Final Prnt 4 Accounting

8/9/2019 Final Prnt 4 Accounting

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A

Project Report

On

Financial Analysis


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Presentedto

Prof: SMurali

Submitted by:

Karan Sanan


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Rajul DubeyHarsha Vijayvergia

Acknowledgement

With a sense of gratitude and respect, we would like toextend our heartiest thanks to all of those who providedhelp and guidance to make this project a big success. NoProject is ever the outcome of single individuals talent oreffort. This work is no exception. This project would nothave been possible without the whole heartedencouragement, support and co-operation of our guide,friends and well-wishers.

Although it is not possible for us to name and thank themall individually, we must make special mention of some ofthe personalities and acknowledge our sincere indebtnessto them.

The successful completion of this project rests on theshoulder of many persons who have helped us directly orindirectly. We wish to take this opportunity to express toallthose, without whose help, completion of this projectwould have been difficult.We are indebted and thankful to all the individuals who

have guided, advised,inspired and supported us inmaking this project a success.

Our gratitude to our honorable guide Prof. S.MURALI forgiving us the opportunity for developing the project and


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his able guidance, inestimable motivation an constantconstant encouragement throughout our project.

Executive Summary

It is Summarize tin of all report in one or two pages so asto provide an overview of the company. it is also calledsynopsis or Abstract. As a partials fulfillment of therequirement for the Managerial Accounting Course. Wehave completed a project reporton financial Analysis of Wipro Ltd.:

Sales Figure is increasing at a handsome rate. it is at

Rs. 58400.23 Million. In 2003-04 and it is increased to Rs.141395.8 Million. So Sales is increased 75.05% becauseof aggressive Selling Policy.

Profit after Tax is also increasing as compare to 2003-04 it is increasing 22514 Million at Rs 3408, 8747,4388.6, 5970.4, respectively last four year. This isbecause company has increased it sales and doing good

cost management.

Net worth of the company is increased in this yearbecause of increase in Reserve& Surplus.


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Current Ratio of Wipro limited is showing goodposition. It is 1.26 Times in 2003-04 then it is increased to2.13 Times in 2007-08 this shows Company has achievedstandard Ratio.

The returns on the investment is somewhat decline incurrent year.

The EPS of Share is increased Rs. 7.43 to Rs 20.62 in2007-08 So Shareholderare benefited.

Companys Total Assets are increased and it trying to

expand its business on theother hand debt are also increased it shows thatcompany trying to Trading on Equity.

After analyzing all aspect Companys performance isgood.


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ACCOUNTING

POLICIES


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Significant accounting policies

i. Basis of preparation of financial statementsThe financial statements are prepared in accordance withIndian Generally Accepted Accounting Principles (GAAP)under the historical cost convention on the accrual basis,except for certain financial instruments which aremeasuredon a fair value basis. GAAP comprises AccountingStandards specified in the Companies (AccountingStandards) Rules, 2006, Accounting Standards issued bythe Institute of Chartered Accountants of India (ICAI) andother generally accepted accounting principles in India.

ii. Use of estimates The preparation of financial statements in accordancewith the generally accepted accounting principlesrequires management to make judgments, estimates andassumptions that affect the application of accounting

policies and the reported amounts of assets andliabilities, income and expenses. Estimates andunderlying assumptions are reviewed on an ongoingbasis. Revision to accounting estimate is recognized inthe period in which the estimates are revised and in anyfuture period affected.


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iii. GoodwillThe goodwill arising on acquisition of a group of assets isnot amortised and is tested for impairment if indicators ofimpairment exist.

iv. Fixed assetsIntangible assets and work-in-progress Fixed assets arestated at historical cost less accumulated depreciation.Costs include expenditure directly attributable to theacquisition of the asset. Borrowing costs directly

attributable to the construction or production ofqualifying assets are capitalized as part of the cost.Intangible assets are stated at the consideration paid foracquisition less accumulated amortization.Advances paid towards the acquisition of fixed assetsoutstanding as of each balance sheet date and the cost offixed assets not ready for use before such date aredisclosed under capital work-in-progress.

v. InvestmentsLong term investments are stated at cost less any otherthan temporary decline in the value of such investments.Current investments are valued at lower of cost and fairvalue determined by category of investment. The fairvalue is determined using quoted market price/marketobservable information adjusted for cost of disposal.

vi. Inventories

Inventories are valued at lower of cost and net realizable

value, including necessary provision for obsolescence.

Cost is determined using the weighted average method.


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vii. Provisions and contingent liabilitiesProvisions are recognised when the Company has apresentobligation as a result of past event, it is probable that anoutflow of resources will be required to settle theobligation, and a reliable estimate can be made of theamount of obligation.A disclosure for a contingent liability is made when thereis a possible obligation or a present obligation that may,but probably will not, require an outflow of resources.

Where there is a possible obligation or a presentobligation in respect of which the likelihood of outflow ofresources is remote, no provision or disclosure is made.

The Company recognizes provision for onerous contractsbased on the estimate of excess of unavoidable costs ofmeeting obligations under the contracts over theexpected economic benefits.

viii. Revenue recognitionServices:Revenue from Software development services comprisesrevenue from time and material and fixed-price contracts.Revenue from time and material contracts is recognizedas related services are performed. Revenue fromfixedprice, fixed-time frame contracts is generallyrecognised in accordance with the Percentage of

Completion method. Revenues from BPO services arederived from both timebased and unit-priced contracts.Revenue is recognised as the related services areperformed, in accordance with the specific terms of thecontract with the customers.


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Revenue from application maintenance services isrecognised over the period of the contract. Revenue fromcustomer training, support and other services isrecognised as the related services are performed.Provision for estimated losses, if any, on incompletecontracts are recorded in the period in which such lossesbecome probable based on the current contractestimates.

Unbilled revenues included in loans and advancesrepresent cost and earnings in excess of billings as at thebalance sheet date. Unearned revenues included incurrent liabilities represent billing in excess of revenue

recognised.

Products:Revenue from sale of products is recognised when theproduct has been delivered, in accordance with the salescontract. Revenues from product sales are shown as netof excise duty, sales tax separately charged andapplicable discounts.

Other income:Agency commission is accrued when shipment ofconsignment is dispatched by the principal.Profit on sale of investments is recorded upon transfer oftitle by the Company. It is determined as the differencebetween the sales price and carrying amount of therelated

investment.Interest is recognized using the time-proportion method,based on rates implicit in the transaction.Dividend income is recognized where the Companysrightto receive dividend is established.


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ix. LeasesLeases of assets, where the Company assumessubstantially all the risks and rewards of ownership areclassified as finance leases. Finance leases arecapitalized at the lower of the fair value of the leasedassets at inception and the present value of minimumlease payments. Lease payments are apportionedbetween the finance charge and the outstanding liability.

The finance charge is allocated to periods during thelease term at a constant periodic rate of interest on theremaining balance of the liability.Leases where the lesser retains substantially all the risks

and rewards of ownership are classified as operatingleases. Lease rentals in respect of assets taken underoperating leases are charged to profit and loss accounton a straight line basis over the lease term.In certain arrangements, the Company recognizesrevenuefrom the sale of products given under finance leases. TheCompany records gross finance receivables, unearned

income and the estimated residual value of the leasedequipment on consummation of such leases. Unearnedincome represents the excess of the gross finance leasereceivable plus the estimated residual value over thesales price of the equipment. The Company recognisesunearned income as financing revenue over the leaseterm using theeffective interest method.

x. Foreign currency transactions The Company is exposed to currency fluctuations onforeigncurrency transactions. Foreign currency transactions are


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accounted in the books of accounts at the average rateforthe month.

Transaction: The difference between the rate at which foreigncurrencytransactions are accounted and the rate at which they arerealized is recognized in the profit and loss account.

Translation:Monetary foreign currency assets and liabilities at periodend are restated at the closing rate. The difference

arisingfrom the restatement is recognized in the profit and lossaccount.In March 2009, Ministry of Corporate affairs issued anotification amending AS 11, The effects of changes inforeign exchange rates. Before the amendment, AS 11required the exchange gain/ losses on the long termforeign currency monetary asset/ liability to be recorded

in the profitThe amended AS 11 provides an irrevocable option to theCompany to amortise exchange rate fluctuation on longterm foreign currency monetary asset/ liability over thelife of the asset/ liability or March 31, 2011, whichever isearlier. The amendment is applicable retroactively fromthe financial year beginning on or after December 7,2006.

The Company did not elect to exercise this option.

xi. Financial InstrumentsFinancial instruments are recognised when the Companybecomes a party to the contractual provisions of theinstrument.


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Derivative instruments and Hedge accounting:The Company is exposed to foreign currency fluctuationson foreign currency assets, liabilities, net investment in anon-integral foreign operation and forecasted cash flowsdenominated in foreign currency. The Company limits theeffects of foreign exchange rate fluctuations by followingestablished risk management policies including the use ofderivatives. The Company enters into derivative financialinstruments, where the counterparty is a bank.

The Company early adopted AS 30 and the limitedrevisionsto other accounting standards which come into effect

uponadoption of AS 30 from April 1, 2008. In accordance withthe recognition and measurement principles set out in AS30, changes in fair value of derivative financialinstrumentsdesignated as cash flow hedges are recognised directly inshareholders funds and reclassified into the profit andloss

account upon the occurrence of the hedged transaction.Changes in fair value relating to the ineffective portion ofthe hedges and derivatives not designated as hedges arerecognised in the profit and loss account as they arise.AS 30 states that particular sections of other accountingstandards; AS 4, Contingencies and Events Occurringafter Balance Sheet Date, to the extent it deals withcontingencies, AS 11 (revised 2003), The Effects of

Changes in Foreign Exchange Rates, to the extent it dealswith the forward exchange contracts and AS 13,Accounting for Investments, except to the extent itrelates to accounting for investment properties, will standwithdrawn only from the date AS 30 becomes mandatory(April 1, 2011 for the Company). Accordingly, the


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Company continues to comply with the guidance in AS 4 relating to contingencies, AS 11 relating to forwardcontracts and AS 13 relating to investments until AS 30becomes mandatory.

The fair value of derivative financial instruments isdetermined based on observable market inputs includingcurrency spot and forward rates, yield curves, currencyvolatility etc.

Non-Derivative Financial InstrumentsA financial instrument is any contract that gives rise to afinancial asset of one entity and a financial liability orequity instrument of another entity. Financial assets of

the Company mainly include cash and bank balances,sundry debtors, unbilled revenues, finance leasereceivables, employee travel and other advances, otherloans and advances and derivative financial instrumentswith a positive fair value. Financial liabilities of theCompany mainly comprise secured and unsecured loans,sundry creditors, accrued expenses and derivativefinancial instruments with a negative fair value. Financial

assets liabilities are recognised on the balance sheetwhen the Company becomes a party to the contractualprovisions of the instrument. Financial assets arederecognized when all of risks and rewards of theownership have been transferred. The transfer of risksand rewards is evaluated by comparing the exposure,before and after the transfer, with the variability in theamounts and timing of the net cash flows of the

transferred assets. The Company measures the financial assets andliabilities, except for derivative financial assets andliabilities at amortized cost using the effective interestmethod. The Company measures the short-term payablesand receivables with no stated rate of interest at original


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invoice amount, if the effect of discounting is immaterial.Non-interest bearing deposits are discounted to theirpresent value.


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FUTURE GROWTH

PROSPECTS

Wipro's forward looking and cautionary statements

Certain statements in this release concerning our future growth prospects

and our ability to successfully complete and integrate potential acquisitions


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are forward looking statements, which involve a number of risks, and

uncertainties that could cause actual results to differ materially from those

in such forward looking statements. The risks and uncertainties relating to

these statements include, but are not limited to, risks and uncertainties

regarding our ability to integrate and manage acquired IT professionals, our

ability to integrate acquired assets in a cost effective and timely manner,

fluctuations in earnings, our ability to manage growth, intense competition

in IT services including those factors which may affect our cost advantage,

wage increases in India, our ability to attract and retain highly skilled

professionals, time and cost overruns on fixed-price, fixed-time frame

contracts, client concentration, restrictions on immigration, our ability to

manage our international operations, reduced demand for technology in our

key focus areas, disruptions in telecommunication networks, liability for

damages on our service contracts, the success of the companies in whichWipro has made strategic investments, withdrawal of fiscal governmental

incentives, political instability, legal restrictions on raising capital or

acquiring companies outside India, unauthorized use of our intellectual

property and general economic conditions affecting our industry. Additional

risks that could affect our future operating results are more fully described

in our filings with the United States Securities and Exchange Commission.

These filings are available at www.sec.gov. Wipro may, from time to time,

make additional written and oral forward looking statements, includingstatements contained in the company's filings with the Securities and

Exchange Commission and our reports to shareholders. Wipro does not

undertake to update any forward-looking statement that may be made from

time to time by or on behalf of the company.


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AUDITREPORT

REPORTThe Directors present the Annual Report of Wipro Limitedfor the year ended March 31, 2000.


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The Scheme of Amalgamation of Wipro ComputersLimited (formerly Wipro Acer Limited) with our Companyhas been approved by the Honble High Court ofKarnataka on February 16, 2000. The erstwhile WiproComputers Limited stands merged with our Companywith retrospective effect from April 1, 1999. The AnnualReport of Wipro Limited for the year 1999-2000 has beenprepared after giving effect to the amalgamation.

(Rs. in mns)

2000 1999Sales and other income (net of excise duty) 23,12918,040Profit before tax from ordinary activities 5071,764Provision for tax501 62Profit after tax from ordinary activities

3,006 1,702Non-recurring/prior period items (523)(581)Profit for the year 2,4831,121Appropriations :Interim dividend on preference shares 266

Interim / Proposed dividend on equity shares 6969Corporate Tax on distributed dividend 10

8


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Sales of the Company in the year ended March 31, 2000, were Rs. 23,129mns, up by 28% and Profit after Tax was Rs.3006 mns, up by 77% over theprevious year. Over the last 10 years, Sales have grown at an averageannual rate of 23% and Profit after tax at 43%. The Companys export atRs.10,506 mns has registered a growth of 61% as compared to the

previous year.

Dividend

The Directors recommend that the interim dividend of fifteenpercent per equity share be considered as the final dividend to beappropriated from the profits for the year 1999-2000 subject to

approval by the members at the Annual General Meeting.

DirectorsMr A Soota, resigned as a Director of the Company with effectfrom August 7, 1999. The Directors place on record theirappreciation of the valuable advice and guidance given by himwhile he was a Director of the Company.Mr Vivek Paul, was appointed as Vice Chairman of the Company

with effect from July 27, 1999 as approved by the members at thelast Annual General Meeting held on July 29, 1999.Mr Hamir K Vissanji, Mr N Vaghul and Mr B C Prabhakar, retireby rotation and being eligible offer themselves for re-appointment.

Fixed depositsFixed deposits from the public as at March 31, 2000, wereRs.0.89 mns, and the unclaimed deposits as at that date were Rs0.89 mns.

Subsidiary companiesAs required under Section 212 of the Companies Act, 1956, theAnnual Reports for the year 1999-2000 and Accounts for the yearended on March 31, 2000, of the subsidiary companies Wipro


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Welfare Limited (formerly Wipro Factors Limited), Wipro NetLimited, Wipro Trademarks Holding Limited (formerly WiproInvestment Limited), Wipro Prosper Limited (formerly InlecInvestment Limited) , Wipro Inc., Enthink Inc., and Wipro JapanKK are attached. With a view to reassure our investors, yourCompany has desubsidiarised Wipro Finance Limited to ensureaccountability and derisk the Company by disposing off 48.69% ofits holding of equity shares in Wipro Finance Ltd.

AuditorsThe auditors, M/s. N M Raiji & Co., retire at the conclusion of theensuing Annual General Meeting and offer themselves for re-appointment.

Members are requested to appoint them as auditors and fix theirremuneration.

Qualification to Auditors reportAuditors comments in their report under para 5(b) read along with

note to accounts no.2 is self explanatory.


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ANNEXURE

AUDITORS

REPORT


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Annexure referred to in paragraph 1 of our report to the members of Wipro

Limited (the Company) for the year ended March 31, 2010

1. a) The Company has maintained proper records showing full particulars,including quantitative details and situation of fixed assets.

b) The Company has a regular programme of physical verification of itsfixed assets by which all fixed assets are verified in a phased manner overa period of three years. In our opinion, this periodicity of physicalverification is reasonable having regard to the size of the Company and thenature of its assets. No material discrepancies were noticed on such

verification.

c) Fixed assets disposed of during the year were not substantial, andtherefore, do not affect the going concern assumption.

2. a) The inventory, except goods-in-transit and stocks lying with thirdparties, has been physically verified by the management during the year. Inour opinion, the frequency of such verification is reasonable. For stockslying with third parties at the year-end, written confirmations have been

obtained.

b) The procedures for the physical verification of inventories followed by themanagement are reasonable and adequate in relation to the size of theCompany and the nature of its business.


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c) The Company is maintaining proper records of inventory. Thediscrepancies noticed on physical verification between the physical stocksand the book records were not material.

3. a) The Company has granted loans to 3 wholly owned subsidiaries

covered in the register maintained under Section 301 of the CompaniesAct, 1956 (the Act). The maximum amount outstanding during the yearand the year-end balance of wipro is given.

Name of the Entity Maximum amount outstanding during yearYear-end balance

Wipro Cyprus Private Limited 1,568Enthink Inc. 42Wipro Singapore Pte Limited 22Wipro Holdings (Mauritius) Limited 3

b) In our opinion, the rate of interest, where applicable and other terms andconditions on which loans have been granted companies, firms or otherparties listed in the register maintained under Section 301 of the Act arenot, prima facie, prejudicial to the interest of the Company.

c) The principal amounts and interest, wherever applicable, are beingrepaid regularly in accordance with the agreed contractual terms.Accordingly, paragraphs 4(iii)(d) of the Order are not applicable to theCompany.

d) The Company has not taken any loans, secured or unsecured, fromcompanies, firms or other parties covered in the register maintained underSection 301 of the Act. Accordingly, paragraphs 4(iii)(e) to (g) of the Orderare not applicable to the Company.

4. In our opinion and according to the information and explanations given tous, there is an adequate internal control system commensurate with the


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size of the Company and the nature of its business with regards topurchase of inventories and fixed assets and with regard to sale of goodsand services. We have not observed any major weakness in the internalcontrol system during the course of the audit.

5. a) In our opinion and according to the information and explanations givento us, the particulars of contracts or arrangements referred to in Section301 of the Act have been entered in the register required to be maintainedunder that Section.

b) In our opinion, and according to the information and explanations givento us, the transactions made in pursuance of contracts and arrangementsreferred to in (a) above and exceeding the value of Rs. 5 lakh with anyparty during the year have been made at prices which are reasonablehaving regard to the prevailing market prices at the relevant time except for

purchases of certain services which are for the Companys specializedrequirements and similarly for sale of certain goods and services for thespecialized requirements of the buyers and for which suitable alternativesources are not available to obtain comparable quotations. However, onthe basis of information and explanations provided, the same appearreasonable.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensuratewith the size and nature of its business.

8. We have broadly reviewed the books of accounts maintained by theCompany pursuant to the rules prescribed by the Central Governmentunder Section 209(1)(d) of the Act for maintenance of cost records inrespect of Vanaspati, Toilet soaps, Lighting products and Mini computers/Microprocessor based system and Data communication system and are of

the opinion that, prima facie, the prescribed accounts and records havebeen made and maintained. However, we have not made a detailedexamination of the records.

9. a) According to the information and explanations given to us and on thebasis of our examination of the records of the Company, amountsdeducted/accrued in the books of account in respect of undisputed


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statutory dues including Provident Fund, Employees State Insurance,Income-tax, Sales-tax, Wealth tax, Service tax, Customs duty, Excise dutyand other material statutory dues have been generally regularly depositedduring the year by the Company with the appropriate authorities. Asexplained to us, the Company did not have any dues on account of

Investor Education and Protection Fund.According to the information and explanations given to us, no undisputedamounts payable in respect of Provident Fund, Employees StateInsurance, Income-tax, Sales-tax, Wealth tax, Service tax, Customs duty,Excise duty and other material statutory dues were outstanding as at March31, 2010 for a period of more than six months from the date they becamepayable.There were no dues on account of cess under Section 441A of the Actsince the date from which the aforesaid Section comes into force has notyet been notified by the Central Government.

b) According to the information and explanations given to us, the followingdues of Income tax, Excise duty, Customs duty, Sales tax and Service taxhave not been deposited by the Company on account of disputes

10. The Company does not have any accumulated losses at the end of thefinancial year and has not incurred cash losses during the financial yearand in the immediately preceding financial year.

11. In our opinion and according to the information and explanations givento us, the Company has not defaulted in repayment of any dues to anyfinancial institution or bank. The Company did not have any outstandingdebentures during the year.

12. The Company has not granted loans and advances on the basis ofsecurity by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the explanations given to us, the

Company is not a chit fund/nidhi/mutual benefit fund/ society


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ANALYSIS OF

BALANCE SHEET


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Trend Analysis of Balance SheetTrend Analysis of Balance Sheet involves calculation of percentage changesin theBalance Sheet items for a no. of successive years. This is carried out bytaking theitems of the past financial year used as base year and items of other years

are


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Trend Analysis of Fixed assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Fixed Assets 100 130.827 112.844 175.077220.726

Interpretation The fixed assets are increase in current year is goodfor the company. Hear fixed assets are increasing as a increasing rate itmeans the company hasexpand its business.

Fixed Assets are continuously increasing year by year. It seems that the company has good future plans andthey want to expand theirbusiness so they have invested more and more funds infixed assets.


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Fixed assets are efficiently utilized by the companydue to which the profit ofthe company is increasing every year. In 2006-07and 2007-08 Company has huge increase itsland, patents, trademarks and rights.

2.1.2 Trend Analysis of total current assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Current Assets 100 129.242 157.708 154.955166.304

InterpretationThe current assets is shows the cash liquidity of the company.Hear it is increase it year by year it means the company has sufficientliquidity forgenerating the business


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RATIO ANALYSIS

Ratio analysis involves establishing a comparativerelationship between thecomponents of financial statements. It presents the

financial statements into variousfunctional areas, which highlight various aspects of thebusiness like liquidity,profitability and assets turnover, financial structure. It is a

powerful tool of financial

analysis, which recognizes a companys strengths as wellas its potential troublespots.It can be further classified as in different categories ofRatio.analysis, which recognizes a companys strengths aswell as its potential troublespots.


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It can be further classified as in different categories ofRatio.Liquidity RatiosProfitability RatiosAsset Turnover Ratiossolvency

Investor-related

.Liquidity Ratio

Liquidity refers to the existence of the assets in the cashor near cash form. This ratioindicates the ability of the company to discharge the

liabilities as and when theymature. The financial resources contributed by owners orsupplemented by outsidedebt primarily come in the cash form as under in thebalance sheet form.

The following Liquidity Ratios are calculated for thecompany.Current Ratio

Quick RatioNet Working Capital

Current Ratio


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This ratio shows the proportion of Current Assets toCurrent Liabilities. It is alsoknown as Working Capital Ratio as it is a measure ofworking capital available at aparticular time. Its a measure of short term financialstrength of the business. Theideal current ratio is 2:1 i.e. Current Assets should beequal to Current Liabilities.Current Ratio = Current Assets

----------------------Current Liabilities

Current Ratio Year 2003-04 2004-05 2005--06 2006-072007-08Ratios 1.26 1.58 1.44 1.67

2.13

Interpretation Current ratio is always 2:1 it means the current assetstwo time of current liability. After observing the figure the current ratio isfluctuating. In the year 2008 ratio is showing good shine. Hear ratio is increase as a increasing rate from 2004 to2008. Company is no where near the ideal ratio in every yearbut every company can notachieve this ratio.


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Current ratio is increased in 2007-08 as compared to2003-04 because of increase inInventories 100.96% and 123.77 % increased in Cash andBank balance. Current ratio is decreased in 2005-06 as compared tothe last year because ofincrease in liabilities by 45.39% and 93.19% in increasing

in Provision.

Quick Ratio

This ratio is designed to show the amount of cashavailable to meet immediatepayments. It is obtained by dividing the quick assets byquick liabilities. Quick Assetsare obtained by deducting stocks from current assets.Quick liabilities are obtained bydeducting bank over draft from current liabilities.Quick Ratio = Quick Assets

-------------------Current Liabilities

Quick RatioYear 2003-04 2004-05 2005--06 2006-072007-08

Ratios 1.2 1.5 1.4 1.62.0

Interpretation Standard Ratio is 1:1


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Companys Quick Assets is more than Quick Liabilitiesfor all these 5 years. In 2007-08 the ratio is increasing because of increasein bank and cash balance. So all the years has quick ratio exceeding 1, the firm isin position to meet itsimmediate obligation in all the years. In 2005-06 quick ratio is decreased because theincrease in quick assets is lessproportionate to the increased quick liabilities. The Quick ratio was at its peak in 2007-08, while was

lowest in the 2004-05.

Profitability RatiosA company should earn profits to survive and grow over along period of time. Itwould be wrong to assume that every action initiated bymanagement of companyshould be aimed at maximizing profits, irrespective ofsocial as well as economicalconsequences. It is a fact that sufficient must be earnedto sustain the operation of thebusiness to be able to obtain funds from investors forexpansion and growth and tocontribute towards the responsibility for the welfare ofthe society in business

environment and globalization.The profitability ratios are calculated to measure theoperating efficiency of thecompany.

The following Profitability Ratios are calculated for thecompany.


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Gross Profit RatioOperating Profit RatioNet Profit RatioRate Of Return On InvestmentRate Of Return On Equity

Gross Profit RatioThis is the ratio expressing relationship between grossprofit earned to net sales. It is auseful indication of the profitability of business. This ratiois usually expressed as

percentage. The ratio shows whether the mark-upobtained on cost of production issufficient however it must cover its operating expenses.Gross Profit Ratio = Gross Profit X 100Sales

Gross profit ratio analysisYear 2003-04 2004-05 2005--06 2006-072007-08

Trend 29.8 31.7 32.6 33.733.0

Operating Profit Ratio


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This ratio shows the relation between Cost of Goods Sold+ Operating Expenses andNet Sales. It shows the efficiency of the company inmanaging the operating costsbase with respect to Sales. The higher the ratio, the lesswill be the margin availableto proprietors.Operating Profit Ratio = COGS+Operatingexpences X 100

----------------------------------------------------

SalesOperating ratio

2003-04 2004-05 2005--06 2006-072007-08 83.5 80.079.0 77.9 81.7

Net Profit Ratio= Net profit x 100--------------------------

Net sales

Net profit ratio2003-04 2004-05 2005-06 2006-072007-0816.3 19.4 19.2 19.8

17.7

Turnover

Asset Turnover Ratio are basically productivity ratioswhich measure the output


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produced from the given input deployed. This relationshipis shown as underProductivity = Output

-------------Input

Assets are inputs which are deployed to generateproduction (or sales). The same setof assets when used intensively produces more output orsales. If the asset turnover ishigh, it shows efficient or productive use of input.

The following Assets Turnover Ratios are calculated forthe company.Total Assets Turnover

Net Fixed Assets TurnoverNet Working Capital TurnoverInventory Turnover RatioDebtor Turnover (in times)

Total Asset Turnover RatioThe amounts invested in business are invested in allassets jointly and sales are

affected through them to earn profits. Thus it is the ratioof Sales to Total Assets. .It isthe ratio which measures the efficiency with which assetswere turned over a period.

Total Asset Turnover Ratio = Sales----------

Total Assets

Total assets turnover ratioYear 2003-04 2004-05 2005-06 2006-072007-08


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Trend 1.5 1.5 1.6 1.5

1.2

Net Fixed Assets TurnoverTo ascertain the efficiency & profitability of business thetotal fixed assets are comparedto sales. The more the sales in relation to the amountinvested in fixed assets, the moreefficient is the use of fixed assets. It indicates higherefficiency. If the sales are less ascompared to investment in fixed assets it means that

fixed assets are not adequatelyutilized in business. Of course excessive sale is anindication of over trading and isdangerous.Net Fixed Assets Turnover Ratio = Sales

----------Net Fixed Assets

Total fixed assets turnover ratioYear 2003-04 2004-05 200506 2006-072007-08

Time 4.0 4.2 4.9 4.0

2.4


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INVESTOR RELATED RATIO:This ratio indicate split of

EPS between Cash Dividends and reinvestment of Profit.

If

the Company has Profitable projects than it will prefer tokeep dividend pay out ratiolower.Dividend pay-out Ratio = Dividend per Share in Rs.

-----------------------------------

Earnings per share inRupees

Year 2003-04 2004-05 2005-06 2006-072007-08Trend(Rs.) 1.54 4.68 2.94 3.773.43


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FINDING

S


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Though the sales has been continuously increasedfrom past 3 years but theproportionate expenditure is also rising so overall notmaking any huge effect on netprofit of this company. Hear the in 2005 company has reinvest profit forbusiness expansion it is good

shine for the company. The total expenditure is near by 80% of total income inevery year. Every year PBT is near by 20% of total income. Fixed assets are efficiently utilized by the companydue to which the profit of thecompany is increasing every year. Liabilities is incressing rate it mean company has to

developed business. Andpurchase raw material on credit basis. Company has enough cash in hand so that in anycondition company can takeAny Financial decision easily. All the years has quick ratio exceeding 1, the firm is inposition to meet itsimmediate obligation in all the years.

GP Ratio shows how much efficient company is inProduction.


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Comments


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The companys future plans for expansion seem cleardue to increasedinvestment in Fixed Assets .Efficient use of these Assetshas enabled the

company to observe an increased profit. Though the companys sale is continuously rising butthe net profit is not somuch increased so management should take some stepsto decrease itsexpenses. Company should try its best to increase sales andprofit.

The profit margin ratio shows decline in current year sothat company shouldtray to increase profit after tax Current ratio is very good it is 2.13:1 so company hasfully utilize cashliquidity for business development


46/49

.


47/49

Comments1: share capital amount from year 03-04 to 04-05 hasincreased in an phenominal manner

2: same goes for year 04-05 to 05-06 as well as 06-07 to07-08

3:goodwill has increse from year 06-07 to 07-08

4:cash balance has increased through out all the years

5:increase in the fixed asset throughout all the year


48/49

SUGGESTION


49/49

The companys future plans for expansion seem cleardue to increasedinvestment in Fixed Assets .Efficient use of these Assetshas enabled thecompany to observe an increased profit. Though the companys sale is continuously rising butthe net profit is not so

much increased so management should take some stepsto decrease itsexpenses. Company should try its best to increase sales andprofit. The profit margin ratio shows decline in current year sothat company shouldtray to increase profit after tax

Current ratio is very good it is 2.13:1 so company hasfully utilize cashliquidity for business development.

Final Prnt 4 Accounting

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Transcript of Final Prnt 4 Accounting