is vital for the triumph of an enterprise. Financial performance analysis
is an appraisal of the feasibility, solidity and fertility of a

business, sub-business or mission. Altman and Eberhart (1994) reported the use of neural
network in identification of distressed business by the Italian central bank. Using over 1,000 sampled
firms with 10 financial ratios as independent variables, they found that the classification of neural
networks was very close to that achieved by discriminant analysis. They concluded that the neural
network is not a clearly dominant mathematical

technique compared to traditional statistical techniques. Gepp and Kumar (2008) incorporated the time
“bias”factor into the classic business failure prediction model.

Using Altman (1968) and Ohlson’s (1980) models to a matched sample of failed and non-
failed firms from 1980’s, they found that the predictive accuracy of Altman’s model declined when
applied against the 1980’s data. The findings explained the importance of incorporating the time factor
in the traditional failure prediction models. Campbell (2008) constructed a multivariate prediction
model that estimates the probability of bankruptcy reorganization for closely held firms. Six variables
were used in developing the hypotheses and five were significant in distinguishing closely held firms
that reorganize from those that liquidate. The five factors were firm size, asset profitability, the number
of secured creditors, the presence of free assets, and the number of under-secured secured creditors.
The prediction model correctly classified 78.5% of the sampled firms. This model is used as a decision
aid when forming an expert opinion regarding a debtor’s likelihood of rehabilitation. No study has
incorporated the financial performance analysis of the central public sector enterprises in Indian drug
& pharmaceutical Industry. Nor has any previous research examined the solvency position, liquidity
position, profitability analysis, operating efficiency and the prediction of financial health and viability
of public

sector drug & pharmaceutical enterprises in India.

According to Gibson (2010) investors and other external users of financial information will
often need to measure the performance and financial health of an organization. This is done in order to
evaluate the success of the business, determine any weaknesses of the business, compare current and
past performance, and compare current performance with industry standards. Financially stable
organizations are desirable, because a financially stable business is one that successfully ensures its
ability to generate income for investors and retain or increase value.
 Financial Ratios

Asset Debt
Profitability Market Value
Liquidity Ratios Management Management
Ratios Ratios
Ratios Ratios

There are many different methods that can be used alone or together to help investors assess
the financial stability of an organization. One of the most common methods is financial ratio analysis.
The basic ratios include five categories: profitability ratios, liquidity ratios, debt ratios, asset
management ratios and market- value ratios (Siddiqui, 2006).

Ratio analysis involves the methods of calculating and interpreting financial ratio in order to
access the firm’s performance and status. The basic inputs to ratio analysis are the firm’s income
statement and balance sheet for the periods to be examined (Peterson and Fabozzi, 2012).
 CHAPTER-III
RESEARCH METHODOLOGY

RESEARCH APPROACH:

The data collected from the company is analyzed also interpreted to know the profit (or) loss
position of the Exide industries Ltd

RESEARCH DESIGN:-

Fundamental to the success of any formal marketing research project is a sound research
design. A research design is purely and simply the framework or plan for a study that guides the
collection and analysis of data. It is a blue print that is followed in completing a study.

Research design of this study is Descriptive research design. This research design provides
opportunity for considering different aspects of the problem under study. It also helps in gaining new
insights and discovery of new ideas.

SOURCE OF DATA: This study is based on the “secondary data”.

SAMPLING PLAN: The data is collected from the net and for the company past five years ratios
and trend analysis has been used for the purpose of analysing data.

APPROACH: The data collected from the company . I was used the calculation.ifind out
the company finanicial performance. It is useful to the company and for me also.

METHODS OF DATA COLLECTION:-

PRIMARY DATA COLLECTION:-

It consists of original information collected for specific purpose. This process involves
designing of research plan, collecting information, inputting the data and producing and analyzing
results.

SECONDARY DATA COLLECTION:-

 It consists of information that already exists somewhere have been collected for specific
purpose. This data is also known as gathered information. This data consists of balance sheet and
profit and loss account and revenue account.

TOOLS FOR ANALYSIS:-

The tool used for analysis is

 Ratio analysis
 Trend analysis
 CHAPTER-IV

DATA ANALYSIS AND INTERPRETATION

TABLE NO 4.1

CURRENT RATIO

The short term solvency position of the company is reflected by current ratio and quick ratio. The
current ratio establishes the relationship between the current assets and current liabilities. A high
current ratio is an assurance that the firm will have adequate funds to pay current liability.

Current ratio = Current assets / Current liabilities.

YEAR Current Assets Current liabilities Ratio

2010
864.23 560.70 1.54

2011
1,240.26 741.92 1.67

2012
1,418.98 887.27 1.59

2013
1,751.08 927.70 1.88

2014 1,822.16 1012.31 1.80

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows the current ratio of the company. It measures firm’s short term
solvency i.e. It’s ability to meet short term obligations. The general norm is 2:1. It is clear that the
company is maintaining higher current ratio. In the year 2010 it was 1.54 ,Except the year of
2014(1.80), the company has maintained current ratio than general norm.
 CHART NO. 4.1

CURRENT RATIO

2 1.88
1.8
1.8 1.67
1.54 1.59
1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2010 2011 2012 2013 2014
 TABLE NO: 4.2

QUICK RATIO
Quick ratio is also called ‘liquidity ratio’ or “Acid test ratio”. The quick ratio is a
more refined measure of the firm’s liquidity. This ratio establishes a relationship between
quick assets and current liabilities. An asset is liquid, if it can be converted into cash
immediately without a loss of values; prepaid expenses and stock are not taken as liquid
assets. Generally a quick ratio of 1:1 is considered satisfactory. The quick ratio may be
calculated as follows:

Quick Assets

Quick Ratio =

Current Liabilities

YEAR Quick Assets Current liabilities Ratio

2010
257.46 560.70 0.45

2011
381.31 741.92 0.51
2012
450.86 887.27 0.50
2013
583.98 927.70 0.62

2014 636.59 1012.31 0.62

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows the quick ratio of the company. The company has highest quick ratio
(0.62) in the year 2014. So, in that year liquidity position was good. During the period 2010
and 2011 & 2012 the ratio was 0.45 and 0.51& 0.50 respectively which are lower than the
previous years. In that year’s short term solvency position is failed to satisfactory.
 CHART NO. 4.2

QUICK RATIO

0.7
0.62 0.62
0.6
0.51 0.5
0.5
0.45
QUICK RATIO

0.4

0.3

0.2

0.1

0
2010 2011 2012 2013 2014

YEAR
 TABLE NO: 4.3

CASH RATIO

CASH RATIO OR ABSOLUTE RATIO

This ratio indicates the relationship between cash and bank balance to current
liability for the study period. It is calculated for comparing the cash with current liability. The
higher proportion denotes idleness of cash which affect the profitability position of the firm
and a low proportion of cash shortage of cash poor liquidity.

Cash and Bank+ investment

Cash Ratio = Current Liability

YEAR Cash & Bank Current liabilities Ratio

2010 1338.25 560.70 2.3

2011 1392.75 741.92 1.8

2012 1602.29 887.27 1.8

2013 1714.92 927.70 1.8

2014 2086.96 1012.31 2.0

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows cash ratio of the company. The ratio ranges from maximum of
2.3in the year 2010 and the minimum of 2 in the year 2014. The company can’t repay its
short term debt quickly. The Trent of cash ratio is increasing.
 CHART NO. 4.4

CASH RATIO

2.5
2.3

2
2
1.8 1.8 1.8

1.5
CASH RATIO

0.5

0
2010 2011 2012 2013 2014

YEAR
 TABLE 4.5

NET WORKING CAPITAL RATIO

This ratio indicates the relationship between Net Assets to working capital for the
study period. It is calculated for comparing the Assets with Working Capital. The higher
proportion denotes idleness of Assets which affect the profitability position of the firm and a
proportion of Working Capital

Working capital

NWC ratio =

Net Assets

Ratio
Year Net Working Capital Net Assets

2010 303.53 2,279.50 0.13

2011 498.34 2,717.40 0.18

2012 531.71 3,031.64 0.17

2013 823.38 3,423.59 0.24

809.85 3,731.46 0.21

2014

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows net working capital ratio of the company. The ratio ranges from
maximum of 0.13in the year 2010 and the minimum of 0.21 the year 2014 .
 CHART No. 4.5

NET WORKING CAPITAL RATIO

0.3

0.25 0.24
NET WORKING CAPITAL RATIO

0.21
0.2 0.18
0.17

0.15 0.13

0.1

0.05

0
2010 2011 2012 2013 2014

YEAR
 TABLE NO: 4.7

DEBT EQUITY RATIO

Debt Equity Ratio

This debt equity ratio indicates the relationship between Total Liabilities and share
holders equity calculated for comparing the cash with current liability. The higher proportion
denotes idleness of cash which affect the profitability position of the firm and a low
proportion of cash shortage of cash poor liquidity.

Debt Equity Ratio =Total Debt / NetWorth

YEAR Total Debt Net Worth Ratio

2010 89.99 2,189.51 0.04

2011 2.15 2,715.25 0.0007

2012 0 3,031.64 0

2013 0 3423.59 0

0 3731.46 0
2014

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows the Debt Equity Ratio of the company. It measures firm’s
short term Debt Equity Ratio i.e. It’s ability to meet short term obligations. The general norm
is 2:1. It is clear that the company is maintaining higher equity ratio. In the year 2010 it was
0.04. Except the year 2012-2014(0), the company has maintained Lower Debt Equity ratio
than general norm.
 CHART No. 4.7

DEBT EQUITY RATIO

0.045
0.04
0.04

0.035

0.03
DEBT EQUITY RATIO

0.025

0.02

0.015

0.01

0.005
0.0007 0 0 0
0
2010 2011 2012 2013

YEAR
 TABLE NO: 4.8

CAPITAL EQUITY RATIO

A computation that indicates the financial strength of a company. The ratio is equal to the
fixed assets of a company divided by its equity capital. Equity capital is the amount of money
invested in a company by its shareholders. If the ratio is greater than 1, some of the
company's assets have been financed by debt.

Equity-Capital Ratio = Capital employed / Networth

Capital employed = Total Assets –Current Liablities

YEAR Capital Employed Net worth Ratio

2010 1718.8 2,189.51 0.78

2011 1975.48 2,715.25 0.72

2012 2144.37 3,031.64 0.70

2013 2495.89 3423.59 0.72

2014 2719.15 3731.46 0.72

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows the Capital Equity Ratio of five years (2010-2014) . The
Capital Equity Ratio Shows fluctuation in the period of study. The ratio goes increase from
0.78 in 2010. in the year 2011-2012 an down to 0.72, 0.70. and reaches in 0.72in the year of
2014.
 CHART NO. 4.8
CAPITAL EQUITY RATIO

0.8

0.78
0.78

0.76
CAPITAL EQUITY RATIO

0.74

0.72 0.72 0.72

0.72

0.7
0.7

0.68

0.66
2010 2011 2012 2013 2014

YEAR
 TABLE 4.9

WORKING CAPITAL TURNOVER RATIO

Capital turnover ratio indicates the velocity of the utilization of net working capital. This
ratio represents the number of times the working capital is turned over in the course of year
and is calculated as follows:

Working Capital Turnover Ratio = Sales / Working Capital

Ratio
YEAR Sales Net Working Capital

2010 4215.97 303.53 13.8

2011 5074.60 498.34 10.1

2012 5117.63 531.71 9.6

2013 6071.37 823.38 7.3

5964.24 809.85 7.3

2014

SOURCE: SECONDARY DATA

INTERPRETATION

The table shows the Working capital turnover ratio of the company during 2010 to
2014. The total liabilities to outsider funds and total assets registered a downward trend. In
the year 2010 the Turnover ratio was lowest the declining position is noticed in the turnover
ratio from 2011 and 2012 (10.1), (9.6). The level capital turnover ratio is quite increase in the
year of 2014 (7.3)
 CHART NO: 4.10

WORKING CAPITAL TURNOVER RATIO

16
13.8
14

12
WORKING CAPTINAL RATIO

10.1
10 9.6

8 7.3 7.3

0
2010 2011 2012 2013 2014

YEAR
 TABLE NO: 4.10

TOTAL ASSET TURNOVER RATIO

The total asset turnover ratio measures the ability of a company to use its assets to
efficiently generate sales. This ratio considers all assets, current and fixed. Those assets
include fixed assets, like plant and equipment, as well as inventory, accounts receivable, as
well as any other current assets.

Total Asset Turnover Ratio = Net Sales / Total Assets

YEAR
Net Sales Total Assets Ratio

2010 4215.97 2,279.50 1.84

2011 5074.60 2,717.40 1.86

2012 5117.63 3,031.64 1.68

2013 6071.37 3,423.59 1.77

5964.24 3,731.46 1.59

2014

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows total asset turnover ratio of the company. The ratio ranges
from maximum of 1.84 in the year 2010 and the minimum of 1.59 in the year 2014.
 CHART NO: 4.10

TOTAL ASSET TURNOVER RATIO

1.9
1.86
1.84
1.85

1.8 1.77
TOTAL ASSET TURNOVER RATIO

1.75

1.7 1.68

1.65
1.59
1.6

1.55

1.5

1.45
2010 2011 2012 2013 2014

YEAR
 TABLE NO: 4.11

NET PROFIT RATIO

Net profit ratio measures the relationship of net profit to net sales and is usually
represented as a percentage. Thus, it is calculated by dividing the net profit by sales.

Net profit (after taxes)

Net profit Ratio = _______________________________ X 100

Net sales

NET PROFIT RATIO

Net Profit Ratio (%)

Net Sales
YEAR

2010 537.09 4215.97 0.12

2011 666.36 5074.60 0.13

2012 461.17 5117.63 0.09

2013 522.78 6071.37 0.08

487.08 5964.24 0.08

2014

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows the net profit ratio of the company. In this company, the net
profit is 0.12 percent in 2010 and is 0.13 percent in 2011, is 0.09 percent in 2012 to, is 0.08
percent in 2013, 0.08 percent in 2014. The company continuously is improving the net profit
of the company.
 CHART NO: 4.11

NET PROFIT RATIO

0.14
0.13
0.12
0.12
NET PROFIT RATIO

0.1
0.09
0.08 0.08
0.08

0.06

0.04

0.02

0
2010 2011 2012 2013 2014

YEAR
 TABLE NO – 4.12

OPERATING PROFIT RATIO

This ratio is also called Operating profit ratio. This ratio is calculated to measure the
operating profit after tax against the amount invested in net sales to ascertain whether
the sales are being utilized properly or not.

OPERATING PROFIT

OPERATING PROFIT RATIO = __________________________ X 100

NET SALES

YEAR OPERATING NET SALES RATIO (%)

PROFIT

2010 894.29 4215.97 0.21

2011 882.26 5074.60 0.17

2012 699.39 5117.63 0.13

2013 784.05 6071.37 0.12

816.84 5964.24 0.13

2014

SOURCE: SECONDARY DATA

INTERPRETATION

The above table shows the Return on Operating Profit ratio is 0.21 in the year 2010 which
is high. But it is low in the year 2014 It reflects the company has invested in assets even
though it cannot fully utilize them. In low ratio, it is not good for the company. Hence, the
company should take necessary steps for the proper utilization of the assets to full extent.
 CHART NO: 4.12

OPERATING PROFIT RATIO

0.25

0.21
0.2
0.17

0.15
0.13 0.13
0.12
RATIO

0.1

0.05

0
2010 2011 2012 2013 2014

YEAR
 TREND ANALYSIS FROM 2010-2014

Mar '14 Trend(%) Mar '13 Trend(%) Mar '12 Trend(%) Mar '11 Trend(%) Mar '10 Trend(%)

Total Share 100 100 100 100 100

85.00 85.00 85.00 85.00 85.00
Capital

Equity 100 100 100 100 100

Share 85.00 85.00 85.00 85.00 85.00
Capital

Reserves 3,646.46 173 3,338.59 159 2,946.64 140 2,630.25 124 2,104.51 100

Networth 3,731.46 170 3,423.59 156 3,031.64 138 2,715.25 124 2,189.51 100

Secured 0 0 0 35 100
0.00 0.00 0.00 0.06 0.17
Loans

Unsecured 0 0 0 2.3 100

0.00 0.00 0.00 2.09 89.82
Loans

Total Debt 0.00 0 0.00 0 0.00 0 2.15 2.3 89.99 100

Total 163 150 132 119 100

3,731.46 3,423.59 3,031.64 2,717.40 2,279.50
Liabilities

Application Of
Funds

Gross 149 141 132 116 100

2,003.75 1,895.21 1,774.67 1,561.15 1,336.46
Block

Net Block 998.02 154 994.41 153 940.87 145 808.64 125 646.42 100

Capital 135 155 84 174 100

Work in 50.98 58.77 31.86 65.97 37.76
Progress

Investments 1,967.01 147 1,640.13 122 1,554.62 112 1,377.97 103 1,335.37 100

Inventories 1,185.57 195 1,167.10 192 968.12 159 858.95 141 606.77 100

Sundry 202 200 158 143 100

516.64 509.19 403.19 366.53 254.58
Debtors

Cash and 119.95 160 74.79 250 47.67 165 14.78 513 2.88 100
Bank
Balance

Total 210 202 164 143 100

Current 1,822.16 1,751.08 1,418.98 1,240.26 864.23
Assets

Loans and 215 189 123 186 100

118.45 103.96 127.19 102.64 54.96
Advances

Total CA, 104 119 115 146 100

Loans & 1,940.61 1,855.04 1,556.17 1,342.90 919.19
Advances

Current 180 165 158 132 100

1,012.31 927.70 887.27 741.92 560.70
Liabilities

Provisions 212.85 108 197.06 200 164.61 167 136.16 138 98.54 100

Total CL & 185 170 159 133 100

1,225.16 1,124.76 1,051.88 878.08 659.24
Provisions

Net Current 275 280 193 178 100

715.45 730.28 504.29 464.82 259.95
Assets

Total 163 150 132 119 100

3,731.46 3,423.59 3,031.64 2,717.40 2,279.50
Assets

Interpretation
In the above Trend Analysis of Balance Sheet, base year is taken as 2010, and
analysis illustrates that, there is a Increasing tendency in the case of Total Assets for each
year. In the year 2010, it was 100 % and in the year 2014 it increased steeply by 163 %.

In the case of Net Block Fixed Assets, the percentage increased from 100% to 154%
by the year 2014. It may be due to writing off depreciation or may be the sale of obsolete
Fixed Assets. However, in the case of Capital work-in-progress it shows a fluctuating trend.
In the year 2014, it shows a high percentage i.e. 50.98% comparing with 2010.

One of the important functions of the Finance Manager is to manage Current Assets
of the organization. Here Current Assets including Sundry Debtors show an increasing trend
in each year. In 2010, it was 100% and in 2014 it is 210%. In the case of Term Loan, the
management is trying to reduce its loan every year. It shows a decreasing trend. Current
liabilities have reduced by the company very sharply.
 CHAPTER-V
5.1FINDINGS
 In the year 2010 it was 1.54 ,Except the year of 2014(1.80), the company has
maintained current ratio than general norm.
 During the period 2010 and 2011 & 2012 the ratio was 0.45 and 0.51& 0.50
respectively which are lower than the previous years. In that year’s short term
solvency position is failed to satisfactory.
 The ratio ranges from maximum of 2.3in the year 2010 and the minimum of 2 in the
year 2014
 The ratio ranges from maximum of 0.13in the year 2010 and the minimum of 0.21 the
year 2014 .
 In the year 2010 it was 0.04. Except the year 2012-2014(0), the company has
maintained Lower Debt Equity ratio than general norm.
 The ratio goes increase from 0.78 in 2010. in the year 2011-2012 an down to 0.72,
0.70. and reaches in 0.72in the year of 2014.
 In the year 2010 the Turnover ratio was lowest the declining position is noticed in the
turnover ratio from 2011 and 2012 (10.1), (9.6). The level capital turnover ratio is
quite increase in the year of 2014 (7.3)
 The ratio ranges from maximum of 1.84 in the year 2010 and the minimum of 1.59 in
the year 2014.
 In this company, the net profit is 0.12 percent in 2010 and is 0.13 percent in 2011, is
0.09 percent in 2012 to, is 0.08 percent in 2013, 0.08 percent in 2014.
 Return on Operating Profit ratio is 0.21 in the year 2010 which is high. But it is low in
the year 2014 It reflects the company has invested in assets even though it cannot
fully utilize them. In low ratio, it is not good for the company. Hence, the company
should take necessary steps for the proper utilization of the assets to full extent.

 In the above Trend Analysis of Balance Sheet, base year is taken as 2010, and
analysis illustrates that, there is a Increasing tendency in the case of Total Assets for
each year. In the year 2010, it was 100 % and in the year 2014 it increased steeply by
163 %.
 4.2 SUGGESTIONS

The following are the suggestions recommended for increasing the

competitiveness of the organization:

1. To ensure short-term safety the company should have proper control over the
current liabilities because the current liabilities affect the operational
efficiency, which there by affect the profitability of the company.
2. The company should look at the efficient management of debtors and efficient
collection performance.
3. The companies should take necessary steps to convert inventories into cash
because nearly 70% of the current assets are in the form of inventories.
4. A little more improvement in Total Asset Turnover Ratio is essential.
Company should invest in fixed assets like modernization, technology up
gradation, etc. which in turn will improve the capacity, efficiency etc. and
minimize the cost of operation.
5. To facilitate the sales, the company should develop new products and new
markets.
6. The financial department should give more priority to shareholders fund.
 4.3.CONCLUSION

The Exide industries Ltd. has been serving the state for more than 60 years. It has
contributed much to the industrial Development of the state and it provides employment to
more than 1200 peoples. It has renewed Battery Manufactures in India as well as in South
Asia. Over the last few years the company has made an indelible mark in the Battery
Manufactures – “A Mark of Glorious Achievement”.

The project study was conducted to measure the financial performance of the
company. Looking into the performance for previous 5 years of Exide industries Ltd
although the company was in loss, various statements shows that it was able to overcome
the situation in an appreciable manner. If better steps are taken, the company can improve
its profitability condition in the future.
 BIBLIOGRAPHY

1) Jain SP and Narang KL

- Advanced Accounting
2) Pandey IM
- Financial Management
3) Maheshwari SN
- Financial Management
4) Khan MY and Jain PK
- Financial Management
5) Sharma RK and Shashi K Gupta
- Management Accounting

6) Various Newspapers, Journals, Magazines and Periodicals

Websites:
http://www.exideindustries.com/
 ANNEXURE-I
BALANCE SHEET OF EXIDE INDUSTRIES LTD 2010-2014

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 85.00 85.00 85.00 85.00 85.00

Equity Share Capital 85.00 85.00 85.00 85.00 85.00

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 3,646.46 3,338.59 2,946.64 2,630.25 2,104.51

Networth 3,731.46 3,423.59 3,031.64 2,715.25 2,189.51

Secured Loans 0.00 0.00 0.00 0.06 0.17

Unsecured Loans 0.00 0.00 0.00 2.09 89.82

Total Debt 0.00 0.00 0.00 2.15 89.99

Total Liabilities 3,731.46 3,423.59 3,031.64 2,717.40 2,279.50

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Application Of Funds

Gross Block 2,003.75 1,895.21 1,774.67 1,561.15 1,336.46

Less: Revaluation Reserves 0.00 0.00 25.68 27.20 30.26

Less: Accum. Depreciation 1,005.73 900.80 808.12 725.31 659.78

Net Block 998.02 994.41 940.87 808.64 646.42

Capital Work in Progress 50.98 58.77 31.86 65.97 37.76

Investments 1,967.01 1,640.13 1,554.62 1,377.97 1,335.37

Inventories 1,185.57 1,167.10 968.12 858.95 606.77

Sundry Debtors 516.64 509.19 403.19 366.53 254.58

Cash and Bank Balance 119.95 74.79 47.67 14.78 2.88

Total Current Assets 1,822.16 1,751.08 1,418.98 1,240.26 864.23

Loans and Advances 118.45 103.96 127.19 102.64 54.96

Fixed Deposits 0.00 0.00 10.00 0.00 0.00

Total CA, Loans & Advances 1,940.61 1,855.04 1,556.17 1,342.90 919.19

Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 1,012.31 927.70 887.27 741.92 560.70

Provisions 212.85 197.06 164.61 136.16 98.54

Total CL & Provisions 1,225.16 1,124.76 1,051.88 878.08 659.24

Net Current Assets 715.45 730.28 504.29 464.82 259.95

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 3,731.46 3,423.59 3,031.64 2,717.40 2,279.50

Contingent Liabilities 231.60 160.79 138.93 123.21 59.75

Book Value (Rs) 43.90 40.28 35.67 31.94 25.76