1

J.J.C.E.T. Sanchalit N.R.Vekariya

MBA college
Bilkha Road, Junagadh 362 001.

This is to certify that Mr. Uddip J. Thumbar, the student of J.J.C.E.T. Sanchalit N.R.Vekariya MBA College Junagadh, SIP (Summer Internship Programme), has undergone his training in Topsun Energy Ltd. Gandhinagar. Undergone my guidance, in subject of Ratio Analysis for the duration of 45 days. He is contributed his own efforts.

Date:Place:- Junagadh

Project Guide Prof. Kinjal D. Vaghasiya

Director Mr. Rajesh Patel

Declaration
Here, I under signed Uddip J. Thumbar studying in MBA Semester 3rd, at J.J.C.E.T. Sanchalit N.R.Vekariya MBA college Junagadh. I have taken the training at Topsun Energy Ltd. Gandhinagar under the subject of Ratio Analysis. I have taken this training with dedication and hard work and all the possible efforts are taken by me.

Before today myself, neither the student have prepared the report with containing all the information as far as the finance is concern.

Date:Place:- Junagadh.

Uddip J. Thumbar, Enrollment No.:- 097360592015

Preface
As a part of our academic study, we the student of MBA are required to under gone training for 45 days in industry, in order to obtain the practical knowledge and broader overviews regarding various factors of finance. This study programme plays a vital role in the development of management student. The theoretical knowledge is not enough for management student to know various angles of business units. Industrial understanding plays the vital role to develop the practical view of student and also making them aware about the problems, opportunities and situation of industrial units. The industrial training of Topsun Energy Ltd. Gandhinagar produce to be a golden opportunities for me to enrich the knowledge by comparing theoretical with managerial skill and application.

Acknowledgement
It is a great pleasure for me to introduce the report before you, which I have prepared with lots of interest and enthusiasm, after being undergone a training at Topsun Energy Ltd. Gandhinagar. I am very much thankful to all managerial authorities of the unit who gave me good response and co-operation along with a friendly environment to work in. I am especially thankful to my guide and H.R. manager of company. I am also very thankful to the director of the company who give me the permission to take my industrial training in his precious unit. And I also very thankful to my guide Prof. Kinjal D. Vaghasiya and our honorable director Mr. Rajesh Patel. And at last how can I forget my friends and family members who always stood beside me in any circumstances.

Index

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

Particulars Executive Summary Introduction of Company Literature Review Research Methodology Ratio Analysis Findings Conclusion Contribution & Learning from the study Bibliography Annexure

Page No. 2 5 29 31 36 74 76 78 80 82

Executive Summary

As per rules of Gujarat Technological University, a student of MBA is to do a final project in any organization for the practical completion of the MBA program. I got golden chance to work with the Topsun Energy Ltd. Situated at Gandhinagar. During my summer internship programme I have gone through the financial matters of Topsun Energy Ltd. And I have prepared the report on financial analysis with help of Ratio Analysis Techniques. During the summer internship programme I have gone through financial data and after scrutinizing them a have given my recommendations. I have found that profitability of the company is increasing at very good rate. The company has to watch out for its operating expenses to improve its profitability. The company is enjoying great liquid position in both the years. Earning per share has also increased for the company. So, company is maintaining the liquidity with profitability. The company has reduced the collection period from 74 days to 64 days. But still it needs more reduction, as the average collection period is preferred to be 45 days. By reducing the collection period company can reduce its working capital requirement. The company has got great potentials in the financial growth. The company needs to effectively utilize the funds available to it. In particular company needs to concentrate on managing current asset and reducing the collection period and operating expense of the company.

General Information

Contents

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

Particulars Introduction of Company Vision of Company Mission of Company Establishment of Company Raw material used by company Manufacturing Facilities Contribution of Company Strength of Company Product Detail

Page No. 5 8 9 10 12 14 16 22 25

1. Introduction of Company History & Overview:Topsun Energy Ltd. is a part of fast growing profit making Vimal Group. Group had started first unit manufacturing Electronic products in year 1972 with major business area in Power & Distribution products, transformers, Boosters, Digital Panel Meters, Inverters, submersible Pumps and Capacitors. The group has achieved the turnover of more than 1000Cr INR in 2007. In the year 1995, they took the opportunity and have expanded their business with graceful entry in the field of solar photovoltaic products. They have maintained their consistent growth till date by valuing customers and running ahead of the latest technologies through their strong innovative efforts.

Topsun Energy Ltd. provides the complete Performance Spectrum in regard to generate power from sunlight, From the initial planning phases through to delivering fully functional turnkey solar solutions. Their

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solutions will meet any kind of unique needs. Their determination remains to ensure that their customers, partners and end users are entirely satisfied with the range of solutions that they will deliver. The Company is trying to complement the PV industries by their efficient photovoltaic (PV) solutions. From both an economic and environmental viewpoint. The reality is that solar power technology is a convincing form of power technology and the company is trying to go together with their latest technology solution.

Board of Directors:There for entire management of company managed by Board of Directors. All important decision is taken by the Board of Director. Topsun Energy Ltd. has following members in his Board of Director:-

Ravi Patel Bipin Majumdar K. Raja Nagpal Munjee N.S.Raghavan D.E.Udwadia A.K.Gupta B.Y. Mehta Paresh Patel

Chairman Managing Director Whole Time Director Director Director Director Director Director Director

11

Organization Structure:Authority and responsibility are the essentials elements on which type of organization depends but there are other elements also like function, communication etc. - Line Organization. - Line and Staff Organization. - Matrix Organization. - Functional Organization. - Committee Organization. From above given all type of organization Topsun Energy Ltd. Has adopted Line Organization.

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2. Vision of Company

"To

Manufacture Quality to

Solar

Photovoltaic and

Modules the

of

the

International

compete

explore

growing

needs of Solar Market worldwide. They will enjoy command of the market with a predominant sales presence and a complex portfolio of the products and brands of renowned quality. They wish to promote the generation and diffusion of knowledge in commercial, technologies and administrative areas. They will select and train their personals and associates in order to attend the required goal. They will offer them very best opportunities for development.

13

3. Mission of Company

Topsun Energy Ltd. intends to develop and market Solar Photovoltaic Modules in various standard and non-standard dimensions, based on mono/multi crystalline solar cells. These panels will be used in standard applications, solar based solutions, Off-Grid, and Hybrid & Grid Tie SPV power plants and in energy-efficient buildings (aiming at zero emission buildings).

14

4. Establishment of Company

Topsun

Energy

Ltd.

is

meeting

the

emerging

and

fast

growing demands of Solar Photovoltaic in India as well as rest of the world. They are manufacturing the Solar Photovoltaic Modules with the basic plant capacity of 40 MWp per year to be expandable up to 70 MWp by 2010 year. The plant is being established with latest technology, semi automatic ultra modern and highly sophisticated equipments and quality control facilities to ensure the Solar Modules of International Standards. They have our own Research and Development facilities for future developments in Solar Solution efficiency as well as high efficient solar photovoltaic panel technology with the balance of systems. A spirit of innovation, speed and extreme reliability of their team forms the very satisfactory product for the customer.

15

Topsun Energy Ltd. is located at Gandhinagar Electronics Zone, the capital city of Gujarat. Gandhinagar Industrial Estate is near to the Electronics SEZ and the complete area is now the hub for electronics industry. Their manufacturing plant is also located in Gandhinagar, Gujarat, India. They have their highly competent and focused technical team and their state-of-the-art research and development center at their plant office in Gandhinagar, Gujarat, India. Their team never stays behind in taking new challenges and helped to increase their market share by adding their expertise and latest technology.

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5. Raw material used by Company

Following are the list of raw material which would used by the company. Adhesive Tape Tape yellow Lohmaan Transparent Tape Aluminum Channel Charge Controller Fan Lug Battery Plug Pin Glass Inter Connect Junction Box Carete Plastics Clip Stretch Film Thermocol Sheet Wire Solar Accessories Solar Cell Packing Material

17

Supplier of Raw material:-

Solar Cells - Moserbaer Photo Voltaic Ltd. Glass - Allied Glasses Pvt. Ltd. Junction Box - Ningbo Shujia International Trading Co. Ltd. Other material - Local market.

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6. Manufacturing Facility

They

have

fully

integrated

Solar

Module

Manufacturing

facilities and Solar Electronics. Manufacturing facility is based upon the lamination technology for terrestrial use using glass as super state and includes complete steps for production from full solar cells as well as cut solar cells for power. They have latest technological production facilities for solar module manufacturing from the highest module range up to 225 MWp with basic annual production capacity of 40 MWp. Topsun Energy Ltd. have the installed production capacity of 40MWp per annum and producing solar modules ranging from 10W to 225W with up to 300 units per day per shift. The facilities will enhance the capacity up to 70 MWp by 2010 with minimum expansion.

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They

have

the

facilities

for

streamlined

production

with

prime aim of achieving production to full install and balanced capacity with rejections at international levels with final product yield @ 98.5%. They have standard quality control facilities and introduced procedures and documentations with aim to produce modules qualified for Indian and international standards.

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7. Contribution of Company
In the forest, tribal community, hilly scattered community, salty sea shores, deserts, village, town, cities during earthquakes, storms, floods through government projects, co-operatives, institutes, ngos high volume, time bound. Topsun Energy Ltd. has established its product, project, installation and service capability in all possible areas. 1. MW Power Plant:

Topsun Energy Ltd. has experience and capability, deployed Solar Power plant in major sectors. Topsun Energy Ltd. came up with Innovative solution on power plant for Stand alone, Hybrid & Grid connected. The Power Plant ranges from 3kw to 60kw & 1MW to 20MW.

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2. Communications:

Topsun Energy Ltd. has wide experience in providing reliable and economical These solar electric be systems utilized for remote daytime power directly solutions. on the systems can during

power from the solar panels or with battery backup for the use 24 X 7 throughout the year. Typical applications powered by solar electricity include microwave repeater towers, base stations, VSATs, and WLL telecommunication systems. 3. Rural Development:

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Topsun Energy Ltd. has developed, supplied and installed thousands of these systems to serve remote locations and improve quality of life. Individuals & professional organizations are increasingly turning to solar electricity for lighting homes, pumping clean drinking water, refrigerating vaccines, schools, hospitals. Also has new application as solar fencing in villages and farms to protect valued crops from animals. 4. Solar Power Plants in Milk Co-Operatives:

During the 90s, India has White Revolution in the field of milk unions through NBDB under the great leadership of Dr. Curion. This has not only brought together the people at village level and start activities on co-operative basis. Milk co-operative societies have been established at each village. These societies are using computerized milk collection system. Co-operatives were helpless to utilize the advance

23

computerized milk collection systems during poor power quality and power failures. Topsun Energy Ltd. has played a key role in providing solar based power pack solution for these co-operatives and provided continuous power facilities for their requirement. System had average payback calculations of 6 to 7 years and also helped them a lot in cutting down the maintenance cost of computer systems which was high enough due to power fluctuations through conventional grid supply. These systems are still active and working even after 8 years. 5. Government/Defense:

Topsun Energy Ltd. has penetrated its various solar solutions into the community through various governments demonstration and awareness programs. They have worked with government departments to provide solar power solutions for special power needs. Their special ranges, systems. feature to naval solutions provide tracking have and application power solutions small in to defense gunnery repeater establishment remote stations

telecom

24

6. Oil & Gas:

Stand alone solar power is a logical solution for the remote energy needs of the oil and gas industry. Topsun Energy Ltd. has almost all range of solutions for delivering reliable, cost-effective electricity for pipeline monitoring, telemetry, offshore drilling rigs, and catholic protection. 7. Lighting products / Remote Home Systems:

Solar Lighting solutions are ideal for those who choose to live beyond the reach of conventional electric power. Solar Lanterns, Solar Home Lights and Solar Street lights are the basic solutions for this segment. These products are available in Compact fluorescent lamps and LED lamps as well. Easy to install, virtually maintenance free, long life and individual use has made these range of products most suitable

25

for most of the government programs of rural electrifications worldwide. These systems or can be delivered on a fully or integrated for ground structure. mounting installed rooftop stand-alone

These are widely used in remote tribal and forest helmets and communities. 8. Solar Lanterns Through World Bank Eco-Development Project :

Gir Forest India the only home for Asiatic Lions. There are many scattered community inside the Gir Forest living in dark since many years. Government of India has declared this as a national park and was unable to provide basic living amenities through conventional sources merely for the genuine cause of saving the only home of Asiatic lions and forest. These people were living in dark due to Government of India and World Bank has jointly worked out the project under eco development work and TopSun Energy Ltd. has joined hands to transform the lives of thousands living in the Gir forest by providing Solar lanterns to households and changed the living standards of the isolated communities and their children.

26

8. Strength of Company

Manufacturing:-

Topsun Energy Ltd. has the facilities for streamlined production with prime aim of achieving production to full install and balanced capacity with rejections at international levels with final product yield @ 98%. They introduced have standard and quality control facilities with aim and to procedures documentations

produce Solar modules to qualify for Indian and international standards. At Topsun Energy Ltd. their production and technical department is highly concerned for the quality and adopted QA procedures right from solar cell selection to the final product. INCREASE MANUFACTURING CAPACITY Our manufacturing, support research of & development, modules are delivery based at and their technical team solar

Indian facilities in Ahmedabad, Gujarat, where they have a plant area of approximately 1500 square meters. This plant contains the capacity of 40MW solar panel manufacturing. They have ongoing development plan so they expect 70MW total plant capacity by March 2010.

27

Quality Control:-

Their quality control was set up according to the quality system requirements of ISO 9001:2000. Their quality control consists of three components: incoming inspections, through which they ensure the quality of the raw materials that they source from third parties, in-process quality control of their manufacturing processes, and output quality control of finished products through inspection and by conducting reliability and other tests. They have received international certifications for their quality assurance programs, including ISO 9001:2000, which they believe demonstrates their technological capabilities as well as instill customer confidence.

28

Research & Development:-

Their Research & Development Team efforts are towards the improving our solar panel manufacturing capability and new DEVELOPMENT TO DRIVE TECHNOLOGY. They have their own Research & Development facilities to develop new solutions and applications for the utmost requirement and satisfactions of customers. Their skilled and hardworking Research and Development team ever stays behind in taking new challenges and help to increase their market share by adding new features and looks to their products.

29

9. Product Details Product Overview:Topsun Energy Ltd. Solar panels with their high power density, refined appearance, best efficiency and premium quality materials are used in both grid-connected and off-grid solution of various applications. Their Shine Series high power, state-of-the-art solar panels ranging from 10W to 225W designed specifically for residential or commercial applications. Their solar panel is been assemble either by monocrystalline or multicrystalline cells, depending on the customer need. Their solar panels offer the end-user superior performance and complete peace of mind while providing the utmost in installation flexibility. They are currently working on a range of significant International and national projects from Nodal agencies, OEMs industry, energy providers & auditors, Indian Government, engineering and planning companies, NGO s, architectures and co-operatives. The variation in power output is based on the conversion efficiency of the cells used in their solar modules, as well as the types of cells. They also design and produce solar modules based on their customer's specifications. Their solar modules are sealed, weatherproof and able to withstand high levels of ultraviolet radiation and moisture. They sell our modules under our own brand. Following are the various products of Company:Solar Shelter Light:-

30

Solar Home System:-

Solar Street Light:-

31

Solar Telecom:-

Solar Village Electrification :1. Solar CFL Lantern:-

32

2. Solar Water Pumps:-

3. Solar Air Cooler:-

33

Literature Review

34

Literature Review

The Renewable Energy World Network provides industry-leading magazines to keep pace with rapid, ever-increasing thirst for in-depth, targeted renewable energy information. With 25,000 subscribers, Renewable Energy World North America serves the renewable energy industry, including power generating utilities, local or central governments, energy advisory or planning agencies, manufacturers of complete renewable energy systems, research or training establishments, aid agencies, large energy users, companies involved directly in renewable, owners/managers of renewable energy sites, consultants in renewable energy and other industries allied to the field. Photovoltaic World is the premier source for solar photovoltaic manufacturing. Each issue provides a timely first look at the latest technologies of the photovoltaic/solar cell industry with topics such as solar packaging technologies, solar materials, solar equipment, solar manufacturing. Process, solar product applications, and other issues important to professionals in the business of solar manufacturing. Hydro Review's goal is to provide readers with reliable, relevant information on the issues and challenges encountered in the hydro industry. Hydro Review offers practical, useful information, helpful examples, and constructive guidance from experts. The information readers receive helps promote and sustain the important role of hydroelectric power in North America.

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Research Methodology

36

Research Methodology
Introduction:Research is an intensive and purposeful search for knowing and understanding of social and physical phenomena. Research is a scientific activity undertaken to establish something, a fact, a theory, a principal, or an application. It is an activity. Research in common parlance refers to a search for knowledge. Research is defined by many experts. Some of the definitions are as follows:(1) According to Clifford Woody:- ,Research comprises defining

and redefining of the problems, formulating the hypothesis or suggested, solution, collection, organizing and evaluating the data, making deductions and reaching conclusions, and at last carefully listing the conclusion to determine whether they fit the formulating hypothesis. (2) According to Redman and Mary: - , Research is a systematized effort to gain new knowledge. Research is thus an original contribution to the existing stock of knowledge making for its advancement. Following are the main characteristics of research:(1) (2) knowledge. (3) (4) Research is undertaken to establish facts or principles. Research is an original contribution to the existing stock of Research is a systematic inquiry. Research is an investigation into a subject or a special field of

knowledge making for its investment.

37

Research is done for various purposes. But the main purpose of research is to discover the answers to the questions through the applications of the scientific procedures. The purpose of research is to find out truth which is hidden and which has not been discovered so far. Following are the some of the purpose of doing the research work. (1) (2) (3) (4) To gain familiarity with a phenomenon or to achieve new To portray accurately the characteristics of the particular To determine the frequency with which something occurs or To test a hypothesis of a causal relationship between variables.

insights into it. individual situation or a group. which it is associated with something else.

Research Methodology is a way to systematically solve the research problem. It is necessary for the researcher to know not only the research techniques but also the methodology. It is necessary for the researchers to design his methodology for his problem as the some may differ from problem to problem. It may be understood as a science of studying how research is done scientifically. It has many dimensions. The scope of research methodology is wider than that of research methods.

38

Objective of Research
The objective of the research should be stated. There refers to the question to which the researcher proposes to seek answers through the research. The objectives stated should be very clear. The objective for instance, may be stated as under. To identify the factors that influence. To study the nature of relation between. To identify the causes. The primary objectives: To study out the main source from where company recruit and selection skilled employees. To select eligible employees with great skill through successful recruitment process. Secondary objectives: Reducing the time gap between recruitment and selection process to get maximum output from the employees. To find out right people at right time to convert the expenses done on recruitment and selection process into revenue. Recruit and select candidate who have sense of belongingness and ready to work in critical conditions with hard work. To create strong relation during the recruitment and selection process so that candidate can feel comfortable to work with the organization. Try to find out maximum skilled candidates through recruitment and selection process.

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Sources of Data
There are two types of sources by which I collect all the information and data for preparation of this Project Report.

PRIMARY SOURCES:The data, which is collected at the present situation by keeping in mind the objectives of the study. Primary data is collected through: Personal visit to the company and discussion with

company personnel.

SECONDARY SOURCES: The data, which is already made available in the company and is collected in the past for some other purpose but now, can be used. Referring Books Referring Annual Report of the Company.

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Ratio Analysis

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Contents

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8.

Particulars Theory of Financial Analysis Meaning of Ratio Analysis Objectives of Ratio Analysis Uses of Ratio Analysis Classification of Ratio Importance/Uses of Ratio Analysis Limitation/Problem of Ratio Analysis Calculation of Ratio

Page No. 38 45 46 46 47 48 49 51

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1.

Theory of Financial Analysis

Meaning of Financial Statement: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 two basic statements: 1) The Income Statement 2) The Balance Sheet Of course, a business may also prepare 3) A Statement of Retained Earnings 4) A Statement of changes in Financial Position in Addition to the above two Statement

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The meaning and significance of each of these statements is being explained below: Financial Statement

Income Statement

Balance Sheet

Statement of Retained Earning

Statement of Changes in Financial Statement

The above we show the various types of the financial statements which are generally used in every business. In the above statements the whole are followed by any firm for knowing the real situation of the financial position of the firm.

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Analysis & Interpretation of Financial Statement:Financial Statements are indication of two significant factors:1) Profitability 2) Financial Soundness

Analysis and interpretation of financial statements, therefore, refers to such a treatment of the information contained in the income statement and the balance sheet so as to afford full diagnosis of the profitability and financial soundness of the business.

A distinction here can be made between the two terms 1) Analysis 2) Interpretation The term Analysis means methodical classification of the data given in the financial statements. The figures given in the financial statements will not help one unless they are put in a simplified form. However, both Analysis and Interpretation are complementary to each other. Interpretation requires Analysis, while Analysis is useless without Interpretation.

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Techniques of Financial Analysis:A financial analysis can adopt one or more of the following techniques/tools of financial analysis. Financial Analysis Techniques

Comparative Common size Cash Financial Financial Trend Fund flow flow CVP Ratio Statement Statement Percentage Analysis Analysis Analysis Analysis

Comparative Financial Statement:Comparative financial statements are those statements, which have

been designed in a way so as to provide time perspective to the consideration of various elements of financial position, embodies in such statements. In these statements figures for two or more periods are placed side by side to facilitate comparison. Both, the income statement and balance sheet can be prepared in the form comparative financial statement. 1) Comparative Income Statement:The income statement disclosed Net Profit or Net Loss on account of operations. A comparative income statement will show the absolute figures for two or more periods, the absolute change from one period to another and, if desired, the change in terms of percentages. Since the figures for two or more periods are shown side by side, the reader can quickly ascertain whether sales have increased or decreased, whether cost of sales has increased or decreased etc. thus, only a reading of data included in

46

Comparative Income Statements will be helpful in deriving meaningful conclusion. 2) Comparative Balance Sheet:Comparative Balance Sheet as on two or more different dates can be used for comparing assets and liabilities and findings out any increase or decrease in those items. Thus, while in a single Balance Sheet the emphasis is on present position, it is on change in the comparative balance sheet. Such a balance sheet is very useful in studying the trends in an enterprise. Common Size Financial Statement:Common size Financial Statements are those in which figures reported are converted into percentages to some common base. In the Income Statement the sale figure is assumed to be 100 and all figures are expressed as a percentage of this total. Trend Percentage:Trend percentages are immediately helpful in making a comparative study of the financial statements for several years. The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same items in the base year. Any year may be taken as the base year. It is usually the earliest year. Any year may be taken as the base year. It is usually the earliest year. Any intervening year may be taken as the base year. Each item of base year is taken as 100 and on that basis the percentages also be taken as index number showing relative changes in the financial data resulting with the passage of time. The method of trend percentages is a usual analytical device for the management since by substituting percentages for large amounts, the brevity and readability. However, trend percentages are not calculated for

47

all of the items in the financial statements they are usually calculated only for the major items since the purpose is to highlight important changes. Fund Flow Analysis:Find flow analysis has become an important tool in the analytical kit of financial analysis, credit granting institutions and financial managers. This is because the balance sheet of business reveals its financial status at a particular point of time. It does not sharply focus those major financial transactions, which have been behind the balance sheet changes. Fund flow analysis reveals the changes in working capital position. It tells about the source from which the working capital was used. It brings out in open the changes, which have taken place behind the balance sheet. Working capital being the life-blood of the business, such an analysis is extremely useful. The technique and the procedure involved in funds flow analysis have been discussed in detail later in the book. Cost Volume Profit Analysis:Cost volume profit analysis is an important tool of profit planning. It studies the relationship between cost, volume of production, sales and profit. Of course, it is not strictly a technique used for analysis of financial statements. However, it is an important tool for the management for decision making since the data is provided by both cost and financial records. It tells the volume of sales at which the firms will break-even, the effect on profit on account of variation in output, selling price and cost, and finally, the quantity to be produced and sold to reach the target profit level.

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Ratio Analysis:This is the most important tool available to finance analysis for their

work. An accounting ratio shows the relationship in mathematical terms between two interrelated accounting figures. The figures have to be interrelated because no useful purpose will be served if ratios are calculated between two figures, which are not at all related to each other, e.g. sales and discount on issue of debentures. A financial analyst may calculate different accounting ratios for different purposes.

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2.

Meaning of Ratio

Accounting ratio gives a skilled and experience analyst, a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statement. Ratios are relationship between expressed in mathematical terms between figures, which are connected with each other in some manner. Obviously, no purpose will be served by comparing two sets of figures, which are not at all connected with each other. Moreover, absolute figures are also unfit for comparison.

Ratios can be Expressed in Two Ways:1) Times: - When one value is divided by another, the unit used to express the quotient is termed as Times. 2) Percentage: - If the quotient obtained is multiplied by 100, the unit of expression is termed as Percentage.

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3.

Objectives of Ratio Analysis

Following are the main objectives of the ratio analysis. Because of these objectives the ratio analysis is made by any organization. Standardize financial information for comparisons. Evaluate current operations. Compare performance with past performance. Compare performance against other firms or industry standards. Study the efficiency of operations. Study the risk of operations.

4.

Uses of Ratio Analysis

The following are the main uses of the ratio analysis.

Evaluate Bank Loan Applications. Evaluate Customers Creditworthiness. Assess Potential Merger Candidates. Analyze Internal Management Control. Analyze and Compare Investment opportunities.

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5.

Classification of Ratio

Ratios can be classified into different categories depending upon the basis of classification. The traditional classification has been on the basis of the financial statement to which the determinants of a ratio belong. On this basis the ratio could be classified as:

Accounting Ratio

Traditional Ratio

Functional Ratio

P&L A/C Ratio

B/S Ratio

Composite Profitability Coverage Ratio Ratio Ratio

Turnover Ratio

Financial Ratio

Liquidity Ratio

Stability Ratio

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6.

Importance/Uses of Ratio Analysis

The following is the uses of the Ratio Analysis: Profitability:Useful information about the trend of profitability is available from profitability ratios. The Gross Profit Ratio, Net Profit Ratio and Ratio of Return on Investment get an idea about overall efficiency of manager and bank as well as other creditors draw useful conclusion about repaying capacity of borrowers. Liquidity:In fact the uses of ratio are excellent guide to measure the efficiency of managers. The Current Ratio, Acid test Ratio and Liquid Ratio will tell whether the business will be able to meet its current liabilities and when they mature. Inter Firm Comparison:The absolute ratio of a firm is not much useful unless they are compared with similar ratios of other firm belonging to the same industry. Indicate Trend:The ratio of last three to five years will indicate the trend in the respective field. It helps to compare the position of the company at different years. Useful for Budgetary Control:Regular budgetary controls are prepared in a business where the system of budgetary control is in use. Efficiency:The turnover ratio is excellent guide to measure the efficiency of managers. All such ratio related to sales present the good picture of the success or otherwise of business.

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7.

Limitation of Accounting Ratios

Comparative Study Required:-

Ratios are useful in judging the efficiency of the business only when they compared with the past results of the business or with the results of a similar business. However, such a comparison only provided a glimpse of the past performance and forecasts for future may not be correct since several other factors like market conditions, management policies etc. affect the future operations. Limitations of Financial Business:-

Ratios are based only on the information, which has been recorded in the financial statement. And financial statement suffer from a number of limitations, the ratios derived there from, therefore are also subject to those limitations. Ratio alone are not Adequate:-

Ratios are only indicators; they cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen. Window Dressing:The term window dressing means manipulation of accounts in a way so as to conceal vital facts and present the financial statements in a way to show a better position than what it actually is. On account of such a situation, presence of a particulars ratio may be definite indicators of a good or bad management.

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Problem of price level change:-

Financial analysis based on accounting ratios will give misleading results if the effects of changes in the price level are not taken into account. No fixed standards:Ratios are a composite of many figures:No fixed standards can be laid down for ideal ratios. Ratios are a composite of many different figures. Some cover a time period, others are at an instant of time while still others are only average. Many of the figures used in to ratio analysis are no more meaningful. A balance sheet figures shows the balance of the account at one moment particular moment only. It certainly not representative of typical balance during the year.

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Calculation of Ratios

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8.

Calculation of Ratios

Profitability Ratio:
(1). Gross Profit Ratio:It is an expressing relationship between Gross profits earned to net sales. It is useful indication of the profitability of the business. If this ratio is low, it indicates that the cost of sales is high or purchasing is insufficient. In such case the management must investing the causes and try to bring up this ratio.

Gross Profit Gross Profit Ratio = X 100 Net Sales 2403.97 2010 = 8815.40 X 100

= 27.27% 2009 = 1460.33 7670.69 = 19.04% X 100

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Gross Profit Ratio

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2009 2010

Gross Profit Ratio

Interpretation of Gross Profit Ratio:Gross Profit ratio or the company is increased by 8% in the comparision of the last year. Gross Profit Ratio shows better profitability of the company. A ratio of the 27.27% & 19.04% shows that for a sale of every Rs.100 a margin of Rs. 19.04 & 27.27 respectively.

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(2). Net Profit Ratio:This ratio is unlikeble for the purpose of ascertaining the overall profitability of business and shows the efficiency or otherwise of operating the business. It is the reverse of the operating ratio. Generally this ratio is computed on the basis of net profit earned from operation of business and non-operating expenses and income are excluded.

Net Profit after sales Net Profit Ratio = X 100 Net Sales 2266.28 8467.42 = 26.76% 1395.92 2009 = 7294.79 X 100

2010 =

X 100

= 19.14%

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Net Profit Ratio

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2009 2010

Net Profit Ratio

Interpretation of Net Profit Ratio:Out of sales of Rs. 100 for 2009 & 2010 the net profit is Rs. 19.14 & Rs. 26.76 respectively. Net Profit Ratio shows that the net profit of the company is increased in the comparison of the last year. Net Profit ratio shows the profit after deducting the expenses of the company.

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(3). Operating Ratio:It is a ratio showing relationship between costs of goods sold plus operating expenses to net sales. It shows the efficiency of the management. The higher the ratio, the less will be the margin available to proprietors.

Cost of goods sold + Operating Expenses Operating Ratio = X 100 Net Sales 3480.85 + 3689.09 8815.40 = 70% 3262.23 + 2452.45 2009 = = 74% 7670.69 X 100

2010 =

X 100

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Operating Ratio
75% 74% 73% 72% 71% 70% 69% 68% 67% 2009 2010 Operating Ratio

Interpretation of Operating Ratio:Out of sales Rs. 100 for 2009, & 2010 the net profit is Rs. 19.14 & Rs. 26.76 respectively. Operating Ratio shows that the net profit of the company is increased in the comparison of the last year. Operating Ratio shows the profit after deducting the expenses of the company.

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Balance Sheet Ratio:

(1). Current Ratio:This most widely used ratio shows the proportion of current assets to current liabilities. It is also known as WORKING CAPITAL RATIO as it is a measure of working capital available at a particular time. It is a measure of short term finance strength of business and shows whether the business will be able to meet its current liabilities as and when they mature, means that a liability that will mature within a period of 12 months is current liabilities.

Current Assets Current Ratio = Current Liabilities 10888.89 2010 = 2371.66 = 4.59 Times 2009 = 4858.813 1814.71 = 2.68 Times X 100 X 100 X 100

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Current Ratio
5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2009 2010 Current Ratio

Interpretation of Current Ratio:-

The standard for current ratio is 2:1, whereas the same for this company for 2009 & 2010 respectively is 2.68:1, & 4.59:1. This figure shows that, for every 1 Rs of current liabilities of the company, the company has the assets of Rs. 4.59 & Rs. 2.68 in the year 2010 & 2009 respectively.

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(2). Liquid Ratio:A variant of current ratio is the liquid or quick ratio, which is designed to show the amount of cash reality liquid able available to meet immediate payment. It is obtained by dividing the liquidated assets by liquid liabilities. Liquid assets are obtained by deducting stock from current assets. And liquid liabilities are obtained by deducting bank overdraft from current liabilities.

Liquid Ratio =

Liquid Assets Liquid Liabilities 10888.89 893.84

2010 =

2371.66

= 4.21 Times 4858.13 903.67 2009 = 1814.71 = 2.18 Times

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Liquid Ratio
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2009 2010 Liquid Ratio

Interpretation of Liquid Ratio:-

Liquid Ratio presents a very comfortable liquid position. The liquid ratio of 2009 & 2010 is 2.1 times & 4.21 times respectively. Liquid Ratio shows that company has Rs. 2.18 & Rs. 4.21 liquid assets for the year 2009 & 2010 respectively to meet the liquid liabilities of Rs. 1. The working capitals are much then present requirement. This should be used to prompt payment to creditors and benefits of lower price and cash discount should be obtained.

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(3). Debt Equity Ratio:This ratio is only another form of proprietary ratio and established relationship between the outside long term liabilities and owners funds its shows the proportion of long term external equity and internal equities. i.e proportional of fund provided by long term creditors and that provided by share holders or proprietors.

Secured Loan + Unsecured Loan Debt Equity Ratio = Equity Share Capital

3331.68 + 4832.23 2010 = 544.98

= 14.98 Times 2961.78 + 48.15 2009 = 362.96

= 8.29 Times

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Debt Equity Ratio

16 14 12 10 8 6 4 2 0 2009 2010 Debt Equity Ratio

Interpretation of Debt Equity Ratio:-

The above calculated ratio suggests that for every Rs. 100 shareholders fund for 2009 & 2010, the long term debt respectively 829 & 1498. The higher ratio means that outsider have a large claim than the owners of the business. The pressure from outsider would increase and a difference will also increase.

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Composite Ratio
(1). Return on Capital Employed:It is an index of profitability of business and is obtained by comparing net profit with capital employed. The ratio is normally expressed in the percentage. The term capital employed includes general reserve and long terms debts such as debtors. It must be remember that in this ratio net profit is before deducting interest and tax.

Net profit before Interest & Tax Return on Capital Employed Ratio = X 100 Capital Employed 2403.97 8163.91 = 29.45% 1460.33 2009 = 3009.93 X 100

2010 =

X 100

= 48.52%

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Return on Capital Employed

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2009 2010

Return on Capital Employed

Interpretation of Return on Capital Employed Ratio:Return on Capital Employed Ratio obtained by comparing earning before interest and tax with capital employed. It means if we employ Rs. 100 of capital then on it how much we get back. Return on Capital Employed Ratio shows the profitability of the business. In 2009 company has earned Rs. 48.52, whereas in 2010 it earns Rs. 29.45. it indicates in the earning.

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(2). Return on Share Holders Fund:In order to judge the efficiency with which the proprietors funds are employed in business, this ratio is ascertained proprietors equity or proprietors funds includes share capital and reserves. It is of great practical importance to the prospective investors, as it enables the profitability of a company to be compared with that of another company. It also indicates whether the return on proprietors fund is enough in relation to the risk that they undertake.

Return on Share Holders Fund Ratio = Share Holders Fund 2077.77 2010 = 6206.2 X 100

Net Profit

X 100

= 33.48% 2009 = 1333.59 4733.19 = 28.18% X 100

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Return on Shareholder's Fund

34.00% 33.00% 32.00% 31.00% 30.00% 29.00% 28.00% 27.00% 26.00% 25.00% 2009 2010 Return on Shareholder's Fund

Interpretation of Return on Shareholders Fund Ratio:Interpretation of Return on Shareholders Fund Ratio increased by 5% in the comparison of the last year this shows the increase in the profit of the company.

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(3). Earning Per Share:Earning per share measure the profit available to the equity holders per share. That is to say that how much they can get per share.

Earning Before Interest & Tax Earning Per Share Ratio = No. Of Equity Share 2077.77 2010 = 109

= Rs. 19.06 1333.57 2009= 73 = Rs. 37.04

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Earning per Share

40 35 30 25 20 15 10 5 0 2009 2010 Earning per Share

Interpretation of Earning Per Share Ratio:Earning per Share Ratio shows that the income for each equity shares. That means we employed one equity share of the company than we got Rs. 19.06 approximately on one share. Here earning per share is Rs. 19.06, which is low, than the comparison of the last year that was Rs. 37.04, so we can say that the trend is decreasing but the ratio is satisfactory because the equity share of the company is Rs. 10 only.

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(4). Debtors Turn Over Ratio:The ratio shows the number of days taken to collect the days of credit sales. It shows the efficiency or otherwise of the collection policy of the enterprise. The ratio is compute by dividing the amount of debtors and bills receivable by the average credit sales . Debtors + Bills Receivable Debtors Turn Over Ratio = X 365 Credit Sales 2010= 1443.79 8467.42 = 62 Days 1468.37 2009 = 7294.79 X 365 X 365

= 74 Days

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Debtors Turn over Ratio

76 74 72 70 68 66 64 62 60 58 56 2009 2010 Debtors Turn over Ratio

Interpretation of Debtors Turn Over Ratio:-

The amount of credit sale is collected in the year 2009 in 74 days, while in 2010; this is collected in 64 days. While the average collection period of the company is 45 days. This indicates slow collection department which required corrective measure.

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(5). Fixed Assets Turn Over Ratio:To ascertain the efficiency and profitability of business, the total fixed assets are compared to sales. The more the sale in relation to the amount invested in fixed assets, the more efficient is the use of fixed assets it indicates higher efficiency. If the sales are less as compared to investment in fixed assets, it means that fixed assets are not advantage utilized in business.

Net Sales Fixed Assets Turn Over Ratio = Fixes Assets 2010 = 7671.21 2023.76 = 3.79 Time 7432.94 2009 = 1857.56

= 4 Time

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Fixed Assete turn over Ratio

4.05 4 3.95 3.9 3.85 3.8 3.75 3.7 3.65 2009 2010 Fixed Assete turn over Ratio

Interpretation of Fixed Assets Turn Over Ratio:-

In the year 2009 the ratio is 4 times that means the turnover of fixed assets is low. In the year 2010 the turnover of fixed assets is 3.79 times i.e. increasing compared to 2009.

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Findings

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Findings
In the Topsun Energy Ltd. I deal with the financial analysis of the company. From the calculation of the ratios I find out the below mention things. The ratio shows that the profit of the company is increased in

the comparison of the last year. The net profit of the company is increased by 7%. It shows the good profitability of the company. Each and every ratio presents the growth of the company. Through the earning per share is decreased in the comparison of the last year but its because of the issue of the bonus shares. But then also the earning per share is satisfactory. Its Rs. 19 Per share while the nominal value is only Rs. 10 per share. Current assets available to the company are more than the requirement. This mentioned that the working capital of the company is much more than the requirement. But the debtors collection period is not according to the requirements. The preferable time is 45 days while company gives 62 days to the debtors.

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Conclusion

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Conclusion
From the analysis of the financial statement through the ratio analysis, I can conclude that the profitability of the company is very good. All the calculate ratios shows the good profitability and good management of working capital, assets as well liabilities also. Through the debtors turnover ratio is low but its not adversely affect the companys profit. And has needed to concentrate more on the domestic marketing more. Company has the specialty division also and planning for the multinational business also. So from these points we can say that the future of the multinational business also. So from these points we can say that future of the company is very bright.

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Contribution & Learning From The Study

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Contribution & Learning of the Study

Organization gave me the precious opportunity for preparation of project. Benefit to organization is the topic which includes how my study is beneficial to the organization. My research study is a ratio analysis which shows that the financial position of the company and also helpful to the company for taking various financial decisions. My research work is also helpful to me for my understanding the real practical knowledge. My research work shows various ratios that shows the various analysis of financial statement and shows the various condition of finance.

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Bibliography

85

Bibliography

www.topsunenergy.com www.google.co.in Books of Advance Accountancy Financial Accounting Annual Report of Topsun EnergyLtd.

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Annexure

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Annexure Statement of Profit & Loss A/C

Profit & Loss A/C of Topsun Energy Ltd. For the year ended on 31-03-2010. As on Particulars Income: Sales & services Less: Excise duty Other income 8815.40 (347.98) 8467.42 167.05 8634.47 Expenditure: Materials consumed & purchased of goods Increase/decrease in inventory Operating & other expenses Depreciation Financing Cost 3399.07 81.78 2689.09 184.06 (123.50) 6230.50 Profit Before Tax: Provision for Tax: Current Deferred (187.35) (138.85) (103.00) (23.74) 2403.97 3223.88 38.35 2452.45 160.76 (27.71) 5847.73 1460.33 7670.69 (375.90) 7294.79 13.27 7308.06 As on 31-03-2010 31-03-2009

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Net Profit After Tax:

2077.77

1333.59

Profit & Loss A/C (Opening Balance) Profit available for Appropriation: Appropriation: Proposed dividend on equity shares Tax on Dividend Transfer to general Dividend Profit & Loss A/C (Closing Balance)

188.51 2266.28

62.33 1395.92

545.75 71.32 1400.00 249.21 2268.28

272.50 34.91 900.00 188.51 1395.92

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Balance Sheet
Balance sheet of Topsun Energy Ltd. As on 31-03-2010. Particulars As on 31-03-2010 Source of Fund: Share Holders fund: Share capital Equity share capital Reserved & Surplus Loan Fund: Secured loan Unsecured loan Differed Tax Liability 3331.68 4832.23 8163.91 505.95 14876.06 Application of Fund: Fixed Assets Gross block Accumulated Depreciation Net Block Capital work-in-progress & Advances 4083.49 (981.02) 3102.47 1504.74 4607.21 Investment 1751.62 2828.85 (805.09) 2023.76 1495.24 3519.00 1547.82 2961.78 48.15 3009.93 367.10 8110.22 544.98 5661.22 6206.20 362.96 4370.23 4733.19 As on 31-03-2009

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Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank balance Loan & Advance to Subsidiaries Loans & Advances to Others 893.84 1443.79 6690.89 1195.30 665.07 10888.89 Current Liabilities & Provisions Net Current Assets (2371.66) 8517.23 14876.06 903.67 1468.37 1474.26 681.40 330.43 4858.13 (1814.71) 3043.42 8110.22