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A
Project Report
On
Financial Analysis
Of
CEAT TYRE LTD
Submitted to
S.V. Institute of Management
Kadi Sarva Vishwavidyalaya University
On
DD/MM/YY
In Partial fulfillment of the requirements for the
Accounting for Managers course in the
Master of Business Administration Programme
Submitted By
MBA semester 1
ANAND SHAH ROLL NO:- 41 DIVISION:- B
TIWARI SANJAY ROLL NO:- 54 DIVISION:- B
1
PREFACE
The MBA degree course has its own distinguished & unique
solidarity like other professional course; one of its basic
requirements during the study terms for the student of first semester
of MBA is to make a financial report on an organization. We have
selected “CEAT TYRE LTD” for making our project report.
CEAT is a well-known company. It has to produce rubber & tyres in
India & export in all over the world; in today’s fast changing &
technological developing world management of finance is very
important phase. In this globalization age, corporate sector of the
country has to stand highly competitive market & further expansion
finance is also needed for day to day requirement. The main object
of the practical study at MBA level is to develop the knowledge
about the finance function make proper decision & to handle an
organization.
The preparation of this project report is to give the basic knowledge
about the industry & how the industry was perform well in the
market.
2
ACKNOWLEDGEMENT
We are interested all our caliber, attention & knowledge in preparing this project
report & while preparing this report we had got to know many things about the
industries & their problems, growth, structure, development etc..
With the presentation of this report we express our gratitude to thanks HOD Dr.
BHAVIN PANDYA, Professor NIKUNJ PATEL, Professor KALPESH
PRAJAPATI & S. V. Institute of Management for the encouragement & support
throughout the preparation of report.
We are very glad to have such co-operation & friendly professors who helped us
every time without hesitating & gave us the best valuable knowledge. Thank you
sir for making us know you will be there when we need somebody.
3
TABLE OF CONTENT
Chapter No Topic Page NoChapter-1 Introduction to the company 6Chapter-2 Comparative balance sheet & Analysis of balance
sheet16
Chapter-3 Comparative Profit & loss& Analysis of Profit & loss
19
Chapter-4 Common size statement 22Chapter-5 Trend Analysis 28Chapter-6 Analysis of Cash flow 35Chapter-7 Ratio Analysis 37Chapter-8 Recommendation & suggestion 66Chapter-9 Contemporary issue in accounting of the
company68
Chapter-10 Bibliography 76Chapter-11 Annexure 78
4
Chapter-1
Introduction to
The Company
5
(A) HISTORY OF THE ORGANIZATION
On the road since 1958, CEAT has run up to be one of the best tyre manufacturers
in the business. We not only make trailblazing tyres, but also market tubes and
flaps. And that's not all. At CEAT we personify our business; tough yet smooth,
secure yet ready to explore the undaunted.
They are young and revving to go; with a maturity that comes with years of market
presence. More than 3500 Cr annual turnover, an impressive list of clients and
OEMs, various awards and certificates are statistics that could speak for them. But
they'd rather scorch the road with their performance!
They believe that tyres are not just accessories; they are the force that moves their
aspirations. With them we get to choose from a wide range of tyres that suit their
needs and vehicle type. (Not to mention, their radials are racers in the world
market!) Strength is one of the most important attributes of our products, which
complements our solid foundation as a part of RPG Enterprises. Our commitment
to quality ensures that you have a safe ride, always. So go on, defy destiny.
6
(B) CORPORATE INFORMATION
Board of Directors
R. P. Goenka
Chairman
H. V. Goenka
Vice-Chairman
Anant Vardhan Goenka
Managing Director
Paras K. Chowdhary
Whole-time Director
& Chief Management Advisor
Vinay Bansal
A. C. Choksey
S. Doreswamy
Mahesh S. Gupta
Haigreve Khaitan
Bansi S. Mehta
Hari L. Mundra
K. R. Podar
7
Audit Committee
Hari L. Mundra
Chairman
S. Doreswamy
Member
Mahesh S. Gupta
Member
Shareholders/Investors
Grievance Committee
Mahesh S. Gupta
Chairman
Paras K. Chowdhary
Member
S. Doreswamy
Member
8
Company Secretary
H. N. Singh Rajpoot
Registered office
463, Dr. Annie Besant Road, Worli,
Mumbai 400 030
Plants
Village Road, Bhandup,
Mumbai 400 078
82, MIDC , Industrial Estate, Satpur,
Nasik 422 007
Village Gate Muvala, Halol, Panchmahal,
Gujarat 389 350
Legal Advisors
Mulla & Mulla and Craige, Blunt & Caroe
Auditors
N. M. Raiji & Co.
9
Registrar & Share
Transfer Agents
TSR Darashaw Limited
6-10, Haji Moosa Patrawala
Industrial Estate, 20, Dr. E. Moses Road,
Worli, Mumbai 400 011
Bankers
Axis Bank Limited
Bank of Baroda
Bank of India
Corporation Bank
Deutsche Bank
Exim Bank
ICICI Bank Limited
Indian Bank
Industrial Development Bank of India
State Bank of India
The Karnataka Bank Limited
UCO Bank
Yes Bank Limited
10
(C) PRODUCT OF THE COMPANY
CEAT manufactures a wide range of tyres for various customer radials for Indian vehicles and caters to various user segments including
Heavy-duty Trucks and Buses Light Commercial Vehicles Earthmovers Forklifts Tractors Trailers Cars SUVs Motorcycles and Scooters Auto-rickshaws
It exports to over 110 countries across the world. In April 2007, the de-merger of its investment business to a separate investment and finance company was approved. CEAT is the only tyre company to be awarded the ISO/TS 16949:2002 certification. It is also the 1st Indian tyre company to get a TUV certificate.
11
(D) COMPARISON OF LAST FIVE YEAR
Comparison of sales:-
YEAR 2007-08 2008-09 2009-10 2010-11 2011-12Sales 2,32,996 2,51,369 2,80,747 3,46,892 4,49,202
2007-08 2008-09 2009-10 2010-11 2011-120
100000
200000
300000
400000
500000
600000
sales
sales
Interpretation:-
The above graph shows the comparison of sales of the company. In 2007-08 the sales of the company was around 2, 32,996 it increases to 2, 51,369 in next years. In 2011-12 it reaches to 4, 49,202. This shows that the company’s turnover is double in last five year.
12
Comparison of profit after tax:-
YEAR 2007-08 2008-09 2009-10 2010-11 2011-12PAT 7.54 22.28 161.04 -16.11 148.60
2007-08 2008-09 2009-10 2010-11 2011-12
-50
0
50
100
150
200
PAT
PAT
Interpretation:-
The above graph shows the profit after tax of the company of last five year. In 2007-08 the profit of the company was very low & it was 7.54%. In 2008-09 it increases to 22028% in 2009-10 it reaches to 160.04% which is very good for the company in 2010-11 the company had made a loss of 16.11% which is not good for the company. In last year the company had made a profit of 148.60%.
13
Comparison of dividend:-
YEAR 2007-08 2008-09 2009-10 2010-11 2011-12DIVIDEND 3.42 6.85 13.70 0.00 13.70
2007-2008 2008-2009 2009-2010 2010-2011 2011-20120
2
4
6
8
10
12
14
16
DIVIDEND
DIVIDEND
Interpretation:-
The above graph shows the dividend paid by the company to its share holders in last five year. In 2010-11 the company had not paid the dividend to its share holder because of the company had made a loss of 16.11%
14
Chapter-2Comparative Balance sheet &
Analysis of balance sheet
Comparative Balance sheet:-
15
March 2012
March 2011
Maech 2010
March 2009
Maech 2008
Sources of fundsTotal Share Capital 34.24 34.24 34.24 34.24 34.24Equity Share Capital 34.24 34.24 34.24 34.24 34.24Share Application Money 3.64 6.05 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 618.46 608.85 594.47 449.45 465.56Revaluation Reserves 0.00 0.00 0.00 4.68 13.45Networth 656.34 649.14 628.71 488.37 513.25Secured Loans 936.43 624.13 312.05 398.12 265.39Unsecured Loans 134.38 130.78 117.32 63.01 64.63Total Debt 1,070.81 754.91 429.37 461.13 330.02Total Liabilities 1,727.15 1,404.05 1,058.08 949.50 843.27
Application Of FundsGross Block 2,100.82 1,881.55 1,256.41 1,234.06 1,214.33Less: Accum. Depreciation 576.74 520.46 487.48 458.67 427.71Net Block 1,524.08 1,361.09 768.93 775.39 786.62Capital Work in Progress 13.42 123.40 233.84 19.56 3.48Investments 74.48 86.53 58.51 42.67 9.60Inventories 579.61 567.46 406.08 219.42 341.06Sundry Debtors 612.60 468.68 376.32 318.71 307.91Cash and Bank Balance 33.43 44.62 35.95 43.48 37.55Total Current Assets 1,225.64 1,080.76 818.35 581.61 686.52Loans and Advances 150.93 159.71 117.34 91.84 84.47Fixed Deposits 0.00 3.26 104.04 158.04 4.03Total CA, Loans & Advances 1,376.57 1,243.73 1,039.73 831.49 775.02Deffered Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 1,237.95 1,383.58 1,006.54 701.77 706.20Provisions 23.44 27.12 36.36 17.80 25.25Total CL & Provisions 1,261.39 1,410.70 1,042.90 719.57 731.45Net Current Assets 115.18 -166.97 -3.17 111.92 43.57Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00Total Assets 1,727.16 1,404.05 1,058.11 949.54 843.27
Contingent Liabilities 182.66 269.63 440.08 159.99 164.33Book Value (Rs) 190.61 187.80 183.60 141.25 145.96
Graph of Total Current Assets & Loans & Advances:-
16
2011-12 2010-11 2009-10 2008-09 2007-080.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,376.57
1,243.73
1,039.73
831.49775.02
Total CA, Loans & Advances
Total CA, Loans & Advances
Graph of Current Liabilities & Provision:-
2011-12 2010-11 2009-10 2008-09 2007-080.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,261.39
1,410.70
1,042.90
719.57 731.45
Total CL & Provisions
Total CL & Provisions
Interpretation:-
17
The comparative balance sheet shows the comparison of total liabilities & total assets. How many total assets are there in the company against its total liabilities? In 2007-08 the total liabilities & assets of the company was 843.27 & it reaches to 1727.16 in 2011-12. Which shows the liabilities & assets of the company increases to two times, it means the company has a ratio of 1:1 of its liabilities & its assets.
18
Chapter-3Comparative profit & loss
&Analysis of profit & loss
19
Comparative profit & loss a/c
March 2012
March 2011
March 2010
March 2009
March 2008
IncomeSales Turnover 4,824.81 3,779.66 3,001.83 2,769.43 2,611.41Excise Duty 352.79 294.61 185.33 239.97 275.38Net Sales 4,472.02 3,485.05 2,816.50 2,529.46 2,336.03Other Income 16.85 22.43 20.85 31.50 77.54Stock Adjustments -25.90 151.74 32.25 8.52 25.79Total Income 4,462.97 3,659.22 2,869.60 2,569.48 2,439.36ExpenditureRaw Materials 3,342.81 2,760.57 1,918.46 1,830.69 1,567.37Power & Fuel Cost 151.47 122.61 108.91 90.54 80.16Employee Cost 232.70 204.43 194.68 160.69 143.02Other Manufacturing Expenses 0.00 135.78 97.76 88.04 96.86Selling and Admin Expenses 0.00 240.59 193.02 322.51 257.75Miscellaneous Expenses 463.57 25.73 18.65 10.65 12.95Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00Total Expenses 4,190.55 3,489.71 2,531.48 2,503.12 2,158.11
Operating Profit 255.57 147.08 317.27 34.86 203.71PBDIT 272.42 169.51 338.12 66.36 281.25
Graph of Total Income:-
20
2011-12 2010-11 2009-10 2008-09 2007-080.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.004,462.97
3,659.22
2,869.602,569.48 2,439.36
Total Income
Total Income
Graph of Total expenses:-
2011-12 2010-11 2009-10 2008-09 2007-080.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00 4,190.55
3,489.71
2,531.48 2,503.122,158.11
Total Expenses
Total Expenses
Interpretation:-
Comparative profit & loss a/c shows the profit & loss of the last five year of the company. In 207-08 the income of the company was around to 2439.36 Rs & the expenditure of the company was 2158.11 Rs. The profit of the company in 2007-08 was 281.25 Rs. It increases by time to time. In 2011-12 the company had made a profit of 272.42 which is low against the profit of 2007-08. In 2008-09 the profit of the company was very low.
21
Chapter-4Common-size statement
22
Common size Balance Sheet:-
March 2012
March 2011
March 2010
March 2009
March 2008
March 2012
March 2011
March 2010
March 2009
March 2008
Sources of fundsEquity share capital 34.24 34.24 34.24 34.24 34.24 1.98% 2.44% 3.24% 3.61% 4.06%Share application money
3.64 6.05 0 0 0 0.21% 0.43% 0.00% 0.00% 0.00%
Reserve 618.46 608.85 594.47 449.45 465.56 35.81% 43.36% 56.18% 47.34% 55.21%Revaluation reserve 0 0 0 4.68 13.45 0.00% 0.00% 0.00% 0.49% 1.59%Net worth 656.34 649.14 628.71 488.37 513.25 38.00% 46.23% 59.42% 51.43% 60.86%Secured loan 936.43 624.13 312.05 398.12 265.39 54.22% 44.45% 29.49% 41.93% 31.47%Unsecured loan 134.38 130.78 117.32 63.01 64.63 7.78% 9.31% 11.09% 6.64% 7.66%Total debt 1,070.81 754.91 429.37 461.13 330.02 62.00% 53.77% 40.58% 48.57% 39.14%Total liability 1727.15 1404.05 1058.08 949.5 843.27 100% 100% 100% 100% 100%
Application of fundsGross block 2,100.82 1,881.55 1,256.41 1,234.06 1,214.33 121.63% 134.01% 118.74% 129.96% 144.00%(-) Acc.depreciasion 576.74 520.46 487.48 458.67 427.71 33.39% 37.07% 46.07% 48.30% 50.72%Net block 1,524.08 1,361.09 768.93 775.39 786.62 88.24% 96.94% 72.67% 81.66% 93.28%Capital work in progress
13.42 123.4 233.84 19.56 3.48 0.78% 8.79% 22.10% 2.06% 0.41%
Total 1,537.50 1,484.49 1,002.77 794.95 790.10 89.02% 105.73% 94.77% 83.72% 93.69%Investment 74.48 86.53 58.51 42.67 9.6 4.31% 6.16% 5.53% 4.49% 1.14%Inventory 579.61 567.46 406.08 219.42 341.06 33.56% 40.42% 38.38% 23.11% 40.44%Sundry debtors 612.6 468.68 376.32 318.71 307.91 35.47% 33.38% 35.57% 33.56% 36.51%Cash & bank 33.43 44.62 35.95 43.48 37.55 1.94% 3.18% 3.40% 4.58% 4.45%Total current assets 1,225.64 1,080.76 818.35 581.61 686.52 70.96% 76.97% 77.34% 61.25% 81.41%Loans & advances 150.93 159.71 117.34 91.84 84.47 8.74% 11.37% 11.09% 9.67% 10.02%Fixed deposite 0 3.26 104.04 158.04 4.03 0.00% 0.23% 9.83% 16.64% 0.48%Total CA loan & adv 1,376.57 1,243.73 1,039.73 831.49 775.02 79.70% 88.58% 98.26% 87.57% 91.91%Differed credit 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%Current liability 1,237.95 1,383.58 1,006.54 701.77 706.2 71.68% 98.54% 95.13% 73.91% 83.75%Provision 23.44 27.12 36.36 17.8 25.25 1.36% 1.93% 3.44% 1.87% 2.99%Total CL & Provision
1,261.39 1,410.70 1,042.90 719.57 731.45 73.03% 100.47% 98.56% 75.78% 86.74%
23
Net current assets 115.18 -166.97 -3.17 111.92 43.57 6.67% -11.89% -0.30% 11.79% 5.17%Misc expenses 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%Total assets 1727.15 1404.05 1058.08 949.5 843.27 100% 100% 100% 100% 100%Contingent liability 182.66 269.63 440.08 159.99 164.33 10.5% 19.20% 41.59% 16.85% 19.49%Book value 190.61 187.8 183.6 141.25 145.96 11.04% 13.38% 17.35% 14.88% 17.31%
Graph of total Debts:-
2011-12 2010-11 2009-10 2008-09 2007-080.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%62.00%
53.77%
40.58%
48.57%
39.14%
Total debt
Total debt
Graph of Total CA Loans & Advances:-
24
2011-12 2010-11 2009-10 2008-09 2007-080.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
79.70%88.58%
98.26%
87.57%91.91%
Total CA loan & adv
Total CA loan & adv
Graph of CL & Provision:-
2011-12 2010-11 2009-10 2008-09 2007-080.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
73.03%
100.47% 98.56%
75.78%
86.74%
Total CL & Provision
Total CL & Provision
Interpretation:-
25
Common size balance sheet shows the percentage increases or decreases in the liabilities & in the assets. It shows the increase or decrease the percentage of share capital & reserve & surplus. As well as it shows the increase or decrease the percentage of current assets & current liabilities & provision
Common size Profit & loss A/c:-
March 2012
March 2011
March 2010
March 2009
March 2008
March 2012
March 2011
March 2010
March 2009
March 2008
Sales Turnover 4,824.81 3,779.66 3,001.83 2,769.43 2,611.41 100.00% 100.00% 100.00%
100.00% 100.00%
Excise Duty 352.79 294.61 185.33 239.97 275.38 7.31% 7.79% 6.17% 8.66% 10.55%Net Sales 4,472.02 3,485.05 2,816.50 2,529.46 2,336.03 92.69% 92.21% 93.83% 91.34% 89.45%Other Income 16.85 22.43 20.85 31.5 77.54 0.35% 0.59% 0.69% 1.14% 2.97%Stock Adjustments
-25.9 151.74 32.25 8.52 25.79 -0.54% 4.01% 1.07% 0.31% 0.99%
Total Income 4,462.97 3,659.22 2,869.60 2,569.48 2,439.36 92.50% 96.81% 95.60% 92.78% 93.41%ExpenditureRaw Materials 3,342.81 2,760.57 1,918.46 1,830.69 1,567.37 69.28% 73.04% 63.91% 66.10% 60.02%Power & Fuel Cost
151.47 122.61 108.91 90.54 80.16 3.14% 3.24% 3.63% 3.27% 3.07%
Employee Cost 232.7 204.43 194.68 160.69 143.02 4.82% 5.41% 6.49% 5.80% 5.48%Other Manufacturing Expenses
0 135.78 97.76 88.04 96.86 0.00% 3.59% 3.26% 3.18% 3.71%
Selling and Admin Expenses
0 240.59 193.02 322.51 257.75 0.00% 6.37% 6.43% 11.65% 9.87%
Miscellaneous Expenses
463.57 25.73 18.65 10.65 12.95 9.61% 0.68% 0.62% 0.38% 0.50%
Preoperative 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%
26
Exp CapitalisedTotal Expenses 4,190.55 3,489.71 2,531.48 2,503.12 2,158.11 86.85% 92.33% 84.33% 90.38% 82.64%Net profit 272.42 169.51 338.12 66.36 281.25 5.65% (-4.48%) 11.26% 2.40% 10.77%
Graph of Total Income:-
2011-12 2010-11 2009-10 2008-09 2007-0890.00%
91.00%
92.00%
93.00%
94.00%
95.00%
96.00%
97.00%
98.00%
92.50%
96.81%
95.60%
92.78%93.41%
Total Income
Total Income
Graph of Total Expenses:-
2011-12 2010-11 2009-10 2008-09 2007-0876.00%
78.00%
80.00%
82.00%
84.00%
86.00%
88.00%
90.00%
92.00%
94.00%
86.85%
92.33%
84.33%
90.38%
82.64%
Total Expenses
Total Expenses
27
Interpretation:-
Common size profit & loss a/c shows the increase or decrease the percentage of income & expenditure of the company in last five year. In 2007-08 the company’s income was 93.41% against its 82.64% expenses. The company had made a profit of 10.77% in 2007-08. In 2010-11 the company had made a loss of 4.48%, the company’s profit was highest in March 2010.
Chapter-5
Trend Analysis28
(Index Analysis)
Trend Analysis of Balance sheet:-
March 2012
March 2011
March 2010
March 2009
March 2008
March 2012
March 2011
March 2010
March 2009
March 2008
Sources of fundsEquity Share Capital 34.24 34.24 34.24 34.24 34.24 100% 100% 100% 100% 100%
Share Application Money
3.64 6.05 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%
Preference Share Capital
0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%
Reserves 618.46 608.85 594.47 449.45 465.56 132.84% 130.78% 127.69% 96.54% 100%
Revaluation Reserves 0 0 0 4.68 13.45 0.00% 0.00% 0.00% 34.80% 100%
Networth 656.34 649.14 628.71 488.37 513.25 127.88% 126.48% 122.50% 95.15% 100%
Secured Loans 936.43 624.13 312.05 398.12 265.39 352.85% 235.17% 117.58% 150.01% 100%
Unsecured Loans 134.38 130.78 117.32 63.01 64.63 207.92% 202.35% 181.53% 97.49% 100%
Total Debt 1,070.81 754.91 429.37 461.13 330.02 324.47% 228.75% 130.10% 139.73% 100%
Total Liabilities 1,727.15
1,404.05 1,058.08
949.5 843.27 204.82% 166.50% 125.47% 112.60% 100%
Application Of Funds
Gross Block 2,100.82 1,881.55 1,256.41 1,234.06 1,214.33 173.00% 154.95% 103.47% 101.62% 100%
Less: Accum. Depreciation
576.74 520.46 487.48 458.67 427.71 134.84% 121.69% 113.97% 107.24% 100%
Net Block 1,524.08 1,361.09 768.93 775.39 786.62 193.75% 173.03% 97.75% 98.57% 100%
Capital Work in 13.42 123.4 233.84 19.56 3.48 385.63% 3545.98% 6719.54 562.07% 100%
29
Progress %Investments 74.48 86.53 58.51 42.67 9.6 775.83% 901.35% 609.48% 444.48% 100%
Inventories 579.61 567.46 406.08 219.42 341.06 169.94% 166.38% 119.06% 64.33% 100%
Sundry Debtors 612.6 468.68 376.32 318.71 307.91 198.95% 152.21% 122.22% 103.51% 100%
Cash and Bank Balance 33.43 44.62 35.95 43.48 37.55 89.03% 118.83% 95.74% 115.79% 100%
Total Current Assets 1,225.64 1,080.76 818.35 581.61 686.52 178.53% 157.43% 119.20% 84.72% 100%
Loans and Advances 150.93 159.71 117.34 91.84 84.47 178.68% 189.07% 138.91% 108.72% 100%
Fixed Deposits 0 3.26 104.04 158.04 4.03 0.00% 80.89% 2581.64%
3921.59% 100%
Total CA, Loans & Advances
1,376.57
1,243.73 1,039.73
831.49 775.02 177.62% 160.48% 134.16% 107.29% 100%
Deffered Credit 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%
Current Liabilities 1,237.95 1,383.58 1,006.54 701.77 706.2 175.30% 195.92% 142.53% 99.37% 100%
Provisions 23.44 27.12 36.36 17.8 25.25 92.83% 107.41% 144.00% 70.50% 100%
Total CL & Provisions 1,261.39
1,410.70 1,042.90
719.57 731.45 172.45% 192.86% 142.58% 98.38% 100%
Net Current Assets 115.18 -166.97 -3.17 111.92 43.57 264.36% -383.22% -7.28% 256.87% 100%
Miscellaneous Expenses
0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%
Total Assets 1,727.16
1,404.05 1,058.11
949.54 843.27 204.82% 166.50% 125.48% 112.60% 100%
Contingent Liabilities 182.66 269.63 440.08 159.99 164.33 111.15% 164.08% 267.80% 97.36% 100%
Book Value (Rs) 190.61 187.8 183.6 141.25 145.96 130.59% 128.67% 125.79% 96.77% 100%
Graph of Total Liabilities:-
2011-12 2010-11 2009-10 2008-09 2007-080.00%
50.00%
100.00%
150.00%
200.00%
250.00%
204.82%
166.50%
125.47%112.60%
100.00%
Total Liabilities
Total Liabilities
Graph of Total CA Loans & Advances:-
30
2011-12 2010-11 2009-10 2008-09 2007-080.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
160.00%
180.00%
160.48%
134.16%
107.29%100.00%
Total CA, Loans & Advances
Total CA, Loans & Advances
Graph of Total CL & Provision:-
2011-12 2010-11 2009-10 2008-09 2007-080.00%
50.00%
100.00%
150.00%
200.00%
250.00%
172.45%192.86%
142.58%
98.38% 100.00%
Total CL & Provisions
Total CL & Provisions
Interpretation:-
31
Trend analysis shows the analysis of assets & liabilities horizontally. In trend analysis we have to take one year as a base year & on the bases of that base year we have to calculate the percentage of the remaining year. In the above trend analysis of balance sheet we have to take 2007-08 as a base year & on the base of that we have to calculate the percentage of the remaining year.
Trend Analysis of Profit & loss A/c:-
March2012
March-2011
March 2010
March 2009
March 2008
March2012
March-2011
March 2010
March 2009
March 2008
Income
Sales Turnover 4,824.81 3,779.66 3,001.83 2,769.43 2,611.41 184.76% 144.74% 114.95% 106.05% 100.00%
Excise Duty 352.79 294.61 185.33 239.97 275.38 128.11% 106.98% 67.30% 87.14% 100.00%
Net Sales 4,472.02 3,485.05 2,816.50 2,529.46 2,336.03 191.44% 149.19% 120.57% 108.28% 100.00%
Other Income 16.85 22.43 20.85 31.5 77.54 21.73% 28.93% 26.89% 40.62% 100.00%
Stock Adjustments -25.9 151.74 32.25 8.52 25.79 -100.43% 588.37% 125.05% 33.04% 100.00%
Total Income 4,462.97 3,659.22 2,869.60 2,569.48 2,439.36 182.96% 150.01% 117.64%
105.33% 100.00%
Expenditure
Raw Materials 3,342.81 2,760.57 1,918.46 1,830.69 1,567.37 213.28% 176.13% 122.40% 116.80% 100.00%
Power & Fuel Cost 151.47 122.61 108.91 90.54 80.16 188.96% 152.96% 135.87% 112.95% 100.00%
Employee Cost 232.7 204.43 194.68 160.69 143.02 162.70% 142.94% 136.12% 112.35% 100.00%
Other Manufacturing Expenses
0 135.78 97.76 88.04 96.86 0.00% 140.18% 100.93% 90.89% 100.00%
Selling and Admin Expenses
0 240.59 193.02 322.51 257.75 0.00% 93.34% 74.89% 125.13% 100.00%
Miscellaneous Expenses 463.57 25.73 18.65 10.65 12.95 3579.69% 198.69% 144.02% 82.24% 100.00%
Preoperative Exp Capitalised
0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 0.00%
Total Expenses 4,190.55 3,489.71 2,531.48 2,503.12 2,158.11 194.18% 161.70% 117.30%
115.99% 100.00%
32
Operating Profit 255.57 147.08 317.27 34.86 203.71 125.46% 72.20% 155.75%
17.11% 100.00%
PBDIT 272.42 169.51 338.12 66.36 281.25 96.86% 60.27% 120.22%
23.59% 100.00%
Graph of Total income:-
2011-12 2010-11 2009-10 2008-09 2007-080.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
160.00%
180.00%
200.00%
182.96%
150.01%
117.64%105.33% 100.00%
Total Income
Total Income
Graph of Total Expenses:-
33
2011-12 2010-11 2009-10 2008-09 2007-080.00%
50.00%
100.00%
150.00%
200.00%
250.00%
194.18%
161.70%
117.30% 115.99%100.00%
Total Expenses
Total Expenses
Interpretation:-
Trend analysis of profit & loss a/c shows the increase or decreases the percentage of income or expenditure horizontally. In the above analysis 200-08 as a base year & on the bases of that the remaining percentage will be calculated in 2007-08 the total income was 100% it increases to 182.96% in 2011-12. Same as the total expenses of the company in 2007-08 was 100% & the expense in 2011-12 it reaches to 194.18%
34
Chapter-635
Analysis of
Cash flow statement
Cash flow statement Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
Net Profit Before Tax 9.79 33.24 239 -37.17 197.31
Net Cash From Operating Activities 72.39 138.64 232.02 131.21 20.47
Net Cash (used in)/from -101.21 -483.68 -240.02 -52.68 61.81
Investing Activities
Net Cash (used in)/from Financing Activities 14.32 252.8 -53.54 81.4 -81.24
Net (decrease)/increase In Cash and Cash Equivalents -14.51 -92.24 -61.53 159.93 1.04
Opening Cash & Cash Equivalents 47.41 139.64 201.52 41.59 40.55
Closing Cash & Cash Equivalents 32.9 47.41 139.99 201.52 41.59
Interpretation:-
Cash flow statement shows the net cash inflow & net cash out flow of the company. In 2007-08 the net cash in the company was 41.59 crore. It reaches to 201.52 crore in 2009-10. In 2011-12 the cash of the company was 32.9 crore.
36
Chapter-7
Ratio analysis37
(A) Meaning and Classification of ratio analysis:-
Meaning:- “A ratio is one number expressed in terms of another. It is a
mathematical yard stick that measures the relationship between two figures.”
“The term accounting ratio is used to describe significant relationship
which exists between figures shows in a balance sheet, in a budgetary
control system or in any other part of the accounting organization.”
Business performance can be measured by use of ratios. In fact an
analysis of financial statements is possible only when figures are 38
expressed as percentage or ratio. Ratio is of major importance for
financial analysis.
Classification of ratios:-
(1) Profitability Ratio:-
“These are the ratios organized to indicate the
profitability of the business.”
- Gross profit ratio
- Net profit ratio
- Operating ratio
- Expense ratio
- Return on capital employed
- Return on shareholder fund
- Return on equity share capital
- Earnings per share
- Price earnings ratio
(2) Liquidity ratio:-
“These ratios indicate the poison of liquidity. They are
computed to ascertain whether the company is capable of meeting its
short term obligation.”
- current ratio
- liquid ratio
- acid teat ratio
39
(3) Leverage ratio:-
“These ratio shows composition of capital i.e. proportion
of owners capital & capital provided by out sides.”
- Proprietary ratio
- Debt equity ratio
- Capital gearing ratio
- Fixed capital to fixed assets ratio
(4) Turnover ratio:-
“These ratios show the efficiency with which resources
are employed in business.”
- Fixed assets turnover ratio
- Total assets turnover ratio
- Stock turnover ratio
- Debtors ratio
- Creditors ratio
(5) Coverage ratio:-
“These ratios show how better the debts payment is
covered by profits in business.”
40
- Debt service coverage ratio
- Interest coverage ratio
(B) Calculation and interpretation of ratio:-
1. Profitability ratio:-
(A) Gross profit ratio = Gross profit * 100
Sales
Gross profit = sales-cogs
2011-12 2010-11 2009-10 2008-09 2007-0895285.29*100464899.71
56358.1*100346892.25
86341.11*100 61059.5*100 67308.86* 100280747.60 251369.25 232996.67
20.50% 16.25% 30.75% 24.29% 28.59%
41
Interpretation:-
Profitability ratio shows the profit of the company. Gross profit of the company in 2007-08 was 28.59% it reaches 24.29% in next year. In 2009-10 the gross profit of the company was 30.75%. In 2010-11 the company’s profit was very low.
(B) Net profit ratio = Net profit * 100
Sales
2011-12 2010-11 2009-10 2008-09 2007-081812.95 * 100464899.71
2228.33 * 100346892.25
16104.15* 100280747.60
1611.16 * 100 14860.44* 100251369.25 232996.67
0.39% 0.64% 5.74% 0.64% 6.38%
42
2011-12; 3.72%
2010-11; 4.00%
2009-10; 3.28%
2008-09; 8.39%
2007-08; 6.92%
Interpretation:-
Net profit ratio shows the profitability of the company. In 2007-08 the profit of the company was 6.38% in 2008-09 the profit of the company was 0.64% which is very low as compare to last year. In 2011-12 the profit of the company is 0.39%which is very low in the five years.
(C) Operating ratio = COGS+ Operating exp *100
Sales
2011-12 2010-11 2009-10 2008-09 2007-08369614.42+38128.21*100464899.71
290534.15+23627.15*100346892.25
194406.49+16310.03*100 190309.75+29488.53*100 165627.81+23134.4*100280747.60 251369.25 232996.67
87.71% 90.56% 75.05% 87.44% 81.09%
43
2011-12; 87.71%
2010-11; 90.56%
2009-10; 75.05%
2008-09; 87.44%
2007-08; 81.09%
Interpretation:-
Operating expenses ratio shows that how much expenses had made by the company in one year. In 2007-08 the expenses of the company was 81.09% & it reaches to 90.56% in the year 2010-11. In the year 2009-10 the expenses ratio was 75.05% which is low as compare to the other years.
(D) Expenses ratio:-
(1) Administration expenses= Adman. Exp. *100
Sales
2011-12 2010-11 2009-10 2008-09 2007-08977.24*100 1063.53*100 1188.79*100 1669.92*100 1176.23*100464899.71 346892.25 280747.60 251369.25 232996.670.21% .31% 0.42% 0.66% 0.50%
44
2011-12; 0.21%
2010-11; 0.31%
2009-10; 0.42%
2008-09; 0.66%
2007-08; 0.50%
Interpretation:-
Administration expenses show the business expenses of the company. In 2007-08 the administration Expenses was 0.50% of the total operating expenses. It reaches to 0.66% in the next year; in 2011-12 the expenses of the company is 0.21% which is very low as compare to 2007-08.
(2) Financial expenses= finance exp.*100
sales
2011-12 2010-11 2009-10 2008-09 2007-0819865.91*100 8675.85*100 5901.44*100 6723.61*100 5841.79*100464899.71 346892.25 280747.60 251369.25 232996.674.27% 2.33% 2.10% 2.67% 2.51%
45
2011-12; 4.27%
2010-11; 2.33%
2009-10; 2.10%
2008-09; 2.67%
2007-08; 2.51%
Interpretation:-
Financial expenses shows the company’s financial expenses which the company had made for improving its performance, its productivity, & for its development. In 2007-08it was 2.51% & it reaches to 4.27% which is double in five years. In 2008-09 it was 2.67%, in 2010-11 it was 2.33%.
(3) Selling & dis. Exp= selling exp*100
Sales
2011-12 2010-11 2009-10 2008-09 2007-0838128.21*100 23627.15*100 16310.03*100 29488.53*100 2313.44*100464899.71 346892.25 280747.60 251369.25 232996.673.72% 4.00% 3.28% 8.39% 6.92%
46
2011-12; 3.72%
2010-11; 4.00%
2009-10; 3.28%
2008-09; 8.39%
2007-08; 6.92%
Interpretation:-
Selling & distribution expenses Shows Company’s manufacturing expenses & transportation expenses. Advertising & marketing expenses is also covered in selling & distribution expenses. In 2007-08 the expense was 6.92% it reaches 3.72% in 2011-12. In 2008-09 it was 8.39% which is very high.
(E) Return on capital employed= Ebit *100
Capital employed
2011-12 2010-11 2009-10 2008-09 2007-082426.99*100 3324.19*100 23899.65*100 3317.22*100 19731.04*100124925.2 127327.98 94076.50 88650.58 77864.811.94% 2.61% 25.40% 3.74% 25.34%
47
2011-12; 1.94%2010-11; 2.61%
2009-10; 25.40%
2008-09; 3.74%
2007-08; 25.34%
Interpretation:-
The above ratio shows the return on capital employed by the company on one year. The company had earned 25.34% return on its capital employed. In 2011-12 its return is very low & it is 1.94% of its total capital which is very low & not good for the company.
(F) Return on shareholder fund= PAT *100
SHARE HOLDER FUND
2011-12 2010-11 2009-10 2008-09 2007-081812.95*100 2228.33*100 16104.15*100 1611.16*100 14860.44*10067761.25 64914.52 62871.45 48838.15 51325.732.68% 3.43% 25.61% 3.30% 28.95%
48
2011-12; 2.68%2010-11; 3.43%
2009-10; 25.61%
2008-09; 3.30%
2007-08; 28.95%
Interpretation:-
Return on shareholders’ funds shows the hoe much return the shareholder were get in return. In 2007-08 the ratio was 28.95% & after that the return of the company were declined & reaches to 3.30% in 2008-09. In 2009-10 it increases to 25.61% which is good for the company.
(G) Return on equity share holder fund= PAT – pref.div *100
Equity share holder fund
2011-12 2010-11 2009-10 2008-09 2007-081812.95-0*100 2228.33-0*100 16104.15-0*100 1611.16-0*100 14860.44-0*10067761.25 64914.52 62871.45 48838.15 51325.732.68% 3.43% 25.61% 3.30% 28.95%
49
2011-12; 2.68%2010-11; 3.43%
2009-10; 25.61%
2008-09; 3.30%
2007-08; 28.95%
Interpretation:-
This ratio indicates the earning of equity share holders of the company. In 2007-08 the ratio was 28.95% & after that the return of the company were declined & reaches to 3.30% in 2008-09. In 2009-10 it increases to 25.61% which is good for the company.
(H) Earnings per share= profit available for share holder
No of equity shares
2011-12 2010-11 2009-10 2008-09 2007-081812.95 2228.33 16104.15 1611.16 14860.443424.35 3424.35 3424.35 3424.25 3424.250.53 rs 0.65 rs 4.70 rs 0.47 rs 4.34 rs
50
2011-12; 0.532010-11; 0.65
2009-10; 4.7
2008-09; 0.47
2007-08; 4.34
Interpretation:-
Earnings per share shows that how much profit each equity shareholders received. In 2007-08 the earnings of the company was 4.34 Rs & it reaches to 4.70 Rs in 2009-10.in 2008-09, 2010-11 it was 0.47 Rs & 0.65 Rs accordingly. This ratio is not good for the company.
(J) Price earnings ratio= market price of share
Earnings of share holders
2011-12 2010-11 2009-10 2008-09 2007-08107.20 107.20 107.20 107.20 107.200.53 0.65 4070 0.47 4.33202.26rs 164.92 rs 22.81 rs 228.09 rs 24.76 rs
51
2011-12; 202.26
2010-11; 164.92
2009-10; 22.81
2008-09; 228.09
2007-08; 24.76
Interpretation:-
price earnings ratio shows that how much return the shareholders had made by its current market price in the market. In 2007-08 it was around 24.76 Rs, in 2008-09 the earnings was 228.09 Rs, in 2010-11 it was 164.92 Rs. This ratio is very good for the company.
2. Liquidity ratio:-
(A) Current ratio:- Current assets
Current liabilities
2011-12 2010-11 2009-10 2008-09 2007-08144851.18 108402.33 92238.09 73964.32 69055.52177686.09 106734.27 75467.05 48904.12 52827.32
52
0.82:1 1.02:1 1.22:1 1.51:1 1.31:1
2011-12; 0.82
2010-11; 1.02
2009-10; 1.22
2008-09; 1.51
2007-08; 1.31
Interpretation:-
Current ratio shows that how much current assets & current liabilities were there in the company. In 2007-08 it was 1.31:1 which means that the company had 1.31 current assets against its current liabilities. In 2008-09 it was 1.51:1, in 2009-10 it was 1.22:1, & in 2011-12 it was 0.82:1 which was very low in the five years.
(B) Liquid ratio:- liquid Assets
Liquid liabilities
2011-12 2010-11 2009-10 2008-09 2007-0888182.71 51656.03 51630.52 52022.69 34949.52177686.09 106734.27 75467.05 48904.12 52827.320.50:1 0.48:1 0.68:1 1.06:1 0.66:1
53
2011-12; 0.5
2010-11; 0.48
2009-10; 0.68
2008-09; 1.06
2007-08; 0.66
Interpretation:-
Liquid ratio shows that how much liquidity the company has in the market. Whether the company is liable to pay its liabilities or not. This all were calculated on the bases of liquidity ratio. The company has more liquidity in 2008-09 which was 1.06:1 means the company is in strong position to repay its liabilities. In 2011-12 it was 0.50:1 which shows that the company had borrowed more money from the market.
(C) Acid test ratio:- cash & bank
Liquid liabilities
2011-12 2010-11 2009-10 2008-09 2007-083595.98 4788.06 13998.91 20151.84 4158.70177686.09 106734.27 75467.05 48904.12 52827.320.20:1 0.05:1 0.19:1 0.41:1 0.08:1
54
2011-12; 0.2
2010-11; 0.05
2009-10; 0.19
2008-09; 0.41
2007-08; 0.08
Interpretation:-
Acid test ratio shows that how much cash is there in the hand of the company against its liquid liabilities. In 2007-08 it was around to 0.08:1, in 2009-10 it was 0.41:1. In last year it was around to 0.2:1 which is very low & it is not good for the company.
3. Leverage ratio:-
(A) Proprietary ratio: - proprietary fund *100
Total assets
55
2011-12 2010-11 2009-10 2008-09 2007-0867761.25 64914.52 62871.45 48838.15 51325.73306216.95 265504.23 198365.44 157725.72 149025.2122.13% 24.45% 31.69% 30.96% 104.69%
2011-12; 22.13%
2010-11; 24.45%
2009-10; 31.69%
2008-09; 30.96%
2007-08; 104.69%
Interpretation:-
Proprietary ratio shows the total proprietary fund against its total assets. In 2007-08
The proprietary ratio was around 104.69% which is very high against its total assets. In 2008-09 it was around 30.96%, in 2009-10 it was 31.69% & in 2011-12 it was 22.30% which is good for the company.
(B) Debt equity ratio:- long term debt *100
Eq. share cap.
Long term debt = secured loan56
2011-12 2010-11 2009-10 2008-09 2007-0857163.95 62413.46 31205.11 39812.43 26539.0867761.25 64914.52 62871.45 48838.15 51325.7384.36% 963.15% 49.63% 81.52% 51.71%
2011-12; 84.36%
2010-11; 963.15%
2009-10; 49.63%
2008-09; 81.52%2007-08; 51.71%
Interpretation:-
The above ratio shows how much debt the company has against its equity share holders. In 2007-08 the company has 51.71% debts against its equity. In 2010-11 it reaches to 963.15% which is very high & not good for the company, in 2011-12 it was around 84%. This ratio shows that the company has more debt against its equity share holders.
(C) Capital gearing ratio:- Fixed charge bearing cap. *100
Equity share capital
Fixed charge bearing capital = secured loan + preference share
2011-12 2010-11 2009-10 2008-09 2007-08
57
57163.95 62413.46 31205.11 39812.43 26539.083424.35 3524.35 3424.35 3424.25 3424.2516.69% 18.23% 9.11% 11.63% 7.75%
2011-12; 16.69%
2010-11; 18.23%2009-10; 9.11%
2008-09; 11.63%
2007-08; 7.75%
Interpretation:-
Capital gearing ratio shows the company’s long term borrowing funds which a company had borrowed. In 2007-08 the company had 7.75% of the total equity. In 2008-09 it was around 11.63%, in 2009-10 it was around 9.11% in 2011-12 it was 16.69% which shows that the company had had taken more borrowings from out siders.
(D) Fixed asset to fixed capital:- Fixed assets
Fixed capital
2011-12 2010-11 2009-10 2008-09 2007-08150152.73 148448.92 100276.58 79494.69 79009.96124925.2 127327.98 94076.56 88650.58 77864.81
58
1.20:1 1.17:1 1.07:1 0.89:1 1.01:1
2011-12; 1.2
2010-11; 1.17
2009-10; 1.07
2008-09; 0.89
2007-08; 1.01
Interpretation:-
The above ratio shows that how much fixed assets were there in the company against its fixed capital. In 2007-08 it was around 1.01:1 which is good for the company. In 2008-09 it reaches to 0.89:1 means the company has 0.89 fixed assets against its 1 capital. In 2011-12 it was around 1.2:1 which is good for the company.
4. Turnover ratio:-
(A) Fixed assets turnover ratio:-Sales
Fixed assets
59
2011-12 2010-11 2009-10 2008-09 2007-08464899.71 346892.25 280747.60 251369.25 67308.86150152.73 148448.92 100276.58 79494.69 79009.963.10 times 2.34 times 2.80 times 3.16 times 0.85 times
2011-12; 3.1
2010-11; 2.34
2009-10; 2.8
2008-09; 3.16
2007-08; 0.85
Interpretation:
Fixed assets turnover ratio shows that how much fixed assets were there in the company against sales of the company. In 2007-08 it was around 3.16 times of the sales. In 2009-10 it was 2.8 times, in 2011- 12 the fixed assets turnover ratio was 3.1 times of its sales.
(B) Total assets turnover ratio:-Sales
Total assets
2011-12 2010-11 2009-10 2008-09 2007-08
60
464899.71 346892.25 280747.60 251369.25 67308.86306216.95 169213.86 130272.83 114982.95 101815.991.52 times 2.05 times 2.16 times 2.19 times 0.66 times
2011-12; 1.52
2010-11; 2.05
2009-10; 2.16
2008-09; 2.19
2007-08; 0.66
Interpretation:-
Total assets turnover ratio shows the total assets of the company against its sales. In 2007-08 the total assets were 2.19 times of its sales which are good for the company. In 2010-11 it was around 2.05% , in 2011-12 the total assets were 1.52 times of the sales.
(C) Debtors turnover ratio:-
Debtors ratio: - debtors + Bills receivables*360
61
Credit sales
2011-12 2010-11 2009-10 2008-09 2007-0860268.47+63664.69*360 46867.97+0*360 37631.61+0*360 31870.85+0*360 30790.82+0*360464899.71 346892.25 280747.60 251369.25 67308.8696 days 49 days 48 days 46 days 165 days
2011-12 2010-11 2009-10 2008-09 2007-08360 360 360 360 36096 49 48 46 1653.75 times 7.35 times 7.5 times 7.83 times 2.18 times
2011-12; 96
2010-11; 49
2009-10; 48
2008-09; 46
2007-08; 165
Interpretation:-
Debtor’s ratio shows that how much debt the company has to recover from the debtors of the company. In 2007-08 debtors turnover ratio was around 2.18 times or more than 160 days in a single year. In 2008-09 it was 46 days; in 2009-10 this ratio was 48 days. In 2011-12 it increases to 96 days.
(D) Creditors turnover ratio:-
Creditor’s ratio: - Creditors + bills payables *360
62
Credit purchase
2011-12 2010-11 2009-10 2008-09 2007-0866894.25+0*360 28308.34+0*360 49159.76+0*360 29496.17+0*360 37039.33+0*360337931.29 264969.78 172825.69 170428.51 147852.8371 days 38 days 102 days 62 days 90 days
2011-12 2010-11 2009-10 2008-09 2007-08360 360 360 360 36071 38 102 62 905.07 times 9.47 times 3.53 times 5.8 times 4 times
2011-12; 71
2010-11; 38
2009-10; 102
2008-09; 62
2007-08; 90
Interpretation:-
The above ratio shows credit period which the company gave to its creditors. In 2007-08 this ratio was around 90 days. It reaches to 71 days in 2011-12. In 2008-09 the creditor’s ratio was 62 days; in 2009-10 it was 102 days.
(E) Stock turnover ratio:- COGS
Average stock
63
2011-12 2010-11 2009-10 2008-09 2007-08369614.42 290534.15 194406.49 190309.75 165687.8120683.7 19856.58 11395.63 10059.92 9833.6117.87 times 14.63 time 17.06 times 18.92 times 16.85 times
2011-12; 17.87
2010-11; 14.63
2009-10; 17.06
2008-09; 18.92
2007-08; 16.85
Interpretation:-
Stock turnover ratio shows that how much stock were being turnover in one year. In 2007-08 the stock turnover ratio of the company was 16.85 times. In 2008-09 the turnover ratio was 18.92 times; in 2009-10 it was 17.06%. In 2011-12 the ratio was 17.87 times. This ratio of the company is very good for the company.
5. Coverage Ratio:-
(A) Debt Service coverage ratio: - P.A.D.P.64
Installment+ interest
2011-12 2010-11 2009-10 2008-09 2007-0824693.94 13501.08 24946.07 11615.74 23853.4443891.61 -24358.83 14290.45 -24652.55 -20845.20.56 times 10857.75 times (loss) 1.75 times 13036.81 times(loss) 3008.24 times
2011-12; 0.56
2010-11; 10857.75
2009-10; 1.75
2008-09; 13036.81
2007-08; 3008.24
Interpretation:-
This ratio show that how much debt covered by the company in one year. Debt service coverage ratio shows that how much debt the company recovers in the last five year. In 2007-08 the debt coverage ratio of the companywas3008.24 times. In 2011-12 it was around to 0.56 times which is very low in the five year. In 2008-09 the company has a loss of 13036.80 times of its profit.
(B) Interest coverage ratio: - EBIT
Interest
65
2011-12 2010-11 2009-10 2008-09 2007-0819731.04 3717.22 23899.65 3324.19 2426.995693.88 6552.56 5683.13 7849.52 15600.780.16 times 0.42 times 4.21times 0.57 times 3.47 times
2011-12; 0.16 2010-11; 0.42
2009-10; 4.21
2008-09; 0.57
2007-08; 3.47
Interpretation:-
Interest coverage ratio shows the company’s interest recovery from the creditors. In 2007-08 it was 3.47 times, in 2011-12 it was around to 0.16 times or in 2009-10 this ratio of the company was 4.21 times which is very high.
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Chapter-8Recommendation & Suggestion
Recommendation & Suggestion:-
Based on the financial analysis of the CEAT TYRE LTD Company;
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We recommend that;
CEAT TYRE is a very well-known tyre company in the market, the overall
performance of the company is very good in the market.
Company’s financial condition is not good in the year 2010-11 because the
company had made a loss of almost 16 %.
Company’s management is poor in some department like production,
marketing.
Company’s financial expenses are too much high in the last five years.
Company had taken loans from many public sector & private sector banks.
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Chapter-9Contemporary issues in
Accounting of the Company
(1) Basis of preparation of Consolidated Financial Statement:-
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The consolidated financial statements are drawn up by using accounting policies as
disclosed in the notes below and are prepared to the extent possible in the same
manner as the Company’s individual financial statements.
(2) Fixed Assets & Intangible Assets:-
Fixed Assets are stated at cost / revalued cost wherever applicable. Cost comprises
of cost of acquisition, cost of improvements, borrowing cost and any attributable
cost of bringing the asset to the condition for its intended use. Cost also includes
direct expenses incurred up to the date of capitalization / commissioning.
Intangible Assets are reflected at the cost of acquisition of such Assets & are
carried at Cost less accumulated amortization & impairment, if any. Leased Assets
comprise of assets acquired under Finance Leases which have been stated at cost of
acquisition plus entire cost component amortizable over the useful life of these
assets.
(3) Borrowing cost:-
Borrowing costs include interest, fees and other charges incurred in connection
with the borrowing of funds and is considered as revenue expenditure for the year
in which it is incurred except for borrowing costs attributed to the acquisition /
improvement of qualifying capital assets and incurred till the commencement of
commercial use of the asset and which is capitalized as cost of that asset.
(4) Depreciation:-70
Depreciation is provided on the Straight Line Method, at the rates prescribed in
Schedule XIV to the Companies Act, 1956.Certain Plants have been treated as
Continuous Process Plants based on technical and other evaluations.
Leasehold land is amortized over the period of the lease. Software expenditure has
been amortized over a period of three years.
Technical Know-how and Brands are amortized over a period of twenty years.
In case of a subsidiary company, depreciation is provided for on a straight line
basis at such rates as will write off various cost of the assets over the period of
their expected useful lives. The principle annual rates of depreciation used are as
follows:
Buildings - 5%
Plant & Equipment - 5 to 20%
Motor vehicles - 20%
The depreciation charge in respect of the subsidiary company is not significant in
the context of the Consolidated Financial Statements.
(5) Impairment of Assets:-71
Subsidiary Companies: at each reporting date an assessment is made as to whether
there is an indication that an Asset may be impaired. Where the carrying amount of
an Asset exceeds its recoverable amount, the Asset is considered impaired and is
written down to its recoverable amount. In assessing value in use, the estimated
future Cash Flows are discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time value of money and the
risk specific to the Asset. An impairment loss is reversed if there has been a change
in the estimate used to determine the recoverable amount.
(6) Investments:-
Investments being long term are stated at cost. Provision against diminution in the
value of investments is made in case diminution is considered as other than
temporary, as per criteria laid down by the Board of Directors after considering
that such investments are strategic in nature.
Current Investment is stated at lower of cost or fair value.
In respect the subsidiary Company the Investment is stated at Cost less provision
for diminution in value if any.
Investment in associate company is accounted as per the ‘Equity method’, and
accordingly, the share of post-acquisition reserves of each of the associate
companies has been added to / deducted from the cost of investments.
(7) Inventories:-
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Raw materials, Stores and spares and Stock-in-process are valued at weighted
average Cost. Finished Goods are valued at lower of cost or net realizable value.
Material-in-transit is valued at cost.
(8) Revenue Recognition:-
Gross Sales include excise duty and are net of trade discounts / sales returns / sales
tax.
Interest is accounted on an accrual basis.
Dividend is accounted when right to receive payment is established.
(9) Export Incentive:-
Export Incentives are recognized in the year of entitlement and credited to the Raw
Material Consumption Account.
(10) Government Grants:-
Grants relating to Fixed Assets are reduced from the cost of Fixed Assets and
Grants related to revenue are shown separately as part of Other Operating Income.
(11) Foreign Currency Transactions:-73
Foreign currency transactions other than those covered by forward contracts are
recorded at current rates.
Forward premier in respect of forward exchange contracts are recognized over the
life of the contract.
Monetary Assets and Liabilities denominated in foreign currency are restated at
year-end rates.
All exchange gains and losses arising out of transaction/restatement, are accounted
for in the Profit and Loss Account.
The financial statements of the consolidated foreign subsidiary are translated in
Indian Rupees, which is the functional currency of the company, as follows:
Assets and liabilities at rates of exchange ruling at year end.
Exchange rate differences arising on the translation of consolidated foreign
subsidiary is transferred to the Foreign Currency Translation Reserve.
(12) Lease rentals:-
The cost components in respect of Finance leases is being amortized over the
primary lease period or effective life of the Assets as depreciation on Leased
Assets and the interest component is charged as a period cost.
Secondary Lease rentals are being charged to Profit and Loss Account.
Leases that do not transfer substantially all the risks and rewards of ownership are
classified as operating leases and recognized as expenses as and when payment are
made over the lease term.
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(13) Research and Development:-
Revenue expenditure on research and development is recognized as an expense in
the year in which it is incurred.
Capital expenditure is shown as an addition to the fixed assets and are depreciated
at applicable rates.
(14) Employee Benefits:-
a) Defined Contribution plan
Contribution to Defined Contribution Schemes such as Provident Fund,
Superannuation, Employees State Insurance Contribution and Labor Welfare Fund
are charged to the Profit and Loss account as and when incurred.
b) Defined Benefit plan
The Company also provides for retirement / post-retirement benefits in the form of
gratuity and Leave encashment. Company’s liability towards these benefits is
determined using Project Unit Credit Method. These benefits are provided based
on the Actuarial Valuation as on Balance Sheet date by an Independent actuary.
c) Short term benefits are recognized as an expense in the profit and loss account
of the year in which the related service is rendered.
d) Long term leave benefits are provided as per actuarial valuation as on Balance
Sheet date by an independent actuary using project unit credit method.
e) Termination benefits are recognized as an expense as and when incurred.
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f) In respect of foreign subsidiary, the provision for gratuity has been made as per
Sri Lankan Accounting Standard 16 –Employee Benefit. Expenditure in respect of
Subsidiary is not significant in the context of the consolidation of financial
statements.
(15) Taxes on Income:-
a) Current Tax: Current Tax is determined in accordance with the provisions of
Income Tax Act, 1961.
b) Deferred Tax Provision: Deferred tax is recognized on timing differences
between the accounting income and the taxable income for the year, and quantified
using the tax rates and laws enacted or substantively enacted on the Balance Sheet
date. Deferred tax assets are recognized and carried forward to the extent that there
is a reasonable certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized.
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Chapter-10
Bibliography
www.moneycontrol.com
www.ceatltd.com
R. Narayan swami
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Chapter-11
Annexures
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80
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