Introduction

In this project I have done the Financial Analysis of Shree Parasnath Re-Rolling Mills Ltd. I have done financial analysis based on two different things: 1. Ratio Analysis: In this I have tried to analyse the liquidity position, short-term solvency, long-term solvency, with the help of different financial ratios, and also to find out trends in profit and turnover over a period of time. 2. Cash Flow Analysis: Here I have tried to figure out the inflow of cash into the company and outflow of cash from the company, on different activities, such as Operating, Investing and Financing.

Company profile:

Located in Durgapur, the Industrial hub of West Bengal, Paras Steel is the first automatic plant in Eastern India to produce Thermex TMT bars as well as the full range of structural steels. It is the only plant in the region to be certified ISO: 9001 for quality processes, ISO: 14001 for environment management and OHSAS 18001 for health and safety standards. The relevant BIS certifications, such as IS 1786:1985 & IS 2062:2006 have also been obtained. The modern plant incorporates a complete Thermex treatment system and a structural mill. The Complete range of requirements can therefore be met under one roof. Durgapur being one of India's premiere steel hubs, the billets is locally procured from Steel Authority of India. Proximity to other raw materials and markets means that Paras products are competitively priced despite their superior quality.

Product range:

TMT Bars Angles Channels Beams/Joists H-Beams Rounds Flats

8mm to 32mm. 35mm to 200mm. 75mm to 450mm. 100mm to 350mm. 150mm to 203mm. Up to 160mm. Up to 400mm.

Paras TMT Bars:

Paras TMT is the latest generation of ribbed, high strength, thermo mechanically treated reinforcement bars that are popular the world over. The company has been the first in Eastern India to introduce the state-of-art Thermex process under licence from HSE, Germany to produce these bars in grades designated as Paras TMT Fe 415 and Paras TMT Fe 500 with different mechanical properties.

The Thermex TMT process features rapid cooling of heated bars periphery. This transforms the peripheral structure to marten site, which is then annealed through the heat available at the core. The resultant bar structure is of tempered marten site on the outer surface and of fine-grained ferrite-pearlite at the core, imparting high strength, toughness and ductility.

Thermo-mechanically treated (TMT) reinforcement bars are today essential for any serious construction. For load bearing applications they have completely replaced CTD and plain bars on account of their remarkable weight to strength ratio.

Paras Structurals:
Structural steel is steel construction materials, a profile, formed with a specific shape or cross section and certain standards of chemical composition and strength. Structural steel shape, size, composition, strength, storage, etc, is regulated in most industrialized countries. Structural Steels shape structure on mathematical geometry and solely depend on 90o.

The structural mill produces a variety of hot rolled products such as angles, channels and beams and joists, as well as flats and rounds of various dimensions. The versatile range includes a cross section of special contours for bridges, buildings, transmission towers, industrial structures as well as for automobile and shipping industries. An online straightening machine ensures accuracy of angles, which is particularly important for transmission towers.

The strength and quality consistency make Paras structural products a favorite among leading engineering and construction companies. All raw materials are sourced from SAIL. Each batch is subjected to stringent tests. Samples from every cast are sent for chemical analysis, tensile and bend tests. Where required, impact and spectromax testing are also undertaken. Finally, piece-by-piece inspection ensures that only flawless pieces are dispatched. When its Paras, you are sure.

Why Paras
Most of the but secondary PARAS is producers the of India who are is having having the the

infrastructure of producing either TMT or Structurals that too with limitations limitations. company infrastructure of producing both TMT and Structurals and without

Strength:
Paras Steels are available in PARAS TMT Fe: 415/500, Paras Structurals Fe: 410/440/490/540 grades which are much stronger than ordinary steels and give a 20% stronger concrete structure with a same quantity of steel.

Thermal Stability:
Paras Steels have high thermal stability unlike other ordinary steel. It can be used even at high temperature till 6000c without any loss in strength.

Bend Properties:
Paras Steels possesses excellent bend ability due to the unique feature of uniform elongation.

Weld Properties:
Paras Steels have very good weld ability. They do not suffer from loss of strength at the weld joints.

Corrosion Resistance:
Paras Steels shows virtually no rusting even after a long time due to the absences of any residual stress.

Earthquake Proof:
Paras Steels can be used in Earthquake zones as its guarantee better elongation.

Coastal Steel:
Paras Steels are rolled from IS 2830 Billets all procured from SAIL to produce CRS Steels, which provides better stability, and function in coastal region.
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Fatigue Resistance:
Paras Steels have high fatigue resistance on dynamic loading on account of the high strength of the surface layer.

Fire Resistance:
Paras Steels have higher thermal stability which making it safer in Fire Hazards.

Quality Assurance:
Paras Steels uses the in house state of the art laboratory with modern and advanced machineries such as SPECTROMAX, UPM, and IMPACT.

Savings:
Paras Steels, extra strength means more savings too. It saves steel up to 20%.

Distributor & Retail Network:

In India:

1. West Bengal

2. 3. 4. 5. 6. 7. 8.
9.

Orissa Tamil Nadu Nagaland Tripura Manipur Meghalaya Rajasthan Delhi Karnataka Assam Andhra Pradesh Mizoram Arunachal Pradesh Bihar Punjab

10. 11. 12. 13. 14. 15. 16. 18. 20. 21. 22.

17. Haryana Kochi

19. Kerela Gujarat Madhya Pradesh Andaman & Nicobar

Outside India:
1. 2. Bhutan Nepal

Major Clients:
Government & Semi-Government Department:

1. Central Public Works Department (all over India) 2. Eastern Railways 3. Military Engineering Services (through contractors) 4. West Bengal Power Development Corp Limited 5. West Bengal State Electricity Board 6. Damoder Valley Corporation (through contractors) 7. BSNL 8. NHPC 9. APCPDCL 10. APNPDCL 11. Central Cold Field Ltd

Approvals from Major Civil Contractor & Consultants:

1. L&T Limited 2. Bengal Ambuja Housing Development Ltd. 3. Maytas Infra Limited. 4. Simplex Infrastructure Ltd.

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5. Shapoorji Pallonji & Co. Ltd. 6. Geo Foundation & Structures India Ltd. 7. Oriental Structures Ltd. 8. Gyatri Project Ltd.

Major Industry Houses during Commissioning:

1. Tata Ryerson Ltd. 2. Tata Motors 3. Bhusan Steels and Power Ltd. 4. B.M.A. Stainless Steel Ltd. 5. Paharpur Cooling Towers Limited 6. E.M.C. Limited 7. Rashmi Metaliks Pvt. Ltd. 8. Emami Papers Mills Pvt. Ltd. 9. Adhunik Group of Companies

Real Estate Developers:

1. Parsvnath Developers Limited, New Delhi 2. Bengal Ambuja Housing Development Ltd., Kolkata 3. Sherwood Projects 4. Unitech Limited 5. Bengal Shelter Housing Development Ltd. 6. Prestige Estate Projects Pvt. Ltd., Bangalore

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7. Ideal Real Estate Pvt. Ltd. 8. Purvankara Projects, Bangalore 9. GEO Foundation Pvt. Ltd., Kochi 10. DLF Ltd.

Certifications:
Life would be substantially more difficult without standards. In order to provide cost effective quality products to its customers, the company has acquired a number of national and international standard quality certificates and license. The list of certificates and license acquired by the company are as follows: ISO 9001-2000

ISO 14001- 2004

OHSAS 180001

ISI 1786:1985 for TMT

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 ISO 2062:1999

HDS Bars Thermex

Companys Vision:
Over the years, Paras has developed an enviable roster of customers in India, as well as a growing export market in Nepal, Bhutan, etc. We are enlisted with numerous Government departments and multinational companies, who recognize the quality of our steel. Noteworthy approvals include Power Grid Corporation for MS angles and Military Engineering Services (MES) for TMT and Structural sections. Many prestigious buildings have been made with our steel. The 21st century has marked good times for the Indian steel industry. Both domestic and international demand has been robust. For producers like Paras, the boom in the infrastructure sector has fuelled demand from the construction industry. Almost all steel companies have done well and we are no exception. Good times, however, do not last forever. In our quarter century of industry experience we have seen the ferrous cycle rise, fall and rise again. We have learnt that what survive is quality -- and the trust of customers. In the last few years we have consistently invested in building a

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modern plant and implementing quality systems and processes. Today we use the best steel as raw material, process it with the best equipment, and follow best practices to assure quality products.

Balance Sheet:
Particulars: 2007 2006 2005

Sources of funds
Share Holders Fund

Equity share capital Share application money

Reserves & surplus

156,900,000.00 40,000,000.00 106,441,191.36

156,900,000.00 22,601,000.00 103,752,206.18

94,900,000.00 10,097,852.10

Loan funds
Secured loans Unsecured loans Deferred Tax Liability 180,510,567.92 57,586,000.00 12,783,300.00 124,281,261.33 4,160,000.00 14,616,000.00 103,179,015.10 11,239,000.00 6,188,100.00

Total

554,221,059.28

426,310,467.51

225,603,967.20

Applications of funds
Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in Progress Investments 252,626,004.13 (73,812,652.14) 178,813,351.99 94,699,988.84 110,000.00 250,280,895.13 (46,726,224.83) 203,554,670.30 1,830,927.00 109,041,230.41 (22,068,253.32) 86,972,977.09 97,863,224.75

Current Assets
Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Less: Current Liabilities & Provisions 205,775,114.29 30,447,580.83 86,336,292.70 113,974,611.00 (155,950,780.37) 140,767,614.50 51,355,943.19 43,557,252.84 102,172,285.88 (116,958,026.20) 41,098,724.98 51,517,882.37 24,303,031.44 62,774,984.46 (138,971,557.89)

Miscellaneous expenses not written off 14,900.00 Total 554,221,059.28

29,800.00

44,700.00

426,310,467.51

14 225,603,967.20

Profit & Loss Account:

Particulars:
Income:
Turnover Acretion to stock
2,055,825,916.00 50,098,123.40 1,467,903,562.38 23,398,801.50 1,303,957,650.00 2,096,847.00

2007

2006

2005

Total Expenditure:
Material Costs Manufacturing Expenses Personnel Expenses Administrative & Selling Expenses Finance Charges Depreciation Preliminary Expense written off

2,105,924,039.40

1,491,302,363.88

1,306,054,497.00

1,822,727,122.72 158,488,729.37 24,257,078.00 27,965,844.08 14,350,857.05 27,421,494.00 14,900.00

1,248,201,421.41 149,416,629.37 10,838,925.00 18,386,744.25 12,334,031.26 24,787,435.51 14,900.00

1,185,470,846.47 67,018,603.23 4,634,486.00 15,364,777.01 6,780,585.51 12,237,405.42 14,900.00

Net Profit during the year Less: Previous Year Adjustment

30,698,014.18
1,108,944.00 10,150,283.00 225,986.00 1,832,700.00 2,666,516.00

27,322,277.08

14,442,893.36

Less: Provision for Taxes

Income Tax Fringe Benefit Tax Deferred Tax Tax on Dividend

2,299,170.00 189,835.00 8,247,900.00

1,132,503.00 5,013,200.00

Net Profit After Tax

18,378,985.18

16,405,354.08

8,297,190.36

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Financial Analysis:
Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. By linking business decisions to financial results this tool helps to analyse business performance under different business scenarios. It will help you conduct "what-if" and "goal-seek" analysis as you develop your sales plan or operations budgets. Financial analysis can reveal much about a company and its operations

Objectives:
The primary objective of financial analysis is to forecast and/or determine the actual financial status and performance. This is to enable the firm to combine that information with all other pertinent data (technical, economic, social, etc.) to assess the feasibility, viability, and potential economic benefits, of a proposed or continuing lending operation. A secondary objective is the provision of Technical Assistance to a borrower and to enable them to make similar assessments for the project. A tertiary objective is to encourage borrowers and to make any necessary changes to their institutional and financial management systems to facilitate the generation of appropriate data to support good financial analysis.
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Helpful in answering questions like:

Which bills are due this week and for what amounts? Are there any customers with payment problems; if so, who needs to be notified?
What are the values of assets and liabilities on a given date?

What is the value of assets, liabilities, and owners equity on a given date? What is the breakdown of expenses by business units? Which business units are hitting their targets? What are the revenue trends by business units? What are the trends in revenue, by revenue types? What is the forecasted revenue? Has this forecast changed? Why has revenue forecasts changed? What is the actual amount of profit margin by business unit or region? What are the associated trends? What is the breakdown of costs by vendors, and what are the associated trends?
What is the change in cash position from period to period?

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Goals:

1. Profitability- its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; 2. Solvency- its ability to pay its obligation to creditors and other third parties in the long-term; 3. Liquidity- its ability to maintain positive cash flow, while satisfying immediate obligations; 4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of the income statement and the balance sheet, as well as other financial and non-financial indicators

Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time.

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Purpose of financial statements

"The objective of financial statements is to provide information about the financial strength, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."

Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.

Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.
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To External Users:
These are potential investors, banks, government agencies and other parties who are outside the business but need financial information about the business for a diverse number of reasons.

Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and is prepared by professionals (financial analysts), thus providing them with the basis in making investment decisions.

Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.

Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company.

Media and the general public are also interested in financial statements for a variety of reasons.

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Ratio analysis:
A ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company's financial statements that contain figures on assets, liabilities, profits, and losses. Ratios are only meaningful when compared with other financial information. Since they are most often compared with industry data, ratios help an individual understand a company's performance relative to that of competitors and are often used to trace performance over time. Financial analysis can reveal much about a company and its operations. However, there are several points to keep in mind about ratios. First, a ratio is a "flag" indicating areas of strength or weakness. One or even several ratios might be misleading, but when combined with other knowledge of a company's management and economic circumstances, financial analysis can tell much about a corporation. Second, there is no single correct value for a ratio. The observation that the value of a particular ratio is too high, too low, or just right depends on the perspective of the analyst and on the company's competitive strategy. Third, financial ratios are meaningful only when compared with some standard, such
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as an industry trend, ratio trend, a trend for the specific company being analyzed, or a stated management objective.

Objectives of ratio analysis:

To allow comparisons to be made which assist in predicting the future. To investigate the reasons for the changes. To construct a simple explanation of a complicated financial statement by its expression in one figure. To permit the charting of a firms history and the evaluation of its present position.
To provide indicators of a firms past performance in terms of

its operational activity and profitability; and near-present financial conditions. To see what information users can get from the accounting system output.

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Advantages of ratio analysis:

It is used as an aid to simplify the comprehension of financial statements of an organization. It is used as an aid to analysis and interpretation of financial statements and acts on an index of the efficiency or otherwise of the enterprise.
It provides data for inter-firm comparison in regard to operating

performance and financial results, which helps the management in planning the future course of action. It can be used for comparing the working results of the different divisions of the same organization.
Accounting ratios based on past performance is helpful in

predicting the future performance of the different divisions and the business as a whole .It can be used for making investing decisions. It can help the management in planning and forecasting and provides clues on future problems. Without going into much detail, the position of the business can be ascertained at a glance. Accounting reports can be strengthened by the use of accounting ratio.

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Limitations of ratio analysis:

Financial statements suffer from a number of limitations. When ratios are constructed from those financial statements, ratios suffer from the inherent weaknesses of the accounting system itself.
By using ratios, forecast of a future of a business may not

prove correct. This is because, ratios are all based on past happenings and not future probabilities. They are subject to change in future. Accounting ratios are simply clues. They do not indicate the cause of difference. Therefore they are not considered as basis for immediate conclusion. Ratios are not free from individual bias, because accounting is man-made. Two identical business units with the same level of operations and investments may show highly in comparable financial results. There is lack of proper standards for ideal ratios. There are many rules of thumb, since it is not possible to establish well accepted absolute standards. While constructing ratios, arithmetic window dressing is possible by concealing vital facts and presenting the financial statements in such a fashion as to show the business in a better position.

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Classification of ratio:
Ratios are classified according to the need of different interested groups (e.g., share holders, lenders, investors, management, etc.). This is the most common classification of ratio. According to the need of the organization / investors, ratios can be classified differently.

Liquidity Ratios:
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Liquidly ratios measure the ability of a firm to meet its short-term obligations .Short-term is conventionally viewed as a period up to one year. By liquidity, we mean the amount of cash or cash equivalents the firm has on hand and the amount of cash it can arrange in a short period of time. Cash is the most liquid asset. It includes currency, demands deposits with bank. Cash equivalents are short term highly liquid investments that are readily convertible into known amounts of cash and which are subjects to an insignificant risk of changes in value stock and debtors are somewhat less liquid. Liquidity is essential for smoothly conducting of business activities. If the firm has a poor liquidity position, it may not be able to make timely payment to the creditors and, in effect, will not be in a position to buy goods or services in future on credit. Poor or insufficient liquidity may result in a serious fundamental problem, particularly in time of adversity, such as when a business unit is shut down by strike or a steep rise in the price of a raw material. Need for liquidity: To invest in projects those were agreed in previous year(s). To take advantage of investment opportunity that arises. To meet working capital needs.

Current Ratio:

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Current Ratio is the relationship between current assets and liabilities. Current assets are cash, cash equivalent and other assets which are expected to be realised in cash or sold or consumed within one year. On the other hand, current liabilities are the obligations of the business which are repayable within a relatively short period of time, usually one year. Current Ratio = Current assets / Current liabilities

Ideal:
Theoretically ideal ratio is 2:1. A decrease in

current ratio indicates that short-term solvency position has deteriorated. A very high current ratio shows under investment in fixed assets, which would adversely affect earning ability.

Findings:

In 2007 current ratio 2.07:1 In 2006 current ratio 2.02:1

Comment:
The company has good current ratio, which shows that it has good short-term solvency position, as its current assets are double of current liabilities.

Quick Ratio:
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The quick ratio is the relationship between quick assets and current liabilities. Quick assets are current assets less stock i.e., cash, bank, cash equivalents, debtors and readily realizable marketable securities. A more stringent test of short-run solvency is the quick ratio. It is widely regarded as the most useful single test of liquidity.

Quick ratio= Quick assets / Quick liabilities

Ideal:
Set standard is 1. If Quick ratio < 1, then organization might not be able to discharge its current liabilities in time. It would adversely affect the goodwill of the organization.

Findings:

In 2007 Quick ratio 0.8:1 In 2006 Quick ratio 0.81:1

Comment:
The ratio is less than because the company has paid huge advances (Rs.11.37 crore) to its suppliers & others, which reduces its obligations substantially, and balance the ratio.

Solvency Ratios:
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In a popular sense, solvency means that a business is able to pay its liabilities as they become due. Insolvency means the business is unable to do so. Whereas liquidity refers to the ability of a firm to meet its short-term liabilities, solvency usually refers to the firms ability to meet long-term liabilities. Solvency depends on the profitability of the business. If a business is not profitable in the longrun, it will not be able to meet its debts. Solvency ratios measure the extent to which the firm has been financed by debt. One of many ratios used to measure a company's ability to meet long-term obligations. The solvency ratio measures the size of a company's after-tax income; excluding non-cash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations.

The important solvency ratios are: Debt-Equity Ratio. Total Assets to Debt Ratio. Proprietory Ratio.

Debt-Equity Ratio:

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It is the ratio between the long-term debts and shareholders funds. Long-term debts include debentures, loan from financial institutions, etc. Shareholders funds include equity and preference share capital plus reserves and surplus minus fictitious assets (e.g., debit balance of the Profit and Loss Account or discount on issue of shares, etc.)

Debt Equity Ratio = Long-term Debts / Shareholders fund.

Ideal:
This ratio should generally be less than 1 since it will show that the claims of the owners are greater than those of lenders. It is also considered unhealthy for a business to have more debt than equity.

Findings:

In 2007 Debt Equity Ratio .78:1 In 2006 Debt Equity Ratio .56:1

Comment:
This increase in ratio was due to increase in external borrowings by Rs.10.96 crore, to increase production, to meet the increasing product demand.

Total Assets to Debt Ratio:

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This ratio shows the relationship between total assets and long-term debts. This ratio measures the proportion of the firms total assets that are financed by long-term debts. Long-term debts include debentures, bonds and loans from financial institutions.

Total asset to debt ratio= Total assets / long term-debt

Ideal:
A high ratio indicates represents a large degree of security to lenders for extending long-term loans to firm. If the ratio is too low, it can be concluded that the firm is using more long-term debts for financing its total assets.

Findings:

In 2007 ratio 2.33:1 In 2006 ratio 3.32:1

Comment:
The reason for sharp decline was because of external borrowing to purchase new assets to increase the scale of production.

Proprietory Ratio:

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The total assets belonging to a concern are financed by a combination of resources provided by shareholders and creditors. The proportion of business assets financed by the shareholders is measured by proprietory ratio.

Proprietory ratio= Shareholders fund / Total assets.

Significance:
This ratio indicates more use of shareholders fund in acquiring total assets of the business. It can be used to ascertain the solvency and financial stability of the firm in the long run. If it is too high (more than .9), it can be concluded that the firm is not willing to use more debt capital.

Findings:

In 2007 .55:1 In 2006 .66:1

Comment:
This fall in ratio shows that the company has financed its new assets by taking loans from external sources.

Activity Ratios:

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Activity ratios are the ratios of the cash elasticity of current assets, i.e., how quickly various current assets are converted into sales and cash. Current assets normally comprise cash, debtors and inventories. A firms ability to meet current liabilities largely depends upon the rate at which cash flows into the business from current operations. Since sales is the critical event in this regard, the rate at which inventories are sold or debtors settle their accounts are very crucial. Thus, it is necessary to evaluate the activity of specified current assets like stock, debtors, and also assets.

The important activity ratios are: Stock Turnover Ratio

Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio Total Assets Turnover Ratio

Stock Turnover Ratio:

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This ratio measures how quickly inventory is sold, i.e., the number of times a businesss stock turnover during a year. This ratio is likely to differ from one business to another.

Stock turnover ratio=Cost of Goods Sold / Average Inventory

Significance:
This indicates whether business is fast or slow moving. If there is sign decrease in stock turnover it is considered as a bad signal. A sharp increase in this ratio indicates stock accumulation, which is associated with risk of obsolence.

Findings:
In 2007 ratio was 11 times. In 2006 ratio was 13 times.

Comment:
This decrease in stock turnover was due to stocking of more raw materials to increase production smoothly to raise sales to Rs.205.58 crores in 2007, from Rs.146.80 crores.

Debtors Turnover Ratio:

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It is the ratio between the credit sales and average (Avg) debtors plus average bills receivable. This ratio indicates the numbers of times per year that the average balances of debtors are collected.

DTR = Credit Sales / (Avg debtors + Avg Bills Receivable)

Significance:
A high ratio may indicate an improvement in business conditions, a tightening of credit policy, or improved collection procedure. A low ratio may be an indication of long credit period, or slow realization from debtors.

Findings:
In 2007 ratio was 32.67 times. In 2006 ratio was 28.54 times.

Comment:
In spite of increase in sales by a huge amount (Rs.58.78 crores), the company was able to improve its collection procedure and policy from last year.

Note: According to the management 65% of sales were on credit.

Creditors Turnover Ratio:

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This is the ratio between the credit purchase and average (Avg) creditors plus average bills payable. This ratio indicates the number of times per year that the average balance of creditors is paid. CTR = Credit Purchase / (Avg Creditors + Avg Bills Payable)

Significance:
A high creditor turnover ratio may indicate strict credit terms granted by suppliers. A low ratio may indicate liberal credit terms allowed by suppliers.

Findings:
In 2007 ratio was 8 times. In 2006 ratio was 6 times.

Comment:
This increase in ratio was due to more purchases of materials which were required for increasing production, rather than tightening of credit policy by suppliers.

Note: According to the management 50% of purchases were on credit.

Working Capital Turnover Ratio:

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This ratio indicates the number of times the working capital (current assets current liabilities), has been turned over or utilized during the period. This is the ratio between turnover (sales) and working capital. It shows the extent to which a business is using its working capital to generate sales.

Working Capital Turnover Ratio = Net Sales / working capital

Significance:
A high ratio indicates efficient use of working capital in generating sales. On the other hand, a low ratio is a indication of inefficiency of working capital management.

Findings:
In 2007 ratio was 6.37 times. In 2006 ratio was 6.23 times.

Comment:
In spite of increase in production the company is able to maintain a stable ratio which is a good signal.

Assets Turnover Ratio:

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This ratio intends to reflect the intensity with which assets are employed. The ratio focuses on the use of assets made by a company and it is considered to be a prime determinant of the level of future income inflows.

Total Assets turn over ratio = Net Sales / Total Assets

Significance:
A high assets turnover ratio indicates that the assets are being utilised efficiently. A low ratio indicates that that the assets are not being efficiently employed.

Findings:
In 2007 ratio was 3.71 times. In 2006 ratio was 3.1 times.

Comment:
This ratio has increased quite considerably which reflects that the assets were used more efficiently with increase in production.

Profitability Ratios:

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The key interest of the owners of a business, e.g., the equity shareholders in the case of a company is the profitability. Profitability means the returns achieved through the efforts of the management on the funds invested by the owners of a business. The amount of profits earned by a business has little significance unless it is related to its source. Profitability is the capacity of an enterprise to make profits as measured by accounting ratios relating profits to sales or to investment. It is the net result of a large number of policies and decisions. Profitability ratios measure managements overall efficiency as shown by the returns generated on sales and investments. The important profitability ratios are: Gross Profit Ratio. Net Profit Ratio. Return on Capital Employed. Return on Net worth. Operating Ratio.

Gross Profit Ratio:

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This is the ratio between gross profit and net sales. The gross profit is the difference between Net sales and Cost of goods sold (i.e., the direct cost of sales). Net sales mean total sales less returns. This ratio is expressed as a percentage of sales.

Gross Profit Ratio = (Gross Profit / Net Sales) * 100

Significance:
The more the gross profit earned the better. The gross profit of the company must cover its operating and other expenses. It measures the efficiency of production, purchase and pricing as well.

Findings:
In 2007 Gross Profit was 11.14%. In 2006 Gross Profit was 14.97%.

Comment:
This decline is Gross Profit was due a considerable rise in the world price of direct inputs like oil, coal, iron ore, and other raw materials and price of products were not raised to capture the market.

Net Profit Ratio:

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This is the ratio between net profit and net sales. Net profit is excess of Total sales of a give accounting period over total expense of that period. Net Profit Ratio = (Net Profit / Net Sales) * 100

Significance:
A good net profit margin indicates managements ability to operate with sufficient success not only to cove cost of production, expenses including depreciation, but also to leave a margin of reasonable compensation for owners- who have provided funds at a risk.

Findings:
In 2007 Net Profit was 0.9%. In 2006 Net Profit was 1.12%.

Comment:
This fall in net profit was because of decline gross profit ratio, increase in tax burden of borrowed capital by Rs.78.51lacs, and increase in personnel, administrative & selling expense by Rs.2.3 crores.

Profit Over the Years:

41

In 2004 Profit was Rs.18lacs. In 2005 Profit grew up to Rs. 82.97lacs. In 2006 galloped at Rs. 1.64 crores. In 2007 it finally reached to Rs. 1.83 crores.

Profit Over The Years

Thousands 21000 17000 13000 Profit 9000 5000 1000

2004

2005 Year

2006

2007

Sales Over The Years:

42

In 2004 Sales was Rs. 33.9 crores. In 2005 Sales became Rs. 130.4 crores. In 2006 it grew up to Rs. 146.8 crores. In 2007 it reached to Rs. 205.82 crores.

Sales
Thousands sales 2500000 2000000 1500000 1000000 500000 0 2004 2005 year 2006 2007

43

Return on Capital Employed:

It is the relationship between Earning Before Interest and Tax (EBIT) and Capital Employed. The shareholders and long-term fund providers are very concerned about the rate of return on capital employed. It measures how well the firm is using all of its assetsboth those provided by its owner and those provided by its lenders. Capital employed includes shareholders funds and long-term loan.

ROCE = (EBIT / Capital Employed) * 100

Significance:
The higher ratio shows the firms ability to use available resources to generate income.

Findings:

In 2007 ratio was 5.7%. In 2006 ratio was 7.4%

Comment:
Due to rise in administrative & other expenses by Rs.2.3crores, and depreciation by Rs.26.34lacs, the EBIT fell, and increase in capital employed by Rs.12.97crores lowered the return.

44

Return on Net Worth:

It is the ratio of net Profit After Tax (PAT) to net worth. It measures the rate of return on the resources provided by the shareholders. Net worth includes share capital and reserve and surplus (after adjusting fictitious assets).

Return on Networth = (Profit After Tax / Networth) * 100

Significance:
This ratio measures the amount of earnings for each rupee that shareholders have invested in the company. A company can increase the return of equity shareholders through the favourable use of debts.

Findings:

In 2007 Return on Net worth was 7%. In 2006 Return on Net worth was 6.3%

Comment:
Increase in net profit after tax was more than last year by Rs.19 lacs, because of increase in reserves by Rs.26.88lacs, which helped to increase production to provide more return on net worth to equity shareholders.

45

Operating Ratio:
This is the ratio between Cost of Good Sold (COGS) plus operating expenses and net sales. It measures the proportion of operating expenses per rupee of sales. It is expressed as a percentage of sales.

Operating Ratio= (COGS + operating expenses) / Net Sales*100

Significance:
A high ratio indicates a small surplus available to the business and a lower profitability and sometimes becomes a burden because of high fixed overheads.

Findings: In 2007 Operating Ratio was 98%.

In 2006 Operating Ratio was 97.1%.

Comment:
The operating expenses increased by Rs.60.66 crores, where as sales only increased by Rs.58.8 crores. This resulted an increase in operating ratio over the period.

Gearing Ratio:
46

Long-term capital of a business is provided by different group of investors (e.g., shareholders, debenture holders, etc.). Gearing is a method of comparing how much of the long-term capital of a business is provided by equity (equity shares + reserve and surplus fictitious assets) and how much is provided by fixed charge capital investors who are entitled to interest or dividend before equity shareholders can have a dividend for themselves. The gearing ratio is a measure of financial risk. Gearing ratio is important when a company wants to raise additional loan capital. If it is a high geared company, then the would-be lenders might take the view that equity shareholders should provide a fair proportion of the total capital for the business and at present they are not doing so. The would be lenders might be worried that profits are not sufficient to meet the future payment of interest. Gearing is the most crucial factor, which must be taken into account while preparing the financial plan of a company. Capital gearing is the process that determines the proportion in the various accounts of securities, which are being issued. In simple words, a company that has raises funds mostly by equity share is low geared while a company which has secured substantial proportion of its long term funds by the issue of preference shares, bonds, and debentures is highly geared.

Capital Gearing Ratio:

47

An investment ratio that compares the borrowing made by the company, with the finance contributed by the shareholders. A company with high gearing is more vulnerable to downturns in the business cycle because the company must continue to service its debt regardless of how bad sales are. Capital Turnover Ratio= (Fixed Charge Capital / Equity)*100

Ideal:
A business is low-geared if it is less than 50, neutrally geared if equal to 50 and, high-geared if it is more than 50.

Findings: In 2007 Ratio was 77%.

In 2006 Ratio was 45%.

Comment:
As a result of increase external borrowings by Rs.10.96 crores, the business became high-geared in 2007 from low-geared in 2006.

Capital Borrowings:
48

In 2004 Secured & Unsecured loans were Rs.7.83 crores. In 2005 company took further loan of Rs. 3.6 crores. In 2006 the loan amount reached to Rs.12.85 crores. In 2007 company took loan of Rs.10.96 crores, and the total loan amount reached at Rs.23.8 crores.

49

Capital borrowings
Thousands 300000 250000 200000 150000 100000 50000 0 2004 2005 year 2006 2007

borrowings

50

Earning Per Share:

Earnings Per Share (EPS) serves as an indicator of a company's profitability. It measures the after-tax earnings generated for each share of common stock. EPS does not apply to preference shareholders as they receive dividends before any dividends are made to common shareholders.

EPS = Net Income After Tax / Number of Equity Shares

Significance:
This is important only for equity shareholders, as it shows them their income per share at the end of period.

Findings:

In 2007 earning per share was Rs.1.71. In 2006 earning per share was Rs.1.05.

Comment:
Though there was fall in net profit margin, the earning per share raised by Rs.0.66. This shows that the equity holders will be more satisfied than last year.
51

Analysis of Ratios:
With the help of ratio analysis, we have come to know about the financial position off the company, the Liquidity status, Short-term solvency, and Long term solvency position by the help of ratios like Current ratio, Liquidity ratio, and Debt-equity ratio and others. Though there is variation in some ratios of present year from the ideal ones, and last year, because the company started to produce in very large quantity to meet its growing product demand. On the other hand, the price of the inputs i.e., iron ore, coal, furnace oil, which forms a major part in production of goods has gone very high in the world market, which increases the cost of production. To finance its production the company took loans of Rs.10.96 crores, from external sources for which it has to pay annual interest of about Rs.1.29 crores, which reduces the profit by a considerable amount. But the company has been able to increase its turnover by Rs.59 crores. And profit by just Rs.19 lacs, because the company didnt want to raise the price of its product to capture the market, hence it reduced the profit margin, but it can be raised in coming years. If the company go on increasing its production, and look into related financial policies, it can come off with a Great Future.

Cash Flow Analysis:

52

Cash Flow Analysis is the study of the cycle of your business' cash inflows and outflows, with the purpose of maintaining an adequate cash flow for your business, and to provide the basis for cash flow management. . "Cash flow measures real money flowing into, or out of, a company's bank account," Cash flow analysis involves examining the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable, and credit terms. By performing a cash flow analysis on these separate components, you'll be able to more easily identify cash flow problems and find ways to improve your cash flow. Cash flow analysis is a method of analyzing the financing, investing, and operating activities of a company. The primary goal of cash flow analysis is to identify, in a timely manner, cash flow problems as well as cash flow opportunities A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases to the total sales due at the end of each month. If the total unpaid purchases are greater than the total sales due, you'll need to spend more cash than you receive in the next month, indicating a potential cash flow problem. It is done with the help of Cash Flow Statement.

Cash Flow Statement:

53

A cash flow statement is a financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often annually or quarterly). The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents, and breaks the analysis down according to operating, investing, and financing activities. As an analytical tool the statement of cash flows is useful in determining the shortterm viability of a company, particularly its ability to pay bills

Purpose:
The cash flow statement is intended to

1. provide

information on a firm's liquidity and solvency and its

ability to change cash flows in future circumstances

2. provide additional information for evaluating changes in

liabilities and equity

assets,

3. improve
methods

the

comparability

of

different

firms'

operating

performance by eliminating the effects of different accounting

4. indicate the amount, timing and probability of future cash flows

Objective:
Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis to assess the

54

ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilise those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation. The Statement deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a cash flow statement which classifies cash flows during the period from operating, investing and financing activities.

Scope:
[

1. An enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented. 2. Users of an enterprise's financial statements are interested in how the enterprise generates and uses cash and cash equivalents. This is the case regardless of the nature of the enterprise's activities and irrespective of whether cash can be viewed as the product of the enterprise, as may be the case with a financial enterprise. Enterprises need cash for essentially the same reasons, however different their principal revenue-producing activities might be. They need cash to conduct their operations, to pay their obligations, and to provide returns to their investors.

55

Benefits of Cash Flow Information:

1. A cash flow statement, when used in conjunction with the other financial statements, provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. Cash flow information is useful in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different enterprises. It also enhances the comparability of the reporting of operating performance by different enterprises because it eliminates the effects of using different accounting treatments for the same transactions and events. 2. Historical cash flow information is often used as an indicator of the amount, timing and certainty of future cash flows. It is also useful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices.

56

Who Should Prepare:

The cash flow statement shall be prepared in accordance with the Accounting Standard on Cash Flow Statement - (AS-3) issued by the Institute of Chartered Accountants of India. AS-3 is mandatory for the following enterprises in respect of accounting periods commencing on or after April 1, 2004. 1. Enterprises whose equity or debt securities are listed on a recognised stock exchange in India or outside, and enterprises that are in process of issuing equity or debt securities that will be so listed as evidenced by the Board of Directors resolution in this regard. 2. Banks including co-operative banks. 3. Financial institutions. 4. Enterprises carrying on insurance business. 5. All other commercial, industrial and business enterprises whose turnover (i.e., excluding other income) for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs.50 crores or which have borrowings including public deposits exceeding Rs.10crores at any time during the accounting period. 6. Holding and subsidiary enterprises of any of the above at any time during the accounting period.

57

Definitions of Important Terms:

Cash comprises cash on hand and demand deposits with banks.

Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Cash flows are inflows and outflows of cash and cash equivalents.

Operating

activities

are

the

principal

revenue-producing

activities of the enterprise and other activities that are not investing or financing activities.

Investing activities are the acquisition and disposal of longterm assets and other investments not included in cash equivalents.

Financing activities are activities that result in changes in the size and composition of the owners capital (including preference share capital in the case of a company) and borrowings of the enterprise.

Cash and Cash Equivalents

58

1. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition. Investments in shares are excluded from cash equivalents unless they are, in substance, cash equivalents; for example, preference shares of a company acquired shortly before their specified redemption date (provided there is only an insignificant risk of failure of the company to repay the amount at maturity). 2. Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an enterprise rather than part of its operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents.

Operating Activities:
59

1. The amount of cash flows arising from operating activities is a key indicator of the extent to which the operations of the enterprise have generated sufficient cash flows to maintain the operating capability of the enterprise, pay dividends, repay loans and make new investments without recourse to external sources of financing. Information about the specific components of historical operating cash flows is useful, in conjunction with other information, in forecasting future operating cash flows. 2. Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the enterprise. Therefore, they generally result from the transactions and other events that enter into the determination of net profit or loss. Examples of cash flows from operating activities are: Cash receipts from the sale of goods and the rendering of services; Cash receipts from royalties, fees, commissions and other revenue; Cash payments to suppliers for goods and services; Cash payments to and on behalf of employees;

60

 Cash receipts and cash payments of an insurance enterprise for premiums and claims, annuities and other policy benefits; Cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities; and

3. Some transactions, such as the sale of an item of plant, may give rise to a gain or loss which is included in the determination of net profit or loss. However, the cash flows relating to such transactions are cash flows from investing activities.

4. An enterprise may hold securities and loans for dealing or trading purposes, in which case they are similar to inventory acquired specifically for resale. Therefore, cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities. Similarly, cash advances and loans made by financial enterprises are usually classified as operating activities since they relate to the main revenue-producing activity of that enterprise.

Investing Activities:

61

The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Examples of cash flows arising from investing activities are: Cash payments to acquire fixed assets (including intangibles). These payments include those relating to capitalised research and development costs and self-constructed fixed assets; Cash receipts from disposal of fixed assets (including intangibles); Cash payments to acquire shares, warrants or debt instruments of other enterprises and interests in joint ventures (other than payments for those instruments considered to be cash equivalents and those held for dealing or trading purposes); Cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interests in joint ventures (other than receipts from those instruments considered to be cash equivalents and those held for dealing or trading purposes); Cash advances and loans made to third parties (other than advances and loans made by a financial enterprise);
[

Cash receipts from the repayment of advances and loans made to third parties (other than advances and loans of a enterprise); financial

Financing Activities:

62

The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise. Examples of cash flows arising from financing activities are: Cash proceeds from issuing shares or other similar instruments; Cash proceeds from issuing debentures, loans, notes, bonds, and other short or long-term borrowings; and Cash repayments of amounts borrowed. Payment of dividend. Payment of interest.

63

Inflow of cash:
Cash flows into the business from different activities, when receipts are more than payments, receipt from sale of property and securities, from issue of shares and bonds, i.e., Operating, Investing, and Financing Activities, there is a quick look at it.

64

Outflow of Cash:
The cash flows out of the business when expenditures are more than receipts, when a property is acquired or purchased, when debs are paid, and while paying dividend. These are categorized as Operating, Investing, and Financing Activities

65

Cash Flow Statement:

Particulars
Cash Flow From Operating Activity:
Net Profit before taxation & Finance Charges Adjustment For Non-Cash Expenses Depreciation Loss on Sale of Fixed Assets Preliminary Expense Written off Adjustment for Change in Net Current Assets (Increase) / Decrease in Inventories (Increase) / Decrease in Debtors (Increase) / Decrease in Loans & Advances Increase / (Decrease) in current Liabilities Less: Tax Paid 45,048,871.23 27,421,494.00 249,136.31 14,900.00 39,656,308.34 24,787,435.51 16,629.00 14,900.00

2007

2006

(6,500,749,979.00) 20,908,362.36 (11,715,381.12) 38,992,754.17 (13,042,785.00)

(99,668,889.52) 161,939.18 (39,342,086.42) (22,013,531.69 (2,489,023.00)

Cash Flow From Operating Activity Cash Flow From Investing Activity:
Purchase of Fixed Assets Sale of Fixed Assets Capital Subsidy Received Investment in Shares Increase in Non Current Assets

42,869,852.16

98,876,318.60

(96,348,373.84) 550,000.00 (110,000.00) (86,944.00)

(45,484,459.97) 131,000.00 9,249,000.00 (55,215.00)

Cash Flow From Investing Activity Cash Flow From Financing Activity:
Payment of Interest Prior Period Adjustment Dividend Increase in Share Capital Increase / (Decrease) in Term Loan Increase / (Decrease) in Unsecured loan Increase in Cash Credit Balance

(95,995,317.84)

(36,159,674.97)

(14,350,857.05) (1,108,944.00) (15,690,000.00) 17,399,000.00 50,755,143.77 53,426,000.00 5,474,162.82

(12,334,031.26)

152,601,000.00 (3,798,750.87) (7,079,000.00) 24,900,997.00

Cash Flow From Financing Activity

Cash Flow Generated During The Year Opening balance of Cash and Cash Equivalent Closing balance of Cash and Cash Equivalent
Note: Figures in brackets represent out-flow of cash.

95,904,505.54 42,779,039.86
43,557,252.84 86,336,292.70

154,290,214.97 19,254,221.40
24,303,031.44 43,557,252.84

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Cash flow from Operating Activities:

In 2004 cash flow from operating activities was negative by Rs.11.5 lacs as there was increase in inventories, debtors, and advances to creditors. In 2005 it became positive to Rs.3.63 crores as level of stock of inventories was reduced, to control outflow of cash. In 2006 again there were huge stockings of inventories, and advance to suppliers, to increase production in coming year, made operating cash flow negative to Rs.9.89 crores. In 2007 the cash flow from operating activities reached Rs.4.29 crores.

Cash Flow O pe rating activ ity.

600000 Hundreds 400000 200000 0 cash flow -200000 -400000 -600000 -800000 -1000000 -1200000 ye a r -988763.18 -11546.23 2004 2005 2006 2007 428698.52

362818.26

Note: All figures in the above paragraph are rounded off to nearest thousand.

67

Cash flow from Investing Activities:

In 2004 the company made investment of Rs.1.91 crores. In 2005 it further purchased Fixed Assets, which increased its investment to Rs.10.14 crores, by issue of shares, and taking Term Loans. In 2006 it restricted its investment to Rs.3.62 crores. In 2007 it further purchased Fixes Assets, by taking Term Loans which raised its investment to Rs.9.6 crores.

C ash Flow Inv e sting activ ity.

1200000 Hundreds 1014599.36 1000000 800000 600000 400000 200000 0 2004 2005 ye a r 2006 2007 191244.68 361596.74 959953.17

cash flow

Note: All Figure in this chart represent out flow of cash. All figures in the above paragraph are rounded off to nearest thousand.

68

Cash flow from Financing Activities:

In 2004 cash in-flow from financing activities was Rs.2.2 crores. In 2005 it reached to Rs.7.44 crores. In 2006 company raised additional capital, which raised its inflow to Rs.15.43 crores. In 2007 as dividends were declared it reduced the inflow of financing activity to Rs.9.6 crores.

Cash Flow from financing activ ity.

1800000 Hundreds 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 2004 2005 ye a r 2006 2007 220508.68 743653.14 1542902.14 959045.05

Note: All Figure in this chart represent in-flow of cash. All figures in the above paragraph are rounded off to nearest thousand.

cash flow

69

Net Cash Flow Generated:

In 2004 net Cash In-flow was Rs.17.71 lacs. In 2005 in reached to Rs.91.87 lacs. In 2006 in spite of huge Operating deficit of Rs.9.89 crores, it showed a positive balance of Rs.1.93 crores. In 2007 net cash In-flow reached to Rs 4.28 crores.

Net Cash Flow Generated.

Hundreds 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 2004 2005 year 2006 2007 17717.77 91872.04 192542.21 427790.39

cash flow

Note: All figures in this chart represent net in-flow of cash. All figures in the above paragraph are rounded off to nearest thousand.

70

Analysis of Flow of Cash:

As there is constant increase in scale of production, the cash flow from operating activity is changing from one year to another. As more stock is accumulated for increasing production, more advance in made to suppliers; the more negative is the cash flow from operating activities in that year but it became positive in the next year. The company is constantly making investment in fixed assets to increase output, investment in shares of other companies, and other activities. It is a good sign of future growth. The company is able to finance it operations by getting finance form various financial institutions, by way of subsidy from government, and by issuing shares of the company. The company is able to arrange finance from different sources as and when required at good terms. There in constantly an upward trend in the net cash flow over the years, in spite of huge negative flow in operating activities in some of the years. It indicates than the company is able to cope up with different situations in a good manner in the proper span of time. This shows its ability to grow fruitfully in the coming future with proper decisions at the required time.

71

Conclusion:
Financial reports contain a lot of information. The main objective of financial analysis is to sort through that information to find useful and relevant data in analyzing a business. Some ratios help analyze the cooperatives financial performance and cash flow analysis. Managers and creditors should find these findings helpful in appraising the financial strength of the cooperative. There is a lot to be said for valuing a company, it is no easy task. I hope that I have helped to shed some light on this topic After doing the Ratio and Cash-flow Analysis of the company I came to the conclusion that, since the company is still in its growing stage so there was many ups and downs in the ratios and flow of cash. The reason of variation in some ratios from their normal set standard is also same. We have seen in spite of deficit in operating cash flow, the company is able keep a growing trend to its net in-flow of cash which in of good sign. The financial managers have made good decisions as and when required to maintain a proper balance in different financial matters. If this increasing profit and cash in-flow trends continue over time then the company can fulfill its vision well ahead of time.

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