A PROJECT REPORT ON Ratio Analysis @ NIRANI SUGAR LIMITED PROJECT REPORT MBA FINANCE.doc

7/26/2019 A PROJECT REPORT ON Ratio Analysis @ NIRANI SUGAR LIMITED PROJECT REPORT MBA FINANCE.doc

1/76

Ratio Analysis at NSL

EXECUTIVE SUMMARY

Ratio Analysis is one of the techniques of financial analysis where ratios are used as a

yardstick for evaluating the financial condition and performance of a firm. Analysis and

interpretation of various accounting ratios gives a better understanding of financialcondition and performance of firm. Trend ratios indicate the direction of change in the

performance improvement, deterioration or constancy- over the year.

Objectives of the study:

. To help the management in its planning and forecasting activities.

!. To evaluate operational efficiency, liquidity, and solvency of "#$.

%. To help the management in having effective control over the activities of

different departments.

&. To compare the previous five years and present year performance of the

company.

'. To give suggestion and recommendation based on the study.

(or the study "irani sugars $td, is considered. The ratio analysis is done using the

)ncome statements and *alance #heets of the company between !++' to !++.

ata )nterpretation on trend ratio analysis is carried out at "#$ at ulali cross Tq/

0udhol ist/ *agalkot arnataka #tate. (or study, of five years is considered and

compared it1s performance over the period of five years. (or result analysis and 0# 23cel

#oftware package are used. (rom the analysis, ) am able to indicate following finding of

the firm

. (rom the current ratio it is found that the ratio is not satisfactory because the 4

increase in current assets is less than the 4 increase in current liabilities during the

year !++'-!++.The highest ratio recorded is %.+& in !++' and the lowest ratio

recorded is +.&! in the year !++5.And less than the standard ratio.

!. (rom the gross profit ratio it is found that the ratio is satisfactory during the last

three years from !++5 to !++. The highest ratio recorded in the year !++6 is

!.7' and the lowest ratio recorded is +. in the year !++'.

%. (rom the operating profit ratio it is found that the ratio is highly satisfactory

during the considered financial years. The highest ratio recorded is ++.+6 in the

year !++5 and the lowest is 77.'7 in the year !++&.

Babasabpatilfreepptmba.com Page 1


2/76


(inally study concluded by giving some suggestion in view of improving

performance and efficiency of the company.



3/76


INTRODUCTION

Ratio analysis is a technique of analy8ing the financial statement of industrial

concerns. "ow a day this technique is sophisticated and is commonly used in business

concerns. Ratio analysis is not an end but it is only means of better understanding offinancial strength and and weakness of a firm.

Ratio analysis is one of the most powerful tools of financial analysis which helps

in analy8ing and interpreting the health of the firm. Ratio1s are proved as the basic

instrument in the control process and act as back bone in schemes of the business

forecast.

ith the he!" of #$tio %e c$& dete#'i&e

The ability of the firm to meet its current obligation.

The limit or e3tent to which the firm has used its borrowed funds.

The efficiency with which the firm is utili8ing in generating sales revenue.

The operating efficiency and performance of the company .

C!$ssific$tio& of R$tios Ratios can be classified into different categories depending upon the basis of

classification.

I( TRADITIONA) C)ASSI*ICATION

Traditional 9lassification has been on the basis of financial statements, on which

ratio may be classified as follows.

. :rofit ; $oss account ratios.

2.g.


4/76


II( *UNCTIONA) C)ASSI*ICATION O* RATIOS

(unctional ratios

. $iquidity ratios

a@ 9urrent Ratio

b@ uick Ratio

!. $everage Ratios

a@ ebt-equity Ratio

b@ 9urrent Asset to :roprietor1s fund Ratio

III( +RO,A,I)ITY RATIOS

a. orking 9apital Turnover Ratio.



5/76


COM+ANY

+RO*I)E



6/76


INDUSTRY +RO*I)E

The -isto#ic$! ,$c./#ou&d of the I&di$& Su/$# I&dust#y:

The sugar industry is proud to be an industry, which spreads the taste of sweetness

to the mankind. The history of origin of this industry is as old as the history of main him

self. #ugar is generally made from sugarcane and beet. )n )ndia, sugar is produced mainly

from sugarcane. )ndia had introduced sugarcane all over the worlds and is a leading

country in the making sugar from sugarcane.

B#aint Cishwamitra1 is known as the research person of the sugarcane in religious

literature. >e can find the e3ample of sugarcane in Cedic literature also as well as

sugarcane. >e can also find the reference of sugar and the sugarcane in :atanDali1s

0ahabashya and the treaty on the grammar of B:anini1.


7/76


N$tio&$! Sce&$#io Of Su/$# I&dust#y:

The first sugar mill in the country was set up in +% in the Enited :rovinces.

There are '77 installed sugar mills, of which &'% were in operation in the year !++!-+%

and utili8ed &.& million ton of sugarcane F74 of total cane production@ to produce

!+.& million tons of sugar. About ' lakhs workmen are directly employed in the sugar.

About ' lakhs workmen are directly employed in the sugar industry besides many in

industries, which utili8e by-products of sugar industry as raw material.

)ndia is the largest consumer and second largest producer of sugar in the world.

The )ndian sugar industry is the second largest agro-industry located in the rural )ndia.

)ndian sugar industry has been a focal point for socio-economic development in the rural

areas. About '+ million sugarcane farmers and a large number of agricultural laborers are

involved in sugarcane cultivation and ancillary activities, constituting 5.'4 of the rural

population. *esides, the industry provides employment to about ! million skilled?semi

skilled workers and others mostly from the rural areas. The industry not only generates

power for its own requirement but surplus power for e3port to the grid based on by-

product *agasses. )t also produces ethyl alcohol, which is used for industrial and potable

uses, and can be used to the manufacture 2thanol, an ecology friendly and renewable fuel

for blending with petrol.

The sugar industry in the country uses only sugarcane as inputG hence sugar

companies have been established in large sugarcane growing states like Ettar :radesh,

0aharashtra, arnataka,


8/76


After de-licensing, a number of new sugar plants of varying capacities have been set up

and the e3isting plants have substantially increased their capacity.

There are '77 installed sugar mills in the country as on 0arch % st !++', with a

production capacity of 6+ lack 0Ts of sugar, of which only &'% are working. These

mills are located in 6 states of the country.

The secto# %ise b#e$. u"0s $s fo!!o%s/

T$b!e &o12

#l. "o. #ector "o of factories

. :rivate 6

!. :ublic 7!%. 9o-operative %'

Total '77



9/76


TIT)E: +RO3ECT ON RATIO ANA)YSIS AT NS)

Objectives of the study:

7. To help the management in its planning and forecasting activities.

5. To evaluate operational efficiency, liquidity, and solvency of "#$.

6. To help the management in having effective control over the activities of

different departments.

. To compare the previous five years and present year performance of the

company.

+. To give suggestion and recommendation based on the study.

)IMITATION O* T-E STUDY

@ The study is limited to few ratios because of non availability of detailed financial

data.

!@ The study is used on secondary data such as annual report of the company

%@ The reliability and accuracy of calculation depends more on information found in

profit and loss a?c and balance sheet.

&@ The study is confined only to a period of ' years.

MET-ODO)O4Y

The study is conducted at "irani #ugars $td, 0udhol.

TqG 0udhol, ist/ *agalkot.

#=ER92# =( ATA 9=$$29T)="

The data is collected in two types

@ :R)0ARI ATA

!@ #29="ARI ATA

25 +#i'$#y d$t$:

)t will be collected with the help of interaction with the employee of "#$, and the

internal guide.

65 Seco&d$#y d$t$:



10/76


Through Annual Reports of the company, 0aga8ine etc.

COM+ANY +RO*I)E

"ame of the company / ")RA") #E


11/76


-ISTORY O* NIRANI SU4ARS )TD(

0?s. ")rani #ugars $imited F"#$@, a company incorporated on the 7 thec, '

under the 9ompanies Act, '7 has applied for Term $oan of Rs. '.+ crores to #ugarevelopment (undF#(@ for meeting part of the capital cost of its proDect envisaging

moderni8ation ; up-gradation of e3isting sugar factory with an installed capacity of

!'+ T9 to %5'+ T9 with substantial investment at ulali cross 0udhol Tq. ist/

*agalkot, arnataka #tate, "#$ has included in the scope of the proDect, the co-

generation of surplus power also at a total proDect cost of about Rs. 5.++ crores. F#ugar

unit Rs. '%.++ crores and cogeneration unit Rs. &&.++ crores@. Total 9ost of the :roDect,

for the #ugar plant e3pansion Rs. '%++ $akhs,FRs. &!.++ 9rores for sugar and .++

crores loading from co-generation plant cost@ consisting of an 2quity 9ontribution of Rs.

'.%+ 9rores :romoters, Rs. '.+ crores equity from #ugar development fund of


12/76


Fa@ High pressure boiler F%!.+ ATA@

Fb@ 0ultiple effect pressure evaporator system with falling film evaporator and also with

captive power generation.

#ubsequently making use of the


13/76


T9 sugar plant at *adagandi village in *ilagi taluk vi8. *ilagi #ugars $imited in

which he holds the position of 0anaging irector. This unit has Dust successfully

completed trial runs and started commercial operations Fduring January !++7@.

0rs. 0.R. "irani has also been recogni8ed and awarded *harat Edyog Ratna

award from govt. of )ndia. He has the credit of taken over a sick mini cement plant

of ++ T: capacity at 0udhol and successfully put into commercial operation

with an increased capacity of !++T: within a short span of time. His social

services contributed in setting up residential schools, .2d. college at 0udhol.

!. 0r. Hanumanth R. "irani, aged about &+ years is a post graduate in commerce

and also a leading advocate in *ilagi Tq. He is the brother of 0r. 0urugesh R.

"irani and is also actively involved in the day-to-day operations of the sugar

plant.

%. 0rs. amala 0urugesh "irani aged about %! years is another director on the

*oard of the company and is the wife of 0r. 0urugesh R. "irani, who associates

0r. 0urugesh R. "irani and 0r. Hanamanth R. "irani in company matters.

As could be observed the company is a family concern and the overallmanagement of the 9ompany rests with 9hairman #hri. 0urugesh R. "irani who

is assisted by the other *oard of irectors.

*$cto#s ,ehi&d Est$b!ish'e&t

. Abundant available of resources like raw materialFsugarcane@, labors Fskilled ;

semi skilled@, transportation facilities, banking facilities,

!. (ertile land with having irrigation facilities. F


14/76


+RODUCT +RO*I)E

+#oduct +#ofi!e:

0ain product >hite 9rystal #ugar/

The main product of the sugar manufacturing process is white crystal sugar .This white

crystal sugar is manufacturing in the following grades/

$-%+ L $arge si8e sugarM

0-%+ L 0edium si8e sugarM

#-%+ L#mall si8e sugarM

#!-%+ L Cery small si8e sugarM

,y8 +#oducts of Su/$# C$&e:

The sugar mill produces many by-product along with sugar. A typical sugarcane

comprising of '+++ tons capacity can produce %&' on of sugar, 6+++ liters alcohol % tons

of yeast, ' tons of potash fertili8er, !' ton of press mud fertili8er and 5'+ kw of power

from bagasse.

Mo!$sses:

0olasses is the final effluent obtained in the preparation of sugar by repeated

crystalli8ation. 0olasses still contains some quantity of sugar, but this sugar cannot be

e3tracted by usual technology. )t is the end product from a refining process carried out to

yield sugar. #ucrose and invert sugars constitute a maDor portion F&+ to 7+4@ of 0olasses.

The yield of 0olasses per ton of sugarcane varies in range of %.'' to &.'4.

0olasses is mainly used for the manufacturing of ethyl alocoholFethanol@,Ieast

and cattle feed "#$ produces alcohol from the molasses left after the e3traction of sugar

from cane Duice cane be used both for portable purpose as well an industrial chemical.

(urther this alcohol can be again purified to produce fuel alcohol that cane be blended

with petrol. 2thanol is in turn used to produce portable liquor and down stream value

added chemical such as acetone, acid, butanol, acetic anhydride, etc. face stiff

competition form production through the petrochemical route.



15/76


The government controls the e3pert of molasses through e3port license issued for

every quarter. 0olasses and alcohol crop based industries were decontrolled in % and

being controlled by respective state government polices. "early 5+' of the alcohol

produced is consumed by portable alcohol sector.

The molasses prices that used to rule around !++ per ton during the yearly niceties

shot up to Rs.&++ per ton as a result of decontrol crop in 7, the prices came down to

Rs .&++ level. The increase in e3cise duty to specific rate of Rs.'++ per ton in 5

budget lend to sharp increase in molasses price.

,$/$sse:

*agasse is a fibrous residue of cane stalk that is obtained after crushing an

e3traction of Duice. )t consists of water, fiber an relatively small quantities of soluble

solids, the composition of bagasse various based on the variety of sugarcane, maturity of

cane, method of harvesting and the efficacy of the sugar mill, the usual bagasse

composition is given below.

9="T2"T RA"


16/76


A#e$ of o"e#$tio&84!ob$!9N$tio&$!9Re/io&$!:

"#$ manufacture is originally from arnataka. The head office of "#$

umbai,*agalkot sameerwadi plant is main manufacturing plant.

0udhol

0ahalingapur

0alapure

#organvi

Roogi

Ettur

Jamakhandi

*asavanbagevadi

#ameerwadi

T$b!e of Su/$# C$&e C#ushed i& diffe#e&t ye$#

#l."o Iear 9ane 9rushed

F)n $akhs@

Recovery 4 uration

Fays@

-!+++ &&'6.'' 5.7 !++

! !+++-!++ +'5.6! 6.6 !!

% !++-!++! 5&'&5.'% .5' 6%

& !++!-!++% &'5%'.&% .7 !' !++%-!++& !5'&.77 .6'

7 !++&-!++' 7%!%&.7+ 6.7 ''

5 !++'-!++7 &5&&+.5%+ +.+ 7%

6 !++7-!++5 %&!67%.5'+ !. !

!++5-!++6 6%+5.'&% !.'7 !%



17/76




18/76


,o$#d of M$&$/e'e&t

. #ri. 0urugesh R. "irani 9hairman ; 0anaging irector

!. #ri. #angamesh R. "irani 23ecutive irector.

%. #ri. Hanamanth R. "irani irector.

&. #mt. amala 0. "irani irector.



19/76


*UNCTIONA) DE+ARTMENTS

STUDY O* DE+ARTMENTS

Human Resource epartment

! 0arketing epartment

% :urchase epartment

& 9ane evelopment epartment

' :roduction epartment

7 (inance epartment

5 #ales and istribution epartment



20/76


-UMAN RESOURCE DE+ARTMENT

The Human Resource department is the primarily concerned with the human

constitution of an organi8ation. )t is concerned with the manpower recruitment,remuneration, promotion, retirement etc., all related to human resource or labors of the

organi8ation.

The Human Resource epartment refers to the systematic approach to the

problem of selection, training motivating and retaining personnel in any organi8ation. )t

also consider with planning, organi8ing, directing the personnel functions in the

organi8ation.



21/76


The de"$#t'e&t is $!so co&ce#&ed %ith #ec#uit'e&t se!ectio& $&d "!$ce'e&t(

evelopment and training to the workers.

! evelopment evaluation of the workers.

% >age and salary administration.

)n "irani #ugars the personnel manager takes all the above responsibilities and

undertakes the activities concerned with him.

#uitable candidates are selected to a particular Dob according to their qualification

and e3perience.

There is no necessary to give training to the workers on separate machine other

than actual production process. Hence training is given on the Dob only.

0anager and supervisor are continuously inspecting every worker ti access their

performance and there is a better scope for hard workers.



22/76


TIME O**ICE

Time office is one of the important sections of administration department. This

section maintains the attendance of workers. )t also shows records of a particular workersabout his working hours, dit, etc. it evaluates the workers punctuality, discipline and

uniforms and maintains documents and records for the future reference purpose.

*UNCTIONS

#howing the absenteeism report of H=.

! To receive the attendance cards from the workers.

% To put attendance of the workers in he muster role.

)n time office there are & types of leaves.

SIC7 )EAVE/- employees are eligible to take have on the sickness. 6 days sick leave

shall be granted with full wages.

CASUA) )EAVE/- + days casual leave shall be granted with full wages or pay

including A to the every workman.

+RIVI)E4ED )EAVE/- ' ays privileged leave shall be granted with full wages or

pay including A to the every workman for every completed year.

SECURITY O**ICE

#ecurity officer also one of the important section of the administration

department. There are totally % guards



23/76


DUTIES O* SECURITY O**ICER

. 0aintain the silencing in the factory area.

!. Time maintenance of workers.%. Raw materials are checked according to the voucher.

&. )ncoming materials are checked, if they are right, they will records inward and

seal the bill and leave inside.

'. )f out going material from the industry that person must and should have got pass

and it is entered in outwards.

7. )f goods are returnable, it will be entered in return A?9 book.

5. All times of A?91s are submitted to 0.. daily.

*ACI)ITY TO OR7ERS

. Availability of rest house with TC facility.

!. Availability of quarters.

%. :roviding ! wheelers for employees who are visiting the field to supervise and

check the availability cane.

&. 23ecutive levels are provided with & wheelers.

'. >eekly one holiday of any in a week

NATIONA) -O)IDAY

The industry can give the leave for the national holidays, fair days of national

holidays should be given to the employees, such as )ndependence day, Republic ay,


24/76


6 Absent statement

S-I*T OR7IN4

)n a shift of 6 hours factory is providing & types of shifts/-

stshift & am ! pm

!ndshift ! pm 6 pm

%rdshift 6 pm & am

ages and salary administration

Training and development

Records and incentives

>elfare maintenance



25/76


-( R( D

NUM,ER O* OR7ERS

=fficers !&

Regular 5!

Trainees %'

aily wages with order 5

Total '7&



26/76


II MAR7ETIN4 DE+ARTMENT



27/76


M$#.eti&/ +#ocess

The term marketing has been derived from the word 0AR2T. 0arket is

generally understood as a place or geographical area where buyers and sellers meet and

enter in to transactions involving transfer of ownership of goods, service, and securities.

*e$tu#es of M$#.eti&/

)t is consumer oriented.

! )t starts and ends with consumer.

% 0arketing is a system

& )t is a goal oriented.

' 23change process is the essence of marketing.

7 )t is the guiding element of business.



28/76


MAR7ETIN4

0arketing is a social and managerial process by which individual and group

obtains what they need and what through creating, offering and e3changing products ofvalues with others. This marketing is important element in every organi8ation, which

should be maintained compulsory in a systematic manner.

This section will take care of all sale transactions like sale of sugar, molasses,

*agasse and scrap material. This section works by 5 employees including sales manager.

The factory has sold the sugar according to central government notification. The central

government sends the notice to the factory every month regarding sale of sugar, without

notice the sugar is not sold to anybody. The government is giving permission for a

particular period, particular for sale of sugar. The sugar is sold to the buyer who quotes

highest price. )n this section, some records like sale of sugar register, molasses register,

*agasse registers and scrap material registers are maintained.

+RODUCT O* SA)E

The organi8ation undertakes selling activities in two methods/-

*REE SA)E/- free sale of sugar is being done to bulk purchases on the basis of

tenders called, collected, negotiated and sold.

! )EVY SA)E/- This is being sold to the government of arnataka on levy basis.

The government then distributes the same to the public through public distribution

outlets at predetermined reasonable price.



29/76


+URC-ASE DE+ARTMENT

:urchase success and failure of any company depends on the cost of materials, the

proper buying of materials and procurement of materials at the right time from the rightsource is having greater importance in any business. There is a need for separate

department for buying the materials known as :urchasing department.

The purchase section also connected to administrative department. )n this section

% workers are working including purchase officers. This section is purchasing all types of

materials for the factory, plant and machinery.

This department also maintains the quality of raw materials, by taking the sample

of cane to laboratory test then if the raw material will below standard then will be

reDected, otherwise the raw material will be purchased at the particular price.

*UNCTIONS O* +URC-ASE DE+ARTMENT/-

Receiving purchasing requisition

etermining the volume of materials to be ordered

:lacing orders

)nviting tenders and quotations from different suppliers

9hecking and passing bills for payment.

Receiving and inspecting materials.



30/76


UA)ITIES O* +URC-ASE MANA4ER

)n "irani )ndustry the purchase has to follow the following qualities.


31/76


CANE DEVE)O+MENT DE+ARTMENT



32/76


O,3ECTIVES O* CANE DEVE)O+MENT DE+ARTMENT

To get high yield of sugarcane to the factory in right time.

To improve variety of cane

To develop the backward area

To provide all facilities like seeds, fertili8ers, unloading and loading charges

To maintain registration of cane, gang and plantation.

To undertake seed distribution programme

The soil of this area is varying alluvial fertile soil is there on the bank of rishna

and


33/76


+RODUCTION DE+ARTMENT

The production department is center of the center organi8ation. The main function

of the production department is (unctions/-

To maintain close and co-ordinates relationship with all others.

To upgrade the technical efficiency of the production.

To flow up the daily production schedule of as per plan.

To produce the future needs of the company and to promote the organi8ation.

O,3ECTIVES

To plan and meet the production requirements as per customer specification

through the continuous improvement in the planning processing and optimum

utili8ation of resource.

To identify control the customer supplied products.

To produce for future needs and customers specification.

This department is one of the core parts in every organi8ation and it plays a vital

role in the organi8ation, smooth going, basically, in every sugar industry production is

divided in to two sections.

2ngineering section

0anufacturing section



34/76


+RODUCTION +ROCESS

Ste" 2( weighing of sugar cane, it means, when the sugar cane comes to the factory.

After weighing of sugar cane the unloaded carrier cane weigh bridge.

Ste" 6( )n the ne3t step sugar cane go to the cane cutter machine and it cuts the fine

pieces after that, there are % mills and ' mills tandem that is sequential mill.

Ste" . Then the ne3t step, the Duice sent to clarifier and in that there is a separation of

dust and clear transferals Duice.

9lear Duice sends to N*hoomi $abhO. This is the produce fertili8er. 9lear Duice

will be thick. )t calls as syrup. Again add to the milk and #=! then it is called syrup

suplitation.

Ste" ?. sulpitation comes to the pan boiling station and this there are % categories, A,*

and 9 first of all the sulpitation goes to the NAO category.

And the pan boiling directly goes to pan crystal. Raw sugar goes to the

centrifugal machine routed to the high speed of around !++ rbm. )t will be separated

sugar crystal and molasses.

Ste" @. )n this, the sugar crystal downs and passes through grass happer. )n the grass

happer the sugar goes to the one place to another place.



35/76


After there is gradation, in that there are % grades. )t will be divide the % grades/- high

grade, small grade, low grade.

Ste" . And then the sugar goes to the different vessels. )n that, package of sugar. )n this

there are ! types packing e3porting and domestic is different.

*INIS-ED +RODUCTS

(inished product is sugar. There are % types of finished sugars, High uality,

0iddle uality and $ow uality.

These are % types of bye products

0olasses

*agasse

(ilters mud

EN4INEERIN4 SECTION

This section is assisted by workshop. )t maintains all the work connected with

plant and machinery.

OR7S-O+:-

)n this workshop machinery work is done. The spares, materials are fabricated

using the lather machines in the workshop, shaping like square cutting etc is also done in

the workshop. (ollowing machines are used in this workshop.

! lathe machines for round Dob

redial drilling machines for drilling hole

shaping machine of %!P for right angle planning

hacksaw machine for cutting

grinding machine for tool grinding



36/76


MANU*ACTURIN4 SECTION

The manufacturing section again divided in to % sub sections.

$aboratory

0anufacturing process


37/76


C-EMICA) DE+ARTMENT

C-EMICA)S USED IN +RODUCTION

9austic #oda F #odium 9arbonate @

>ashing soda F #odium *icarbonate @

9ommon salt F sodium 9hloride @

:hosphoric Acid F To maintain the :H @

Ammonium *i-fluoride

(ormalin quality maintain and preservative

0ill sanitation chemical to prevent the generation of bacteria and germs

Hydrous - Esed for 9olor

Ciscosity - Esed for reducer

0isopropile - Esed for Alcohol

9ommercial H9$

*leaching :owder - #hining purpose

$ed Acitate -(or laboratory purpose



38/76


+#ocess



39/76


*INANCE DE+ARTMENT



40/76


SA)ES AND DISTRI,UTION DE+ARTMENT

SA)ES MAN4EMENT +RACTICE O* NIRANI SU4ARS

The marketing department of "irani #ugars is working in two ways.

. (ree #cale

!. $evy #cale

The out put of the factory produced is sold to public and


41/76


SOT ANA)YSIS



42/76


SOT ANA)YSIS

STREN4T-S

The :romoter are young political background and have vast industrial e3perience

in the field of #ugar and are having good relationship with the local farmers. This

may help them in sugarcane procurement.

"o difficulty is envisaged in availability of raw material i.e. sugar cane, as the

proDect is coming up in the area of sugar cane growing belt with a good irrigation

facilities and good recovery.

The area will not suffer draught as the $ift irrigation system of Almatti am as

already implemented hence the #ugar recovery in the area is good.

The co-generation of power of 7 0> will improve the profitability of the

company.

The by-product vi8. molasses will bring additional revenue as it will be sold to

distillery units as raw material.

EA7NESSES

9o-


43/76


O++ORTUNITIES

#etting up of further down stream proDects like manufacture of ethanol or a

distillery for manufacture of liquor.

T-REATS

Raw material, cane, being a agricultural product its availability and prices are

dependent upon vagaries of monsoon.

Tough competition from other sugar factories.

(ailure to adopt modern technology.

Enable to satisfy the needs of workers, this might make them to leave the

organi8ation.



44/76


Visio& of Ni#$&i Su/$#s )td(

. To establish production 5,'++ T.9. at 0udhol.

!. To produce &+ 0egawatt electricity.

%. To produce !,+++ liters of distillery unit..

&. To produce +,+++ ton *io fertili8ers.

'. To establish agricultural development and resource center at 0udhol.

7. :lan to establish "irani 2ducation )nstitution in *ilagi and 0udhol.

5. CiDaya 9o-operative 9redit society. CiDayanagar 0udhol.

6. To implement highly technical "irani 2ducational institutes 0udhol ; *ilagi



45/76


MISSION

>e will provide products of superior quality at competitive price and ensure

sustained profitability and growth. >e will protect the interest of all concerned promoters, shareholders, customers,

distributors, employees and community.

>e believe in fair trade practice, standards and strive for total customer1s

satisfaction, keeping the environment eco friendly.

>e believe that our people are most valuable assets for personal and

organi8ational growth.

>e will treat our people with dignity and look after the safety and welfare ofindividuals and there families.

>e provide electricity which is maDor necessity for the country.

#ugar industries are providing ethanol which can be added in diesel and diesel is

maDor requirement of the company.

O,3ECTIVES O* NIRANI SU4ARS )TD(:

. 0a3imum, effective and efficient utili8ation of available resources.

!. To manufacture good quality sugar and bi-products.

%. >elfare of agriculturists

&. To provide comparative market rate to the farmers.

'. :roper co-ordination and co-operation among its members.

7. To maintain proper means of transportation to the farmers during season.

5. :rovide modern techniques and methods and of cultivation and to supply seeds,

fertili8ers to the farmers.

6. To undertake such other activities as are incidental and conductive to the

development of society.



46/76


DATA INTER+RETATION

B RATIO ANA)YSIS



47/76


INTRODUCTION

Ratio analysis is a technique of analy8ing the financial statement of industrial concerns.

"ow a day this technique is sophisticated and is commonly used in business concerns. Ratio

analysis is not an end but it is only means of better understanding of financial strength and andweakness of a firm.

Ratio analysis is one of the most powerful tools of financial analysis which helps in

analy8ing and interpreting the health of the firm. Ratio1s are proved as the basic instrument in

the control process and act as back bone in schemes of the business forecast.

ith the he!" of #$tio %e c$& dete#'i&e

The ability of the firm to meet its current obligation.

The limit or e3tent to which the firm has used its borrowed funds.

The efficiency with which the firm is utili8ing in generating sales revenue.

The operating efficiency and performance of the company .

C!$ssific$tio& of R$tios

Ratios can be classified into different categories depending upon the basis ofclassification.

I(TRADITIONA) C)ASSI*ICATION

Traditional 9lassification has been on the basis of financial statements, on which

ratio may be classified as follows.

2( +#ofit B )oss $ccou&t #$tios(

2.g.


48/76


II( *UNCTIONA) C)ASSI*ICATION O* RATIOS

*u&ctio&$! #$tios

6( )iuidity #$tios

c@ 9urrent Ratio

d@ uick Ratio

6( )eve#$/e R$tios

c@ ebt-equity Ratio

d@ 9urrent Asset to :roprietor1s fund Ratio

III( +RO,A,I)ITY RATIOS

a. orking 9apital Turnover Ratio.



49/76


ANA)YSIS B INTRE+RETATION

I( )iuidity R$tio

$iquidity ratio measures the ability of the firm to meet

its current obligation Fliabilities@. )n fact analysis of liquidity

needs the preparation of cash budget and cash and fund flow

statement but liquidity ratio, by establishing a relationship

between cash and other current asset to current obligation, to

provide a quick measure of liquidity. A firm should ensure that

it doesn1t suffer lack of liquidity and also that it dose not have

e3cess liquidity.

The common liquidity ratios are/-

2( Cu##e&t R$tio

9urrent ratio may be defined as the relationship

between current asset and current liabilities. This is a measure

of general liquidity ; is most widely used to make analysis of

short-turn financial position or liquidity of firm. )t is calculated

by dividing the total current assets by total current liabilities.

9urrent Ratio Q 9urrent Assets

9urrent $iabilities



50/76


TA,)E82(2 Cu##e&t R$tio

Ye

$#

Cu##e&t Cu##e&t R$tio

Assets )i$bi!ities

!++&-+' &%++57+% &!+''&7 %.+&

!++'-+7 %&%77'!% !!&5'6+%' .'

!++7-+5 %%7%6%!7 6+!67!+ +.&!

!++5-+6 &56!75 676'%6&+ +.&6

!++6-+ %&%&'57 55&'%+6 +.&'

CURRENT RATIO

3.04

1.5

0.42 0.48 0.450

0.5

1

1.5

2

2.5

3

3.5

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

Ratio

INTER+RETATION

The above table shows that "#$1s current ratio has decreased

from %.+& to .' in the year !++' and !++7 and in the year !++5

it was drastically fluctuated to +.&! and then the year !++6 itraise to +.&6 but again decreased to +.&' in the !++ .

The company had the fluctuation of !&.!+4 increase in current

assets and 6.64 in current liabilities. in the year !++ the

current assets has decreased by 7.%64 and +.6!4 in current

liabilities.

An ideal current ratio is !/ for every one rupee of current

liabilities, current assets of doable rupee are available. The



51/76


current ratio determines margin of safety for creditors, there has

been decrease in the ratio during !++ compared with !++6.

6( uic. R$tio9Acid Test R$tio

uick ratio establishes relationship between quick or

liquid assets ; current liabilities. )t is also known as acid test

ratio. An asset is said to be liquid if it can be converted into

case within short period of time without loss of value. The

prepaid e3penses and stock were e3cluded.

uick ratio Q uick asset

9urrent $iabilities

TA,)E82(6 uic. R$tio

Iear uick 9urrent Ratio

Assets $iabilities

!++&-+' !6&!6!6%5 &!+''&7 !.+

!++'-+7 55!55 !!&5'6+%' +.5

!++7-+5 %6%%!57 6+!67!+ +.5

!++5-+6 !56%5% 676'%6&+ +.'

!++6-+ 5+56& 55&'%+6 +.!!

QUICK RATIO

2.01

0.79

0.17 0.15 0.220

0.5

1

1.5

2

2.5

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

YEAR

RATIO

Ratio

INTER+RETATION:

The above table shows that the quick assets of "#$ has

decreased from !.+ to +.5 in the year !++' and !++7 and had



52/76


drastical fluctuation to +.5 and +.' in the year !++5 and !++6

and had slight raise to +.!! in the year !++.

The company had fluctuation 5.'4 decrease in quick asset

and and 6.64 increase in current liabilities and in the year

!++ there was increase in quick asset %%.'74 and +.6!4

decrease in current liabilities.

This ratio measures firm1s ability to serve short term liabilities.

The ideal quick ratio is NO . a low quick ratio represents that

firm1s liquidity poison is not good.

II( )eve#$/e R$tios

$everage ratios are also known as capital structureratio. These ratios indicate mi3 of funds provided by owners ;

lenders. As a general rule these should be appropriate mi3 debt

; owners equity in financing the firm1s assets.

$everage ratios are calculated to Dudge the long long-

term financial position of the company. #ome of the popular

leverage ratios are/

a( Debt8Euity R$tio

ebt-2quity ratio shows the relative contribution of

creditors and owners. ebt-2quity also known as 23ternal-

)nternal equity ratio. )t is calculated to measure the relative

claims of outsiders against firm assets.

ebt-2quity Ratio Q Total ebt

"et >orth

TA,)E86(2 Debt Euity R$tio



53/76


DEBT EQUITY RATIO

0.61 0.620.52

0.820.93

0

0.2

0.4

0.6

0.8

1

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

Ratio


Iear Total ebt "et >orth Ratio

!++&-+' ''&+!& &%+'!&! +.7

!++'-+7 &!&7!% 7%5&5 +.7!

!++7-+5 '&5767&5 '766!6+57 +.'!

!++5-+6 '7'+!577 '5+666'6 +.6!

!++6-+ 7!5%575 '5!77+65 +.%


54/76


INTER+RETATION

The table shows that the total debt ratio of "#$ had

increase in the year !++' and !++7 from +.7 to +.7! and had

fluctuation to +.'! in the year !++5 and further increased to

+.6! in the !++6 and +.% in the year !++. The company had

increase in the total debt by %.!54 and +.!%4 in net worth

and in the year !++ the debt was increased by .+!4 and

+.664 in net worth.

ebt equity ratio measures ultimate solvency of the company.)t

provides a margin of safety to creditors,thus when the ratio is

smaller the creditors are more secured . An appropriate debt

equity ratio is +.%%.A ratio higher than this is an indication of

risky financial policies.



55/76


b( Cu##e&t Assets to +#o"#ieto#0s fu&ds #$tio

This ratio is calculated by dividing total current assets

by shareholders funds. )t indicates the e3tent to which

proprietor funds are invested in current assets. There is no rule

of thumb for this ratio ; depending upon the nature of the

business there may be different ratios for different firms.

9A to :( ratio Q 9urrent Assets

:roprietors (und

TA,)E86(6 Cu##e&t Assets to +#o"#ieto#s *u&d

Iear 9urrent Assets :roprietors (und Ratio

!++&-+' &%++57+% !5%%'+++ .5

!++'-+7 %&%77'!% !5&+++++ .'6

!++7-+5 %%7%6%!7 !5'%++++ .''

!++5-+6 &56!7& !6+6&' .!

!++6-+ %&%&'57 !!%6%!5& .'7

C/A TO PROPRIETARY RATIO

1.97

1.58 1.55

1.92

1.56

0

0.5

1

1.5

2

2.5

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

Ratio



56/76


INTER+RETATION

The table of current assets to proprietory ratio shows that the ratio

has been decreased by .5 to .'6 in the year !++' and !++7 and

.'' in the year !++5 and then raise to .! in the year !++6 and then

decreased to .'7 in the year !++.

There was raise in current asset by !&.!+4 in the year !++6 and

proprietary fund by +.!!4 and further in !++ there was decrease by

7.%64 in current asset and there was increase by !.5%4 in

proprietary fund

This ratio indicates the e3tent to which proprietors fund are invested

in current asset



57/76


III(+#ofit$b!i!ity R$tios

The primary obDective of a business undertaking is to

earn profits. :rofit is the difference between revenue ;

e3penses over a period of time. :rofit is output of a company ;

company will have no further if it fails to make sufficient profit

:rofits are thus a useful measure of overall efficiency of a firm.

These ratios are calculated to measure the operating

efficiency of the company. *eside management, creditors,

owners are also interested in the profitability of the company.


58/76


TA,)E8


59/76


The gross profit indicates the degree to which the selling price

of goods per unit may decline without resulting in losses on

operation of the firm .)t reflects the efficiency with which firm

produces its products.

b5 O"e#$ti&/ R$tio

)t is the relation between cost of goods sold ;

operating e3penses on one hand ; the sales on the other hand.

)t measures the cost of operations per rupee of sales.

=perating Ratio Q =perating 9ost ++

#ales

TA,)E8


60/76


years !++7 and !++5 but further fluctuating to 6.7! in the year

!++6 and 5&.+& in the year !++ .

There is a decrease in operating cost by !&.'64 and !.%&4 in

sales but in the year !++ there was increase by !.%4 in

operating cost and 7!.%74 in sales.

An increase in the ratio over a previous period is an indication of

improvement in a operational efficiency of a concern the higher

the ratio is more successful the business is ,but a lower ratio

indicates large amount of manufacturing e3penses.

6( +#ofit$bi!ity i& #e!$tio& to I&vest'e&t

$( Retu#& o& sh$#eho!de#s I&vest'e&t:

Return on shareholders investments, popularly known

as R=). )t is the relationship between net profit after ta3 ;

shareholders funds. Thus this ratio is considered as affective

indicator of the company1s profitability because it reflects the

success of management in the efficient utili8ation of the

owner1s investment.

R=)Q. "et :rofit after Ta3 ++

#hareholders fund

TA*$2-%.% Return on shareholder investment

Ye$# S$!es Cu##e&t Assets R$tio

!++&-+' !76&!&' &%++57+% +.7!

!++'-+7 7!!7567&! %&%77'!% .6

!++7-+5 '!'%!76 %%7%6%!7 .57

!++5-+6 &'%&%'!% &56!7& .+

!++6-+ 5%7!+765 %&%&'57 !.



61/76


INTRE+RETATION:

The above table reveals that there is increase in the return on

investment from !+4 in the year !++' to !4 in the year !++7

but fell down to 5.+4 in the year !++5 .(urther in the year

!++6 there was a drastical raise to !&.&4 but fluctuated to

+.+&4 in the year !++.

Through the analysis we found that in the year !++ the net

profit was decreased by .6!4 and increased shareholders

fund by +.5%. This ratio is used to measure the overall

efficiency of a concern ,the higher the ratio the better the results

will be as this ratio reveals how well the resources of a concern

are being used.



62/76


IV( Activity R$tios:

(unds are invested in various assets in business to

make sales ; earn profit. The efficiency with which assets are

managed directly affects the volume of sales. The better the

management of assets, the larger is the amount of sales ; the

profit. Activity ratio measures the efficiency or effectiveness

with which a firm manages its resources or assets. These ratios

are also called turnover ratio because they indicate the speed

with which assets are converted or turned over into sales.

The various activity ratios are/

$( I&ve&to#y Tu#&ove# R$tio:

)nventory turnover ratio indicates the number of times

stock has been turned over during the period ; evaluates

efficiency with which a firm is able manage inventory.

The ratio is calculated by dividing the net sales divided

by average inventory at cost.

)TRQ "et #ales .

Average )nventory at 9ost

Average inventory should be taken for calculating stock

turnover ratio. Adding the stock in the beginning ; at the end

of period ; dividing it by ! to calculate average inventory.



63/76


TA*$2-&. )nventory turnover ratio

Iear "et #ales Average )nventory Ratio

!++&-+' !76&!&' &+&+''7 .6

!++'-+7 7!!7567&! &&+&'5% !.&&

!++7-+5 '!'%!76 %!7&++6+ .

!++5-+6 &'%&%'!% &6&7!%+&& +.&

!++6-+ 5%7!+765 %5%&&%& .&

INVENTORY TURNOVER RATIO

1.81

2.44

1.9

0.94

1.94

0

0.5

1

1.5

2

2.5

3

200 4- 05 200 5- 06 2 00 6- 07 2007- 08 200 8- 09

YEAR

RATIO

Ratio

INTER+RETATION:

The table shows the increase in the inventory turnover ratio

from .6 to !.&& in the year !++' and !++7 .)n the year !++5

there was a fluctuation to . and further to +.& in the year

!++6,but in the year !++ there was a drastical increase to .&.

The company had !%.&54 decrease in net sales and increase by

''.++4 in average inventory but in the year !++ there was

increase in net sales by 7!.%74 and decrease by !.5%4 in

average inventory.

)nventory turnover ratio signifies the liquidity of the inventory.

A high ratio implies good inventory management ,a low ratio



64/76


results in blocking of funds in inventory. The reference value of

this ratio and the ma3imum conversion period is %66.



65/76


b( Assets Tu#&ove# R$tio:

Assets are used to generate sales. Therefore a firm

should manage its assets efficiency to ma3imum sales. Assets

turnover ratio shows relationship between sales ; assets. The

various assets turnover ratio are/MM

i( *ied Assets Tu#&ove# R$tio:

This ratio establishes the relationship between the costs of

goods sold and fi3ed assets. )t can be calculated by ,

(i3ed Assets Turnover Ratio Q #ales

(i3ed Assets

TA,)E : =(6 *ied Assets Tu#&ove# R$tio

Iear #ales "et (i3ed Assets Ratio

!++&-+' !76&!&' '!%'6'%' +.'

!++'-+7 7!!7567&! '%!7+'' .7

!++7-+5 '!'%!76 '766!6757 .+&

!++5-+6 &'%&%'!% '5+666'6 +.6+

!++6-+ 5%7!+765 '5!77+65 .!

F/A TURNOVER RATIO

0.51

1.161.04

0.8

1.29

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2004-05 2005-06 2006-07 2007-08 2008-09

YEAR

RATIO

Ratio



66/76


INTRE+RETATION:

The table reveals that there is increase in fi3ed asset turnover

ratio from +.' in the year !++' to .7 in the year !++7 but

decreased to .+& in the year !++5 and drastical fluctuation to +.6

in the year !++5 and raise in the year to .! in the year !++.

The company had !%.&54 decrease in net sales and increase in

fi3ed assets by +.!%4 in the year !++6 and further in the year

!++ it had increase net sales by 7!.%74 and increase by +.64

in fi3ed assets.

=ne of the cautions to be kept in mind that when fi3ed assets are

old and substantially depreciated the ratio tenders to be

high,because,the denominator of the ratio will be low.



67/76


ii( Cu##e&t Assets Tu#&ove# R$tio:

This ratio is indicates how many net sales are made for every

rupee of investment in current assets.

9urrent Assets Turnover Ratio Q #ales

9urrent Assets

TA,)E: =(< Cu##e&t Assets Tu#&ove# R$tio

C/A TURNOVER RATIO

0.62

1.81 1.76

1.09

2.11

0

0.5

1

1.5

2

2.5

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

YEAR

RATIO

Ratio

INTRE+RETATION:

The table reveals that the current ratio has drastical increase

from +.7! the year !++' to .6 in the year !++7 but again there

was a decrease to .57 in the year !++5 and .+ in the year


Ye$# Net +#ofit Sh$#eho!de# *u&d R$tio

!++&-+' &%+'!&! !5%%'+++ !+4

!++'-+7 7%5&5 !5&+++++ !4

!++7-+5 '!&'%6 !5'%++++ 5.+4

!++5-+6 '+&'575 !6+6&' !%.&4!++6-+ &!% !!%6%!5& +.+&4


68/76


!++6. *ut there was a drastical increase of ratio to !. in the

year !++.

The company had decrease of !%.&54 in net sales and increase

in current assets by !&.!+4 . )n the year !++ there was increase

in net sales by 7!.%74 and 7.%64 decrease in currents asssets.

d( o#.i&/ C$"it$! tu#&ove# R$tio:

A firm may also related net current assets to sales.

>orking capital turnover ratio indicates the velocity of the

utili8ation of net working capital.

>orking 9apital Turnover RatioQ #ales

"et 9urrent Assets

TA,)E:=(= o#.i&/ C$"it$! Tu#&ove# R$tio


Iear #ales "et 9urrent Assets Ratio

!++&-+' !76&!&' &'67&!&'.' .!!

!++'-+7 7!!7567&! 7!'!%+7.& %.%5

!++7-+5 '!'%!76 !!6665+'&5 +.!

!++5-6 &'%&%'!% 6+5!'6.' '.!%

!++6-+ 5%7!+765 5!7+6'%.& 6.'


69/76


INTER+RETATION

The table reveals that the working capital turnover ratio of "#$

in the year !++' was .!! and increased to %.%5 in the year

!++7.but in the year !++5 there was a drastical fluctuation to

+.! in the year !++5 further there was a high increase in

working capital turnover ratio to '.!% in the year !++6 and 6.'

in !++.

There is decrease in net sales by !%.&54 and &.6+4 in net

current assets in the year !++6 and in the year !++ the net

sales increased by 7!.%74 and decreased by %6.674 in netcurrent assets.

The assets turnover ratio measures the efficiency of a firm in

managing and utili8ing the assets.Higher turnover ratio,more

efficient is the management utili8ation of the assets while low

turnover are indicative of under utili8ation of available

resources and presence of idle capacity. )n operational terms, it

implies that firm can e3pand its activity level without requiring

additional capital investments.



70/76




71/76


*INDIN4S

B

SU44ESTIONS



72/76


*INDIN4S

I ( )IUIDITY RATIO:

. (rom the current ratio it is found that the ratio is not

satisfactory because the 4 increase in current assets is

less than the 4 increase in current liabilities during the

year !++'-!++.The highest ratio recorded is %.+& in

!++' and the lowest ratio recorded is +.&! in the year

!++5.And less than the standard ratio.

!. (rom the quick ratio it is found that the ratio is not

satisfactory because the ratios recorded during the year

were less than the standard ratio.)n the year !++6 the

ratio recorded is +.' and the ratio recorded highest was

!.+ in the year !++'.

II ( )EVERA4E RATIO:

. (rom the debt equity ratio it is found that the ratio

recorded during the year !++',!++7,; !++5 is

satisfactory as the ratios are near to the standard ratio

but during the year !++6;!++ it is not satisfactory as

the ratios are very high compared to the standard ratio.

!. (rom the current assets to proprietors fund ratio is not

satisfactory as the proprietory funds invested in the

current assets is less in the year !++ is less compared

to previous years .The highest ratio recorded is .5 in

the year !++' and the lowest ratio recorded is .'' in

the year !++5.

III ( +RO*ITA,I)ITY RATIOS:



73/76


. (rom the gross profit ratio it is found that the ratio is

satisfactory during the last three years from !++5 to

!++. The highest ratio recorded in the year !++6 is

!.7' and the lowest ratio recorded is +. in the year

!++'.

!. (rom the operating profit ratio it is found that the ratio

is highly satisfactory during the considered financial

years.The highest ratio recorded is ++.+6 in the year

!++5 and the lowest is 77.'7 in the year !++&.

%. (rom the return on investment it is found that the ratio

calculated for the considered financial years is good .

The ratio is satisfactory as the return on investment is

effective and good,comparing the previous years.

IV ( ACTVTY RATIOS :

. (rom the inventory turnover ratio it is found that the

ratio is not satisfactory as the inventory holding period

is very high,compared during the financial years.

!. (rom the fi3ed assets turnover ratio it s found that the

ratio is satisfactory as the ratios are raising yearly

during the comparative years.



74/76


Su//estio&

. The company may improve its current ratio by

decreasing the current liabilities because in the year

!++6-+ current assets are decreased and it may also

improve its quick ratio.

!. The company may decrease its total debt as there is

increase in total debt the year !++6-+. The company

may increase its investment in current assets.

%. $ong terms solvency of the company has to be

improved by limiting amount invested by outsiders to

the amount invested by the owner of the company . this

can be achieved by purchasing the shares gradually.

&. The proper management of the inventory can improve

liquidity position and efficiency of the company.



75/76


CONC)USION

#tuday of ratio analysis of nirani sugars $td. Reveals

the performance of the company in terms of financial aspects. )tis found that there is increase in sales gross profit during !++'

to !++. The cash balance is also increased for the above saied

years this is due to company1s revised policy in debt collection.

)t is also observed that the current ratio is not so satisfactory

which creates chunks in the current assets in the form of sundry

debtors and inventory.



76/76


Refe#e&ces

@. Annual reports of "irani sugars ltd. for !++', !++7, !++5,

!++6, !++.

!@. J 0adegouda NAccounting for managersO

%@. han 0 and :.. Jain N(inancial managementO

Documents

A PROJECT REPORT ON Ratio Analysis @ NIRANI SUGAR LIMITED PROJECT REPORT MBA FINANCE.doc