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CHAPTER. 1

INTRODUCTION

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HISTORY OF ATLAS CYCLE:-

A man had a dream – to provide quality bicycles to his countrymen at reasonable prices.

The man was Late Janki Das Kapur.

Atlas Cycles started its odyssey way back in 1951 and today it is one of the largest

manufacturers of bicycles in the world. Atlas bicycles are ridden over 50 countries around

the globe. Now, Atlas Cycles (Sonepat) has also bagged ISO 9001: 2000 certificate by

implementing the latest International Quality Management System. And they owe all this

success to their devoted workers, engineers and their numerous satisfied customers

worldwide. A man had a dream. To provide quality bicycles to his countrymen at reasonable

prices. The man was Late Shri Janki Das Kapur. The dream: Atlas Cycle Industries Ltd.

A modest beginning in an improvised shed at Sonepat. This was transformed into a 25 acre

factory complex in a record period of 12 months.

In the very first year of operation 12000 Atlas Cycles rolled out of the plant. Soon, the first

consignment of Atlas Cycles was sent overseas. Atlas has since then exported to over 35

countries.

By 1965, Atlas had emerged as India's largest cycle manufacturer. Greater demand, higher

production and ever-expanding markets made Atlas a name to reckon with.

Company has three well- integrated Bicycle plants to meet the rising domestic and

international demands as well as five ancillary units for manufacturing components. It has

manufacturing facilities at Sonapet, Rasoi, Sahibabad and Gurgaon near Delhi. To meet its

entire steel tube requirements the Atlas Steel Tube mill was set up at Gurgaon. Atlas cycles

as well as components are exported to over 35 countries among them are advance countries

like Italy, Holland, U.K., Japan and Australia.

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It was time for accolades. ATLAS was presented with the FICCI Award for 'Best Industrial

Relations'. ATLAS' growing importance in the international arena did not go unnoticed

either. Italy's Gold Mercury International Award was conferred on ATLAS. Subsequently,

ATLAS also received the prestigious EEPC Award for export excellence for the year 198O-

81 and several times later on. The honor of being appointed official supplier of bicycles to

the IXth Asiad, at Delhi, added another feather to ATLAS' cap. With growing demand for its

products came the need for achieving self-sufficiency in specialized bicycle components.

To meet its entire steel tube requirements the ATLAS Steel Tube mill was set up at Gurgaon.

Not only was dependence on external suppliers broken but stringent quality controls,

synonymous with ATLAS, could be maintained.

To meet the entire requirement for steel tubes, ATLAS Steel Tube Industries was set up as a

subsidiary unit in Gurgaon in 1983. This division was recently shifted to Bawal, District

Rewari in 2006 for expansion purpose and re-setup on a sprawling 10 acre land. This unit

built with Japanese collaboration is equipped with the latest machinery for mass production.

ATLAS has achieved self-sufficiency even in the production of chains, chain wheels, hubs

and more.

New expansions. New entrants. At ATLAS this is a process that never seems to stop. An

ATLAS cycle to suit every individual taste and requirement. The promise of ATLAS. The

dream of one man fifty years ago. The dream continues. To clock new records, new

innovations, new venture.

1950 - The Company was incorporated on 31st May, at Sonepat.

The Company's objects are to manufacture bicycles and bicycle components and parts.

Some of the trade names used by the company are `ATLAS', `ARMY', `EASTERN STAR'

and `ZEBRA'. The factory is located at Sonepat, near Delhi, and the factory buildings cover

an area of about 2, 50,000 sq. ft.

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- The capital structure in 1956. 3,144 pref. shares fully paid-up 160 pref. Shares 90%

paid-up 255 pref. shares 50% paid-up.

1969 - The Company sponsored a scheme for the manufacture of powered bicycles in

technical collaboration with S.A.C.E.M. of France, one of the largest manufacturers of

powered bicycles under the trade name `Velosolex'.

- 1, 10,000 bonus equity shares issued in the prop. 1:2.

1970 - A new company under the name and style of Atlas Auto-Cycles Ltd., was registered

as a subsidiary of the company for this purpose on 9th March. This company was to

manufacture 50,000 powered bicycles per annum. The company obtained Governments

approval for investing Rs.10 lakhs in the equity capital of Atlas Auto-Cycles Ltd.

1971 - The Collaboration agreement for the manufacture of powered b icycles was

unilaterally terminated by the foreign collaborator on technical grounds.

1972 - In January, the factory entered into a technical collaboration agreement with an

Iranian party who proposed to manufacture bicycles and bicycle parts. The company was to

supply technical know-how etc. in consideration of some technical fees payable by the

Iranian party.

- The Company also entered into another 10 year collaboration agreement with the National

Development Corporation of Tanzania for the manufacture of bicycles in that country. This

agreement was transferred to The National Bicycles Co., Ltd. Tanzania.

1977 - 2,00,000 bonus equity shares issued in prop. 5:11.

1978 - 1,10,000 bonus equity shares issued in the prop. 1:3.

1979 - Punjab and Haryana High Court approved the amalgamation of this subsidiary with

the company with effect from 1st January.

- Authorised capital reclassified. 7,579 - 11% pref. and 1,29,337 No. of equity shares

allotted to members of Atlas Auto-Cycles, Ltd. without payment in cash upon its merge with

the company.

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1985 - The Company went ahead with its tube mill project at Gurgaon (Haryana). A factory

with a production capacity of 10,000 TPA of tubes was under construction.

1986 - Land and buildings of the company were revalued as on 30th June, and the net surplus

of Rs 789.06 lakhs arising out of this was credited to capital reserve.

1987 - 3,84,668 bonus equity shares issued in the prop. 1:2.

1990 - 6,856 - 11% pref. shares were redeemed as on 31st March, 1991.

1991 - 723 - 11% pref. shares redeemed. 4, 71,250 No. of equity shares issued on part

conversion of pref.

1992 - The company issued 494550 - 15% PCD of Rs.200 each on Rights basis. Of these

Rs.130 of the face value of each debenture was converted into one equity share of Rs.10

each at a prem. of Rs.120 per share. Accordingly 471250 shares allotted.

- Balance Rs.70 of the face value of each debenture was to BE REDEEMED at par in three

instalments of Rs.25, Rs.25 and Rs.20. at the end of 7th, 8th and 9th year respectively from

the date of allotment of debenture ie., on January 2000, 2001 and 2002 respectively.

1994 - A sophisticated latest technology tube mill for rolling bigger dia tubes was installed

and commissioned.

- During October, November the company issued 8,25,000 - 12.5% second non

convertible redeemable debentures of Rs.200 each with detachable warrants.

- Rs.200 of the face value of each debenture was to be redeemed in three equal instalments

at the end of 7th, 8th and 9th year respectively from the date of allotment of debentures ie.,

November 2000, 2001, & 2002 respectively.

- Each warrant entitles the holder to apply for one equity share of Rs.10 each at a prem. of

Rs.230 per share between expiries of 12 months from the date of allotment of debentures.

- 8, 12,627 bonus equity shares issued in prop. 1:2.

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1995 - A number of new sizes were added to the existing product range. A godown was

opened in Delhi & at Pune for sale of tubing.

1996 - The performance of the second bicycle plant at SAHIDABAD SHOWED an upward

trend mainly due to the newly introduced `Laser' series of bicycles and aggressive marketing

strategies etc.

- The third bicycle unit with a modern state-of-the-art plant is situated on 16 acres of land at

Malanpur, district Bhind, Gwalior. It has fully automatic computer controlled debasing pre-

treatment and paint plant. Overhead conveyors running into kilometres have been provided

for improved material handling.

Also, specially designed ramps have been provided for loading and unloading of trucks. - 7,

87,937 No. of equity shares allotted (prop. Rs.5 per share) against detachable warrants along

with 12.5% Right NCDs OF RS.200 each.

2000 - Noted Industrialist and Atlas Cycle Industries Ltd. president Bishamber Das Kapur

passed away on 16th August night at the Escort Heart and Research Institute.

2001 - The name of the company be changed as `Atlas Cycles (Haryana) Ltd'.

2004 - Atlas ropes in Sunil Shetty, Sania Mirza as brand ambassadors

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CORPORATE OVERVIEW

ATLAS is not just a Company; it is a phenomenon.

ATLAS has been India's brand leader in the bicycle segment with equal prominence on the

global platform. Ever pioneering and ever leading in bringing out the latest technology,

offering smart machines at affordable costs. Our growth dynamics is uniquely linked with

our consumers who drive us to keep innovating and excelling. It is our prime objective to

deliver the best quality product and services with upgraded R&D measures.

ATLAS Cycles is undergoing a metamorphosis, with growing consumers' aspirations

generating an exciting overdrive of competition across the market. In such scenario, it's the

vision armed with high end upgraded technology and innovative niche designs which rules

the roost.

Realizing this we have set our objectives clear and pragmatic and that is to keep our

consumers at the center of our endeavors and produce the bicycles that are at par with

global standards. Our quest for better corporate performance and greater custo mer

satisfaction would very soon begin to show even better results.

New expansions. New entrants. At ATLAS, this is a process that never seems to stop.

An ATLAS cycle to suit every individual taste and requirement. A household name in cities

and villages across the length and breadth of the country. The promise of ATLAS. The

dream of one man fifty years ago. The dream continues. To clock new records, new

innovations, and new ventures.

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FiveDecadesofCyclingRevolution

Atlas name is synonymous with the cycling revolution in India. Since 5 decades the

Company has enjoyed a position of eminence and leadership in the Bicycle industry. This

was made possible because Atlas constantly strived to move ahead with never ending zeal,

technological up gradations, backward and forward integration and user friendly

innovations.

Atlas logo has been derived from Greek God depicting the legendary hero holding the word

on his shoulders. Thus Atlas assimilates in itself aspirations of the millions in their progress

and transition through various phases in their lives.

4MillionBicycles

Atlas is proud to be one of the top bicycle producing companies in the world, with a

capacity to produce 4 million bicycles per year. Today, Atlas has earned not only brand

loyalty but also millions of satisfied customers in India and abroad. This is corroborated by

the fact that Atlas Bicycles are being used in over 85 countries. Atlas always tries to access

customer needs and add value to the product. By following philosophy of continual up

gradation and improvement, it has adorned a culture that embraces quality. The company

has also been accredited with ISO-9001-2000 certification.

AGlobalPhenomenon

With a perfect assimilation of styles, technology & a focus on customer needs, Atlas has

formed strong strategic alliances overseas.

By offering a wide range of products for almost all segments and age groups, it has strived

to be extremely market friendly and thus emerging as an internationally preferred brand. A

fact that is proven by its wide acceptance despite stiff market competition that is emerging

globally.

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TheRoadAhead

Keeping pace with the sprit of Racing Ahead of Times, Atlas is constantly trying to

innovate and offer products with a firm commitment to meet the emerging customer needs

thereby enhancing its brand image and acceptability in the global market place

Atlas: World Class Technology

Automated hi- technology machines at Atlas' continuously updated plants ensure precision

engineering, optimum application of manpower, and obtaining value of time. Accuracy is

determined to the smallest detail.

Quality Control

Dedication to quality is the unwritten code at Atlas. Every Atlas cycle undergoes a series of

uncompromising quality control tests before taking to the roads. Individual parts of every

cycle are checked for quality, endurance and roadworthiness.

THE MANUFACTURING PROCESS

Seamless frame tubes are constructed from solid blocks of steel that are pierced and "drawn"

into tubes through several stages. These are usually superior to seamed tubes, which are

made by drawing flat steel strip stock, wrapping it into a tube, and welding it together along

the length of the tube. Seamless tubes may then be further manipulated to increase their

strength and decrease their weight by butting, or altering the thickness of the tube walls.

Butting involves increasing the thickness of the walls at the joints, or ends of the tube, where

the most stress is delivered, and thinning the walls at the center of the tube, where there is

relatively little stress. Butted tubing also improves the resiliency of the frame. Butted tubes

may be single-butted, with one end thicker; double-butted, with both ends thicker than the

center; triple-butted, with different thicknesses at either end; and quad-butted, similar to a

triple, but with the center thinning towards the middle. Constant thickness tubes, however,

are also appropriate for certain bikes.

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The tubes are assembled into a frame by hand-brazing or welding by machine, the former

being a more labor-intensive process and therefore more expensive. Composites may be

joined with strong glue or plastic binders. The components are generally manufactured by

machine and may be attached to the frame by hand or machine. Final adjustments are made

by skilled bicycle builders.

THE RAW MATERIAL

The most important part of the bicycle is the diamond-shaped frame, which links the

components together in the proper geometric configuration. The frame provides strength and

rigidity to the bicycle and largely determines the handling of the bicycle. The frame consists

of the front and rear triangles, the front really forming more of a quadrilateral of four tubes:

the top, seat, down, and head tubes. The rear triangle consists of the chainstays, seatstays,

and rear wheel dropouts. Attached to the head tube at the front of the frame are the fork and

steering tube.

For much of the bicycle's history the frame was constructed of heavy, but strong, steel

and alloy steel. Frame material was continually improved to increase strength, rigidity,

lightness, and durability. The 1970s ushered in a new generation of more

versatile alloy steels which could be welded mechanically, thereby increasing the availability

of light and inexpensive frames. In the following decade lightweight aluminum frames

became the popular choice. The strongest metals, however, are steel and titanium with life-

expectancy spanning decades, while aluminum mayfatigue within three to five years.

Advances in technology by the 1990s led to the use of even lighter and stronger frames made

of composites of structural fibers such as carbon. Composite materials, unlike metals,

areanisotropic; that is, they are strongest along the axis of the fibers. Thus, composites can

be shaped into single-piece frames, providing strength where needed.

The components, such as wheels, derailleurs, brakes, and chains, are usually made of

stainless steel. These components are generally made elsewhere and purchased by the

bicycle manufacturer.

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ASSEMBLING THE FRAME

Tailoring the tubes

The metal is annealed, or softened by heating, and hollowed out to form "hollows,"

or "blooms." These are heated again, pickled in acid to remove scale, and lubricated.

The hollows are measured, cut, and precision mitered to the appropriate dimensions.

Frame sizes for adult bicycles generally run from 19-25 inches (48-63 cm) from the

top of the seat post tube to the middle of the crank hanger.

Next, the hollows are fitted over a mandrel, or rod, attached to a draw bench. To

achieve the right gauge, the hollows pass through dies which stretch them into

thinner and longer tubes, a process called cold drawing.

The tubes may be shaped and tapered into a variety of designs and lengths. The taper-

gauge fork blades may have to pass through more than a dozen operations to achieve

the correct strength, weight, and resilience.

Brazing, welding, and gluing

Tubes can be joined into a frame either by hand or machine. Frames may be brazed,

welded, or glued, with or without lugs, which are the metal sleeves joining two or

more tubes at a joint. Brazing is essentially welding at a temperature of about 1600°F

(871°C) or lower. Gas burners are arranged evenly around the lugs which are heated,

forming a white flux that melts and cleans the surface, preparing it for brazing. The

brazing filler is generally brass (copper-zinc alloy) or silver, which melt at lower

temperatures than the tubes being joined. The filler is applied and as it melts, it flows

around the joint, sealing it.

Aligning and cleaning

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The assembled frames are placed into jigs and checked for proper alignment.

Adjustments are made while the frame is still hot and malleable.

The excess flux and brazing metals are cleaned off by pickling in acid solutions and

by washing and grinding the brazing until it is smooth.

After the metals have cooled, further precision alignments are made.

Finishing

The frames are painted, not only to create a more finished appearance, but also to

protect the frame. The frame is first primed with an undercoat and then painted with a

colored enamel. Paint may be applied by hand-spraying or by passing the frames

through automatic electrostatic spraying rooms. The negatively charged frames

attract the positively charged paint spray as the frames rotate for full coverage.

Finally, transfers and lacquer are applied to the frame. Chrome plating may also be

used instead of paint on components such as the fork blades.

ASSEMBLING THE COMPONENTS

Derailleur’s and gear shift levers

Depending on the style of bicycle, the gear shift levers are mounted either on the

down tube—popular on racing bikes—on the stem, or on the handlebar ends. A cable

is attached, which extends to the front and rear derailleurs. Front derailleurs, which

move the chain from one drive sprocket to another, may be clamped or brazed onto

the seat tube. Rear derailleurs may be mounted with bolt-on hangers or integral

hangers.

Handlebars, stems, and headsets

Handlebars may be raised, flat, or I dropped. They are bolted to the bicycle stem

which is then fitted into the head tube. The headset components, including bearings,

cups, and locknuts, are attached to the head tube. The headset allows the fork to turn

inside the head tube and thus makes steering easier.

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Brakes

The brake levers are mounted to the handlebars. Cables extend to the brakes and are

fastened to the calipers. Tape, made of plastic or cloth, can then be attached to the

handlebars and the ends are plugged.

Saddles and seat posts

Seat posts are generally steel or aluminum alloy and are bolted or clamped into

position. The saddle is generally made of molded padding and covered with nylon or

plastic materials. Although leather was the norm for saddles for a long time, it is less

commonly used today.

Cranksets

The crankset supports the pedals and transfers power from the pedals to the chain and

rear wheel. Cranksets consist of steel or aluminum alloy crank arms, chain rings, and

the bottom bracket assembly of axle, cups, and bearings. They are attached with bolts

and caps into the bottom bracket of the bicycle frame. The pedals are then screwed to

the ends of the crank arms.

Wheels, tires, and hubs

Wheel manufacturers conform to the A J International Standards Organization (ISO)

system for wheel diameter and tire sizes. Wheels may be constructed by machines,

which roll steel strips into hoops that are welded into rims. The rims are drilled to

accept spokes, which are laced one round at a time between the rim and hub flange.

A wheel must be trued, or straightened, in radial and lateral directions to achieve

uniform tension. Next, the rim liner, tire, and inner tube are attached. The chain may

also be fitted onto the bicycle.

Rear wheels are fitted with a free-/ wheel, consisting of several cogs and spacers,

which frees the rear wheel from the crank mechanism when the rider stops pedaling.

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Wheels are attached to the bicycle frame by means of an axle which runs through the

hub of the wheel. The axle may be tightened with bolts at the ends or with quick-

release skewers.

POLICIES

Quality Policy

Quality at ATLAS Cycles has been at the core of all the business operations. Every cycle that

rolls out of our production line bears the hallmarks of quality and excellence. This is

achieved through a stringent quality control system backed up by an intensive research and

development program. From working with alternative construction materials and enhancing

processing methods, to improving aerodynamics, progress and innovation, all aspects are

intertwined in our quest for better products and satisfied customers. Our production facilities

have been certified to be in compliance with ISO 9001:2000 standards.

Today, our products are built to standards that go beyond mere compliance to National and

International norms and strive to benchmark improved levels in quality and perfection.

Safety Policy

At ATLAS, we are committed to the safety and well being of all employees and personnel

who are in any way associated with our manufacturing operations. It is only through safe

working practices and by creating safe working environments that a workforce can be

encouraged and inspired to reach higher levels of productivity.

Our safety policy includes:-

Consideration and understanding of safety and health in all aspects of our activities.

Assuring compliance with all relevant safety and health standards

Ensuring safety through an interactive approach that empowers employees to demand

better conditions

A sustained and consistent improvement in safety standards

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Zero Tolerance Policy

At ATLAS Cycles, we have adopted a very stringent attitude to any irregularities in

operations such as:

Constructing False Data.

Providing false statements or concealing essential truths intentionally.

Sabotage or trading of confidential information.

Partisanship towards suppliers for personal gain.

Compromising on quality.

Working against company's interests.

Theft or embezzlement.

Disorderly conduct of any sort

ATLAS CYCLES R&D UNIT

Research & Development

ATLAS spends a sizeable amount of money every year in research and development

activities aimed at improving the product design, obtaining material optimization, improving

surface finishing methods as well as better handling and packaging techniques.

A highly developed research and development wing of ATLAS is the only center of its kind

in India. This in-house R & D center is a totally computerized unit, recognized by the

Government of India. It conducts continuous intense research and development activities in

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every area related to the modern bicycle industry - including research in alternative

materials, developed processing, kinetics, aerodynamics, reduction of human fatigue and

other various innovative technologies

Atlas Cycles (Haryana) Ltd., Sonepat, has the privilege of being the only Indian complete

bicycle manufacturing unit whose in house R&D unit has been recognized by the

Department of Scientific & Industrial Research, Ministry of Science & Technology,

Government of India. Our R&D Centre is well equipped with Computer Aided Designing

facility, prototype making facility and testing facilities etc.

Atlas R&D concentrates on development of new models of bikes ranging from Kids to

Mountain Bikes, City Bikes, Suspension Bikes, Sports Bikes etc.

Atlas spends a sizeable amount of money every year on research and development activities

aimed at improving the product design, obtaining material optimisation, improving surface

finishing methods as well as better handling and packing techniques.

Atlas is the only complete bicycle producing unit in India to have beer accorded recognition

for its in-house Research &. Development unit by the Government of India.

LABOUR RELATIONS

Company has extended complete freedom of association to its workmen and effective

recognition of their right to collective bargaining. Atlas workmen have their own elected

Worker's Union registered under Government Act. The Union is recognized by the

Government and the factory. The Union has been given the natural light for collective

bargaining in the common interest of working force. Cordial industrial relation is maintained

in the factory. The Grievance Redressal Procedure is updated from time to time. The labour

welfare activities and programmes are organized by the factory as an ongoing process

throughout the year which has played an important role in establishing an atmosphere of

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mutual trust and harmony. The company is running smoothly since last more than two

decades without any workers unrest.

Products:-

Manufacturers and Exporters of BICYCLES, BICYCLE PARTS & STEEL TUBES :-

Mountain Bikers : - M s 21 Speed - M S V2 - Velocity 18 Speed - Center shox - Ninja

Deluxe - Inferno - nucleus - stud - viper - vogue - pacific - Double impact - Tank - Spice-G

City Bikes : - Swan Aslr-G - ASLR-L - ASLR-LC - MONALISA Childeren Bikes : -

CRAZY TOONS - KINDS CLUB - WEB KING - SNIFFER - HIGH RISER DX - BRAVE

- CHEETAH - HUMPTY BUMPTY - BIRDY - BUNNY - CHEETAH DX - SEIFT -

ABCMISCHIEF-BMX - AHR DX Roadsters : - GOLDLINE SUPER SB - LADIES -

GIRLS - BOYS - SOLDIER - SUPER STRONG - COMMANDO - SMARAT -

SILVERLINE - SUPERME - LOW GRAVITY - AGRD 24 - ASB-SA-STT - ASB-SA-DTT

- SUPER STRONG - AGRE - APGR - ALC - BOSS - DOVE - ABD - ALP Fancy Bikes : -

MONTANA - INFERNO - VELOCITY - TURBO - SLR GENTS - CONCORDE PRO - X-

CEL - ZOOM - DIAMOND - NUCLEUS - PACIFIC - DOUBLE IMPACT - VIPER -

VOGUE - STUD - TANK - CENTRE SHOX - PACIFIC JR. - NUCLEUS JR. - INFERNO

JR Ladies Bikes : - SLR LADIES - MONICA - DOVE - SPARKLE - TULIP - DOVE VX -

MONALISA - SWAN - SPICE-G Exercisers : - AEX - ABK DX

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MISSION AND VISION:-

The Vision

"They, at the Atlas Group are continuously striving for synergy between technology, systems

and human resources to provide products and services that meet the quality, performance,

and price aspirations of the customers. While doing so, they maintain the highest standards

of ethics and societal responsibilities, constantly innovate products and processes, and

develop teams that keep the momentum going to take the group to excellence in everything

they do."

The Mission Statement

"Its their mission to strive for synergy between technology, systems and human resources, to

produce products and services that meet the quality, performance and price aspirations of

their customers. While doing so, they maintain the highest standards of ethics and societal

responsibilities. "

This mission is what drives them to new heights in excellence and helps them to forge a

unique and mutually beneficial relationship with all their stakeholders. They are committed

to move ahead resolutely on this path, shown to them by visionary Mr. Late Janki Das

Kapur.

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ACHIVEMENTS:-

ATLAS bicycles today run ever street and by- lanes of India, as well as on the far flung roads

of the United States, Germany, Holland, Denmark, Australia, Japan, Egypt and Zambia

among others. The numero Uno position has been maintained due to its adherence to quality

and good workmanship, notching up many ‗firsts‘ in the cycle industry.

Time Line highlights

A glimpse of some of our exclusive achievements across the spread of time:

1973 : They introduced the First Road Racing Bicycle in India

1977 : They won the Gold Mercury International Award from the Govt. of Italy. They

were the first and only Indian Cycle manufacturer to receive this Award

198O-

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: Received the prestigious EEPC Award for export excellence for the year and

several times later on

1982 : They hold the rare distinction of getting sole franchise as official supplier of

bicycles to Sixth Asiad Games held at New Delhi

1987 : They launched the 5 & 10 Gears model for the first time in India

Some other Landmarks

Along with the above highlights, they hold several landmarks in our journey through this

industry. Some of them are as follows:

They are the first Indian cycle manufacturers to introduce twin suspension double

shocker bike

They are the first to produce bicycles with power brakes. ATLAS Macho cycle was

one of the leading models in the market for several years

They were presented with the FICCI Award for 'Best Industrial Relations'

Introduced India's First Cricket Bike followed by immediate success

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Previous Brand Ambassadors

Sunil Shetty (Bollywood Actor)

Sania Mirza (Tennisplayer)

Robin Singh (Cricketer)

Premchand Degra (Body Builder & Mr. Universe 1988)

Atlas Cycle Haryana Ltd is all set to enter the African continent, the UK, East Europe and

Russia. The company started exporting bicycles in 1958 and at present, the cycles are used in

over 50 countries.

―Atlas has sold over 17 lakh cycles in fiscal 2003-04. The company is aiming to increase

this figure to about 20 lakh. The company recorded a turnover of Rs 340 crore in 2003-04,‖

Girish Kapur, joint president, Atlas Cycles, said. Atlas is planning to launch Samrat range of

bicycles. The company has more than 50 models with over six models for women, 20 to 30

in the fancy sports category and eight to 10 kids‘ models.

Atlas said the company has a 28 per cent share of the bicycle market. The major players in

the market are Hero, Atlas, TI Cycles and Avon.

Bicycle makers in the country post 5 per cent growth a year, but in the current fiscal year,

Atlas has registered a growth of over 15 per cent, the company said.

Kapur said, ―The Union Budget has a lot of pro-poor proposals. However, the common

man‘s vehicle would get costlier as excise duty on steel has increased by four per cent. The

bicycle industry has seen a 25 per cent hike in raw material and steel prices in the past six

months.‖

Atlas has manufacturing units at Sahibabad in Uttar Pradesh, Malanpur in Madhya Pradesh

and Sonepat in Haryana.

―Atlas is the only Indian bicycle company with a complete manufacturing unit whose in-

house research and development unit has been recognised by the department of scientific and

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industrial research, Union ministry of science and technology. The company has a modern

paint application unit at Sahibabad,‖ said Kapur.

FUTURE PROSPECTS OF COMPANY:

Atlas Cycles started its odyssey way back in 1951 and today it is one of the largest

manufacturers of bicycles in the world. Atlas bicycles are ridden over 50 countries around

the globe. Atlas Cycles, Sonepat unit caters to the needs of North-East and Central Africa,

USA, Latin America, South and Central America including Mauritius, West Indies and

Madagascar Island. Atlas cycles are very popular and commonly used in countries of Egypt,

Zambia and Kenya.

Atlas Management is conscious about its social responsibility to protect and conserve

environment for the future generation. It has taken all around actions for pollution control in

the field of water, air and noise and complies with all the regulatory norms as per the laws of

the land. It is also working in direction of pollution prevention as per the guidelines of

United Nations Environment Programme (UNEP) and Global Compact (GC). The company

has variety of manufacturing activities including electroplating, heat treatment, painting, etc.

As a precautionary approach to environment challenges arising out of effluent generated by

these production shops the company has installed most modern Effluent Treatment Plant

designed and commissioned by National Productivity, New Delhi. It is reputed as one of the

best Effluent Treatment Plants in northern India in private sector industries. In order to

augment photo - synthesis cycle of nature and to maintain greenery, company has planted

more than 2000 plants and trees in its campus of 28 acres. Rain harvesting system has also

been incorporated for best utilization of rain water and 70% rain water is now being

recharged to sub - soil effectively.

According to Mr Sanjay Kapur, Joint President, Atlas Cycles (Haryana) Ltd.

(Malanpur Unit).

Our aim is to produce quality bicycles at affordable prices to match the lifestyles of our

customers across all age groups and the launch of Dragon and Sting mark a step further in

this direction.

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Despite of slump in market Atlas cycle ltd posted 22.78 per cent increase in net profit of Rs

97 lakh for the fourth quarter ended March 31, 2009, compared with Rs 79 lakh recorded

during the same period a year ago.

The latest bikes are for the urban kids. This sizable population has the tendency to facsimile

the West, especially in their lifestyles. And since the adventure sport is growing rapidly

there, we hope a good response in India too. There is a good chance of increase in sales of

hi-end products is expected to grow with the Commonwealth games in 2010.

An eco-friendly mode of transportation, bicycles are being revived across the world and the

steps are taken, especially by the symbols of modernization, like the Metro in the capital in

encouraging commuters to pedal their way to their destinations.

Bicycle Industry - The Changing Market Scenario

The country today is on the threshold of globalization and teaming million are looking for

higher level of growth together with equitable distribution of income to improve their lots.

Generally the economic signs appear to be favorable fo r the country to improve its

performance and in turn improve the lot of its people. Obviously; this improvement is going

to reflect upon the Bicycle Industry in particular and transport segment in general. With

customers of the country aspiring for higher and higher the current Bicycles users will be

graduating to auto two-wheelers, but there will be a new population looking to the bicycle as

means of transport. Similarly a new generation of buyer will look to bicycle as a mean of

leisure recreation and good way to keep fit.

We, therefore, see a healthy sustained growth of cycle industry. Presuming that growth of

last 3-4 years is sustained for next 10 years i.e. the time we reach the year 2010, the Indian

bicycle industry would need to produce about 1.75 crore bicycles to plug the demand and

23

supply gap. However, there will be a change in the demand pattern linked with consumer

changing aspiration and choice giving way to latest technology and newer marketing

concepts. Industry is already witnessing this to some extent.

The new millennium has brought new challenge of opening up of import of Cycles. The

manufacturers in India agree to the point that Indian Bicycle Industry does not foresee any

problem as the product offered today by Indian manufacturers in the market are best suited

to Indian conditions and are most economical and value for money products.

Indian economy is doing fairly well as the agricultural and industrial growth overall is

showing favorable trend for last quite some years. Good monsoons and good efforts to give

leverage to the trade has helped our economy boost. The developments made at technology

front especially in software and electronic field has made every entrepreneur quite

enthusiastic about future. The benefits of these developments, technology coupled with

favorable atmosphere has percolated to the consumer as well who now has a wider choice at

very competitive rates.

The growth rate of Roadster bicycle is expected to slacken and the newer segments of the

market like fancy bicycles will grow far more rapidly. It would not at all be surprising if by

2010 the fancy bicycles and roadster bicycles have almost equal market share against

existing 20% market share of fancy bicycles. This switch over will not be easy one and will

require a total redefining of industry to meet the new challenges. The fancy bicycle require

for greater flexibility in manufacturing, much tighter quality management; being wide in

rage and variety - require for more efficient supply chain management, far more improved

after-sales-service to the increasingly demanding consumers and most important; change in

retail ambiance.

In fact, the worlds over markets are behaving in similar fashion and product features have

become alike all over. New segments are emerging and to cater such markets, newer models

with world class features are being introduced in Indian markets at regular intervals. Hero

Ranger Swing revolutionized the multi-geared segment and has created a niche for itself

Ranger-M, Piranha, Queen, Active, Charmeleon and Hero Neon have been clear cut winners

24

and have taken the market by storm. This increasing segmentation is Mantra for success in

today's environment of high expectations and low brand loyalty.

We at Hero have taken into our stride to these impending changes and are prepared to meet

the challenges thus posed so that the benefits of these changes are reaped. The initiative for

the change in durable consumer industry has to be driven by the manufacturers. This will be

through investment in more flexible plant and machinery to produce more contemporary

bicycles in much shorter turnaround time. We have to look into the entire gamut of the

market and help our retail outlets to improve their ambiance to the customer, to pull them to

their shops.

On the whole the future for Indian industry including Bicycle will be challenging. The

domestic market will be open to good and services from global companies with low tariffs.

Protection will be a thing of the past. The companies that will survive will be those which

successfully restructure and modernize to achieve global competitiveness in terms of both

quality, cost and distribution system.

25

INDIAN CYCLE INDUSTRY:-

Bicycle was seen in India in the year 1890. Import of cycles, however, started in 1905 and

continued for more than 50 years. Complete ban on imports was announced by the

Government in July, 1953, but cycle kept on simmering in the country till 1961. In 1890,

selling price of an imported bicycle was around Rs. 45/-; in 1917, during the First World

War the price jumped to Rs. 500/- but dropped considerably, month by month and came

down to Rs. 35/- or so (U. K. makes) and Rs. 15/- or so (Japanese models).

It would be interesting to mention that in 1919, five persons in Punjab imported cycles and

used them on The Mall, Simla. These included one Bishop, Two military men and two

contractors including S. Pala Singh Bhogal (Grand Father of Mr. M.S. Bhogal of Ludhiana).

Under special permission of the Governor, they were allowed to use cycles on 'The Mall'

only for one hour in a day. They imported B.S.A. Cross Bar Cycle from U.K. and it used to

be a kind of Mela at that particular hour on the Mall in Simla, the scene watched by

hundreds of people every day. Later, a firm was formed under the name of Singh & Co. with

shops on Railway Road, Jalandhar and Bazar Vakillan, Hoshiarpur, which imported bicycles

in the year 1930 onwards.

With an annual turnover of more than 12 million bicycles, the bicycle industry is one of the

most established industries in India. It has raised the country's position to that of the second

largest bicycle manufacturer in the world, next only to China. India has seen a tremendous

increase in the number of bicycle manufacturers and bicycle exporters in the recent past.

Today, the Indian bicycle manufacturing and bicycle spares industry is well accepted and is

also widely recognized for its quality standards in international markets.

Most bicycle components, spares and bicycle accessories in India, except for free wheels and

single piece bicycle hubs, are manufactured by the Small Scale Sector (SSIs), while the large

scale units are permitted to manufacture bicycle frames, chains and rims for captive

consumption. Manufacture and export of complete bicycles falls within the purview o f the

Organized Sector. The Indian bicycle industry is currently in the midst of making endeavors

26

for enhanced and increased bicycle exports since the scope for export of Indian

manufactured bicycles in the international market is significant.

Industry Prospects and Challenges

"Results always exist outside the organization - in the market place.

Only costs and efforts exist inside the organization". -Peter Drucker

The bicycle industry has been on an upswing in the last few years. Major players are

increasingly turning to innovative product features to capture the market. In fact the bicycles

have donned a 'new avataar'. After years of sluggish growth and zero innovation, the

industry has been witnessing a flurry of activities.

Bicycle manufacturers are flooding the market with sleek, trendy and colorful models. The

customers suddenly found that they have a wide choice to meet every need and taste. The

fancy bicycle, for that matter new wave bicycle sector, thus began growing. However, the

growth rate is indeed dramatic as compared to the growth of conventional bicycles.

Market and customer focus "Wake up every morning terrified", said Jeff Bezos - Time

Magazine's 'Person of the year', "not of the competition but of our customers." This profound

observation sums up: "Customer is the King". The key to survival is, therefore, the ability to

learn and change. The customer profile is changing fast. Resultantly, the market-place today

is in a constant state of change and constantly changing markets require a sensitive feel,

careful analysis, flexible thinking and rapid action on the part of bicycle industry for

survival.

Inflation viz-a-viz growth

27

The bicycle industry is facing an ever growing menace of inflation. The all round increase in

the costs of inputs has necessitated the periodical upward revision of rates, much to the

dismay of dealers and customers. The unavoidable phenomenon can only be met by

increased vigilance in monitoring costs as well as by general diligence in application of

technology for improving process efficiency.

New EXIM policy - Challenges ahead

The new Exim policy announced by the Government of India in tune with the liberalization

policy pursued has put bicycles in the Open General License (OGL) thus paving the way for

the presence of foreign brands in the Indian market.

To meet the challenge from the foreign brands, the need of the hour is to make ceaseless

efforts for updating the models with stress on strength and optics based on International

quality standards. In other words, a dent can be made to take on foreign brands only by

faithfully enforcing ISO series quality norms by maintaining rigid quality standards at every

stage of production, up gradation of technology, strong Research and Development (R&D)

base and effective monitoring.

Once the industry is able to achieve sustained desired quality standards, the industry shall be

in a far better position in gaining competitive edge over foreign brands. The earlier it is

achieved, the better for the Indian bicycle industry, as the challenge is 'real' and has come to

stay.

Interestingly enough, the West is rediscovering the virtues of non-motorized transport,

especially bicycle. It is gathered that "countries like Finland have three bicycles for every

five persons. In some American States, it is mandatory for companies/firms employing more

than 100 persons to provide incentives for using bicycle. In Europe, trains and buses have

28

special space for carrying bicycles and Railway Stations provide more parking area for

bicycles than cars."

This explains how well the 'bicycle concept' has caught-up in advanced Western countries.

With Government of India putting up priority on 'market economy', it is for the Indian

bicycle industry to hold a solid edge in the world market.

Most state governments have special schemes that involve gifting bicycles to people, mostly

children, in the economically weaker sections of the society. Such is the impact on this

industry that the government is one of the biggest customers for bicycle manufacturers. State

governments invite tenders for supply of bicycles and the big players get to make the most of

it.

The central and state governments are believed to have ordered around 1.5 million bicycles

in 2008 to hand them over to poor children under various social welfare schemes. An

industry source estimates that the figure could go up to 2.5 million units in 2009. States like

Maharashtra, Madhya Pradesh, Bihar and Jharkhand are among those supplying bicycles free

of charge to poor school-going children. The Assam government has made a provision for

Rs 24 crore in 2008-09 for providing bicycles to about one lakh girl students living below

the poverty line. The Haryana government has supplied bicycles to certain schools under the

Sarv Shiksha Abhiyan scheme. The bicycles are to be provided free of charge to those girl

students who have to walk more than 2 km to school.

The Tamil Nadu government also runs schemes to encourage higher education among the

Scheduled Castes/Scheduled Tribes, Scheduled Caste converted Christians studying in

classes XI and XII in government and government-aided schools, under which free bicycles

are distributed to students.

Despite the slowdown, the bicycle industry is booming, thanks to government tenders for

more bicycles

29

Market share of various brands in cycle industry:-

The present scenario of cycle industry can be well seen in this graph. It can be observe that

Hero industry is well leading the cycle industry having 35% share where as second place is

taken by Atlas cycle having 24% share. But in recent study and the conclusion given by

researcher it is being said that Indian player are going to face biggest threat from Chinese

manufactures. The threat of Chinese cycles priced around Rs. 500- 700 flooding the Indian

market that would ultimately pedal out the Indian players. "It is all media hype to unrealistic

levels as Chinese cycles didn't materialise here as predicted. However the reports had one

effect, that is postponing purchase decision by the people,".

China like India is a major exporter of bicycles and is much bigger than Indian industry.

Firstly it should be noted that bicycles were removed from the bonded category more than a

year back. Contrary to the expectations there was no major influx of bikes from China

producing around 22 million cycles per annum (p.a.). This despite the fact that bicycles

comes next only to wristwatches in market penetration in India.

30

The reasons for this phenomenon is varied like investing in crucial activities like setting up

assembly line, brand building, putting in place proper sales and service network and finally

the market scenario. Of all the above the last one is what favours Indian industry.

The 12-million units p.a. Indian bicycle industry could be classified into two categories viz a

standard roadster and specials. The latter includes mountain terrain bikes (MTB) and

children's cycles. However demand is skewed more in favour of standard roadster segment

to the extent of 65-70 per cent with most of the sales coming from semi-urban and rural

areas.

Coming back to the import threat, a Chinese roadster costs $25 (CIF) or around Rs. 1,150

and if one adds 40 per cent import duty the price goes up to Rs. 1,610. "On this charges like

freight, overheads etc have to be added and it will make the Chinese bicycles dearer than

ours,".

Ultimately cost cutting has to be the mantra for Indian industry to stay afloat. An Indian

team sometime back visited China to find out how the Chinese bicycle manufacturers attain

cost competitiveness. However the team was not successful in unravelling the mystery.

But using plastic components would make the Indian players much more competitive. While

the domestic industry will raise the issue of durability, it should be borne in mind that there

are strong plastic compounds that are available now. One shouldn't forget that car bumpers

are now made of plastics. All that a cycle buyer looks for is a functional bicycle of good

quality and not a heavily steeled one.

These are some off major threat to Indian bicycle industry.

31

Sources of Data:-

www.domain-b.com article written by Venkatachari Jagannathan 12 June 2001.

www.atlascycle.co.in

www.myatlascycle.com

www.bsrdindia.com/org artical by Research and development center forBicycle.

32

OBJECTIVE OF PROJECT:-

Objective of Project Report:

The object of project is to study and analysis the Financial and cost statement of the

Atlas cycle ltd.

The study is about analysing the growth pattern of company with the help of

statements.

The various cost reduction method implemented by company.

The techniques followed by company to remain competitive in the market.

To make the major findings from the data‘s of the company.

To make recommendations, which may be useful for the company

Scope of the project:

To carry out analysis of financial and cost statements of Atlas Cycle ltd using ratio

analysis.

To find out weakness and cost reduction techniques which would be beneficial for

company, to increase profit and reduce its loss.

Reason behind selection of this topic:-

Corporate world is totally different from what we perceive on our own. The method what we

use to prepare financial statement and cost statement are totally different from what we have

studied in book. But continues guiding by my corporate guide Mr. Ashok Gupta and other

33

Concern person in the company it become clear that tools and techniques that are used in the

preparation of these statement are different.

To get acquaintance with different tools and techniques used in preparation of

financial statements.

The main purpose of prepare financial statement.

What facts and figure the statement shows.

What are different tools that a company use to make it cost efficient?

The tools used to compare health of one‘s company with the others. Like ratio

analysis.

What are different benchmark ratios that a particular firm has in any particular

Industry?

34

CHAPTER. 2

REVIEW LITERATURE

35

REVIEW LITERATURE

A literature review discusses published information in a particular subject area, and

sometimes information in a particular subject area within a certain time period.

A literature review can be just a simple summary of the sources, but it usually has an

organizational pattern and combines both summary and synthesis. A summary is a recap of

the important information of the source, but a synthesis is a re-organization, or a reshuffling,

of that information. It might give a new interpretation of old material or combine new with

old interpretations. Or it might trace the intellectual progression of the field, including major

debates. And depending on the situation, the literature review may evaluate the so urces and

advise the reader on the most pertinent or relevant.

A literature review is an account of what has been published on a topic by accredited

scholars and researchers. Occasionally we would be asked to write one as a separate

assignment (sometimes in the form of an annotated bibliography), but more often it is part

of the introduction to an essay, research report, or thesis. In writing the literature review, our

purpose is to convey to our reader what knowledge and ideas have been established on a

topic, and what their strengths and weaknesses are. As a piece of writing, the literature

review must be defined by a guiding concept (e.g., our research objective, the problem or

issue we will be discussing or our argumentative thesis). It is not just a descriptive list of the

material available, or a set of summaries

Besides enlarging our knowledge about the topic, writing a literature review let us gain and

demonstrate skills in two areas

1. information seeking: the ability to scan the literature efficiently, using manual or

computerized methods, to identify a set of useful articles and books

2. critical appraisal: the ability to apply principles of analysis to identify unbiased and

valid studies.

36

Why do we write literature reviews?

Literature reviews provide you with a handy guide to a particular topic. If you have limited

time to conduct research, literature reviews can give you an overview or act as a stepping

stone. For professionals, they are useful reports that keep them up to date with what is

current in the field. For scholars, the depth and breadth of the literature review emphasizes

the credibility of the writer in his or her field. Literature reviews also provide a solid

background for a research paper's investigation. Comprehensive knowledge of the literature

of the field is essential to most research papers.

The topic as well as industry selected for the project is very vast in itself and there are lots of

researches and studies already have been done by many researchers. To start with work done

in the field of cycle industry.

Causes of growth: a study of Taiwan's bicycle industry

Wan-wen Chu*

*Academia Sinica Taipei, Taiwan

Abstract

This paper looks at the history of Taiwan's bicycle and parts industries and examines the

lessons that can be learned from it. The initial impetus for the big change came in the form of

large OEM orders from the American importers, which was prompted by the sudden US

demand surge in 1971–74. Taiwan out competed other places, because its industry was able

to respond quickly in terms of production capability and entrepreneurship. This was as a

result of accumulated learning under import-substitution, and from the favourable factors on

the overall and industry level in Taiwan. Conditions in Taiwan fostered the emergence of

numerous SMEs, which helped the development of a parts suppliers' network. All three

factors—accumulated learning, a favourable environment, and globalisation of production—

were necessary conditions for the growth of Taiwan's bicycle industry.

37

.

Racing and Back-Pedalling into the Future: New Product Introduction and

Organizational Mortality in the US Bicycle Industry, 1880-1918

Glen Dowell

College of Business, University of Notre Dame, Notre Dame, USA

Anand Swaminathan

Graduate School of Management, University of California, Davis, USA

We hypothesize that some overlap of production between and within product generations

reduces firm mortality, as it allows firms to retain valuable routines. Excessive overlap,

however, becomes harmful. An analysis of the effects of new product introduction on

mortality rates among the population of US bicycle producers over 1880-1918 supports our

hypotheses. Our results suggest the value of separating out the content effects of innovation,

which are often positive, from the process effects which tend to be disruptive.

Article

Asian Business & Management (2005)

Inter-organizational Network and Firm Performance: The Case of the Bicycle Industry

in Taiwan

Samson Wong Yue-Ming

Graduate School of International Development, Nagoya University, Furo-cho, Chikusa-ku,

Nagoya 464-8601, Japan. E-mail: m000103d@mbox.nagoya-u.ac.jp

Abstract.

The management of inter-firm networks is of paramount importance in the study of company

performance. In this paper, we attempt to provide a better understanding of how the

competencies of firms in an emerging market may be strengthened through the assiduous

manipulation of network relationships. Using research data on 52 firms in the bicycle

38

industry of Taiwan, we explore whether involvement in strategic network organizations can

be a valuable aid to competitiveness. In particular, we find that company performance

benefits from strong network functions in the technology and marketing made available by

such inter-firm relationships. Our findings confirm that those producers with more

collaboration with other firms within their industry perform better than otherwise

comparable firms with fewer cooperative activities. Consistent with our argument within the

supplier–buyer relationship in the industry, our statistical analyses also suggest that suppliers

retain a more proactive strategic behaviour in managing business networks than buyers.

Mass Customization: Implementing the Emerging Paradigm for Competitive

Advantage

Suresh Kotha

Strategic Management Journal, Vol. 16, Special Issue: Technological

Transformation and the New Competitive Landscape (Summer, 1995), pp. 21-42

(article consists of 22 pages)

Published by: John Wiley & Sons

Abstract

In many industries the dominant paradigm, `mass production,' is being challenged by the

emerging paradigm, `mass customization.' Accordingly, many researchers posit that firms

which replace `mass production' with `mass customization' will gain a significant

competitive advantage. Based on an in-depth study of the National Bicycle Industrial

Company (NBIC), this paper explores the dynamics of pursuing both mass production and

mass customization strategies simultaneously. At the operational level, the paper discusses

the organizational mechanisms instituted by the NBIC in order to benefit from the

simultaneous pursuit of both approaches. At the competitive level, it isolates the relative

39

contributions of both approaches to the overall competitive positioning of this firm in its

industry. Based on this discussion, it provides a framework that illustrates the dynamics

involved in the pursuit of both approaches. Implicitly, the paper argues that for firms

competing in rapidly changing environments the ability to maintain a sustainable

competitive advantage depends on the firm's capability to create knowledge by interacting

both mass customization and mass production approaches. Finally, the paper concludes with

managerial and research implications regarding the emerging paradigm of mass

customization.

From mass production to mass customization: The case of the National

Industrial Bicycle Company of Japan.

Suresh Kotha, Assistant Professor of Business Policy and Operations Management

Stern School of Business, New York University, USA

Abstract

By means of a detailed study of the National Industrial Bicycle Company of Japan (NIBC),

Suresh Kotha examines the dynamics of implementing mass customization in a firm that

pursues both mass production and mass customization in two different factories. NIBC reaps

superior returns by employing a ‗system‘ which increases interaction between the mass

production and mass custom factories and encourages knowledge creation.

40

The author then considers the most important external (industry level) and internal (firm

level) conditions which are necessary to successfully pursue mass customization, and points

out that the interactions and interrelationships between them are important to a successful

outcome too.

Refugees as Entrepreneurs: The Case of the Indian Bicycle Industry

Sukhpal Singh

Institute of Rural Management, Anand

Like many other industries, bicycle production in India developed after Independence. But

unlike most other industries which remained concern treated in metropolitan centres, bicycle

manufacturing took roots in up country towns, defying competition from metropolitan

enterprises. This paper, discussing the factors responsible for the success of the northern

entrepreneurs, emphasises that various concessions given by the government to the refugees

from Pakistan played a critical role.

Consumer Product Safety Regulation in the United States and the United

Kingdom: The Case of Bicycles

Journal article by Wesley A. Magat, Michael J. Moore; Rand Journal of Economics,

Vol. 27, 1996

This study analyzes the effect of bicycle safety regulation in the United States and the

United Kingdom using data on monthly injury rates. Unlike many previous studies of

product safety regulation, a specific product regulation is analyzed, and long data

series are available. In both countries, the regulation led to a significant decrease in

41

accidents per bicycle in use. The effect in the United States is larger than in the United

Kingdom.

Abstract:

In the United States, accidents inside the home, in the workplace, and outside of

the home and work injure millions of citizens every year. In particular, accidents

associated with consumer products injured about 30 million people in 1986 and resulted

in 21,600 deaths. The consequences of these accidents impose a large and serious cost

on the country, justifying extensive efforts to understand them.

The traditional approach to attacking the consumer product safety problem has

been the imposition of direct standards on product design. Paradoxically, the academic

literature on the effectiveness of safety standards provides little evidence that design

standards have any significant effects. Worse yet, this literature suggests that in some

cases the standards can actually lead to increases in the frequency and severity of

accidents.

MULTISPEED, CHAINLESS VEHICLE DRIVE SYSTEM

Loeb et al.

ABSTRACT

A multispeed, chainless bicycle drive and transmission system wherein the drive train

includes a shift able drive shaft connecting the pedal crank shaft and driving wheel by means

of vertical gear wheels mounted transversely thereon having a multitude of concentric series

42

of gear teeth for providing different drive or gearing ratios. The geared drive shaft is moved

from one series of gear teeth to another on one or both of the gear wheels to change the gear

ratio by means of two independently moving, splinted, concentric shaft members which mate

through contact gears with the selected gear teeth series. The splinted shaft members are

mounted within a tubular housing via three ball bushings which permits both longitudinal

and rotational movement of the enclosed shaft members. A spring- loaded ball system is used

to assure proper relative positioning of the splined shafts with respect to the selected gear

teeth series.

Charging device on a vehicle to charge an electric bicycle

Wu Hung Sheng et al

ABSTRACT

A charging device for charging an electric bicycle includes a charger which is received in the

trunk ol a vehicle and electrically connected to the battery ol the vehicle by a conductive

wire. A wire extends from the charger and is detachably connected to the rechargeable

battery ol the electric bicycle which can be received in the trunk or carried on the vehicle by

a bicycle carrier attached to the vehicle. The conductive wire has the first end connected to

the charger and the second end having an adapter which is received in the cigarette lighter

receptacle hole in the vehicle.

43

These are some of the previous studies done by researchers. Now the research work done

related to topic of my project.

Analysis of financial statements:-

Accounting standards and value relevance of financial statements: An

international analysis.

Mingyi Hung

Leventhal School of Accounting and Marshall School of Business, University of Southern

California, Los Angeles, USA

Abstract

Using 17,743 firm-year observations of industrial companies in 21 countries from 1991 to

1997, this paper finds that the use of accrual accounting (versus cash accounting) negatively

affects the value relevance of financial statements in countries with weak shareholder

protection. This negative effect, however, does not exist in countries with strong shareholder

protection. These findings are consistent with the belief that shareholder protection improves

the effectiveness of accrual accounting, and suggest the importance of considering

shareholder protection when formulating accounting policies related to accruals.

Fraudulently Misstated Financial statements Insider Trading: An Empirical

Analysis.

Scott L. Summer

John T. Sweeney university of Missouri – Columbia

Abstract

The study investigates the relationship between insider trading and fraud. They found that in

the presence of fraud, insider reduce their holdings of company stock through high level of

44

selling activity as measured by either the number of truncations, the number of share sold ,

or the dollar amount of share sold. Moreover they represent the evidence that a cascaded

logit modal, incorporated insider trading variable and firm specific financial characteristics,

differentiate company with fraud with company without fraud.

Forecasting Company Failure in the UK Using Discriminant Analysis and

Financial Ratio Data

By R. J. Taffler City University Business School, London, U.K

Abstract

This paper describes an operational discriminant model for the identification o f British

companies at risk of failure and discusses the results from its application since it was

developed and its degree of inter temporal validity. It raises a number of issues related to the

use of multivariate statistical techniques in the finance area and highlights some of the

methodological weaknesses in extant studies.

On The Use Of Information Theory Concept In The Analysis Of Financial

Statement

HENRI THEIL: The University of Chicago

Management Science vol.15, no. 9

Abstract

Balance sheets and income statements are numerical decompositions of certain total sums:

total assets, total liabilities, total sales, and total costs and expenses. The behavior of

individual items measured as fractions of the corresponding total is important for the

analysis of the company's financial position. It will be argued in this article that certain

concepts derived from information theory are useful as summarizing descriptive devices for

changes in such fractions as well as for the analysis of differences between companies of the

same industry.

45

Five-Hundred Life-Saving Interventions and Their Cost-Effectiveness

Tammy O. Tengs , Miriam E. Adams , Joseph S. Pliskin , Dana Gelb Safran , Joanna

E. Siegel , Milton C. Weinstein , John D. Graham

ABSTRACT

We gathered information on the cost-effectiveness of life-saving interventions in the United

States from publicly available economic analyses. "Life-saving interventions" were defined

as any behavioural and/or technological strategy that reduces the probability of premature

death among a specified target population. We defined cost-effectiveness as the net resource

costs of an intervention per year of life saved. To improve the comparability of cost-

effectiveness ratios arrived at with diverse methods, we established fixed definitional goals

and revised published estimates, when necessary and feasible, to meet these goals. The 587

interventions identified ranged from those that save more resources than they cost, to those

costing more than 10 billion dollars per year of life saved. Overall, the median intervention

costs $42,000 per life-year saved. The median medical intervention costs $19,000/life-year;

injury reduction $48,000/life-year; and toxin control $2,800,000/life-year. Cost/life-year

ratios and bibliographic references for more than 500 life-saving interventions are provided.

Avinash K. Dixit, The making of economic policy: A transaction-cost politics

Perspective. Cambridge: MIT Press, 1998. xvii + 192 pages. $22.50 (cloth).

Economists cannot claim that market failures can be corrected simply by Showing that the

optimal outcome in a model of a social-welfare maximizing entity divorced from any real

political process will outperform the market. The most we can do is to understand how the

combined economic-political system evolves mechanisms to cope with the variety of

transaction costs that it must face (p. xv). Alvinash Dixit developed a very interesting and

original series of lectures on what he calls transaction-cost politics (TCP) for presentation at

the Center for Economic Studies at the University of Munich a few years ago. The lectures

have been published in both hard and paperback volumes by MIT Press. Public Choice

scholars will find much of interest in the resulting slim and very readable monograph on

policy making.

46

The Dixit lectures are of special interest for several reasons. First, Professor Dixit is a master

of modern neoclassical analysis and game theory. This, of course, is not a sufficient

condition for having anything interesting to say about political economy. Many from the

mainstream who dabble at political economy seem almost totally unaware of the careful

work developed by the rational politics and public choice research programs over the past

thirty years. This often leads their political economy to be rather light on politics – especially

regarding significant institutional features like elections and interest groups. In such cases,

one may still learn a bit about processes of collective decision making but mostly one learns

about the still limited penetration of public choice contributions into mainstream economic

thought. The extensive reference list developed by Professor Dixit provides an illustration of

this. Only about 10 percent of the references are from the public choice and rational politics

literatures. Only Buchanan, North, Olson, and Shepsle are cited more than once among

prominent public choice researchers.

COST AND PRODUCTION FUNCTIONS,

Corporate Author: PRINCETON UNIV NJ

Personal Author(s): Shephard, Ronald W.

Report Date: 1953

Pagination or Media Count: 111

Abstract : Contents: The process production function; Heuristic principle of minimum

costs; The producer's minimum cost function; Dual determination of prod uction function

from cost function; Geometric interpretation of the duality between cost and production

function; Constraints on the factors of production; Homothetic production functions, The

Cobb-Douglas production function; The problem of aggregation; The dynamics of

monopoly.

47

A Transaction Cost Analysis and Propositions, by Erin Anderson and Hubert

Gatignon © 1986 Palgrave Macmillan Journals.

Abstract

A "frontier issue" in international marketing is the appropriate choice of entry mode in

foreign markets. The objective of this paper is to offer a transaction cost framework for

investigating the entry mode decision. This framework provides 1) a theoretical basis for

systematically inter relating the literature into propositions, 2) propositions about

interactions which resolve the apparently contradictory arguments advanced to date.

Specifically, the paper: bullet illustrates the feasibility of clustering 17 entry modes into the

degree of control the mode provides the entrant; bullet proposes that the most appropriate

(i.e., most efficient) entry-mode is a function of the tradeoff between control and the cost of

resource commitment bullet advances testable propositions delimiting the circumstances

under which each mode maximizes long-term efficiency. The entry mode literature is

reviewed in the context of these propositions, and guidelines are derived for choosing the

appropriate mode of entry, given certain characteristics of the firm, the product, and the

environment

Quality function deployment: A literature review

Lai-Kow Chan,and Ming-Lu Wu

Abstract

This paper presents a literature review of quality function deployment (QFD) based on a

reference bank of about 650 QFD publications established through searching various

sources. The origination and historical development of QFD, especially in Japan and the US,

48

are briefly accounted first, followed by a partial list of QFD organizations, softwares, and

online resources. Then a categorical analysis is conducted about QFD‘s functional fields,

applied industries and methodological development. Ten informative QFD publications are

also suggested, particularly for those who are not yet familiar with QFD. It is hoped that the

paper can serve the needs of researchers and practitioners for easy references of QFD studies

and applications, and hence promote QFD‘s future development.

Interactive control in target cost management

Takeyuki Tani

Abstract

This paper discusses target cost management (TCM) from the viewpoint of simultaneous

engineering. Firstly, it shows empirically how simultaneous engineering is implemented in

Japanese companies. Secondly, it formulates and then tests hypotheses on the influential

power of managers involved in the process of target costing. Thirdly, it describes processes

of interactive control directed at information and value sharing among managers that help

explain why simultaneous engineering is working effectively in Japanese companies. It also

formulates and tests hypotheses on information and value sharing among managers.

Fourthly, it concludes that interactive control in TCM helps generate unique ideas for

product development and cost reduction, and that Target Cost Management is a key

subsystem of strategic cost management.

49

THE FUTILITY OF UTILITY ANALYSIS

GARY P. LATHAM, GLEN WHYTE

ABSTRACT

In a study involving 143 experienced managers, utility analysis was found to influence

managerial decision making, but not in the way intended by advocates of this technique.

Utility analysis reduced the support of managers for implementing a valid selection

procedure, even though the analysis indicated that the net benefits from the new procedure

were substantial. In light of these findings, industrial/organizational psychologists are

advised to reconsider their assumptions regarding the information manage rs use when

managers make human resource policy decisions.

Overhead Allocation and Incentives for Cost Minimization in Defense

Procurement, by William P. Rogerson © 1992 American Accounting

Association.

Abstract

Defense firms typically produce a large number of products. The purpose of this article is to

explain how two features of the current regulatory process create a significant incentive for

these multiple-product firms to choose inefficient production methods. The first feature is

that the marginal impact of accounting cost on price varies significantly among products.

Prices for a defense firm's products are set according to a rather unique process that

combines elements of both competition and cost-based regulation. Defense firms typically

produce some purely commercial products and prices for these products are competitively

determined. Aside from standard off- the-shelf items such as army boots, most defense

products are purchased from a sole source and thus their prices are nominally cost-based. In

reality, the negotiated price is likely to be affected by other factors as well. In particular, in

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cases where closer substitutes exist or where an alternative source might not be prohibitively

expensive, the potential cost of these alternatives plays a role. The important consequence of

this is that the negotiated price will not necessarily decline or rise by a full dollar when the

projected cost of production declines or rises by a dollar. In more competitive procurements

where the cost of alternatives plays a stronger role, changes in projected accounting cost are

less important. The second feature of the regulatory process concerns the method that

defence firms are allowed to use to calculate the cost of each product. Following traditional

commercial accounting practices, only a relatively small fraction of costs are directly

charged to products. The remaining costs are grouped together into overhead pools and

allocated across products usually in proportion to directly charged labour use. These two

features create the following incentive problem. Given the first feature, the firm would like

to be able to assign more of its costs to well- funded sole source procurements instead of to

more competitive procurements or commercial products. The second feature provides a

method for accomplishing this task. Namely, the firm can increase (decrease) the amount of

overhead allocated to a contract by increasing (decreasing) the amount of direct labour used

on the contract. This means that the firm will have an incentive to engage in pure waste by

padding direct labour usage on contracts with cost sensitive revenues. It will also have the

incentive to distort its input substitution decisions between labour and other inputs by using

too much (too little) direct labour on contracts with cost sensitive (cost insensitive) revenues.

Two major types of input substitutes for labour exist. The first is capital. Thus, we would

expect the firm to purposely under-capitalize production of products with cost sensitive

revenues and over-capitalize production of products with cost insensitive revenues. The

second possible input substitute is material. For many subcomponents of a weapon, a firm

has the potential option of subcontracting production to another firm or making the

component in-house. Subcontracting will result in higher direct material costs for the firm

but lower direct labor costs. Thus, engaging in more in-house production is essentially a way

of substituting towards direct labor and away from direct material. In particular, then, we

would expect the firm to purposely engage in too much in-house production for its products

with cost sensitive revenue and too much subcontracting for its products with cost

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insensitive revenue. An important point to note about this incentive effect is that it does not

require the firm to report any cost projections untruthfully. That is, in the behaviour

predicted by this article, the firm does not make money by projecting that costs will be high

(in order to get a high price) and then actually having low costs. The firm actually spends all

of the money that is charged as a cost. The profit occurs through shifting the assignment of

these costs. The importance of this point is that auditing is very poorly equipped to deal with

this type of behaviour. Auditing is relatively good at determining whether the firm actually

spent as much as it projected. However, it is relatively poor at determining whether any

expenditure that actually occurred was necessary. Braeutigam and Panzar (1989), Brennan

(1990), and Sweeney (1982) have analyzed models of public utility regulation where the

utility has commercial business segments. They make the general point that, depending upon

how costs are allocated, the firm may have an incentive to distort its output and/or input

decisions in order to shift overhead to the regulated sector. However, none of these articles

analyzes allocation schemes based on direct labour or any other input base. Braeutigam and

Panzar (1989) and Sweeney (1982) consider allocation schemes based on units of output

under the assumption that comparable units of output exist across different products.

Brennan (1990) considers allocation schemes where each product is allocated a fixed,

invariant share of overhead. Thus all of the predictions of this article regarding the particular

sorts of input distortions one would expect to see in defence procurement are new to this

article. Furthermore, on a technical level, the model of this article is also somewhat different

because it considers a multiple product case where products are not necessarily either

perfectly competitive or perfectly regulated and the level of competitiveness varies from

product to product.

Better Medicare Cost Report Data are Needed to Help Hospitals Benchmark

Costs and Performance Magnus, Stephen A.; Smith, Dean G.

52

Abstract

To evaluate costs and achieve cost control in the face of new technology and demands for

efficiency from both managed care and governmental payers, hospitals need to benchmark

their costs against those of other comparable hospitals. Since they typically use Medicare

Cost Report (MCR) data for this purpose, a variety of cost accounting problems with the

MCR may hamper hospitals' understanding of their relative costs and performance.

Managers and researchers alike need to investigate the validity, accuracy, a nd timeliness of

the MCR's cost accounting data.

Costing the distribution of insecticide-treated nets: a review of cost and cost-

effectiveness studies to provide guidance on Standardization of costing

methodology

Jan Kolaczinski*1 and Kara Hanson2

Abstract

Background: Insecticide-treated nets (ITNs) are an effective and cost-effective means of

malaria control. Scaling-up coverage of ITNs is challenging. It requires substantial resources

and there are a number of strategies to choose from. Information on the cost of different

strategies is still scarce.

To guide the choice of a delivery strategy (or combination of strategies), reliable and

standardized Cost information for the different options is required.

Methods: The electronic online database Pub Med was used for a systematic search of the

Published English literature on costing and economic evaluations of ITN distribution

programmes.

The keywords used were: net, bed net, insecticide, treated, ITN, cost, effectiveness,

economic and evaluation. Identified papers were analysed to determine and evaluate the

costing methods used.

Methods were judged against existing standards of cost analysis to arrive at proposed

standards for Undertaking and presenting cost analyses.

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Results: Cost estimates were often not readily comparable or could not be adjusted to a

different context. This resulted from the wide range of methods applied and measures of

output chosen. Most common shortcomings were the omission of certain costs and failure to

adjust financial costs to generate economic costs. Generalise ability was hampered by

authors not reporting quantities and prices of resources separately and not examining the

sensitivity of their results to variations in underlying assumptions.

Conclusion: The observed shortcomings have arisen despite the abundance of literature and

Guidelines on costing of health care interventions. This paper provides ITN specific

recommendations in the hope that these will help to standardize future cost estimates.

Using activity-based costing to reengineer the reverse logistics channel

Author(s):

Thomas J. Goldsby, David J. Closs

Journal: International Journal of Physical Distribution & Logistics Management

Abstract:

Activity-based costing (ABC) is a tool used by managers to more closely approximate the

―true costs‖ of operations. The application of ABC in logistics is more commonplace today

than just a few years ago, though still far short of universal. Sound tracking of operational

costs is critical when pursuing the logistics objective of providing desired customer service

at the lowest total cost. This research illustrates an actual application of ABC to reverse

logistics activities performed across supply chain organizations. More specifically, a case

study of a Michigan beverage distributor and retailer that collect empty beverage containers

for recycling purposes is presented. The case study demonstrates the ABC application in

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detail and discusses the re-engineering of supply chain-wide processes resulting from the

analysis.

Lessons from Cost-Effectiveness Research for United States Public Health

Policy

Scott D. Grosse,1 Steven M. Teutsch,2 and Anne C. Haddix3

Abstract

The application of cost-effectiveness analysis to health care has been the subject of previous

reviews. We address the use of economic evaluation methods in public health, including case

studies of population- level policies, e.g., environmental regulations, injury prevention,

tobacco control, folic acid fortification, and blood product safety, and the public health

promotion of clinical preventive services, e.g., newborn screening, cancer screening, and

childhood immunizations. We review the methods used in cost-effectiveness analysis, the

implications for cost-effectiveness findings, and the extent to which economic studies have

influenced policy and program decisions. We discuss reasons for the relatively limited

impact to date of economic evaluation in public health. Finally, we address the vexing

question of how to decide which interventions are cost effective and worthy of funding.

Policy makers have funded certain interventions with rather high cost-effectiveness ratios,

notably nucleic acid testing for blood product safety. Cost-effectiveness estimates are a

decision aid, not a decision rule.

55

An Emperical Analysis Of The Relation Between The Board Of Director

composition And Financial Statement Fraud

Mark. S. Beasley North Carolina State University

Abstract

This study empirically tests the prediction that the inclusion of larger proportions of outside

members on the board of directors significantly reduces the likelihood of financial statement

fraud. Results from logit regression analysis of 75 fraud and 75 no-fraud firms indicate that

no-fraud firms have boards with significantly higher percentages of outside members than

fraud firms; however, the presence of an audit committee does not significantly affect the

likelihood of financial statement fraud. Additionally, as outside director ownership in the

firm and outside director tenure on the board increase, and as the number of outside

directorships in other firms held by outside director‘s decreases, the likelihood of financial

statement fraud decreases.

A cost-benefit analysis of electronic medical records in primary care

The American Journal of Medicine, Volume 114, Issue 5, Pages 397-403

Abstract

Purpose

Electronic medical record systems improve the quality of patient care and decrease medical

errors, but their financial effects have not been as well documented. The purpose of this

study was to estimate the net financial benefit or cost of implementing electronic medical

record systems in primary care.

Methods

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We performed a cost-benefit study to analyze the financial effects of electronic medical

record systems in ambulatory primary care settings from the perspective of the health care

organization. Data were obtained from studies at our institution and from the published

literature. The reference strategy for comparisons was the traditional paper-based medical

record. The primary outcome measure was the net financial benefit or cost per primary care

physician for a 5-year period.

Results

The estimated net benefit from using an electronic medical record for a 5-year period was

$86,400 per provider. Benefits accrue primarily from savings in drug expenditures, improved

utilization of radiology tests, better capture of charges, and decreased billing errors. In one-

way sensitivity analyses, the model was most sensitive to the proportion of patients whose

care was capitates; the net benefit varied from a low of $8400 to a high of $140,100. A five-

way sensitivity analysis with the most pessimistic and optimistic assumptions showed results

ranging from a $2300 net cost to a $330,900 net benefit.

Ionic activators in the electrolytic production of hydrogen—cost reduction-

analysis of the cathode

Laboratory of Physical Chemistry, Vinca Institute of Nuclear Sciences, Belgrade ,

Yugoslavia

Faculty of Physical Chemistry, University of Belgrade, Belgrade , Yugoslavia

Abstract

As recent technology progress makes hydrogen a realistic long-term energy option with little or no pollution, development of new methods for its production and improvement of

conventional technology is important. In spite of the fact that, among overall world technologies for hydrogen production today, only 4% is produced by electrolysis, this is the most promising method in the future as a consequence of the high existing water supply. The

limitation factor for its use on the large scale is well known-high energy consumption.

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In this work, methods for increasing efficiency and lowering the energy consumption in the

electrolytic hydrogen production are presented. The stability of ionic activators, as an indicator of capital cost, are also shown, as are an analysis of composition, structure and

morphology characteristic of cathode, formed in the presence as ionic activators.

Accounting For Financial Analysis:-

Dr. J.D. Aggarwal, professor of Finance, Founder, Chairman and Director of Indian Institute

of Finance and Chief Editor of Finance India.

Abstract

It is one of the book were we can find maximum for getting deep insight in finance. The

book is written by such a person who requires no introduction in the field of finance. The

provide deep knowledge starting from basic about analysis of financial statement its

objective for assessing the health of an company its advantage and disadvantages.

The book provides knowledge about how to read a balance sheet different format and

requirement by company to prepare according to law requirement.

It also tells about essential tools and techniques requirement for analysis of financial

statement.

Economic Decision Making:-

Dr. J.D. Aggarwal, professor of Finance, Founder, Chairman and Director of Indian Institute

of Finance and Chief Editor of Finance India.

Abstract:-

Again a deep research done by novel laureates Dr. J. D. Aggarwal which provide knowledge

about the usefulness of Economics in Finance. The book deals with tools and techniques

that a economist can use for assessing the economic condition of any country and the

business group of that country.

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Again the economic theories give by the author is very use full in making decision and

arriving at any conclusion.

Last but not the least the economic theories like utility theory, totalitarian theory and many

more which are very useful in decision making.

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CHAPTER. 3

RESEARCH METHODOLOGY

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Research methodology:-

The system of collecting data for research projects is known as research methodology. The

data may be collected for either theoretical or practical research for example management

research may be strategically conceptualized along with operational planning methods and

change management

.Some important factors in research methodology include validity of research data, Ethics

and the reliability of measures most of your work is finished by the time you finish the

analysis of our data.

Formulating of research questions along with sampling weather probable or non probable is

followed by measurement that includes surveys and scaling. This is followed by research

design, which may be either experimental or quasi-experimental. The last two stages are data

analysis and finally writing the research paper, which is organised carefully into graphs and

tables so that only important relevant data is shown.

Research Methodology Help

A dissertation's methodology consists of four parts: participants, instruments, procedures,

and data analysis. Even though these components tend to be similar in structure and format,

many students experience frustration during this important process. Our consultants can help

you construct a proper research methodology section.

How to Choose a Qualitative or Quantitative Research Methodology

There are a number of issues to consider when debating between a qualitative and

quantitative research design. Neither methodology is simply "better" or "easier" than the

other. Our staff can help you decide between these two research methodologies and put you

one step closer toward completing a successful research project.

Qualitative Research Methodology & Data Analysis Services

We provide a range of qualitative research methodology and data analysis services to

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graduate students at every phase of the dissertation and thesis process. We can help you

choose a qualitative approach and analyze your qualitative data through such procedures as

grounded theory, domain analysis, and analytic induction.

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Sources of Data collection:-

There are primarily two of collection of data that are Primary source and secondary source.

Primary research entails the use of immediate data in determining the survival of the market.

The popular ways to collect primary data consist of surveys, interviews and focus groups,

which shows that direct relationship between potential customers and the companies.

Primary data is accumulated by the researcher particularly to meet up the research objective

of the subsisting project.

Two strategies are commonly employed when researchers gather primary data: randomizing

and blinding. Both of these strategies serve to keep the results objective. Both involve

limiting the information given either to the researcher or the subject about which test group

to which a subject has been assigned. The researcher is prevented from imposing her bias on

the data so she may be a more careful observer

Once the primary data has been gathered, analysts study it using other research methods.

They look for relationships between factors that may suggest the designs for new studies.

When they combine the primary data from more than one study, they are using integrative

methods. Their findings present secondary data, a synthesis of several streams of primary

data.

There are many methods of collecting primary data and the main methods include:

questionnaires

interviews

focus group interviews

observation

case-studies

diaries

critical incidents

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Portfolios.

Advantage of Primary source of Data:-

The first advantage of primary data is that it can be collected from a number of ways like

interviews telephone surveys, focus groups etc. Secondly, it can be also collected across the

national borders through emails and posts. Thirdly, it can include a large population and

wide geographical coverage. Fourthly, it is relatively cheap and no prior arrangements are

required. Moreover, primary data is current and it can better give a realistic view to the

researcher about the topic under consideration.

Disadvantage of Primary source of Data:-

The major disadvantage of primary data is that it has design problems like how to design the

surveys. The questions must be simple to design a general lingo (understandable). Some

respondents do not give timely responses. Sometimes, the respondents may give fake,

socially acceptable and sweet answers and try to cover up the realities. In some primary data

collection methods there is no control over the data collection. Incomplete questionnaire

always give a negative impact on research.

Sources of primary data where the employees of Atlas cycle ltd. During my 2 month project,

I continuously keep on rotating myself in different department of the company . During this

period data was collected from AGM finance , DGM sales , DGM cost and various

employees of sales, purchase and account department.

Secondary sources of Data:-

Secondary data is data that is neither collected directly by the user nor specifically for the

user, often under conditions not known to the user. Examples include Government reports.

Secondary information has already been collected for some other purposes. It may be

available from internal sources, or may have been collected and published by another

organization. Secondary data is cheaper and more quickly available than primary data, but

likely to need processing before it is useful.

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Secondary data analysis saves time that would otherwise be spent collecting data, and often

provides a larger and higher-quality database than would be feasible for any individual

researcher to collect. For analysts of social and economic change, secondary data is usually

essential, since it is impossible to conduct a new survey that can adequately capture past

change.

Sources of secondary data:-

Published report

Government statistics

Scientific and technical Abstracts

Company's financial statements

Banks reports

web sites

journals

Magazines

Challenges of secondary data analysis:-

There are several things to take into consideration when using pre-existing data. Secondary

data does not permit the progression from formulating a research question to designing

methods to answer that question. It is also not feasible for a secondary data analyst to engage

in the habitual process of making observations and developing concepts. These limitations

hinder the ability of the researcher to focus on the original research question. Data quality is

always a concern because its source may not be trusted. Even data from official records may

be bad because the data is only as good as the records themselves. There are six questions

that a secondary analyst should be able to answer about the data they wish to analyze.

1. What were the agency's or researcher's goals when collecting the data?

2. What data was collected and what is it supposed to measure?

3. When was the data collected?

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4. What methods were used? Who was responsible and are they available for questions?

5. How is the data organized?

6. What information is known about the success of that data collection? How consistent is

the data with data from other sources?

Advantage of secondary data:-

Secondary data is the most easily accessible data and saves the researcher the trouble of

going through the tiresome process of collecting data personally.

· Secondary data is readily available at cheap rates and is usually quite inexpensive.

· Collecting secondary data and analysing it saves time and effort.

· Secondary data is unobtrusive. It is easily available and the researcher can get it without

much struggle.

· Secondary data avoids data collection problems and it provides a basis for comparison.

Disadvantage of secondary data:-

Since many surveys deal with national populations, if you are interested in studying a

well-defined minority subgroup you will have a difficult time finding relevant data.

Secondary analysis can be used in irresponsible ways. If variables aren't exactly those

you want, data can be manipulated and transformed in a way that might lessen the

validity of the original research.

Much research, particularly of large samples, can involve large data files and difficult

statistical packages.

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Tools and techniques used in the analysis are:

Comparison of financial statement for 2 years.

Comparison between cost sheets of 2 year.

Ratio analysis

Analyses of financial statements are the end product of the accounting process. Last but not

the least leg of the accounting process is summarising the accounting data in the form

balance sheet, income statement and change in the financial position which help in analysis

and interpretation of the accounting data.

Financial statement normally includes Balance sheet and profit and loss account and cash

flow statement.

Balance sheet:-

It gives the statement of shareholder equity ( paid-up share capital and reserve and surplus) ,

loans , current liabilities and provisions, investment , loan and advances, and currnet asset.

The format of the balance sheet is prescribed in schedule VI of the companies Act.

Profit and loss account:-

Income Statement:-

An income statement reports the organization‘s financial performance over a specified

period of time. It summarizes all revenue earned and expenses incurred during a specified

accounting period. An institution prepares an income statement so that it can determine its

net profit or loss (the difference between revenue and expenses).

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Revenue Expenses

Refers to money earned by an organization for goods sold and services rendered during an

accounting period, including

• Interest earned on loans to clients

• Fees earned on loans to clients

• Interest earned on deposits with a bank, etc.

Represent costs incurred for goods and services used in the process of earning revenue.

Direct expenses for an MFI include

• Financial costs,

• Administrative expenses, and

• Loan loss provisions.

An income statement

• Relates to a balance sheet through the transfer of cash donations and net profit (loss) as

well as depreciation and in the relationship between the loan loss provision, and the reserve.

• Uses a portfolio report‘s historical default rates (and the current reserve) to establish the

Loan Loss Provision.

• Relates to a cash flow statement through the net profit/loss as a starting point on the cash

flow (indirect method).

An income statement is a measure of financial performance between two points in time. It

lists revenue, gain expense and loses over a period of time . The profit is shown before and

after tax by making due adjustment for prior period transaction.

The net profit so arrived at is used for appropriation in various reserve mandates by the law

or decides upon by the Board of Director.

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Cash flow statement:-

It indicates inflows and outflows of cash during an accounting period. A cash flow statement

is required to be published pursuant to clause 32 of the listing agreement and should be

based on and be in agreement with corresponding profit and loss Account and balance sheet

of company.

A cash flow statement

• Classifies the cash flows into operating, investing and financing activities.

♦ Operating activities: services provided (income-earning activities).

♦ Investing activities: expenditures that have been made for resources intended to generate

future income and cash flows.

♦ financing activities: resources obtained from and resources returned to the owners,

resources obtained through borrowings (short-term or long-term) as well as donor funds.

• Can use either

♦ The direct method, by which major classes of gross cash receipts and gross cash payments

are shown to arrive at net cash flow (recommended by IAS)

♦ The indirect method, works back from net profit or loss, adding or deducting noncash

transactions, deferrals or accruals of past or future operating cash receipts or payments, and

items of income or expense associated with investing or financing cash flows to arrive at net

cash flow.

Concept of financial analysis:-

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Financial analysis forms an important part of business analysis, which is precede by

accounting analysis and followed by prospective analysis. It also involves how analytical

tools and techniques such as Ratio, cash flow measure can be used to evaluate the operation,

financial and investment performance of a business enterprise with a focus effectiveness and

efficiency in the conduct of business affair by the management.

To use financial analysis to improve institution‘s sustainability, by

1. Identifying the components, purpose, relationships, and importance of the main

Financial statement;

2. Learning the formats of income statements and balance sheets to easily separate the

Effect of donor funds;

3. Analyzing financial statements to monitor profitability, efficiency, and portfolio quality;

4. Adjusting costs for inflation, subsidized cost of funds, and in-kind donations; and

5. Identifying critical factors for moving toward financial sustainability

RATIO ANALYSIS:-

Ratio Analysis uses a combination of financial or operating data from a company or industry

to provide a basis of comparison. Each ratio measures a unique relationship that may impact

others.

It involves the method of calculating and interpreting financial ratio in order to assess the

strengths and weakness underlying the performance of an enterprise. In order to calculate a

ratio a relevant relationship between two numbers of financial statements is established and

the result of the same is interpreted in order to derive meaningful conclusion.

Several of the most commonly used ratios are grouped into categories, including:

Liquidity Ratios measure how easily a firm can meet its obligations.

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Profitability Ratios indicate the earnings potential of a company.

Asset Management Ratios measure how efficiently a company uses its assets.

Debt Management Ratios indicate financial leverage and how well a company can

handle that debt.

Dividend/Market Value Ratios measure earnings for investors.

Liquidity Ratios provide ability to meet short – term obligation as they become due. Liquid

asset are those which can be converted in cash.

Quick Ratio

Current Ratio

Current ratio:-The Current Ratio measures a company's ability to meet short-term

obligations (under a year) by using current assets

Given the current assets and current liabilities from a company's balance sheet:

Current Ratio = (Current Assets) / (Current Liabilities)

Generally, the higher the ratio, the stronger the liquidity position of the company and

the more easily it can meet its obligations.

Quick ratio:-

The Current Ratio measures a company's ability to meet short-term obligations

(under a year) by using current assets

Given the current assets and current liabilities from a company's balance sheet:

Current Ratio = (Current Assets) / (Current Liabilities)

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Generally, the higher the ratio, the stronger the liquidity position of the company and

the more easily it can meet its obligations.

Profitability Ratios indicate the earnings and profitability potential of a company.

Basic Earning Power Ratio

Earnings Per Share

Gross Profit Ratio

Profit Margin

Return on Assets

Return on Equity

Basic Earning Power Ratio

The Basic Earning Power Ratio isolates earnings from uses of leverage

Given Earnings before Interest and Taxes (EBIT) from a company's income

statement and total asset from the balance sheet.

EBIT = Net Income + Interest + Taxes

Basic Earning Power = EBIT / (Total Assets)

Generally, the higher the ratio, the more raw earnings potential of the company.

Earnings Per Share

Earnings Per Share (EPS) indicates how much profit the company earns for each

share of common stock outstanding.

Given net income from a company's income statement and the number of shares

outstanding:

Earnings Per Share = (Net Income) / (Number of shares of common stock

outstanding)

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Generally, the higher the ratio, the more potential value for the stock price.

Gross Profit Ratio

The Gross Profit Ratio indicates how much of each sales dollar is available to pay

expenses.

Given sales and cost of goods sold from a company's income statement:

Gross Profit Ratio = (Sales - Cost of Goods Sold) / (Sales)

Generally, the higher the ratio, the more from easily expenses can be covered from

sales.

Profit Margin

The Profit Margin Ratio indicates how profitable a company's sales are.

Given net income and sales from a company's income statement:

Profit Margin Ratio = (Net Income) / (Sales)

Generally, the higher the ratio, the more profit earned from each dollar in sales.

Return on Assets

Return on Assets (ROA) shows after-tax profit as a percentage of total assets.

Given net income from a company's income statement and total assets from the

balance sheet:

Return on Assets = (Net Income) / (Total Assets)

Generally, the higher the ratio, the greater the profit from corporate assets.

Return on Equity

73

The Return on Equity Ratio (ROE) relates profitability to ownership by showing

income as a percentage of equity.

Given net income from a company's income statement and total assets from the

balance sheet:

Return on Equity Ratio = (Net Income) / Equity

Generally, the higher the ROE, the more profit is earned for owners of the company.

Asset Management Ratios or Activity Ratio:- It help in commenting on the efficiency of

the firm in managing its assets. The speed with which assets are converted into sales is

captured by activity ratio.

Days Sales Outstanding (DSO)

Fixed Asset Turnover (FAT) Ratio

Total Assets Turnover Ratio

Days Sales Outstanding (DSO)

Days Sales Outstanding (DSO) indicates how well receivables are managed.

Given the sales from a company's income statement and accounts receivable from the

balance sheet:

DSO = (Accounts Receivable) / (Average sales per day)

Generally, the higher the ratio, the more potential for problems in getting paid.

Fixed Asset Turnover (FAT) Ratio

The Fixed Asset Turnover Ratio measures how fixed assets are used to generate

sales.

74

Given sales from a company's income statement and net fixed assets from the balance

sheet:

Fixed Asset Turnover Ratio = Sales / (Net Fixed Assets)

Generally, the higher the ratio, the more sales the company is able to generate from

its fixed assets, and thus the more efficient the firm's production.

Total Assets Turnover Ratio

The Total Assets Turnover Ratio compares sales to total assets.

Given sales from a company's income statement and total assets from the balance

sheet:

Total Asset Turnover = Sales / (Total Assets)

Generally, the higher the ratio, the more sales are achieved from the company's

assets.

Debt Management Ratios or Solvency ratio:- Long tern creditors are more concerned

with the firms long term financial strength . a firm should have a strong short term and long

term financial position.

Debt Ratio

The Debt Ratio indicates how much of the assets are provided through debt.

Given the total debt and total assets from a company's balance sheet:

Debt Ratio = (Total Debt) / (Total Assets)

Generally, the higher the ratio, the greater the liquidity (ability to meet current

obligations using liquid assets).

Debt to Equity Ratio

The Debt to Equity Ratio indicates how much financing is provided through debt as

compared to equity.

Given the total debt and total assets from a company's balance sheet, use the Debt

Ratio:

75

Debt Ratio = (Total Debt) / (Total Assets)

Debt to Equity Ratio = (Debt Ratio) / (1 - Debt Ratio)

Generally, the higher the ratio, the more financial leverage is employed by the firm,

and the higher the financial risk.

EBITDA Coverage

The EBITDA Coverage Ratio shows if earnings are able to satisfy all financing

obligations, including leases and principle payments.

Given the EBITDA and lease paid from the Income Statement and the interest and

principle paid from the Statement of Cash Flow:

EBITDA Coverage = (EBITDA + Lease Paid) / (Interest + Principle Paid +

Lease Paid)

Generally, the higher the ratio, the more secure the lender's position. A ratio less than

1.0 indicates an inability to meet financial obligations out of operating cash flow.

TIE Ratio or INTEREST COVERAGE RATIO

The Times Interest Earned Ratio shows the ability to service interest payments from

earnings. This ratio focuses more narrowly than the EBITDA Coverage Ratio which

considers other obligations than interest which must also be paid from earnings.

Given the Earnings Before Interest and Taxes (EBIT) and Interest from the Income

Statement:

The Times Interest Earned Ratio = EBIT / Interest

Generally, the higher the ratio, the more easily interest obligations can be met out of

earnings. A ratio of less than 1.0 means earnings are insufficient to meet the interest

payments.

76

Advantage of Ratio Analysis:-

There are various groups of people who are interested in analysis of financial position of a

company. They use the ratio analysis to workout a particular financial characteristic of the

company in which they are interested. Ratio analysis helps the various groups in the

following manner: -

1. To workout the profitability: Accounting ratio help to measure the profitability of

the business by calculating the various profitability ratios. It helps the management to

know about the earning capacity of the business concern. In this way profitability

ratios show the actual performance of the business.

2. To workout the solvency: With the help of solvency ratios, solvency of the

company can be measured. These ratios show the relationship between the liabilities

and assets. In case external liabilities are more than that of the assets of the company,

it shows the unsound position of the business. In this case the business has to make it

possible to repay its loans.

3. Helpful in analysis of financial statement: Ratio analysis help the outsiders just

like creditors, shareholders, debenture-holders, bankers to know about the

profitability and ability of the company to pay them interest and dividend etc.

4. Helpful in comparative analysis of the performance: With the help of ratio

analysis a company may have comparative study of its performance to the previous

years. In this way company comes to know about its weak point and be able to

improve them.

5. To simplify the accounting information: Accounting ratios are very useful as they

briefly summarise the result of detailed and complicated computations.

6. To workout the operating efficiency: Ratio analysis helps to workout the operating

efficiency of the company with the help of various turnover ratios. All turnover ratios

are worked out to evaluate the performance of the business in utilising the resources.

77

7. To workout short-term financial position: Ratio analysis helps to workout the

short-term financial position of the company with the help of liquidity ratios. In case

short-term financial position is not healthy efforts are made to improve it.

8. Helpful for forecasting purposes: Accounting ratios indicate the trend of the

business. The trend is useful for estimating future. With the help of previous years‘

ratios, estimates for future can be made. In this way these ratios provide the basis for

preparing budgets and also determine future line of action.

Limitations of Ratio Analysis

In spite of many advantages, there are certain limitations of the ratio analysis techniques and

they should be kept in mind while using them in interpreting financial statements. The

following are the main limitations of accounting ratios:

1. Limited Comparability: Different firms apply different accounting policies.

Therefore the ratio of one firm can not always be compared with the ratio of other

firm. Some firms may value the closing stock on LIFO basis while some other firms

may value on FIFO basis. Similarly there may be difference in providing

depreciation of fixed assets or certain of provision for doubtful debts etc.

2. False Results: Accounting ratios are based on data drawn from accounting records.

In case that data is correct, then only the ratios will be correct. For example,

valuation of stock is based on very high price, the profits of the concern will be

inflated and it will indicate a wrong financial position. The data therefore must be

absolutely correct.

3. Effect of Price Level Changes: Price level changes often make the comparison of

figures difficult over a period of time. Changes in price affects the cost of production,

sales and also the value of assets. Therefore, it is necessary to make proper

adjustment for price- level changes before any comparison.

4. Qualitative factors are ignored: Ratio analysis is a technique of quantitative

analysis and thus, ignores qualitative factors, which may be important in decision

78

making. For example, average collection period may be equal to standard credit

period, but some debtors may be in the list of doubtful debts, which is not disclosed

by ratio analysis.

5. Effect of window-dressing: In order to cover up their bad financial position some

companies resort to window dressing. They may record the accounting data

according to the convenience to show the financial position of the company in a

better way.

6. Costly Technique : Ratio analysis is a costly technique and can be used by big

business houses. Small business units are not able to afford it.

7. Misleading Results: In the absence of absolute data, the result may be misleading.

For example, the gross profit of two firms is 25%. Whereas the profit earned by one

is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs.

10,00,000 and sales are Rs. 40,00,000. Even the profitability of the two firms is same

but the magnitude of their business is quite different.

8. Absence of standard university accepted terminology: There are no standard

ratios, which are universally accepted for comparison purposes. As such, the

significance of ratio analysis technique is reduced.

SWOT ANALYSIS:-

The third tool used for completion of the project is swot analysis. Where we try to analyze

the strength, weakness, opportunity and threat associated with company. The SWOT analysis

provides information that is helpful in matching the firm's resources and capabilities to the

competitive environment in which it operates. As such, it is instrumental in strategy

formulation and selection.

SWOT Analysis: Relevant Factors

A list of general factors which affect Strengths, Weaknesses, Opportunities and Threats is a

great thinking aid that allows you to better analyze the complete range of variables that

79

affect your enterprise. Pertinent Factors can be categorized as Internal Factors and External

Factors for the purposes of SWOT planning.

Internal Factors

These factors are those that affect your Strengths and Weaknesses and are within or a part of

your enterprise. Internal Factors usually imply organizational charac teristics and can include:

• General: People, Process, Technology, Information, Ideas, Beliefs, Values, Experience

• Departmental: Sales, Marketing, Finance, HR, IT, Administration, Operations

• Financial: Costs, Assets, Liabilities, Capital, Leverage, Liquidity, Expenses, Value,

Profitability, Revenue, Debt, Risk

• Organizational: Management, Team, Morale, Structure, Location, Industry, Business

Model, Partners, Accreditations

• Operational: Efficiencies, Time, Cost, Manpower, Machines, Automated, Manual

• Marketing: Product, Price, Place, Promotion

What other ways are there of looking at your organization and breaking it up into a series of

related parts and concepts? As you can see, SWOT Analysis brings up the more basic

question of how to define the internal and external factors that shape business. Any

methodology used to define your business and business environment can then provide points

of analysis for a SWOT exercise.

External Factors

These factors within a SWOT Analysis are those that affect Opportunities and Threats and

are external to your organization. External factors usually imply environmental or market

conditions and can include:

80

• Macroenvironment: social, economic, legal, government, technology, environment

• Market: customer, competition, trends

Analyzing Factors

The purpose behind looking at internal and external factors affecting your business is a

thinking exercise. The factors listed above are merely definitions to get your started and are

not endpoints that are graded from 1-10 to establish Strengths, Weaknesses, Opportunities

and Threats. Each should be elaborated on as appropriate for your situation.

What other ways can you find to categorize the various factors that play into your own

SWOT Analysis? Almost any model for analysis internal and external business conditions

can be used to define specific factors that will come into play in a SWOT exercise.

Whichever thinking model you are comfortable with and use should also be applied to

SWOT planning.

There is no end to how you can categorize the various factors that affect your decisions in

obtaining your objective. Each set of factors is based on a specific perspective of looking at

businesses and so you may find some overlap and interchange when looking at and

analyzing the factors pertaining to your specific enterprise in various ways.

Thinking about factors is a great way to expand your analysis of any one Strength,

Weakness, Opportunity or Threat to ensure that you cover the full range of variables

affecting your planning. For example, if a specific organizational process is deemed ―time

intensive‖ and this is seen as a weakness, then what about other process delays? Similarly,

the same Weakness can be expanded upon to look at the ―people‖ factor within your

organization as a whole.

81

Strengths and weaknesses are internal factors that create value or destroy value. They can

include assets, skills, or resources that a company has at its disposal, compared to its

competitors. They can be measured using internal assessments or external benchmarking.

Opportunities and threats are external factors that create value or destroy value. A company

cannot control them. But they emerge from either the competitive dynamics of the

industry/market or from demographic, economic, political, technical, social, legal or cultural

factors (PEST).

Advantage and Disadvantage of Swot analysis:-

The biggest advantages of SWOT analysis are that it is simple and only costs time to do. It

can help generate new ideas as to how a company can use a particular strength to defend

against threats in the market. If a company is aware of the potentia l threats then it can have

responses and plans ready to counteract them when they happen.

There are also disadvantages of SWOT analysis. A typical SWOT analysis is a usually a

simple list and not critically presented. If a company is thinking about compiling lists it may

not be focused sufficiently on how to achieve its objectives. Taking a list approach can also

result in items not being prioritised. For example, a long list of weaknesses may appear to be

'cancelled out' by a longer list of strengths, regardless of how significant those weaknesses

are.

82

CHAPTER. 4

ANALYSIS

83

ANALYSIS:-

It is one of the important part of my project report. It contains study of financial statement

like Balance sheet, profit and loss account and cash flow statement. As , I was also concern

with the cost reduction techniques implemented by the company , so my analysis part also

consist of cost sheet analysis.

To find the financial health of company the use of Ratio analysis will be implemented.

Which will help in finding the current position of company in discharging its obligation and

how company take care of its shareholders?

The analysis will consist of data of four year but major comparison will be done between

data of two years that are 2007-08.

Also the study will consist of graphs which will be helpful for every person to understand

the finding and conclusion of my project.

84

Balance sheet (Rs crore)

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Sources of funds

Owner's fund

Equity share capital 3.25 3.25 3.25 3.25

Share application money - - - -

Preference share capital - - - -

Reserves & surplus 111.90 115.41 63.46 64.21

Loan funds

Secured loans 79.69 65.80 59.51 63.39

Unsecured loans 5.49 5.48 9.96 6.51

Total 200.34 189.94 136.18 137.37

Uses of funds

Fixed assets

Gross block 141.54 121.70 94.04 90.18

Less : revaluation reserve 3.90 3.90 3.90 3.90

Less : accumulated depreciation 64.37 58.85 56.74 52.88

85

Net block 73.27 58.96 33.40 33.40

Capital work-in-progress - 3.49 3.57 -

Investments 23.19 17.41 11.30 16.40

Net current assets

Current assets, loans & advances 287.36 283.45 222.24 196.99

Less : current liabilities &

provisions 183.49 173.37 134.34 109.43

Total net current assets 103.87 110.08 87.90 87.56

Miscellaneous expenses not written - - - -

Total 200.34 189.94 136.18 137.37

Notes:

Book value of unquoted investments 23.19 17.41 11.30 15.40

Market value of quoted investments - - - -

Contingent liabilities 3.11 4.15 3.43 3.47

Number of equity shares outstanding

(Lacs) 32.52 32.52 32.52 32.52

86

ANALISYS OF BALANCE SHEET :-

Company have not issued any new share since 2005. It‘s maintaining the same amount of

3.25 crs. And also the company emphasis on maintaining a good amount of reserve and

surplus but in year 2006-07 the amount increased many folds the reason was company has

sold its fixed asset in Bawal which include Land and Building which provided the profit of

Rs. 100.64 crs.

Till date company has not issued any preference share to public.

Coming to Loan Funds we can observe that there was decrease in secured loan in the year

2005-06 comparing to 2004-05 but again in the subsequent year company has availed

secured loan and the trend remain the same in current financial year also.

Similarly in unsecured loan section the trend is opposite of secured loan the company has

raised funds in year 2005-06 but repaid in subsequent year.

Coming to fixed asset the company is continuously expanding its business and acquiring

fixed asset in terms of land and building and other assets also. Despite of sale of Land and

Building in the year 2006-07 company has acquired some fixed asset which can be clearly

observed.

Coming to the calculation of working capital requirement which consist of net of current

asset.

There is an increase in current asset year after year starting from 2004-05 and the trend

remain same in the subsequent year there was a massive increase in current asse t in the year

2006-07 the year also observed the increase in sales.

In the section of current liability the same trend can be observed there was also one reason

for this that was economic boom in this period which also provided boost to cycle industries.

87

BALANCE SHEET ANALYSIS FOR THE YEAR 2006-07 AND 2007-08

2008 2007 Growth/Decline%

Sources of Funds

Shareholder funds

Issued share capital 3,25,,19,190 3,25,,19,190 0

Reserve and Surplus 1,15,79,97,750 1,19,30,77,890 -2.940305934

1,19,05,16,750 1,22,55,97,080 -2.862305286

Loan Funds

Secured Loans 79,68,80,503 65,79,80,642 21.11002241

Unsecured Loans 5,49,30,000 5,48,43,000 0.158634648

85,18,10,503 71,28,23,642 19.49807117

2,04,23,27,443 1,93,84,20,722 5.360380222

Application of Funds

Fixed Assets 77,16,89,489 66,34,68,632 16.31137506

Investments 23,19,37,226 17,41,49,091 33.18313904

Current Asset and Loans 2,87,35,79,538 2,83,45,40,474 1.377262535

Less Current Liabilities And Prov.

1,77,05,78,806 1,71,64,37,475 3.154285069

Net current Assets 1,10,30,00,732 1,11,81,02,999 -1.350704453

Less deferred tax Liability. 6,43,00,000 1,73,00,000 271.6763006

2,04,23,27,443 1,93,84,20,722 5.360380222

88

Comparing the balance sheet of two year we can observe that sources of fund for the

company are decreasing that of from the last year that is 2006-07. Issued share capital for the

company is same over the year the decrease is in the Reserve and surplus. Capital reserve is

same as it was in the year 2006-07 but revenue reserve is decreasing and also surplus carried

forward is decreasing. Coming to secured loan Company has raised term loan by the way of

Deposit and Bank loan it was mainly used to acquire assets as in the application of fund the

company has acquired fixed asset which include machine like Air blower replacement of

furnaces and some expenses under construction and installation. Coming to Investment

Company invest her funds under two heads that are Long term investment and Current

investment. In the year 2007-08 company has invested in Central bank of India by the way

of Equity fund and in Current Investment Company had invested in mutual funds of different

company.

Coming to Current assets there is increase in stock and it was due to increase in production

and also in stock increase was mainly in production materials. Despite of increase in sales

volume the company seems to have changed their credit policy due to which there is

reduction in debtors.

In the year 2007-08 company has recovered cash and loans from and also has paid advance

taxes due to which there is increase in Loan and advance. The increase in loan and advances

were utilised to acquire fixed asset and also there is increase in investment which can be

clearly observed. It was the period when economy was on boom and stock market was

soaring like anything company utilised the market to grow its funds and invested heavily.

In current liabilities there is increase in it and it is because of increase in creditors and

unclaimed dividend and remaining all items are same as they were last year.

Now due to all this effects there is overall growth in balance sheet 5.360380222 %

of comparing that of from last year.

89

90

INCOME STATMENT

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Income:

Operating income 576.66 491.99 452.63 430.36

Expenses

Material consumed 452.71 401.44 345.78 326.73

Manufacturing expenses 9.08 10.79 12.28 15.44

Personnel expenses 33.66 30.49 27.37 27.04

Selling expenses 45.07 44.86 37.39 33.64

Administrative expenses 20.27 31.89 18.41 17.41

Expenses capitalised - - - -

Cost of sales 560.80 519.47 441.24 420.26

Operating profit 15.87 -27.48 11.40 10.10

Other recurring income 3.77 3.91 2.52 3.31

Adjusted PBDIT 19.64 -23.57 13.92 13.40

Financial expenses 9.48 7.03 7.65 5.64

Depreciation 6.41 4.51 3.97 3.79

Other write offs - - - -

Adjusted PBT 3.75 -35.11 2.30 3.97

Tax charges 2.42 12.17 1.20 1.30

Adjusted PAT 1.34 -47.28 1.10 2.67

91

Non-recurring items 0.67 100.94 -0.19 -0.40

Other non cash adjustments - - - -

Reported net profit 2.00 53.66 0.91 2.27

Earnings before appropriation 5.16 54.87 3.23 4.48

Equity dividend 1.46 1.46 1.46 1.46

Preference dividend - - - -

Dividend tax 0.25 0.25 0.21 0.21

Retained earnings 3.45 53.16 1.56 2.81

Annual results in brief (Rs crore)

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Sales 551.89 483.91 435.36 407.22

Operating profit 10.21 17.15 7.81 8.89

Interest 8.05 6.70 6.72 6.01

Gross profit 8.93 81.46 5.73 7.28

92

Analysis of Income Statement:-

Coming to analysis of Profit and loss a/c we can clearly observer that sales for the company

is increasing year by year by some margin but in the year 2007-08 sales of company has

increased by great margin. During the current years cycle has seen a great demand in its

product the reasons are like introduction of innovative and a great variety of product. At the

same time government policies which are favourable for this industry had also helped a lot to

boost the production of cycle. We can also observe that as manufacturing capacity is

increasing the manufacturing cost is decreasing it is due to reduction in fixed cost as

production volume is increasing. To support this view we can also observe that company is

continuously increasing its human resources year by year.

Coming to operating profit which has shown a drastic change in the year 2006-07 which

even gone to negative (-27.48 cr) the reason are. There are three places were Atlas carry on

its production activity. One is in Sahibabad, another in Sonepat and other is Malanpur.

Now two of its firm is currently running under losses that are Sonepat and Malanpur and

only Sahibabad is one that is making profit so due to this company is having negative

operating profit another reason for the same was increase in consumption in materials as well

as increase in direct taxes. And this is the reason why company is having negative profit

after tax.

Coming to profit for appropriation we can observe that in the year when company was

having negative PAT it is showing maximum profit for appropriation the reason is that in

this year company has sold off its Land and Building which was in Bawal and due to which

company is showing 54.87cr of amount for appropriation.

Company also follow a strong policy of paying dividend to its equity holders every year

which can be clearly observed. And at the same time it also pays off its interest obligation.

93

Profit and Loss Account For The year 2006-07 and 2007-08

2008 2007 Growth/Decline%

INCOME

Gross Trun Over 5,90,13,93,924 5,02,27,12,708 17.49415639

Less Excise 13,47,45,512 10,27,84,070 31.09571551

Sale Net Off Excise 5,76,66,48,412 4,91,99,28,638 17.21000113

Less Rebate 14,26,61,443 19,00,51,642 -24.93543255

Net Sale 5,62,39,86,969 4,72,98,76,996 18.90345085

Other Income 4,93,57,517 1,05,39,84,486 -95.3170547

5,67,33,44,486 5,78,38,61,482 -1.910782206

EXPENDITURE 5,62,45,93,185 5,12,10,91,244 9.831926771

PBT before Extra ordinary Items 4,87,51,301 66,27,70,238 -92.64431349

Extra ordinary item 45,60,820 44,42,353 2.666762412

Profit Before taxation 4,41,90,481 65,83,27,885 -93.28746632

Provision for taxation 2,41,50,000 12,17,00,000 -80.15612161

Profit after taxation 2,00,40,481 53,66,27,885 -96.26547901

profit brought forward 3,16,04,574 1,20,97,310 161.2529066

Profit for appropriation 5,16,45,055 54,87,25,195 -90.58817502

Appropriation

Proposed Dividend 1,46,33,635 1,46,33,635 0

Dividend Tax 24,86,986 24,86,986 0

General Reserve 1,20,00,000 5,00,00,00,000 -99.76

Surplus Carried Forward 2,25,24,434 3,16,04,574 -28.73046161

94

Comparing the profit and loss account statement of 2 years of the company we can observe

that there is massive increase in sales which was due to good economic condition and good

government policies. The sales volume for the year 2007-08 increased by around 3 lakhs in

quantity which was excluding bicycle component and steel tubes. Coming to the section of

other income there is decrease in it and it is because of in the year 2006-07 company has sold

its fixed asset which provided her huge abnormal cash inflow.

Coming to expenditure section there is huge increase from the previous year and it is in

material consumption but there is decrease in manufacturing, Personnel and Administrative

expenses it is because of decrease in fixed cost. There is also increase in interest expenses

from the previous year.

Coming to profit after tax there is decrease by 92%. In previous year company has sold its

fixed asset which consist of land and building due to which there was increase in profit after

tax. Company has a provision of extra ordinary items which consist of legal charge.

Due to this there was massive increase in profit for appropriation which can be clearly

observed as there is fall of about 91% in it. There is no change in proposed dividend as we ll

as dividend tax

Company has transferred its profit to general reserve in the previous year which is much

more than this year.

95

CASH FLOW STATEMENT FOR THE YEAR 2006-07 & 2007-08

2006-07 2007-08 GROWTH

/DECLINE %

Cash flow from operating activities

PBT and extra ordinary items -28,76,14,107 11,20,24,053 138.94

Adjustment for dep& write offs

4,51,14,415 6,40,77,953 42.03432096

Operating profit before W.C

change -24,24,99,692 17,61,02,006 172.61

Adjustment for:

change in trade and receivables

-16,04,24,442

12,86,98,935

180.22

change in inventories

-15,32,53,823

-17,66,34,569

-15.25

change in loans and advances

-1,34,44,153

-13,12,84,968

-876.52

change in trade payable

34,76,36,220

4,50,05,134

-87.05

change in other current

liabilities

89,156

3,66,879

311.5

cash generated from operation

-22,18,96,734

4,22,53,417

119.04

Direct taxes paid /refund

-6,83,59,654

-9,66,31,328

-41.35

Net cash flow from operating Act.

-29,02,56,388

-5,43,77,911

812.65

96

Cash flow from investing activities

Purchase of fixed asset

-37,19,87,407

-25,77,69,087

30.7

Proceeds on sale of fixed asset

1,07,85,36,049

8,87,66,572

-91.76

Dividend income

78,05,702

1,11,11,342

42.34

purchase of investment

-6,11,03,768

-5,77,88,135

5.42 proceed from sale of investment

0

0

0

Net cash used in investing activities

65,32,50,576

-21,56,79,308

-133.0163211

Cash flow from financing activities

proceed from borrowings

13,89,86,861

repayment of borrowings

-4,79,38,254

0

interest paid

-7,03,16,518

-9,48,10,458

34.8338352

interest received

20,68,943

1,25,69,253

507.5205068

Dividend paid

-1,58,00,845

-1,56,23,306

-1.123604465

Net cash used in financing act. -13,19,86,674

4,11,22,350

131.15

change in cash & cash equivalent

23,03,77,317

-22,89,34,869

-199.3738759

cash &cash equivalent as on 1.04.07

6,05,48,678

29,09,25,995

380.4828191

cash &cash equivalent as on

31.04.07

29,09,25,995

6,19,91,126

-78.69178861

97

ANALYSIS OF CASH FLOW STATEMENT:-

We can observer that Net profit before tax has increased by a great margin it was due to that

in this period all three unit of Atlas has incurred profit where last year that is 2006-07 two of

its unit were under loss. Coming to depreciation Part Company follows straight line method

for its two units that are Sahibabad and Malanpur while written down value method for

Sonepat unit.

Coming to adjustment for working capital requirement we know that whenever there is

increase in current asset from the previous year there is increase in requirement of working

capital. In the given year stock is increasing where as debtors are decreasing the reason for

the same is company realization process has become strong. Coming to Loan and Advances

which has increased from previous year and due to which there is increase in current asset

which ultimately increases the working capital requirement.

Coming to current liabilities which is just reverse of current asset means when current

liabilities increase the requirement for working capital decreases where as when it decreases

the requirement increases. So in this creditors are increasing means need of working capital

is reduced. We can also observe that other current liabilities are increasing compared to

previous year which again reduces the need of working capital.

Company has paid more Direct Taxes in the 2007-08 than in 2006-07 it is mainly due to

higher sales and high income it was due to in this period the economy was on boom creating

high demand for cycles.

Coming to cash flow from Investing activities we can observe that company has acquired

fixed asset this year also but less than that of previous year. Company invest huge amount of

money in different types of investment like Mutual funds. Company has invested in 30

different types of mutual funds excluding other investment.

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Now cash flow from financing activities in the period of 2007-08 company has borrowed

loan from different bank which include EXIM and SIDBI. There is no repayment of loan

during this year.

Finally coming to cash and cash equivalent on 31.03.2008 which is reduced by a great

margin from the previous year it was due to that company has sold its fixed asset in the year

2006-07 which provided her lot of cash flow but in the year 2007-08 company has made

huge profit due to increase in sales volume.

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COST STATEMENT ANAYLSIS:

―The statement of cost according to element wise is known as cost sheet‖.

A cost benefit analysis is done to determine how well, or how poorly, a planned action will

turn out. Although a cost benefit analysis can be used for almost anything, it is most

commonly done on financial questions. Since the cost benefit analysis relies on the addition

of positive factors and the subtraction of negative ones to determine a net result, it is also

known as running the numbers.

Cost Benefit Analysis

A cost benefit analysis finds, quantifies, and adds all the positive factors. These are the

benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs. The

difference between the two indicates whether the planned action is advisable The real trick to

doing a cost benefit analysis well is making sure you include all the costs and all the benefits

and properly quantify them.

Should we hire an additional sales person or assign overtime? Is it a good idea to purchase

the new stamping machine? Will we be better off putting our free cash flow into securities

rather than investing in additional capital equipment? Each of these questions can be

answered by doing a proper cost benefit analysis.

Costing involves the following basic aspects (or 5 ‘A’s): -

1. Ascertain Costs: - Ascertain or collect all the expenses relating to a particular period.

2. Analyze Costs: - Analyze or classify the expenses under different heads of account

such as material, Labour, Expenses etc.

3. Allocate Costs: - Allocate or charge in full the direct expenses or the specific costs

such as Raw Materials, Labour to relevant product, contract or process.

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4. Apportion Costs: - Apportion or distribute common expenses to each product,

contract or process on suitable basis.

5. Absorb Costs: - Absorb the total expenses of a department over its products. So, in

this final step, the individual cost of each product is determined. This product cost is

then reported to management.

The preparation of cost sheet is one of the important and primary function of cost

accounting.

This can be described as the process of accumulating, measuring, analyzing, interpreting and

reporting cost information that is both useful and relevant to the internal and external

stakeholders of a business entity. External stakeholders are those who have a vested financial

interest in a business or company. For example banks (loans), financial houses (mortgages),

investors (investments), etc. Internal stakeholders are the business or company directors,

managers, division heads, etc.

One of the many benefits of cost accounting is that it turns data into information, knowledge

and wisdom about a business entity‘s operations that is useful for:

measuring performance

reducing or managing costs

determining the fees or prices for goods and services

deciding to authorize, modify or discontinue a program or activity

Another benefit is that information on the costs programs and activities may be used as a

basis to estimate future costs in preparing and reviewing budget requests. Once budgets are

approved and executed, cost information serves as a useful feedback on performance.

Moreover, costs may be compared to known or assumed benefits to identify value-added and

non-value added activities. Reliable information on the cost of programs and activities is

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crucial for the effective management of a business entity‘s operations. Cost accounting is

especially important for fulfilling the objective of assessing operational performance. The

objective is to improve the efficiency and effectiveness of operations by furnishing program

managers and others with timely and relevant cost-based performance information to allow

for continuous improvement in delivering outputs and outcomes to stakeholders. Cost

accounting has been with us since early times to help managers understand the costs of

running a business. Modern cost accounting originated during the industrial revolution, when

the complexities of running a large scale business led to the development of systems for

recording and tracking costs to help business owners and managers make decisions.

In the early industrial age, most of the costs incurred by a business were what modern

accountants call "variable costs" because they varied directly with the amount of production.

Money was spent on labour, raw materials, power to run a factory, etc. in direct proportion to

production. Managers could simply total the variable costs for a product and use this as a

rough guide for decision-making.

Some costs tend to remain the same even during busy periods, unlike variable costs which

rise and fall with volume of work. Over time, the importance of these "fixed costs" has

become more important to managers. Examples of fixed costs include the depreciation of

plant and equipment, and the cost of departments such as maintenance, tooling, production

control, purchasing, quality control, storage and handling, plant supervision and engineering.

In the early twentieth century, these costs were of little importance to most businesses.

However, in the twenty-first century, these costs are often more important than the variable

cost of a product, and allocating them to a broad range of products can lead to bad decision

making.

In modern accounting, costs are measured in accordance with Generally Accepted

Accounting Principles (GAAP). In accordance to GAAP the principle is to record historical

events and assign a monetary value to each event that has taken place. Costs are measured in

units of currency by convention. Cost accounting could also be defined as a kind of

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management accounting that translates the Supply Chain (the series of events in the

production process that, in concert, result in a product) into financial values.

The statement consist of consist of

Prime cost

Work cost

Cost of production

Total cost

Company do standard costing for evaluation purpose and also to measure the deviation.

A standard cost is a planned cost for a unit of product or service rendered. Standard costs

represent excellent target costs that should be obtained. The institute of Cost and

Management Accountants (UK) defines standard cost as ―a predetermined cost, which is

calculated from the management‘s standard of efficient operation and the relevant necessary

expenditure. It may be used as a basis for price fixing and for cost control through varia nce

analysis.‖

Advantages of Standard Costing

The advantages to be derived from a system costing will vary from one business to another.

Much depends upon the degree of sophistication achieved and the acceptance by the

management of utility of the system. Some of the advantages are as follows:-

Effective cost control: The most important advantage of standard costing is that it facilities

the control of costs. Control is exercised by comparing actual performance with standards

and taking action on the basis of variances so revealed.

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Help in planning: Establishing standards is a very useful exercise in business planning with

instills in the managements a habit of thinking in advance.

Provides incentives: The standards provide incentives and motivate to work with greater

effort. Schemes may be formulated to reward those who achieve or surpass the standard.

This increases efficiency and productivity.

Fixing prices and formulating policies: Standard costs are a valuable aid to management in

determining prices and formulating production policies. For instance: - prices may be fixed

by adding a standard margin of profit in standard cost. Similarly, standard costing furnishes

cost estimates while planning production of new products.

Disadvantages of Standard Costing

Standard costing system suffers from certain disadvantages. This may be because of lack of

education and communication and resultant misunderstanding on the part of managerial

staff. Some of the disadvantages are:-

The system may not be appropriate to the business.

The staff may not be capable of operating the system.

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A business may not be able to keep standards up-to-date. In other words, a business

may not revise standards to keep pace with the frequent changes in manufacturing

conditions. Firms may avoid revising standards as it is a costly affair.

Inaccurate and unreliable standards cause misleading results and thus may not enjoy

the confidence of the users of the system.

Setting of Standard Costs

The success of standard costing system depends on the reliability, accuracy and acceptance

of the standards. Extreme care, therefore, must be taken to ensure that all factors have been

considered in the establishment of standards.

Standard costs are set for each element of cost i.e. direct materials, direct labour and

overheads. These are described below:-

Setting standards for direct materials

Material price standard.

Material quantity standard.

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Material price standard

This is a forecast of the average prices of materials during the future period. This standard is

quite difficult to establish because prices are regulated more by the external factors than by

the company management. The purchasing department notifies the standard prices after

considering factors like:-

a) Purchase prices of recent orders.

b) Prices specified in the long term contracts.

c) Forecasts of the commodity price trends.

Note: Provisions should be made for discounts, packing and delivery charges, etc.

Material quantity standard

While setting quantity standard, the quality and size of material items to be consumed should

be standardized. The standard is usually developed from material specifications prepared by

the department of engineering of product design.

Setting standards for direct labour

Labour rate standard.

Labour efficiency standard.

Labour rate standard

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This is determined having regard to the current rates of pay and any anticipated variations.

Sometimes an agreement between trade unions and employer covers a number of future

months or years. In such cases, the agreed rate should be adopted as the standard rate for the

period.

Where workers are paid on time basis, it is necessary to establish:-

a) The labour time standard for each operation.

b) The wage rate of each grade of labour.

c) The grades of labour to be employed.

Note: (Type of operation will determine the grade of labour to be employed may be male or

female, skilled, unskilled or semi-skilled, etc.)

(Where workers are paid on piece basis, the standard cost will be a fixed rate per piece.)

Labour time (or efficiency) standard

Standard time for labour should be scientifically determined by time and motion studies

carried out in conjunction with a study to determine the most efficient method of working.

Due allowance should be made for normal loss time like fatigue; idle time, tool setting, etc.

Setting standards of direct expenses

Direct expenses are not very common, but if there are any direct expenses relating to the cost

unit, standards for these too must to set. Setting these standards are usually quite simple as

these may be based on past records adjusted according to anticipated changes therein.

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Variance Analysis

The function of standards in cost accounting is to indicate variances between standard cost

and actual cost which have been recorded. The institute of cost and management accounts

defines variance as the difference between a standard cost and the comparable actual cost

incurred during a period. Variance analysis can be defined as the process of computing the

amount of and isolating the cause of variance between actual cost and standard cost.

Variance analysis involves two phases:

Computation of individual variances.

Determination of the cause of each variance

The main purpose behind this analysis is to reconcile the cost statement with financial

statement and find out the change in cost of the one of the profitable brand manufactured by

the atlas cycle ltd. On the basis of this analysis we will find out the various cost reduction

technique implemented by the company to reduce it manufacturing cost and increase its

profit. Atlas has a very good research and development department which mainly focuses on

improving the quality and reducing the cost at the same time.

To do the analysis we will compare the cost sheet of most profitable and popular brand

manufacture by Atlas cycle ltd during the two year. The cost sheet for the month of

September 2006-07 and 2007-08.

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COST SHEET FOR THE MONTH OF SEPTEMBER 2006-07

Items Material cost

Consumable

cost

Direct lab Power Total

Frame 169.24 48.82 18.2 7.93 244.19

Fork 99.47 6.83 2.25 1.5 110.05

Mudguard 46.46 20.39 5.1 6.82 78.77 Chain cover 17.48 5.11 1.45 1.25 25.65

Total 333 81.15 27 17.5 458.65

Bought out components

Handle

101.99

Brake

37.18 Chain wheel&crank

80.83

Hub

48.79 Spoke,Nipple&Washer

49.81

Reflector

4.06 Rim &Rim Tape

179.33

Chain Adjuster

1.58 Pedal

48.48

Tyre

118.9

Tube

48.6 Saddle

67.63

Freewheel

17.09 Chain

27.82

Stand

48.91 Adj. for cost of stand in AP.TN

-0.95

TOTAL

1338.96

Add Freight Inward

16.9 Add Freight Outward

51.38

Marginal Cost

1,406.97

Selling Price(Average)

1,651.97

Less Rebate and Cash Dis.(Est.)

60.36

Net selling Price (Avg)

1,591.61

Contribution

184.64

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COST SHEET FOR THE MONTH OF SEPTEMBER 2007-08

Items Material

cost

Consumable

cost

Direct

lab Power Total

Frame 176.98 67.67 19.2 8.93 272.78

Fork 107.03 8.83 2.25 1.5 119.61 Mudguard 47.53 25.39 5.6 6.82 85.34 Chain cover 19.45 6.11 1.45 1.25 28.26

Total 350.99 108 28.5 18.5 505.99

Bought out components

Handle

103.47

Brake

37.69

Chain wheel&crank

80.8

Hub

49.93

Spoke,Nipple&Washer

53.56

Reflector

4.19

Rim &Rim Tape

171.84

Chain Adjuster

1.78 Pedal

51.64

Tyre

112.62 Tube

48.9

Saddle

70.92

Freewheel

16.65

Chain

27.34 Stand

50.75

Adj. for cost of stand in AP.TN

-0.99

TOTAL

1387.08

Add Freight Inward

19.68 Add Freight Outward

56.17

Marginal Cost

1462.93

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Selling Price(Average)

1738.98 Less Rebate and Cash Dis.(Est.)

101.01

Net selling Price (Avg)

1637.97

Contribution

175.04

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COMPARISION BETWEEN THE TWO YEAR COST SHEETS:

Items Total Total INCREASE OR

DECREASE % Frame 244.19 272.78 11.70809615

Fork 110.05 119.61 8.686960473

Mudguard 78.77 85.34 8.34073886 Chain cover 25.65 28.26 10.1754386

Total 458.65 505.99 10.32159599

Bought out components

Handle 101.99 103.47 1.451122659

Brake 37.18 37.69 1.371705218

Chain wheel&crank 80.83 80.8 -0.037114933 Hub 48.79 49.93 2.336544374

Spoke,Nipple&Washer 49.81 53.56 7.528608713 Reflector 4.06 4.19 3.201970443

Rim &Rim Tape 179.33 171.84 -4.176657559 Chain Adjuster 1.58 1.78 12.65822785

Pedal 48.48 51.64 6.518151815 Tyre 118.9 112.62 -5.281749369

Tube 48.6 48.9 0.617283951

Saddle 67.63 70.92 4.864705013

Freewheel 17.09 16.65 -2.574605032

Chain 27.82 27.34 -1.725377426 Stand 48.91 50.75 3.762011859 Adj. for cost of stand in AP.TN

-0.95 -0.99 4.210526316

TOTAL 1338.96 1387.08 3.59383402

Add Freight Inward 16.9 19.68 16.44970414 Add Freight Outward 51.38 56.17 9.322693655

Marginal Cost 1,406.97 1462.93 3.977341379

Selling Price(Average) 1,651.97 1738.98 5.267044801

Less Rebate and Cash

Dis.(Est.) 60.36 101.01

67.34592445 Net selling Price (Avg) 1,591.61 1637.97 2.912773858

Contribution 184.64 175.04 -5.199306759

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ANAYSIS OF COST SHEET:

The major portion of bicycle which consists of 32% of total cost is itself manufactured by

company itself. Like Frame, Fork, Mudguard and chain cover. Rest of part Atlas got

manufactured by others to whom the tender has been given. Atlas has provided them there

logo and trademark and the company get manufactured these items according to their

specification.

Comparing the two cost sheet we can observer that contribution margin for the company is

reduced by great margin and at the same time cost for the company has increased.

According to the company personnel earlier they were using 2mm thickness of steel in

manufacturing the cycle but after hard work done by R&D department Company

management came on conclusion to reduce it thickness. It was also a step toward reducing

the cost but due to hike in steel price it doesn’t seems to work for the company. Earlier

company used to do NICKEL plating on both side of RIM used in bicycle. It was the time

when nickel price was somewhere 1470 Rs/kg. Company as step of cost reduction started

to use nickel plating on only one side of RIM and on another they started to use Paint it was

the case of 2006-07. Suddenly Nickel prices dipped and dipped by more than 50% in the

year 2007-08 which was again a set back for the company because this time when company

wanted to revert back toward nickel plating customer protested as they wanted the

painted RIM over the nickel one.

Again coming to costing the year 2006-07 was one of the worst year for the Atlas company

as this year witnessed growth in all sector except in cycle industry. Reason were hike in

steel prices , market condition was not suitable for the industry.

Coming to contribution part which consists for Overhead and profit. Overhead consist of

indirect manufacturing expenses like depreciation, Repairs and maintenance and financial

expenses.

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Company provides rebate to its Dealers depending on some factors like Advance payment,

number of quantity ordered and number of time the order. Some time Company also

provide perks to its dealers like return ticket to some place for touring.

One of the other methods of cost reduction applied is that they change the packing

methods as well some technique of manufacturing of cycle.

Company apart from cost sheet also does standard and actual costing. Where standard

costing is set as standard for the month and after that company do actual costing to find

the degree of deviation.

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RATIO ANALYSIS:-

Ratio analysis is the process of determining and expressing the numerical or quantitative

relationship between two related variables for purposes of financial analysis. Ratio analysis

is the calculation and comparison of ratios, which are derived from the information in a

company's financial statements. The level and historical trends of these ratios can be used to

make inferences about a company's financial condition, its operations and attractiveness as

an investment.

Ratio analysis help us to check whether a business is doing better this year than it was last

year and also tells us if the business is doing better or worse than other businesses doing and

selling the same things.

Ratios should be taken as guides that are useful in evaluating a company‘s financial position

and operations and making comparisons with results in previous years or with other

companies. The primary purpose of ratios is to point out areas needing further investigations

Advantages or Uses of ratio analysis

Ratio analysis can be of invaluable aid to management in the discharge of its basic function

of planning, forecasting, coordination, communication and control. It is a device to diagnose

the disease of an enterprise. It is the powerful tool of financial analysis. The advantages of

ratio analysis are summarized as below.

1. Ratios are helpful in judging financial performance of an enterprise over a period of

time. They tell the various aspects of management performance and the overall

financial position.

2. A study of the trend of strategic ratios may help the management in the task of

planning and forecasting.

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3. The ratios measure the efficiency of operations of enterprises. Hence they can be

used as a tool of management control.

4. It is possible to taste the liquidity, profitability, leverage, and turnover of the

enterprise through the technique of ratio analysis.

5. Sometimes investment decisions are guided by some ratios

6. Ratio analysis simplifies the comprehension of financial statements.

7. Ratio analysis communicates the financial strength or weakness of a firm in a more

reasonable and understandable manner.

Now this part will consist of those ratios which have significance related to balance

sheet.

a) Current Ratio:

Current ratio is defined as the ratio of current assets to current liabilities. It shows

the relationship between total current assets and total current liabilities. It is a

measure of firm‘s short-term solvency. It is calculated as follows:

A rule of thumb sometimes applied to the current ratio is that it should be around 2:1.

This figure should be used with caution. If the company has a rapid inventory

turnover and can easily collect its receivables, the current ratio can be lower. If the

ratio drops to near 1, then the enterprise will be in a potentially unstable pos ition. If

the ratio is low, it may mean that the enterprise is undercapitalized, and consideration

will have to be given to providing more capital, either through increased equity or

more long-term debt. Faced with a low current ratio, an enterprise will have to exist

on a day-to-day basis, and thus it may have to adopt uneconomic practices. Its

products may have to be sold at lower prices to receive payment in cash, or it may

lose sales to competitors that can offer better credit terms. In the operating cycle of

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the firm current assets are converted into cash to provide funds for the payment of

current liabilities. So, the higher the current ratio, higher the short term liability. A

firm which has large amount of cash and accounts receivable is more liquid than a

firm with a high amount of inventories in its current assets, though both the firms

may have the same current ratio

Current Asset

Current Ratio = -------------------------------------------

Current Liabilities

b) Debt Equity Ratio:

Debt equity ratios show the relationship between total debts and owned capital. It is the ratio

of amount invested by outsiders to the amount invested by the shareholders. It may be

expressed as follows;

This ratio reflects the relative claims of creditors and shareholders against the assets of the

firm. A high ratio shows a large share of financing by the creditors of the firm. A low ratio

implies a smaller claim of creditors.

The D/E ratio indicates the margin of safety to the creditors. If for instance the D/E ratio is

1:2, it implies that for every rupee of outside liability the firm has 2 Rs. of owners capital or

the stake of creditors is one half of the owners. Conversely, if D/E ratio is 2:1 it implies low

safety margin for the creditors.

If D/E ratio is high, the owners are putting up relatively less money of their own. It is a

danger signal for the creditors, considering what would happen if the project fails or the

management behaves irresponsibly..

A high proportion of debt in the capital structure would lead to inflexibility in the operations

of the firm as creditors would exercise pressure and interfere in management.

Nevertheless, the shareholders stand to gain if the firm performs well with increase in

operating profits. This is because debt carries a fixed rate of return and if the firm is able to

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earn on the borrowed funds a rate higher than the fixed charge on loans, the benefit will go

to shareholders.

A low D/E ratio has just the opposite implications.

External Equity or Debt

Debt-Equity Ratio = -------------------------------

Internal Equity

c) Interest Coverage Ratio:

Interest coverage ratio indicates the firm‘s ability to make regular interest payments

out of its current earning. The standard for this ratio is that interest charges should be

covered six to seven times. It is calculated by dividing the operating profit and earnings

before interest and taxes by the fixed interest charges on loans. It may be calculated as

follows:

Earning Before interest and tax

Interest Coverage Ratio = -----------------------------------------

Interest

d) Return on Investment:

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The ROI is the most important ratio of all. It is the percentage of return on funds

invested in the business by its owners. In short, this ratio tells the owner whether or not all

the effort put into the business has been worthwhile.

The ROI is calculated as follows:

Net Profit after Tax

Return on Investment = ----- -------------------------------- X 100

Total Assets

e) Earning per Share Ratio:

The most widely used ratio, it tells how much profit was generated on a per

share basis. It measures the profitability of the company from the equity shareholders

point of view. It helps to determine the market price of equity shares.

Net income – dividend on preference stock

EPS = -------------------------------------------------------

No. of shares

f) Debtors/Receivable Turnover Ratio

It shows how quickly the debtors are converted in to cash. It is also a test of the liquidity of

a firm. A shorter collection period indicates prompt payments of debtors while a longer

period indicates the inefficiency of credit collection.

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It can be calculated as using the following formula.

Credit sale

Debtors Turnover Ratio = -----------------

Debtors

g) Assets Turnover Ratio:

This ratio measures the efficiency of a firm in managing and utilizing its assets. It is

based on the relationship between sales or cost of sales and assets/investments of a firm. The

ratio may be calculated as follows:

Sales

Fixed assets turnover = -------------------

Fixed assets

a) Gross Profit Ratio:

Gross Profit Ratio represents the gross margin or profit on net sales, and indicates the

degree to which the selling price may decrease without any loss from operation to the firm.

The gross profit margin is not an exact estimate of the company's pricing strategy but it does

give a good indication of financial health, as it is a resultant of relationship between prices,

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sales-volume and cost. Without an adequate gross margin, a company will be unable to pay

its operating and other expenses and build for the future. In general, a company's gross profit

margin should be stable. It should not fluctuate much from one period to another, unless the

industry it is in; has been undergoing drastic changes which will affect the costs of goods

sold or pricing policies.

A high ratio of gross profit to sales is a sign of good management as it can imply that the

cost of production of the firm is relatively low. It is also indicative of higher sales price

without a corresponding increase in the cost of goods sold. A very high gross profit margins

may also be a result of unsatisfactory basis of valuation of stock i.e. over-valuation of

closing stock and under-valuation of opening stock.

A relatively low gross profit margin is a definite danger signal, warranting a careful and

detailed analysis of the factors responsible for it. The important contributory factors may be

(1)a high cost of production reflecting acquisition of raw materials and other inputs on

unfavorable terms, inefficient utilization of current as well as fixed assets. (2) A low selling

price resulting from severe competition, inferior quality of product, and lack of demand.

A high G/P ratio is a sign of good management. It is calculated as follows:

Gross Profit

Gross Profit Ratio = -------------------- X 100

Net Sales

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b) Net Profit Ratio:

This ratio is the percentage of sales left after subtracting the Cost of Goods sold and

all expenses, except income taxes. It provides a good opportunity to compare your

company's "return on sales" with the performance of other companies in your industry. The

Net Profit Margin Ratio is calculated as follows:

Net Profit

Net Profit Ratio = ------------------- X 100

Net Sales

c) Inventory Turnover Ratio

Inventory turnover ratio is the measure of liquidity of inventory. This ratio

indicates the speed with which the inventory is sold. A high turnover ratio

indicates that the inventory sold fast. It is an indication of good inventory

management. This ratio is also an index of profitability. A ratio of six or seven

times is considered satisfactory.

The inventory turnover can also relate to the average length of time a firm keeps its

inventory on hand. A low turnover ratio may mean that a company with large

stocks on hand may find it difficult to sell its product, and this may be an indicator

that the management is not able to control its inventory effectively. A low turnover

ratio may, however, also mean that large stocks must be held to ensure that

production schedules are met. A low ratio means a sizeable amount of funds are

tied up. A high turnover ratio may mean that the enterprise is able to recover its

inventory investment rapidly and that there is a good demand for its products. On

the one hand, when the ratio is much higher than the industry average, it may mean

that the enterprise is very efficient in managing its inventories. On the other hand, it

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may mean that the enterprise is starved of funds and cannot afford to maintain a

sufficient inventory; as a result, it may be forced to forgo sales opportunities.

In this regard inventory involves two risks:

a) Running out of stock due to low inventory (high inventory turnover) which may

indicate future shortages.

b) Excessive carrying charges because of high inventory (low turnover).

Cost of Goods Sold

Inventory Turnover Ratio = -------------------------------------

Average inventory at Cost

d) Dividend Payout Ratio

The Dividend Payout Ratio measures what a company‘s pays out to investors in

the form of dividends. It measures the amount of current net income paid out in

dividends rather than retained by the business. It can be calculated as:

Dividend per Share

Dividend Payout Ratio = ------------------------------------

Earnings per Share

e) Return on Net Worth:-

RONW is one of the most important profitability ratios, which assess how much the

capital invested has earned during the period. It is calculates as follows:

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PBIT

Return of Net worth = ---------------------------- X 100

Total Net worth

f) Earning Retention Ratio :-

It is the ratio which shows the ratio of profit after tax that company retains after paying

dividend. It is calculated as

Earning retention ratio = 1 – Dividend payout ratio

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RATIOS RELATED TO BALANCE SHEET

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

Debt - equity ratio 1.03 1.04 0.6 0.73

Current ratio 1.8 1.65 1.63 1.57

Interest covg ratio 2.37 1.82 -3.35 2.07

Return on invest. 3.26 2.37 28.87 2.57

EPS 6.97 2.81 165.02 6.16

fixed asset turnover ratio 4.77 4.81 4.04 4.07

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GRAPHS

Interpretation: In the company the ratios were 1.03, 1.04, 0.6 and 0.73 in the year 2004-05,

2005-06, 2006-07 and 2007-08. The lower the ratio the better it is. In the year 2006-07 the

ratio was lower. The debt borrowing was there in the other years so lower the ratio is

better. High indebtedness leads to creditor’s pressure and constraints on independent

functioning and energy of management. Hence we can say that the debt capital ratio as

witnessed by the firm has been decreasing which is not-good for the company. For the

cycle industry the optimal ratio is 3:1.

0

0.2

0.4

0.6

0.8

1

1.2

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

Debt - equity ratio

Debt - equity ratio

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Interpretation: By looking the current ratio of last 4 years, we can say that in the year 2004-

05 is 1.8 and in year 2005-06 decreases to 1.65, which is due to increase in current assets is

more less than current liabilities. Current ratio of 2005-06 and in the year 2006-07 remains

same that is 1.65.

As we all know that the Current ratio is the measure of short term solvency of the firm. It

tell us the arability of current assets for each rupee of current liability. The Current Ratio of

Atlas cycle Limited is higher than one that is the firm has more of current assets than claim

against them.

The higher the current ratio, the greater the margin of safety. The current ratio of 1.33:1 is

the optimal current ratio where as the current ratio of Atlas cycle Limited is 1.57 for the last

year so the firm is having sufficient liquid.

1.25

1.35

1.45

1.55

1.65

1.75

1.85

1.95

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

Current ratio

Current ratio

127

Interpretation: The interest coverage ratio is a measurement of the number of times a

company could make its interest payments with its earnings before interest and taxes; the

lower the ratio, the higher the company’s debt burden.

As a general rule of thumb, investors should not own a stock that has an interest coverage

ratio under 1.5. An interest coverage ratio below 1.0 indicates the business is having

difficulties generating the cash necessary to pay its interest obligations.

In the case of Atlas Company we can observe that in the year 2004-05 has highest ratio of

2.37 comparing to other 3 years. In the year 2006-07 company is having negative ratio of -

3.35 which show that company’s health in this period was very bad. But overall company is

having ratio over 1.5 which is comparatively good.

-4.25

-3.25

-2.25

-1.25

-0.25

0.75

1.75

2.75

3.75

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

Interest covg ratio

Interest covg ratio

128

Interpretation: Is used to evaluate the efficiency of an investment or to compare the

efficiency of a number of different investments. If an investment does not have a positive

ROI, or if there are other opportunities with a higher ROI, then the investment should be

not be undertaken.

Company has overall good ROI we can see that in every year it is above 2. In the year 2006-

07 company’s ROI is 28.87 which was due to high Profit after tax. This was because of

company has sold off its fixed asset in the same year.

0.5

3

5.5

8

10.5

13

15.5

18

20.5

23

25.5

28

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

Return on invest.

Return on invest.

129

In the year 2004-05 EPS was 6.97 which decreased to 2.81 in the year 2005-06 and it

increased to 165.02 in the year 2006-07 but again came down to 6.16. The reason for

sudden jump in EPS was the abnormal profit which occurred for the company on the sale of

fixed asset.

The earnings per share of the company has been fluctuating thus we can say that in any

year shareholders ar getting good return but in some year they are receiving low return

0.510.520.530.540.550.560.570.580.590.5

100.5110.5120.5130.5140.5150.5160.5170.5

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

EPS

EPS

130

Interpretation: An indicator of how profitable a company is relative to its total fixed

assets. ROA gives an idea as to how efficient management is at using its assets to generate

earnings.

In this case company was having good return in earlier two year that were 2004-05 and

2005-06 but it has decreased in last two year that are 2006-07 and 2007-08.this show

company efficiency has decreased over the period

3.6

3.8

4

4.2

4.4

4.6

4.8

5

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

fixed asset turnover ratio

fixed asset turnover ratio

131

RATIOS RELATED TO PROFIT AND LOSS A/C

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

Gross Profit Ratio 1.46 1.63 -6.5 1.64

Net Profit Ratio 0.52 0.2. 10.82 0.34

Inventory Turnover Ratio 11.62 10.48 8.86 7.59

Dividend Payout Ratio 27.54 34.13 3.19 20.35

Return of Net worth 1.74 45.22 1.37 3.35

Earning retention ratio 74.17 67.14 96.84 77.90

PAT to SALE 1.1 0.741 11.33 0.934

132

GRAPHS

Interpretation: Gross profit margin indicates the relationship between net sales revenue and

the cost of goods sold. A high gross profit margin indicates that a business can make a

reasonable profit on sales, as long as it keeps overhead costs in control.

In given case we can observe that gross profit has increased in the year 2005-06 comparing

to 2004-05. But in the year 2006-07 company was not having sufficient sales revenue it was

because two of its concern was under loss in this period but in year 2007-08 company again

regain its position.

-7

-6

-5

-4

-3

-2

-1

0

1

2

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

Gross Profit Ratio

Gross Profit Ratio

133

Interpretation: The ratios were in 2007-08, 2006-07, 2005-06 and in 2004-05 were .052% ,

0.2% , 10.82% and 0.2% . The profit is showing downward trend on yearly basis. Again in

the year 2006-07 there was abnormal profit which is also known as non recurring items due

to which there is high ratio.

This ratio is the measure of converting each rupee sale into net profit. If net profit margin

would have been inadequate which is happing in this our case then it shows failure of firm to

achieve satisfactory return on share holder‘s fund. We can say that the company has a poor

net profit margin hence is not able to efficiently converting each rupee sale into net profit

0

2

4

6

8

10

12

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

Net Profit Ratio

Net Profit Ratio

134

Interpretation: The ratio for the four year are 11.62 , 10.48, 8.86 and 7.59 for the years 2004-

05,2005-06,2006-07and 2007-08.

The inventory turnover ratio shows how rapidly the inventory is turning into receivables

through sales. Generally a high inventories turnover ratio indicates good inventory

management. A low level of inventory turnover implies excessive inventory levels than

warranted by turnover by production and sales activities, or slow moving obsolete inventory.

A high level of sluggish inventories amount to unnecessary blockage of funds, reduced

profits and increased costs. The obsolete inventories have to be written off; this would

adversely affect the working capital and the liquidity of the firm. Atlas cycle has a very good

inventory turnover ratio as it show the efficiency of company is very good

0

2

4

6

8

10

12

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

Inventory Turnover Ratio

Inventory Turnover Ratio

135

Interpretation: The amount of earnings paid out in dividends to shareholders. Investors can

use the payout ratio to determine what companies are doing with their earnings. A very

low payout ratio indicates that a company is primarily focused on retaining its earnings

rather than paying out dividends. The payout ratio also indicates how well earnings support

the dividend payments: the lower the ratio, the more secure the dividend because smaller

dividends are easier to pay out than larger dividends.

In our case company‘s payout policy is little bit fluctuating. As we can observe that in the

year 2004-05 company has paid 27.34% of dividend where as in year 2005-06 it has paid

34.13%. but in the year 2006-07 the dividend margin decreased heavily. But in subsequent

year again company has paid some dividend to its share holders.

0

5

10

15

20

25

30

35

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

Dividend Payout Ratio

Dividend Payout Ratio

136

Interpretation: The percent of earnings credited to retained earnings. In other words, the

proportion of net income that is not paid out as dividends. Most earnings retained are re-

invested into the company's operations.

In our case company is retaining back a good amount of profit. If we will observe then will

find that in every year company makes heavy investment in acquiring fixed asset and also

do investment.

Company is retention ratio is increasing on yearly basis. If we observe than we will find that

company is almost retaining 70% of profit. The major benefit of it is that for investment

purpose company don‘t have to borrow external debt.

0

20

40

60

80

100

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

Earning retention ratio

Earning retention ratio

137

Interpretation: It shows the margin of Profit after tax in total sales. It also measures the

efficiency of company in earning good amount of after tax profit from their sales.

In our case company is not having satisfactory ratio. As we can observe that there is

downward trend in the same on year by year basis. Again in the year 2006-07 the growth

level in the ratio is just due to abnormal profit.

So overall it is not a good sign company must focus on increasing its profit after tax margin .

0

2

4

6

8

10

12

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

PAT to SALE

PAT to SALE

138

SWOT ANALYSIS OF ATLAS CYCLE LTD.:

A vital tool to figuring out the strategic side of any business idea is knowing and

understanding the acronym: SWOT. First, after fully planning and figuring out what will go

into your business idea on paper, the next step is to analyze the company‘s SWOT. While

going through this process you‘ll be able to focus on the strengths and realize weaknesses

early so the business plan can be amended. With this well-rounded business plan and a

completely understood approach, you‘ll be able to safely move towards getting the ball

rolling.

139

The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This

is an analysis of the business plan that covers both internal and external factors. By using

this tool, you‘ll be able to see the pros and cons before even putting any money into a

project.

The Strengths and Weaknesses categories are both internal factors. These are pretty self-

explanatory, but they are the aspects of your business that you would be directly in control

of. Some of these would include the proper management of staff, managing cash flow,

knowing the company‘s capacity of supply and demand, and the overall efficiency of your

operations.

The Opportunities and Threats portion are external factors. These two are influences

outside of your control and are normally external environmental factors. By pointing out

these aspects of the business, you‘ll be able to try and cradle the Opportunities to make the

most of them and, hopefully, avoid the Threats before they occur. A few examples of these

are changes in the economy, new technologies, outsourcing, industry/customer needs, and

weather issues.

All in all, after using the SWOT analysis on your business plan, you‘ll have a much better

understanding before contributing a large start-up financial investment.

140

Strength:

For the company like Atlas which is second largest manufacturer of Bicycle in India. It has

seen a tremendous increase in the number of bicycle manufacturers and bicycle exporters in

the recent past. Today, bicycle manufacturing and bicycle spares industry is well accepted

and is also widely recognised for its quality standards in the international market.

Atlas has a very strong motivated work force which is the greatest strength for the

company.

Strong relationships with many different manufacturers, often negotiating an

exclusive distribution deal with them.

Excellent staff who are well- trained cycling enthusiasts who recognize the need to

ensure complete customer satisfaction.

A wide selection of goods.

Weakness:

The difficulty of raising visibility among all of the perspective customers.

The nature of the industry which does not have a smooth, constant flow of goods

(specials and closeouts).

Predicting what products will sell is difficult and since closeouts by their nature are

purchased in big lots, a wrong choice could create a glut of inventory.

141

Opportunity:

Wheelie Deals' business model addresses the problem that the retail industry faces

decreasing margins.

The ability to spread fixed costs over a larger area as sales increase, increasing profit

margins.

While the bicycle industry is affected to some degree by the circular nature of the

economy, bicycle and accessory sales never fall completely flat since there are many

people that ride bikes regardless if it is economic boom or bust.

Threat:

Entry into this market niche from an established distributor, recognizing this is the

area for growth in the industry.

A decrease in the willingness for manufacturers to sell their closeouts to retailers via

wholesalers, instead selling all of their excess directly to the mail order houses.

The major threat facing the bicycle industry is steep increase in the price of basic raw

material like steel.

The market is not absorbing the full impact of price increase resulting in affect the

industry‘s profitability position.

142

CHAPTER. FIVE

FINDINGS, LIMITATION AND

SUGGESTION & CONCLUSION

143

FINDING:-

Coming to the final stage of project the findings are pearls that a person learn from its

project. During the project duration of two month it became very clear the corporate

structure and the working environment of a company. The difference between actual balance

sheet and the balance sheet given in a book is totally different and exist in different realm of

study. Now coming to finding which can be summarised are as follow .

Debt - Equity ratio:- In the company the ratios were 1.03, 1.04, 0.6 and 0.73 in the

year 2004-05, 2005-06, 2006-07 and 2007-08. The lower the ratio the better it is. In

the year 2006-07 the ratio was lower. The debt borrowing was there in the other years

so lower the ratio is better. High indebtedness leads to creditor‘s pressure and

constraints on independent functioning and energy of management. We can say that

company mainly running on its own fund because from 2004 company has not issued

and equity share to raise money which is again a good sign and depict good financial

health of company.

Current ratio:- By looking the current ratio of last 4 years, we can say that in the

year 2004-05 is 1.8 and in year 2005-06 decreases to 1.65, which is due to increase in

current assets is more less than current liabilities. Current ratio of 2005-06 and in the

year 2006-07 remains same that is 1.65. As we all know that the Current ratio is the

measure of short term solvency of the firm. It tells us the arability of current assets

for each rupee of current liability. The Current Ratio of Atlas cycle Limited is higher

144

than one that is the firm has more of current assets than claim against them. Having

sufficient working capital to carry on its day to day expenses. Despite of having low

PAT in same year still company is in good condition to finance its working capital.

Interest coverage ratio:-The interest coverage ratio is a measurement of the number

of times a company could make its interest payments with its earnings before interest

and taxes; the lower the ratio, the higher the company‘s debt burden. In the case of

Atlas Company we can observe that in the year 2004-05 has highest ratio of 2.37

comparing to other 3 years. In the year 2006-07 company is having negative ratio of -

3.35 which show that company‘s health in this period was very bad. But overall

company is having ratio over 1.5 which is comparatively good. The company has

three branches out of which two are running under loss and the effect is being shown

on all three concerns.

Return on Investment:- Is used to evaluate the efficiency of an investment or to

compare the efficiency of a number of different investments. If an investment does

not have a positive ROI, or if there are other opportunities with a higher ROI, then

the investment should be not be undertaken. Company has overall good ROI we can

seen that in every year it is above 2. In the year 2006-07 company‘s ROI is 28.87

which was due to high Profit after tax. This was because of company has sold off its

fixed asset in the same year. That means in every year company has been able to earn

sufficient earning from its investment this show company is very much competent in

taking financial decisions.

EPS:- In the year 2004-05 EPS was 6.97 which decreased to 2.81 in the year 2005-

06 and it increased to 165.02 in the year 2006-07 but again came down to 6.16. The

145

reason for sudden jump in EPS was the abnormal profit which occurred for the

company on the sale of fixed asset. The earnings per share of the company has been

fluctuating thus we can say that in any year shareholders are getting good return but

in some year they are receiving low return this was mainly due to slowdown in

economic growth during these year.

Return on Asset:- An indicator of how profitable a company is relative to its total

fixed assets. ROA gives an idea as to how efficient management is at using its assets

to generate earnings. In this case company was having good return in earlier two year

that were 2004-05 and 2005-06 but it has decreased in last two year that are 2006-07

and 2007-08.this show company efficiency has decreased over the period.

Gross profit margin:-Gross profit margin indicates the relationship between net

sales revenue and the cost of goods sold. A high gross profit margin indicates that a

business can make a reasonable profit on sales, as long as it keeps overhead costs in

control. In given case we can observe that gross profit has increased in the year 2005-

06 comparing to 2004-05. But in the year 2006-07 company was not having

sufficient sales revenue it was because two of its concern was under loss in this

period but in year 2007-08 company again regain its position.

Net profit ratio:- The ratios were in 2007-08, 2006-07, 2005-06 and in 2004-05

were .052% , 0.2% , 10.82% and 0.2% . The profit is showing downward trend on

yearly basis. Again in the year 2006-07 there was abnormal profit which is also

known as non recurring items due to which there is high ratio. This ratio is the

measure of converting each rupee sale into net profit. If net profit margin would have

been inadequate which is happing in this our case then it shows failure of firm to

146

achieve satisfactory return on share holder‘s fund. We can say that the company has a

poor net profit margin hence is not able to efficiently converting each rupee sale into

net profit.

Inventory turnover ratio:- The ratio for the four year are 11.62 , 10.48, 8.86 and

7.59 for the years 2004-05,2005-06,2006-07and 2007-08. The inventory turnover

ratio shows how rapidly the inventory is turning into receivables through sales.

Generally a high inventories turnover ratio indicates good inventory management. A

low level of inventory turnover implies excessive inventory levels than warranted by

turnover by production and sales activities, or slow moving obsolete inventory. A

high level of sluggish inventories amount to unnecessary blockage of funds, reduced

profits and increased costs. The obsolete inventories have to be written off; this

would adversely affect the working capital and the liquidity of the firm. Atlas cycle

has a very good inventory turnover ratio as it show the efficiency of company is very

good. But as per the company personnel high ratio is also not good as it will lead to

high inventory cost and reduction in quality of product.

Dividend payout ratio:- The amount of earnings paid out in dividends to

shareholders. Investors can use the payout ratio to determine what companies are

doing with their earnings. A very low payout ratio indicates that a company is

primarily focused on retaining its earnings rather than paying out dividends. The

payout ratio also indicates how well earnings support the dividend payments: the

lower the ratio, the more secure the dividend because smaller dividends are easier to

pay out than larger dividends. In our case company‘s payout policy is little bit

fluctuating. As we can observe that in the year 2004-05 company has paid 27.34% of

147

dividend where as in year 2005-06 it has paid 34.13%. but in the year 2006-07 the

dividend margin decreased heavily. But in subsequent year again company has paid

some dividend to its share holders.

Earning retention ratio:- The percent of earnings credited to retained earnings. In

other words, the proportion of net income that is not paid out as dividends. Most

earnings retained are re- invested into the company's operations. In our case company

is retaining back a good amount of profit. If we will observe then will find that in

every year company makes heavy investment in acquiring fixed asset and also do

investment. Company is retention ratio is increasing on yearly basis. If we observe

than we will find that company is almost retaining 70% of profit. The major benefit

of it is that for investment purpose company don‘t have to borrow external debt. This

is the greatest source of fund that company utilises for investment purpose.

PAT to Sale:- It shows the margin of Profit after tax in total sales. It also measures

the efficiency of company in earning good amount of after tax profit from their sales.

In our case company is not having satisfactory ratio. As we can observe that there is

downward trend in the same on year by year basis. Again in the year 2006-07 the

growth level in the ratio is just due to abnormal profit. So overall it is not a good sign

company must focus on increasing its profit after tax margin .

Apart from these all there are some more facts and figure that must pointed out and that are:-

148

Company is not in very good health due to tough competition from rivals and also

threat from Chinese companies.

The sister concern are in very bad condition and due to this company has already

taken the initiative of diversification to hedge its risk.

Company is not declaring dividends on regular basis which is not a good sign again

this will impact on future prospects of company.

Despite of good technology company is not investing good amount in research and

development.

There is lack of coordination between cost department and finance department.

There is lack of control mechanism in the company.

Due to tough competition in market company is compromising in quality.

149

CONCLUSION:

During the project we observe that what statements are necessary for the analysis and what it

signifies for the company. The statement consists of financial and cost statements like

Balance sheet, profit and loss statement, cash flow statement and cost sheet. Company do

prepare cost sheet on monthly basis to reconcile it with the financial statements so as to keep

check on the process and find out any deviation.

The Statements were totally different from what we have studied in book the working

process which company follows were also totally different.

Company has a wide range of product due to which Atlas has competitive edge over some of

its competitors like TI INDIA, AVON and others. Another important and positive factor for

the company is that company do manufacture most of parts in house by them self which

again make them competitive in the cycle industry.

Company have a very strong and innovative R & D and quality control unit which

continuously work to improve the quality and bring new innovative products.

Company is fully automated and computer driven of which company feel proud. Company

work on ERP which is built by them self.

Coming to analysis we have observed that company has three units functioning that are one

in MALANPUR, SONEPAT and SAHIBABAD. Out of three two of its unit are running

under losses that are MALANPUR AND SONEPAT due to which SAHIBABAD unit has to

feel the set back.

150

The major reasons for loss are increase in steel prices, adverse market condition, decrease in

sales figure and extra competition from rivals.

Company due to its reputation and long standing it became easy for it to avail cheap loan

from public by way of fixed deposit. Company ask for fixed deposit from public for the term

of 1 year company give 11% interest and for 2 to 3 years they pay 11.5% interest. One of the

brokers for the company is BAJAJ CAPITAL LTD.

Despite of its two units running under loss the Sahibabad unit is continuously increasing its

production volume and sales volume too. Some of its ratio are very strong and shows good

sign for the company. Like Debt – Equity ratio which shows that company don‘t require

external fund to run its business and company control is very much in company‘s hand.

The various ratio analysis and cash flow statement also shows that the company‘s financial

position is very good and company is moving sound financially these describe a feasible

position of the company.

According to company they have started to focus on urban population as there prospective

customer. The factors that they think will work for them are,

People are becoming more health conscious.

Changing hobby.

Environment factors like Global warming.

But there is also a major threat in this process that is of China. As china is largest

manufacture of cycle and due to this it is one of the major threat for the company.

151

SUGESSTION:

Company must work on its marketing effort to improve its sales and share in market.

As Indian cycle industry is large enough to be tapped.

Company should invest more on R&D to provide more innovative product.

Company should focus on comparative analysis with its competitors to get a clear

picture of its position.

Must focus on profitability ratio which shows the alarming situation for the company.

Company must pay attention on window dressing process which would provide them

clear picture of difference in the estimated and actual.

There is lack of coordination between cost department and financial department due

which there is decrease in sales figure of other units.

Company should reduce the decision making and implementation time.

Company should adopt new techniques of risk calculation and financial analysis to

count on actual figures.

There is an immediate requirement for ATLAS to reduce its operating expenses.

Modernization of the units as well as bringing in automation after a thorough analysis

of its relevance can help the company in the cause. A reduced operating ratio shows

signs of good management and hence the company should strive to achieve the same.

152

An analysis of the Critical success factors for not only the cycle industry, but also

steel, paint, tube and tayer industry should be done. Critical success factors are those

handful of factors that an industry or business cannot do without. Usually identifying

and automating them reduces time and maximizes profits for the company. Almost

all well-known organizations around the world either have a core team for the same

or hire professional services.

Profit ratios for the company needs to be improved as compared to other industry

players and stabilized to tide over bad phases in the industry

153

Limitations Of Study

The topic is a voluminous one for which the time allotted was insufficient.

The scope of the study was limited to Atlas cycle ltd. Finance & account division.

Certain factors are treated as highly confidential by the management and hence data

access was limited.

Most of the information collected is more practical and understandable, but it is

difficult to put it in proper theoretical language.

The theoretical aspect which we have learnt in books was totally different that of

original working in the company.

We have started our training in the month of April when company do there audit

work and this is closing month so company personnel where not being able to

provide us enough time.

Financial statements are based on historical costs and do not consider inflation.

Management may hedge or exaggerate its financial figures. Hence certain ratios

will not be accurate indicators.

A ratio does not describe the quality of its components. For example, the current

ratio may be high but inventory may consist of obsolete merchandise.

Ratios are static and do not take into account future trends.

154

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155

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