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PROJECT REPORT ON

FINANCIAL STATEMENT ANALYSIS THROUGH RATIOS

SHETKARI-VINKARI SAHAKARI SOOT GIRNI (LTD), ISLAMPUR

SUBMITTED BY

Mr. SUJIT KABADGE MBA

SUBMITTED IN PARTIAL FULFILLMENT OF THE DEGREE OF MASTERS OF BUSINESS ADMINISTRATION UNIVERSITY OF PUNE

THROUGH

PIMPRI CHINCHWAD EDUCATION SOCIETYS


S.B.PATIL INSTITUTE OF MANAGEMENT AKURDI PUNE, MAHARASHTRA 2010-2012

Acknowledgement
Success can never be attained without proper guidance

A project in an organization is an experience wherein the academic knowledge gained from the institute is applied in a practical manner. I had an opportunity to complete my summer project in Shetakari Vinakari Sahakari Soot Girni Ltd.

The project is a great source of learning and a good experience as it made me aware of professional culture and conducts that exists in an organization. In this journey many people were influential without whom the task would have been incomplete.

I hereby express heartfelt gratitude to MR. Pande (M.D.,SHETAKARI VINAKARI SAHKARI SOOT GIRNI LTD.) Who gave me opportunity to do project in Crompton greaves Ltd. I sincerely thank to MR. H.B.Mulani (industrial guide) whose valuable guidance encouraged me.

I am very thankful to Prof. ANISH KARIA sir, who is my project guide, for helping me at all stages of my project work and for properly guiding me in the preparation of this project report.

In addition, I thank to the staff members and all my seniors in Shetakari Vinakari Sahakari Soot Girni Ltd. who helped me in the successful completion of this project.

The rich experience, which I gathered during my short stay with the company, will act, as a valuable tool in my future. I will always carry very fond memories of these training days.

(SUJIT KABADGE)

DECLARATION

I, Sujit Sunil Kabadge hereby declare that this project report titled Study of Financial Statement Analysis through Ratios. Of SHETAKARI VINAKARI SAHAKARI SOOT GIRNI LTD. ISLAMPUR Is an originally work done by me in partial fulfillment for the degree of Master of Business Administration from university of Pune.

I, further declare that this work is not partly or wholly submitted for any other purpose and that the data included in the report, collected from various sources are true to the best of my knowledge.

(Sujit Kabadge) MBA, S.B.Patil Institute Of Management.


Akurdi, Pune.

INDEX

CHAPTER NO.

TITLE

PAGE NO.

1.

EXECUTIVE SUMMARY

07-09

2.

COMPANY PROFILE

10-22

3.

OBJECTIVE OF PROJECT

23-26

4.

RESEARCH METHODOLOGY

27-50

5.

THEROTICAL BACKGROUND

51-85

6.

DATA ANALYSIS & INTERPRETATION

86-89

7.

FINDINGS & OBSERVATION

90-91

8.

RECOMMENDATIONS

92-93

9.

BIBLIOGRAPHY

94-95

10.

ANNEXURES

96-97

CHAPTER - 1

EXECUTIVE SUMMARY

Title of the project:


Financial Statement Analysis through ratio with respect to Shetkari Vinkari Sahakari Soot Girni Ltd Islampur. Objectives of Study: To know efficiency with which the operation of the Shetkari Vinkari Soot Girni Ltd Islampur carried on. To know their return on investment. To know financial position of the Shetkari Vinkari Sahakari Soot Girni Ltd Islampur to meet all its obligations-both long-term as well as short-trerm without strain. To determine solvency of the firm. To know efficiency with which the capital employed is rotated in the Shetkari Vinkari Sahakari Soot Girni Ltd Islampur.

Scope of the study: 1. Geographical Scope:- The study is limited to financial statement analysis through ratios with respect to Shetkari Vinkari Sahakari Soot Girni Ltd Islampur. 2. Analytical Scope:- The study is limited to ratio analysis of financial statement of Shetkari Vinkari Sahakari Soot Girni Ltd Islampur.For the financial years 2009-10 to 2010-11.

This project named Ratio Analysis was carried out at SHETKARI-VINKARI SAHAKARI SOOT GIRNI(LTD),to analyze and understand financial feasibility of the company in terms of liquidity, turnover, solvency, profitability etc. by using Ratio Analysis technique.

I chose to do this project at SHETKARI-VINKARI SAHAKARI SOOT GIRNI (LTD), because it is a well known industry for production of garments in a very short period.

The Ratio Analysis technique is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance-sheet and the profit and loss account because the figures recorded in the financial statements are absolutely incapable of revealing the soundness or otherwise of a Company's financial position or performance. Thus the technique of "Ratio Analysis" has been used which is supposed to be powerful tool for financial statements.

In Ratio Analysis technique a ratio is used as a benchmark for evaluating the financial position and the performance of the firm.

CHAPTER - 2

COMPANY PROFILE

PROFILE OF THE COMPANY

Parivartan Garment Co-Op Industries Ltd Islampur


Hon. Jayant Patil Minister of Maharashtra and Hon. Chairmen Mr. Dilip Patil established this textile park known as Rajaram Group of Textile Industries.

Introduction of Rajaram Group:


The Parivartan garment is a part of The Rajarambapu Group Of Textile Industries and is synonymous with dedication to productivity, quality and versality in the field of textile manufacturing world to house all the necessary equipment and facilities necessary for spinning, weaving, knitting, yarn dyeing, fabric processing, and ready made garmenting, under one roof. The group believers in the entire chain-from value addition and commitment to constant development both in technology and commercially. The Rajarambapu Group Of Textile Industries was the the brainchild of the great visionary of that time, Rajarambapu Patil.It Is he who laid a very robust foundation for the business, which later flourished and consolidated under the able leadership of Hon. Jayant Patil ,Minister of Maharashtra .The business has established a globle presence today,with a sizable market share in domestic as well as export markets. The Rajarambapu Group Of Textile Industries stands firmly on the foundation of honesty and integrity. These are values we proud to uphold. We believe in the power and efficiency of teamwork .Each employee is treated as an important part of the whole organization, and is encouraged to work in harmony with the rest of the group in order achieve the highest levels of performance. As an Organization we believe in contributing to society and endeavor make a difference in whatever humble way we can to aid the socio-economic growth of society.Duty goals remain the endless the endless pursuit of achieving high standard of productivity,quality and service through excellence.

The Shetkari Vinkari Sahakari Soot Girni Ltd.


This is state-of-the 25,200 spindles project, with machines from Laxmi Machine from machine Works, Coimbatore and winding Machine from Murata(Japan) and a laboratory from premier Inc .The set up of machinery and modern testing equipment result in production that happens at a high speed and a quality of yarn of a superior quality. The yarn produced by the mill is accepted by the export market on all counts of quality standards. The project has launched in two phases, the first of whiiscomplete;18000 spindles are presently under production. The unit has been awarded 1st prize for the best technical performance in the first year.

Jayant Textile Co-op Industries Ltd.


This unit is engaged in manufacture of Standard and Technical woven fabric made of various types of natural, artificial and synthetic yarn. Producing fabrics such as plain, Poplin Twill, Cotton Voile ,Corduroy, Herringbone ,Crepe Georgette and Satin. the fabrics are used in area such as technical textiles, agriculture and construction, the shoe industry, clothing, geo textile, upholstery, floor coverage,filtration,hygiene,medical,automobile,shipping,railways,and airplane, environmental protection,packaging,personal protection,and sport.for the production of all this,a10 double Width Looms from Smote,Wama tex & wanly are installed having a production capacity of 75000 mtrs.Cloth per-month.

Indraprastha Knitting & Garments Co-Op Industries Ltd.:


This outfit manufactures knitwear for men, ladies, children and babies. The Regular knit structures manufactured here are, ribbed, jerseys, interlocked, piqued, feeder strips herringbone fleece.100% cotton and blended fabrics are produced using circular knitting machines from Myer and Cie .The manufacturing capacity is 60000kg of fabric per month.a sizeable part of the production is exported to European countries and to the Worlds major fashion Capitals. The unit has a versatile production capacity and can produce any kind of knitted fabric. Two more projects of knit processing have been undertaken in order to boost the production add value.

Pratibimb processing Co-Op Industries:

This is an ultra modern knit fabric processing plant with facilities for reactive dyeing of 100% cotton knitted fabric. We have the most advanced dyeing machines from Germany, the Squeezer from Corino,Itely,the Relax Dryer from salvade, Itely and the Compacting Calenders from Lafer,Itely and a Laboratory from Tree point, Mathis Switzerland.The production capacity at this unit 4 MT per day. This is also an Environment friendly dying unit where we have employed the advanced ETP for effluent treatment.

Prerana Yarn Dying Co-Op Industries:


This is state of art dying house for yarn which has the capacity of 3MT per day for dying of 100% cotton yarn.The Forn (Hong Kong) are high temperature and pressure and dyeing machines, it is a solution for cotton as well as polyester yarn.

Parivartan Garment Co-op Industries:


This perhaps the orgnizations most state-of-the-art, modern garmenting project yet. This unit has production capacity of 4500 garments per day.This houses the most modern and efficient machinery from Japan, Taiwan, china. It is this unit that is able provides complete garmenting solutions from stitching, finishing, washing,printing to embroidering,parivartan transforms mere fabric into fashionable wear.

This unit is unique in another way too; it has been structured and run with the express aim of creating employment for the female contigent of our society.

The mens innerwear market is expanding as the options for men get more adventurous and interesting. It is no longer limited to staid looking, coloured briefs briefs. Manufactures are designing exclusive undergarments for men and have discovered that there is alarge market to tap out there is large market to tap out there. The innovation in mens inner wear is happening with respect to materials, styles and colours. Age is one of the factors that determine the market too, as younger men are more experimental in nature, while older age generally driven by comfort.

3.3 Vision of Rajaram Bapu Textile:The Rajaram bapu group of textile Industrys vision entails helping people to improve the quanlity of their lives by providing them superior quality of cloths which is primary need of human life. Rajaram group stands firmly on the foundation of honesty and integrity. These are values we proud to uphold. We believe in the power and efficiency of teamwork. Each

employee is treated as an important part of the whole organization, and is encouraged to work in harmony with the rest of the group in order to achieve the highest levels of performance. 3.4 Mission of Rajaram Bapu Textiles :As an organization we believe in contributing to society and endeavour make a difference in whatever humble way we can, to aid the socio-economic growth of society. Duty for us is a way of life. Work to us is both, pleasure and worship. Our goal remain the endless pursuit of achieving high standards of productivity, quality and service through excellence. 3.5 Quick View Of Rajaram Bapu Textile Founder: Mr. Jayant Patil Chairman : Mr. Dilip Patil Vice Chairman & CEO : Mr. Hemant Pande Headquaters : Islampur MIDC Islampur Tal: Walva Dist Sangli Website: www.ejaydeep.com Number of employees : 2000 ( for all business division) Sister Concern :- 6 companies as follows a) The Shetkari Vinkari Sahakari Soot Girni Ltd. b) Jayant Textile Co. Op Industries Ltd. c) Indraprastha Knitting & Garments Co.Op. Industries Ltd d) Pratibimb Processing Co. Op. Industries Ltd. e) Prerna Yrn Dying Co.op Industries f) Parivartan Garments Co.OP Industries

Organization And Organizational Chart:-

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12

Name Shri Dileep L Patil Shri. Bashir K Momin Shri Suhas R Patil Shri. Vishwas V Barawade Mahadev M Patil Shri Appasaheb B Munjaba Shri Hambirrao K Pawar Shri Raghunat S Patil Jyantrao N patil Shri Prasad M Tagare Shri Yuvraj M Suryawanshi Shri Rajendra B Pawar Shri Mohanrao G Patil

Designation Chairman Vice Chairman Director Director Director Director Director Director Director Director Director Director Director Director Director Director

14 15 16

Shri Rajendra R Pise Shri Nivrutti D Bamane Shri Raghunath S Madne

17 18

Sou Roja R Kinikar Sou Kamal R Patil

Director Director

Board of Directors

CHAIRAMAN/MANAGING DIRECTOR

GENERAL MANAGER

PRODUCTION MANAGER PRODUCTION SUPERVISOER

STORE KEEPER STORE CLERK

PERSONAL AND LOBOURWELFARE MANAGER

WATCHMAN

CLERK CLERK

PRODUCTION CLEARK

OPERATOR WORKER

CHAPTER - 3

OBJECTIVES OF PROJECT

Title of the project:


Financial Statement Analysis through ratio with respect to Shetkari Vinkari Sahakari Soot Girni Ltd Islampur. Objectives of Study: To know efficiency with which the operation of the Shetkari Vinkari Soot Girni Ltd Islampur carried on. To know their return on investment. To know financial position of the Shetkari Vinkari Sahakari Soot Girni Ltd Islampur to meet all its obligations-both long-term as well as short-trerm without strain. To determine solvency of the firm. To know efficiency with which the capital employed is rotated in the Shetkari Vinkari Sahakari Soot Girni Ltd Islampur.

Scope of the study: 3. Geographical Scope:- The study is limited to financial statement analysis through ratios with respect to Shetkari Vinkari Sahakari Soot Girni Ltd Islampur. 4. Analytical Scope:- The study is limited to ratio analysis of financial statement of Shetkari Vinkari Sahakari Soot Girni Ltd Islampur.For the financial years 2009-10 to 2010-11.

CHAPTER 4 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Primary Data: The primary data are those, which are collected afresh and for the first time, and thus happen to be original in chapter. The primary data related to the project was collected from the discussion and interaction with the senior employees and executives in the organization from Accounts and Finance Department. Secondary Data: The secondary data, on the other hand are those which have already then collected by someone else and which have already been passed through the statistical process. Secondary data was collected from documents, which were in printed form like annual reports, pamphlets, reference books based on Financial Management and through websites

METHODOLOGY FOR ANALYSIS

The methodology opted for carrying out project was by way of collection of data from the companys annual reports for the past three years i.e. from 2008-2009, 2009-2010, and 20102011, for the calculation of ratios. The theory related to ratios was gathered from various financial management books, which served the purpose of calculation and analysis of ratios. Further based on the above statements ratios related to liquidity, turnover, solvency, profitability and over profitability groups and miscellaneous groups have been calculated and interpreted in an intra firm comparison method. Similarly the ratios have been presented in graphical format to have clear understanding of it during three financial years and changes in it.

CHAPTER - 5 THEORETICAL BACKGROUND

MEANING OF RATIO

A ratio is a simple arithmetical expression of the relationship of one number to another. According to Accountants Handbook by Wixon Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers. In short it can be defined as the indicated quotient of two mathematical expressions. The ratios can be expressed in 1) Percentages 2) Fraction 3) Proportion of numbers.

MEANING OF RATIO ANALYSIS


Ratio Analysis is a technique of analysis and interpretation of financial statements. It is defined as the systematic use of ratios to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performances and current financial condition can be determined. There are a number of ratios which can be calculated from the information given in the financial statements, but the analysts has to select the appropriate date and calculate only a few appropriate ratios from the same keeping in mind the objectives of analysis. The following four steps involved in the ratio analysis: 1. Selection of relevant data from financial statements depending upon financial analysis. 2. Calculation of appropriate ratios. 3. Comparison of the calculated ratios of the same firm in the past or the ratios developed from projected financial statements to the ratios of some other firms or the comparison with ratios of the industry to which firm belonged. 4. Interpretation of ratios.

INTERPRITATION OF RATIOS

The interpretation of ratios is an important factor. Though calculation of ratios is also important but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness. The impacts of factors such as price level changes, change in accounting policies, window dressing etc should be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in following ways: 1. Intra firm comparison : - Here the ratios of one organization may be compared with the

ratios of the same organization for the various years either the previous years or the future years. 2. Inter firm comparison : - The ratios of one organization may be compared with the ratios of the other organization in the same industry and such comparison will be meaningful as the various organizations, in the same industry may be facing similar kinds of financial problems. 3. The ratios of an organization may be compared with some standards, which may be supposed to be the thumb-rule for the evaluation of the performance.

Lenders need it for carrying out the following: Technical Appraisal Commercial Appraisal Financial Appraisal Economic Appraisal Management Appraisal

Its a tool which enables the banker or lender to arrive at the following factors: Liquidity position Profitability Solvency Financial Stability Quality of the Management Safety & Security of the loans & advances to be or already been provided

Before looking at the ratios there are a number of cautionary points concerning their use that need to be identified: The dates and duration of the financial statements being compared should be the same. If not, the effects of seasonality may cause erroneous conclusions to be drawn. The accounts to be compared should have been prepared on the same bases. Different treatment of stocks or depreciations or asset valuations will distort the results. In order to judge the overall performance of the firm a group of ratios, as opposed to just one or two should be used. In order to identify trends at least three years of ratios are normally required.

There are many different groups of people (or stakeholders) who are interested in the accounts of a company, including: 1. The management and the employees - to see if pay rises are likely, or to ensure that their jobs are secure. 2. Creditors - to ensure that the business has the necessary money to repay them. 3. Potential lenders - to see if the business is solvent and profitable enough to repay any loans. 4. The community - to ensure that jobs and services for the local community are assured. Using financial ratios can assist these people in identifying the financial strengths and weaknesses of a company, as well as indicating to the company itself those areas that need corrective action.

Types of Ratio Comparisons

There are three types of ratio comparisons that can be made: 1. Cross-Sectional Analysis 2. Time-Series Analysis 3. Comparative Analysis 1. Cross-sectional analysis compares ratios at a point in time and is used to find out whether they are high or low relative to other companies or the industry. This type of analysis helps to rank performance and indicates whether ratios are higher or lower than competitors at a point in time. But sometimes a single years ratio can become distorted by unusual developments, such as extraordinary expenses and unusual price changes that are unlikely to reoccur. That is why managers must also analyze changes in these ratios over time.

2. Time series analysis allows managers to trace the trend of ratios over time and thus provides a way of observing improvements or deterioration in performance. Also, some firms may have recorded poor ratios in the past but their ratios may be catching up to the industry. Should a current ratio be abnormally high or low relative to the past trend, it might be a one-time occurrence that should he ignored. There are deviations from past trends, and they should be investigated to ascertain whether the shifts are permanent or just a one-time occurrence. And then, there may be some ratios that are better than the industry or other competitors but if the trend is declining, we should find out why they are falling and If this trend will continue.

3. Comparative analysis refers to a study of company ratios relative to the ratios of an industry or other companies. It is important to analyze the reasons why certain ratios lie above or below certain benchmarks and why other ratios are gaining or declining on a relative basis.

Objectives of Ratio Analysis

1. To allow comparison to be made which assists in predicting future. 2. To investigate reasons for changes. 3. To construct the simple explanation of the complicated financial statement by its expression in one figure. 4. To permit the charting of a firms industry and evaluation of its present position. 5. To provide indicators of firms past performance in terms of its operational activity and profitability; and near-present financial condition. 6. To see what information users can get from accounting system output.

7. To study the efficiency of an operation. 8. To study the risk of an operation. 9. To standardize financial information for comparison.

Advantages and Uses of Ratio Analysis Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures. According to Myers, "Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements." There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to workout a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: 1. To workout the profitability: Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business. 2. To workout the solvency: With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans.

3. Helpful in analysis of financial statement: Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc. 4. Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them. 5. To simplify the accounting information: Accounting ratios are very useful as they briefly summarize the result of detailed and complicated computations. 6. To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources. 7. To workout short-term financial position: Ratio analysis helps to workout the shortterm financial position of the company with the help of liquidity ratios. In case shortterm financial position is not healthy efforts are made to improve it. 8. Helpful for forecasting purposes: Accounting ratios indicate the trend of the business. The trend is useful for estimating future. With the help of previous years ratios, estimates for future can be made. In this way these ratios provide the basis for preparing budgets and also determine future line of action.

Limitations of Ratio Analysis In spite of many advantages, there are certain limitations of the ratio analysis techniques and they should be kept in mind while using them in interpreting financial statements. The following are the main limitations of accounting ratios: 1. Limited Comparability: Different firms apply different accounting policies. Therefore the ratio of one firm cannot always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO

basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc. 2. False Results: Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct. 3. Effect of Price Level Changes: Price level changes often make the comparison of figures difficult over a period of time. Changes in price affects the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for pricelevel changes before any comparison. 4. Qualitative factors are ignored: Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis. 5. Effect of window-dressing: In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the convenience to show the financial position of the company in a better way. 6. Costly Technique: Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it. 7. Misleading Results: In the absence of absolute data, the result may be misleading. For example, the gross profit of two firms is 25%. Whereas the profit earned by one is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs. 10,00,000 and sales are Rs. 40,00,000. Even the profitability of the two firms is same but the magnitude of their business is quite different. 8. Absence of standard university accepted terminology: There are no standard ratios, which are universally accepted for comparison purposes. As such, the significance of ratio analysis technique is reduced. 9. Forecast of future of the business may not prove correct: This is because the ratios are based on past happenings not future probabilities. They are subject to change in future.

CLASIFITATION OF RATIOS

The ratios may be classified under various ways, which may use various criterions to do the same. However for the convenience purpose, the ratios are classified under following groups. 1. Liquidity group 2. Turnover group 3. Profitability group 4. Solvency group and 5. Miscellaneous group

A) LIQUIDITY GROUP: The ratios computed under this group indicate the short-term position of the organization and also indicate the efficiency with which the working capital is being used. Commercial banks and short-term creditors may be basically interested in the ratios falling under this group. Two most important ratios may be calculated under this group.

1) Current Ratio: It is calculated as, Current Assets Current Liabilities The current assets of a firm represent those assets which can be, in the ordinary course of business, converted into cash within a short period of time, normally not

exceeding one year and include cash and bank balances, marketable securities, inventory of raw materials, semi-finished (work-in-progress) and finished goods, debtors net of provision for bad and doubtful debts, bills receivable and prepaid expenses. The current liabilities defined as liabilities which are short-term maturing obligations to be met, as originally contemplated, within a year, consist of trade creditors, bills payable, bank credit, provision for taxation, dividends payable and outstanding expenses. Rationale: The current ratio of a firm measures its short term solvency, that is, its ability to meet short- term obligations. As a measure of short-term/current financial liquidity, it indicates the rupees of current assets (cash balance and its potential source of cash) available for each rupee of current liability/ obligation payable. The bigger the current ratio, the larger is the amount of rupees available per rupee of current liability, the more Is the firms ability to meet current obligations and the greater is the safety of funds of short-term creditors. Thus, current ratio, in a way, is a measure of margin of safety to the creditors. The need for safety margin arises from the inevitable unevenness in the flow of funds through the current assets and liabilities account. If the flows were absolutely smooth and uniform each day so that inflows exactly equaled absolutely maturing obligations, the requirement of a safety margin would be small. The fact that a firm can rarely count on such an even flow requires that the size of the current assets should be sufficiently larger than current liabilities so that the firm would be assured of being able to pay its current maturing debt as and when it becomes due. Moreover, the current liabilities can be settled only by making payment whereas the current assets available to liquidate them are subject to shrinkage for various reasons, such as bad debts, inventories becoming obsolete or unsalable and occurrence of unexpected losses in marketable securities and so on. The current ratio measures the size of the short-term liquidity 'buffer. A satisfactory current ratio would enable a firm to meet its obligations even when the value of the current assets declines. 2) Liquid Ratio or Acid Test Ratio: It is calculated as, Liquid Assets Liquid Liabilities

Here liquid assets include all assets except inventory and prepaid expenses and liquid liabilities except overdraft or cash credit or outstanding expenses. Liquid ratio indicates the backing available to liquid liabilities in the form of liquid assets. The term liquid assets indicate the assets, which can be converted in the form of cash without any reduction in the value. Almost immediately whereas the term liquid liabilities which are required to be paid almost immediately. In other words, a higher liquid ratio indicates that there are sufficient assets available with the organization, which can be converted in the form of cash almost immediately to pay off those liabilities, which are to be paid off almost immediately. As such higher the liquid ratio better will be the situation. A liquid ratio of 1:1 is supposed to be standard and ideal.

B) SOLVENCY GROUP:

1) Debt Equity Ratio: It is calculated as, Long Term Debt Shareholders Fund The relationship between borrowed funds and owners capital is a popular measure of the longterm financial solvency of a firm. This relationship is shown by the debt-equity ratios. This ratio reflects the relative claims of creditors and shareholders against the assets of the firm. Alternatively, this ratio indicates the relative proportions of debt and equity in financing the assets of a firm. Debt-equity ratio indicates the state of shareholders or owners in the organization vis--vis that of the creditors. It indicates the cushion available to the creditors on liquidation of the organization. A high debt-equity ratio may indicate that financial status of the creditors is more than that of the owners. A very high debt-equity ratio may make the proportion of investment

in the organization a risky one. On the other hand a very low debt equity rate may mean that the borrowing capacity of the organization is being underutilized. A high debt-equity ratio has equally serious implications from the firms point of view also. A high proportion of debt in the capital structure would lead to inflexibility in the operations of the firm as creditors would exercise pressure and interfere in management. Secondly, such a firm would be able to borrow only under very restrictive terms and conditions. Further, it would have to face a heavy burden of interest payments, particularly in adverse circumstances when profits decline. Finally, the firm will have to encounter serious difficulties in raising funds in future.

2) Capital Employed Ratio: It is calculated as, Fixed Assets Capital Employed Normally a proprietor should provide all the funds required to purchase fixed assets. If the capital employed ratio exceeds 100%, it indicates that the company has used short-term funds for acquiring fixed assets, which policy is not desirable. When the amount of proprietor funds exceeds the value of fixed assets i.e., when the percentage is less that 100, a part of the net working capital is supplied by the shareholders, provided that there are no other non-current assets. Though it is not possible to lay down a rigid standard as regards the percentage of capital which should be invested in fixed assets in each industry there always is a maxim which should not be exceeded so that the harmony among the fixed assets, debtors and stock is not disturbed. The ratio should generally be 65%. x 100

3) Proprietary Ratio: It is calculated as, Proprietary Funds Total Assets

This ratio indicates the extent to which the owners funds are sunk in different kinds of assets. If the owners fund exceeds fixed assets, it indicates that a part owners fund invested in the current assets also and if owners fund are less than fixed assets it indicates that the creditors finance a part of fixed assets either by long term or short term. It's primarily the ratio between the proprietor's funds and total assets. This ratio indicates the proportion of the proprietors funds used for financing total assets. A high ratio indicates high financial strength but a very high ratio will indicate that the firm is not using external funds adequately.

4) Interest Coverage Ratio: It is calculated as, PBIT Interest Charges Interest Coverage Ratio is also known as time-Interest-earned ratio. This ratio measures the debt servicing capacity of a firm in so far as fixed interest on long-term loan is concerned. It is determined by dividing the operating profits or earnings before interest and taxes (EBIT) by the fixed interest charges on loans. Thus, it should be noted that this ratio uses the concept of net profits before taxes because interest is tax- deductible so that tax is calculated after paying interest on long-term loan. This ratio, as the name suggests, indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to service its interest payments would not be adversely affected. For instance, an interest coverage of 10 times would imply that even if the firms EBIT were to decline to one-tenth of the present level, the operating profits available for servicing the interest on loan would still be equivalent to the claims of the lenders. On the other hand, coverage of five times would indicate that a fall in operating earnings only upto one-fifth level can be tolerated. From the point of view of the lenders, the larger the coverage, the greater is the ability of the firm to handle fixed-charge liabilities and the more assured is the payment of interest to them. However, too high a ratio may imply unused debt capacity. In contrast, a low ratio is a danger signal that the firm is using excessive debt and does not have the ability to offer assured payment of interest to the lenders.

C) TURNOVER GROUP:

1) Stock Turnover Ratio or Inventory Turnover Ratio: It is calculated as, Cost of Goods Sold Average Inventory This ratio indicates the number of times inventory is replaced during the year. It measures the relationship between the cost of goods sold and the Inventory level. The inventory/stock turnover ratio measures how quickly inventory is sold. It is a test of efficient inventory management to judge whether the ratio of a firm is satisfactory or not, it should be compared over a period of time on the basis of trend analysis. It can also be compared with the level of other firms in that line of business as well as with industry average. In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies good inventory management. Yet, a very high ratio calls for a careful analysis. It may be indicative of underinvestment in, or very low level of, inventory. A very low 1evel of inventory has serious implications. It will adversely affect the ability to meet customer demand as it may not cope with its requirements. That is, there is a danger of the firm being out of stock and incurring high stock out cost. It is also likely that the firm may be following a policy of replenishing its stock in too many small sizes. Apart from being costly, this policy may retard the production process as sufficient stock of materials may not be available. Similarly, a very low inventory turnover ratio is dangerous. It signifies excessive inventory or overinvestment in inventory. Carrying excesses inventory involves cost in terms of interest on funds locked up, rental of space, possible deterioration and so on. A low ratio may be the result

of inferior quality goods, overvaluation of closing inventory, stock of unsaleable, obsolete goods and deliberate excessive purchases in anticipation of future increase in their prices and so on. Thus, a firm should have neither too high nor too low inventory turnover. To avoid both stock out costs associated with a high ratio and the cost of carrying excessive inventory with a low ratio, what is suggested is a reasonable level of this ratio.

2) Debtors Turnover Ratio: It is calculated as, Net Credit Sales Average Sundry Debtors This ratio indicates the speed with which debtors accounts receivable are being collected. A turnover ratio of 8 signifies that debtors get convened into cash 8 times in a year. The collection period of 1.5 months or 45 days implies that debtors on an average are collected in 45 days. Thus, it is indicative of the efficiency of trade credit management. The higher the turnover ratio and the shorter the average collection period, the better is the trade credit management and the better is the liquidity of debtors, as short collection period and high turnover ratio imply prompt payment on the part of debtors. On the other hand, low turnover ratio and long collection period reflect delayed payments by debtors. In general, therefore, short collection period (high turnover ratio) is preferable.

a) Calculation of Daily Sales: It is calculated as, Net Credit Sales Number of Working Days

b) Calculation of Collection Period: -

It is calculated as,

Closing Sundry Debtors Daily Sales

The average collection period as computed above should be compared with the normal credit period extended to the customers. If the average collection period is more than the normal credit period allowed to the customers, it may indicate over investment in debtors which may be the result of over extension of credit period, liberalization of credit term, ineffective collection procedure and so on.

3) Creditors Turnover Ratio: It is calculated as, Net Credit Purchases

Average Sundry Creditors It is a ratio between net credit purchases and the average amount of creditors outstanding during the year. A low turnover ratio reflects liberal credit terms granted by suppliers, while a high ratio shows that accounts are to be settled rapidly. The creditors turnover ratio is an important tool of analysis as a firm can reduce its requirement of current assets by relying on suppliers credit. The extent to which trade creditors are willing to wait for payment can be approximated by the creditors turnover ratio.

4) Working Capital Turnover Ratio: It is calculated as, Net Sales Net Working Capital This ratio compares the net sales with net working capital of the business firm. The higher, the better is the utilization of the working capital and also indication of lower working capital.

However, a very high working capital turnover ratio is a sign of over trading and firm may face shortage of working capital. A firm should compare this ratio with the ratio of the other firms in the same industry and also with the industry average to find out its position as compared to other firms. Similarly, an intra-firm comparison will also help to find out the comparative performance of the firm. A high working capital turnover ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in the working capital. It indicates that working capital is turned over in the form of sales more number of times.

5) Fixed Assets turnover Ratio: It is calculated as, Net Sales Net Fixed Assets Thesis: This ratio indicates the amount of sales realized per rupee of the investment in fixed assets. This ratio is more important for manufacturing concerns, as it indicates the utilization of fixed assets. Fixed assets are acquired basically for improving the earning capacity of the business. A higher ratio indicates higher amount of sales generated per rupee of the investments in fixed assets. A lower ratio indicates lower sales generated per rupee of the fixed assets and hence investments in fixed assets are not justified.

6) Capital Turnover Ratio: It is calculated as, Net Sales Capital Employed Capital employed = Shareholders Fund + Long Term Liabilities This ratio indicates the efficiency of the organization with which the capital employed is being utilized. A high capital turnover ratio indicates the capability of the organization to achieve

maximum sales with minimum amount of capital employed. As such higher the capital turnover better will be the situation.

D) PROFITABILITY GROUP:

1) Gross Profit Ratio: It is calculated as, Gross Profit x 100 Net Sales This ratio shows the margin left after meeting the purchase & manufacturing costs. It measures the efficiency of production as well as pricing. A high gross profit means a high margin of covering other expenses like administration, selling & distribution expenses, i.e. other than the cost of goods sold. Thus gross profit ratio indicates the relation between production cost and sales and efficiency with which the goods are produced or purchased. A high gross profit ratio may also indicate that the organization is able to produce or purchase at a relatively lower cost.

2) Net Profit Ratio: It is calculated as, Net Profit after Taxes x 100 Net Sales The net profit ratio indicates that portion of sales available to the owners after the consideration of all types of expenses and costs either operating or non-operating or normal or abnormal. net sales. It measures overall efficiency of all functions of business firm like production, administration, selling, financing, pricing etc. This ratio is very useful for prospective investor because it reveals the overall profitability of the firm. Higher the ratio,

better it is because it gives an idea of overall efficiency of the firm. Net profit ratio provide a valuable understanding of the cost & profit structure of the firm & enable the analyst to identify the sources of the business efficiency or inefficiency.

3) Operating Ratio: It is calculated as, (Cost of goods sold + Operating exp) Net Sales This ratio indicates the percentage of net sales, which is absorbed by the operating cost. A high operating ratio indicates that only a small margin of sales is available to meet the expenses in the form of interest, dividend and operating expenses. As such low operating ratio will always be desirable. x 100

OVEALL PROFITABILITY GROUP: 1) Return on Capital Employed: It is calculated as, Net Profit before Interest & Tax Capital Employed Return on capital employed measures the profitability of the capital employed in the business. A high return on capital employed indicates a better and profitable use of long-term funds of owners and creditors. As such a high return on capital employed is preferred. This ratio is considered to be a very important because it reflects the overall efficiency with which capital is used. The ratio of particular business should be compared with other business firms in the same industry to find out the exact position of the business. x 100

2) Return on Total Assets: It is calculated as, Profit After Tax Total Assets Return on assets measures the profitability of the investment in a firm. As such higher return on assets will always be preferred. However return on assets does not indicate the profitability of various sources of funds, which finance total assets. x 100

3) Return on Shareholders Funds: It is calculated as, PAIT Equity Shareholder's funds Equity Shareholder's funds = Equity Capital + Reserves and Surplus This ratio indicates the productivity of the owned funds employed in the firm. However in judging the profitability of a firm, it should not be overlooked that during inflationary periods, the ratio may show an upward trend because the numerator of the ratio represents current values whereas the denominator represents historical values. x 100

E) MISCELLANEOUS GROUP: 1) Earning Per Share: It is calculated as, PAIT No. of equity Share

Earnings Per Share (EPS) measures the profit available to the equity shareholders on a per share basis, that is, the amount that they can get on every share held. It is calculated by dividing the profits available to the shareholders by the number of the outstanding shares. The profits available to the ordinary shareholders are represented by net profits after taxes and preference dividend. Yet, EPS as a measure of profitability of a firm from the owners point of view should be used cautiously as it does not recognize the effect of increase in equity capital as a result of retention of earnings. If EPS increases, the possibility of a higher dividend per share also increases. Market price of shares of a company may also show an upward trend if the EPS is showing a rising trend. However, it should be remembered that EPS of different companies may vary from company to company due to the following different practices by different companies regarding stock in trade, depreciation, source raising finance, tax planning measures etc.

2) Dividend Payout Ratio: It is calculated as, Dividend Per Share x 100 EPS Dividend Payout Ratio indicates the percentage of profit distributed as dividends to the shareholders. A higher ratio indicates that the organization is following a liberal policy regarding the dividend while lower ratio indicates a conservative approach of the management towards the dividend.

3) Capital Gearing Ratio: It is calculated as, Fixed Charges Bearing Securities Equity Shareholders Funds A high capital-gearing ratio indicates that in the capital structure, fixed income bearing securities are more in comparison to the equity capital in that case the Company is said to be

highly geared. On the other hand, if fixed income-bearing securities are less as compared to equity capital the company is said to be lowly geared.

CHAPTER - 6 DATA ANALYSIS AND INTERPRETATION

1. Current Ratio : Current Asset Current Ratio = ________________ Current Liabilities

Year 2008-09 2009-10 2010-11

Current Ratio 1.45 1.36 1.36

Currrent Asset 10.66 13.25 15.17

Current Liabilities 7.35 9.77 11.15

Current Ratio
1.45 1.46 1.44 1.42 1.4 1.38 1.36 1.34 1.32 1.3 2008-09 2009-10 2010-11 1.36 1.36 Current Ratio

Interpretation:Current Ratio in a business concern indicates the availability of current assets to meet its current liabilities. Higher the ratio better is the coverage. The ere is the standard for current for each unit of current liabilities. In companies Current Ratio is low as compare to 2008-09 & then its stable for two years,which means there is less efficient use of funds.This is because a stable current ratio means excessive dependence on long-term sources of funds.

2. Quick /Liquid/Acid Test Ratio: Quick Assets Quick Ratio = _______________ Quick Liabilities

Year 2008-09 2009-10 2010-11

Quick Assets 10.31 12.83 14.65

Quick Liabilities 7.35 9.77 11.15

Quick Ratio 1.4 1.31 1.31

Quick Ratio
1.4 1.4 1.38 1.36 1.34 1.32 1.3 1.28 1.26 2008-09 2009-10 2010-11 1.31 1.31 Quick Ratio

Interpretation:Quick ratio is an indicator of short-term solvency of the company. Companys 2008-09 ratios are high & then its similar in 2009-10 & 2010-11. This indicates company has no over-stock in these years.

3. Gross Profit Ratio : Gross Profit Gross Profit Ratio = ___________ x 100 Net Sales

Gross Profit Year 2008-09 2009-10 2010-11 4.12 4.81 5.91

Net sales

Gross Profit Ratio 20.58 20.02% 35.00 13.74% 37.46 13.85%

Gross Profit Ratio


25.00% 20.02% 20.00% 13.74% 15.00% Gross Profit Ratio 10.00% 5.00% 0.00% 2008-09 2009-10 2010-11 13.85%

Interpretation :Gross Profit Ratio indicates the degree to which the selling price of goods per unit may decline without resulting in losses from operations to the firm. Companys gross profit is decreased in 2009-10, this is danger signal for the company to cover operating expenses & to provide for fixed charges & building up reserves, but after that in 2010-11 company has maintained some stability in gross profit ratio.

4. Net profit Ratio: Net Profit Net Profit Ratio = ____________ x 100 Net Sales Net Profit Year 2008-09 2009-10 2010-11 0.51 0.46 1.23 Net Sales 20.58 35.00 37.46 Net Profit Ratio 2.48% 1.31% 2.54%

Net Profit Ratio


3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2008-09 2009-10 2010-11 1.31% Net Profit Ratio 2.48% 2.54%

Interpretation :Net Profit helps in determining the efficiency with which affairs of the business are being managed.In companys net profit ratio has been decreased in 2009-10 & then 2010-11 its increased ,that means its operational efficiency of the business has increased.This also helps to check the profitability of the business.

5. Operating Profit Ratio:


Operating Profit Operating Profit Ratio = _______________ Net Sales Operating Profit Year 2008-09 2009-10 2010-11 1.04 0.36 0.43 Net Sale Operating Profit Ratio 20.58 5.05% 35.00 1.03% 37.46 1.15% x 100

Operating Profit Ratio


6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2008-09 2009-10 2010-11 1.03% 1.15% Operating Profit Ratio 5.05%

Interpretation :Operating Profit Ratio is calculated to evaluate operating performance of business. In this company operating performance of business2008-09 has been decreased after 2009-10 & 2010-11. Its danger position of the company in position to handle operating expenses.

6. Operating Ratio :
Cost of goods sold + Operating Expenses Operating Ratio = ___________________________________ Net Sales x 100

Year 2008-09 2009-10 2010-11

Operating Cost 16.12 29.84 32.35

Net Sales 20.58 35.00 37.46

Opearting Ratio 78.32% 85.25% 86.35%

Opearting Ratio
88.00% 85.25% 86.00% 84.00% 82.00% 80.00% 78.00% 76.00% 74.00% 2008-09 2009-10 2010-11 78.32% Opearting Ratio 86.35%

Interpretation :Operating Ratio is the test of the operational efficiency with which the business is being carried. In this company,there is increased in the operatig ratio in 2009-10 & 2010-11,thats why proprietor has to find out the reason & he should be checked it,because high operating cost will affect to the net profit of the company.

7. Debtors Turnover Ratio:


Net Sales Debtors Turnover Ratio = ___________ Net Debtors

Net Sales Year 2008-09 2009-10 2010-11

Net Debtors 5.22 6.58 7.55

Debtor's Turnover Ratio 3.94 5.31 4.96

20.58 35 37.46

Debtor's Turnover Ratio


6 5 4 3 2 1 0 2008-09 2009-10 2010-11 Debtor's Turnover Ratio 3.94 5.31 4.96

Interpretation :Debtors Turnover Ratio indicates the efficiency of the staff entrusted with collection of book debts. As per this ratio of the company it show that, company is trying efficiently to collect its debts promptly.

8. Creditors Turnover Ratio :


Net Purchases Creditors Turnover Ratio = Net Creditors

Net Purchases Year 2008-09 2009-10 2010-11 13.02 21.17 22.29

Net Creditors 0.75 1.25 1.3

Creditors turnover ratio 17.36 16.94 17.14

Creditors turnover ratio


17.36 17.4 17.3 17.2 17.1 17 16.9 16.8 16.7 2008-09 2009-10 2010-11 16.94 17.14 Creditors turover atio

Interpretation :Creditors turnover Ratio indicates about the propmtness or otherwise in making payment of credit purchases. As per this ratio of the company it shows that, company is making payment of creditors promptly, thus enhancing the credit worthiness of the company.

9. Proprietary Ratio :
Proprietors Fund Proprietary Ratio = _________________ Total Assets Proprietors Total Fund Assets 29.72 30.93 33.82 55.82 56.15 56.87 Proprietary Ratio 0.53 0.55 0.59

Year 2008-09 2009-10 2010-11

Proprietary Ratio
0.59 0.59 0.58 0.57 0.56 0.55 0.54 0.53 0.52 0.51 0.5

0.55 0.53 Proprietary Ratio

2008-09

2009-10

2010-11

Interpretation :Proprietary Ratio focuses the attention on the general financial strength of the company. Companies Proprietary Ratio are more than 50 percent. Which will be good for the creditors, in the event of losses a part of their money. The company should be increased his proprietors fund.

10. Fixed Assets to Net Worth Ratio:


Fixed Assets Fixed Assets to Net Worth Ratio = ________________ Proprietors fund

Fixed Assets

Year 2008-09 2009-10 2010-11

Proprietors Fixed Fund Assets to Net Worth Ratio 45.16 29.72 1.51 42.9 30.93 1.39 41.7 33.82 1.23

Fixed Assets to Net Worth Ratio


1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008-09 2009-10 2010-11 Fixed Assets to Net Worth Ratio 1.51 1.39 1.23

Interpretation :Fixed asset to net worth indicates the efficient utilization of funds to acquire fixed assets. In this company proprietors efficiency to acquire fixed assets is decreased, this point has to consider seriously by proprietor .

11. Fixed Asset Ratio:


Fixed Assets Fixed Asset Ratio = _______________________ Total Long term Liabilities

Fixed Assets Year 2008-09 2009-10 2010-11 45.16 42.9 42.7

Total Long Term Liabilities 18.5 15.2 11.6

Fixed assets Ratio 2.44 2.82 3.59

Fixed assets Ratio


4 3.5 3 2.5 2 1.5 1 0.5 0 2008-09 2009-10 2010-11 Fixed assets Ratio 2.44 2.82 3.59

Interpretation :Fixed Assets Ratio shows that a part of the working capital has been financed through long-term funds. Fixed assets ratio of this company are increased, its good for company.

12. Return on Proprietors Investment Ratio:


Net Profit Return on Proprietors Investment Ratio = ___________________ x 100 Proprietors Fund

Net Profit

Year 2008-09 2009-10 2010-11

Proprietors Return on Fund Proprietors Investment Ratio. 29.72 30.93 33.82 0.01 0.01 0.03

0.51 0.46 1.23

Return on Proprietors Investment Ratio.


0.03 0.03 0.025 0.02 0.015 0.01 0.005 0 2008-09 2009-10 2010-11 0.01 0.01 Return on Proprietors Investment Ratio.

Interpretation :Return on proprietors Investment indicates the profitability of the company from his investment. In this company net profit has increased but in the proportion proprietor has increased his fund. Proprietors should consider this point for expansion of business.

13. Return Capital Employed Ratio:


Net Profit Return Capital Employed Ratio = ___________________ x 100 Net Capital Employed Net Profit Net Capital Employed 73.1 69.67 64.51 Return Capital Employed Ratio 0.69% 0.66% 1.90%

Year 2008-09 2009-10 2010-11

0.51 0.46 1.23

Return Capital Employed Ratio


2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 1.90%

0.69%

0.66%

Return Capital Employed Ratio

2008-09

2009-10

2010-11

Interpretation :Return on Capital Employed is a concept the profit, which a firm earns on investing a unit of capital. In this company return of capital employed ratio has increased in 2010-11,which show profit ,which company earns on investing ,has stability in 2008-09 & 2009-10 &after that companys profit has been increased in current year.

14. Fixed Assets Turnover Ratio:


Net Sales Fixed Assets Turnover Ratio = ______________ Net Fixed Assets Net Sales Net Fixed Assets Fixed Assets Turnover Ratio 0.45 0.81 0.9

Year 2008-09 2009-10 2010-11

20.58 35 37.48

45.16 42.9 41.7

Fixed Assets Turnover Ratio


0.9 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0.81

0.45 Fixed Assets Turnover Ratio

2008-09

2009-10

2010-11

Interpretation :Fixed Assets turnover indicates extent to which the investment in fixed assets contributed to words sales. There is increase in net fixed assets with increase in net sales that means company is increasing its fixed turnover ratio.

15. Debt- Equity Ratio:


Total Debt Debt- Equity Ratio = ____________ Net Worth Total Debt Year 2008-09 2009-10 2010-11 0.62 0.49 0.34 Net Worth DebtEquity Ratio 0.02 0.01 0.01

29.72 30.93 33.82

Debt-Equity Ratio
0.02 0.02 0.015 0.01 0.01 0.005 0 2008-09 2009-10 2010-11 0.01 Debt-Equity Ratio

Interpretation :Debt-Equity indicates the proportion of owners stake in the business. Excessive liabilities tend to cause insolvency. In this cause company provides a margin of safety to the creditors satisfactory in some extent. But companys debt-equity ratio is decreased after 2008-09,this should be considered by company.

16. Working Capital Turnover Ratio :


Sales Working Capital Turnover Ratio = ______________ Working Capital

Sales

Working Capital

Year 2008-09 2009-10 2010-11

Working Capital Turnover Ratio 6.21 10.05 9.34

20.58 35.00 37.46

3.31 3.48 4.01

Working Capital Turnover Ratio


12 10 8 6 4 2 0 2008-09 2009-10 2010-11 6.21 Working Capital Turnover Ratio 10.05 9.31

Interpretation :Working Capital indicates whether or not working capital has been effectively utilized in making sales. As per above ratio companys 2008-09 after that increase working capital & then stability of the position is making effective utilization of working capital, which will be good signal for the company.

CHAPTER -7 FINDINGS AND OBSERVATION

FINDINGS AND OBSERVATION

The overall liquidity position of the company is satisfactory as both current ratio as well as liquid ratio is more than standard which concludes that company has got sufficient assets to pay off short term debts as and when they fall due. The debt equity ratio is found to be very low which concludes that the company is not taking risk and mainly using shareholders funds for financing its requirements. The firm has got satisfactory fixed assets turnover ratio due to increase in the sales. Working capital turnover ratio of the firm indicates that there is excess investment in working capital which shows rise in the activity compared to 2008-09.

The net profit ratio for the year 2010-2011 is 2.4% indicating increase in net sales available to shareholders of the company.

CHAPTER - 8

RECOMMENDATIONS

Recommendation
The solvency position of the company is not satisfactory. The proprietary ratio indicates that there is on an average only 55% investment of shareholders funds in the total assets of the company.

The gross profit ratio is in declining trend which is indicating inefficiency in production cost and is a major concern which needs immediate attention.

Operating profit ratio is decreasing year after year. So to avoid this the firm would be well advised to maintain a close watch on the trend of ratio and thoroughly investigate the factors responsible for it. Employees can be motivated through competition, prizes and incentives declared by the company from time to time. The company has more current assets as compared to the current liabilities, which will affect the overall profitability position of the company so the company should manage its current assets properly. The company should be moving ahead with strong performance and well conceived strategies for expansion diversification and corporate

transformation.

LIMITATIONS TO STUDY:

All the data are secondary data. As the data are secondary data so the reliability of the result depends upon the reliability of the data published. Lack of accessibility. Insufficient data on the site. Unprecedented changes in Government policies are not considered in the project. Study is only based on Annual Report of the company. The data of only last three years are analyzed. The time limit of project is only 50 days. Due to busy working schedule of company, time available for discussion with company employees was limited.

CHAPTER - 9

BIBLIOGRAPHY
BIBLIOGRAPHY

BIBLIOGRAPHY

Following books were referred for carrying out the project: Financial Management M. Y. Khan / P. K. Jain. Financial Management I. M. Pandey. Financial Management S. M. Inamdar, Management Accounting M. G. Patkar, Corporate Accounting by Amitabha Mukherjee & Mohammed Hanif

Annual Reports from 2008-09 to 2010-11 of SHETAKARI VINAKARI SAHKARI SOOTGIRNI LTD. Following websites were referred: www.ejaydeep.com www.google.co.in Various Management Sites.

CHAPTER - 10

ANNEXTURE

SHETKARI VINKARI SAHAKARI SOOT GIRNI LTD, ISLAMPUR ANALYSIS OF BALANCE SHEET FOR YEAR 2008-09,2009-10,2010-11
Sr.No . LIBILITIES Current Liabilities Short Term loans from Applicant Bank including BP&BD 2008 -09 2009 -10 2010 -11 Sr.No . ASSETS Current Assets Cash & Bank Balances Govt. & Other Trustee Securities Fixed Deposits with Banks Domestic Receivables including BP/BD Export Receivables including BP/BD Deferred receivables (due within one year) Imported Raw Material Indigenous Raw Material Stock in Process Finished Goods Imported Cosumables 2008 -09 2009 -10 2010 -11

5.00

5.00

5.00

0.65

0.75

1.25

2 Short Term Loans From Other Bank including BP&BD 0.00 0.00 0.00 3

0.00 0.00

0.00 0.00

0.00 0.00

5.00

5.00

5.00

5.22

6.58

7.55

Sub Total(A)

0.00

0.00

0.00

2 3 4 5 6 7

Short Term Borrowing from Others Sundry Creditors(Trade) Advance Payment from custmers Net Provision For Taxation(if Positive) Dividend payable Other Statutary Liab.(Due witin one year) Overdue Term Liabilities Installments of the term loan/DPGs/Deposits/Deentu res due within next year. Other current liabilities &b provision (due within one year) Other dues.

0.75

1.25

1.30

6 7

0.00 0.00 0.75 0.35 3.22 0.00

0.00 0.00 1.25 0.42 3.78 0.00

0.00 0.00 1.50 0.50 3.90 0.00

0.00

0.00

0.00

8 9

0.08 1.50

0.08 3.30

0.10 3.60

10 11

0.02

0.14

1.15

12

Indigenous Consumables a. Packing Material Advances to Suppliers Net Advance Payment of Taxes (if positive) Other Current Assets (specify

0.00

0.00

0.00

9 10

0.00 0.00

0.00 0.00

0.00 0.00 13

0.47 0.00

0.47 0.00

0.47 0.00

14 Sub total(B) 2.35 4.77 6.15 15

0.00 0.00

0.00 0.00

0.00 0.00

major items) TOTAL CURRENT ASSETS 16 Fixed Assets a. Gross Block (Land & Building, Machinery) b. Capital Expenditure C. Depreciation to Date Net Block OTHER NON CURRENT ASSETS a. Investment in sub co.s/affiliates b.Investment in Others c. Advance to suppliers of Capital goods & Contractors d. Deferred Receivables (Maturing after a year) e. Other Noncurrent investments TOTAL OTHER NON CURRENT ASSETS Intangible Assets a. Preliminary Expenses b. Deffered Revenue expenditure c. Other Intangibles ( patents, goodwill etc.) TOTAL INTANGIBLE ASSETS

TOTAL CURRENT LIABILITIES (A+B) 13 TERM LIABILITIES

7.35

9.77

11.15

10.66

13.25

15.17

a.Debentures (not maturing within one year) b.Preference Shares (redeemable after 1 year) c.Term Loan From Bank ( Less next Year Instalments

48.74 0.00 3.58 45.16

48.74 0.00 5.84 42.90

49.75 0.00 8.05 41.70

18.5 0

15.2 0

11.6 0

14 Other Term Liabilities


Dealers Deposit

0.00 0.00 18.5 0 25.8 5

0.00 0.00 15.2 0 24.9 7

0.00 0.00 11.6 0 22.7 5

17

Deferred Sales Tax Total Term Liabilities

0.00 0.00

0.00 0.00

0.00 0.00

15 Total of Outside Liabilities

0.00

0.00

0.00

16 NET WORTH
a.Share Capital

0.00

0.00

0.00

26.5 0 2.25 0.00 0.00 0.00

26.5 0 3.00 0.00 0.00 0.00

26.5 0 3.66 0.00 0.00 1.00 18

0.00

0.00

0.00

b.General Reserve c. Revaluation Reserve d. Adjustments for previous Year costs e. Other reserves (excluding Provisions)

0.00 0.00 0.00

0.00 0.00 0.00

0.00 0.00 0.00

0.00

0.00

0.00

f. Surplus (+) or deficit (-) in profit & Loss A/c

0.97 29.7 2

1.43 30.9 3

2.66 33.8 2

0.00

0.00

0.00

NET WORTH

0.00

0.00

0.00

TOTAL LIABILITIES

55.5 7

55.9 0

56.5 7

TOTAL ASSETS

55.8 2

56.1 5

56.8 7

Trading & Profit & Loss Account for the year 2008-09,2009-10,2010-11 2008-09 (amt. in Crs.) 18.48 2.1 20.58 0 20.58 40% 2009-10 (amt. in Crs.) 31.1 3.9 35.00 0.00 35.00 70% 2010-11 (amt. in Crs.) 32.93 4.53 37.46 0 37.46 7%

Sr.No. 1

2 3 4 5

6 7 8 9 10 11

12 13 14 15 16 17 18

Particulars Operating Statement i. Domestic Sale ii. Export Sale Total Gross Sale Less: Excise Duty Net Sales (1-2) Growth in sales Cost of sales a. Raw material (Imported) b. Raw Material(Indigenous) c. Stores & Spares (Imported) d.store&spares(Indigenous) power&fuel Direct Labour Repaire&Maintainance Other Mfg.Expences Depreciation Other Expences a.Bad debts b.R.D.D c.Plant&Machinerywritten off Sub Total Add:Opening Stock In Progress Sub Total Deduct:Closing Stock In Progress Cost Of Production Add:Opening Stock In Finished Goods Sub Total Deduct:Closing Stock Of Finished Goods Sub Total(Total Cost Of Sales) Gross Profit Gross Profit/Sales Selling Expences Administrative Expences

13.2 0.19 3.12 0.91 0.05 0.29 1.47 0

21.17 0.47 4.78 0.47 0.73 2.26 0.00

22.29 0.7 4.79 0.7 0.73 2.21 0

19.05 0.34 19.39 0.35 19.04 0.64 19.68 3.22 16.46 4.12 20.02% 0.88 0.54

30.82 0.35 31.17 0.42 30.75 3.22 33.97 3.78 30.19 4.81 13.74% 0.91 0.59

32.47 0.42 32.89 0.5 32.39 3.78 36.17 3.9 32.27 5.19 13.85% 0.98 0.75

Sub Total

17.88

31.69

34