CHAPTER-I
INTRODUCTION
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 1
1.1 INTRODUCTION
MEANING OF RATIO:
A relationship be HI-TECH en various accounting figures, which are connected with each
other, expressed in mathematical terms, is called accounting ratios.
DEFINITION:
1)According to Kennedy and Macmillan, "The relationship of one item to another
expressed in simple mathematical form is known as ratio."
2)Robert Anthony defines a ratio as – "simply one number expressed in terms of
another."
Accounting ratios are very useful as they briefly summaries the result of
detailed and complicated computations. Absolute figures are useful but they do not
convey much meaning. In terms of accounting ratios, comparison of these related figures
makes them meaningful. For example, profit shown by two-business concern is Rs.
50,000 and Rs. 1, 00,000. It is difficult to say which business concern is more efficient
unless figures of capital investment or sales are also available.
Analysis and interpretation of various accounting ratio gives a better understanding of the
financial condition and performance of a business concern.
A ratio is simple arithmetical expression of the relationship of one number to another. It
may be defined as the indicated quotient of two mathematical expressions.
According to Accountant’s Handbook by Wixon, Kell and Bedford,
“A ratio is an expression of the quantitative relationship bet HI-TECH en two
number.”
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 2
MEANING OF FINANCIAL RATIO ANALYSIS:
Financial Ratio Analysis:-
Ratio analysis is the process of determining and presenting the relationship of items and
group of items in the statements.
According to Batty J. Management Accounting:
“Ratio can assist management in its basic functions of forecasting, planning
coordination, control and communication”.
It is helpful to know about the liquidity, solvency, capital structure and profitability
of an organization. It is helpful tool to aid in applying judgments, otherwise complex
situations.
. Ratio analysis is one of the techniques of financial analysis to evaluate the financial
condition and performance of a business concern. Simply, ratio means the comparison of
one figure to other relevant figure or figures.
According to Myers, “Ratio analysis of financial statements is a study of relationship
among various financial factors in a business as disclosed by a single set of statements
and a study of trend of these factors as shown in a series of statements."
Ratio analysis is the method or process by which the relationship of items or group
of items in the financial statement are computed, determined and presented.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 3
1.2 NEED OF THE STUDY
Horizhantal analysis- the a analysis is to long a year to year comparison of a
firm ratios
Vertical analysis- the comparison of balance sheet accounts either using ratios
or not to get use full information and draw use full consultation
Cross-selection analysis- ratio are used and compared between several firms
of the same industry in other to draw conclusion about and entity’s profitability
and financial performance
Inter firm analysis- can be categorized under cross sectional as the analysis is
done by using some basic ratios of the industry in which the firm under analysis
belongs to ( and specifically the average of all the firm of the industry ) as bench
mark or basis for our firms overall performance evaluations
1.3COMPANY PROFILE
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 4
INTRODUCTION
HI-TECH Engineering Corporation India Private limited is a well known name
in field of Turnkey sugar plant, Boilers with co generation and turnkey switchyards.
With a team of more than 125 skillful qualified and experienced professionals and 350
skilled labor force; HI-TECH ensures to deliver the highest quality and optimum
satisfaction of client.
HI-TECH designs, manufactures and executes the turnkey sugar plants including
cane mills, boilers with cogeneration and turnkey switchyards. Now HI-TECH are also
exporting sugar plant equipments to Africa.
HI-TECH are committed to provide quality product to client and ISO 9001-2008
certification ensures the quality and integrity in every equipment HI-TECH manufacture
at our workshop. With the constant focus on design, QC and R&D, HI-TECH make sure
that our clients get the best value and quality products.
VISSION
Considering the demand of manufacturing sector, wants to fulfill
present and future market potential by providing quality Sugar and
cogeneration plants on turnkey basis.
MISSION
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 5
Our Mission is to provide our customer cost effective quality product with the latest
technology, thus satisfying every criteria.
VALUES
The values that define our culture are:
Innovation across the whole company.
Be committed, reliable & credible.
Create value products for our customers.
Create value for all our stakeholders & customers.
PRODUCT RANGE
Turnkey Sugar Plant
HI-TECH provide turnkey Sugar Plants with Co-Generation. Presently, HI-TECH are
designing and setting up a Sugar Plant with a capacity of 7500 TCD with 35 MW co-
generation along with four more project.
Boiler & Cogeneration
HI-TECH are executing boilers up to 180 TPH steam generating capacity at
87Kg/Sq.Cm, pressure 520 C Temperatures. HI-TECH can manufacture water tube & fire
tube boilers, waste heat recovery boiler and fluidized bed combustion boilers.
Turnkey Switch yards for Co-generation
HI-TECH are turnkey supplier of Co-generation units and is executing 18 MW & 35 MW
Co-generation unit. All electrical equipments and system required for the plant are
developed in-house.
Cane Mills
HI-TECH can design, Manufacture, Supply and Erection & Commission various sizes of
milling of High performance along with Pressure Feeders from 22” X 44” Mills to 45”X
90” Mills.
Coal & Baggage handling System
HI-TECH have separate department for baggage, Coal & Ash handling in cogeneration
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 6
projects.
Authorized dealers of Sugar Cane harvester
QUALITY POLICY HI-TECH at Engineering Corporation India Pvt. Ltd. as
an Organization and as individuals, commit ourselves to supply Cost effective Quality
Machineries with fairness & Honesty in Sugar Industries on Turn Key basis, Steam
Generators and Cogeneration Plants, according to customer needs and provide services to
their expectations through our experienced team, skills, and innovative technology.
Quality and its implementation is an integral Part of HI-TECH. The Management is
committed to ensure that everybody in the organization understands & implements the
quality policy & contributes in continual improvement of the Quality Management
System.
Quality Objectives
Customer Satisfaction index up to min 80%.
Resolution of Customer Problems within 48 business hours.
On time Project Execution.
Zero accident at works centre.
COLLABORATION “Our Focused approach on latest technology with best
technical know – how and expertise ensures the quality product delivery and optimum
satisfaction of clients”
BMA, Germany (Order to order basis)
DINAMIC OIL, Italy
DESMET Distillery Plants
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 7
HI-TECH are the developers of the world famous Fire CAD – Boiler Design
Software. Fire CAD suite of software was developed by its technical director Mr.
Narasimha Patrudu.
Sr. No.
NAME OF CLIENT YEAR DETAILS
1 Baramati Agro Limited 2007 10tph Fire Tube Boiler
2 Baramati Agro Limited 2008 120tph Boiler for Sugar Plant
3 Saikrupa Sugars Limited 2008 180tph Boiler for Sugar Plant
4 Samrudhi Sugars Limited 2008 60tph Boiler for Sugar Plant
5 Jakraya Sugars Limited 2009 70tph Boiler for Sugar Plant
6 Shivsagar Sugars Limited 2009 110tph Boiler for Sugar Plant
7 Oasis Alcohol Ltd 2010 20tph Boiler for Distillery 100%Coal Fired
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 8
8Maharashtra Shetkari Sugars Ltd
2010 50tph Boiler for Sugar Plant
EXPORT PROJECT
Sr.
No.NAME OF CLIENT YEAR DETAILS
1 Wonji Sugar Plant, Ethiopia 2009 45tph Boiler for Sugar Plant
2 Shoa Sugar Plant, Ethiopia 2009 45tph Boiler for Sugar Plant
Turkey sugar plant
HI-TECH manufactures Turnkey Sugar Plant with Cogeneration. Now HI-TECH are
manufacturing Sugar Plant having capacity of 7500 TCD with 35 MW Cogeneration.
Currently HI-TECH are exporting sugar plants to Ethiopia.
HI-TECH ADVANTAGE – BOILING HOUSE & GENERAL
PARAMETERS ADVANTAGE HI-TECH REASON
MANPOHI-TECHR
REQUIREMENT
152 FOR A 1500 TO 4200 TCD
PLANT AUTOMATION
RETURN ON
INVESTMENT
BREAK EVEN WITHIN 3 YEARS
OF OPERATION
REFERENCE: 1500 TCD
PLANT IS IN
OPERATION AT 3500
TCD
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 9
STEAM
CONSUMPTION 38% ON CANE CRUSHED
USED FLASH VESSELS,
OSV & OTHER STEAM
SAVING DEVICES
POHI-TECHR
CONSUMPTION
22 KW PER TON OF CANE
CRUSHED REFERENCE :
ACHIEVED 3400 TCD CRUSHING
WITH 3 MW TURBINE
GENERATOR SET
100 % INLINE
PLANETORY GEAR
BOXES, SCREW PUMPS
& VFDS
LIFE OF PLANT LONG LASTING
ROBUST DESIGN & BEST QUALITY MATERIAL AND WORKMANSHIP
OUR ACHIEVEMENT IN 1st SUGAR PLANT HI-TECH entered the industry by
modifying existing Sugar Plant by making significant changes to the Milling plant of
the existing sugar plant.
HI-TECH have totally changed total mill drive system with unique Inline
planetary gear box, Rope Coupling and ACVFD drive; Our planetary drive is
highly energy efficient compact as HI-TECH ll as with very low maintenance
operation of drive system with very less noise. This system is used first time in
India.
Adding over HI-TECH used all inline planetary gearbox (Dynamic Oil Italy
Make) for all carriers as HI-TECH ll as for feeder table and getting advantage of
HI-TECH saving.
All pumps for magma, molasses and mesquite are screw pumps which are highly
energy efficient as compared to Rota pump.
HI-TECH have used OSV (Overflow Surplus Valve) by that HI-TECH saved lot
of steam consumption.
HI-TECH have done centralized Grease lubrication system
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 10
BAL has achieved 3000Tonne crushing on cane in one day and 3MW HI-TECH
when the plant equipped with all electrical drives; itself is record to crush more
than 3000Tonnes using 3MW HI-TECH.
Entire Plant was completed in record time of 7 months.
Boiling house is operating at 38%of steam.
CANE MILLS
HI-TECH are capable to supply milling Plant from 500TCD to 12000 TCD.
HI-TECH have already commissioned mill size 33X66 & 42X84.
36X78 & 45X90 is under execution
COMPARISN PARAMETERS
HI-TECH MILLING PLANT
CONVENTIONAL MILL WITH
HELICAL PLANETORY
CIVIL COST
VERY LESS COMPARED TO
CONVENTIONAL AS HI-TECHLL AS
TANDOM WITH INDIAN
PLANETARY
VERY HIGH HIGH
HI-TECHIGHT OF MILL DRIVE
SYSTEM AROUND 13 TON 30 TO 40 TON AROUND 25 TON
EFFICIENCY 95% AROUND 70 % AROUND 80 %
SPACE REQUIREMENT
COMPACT DESIGN RESULTS IN VERY
LESS SPACE
HUGE SPACE REQUIREMENT
HIGH SPACE REQUIREMENT
DUE TO BIG GEAR BOX AND
FORCED
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 11
LUBRICATION SYSTEM
LUBRICATION REQUIRED
400 LITRES VERY HIGH 1200 LITRES
SPARE PARTS INVENTORY
VERY LESS AS MOVING PARTS ARE VERY LESS
AND WITH BETTER
METALLURGY
MANY SPARE PARTS REQUIRED
MANY SPARE PARTS
REQUIRED DUE TO POOR
METALLURGY OF MOVING
PARTS
NOISE CREATED COMPARED TO
PIN DROP SILENCE VERY HIGH HIGH
RELIABILITY
100 % RELIABLE AS EACH PART IS
TAKEN CARE COMPLETELY
WHILE INSTALLATION
RELIABLE VERY LESS
POHI-TECHR CONSUMPTION
LEAST VERY HIGH HIGH
INSTALLATION TIME
QUICK INSTALLATION IS
POSSIBLE LONGEST LONG
MAINTENANCE & OPERATION
USER FRIENDLY TEDIOUS PROCESS
TIME CONSUMING
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 12
Inline Planetary GEAR BOX in Our Sugar Mills
HI-TECH are Pioneers in India to Launch the Inline Planetary Gear Box instead of
conventional Mill Gearing System for Mill Drive which saves the HI-TECH loss in
transmission. Also it reduces the overall Cost of foundation for mills.
HI-TECH ADVANTAGE – MILLING PLANT
Sr. No.
NAME OF CLIENTYEA
RDETAILS
1 Baramati Agro Ltd. 2007 Sugar Plant 1500 TCD (Commissioned)
2 Baramati Agro Ltd. 2008Sugar Plant 4200 TCD with 18 MW Cogeneration (Commissioned)
3 Samruddhi Sugar Ltd. 2008Sugar plant 2500 TCD with 8 MW Cogeneration (Under Commissioned)
4 Sai Krupa S. K. Ltd. 2008Sugar Plant 7500 TCD with 35 MW Cogeneration (Under Execution)
5Dadra Nagar HI-TECH Sahakari Khand Udhyog
2007 Sugar Plant 1250 TCD (Under Commissioned)
6Shree Shivsagar Sugar & Agro Products Ltd.
2009 Sugar Plant 2500 TCD (Under Execution)
7 Jakaraya Sugars Ltd. 2009Sugar Plant 2500TCD With 12 MW Cogeneration (Under Execution)
8Shreenath Mastoba S.K. Ltd., Pateshan
2003 (Commissioned)
9 Maharashtra Shetkari Sugars Ltd.
2010 Sugar Plant 3500TCD with 20 MW Cogeneration
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 13
EXPORT PROJECT
Sr. No.
NAME OF CLIENT YEAR DETAILS
1Wonji Sugar Ltd (Ethiopia)
2009 Rehabilitation
2Shoa Sugar Ltd (Ethiopia)
2009 Rehabilitation
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 14
Research & Development
Our R & D Department is staffed with well qualified and skilful
experienced person. They are engaged in various R & D activities like problem
identification, problem recognition, and thinking of various alternatives for the
solution and carry out design exercise to improve the product. Defect investigation and
defect rectification are also part of R & D Department.
The R&D Department is also responsible to develop new equipments to meet specific
need of user. The R&D Department uses the world class technology while caring our new
technology.
Our R & D Dept. is developing product to solve agriculture problems and also
developing product for defense purpose.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 15
CURRENT PROJECTS IN HAND
Sr. No.
NAME OF CLIENT YEAR DETAILS
1Baramati Agro Ltd. (1st Phased)
2007 Sugar Plant 1500 TCD (Commissioned)
2Baramati Agro Ltd. (2nd Phased)
2008Sugar Plant 4200 TCD with 18 MW Cogeneration (Commissioned)
3 Samruddhi Sugar Ltd. 2008Sugar plant 2500 TCD with 7 MW Cogeneration (Under Commissioning)
4 Sai Krupa S. K. Ltd. 2008Sugar plant 7500 TCD with 35 MW Cogeneration (Under Execution)
5Dadra Nagar HI-TECH Sahakari Khand Udhyog
2007Sugar Plant 1250 TCD (Under Commissioning)
6Shree Shivsagar Sugar & Agro Products Ltd.
2009 Sugar Plant 2500 TCD (Under Execution)
7 Jakaraya Sugars Ltd. 2009Sugar Plant 2500TCD With 12 MW Cogeneration (Under Execution)
8Shreenath Mastoba S.K. Ltd., Pateshan
2003 (Commissioned)
9 Oasis Alcohol Ltd 201020TPH steam generation at 45Kg/Sq.Cm pressure and 4400C temp. For Distillery Unit.
10Maharashtra Shetkari Sugars Ltd.
2010Sugar Plant 3500TCD with 20 MW Cogeneration
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 16
EXPORT PROJECT
Sr. No.
NAME OF CLIENT YEAR DETAILS
1 Wonji Sugar Ltd (Ethiopia) 2009 Rehabilitation
2 Shoa Sugar Ltd (Ethiopia) 2009 Rehabilitation
OUR ACHIEVEMENT IN 1st SUGAR PLANT
HI-TECH entered the industry by modifying existing Sugar Plant by Making
significant changes to the Milling plant of the existing sugar plant.
HI-TECH have totally changed total mill drive system
with unique Inline planetary gear box, Rope Coupling and
ACVFD drive; Our planetary drive is highly energy efficient
compact as HI-TECH ll as with very low maintenance
operation of drive system with very less noise. This system is
used first time in India.
Adding over HI-TECH used all inline planetary gearbox (Dynamic Oil Italy
Make) for all carriers as HI-TECH ll as for feeder table and getting advantage of HI-
TECH saving.
All pumps for magma, molasses and mesquite are screw pumps which are highly
energy efficient as compared to Rota pump.
HI-TECH have used OSV (Overflow Surplus Valve) by that HI-TECH saved lot
of steam consumption.
HI-TECH have done centralized Grease lubrication system
BAL has achieved 3000Tonne crushing on cane in one day and 3MW HI-TECH when
the plant equipped with all electrical drives; itself is record to crush more than
3000Tonnes using 3MW HI-TECH.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 17
CHAIRMAN(Sanjay Awate)
SANJAY AWATE
SHRIKANT DESHMUKH
(DIRECTOR)
General Manager (Finance) kishor sir
(kisM.G.GODBOLE
Account Purchase Store (R.M & Central
Design
Sr. ManagerKISHOR SHINDE
ManagerSANTOSH PANCHWAGH
JAYANT INGOWLE (DIRECTOR)
Officers
OfficersOfficers
N.PATHRUDN (DIRECTOR)
Marketing
RAJENDRA INGOWLE(DIRECTOR)
BOARD OF DIRECTOR
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 18
CHAPTER-II
LITERATURE REVIEW
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 19
REVIEW OF LITERATURE
2.1 INTRODUCTION
Ratio Analysis can be defined as the study and interpretation of relationships bet HI-
TECH en various financial variables, by investors or lenders. It is a quantitative
investment technique used for comparing a company's financial performance to the
market in general. A change in these ratios helps to bring about a change in the way a
company works. It helps to identify areas where the management needs to change.
2.2 CLASSIFICATION OF RATIO:
CLASSIFICATION OF RATIO
BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER
STATEMENT
1] BALANCE SHEET 1] LIQUIDITY RATIO 1] RATIOS FOR
RATIO 2] LEVERAGE RATIO SHORT TERM
2] REVENUE 3] ACTIVITY RATIO CREDITORS
STATEMENT 4] PROFITABILITY 2] RATIO FOR
RATIO RATIO SHAREHOLDER
3] COMPOSITE 5] COVERAGE 3] RATIOS FOR
RATIO RATIO LONG TERM
CREDITORS
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 20
2.3 BASED ON FINANCIAL STATEMENT:
Accounting ratios express the relationship between figures taken from financial
statements. Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of
classification of ratios is based upon the sources from which are taken.
1] Balance sheet ratio:
If the ratios are based on the figures of balance sheet, they are called Balance
Sheet Ratios. E.g. ratio of current assets to current liabilities or ratio of debt to equity..
2] Revenue ratio:
Ratio based on the figures from the revenue statement is called revenue statement
ratios.
3] Composite ratio:
These ratios indicate the relationship between two items, of which one is found in
the balance sheet & other in revenue statement.
2.4 BASED ON FUNCTION:
Accounting ratios can also be classified according to their functions in to liquidity
ratios, leverage ratios, activity ratios, profitability ratios & turnover ratios.
1] Liquidity ratios:
It shows the relationship between the current assets & current liabilities of the
concern e.g. liquid ratios & current ratios.
2] Leverage ratios:
It shows the relationship between proprietors funds & debts used in financing the
assets of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.
3] Activity ratios:
It shows relationship between the sales & the assets. It is also known as Turnover
ratios & productivity ratios e.g. stock turnover ratios, debtor’s turnover ratios.
4] Profitability ratios:
It shows the relationship between profits & sales e.g. operating ratios, gross profit
ratios, operating net profit ratios, expenses ratios
5] Coverage ratios: It shows the relationship between the profit on the one hand & the
claims of the outsiders to be paid out of such profit e.g. dividend payout ratios & debt
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 21
service ratios.
2.5 BASED ON USER:
1] Ratios for short-term creditors:
Current ratios, liquid ratios, stock working capital ratios
2] Ratios for the shareholders:
Return on proprietors fund, return on equity capital
3] Ratios for management:
Return on capital employed, turnover ratios, operating ratios, expenses ratios
4] Ratios for long-term creditors:
Debt equity ratios, return on capital employed, proprietor ratios.
I] LIQUIDITY RATIO:
The liquidity ratio measures the firm’s liquidity and its ability to meet its maturing short
term obligations. It is defined as the ability to realize value in money, the most liquid of
assets. It refers to the ability to pay in cash, the obligations that are due. The quantitative
aspects includes the quantum, structure and Utilizations of liquid assets and in the
qualitative aspect, it is the ability to meet all present and potential demands on cash from
any source in a manner that minimizes cost and maximizes the value of the firm.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 22
. These ratios are discussed below
1) Current ratio:
Meaning:
This ratio compares the current assets with the current liabilities. It is also known as
‘working capital ratio’ or ‘solvency ratio’. It is expressed in the form of pure ratio.
The current ratio 2:1 shows highly solvent position.
Current ratio = Current assets
Current liabilities
2) Liquid / Quick / Acid test ratio:
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the
quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1
Generally, a quick ratio of 1:1 is considered good.
Liquid ratio = Liquid current assets
Liquid liabilities
3) Cash ratio:
Meaning:
This is also called as super quick ratio. This ratio considers only the absolute liquidity
available with the firm. The cash & bank balance are the most liquid assets. The ideal
cash ratio is taken as 1:2. It is calculated as follows
Cash + Bank + Marketable securities
Cash ratio =
Total current liabilities
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 23
II] LEVERAGE RATIOS:
Leverage ratios lay emphasis on long term financial prospects. In order to assess the long
term financial soundness it is necessary to find out whether the organization is able to
maintain or increase the market value of its shares. The long term financial stability of the
firm may be considered as dependent upon its ability to meet all its liabilities, including
those not currently payable.
1) Debt equity ratio:
This ratio is calculated to measure the comparative proportions of outsiders’ funds and
shareholders’ funds invested in the company. It indicates how many rupees have come
from borrowing from every rupee of shareholders funds.
Debt equity ratio = Long term debts
Equity
2) Shareholders equity ratio:It is assumed that larger the proportion of the shareholders equity, the stronger is the
financial position of the firm. This ratio will supplement the debt equity ratio. In this ratio
the relationship is established between shareholders funds and the total assets.
Shareholders equity ratio = Shareholders equity
Total assets
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 24
3) Interest coverage ratio:
This ratio compares the net profit before interest and tax with the interest payments and
long-term liabilities. This ratio indicates whether adequate coverage of net profit is
available for the payments of interest or not.
Interest coverage ratio = Net profit before interest and tax
Interest
4 ) Proprietary ratio:
It is the ratio between proprietor’s fund and total assets. It indicates the strength of the
funding of the company. A high ratio will definitely indicate high financial strength but a
very high ratio will indicate inadequate utilization of external equities.
Proprietary ratio = Proprietor’s funds
Total assets
III] TURNOVER RATIOS:
Assets management ratio measures how efficiently the firm employs its resources. These
ratios are also called activity or turnover ratios which involve comparison between the
level of sales and investment in various accounts. They are used to measure speed with
which various accounts are converted into sales or cash.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 25
1) Inventory turnover ratio:
It establishes relationship between cost of goods sold during a given period and the
average amount of inventory held during that period. It indicates the number of times
finished stock is turned over during a given accounting period. High ratio shows rapid
turnover & low ratio shows slow moving stock.
Inventory turnover ratio = Cost of goods sold OR sales
Average inventory
2) Debtor’s turnover ratio:
This ratio indicates the credit policy follow by a business firm. The higher the ratio is the
collection period while low ratio indicates higher collection period. An average collection
period, which is shorter, needs to be analyzed carefully.
Debtors turnover ratio = Credit sales
Average debtors
3) Creditors turnover ratio:
This ratio indicated the credit period allow by the creditors. A high turnover ratio
indicates that payment to creditors is quite prompt but it also implies the full advantage of
credit allow by creditors is not taken. A low ratio indicates that payment to creditors is
not quite prompt and it needs to be improved.
Creditor’s turnover ratio = Credit purchases
Average creditors
4) Fixed assets turnover ratio:This ratio indicates the number of times fixed assets are being turned over during a
particular period. It is one of the indications of efficiency of using fixed assets in the
business. A high ratio indicates that fixed assets are contributing quite substantially in
making sales, while low ratio indicates that fixed assets are not being used efficiently.
Fixed assets turnover ratio = Net sales
Fixed assets
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 26
5) Total asset turnover ratio:
This ratio indicates the number of times total assets are being turned in a year. The higher
the ratio indicates overtrading of total assets while a low ratio indicates idle capacity.
Total assets turnover ratio = Sales
Total assets
6) Working capital turnover ratio:
This ratio compares the net sales with net working capital. The indication given by this
ratio is the number of times working capital is turned around in a particular period. The
higher the ratio the better the utilization of working capital and HI-TECH is the
investment in working capital. However, a very high working capital turnover ratio is a
sign of overtrading and a firm may face shortage of working capital.
Working capital turnover ratio = Net sales
Working capital
7) Capital employed turnover ratio:
This ratio shows efficiency of capital employed in the business by computing how many
times capital employed is turned over in a given period.
Capital turnover ratio = Net Sales
Capital employed
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 27
IV] PROFITABILITY RATIOS:
With a very few exceptions the entire corporate sector aims at maximizing the amount of
profits. Some of the public sector undertakings are also aiming at earning reasonable
amount and rate of profits. Even a few services oriented organizations are working on a
‘no-profit, no-loss’ basis. Profit maximization is therefore one of the primary objectives
of business enterprise. Profit should not be confused with profitability because profit is
one of the determinants of profitability.
1) Gross profit ratio:
This ratio shows the margin left after meeting the manufacturing costs. It measures the
efficiency of production as well as pricing. A high gross profit ratio means high margin
for covering other expenses, other than the costs of goods sold.
Gross profit ratio = Gross profit x 100
Net sales
2) Net profit ratio:
This ratio indicates the earnings left for shareholders (equity & preference) as a
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 28
percentage of net sales. It measures the overall efficiency of all the functions of a
business firm like production, administration, selling, financing, pricing, tax management
etc.
Net profit ratio = Net profit before interest & tax x 100
Sales
3) Return on total assets
This ratio is also known as profit to assets ratio and it establishes the relationship between
net profit and assets.
Return on total assets = Net profit after tax x 100
Total assets
4) Return on Shareholders fund or return on net worth:
It shows the percentage of net profit available for equity shareholders to equity
shareholders funds. This ratio indicates the productivity of the ownership capital
employed in the firm.
RONW = Net profit after interest and tax x 100
Net worth
5) Return on capital employed:
This ratio indicates the percentage of net profits before interest and tax to total capital
employed. Capital employed refers to long-term funds supplied by the lenders and
owners of the firm.
ROCP= Net profit before interest and tax x 100
Capital employed
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 29
V] MARKET BASED RATIOS:
The market based ratios relates the firm’s stock price to its earnings and book value per
share. These ratios give management an indication of what investors think of the
company’s past performance and future prospects. If firm’s profitability, solvency and
turnover ratios are good, then the market based ratios will be high and its share price is
also expected to be high.
1) Earnings per share:
This ratio indicates the amount of net profit available per equity share of a business firm.
EPS is one of the criteria of measuring the performance of a company. If EPS increases,
the possibility of a higher dividend payable by the company increases.
EPS = Net profit after interest, tax and preference dividend
Number of equity shares
2) Cash earnings per share:
Cash earnings per share are more reliable yardstick for measurement of performance of
companies, especially for highly capital intensive industries where provision for
depreciation is substantial.
CEPS = Net profit after tax + depreciation
No. of equity shares
3) Dividend payout ratio:
This ratio indicates the percentage of profit distributed as dividends to the shareholders. A
higher ratio indicates that the company follows a liberal dividend policy while a HI-
TECH ratio implies a conservative dividend policy.
Dividend payout ratio = Dividend per share x 100
Earning per share
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 30
2.6 IMPORTANCE OF RATIO ANALYSIS:
As a tool of financial management, ratios are of crucial significance. The
importance of ratio analysis lies in the fact that it presents facts on a comparative basis &
enables the drawing of interference regarding the performance of a firm. Ratio analysis is
relevant in assessing the performance of a firm in respect of the following aspects:
1] LIQUIDITY POSITION: -
With the help of Ratio analysis conclusion can be
drawn regarding the liquidity position of a firm.
2] LONG TERM SOLVENCY: -
Ratio analysis is equally useful for assessing the long-term financial viability of a
firm.
3] OPERATING EFFICIENCY:
Yet another dimension of the useful of the ratio analysis, relevant from the
viewpoint of management, is that it throws light on the degree of efficiency in
management & utilization of its assets.
4] OVERALL PROFITABILITY:
Unlike the outsides parties, which are interested in one aspect of the financial
position of a firm, the management is constantly concerned about overall profitability of
the enterprise.
5] INTER – FIRM COMPARISON:
Ratio analysis not only throws light on the financial position of firm but also
serves as a stepping-stone to remedial measures.
6] TREND ANALYSIS:
Finally, ratio analysis enables a firm to take the time dimension into account.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 31
2.7 ADVANTAGES OF RATIO ANALYSIS:
Financial ratios are essentially concerned with the identification of significant
accounting data relationships, which give the decision-maker insights into the financial
performance of a company. The advantages of ratio analysis can be summarized as
follows:
1. Helpful in analysis of Financial Statements.
2. Helpful in comparative study.
3. Helpful in locating the weak spots of the business.
4. Helpful in Forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal Standards.
7. Effective Control.
8. To workout the profitability: Accounting ratio help to measure the profitability of the
business by calculating the various profitability ratios.
9. 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.
10. To simplify the accounting information: Accounting ratios are very useful as they
briefly summaries the result of detailed and complicated computations.
11. To workout the operating efficiency: Ratio analysis helps to work out the operating
efficiency of the company with the help of various turnover ratios.
12. To workout short-term financial position: Ratio analysis helps to work out the short-
term financial position of the company with the help of liquidity ratio.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 32
2.8 PURPOSE OF RATIO ANLYSIS:
1] To identify aspects of a business’s performance to aid decision making.
2] Quantitative process – may need to be supplemented by qualitative
Factors to get a complete picture.
3] 5 main areas:-
Liquidity – the ability of the firm to pay its way.
Investment/shareholders – information to enable decisions to be made on the
extent of the risk and the earning potential of a business investment.
Gearing – information on the relationship between the exposure of the business
to loans as opposed to share capital.
Profitability – how effective the firm is at generating profits given sales and or its
capital assets.
Financial – the rate at which the company sells its stock and the efficiency with
which it uses its assets.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 33
2.9. ROLE OF RATIO ANALYSIS:
It is true that the technique of ratio analysis is not a creative technique in the sense
that it uses the same figure & information, which is already appearing in the financial
statement. At the same time, it is true that what can be achieved by the technique of ratio
analysis cannot be achieved by the mere preparation of financial statement.
Ratio analysis helps to appraise the firm in terms of their profitability & efficiency
of performance, either individually or in relation to those of other firms in the same
industry. The process of this appraisal is not complete until the ratio so computed can be
compared with something, as the ratio all by them do not mean anything. This
comparison may be in the form of intra firm comparison, inter firm comparison or
comparison with standard ratios.
Ratio analysis is one of the best possible techniques available to the management
to impart the basic functions like planning & control. As the future is closely related to
the immediate past, ratio calculated on the basis of historical financial statements may be
of good assistance to predict the future.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 34
CHAPTER-III
RESEARCH METHODOLOGY
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 35
3.1 TITLE OF PROJECT:
“A Study of Financial Ratio Analysis.”
Financial ratio analysis is the calculation and comparison of main indicatives ors
ratios which are derived from the information given in a company’ financial statements
which must be similar points in time and prefer by audited financial statements and
developed in the same manner. It involves methods of calculating and interpreting
financial ratios in order to asses. A firm’s performance and status. This analysis is
primarily designed to meet informational need, of investors creditors and management.
The objective of ratio analysis is the comparative measurement of financial data to
facilitate wise investment, credit and managerial decision.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 36
3.2 OBJECTIVE OF RATIO ANALYSIS:
Ratio is work out to analyze the following aspects of business organization-
1) Solvency-
Long term
Short term
Immediate
2) Stability.
3) Profitability.
4) Operational efficiency.
5) Credit standing.
6) Structural analysis.
7) Effective utilization of resources.
8) Leverage or external financing.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 37
3.3 RESEARCH METHODOLOOGY
Research is an organized and systematic way of finding answers to questions.
Organized in the sense, that there is a structure or method in going about doing research.
It is planned procedure, not a spontaneous one. It is focused & limited to a specific scope.
Systematic because there is a definite set of procedures and steps which you will follow.
There are certain things in the research process, which are always done in order to get the
most accurate results.
Finding answer is the end of all research. Whether it is the answer to a hypothesis
or even a simple question, research is successful when we find answers. Sometimes, the
answer is no, but it is still an answer.
Questions are central to research. If there is no question, then the answer is off
no use. Research is focused on relevant, useful and important questions. Without a
question, research has no focus, drive or purpose.
Area of the Research: Finance
A research design was prepared as under:
The analysis is done on the subject Interpretation of the financial statement by
using ratio analysis technique.
The analysis is done in the firm HI-TECH..
The analysis is done with the help for primary and secondary data.
The purpose of the project is to study the various financial ratios.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 38
Primary Source of Data:
The primary source of data has been collected from the finance departments
through formal discussions with Accountants of HI-TECH and other officials of
the company.
This data is generated specifically for the purpose of working out the project. This
data means the first hand information, which is collected through various sources
e.g. Questionnaires.
Schedules and Formal / Informal Information:
1] Information relating to the project was collected during formal & informal
discussions with the HOD (Finance).
2] Quires arising in due course of the project brought into the notice of concerned
authority & necessary explanation & solutions are adapted.
2] Secondary Source of Data:
Secondary data means that the data is already analyzed by someone else. It is also
called as indirect data.
The secondary source of data includes the information collected from the annual
reports of the company for relevant periods.
All the financial data of HI-TECH has been taken from the various statements of
the company such as Balance Sheet, Profit and Loss account.
Thus this report is based on the information provided by the concerned authorities
& by referring books named financial management.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 39
1] Annual Report
Majority of information gathered from data exhibited in the annual
reports of the company. These include annual reports of the year 2006-07, 2007-08 &
2009-10.
2] Reference Books:
Theory relating to the subject matter and various concepts taken up from various
financial reference books.
3] HI-TECH sites:
The information relating to ratio analysis taken up from HI-TECH sites.
Research Design:
It includes following steps:
1] Calculations of Ratios.
2] Analyzing & Interpreting the Ratios.
3] Research Findings.
4] Recommendations.
5] Conclusion.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 40
CHAPTER-IV
DATA ANALYSIS AND CONCLUSION
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 41
4.1DATA ANALYSIS AND INTERPRETATION:
4.1.1 Introduction:
The present chapter is concerned with analysis and interpretation of collected
data. This is essential for scientific study and for ensuring that the researcher has
all relevant data for making contemplated comparison and analysis.
4.1.2 Data Analysis:
For the purpose of analysis of data, researcher had used various statistical as HI-
TECH as analytical tools like tabulation and percentage.
After collection of data, the next and more important step is analysis of data. This is
essential for scientific study. Analysis of data in general way involves a number of
closely related operations, which are performed with the purpose of summarizing the
collected data and organizing these in such a manner.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 42
4.2.1. CURRENT RATIO:
Current ratio =Current Assets / Current Liabilities
Particulars 2007-08 2008-09 2009-10 2010-11
Current asset 202,733,393 124,410,256 95,254,930 179,383,350
Current
liabilities
27,989,998 40,258,807 26,633,631 183,712,046
Ratio (in times) 7.24 3.09 3.5 .98
2007-08 2008-09 2009-10 2010-110
1
2
3
4
5
6
7
8
CURRENT RATIO
YEAR
RATI
O
INTERPRETATION:
A higher current ratio has better liquidity. A standard norm of current ratio is 2:1. Since
last 3 years company’s current assets are more than its current liabilities. So that the
company is assuring to pay its current maturing debt as and when it becomes due. Ratio
is satisfactory to the company according to its characteristics. It is good sign that
company is keeping sufficient margin of safety.
2. QUICK/ ACID TEST RATIO:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 43
Quick Ratio= Quick Assets /Quick Labilités
Particulars 2007-08 2008-09 2009-10 2010-11
Liquid Assets 86,565,960 60,877,549 64,306,449 75,550,914
Liquid Liabilities 27,989,998 40,258,807 26,633,631 183,712,046
Ratio ( in times )
3.09 1.51 2.41 .41
2007-08 2008-09 2009-10 2010-110
0.5
1
1.5
2
2.5
3
3.5
QUICK ACID TEST RATIO
QUICK ACID TEST RATIO
YEAR
RATI
O
INTERPRETATION:
It is widely accepted as the best available test of the liquidity position of the firm.
Generally speaking, a liquid ratio 1:1 is considered satisfactory as a firm can easily meets
all current claims. The ratio of 2006-07 is 3.09 and in 2007-08 and 2008-09 the ratio is
near to ideal. The ratio of 2009-10 is .41 is very low because of excess current liability
3. FIXED ASSET TURNOVER RATIO:
SalesFixed Assets Turnover Ratio =
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 44
Fixed Assets
Particulars 2007-08 2008-09 2009-10 2010-11
Sales 645,057,254 600,889,091 422,137,997 552,839,754Fixed asset 602,037,387 580,445,311 515,250,916 460,195,562Ratio (in times) 1.07 1.03 .81 1.20
2007-08 2008-09 2009-10 2010-110
0.2
0.4
0.6
0.8
1
1.2
1.4
FIXED ASSET TURNOVER RATIO
FIXED ASSET TURNOVER RATIO
YEAR
RATI
O
INTERPRETATION:
A high ratio indicates efficient utilization of fixed assets in generating sales. And low
ratio indicates low sales per rupee of fixed asset.
4 .CURRENT ASSET TURNOVER RATIO:
Current asset turnover ratio= sales
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 45
Current asset
Particulars 2007-08 2008-09 2009-10 2010-11
Sales 645,057,254 600,889,091 422,137,997 552,839,754Current asset 202,733,393 124,410,256 95,254,930 179,383,350Ratio(in times) 3.18 4.82 4.43 3.08
2007-08 2008-09 2009-10 2010-110
1
2
3
4
5
6
CURRENT ASSET TURNOVER RATIO
CURRENT ASSET TURNOVER RATIO
YEAR
RATI
O
INTERPREATATION:-
The graph shows that Hi-Tec industries Ltd Baramati is increasing current assets
turnover ratio year 2006-07&2007-08.In year 2008-09&&2009-10 the CATR is
decreasing . It means that they achieve maximum sales by investing minimum current
assets .
5. WORKING CAPITAL TURNOVER RATIO:
Working capital turnover ratio = Net sales
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 46
Working capital
Particulars 2007-08 2008-09 2009-10
Net Sales
645,057,254 600,889,091 422,137,997
Working capital 174,743,395 84,151,449 68,621,299
Ratio(in times) 3.69 7.14 6.15
2007-08 2008-09 2009-100
1
2
3
4
5
6
7
8
WORKING CAPITAL TURNOVER RATIO
WORKING CAPITAL TURNOVER RATIO
YEAR
RATI
O
INTERPRETATION:
This ratio compares the net sales with net working capital of company. The indication
given by this ratio is the number of times working capital is turned around in a particular
period. The higher this ratio, the better is the utilization of working capital and also
indication of low working capital.
6. INVENTORY TURNOVER RATIO:
Net sales
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 47
Inventory Turnover Ratio =
Average Inventory
Particulars 2007-08 2008-09 2009-10 2010-11
Net Sales 645,057,254 600,889,091 422,137,997 552,839,754
Average Inv. 18,010,981 47,249,491 18,933,771 19,503,787.5
Ratio(in times) 35.53 12.71 22.29 28.34
2007-08 2008-09 2009-10 2010-110
10
20
30
40
INVENTORY TURNOVER RATIO
INVENTORY TURNOVER RATIO
YEAR
RATI
O
INTERPRETATION:
It measures how quickly inventory sold. A high inventory turnover ratio is better than a
low ratio. A high ratio implies good inventory management. Yet, a very high ratio calls
for a careful analysis. Very low level of inventory has serious implications.
7. CREDITOR’S TURNOVER RATIO:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 48
Creditor’s turnover ratio = credit purchase
Sundry creditors
Particulars 2007-08 2008-09 2009-102010-11
Credit purchase
361,959,352.11 390,845,451.34 326,808,448 462,020,245.68
Sundry creditors
21,749,963 32,178,140 21,364,846 175,035,859
Ratio (in times)
16.64 12.14 15.29 2.63
2007-08 2008-09 2009-10 2010-1102468
1012141618
CREDITORS TURN OVER RATIO
CREDITORS TURN OVER RATIO
YEAR
RATI
O
INTERPRETATION:
The creditor’s turnover ratio graph shows that in year 2006-07 Soma Textile and
Industries Ltd, Baramati. is very high ratio it means delay in payment to suppliers. But
2009-10 it is very low it means creditors are paid promptly. In year 2007-08 and 2008-09
the ratio is good.
8.CAPITAL TURNOVER RATIO:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 49
Sales
Capital Turnover Ratio = Capital Employed
(Capital employed=fixed asset + current asset-current liabilities)
Particulars 2007-08 2008-09 2009-10 2010-11
Sales 645,057,254 600,889,091 422,137,997 552,839,754
Capital Employed
776,780,782 664,596,760 583,872,216 455,866,866
Ratio(In times) .83 .90 .72 1.21
2007-08 2008-09 2009-10 2010-110
0.2
0.4
0.6
0.8
1
1.2
1.4
CAPITAL TURN OVER RATIO
CAPITAL TURN OVER RATIO
YEAR
RATI
O
INTERPRETATION: In case of Soma Textile & Industries Ltd,Baramati.ratio has increased in year 2006-07, 2007-08 & 2009-10.But except in 2008-09.
High ratio indicates efficiency of the organization with which the capital is being utilized.
9. TOTAL ASSET TURNOVER RATIO:
Sales
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 50
Total Assets Turnover Ratio = Total Assets
Particulars 2007-08 2008-09 2009-10 2010-11
Sales 645,057,254 600,889,091 422,137,997 552,839,754
Total asset 804,770,780 704,855,567 610,505,847 639,578,912
Ratio(in times) .80 .85 .69 .86
2007-08 2008-09 2009-10 2010-110
0.10.20.30.40.50.60.70.80.9
1 TOTAL ASSET TURN OVER RATIO
TOTAL ASSET TURN OVER RATIO
YEAR
RATI
O
INTERPRETATION:
The total asset’s utilization is satisfactory, because high ratio indicates efficient
utilization of total assets in generating sales.
10. DEBTOR’S TURNOVER RATIO:
Total Sales / Credit Sales
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 51
Debtors Turnover Ratio =
Average A/Cs Receivable
Particulars 2007-08 2008-09 2009-10 2010-11
Credit Sales 645,057,254 600,889,091 422,137,997 552,839,754
A/c receivable 34,413,938 14,165,050 21,064,406 13,415,725
Ratio(in times) 18.74 42.42 20.04 41.20
INTERPRETATION:
A higher turnover ratio and shorter collection period, a better is the trade credit
management and better is the liquidity of debtors, as short collection period and high
turnover ratio imply prompt payment on the part of debtors. In short, high turnover is
preferable.
11. GROSS PROFIT RATIO:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 52
2007-08 2008-09 2009-10 2010-1105
1015202530354045
DEBTOR TURNOVER RATIO
DEBTOR TURNOVER RATIO
YEAR
RATI
O
Gross Profit Ratio = Gross Profit / Sales*100
Particulars 2007-08 2008-09 2009-10 2010-11
Gross Profit 240,188,494.34 158,393,158.36 67,007,428.54 53,736,776.77Sales 645,057,254 600,889,091 422,137,997 552,839,754Ratio (%) 37.23 26.35 15.87 9.72
INTERPRETATION:
The gross profit ratio is decreasing every year. so Soma Textile & Industries Ltd,
Baramati .have to maintain it properly. But, the Average Industry ratio is 20% to 40%. So,
ratios are satisfactory.
12. NET PROFIT RATIO:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 53
2007-08 2008-09 2009-10 2010-110
5
10
15
20
25
30
35
40
GROSS PROFIT RATIO
GROSS PROFIT RATIO
YEAR
RATI
O
Net Profit Ratio = Net Profit / Sales*100
Particulars 2007-08 2008-09 2009-10 2010-11
Net profit 15,168,889 45,195,592 119,119,749 50,854,022
Sales 645,057,254 600,889,091 422,137,997 552,839,754
Ratio (%) 2.35 7.52 28.21 9.19
INTERPRETATION:
This ratio measures overall efficiency of all the functions of a business firm like
production, administration, selling, financing, pricing, tax management etc. The higher
ratio indicates better it is because it gives an idea of overall efficiency of the firm.
13.CASH PROFIT RATIO:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 54
2007-08 2008-09 2009-10 2010-110
5
10
15
20
25
30
NET PROFIT RATIO
NET PROFIT RATIO
YEAR
RATI
O
Cash profit
Cash profit ratio = *100
Sales
Cash profit ratio = (Net profit+ non cash expenses/depreciation)
Particulars 2007-08 2008-09 2009-102010-11
(Net profit+ depreciation)
73,088,711 103,857,607 176,710,700 108,184,838
Sales 645,057,254 600,889,091 422,137,997 552,839,754
Ratio (%) 11.33 17.28 41.86 19.56
INTERPRETATION:
The cash profit ratio is increasing first three years i.e. 2006-07, 2007-08 & 2008-09.But
then decreasing in year 2009-10.
14. FIXED ASSET TO CAPITAL EMPLOYED:
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 55
2007-08 2008-09 2009-10 2010-1105
1015202530354045
CASH PROFIT RATIO
CASH PROFIT RATIO
YEAR
RATI
O
Fixed asset to capital employed = Fixed asset/capital employed *100
Particulars 2007-08 2008-09 2009-10 2010-11
Fixed asset 602,037,387 580,445,311 515,250,916 460,195,562Capital Employed
776,780,782 664,596,760 583,872,216 455,866,866
Ratio (%) 77.50 87.33 88.24 101
INTERPRETATION:
The above graph shows that fixed asset turnover ratio is increasing every year. So this
ratio is good for Soma Textile & Industries Ltd, Baramati. Capital employed indicates the
long term fund supplied by creditors and owners of the firm.
4.2 FINDINGS:-
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 56
2007-08 2008-09 2009-10 2010-110
20
40
60
80
100
120
FIXED ASSET TO CAPITAL EMPLOYED
FIXED ASSET TO CAPITAL EMPLOYED
YEAR
RATI
O
ACTIVITY RATIOS:
Ratios are increasing which shows that efficient utilization of long term funds.
Inventory Turnover ratio of the company is Decreasing year-by-year. It means Company
is not efficiently managing investment in Inventories.
Collection period is less than the payment period. This shows the efficiency of the
management.
Accounts of the creditors are settled rapidly.
PROFITABILITY RATIOS:
The Gross profit ratio decrease year-by-year due to increase in material & manufacturing
cost.
Operating performance of the company is satisfactory.
Net profit of the company decreased increase in indirect expenses as compared to year
2005-06 & 2006-07.
LIQUIDITY RATIOS:
Company’s current assets are more than its current liabilities. Company is keeping
sufficient margin of safety.
CONCLUSION:-
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 57
In this project financial statement of last 3 years has been compared &
through the ratio analysis technique it is concluded that the company is doing
excellent in its field year after year. The study is restricted to only financial
statements. The company’s business has recorded significant increase in sales
& profit.
In this project ratio analysis indicates, the financial position of the
company. Also with the help of ratio analysis and past data management can
taking corrective action regarding growth of business.
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 58
CHAPTER-V
SUGGESTIONS
SUGGETIONS:-
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 59
In future company should expand their Business for increase in Profit.
Gross profit of the company is low because of increase in raw material cost.
Hence Company should purchase raw material in bulk quantity whenever cost is
low.
Company should make contract with vendors for a long period at fixed prices.
LIMITATIONS OF RATIO ANALYSIS
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 60
Ratio analysis has its limitations. These limitations are described below:
1. Ratios are calculated on the basis of past financial statements. They do not indicate
future trends and they Comparison not possible if different firms adopt different
accounting policies.
2. Ratio analysis becomes less effective due to price level changes.
3. Ratio may be misleading in the absence of absolute data.
4. Limited use of a single data.
5. Lack of proper standards.
6. False accounting data gives false ratio.
7. Ratios alone are not adequate for proper conclusions.
8. Effect of personal ability and bias of the analyst.
9. Limited Comparability.
10. Qualitative factors are ignored.
11. Effect of window-dressing.
12. Costly Technique.
BIBLIOGRAPHY
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 61
Referred Books:
1. Cost Accounting & Financial management.-(M Y Khan and P K Jain)
4th edition, 200, Tata McGraw – Hill Publishing Co. Ltd.New Delhi
2. Financial Management.- (Dr. Nachiket Inchlekar)
1st edition De. 2008, Nirali Publication Pune.
3. Financial Management.- (Prof. Ravi M. Kishore)
6th edition, 2008, Taxman Allied Service (P) Ltd. New Delhi.
4. Financial Management. - (Satish M.Inamdar)
Everest Publishing House
HI-TECH sites:
Annual Reports of HI-TECH engineering company ltd baramati.
(Year 2006-07, 2007-08, 2008-09 2009-10)
WEBSITE:
1] www,universalteacher4u.com/cbse/xii……………..
2] eg,Wikipedia.org/wiki/financial_ratio
ANNEXURE
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 62
HI-TECH ENGINEERING CO. LIMITED
BALANCESHEET AS AT 31St MARCH,2008
Schedule 2008 Rupees 2007 Rupees
SOURCES OF FUNDS
Head office a/c 1 402,372,616 479,385,818
Reserves and surplus
Total 402,372,616 479,385,818
LOAN FUNDS
Secured Loans 2 160,578,780 198,832,517
Unsecured Loans 3 103,430,428 100,000,000
264,009,208 298,832,517
TOTAL 666,381,824 778,218,335
APPLICATION OF FUNDS
FIXED ASSETS 4
Gross Block 1,183,345,110 1,153,408,246
Accumulated Depreciation 602,899,800 551,482,144
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 63
Net Block 580,445,311 601,926,102
Capital work-in-progress 111,285
580,445,311 602,037,387CURRENT ASSETS,LOANS AND ADVANCES
Inventories 5 63,532,707 116,167,443
Sundry Debtors 6 14,165,050 34,413,938
Cash & Bank Balances 7 7,146,275 21,512,512Loans,Advances & other current assets 8 39,566,224 30,639,500
124,410,256 207,733,393LESS: CURRENT LIABILITIES AND PROVISIONS
Liabilities 9 40,258,807 27,989,998
Provisions 10 2,723,776 3,257,171
42,982,583 31,247,169
Net Current AssetsMISCELLEANEOUS EXPENDITURE 11 81,427,673 171,486,224
(to the extent not return of or adjusted) 4,508,841 4,694,724
TOTAL 666,381,824 778,218,335
NOTES TO ACCOUNTS 19 0
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 64
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 65
HI-TECH ENGINEERING CO. LIMITED PRFIT & LOSS ACCOUNT
Schedule 2008(Rs) 2007(Rs)
INCOMESales 600,889,091 645,057,254Interest Received 12 819,827 854,857Other income 13 31,185,373 20,556,217
TOTAL 632,894,291 666,468,328
EXPENDITURE
Manufacturing & Other Expenses 14 599,381,888 572,417,874Interest Paid 12 20,045,980 20,389,333Depreciation 4 58,662,015 57,919,822
TOTAL 678,089,883 650,727,029
PRIOR PERIOD ITEMSPROFIT BEFORE TAX 45,195,592 15,741,299
Fringe Benefit Tax 178,947 196,964(Refer note 25 of Notes On Accounts)
PROFIT/(LOSS) FOR THE YEAR 45,374,539 15,544,335PROFIT/(LOSS) TRANSFERRED TO HEAD OFFICE 45,374,539 15,544,335
NOTES TO ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2008
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 66
HI-TECH ENGINEERING CO. LIMITED
BALANCSHEET AS AT 2009-10
Schedule2009-10 Rupees 2008-09 Rupees
SOURCES OF FUNDS
Head office a/c 1 310,166,589 443,639,721Reserves and surplusTotal 310,166,589 443,639,721
LOAN FUNDS 2 139,263,604 137,862,078Secured Loans 3 4,339,760 4,339,759Unsecured Loans
143,603,364 142,201,837
TOTAL 453,769,953 585,841,558
APPLICATION OF FUNDS 4FIXED ASSETSGross Block 1,144,016,467 1,141,741,007Accumulated Depreciation 683,820,905 626,490,091
Net Block 460,195,562 515,250,916Capital work-in-progress
460,195,562 515,250,916CURRENT ASSETS,LOANS AND ADVANCESInventories 5 103,832,436 30,948,481Sundry Debtors 6 13,415,725 21,064,406Cash & Bank Balances 7 13,546,729 4,666,896Loans, Advances & other current assets 8 48,588,461 38,575,148
179,383,350 95,254,931LESS: CURRENT LIABILITIES AND PROVISIONS 9 183,712,046 26,633,631Liabilities 10 2,097,003 2,539,498Provisions 185,809,049 29,173,129
Net Current Assets 11 6,425,699 66,081,802MISCELLEANEOUS 4,508,841
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 67
EXPENDITURE(Refer Note no.08 in Notes to accounts)
TOTAL 453,769,863 585,841,55919
NOTES TO ACCOUNTS
M.I.M-KALAMB-WALCHANDNAGAR 2010-2012Page 68
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