mba finance project

INTRODUCTION T0 STUDY

No business can plan its activities without considering its financial resources.

Financial management is that part of management which deals with raising of funds in

the most economical and suitable manner, using the funds as profitability as possible,

planning future operations, inspections, controlling current performance and future

development through financial accounting and other means.

Finance in essence is considered with the acquisition and use of funds by a

business firm. The main objective of financial management is to control required funds

for meeting short term and long-term needs of business enterprise and to maximize the

value firm to its equity share holders.

To have a clear understanding of the profitability and financial position of

business, the financial statements have to be analyzed and interpreted. Financial

statements are prepared for decision making. They play a dominant role in setting the

framework of managerial decisions. But the information provided by the financial

statement is not an end in itself as no meaningful conclusions can be drawn from these

statements alone. However, the information provided by the financial statement is of

immense use in making decision through analysis and interpretation of financial

statement. It helps to summarize large quantities of financial data and to make

quantitative judgments about the firm's financial performance.

The study entitled ‘An analytical study of Financial Performance with reference to

The Western India Ply woods Ltd. Kannur has been oriented with a view to study the

financial position of the company that help in making sound decision by analyzing the

recent trend.

1. INDUSTRY PROFILE

Plywood Manufacture in India

In 1916, Government of India set up a committee to explore the feasibility of

manufacturing tea chest plywood in Bengal and Assam and the other in North Bengal

were set up in 1917 to manufacture the same, but they stopped production owing to non-

availability of suitable bonding materials, indigenous lead lining nails and bands for

packing. Both the imported plywood and sawn wood chest were used together. No

development took place for some time until two factories in Assam took up the matter as

a challenge and started making plywoods for tea chest by around 1924 -1925. These were

resistance from the tea industry for the use of locally made plywood on the ground that

quality of timber used was not suitable.

Since independence the plywood industry has regained strength and has grown to

a full-pledged industry in spite of some setbacks faced by the industry in the post war

period. In 1947, India was a net import of plywood, mainly tea-chest plywood compared

to the plywood production in 1947 which was negligible, the present day production has

grown up to 62 Million . These have been a steady growth in the plywood industry. Since

the last 3-1 years.

The plywood industry consumes about 15 million M3 of timber. The other main

raw materials used by plywood industry in the synthetic rain which is available within the

country.

In Kerala, there are more than 500 plywood industries including large scale

industries such as Hindustan New Print and Western India Plywood Ltd. In India

Plywood industry are mainly located in Assam, Karnataka, Kerala, Maharashtra, Madhya

Pradesh and Andaman & Nicobar Islands.

Role of Plywood Industries in India:-

Plywood industries have played a significant role in the Socio-economic

development of the country. They provided various types of plywood products that are

required for various infrastructural developments. This industry means the strategic needs

of our country like portion plywood, plywood for pre-fabricated houses required for

soldiers on the Himalayan frontiers and other government needs. This industry also

means the packaging requirements of the country export. The industry also provides

employment to a large number of people directly and indirectly, through various sales

outlets.

Problems regarding Plywood:-

Wood based industries in India faces a lot of problems. Major are in the under

utilization of installed capacity due to the non-availabil.ity of required timber in India.

Most wood based industries depend upon the government owned forest for their raw

material. But due to the shortage in the effective forest covers, which was needed for

maintaining ecological stability, the central goal controls the falling of trees. Thus the

diminishing forest covers inadequate natural degeneration and subsequent for falling of

trees, led the industries into hardships. Due to non-availability the big industrial

consumers resorted to import, which increased their cost of production. However

plantation would have the inherent deficiency of susceptibility to bio deterioration and

therefore expanded use of preservation like Bora and Boric acid is imperative. But this

may lead to environmental pollution. High cost of production due to increased cost of

gilth logs, urea formaldehyde and phenol formaldehyde, competition from private and

public sector, import restriction imposed by government, mismanagement labour, and

unrest are other factors which adversely affected growth and profitability of the plywood

industry.

2. COMPANY PROFILE

2.1ORIGIN OF THE ORGANIZATION

The western India plywoods Ltd., the largest wood integrated industrial Complex

in Southern Asia was started in the year 1975 at Baliapatam, Kannur.

Thanks to the dynamism and vision of its founder late Mr. A.K.Kaderkutty, who

is acknowledged doyen of the Indian wood working industry. The Company which

commenced as a Plywood unit has steadily expanded to produce the diverse products,

which it now offers consumers.

A Hardboard plant was set up in 1959 - 1960 with West German Technical

collaboration. Initially with a capacity of 12.5 tones. This has now increased its capacity

to 120 tons per day. Besides plywoods and Hardboard the company also produces quality

flush doors, Block boards, Densified wood, Modern furniture items and a boost of other

products to suit the end market needs.

In 1978 the Western India Plywoods Ltd., set up a plant for manufacturing a Di

Allyl Phalate(DAP) molding powder, a thermoplastic that has to be imported until then,

significantly the technology developed in house with support from Shree Ram Institute of

industrial Research Delhi.

In 1989, the company has put up a pre finishing plant with Italian and German

Technical support for printing wood grains and plain colours on plywood’s and

hardboards. The pre finishing plant is the only one of its kind in the country and one of

the very new plants in the world. The State-of-the-art-technology adopted here eliminates

the pollution problem completely.

The company has also for the first time in the country, put up a pilot plant for

radiating wood in collaboration with the Baba Atomic Research centre, Mumbai in order

to upgrade the quality of low-grade timber. The company has set up a modem Research

and the most important feature of wood based complex is its motto of `cent percent

utilization' of wood.

2.2 GROWTH

The manufacture of plywood was stepped up steadily by addition of new machinery,

mostly imported. The company also diversified from Tea chests and Commercial

plywood to Decorative plywood, Block board, and Flush door, Shuttering and Marine

Plywood, Aircraft Plywood etc. The Company planned and executed the hardboard plant

between the years 1956 and 1958 with an initial installed capacity of 12.5 tones of

hardboard per day. The company also installed its own synthetic resin unit in 1959 with a

capacity of 200 tones.

WIP moved into chemical plastics sector. In 1978 WIP setup a plant for manufacturing

Di-allyl Phthalate (DAT) molding powder a thermoplastic which has to be improved,

until then significantly the technology was developed in-house with the support from

Shree Ram Institute of Industrial Research, Delhi.

All the raw materials and processes employed in the plant are 100% eco friendly. From

1971 onwards the company has been exporting decorative Plywoods and veneers to USA,

Germany, France, Dubai, Sweden and other countries of Middle East. In the present WIP

products are exported to more than 29 countries spread across 4 continents to buyers

associated with the company for over three decades.

CORPORATE GOVERANANCE PHILISOPHY

As an ISO 9001 : 2000 unit, engaged in the business of manufacture and sale of diverse

range of products, the company envisages the assurance of product quality, transparency,

accountability and integrity in its operations and in its relation with all the share holders,

that is customers: investors, employees, the government and other business associates.

2.3 Achievements of the organization

First to make irradiated wood

First to make aircraft plywood

First to make synthetic resin adhesive bonded plywood using hot pressing

techniques.

First to make high pressure industrial laminates

First to make quality hardboard way back in 1959-60

First to manufacture Di Ally phthalate molding powder

First to manufacture GI –Plywood-GI sandwich panel for anechoic chamber.

First to make pre-finished Plywood’s and hardboards using UV cured surface

finishing techniques.

First to get ISO 9000 certification for hardboard and prefinished boards.

The company has earned special appreciation from leading industries in the

automotive sector, Footwear sector, ISRO, BARC, Indian Railways etc.

PATENTS

Radiation induced polymerization of DAP, MMA & PE

Radiation induced polymerization of DAP & MMA

A process for manufacture of wood polymer composites by gamma irradiation

Manufacture of ABS plastics

Manufacture of SAN plastics

2.4 VISION, MISSION AND QUALITY POLICY

VISION

Continue to remain the best plywood panel corporation in India with a growth in

allied areas

MISSION

To provided utmost satisfaction to the consumer through best quality and

customer care.

To continusely upgrade the product through innovation and convergence of new

technology and to produce the best quality product.

To safe guard and enhance share holders value

To respect the dignify of all employees and together to become instrumental in

the development of the country while protecting the environment.

To utilizes the surpluses for the welfare of employees and the society at large

QUALITY POLICY

Quality policy of WESTERN INDIA PLYWOODS LTD is to manufacture

products as per national/international standard and make them available to customers as

per requirement.

WESTERN INDIA PLYWOODS LTD endeavor to upgrade the quality of its

products and related services on a continual basis through regular improvement effort. A

well defined quality management system has been implemented. This system is

continuously revised to enhance its effectiveness and updated to meet changing needs.

2.5 OBJECTIVES

Suitable equipments and machinery for process control at all stages.

Provision of adequate resources including raw materials and personnel to ensure

constant product quality.

Well defined process and product characteristics to enable monitoring analysis

and continual improvement

Communication of requirement of products including customers’ requirement,

statutory/regulatory requirements as per aspect of QMS including policy and

objective among all employees.

2.6 OWNERSHIP PATTERN:

The western India plywood is a public limited company. The organizational structure

consists of BOD at the top. At present, the members of BOD are,

Mr. P.C.D. Nambiar, Chairman

Mr. G.S.A. Saldanha, Director

Mr. N.L. Vaidyanathan, Director

Mr. V. Ramachandran, Director

Mr. Manoj Joshi, Director

Mr. Bhaskar Menon, Director

Mr. Ranjit Kuruvila, Director

Mr. A.J. Pai, Director (KSIDC, Nominee)

Mr. G. Gangadharan Nair, Director (IFCI, Nominee)

Mr. P.K. Mohamed. MD

Mr. P.K. Mayan Mohamed, Executive Director

The company has various departments the managers of these departments are headed by a G.M, Who is responsible for all the affairs of the company in the absence of M.D.

2.7 PRODUCT PROFILE

The major product for which the company has been the leaders in quality since 1945

is just because of its finest quality products produced as per international standards. The

products of the company are globally accepted. Over the last 50 years, through its close

knit co-ordination of various processing units, professional management and maximum

utilization of facilities available, the company has made an indelible mark in the wood

industry – a mark of glorious achievements

WIPWOOD

Densified wood is used in the manufacturing of textile & jute mill accessories

WIPLAM

Densified wood is used in the manufacture of insulation components for

transformers & switchgears

WIPCHECK

Densified compressed floor board, with both chequred and plain surfaces,

building & chemical industries

WIPROC

Densified wood used in the manufacture of high precision jig formatting tools in

aeronautical industry & neutron shields in reactors.

WIPBEAR

Densified wood used in the manufacturer of bearing and gears

WIPCHEM

Densified wood used in manufacture of electrical insulation components like

studs, nuts, cleats & other segments

WIPRESS

Rigid and high purity densified wood with excellent electrical and mechanical

properties, for use in the transformer industry.

WIPLAC

Pre-finished plywood & hard board, used in the manufacture of panel coiling and

furniture.

ULTRACLICK

Engineered wood flooring

COMPREG SLATS.

Used for railway coaches, paneling and as a building material.

DENSIFIED MOULDED SEATS

Used for railway coaches, auditoriums & restaurant.

WESTINDPLY

Decorative finished and commercial finished BWR and BWP grade

plywoods, manufactured from selected species of timber, water proof quality used

for boat building, concrete shuttering, furniture, partitions, paneling etc.

HARDBORDS

Used extensively by automobile industries, fiber drum manufactures, shoe

manufactures, photo frame backing, clock manufactures, school writing parts and also

for partitions.

FURNITURE

All type of furniture including molded a knock down furniture

2.8 ORGANIZATIONAL STRUCTURE

The usual way of depicting a formal organization is an organization chart. The

connecting line on this chart shows who is accountable to whom and who is in charge of

which department. Organization chart reveals the mode of authority and responsibility

delegated in organization.

2.8 ORGANIZATIONAL STRUCTURE

Managing Director

Executive Director

GM (administration)

GM (production)

Company Secretary Chief Accountant officer

Technical Manager Development Manager

Marketing Head Works Manager

Central Excise Plant Manager

Sales Manager DWD

HD/PFP/

Store/P&A

Electric

Densified Wood

Products

Plywood, Flush door, Block board

2.9 DEPARTMENTALIZATION

2.9.1 FINANCE DEPARTMENT

The Chief Accounts officer is the head of the Accounts Department. He is assisted

by the Accounts officers. All financial decisions are taken by the Accounts Department.

WIP Ltd. Maintains 5 subsidiary book. They are as follows-

1. Cash Receipt a\c

2. Cash Payment a\c

3. Bank Receipt a\c

4. Bank Payment a\c

5. Journal

Journal entries are maintained in order to rectify the errors. The three personal

ledgers maintained are:-

1. Account receivables

2. Account Payables

3. Advance to Staff

Rest all entries are included under direct expenses. Each and every transaction is

reflected in general ledger. General Ledger includes direct expenditure and all other items

like total sales, purchases, payables, receivables etc. The sale Department maintains Sales

Day Book, Debit Note and Credit Note.

Depreciation is provided on the straight-line method at the rebate specified in

schedule XIV of the Companies Act 1956.

The audits, finance, share transfer and grievance committee regularly meets to

consider aspects relevant to each committee. It is ensured that the share transfer agents

promptly attend to all Shareholders grievances. There is comprehensive management

reporting system on all aspects of operation and the boards of directors them

periodically.

FUNCTIONS

1. Allocation of Funds

2. Raising of Funds

3. Profit Planning

2.9.1 HIERARCHY OF FINANCE DEPARTMENT

THE BANKERS

Indian Overseas Bank, State Bank of India, Dena Bank and Punjab National Bank

are the bankers of the western India Plywoods Ltd.

DEMATERIALIZATION OF SHARE

The Company-had entered into an agreement with National Securities Depositors service

Ltd. (NSDL) from 15th March onwards for Company's share traded in electronic form.

SOURCE OF FUNDS

Shares Reserves and Surplus

Loans

Secured Loans

Unsecured Loans

General Finance And Company Secretary

Accounts Manager

Assistant accountant manager

Accounts staff Accounts staffAccounts staff

ACCOUTING PROCEDURE

WIP follows double accounting system and also maintain four types of journals. They are-

1. CPB (Cash Payment Book)

2. BPB (Bank Payment Book)

3. CRB (Cash Receipt Book)

4. BRB (Bank Receipt Book)

For these 4 types of journals a sub ledger is prepared. This is classified into three.

a. Accounts Receivable Book (ARB)

b. Accounts Payable Book (APB)

c. Personal Ledger (PL)

At the end of every month the sum total of the ledger are transferred to the main

ledger. Then there should have the equality in the amount of sub ledger and the main

ledger.

The next accounting procedure is preparing trial balance. At the end of every

financial year, profit and loss account and Balance sheet is prepared, from which

financial position of WIP is noticed.

CAPITAL STRUCTURE

The capital structure of WIP was made up of equity chare and preference shares.

They issue only redeemable preference shares. They also issue bonus shares at the time

of high profit. Their shares are registered in cochin and madras stock exchanges. A part

of company's profit was transferred profit and loss account is on the board's decision

Foreign Currency Transaction

Foreign currency liabilities outstanding as at the balance sheet are translated to

exchange rates prevailing on the date and the loss or gain arising out of the said

transactions relating to acquisition of fixed assets is adjusted to cost of relative assets and

others are charged to profit and loss account.

Dividends

In view of the lack of disturbance profit, directors are unable to recommend any

dividends for the past five accounting years. Company is proposing to pay- dividend in

the following year.

Income Tax

Provisions for income tax are made based on the assessable income as computed

accordance with the provision of the Income Tax Act, 1961. Timing differences between

accounting and taxable income capable of reversed in subsequent years are recognized as

deferred tax.

WIP publishes Annual Report every year, which includes the Profit and Loss

account, Balance Sheet, accounting policies of the business etc.

2.9.2 MARKETING DEPARTMENT

Marketing is one of the most dynamic fields within the management arena. The

main duties of marketing department in an organization are to analyze market, find

opportunities, design product, formulate marketing strategies, develop specific methods

and action, propose a budget and establish a set of controls.

POLICY

High quality and high price is the policy of WIP. So the company aims quality

conscious customers.

OVER ALL MARKETING STRATEGIY

Marketing strategy revolve around its product quality. The company's emphasis

on product performance and reliability has enabled it to command a performance

premium in the market it as entered significant brand equity in its target market coupled

with superior product development capabilities has enabled.

PROMOTION

The very important point to be noted is that till now there has been no advertising

for WIP LTD. The main promotion activity of WIP is conducting and participating in

exhibitions to attract potential customers. They have more of a direct selling approach. It

has around 40 sakes depots nationwide.

COMPETITORS

At first there was no strong competition WIP was the monopolistic company. But

now it faces strong competition from IPM (Indian Plywood Manufacturing Company) as

a slight a competition from Polymer, Kitply and Century etc.

TARGET SEGMENTS

As wood based panels are essentially intermediate products that are used for

further processing and value addition, the most logical segmentation variable is end use

of application. WIP distinguishes between industrial marketing, export marketing and

marketing at the retail level and has developed separate programs for each

Some of the major segments are:-

> The interior design and furniture manufacture segment

> The building construction segment

> The automotive coach - building segment

> The boat - building segment

MARKETING MIX

A description of the marketing mix adopted for WIP's major product line is

provided below.

PRICING

Consequent to superior raw materials and additional processing incorporated in

the manufacture of the WIP's plywood panels - they are more expensive than product

offered by the competitors. WIP's philosophy of continuously upgrading its machinery to

help in line with state - of-the art technology also adds to final produced cost. However

the additional perceived value arising out of such investments in more than the marginal

cost addition and hence customers are willing to retain loyal to WIP's products.

2.9.2 HIERARCHY OF MARKETING DEPARTMENT:

2.9.3 PRODUCTION DEPARTMENT

Production is the process by which raw materials are converted into finished

products. The production manager manages the Production Department followed by

production Executive, production Assistant and production Supervisors. It is the

responsibility of the Production Manager to determine the product designed by the firm.

Managing Director

Marketing Coordinator

Business Manager

Marketing Officer

Marketing Executive

Marketing Representative

Marketing Manager

Care should be taken to ensure that the products manufactured are of high quality and

produced in the specified time.

The raw materials that are used to produce the output as follows:

1. Wood

2. Steams

3. Chemicals

WOOD

For general purpose the wood used are Kalpine, Cellapine, Mango, Neeli, Pali,

Mullanpali, Redcidar, Pula, Redpine, Cher etc.

For decorative purpose, the woods used are Rosewood, Teak, Mahogony, Padauk,

Beech Silver Oak, Kussia, Dhavala and Chempak.

STEAM

Steam is the energy used to operate the machines. The steam comes from boilers.

There are four to five types of boilers. They are:-

1. Saw Dust Boiler

2. Fire wood Boilers

3. Industrial Engineering & Agricultural Cooperation Boilers

4. Thermo Pack Boilers.

CHEMICALS

The various chemical used in the preparation of plywood are Urea formaldehyde,

Acrolith. Phenol Formaldehyde etc.

The product mix of WIP includes Hardboard, Plywood, Densified Wood, Industrial

Marinates, and Furniture and pre-finished Boards.

Production Manager

Works Manager

Supervisor (shifting charge)

Operators

Operators Assistant

2.9.3 HIERARCHY OF PRODUCTION DEPARTMENT:

2.9.4 SALES DEPARTMENT

Sales department is one of the core departments in WIP Ltd. Sales volume is one

of the most important variables affecting profit. Sales are done directly by the company

itself. The finished goods after inspection are sent to Sales Department. They have their

own value department where all the company's products are displayed and sold WIP has

their own list of value customers like Indian Railway, Defense etc. Besides they have an

exciting range of specialty products from which customers can choose. Any wood

materials used at the time of construction of a house are available at the sales depots.

WIP Ltd engages in industrial sales, export sale and in domestic sale. The main

industrial customers’ of the company are Indian Railways, HMT, KSRTC, Shipyard etc.

Products are mainly exported to the countries like United States of America. France,

Netherlands, Sri Lanka, Japan and Canada. Domestic buyers are mainly carpenters,

furniture companies and local people.

The Commercial Tax Orifice (CTD) heads the sales tax division. Sales tax is the

main revenue to the government. Sales tax is paid according to the General Sales Act

1963. Sales Tax is divided into Central Sales Tax (CST) and Kerala Government Sales

Tax (KGST), There are five schedules to the General Sales Act. To exempt from tax

various firms submit F- from, C-form and H-form. If one copy of bill of dealing is shown

sales tax need not be paid.

Separate return should files for KGST and CST. Annual return is filed on April

30th every year. If sales tax is not paid in time, interest is calculated @ 24% per annum.

The Central tax rate will change according to the rate created by the Central/State

government

2.9.4 HIERARCHY OF SALES DEPARTMENT:

Sales Manager

Assistant Sales Manager

Depot Manager Senior Assistant

Assistant Depot Manager

Clerk Junior Assistant

Clerk

Trainee

2.9.5 HUMAN RESOURCE DEPARTMENT

The western India Plywoods Ltd is a forward looking organization committed to

identify, train, develop and sustain its human resources in such a manner as to integrate

the individual career aspirations of its executives with the fulfillment of the objectives.

Towards this WIP accepts basically that fair equitable and performance oriented policy

with respect to its human resources.

WIP ltd is having a well-government personnel department, which is concerned

with the creation of harmonious relationship, among its employees, bringing about their

utmost individual development. This department is coming under the authority of General

Manager followed by Factory Executive and the Welfare Officer. The Chief time keeper

and the time clerks assist them Welfare Officer deals with the welfare activities of the

company. The chief time keeper deals with the wage and salary administration provident

fund etc. The clerks deal with attendance. Leave time management, action ESI and PE.

The company has ensured that the work force in the company is kept at the

minimum. The strength last year was 958, which has come down to 884 (including 150

staff members) during the current year, which is 13% less than the previous year. WIP is

an ISO 9001:2000 certified company. Under the ISO set up, three company conduct

regular training programs to the employee to impress on them the need for quality and

productivity, thereby improving their performance. These regular programs have helped

to achieve cost effectiveness and improve the overall work.ing of the organization. The

company has employees both permanent and temporary worker. The trainees are selected

by the supervisor according to their performance. The workers of the company are paid

by the time rate wage system i.e. according to time spent on work. Though the basic pay

defer, the dearness allowance remains the same. The bonus is paid once in a year and it

ranges from 5.33% to 20%.

Out of remuneration paid to the employees, 8.33% contributes to the Provident

fund. 1.75% of workers’ wages is deposited in ESI and the management contributes

4.75% of the worker's salary. (ESI is applicable only to those employees whose salary is

below 7500) ESI provides insurance and helps workers in case of accident. Staff

members are entitles to one leave for every 10 days works (2 1/2 days of leave in a

month). The workers are eligible for 12 leave if they had worked 240 days in the previous

year. (One leave for every 20 days work)

FUNCTIONS OF HUMAAN RESOURCE DEPARTMENT

1. Employee Evaluation and Selection

2. Defining job or skill requirement

3. Arranging for induction and training

4. Co-coordinating personnel Appraisal

HRD POLICY

HRD Policy of the WIP Ltd is as follows:

Select

Develop

Maintain competent Personnel

HRD OBJECTIVES

> To integrate the growth opportunity of the enterprise with the fulfillment of company's

objectives.

> To identify, train and develop competent personnel with the growth potential and to

provide a policy environment for high levels of performance.

> To provide a system of equality in opportunity, equality in assessment and uniformity

in implementation

> To ensure continuity of the management by systematic succession.

> To seek and provide a continuous team of executors of sustained high levels of

competition in the company.

2.9.5 HIERARCHY OF HUMAN RESOURCE DEPARTMENT:

2.9.6 PURCHASE DEPARTMENT

Purchase department carries out the procurement of all indigenous items like raw

materials, machines, spares, other instruments etc. Purchase of materials is done

according to the recommendation and specification from the user department.

In WIP, there is no separate store department or stores manager. It comes under

the functions of the purchase department and the store keeper carries out the basic

functions.

Purchase Procedure of a Non-Timber item:

l. Generation of Indent

Indent is obtained from stores as per the request of user department. This gives

the details of the material to be purchased. Colour coding system adapted to differentiate

different sections

Managing Director

General Manager

(Administration)

Factory Executive

Chief Time KeeperWelfare Officer Personnel Manager

Clerks Clerks Clerks

2. Store Indent; Register

Managing Director Signs all the indents received from the stores indent register

and the indent number is given for easy verification.

3. Sending Enquiry

The company decides from which supplier they have to buy the required material

based on the approved vendors list as enquiries are send to the approved vendors

specifying the requirements of the material in detail.

4. Offer of Quotation by the supplier

Quotation is to reach the company within a specified period Quotations received

are clubbed together with the relevant indents and the copy of the enquiry is send to the

Works Manager or General Manager for taking decisions regarding the vendor's

selection.

5. Issue of Order

The purchase order is issued to the recommended vendor. The purchase executive

or the Managing director prepares the purchase order. Five copies of the purchase order

are prepared.

6. Follow Up

If the supplier does not meet the order in time, follow up action is done by email,

telephone etc.

7. Receipt of Invoice

The purchase department receives the invoice copy for the party. It contains

details regarding terms of the payment. Dispatch details etc.

8. Checking the invoice

The purchase department checks the invoice with the purchase order in respect of

specification of materials, quantity, price etc. and sends it to the stores.

9. Arrangement for the collection of the materials

Purchase department arranges for the collection of materials and delivers to the

stores.

10. Payment of the bills

Bill entered in the purchase day book is sent from the purchase department duly

signed by the Purchase Executive and Secretary/ GM and it is passed to MS and then it is

passed to the Accounts Department For making payments.

2.9.6 HIERARCHY OF PURCHASE DEPARTMENT:

2.9.7 RESEARCH AND DEVELOPMENT

The company has a well equipped Research and Development laboratory which is

one of the best research centers in wood working industry in the country approved by the

department of Scientific and Industrial Research Ministry of Science and Technology

government of India where continuous research is going on for improvement of quality

Assistant

Purchase Exeq

EEmanager

General Manager

Executive Director

Managing Director

and development of new products, through technological and methodological up

gradation. The benefit of successful R & D activities has had the distinct advantage of

increasing the technical competence and problem solving capability of the organization in

general and the R&D group in particular.

A Pan Bit irradiator was set up in the R & D with the co-operation and assistance

of Baba Atomic Research Centre, Mumbai, the only one of its kind in the industry in

India employing nuclear energy for peaceful purposes.

The company has also diversified its activities into the manufacture of Resorcinol

based glues, daily phthalate and sheet molding compounds, the development daily

phthalate based molding compounds, a raw material used in the electronic component

industry was the results of WIP's indigenous research and development efforts. This R &

D work enabled India to become the third country in the world (other two countries being

USA and Japan) to produce this special item.

2.9.8 QUALITY MANAGENMENT SYSTEM (QMS)

A well defined Quality Management System is in place. The QMS is certified by

ISO 9001, the international benchmark of progressive organization

Quality Policy

Quality policy of WIP is to manufacture products as per national and/ or

international standards to upgrade the quality on a continual basis through regular

improvement efforts. A well defined QMS has been implemented. This system is

continuously reviewed to enhance its effectiveness and updated to meet the challenging

need.

Quality Objectives

1. Suitable equipment and machinery for process control at all stage.

2. Provisions of adequate resources including raw material and personnel to ensure

consistent product quality.

3. Communication of requirement of products including customer requirement, statutory/

regulatory requirements aspects of QMS including policy and objective among all

employees.

The management representative has total responsibility for the Quality

Management System. Master copies of all QMS documents viz. Quality System Manual,

Work Instructions and other documents are available with the Management

Representative.

2.9.7 HIERARCHY OF QMS DEPARTMENT:

2.10 FUTURE GROWTH AND PROSPECTS

There is a lot of scope for the wood industry in India as well as in the global

economy .The company is focusing on the waste utilization mainly through which it can

reduce the cost drastically. The future plans of the company are:

Development of wood panel products, wood preservation, synthetic resin

adhesive & wood waste utilization.

New product development value addition, cost reduction & recognition of

excellence relating to wood panel products.

Soft feel coating system for wood based products & development of bio-fuel from

industrial wood wastes.

Managing Director

Management Representatives

Quality Awareness Engineer

3 McKinsey’s 7S Framework

Introduction to 7S Model:

The 7s framework has first appeared in the book “The Art of Japanese

Management” by Richard Pascal and Anthony Athos in 1981. The two authors were

looking at how Japanese industry had been so successful, at around the same time Tom

Peters and Robert Waterman were exploring what made a company excellent. The 7S

Model was born at a meeting of the four authors in 1978. It then appeared in the book

“IN search of Excellence” by Peters and Waterman in 1982. Subsequently, it was taken

up as a basic tool by the global Management Consultancy Company McKinsey to

diagnose the cause of organizational problems and to formulate programs for

improvement, then on it became famous as McKinsey 7S Model.

The Model starts on the premise that an organization is not just Structure, but

consists of 7 elements with a complex relationship between them.

i. STRUCTURE

The design of an organizational structure is a critical task of the top management

of an organization. It is the skeleton of the whole organization edifice. Organizational

structure refers to the relatively more durable organizational arrangements and

relationships. It prescribes the formal relationships among various positions and

activities. Arrangements about reporting relationships, how an organizational member

communicates with other members, and what roles he/she has to perform and what rules

and procedures exist that guide the various activities performed by members are all part

of the organizational structure.

ORGANISATIONAL CHART

Managing Director

Executive Director

GM (administration)

GM (production)

Company Secretary Chief Accountant officer

Technical Manager Development Manager

Marketing Head Works Manager

Central Excise Plant Manager

Sales Manager DWD

HD/PFP/

Store/P&A

Electric

Densified Wood

Products

Plywood, Flush door, Block board

ii. STRATEGY

Strategy refers to the systematic action and allocation of resources to achieve the

companies aim the integrated vision and direction of the company as well as the manner,

in which it drives, articulate, communicates and implements that vision and direction.

One of the most important evaluation of raw material utilization proper manner

and avoid the wastage through scientific and systematic manner concern the

management organization strategy and so on.

Strategy is a plan an organization formulates to gain a substantial advantage over

the competition. “Strategy is the determination of basic long term goals and objectives of

an enterprise, and the adoption of course of action and the allocation of resources

available for carrying out these goals.

Western India Plywoods Ltd having potential statement of the technology aware

about the views growth of the marketing is booming income rise, demand for goods

increases and hence the performance brand image of its product.

WASTE CONTROL STRATEGY

In order to survive in the market company follows waste control strategy. Western

India Plywoods Ltd maintains all the materials in a systematic & in a scientific way.

iii. SYSTEMS

Systems means all the producers, formal and informal, that makes the

organization go, day by day year by year; capital budgeting system, training system, cost

accounting procedures, budgeting. Training system of Western India Plywoods Ltd is as

follows

The following factors are considered for training

Strategic plans of the organization and meet operational areas as estimated by

the top management.

Training requirements as projected by the departmental heads and individual

employees

Reporting officer remarks in performance approvals reports.

Refresher training requirements in critical areas.

Career planning and succession planning inputs.

Inputs required by new entrants.

Training arising out of promotion and transfer.

Training calendar.

Identification of training needs.

Selection trainees, Evaluating of the training program.

Conducting the training program.

What is the system focuses in the Western India Plywoods Ltd organizational

factors impact on the taking perfect decision making skill throughout the information

regarding system than having training programs conducted for the supervisor’s carrier

planning process.

The main objective of the system towards formal and informal making perfect

decision analysis in the particular Refresher training requirements in critical areas and

Strategic plans of the organization and meet operational areas as estimated by the top

management.

Once an organization is setup and achieves its basic market share it becomes

more service oriented on the way to its growth. It has adapted the systems like ‘No

Child Labor’, employees are taken care of by providing them the facilities like medical

aids and their complaints are considered and overcome immediately.

Innovation Systems

Performance Management Systems

Financial Systems / Capital Allocation Systems

Compensation System / Reward System

Total Quality Systems

iv. SHARED VALUES

It refers to the core or fundamental values that are widely shared in the

organization and serve as guiding principle that are important. These values have great

meaning because they focus attention and provide a broader sense of purpose. Values are

things that you would strive for even if they were demonstrably not profitable. Values act

as an organization’s conscience, providing guidance in time of crisis.

Shared Values are what engender trust. Values are the identity by which a

company is known throughout its business areas. These values must be explicitly stated

as both corporate objectives and individual values. A shared value is an essential

characteristic or attribute promoted by the organization to motivate the behavior of

members of the organization. In simple words, shared values are what engender trust.

Values are the identity by which the organization is known in its business areas.

Western India Plywoods Ltd has the commitment in accepting the goals, achievements and objectives. It has its organizational values with quality policy, customer satisfaction and also with the employees.

v. STAFFAs a management function, staffing, or human resource management, is the one that

deals with the acquiring, training, appraising and compensation the staff that work for a

business. Effective staffing management is crucial to the success of a business. Without

the right staff, a business or organization may be unable to deal with any changes or

anything new in an efficient and successful manner. Within staffing there are three main

principles that should be adhered to in order to run a smooth and cooperative business.

These principles are that all managers are human resource management, employees are

very important and that human resource management is a matching process.

Technical Staff

These are the staffs they are responsible for the work related to technical aspect. In

this company they are appointing well qualified and experienced persons as technical

staff .So these staff will have good knowledge about the working environment.

Supervisory Staff

These are the person who is in charge with supervising the other employees in the

organization .In this company they are employing experienced staff as supervisor. So

they can observe the fellow workers and guide them as per the companies need. The

experienced supervisors are one of the key assets of this company.

Clerical staff

These staffs are responsible for the office work .These people are the back bone of the

company. If they work well, it will be an asset to the company. In this company they are

employed well & qualified employees for office work. These staffs are working

together for achieving companies objectives.

Staffing may be defined as filling and keeping filled the positions in the

organization structure. This is done by identifying work force requirements, inventorying

the people available and recruiting, selecting, placing, promoting, appraising, planning

the careers of, compensating and training or otherwise developing both candidates and

current job holders so that tasks are accomplished effectively and efficiently.

The responsibility and authority of all the persons affecting quality and their

interrelations have been defined and documented whenever personal responsible for

specific quality functions are not available the immediate supervisor shall re-delegate

their responsibilities. The responsibility and authority of some key personnel, who

performs, manage and verify the work including persuades who need organization

freedom to:

Initiate action to prevent the occurrence of any non-conforming relating to the

product, process and quality management system.

Identify and record any problem relating to product process and quality

management system.

Control the non-conforming product from further or until the non-conformity is

corrected.

vi. SKILLS

Skills include the distinctive competencies that reside in the organization. These

can be distinctive competencies of people, management practices, systems and

technology.

Training

Manager’s Team player, Communication skill, Negotiation skill, Inter Personnel skill.

Engineers Technical knowledge of production, knowledge of machinery used, updated

knowledge of technology, Team player.

Semi skilled knowledge of the process, Hardworking, physically fit.

Employee skill is identified by way of performance appraisal. Depending on the

strength and weaknesses of the employee the training program is conducted. The

company has skilled, unskilled and semiskilled labors. Depending on the job nature and

importance on-job training will be given to them. The training will be given to enhance

the environmental awareness among employees through training, development and

education. The training to an employee shall be of 1 type.

On the job training by concerned supervision.

Class room training by HRD department.

A skill is the ability, knowledge, understanding and judgment to accomplish a

task. Skills may be defined as what the company does best; the distinctive capabilities

and competencies that reside in their organization.

The organization selects and assigns personnel performing work affecting product

quality based on appropriate education skills and experience. The organization has also a

system to assess the competence of its personnel on periodic basis (performance appraisal

and development report) to identify gap in the performance, if any as well as assessing

their training needs to bridge the gap.

vii. STYLE

Top down, participative and authoritative.

Top down: It is decentralized authority and encourages subordinates to express their

opinion in decision making as well as in implementing the decision. However decisions

are taken by the leaders thus, decision are arrived at by consultation.

Participative: It is decentralize authority and encourage subordinates to participate and

involves in decision making and implementation processes. Decisions are made by the

top and his subordinate.

Authoritative

It is centralized power of decision making in themselves. Followers have no say

either in decision making or in implementation. They have to completely obey and follow

the instruction of the leaders. The leaders take full authority and full responsibility.

Western India Plywoods Ltd has both top down and participative style of

functioning .since all the crucial decisions (strategic decisions) are taken by top

management and it is passed to the middle level management for implementation. At the

same time many day to day decisions are taken in participative manner. It is taken with

proper consultation and negotiation among the middle level mangers and supervisor.

The company’s decision making is done by way of selecting the tender as

government decides on sale to be done by the companies in a particular month. So

decision is based on government policies on how much unit of power sell by companies.

This leads to the free flow of communication within the organization. The

management training is totally democratic there are no any restrictions to any

employees to express his opinion. Western India Plywoods Ltd has got open door policy

i.e. any level of employee can meet directly to his superior or managing director without

any hesitation.

Style of leadership or relationship refers to the manner in which an individual

uses his or her talents, values, knowledge, judgment and attitudes to lead and relate to

others. Style expresses the person’s character. Style is the leadership approach; also the

way in which the employees in the organization present themselves to the outside

world, to suppliers and customers. In simple words, a style is the pattern of behavior,

which a leader adopts in influencing the behavior of his followers (Subordinates) in the

organization context.

4. SWOT ANALYSIS

SWOT stands for Strength, Weakness, Opportunities and Threats. Strengths

and Weakness are the internal factors of the company where as Opportunities and Threats

are external factors. SWOT Analysis is the tool for auditing an organization and its

environment. It is the first stage as planning and helps marketers to focus on key issues

have been identified, they feed into marketing objectives. It can be used in conjunction

with other tools as audit and analysis.

i. STRENGTH

The company has been maintaining a high quality for its products and as its products are well accepted in the market by quality conscious customers, it does not anticipate any marketing problem. They are considered to be the “The Leaders in Quality Since 1945”.

The company has a well established R&D unit, one of the best kinds in the wood

based industry.

The company is duly equipped to develop new products to meet the requirements

of the market.

The products of WIP are certified by ISO.

ii. WEAKNESSES

There is an acute shortage of good raw materials which has forced the company to

import a substantial portion of its main raw material viz. timber, which has also

seen a considerable increase in price.

Lack of good distribution network as compared to the competitors.

Promotion of competitors is better to that of WIP. The Company concentrates

only on Industrial Market.

The price of WIP’s products is high as compared to its competitors.

iii. OPPORTUNITIES

The company is a leading supplier to Railways, Defense, Automobile, Electrical,

Transport, Civil Aviation and other industries.

Several products have been developed for the specific requirements of the

Automobile, Transport and communication sectors such as Densified wood etc.

and these products which have technological advantages over competitive

products.

The Company diversified from the production of chest and commercial plywood

to manufacture Decorative Plywood, Block Boards, Shuttering Plywood and

Aircraft plywood.

The products of the Company are being exported to Germany, France, U.S.A,

Sweden, West Asia and South Asian countries.

iv. THREATS

The high power tariff and increasing cost of furnace oil and other petroleum

products and chemicals.

There are many medium scale and small scale plywood industries. They fix low

price for their products.

In some product ranges, imported items are available at lower cost than is

currently produced in India.

In general, the working of the company has been adversely affected by the effects

of Globalization.

5. FINANCIAL ANALYSIS

PARTICULARS 2010 2011

I.INCOME

1. Sales 3,28,091 7,19,255

2. Other income 34,634 1,282

3.Deferred tax liability

TOTAL (A) 3,62,725 7,20,537

II. EXPENCE

4. Cost of material 96,768 2,08,780

5.Power and Fuel 54,302 1,09,582

6.Salaries and wages 47,949 83,183

7. Excise duty 37,338 82,069

8. Packing and forwarding 33,321 39,742

9. Other expenses 24,882 1,02,176

10. Depreciation 22,500 46,607

TOTAL (B) 3,07,060 6,72,139

11. Profit/loss before taxation (A-B) 55,665 48,398

12. Provision for taxation 2,956 5,630

13. Profit/loss after tax 52,709 42,768

14. Retained profit 52,709 42,768

15. Fixed assets gross 11,80,593 11,83,150

16. Accumulated depreciation 6,86,046 7,32,396

17. Net current assets 2,74,722 4,50,754

TOTAL ASSETS 7,69,269 8,07,338

18. Share capital 2,23,200 2,23,200

19. Reserves and surplus 41,720 84,488

20. Long term borrowings 2,41,060 2,41,729

21. Short term borrowings 2,63,289 2,57,921

22. Deferred tax liability

TOTAL LIABILITIES 7,69,269 8,07,338

Taxes – central, state, local 54,583 1,11,166

BUSINESS AND OPERATIONS

During the year 2010-11, the Company achieved a turnover of Rs. 71.92crores and a

profit before tax of Rs. 4.83crores. The Company has already chalked out various action

plans for further improvement in turnover and profit. The construction boom in several

areas of Kerala has helped the wood based panel industry to improve production and

demand for the related products has seen an upward trend. The Company hopes that the

availability of quality material for plywood production will improve shortly when the

Malaysian Joint venture Company commences the despatch of veneers from 2011- 12.

This will enhance the plywood production and turnover substantially. Also, various value

added products are being introduced which would give the Company higher returns.

The Company has maintained a satisfactory relationship with Bankers and Term Lending

Institutions and has been regular in paying interest, installments etc

DIVIDEND

The Board of Directors recommends a dividend due on Preference share up to 31.03.2011

which

works out to Rs.20.60lakhs. The Board also recommends payment of dividend of 10% on

equity shares, which works out to Rs.84.87lakhs.

REDEMPTION OF PREFERENCE SHARES

The Company had issued redeemable preference shares to IFCI Ltd. for Rs. 2Cr, out of

which Rs.lCr was redeemed on 7.12.2009 and balance Rs. lCr on 28.05.2011 along with

the accumulated dividend till the date of redemption. The Company had transferred Rs.

lCr each to Capital Redemption Reserve Account out of the profit of the years2009-10 &

2010-11 respectively.

6. LEARNING EXPERIENCE

The learning experience gained by me during the in-plant training was very much

practical oriented. Mostly all the concepts and theories, which I studied in the class, are

applicable practically.

I had a great time working on the project, as it gives insights into the working

environment of an organization. The training has exposed me to many facts of an

organization and also helped me to know how various departments are being functioned

at various levels. All the staffs in the company were very much co-operative and keen to

explain each and every aspects of the company. During the time of production process a

systematic layout of machines were learnt. The plant is systematically designed so that

the production testing quality control is systematically arranged.

I understood that the work allotted to specific departments depending upon the

nature and allotted work is expected to complete within time both effectively and

efficiently. The authority and responsibility relationship, information flow etc of the

organization was learnt. During the in-plant training the various concepts were linked

with the practical application of those followed the organization.

Concern of high quality, safety measures, good working environment, high

concern for environmental protection, developing the team spirit among the employees

and developing the morale of the employees etc were known. I became more aware of the

plywood industry and the role played by The Western India Ply woods Ltd.

All together as a good learning experience as it could see the sum of the things

which studied in class is being put to practical use.

1.GENERAL INTRODUCTION

THEORETICAL BACKGROUND OF THE RESEARCH

No business can plan its activities without considering its financial resources. Financial

management is that part of management which deals with raising of funds in the most economical

and suitable manner, using the funds as profitability as possible, planning future operations,

inspections, controlling current performance and future development through financial

accounting and other means.

Finance in essence is considered with the acquisition and use of funds by a business firm. The

main objective of financial management is to control required funds for meeting short term and

long-term needs of business enterprise and to maximize the value firm to its equity share holders.

To have a clear understanding of the profitability and financial position of business, the financial

statements have to be analyzed and interpreted. Financial statements are prepared for decision

making. They play a dominant role in setting the framework of managerial decisions. But the

information provided by the financial statement is not an end in itself as no meaningful

conclusions can be drawn from these statements alone. However, the information provided by the

financial statement is of immense use in making decision through analysis and interpretation of

financial statement. It helps to summarize large quantities of financial data and to make

quantitative judgments about the firm's financial performance.

The study entitled ‘An analytical study of Financial Performance with reference to The Western

India Ply woods Ltd. Kannur has been oriented with a view to study the financial position of the

company that help in making sound decision by analyzing the recent trend.

Tools for analysis:

The data collected was analysed by using the following tools:-

Ratio analysis

Comparative balance sheet

RATIO ANALYSIS

The financial statements, Balance sheet and income statement depicts the picture what

has actually happened to earnings during a specified period and presents summary of financial

position of the company at a given point of time. Ratio analysis is a very powerful tool useful for

measuring performance of an organisation. The ratio analysis concentrates on the inter-

relationship among the figures appearing in the financial statements. The ratio analysis helps the

management to analyse the past performance of the firm and to make further projections. Ratio

analysis allows interested parties like shareholders, investors, creditors, government and analysis

to make an evaluation of certain aspects of a firm’s performance. Ratio analysis is a process of

comparison of one figure against another which make a ratio and the appraisal of the ratios to

make proper analysis the about the strength and weaknesses of the firms operations. The

calculation of ratios is a relatively easy and simple task but the proper analysis and interpretation

of the ratios can be made only by the skilled analyst. Ratios normally pinpoint a business strength

and weakness in two ways.

Ratio provide an easy way to compare present performance with past.

Ratios depict the areas in which a particular business competitively advantage or

disadvantaged through comparing ratios to those of other business of the same size

within the same industry.

COMPARATIVE FINANCIAL STATEMENTS

Comparative financial statements are ones, which have been prepared in a systematic

manner and provides statistical information about a particular event {Financial transaction}or

aspect, taking place on different dates or during different periods.

The comparative financial statements are chalked out in columnar form (in majority of the cases).

One is also able to view comparative accounts of different companies.

Comparative financial statements, like all other financial statements have the following types of

financial statements:

Income statements

Balance sheet

Income statements:

Also known as profit and loss financial statement, these types of comparative financial statements

suggest profit amount earned by a company as well as amount of money lost by a company. Loss

or profit may not always mean, loss or profit of money, it may also include any asset or stock,

which has an economic value. Income statements also include expenditure incurred for

conducting activities, related to operations. This type of a financial statement is referred as an

operating financial statement.

Balance sheet:

Information pertaining to expenses and profit earned by a company are recorded in the balance

sheet. A balance sheet is often described as a "snapshot of a company's financial condition". Of

the four basic financial statements, the balance sheet is the only statement which applies to a

single point in time of a business calendar year. The difference between the assets and the

liabilities is known as equity or the net assets or the net worth or capital of the company and

according to the accounting equation, net worth must equal assets minus liabilities.

1.2 STATEMENT OF THE PROBLEM

The justification of existence of any company is determined by performing as per

expectations. Analysis of overall performance is one of the major requirements for planning.

Performance evaluation is necessary from the point of view of creditors, public, government,

other organizations and the company itself. It is also necessary to bridge the gap between the

current and expected position by taking corrective measures. It acts as a yardstick of measuring

how the company has been able to move forward as per the plan.

This is to find out how Different financial components such as debt and equity affects

the financial strength and weakness of Western India Plywoods.

The information provided through the analysis and interpretation of financial statements

is of immense help in making decisions. They play a dominant role in setting the framework of

managerial decisions.

1.3 OBJECTIVE OF THE STUDY

To analyse the financial strength and weakness of the firm using various

analytical tools like Ratio Analysis and Comparative statements.

To examine the various components of the financial statements of the company &

to find out how the Debt and Equity affect the financial performance.

To make an overall performance analysis and know the progress of the concern

through the five years data.

To evaluate the liquidity position and profitability of the company.

To involve comparison for a useful interpretation of the financial statements.

1.4 SCOPE FOR THE STUDY

A company’s profitability and efficiency can be evaluated only through the device of

financial analysis of its financial statements. This study is very much useful to share holders and

creditors of the company. The study mainly covers the analysis of financial position and

operational strength/weakness of the company.

The study is aimed at analyzing the financial statements of Western India Plywoods on

the basis of ratio analysis and comparative balance sheet in order to know the company’s

financial & cash position and its performance during the past five years from 2006-2011.

1.5 RESEARCH METHODOLOGY

The study is partly descriptive and partly analytical. It is descriptive as it traces theoretical frame

work of financial management. It is analytical in the sense that it makes an appraisal of the

financial management in Western India Plywoods Ltd. The Research Design is needed because it

felicitates the smooth sailing of the various research operations. There by making research as

efficient as possible yielding maximum information with minimum expenditure.

The study is primarily based on the internal records and annual accounts of the company. Besides

this information’s are gathered through discussion with the officers of the company. Personal

interview was held with various personnel working in the company.

1.5.1 TYPE OF RESEARCH

DESCRIPTIVE RESEARCH

The study is primarily based on the internal records and the annual records of the company.

Besides information is gathered through discussions held with the officers of the company.

1.5.2 SAMPLING METHOD

1.5.2.1 Universe

The entire financial data of the company is considered as the universe of data.

1.5.2.2 Sample size

Financial data which is relevant to 5 years is taken as the sample size.

1.5.2.3 Sample method

Convenience sampling method is used to collect data for the study. A convenience sample is one

of the main types of non-probability sampling methods. A convenience sample is made up of

people who are easy to reach.

1.5.3 SOURCE OF DATA

Secondary data is the major base of the study. Secondary data is collected from

publications such as annual reports and other records which include journals, magazines and

company web sites of Western India Plywood ltd.

1.6 LIMITATIONS OF THE STUDY

The period of the study is limited to data of 5 years.

The study is based on the secondary data provided by the company

It is difficult to judge the financial performance with the said ratios

Both managers and employees are not ready to fully reveal the data required for

the project and the document of the company are not open for the public scrutiny

The time period was limited to 10 weeks which is not sufficient to have a

complete study.

2. DATA ANALYSIS & INTERPRETATION

2.1 RATIO ANALYSIS

1.1.1 CURRENT RATIO

CURRENT RATIO = CURRENT ASSET/ CURRENT LIABILITIES

This ratio is most commonly used to perform the short – term financial analysis. Also known

as the working capital ratio, this ratio matches the current assets of the firm to its current

liabilities.

TABLE NO: 2.1.1

YEAR CURRENT

ASSETS

CURRENT

LIABILITIES

CURRENT

RATIO

2006 – 2007 5,24,434 2,00,483 2.61

2007 – 2008 5,25,569 2,09,721 2.50

2008 – 2009 4,97,588 3,03,618 1.63

2009 – 2010 5,26,498 2,57,407 2.04

2010 – 2011 5,93,627 2,46,131 2.41

CHART NO:2.1. 1

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

0

0.5

1

1.5

2

2.5

3

CURRENT RATIO

INTERPRETATION

The standard current ratio is 1.5:1. The current ratio of the company is satisfactory during the

year 2008 – 2009 and all other years the current ratio is excess. Hence the position is very

good from the point of view of creditors. There is an abnormal excess in the current ratio due

to the excess of funds in current assets. They have to plan on the idle assets to utilize it

completely.

2.1.2 QUICK RATIO

QUICK RATIO = QUICK ASSETS/ QUICK LIABILITIES

This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of liquidity of a

company. It shows the ability of a business to meet its immediate financial commitments. It is

used to supplement the information given by the current ratio.

TABLE NO: 2.1.2

YEAR QUICK ASSETS CURRENT LIABILITIES QUICK RATIO

2006 – 2007 1,36,717 2,33,255 0.56

2007 – 2008 1,46,946 2,09,727 0.70

2008 – 2009 1,29,959 3,03,104 0.42

2009 – 2010 1,43,404 2,57,407 0.55

2010 – 2011 1,69,482 2,46,131 0.68

CHART NO: 2.1.2

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

QUICK RATIO

INTERPERTATION

The ratio measures that the ability of the business to meet financial obligations as they come

due, without disrupting the normal, ongoing operations of the business. The standard quick

ratio is 1:1. Here, quick ratio from 2007 – 2011 is lower than the ideal ratio, indicating that the

firm is not able to meet its quick liabilities in time.

2.1.3 WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO = NET SALES / WORKING CAPITAL

This ratio indicates the efficiency or inefficiency in the utilization of working capital in making

sales.

TABLE NO: 2.1.3

YEAR NET SALES WORKING CAPITAL WCT RATIO

2006 – 2007 4,48,306 2,91,209 1.53

2007 – 2008 4,58,297 3,15,842 1.45

2008 – 2009 7,63,283 1,93,179 3.95

2009 – 2010 2,90,918 2,69,091 1.08

2010 – 2011 6,34,013 3,47,496 1.82

CHART NO: 2.1.3

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.5

1

1.5

2

2.5

3

3.5

4

4.5

WCT RATIO

INTERPRETATION

The ratio measures the efficiency with which working capital is being used by a firm. A low

working capital turnover ratio may reflect an in adequacy of working capital and lower turnover

of inventories or receivables. The working capital turnover ratio show a declining trend from

2006 - 2007 to 2007 - 2008. Thereafter it increased and again declined and reached to 1.82 during

the year 2010 – 2011.

2.1.4 DEBTORS TURNOVER RATIO

DEBTORS TURNOVER RATIO = NET CREDIT SALES /

AVERAGE DEBTORS

This ratio indicates the relationship between net credit sales and trade debtors. It also shows the

rate at which cash is generated by the turnover of debtors.

TABLE NO: 2.1. 4

CHART NO:2.1. 4

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110123456789

10

DTR RATIO

INTERPRETATION

The ratio measures that the rate at which debtors are converted into sales and then into cash. The

increase in debtor’s turnover ratio will contribute towards the profitability of the company. Here,

the debtor’s turnover ratio of 9.42 during 2008 – 2009 is the highest and 3.49 in 2009 – 2010 are

the lowest as compared to any other year. It again rose in the year 2010-2011.

YEAR

NET CREDIT

SALES

AVERAGE

DEBTORS

DTR RATIO

2006 – 2007 4,48,306 72,097 6.21

2007 – 2008 4,58,297 71,838 6.37

2008 – 2009 7,63,283 80,975 9.42

2009 – 2010 2,90,918 83,306 3.49

2010 – 2011 6,34,013 97,695 6.48

2.1.5 GROSS PROFIT RATIO

GROSS PROFIT RATIO = GROSS PROFIT / NET SALES X 100

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 evaluates the effectiveness of business. It indicates the efficiency of firm in

terms of its production and how much it has gained profit. Gross profit reflects the profit firm has

made on cost of goods sold.

TABLE NO: 2.1.5

YEAR GROSS PROFIT NET SALES GROSS PROFIT

RATIO

2006 – 2007 90,939 4,48,306 20.28%

2007 – 2008 69,704 4,58,297 15.20%

2008 – 2009 1,69,969 7,63,283 22.26%

2009 – 2010 68,004 2,90,918 23.37%

2010 – 2011 1,57,496 6,34,014 24.84%

CHART NO: 2.1.5

2006 - 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

GROSS PROFIT RATIO

INTERPRETATION

Gross profit ratio is increasing during the year 2007 – 2008 to 2010 – 2011. A high gross profit

ratio helps to cover all operating expenses, fixed interest charges, dividend and appropriation of

reserve. This ratio indicates the efficiency of production or trading operations. In 2010-2011 it is

high compared to the other years.

2.1.6 NET PROFIT RATIO

NET PROFIT RATIO = NET PROFIT / NET SALES X 100

The net profit ratio is the overall measure of a firm’s ability to turn each rupee of sales into profit.

It indicates the efficiency with which a business is managed. The net profits are obtained after

deducting income-tax and, generally, non-operating expenses and incomes are excluded from the

net profits for calculating this ratio. Thus, incomes such as interest on investments outside the

business, profit on sales of fixed assets and losses on sales of fixed assets, etc are excluded.

TABLE NO: 2.1.6

YEAR NET PROFIT NET SALES NET PROFIT RATIO

2006 – 2007 (46,095) 4,48,306 (10.28)%

2007 – 2008 (40,754) 4,58,297 (8.89)%

2008 – 2009 21,853 7,63,283 2.68%

2009 – 2010 52,709 2,90,918 18%

2010 – 2011 42,768 6,34,013 6%

CHART NO: 2.1.6

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 2011

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

NET PROFIT RATIO

INTERPRETATION

The ratio indicates the firm’s capacity to withstand adverse economic conditions. From 2006 –

2007 to 2007 – 2008 the company has been running in loss due to the low demand and price

competition. However, from 2008 – 2009 the company started making profit. In 2010-2011 the

profit again declined compared to the previous year.

2.1.7 DEBT EQUITY RATIO

DEBT EQUITY RATIO = EXTERNAL EQUITY / INTERNAL

EQUITY

This ratio attempts to measure the relationship between long term debts and shareholders

fund. This ratio measures the relative claims of long term creditors on the one hand and

owners on the other hand, on the assets of the company. A high debt/equity ratio generally

means that a company has been aggressive in financing its growth with debt. This can

result in volatile earnings as a result of the additional interest expense.

TABLE NO: 2.1.7

YEAR EXTERNAL

EQUITY

INTERNAL EQUITY DEBT – EQUITY

RATIO

2006 – 2007 4,49,763 1,72,169 2.61

2007 – 2008 5,03,717 1,72,169 2.92

2008 – 2009 3,41,188 1,72,169 1.98

2009 – 2010 2,41,060 2,64,920 0.90

2010 – 2011 2,41,729 3,07,688 0.78

CHART NO: 2.1.7

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.5

1

1.5

2

2.5

3

3.5

DEBT – EQUITY RATIO

INTERPRETATION

This ratio measures long term solvency. The ideal debt equity ratio is 2:1. A high ratio shows that

the creditors have invested more in the business than the shareholders. A low ratio indicates a

smaller claim of creditors. More precisely, the greater the debt equity ratio, the greater the risk to

the creditors. In 2010-2011 the company is having the ratio compared to the other years.

2.1.8 PROPRIETARY RATIO

PROPRIETARY RATIO = SHARE HOLDERS FUND / TOTAL

ASSETS

This is a variant of debt equity ratio. It measures the relationship between share holders fund and

total assets. Establishes relationship between proprietor's funds to total resources of the unit.

Where proprietor's funds refer to Equity share capital and Reserves, surpluses and Tot resources

refer to total assets.

TABLE NO: 2.1.8

YEAR SHAREHOLDERS

FUNDS

TOTAL

ASSETS

PROPRIETARY

RATIO

2006 – 2007 1,72,169 1,08,389 0.15

2007 – 2008 1,72,169 10,58,194 0.16

2008 – 2009 1,72,169 10,18,046 0.17

2009 – 2010 2,64,920 10,26,676 0.25

2010 – 2011 3,07,688 10,53,469 0.29

CHART NO: 2.1.8

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.05

0.1

0.15

0.2

0.25

0.3

0.35

PROPRIETARY RATIO

INTERPRETATION

Proprietary Ratio keeps increasing during the year from 2006 – 2007 to 2010 – 2011. The

proprietary ratio is high during the year 2010 – 2011, this indicates that relatively favourable

position to the creditors at the time of liquidation. In 2006 – 2007, low proprietary ratio indicates

that the lower proportion of net worth is invested in fixed assets.

2.1.9 CAPITAL GEARING RATIO

CAPITAL GEARING RATIO = FIXED INCOME BEARING

FUNDS / EQITY SHAREHOLDERS FUND

This is the ratio between the fixed interest bearing securities and equity share capital. Fixed

income securities include debentures and preference share capital.

TABLE NO: 2.1.9

YEAR FIXED INCOME

BEARING

FUNDS

EQUITY

SHAREHOLDERS

FUNDS

CAPITAL

GEARING

RATIO

2006 – 2007 7,56,345 1,26,169 5.9

2007 – 2008 7,96,585 1,26,169 6.31

2008 – 2009 6,41,058 1,26,169 5.08

2009 – 2010 6,42,676 1,26,593 5.07

2010 – 2011 6,37,977 1,69,361 3.76

CHART NO: 2.1.9

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

1

2

3

4

5

6

7

CAPITAL GEARING RATIO

INTERPRETATION

From 2006 – 2007 to 2007 – 2008 the capital gearing ratio has slightly increased and thereafter

declined and reached up to 3.76 in 2010-2011, indicating that the proportion of fixed income

bearing funds declines each year, which increases the risk of equity shareholders.

2.1.10 SOLVENCY RATIO

SOLVENCY RATIO = TOTAL ASSETS / TOTAL OUTSIDE

LIABILITIES

These ratios are used to analyse the long term solvency of any particular business concern.

Acceptable solvency ratios will vary from industry to industry, but as a general rule of

thumb, a solvency ratio of greater than 20% is considered financially healthy. Generally

speaking, the lower a company's solvency ratio, the greater the probability that the

company will default on its debt obligations.

TABLE NO: 2.1.10

YEAR TOTAL ASSETS TOTAL OUTSIDE

LIABILITIES

SOLVENCY

RATIO

2006 – 2007 10,83,894 9,43,570 1.14

2007 – 2008 10,58,194 9,60,312 1.10

2008 – 2009 10,18,046 8,98,162 1.13

2009 – 2010 10,26,676 7,61,756 1.34

2010 – 2011 10,53,469 7,45,781 1.41

CHART NO: 2.1.10

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

SOLVENCY RATIO

INTERPRETATION

The ratio is used to test the solvency of a firm. Solvency ratio has slightly increased from 2006 –

2007 to 2010 – 2011 which indicates the firm’s ability to meet the outside liabilities out of total

assets.

2.1.11 FIXED ASSETS TURNOVER RATIO

FIXED ASSETS TURN OVER RATIO = NET SALES / FIXED

ASSETS

This ratio indicates the efficiency with which the firm is utilising its investments in fixed assets

such as plant and machinery, land and building etc. 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.

TABLE NO: 2.1.11

YEAR NET SALE FIXED ASSETS FAT RATIO

2006 – 2007 4,48,306 5,56,721 0.8

2007 – 2008 4,58,297 5,30,037 0.86

2008 – 2009 7,63,283 5,21,763 1.46

2009 – 2010 2,90,918 5,00,718 0.58

2010 – 2011 6,34,013 4,59,842 1.37

CHART NO: 2.1.11

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

FAT RATIO

INTERPRETATION

This indicates the ratio of net sales to fixed assets. In the year 2008 – 2009 shows the highest

ratio, 2009 – 2010 shows big fall due to lower sale. In the year 2006 – 2007 and 2007 – 2008

shows somewhat same ratio and 2010 – 2011 shows a recovery due to increase in sales.

2.1.12 CAPITAL RESERVE RATIO

CAPITAL RESERVE RATIO = CAPITAL / RESERVE

TABLE NO: 2.1.12

YEAR CAPITAL RESERVE CAPITAL TO RESERVE RATIO

2006 – 2007 3,87,717 5,59,460 0.69

2007 – 2008 3,78,623 5,32,625 0.71

2008 – 2009 80,975 5,21,763 0.15

2009 – 2010 3,83,094 5,00,178 0.76

2010 – 2011 3,87,717 5,59,460 0.69

CHART NO: 2.1.12

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

CAPITAL TO RESERVE RATIO

INTERPRETATION

The capital reserve ratio is very low during the year from 2008 – 2009 which indicates the

proportion between capital and reserve is low and high during the year 2009 – 2010. In 2010-

2011 also the company has a standard ratio.

2.1.13 INVENTORY TO WORKING CAPITAL RATIO

INVENTORY TO WORKING CAPITAL RATIO = INVENTORY /

WORKING CAPITAL

This ratio establishes the relationship between the cost of goods sold during a given period and

the average amount of stock carried during the period. A low value of 1 or less of inventory to

working capital means that a company has high liquidity of current asset.. It is not favourable for

management because excessive inventories can place a heavy burden on the cash resources of a

company.

TABLE NO: 2.1.13

YEAR INVENTORY WORKING CAPITAL

INVENTORY TO WORKING CAPITAL

2006 – 2007 3,87,717 2,91,209 1.33

2007 – 2008 3,78,623 3,15,842 1.19

2008 – 2009 3,66,324 1,93,179 1.89

2009 – 2010 3,83,094 2,69,091 1.42

2010 – 2011 4,24,145 3,47,496 1.22

CHART NO: 2.1.13

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.20.40.60.8

11.21.41.61.8

2

INVENTORY TO WORKING CAPITAL

INTERPRETATION

The ratio measures the proportion between the inventory and working capital. The inventory to

working capital ratio is high during the year 2008 – 2009 and low in 2007 – 2008.

2.1.14CASH TURN OVER RATIO

CASH TURN OVER RATIO = SALES / CASH

TABLE NO: 2.1.14

YEAR SALES CASH CASH TURN

OVER RATIO

2006 – 2007 4,48,306 10,794 41.53

2007 – 2008 4,58,297 11,041 41.50

2008 – 2009 7,63,283 11,930 63.98

2009 – 2010 2,90,918 13,424 21.67

2010 – 2011 6,34,013 29,272 21.65

CHART NO: 2.1.14

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 2011

0

10

20

30

40

50

60

70

CASH TURN OVER RATIO

INTERPRETATION

Cash turnover ratio during 2010 – 2011 of 21.65 which is very less compared to other years.

During the year 2008 – 2009 the increase shows that there is proper utilisation of the resources of

the company. In 2006-2009 it was high after that it declined highly.

2.1.15CAPITAL TURNOVER RATIO

CAPITAL TURN OVER RATIO = SALES / CAPITAL

TURNOVER

This ratio shows the efficiency with which capital employed in a business is used. A high

capital turnover ratio indicates the possibility of greater profit and a low capital turnover is a sign

of insufficient sale and possibility of lower profits.

TABLE NO: 2.1.15

YEAR SALES CAPITAL

EMPLOYED

CAPITAL

TURNOVER RATIO

2006 – 2007 4,48,306 10,83,894 0.41

2007 – 2008 4,58,297 10,58,194 0.43

2008 – 2009 7,63,283 10,18,046 0.74

2009 – 2010 2,90,918 10,26,676 0.28

2010 – 2011 6,34,013 10,53,469 0.60

CHART NO: 2.1.15

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 - 20110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

CAPITAL TURNOVER RATIO

INTERPRETATION

The ratio measures the proportion of sales is made out of total capital employed. A low capital

turnover ratio means that no sufficient sales are being made and profit are low. Capital turnover

ratio has increased from 2006 – 2007 to 2008 – 2009 and thereafter significantly declined to 0.28

in 2009-2010 and then again increased during the year 2010 – 2011 to 0.6.

2.1.16 FIXED ASSETS COVERAGE RATIO

FIXED ASSETS COVERAGE RATIO = NET BLOCK / TERM LIABILITY

Determines a firm's ability to uphold its debt payments and contracts with all of its fixed assets

(cash, property, et cetera), minus any outstanding liabilities. When calculated properly, a fixed

asset coverage ratio demonstrates how well the cash and properties owned by a company.

TABLE NO: 2.1.16

YEAR

NET BLOCK TERM LIABILITIES FIXED ASSETS

COVERAGE RATIO

2006 – 2007 5,53,851 4,49,763 1.23

2007 – 2008 5,27,947 5,03,717 1.04

2008 – 2009 4,77,999 3,41,188 1.40

2009 – 2010 4,94,547 2,41,060 2.05

2010 – 2011 4,50,754 2,41,729 1.86

CHART NO: 2.1.16

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.5

1

1.5

2

2.5

FIXED ASSETS COVERAGE RATIO

INTERPRETATION

In 2009 – 2010 there is a high fixed coverage ratio because the firm using the fixed assets to pay

the term liabilities. In 2007 – 2008 there is a low fixed coverage ratio because the firm not using

the fixed assets to pay the term liabilities. In 2010-2011 it is as par to the previous year.

2.1.17 DEBTS ASSETS RATIO

DEBT ASSET RATIO = TOTAL DEBTS / ASSETS

Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are

provided via debt. It is the ratio of total debt (the sum of current liabilities and long-term

liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as

'goodwill').

TABLE NO: 2.1.17

YEAR TOTAL DEBTS ASSETS DEBTS ASSETS RATIO

2006 – 2007 7,10,345 10,83,894 0.65

2007 – 2008 7,50,585 10,58,194 0.70

2008 – 2009 5,95,058 10,18,046 0.58

2009 – 2010 5,04,349 10,26,676 0.49

2010 – 2011 4,99,650 10,53,469 0.47

CHART NO: 2.1.17

2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 20110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8 DEBTS ASSETS RATIO

INTERPRETATION

The debt – asset ratio expresses the relationship between total debts and total assets. The higher

the ratio, the greater the risk exposure of the company. Debt – assets ratio has increased from

2006 – 2007 to 2007 – 2008 and thereafter declined from 2008 – 2009 to 2010 – 2011. In 2010 –

2011 the debt asset rate was low which reduces the risk of the company.

2.2 COMPARATIVE BALANCE SHEET

2.2.1COMPARATIVE BALANCE SHEET ANALYSIS FOR THE YEAR ENDED 31ST MARCH

2007-2008 ( Rs in thousands)

TABLE NO: 2.2.1

PARTICULARS 2007 2008 INCREASE/

DECREASE

INCREASE/

DECREASE

%

LIABILITIES

Shareholders fund:

share capital 1,30,873 1,30,873 0 0

Reserves & surplus 41,296 41,296 _ _

Loan:

Secured 7,36,303 7,43,777 7,474 1.01

Unsecured 6,784 6,808 (24) (0.35)

Current liabilities & provisions 2,33,225 2,09,777 (234,98) (10.07)

Deferred tax liabilities 1,837

TOTAL

10,83,894 10,58,194 (25,700) (2.37)

ASSETS

Fixed assets 5,53,851 5,27,947 (25,904) (4.67)

Investments 2,739 2,588 (151) (5.51)

Capital WIP 2,870 2,090 (780) (27.17)

Current assets

Sundry debtors 72,097 71,838 (259) (0.35)

Cash & bank balance 10,794 11,041 247 2.208

Other current assets 11,500

Loans & advances 53,826 52,567 (1,259) (2.33)

Inventories 3,87,717 3,78,623 (9,094) (2.34)

TOTAL 10,83,894 10,58,194 (25,700) (2.37)

INTERPRETATION

The total fixed assets have been decreased by Rs.25,904 during 2005. For this

purpose, investments worth Rs.151 have been realised.

The total assets have been reduced by Rs.25,700 and current assets have been

decreased by Rs.10,365. It indicates that the addition to fixed assets have been

financed partly by the sale or reduction of other assets.

The reserves and surplus of the company has no change during the year 2007 – 2008

The fixed assets of the company decreased by Rs.25,904 and the percentage of

decrease is 4.67%.

The relationship between current assets and current liabilities is unfavorable.

2.2.2 COMPARATIVE BALANCE SHEET ANALYSIS FOR THE ENDED 31ST MARCH

2008 – 2009 (Rs in thousand)

TABLE NO: 2.2.2


DECREASE

INCREASE/

DECREASE%

LIABILITIES

Shareholders fund:

share capital 1,30,873 1,30,873 0 0

Reserves & surplus 41,296 41,296

Loan:

Secured 7,43,777 5,84,549 (1,59,228) (21.40)

Unsecured 6,808 10,509 3,701 54.36

Current liabilities &

provisions

2,90,727 3,03,104 93,377 (44.52)

Deferred tax liabilities

TOTAL 10,58,194 10,18,046 (40,148) (3.79)

ASSETS

Fixed assets 5,27,947 4,77,999 (49,948) (9.46)

Investments 2,588 3,611 1,023 39.52

Capital WIP 2,090 40,153 38,063 1821.19

Current assets

Sundry debtors 71,838 80,975 9,137 12.71

Cash & bank balance 11,041 11,930 889 8.05

Other current assets 11,500

Loans & advances 52,567 37,054 (15,513) (29.51)

Inventories 3,78,623 3,66,324 (12,999) (3.24)

TOTAL 10,58,194 10,18,046 (40,148) (3.79)

INTERPRETATION

The fixed assets have been decreased by Rs.49,948, for this the investments of

Rs.1,028 have been increased by Rs.39.52%.of the sale of fixed assets.

The reserves and surplus of the company has no change during the year 2008 –

2009

The secured loan of the company has reduced

2.2.3 COMPARATIVE BALANCE SHEET ANALYSIS FOR THE YEAR ENDED 31ST

MARCH 2009 – 2010 ( Rs in thousands)

TABLE NO: 2.2.3

PARTIC0ULARS 2009 2010 INCREASE/

DECREASE

INCREASE/

DECREASE %

LIABILITIES

hareholders fund:

share capital 1,30,873 2,23,200 92,327 170.55

Reserves & surplus 41,296 41,720 424 1.02

Loan:

Secured 5,84,549 4,80,445 (1,04,104) (17.80)

Unsecured 10,509 23,904 13,395 127.46


provisions

3,03,104 2,57,407 (45,697) (15.07)

TOTAL 10,18,04

6

10,26,676 8,630 0.847

ASSETS

Fixed assets 4,77,999 4,94,547 16,548 3.46

Investments 3,611 5,631 2,020 55.94

Capital WIP 40,153

Current assets

Sundry debtors 80,975 83,306 2,331 2.87

Cash & bank balance 11,930 13,424 1,494 12.52

Loans & advances 37,054 46,674 9,620 25.96

Inventories 3,66,324 3,83,094 16,770 4.57

TOTAL 10,18,04

6

10,26,676 8,630 0.847

INTERPRETATION

The equity capital of the company increased by Rs. 92,327 and secured loan has been

redeemed by Rs.1,04,104. the redemption of secured loans out of profits.

The current assets of the company increased to an extend of Rs.30,215 during the

period of 2009 – 2010.

The total fixed asset have been added by Rs.16,548 during 2007. For this purpose

investment of Rs.2,020 has not been realized

2.2.4 COMPARATIVE BALANCE SHEET ANALYSIS FOR THE YEAR ENDED 31ST

MARCH 2010 – 2011 (Rs in thousands)

TABLE NO: 2.2.4


DECREASE

INCREASE/

DECREASE %

LIABILITIES

Shareholders fund:

Share capital 2,23,200 2,23,200 0 0

Reserves & surplus 41,720 84,488 42,768 102.51

Loan:

Secured 4,80,445 4,80,015 (430) (0.0895)

Unsecured 23,904 19,635 (4,269) (17.85)


provisions

2,57,407 2,46,131 (11,276) (4.380)

TOTAL 10,26,676 10,53,469 26,793 2.609

ASSETS

Fixed assets 4,94,547 4,50,754 (43,793) (8.85)

Investments 5,631 5,632 1 0.017

Capital WIP 3,456

Current assets

Sundry debtors 83,306 97,695 14,389 17.27

Cash & bank balance 13,424 29,272 15,848 118.05

Loans & advances 46,674 42,515 (4,159) (8.910)

Inventories 3,83,094 4,24,145 41,051 10.71

TOTAL 10,26,676 10,53,469 26,793 2.609

INTERPRETATION

The equity share capital of the company has not been changed during the year

2010 – 2011. But the secured loans and the unsecured loans redeemed by Rs.

(430) and unsecured loan for Rs.4,269.

The current assets of the company increased to an extend of Rs.67,129 during the

period 2010 – 2011. This indicates that the company invested more in current

assets.

The total fixed assets have been reduced by Rs.(43,793). For this purpose

investments of Re.1 have been realised.

The reserves and surplus of the company increased by Rs.42,768 and the

percentage increase is 102.51%. This indicates that the emergencies occur in the

company, the company uses reserves and surplus to overcome these emergencies.

The current liability of the company is unfavourable. This indicates the funds are

not being economically used by the firm. The fixed assets of the company

decreased by Rs.(43,793) and the percentage of decrease is (8.85%).

During the period of 2010 – 2011 the company’s overall performance was good.

3. FINDINGS

The analysis gives an inflated image of company’s performance during the period of

2006-2011

The company is having excess of fund where the current ratio of the company is high

therefore there is an excess of fund in the organization which is not utilized.

The quick ratio of the company also shows high as 2.30 in 2007 – 2008. There is

increase in quick ratio. Quick ratio is lower than the ideal ratio, indicating that the

firm is not able to meet its quick liabilities in time in 2010-2011.

The capital turnover ratio of the company is in a standard position due to the increase in

sales.

Fixed assets turnover ratio of the company is not satisfactory level.

The working capital turnover ratio of the company is almost to the standard in the

year 2010-2011.

The average margin of the goods sold is high compared to the previous year’s,

which shows a high percentage of gross profit.

The administrative expense of the company is high, where there is low net profit

to the company.

The proprietary ratio is high during the year 2010 – 2011; this indicates that

relatively favorable position to the creditors at the time of liquidation.

The capital gearing ratio declined and reached up to 3.76 in 2010-2011, indicating

that the proportion of fixed income bearing funds declines each year, which

increases the risk of equity shareholders

In 2010 – 2011 the debt asset rate was low which reduces the risk of the company.

Return on investment ratio shows negative in 2006 – 2007 and 2007 – 2008, but increase

thereafter and reduces 13.89 2010 and 2011.

Debtor’s turnover ratio on the short collection period. It means a debtor’s has short

collection period which implies quick payment by debtors. WIP LTD is not in a

satisfactory level.

4. SUGGESTIONS

Though the sales of the concern is increasing year after year. The profitability of the

concern is not increasing proportionately. Firm should take effective steps like keep

stability in capital turnover, fixed assets turnover and try to maintain return on

investment.

The company is not depending much on outsider’s fund which may affect its functioning.

Company tries to effectively utilize outsider’s fund.

Firm’s dependence on creditors for its working capital has been decreasing which is

alarming for creditors.

The return on capital employed is unsatisfactory in almost all the years. Having regarded

to the risk factor the rate of return is lower than the bank rate. Steps shall be taken to

utilize the ideal fund to make the rate of return satisfactory.

The company should effectively utilize its working capital in generating sales.

Creditor's management has to be properly done by the company. Steps should be taken

so that the creditors are paid in time.

5. CONCLUSION

The Western India Plywoods Ltd has been serving the state for more than 60 years. It has

contributed much to the industrial development of the state and is providing employment to

hundreds of people. Company is providing their products to various sectors like railways,

automobiles, civil aviation, transport etc. Over the last few years the company has made an

indelible mark in the wood industry.

The study conducted to measure the financial performance of the company has observed

that the financial position of the company is satisfactory, further improvement has to be made.

To an extend the debt and equity of the company is affecting the financial performance of

the company.

ANNEXURE

FIVE YEAR FINANCIAL SUMMARY

PARTICULARS 2007 2008 2009 2010 2011

I.INCOME

1. Sales 4,91,595 4,99,305 8,58,160 3,28,091 7,19,255

2. Other income 4,966 91,193 1,51,986 34,634 1,282

3.Deferred tax liability 11,763 1,837

TOTAL (A) 5,08,324 5,92,335 10,10,146 3,62,725 7,20,537

II. EXPENCE

4. Cost of material 1,30,106 1,44,488 2,33,091 96,768 2,08,780

5.Power and Fuel 1,12,466 1,28,448 1,53,703 54,302 1,09,582

6.Salaries and wages 85,381 78,030 1,43,519 47,949 83,183

7. Excise duty 54,464 54,277 99,601 37,338 82,069

8. Packing and forwarding

25,494 25,812 65,560 33,321 39,742

9. Other expenses 98,681 1,60,271 2,25,852 24,882 1,02,176

10. Depreciation 46,827 41,764 65,721 22,500 46,607

TOTAL (B) 5,54,419 6,33,089 9,87,047 3,07,060 6,72,139

11. Profit/loss before taxation (A-B)

(46,095) (40,754) 23,099 55,665 48,398

12. Provision for taxation 1,246 2,956 5,630

13. Profit/loss after tax (46,095) (40,754) 21,853 52,709 42,768

14. Dividend

a) Preference

b) Equity

c) Percentage

d) Income tax on dividend

15. Retained profit 21,853 52,709 42,768

16. Fixed assets gross 11,14,151 11,27,888 11,43,011 11,80,593 11,83,150

17. Accumulated depreciation

5,60,264 5,99,941 6,65,012 6,86,046 7,32,396

18. Net current assets 3,63,242 3,94,807 2,89,228 2,74,722 4,50,754

TOTAL ASSETS 9,17,093 9,22,754 7,67,227 7,69,269 8,07,338

19. Share capital 1,30,873 1,30,873 1,30,873 2,23,200 2,23,200

20. Reserves and surplus 41,296 41,296 41,2964 41,720 84,488

21. Long term borrowings 4,82,500 5,03,717 3,41,188 2,41,060 2,41,729

22. Short term borrowings

2,60,582 2,46,868 2,53,870 2,63,289 2,57,921

23. Deferred tax liability 1,837

TOTAL LIABILITIES 9,17,093 9,22,754 7,67,227 7,69,269 8,07,338

Taxes – central, state, local

91,815 93,804 1,45,601 54,583 1,11,166

BIBLIOGRAPHY

PRASANNA CHANDRA “FINANCIAL MANAGEMENT THEORY AND

PRACTICE”, Fourth Edition, Tata Mc Graw Companies.

Last five year Annual Report(2007-2011) of Western India Plywoods Ltd.,

Kannur.

R.K.SHARMA AND GUPTHA: “MANAGEMENT ACCOUNTING” 2nd edition,

Kalyani Publishers, New Delhi.

I M PANDEY: Financial Management, 8th Edition, Vikas Publishing House

Wood Talk, Western India Plywoods

Websites

www.wipltd.org

www.wekipedia.org

www.google.com

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