59536823 Final Project

.

CHAPTER 1

INTRODUCTION

IMK-ADOOR Page 1

.

INTRODUCTION

Apart from the economics and accounting, finance also draws for its day to day decisions on

supportive disciplines such as marketing, production and quantitative methods. Financial

managers should consider the impact of new product development and promotion plans made in

marketing area since their plans will require capital outlays and have impact on the projected

cash flows. Similarly, changes in the production process may necessitate capital expenditure

which the financial managers must evaluate and finance. And finally the tools of analysis

developed in the quantitative method area are helpful in analyzing complex financial

management problems.

A successful sales program is necessary for earning profits by any business enterprise. Sales do

not convert into cash instantly; there is invariably a time lag between the sale of goods and the

receipt of ash. There is, therefore a need for working capital in the form of current assets to deal

with the problem arising out of the lack of immediate realization of cash against the goods sold.

Therefore, sufficient working capital is necessary to sustain sales activity.

Ratios are relative figures reflecting the relationship between variables. They enable to draw

conclusion regarding financial operations. The use of ratios, as a tool of financial analysis,

involves their comparison, for a single ratio, like absolute figures, fails to reveal the true

position. Trend ratios involve a comparison of the ratio of a firm over time, that is, present ratio

is compared with past ratio for the same firm. Trend ratio indicates the direction of change in the

performance- improvement, deterioration or constancy- over the year. Inter firm comparison

involving comparison of the ratios of a firm with those of others in the same line of business or

for the industry as a whole reflects its performance in relation to its competitors.

Saint Gobain SEFPRO group today under a fully integrated worldwide commercial network

and manufacturing plants dedicated to special Refractories for the glass industry. Fused cast

materials are produced by SEPR France SEPR – Italy, SEPR –USA, SEPR-China, and SEPR-

India. It was made up of melted clay and denser the bonded refractors it also had high

temperature conductivity and longer life combined to bonded refractors.

IMK-ADOOR Page 2

.

OBJECTIVES OF THE STUDY

To evaluate past financial performance.

To measure profitability and solvency of Saint-Gobain SEFPRO SEPR Refractories India

Ltd.

To measure the liquidity position of Saint-GobainSEFPRO SEPR Refractories India Ltd.

To determine its progress over five years.

To find out the financial strength and weakness of the firm.

IMPORTANCE OF STUDY

The use of financial analysis is not confined to the financial managers. There are different parties

interested in the ratio analysis to know the financial position of a firm for different purposes.

Using financial analysis one can measure the financial condition of a firm and can point out

whether the condition is strong, good or poor. Conclusions can also be drawn on whether

performance of the firm is improving or deteriorating. It helps the managers in decision making,

financial forecasting and planning, coordinating, controlling the business and also to

communicate the financial position in a more easy and understandable manner.

SCOPE OF THE STUDY

The study covers a period of 5 years from 2005-06 to 2009-10. The study involves the purpose

of analyzing and interpreting the financial statements of The Saint-Gobain SEFPRO SEPR

Refractories India Ltd .with the help of ratios. Ratios are calculated with the available

information and only relevant ratios are calculated, analyzed and interpreted. The 5 years period

is considered quite adequate for analysis. Since the main tool used in the study is ratio analysis,

the predictive power of financial ratios relies on analyst’s perception, which indicates subjective

nature of the study. But the whole hearted co operation from the staff of Saint-Gobain SEPR

Refractories India Ltd and the data provided by them helped to make the study fruitful to a great

extent.

IMK-ADOOR Page 3

.

RESEARCH METHODOLOGY

Research Design

The research design used here is descriptive one in nature .

Sources Of Data

Data required for the research methodology has been collected from two sources. The source of

data collection is

Primary Data: This source of data used for the study is obtained from managers, officers &

supervisors of the finance & accounts department.

Secondary Data: The secondary source of data obtained from the published annual reports,

company handouts & other documents of the company. This was to get clarification and for the

information to gain insight to the nature of the problem studied.

Tools Used

Tools used for financial analysis are Ratio Analysis, Comparative Balance sheet and Trend

Analysis

LIMITATION OF THE STUDY

The researcher has to encounter different constraints in completing the study:

First & foremost among them was time constraints.

The period of study was not fully sufficient to make an in depth & in detailed study of all

activities process, procedures & documents before arriving at the conclusion based on the

study.

The study is mainly based on the available published information; it is bound to suffer from

certain limitation, it has not been possible to have an in depth study due to the non revealing

IMK-ADOOR Page 4

.

nature of certain facts by the company executives on the context that it would adversely

affect the interest of the organization.

The ratios are calculated on past financial data. So it is difficult to consider probable

happening in the future.

It is only a comparative study, other factors like market conditions, management policies

etc., may affect the future operations.

Non financial changes are important for the business, which is not mentioned in the

financial statement.

Tools used for the study is only indicators.

PERIOD OF THE STUDY

The study was conducted based on the financial statements of the last five years from Dec-2005

to March 2010.

IMK-ADOOR Page 5

.

CHAPTER SCHEME

Chapter 1 Introduction

This chapter contains a general introduction about the topic, the objectives, importance and

scope of the study, Research Methodology and finally the limitations of the study.

Chapter 2 Industry Profile

This chapter gives a brief profile of the Refractories Industry

Chapter 3 Company Profile

This chapter deals with profile of Saint-Gobain SEFPRO SEPR Refractories India Ltd

Chapter 4 Theoretical Framework

This Chapter provides a theoretical base of the project work.

Chapter 5 Analysis and Interpretation

This chapter involves the analysis of data and interpretation of ratios. The ratios obtained have

been pictorially represented by way of charts to have better clarity.

Chapter 6 Findings, Suggestions and Conclusion

This chapter involves the findings of the study, recommendations after analyzing the findings

and finally conclusion. Bibliography and Appendix follows it.

IMK-ADOOR Page 6

.

CHAPTER 2

INDUSTRY PROFILE

IMK-ADOOR Page 7

.

INDUSTRY PROFILE

Refractories are the products to resist the corrosive and erosive action of hot glasses, liquid

and solid at high temperature in various kilns and erosive action of hot glasses, liquid and

solid at high temperature in various kilns and furnaces. These are made mainly from non-

metallic minerals. The refractories are highly demanded in the glass industry.

In older days the bonded refractories are used in the furnaces are not able to resist corrosive

action of melted glasses. Therefore there was need to develop an alternative refractory to

resist the temperature and corrosion.

In 1926 the first fused cast refractory was brought to us from Germany. It was made up of

melted clay and denser bonded refractories.

Since then fused technology has under gone tremendous changes. Today different types of

refractors are available to meet different types of operating conditions.

The production of refractories started in India in the form of fire clay bricks in 187. Today a

wide variety of refractory products are manufactured tailor made to suit the requirements of

the application in various sectors which include iron & steel, cement, glass, non-ferrous

metal, petrochemical, fertilizer, thermal power plant etc.

2.1 PRODUCTION SCENARIO

The installed capacity for refractory production in India is 1.65 million tons & today runs at

62.37% of the total capacity. The production was a mere 47.25% of the installed capacity in

2002-03. Refractory production in the country has been showing a growth of 16% per annum

from 2002-03 till now. This is to the stupendous growth in steel production for the few years.

Refractories are the products to resist the corrosive and erosive action of hot glasses, liquid

and solid at high temperature in various kilns and erosive action of hot glasses, liquid and

solid at high temperature in various kilns and furnaces. These are made mainly from non-

metallic minerals. The refractories are highly demanded in the glass industry.

Refractories must be chosen according to the conditions they will face. Refractory

materials are used extensively in the metal industries, along with glass melting & other heat

IMK-ADOOR Page 8

.

treatment operations. Refractory metals are a class of metals that are extraordinarily

resistant to heat & wear. They are said to be poorly resistant to oxidation & corrosive. They

are used in lighting, tools, lubricants, nuclear reaction control rods, as catalysts,& for their

chemical or electrical properties.

2.2 FUTURE OUTLOOK

Refractories cost about 8%-10% of the total cost of steel production. There is greater

possibility in reducing the specific consumption of refractories by 9 kg/T in steel industry,

0.4Kg/T in cement industry in the coming 3 to 4 years. Refractories still have many areas

in various sectors to enter in & it would be the monolithic & special products that would

dominate the production in future.

2.3 MILESTONES IN REFRACTORIES DEVELOPMENT IN INDIA

1874: Fire clay bricks

1941: Magnetite bricks

1949: Coke oven silica bricks

1955: Sillimanite blocks for glass industries.

1960: Bauxite based high alumina bricks for steel & cement

industries.

1977: AZS electro cast blocks

1983: Magnesia carbon refractories

1985: Ceramic fibers

1986: Bubble alumina based insulating blocks

1990: Direct bonded magnesia-chrome bricks

1990: Slide gate refractories

1991: Dense silica shapes for blast furnace stoves

IMK-ADOOR Page 9

.

1993: Alumina carbon continuous casting refractories

1993: Dry basic ramming mass for furnaces

1994: Ultra low cement cartable/monolithic

1995: Alumina carbon silicon carbide blast furnace through mass

1998: Magnesia alumina zircon bricks for cement rotary kilns

IMK-ADOOR Page 10

.

CHAPTER 3

COMPANY PROFILE

IMK-ADOOR Page 11

.

3.1 SAINT-GOBAIN – GROUP

The origin of the Saint-Gobain groups traces back to 1665 in France with a setting of the

manufacture Royal des Glaces de mirrors (Royal Mirror Glass Works) by Jean Baptist co Codert,

King Louis XIV’s comptroller of finance at Saint-Gobain in France.

Since then it has been a long journey from producing glass for the historic hall of mirrors at the

place of what Saint-Gobain today.Over the years the group has witnessed and immense evolution

it forayed into diverse business broadened its international presence and continued to build on

and leverage its inherent strengths.

Today the group features as one of the world’s leading Industrial Corporation ranged at 116 in

the fortune Global 500 list (2007). The groups diversions, strength and reach is reflected in its

strong international presence, with over 1400 consolidated companies in countries, sales

exceeding 41 billion Euros and a committed team for over 207000 employees worldwide. The

company has manufacturing facilities in US, France and India.As a procedure, processor and

distributor a high technology materials (glass, ceramics, plastics, ductile, iron etc), Saint-Gobain

transforms raw materials into advanced products for use in our daily lives. The groups business

comprises 5 sectors, namely building distribution, high performance materials, flat glass,

packaging and other refractories.

The Saint-Gobain groups invest about 345 million Euros in R & D each year. A team of over

3000 individuals work relentlessly in the groups 16 research centers and development units.

GROUP COMPANIES

Saint-Gobain SEFPRO

Saint-Gobain Sekurit Ltd.

Grindwell Norton

Saint-Gobain Weber

Saint-Gobain Flat Glass Ltd.

IMK-ADOOR Page 12

.

3.2 MILESTONES

Year Event

1688 First glass casting

1692 Factory opens at Saint-Gobain (Aisne, France)

1853 First Saint-Gobain site outside France (Mannheim, Germany)

1856 Pont-à-Mousson founded

1880 Exports from Pont-à-Mousson developed

1889 Saint-Gobain sets up in Italy (Pisa) followed by other sites in Belgium

(1900) and Spain (1904)

1918 Saint-Gobain and Pont-à-Mousson begin to implement diversification

policies

From 1920 Glass production using continuous casting processes developed

1930 The use of centrifugation process for producing cast iron piping adopted by

Pont-à-Mousson

1946 Ductile cast iron replaces grey cast iron for piping manufacturex

From 1950 Saint-Gobain and Pont-à-Mousson begin to develop internationally

1957 TEL industrial glasswool production process begins to be used on an

industrial scale

1962 Saint-Gobain adopts Float Glass (first factory built for this purpose)

1966 Shareholding acquired in CertainTeed

IMK-ADOOR Page 13

.

1970 Saint-Gobain and Pont-à-Mousson merge.

Organisation reflecting the Group’s refocusing and complementary offering

on the building, automotive and service markets

1974 The Group becomes established in the USA

1976 Majority holding in CertainTeed acquired

1982 The Group is nationalised

1986 Saint-Gobain is privatised. Group portfolio reconfiguration begins

From 1986 Insulation sector expands internationally

1988 First acquisitions in the ceramics sector

1990 Friendly takeover of Norton

1995 Ball & Foster in the USA acquired

1996 Acquisition of the Poliet Group (Point P, Lapeyre, La Plateforme, K par K,

Weber)

From 1998 Distribution developed via its brands in Europe (acquisition of Meyer, Raab

Karcher, Jewson, Dahl) and worldwide (La Plateforme)

2005 Takeover bid for BPB

2007 Acquisition of Maxit

IMK-ADOOR Page 14

Table 3.1

.

MARKETS

77% of sales on the habitat and construction markets.

Saint-Gobain has now clearly defined itself with regard to the habitat and construction markets,

in the broadest sense, having stated its new ambition to become “world leader on the habitat and

construction markets, providing innovative solutions to the key challenges of our age: growth,

energy and the environment". The immense potential of this sector certainly offers Saint-Gobain

opportunities for developing its different activities.

3.3 SAINT-GOBAIN IN INDIA

The Saint-Gobain group touches Indian shores in 1996 making its presence felt with the

acquisition of a majority holding in Grind Well Norton. The group first subsidiary in India, the

group has come a long way since with substantial investments in India. Today the group has 9

companies in India offering a variety of engineered materials. Each of these companies is a

forerunner standing tall amongst the leaders in its respective field.

3.4 SAINT-GOBAIN SEFPRO

Saint-Gobain SEFPRO is the only refractory group worldwide fully dedicated to and streamlined

for offering top-of-the-line refractory solutions specifically to the Glass Indutries.

With its 10 manufacturing sites around the world, Saint-Gobain SEFPRO offers total reactivity

to the Glassmakers needs, combining the power of a global player and its large available

resources with the proximity of local partners.

Saint-Gobain SEFPRO also has the largest research centres in the world specialising in

refractories and their interaction with all types of glasses, and has been leading the industry for

decades in the development of new materials.

3.5 HISTORY MILESTONES

1929: Corning and Saint-Gobain set-up in Modane, France, "L' ELECTRO-

REFRACTAIRE" for the production of fused cast refractories for glass furnaces.

1947: A new production site is selected in Le Pontet, near Avignon, France.

IMK-ADOOR Page 15

.

1971: Acquisition of REFRADIGE (Italia) (now SEPR ITALIA S.p.A). This fused cast

materials manufacturing facility was established in 1960, under the name of

"SICEDISON"

1973: "L' ELECTRO-REFRACTAIRE" becomes S.E.P.R. (Société Européenne de

Produits Réfractaires).

1987: Integration of CORHART REFRACTORIES (USA).

1991: Signature of a Joint Venture agreement for the production of fused cast refractories

in China (ZPER Co. Ltd.).

1996: Integration of SAVOIE REFRACTAIRES (France). SAVOIE, established in 1898,

is specialized in manufacturing bonded materials for the Glass Industry.

2001: ZPER is renamed "Beijing SEPR Refractories." Inauguration of a new plant in

Changping (Beijing)

2002: Integration of CUMI (India) created in 1977, now SEPR Refractories India Ltd.

2003: Toshiba Monofrax, now Saint-Gobain TM K.K, joins the Saint-Gobain SEFPRO

family.

2006: Start of Linyi Saint-Gobain Refractory (JV) China.

3.6 SEPR REFRACTORIES INDIA LIMITED

SEPR Refractories India Limited is a Wholly Owned Subsidiary of Saint-Gobain SEFPRO

who is one of the world’s largest manufacturers of fused cast refractories for glass furnaces.

SEPR India came into being in 2002 by acquiring the fused cast business from Carborundum

Universal (CUMI), PRODUCTS A fused cast refractory is a high–density material obtained by

melting a mixture of the purest oxides and casting them into moulds to create the required

shapes. Fused cast refractory blocks are preferred by the glass industry mainly because they offer

good glass corrosion resistance at high temperatures with no glass defects.

Apart from fused cast refractories, we also manufacture Wear Resistant fused cast materials,

sintered refractories and monolithics. In view of our ability to manufacture products with

IMK-ADOOR Page 16

.

Internationally acclaimed standards, we today are preferred suppliers to leading Glass

manufacturers and designers like SGG, Fives Stein, SORG, HORN, TECO, NEG etc. We are

proud to have a satisfied clientele which spreads over South East Asia, Russia, Europe, America,

Africa etc.

PLANT

The Company’s manufacturing facility is located at Palakkad in Kerala. The plant is installed in

a total land area of 22 acres The company has completed the major Expansion plan in Jun’09 .

With this the company has an annual production capacity of 10000 MT of Fused Cast

Refractories. The company achieved a cumulative aggregate growth rate of 30% in Annual

Sales, while the production capacities increased by 3 times since the year of inception,i.e.2002.

QUALITY ASSURANCE

Continuous Quality Improvement and close customer interaction have enabled us to consolidate

our position in the Glass industry. We strictly adhere to quality control measures in every stage

of production process. We are certified for ISO 9001, ISO 14001 and OHSAS 18001. The

company has highly talented, committed professionals & skilled labour for putting in best

practices.

IMK-ADOOR Page 17

.

CHAPTER 4

THEORETICAL PERSPECTIVE

IMK-ADOOR Page 18

.

INTRODUCTION

Accounting is known as the language of business as it conveys the financial story of the business

concerns. Accounting is the process of identifying, measuring and communicating economic

information to permit judgments and decisions by users of the informational. It involves

collecting, summarizing, analyzing and reporting in monetary terms the information about an

organization, the end products of accounting translations are financial statements.

4.1 FINANCIAL STATEMENTS

Financial statements 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, as in the case of an income statement.

Thus the term financial statements include two basic statements:

The Income Statements

The Balance Sheet

INCOME STATEMENT/PROFIT AND LOSS ACCOUNT

It explains what has happened to a business as a result operations between two balance sheet

dates. For this purpose, it matches the revenue and costs incurred in the process of earning

revenues and show the net profit earned or loss suffered during a particular period.

BALANCE SHEET

Balance sheet provides a snapshot of financial position of the firm at the close of the firm’s

accounting period. It contains information about recourses and obligations of a business entity

and about its owners interests in the business at a particular point of time.

NATURE OF FINANCIAL STATEMENTS

Financial statements are only the summary of the transactions carried out in a given period of

time. Financial statements exhibit a combination of recorded facts, accounting conventions and

personal judgments and the judgments and conventions applied affect them materially.

The nature of financial statements is follows:

IMK-ADOOR Page 19

.

Financial statements are recorded facts

Financial statements are prepared in accordance with the transactions recorded as per the

accepted principles of accountancy.

Financial statements also reflect the judgment made by the accounts at the time of

finalizing these statements.

IMPORTANCE OF FINANCIAL STATEMENTS

Financial statements contain a lot of useful and valuable information regarding

profitability financial position and future prospects of the firm. These statements are mirror,

which reflect the financial position and operating strengths and weakness. The utility of financial

statements to different parties may be summarized as follows.

Management depends heavily on the financial and managerial reports in order to

formulate company policies, establish organizational objectives, and evaluate company’s

performance and its employees and to make other related decisions.

Owners require information periodically on how investment is performing and whether or

not their continue investment is justified.

Investors in business learn a great deal about the company from its financial statements.

Employees and trade unions make frequent use of available information in financial

statements to demand for wage rise, better working conditions, bonus etc.

Central, state and local governments are interested in analyzing financial statements to

know the earnings for framing their fiscal and taxation policies.

Trade Associations analyze financial statements and make available the essence by way

of reports to their members. Based on these statements they can demand subsidies or

concessions from government

The financial statements enable the stock brokers to judge the financial soundness of the

business concerns and price fixation. The stock exchange protects the corporate investors

by continuously monitoring the companies through financial statements.

IMK-ADOOR Page 20

.

OBJECTIVES OF FINANCIAL STATEMENTS

The main objective of financial statement is to know the profit or loss for a particular period and

to find out the financial position on a particular date. The other important objectives are:

To provide reliable financial information about economic resources and obligations of the

business enterprise.

To provide reliable information about changes in net resources of an enterprise that result

from the profit directed and other activities.

To provide financial information that assists in estimating the earning potential of the

enterprise.

To disclose, to the extend possible, other information related to the financial statement that is

relevant to statement users.

To assist in decision-making

The preparations of financial statements are not the end aim. The statements become a tool for

the future planning and forecasting. The various information given in the statements are much

helpful to the management to take various steps of managerial decisions. The major policies of

the company are designed only on the basis of information available from the financial

statements.

LIMITATIONS OF FINANCIAL STATEMENT

Financial statements do not present a final picture of the business. They suffer from the

following limitations:

Some items in the financial statements are based on personal judgment of the

accountant. This will affect the validity of financial statements.

Balance sheet does not reveal the true picture of the business. In the Balance Sheet, assets

are shown at original costs. Replacement cost or realizable value is ignored.

Financial statements ignore the change in price level.

IMK-ADOOR Page 21

.

These statements are accounting for fast rather than accounting for future. Hence, they

are of little value to management in taking decisions.

Non-monetary factors such as creditworthiness, efficiency of management etc influence

financial statements. But these factors are no considered while preparing financial

statements.

These statements are sometimes prepared according to the needs of the situation or the

whims of management. Window dressing may also be restored to in order to show better

financial position of a concern than its real position.

4.2 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS

Analysis and interpretation of financial statements refers to the process of determining the

significant operating and financial characteristics from the accounting data with a view to getting

an insight into the activities of an enterprise. Myers defines “financial statement analysis is

largely a study of relationship among the various financial factors in a business as disclosed by a

single set of statements, and a study of the trend of these factors as shown in a series of

statements”. By establishing a strategic relationship between the items of a balance sheet and

income statement and other operative data, the financial analysis explains the meaning and

significance of such items.

The terms ‘analysis’ and ‘interpretation’ are complimentary to each other, though sometimes

they are used distinctively. While analysis is used to mean the simplification of data by

methodical classification of data given in the financial statements, the term interpretation means

explaining the meaning and significance of the data so simplified. However, analysis is useless

without interpretation, and interpretation becomes difficult without analysis. Hence, ass the

objective of analysis is to study the relationship among the various items of financial statements

by interpretation, many to cover both analysis and interpretation together use it.

OBJECTIVE OF FINANCIAL ANALYSIS

Different parties are interested in the financial statements for different purposes and look at them

from different angles. For example, the debenture holders analyze the statements in order to

ascertain the ability of companies to make regular periodical interest payments and final

payments of principal amount on maturity. The prospective shareholders would like to know

IMK-ADOOR Page 22

.

whether the business is profitable and is progressing on sound lines. Above all, the management

is interested in the operational efficiency as well as the financial position of the business. Hence,

the main objective of financial analysis is to make a detailed study about the cause and effect of

the profitability and financial condition of the firm.

TYPES OF FINANCIAL ANALYSIS

Financial analysis may be classified into different categories depending upon (1) the materials

used, and (2) the method of operation followed in the analysis. Based on the material used or

people interested in the analysis, it may be classified as external vs. internal analysis.

External analysis

People outside the firm do external analysis in the matter of financial statement analysis,

investors, credit agencies, government agencies, shareholders, etc., are outsiders/external parties

to the firm. An external analyst usually has only the published information to rely upon. His

position has been improved in recent times due to increased government regulations requiring

business concerns to provides detailed information to the public through audited account.

Internal analysis

Analysis for management purposes is the internal type of analysis. It is done by the company’s

finance and accounting departments and is more detailed than external analysis. Executives and

employees of the organization also conduct it. Officers appointed by the governmental or court

agencies under regulatory and other jurisdictional powers vested in them over the business also

conduct the analysis.

Based on the methods of analysis, it may be classified as horizontal vs. vertical analysis.

Horizontal analysis: It refers to the comparison of the trend of each item in the financial

statement over a period of years, or that of companies. The figures for this type of analysis are

presented horizontally over a number of columns. Such a column represents a year or a

company. This type of analysis is also called as Dynamic analysis as it is based on data from

year to year, rather than on data of any one year.

IMK-ADOOR Page 23

.

Vertical analysis: It is also called as Static analysis. In vertical analysis the figures relating to a

financial statement are presented vertically, i.e., a figure from a year’s statement is compared

with a base selected from the same statement. This type of analysis is mainly used to study

through ratios the quantitative relationship of various items in the financial statement on a

particular data, or for one accounting period. It is useful to understand the performance of several

companies in the same group, or many divisions or departments in the same company. However

this type of analysis is not very conducive to a proper analysis of a company’s financial position,

for it depends on the data for one time period. In order to make it more effective, it could be

conducted both vertically as well as horizontally.

4.3 COMPARATIVE FINANCIAL STATEMENTS

Comparative financial statements refer to the statements of financial position of a business,

which are prepared in such a way as to provide a time perspective to the various elements

embodied in the financial statements. In these statements figures are placed side by side for two

or more periods in order to facilitate comparison among two or more firms that belong to the

same industry. Comparison may be regarding to profitability and financial soundness.

4.4 TREND PERCENTAGES

Trend analysis refers to the comparison of past data over a period of time with that of a base

year. Under this method, percentage relationship that each statement item bears to the same item

in the base year is calculated. Any year i.e., earliest year involved in comparison, or the latest

year, or any intervening year, may be taken as the base year. As the purpose of this analysis is to

highlight some important changes, the trend calculated only for some important items that

can be connected with each other. The concerned item in the base year is taken to be equal to as

100 and then based on this, trend percentage for the curresponding items in other years are

calculated. This method is a horizontal type of analysis of financial statements. The trend

percentage are shown in comparative financial statements.

Trend analysis is a useful tool for the management since it reduces large amount of absolute data

in to a simple and easily readable form. By looking at the trend in a particular ratio one can see

whether the ratio is increasing or decreasing or remaining constant. From this a problem is

unearthed and good management is observed.

IMK-ADOOR Page 24

.

4.5 RATIO ANALYSIS

The term ‘ratio’ simply means one number expressed in terms of another. It describes in

mathematical terms the quantitative relationship that exists between two numbers. The term

‘accounting ratio’, j. batty points out, is used to describe significant relationships between figures

shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any

other part of the accounting organization. Ratio analysis, simply defined, refers to the analysis

and interpretation of financial statements through ratios. Nowadays it is used by all business and

industrial concerns in their financial analysis. Ratios are considered to be the best guides for the

efficient execution of basic managerial functions like planning, forecasting and control, etc.

Ratios are invaluable aids to management and others who are interested in the analysis and

interpretation of financial statements. Absolute figures may be misleading unless compared, one

with another. Ratios provide the means of showing the relationship that exists between figures.

Though there is no special magic in ratio analysis, many prefer to base conclusions on ratios as

they find them highly useful for making judgments more easily. However, the numerical

relationships of the kind expressed by ratio analysis are not an end in themselves but are a means

for understanding the financial position of a business. Generally, simple ratios or ratios compiled

from a single year’s financial statements of a business concern may not serve the real purpose.

Hence, ratios are to be worked out from the financial statements of a number of years.

Ratios, by themselves, are meaningless. They derive their status partly from the injenuity and

experience of the analyst who uses the available data in systematic manner. Besides, inorder to

reach valid conclusions, ratios have to be compared with some standards that are established

with a view to present the financial position of a business under review. However it should be

borne in mind that after computing the ratios one cannot categorically say whether a particular

ratio is good or bad as the conclusions may vary from business to business a single ideal ratio

cannot be applied for all types of business. A complete record of ratios employed is advisable;

and explanations of each, and actual rations year by year should be included. The record may be

treated as apart of an account manual or a special ratio register may be maintained.

IMK-ADOOR Page 25

.

USES OR ADVANTAGES OF RATIO ANALYSIS

Simplification of mass of accounting data

Ratios enable the mass of accounting data to be summarized and simplified. Beside, they provide

the means of showing the interrelationship that exist between various segments of business, as

revealed through accounting statements, and thereby prevent distortions that may result from the

study of absolute figure.

An invaluable aid to management

Ratio analysis helps management in the discharge of its basic functions such as planning,

forecasting, control, etc. The trend ratios may be useful for predicting likely events in the future.

The plans made can be ‘signposted’ by accounting ratios and thereby became an integral part of

the standard costing and budgetary control system.

Facilitates better co ordination and control

Ideal ratios can be established and the relationship between primary ratios may be used to

establish the desire coordination. Ratios may also be used for control of performance as well as

control of costs. They are an effective means of communication and play vital role in informing

the position of and progress made by the business concern to the owners or other parties.

A tool to assess important characteristics of business

Ratio analysis is an effective instrument to assess important characteristics of business like

liquidity, solvency, profitability etc.. a study on this aspects may enable to draw conclusions

relating to the financial requirements and capabilities of business concerns.

An effective tool of analysis for intra-firm and inter-firm comparisons

Ratio may also be used as measures of efficiency. It is the main tools of analysis for inter- firm

and intra- firm comparisons. By comparing the ratios of different firms one may the identify

IMK-ADOOR Page 26

.

factors associated with successful and unsuccessful firm or strong and weak firms or over valued

and undervalued firms.

UTILITY OF RATIO ANALYSIS

The utility of ratio analysis may be explained under the following heads:

Utility to management:

Ratio analysis helps the management in (a) formulating the policies, (b)forecasting and planning

(c) decision making (d) knowing the trends of business (e) measuring efficiency (f)

communicating and (g) controlling.

Utility to shareholders and investors:

An investors would normally assess the financial position of a business before they invests the

money in it. He is interested in the safety, security and profitability of his investment.

Accounting ratios help the prospective investors in selecting best companies to invest their funds.

Ratios enable the shareholders to evaluate the performance and future prospectus of the

company. On the basis of some ratios, they are able to calculate the price of their shares.

Utility to creditors

The creditors or suppliers are those who supply goods to the firm on credit basis. They are

interested in the liquidity position or short term financial position, they use liquidity ratios.

Utility to employees:

The employees are interested in the profitability of the company. Their wages, fringe benefits,

working conditions etc. are related to the profits earned by the company. They want to ascertain

the profitability for demanding age increase and other benefits. For understanding the

profitability of the company, profitability ratios come to their help.

Utility to government:

IMK-ADOOR Page 27

.

The government uses ratio analysis for studying the cost structure of the industries. On the basis

of this study, the government can formulate various policies. It can implement the price control

measures to protect interest of customers.

In short, ratio analysis helps to judge operational efficiency, liquidity, profitability, solvency and

growth potential of a firm.

LIMITATIONS OF RATIO ANALYSIS

Limitations of financial statements: Ratios are mainly calculated from the information

recorded in the financial statements. As financial statements suffer from a number of limitations,

such limitations may affect the quality of ratio analysis. For example, the financial statements do

not reveal non-financial changes though important for the business. Hence, the ratio analysis

may fail to serve its purpose fully.

No fixed standards: Ratios gain significance only when they are compared with other ratios or

standards. But it is very difficult to lay down fixed standard for ideal ratios. Also ratios share

with statistical concepts all the limitations of the latter.

Qualitative factors are ignored: ratios are tools of quantitative analysis only and normal

qualitative factors that may generally influence conclusions derived are ignored while computing

ratios. For example, a high current ratio may not necessarily mean sound liquid position when

current assets include a large inventory consisting of mostly obsolete items. Hence, it is very

difficult to generalize whether a particular ratio is ‘good’ or ‘bad’.

Lack of standard formulae: There are no standard formulae for working out ratios and it makes

comparison very difficult. They are worked out on the basis of different items in different

industries. In addition, the number of ratios is so large that the task of selecting appropriate ratios

for different units becomes very difficult. Ratios also fail to indicate clearly the point where the

error lies.

It is no substitute for personal judgment: Ratio analysis is only a beginning and gives just a

fraction of information needed for decision-making. It is just an aid and cannot replace thinking

and personal judgment employed in the decision-making process.

IMK-ADOOR Page 28

.

Problems of price level changes: Ratios fail to reflect the price level changes as they are based

on historical data. Hence, they may give misleading results when inflationary conditions are

ignored. Comparison of two firms set up in different years through ratio analysis may not be

meaningful, since the values of assets and liabilities of the two companies may not be

comparable.

Ratios alone are not adequate: Ratios computed from historical data are used for predicting

and projecting the likely events in the future. Such ratios may provide only a glimpse of a firm’s

past performance, but the forecast for the future may not be correct since several other factors

like management policies, economic and market conditions, etc., may induce future operations.

It may be concluded that ratio analysis, if not done properly or done mechanically, would be both

misleading and dangerous. It is an aid to management to take correct decisions, but as a

mechanical substitute for personal judgment and thinking, it would be worse than useless.

CLASSIFICATION OF RATIOS

In view of the various users of ratios, they are classified in to four important categories.

Liquidity Ratios

Activity Ratios

Leverage Ratios

Profitability Ratios

LIQUIDITY/ SHORT TERM SOLVENCY RATIOS

Liquidity ratio measures the ability to fulfil short- term commitments with liquid assets. These

ratios compare assets that can be converted in to cash quickly to fund short term obligation the

important liquidity ratios are:

IMK-ADOOR Page 29

.

a. Current Ratio

The current ratio is the ratio of current assets to current liabilities. It is calculated by dividing

current assets by current liabilities. The current ratio of a firm measures its short term solvency,

which is the firm’s ability to meet short term obligations. The higher the current ratio, the larger

is the amount of rupees available per rupee of current liability, the more is the firm’s ability to

meet current obligations and the greater is the safety of funds of short term creditors. Thus,

current ratio, in a way, is a measure of margin of safety to the creditors.

Current ratio = Current assets / Current liabilities

b. Quick ratio / acid test ratio

The acid test ratio is the ratio between quick assets and current liabilities and is calculated by

dividing the quick assets by the current liabilities. Acid test ratio is a measure of liquidity

calculated by dividing, current assets minus inventory and prepaid expenses by current liabilities.

Quick ratio = Quick asset / Current liabilities

c. Cash ratio

Cash is the most liquid asset. A financial analyst may examine cash ratio and its equivalent to

current liabilities. Trade investment or marketable securities are equivalent of cash. Therefore,

they may be included in the computation of cash ratio.

Cash ratio = Cash + marketable securities / Current liabilities

The absolute liquid asset includes cash and near cash assets like the cash in bank and at hand and

also the readily marketable securities.

d. Inventory to Working Capital Ratio

Inventory to Working Capital Ratio = (Inventory / Working Capital) X 100

Inventory Includes opening stock, work in progress, finished goods and semi finished good.

Working capital is the excess of current Assets over current liabilities.

IMK-ADOOR Page 30

.

ACTIVITY/TURNOVER RATIO

Funds of creditors and owners are invested in various assets to generate sales and there by

profits. The better management of assets means the larger the amount of sales. Activity ratios are

employed to evaluate the efficiency with which the firm manages and utilizes assets. These ratios

are also called turnover ratios because they indicate the speed with which assets are being

converted or turnover ratios. Important activity ratios are:

a. Working capital Turnover Ratio

It is the relation between sales and working capital. It is given by the formulae

Working capital ratio = Net Sales / Working Capital

This indicates whether working capital is effectively used in making sales. A low working

capital turnover Ratio may reflect an inadequacy of working capital and lower turnover of

inventory or receivables.

b. Stock Turnover Ratio

It is computed by dividing the cost of goods sold by the average inventory. The ratio indicates

how fast inventory is sold. A high ratio is good from the view point of liquidity and vice versa.

A low ratio would signify that inventory does not sell fast and stays on the shelf or in the

warehouse for a long time.

Stock turnover ratio is given by the formulae = cost of the goods sold / Average Stock

Cost of goods sold = Sales – Gross Profit.

Average stock = (Opening stock + Closing stock) / 2

This ratio establishes the relationship between cost of goods sold and inventory. It shows how

many times during the period, the firm has turned its inventory.

c. Debtors Turnover Ratio:

A firm sells goods for cash and credit, when it sells goods for credit, Debtors are created. The

liquidity position of a firm depends upon the quality of debtors as they are included in the current

IMK-ADOOR Page 31

.

assets. Debtor’s turnover ratio indicates the relationship between debtors and sales. It indicates

number of times debts are collected in a year.

Debtors turnover ratio = Net Annual credit sales / Average Debtors

Debt Collection Period = Number of days in a year / Debtor’s Turnover Ratio

d. Fixed Assets turnover Ratio

This ratio measure’s sale per rupee of investment in fixed assets. This ratio supposed to measure

the efficiency with which fixed assets are employed. A high ratio indicates the high degree of

efficiency in asset utilizing and a low ratio reflects inefficient use of assets. It is the ratio between

fixed assets and net sales.

Fixed assets turnover ratio = Net sales / Fixed Assets

Fixed Assets means the fixed assets after depreciation and turnover means net sales after

deducting returns.

e. Creditors’ Turnover Ratio

This ratio measures the managerial efficiency in paying out the creditor’s liability. A very low

creditor’s turnover ratio or too long credit payment period is also not good from the firm’s view

point because in such case the tendency of credit purchase increases, scope of getting cash

discount diminishes and the overall cost of production increases.

Creditors Turnover Ratio = Credit Purchases / Average Creditors

Credit Payment Period = Number of days in a year / Creditors’ Turnover Ratio

f. Current Assets turnover Ratio

This ratio indicates the relationship between current assets and turnover.

Current assets turnover ratio = Net sales / Current Asset

IMK-ADOOR Page 32

.

A high ratio indicates better utilization of current assets and a lower ratio indicates poor

utilization.

g. Total Assets Turnover Ratio.

Some analysts like to compute the total assets turnover in addition to or instead of net assets

turnover. This ratio shows the firm’s ability in generating sales from all financial recourses

committed to total assets.

This ratio establishes the relationship between total assets and turnover. It is given by the

formulae.

Total asset turnover ratio = Sales / Total Assets

h. Sales to capital employed Ratio.

Sales to capital employed ratio = Sales / Capital Employed

The sales refer to annual sales less returns. Capital employed refers to total long term funds used

or employed in the business. It is equal to net fixed assets to trade investment to net working

capital.

LEVERAGE RATIOS

Leverage ratio measures the extent of the firm’s total burden of debt. They reflect the ability to

meet both long term and short term obligation. It measures the relative interest of the owners and

the creditors in an enterprise. The principal leverage ratios are.

a. Debt- Equity/ External Ratio

Debt equity ratio shows the relationship between long-term debts and shareholders funds’. It is

also known as ‘External-Internal’ equity ratio.

Debt Equity Ratio = Long Term Debt / Equity

Where Debt (long term loans) includes Debentures, Mortgage Loan, Bank Loan, Public

Deposits, Loan from financial institution etc.

IMK-ADOOR Page 33

.

Equity (Shareholders’ Funds) = Share Capital (Equity + Preference) + Reserves and

Surplus – Fictitious Assets

This ratio is a measure of owner’s stock in the business. Proprietors are always keen to have

more funds from borrowings because:

(i) Their stake in the business is reduced and subsequently their risk too

(ii) Interest on loans or borrowings is a deductible expenditure while computing taxable profits.

Dividend on shares is not so allowed by Income Tax Authorities.

The normally acceptable debt-equity ratio is 2:1.

b. Proprietary Ratio

It establishes the relationship between shareholders or proprietors fund and total asset. Ratio

shows how much funds have been contributed by the shareholders in the total assets of the firm.

Proprietary ratio = Net worth / Total Assets

Here net worth means excess of total assets over liabilities. Total assets include tangible and non

tangible assets.

c. Solvency ratio

This ratio expresses the relation between total assets and total liabilities of a business. It

measures the solvency of the business.

Solvency ratio = Total Assets / Total Debt

Here there is no standard ratio, if the ratio is high, then the financial position of concern is

stronger and if the ratio is low, then the financial position is weak.

d. Fixed assets Ratio

It is the ratio of fixed assets to long term funds or capital employed.

Fixed asset ratio = fixed assets / Long term Funds

The fixed assets refer to fixed assets after depreciation and also include long term investments.

Long term fund includes shareholders fund and long term borrowed funds. It helps to ascertain

the proportion of long term funds invested in fixed assets. Lower the fixed ratio better is the

financial position.

IMK-ADOOR Page 34

.

e. Fixed Assets to Net worth Ratio

This ratio indicates the relationship between fixed assets and Net worth

Fixed Assets to Net worth Ratio= Fixed Assets/ Net worth

f. Net worth to capital employed Ratio

This indicates the proportion of debt or net worth in total net assets of the concern.

Net worth capital Ratio = Net Worth / Capital Employed

A high ratio indicates that financial position of the firm is sound and a low ratio indicates that the

financial position is not sound.

PROFITABILITY RATIOS

Profitability ratio measures the success of the firm in earning a net return on its operations. Profit

is an important objective of an enterprise. It is of much importance to the enterprise,

Management, Government, Customers, Creditors, Employees and to the country. Profitability of

a firm can be easily measured by profitability ratios.

a. Gross Profit Ratio

Gross Profit Ratio shows the relationship between Gross Profit of the concern and its Net Sales.

Gross Profit Ratio can be calculated in the following manner:

Gross profit ratio = (Gross profit / Net Sales) X 100

Gross Profit Ratio provides guidelines to the concern whether it is earning sufficient profit to

cover administration and marketing expenses and is able to cover its fixed expenses. The gross

profit ratio of current year is compared to previous years’ ratios or it is compared with the ratios

of the other concerns. The minor change in the ratio from year to year may be ignored but in case

there is big change, it must be investigated. This investigation will be helpful to know about any

departure from the standard mark-up and would indicate losses on account of theft, damage, bad

stock system, bad sales policies and other such reasons.

Gross profit means profit that a concern earns on its trading or it indicates efficiency with which

management products of net sales over the cost of goods sold. Cost of goods sold means opening

IMK-ADOOR Page 35

.

stock of finished goods to purchases of finished goods + all the expenses incurred on finished

goods - closing stock of finished goods.

b. Net Profit Ratio

Net Profit Ratio shows the relationship between Net Profit of the concern and Its Net Sales. Net

Profit Ratio can be calculated in the following manner:

Net Profit Ratio = (Net Profit / Net Sales) X 100

Where Net Profit = Gross Profit – Selling and Distribution Expenses – Office and

Administration Expenses – Financial Expenses – Non Operating Expenses + Non Operating

Incomes.

Net Profit means the final balance of operation and non operating incomes after meeting

expenses, both operating and non operating expenses.

c. Operating Ratio

It is used to analyze profitability and managerial efficiency. It explains the proportion of

operating expenses in sales of rupee 1. This can be found out by using the following formula

Operating Ratio= (Cost of goods sold + operating expenses)/ Net sales X 100

d. Expense Ratio

These ratios are used to measure the profitability and managerial efficiency. The relationship

between any particular expense and net sales is expressed by this ratio. This ratio can be

calculated by using the following formula

Expense Ratio = (Particular Expense / Net Sales) X 100

e. Material consumed ratio

It is used to analyze the managerial skill in carrying out the production and increasing the

profitability of the firm. It explains the proportion of material cost of the total sales . This ratio

can be calculated by using the following formula:

f. Operating Profit Ratio

IMK-ADOOR Page 36

.

Operating Profit Ratio = (Operating Profit / Net Sales) X 100

Operating Profit = Net Sales- ( Cost of goods Sold+ Office & Administrative expenses+

Selling & Distribution Expenses )

A high operating profit ratio is an indicator of good profitability and efficient managerial ability.

It is relevant to mention in thyis context that the operating profit ratio and operating ratio are

complementary to each other. If a firm’s operating ratio is 80% its operating profit ratio would

be 20% or (100-80) %.

IMK-ADOOR Page 37

.

CHAPTER 5

DATA ANALYSIS AND INTERPRETATION

IMK-ADOOR Page 38

.

5.1 RATIO ANALYSIS

1. Current ratio

Current ratio = Current asset/Current liabilities

In Rs. Lakhs

Source: Annual Report Table 5.1

Chart 5.1

Interpretation:

The current ratio for 2009-10 is 2.13 It implies that for every one rupee of current liabilities,

current assets of 2.13 times the current liabilities are available. The year wise comparison of the

firm shows that the firm is in a better liquid position or maintains short term solvency.

IMK-ADOOR Page 39

Year Current Assets Current Liabilities Current Ratio

2005 1927.33 1652.73 1.17

2006 1754.30 968.30 1.81

2007 1850.57 904.13 2.05

2008-09 5284.30 2748.43 1.92

2009-10 6038.14 2840.04 2.13

.

2. Quick Ratio/ Acid Test Ratio:

Quick Ratio = Quick assets/Current Liabilities

In Rs. Lakhs


Chart 5.2

Interpretation

Generally an acid test ratio of 1:1 is considered satisfactory as a firm can easily meet all current

claims. The position of the firm is in a satisfactory level for the last five years. The firm has 1.39

liquid assets to meet its current liabilities of each Rs.1/- in 2010. The firm is in a better position

to meets its current liabilities.

IMK-ADOOR Page 40

Year Quick Assets Current Liabilities Quick Ratio

2005 1419.48 1652.73 0.86

2006 694.02 968.30 0.72

2007 1255.32 904.13 1.39

2008-09 3231.50 2748.43 1.17

2009-10 3949.20 2840.04 1.39

.

3. Cash Ratio

Cash Ratio = (Cash+ Marketable Securities)/ Current Liabilities

In Rs. Lakhs

YearCash+ Marketable

Securities Current Liabilities Cash Ratio

2005 1436.84 1652.73 0.87

2006 821.70 968.30 0.85

2007 1724.12 904.13 1.91

2008-09 281.96 2748.43 0.10

2009-10 919.24 2840.04 0.32Source: Annual Report Table 5.3

Chart 5.3

Interpretation

Above statement shows the immediate cash available to meets its current liability. In 2010 the

firm has 0.32 rupees of cash available to meets its current liability of each one rupee.

IMK-ADOOR Page 41

.

4. Stock to Working Capital Ratio

Stock to Working Capital Ratio = (Closing Stock/ Working Capital) x100

In Rs. Lakhs

Year Closing Stock Working Capital Stock to WC Ratio (%)

2005 507.85 274.60 184.94

2006 1060.29 786.01 134.89

2007 595.25 946.44 62.89

2008-09 2052.80 2535.86 80.95

2009-10 2088.94 3198.10 65.32


Chart 5.4

Interpretation

This ratio shows the relationship between Closing stock and working capital of a firm. Ideal

standard in Indian Perspective is 75 to 100%.From the calculation it is clear that company is not

meeting the standards in the year 2010 and 2007. Company should take actions to increase the

Stock to Working Capital Ratio.

IMK-ADOOR Page 42

.

5. Net Working Capital Ratio

Net Working Capital Ratio = Net Working Capital/ Net Asset

In Rs. Lakhs

Year Net Working Capital Net Asset Net WC Ratio

2005 274.60 2621.10 0.10

2006 786.01 2811.83 0.28

2007 946.44 3078.81 0.31

2008-09 2535.86 10323.25 0.25

2009-10 3198.10 11086.12 0.29


Chart 5.5

Interpretation

The net working capital ratio shows the relation between the net working capital and the net

asset. It shows the amount of networking capital involved in the net asset. In the year 2010 net

working capital ratio is 0.29.

IMK-ADOOR Page 43

.

6. Proprietary Ratio

Proprietary Ratio = Proprietors’ Fund / Total Assets

In Rs. Lakhs

Year Proprietors’ Fund Total Assets Proprietary Ratio

2005 2479.73 4251.24 0.59

2006 2836.87 3921.19 0.72

2007 4328.60 5377.19 0.80

2008-09 7383.32 12820.83 0.58

2009-10 8970.03 13969.24 0.64


Chart 5.6

Interpretation

A high proprietary ratio indicates more use of proprietor’s funds in acquiring total assets of the

firm. This situation shows a favourable long term solvency and a satisfactory financial Satiability

of the firm. So a high proprietary ratio is favourable to the long term creditors and investors.

From this it is clear that in 2010 64% of firm’s asset is financed by proprietor’s fund itself. From

the analysis it is very clear that firm is using a nominal amount of debt for financing its assets.

IMK-ADOOR Page 44

.

The company is adopting more conservative financial policy as it is using a very nominal amount

of debt capital.

7. Debt Equity Ratio

Debt Equity Ratio = Debt/Equity

In Rs. Lakhs

Year Debt Equity DE Ratio (T)

2005 0 2479.73 0

2006 30.15 2836.87 0.01

2007 32.82 4328.60 0.008

2008-09 1734.93 7383.32 0.23

2009-10 2685.07 8970.03 0.30


Chart 5.7

Interpretation

This ratio reveals the extent of owners’ investment in relation to the use of debt capital. From the

analysis it is clear that company is following a conventional financing policy and debt-equity

ratio is not in a satisfactory level. The ideal debt-equity ratio in Indian perspective is 1:1. But

IMK-ADOOR Page 45

.

company does not meet this ideal ratio. In 2010 for every 1 rupee equity company is using only

0.30 rupee debt. Debt – Equity ratio is not in a satisfactory level. The interesting thing is that

company has started to use more debt capital in recent years compared to the previous years.

8. Fixed Assets to Current Asset Ratio

Fixed Assets to Current Asset Ratio =Fixed Asset/ Current Asset

In Rs. Lakhs

Year Fixed Asset Current Asset Fixed Asset to Current Asset Ratio

2005 2346.49 1927.33 1.22

2006 2025.82 1754.30 1.15

2007 2132.37 1850.57 1.15

2008-09 7787.39 5284.30 1.47

2009-10 7888.02 6038.14 1.31


Chart 5.8

Interpretation

This ratio is used to measure the long term solvency and financial stability of the firm. If this

ratio is high that indicates more investment in fixed assets than current assets. From this it is

clear that company is having more investments in fixed assets than current assets. In 2010 for

IMK-ADOOR Page 46

.

every 1 rupee current asset company is having 1.31 fixed assets. Higher investments in fixed

assets will reduce the profitability of the firm as the current asset is more productive than the

fixed asset.

9. Fixed Assets to Net worth Ratio

Fixed Assets to Net worth Ratio = Fixed Asset/ Net Worth

In Rs. Lakhs

Year Fixed Asset Net Worth Fixed Asset to Net worth ratio

2005 2346.49 2479.73 0.95

2006 2025.82 2836.87 0.71

2007 2132.37 4328.60 0.49

2008-09 7787.39 7383.32 1.05

2009-10 7888.02 8970.03 0.88


Chart 5.9

Interpretation

IMK-ADOOR Page 47

.

This ratio shows the relationship between fixed asset and Net Worth of the organization. From

the analysis it is clear that company is having good fixed asset to net worth ratio.

10. Solvency Ratio / Debt Ratio

Solvency Ratio = Total Asset/ Outside Liabilities

In Rs. Lakhs

Year Total Asset Outside Liabilities Solvency Ratio

2005 4273.83 1771.51 2.41

2006 3780.12 1084.32 3.49

2007 3982.94 1048.58 3.80

2008-09 13071.68 5473.50 2.38

2009-10 13926.15 4999.22 2.79


Chart 5.10

Interpretation

IMK-ADOOR Page 48

.

Solvency means the ability to meet outsiders’ fund out of total assets of the firm. From the

analysis it is clear that company s having a good solvency ratio. In 2010 for every 1 rupee

outsiders’ fund company is having 2.79 times asset for financing. Company’s solvency ratio is in

a satisfactory position.

11. Gross Profit Ratio

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

In Rs. Lakhs

Year Gross Profit Net Sales GP Ratio (%)

2005 2831.54 4389.25 64.51

2006 1490.52 2240.28 66.53

2007 3175.05 5464.53 58.10

2008-9 5831.31 10358.17 56.30

2009-10 5881.15 9804.41 59.98


Chart 5.11

Interpretation

This ratio is used to measure the profitability and managerial efficiency of the firm. The

relationship between gross earnings and sales is explained through this ratio. A higher gross

IMK-ADOOR Page 49

.

profit ratio is favourable for earning sufficient net profit after meeting indirect cost and incidental

expenses. Generally a gross profit ratio of 25 % to 30% is taken as an acceptable norm in Indian

Perspective. From the analysis it is clear that company is having a good gross profit ratio.

12. Net Profit Ratio

(Net Profit Ratio = Profit after Tax/ Net Sales)X100

In Rs. Lakhs

Year Profit after Tax Net Sales NP Ratio (%)

2005 912.04 4389.25 20.78

2006 258.48 2240.28 11.54

2007 1111.36 5464.53 20.34

2009 2427.39 10358.17 23.43

2010 1438.93 9804.41 14.68


Chart 5.12

Interpretation

It is used to measure the overall profitability and efficiency of the management in generating

additional revenue over and above the total operating cost. It does not make any difference

between operating and non operating expenses and shows the relationship between net profit and

sales. From the analysis , it is clear that company is having a satisfactory net profit ratio. In 2010

IMK-ADOOR Page 50

.

company has earned 14.68% of Net sales as profit. Company should take actios to reduce

indirect expenses as it affects the net profit of the company. Company is having good GP Ratio,

but Net Profit Ratio is comparatively lower meaning that company should take action to reduce

the indirect expenses.

13. Operating Ratio

Operating Ratio = [(Cost of Goods Sold +Operating Expense)/ Net Sales] X100

In Rs. Lakhs

Year Cost of Goods Sold +Operating

Expense

Net Sales Operating Ratio (%)

2005 2482.51 4389.25 56.56

2006 1474.83 2240.28 65.83

2007 3600.80 5464.53 65.89

2008-09 7471.94 10358.17 72.14

2009-10 6927.91 9804.41 70.66


Chart 5.13

Interpretation

IMK-ADOOR Page 51

.

It explains the proportion of operating expenses in sales of rupee one. From the analysis it is

clear that company has to spend 72.44 rupee for generating the sales of Rs. 100. An ideal

standard for this ratio is absent but generally an operating ratio of 70 % to 80% is accepted as

standard in Indian perspective. So firm’s operating ratio is in a satisfactory level. But firm should

take care of controllable expenses to increase the net profit of the firm.

14. Operating Profit Ratio

Operating Profit Ratio= (Operating Profit/ Net Sales) X100

In Rs. Lakhs

Year Operating Profit

Net Sales OP Ratio (%)

2005 1906.74 4389.25 43.44

2006 765.45 2240.28 34.17

2007 1863.74 5464.53 34.11

2008-09 2886.23 10358.17 27.86

2009-10 2876.50 9804.41 29.34


IMK-ADOOR Page 52

.

Chart 5.14

Interpretation

A high operating profit ratio is an indicator of good profitability and managerial efficiency. An

ideal norm for operating profit ratio is absent but an operating profit ratio of 20 % to 25 % is

considered as satisfactory in the case of manufacturing firm. Here the operating profit ratio is

satisfactory.

15. Material Consumed Ratio

Material Consumed Ratio = (Material Consumed/ Net Sales) X100

In Rs. Lakhs

Year Material Consumed Net Sales Material Consumed Ratio (%)

2005 949.97 4389.25 21.64

2006 279.73 2240.28 12.49

2007 1566.09 5464.53 28.66

2008-09 2949.11 10358.17 28.47

2009-10 2521.33 9804.41 25.72


IMK-ADOOR Page 53

.

Chart 5.15

Interpretation

This ratio is used to analyse the managerial skill in carrying out production and in increasing the

profitability of the firm. In order to generate a sale of Rs.100, company is consuming raw

material of Rs.25.72.

16. Interest Coverage Ratio

Interest Coverage Ratio = EBIT/ Fixed Interest

In Rs. Lakhs

Year EBIT Fixed Interest Interest Coverage Ratio

2005 1427.92 13.53 105.54

2006 394.20 0.62407 631.66

2007 1711.32 11.86 144.29

2008-09 2487.39 145.57 17.09

2009-10 2642.91 174.08 15.18


IMK-ADOOR Page 54

.

Chart 5.16

Interpretation

Interest coverage ratio measures as how many times the interest burden of the firm is covered by

the EBIT of the firm. From the analysis, it is clear that firm is having good interest coverage

ratio. In 2010 firm is having 15.18 times of Interest as its EBIT. So lenders need not worry

regarding their repayment of loan and interest.

17. Financial Leverage Ratio

Financial Leverage Ratio = EBIT/ PBT

In Rs. Lakhs

Year EBIT PBT Financial Leverage Ratio

2005 1427.92 1414.39 1.01

2006 394.20 393.58 1.001

2007 1711.32 1699.46 1.01

2008-09 2487.39 2341.82 1.06

2009-10 2642.91 2468.83 1.07


IMK-ADOOR Page 55

.

Chart 5.17

Interpretation

This ratio tells about the extent of changes in PBT as a result of changes in PBIT. The financial

risk of a firm depends on the use of the use of debt capital in its capital structure. Debt capital is

less costly than equity capital. If this ratio is marginally more than 1 that is nearer to 1 it indicate

moderate use of debt capital, low financial risk and good financial judgment. Here from the

analysis, it can be concluded that company is having low financial risk.

IMK-ADOOR Page 56

.

18. Return on Capital Ratio

Return on Capital Ratio = (PATBI/ Net Capital Employed) X100

In Rs. Lakhs

Year PATBI Net Capital Employed

ROC Ratio (%)

2005 925.58 2621.10 35.31

2006 259.10 2811.83 9.21

2007 1123.22 3078.81 36.48

2008-09 2572.96 10323.25 24.92

2009-10 1613.01 11086.12 14.55


Chart 5.18

Interpretation

This ratio shows the profit achieved in comparison to the capital employed. From the analysis, it

is clear that company is having good Return on Capital Employed ratio. In 2010 company has

earned Rs.14.55 on every 100 rupee capital employed.

IMK-ADOOR Page 57

.

19. Return on Investment

Return on Investment=( EBIT/ Net Capital Employed)X100

In Rs. Lakhs

Year EBIT Net Capital

Employed

ROI Ratio (%)

2005 1427.92 2621.10 54.48

2006 394.20 2811.83 14.10

2007 1711.32 3078.81 55.58

2008-09 2487.39 10323.25 24.09

2009-10 2642.91 11086.12 23.84


Chart 5.19

Interpretation

This ratio tells about the return on actual investment made by the company. Company is having a

satisfactory ROI ratio.

IMK-ADOOR Page 58

.

20. Inventory Turnover Ratio

Inventory Turnover Ratio= Cost of Goods Sold/ Average Stock

In Rs. Lakhs

Year Cost of Goods Sold

Average Stock IT Ratio IT(Days)

2005 1557.71 501.23 3.11 117

2006 749.76 784.07 0.96 382

2007 2289.48 827.77 2.77 132

2008-09 4526.86 1324.02 3.42 107

2009-10 3923.26 2070.87 1.89 193


Chart 5.20

Interpretation

This ratio is used to measure the efficiency of inventory management in the organization. It

explains the relationship between cost of goods sold and the average inventory. From the

analysis, it is very velar that company’s inventory management system is very poor. In 2010

company took almost 382 days to turnover its inventory. But in capital goods inventory an

inventory ratio near to 2 can be considered as satisfactory as this process takes long time to

IMK-ADOOR Page 59

.

complete the production and goods are produced according to the orders given by the company.

Poor inventory turnover ratio of 2006 affected the sales of the company.

21. Debtors Turnover Ratio

Debtors Turnover Ratio = Credit Sales/Average Debtors

In Rs. Lakhs

Year Credit Sales Average Debtors DT Ratio

DTR (Days)

2005 526.71 646.11 0.81 448

2006 224.32 489.21 0.46 796

2007 630.61 510.16 1.24 295

2008-09 932.24 927.64 1.005 363

2009-10 1400.01 1341.85 1.04 349


Chart 5.21

Interpretation

IMK-ADOOR Page 60

.

A high debtor’s turnover ratio in comparison to the industry standards indicates quick collection

from debtors. From the analysis it is clear that company is not having good Debtors’ turnover

ratio. In 2010 company has taken 349 days to recover amount from debtors.

22. Creditors turnover Ratio

Creditors turnover Ratio= Credit Purchase/ Average Creditors

In Rs. Lakhs

Year Credit Purchase Average Creditors CT Ratio CT Ratio(Days)

2005 1027.28 1074.57 0.96 381

2006 873.38 826.56 1.06 345

2007 1099.85 803.50 1.37 266

2008-09 4134.97 1737.48 2.38 153

2009-10 2385.88 2621.24 0.91 401


Chart 5.22

Interpretation

IMK-ADOOR Page 61

.

A very low creditor’s turnover or too long credit payment period is not good from the point of

view of the company because in such case the tendency of credit purchase increases, scope of

getting cash discount diminishes and the overall cost of production increases. Here firm’s

Creditors turnover ratio is not in satisfactory level for the year 2010.

23. Working Capital Turnover Ratio

Working Capital Turnover Ratio=Net Sales/Net Working Capital

In Rs. Lakhs

Year Net Sales Net Working Capital

WCT Ratio

2005 4389.25 274.60 15.98

2006 2240.28 786.01 2.85

2007 5464.53 946.44 5.77

2008-09 10358.17 2535.86 4.08

2009-10 9804.41 3198.10 3.06


Chart 5.23

IMK-ADOOR Page 62

.

Interpretation

Working capital turnover ratio shows the ability of the firm in generating the sales with the

working capital of the firm. In 2010 firm has generated Rs.3.06 sale on 1 rupee working capital.

24. Capital Turnover Ratio

Capital Turnover Ratio= Net Sales/ Capital Employed

In Rs. Lakhs

Year Net Sales Capital Employed CT Ratio

2005 4389.25 2621.10 1.67

2006 2240.28 2811.83 0.80

2007 5464.53 3078.81 1.77

2008-09 10358.17 10323.25 1.003

2009-10 9804.41 11086.12 0.88


Chart 5.24

IMK-ADOOR Page 63

.

Interpretation

It is used to analyse the efficiency in use of capital and overall managerial efficiency. It explains

the sales achieved for per rupee net capital employed. In 2010 company has generated Rs.0.88

sales on every 1 rupee capital employed. It is not satisfactory.

25. Earnings Per Share

Earnings Per Share= PAT/ No. Of equity shares

In Rs. Lakhs

Year PAT No. Of equity shares

EPS

2005 912.04 30.00007 30.40

2006 258.48 30.00007 8.62

2007 1111.36 30.00007 37.05

2008-09 2427.39 33.83393 71.74

2009-10 1438.93 33.83393 42.53


Chart 5.25

IMK-ADOOR Page 64

.

Interpretation

In the earning per share shows the earning of each share out of its profit. Earning in 2010 is Rs.

42.53 that means a shareholder will get an earning of Rs 42.53 on his share.

5.2 COMPARATIVE FINANCIAL STATEMENTS

1. COMPARATIVE BALANCE SHEET 2005-2006

In Rs. Lakhs

PARTICULARS 2005 2006 INCREASE DECREASE % OF CHANGES

I. SOURCES OF FUND

1.Shareholders’ Fund

a. Share Capital 300.0007 300.0007 - - 0

b. Reserves & Surplus

3127.29 3191.91 64.62 2.07

2.Loan Funds

a. Secured Loans - -

b. Unsecured Loan - 30.15 30.15 100

3.DT Liability 118.78 85.88 32.9 27.70

TOTAL 3546.07 3607.94 61.87 1.74

IMK-ADOOR Page 65

.

II. APPLICATION OF FUND

1.Fixed Asset

a. Gross Block 3735.59 3812.75 77.16 2.07

b. Less: Depreciation

1454.45 1856.02 401.57 27.61

c. Net Block 2281.14 1956.73 324.41 14.22

d. Capital WIP 65.35 69.09 3.74 5.72

2346.49 2025.82 320.67 13.66

2.Investments 924.97 796.11 128.86 16.19

3.Curent Assets

a. Inventories 507.85 1060.29 552.44 108.78

b. Sundry Debtors 702.25 276.16 426.09 60.67

c. Cash & Bank 512.86 26.59 486.27 94.81

d .Other Current Assets

1.71 2.05 0.34 16.56

e. Loans & Advances

202.66 389.22 186.56 92.01

1927.33 1754.30 173.03 8.97

Less C L

a. Liabilities 905.91 747.21 158.7 17.52

b. Provisions 746.82 221.08 525.74 70.40

Net CA 274.60 786.01 511.41 186.24

IMK-ADOOR Page 66

.

Total 3546.07 3607.94 61.87 1.74

Source: Annual Report

Table 5.26

IMK-ADOOR Page 67

.

Interpretation

From the above comparative Balance Sheet, following conclusions can be drawn;

Fixed Assets have been decreased by Rs. 320.67 Lakhs

A huge decrease in the cash and bank balances and sundry debtors made current assets

decreasing.

Current Liabilities have been reduced by Rs.684.44 Lakhs

Net Working Capital has been increased by Rs 511 Lakhs

Shareholders’ Fund has been increased by Rs 64.62 Lakhs.

Company has raised Rs.30.15 Lakhs by way of unsecured Loans.

Company’s deferred tax Liability has also been decreased by Rs.32.90

From these points, it is clear that company’s financial position in 2006 is not satisfactory when

compared to 2005.

IMK-ADOOR Page 68

.

2. COMPARATIVE INCOME STATEMENT 2005-2006

In Rs. Lakhs


I.INCOME

a. Sales 4884.14 2540.36 2343.78 47.99

b. Less Excise Duty 494.89 300.08 194.81 39.36

4389.25 2240.28 2148.97 48.96

c. Other Income 86.11 105.69 19.58 22.74

4475.36 2345.97 2129.39 47.58

II.EXPENDITURE

a. Materials 949.97 279.73 670.24 70.55

b. Employee Cost 467.57 343.71 123.86 26.49

c. Other Expenses 1195.17 923.64 271.53 22.72

d. Int & Fin Charges 13.53 0.62 12.91 95.44

e. Pre-Operative & Preliminary Exp

28.78 - - 28.78 100

f. Depreciation/Amrn 405.94 404.69 1.25 0.31

3060.98 1952.39 1108.59 36.22

III.PBT 1414.38 393.58 1020.8 72.17

a. Provision for tax 502.34 135.1 367.24 73.11

IV. PAT 912.04 258.48 653.56 71.66

IMK-ADOOR Page 69

.

a. Profit B/F 141.94 274.85 132.91 93.64

V. Amount Available for Appropriation

1053.98 533.33 520.65 49.40

Less:

Proposed dddDividend

599.90 170.00 429.9 71.66

Dividend Tax 88.03 23.84 64.19 72.91

Transfer to GR 91.20 25.85 65.35 71.66

VI. Balance Transferred to Balance Sheet

274.85 313.62 38.77 14.10


Interpretation

From the above comparative Income Statement following points can be noted;

A huge decrease in the Net sales. Net sales have been decreased by 47.99% when

compared to the previous year. It will make a huge impact on the net profit of the

company.

Other income by way of sale of fixed assets, profit on investment in Mutual Fund has

been increased by 22.74 % when compared to the previous year.

A huge decrease in the consumption of materials which shows lower production in the

year.

Profit After Tax has been decreased by Rs. 653.56 Lakhs.

From the above points we can conclude that Financial Performance of the company in the year

2006 is not at all satisfactory when compared to 2005.

IMK-ADOOR Page 70

.

3. COMPARATIVE BALANCE SHEET 2006-2007

In Rs. Lakhs


I. SOURCES OF FUND


a. Share Capital 300.0007 300.0007


3191.91 4303.27 1111.36 34.82

2.Loan Funds

a. Secured Loans - -

b. Unsecured Loan 30.15 32.82 2.67 8.86

3.DT Liability 85.88 111.63 25.75 29.98

TOTAL 3607.94 4747.72 1139.78 31.59


1.Fixed Asset

a. Gross Block 3812.75 4215.69 402.94 10.57

IMK-ADOOR Page 71

.


1856.02 2115.47 259.45 13.99

c. Net Block 1956.73 2100.21 143.48 7.33

d. Capital WIP 69.09 32.16 36.93 53.45

2025.82 2132.37 106.55 5.26

2.Investments 796.11 1668.91 872.8 109.63

3.Curent Assets

a. Inventories 1060.29 595.25 465.04 43.86

b. Sundry Debtors 276.16 744.17 468.01 169.47

c. Cash & Bank 26.59 56.21 29.62 111.40

d. Other CA 2.05 3.63 1.58 77.07

e. Loans & Advances

389.22 451.31 62.09 15.95

1754.30 1850.57 96.27 5.49

Less C L

a. Liabilities 747.21 859.79 112.58 15.07

b. Provisions 221.08 44.34 176.74 79.94

Net CA 786.01 946.44 160.43 20.41

Total 3607.94 4747.72 1139.78 31.59


IMK-ADOOR Page 72

.

Interpretation

From the above Comparative Balance Sheet following inferences can be made;

A huge increase in the Shareholders’ Fund which means company is depending more on

equity than debt.

5.26 % increase in the Fixed Assets

Investments have been increased by 109.63 % which means company has made a huge

investment outside the business.

Net Working Capital has been increased by Rs. 160.43 Lakhs.

Current Liabilities have been decreased by Rs. 64.16

From the above points, it is clear that Financial Position of the company has progressing toward

a satisfactory level.

IMK-ADOOR Page 73

.

4. COMPARATIVE INCOME STATEMENT 2006-2007

In Rs. Lakhs


I.INCOME

a. Sales 2540.36 5883.06 3342.70 131.58


2240.28 5464.53 3224.25 143.92

c. Other Income 105.69 417.34 311.65 294.87

2345.97 5881.87 3535.90 150.72

II.EXPENDITURE

a. Materials 279.73 1566.09 1286.36 459.86

b. Employee Cost 343.71 523.38 179.67 52.27

c. Other Expenses 923.64 1814.91 891.27 96.49

d. Int & Fin Charges 0.62 11.86 11.24 1812.9

f. Depreciation/Amrtn 404.69 266.17 138.52 34.23

1952.39 4182.41 2230.02 53.31

III.PBT 393.58 1699.46 1305.88 331.79

a. Provision for tax 135.1 588.1 453 335.31

IV. PAT 258.48 1111.36 852.88 329.96

IMK-ADOOR Page 74

.

a. Profit B/F 274.85 313.62 38.77 14.10

V. Amount Available for Appropriation

533.33 1424.98 891.65 167.18

Less:

Proposed dddDividend

170.00 - 170.00 100

Dividend Tax 23.84 - 23.84 100

Transfer to GR 25.85 - 25.85 100


313.62 1424.98 1111.36 354.36


Table 5.29

IMK-ADOOR Page 75

.

Interpretation

From the above Comparative Income Statements, following conclusions can be made;

A huge increase in the Net Sales- 143.92 % when compared to 2006.

Materials consumption has been increased by Rs.1286.36 lakhs , which means larger

production.

Interest and Finance charges increased by Rs.11.24 Lakhs which means company has

started to depend on loans from financial situation.

Net Profit has been increased by Rs.852.88 Lakhs.

While looking the overall performance of the company in the year 2007, it is far better than in

the last year 2006.

IMK-ADOOR Page 76

.

5. COMPARATIVE BALANCE SHEET 2007- 2008-09

In Rs. Lakhs

PARTICULARS 2007 2008-09 INCREASE DECREASE % OF CHANGES

I. SOURCES OF FUND


a. Share Capital 300.0007 338.3393 38.3386 12.78


4303.27 7461.96 3158.69 73.40

2.Loan Funds

a. Secured Loans 2546.09 2546.09 100

b. Unsecured Loan 32.82 142.98 110.16 335.65

3.DT Liability 111.63 - 111.63 100

TOTAL 4747.72 10489.37 5741.65 120.93


1.Fixed Asset

a. Gross Block 4215.69 5529.12 1313.43 31.15

IMK-ADOOR Page 77

.


2115.47 2787.12 671.65 31.75

c. Net Block 2100.21 2741.99 641.78 30.56

d. Capital WIP 32.16 5045.39 5013.23 15588.40

2132.37 7787.38 5655.01 265.19

2.Investments 1668.91 1.01 1667.90 99.94

3.DT Asset - 165.11 165.11 100

4.Curent Assets

a. Inventories 595.25 2052.80 1457.55 244.86

b. Sundry Debtors 744.17 1111.11 366.94 49.31

c. Cash & Bank 56.21 281.96 225.75 401.62

d. Other CA 3.63 6.37 2.74 75.48

e. Loans & Advances

451.31 1832.06 1380.75 305.94

1850.57 5284.30 3433.73 185.55

Less C L

a. Liabilities 859.79 2615.16 1755.37 204.16

b. Provisions 44.34 133.27 88.93 200.56

Net CA 946.44 2535.86 1589.42 167.94

Total 4747.72 10489.37 5741.65 120.93


IMK-ADOOR Page 78

.

Interpretation

From the above Comparative Balance Sheet, following conclusions can be drawn;

Share Capital has been increased as a result of amalgamation with Saint-Gobain

Weber. These shares are issued to Saint-Gobain Weber as considearation other than

cash.

Company’s loan fund has increased which means company started to depend on debt

funds.

Fixed Assets have been increased by Rs.5655.01 Lakhs.

Working Capital has been increased by 167.94 % .

From the above points, it can be concluded that company is in a good financial position in the

year ended 31-March-2009.

IMK-ADOOR Page 79

.

6. COMPARATIVE INCOME STATEMENTS 2007-2008-09

In Rs. Lakhs

PARTICULARS 2007 2008-09 INCREASE DECREASE % OF CHANGES

I.INCOME

a. Sales 5883.06 11261.27 5378.21 91.42


5464.53 10358.18 4893.65 89.55

c. Other Income 417.34 480.73 63.39 15.19

5881.87 10838.91 4957.04 84.28

II.EXPENDITURE

a. Materials 1566.09 2949.11 1383.02 88.31

b. Employee Cost 523.38 1296.87 773.49 147.79

c. Other Expenses 1814.91 3661.06 1846.15 101.72

d. Int & Fin Charges 11.86 145.57 133.71 1127.40


4182.41 8497.09 4314.68 103.16

III.PBT 1699.46 2341.82 642.36 37.80

a. Provision for tax 588.1 -85.57 673.67 114.55

IV. PAT 1111.36 2427.39 1316.03 118.42

IMK-ADOOR Page 80

.

a. Profit B/F 313.62 1424.98 1111.36 354.37


1424.98 3852.37 2427.39 170.35


Interpretation

From the above Comparative Income Statement following conclusions can be made;

89.55 % increase in the Net Sales when compared to previous year.

Net Profit has increased by Rs.1316.03

While comparing the Income Statement of 2009 with 2007, a satisfactory financial performance

can be witnessed.

IMK-ADOOR Page 81

.

7. COMPARATIVE BALANCE SHEET 2008-09-2009-10

In Rs. Lakhs

PARTICULARS 208-09 2009-10 INCREASE DECREASE % OF CHANGES

I. SOURCES OF FUND


a. Share Capital 338.3393 338.3393


7461.96 8900.89 1438.93 19.28

2.Loan Funds

a. Secured Loans 2546.09 1668.14 877.95 34.48

b. Unsecured Loan 142.98 66.79 76.19 53.29

3.DT Liability - 424.25 424.25 100

TOTAL 10489.37 11398.41 909.04 8.67


1.Fixed Asset

a. Gross Block 5529.12 11187.95 5688.83 102.35


2787.12 3474.33 687.21 24.66

IMK-ADOOR Page 82

.

c. Net Block 2741.99 7713.62 4971.63 181.31

d. Capital WIP 5045.39 174.39 4871 96.54

7787.38 7888.01 100.63 1.29

2.Investments 1.01 312.29 311.28 30819.80

3.DT Asset 165.11 - 165.11 100

4.Curent Assets

a. Inventories 2052.80 2088.94 36.14 1.76

b. Sundry Debtors 1111.11 1572.59 461.48 41.53

c. Cash & Bank 281.96 607.97 326.01 115.62

d. Other CA 6.37 11.19 4.82 75.77

e. Loans & Advances

1832.06 1757.45 74.61 4.07

5284.30 6038.14 753.84 14.27

Less C L

a. Liabilities 2615.16 2627.32 12.16 0.46

b. Provisions 133.27 212.72 79.45 59.62

Net CA 2535.86 3198.10 662.24 26.12

Total 10489.37 11398.41 909.04 8.67


IMK-ADOOR Page 83

.

Interpretation

From the above Comparative Balance Sheet, following inferences can be made;

Reserves & Surplus has increased to Rs.8900.89 Lakhs which means increase in the

owners’ fund.

Secured and Unsecured loans are decreased to 1668.14 and 66.79 respectively which

mean decrease in the borrowed funds.

Fixed Assets have been increased by Rs.100.63 Lakhs.

Increase in the investment form Rs 1.01 Lakhs to 312.29 Lakhs.

While comparing the overall financial position of the firm in 2010, it is better than in the

previous year. (Previous Year Report is a 15 month report from Jan-2008 to Mar-2009)

IMK-ADOOR Page 84

.

8. COMPARATIVE INCOME STATEMENTS 2008-09-2009-10

In Rs. Lakhs

PARTICULARS 2008-09 2009-10 INCREASE DECREASE % OF CHANGES

I.INCOME

a. Sales 11261.27 10095.46 1165.81 10.35


10358.18 9804.41 553.77 5.35

c. Other Income 480.73 727.84 247.11 51.40

10838.91 10532.25 306.66 2.83

II.EXPENDITURE

a. Materials 2949.11 2521.33 427.78 14.51

b. Employee Cost 1296.87 1261.53 35.34 2.73

c. Other Expenses 3661.06 3414.72 246.34 6.73

d. Int & Fin Charges 145.57 174.08 28.51 19.59


8497.09 8063.42 433.67 5.10

III.PBT 2341.82 2468.83 127.01 5.42

a. Provision for tax -85.57 1029.90 1115.47 1303.57

IMK-ADOOR Page 85

.

IV. PAT 2427.39 1438.93 988.46 40.72

a. Profit B/F 1424.98 3852.37 2427.39 170.34


3852.37 5291.30 1438.93 37.35


Interpretation

From the above Comparative Income Statement, following conclusions can be drawn;

Sales has been decreased by 10.35 % when compared to the previous year

Net Profit has been decreased by Rs.988.46 Lakhs.

While comparing the overall financial performance of the company in 2010, it is not satisfactory as in 2009

IMK-ADOOR Page 86

.

5.3 TREND ANALYSIS

1. Sales

In Rs. Lakhs

Year Net Sales Trend (%) Increase/Decrease (%)

2005(Base Year) 4389.25 100 0

2006 2240.28 51 -49

2007 5464.53 124 24

2008-09 10358.18 236 136

2009-10 9804.41 223 123


Table 5.34

Chart 5.26

Interpretation

From the analysis it is clear that the firm is showing an upward trend in the sales. Decrease in the

sales in the year 2006 is caused by poor production. However while looking the sales for the

whole year , it is apparent that company is showing a positive trend.

IMK-ADOOR Page 87

.

2. Net Profit

In Rs. Lakhs

Year Net Profit Trend (%) Increase/Decrease (%)

2005(Base Year)

912.04 100 0

2006 258.48 28 -72

2007 1111.36 122 22

2008-09 2427.39 266 166

2009-10 1438.93 158 58


Table 5.35

Chart 5.27

Interpretation

IMK-ADOOR Page 88

.

The Net Profit of the Company is showing an upward trend. Decreased production and sales in

the year 2006 reduced Net Profit of the company. While looking the overall performance of the

company, Net Profit is on a positive trend.

CHAPTER 6

FINDINGS

IMK-ADOOR Page 89

.

CONCLUSION

SUGGESTIONS

6.1 FINDINGS OF THE STUDY

Saint-Gobain SEFPRO is the only company in India which produces Fused Cast

Refractory.

Company has customers all over the world including group companies and others.

Saint-Gobain SEFPRO has two plants in Palakkad and third plant is under construction

which will be completed in the next August.

Company is following conservative financial policy where it uses limited amount of debt

capital compared to equity capital.

Saint-Gobain SEFPRO’s inventory management is not at a satisfactory level.

Debtor’s Turnover Ratio reveals a poor debt collection.

Company is not making immediate payment towards their creditors.

Saint-Gobain SEFPRO’s ROI for the last three years showing a decreasing trend.

Saint-Gobain has good solvency as against outsider’s liability.

Company’s operating profit is in a satisfactory level.

Company’s Sales shows an upward trend.

Company’s current asset shows an upward movement which is agood sign as far as the

returns are concerned.

IMK-ADOOR Page 90

.

6.2 CONCLUSION

By analyzing the financial performance of the Saint-Gobain SEFPRO, Palakkad, it can be seen

that company’s financial performance is in a satisfactory level. Saint-Gobain SEFPRO is the

only company in India which produces Fused Cast Refractory for Steel Industries.Strong brand

image and customer bases make Saint-Gobain SEFPRO a company which continuously

generates profit for the year. From the analysis, it is clear that company has a good short term

and long term solvency to meet its outside liabilities. But company’s Inventory management is

not in satisfactory level as there is excessive blocking of moey in inventories. From the analysis ,

it is apparent that company is using only a limited amount of debt capital compared to equity

capital. This is the sign that company is following a conservative financial policy.

IMK-ADOOR Page 91

.

6.3 SUGGESTIONS

Company should improve its inventory management system to avoid excessive stock on

inventories. It will lead to blocking of capital in inventories. Company should think about

adopting new techniques for inventory management like JIT techniques.

Debtors’ collection period of the company is not in a satisfactory level. Company should

take action to increase debtors’ collection period. Company can offer cash discounts to its

debt ors for making immediate repayment.

Company should reduce the credit payment period.

Company should trade on equity by utilizing more debt funds.

IMK-ADOOR Page 92

.

BIBLIOGRAPHY

1. KotharI.C.R, Research Methodology- Methods & Techniques,2nd edition New Age

International Publishers, New Delhi.,2006

2. Pandey I.M,Financial Management,9th edition, Vikas Publishing House Pvt Ltd, New

Delhi, 2009

3. ICWAI, Financial Accounting, Directorate of studies ICWAI, Kolkata , 2010

4. ICAI, Cost Accounting & Financila Management, Department of Publication ICAI,

Noida,2009.

5. www.saint-gobain.com

6. Annual Report of the company. (2005,2006,2007,2008-09,2009-10)

IMK-ADOOR Page 93

http://www.saint-gobain.com/

Documents

59536823 Final Project