“A STUDY ON THE FINANCIAL PERFORMANCE OF

ROOTS INDUSTRIES INDIA LIMITED

COIMBATORE

SUBMITTED BY

S.SATHEESH

(REG. NO. 11CM62202)

The Report is submitted as partial fulfillment of the requirement of MBA Program of

MANONMANIAM SUNDARANAR UNIVERSITY

Under the guidance of

MS.J. RENUKA PETERS

INDIGROW INSTITUTE OF PROFESSIONAL STUDIES

EVERONN EDUCATION LIMITED

COIMBATORE

OCTOBER - 2011

INDIGROW INSTITUTE OF PROFESSIONAL STUDIESEVERONN EDUCATION LIMITED334, Puliakulam Road, (opp) Carmel Garden School, Coimbatore-641 045

CERTIFICATE

This is to certify that the project titled “A STUDY ON THE FINANCIAL

PERFORMANCE ROOTS INDUSTRIES INDIA LIMITED” is submitted to

Manonmaniam Sundaranar University as partial fulfillment of the requirement of MBA Program,

is a record of the original work done by S.SATHEESH during the period of his study in

Indigrow Institute of Professional Studies, Puliakulam Road, Coimbatore under my supervision

and guidance and the report has not formed the basis for the award of any

Degree/Associateship/Fellowship or other similar title to any candidate in any university.

______________ __________________

Faculty Guide Campus Head

Viva voce examination held on _______________________

_________________ ____________________

Internal Examiner External Examiner

DECLARATION

I, S.SATHEESH here by declare that the project titled “A STUDY ON THE FINANCIAL PERFORMANCE OF ROOTS INDUSTRIES INDIA LIMITED” is submitted to Manonmaniam Sundaranar University as partial fulfillment of the requirement of MBA Program, is a record of the original work done by me under the supervision and the guidance of MS.J. RENUKA PETERS. Faculty Member Indigrow Institute of Professional Studies, Puliakulam Road, Coimbatore.

I further declare that this report has not been submitted to any other

Universities / Institutions / Board for the award of any Degree / Diploma before.

Date: S.SATHEESH

Place: (11CM62202)

INTRODUCTION

ABOUT THE STUDY

The project work titled “the study on financial

performance” with reference to Roots Industries India Limited. The main objective

of study is to find out the financial strength and weakness of the company using

financial analysis.

Finance is one of the major element is activity the overall growth of

economy. Finance is the life blood of economy activity a well-knit financial system

directly contributes to the growth of economy. An efficient system calls for the

effective performance of financial institutions and financial instruments and

financial market.

Meaning:

A tool used by individuals to conduct a quantitative analysis of

information in a company's financial statements. Ratios are calculated from current

year numbers and are then compared to previous years, other companies, the

industry, or even the economy to judge the performance of the company. Ratio

analysis is predominately used by proponents of fundamental analysis.

Definition:

According to Prof. Spring field, Prof. Mass & Merrium, a ratio is defined

As “The indicated quotient of two mathematical impression” and as “The

Relationship between two (or) more things”

Importance of ratio analysis

It helps in evaluating the firm’s performance:

With the help of ratio analysis conclusion can be drawn

regarding several aspects such as financial health, profitability and operational

efficiency of the undertaking. Ratio points out the operating efficiency of the firm

i.e. whether the management has utilized the firm’s assets correctly, to increase the

investor’s wealth. It ensures a fair return to its owners and secures optimum

utilization of firms assets

It helps in inter-firm comparison:

Ratio analysis helps in inter-firm comparison by providing

necessary data. An interfere comparison indicates relative position. It provides the

relevant data for the comparison of the performance of different departments. If

comparison shows a variance, the possible reasons of variations may be identified

and if results are negative, the action may be initiated immediately to bring them in

line.

It simplifies financial statement:

The information given in the basic financial statements serves no

useful Purpose unless it s interrupted and analyzed in some comparable terms. The

ratio analysis is one of the tools in the hands of those who want to know something

more from the financial statements in the simplified manner.

It helps in determining the financial position of the concern:

Ratio analysis facilitates the management to know whether the

firms financial position is improving or deteriorating or is constant over the years

by setting a trend with the help of ratios The analysis with the help of ratio analysis

can know the direction of the trend of strategic ratio may help the management in

the task of planning, forecasting and controlling.

It is helpful in budgeting and forecasting:

Accounting ratios provide a reliable data, which can be compared,

studied and analyzed. These ratios provide sound footing for future prospectus.

The ratios can also serve as a basis for preparing budgeting future line of action.

Liquidity position:

With help of ratio analysis conclusions can be drawn regarding the

Liquidity position of a firm. The liquidity position of a firm would be satisfactory

if it is able to meet its current obligation when they become due. The ability to met

short term liabilities is reflected in the liquidity ratio of a firm.

Long term solvency:

Ratio analysis is equally for assessing the long term financial ability

of the Firm. The long term solvency s measured by the leverage or capital structure

and profitability ratio which shows the earning power and operating efficiency,

Solvency ratio shows relationship between total liability and total assets.

Operating efficiency:

Yet another dimension of usefulness or ratio analysis, relevant

from the View point of management is that it throws light on the degree efficiency

in the various activity ratios measures this kind of operational efficiency.

Help in investment decisions:

It helps in investment decisions in the case of investors and

lending decisions in the case of bankers.

Advantages of Ratios Analysis

Simplifies financial statements:

It simplifies the comprehension of financial statements. Ratios tell the

whole story of changes in the financial condition of the business

Facilitates inter-firm comparison:

It provides data for inter-firm comparison. Ratios highlight the

factors associated with successful and unsuccessful firm. They also reveal strong

firms and weak firms, overvalued and undervalued firms.

Helps in planning:

It helps in planning and forecasting. Ratios can assist

management, in its basic functions of forecasting. Planning, co-ordination, control

and communications.

Makes inter-firm comparison possible:

Ratios analysis also makes possible comparison of the performance of

different divisions of the firm. The ratios are helpful in deciding about their

efficiency or otherwise in the past and likely performance in the future.

Help in investment decisions:

It helps in investment decisions in the case of investors and lending

decisions in the case of bankers.

Limitations of Ratios Analysis

Comparative study required:

Ratios are useful in judging the efficiency of the business only when

they are compared with past results of the business. However, such a comparison

only provide glimpse of the past performance and forecasts for future may not

prove correct since several other factors like market conditions, management

policies.

Lack of adequate standard:

No fixed standard can be laid down for ideal ratios. There are no well

accepted standards or rule of thumb for all ratios which can be accepted as norm. It

renders interpretation of the ratios difficult.

Limited use of single ratios:

A single ratio, usually, does not convey much of a sense. To make a

better interpretation, a number of ratios have to be calculated which is likely to

confuse the analyst than help him in making any good decision.

Personal bias:

Ratios are only means of financial analysis and not an end in itself. Ratios

have to interpret and different people may interpret the same ratio in different way.

Incomparable:

Not only industries differ in their nature, but also the firms of the similar

business widely differ in their size and accounting procedures etc. It makes

comparison of ratios difficult and misleading.

Problems of price level changes:

A change in price level can affect the validity of ratios calculated for

different time periods. In such a case the ratio analysis may not clearly indicate the

trend in solvency and profitability of the company. The financial statements,

therefore, be adjusted keeping in view the price level changes if a meaningful

comparison is to be made through accounting ratios.

Objectives of the study

1. To assess the profitability and operating efficiency of Roots

Industries India Limited.

2. To assess the liquidity position of Roots Industries India

Limited.

Scope of study

This study focuses on the information contained in financial statements

with a view to find out the strength and weaknesses of Roots Industries India

Limited. Roots Industries India Limited is a manufacturer of horns. They

produce, export and supply, automotive electric horns, air horns, halogen lamps,

friction products, auto electrical accessories , automotive two wheeler spare parts.

The study uses ratio analysis to dissect and establish relationship between

the elements of financial statement. The operational profitability and financial

position are analyzed with the help of liquidity ratios, profitability ratios and

activity ratios. In order to find out the earning power of the company, Du Pont

Technique is used.

Research methodology

The study uses analytical research methodology by collecting information

that has been gathered from Roots Industries India Limited and looks at what it

shows as trends.

Data collection

1. Primary data:

The study relies on primary data to interpret financial information

which is collected through questionnaire and interviews with officials from

finance department.

2. Secondary data:

The data for operational and profitability analysis is mainly taken from

annual reports. Apart from this, books, magazines, and office documents are

also used.

Tools applied

1. Ratio analysis

2. Du Pont Technique

Chapterisation

1. Introduction

2. Review of literature

3. Profile of Roots Industries India Limited

4. Data analysis

5. Finding and conclusion

Study Plan:

Sl No Study Coverage Date:

1. Title

2. Proposal

3.