A STUDY ON FINANCIAL STATEMENT ANALYSIS IN MOKSHWA SOFT DRINKS

AT COIMBATORE

CHAPTER-I

INTRODUCTION

Financial statements are formal record of the financial activities of a business, person or
other entity and provide an overview of a business or person’s financial condition in both short
and long term. They give an accurate picture of a company’s condition and operating results in a
condensed form. Financial statements are used as a management tool primarily by company
executive and investor’s in assessing the overall position and operating results of the company.

Analysis and Interpretation of financial statements help in determining the liquidity

position, long term solvency, financial viability and profitability of a firm. Ratio analysis shows
whether the company is improving or deteriorating in past years. Moreover, comparison of
different aspects of all the firms can be done effectively with this. It helps the clients to decide in
which firm the risk is less or in which one they should invest so that maximum benefit can be
earned.

Industries are capital intensive; hence a lot of money is invested in it. So before investing
in companies one has to carefully study its financial condition and worthiness. An attempt has
been carried out in this project to analyze and interpret the financial statements of a company.

Financial statements are records that provide an indication of the organization’s financial
status. It quantitatively describes the financial health of the company. It helps in the evaluation of
company’s prospects and risks for the purpose of making business decisions. The objective of
financial statements is to provide information about the financial position, Statement and
changes in financial position of an enterprise that is useful to a wide range of users in making
economic decisions. Financial statements should be understandable, relevant, reliable and
comparable.
 They give an accurate picture of a company’s condition and operating results in a
condensed form. Reported assets, liabilities and equity are directly related to an organization's
financial position whereas reported income and expenses are directly related to an organization's
financial Statement. Analysis and interpretation of financial statements helps in determining the
liquidity position, long term solvency, financial viability, profitability and soundness of a firm.
There are four basic types of financial statements: balance sheet, income statements, cash flow
statements, and statements of retained earnings.

The analysis of financial statement is a process of evaluating the relationship between

component parts of financial statement to obtain a better understanding of firm financial position.
Analysis is a process of critically examining the accounting information given in financial
statements. For the purpose of analysis, individual items are studied; their interrelationship with
other related figures is established.

Thus analysis of financial statement refer to treatment of information contain in financial

statement in a way so as to afford a full diagnosis of the profitably and financial position of the
firm concern.

FINANCIAL STATEMENTS

Financial statements (or financial reports) are formal records of the financial activities of
a business, person, or other entity. Financial statements provide an overview of a business or
person's financial condition in both short and long term. All the relevant financial information of
a business enterprise, presented in a structured manner and in a form easy to understand is called
the financial statements.

The analysis of financial statement is a process of evaluating the relationship between

component parts of financial statement to obtain a better understanding of firm financial position.

A complete set of financial statement comprises:

 A statement of financial position as at the end of the period:

 A statement of comprehensive income for the period;
  A statement of changes in equity for the period:
 A statement of cash flow for the period.
 Notes of Account comprising a summary of significant accounting policies and other
explanatory information.

THERE ARE FOUR BASIC FINANCIAL STATEMENTS:

1. Balance sheet:
It is also referred to as statement of financial position or condition, reports on a
company's assets, liabilities, and ownership equity as of a given point in time. The
Balance Sheet shows the health of a business from day one to the date on the balance
sheet.
2. Income statement
It is also referred to as Profit and Loss statement (or "P&L"), reports on a company's
income, expenses, and profits over a period of time. Profit & Loss account provide
information on the operation of the enterprise. These include sale and the various
expenses incurred during the processing state.
The income statement shows a presentation of the sales, the main expenses and the
resulting net income over the period. Net income is based on accounting principles
which gives guidance/rules on when to recognize revenues and expenses, whereas
cash from operating activities, obviously is cash based.
3. Statement of Retained Earnings:
It explains the changes in a company's retained earnings over the reporting period.
The statement of retained earnings shows the breakdown of retained earnings. Net
income for the year is added to the beginning of year balance, and dividends are
subtracted. This results in the end of year balance for retained earnings.
4. Cash Flow Statement
It reports on a company's cash flow activities; particularly it’s operating, investing
and financing activities. The statement of cash flows the ins and outs of cash during
the reporting period. The statement of cash flows takes aspects of the income
statement and balance sheet and kind of crams them together to show cash sources
and uses for the period.
FINANCIAL STATEMENT ANALYSIS:

Financial analysis is the process of examining a company’s Statement in the context of its
industry and economic environment in order to arrive at a decision or environment. For this
purpose, financial reports are one of the most important sources of information available to a
financial analyst. Furthermore, the analyst also uses information contained in the notes to
financial statements and supplementary information (such as management discussion). It is
important that an analyst have a strong understanding of each of these sources of information.

Financial Statement Analysis is a method of reviewing and analyzing a company’s

accounting reports (financial statements) in order to gauge its past, present or projected future
Statement. This process of reviewing the financial statements allows for better economic
decision making.

Globally, publicly listed companies are required by law to file their financial statements
with the relevant authorities. For example, publicly listed firms in America are required to
submit their financial statements to the Securities and Exchange Commission (SEC). Firms are
also obligated to provide their financial statements in the annual report that they share with their
stakeholders. As financial statements are prepared in order to meet requirements, the second step
in the process is to analyze them effectively so that future profitability and cash flows can be
forecasted.

Therefore, the main purpose of financial statement analysis is to utilize information about
the past Statement of the company in order to predict how it will fare in the future. Another
important purpose of the analysis of financial statements is to identify potential problem areas
and troubleshoot those.

FINANCIAL STATEMENT USERS

There are different users of financial statement analysis. These can be classified into
internal and external users. Internal users refer to the management of the company who analyzes
financial statements in order to make decisions related to the operations of the company. On the
other hand, external users do not necessarily belong to the company but still hold some sort of
financial interest. These include owners, investors, creditors, government, employees, customers,
and the general public. These users are elaborated on below:

1. Management

The managers of the company use their financial statement analysis to make intelligent
decisions about their Statement. For instance, they may gauge cost per distribution channel, or
how much cash they have left, from their accounting reports and make decisions from these
analysis results.

2. Owners

Small business owners need financial information from their operations to determine
whether the business is profitable. It helps in making decisions like whether to continue
operating the business, whether to improve business strategies or whether to give up on the
business altogether.

3. Investors

People who have purchased stock or shares in a company need financial information to
analyze the way the company is performing. They use financial statement analysis to determine
what to do with their investments in the company. So depending on how the company is doing,
they will hold onto their stock, sell it or buy more.

4. Creditors

Creditors are interested in knowing if a company will be able to honor its payments as
they become due. They use cash flow analysis of the company’s accounting records to measure
the company’s liquidity, or its ability to make short-term payments.

5. Government

Governing and regulating bodies of the state look at financial statement analysis to
determine how the economy is performing in general so they can plan their financial and
industrial policies. Tax authorities also analyze a company’s statements to calculate the tax
burden that the company has to pay.

6. Employees

Employees need to know if their employment is secure and if there is a possibility of a

pay raise. They want to be abreast of their company’s profitability and stability. Employees may
also be interested in knowing the company’s financial position to see whether there may be plans
for expansion and hence, career prospects for them

7. Customers

Customers need to know about the ability of the company to service its clients into the
future. The need to know about the company’s stability of operations is heightened if the
customer (i.e. a distributor or procurer of specialized products) is dependent wholly on the
company for its supplies.

8. General Public

Anyone in the general public, like students, analysts and researchers, may be interested in
using a company’s financial statement analysis. They may wish to evaluate the effects of the firm
on the environment, or the economy or even the local community. For instance, if the company
is running corporate social responsibility programs for improving the community, the public may
want to be aware of the future operations of the company.

METHODS OF FINANCIAL STATEMENT ANALYSIS

There are two main methods of analyzing financial statements: horizontal or trend
analysis, and vertical analysis. These are explained below along with the advantages and
disadvantages of each method.
HORIZONTAL ANALYSIS

Horizontal analysis is the comparison of financial information of a company with

historical financial information of the same company over a number of reporting periods. It
could also be based on the ratios derived from the financial information over the same time span.
The main purpose is to see if the numbers are high or low in comparison to past records, which
may be used to investigate any causes for concern. For example, certain expenditures that are
high currently, but were well under budget in previous years may cause the management to
investigate the cause for the rise in costs; it may be due to switching suppliers or using better
quality raw material.

This method of analysis is simply grouping together all information, sorting them by time
period: weeks, months or years. The numbers in each period can also be shown as a percentage
of the numbers expressed in the baseline (earliest/starting) year. The amount given to the
baseline year is usually 100%. This analysis is also called dynamic analysis or trend analysis.

ADVANTAGES AND DISADVANTAGES OF HORIZONTAL ANALYSIS

When the analysis is conducted for all financial statements at the same time, the complete
impact of operational activities can be seen on the company’s financial condition during the
period under review. This is a clear advantage of using horizontal analysis as the company can
review its Statement in comparison to the previous periods and gauge how it’s doing based on
past results.

A disadvantage of horizontal analysis is that the aggregated information expressed in the

financial statements may have changed over time and therefore will cause variances to creep up
when account balances are compared across periods.

Horizontal analysis can also be used to misrepresent results. It can be manipulated to

show comparisons across periods which would make the results appear stellar for the company.
For instance, if the profits for this month are only compared with those of last month, they may
appear outstanding but that may not be the case if compared with the same month the previous
year. Using consistent comparison periods can address this problem.
VERTICAL ANALYSIS

Vertical analysis is conducted on financial statements for a single time period only. Each
item in the statement is shown as a base figure of another item in the statement, for a given time
period, usually for year. Typically, this analysis means that every item on an income and loss
statement is expressed as a percentage of gross sales, while every item on a balance sheet is
expressed as a percentage of total assets held by the firm.

Vertical analysis is also called static analysis because it is carried out for a single time
period.

ADVANTAGES AND DISADVANTAGES OF VERTICAL ANALYSIS

Vertical analysis only requires financial statements for a single reporting period. It is
useful for inter-firm or inter-departmental comparisons of Statement as one can see relative
proportions of account balances, no matter the size of the business or department.

Because basic vertical analysis is constricted by using a single time period, it has the
disadvantage of losing out on comparison across different time periods to gauge Statement. This
can be addressed by using it in conjunction with timeline analysis, which shows what changes
have occurred in the financial accounts over time, such as a comparative analysis over a three-
year period. For instance, if the cost of sales comes out to be only 30 percent of sales each year
in the past, but this year the percentage comes out to be 45 percent, it would be a cause for
concern.

IMPORTANCE OF ANALYSIS OF FINANCIAL STATEMENT

Financial statement is prepared at a certain point of time according to established

convention. These statements are prepared to suit the requirement of the proprietor. For
measuring the financial soundness, efficiency, profitability and future prospects of the concern, it
is necessary to analyze the financial statement. Following purposes are served by the Financial
analysis: -
 Help in Evaluating the operational efficiency of the Concern:- It is necessary to analyze
the financial statement for matching the total expenses incurred in manufacturing, Advertising,
selling and distribution of the finished goods and total financial expanses of the current year
comparing with the total expanses of the previous year and evaluate the managerial efficiency of
concern.

Help in Evaluating the short and long term financial position:- It is necessary to analyze
the financial statement for comparing the current assets and current liabilities to evaluate the
short term and long term financial soundness.

Help in calculating the profitability:- It is necessary to analyze the financial statement to

know the gross profit and net profit.

Help in indicating the trend of achievements:- Analysis of financial statement helps in

comparing the Financial position of previous year and also compare various expenses, purchases
and sales growth, gross and net profit. Cost of goods sold, total value of assets and liabilities can
be compare easily with the help of Analysis of financial statement.

Forecasting, budgeting and deciding future line of action:-The potential growth of the
business can be predicts by the analysis of financial statement which helps in deciding future line
of action. Comparisons of actual performance with target show all the shortcomings.

FINANCIAL ACCOUNTING:

Financial accounting is the process of systematic recording of the business transactions in the
various books of accounts maintained by the organization with the ultimate intention of
preparing the financial statement there from. These financial statements are basically in two
forms. One, profitability statement which indicates the result of operations carried out by the
organization during a given period of time and second balance sheet which indicates the state of
affairs of the organization at any given point of time in terms of its assets and liabilities.

 Main purpose of financial accounting is to ascertain profit or loss and to indicate financial
position of an enterprise.
  Two fundamental statements of financial accounting are income and expenditure
statement and balance sheet.
 The profit and loss account or income and expenditure account is prepared for a
particular period to find out the profitability of the firm and balance sheet is prepared on a
particular date to determine the financial position of the firm.
 Financial accounting summaries transactions taking place during a period with the
objective of preparing the financial statement.

FINANCIAL STATEMENT ANALYSIS

Financial Statement analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account.

It also helps in short-term and long-term forecasting and growth can be identified with
the help of financial Statement analysis.

The dictionary meaning of ‘analysis’ is to resolve or separate a thing in to its element or

components parts for tracing their relation to the things as whole and to each other.

FINANCIAL STATEMENTS

‘FINANCIAL STATEMENT’ refers to formal ad original statements prepared by a

business concern to disclose its financial information

According to John. N.Meyer, “The financial statement provides summary of accounts of

a business enterprise, the balance sheet reflecting assets, liabilities and capital as on a certain
date and the income statement showing the result of operation during a certain period”

The financial statements are prepared with a view to depict the financial position of the
concern. They are based on the recorded facts and are usually expressed in monetary terms. The
financial statement are prepared periodically that is generally for the accounting period
 The term financial statement has been widely used to represent two statements prepared by
accountants at the end of specific period. They are :

 Profit and loss a/c or income statement

 Balance sheet or statement of financial position

LIMITATION OF FINANCIAL STATEMENT:

 Information shown in financial statement is not precise since it is based on practical

experience and the conventions and rules developed therefore
 Financial statements do not always disclose the correct financial position of the business
concern as they are influenced by the personal opinions, judgement, subjective view and
whims of accountant of each concern
 Balance sheet of a concern is a statics document it disclose the financial position of a
concern on a particular date.
 Information disclosed by profit& loss a/c may not be the real profit as many items shown
in the profit & loss a/c may not the real
 Financial statements are dumb, because they speak themselves. The statements require
further detailed analysis and interpretation.
 Financial statement of the one period may not be comparable.
 Financial statement does not disclose the contribution of man towards the efficiency of
the business.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

The various tools of financial statement are used for decision-making process. The
financial statement becomes a tool for future planning and forecasting. The analysis of these
statements involves their division according to similar groups and arranged in desired form. The
interpretation involves the explanation of financial facts in a simplifier’s manner

OBJECTIVES OF ANALYSIS AND INTERPRETATION:

 The users of financial statement have definite objectives to analysis and interpret .Therefore;
there are variations in the objectives of interpretation by various classes of people. However,
there are certain specific and common objectives which are listed below:

 To interpret the profitability and efficiency of various business activities with the help of
profit and loss account;
 To measure managerial efficiency of the firm;
 To ascertain earning capacity in future period;
 To measure short-term and long -term solvency of the business;
 To determine future positional of the concern;
 To measure utilization of various assets during the period;
 To compare operational efficiency of similar concerns engaged in the same industry

Type of Analysis:

The process of financial statement analysis is of different types. The process of analysis
is classified on the basis of information used and ‘modus operandi’ of analysis. The classification
is as under:

Financial statement analysis

On the basis of information on basis of ‘modus operandi’ of

Used: analysis:

(a) External analysis (a) Horizontal analysis

(b) Internal analysis (b) Vertical analysis

LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is a very important device but it has Certain limitation which are to
be kept in mind. Following are the limitations of financial statement analysis.

1. Based on past data:

The nature of financial statements is historical. Past cannot be the index of future estimation,
forecasting, budgeting and planning.

2. Financial statement analysis cannot be a substitute for judgment :

Analysis is tools which can be utilized usefully by an expert may lead to erroneous conclusion by
unskilled analysis. Thus the result analysis cannot be considered as judgment or conclusion

3. Reliability of figures:

The accuracy and reliability of analysis depends on reliability of figures derived from financial
statement.

4. Different interpretation:

Result of the analysis may be interpreted differently by different user

5. Change in accounting methods:

Analysis will be effective if the figures taken from financial statements comparable. If there are
frequent change in accounting policies and method, figures of different periods will be different
and comparable.

6. Price level change:

The ever rising inflation erodes the value of money in the present day economic situation, which
reduces the validity of analysis.

7. Limitations of the tools of analysis:

Different techniques of analysis are used by an analyst. These tools are suitable for different
type of analysis. Application of a particular tool or technique depends on the skill and expertise
of the analyst. If an unsuitable technique is used, it give misleading result. It may lead to wrong
conclusions and prove harmful to the business concern.
METHODS OF ANALYSIS AND INTERPRETATION

The analysis and interpretation of financial statement is used to determine the financial
position and result of operation as well. The following are the tools that are used for analyzing
the financial position of the company:

 Ratio Analysis
 Comparative balance sheet
 Common size balance sheet
 Trend analysis

RATIO ANALYSIS

Ratio analysis is an important and age-old technique. It is a powerful tool of financial

Analysis. It is defined as “The indicated quotient of two mathematical expressions” and as “the
relationship between two or more things” .Systematic use of ratio is to interpret the financial
statement so that the strength and weakness of a firm as well as its historical Statement and
current financial condition can be determined.

A ratio is only comparison of the numerator with the denominator .The term ratio refers
to the numerical or quantitative relationship between two figures. Thus, ratio is the relationship
between two figures and obtained by dividing a former by the latter. Ratios are designed show
how one number is related to another.

The data given in the financial statements are in absolute form and are dumb and are
unable to communicate anything. Ratios are relative form of financial data and are very useful
technique to check upon the efficiency of a firm. Some ratios indicate the trend or progress or
downfall of the firm.

In the view of the requirements of the various users of ratio, it is divided in to the following
important categories.

 1. Liquidity ratios
 2. Activity ratios
  3. Profitability ratios
 4. Earnings ratios

LIQUIDITY RATIOS:

Liquidity ratios measure the ability of the firm to meet it’s a current obligation. In fact,
analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements;
but liquidity ratios, by establishing a relationship between cash and other current asset to current
obligations provide a quick measure of liquidity.

A firm should ensure that it does not suffer From lack or liquidity, and it does not have
excess liquidity .the failure of the company to meet its obligations due to its lack of liquidity,
will result in a poor creditworthiness, loss of creditor’s confidence, or even in legal tangles
resulting in the closure of the company a very high degree of liquidity is also bad idle assets earn
nothing. The firms fund will be unnecessarily tied up in current assets. Therefore it is necessary
to strike a proper balance between high liquidity and lack of liquidity.

ACTIVITY RATIO OR TURNOVER RATIO:

Activity Ratio highlights the activity and the operational efficiency of the business
concern. The better managements of asserts the larger the amount of sales. Activity ratio
measures the relationship between the sales and the assets. Turnover ratios are employed to
evaluate the efficiency with which the firm manages and utilize s its assets. Their ratio indicates
the speed with which assets are brought converted as turn over into sales.

PROFITABILITY RATIOS:

Profitability reflects the final result of the business operations. Profit earning is
considered essential for the survival of the business. There are two types of profitability ratios
profit margin ratio and the rate of return ratios. Profit margin ratio shows the relationship
between profit and sales.

Popular profit margin ratios are gross profit margin and net profit margin ratio. Rate of
return ratio reflects between profit and investment. The important rates of return measures are
rate of return on total assets and rate in equity.

EARNINGS RATIOS:

Earnings are income to the shareholders of the share invested by them. Hence the
earnings ratio will be useful to the investors to the value of the shares that is been holding by
them

COMPARATIVE BALANCE SHEET:

The comparative balance sheet is helpful in analysing and evaluating the financial
position of the firm over a period of years. The comparative balance sheet analyse is the study of
the trend of the same items, group of items, and computed items in two or more balance sheet of
the same business enterprise on different dates.

The changes in periodic balance sheet items reflect the conduct of a business. The
changes can be observed by comparison of the balance sheet at the beginning and at the end of
the period and these changes can help in forming an opinion about the progress of an enterprise

COMMON SIZE BALANCE SHEET:

Financial statements when read in absolute figure are not easily understandable. They are
even miss leading. Each items of asset is converted in to percentage to total asset and each item
of capital and liabilities is expressed to total liability and capital fund. Thus the whole balance
sheet is converted in to percentage form i.e., every individual item stated as a percentage of total
100.such converted balance sheet is known as common size balance sheet. The percentage so
calculated can be easily compared with the corresponding percentages in some other period.

TREND ANALYSIS:
 The ‘trend’ signifies a tendency and as such the review and appraisal of tendency in
accounting variables are nothing but the trend analysis. Trend analysis is carried out by
calculating trend ratio. Trend analysis is significant for forecasting and budgeting. Trend analysis
discloses the change in financial and the operating data between specific periods.

PURPOSE OF THE STUDY

A financial services sector plays a critical role in fulfilling the needs of growing and
increasingly diverse economy, offering high quality services to business and individual alike.
Though Indian banking system registered commendable progress in terms of geographical and
functional coverage, its performance in terms of operational efficiency and viability still leaves
considerable room for improvement
A bank’s balance sheet and income statement are valuable information sources for identifying
risk taking and assessing risk management effectiveness. Although amounts found on these
statements does not provide valuable insights of performance so ratio analysis is required for
determining good or bad performance of bank and also for determining its causes. The study
includes the calculation of different financial ratios. It compares three years financial statements
of the company to know its performance in these different years.

A financial statement is an organized collection of data according to logical and consistent

accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business firm. It may show a position at a moment of time as in the case of a balance sheet, or
may reveal a series of activities over a given period of time, as in the case of an income
statement.
Thus, the term financial statement generally refers to the basis statements;
i) The income statement
ii) The balance sheet
iii) A statement of retained earnings
iv) A statement of charge in financial position in addition to the above two statement.
v) The basic objective of studying the ratios of the company is to know the financial
position of the company.
NEED FOR THE STUDY
The need for the study is as follows:
1. The study aim at assessing profitability and solvency position of the company.
2. The liquidity and activity positions of the firm are analyzed using liquidity and
turnover ratios involving current liabilities.
3. The solvency position of the company is also analyzed using ratios

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVES
 To analyze the overall financial performance analysis of three MOKSHWA
SOFT DRINKS AT COIMBATORE
SECONDARY OBJECTIVES
 To ascertain the short term and long term solvency position of the MOKSHWA
SOFT DRINKS AT COIMBATORE
 To ascertain the profitability ratio of MOKSHWA SOFT DRINKS AT
COIMBATORE during the past five financial years.
 To know the overall financial position of MOKSHWA SOFT DRINKS AT
COIMBATORE during the past five financial years
 TO Draw the significant relationship between increase or decrease of income and
expenditure with respect to different activities
 To study the changes which take place in revenue account during the years and
their trends
 To study the growth rate which take place with respect to each activity
 To highlight the service coming in the area of finance with the help of the trend
Analysis comparative balance sheet Analysis commensurate balance sheet analysis
and the view to increasing efficient of the MOKSHWA SOFT DRINKS AT
COIMBATORE
 To assess the working capital employed by the MOKSHWA SOFT DRINKS AT
COIMBATORE

SCOPE OF STUDY
  The activities as the sources are planned in on systematic manner.
 It provides validity, objectives & reliability in business management.
 It creates harmony in the relationship between the management & employee.
 The management aims to control the cost of the production at the same time increase
the efficiency of Employee.
 Impact of ratio analysis for MOKSHWA SOFT DRINKS AT COIMBATORE
 To study how the short term funds and long term funds are generated.

LIMITATIONS OF THE STUDY

 Time has been a limit factor and it has been difficult the various aspects of finance with
the prescribed time.
 Financial statements are only in terms of reports. They are not final because the exact
financial position can be known only when the business is closed.
Financial statement are prepare on the basis of certain accounting concepts and
conventions any changes in the method or procedure of accounting limits the utility the
utility of financial statements.
 The number of parties interested in the financial statement is large and their interest
differs. The financial statements cannot meet the purpose of parties interested in them.
 The authenticity of the financial statement has not been checked with the book of
accounts of the company.

CHAPTER II
REVIEW OF LITERATURE
REVIEW OF LITERATURE
1. Barton and Schmidt (1986) The size of the equity pool also may depend on the rate of
profitability, income distribution, and equity redemption. Decisions by cooperative
management and members regarding equity investment should be based on the members
cost of equity capital. The cost to the member of providing equity is the opportunity cost
of investing money in a member's own operation or other alternatives.
2. Cobia and Brewer (1988). An agricultural cooperative requires capital to finance fixed
assets (such as land, buildings, and equipment) and other assets (such as investments in
 other cooperatives), and to provide working capital. Thus, cooperative management may
follow the practice of maximizing the use of equity capital and minimizing the use of
debt.
3. Featherstone (1989) The cooperative needs to determine a leverage level and then
manage equity investment and redemption to achieve this level. Cooperatives must be lie
to identify optimal levels of debt and equity to operate efficiently and to guard against
unexpected economic shocks, because leverage affects the probability of equity loss and
bankruptcy
4. Cobia and Brewer (1990) Cooperatives also acquire capital through debt financing.
Using debt is attractive to cooperative directors who represent members' interests,
because it allows for members to achieve a higher return on patronage and equity when
the cost of debt is less than the cost of equity. However, acquiring too much debt subjects
the cooperative to unbearable financial risk caused by varying profitability and interest
rates.
5. JL Berens and CJ Cuny (1995) corporate finance researchers have long been puzzled
by Iow corporate debt ratios given debt's corporate tax advantage. This article recognizes
that firm value typically reflects a growing stream of earnings, while current debt reflects
a no growing stream of interest payments. Debt to value is therefore a distorted measure
of corporate tax shielding
6. Hopkins (1995) one of the most important and most difficult decisions cooperative
management must make is the choice of capital structure. Through proper capital
sln1cture, management can influence the financial performance of the business (Forster).
The cost of debt is less than the cost of equity capital because of differences in risk and
the tax deductibility of debt.
7. Davis, Henry A (1998) Capital structure describes how a corporation has organized its
capital-how it obtains the financial resources with which it operates its business.
Businesses adopt various capital structures to meet both internal needs for capital and
external requirements for returns on shareholders investments Executives Research
Foundation.
8. Vojislav Maksimovic (1999) This paper analyzes the relationship between a firm's
capital structure and its information acquisition prior to capital budgeting decisions. It is
 found that low-growth industries can sustain a large number of levered firms. In these
industries, leverage is negatively related to a firm's incentive to acquire information
during the capital budgeting process.
9. Arntzen. L. Fallan (2003) The most important arguments for what could determine
capital structure is the pecking order these static trade off theory. These two theories are
reviewed, but neither of them provides a complete description of the situation and why
some firms prefer equity and others debt under different circumstances.
10. Christopher J. Green (2004) capital structure and firm ownership in order to identify
the leading theoretical and empirical issues in this area. The theoretical component of the
survey attempts to reconcile competing theories of capital structure and appraises recent
models which use agency theory and asymmetric information to explore the impact of
managerial shareholdings, corporate strategy and taxation on the firm's capital structure.
11. Denis (2004) The field of empirical capital structure studies is very actively researched,
the large majority of studies has been conducted on samples of large firms. The relative
shortage of research into private small firm capital structure is troubling because small
firms provide about half of private sector employment and produce about half of private
sector output in the United Even their aggregate importance as users of financing has
recently surpassed that of better-known large-firm markets.
12. Dirk hack births (2004) This paper develops a framework for analyzing the impact of
macroeconomic conditions on credit risk and dynamic capital structure choice. We begin
by observing that when cash flows depend on current economic conditions, there will be
a benefit for firms to adapt their default and financing policies to the position of the
economy in the business cycle phase.

13. Fernandez (2004) capital structure and factor-product markets. These studies relate some
elements of the modern financial theory to the stakeholder theory, industrial organization,
and firms strategic management. Three main points are highlighted. First, the relevant
role of non-financial stakeholders in capital structure design. Second, the interactions
between capital structure and market structure.
14. Frank Adams (2004) Capital structure theories grounded in the finance paradigm
(agency theory, transaction cost theory) have contributed to our understanding of capital
 structure decision making. However, they do not address the intricacies of capital
structure decision making from a managerial choice perspective, especially in privately
held firms.
15. Hovakimian (2004) This study examines capital structure decisions in a small and
medium enterprise (SME) setting. Specifically, we look at two main issues. First, we test
whether industry median leverage, which has been found to affect large firm capital
structure decisions also guide financing patterns of SMEs
16. Vanitha. S and Selvam. M (2007) “Financial Performance of Indian Manufacturing
Companies during Pre and Post Merger” they analyzed the pre and post merger
performance of Indian manufacturing sector during 2000-2002 by using a sample of 17
companies out of 58 (thirty percent of the total population). For financial performance
analysis, they used ratio analysis, mean, standard deviation and ‘t’ test. They found that
the overall financial performance of merged companies in respect of 13 variables were
not significantly different from the expectations.
17. Kumar (2009), "Post-Merger Corporate Performance: an Indian Perspective" examined the post-
merger operating performance of a sample of 30 acquiring companies involved in merger
activities during the period 1999-2002 in India. The study attempts to identify synergies, if any,
resulting from mergers. The study uses accounting data to examine merger related gains to the
acquiring firms

CHAPTER III
RESEARCH METHODOLOGY
RESEARCH DESIGN:
The research approach used for the study is descriptive. The form of the study is on the financial
statement analysis in general and specific to the cash position.
DATA COLLECTION
PRIMARY DATA:
The primary data is collected from the personnel interview.
SECONDARY DATA:
 The study has been made using secondary data, which are obtained from annual reports and
statements of accounts.
ANALYTICAL TOOLS FOR THE STUDY:
The researcher for the purpose of analysis and interpretation of the following tools have been need
 RATIO ANALYSIS

CHAPTERIZATION SCHEME

 Chapter I deal with the introduction, company profile, and industry profile
 Chapter II deals with the review of literature
 Chapter III deals with the research methodology
 Chapter IV deals with the data analysis and interpretation
 Chapter V deals with the finding, suggestion, and conclusion