HANANI organisational study

Financial analysis of “HANANI RUBBERS”

CHAPTER-1

INTRODUCTION

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INTRODUCTION

It is rightly said that finance is the

lifeblood of an enterprise. In our present day economy,

finance is defined as the provision of money at the

time when it is required. Every enterprise whether big,

medium or small needs finance to carry on its

operations and its targets.

Moreover, finance guides and regulates investment

decisions and expenditure. The expenditure decisions

may pertain to recurring expenditure or they may be

capital expenditure programmes. The major task of

finance is to get the maximum of the available funds

and the finance manager should perform this task most

effectively for his success.

Financial management is the managerial activity,

which is concerned with the planning and controlling

the firm’s financial resources.

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Managing of finance is an important activity that

involves both short-term and long-term planning. The

goal of any enterprise is either profit maximization or

wealth maximization. This is achieved through

management. Thus, due important is given to financial

management so as to achieve the overall goals of the

firm.

There are various methods or techniques

used in analyzing financial statements, such as

comparative statements, trend analysis, common-size

statement, schedule of changes in working capital,

funds flow and cash flow analysis, cost-volume-profit

analysis and ratio analysis.

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CHAPTER-2

PROFILE

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INDUSTRY PROFILE

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INDUSTRY PROFILE

Water is the most important necessity for life. The

drinking-water needs for individuals vary depending on

the climate, physical activity and the body culture. but

for average consumers it is estimated to be about two to

four litres per day. The growing number of cases of

water borne diseases, increasing water pollution,

increasing urbanization, increasing scarcity of pure and

safe water etc. have made the bottled water business just

like other consumer items. Scarcity of potable and

wholesome water at railway stations, tourists spots, and

role of tourism corp. etc. has also added to the growth.

Indians currently spending about $330m a year on

bottled water, analysts estimate. The packaged water

market constitutes 15 per cent of the overall packaged

beverage industry, which has annual sales of at least

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$2.6bn, Deepak Jolly, a spokesperson for Coca-Cola

India said.

Almost all the major international and national brands

water bottles are available in Indian market right from

the malls to railway stations, bus stations, grocery stores

and even at panwala's shop. Before few years bottle

water. was considered as the rich people's choice, but

now it is penetrated even in rural areas. The growth and

status of Indian Bottled Industry in comparison with

Western or Asian market, India is far behind in terms of

quantum, infrastructure, professionalism and standards

implementation. The per capita consumption of mineral

water in India is a mere 0.5-liter compared to 111 liter in

Europe and 45-liter in USA. Also As per UN study

conducted in 122 countries, in connection with water

quality, India's number was dismal 120. In comparison to

global standards India's bottled water segment is largely

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unregulated.

Former President Dr. A.P.J. Abdul Kalam has urged

youngsters on July 17, 2010 to be aware of water

conservation techniques to avoid grave water crisis in

future."It is so sad that today, people are forced to buy

water in plastic bottles. I am told that bottled water

industry is worth nearly 10000 crore rupees and even big

companies like the Coke and Pepsi are involved in this

bottling of water and making money. So, it is imperative

that we ought to save water," he added. Do not be

surprise if today's bottles water industry becomes next

Oil industry by 2025.

Bottled Water Industry in India

Water Shortage and Health Awareness Driving Bottled

Water Consumption in India. The Indian market is

estimated at about Rs 1,000 Crore and is growing at

whopping rate of 40 per cent. By 2010, it will reach Rs

4,000 -5,000 Crore with 33 per cent market for natural

mineral water. According to a national-level study,

there are more than 200 bottled water brands in India and

among them nearly 80 per cent are local brands. In fact, ~ 8 ~


making bottled water is today a cottage industry in the

country. Leave alone the metros, where a bottled-water

manufacturer can be found even in a one-room shop, in

every medium and small city and even some prosperous

rural areas there are bottled water manufacturers. While

India ranks in the top 10 largest bottled water consumers

in the world, its per capita per annum consumption of

bottled water is estimated to be five litres which is

comparatively lower than the global average of 24 litres.

Today it is one of India's fastest growing industrial

sectors. Between 1999 and 2004, the Indian bottled water

market grew at a compound annual growth rate (CAGR)

of 25 per cent - the highest in the world. The total annual

bottled water consumption in India had tripled to 5

billion liters in 2004 from 1.5 billion liters in

1999. Global consumption of bottled water was

nearing 200 billion liters in 2006.

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COMPANY PROFILE

Aiswarya Beverages is a private company incorporated

in 2000 with its plant at Thiruvalla in Pathanamthitta

District of Kerala. The company was promoted by Aby

Mathew, an NRI from UAE. The company’s registered

office is located at Kerala.

.The company bottles and sells natural mineral water

under the brand name Classic, sources its water directly

from an underground aquifer located about 130 metres

below the earth's surface.

The company started its commercial production in April

2000. The company now proposes to expand its retail

distribution network by appointing consignee and

distributors agents in various parts of the country. The

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company’s existing clientele includes 5 Star Hotels,

Airlines, Embassies etc, and tie-ups with ‘A’ category

retail outlets, modern retail (malls), multiplexes,

hypermarts, fine-dine restaurants are also in the offing.

The brand Classic, enjoys an aspirational equity amongst

consumers and has the potential of truly becoming an

international and iconic brand, it is this potential that the

new management proposes to unlock through brand

building and enhanced distribution.

Product range of the company include:

The company’s principal activity is to manufacture

packaged natural mineral water with in-house facilities to

manufacture PET bottles and caps. It markets its

products under the brand name Classic natural mineral

water is available in four pack sizes namely,25 ltr, 2 ltr,

1.5 ltr, 1 ltr.

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Awards/Achievements

The company and the product enjoy the certification

of various authorities like HACCP, BIS and ISI in

India.

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OBJECTIVES

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OBJECTIVES OF THE STUDY

The following are the objectives of the study

To understand the risk involved in capital

market.

To study and analysis of the market potential.

To assess the profitability of the “Aiswarya

Beverages

To assess the financial stability of the capital

market.

To understand how to hedge the risk in capital

market.

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SCOPE OF THE STUDY

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SCOPE OF THE STUDY

It examines liquidity, solvency and financial

position during the period of study.

The study tries to analyses the financial position

of the company.

The study provides some suggestions and

recommendation for the further improvement of

the financial position.

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METHODOLOGY

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METHODOLOGY

Data Collection

Data place a very important role in any research

program. Source of data are of two types, Primary and

Secondary. The data is used in the study were collected

from the published annual report of relevant period of the

company. The major source is secondary as mentioned.

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Secondary data have been collected from

different records of the company, standing rules,

annual reports, web sites and various other

publications, Reference from books, periodicals and

newspapers have also been extensively used.

Period of the study

The period of study started from 2007 to 2011.

LIMITATIONS OF THE STUDY

The inexperience makes the study less precise than

professionals.

The tools used for analysis are limited.

In depth analysis could not be done due to time

constraint.

It is very difficult to predict the price movement of

security because of market risk is associated with it.

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CHAPTER-3

THEORETICAL FRAME WORK

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RATIO ANALYSIS

Meaning

Ratio analysis is one of the powerful tools of the

financial analysis. A ratio can be defined as” the

indicated quotient of two mathematical expressions” and

as “the relationship between two or more things”. Ratio

is, thus, the numerical or an arithmetical relationship

between two figures. It is expressed where one figure is

divided by another. A ratio can be used as a yardstick for

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evaluating the financial position and performance of a

concern because the absolute accounting data cannot

provide meaningful understanding and interpretation. A

ratio is the relationship between two accounting items

expressed mathematically. Ratio analysis helps the

analyst to make quantitative judgement with regard to

concern’s financial position and performance.

IMPORTANCE OF RATIO ANALYSIS

As a tool of financial management, ratios are of

crucial significance. The importance of ratio analysis lies

in the fact that it presents facts on a comparative basis &

enables the drawing of interference regarding the

performance of a firm. Ratio analysis is relevant in

assessing the performance of a firm in respect of the

following aspects:

1] Liquidity position.

2] Long-term solvency.

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3] Operating efficiency.

4] Overall profitability.

5] Inter firm comparison.

6] Trend analysis.

1] LIQUIDITY POSITION

With the help of Ratio analysis conclusion can be

drawn regarding the liquidity position of a firm. The

liquidity position of a firm would be satisfactory if it is

able to meet its current obligation when they become

due. A firm can be said to have the ability to meet its

short-term liabilities if it has sufficient liquid funds to

pay the interest on its short maturing debt usually within

a year as well as to repay the principal. This ability is

reflected in the liquidity ratio of a firm. The liquidity

ratio is particularly useful in credit analysis by bank &

other suppliers of short term loans.

2] LONG TERM SOLVENCY

Ratio analysis is equally useful for assessing the

long-term financial viability of a firm. This respect of the

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financial position of a borrower is of concern to the long-

term creditors, security analyst & the present & potential

owners of a business. The long-term solvency is

measured by the leverage/ capital structure &

profitability ratio Ratio analysis s that focus on earning

power & operating efficiency.

Ratio analysis reveals the strength & weaknesses of

a firm in this respect. The leverage ratios, for instance,

will indicate whether a firm has a reasonable proportion

of various sources of finance or if it is heavily loaded

with debt in which case its solvency is exposed to serious

strain. Similarly the various profitability ratios would

reveal whether or not the firm is able to offer adequate

return to its owners consistent with the risk involved.

3] OPERATING EFFICIENCY

Yet another dimension of the useful of the ratio

analysis, relevant from the viewpoint of management, is

that it throws light on the degree of efficiency in

management & utilization of its assets. The various

activity ratios measure this kind of operational

efficiency. In fact, the solvency of a firm is, in the ~ 24 ~


ultimate analysis, dependent upon the sales revenues

generated by the use of its assets- total as well as its

components.

4] OVERALL PROFITABILITY

Unlike the outsides parties, which are interested in

one aspect of the financial position of a firm, the

management is constantly concerned about overall

profitability of the enterprise. That is, they are concerned

about the ability of the firm to meets its short term as

well as long term obligations to its creditors, to ensure a

reasonable return to its owners & secure optimum

utilization of the assets of the firm. This is possible if an

integrated view is taken & all the ratios are considered

together.

5] INTER – FIRM COMPARISON

Ratio analysis not only throws light on the financial

position of firm but also serves as a stepping-stone to

remedial measures. This is made possible due to inter

firm comparison & comparison with the industry

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averages. A single figure of a particular ratio is

meaningless unless it is related to some standard or

norm. One of the popular techniques is to compare the

ratios of a firm with the industry average. It should be

reasonably expected that the performance of a firm

should be in broad conformity with that of the industry to

which it belongs. An inter firm comparison would

demonstrate the firms position vice-versa its

competitors. If the results are at variance either with the

industry average or with those of the competitors, the

firm can seek to identify the probable reasons & in light,

take remedial measures. 6] TREND ANALYSIS

Finally, ratio analysis enables a firm to take the time

dimension into account. In other words, whether the

financial position of a firm is improving or deteriorating

over the years. This is made possible by the use of trend

analysis. The significance of the trend analysis of ratio

lies in the fact that the analysts can know the direction of

movement, that is, whether the movement is favourable

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or unfavourable. For example, the ratio may be low as

compared to the norm but the trend may be upward. On

the other hand, though the present level may be

satisfactory but the trend may be a declining one.

ADVANTAGES OF RATIO ANALYSIS

Financial ratios are essentially concerned with the

identification of significant accounting data relationships,

which give the decision-maker insights into the financial

performance of a company. The advantages of ratio

analysis can be summarized as follows:

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Ratios facilitate conducting trend analysis,

which is important for decision making and

forecasting.

Ratio analysis helps in the assessment of the

liquidity, operating efficiency, profitability and

solvency of a firm.

Ratio analysis provides a basis for both intra-

firm as well as inter-firm comparisons.

The comparison of actual ratios with base year

ratios or standard ratios helps the management

analyze the financial performance of the firm.

LIMITATIONS OF RATIO ANALYSIS

Ratio analysis has its limitations. These limitations

are described below:

1] Information problems

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Ratios require quantitative information for

analysis but it is not decisive about analytical

output.

The figures in a set of accounts are likely to be at

least several months out of date, and so might

not give a proper indication of the company’s

current financial position.

Where historical cost convention is used, asset

valuations in the balance sheet could be

misleading. Ratios based on this information will

not be very useful for decision-making.

2] Comparison of performance over time

When comparing performance over time, there is

need to consider the changes in price. The

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movement in performance should be in line with the

changes in price.

When comparing performance over time, there is

need to consider the changes in technology. The

movement in performance should be in line with the

changes in technology.

Changes in accounting policy may affect the

comparison of results between different accounting

years as misleading.

3] Inter-firm comparison

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Companies may have different capital structures and

to make comparison of performance when one is all

equity financed and another is a geared company it

may not be a good analysis.

Selective application of government incentives to

various companies may also distort intercompany

comparison. comparing the performance of two

enterprises may be misleading.

Inter-firm comparison may not be useful unless the

firms compared are of the same size and age, and

employ similar production methods and accounting

practices.

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Even within a company, comparisons can be

distorted by changes in the price level.

Ratios provide only quantitative information, not

qualitative information.

Ratios are calculated on the basis of past financial

statements. They do not indicate future trends and

they do not consider economic conditions.

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PURPOSE OF RATIO ANALYSIS:

To identify aspects of a business performance to aid

decision making.

Quantitative process – may need to be

supplemented by qualitative Factors to get

a complete picture.

5 main areas:-

Liquidity – the ability of the firm to pay its way .

Investment/shareholders – information to enable

decisions to be made on the extent of the risk and

the earning potential business investment.

Gearing – information on the relationship between

the exposures of the business to loans as opposed to

share capital .

Profitability – how effective the firm is at

generating profit given sales and or its capital

assets .

Financial – the rate at which the company sells its

stock and the efficiency with it uses its assets.

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ROLE OF RATIO ANALYSIS

It is true that the technique of ratio analysis is not a

creative technique in the sense that it uses the same

figure & information, which is already appearing in the

financial statement. At the same time, it is true that what

can be achieved by the technique of ratio analysis cannot

be achieved by the mere preparation of financial

statement.

Ratio analysis helps to appraise the firm in terms of

their profitability & efficiency of performance, either

individually or in relation to those of other firms in the

same industry. The process of this appraisal is not

complete until the ratio so computed can be compared

with something, as the ratio all by them do not mean

anything. This comparison may be in the form of intra

firm comparison, inter firm comparison or comparison

with standard ratios. Thus proper comparison of ratios

may reveal where a firm is placed as compared with

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earlier period or in comparison with the other firms in the

same industry.

Ratio analysis is one of the best possible techniques

available to the management to impart the basic

functions like planning & control. As the future is closely

related to the immediate past, ratio calculated on the

basis of historical financial statements may be of good

assistance to predict the future.

Ratio analysis also helps to locate & point out the

various areas,

which need the management attention in order to

improve the situation. As the ratio analysis is concerned

with all the aspect of a firms financial analysis i.e.

liquidity, solvency, activity, profitability & overall

performance, it enables the interested persons to know

the financial & operational characteristics of an

organisation & take the suitable decision.

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TYPES OF RATIO ANALYSIS

LIQUIDITY RATIO

Liquidity refers to the ability of a firm to meet its

short-term (usually up to 1 year) obligations. The ratios,

which indicate the liquidity of a company, are Current

ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios

are discussed below:-

CURRENT RATIO

Meaning:

This ratio compares the current assets with the

current liabilities.

It is also known as ‘working capital ratio’ or ‘solvency

ratio’. It is expressed in the form of pure ratio.

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Formula:

Current assets

Current ratio = Current liabilities

The current assets of a firm represents those assets

which can be, in the ordinary course of business,

converted into cash within a short period time, normally

not exceeding one year. The current liabilities defined as

liabilities which are short term maturing obligations to be

met, as originally contemplated, with in a year.

Current ratio (CR) is the ratio of total current

assets (CA) to total current liabilities (CL). Current

assets include cash and bank balances; inventory of raw

materials, semi- finished and finished goods; marketable

securities; debtors ( net of provision for bad and

doubtful debts ) ; Bills Receivable; and Prepaid

expenses. Current liabilities consist of trade creditors,

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bills payable, bank credit, and provision for taxation,

dividends payable and outstanding expenses. This ratio

measures the liquidity of the current assets and the ability

of a company to meet its short-term debt obligation.

Current ratio measures the ability of the company to

meet its Current liabilities, i.e., Current assets gets

converted into cash in the operating cycle of the firm and

provide the funds needed to pay for Current liability.

Higher the current ratio, the greater short-term solvency

happens. This compares assets, which will become

liquid within approximately twelve months with

liabilities, which will be due for payment in the same

period and is intended to indicate whether there are

sufficient short-term assets to meet the short- term

liabilities. Recommended current ratio is 2: 1.

Any ratio below indicates that the entity may face

liquidity problem but also Ratio over 2: 1 as above

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indicates over trading, that is the entity is under utilizing

its current assets.

LIQUID RATIO

Meaning:

Liquid ratio is also known as acid test ratio or quick

ratio. Liquid ratio compares the quick assets with the

quick liabilities. It is expressed in the form of pure ratio.

E.g. 1:1.

The term quick assets refer to current assets, which can

be converted into, cash immediately or at a short

notice without diminution of value.

Formula:

Liquid ratio = Quick Assets

Quick Liability

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Quick Ratio (QR) is the ratio between quick current

assets (QA) and Current liability. Quick current assets

refer to those current assets that can be converted into

cash immediately without any value strength. Quick

current assets include cash and bank balances, short-term

marketable securities, and sundry debtors. Inventory and

prepaid expenses are excluded since these cannot be

turned into cash as and when required. Quick Ratio

indicates the extent to which a company can pay its

current liabilities without relying on the sale of

inventory. This is a fairly stringent measure of liquidity

because it is based on those current assets, which are

highly liquid. Inventories are excluded from the

numerator of this ratio because they are deemed the least

liquid component of current assets. Generally, a quick

ratio of 1:1 is considered good. One drawback of the

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quick ratio is that it ignores the timing of receipts and

payments.

CASH RATIO

Meaning:

This is also called as super quick ratio. This ratio

considers only the absolute liquidity available with the

firm.

Formula:

Cash ratio= Cash+ Bank+ Marketable securities

Total current liabilities

Since cash and bank balances and short term

marketable securities are the most liquid assets of a firm,

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financial analysts look at the cash ratio. If the super

liquid assets are too much in relation to the current

liabilities then it may affect the profitability of the

firm.

INVESTMENT / SHAREHOLDER

EARNING PER SHARE

Meaning:

Earnings per Share are calculated to find out overall

profitability of the organization. Earnings per share

represent earning of the company whether or not

dividends are declared. If there is only one class of

shares, the earnings per share are determined by dividing

net profit by the number of equity shares.EPS measures

the profits available to the equity shareholders on each

share held.

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Formula:

Earning per share = NPAT

Number of equity share

The higher Earning per share (EPS) will attract

more investors to acquire shares in the company as it

indicates that the business is more profitable enough to

pay the dividends in time. But remember not all profit

earned is going to be distributed as dividends the

company also retains some profits for the business.

DIVIDEND PER SHARE

Meaning:

Dividend per share (DPS) shows how much is paid

as dividend to the shareholders on each share held.

Formula:

Dividend per Share= Dividend Paid to Ordinary

Shareholders

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Number of Ordinary Shares

DIVIDEND PAYOUT RATIO

Meaning:

Dividend Pay-out Ratio shows the relationship

between the dividends paid to equity shareholders out of

the profit available to the equity shareholders.

Formula:

Dividend Payout ratio = Dividend per share *100

Earning per share

Dividend Payout ratio (D/P ratio) shows the

percentage share of net profits after taxes and after

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preference dividend has been paid to the preference

equity holders.

CAPITAL GEARING RATIO

Meaning:

Gearing means the process of increasing the equity

shareholders return through the use of debt. Equity

shareholders earn more when the rate of the return on

total capital is more than the rate of interest on debts.

This is also known as leverage or trading on equity. The

Capital-gearing ratio shows the relationship between two

types of capital via: - equity capital & preference capital

& long term borrowings. It is expressed as a pure ratio.

Formula:

CGR = Preference capital+ secured loan

Equity capital & reserve & surplus

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Capital gearing ratio indicates the proportion of debt

& equity in the financing of assets of a concern.

PROFITABILITY RATIO

These ratios help measure the profitability of a firm.

A firm, which generates a substantial amount of profits

per rupee of sales, can comfortably meet its operating

expenses and provide more returns to its shareholders.

The relationship between profit and sales is measured by

profitability ratios. There are two types of profitability

ratios:

1. Gross Profit Margin

2. Net Profit Margin.

1. GROSS PROFIT RATIO

Meaning:

This ratio measures the relationship between gross

profit and sales. It is defined as the excess of the net sales ~ 46 ~


over cost of goods sold or excess of revenue over cost.

This ratio shows the profit that remains after the

manufacturing costs have been met. It measures the

efficiency of production as well as pricing. This ratio

helps to judge how efficient the concern is I managing its

production, purchase, selling & inventory, how good its

control is over the direct cost, how productive the

concern , how much amount is left to meet other

expenses & earn net profit.

Formula:

Gross profit ratio = Gross profit *100

Net sales

2. NET PROFIT RATIO

Meaning:

Net Profit ratio indicates the relationship between

the net profit & the sales it is usually expressed in the

form of a percentage.

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Formula:

Net profit ratio = NPAT * 100

Net sale

This ratio shows the net earnings (to be distributed

to both equity and preference shareholders) as a

percentage of net sales. It measures the overall efficiency

of production, administration, selling, financing, pricing

and tax management. Jointly considered, the gross and

net profit margin ratios provide an understanding of

the cost and profit structure of a firm.

RETURN ON CAPITAL EMPLOYED RATIO

Meaning:

The profitability of the firm can also be analyzed

from the point of view of the total funds employed in the

firm. The term fund employed or the capital employed

refers to the total long-term source of funds. It means

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that the capital employed comprises of shareholder funds

plus long-term debts. Alternatively it can also be defined

as fixed assets plus net working capital. Capital

employed refers to the long-term funds invested by the

creditors and the owners of a firm. It is the sum of long-

term liabilities and owner's equity. Return On Capital

Employed (ROCE) indicates the efficiency with which

the long-term funds of a firm are utilized.

Formula:

Return on capital employed = NPAT *100

Capital employed

FINANCIAL RATIO

These ratios determine how quickly certain current

assets can be converted into cash. They are also called

efficiency ratios or asset utilization ratios as they

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measure the efficiency of a firm in managing assets.

These ratios are based on the relationship between the

level of activity represented by sales

or cost of goods sold and levels of investment in various

assets. The important turnover ratios are debtors turnover

ratio, average collection period, inventory/stock turnover

ratio, fixed assets turnover ratio, and total assets turnover

ratio. These are described below:

DEBTORS TURNOVER RATIO (DTO)

Meaning:

Debtors Turnover Ratio (DTO) is calculated by

dividing the net credit sales by average debtors

outstanding during the year. It measures the liquidity of a

firm's debts. Net credit sales are the gross credit sales

minus returns, if any, from customers. Average debtors

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are the average of debtors at the beginning and at the end

of the year. This ratio shows how rapidly debts are

collected. The higher the DTO, the better it is for the

organization.

Formula:

Debtors turnover ratio = Credit sales

Average debtors

INVENTORY OR STOCK TURNOVER RATIO

(ITR)

Meaning:

Inventory or stock Turnover Ratio (ITR) refers to

the number of times the inventory is sold and replaced

during the accounting period.

Formula:

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Stock Turnover Ratio = COGS

Average stock

Inventory or stock Turnover Ratio (ITR) reflects the

efficiency of inventory management. The higher the

ratio, the more efficient is the management of

inventories, and vice versa. However, a high inventory

turnover may also result from a low level of inventory,

which may lead to frequent stock outs and loss of sales

and customer goodwill. For calculating ITR, the average

of inventories at the beginning and the end of the year is

taken. In general, averages may be used when a flow

figure (in this case, cost of goods sold) is related to a

stock figure (inventories).

FIXED ASSETS TURNOVER (FAT)

Meaning:

The Fixed Asset Turnover (FAT) ratio measures the

net sales per rupee of investment in fixed assets. \

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Formula:

Fixed assets turnover = Net sales

Net fixed assets

This ratio measures the efficiency with which fixed

assets are employed. A high ratio indicates a high degree

of efficiency in asset utilization while a low ratio reflects

an inefficient use of assets. However, this ratio should be

used with caution because when the fixed assets of a firm

are old and substantially depreciated, the fixed assets

turnover ratio tends to be high (because the denominator

of the ratio is very low).

PROPRIETORS RATIO

Meaning:

Proprietary ratio is a test of financial & credit strength of

the business. It relates shareholders fund to total assets.

This ratio determines the long term or ultimate solvency

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of the company. In other words, Proprietary ratio

determines as to what extent the owner’s interest &

expectations are fulfilled from the total investment made

in the business operation. Proprietary ratio compares the

proprietor fund with total liabilities. It is usually

expressed in the form of percentage. Total assets also

know it as net worth.

Formula:

Proprietary ratio = Proprietary fund

Total fund

STOCK WORKING CAPITAL RATIO

Meaning:

This ratio shows the relationship between the

closing stock & the working capital. It helps to judge the

quantum of inventories in relation to the working capital

of the business. The purpose of this ratio is to show the

extent to which working capital is blocked in inventories.

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The ratio highlights the predominance of stocks in the

current financial position of the company. It is expressed

as a percentage.

Formula:

Stock working capital ratio = Stock

Working Capital

Stock working capital ratio is a liquidity ratio. It

indicates the composition & quality of the working

capital. This ratio also helps to study the solvency of a

concern. It is a qualitative test of solvency. It shows the

extent of funds blocked in stock. If investment in stock is

higher it means that the amount of liquid assets is lower.

DEBT EQUITY RATIO

Meaning:

This ratio compares the long-term debts with

shareholders fund. The relationship between borrowed

~ 55 ~


funds & owners capital is a popular measure of the long

term financial solvency of a firm. This relationship is

shown by debt equity ratio. Alternatively, this ratio

indicates the relative proportion of debt & equity in

financing the assets of the firm. It is usually expressed as

a pure ratio.

Formula:

Debt equity ratio = Total long Term debt

Total shareholders fund

Debt equity ratio is also called as leverage ratio.

Leverage means the process of the increasing the equity

shareholders return through the use of debt. Leverage is

also known as ‘gearing’ or ‘trading on equity’. Debt

equity ratio shows the margin of safety for long-term

creditors & the balance between debt & equity.

RETURN ON PROPRIETOR FUND

~ 56 ~


Meaning:

Return on proprietors fund is also known as ‘return

on proprietor’s equity’ or ‘return on shareholders’

investment’ or ‘investment ratio’. This ratio indicates the

relationship between net profits earned & total

proprietor’s funds. Return on proprietors fund is a

profitability ratio, which the relationship between profit

& investment by the proprietors in the concern. Its

purpose is to measure the rate of return on the total fund

made available by the owners. This ratio helps to judge

how efficient the concern is in managing the owner’s

Fund at disposal. This ratio is of practical importance to

prospective investors & shareholders.

Formula:

Return on proprietors fund = NPAT * 100

Proprietor’s fund

CREDITORS TURNOVER RATIO

~ 57 ~


Meaning:

It is same as debtor’s turnover ratio. It shows the

speed at which payments are made to the supplier for

purchase made from them. It is a relation between net

credit purchase and average creditors

Formula:

Credit turnover ratio = Net credit purchase

Average creditors

Average age of accounts payable = Months in a year

Credit turnover ratio

Both the ratios indicate promptness in payment of

creditor purchases. Higher creditors turnover ratio or a

lower credit period enjoyed signifies that the creditors

are being paid promptly. It enhances credit worthiness of

the company. A very low ratio indicates that the

company is not taking full benefit of the credit period

allowed by the creditors.

~ 58 ~


~ 59 ~


CHAPTER – 4

DATA ANALYSIS AND

INTERPRETATION

Current Ratio

Meaning:

~ 60 ~


This ratio compares the current assets with the current

liabilities. It is also known as ‘working capital ratio’ or ‘

solvency ratio’. It is expressed in the form of pure ratio.

Formula:

Current assets

Current ratio = Current liabilities

Current Ratio

~ 61 ~


Year 2011 2010 2009 2008 2007

A) Curr

ent

Assets

270.53 180.69 88.11 84.37 59.43

B) Curr

ent

Liability

94.93 89.31 82.83 69.71 42.01

C) Curr

ent ratio

(A/B)

2.84 2.02 1.06 1.21 1.41

Interpretation;

It is ratio between current assets and current liability. Its

idle ratio is 2:1. The firm satisfies the idle ratio in the

year 2011.

Current Ratio Graph

~ 62 ~


2011 2010 2009 2008 20070

0.5

1

1.5

2

2.5

3 2.84

2.02

1.061.21

1.41

Chart Title

Quick Ratio

~ 63 ~


Acid – test quick ratio is a

measure of liquidity calculated dividing current assets

minus inventory and prepared expenses by current

liabilities. It is also known as liquid ratio. The acid – test

ratio is the measure of liquidity designed to overcome

defect of the current assets of the firm. As a convention

quick ratio of 1:1 is considered as satisfactory. It

measures the firm’s capacity to pay off current obligation

immediately.

Quick- Acid –test/Liquid ratio = Liquid Assets

Current Liabilities

~ 64 ~


Quick Ratio

Year 2011 2010 2009 2008 2007

A) Qu

ick

Assets

142.43 98.53 35.86 43.41 30.99

B) Qu

ick

Liabilit

y

94.93 89.31 82.89 69.71 42.01

C) Qu

ick

(A/B)

1.50 1.10 0.43 0.62 0.73

Interpretation;

~ 65 ~


It is the ratio between Quick assets and Quick liability it

idle ratio is 1:33:1. The above table shows that the firm

satisfies the ratio in the year 2011.

Quick Ratio Graph

2011 2010 2009 2008 20070

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6 1.5

1.1

0.43

0.620000000000003

0.730000000000001

Chart Title

~ 66 ~


Absolute Cash Ratio

Though receivables are generally more liquid

than inventories, there may be debt having doubt

regarding their reliability in time. So to get n idea about

the absolute liquidity of the concern, both inventories

and receivables are excluded from the current asset and

only absolute liquid asset such as cash in hand, cash at

~ 67 ~


bank and salable securities are taken into account.

Absolute liquidity ratios are calculated as follows

Absolute liquidity ratio = cash at bank + marketable

securities

Current liabilities

Absolute Cash Ratio

Year 2011 2010 2009 2008 2007

A) Cash 5.03 6.56 3.50 3.02 1.30

B) Market

able

securities

- - - - -

C) Current 94.9 89.3 82.8 69.7 42.0

~ 68 ~


liability 3 1 9 1 1

D) Absolut

e Cash

ratio(a+b)

c

0.05 0.07 0.04 0.04 0.03

Interpretation;

It is ratio between cash plus marketable securities and

current liability. Its idle ratio is .75:1. The above table

shows that in all yours the ratio are not idle.

Absolute Cash Ratio Graph

~ 69 ~


2011 2010 2009 2008 20070

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.05

0.07

0.04 0.04

0.03

Chart Title

.

Gross profit ratio

~ 70 ~


Gross profit ratio expresses relationship between gross

profit and net sales. It is obtained by dividing gross profit

by net sales and expressing this relationship as a

percentage. Gross profit is obtained by deducting cost of

goods sold from net sales. Net sales are basically

determined by deducting sales returns from sales.

Gross profit ratio = Gross profit

Sales

Gross profit ratio

~ 71 ~


Year 2011 2010 2009 2008 2007

A) G

ross

profit

200144.1

8

103.2

093.79 80.20

B) Sa

les

764.5

1

479.1

1

340.2

3

299.8

3

234.5

7

C) G

ross

profit

ratio

(A/B)

26.16 30.09 30.33 31.28 34.19

Interpretation;

Gross profit ratio shows a decreasing trend from the

initial year to the final year. It will affect the future

running of the business

Gross profit ratio

~ 72 ~


2011 2010 2009 2008 20070

5

10

15

20

25

30

35

40

26.1630.09 30.33 31.28

34.19

Chart Title

Net Profit Ratio

~ 73 ~


It is the ratio between net profit and sale.

Net Profit Ratio = Net Profit *100

Sales

Net Profit Ratio

~ 74 ~


Year 2011 2010 2009 2008 2007

D) N

et

profit

42.64 25.57 17.35 37.42 1332

E)Sales 764.5

1

479.1

1

340.2

3

299.8

3

234.5

7

F)Net

profit 5.57 5.31 5.09 12.48 5.67

Interpretation;

The net profit ratio shows an increasing trend from 2009

to 2011. So the firm should try to maintain the same

standard in the subsequent years.

Net Profit Ratio

~ 75 ~


2011 2010 2009 2008 20070

2

4

6

8

10

12

14

5.57 5.31 5.09

12.48

5.67

Chart Title

Operating Profit ratio

~ 76 ~


This Ratio revels operating Performance of business. It

should be calculated as:-

Operating Profit *100

Sales

Operating Profit

Net profit ***

Add non operating expenses ***

Less non operating Income ***

Operating profit ***

~ 77 ~


Operating Profit Ratio

Year 2011 2010 2009 2008 2007

A) Oper

ating

Profit

74.19 51.39 32.12 30.71 26.98

B) Sale

s

764.5

1

479.1

1

340.2

3

299.8

3

234.5

7

C) Oper

ating

profit

ratio

(A/B)

9.70 10.72 9.44 10.24 11.50

Interpretation;

It is the ratio between operating profit and sales. It

indicate the operating performance of business. The

above table shows that the operating performance is vary

from year after year.

~ 78 ~


Operating Profit Ratio

~ 79 ~


Debt Service Coverage Ratio

1. In corporate finance, it is the amount of cash flow

available to meet annual interest and principal payments

on debt, including sinking fund payments.

2. In government finance, it is the amount of export

earnings needed to meet annual interest and principal

payments on a country's external debts.

3. In personal finance, it is a ratio used by bank loan

officers in determining income property loans. This ratio

should ideally be over 1. That would mean the property

is generating enough income to pay its debt obligations.

In general, it is calculated by:

~ 80 ~


Debt Service Coverage Ratio

Year 2011 2010 2009 2008 2007

A) Earni

ng for

debt

service

79.26 52.57 35.40 61.00 32.35

B) Inter

est

installmen

t

12.22 5.83 5.08 5.10 4.00

C) DSC

R (A/B)6.48 9.01 6.96 11.96 8.08

~ 81 ~


Interpretation;

The idle DSCR is 1:33:1 from the above statement it is

clear that the firm may borrow a little portion amount

while comparing their earnings

Debt Service Coverage Ratio graph

2011 2010 2009 2008 20070

2

4

6

8

10

12

14

6.48

9.01

6.96

11.96

8.08

Chart Title

~ 82 ~


Interest Coverage Ratio

This ratio revels the ability of the firm to meet interest

obligation of the current year. The ideal ratio is more

than 1

It should be calculated as

EBIT

Interest

EBIT - Earnings before interest and tax

~ 83 ~


EBIT = Earnings after tax ***

Add Interest ***

Add Taxation ***

EBIT ***


Year 2011 2010 2009 2008 2007

A) Earni

ng for

debt

service

79.26 52.57 35.40 61 32.55

B) Inter

est

installmen

12.22 5.83 5.08 5.10 4.00

~ 84 ~


t

C) DSC

R (A/B)6.48 9.01 6.96 11.96 8.08

Interpretation;

The idle interest coverage ratio is greater than one. So it

means that the firm has the capacity to settle their

liabilities.

~ 85 ~



2011 2010 2009 2008 20070

2

4

6

8

10

12

14

6.48

9.01

6.96

11.96

8.08

~ 86 ~


Capital to Total fund Ratio

It is a ratio which reveal

(1) Long term solvency of firm

(2) Extent of own fund used in operation

(3) Mode of financing

It should be calculated as follows

Share holders fund

Total Income

Share holders fund = Equity share capital+Preference

share capital+Reserve and surplus

(-) Accumulated Losses

Total Fund = Debt + Equity

~ 87 ~


Capital to total fund Ratio

Year 2011 2010 2009 2008 2007

A) Ca

pital

171.9

8

171.3

3

156.3

0

147.6

9

59.8

8

B) Tot

al Fund

311.7

7

221.9

9

152.7

0

153.7

6

74.2

5

C) Ca

pital to

total

fund

ratio

0.55 0.77 1.02 0.96 0.80

Interpretation;

From total fund owner’s contribution id reduced year

after year that means the firm will borrow money from

outside source. So proper step is taken to reduce the

same.

~ 88 ~


Capital to total fund Ratio

~ 89 ~


Fixed Assets to Long Term Fund Ratio

It is a ratio between fixed assets and long term

fund

Long term fund = Share holders fund + Debt fund

It indicates fixed assets financed by long term loan. Its

ideal ratio is less than one it should be calculated as

Fixed Assets

Long term Fund

~ 90 ~


Fixed Assets to long term fund.

Year 2011 2010 2009 2008 2007

A) Fi

xed

assets

113.78 112.29 71.28 43.77 37.07

B) Lo

ng term

fund

311.77 221.99 152.70 153.76 74.25

C) Fi

xed

Assets

to long

term

fund

0.36 0.50 0.46 0.28 0.50

Interpretation;

From the above table it is clear that the ratio shows a

fluctuating trend

~ 91 ~


Fixed Assets to long term fund.

2011 2010 2009 2008 20070

0.1

0.2

0.3

0.4

0.5

0.6

0.36

0.50.46

0.28

0.5

Chart Title

~ 92 ~


Proprietary Ratio

This ratio reveals the amount of owners fund used in

financing the assets

It i s calculated by Proprietary fund

Total Asset

Proprietary fund = Equity share capital + Preference

share capital + Reserve & Surplus - Accumulated losses

~ 93 ~


Proprietary Ratio

Year 2011 2010 2009 2008200

7

A) Capit

al

171.9

8

171.3

3

156.3

0

147.6

9

59.8

8

B) Total

Fund

311.7

7

221.9

9

152.7

0

153.7

6

74.2

5

C) Propri

etary Ratio 0.55 0.77 1.02 0.96 0.80

Interpretation;

It indicates the amount of owners fund used in financing

the assets.

~ 94 ~


Proprietary Ratio Graph

~ 95 ~


Capital to debt Ratio

A measurement of a company's financial leverage,

calculated as the company's Capital divided by its

total Debt. Debt includes all short-term and long-term

obligations. Total capital includes the company's debt

and shareholders' equity, which includes common stock,

preferred stock, minority interest and net debt.

Calculated as:

Capital to Debt ratio = Capital

Debt

~ 96 ~


Capital to debt Ratio

Year 2011 2010 2009 2008 2007

A) Ca

pital

171.9

8

171.3

3

156.3

0

147.6

9

59.5

8

B) De

bt

139.7

980.57 26.25 35.92

36.0

7

C) Ca

pital to

Debt

ratio

0.81 0.47 0.16 0.24 0.60

Interpretation;

Capital to debt ratio shows a decreasing trend from 2007

to 2009 and from 2010 it shows an increasing trend. It

means that the firm was borrowing money from outside

source.

~ 97 ~


Capital to debt Ratio Graph

~ 98 ~


Capital gearing Ratio

A general term describing a financial ratio that compares

some form of owner's equity (or capital) to borrowed

funds. Gearing is a measure of financial leverage,

demonstrating the degree to which a firm's activities are

funded by owner's funds versus creditor's funds.

Calculated as:

Capital to Debt ratio = Capital

Debt

~ 99 ~


Capital to gearing Ratio

Year 2011 2010 2009 2008 2007

A) Ca

pital

171.9

8

171.3

3

156.3

0

147.6

9

59.5

8

B) De

bt

139.7

980.57 25.25 35.92

36.0

7

C) Ca

pital

gearing

ratio

0.81 0.47 0.16 0.24 0.60

Interpretation;

Capital gearing ratio shows a decreasing trend from 2007

to 2009 and from 2010 it shows an increasing trend.

~ 100 ~


Capital gearing Ratio Graph

~ 101 ~


Fixed Assets To Turn Over ratio

A financial ratio of net sales to fixed assets. The fixed-

asset turnover ratio measures a company's ability to

generate net sales from fixed-asset investments

- specifically property, plant and equipment (PP&E) -

net of depreciation. A higher fixed-asset turnover ratio

shows that the company has been more effective in using

the investment in fixed assets to generate revenues.

The fixed-asset turnover ratio is calculated as:

~ 102 ~


Fixed Assets To Turn Over ratio

Year 2011 2010 2009 2008 2007

A) S

ales

764.5

1

479.1

1

340.2

3

299.8

3

234.5

7

B) Fi

xed

Assets

113.7

8

112.2

971.28 43.77 37.07

C) Fi

xed

Assets

to

turnov

er

Ratio

6.71 4.26 4.77 6.85 6.32

Intrepretation;

~ 103 ~


Fixed Assets to turnover ratio shows a decreasing trend

from the year 2008 to 2010 and in the year 2011 it shows

an increasing trend

Fixed Assets To Turn Over ratio Graph

~ 104 ~


Capital Turn Over ratio

The capital employed turnover ratio tells us the state of

the relationship between the shareholders' investment in

the business and the turnover that the management of the

business has been able to generate from it.

Capital Employed

Turnover=

Sales

Capital

~ 105 ~


Capital Turnover ratio

Year 2011 2010 2009 2008 2007

A) Sal

es

764.5

1

479.1

1

340.2

3

299.8

3

234.5

7

B) Ca

pital

employ

ed

171.9

8

171.3

3

156.3

0

147.6

959.58

C) cap

ital

turnover

Ratio

4.44 2.79 2.17 2.03 3.93

Intrepretation;

Capital turnover ratio shows an increasing trend from

2008 to 2011

~ 106 ~


CapitalTurn Over ratio Graph

~ 107 ~


BALANCE SHEET AS ON 31-03-2010

SOURCE OF FUNDSCapital 29.85Reserves 11.63Net worth 141.48Secured loans 70.51Un secured loans 10.00Total Debt 80.51Total Liabilities 221.99APPLICATION OF FUNDSGross Block 137.89(Less Accum Depreciation) 25.60Net Block 112.29Capital Work In progress 2.89Investments 4.58Inventories 98.53Sundry Debtors 75.60Cash and Bank Balances 6.56Total Current Assets 180.69Loans and Advances 10.00Fixed deposits 0.85Total CA, Loans & Advances 191.54(Current Liabilities) 75.89(Provision) 13.42(Total CL & Provision) 89.31

~ 108 ~


Net Current Assets 102.23

Total Assets 221.99 A in ‘0000


A in ‘0000

SOURCE OF FUNDSCapital 29.85Reserves 96.60Net worth 126.45Secured loans 26.25Un secured loans 0.00Total Debt 26.25Total Liabilities 152.70APPLICATION OF FUNDSGross Block 90.11(Less Accum Depreciation) 18.83Net Block 71.28Capital Work In progress 25.77Investments 11.36Inventories 35.86Sundry Debtors 48.75Cash and Bank Balances 3.50

~ 109 ~


Total Current Assets 88.11Loans and Advances 38.47Fixed deposits 0.59Total CA, Loans & Advances 127.17(Current Liabilities) 40.62(Provision) 42.27(Total CL & Provision) 82.89Net Current Assets 44.28Total Assets 152.69


A in ‘0000

SOURCE OF FUNDSCapital 29.85Reserves 87.99Net worth 117.84Secured loans 35.92Un secured loans 0.00Total Debt 35.92Total Liabilities 153.76APPLICATION OF FUNDSGross Block 59.02(Less Accum Depreciation) 15.25Net Block 43.77Capital Work In progress 15.53Investments 15.00Inventories 43.41Sundry Debtors 37.94Cash and Bank Balances 3.02Total Current Assets 84.37

~ 110 ~


Loans and Advances 29.24Fixed deposits 35.55Total CA, Loans & Advances 149.16(Current Liabilities) 37.30(Provision) 32.41(Total CL & Provision) 69.71Net Current Assets 79.45Total Assets 153.75


A in ‘0000

SOURCE OF FUNDSCapital 21.40Reserves 16.78Net worth 38.18Secured loans 36.07Un secured loans 0.00Total Debt 36.07Total Liabilities 72.45APPLICATION OF FUNDSGross Block 48.99(Less Accum Depreciation) 11.82Net Block 37.07Capital Work In progress 2.99Investments 0.00Inventories 30.99Sundry Debtors 27.14Cash and Bank Balances 1.30Total Current Assets 59.43Loans and Advances 16.60

~ 111 ~


Fixed deposits 0.15Total CA, Loans & Advances 76.18(Current Liabilities) 28.98(Provision) 13.03(Total CL & Provision) 42.01Net Current Assets 34.17Total Assets 74.23

PROFIT AND LOSS ACCOUNT FOR THE YEAR

ENDED 31-03-2011

A in ‘0000

INCOMESales 764.51Other Income 5.07Stock Adjustments 32.28Total Income 801.86EXPENDITURERaw Materials 552.41Power And Fuel 2.91Employee Cost 37.48Other Manufacturing Expenses 3.99Selling and Admin Expenses 122.26

~ 112 ~


Miscellaneous Expenses 3.55Total Expenses 722.60Operating Profit 74.19PBDIT 79.26Interest 12.22PBDT 67.04Depreciation 7.94Profit Before tax 59.10Extra Ordinary items 0.00PBT (Post Extra Ord Items) 59.10Tax 16.47Reported Net profit 42.64

~ 113 ~



ENDED 31-03-2010

A in ‘0000

INCOMESales 479.11Other Income 1.12Stock Adjustments 52.00Total Income 532.23EXPENDITURERaw Materials 354.44Power And Fuel 2.85Employee Cost 26.81Other Manufacturing Expenses 2.83Selling and Admin Expenses 89.93Miscellaneous Expenses 2.86

~ 114 ~


Total Expenses 479.72Operating Profit 51.39PBDIT 52.51Interest 5.83PBDT 46.68Depreciation 7.15Profit Before tax 39.53Extra Ordinary items (0.04)PBT (Post Extra Ord Items) 39.49Tax 14.00Reported Net profit 25.47

~ 115 ~



ENDED 31-03-2009

A in ‘0000

INCOMESales 340.23Other Income 3.28Stock Adjustments (10.03)Total Income 333.48EXPENDITURERaw Materials 205.53Power And Fuel 0.95Employee Cost 19.06Other Manufacturing Expenses 1.46Selling and Admin Expenses 68.96Miscellaneous Expenses 2.12Total Expenses 298.08Operating Profit 32.12

~ 116 ~


PBDIT 35.40Interest 5.08PBDT 30.32Depreciation 4.05Profit Before tax 26.27Extra Ordinary items 0.00PBT (Post Extra Ord Items) 26.27Tax 8.93Reported Net profit 17.35

~ 117 ~



ENDED 31-03-2008

A in ‘0000

INCOMESales 299.83Other Income 30.29Stock Adjustments 12.94Total Income 343.06EXPENDITURERaw Materials 201.65Power And Fuel 0.60Employee Cost 15.43Other Manufacturing Expenses 1.30Selling and Admin Expenses 61.34Miscellaneous Expenses 1.74Total Expenses 282.06Operating Profit 30.71PBDIT 61.00Interest 5.10

~ 118 ~


PBDT 55.90Depreciation 3.47Profit Before tax 52.43Extra Ordinary items 0.00PBT (Post Extra Ord Items) 52.43Tax 15.01Reported Net profit 37.42

~ 119 ~



ENDED 31-03-2007

A in ‘0000

INCOMESales 234.57Other Income 5.37Stock Adjustments 9.16Total Income 249.10EXPENDITURERaw Materials 152.56Power And Fuel 0.40Employee Cost 9.85Other Manufacturing Expenses 0.72Selling and Admin Expenses 52.13Miscellaneous Expenses 1.09Total Expenses 216.75Operating Profit 26.98PBDIT 32.35Interest 4.00PBDT 28.35

~ 120 ~


Depreciation 2.94Profit Before tax 25.41Extra Ordinary items 0.03PBT (Post Extra Ord Items) 25.44Tax 7.20Reported Net profit 13.32

~ 121 ~


CHAPTER – 5

FINDINGS

~ 122 ~


FINDINGS

current ratio is the ratio between current assets and

current liability. Its idle ratio is 2:1. The firm

satisfies the idle ratio in the year 2011.

Quick ratio is the ratio between Quick assets and

Quick liability it idle ratio is 1:33:1. The firm

satisfies the idle ratio in the year 2011.

Absolute cash ratio is the ratio between cash plus

marketable securities and current liability. Its idle

ratio is .75:1. The firm does not satisfy the idle ratio

in any year.

Gross profit ratio shows a decreasing trend in the

initial year to last year. It will affect the future

running of the firm.

The net profit ratio shows a increasing trend form

the year 2009 to 2011.

~ 123 ~


Operating profit ratio is the ratio between operating

profit and sales. It indicates the operating

performance of business. Form the study it is found

that the operating performance is vary from year

after year.

The idle interest coverage ratio is greater than one.

So it means that the firm has the capacity to settle

their liabilities.

From total fund owners contribution is reduced

form the year 2010 that means the form is

borrowing money from outside source

From the study it is clear that the fixed asset to long

term fund ratio shows a fluctuating trend. Which

means the addition of fixed assets is made with the

operating income of business.

Capital to DEBT ratio shows a decreasing trend

from 2007 to 2009 and from 2010 it shows a

~ 124 ~


Increasing trend it means the firm is borrowing

money from outside source

Fixed assets turn over ratio is increased in last year

It means addition to fixed asset is made with

addition to sales

Capital turnover ratio shows a increasing trend

from 2008 to 2011.

~ 125 ~


CHAPTER – 6

SUGGESTIONS

~ 126 ~


SUGGESTION

Current ratio is the ratio between current assets and

current liability. Its idle ratio is 2:1. The firm

satisfies the idle ratio in the year 2011. Try to

maintain the same.

Quick ratio is the ratio between Quick assets and

Quick liability it idle ratio is 1:33:1. The firm

satisfies the idle ratio in the year 2011. The firm

should try to maintain the same.

~ 127 ~


Absolute cash ratio is the ratio between cash plus

marketable securities and current liability. Its idle

ratio is .75:1. The firm does not satisfy the idle ratio

in any year. So all the steps are taken for

maintaining the idle ratio in the subsequent years.

Gross profit ratio shows a decreasing trend in the

initial year to last year. It will affect the future

running of the firm. So the firm should try to

increasing their operating efficiency in the

subsequent years.

The net profit ratio shows a increasing trend form

the year 2009 to 2011. Try to maintain the same in

the subsequent years.

Operating profit ratio is the ratio between operating

profit and sales. It indicates the operating

performance of business. Form the study it is found

that the operating performance is vary from year

after year. So the firm should try to increasing their

operating efficiency in the subsequent years

~ 128 ~


From total fund owners contribution is reduced

form the year 2010 that means the form is

borrowing money from outside source. So the firm

should take all the steps to reduce the borrowings

from out side source.

.

Capital to DEBT ratio shows a decreasing trend

from 2007 to 2009 and from 2010 it shows a

increasing trend it means the firm is borrowing

money from outside source. Take all steps to

reduce the borrowing of outside fund.

Fixed assets turn over ratio is increased in last year

It means addition to fixed asset is made with

~ 129 ~


addition to sales.the firm should maintain the

increasing trend in the subsiquent years.

~ 130 ~


CHAPTER – 7

CONCLUSION

CONCLUSION

A Hanani rubber is a manufacturing firm

under this study. Analyzed the financial debt of the firm

from the financial year 2007 to 2011. During this period

studied their different financial ratios. By verifying all

the ratios, it is concluded that the firm is financially ~ 131 ~


sound in all respect. Within a short period of time, the

firm will create 100% of result in their operations.

Therefore, the study concludes that the firm can expand

their all activities at all levels.

~ 132 ~


CHAPTER – 8

BIBLIOGRAPHY

~ 133 ~


BIBLIOGRAPHY

BOOKS:

Financial Management, K.C. Kapoor, L.R.

Maheshwari, Reliance Publication 13th Edition.

Financial Accounting, K.G.C. Nair Chandh,

Publication 9th Edition.

Management Accounting, Khan and Jain, Tata

Mc Grow Hill, 3rd Edition.

Research Methodology, C.R. Kothari, 2nd Edition,

New Age International (P) Ltd.,

REPORT:

Annual Report of Hanani rubbers , from the

financial year 2007to 2011.

WEBSITES:

www.financialanalysis .com

~ 134 ~

http://www.financialanalysis/

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HANANI organisational study