A REPORT ON SUMMER PROJECT WORK OF RATIO ANALYSIS FOR BELL CERAMICS LTD.

Submitted to:GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD

Prepared by :Nilam G. Gandhi ID NO.:-107420592002 MBA First Year

Under the Guidance of :Prof. Bhavik Mehta Prof. Rajkumari Soni

PARUL INSTITUTE OF ENGG. & TECH. (PIET) MBA P.O.- LIMDA, TALUKA WAGHODIA

DIST VADODARA, GUJARAT. CERTIFICATE FROM COMPANY

CERTIFICATE FROM FACULTY GUIDE

CERTIFICATE This is to certify that the project work entitled RATIO ANALYSIS OF BELL CERAMIC LTD., BARODA was carried out by GANDHI NILAM G. in partial fulfillment of the Award of the degree in Master of Business Administration to the GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD in the year 2010 - 2012. It is certified that all correction/suggestion indicated for internal assessment have been incorporated in the Report deposited in the department library. The project report has been approved as it satisfies the academic requirements in respect of project work prescribed for the Master of Business Administration Degree. Signature of Guide Name of Guide College Signature of Director Name of Director : Parul Institute Engineering and Technology, MBA Department ( Ins. Code 742 )

DECLARATION
I here by declare that the project report entitled, RATIO ANALYSIS OF BELL CERAMICS LTD. submitted as per the requirement for the degree of Master of Business Administration of Parul Institute of Engineering and Technology (G.T.U.) is an original piece of research work carried out by me under the guidance of Prof. Bhavik Mehta and Prof. Rajkumari Soni. The information has been collected from genuine and authentic sources. This project is not submitted for the award of any type of other degree, diploma or any other similar title or prizes.

PLACE :- Vadodara DATE :-

NAME OF CANDIDATE:Miss. Nilam Gandhi

ACKNOWLEDMENT
Perseverance inspiration and motivation have always played a key role in success of any venture. I hereby express my deep sense of gratitude to all the personalities involved directly and indirectly in my project work. I would thank to God for their blessing and my parents also for their valuable suggestion and support in my project report. With an immense pleasure, I would like to express my thanks to Ms. Mukti Mehta (Deputy Finance Manager), project guide for having given me this privilege of working under her and completing this study. I would also like to thank Mr. G P Zala (GM of Finance), Mr. P D Baxi (Head of Account), Mr. Bhaskar (Asst. manager of Finance), who have rendered their whole hearted support at all times for the successful completion of this project report. I would also like to thank all staff members at Corporate office as well as at Dora office of Bell Ceramics Ltd. ,who have helped me for this project directly or indirectly. Last but not least, I would like to express my sincere gratitude to Bhavik sir and other faculty members who have taught me in my entire MBA curriculum and our HOD, Dr. P G K Murthy, who has always been a source of guidance, inspiration and motivation. However, I accept the sole responsibility for any possible errors of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice.

TABLE OF CONTENTS
CH. NO. TOPIC Title Page Certificates i. From company ii. From Faculty Guide Declaration Acknowledgement Table of Contents Executive Summary PART I ORGANISATION PROFILE Introduction Company Profile Evolution & History Vision & Mission Organization chart of the company Products & Distribution Network Orient Ceramic & Industries ltd Bell Acquisition Major Competitors of Bell Ceramic Tiles in India Finance Department Organization chart & Activities My learning from the study of company PART 2 PROJECT STUDY Overview of the study Research Methodology Ratio Analysis Meaning & Importance Standards of the Ratio Advantages & Uses of Ratio Analysis Limitations of Ratio Analysis Sources of data for ratios Purpose & Types of Ratios Forms of Ratios Users of Financial Ratios Classification of various ratios Ratio Calculations Profitability Ratios Liquidity Ratios Leverage Ratio Turnover Ratio SWOT Analysis Findings & Interpretation Conclusion & Limitations Recommendations & Suggestions Appendices 6 PAGE NO. 1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 21 22 23 24 24 26 27 27 28 29 30 32 47 56 61 72 74 75 76 77

1. 2.

3.

4. 5. 6.

7.

8. 9. 10. 11.

Bibliography

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EXECUTIVE SUMMARY
The products and the company are very familiar to the people in the urban area. In some areas there is a tough competition with major players such as Kajaria, Somany and Nitco etc. But along with the competition from national players there is a dominating threat in the market from local players which are generally from Gujarat (i.e. morbi tiles) they have exploited the market trends , they sell at very low rates and offer huge commissions. The quality also varies. So, as the consumer in the small town prefer having cheap tiles. local tiles purely satisfied these needs and therefore sells more. Bell products are known in the market for its quality. Many dealers were interested in sub dealership rather than dealership because of financial constraints, lack of awareness and motivation. So the company should try to concentrate on promotional plans. Existing dealers complaint of packaging procedures. Many dealers complaint of an imperfect, unattractive, insufficient, uninformative catalogue and compared with kajarias catalogue, which is quite impressive as the people in small towns mainly gets attract due to colors, shades, designs rather than quality which is a key strength of Bell products so the company should try to make the catalogue more impressive. But right now the sales of the company are decreased due to the competition.

PART I
ORGANISATIONAL PROFILE

CHAPTER - 1
INTRODUCTION :After preparation of the financial statements, one may be interested in knowing the position of an enterprise from different points of view. This can be done by analyzing the financial statement with the help of different tools of analysis such as ratio analysis, funds flow analysis, cash flow analysis, comparative statement analysis, etc. Here I have done financial analysis by ratios. In this process, a meaningful relationship is established between two or more accounting figures for comparison. Financial ratios are widely used for modeling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Financial statements are those statements which provide information about profitability and financial position of a business. It includes two statements, i.e., profit & loss a/c or income statement and balance sheet or position statement. The income statement presents the summary of the income earned and the expenses incurred during a financial year. Position statement presents the financial position of the business at the end of the year. Before understanding the meaning of analysis of financial statements, it is necessary to understand the meaning of analysis and financial statements . Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. Thus, analysis of financial statements means establishing meaningful relationship between various items of the two financial statements, i.e., income statement and position statement.

CHAPTER - 2
COMPANY PROFILE:-

TYPE

:- Private Limited Company

INCORPORATED ON :- 18 th October , 1985 REGISTERED OFFICE :Address :- Village : Dora, Taluka : Amod, District :Bharuch-392 230. Gujarat (India). Phone :- +91-2641-235151,235153 Fax :- +91-2641-235160 KEY PERSON INDUSTRY PRODUCTS EMPLOYEES WEBSITE :- Mr. K M Pai (MD) :- Ceramic Tiles :- Wall & Floor Tiles :- + 700 :- http://www.bellceramic.com

EVOLUTION & HISTORY :10

 The company was incorporated on 18th October,1985, at Dora, Gujarat, and obtained a certificate of commencement of business on 8th November, 1985. It was promoted by R. K. Jatia and R. G. N. Swamy, a non resident India. The aim of the company is to manufacture world class ceramic glazed wall and floor tiles. The company undertook to set up a plant for the manufacture of 20000 tonnes per annum of ceramic wall tiles and floor tiles. The company proposed install a project to manufacture ceramic glazed floor tiles with the installed capacity of 55000 tonnes per annum at Hoskote, Karnataka in 1994. In 1996, the project of floor tiles with installed capacity of 55000 TPA was undertaken. Present installed capacity of Bell is 10 lacs square meters per month. This company is accredited with ISO 9001:2000 and 14001.

Gujarat Plant : Located at village DORA ,TA. AMOD, DIST.- BHARUCH, GUJARAT. The place is around 60 km away from VADODARA. Dora plant has production installed capacity of 63.87 lacs square meters per annum of wall and floor tiles. This is the Registered office of the Bell Ceramics Ltd. Present capacity of the Plant is 17000 sqm per day.

Karnataka Plant : Located at Village CHOKKANHALLI , TA. HOSKOTE , DIST.BANGLORE (Rural) , KARNATAKA. Bangalore plant has an installed capacity of 82.13 lacs square meters per 11

annum of floor tiles.

The plant was started on 26th March, 1998.

The place is about 70 km away from Banglore City. This plant produces floor tiles only.

VISION :To become the most preferred provider of tiling solutions.

MISSION:To delight every individual associated with Bell by providing innovative and quality product & services on an ongoing basis.

12

ORGANISATION CHART OF THE COMPANY :-

Board of Directors

Managing Director

Corporate Office

Dora Unit

Hoskote Unit

Finance Department

Account Department

Finance Department

Marketing Department

HRD Department

Marketing Department

Production Department

Production Department

Stores Department

Stores Department

QC Department

QC Department

Purchase Department

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PRODUCTS OF BELL CERAMIC :-

BELL CERAMICS
HOSKOTE (KARNATAKA) (1995)

DORA (GUJARAT) 1985

WALL TILES

FLOOR TILES

FLOOR TILES

QUALITY

FIRST

COMMERCIAL

ECONOMY

DISTRIBUTION NETWORK :-

SELLING

From Warehouse

From Depot

Depot (Stock Transfer)

Dealer

Project

Dealers

Project

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ORIENT CERAMICS & INDUSTRIES LTD. : OCIL was formed on 18th May 1977 as a public limited company and has been at the forefront of innovation in home dcor ever since. The Company's manufacturing unit is at Sikandarabad, Uttar Pradesh. Orient Ceramics and Industries Limited is an India-based company. The Company is engaged in manufacture of Ceramic Tiles. The Company also manufactures ultra-vitrified tiles. The Company's product portfolio includes Orient Tiles, Europa Tiles and Stiler Tiles. Current Installed Capacity of the company is 220000 TPA.

VISION OF THE COMPANY :Delight Customers & Reward shareholders by providing Innovative solutions that are FAMOUS for QUALITY

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BELL ACQUISITION :-

OCIL had bought 68% shares of Bell Ceramics in December, 2010. OCIL, which became India's largest tile maker after the acquisition with a 10 per cent market share at present, had bought 68% in Bell at a cost of Rs 19 crore. Bell's operational efficiency improved from 60-65 per cent to 80-85 per cent with little or no investments. Bells production capacity increases to 30 crore square feet of walls and floors every year after acquisition. Bells distribution network is very good in west and south zone of India, while Orients distribution network is very good in north zone. Because of acquisition both companys distribution network can be spread in all over

16

India.

Major Competitors of Bell Ceramic Tiles in India :1. HR JOHNSON 2. KAJARIA CERAMICS LTD. 3. SOMANY PILKINGTON LTD. 4. MURUDESHWAR CERAMICS LTD. 5. NITCO TILES LTD. 6. ORIENT CERAMICS LTD. 7. RESTILLE CERAMICS LTD. 8. EURO CERAMICS PVT LTD.

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CHAPTER 3 :- FINANCE DEPARTMENT

ORGANISATION CHART :-

MD Mr. K M Pai GM Mr. G P Zala

Mr. G P Zala President (Marketing) Mr. A N Rangaswamy

Manager At Corporate

Manager At Dora

Manager At Hoskote Officers

Officers

Officers

ACTIVITIES DONE BY FINANCE DEPARTMENT :Finance department of the company is at corporate office, Vadodara. All financial activities are handled by the finance department at corporate office. Following activities are done by the finance department. Handling Bank loan and its transactions. Handling selling & distribution expenses like salary of salesmen, traveling expenses, commission of the salesman, advertisement expenses, etc. Handling administration cost, finance cost, taxes, etc. Payment to creditors. Consolidated statements are also made here.

18

MY LEARNING FROM THE STUDY OF COMPANY :Before summer internship at Bell Ceramic, I had not any experience of Working in a good company. I have learn many areas of the company. Before joining bell I was only known about tiles are that it is used for flooring and wall. But I was not aware about different types of tiles like vitrified tile, ceramic tile, joint free (edge- cut) tile, group 5 series etc. and I come to know about the history of the tile and its industrial statistics. So that is also helpful to me. During my training, we went to Dora for three days and we learnt the process for making tiles practically. We also learnt about the different departments like account department, hr department, production department, stores department, warehouse department, purchase department, etc. under the observation of head of respective department. At dora, they are using the FIFO method for inventory. We are also aware from taxes related to production company. After doing the company, I can aware about the activities done in the different departments, especially in finance department. I understand the difference between practical knowledge and theoretical knowledge.

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PART II
PROJECT STUDY

20

CHAPTER 4 :- OVERVIEW OF STUDY

SCOPE OF THE STUDY :Ceramic tiles come under the Building material Industry. Over the years , Indian building material Industry grow at a fast pace of almost 16 % per annum due to boom in real estate and construction industry. Increase in income levels and availability of a range of financing options for housing is enabling rapid growth in housing construction. In India , growth rate of building material industry is at very high and constantly growing. By this project finding , we have been trying to catch the demand and opportunities of various tile making organizations for their commercial and residential needs.

OBJECTIVE OF THE STUDTY :My soul objective of this report confines with following facts : Ratio analysis is a powerful tool of financial analysis. It gives a fair indication of a companys financial health. Calculation of ratios to know the financial position of the company. Comparison with the past years ratio to know the companys performance, i.e, Time series analysis. Comparison of ratios with other tile producing companies to know the companys position in the market. It gives the indication of direction of change and reflects whether the organizations financial position and performance has improved, deteriorated or remained constant over period of time.

21

 To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.

CHAPTER 5 :- RESEARCH METHODOLOGY

METHODOLOGY :The research involved extensive and intensive studies of Bell Ceramics Ltd. In this report a sincere effort has been made to study the financial statement analysis of the company. During this training, I study the financial position and performance of the company. At last , I have given the interpretation and conclusion of the study.

DATA RESOURCES :The whole of my study based on secondary data. Secondary data are most useful to me for my report. SECONDARY DATA :During the time period of my study, I have taken help of the following secondary data. Induction material of the company Annual report of the company Balance sheet of last four years of the company Income statement of last four years of the company. Financial statement of the orient and somany.

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CHAPTER 6 :- RATIO ANALYSIS

Meaning of Ratio Analysis :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."

Importance of Ratio Analysis : To assess the earning capacity or profitability of the firm. To assess the operational efficiency and managerial effectiveness. To assess the short term as well as long tern solvency of the company. To identify the reasons for change in profitability and financial position of the company. To make time series analysis. To make forecasts about future prospects of the company. To assess the progress of the company over a period of time. To help in decision making and control. To guide or determine the dividend action.

23

 To provide important information for granting credit.

Standards of Ratio Analysis :The Ratio Analysis involves comparison for a useful interpretation of the financial statements. A single ratio itself does not indicate favourable or unfavourable condition. It should be compared with some standard. Standard of comparison may consist of :

1 ) Past Ratios :Ratios calculated from the past financial statements of the same firm.

2 ) Competitors Ratios :Ratios of some selected companies, especially the most progressive and successful competitor, at the same point in time.

3 ) Industry Ratio :Ratios of the industries to which the company belongs. In this case, Tile Industry.

4 ) Projected Ratio :Ratios developed using the projected, or proforma, financial statements of the same firm.

Advantages & Uses 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:

24

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, debentureholders, 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 summarize 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 utilizing the resources. 7. To workout short-term financial position:25

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 use of a single ratio:Ratios can be useful only when they are computed in sufficient large number. A single ratio usually, does not convey much of meaning. To make a better understanding or interpretation number of ratios have to be calculated which is likely to confused the analyst in making any meaningful conclusions. 2. Lack of standards:There are no well accepted standards or rules of thumbs for all ratios, which can be accepted as norms. It renders interpretation of difficult ratios. 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:-

26

Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision 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. Incomparability :Not only industries differ in nature , the forms of similar business widely differ in their sizes and accounting procedures. It makes comparison of ratio difficult and misleading.

Sources of data for Financial Ratios :Values used in calculating the financial ratios can be taken from following sources : Balance Sheet Income statement

27

 Statement of cash flows Statement of Retained earnings

Purpose and Types of Ratios :1) Profitability Ratio :It measures the firms use of its assets and control of its expenses to generate an acceptable rate of return.

2) Liquidity Ratio :It measure the availability of cash to pay debt. 3) Efficiency Ratio :It measure how quickly a firm converts non-cash assets to cash assets.

4) Debt Ratio :It measure the firm's ability to repay long-term debt.

5) Market Ratio :It measure investor response to owning a company's stock and also the cost of issuing stock.

Forms of Ratios :1) As a pure ratio:For example the equity share capital of a company is Rs. 20,00,000 & the preference share capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is 20,00,000: 5,00,000 or simply 4:1.

2) As a rate of times:In the above case the equity share capital may also be described as 4 times that of preference share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit sales are Rs. 30,00,000. sothe ratio of credit sales to cash sales can be

28

described as 2.5 [30,00,000/12,00,000]or simply by saying that the credit sales are 2.5 times that of cash sales.

3) As a percentage:In such a case, one item may be expressed as a percentage of some other item. For example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000, then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000]

Steps in Ratio Analysis :The Ratio analysis require three steps as follows : 1) Collect the information from the financial statements. 2) To arrange information in a way to highlight significant relationship. 3) Comparing the ratio with some predetermined standards.

Users of Financial Ratios :Analysis of financial statement has become very significant due to widespread interest of various parties in the financial result of a business unit. The various persons interested in the analysis of financial statements are:-

1 ) Short- term creditors

They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not.

2 ) Long term creditors

They are interested in knowing whether the principal amount and interest thereon will be paid on time or not.

3 ) Shareholders
They are interested in profitability, return and capital appreciation.

4 ) Management

29

The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions.

5 ) Trade unions
They are interested in financial statements for negotiating the wages or salaries or bonus agreement with management.

6 ) Taxation authorities
These authorities are interested in financial statements for determining the tax liability.

7 ) Researchers
They are interested in the financial statements in undertaking research in business affairs and practices.

8 ) Employees
They are interested as it enables them to justify their demands for bonus and increase in remuneration.

Classification of Various Ratios :1 ) Profitability Ratio :A) In relation to sales

Gross profit ratio Operating profit ratio Net profit ratio Expense ratio

B) In relation to investment : Return on investment Return on Equity Return on total asset Earning per share Price earning ratio

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2 ) Liquidity Ratio : Current ratio Acid test ratio Cash ratio Cash Conversion Cycle

3 ) Leverage Ratio : Debt equity ratio Debt asset ratio Interest coverage ratio

4 ) Turnover Ratio : Inventory turnover Debtors turnover Average collection period Fixed asset turnover Total asset turnover Working capital turnover

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CHAPTER 7 :- RATIO CALCULATIONS

PROFITABILITY RATIOS :In the income statement, there are four levels of profit or profit margins gross profit, operating profit, pretax profit and net profit. The term "margin" can apply to the absolute number for a given profit level and/or the number as a percentage of net sales/revenues. The objective of margin analysis is to detect consistency or positive/negative trends in a company's earnings. Positive profit margin analysis translates into positive investment quality. Generally, two major types of profitability ratios are calculated : A ) In relation to Sales B ) In relation to Investment.

A ) In relation to Sales :1 ) GROSS PROFIT RATIO :The Gross Profit Ratio reflects the efficiency with which management

32

produces each unit of product. This ratio indicates the average spread between the cost of goods sold and sales revenue. The gross profit margin is used to analyze how efficiently a company is using its raw materials, labor and manufacturing-related fixed assets to generate profits. A higher margin percentage is a favorable profit indicator.

Formula :Gross Profit Gross Profit Ratio = --------------------- x 100 Net Sales Gross Profit = Sales Cost of Goods sold Comparison with past years Year Gross Profit Net Sales Gross Profit Ratio 2007- 08 -565.94 16184.2 -3.50% 2008- 09 1235.97 18880.8 6.55% 2009-10 350.39 15330.2 2.30% 2010-11 533.34 14677.5 3.63%

Gross Profit Ratio 8 6 Ratio (in %) 4 2 0 -2 -4 -3.5 2007-08 2008-09 2009-10 Year 2010-11

6.55 3.63

2.3

Analysis on the basis of Past years :The companys gross profit for the year 2010-11 is higher than 2009-10. This is good sign for the company. This ratio shows that the company has to reduce its cost of goods sold (manufacturing related expenses) to increase its Gross profit. Comparison with competitors Gross Profit Net Sales Bell 533.34 14677.5 Orient 1821.00 28964.00 Somany 5166.00 71058.00

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Gross Profit Ratio

3.63%

6.29%

7.27%

Gross Profit Ratio

8 7 6 5 4 3 2 1 0 7.27 6.29

Ratio (in %)

3.63

Bell

Orient

Somany

Company

Analysis on the basis of Competitors :From the above three companies, Somanys gross profit and net sales both are higher than orient and bell. Somanys cost of goods sold is less than its sells. This ratio shows that manufacturing related expenses of Somany are lower against its sales. Bell Ceramic has to reduce its cost of goods sold and increase its sales to increase the gross profit.

2 ) OPERATING PROFIT MARGIN :The operating margin is the measurement of managements efficiency. It compares the quality of a companys activity to its competitors. A business that has a higher operating margin is generally doing better as long as the gains didn't come by piling on debt or taking highly risky speculations with shareholders' money. Management has much more control over operating expenses than its cost of sales outlays. The operating margin also serves as an indicator of the cost-competitiveness compared to peers where individual costs cannot be determined easily.

Formula :Operating Profit Operating Profit Margin = ----------------------- x 100 Net Sales

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Comparison with past years Year Operating Profit Net Sales Operating Profit Margin 2007- 08 -799.97 16184.2 -4.94% 2008- 09 1050.98 18880.8 5.57% 2009-10 140.74 15330.2 0.92% 2010-11 0.10 14677.5 0.001%

Operating Profit Ratio

6 4 Ratio(in %) 2 0 -2 -4 -4.94 -6 2007-08 2008-09 Year 2009-10 2010-11 0.92 5.57

0.001

Analysis on the basis of Past years :The operating profit ratio of the company for 2010-11 is very lower than last two years, which indicates inefficiency of the management. The company has to increase its operating income to stand in the competition. The management of the company can control the operating expenses to increase its operating profit. Comparison with competitors Operating Profit Net Sales Operating Profit Margin Bell 0.10 14677.5 0.001% Orient 1601.00 28964.00 5.53% Somany 5162.00 71058.00 7.26%

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Operating Profit Margin

8 7.26 5.53

Ratio (in %)

7 6 5 4 3 2 1 0 0.001 Bell

Orient

Som any

Company

Analysis on the basis of Competitors :The operating profit ratio of the company for 2010-11 is very lower than its competitors. Orient and Somanys operating expenses are very less against their sales in compare to Bell Ceramic. The management of the Bell Ceramic has to reduce its operating expenses to stand in the competition.

3 ) NET PROFIT RATIO :The net profit margin tells us how much of each rupee of sales is left over for the owners after all expenses and taxes. The profit margin tells us how much profit a company makes for every rupee it generates in revenue or sales. Profit margins vary by industry, but all else being equal, the higher a company's profit margin compared to its competitors, the better.

Formula :Net Profit Net Profit Ratio = ---------------- x 100 Net Sales Comparison with past years Year Net profit (PAT) Net Sales Net Profit Ratio 2007- 08 -2182.44 16184.2 -13.50% 2008- 09 33.30 18880.8 0.18% 2009-10 -637.32 15330.2 -4.16% 2010-11 -481.93 14677.5 -3.28%

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Net Profit Ratio 2 0 -2 -4 -6 -8 -10 -12 -14

0.18 -4.16 -3.28

Ratio (in %)

-13.48 2007-08 2008-09 2009-10 2010-11

Year

Analysis on the basis of Past years :The company is doing the loss from last two years. The companys loss for 2010-11 is lower than last year, which is good sign for the company. The company is takeover by Orient Ceramic & Industries Ltd because of the loss. And after the acquisition with Orient Ceramic, Bell has an opportunity to increase its performance again. Comparison with competitors Net profit (PAT) Net Sales Net Profit Ratio Bell -481.93 14677.5 -3.28% Orient 1196.00 28964.00 4.13% Somany 2343.00 71058.00 3.30%

Net Profit Margin

5 4 3

4.13 3.3

Ratio (in %)

2 1 0 -1 -2 -3 -4 -3.28 Bell Orient Som any

Company

Analysis on the basis of Competitors :37

Here, Net profit margin of the Orient Ceramic is higher, which shows the efficient management of the company. Now, the Bell Ceramic is takeovered by the Orient, Bells management has a good opportunity to work under the effective management. And because of this Bell can improve its performance.

4 ) EXPENSE RATIO :The specific expense ratio explains the changes in the profit margin ratio. This ratio indicates the specific variations in expense. This ratios light on managerial policies and programmes. The high ratio indicates the high expenses of the company. The low ratio indicates the low expenses of the company.

Formula :Specific Expense Expense Ratio = ------------------------ x 100 Net Sales Comparison with past years Year Material Expense Personnel Expense Manufacturing & Selling Exp. Net Sales Material Expense Ratio Personnel Expense Ratio Manufacturing & Selling Exp. Ratio 2007- 08 5514.27 1622.86 7697.88 16184.2 34.07% 10.03% 47.56% 2008- 09 6069.02 1682.38 9639.66 18880.8 32.14% 8.91% 51.06% 2009-10 4585.74 1611.8 7258.02 15330.2 29.91% 10.51% 49.11% 2010-11 4506.69 1757.40 7487.55 14677.5 30.70% 11.97% 51.01%

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Specific Expense Ratio

60 50 Ratio (in %) 40 30 20 10.03 10 0 2007-08 2008-09 Year 2009-10 2010-11 8.91 10.51 11.97 34.07 47.56 51.06 49.11 51.01

32.14

29.91

30.7

Material Exp. Ratio Personnel Exp.Ratio Mnfg. Exp. Ratio

Analysis on the basis of Past years :All specific expense ratios of the company for 2010-11 are little increase than last year, which is satisfactory for the company. There is very little fluctuation between all four years specific expense ratio. The company has try to reduce these expenses to increase the net profit. Comparison with competitors Material Expense Personnel Expense Manufacturing & Selling Exp. Net Sales Material Expense Ratio Personnel Expense Ratio Manufacturing & Selling Exp. Ratio Bell 4506.69 1757.40 7487.55 14677.5 30.70% 11.97% 51.01% Orient 6348.00 3297.00 11551.00 28964.00 21.92% 11.38% 39.88% Somany 10364.00 5431.00 22503.00 71058.00 14.60% 7.64% 31.67%

39

Specific Expense Ratio

60 50 51.01 39.88 30.7 21.92 14.6 11.97 11.38 7.64 31.67

Ratio (in %)

40 30 20 10 0

Bell Orient Somany

Material Exp. Personnel Mnfg. Exp. Exp.

Expenses

Analysis on the basis of Competitors :If we compare the Bell Ceramic with its competitors, we can show that the material, personnel and manufacturing expenses of the company are higher than the Orient and Somany. Bell Ceramic has to reduce its expenses to earn the net profit.

B ) In relation to Investment :1 ) RETURN ON INVESTMENT :The conventional approach of calculating ROI is to divide PAT by Investment. Investment represent pool of funds supplied by shareholders and lenders, while PAT represent residue income of shareholders. Therefore it is unsound to use PAT in calculation of ROI. We have use EBITDA level to calculate the ROI.

Formula :EBITDA Return on Investment = ------------------ x 100 Total Asset EBITDA = Earnings Before Interest, taxes, depreciation and amortization Comparison with past years Year EBITDA Total Asset 2007- 08 332.82 14115.82 40 2008- 09 2170.25 12887.25 2009-10 1255.34 12410.79 2010-11 1109.62 17949.23

Return on Investment

2.36%

16.84%

10.11%

6.18%

Return on Investment
18 16 14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 2.36 16.84

Ratio (in %)

10.11 6.18

Year

Analysis on the basis of Past years :Return on investment of the company is lower than past years, which is not good for the company. For the year 2008-09, this ratio of the company was good. The company has to increase its return ROI. The company received less interest on its investment. Comparison with competitors EBITDA Total Asset Return on Investment Bell 1109.62 17949.25 6.18% Orient 2579.00 17624.67 14.63% Somany 6888.00 32257.00 21.35%

41

Return on Investment
25 21.35 20

Ratio (in %)

15 10 5 0 Bell 6.18

14.63

Orient

Som any

Company

Analysis on the basis of Competitors :ROI of the Somany is higher than other two companies. The high ROI of the company shows the better performance. Bells performance is worst than its competitors.

2 ) RETURN ON EQUITY :This ratio indicates the profitability of an entity's capital investments. If this ratio is lower than the rate at which the company borrows, any further rise in debt will lead to negative earnings growth. This ratio is calculated to see the profitability of owners investment in the company.

Formula :PAT Return on Equity = ------------------- x 100 Net Worth Comparison with past years Year PAT Net Worth Return on Equity 2007- 08 -2182.4 4610.44 -47.33% 2008- 09 33.3 3677.71 0.91% 2009-10 -637.33 3677.71 -17.33% 2010-11 -481.94 8902.28 -5.41%

42

Return on Equity
5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 -50

0.91 -5.41 -17.33

Ratio (in%)

-47.33 2007-08 2008-09 2009-10 2010-11

Year

Analysis on the basis of Past years :As the company is doing loss, company can not give the dividend to the equity shareholders. Companys loss is decreasing, so equity shareholders will get dividend on their shares in near future. Comparison with competitors PAT Net Worth Return on Equity Bell -481.93 8902.28 -5.41% Orient 1196.00 6882.2 17.38% Somany 2343.00 10247 22.87%

Return on Equity

25 20 15 10 5 0 -5 -10

22.87 17.38

Ratio (in %)

-5.41 Bell Orient Som any

Company

Analysis on the basis of Competitors :The Somany Tiles gives more return to its equity shareholders. As we know

43

Bell is suffering from loss and its financial position is not good, it can not give any type of return to equity shareholders. Market price of the share of Bell is also lower than its face value.

3 ) RETURN ON TOTAL ASSET :This ratio indicates how profitable a company is relative to its total assets. The return on assets (ROA) ratio illustrates how well management is employing the company's total assets to make a profit. The higher the return, the more efficient management is in utilizing its asset base.

Formula :PBIT Return on Total Asset = ------------------ x 100 Total Asset PBIT = Profit before Interest and Taxes = Operating Profit Comparison with past years Year PBIT Total Asset Return on Total Asset 2007- 08 -799.97 14115.82 -5.67% 2008- 09 1050.98 12887.25 8.16% 2009-10 140.74 12410.79 1.13% 2010-11 0.10 17949.23 0.001%

Return on Total Asset

10 8

8.16

Ratio (in times)

6 4 2 0 -2 -4 -6 -5.67 2007-08 2008-09 2009-10 2010-11 1.13 0.001

Year

Analysis on the basis of Past years :The management of Bell Ceramic is very inefficient in using the assets to earn

44

more profit. Because of inefficient management, return on total asset is decreases very much. After paying taxes and interest, this ratio will show negativity. Comparison with competitors PBIT Total Asset Return on Total Asset Bell 0.10 17949.25 0.001% Orient 1601.00 17624.67 9.08% Somany 5162.00 32257 16%

Return on Total Asset

16 14 12 10 8 6 4 2 0 16

Ratio (in times)

9.08

0.001 Bell Orient Som any

Company

Analysis on the basis of Competitors :Return on Total Asset of the Bell Ceramic shows its poor performance. Somanys management is very efficient to earn return on its Total Asset.

4 ) EARNING PER SHARE :The profitability of the shareholders investment can be measured by calculating the Earning per Share. EPS simply shows the profitability of the company on a per share basis. The higher EPS indicates the higher earning per share and the lower EPS indicates the lower earning per share. It does not reflect how much is paid as dividend. Formula :PAT Pref. Dividend Earning per Share = -----------------------------No. of Equity Shares 45

Comparison with past years Year PAT No. of Equity Shares Earning per Share 2007- 08 -2182.4 365.21 Rs.-5.98 2008- 09 33.3 365.21 Rs. 0.10 2009-10 -637.33 365.21 Rs.-1.75 2010-11 -481.94 121.74 Rs.-3.96

Earning Per Share

1 0 Ratio (in Rs.) -1 -2 -3 -4 -5 -6 -5.98 2007-08 2008-09 Year 2009-10 2010-11 -3.96 -1.75 0.1

Analysis on the basis of Past years :Preference dividend is not given to the preference shareholder, so it is excluded here. As we seen above, the company is making loss, EPS of the company is negative. Equity shareholder of the company can not earn any rupee per share because of its loss. Comparison with competitors PAT No. of Equity Shares Earning per Share Bell -481.93 121.74 Rs.-3.96 Orient 1196.00 1053 Rs. 1.14 Somany 2343.00 345 Rs. 6.79

Analysis on the basis of Competitors :EPS of the Somany Tiles is higher than bell and orient. Shareholders will like to invest in somanys shares because it has high EPS. If shareholders invest in Bells shares, they have to face loss on their investment.

46

LIQUIDITY RATIOS:Liquidity ratios attempt to measure a company's ability to pay off its shortterm debt obligations. This is done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities. The ratios used here are current, quick and cash ratio. We will also see the cash conversion cycle of the company.

1 ) CURRENT RATIO :The current ratio is a financial ratio designed to tell the level of current assets compared to current liabilities. The current ratio is a measurement of the companys short term solvency. It indicates the availability of current assets in rupees for every one rupee off current liability. The current ratio is also called as working capital ratio, as working capital is the difference between current assets and current liabilities.

Formula :Current Asset

47

Current Ratio = ------------------------Current Liabilities Comparison with past years Year Current Asset (Rs. In Lacs) Current Liabilities (Rs. In lacs) Current Ratio 2007- 08 4998.53 4962.16 1.007: 1 2008- 09 5544.83 5005.8 1.11: 1 2009-10 4679.73 4373.26 1.07: 1 2010-11 5178.59 4261.32 1.22: 1

Current Ratio
1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 Year
Ratio

1.007

1.11

1.07

1.22

Analysis on the basis of Past years :Current ratio measures the ability of the firm to meet its current liabilities. It represent margin of safety for creditors. A ratio of greater than one means that the firm has more current assets than current claims against them. The companys current ratio for the year 2010-11 is 1.22 : 1 which is greater than the past three years, which is good for the company. However, as compare to standard ratio i.e, 2:1 , the companys ratio is lower, liquidity position of the company is increasing. Comparison with competitors Current Asset (Rs. In Lacs) Current Liabilities (Rs. In lacs) Current Ratio Bell 5178.59 4261.32 1.22 : 1 Orient 14140.01 6586.29 2.15 : 1 Somany 30193 15701 1.92 : 1

48

Current Ratio
2.5 2 2.15 1.92

Ratio

1.5 1 0.5 0

1.22

Bell

Orient

Som any

Company

Analysis on the basis of Competitors :Current ratio of the Orient Ceramic is better, because it is higher than the standard ratio 2:1. Perfect liquidity position of the company can be measure after excluding inventory.

2 ) ACID TEST RATIO (QUICK RATIO) :The Acid Test Ratio (also called the Quick Test or Liquidity Ratio), establishes a relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Inventories are considered to be less liquid. Inventories are required some time for realizing into cash. Therefore, Inventories can not be included in the current asset to calculate this ratio. This ratio gives more accurate result than the current ratio.

Formula :Current Asset - Inventories Quick Ratio = -------------------------------------Current Liabilities Comparison with past years Year Current Asset (Rs. In Lacs) Inventories 2007- 08 4998.53 3077.06 49 2008- 09 5544.83 3720.33 2009-10 4679.73 2984.12 2010-11 5178.59 3412.84

Current Liabilities (Rs. In lacs) Quick Ratio

4962.16 0.39: 1

5005.8 0.36: 1

4373.26 0.39: 1

4261.32 0.41: 1

Acid Test Ratio 0.41 0.4 0.39 0.38 0.37 0.36 0.35 0.34 0.33 0.41 0.39 0.39

Ratio

0.36

2007-08

2008-09

2009-10

2010-11

Year

Analysis on the basis of Past years :The standard quick ratio is 1 : 1. The companys quick ratio for the year 201011 is higher than past three years, which is good for the company but it is lower than the standard ratio. Companys maximum fund is locked in the inventory. Comparison with Competitors Current Asset (Rs. In Lacs) Inventories Current Liabilities (Rs. In lacs) Quick Ratio Bell 5178.59 3412.84 4261.32 0.41: 1 Orient 14140.01 6905.24 6586.29 1.10: 1 Somany 30193 9764 15701 1.30: 1

Quick Ratio
1.4 1.2 1 Ratio 0.8 0.6 0.4 0.2 0 Bell Orient Som any Com pany 1.3 1.1

0.41

Analysis on the basis of Competitors :Orient and Somanys quick ratio is higher than the standard ratio, which 50

shows that these companies have less inventory level. Bells inventory level is high and its more funds are blocked in inventory. This ratio shows that Bells liquidity position is not good.

3 ) CASH RATIO :Cash is the most liquid asset. Trade investment or marketable securities are equivalent of cash, therefore they may be included in the computation of cash ratio.

Formula :Cash + Marketable securities Cash Ratio = -----------------------------------------Current Liabilities Comparison with past years Year Cash Equivalents Marketable Securities Current Liabilities Cash Ratio 2007- 08 49.31 0 4962.16 0.0099 : 1 2008- 09 40.43 0 5005.8 0.0081 : 1 2009-10 47.16 0 4373.26 0.011 : 1 2010-11 56.15 0 4261.32 0.013 : 1

Cash Ratio
0.014 0.012 Ratio (in %) 0.01 0.008 0.006 0.004 0.002 0 2007-08 2008-09 2009-10 2010-11 Year 0.0099 0.0081 0.011 0.013

Analysis on the basis of Past years :This company carries small amount of cash. There is nothing to be worried about the lack of cash, because the company has reserve borrowing power. And the companys cash and bank balances also continuously increasing from the year 2008-09.

51

Comparison with competitors Cash Equivalents Marketable Securities Current Liabilities Cash Ratio Bell 56.15 0 4261.32 0.013 : 1 Orient 189.42 0 6586.29 0.029 : 1 Somany 1472 0 15701 0.094 : 1

Cash Ratio 0.1 0.08 Ratio (in %) 0.06 0.04 0.02 0.013 0 Bell Orient Som any Com pany 0.029

0.094

Analysis on the basis of Competitors :The Bell Ceramic has less cash in comparing to its competitors. But bell has taken the cash credit from the Bank of India and Punjab National Bank. Because of CC facility, the company is not worried about the lack of cash.

4 ) CASH CONVERSION CYCLE :The cash conversion cycle (CCC) measures the number of days a company's cash is tied up in the the production and sales process of its operations and the benefit it gets from payment terms from its creditors. The shorter this cycle, the more liquid the company's working capital position is. The CCC is also known as the "cash" or "operating" cycle.

Formula :Cash Conversion Cycle = DIO + DSO DPO Where, DIO = Days Inventory Outstanding DSO = Days Sales Outstanding 52

DPO = Days Payable Outstanding Closing Inventory DIO = -------------------------Net Sales per Day Where, Net Sales per Day = Net Sales / 365 Comparison with past years Year Closing Inventory Net Sales per Day Days Inventory outstanding 2007- 08 3077.06 44.34 69 2008- 09 3720.33 51.73 72 2009-10 2984.12 42.00 69 2010-11 3412.84 40.21 85

Comparison with competitors Closing Inventory Net Sales per Day Days Inventory outstanding Bell 3412.84 40.21 85 Closing Debtor DSO = ------------------------Net Sales per Day Comparison with past years Year Closing Debtors Net Sales per Day Days Sales outstanding 2007- 08 1196.7 44.34 27 2008- 09 1225.52 51.73 24 2009-10 1248.06 42.00 30 2010-11 1354.45 40.21 34 Orient 6905.24 79.35 87 Somany 9764 194.68 50

Comparison with competitors Closing Debtors Net Sales per Day Days Sales outstanding Bell 1354.45 40.21 34 Orient 4031.7 79.35 51 Somany 12933 194.68 66

Closing Creditors DPO = -----------------------53

Net sales per day Comparison with past years Year Closing Creditors Net Sales per Day Days Payable outstanding 2007- 08 4850.83 44.34 109 2008- 09 4889.9 51.73 95 2009-10 4306.35 42.00 103 2010-11 4261.32 40.21 106

Comparison with competitors Closing Creditors Net Sales per Day Days Payable outstanding Bell 4261.32 40.21 106 Comparison with past years Year DIO + DSO - DPO = Cash Conversion Cycle 2007- 08 69 27 109 -13 days 2008- 09 72 24 95 1 day 2009-10 69 30 103 -4 days 2010-11 85 34 106 13 days Orient 6291.65 79.35 79 Somany 12493 194.68 64

Cash Conversion Cycle

15 10 Ratio (in Days) 5 0 -5 -10 -15 -13 2007-08 2008-09 Year 2009-10 2010-11 1 -4 13

Analysis on the basis of Past years :DIO of the company for current year is higher than last years, it means inventory is taken more time to convert into sales in compare to last years. DSO of the company is also higher, which shows that debtors are taken more time than last years. DPO is quite high than last year, which shows that company is taking 3 times more time than DSO into payment to creditors.

54

Comparison with competitors DIO + DSO - DPO = Cash Conversion Cycle Bell 85 34 106 13 days Orient 87 51 79 59 days Somany 50 66 64 52 days

Cash Conversion Cycle

60 Ratio (in Days) 50 40 30 20 10 0 Bell Orient Som any Com pany 13 59 52

Analysis on the basis of Competitors :DIO of the Somany tiles is better than others. DSO of the Bell Ceramic is better than its competitors. DPO of bell ceramic is higher that shows that it is taken more time into payment of creditors than its competitors. Averagely, CCC of the Bell ceramic is better than its competitors.

LEVERAGE RATIOS :The short term creditors, like bankers and suppliers of raw material, are more concerned with the companys current debt- paying ability. On the other hand, long term creditors, like debenture holders, financial institutions, etc. are more concerned with the companys long term financial strength. To judge the long term financial position of the company, leverage ratios are calculated.

1 ) DEBT EQUITY RATIO :Debt can increase a company's return on equity, but too much can take a 55

company into bankruptcy. The debt to equity ratio measures how much money a company should safely be able to borrow over long periods of time. A great sign of prosperity is when a balance sheet shows the amount of long term debt has been decreasing for one or more years.

Formula :Total Debt Debt Equity Ratio = -------------------------------Share holders Equity Comparison with past years Year Total Debt Shareholders Equity Debt Equity Ratio 2007- 08 14467.54 3652.14 3.96times 2008- 09 14215.34 3652.14 3.89times 2009-10 13106.34 3652.14 3.59times 2010-11 13308.27 1217.38 10.93times

Debt Equity Ratio 12 Ratio (in Times) 10 8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 Year 3.96 3.89 3.59

10.93

Analysis on the basis of Past years :The debt equity ratio shows lenders contribution for each rupee of owners contribution. The debt equity ratio for the year 2010-11 is higher than last three years, which indicates that company more relies on debt funds and less on equity funds. This is not good sign for the company. If the company more focus on equity funds, it has to pay less interest on debt funds. Comparison with competitors Total Debt Shareholders Equity Debt Equity Ratio Bell 9046.95 1217.38 7.43 times 56 Orient 10280.41 1053 9.76 times Somany 19444 690 28.18 times

Debt Equity Ratio

30 25 Ratio (in times) 20 15 10 5 0 Bell Orient Som any Com pany 7.43 9.76 28.18

Analysis on the basis of Competitors :In compare to competitors, Bells long term debt is lower. This is good sign for the company. Bells debt equity ratio is lower than its competitors, which is good for the company.

2 ) DEBT ASSET RATIO :The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on leverage, i.e, money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. Total capital Employed = Total Net Asset

Formula :Total Debt Debt Ratio = ----------------------Total Asset Comparison with past years Year Total Debt Total Asset 2007- 08 9505.38 14115.82 2008- 09 9209.54 12887.25 2009-10 8733.08 12410.79 2010-11 9046.95 17949.23

57

Debt Asset Ratio

0.67 : 1

0.71 : 1

0.70 : 1

0.50 : 1

Debt Asset Ratio 0.8 0.6 Ratio 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 Year

0.67

0.71

0.7 0.5

Analysis on the basis of Past years :The debt asset ratio measures the extent to which borrowed funds support the firms assets. The company is having lower ratio than past years. It indicates that less assets are financed with the debts fund. Comparison with competitors Total Debt Total Asset Debt Ratio Bell 9046.95 17949.25 0.50: 1 Orient 10280.41 17624.67 0.58: 1 Somany 19444 32257 0.60: 1

Debt Asset Ratio

0.6 0.58 0.56 Ratio 0.54 0.52 0.5 0.48 0.46 0.44 Bell Orient Som any Com pany 0.5 0.6 0.58

Analysis on the basis of Competitors :This ratio shows that the Bell Ceramic has stronger position of equity funds

58

than its competitors. Bell Ceramic is using less leverages than orient and Somany.

3 ) INTEREST COVERAGE RATIO :The Interest coverage ratio is used to test the companys debt servicing capacity. This ratio shows the number of times the interest charges are covered by funds that are ordinarily available for their payment. A higher ratio is desirable but too high ratio indicates that the company is very conservative in using debt, and that it is not using credit to the best advantage of shareholders. A lower ratio indicates excessive use of debt, or inefficient operations.

Formula :EBIT Interest Coverage Ratio = ---------------------Interest EBIT = Earnings Before Interest & taxes. Comparison with past years Year EBIT Interest Interest Coverage Ratio 2007- 08 -799.97 1295.48 -0.62 2008- 09 1050.98 1163.21 0.90 2009-10 140.74 1088.02 0.13 2010-11 0.10 1534.30 0.0001

Interest Coverage Ratio

1 0.8 Ratio (in Times) 0.6 0.4 0.2 0 -0.2 -0.4 -0.6 -0.8 2007-08 2008-09 Year 2009-10 2010-11 -0.62 0.13 0.0001

0.9

Analysis on the basis of Past years :-

59

The interest coverage ratio of the company is very lower than past two years, which shows inefficient operations of the company. This is not satisfactory for debt providers. When a company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable. Comparison with competitors EBIT Interest Interest Coverage Ratio Bell 0.10 1534.30 0.0001
Interest Coverage Ratio
3 2.5 Ratio (in times) 2 1.5 1 0.5 0 0.0001 Bell Orient Som any 1.92 2.88

Orient 1601.00 832.00 1.92

Somany 5162.00 1795.00 2.88

Com pany

Analysis on the basis of Competitors :Bell Ceramics interest coverage ratio is lower than its competitors. This is not satisfactory for the debt providers of the Bell Ceramic in compare to its competitors. The interest coverage ratio of Bell is lower than 1.5, which shows questionable position of the company to cover the interest expenses.

TURNOVER RATIOS
Turnover Ratio indicate the speed with which assets are being converted or turned over into sales. These ratios also known as Activity Ratios. These ratios are employed to evaluate the efficiency with which the company manages and utilizes its assets.

60

1 ) INVENTORY TURNOVER RATIO :The inventory turnover ratio, also known as inventory turn, tells an investor how often a company sells through its inventory. Generally, the faster inventory is turned, the less risk of loss and the more efficient management is handling capital.

Formula :Net Sales Inventory Turnover = -----------------------Closing Inventory Comparison with past years Year Net Sales Closing Inventory Inventory Turnover 2007- 08 16184.2 3077.06 5.26times 2008- 09 18880.8 3720.33 5.08times 2009-10 15330.2 2984.12 5.14times 2010-11 14677.5 3412.84 4.30times

Inventory Turnover Ratio

6 Ratio (in Times) 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 Year

5.26

5.08

5.14 4.3

Analysis on the basis of Past years :Inventory turnover indicates the efficiency of the company in producing and selling the tiles. It is lower than the past three years. Days of Inventory holding also increases from last years, i.e, 360/4.30 = 84 days. It implies that, Company maintains excessive inventory level than demanded by production and sales. Slow moving of inventory than last years.

61

Comparison with competitors Net Sales Closing Inventory Inventory Turnover Bell 14677.5 3412.84 4.30 times Orient 28964.00 6905.24 4.19 times Somany 71058.00 9764 7.28 times

Inventory Turnover
8 7

7.28

Ratio (in times)

6 5 4 3 2 1 0 Bell Orient Som any 4.3 4.19

Company

Analysis on the basis of Competitors :Inventory turnover ratio of Bell is lower than Somany, which indicates that the somanys inventory moving speed is higher than bell ceramics.

2 ) DEBTORS TURNOVER RATIO :The company sells goods for cash and credit. When the company extends credits to its customers, debtors are created in the companys accounts. Debtors are convertible into cash in short period of time, therefore they are included in the current assets. The liquidity position of the company depends on the quality of debtors.

Formula:Net Sales Debtors Turnover = --------------------Closing Debtors Comparison with past years Year Net Sales 2007- 08 16184.2 2008- 09 18880.8 2009-10 15330.2 2010-11 14677.5

62

Closing Debtors Debtors Turnover

1196.7 13.52times

1225.52 15.41times

1248.06 12.28times

1354.45 10.84times

Debtors Turnover Ratio

16 14 12 10 8 6 4 2 0 15.41 13.52 12.28 10.84

Ratio (in Times)

2007-08

2008-09

2009-10

2010-11

Year

Analysis on the basis of Past years :Generally, the higher the value of debtors turnover, the more efficient is the management of credit. But here, Debtors turnover ratio for the current year is lower than the past years, which shows the less efficient management of credit than last years. As the companys debtors turnover ratio is decreasing since three years, company has to improve the policies related to credit management. Comparison with competitors Net Sales Closing Debtors Debtors Turnover Bell 14677.5 1354.45 10.84 times Orient 28964.00 4031.7 7.18 times Somany 71058.00 12933 5.49 times

Debtors Turnover Ratio

12 10 Ratio (in times) 8 6 4 2 0 Bell Orient Som any Com pany 7.18 5.49

10.84

63

Analysis on the basis of Competitors :Collection of the debtors are made in 33 days (365 / 10.84) for bell ceramic, which is lower than its competitors. This ratio shows that debtors of Bell are converted into cash in the short period. Because of this Bell Ceramic can pay its debt earlier and can use the cash for inventory purchase.

3 ) AVERAGE COLLECTION PERIOD :The Average collection period indicates the time in which the company collect its debt. The lower collection period shows the efficient credit management. The higher collection period shows the inefficient credit management of the company.

Formula :360 Average Collection Period = ----------------------Debtors Turnover Comparison with past years Year Debtors Turnover Average Collection Period 2007- 08 13.52 27 days 2008- 09 15.41 23 days 2009-10 12.28 29 days 2010-11 10.84 33 days

Average Collection Period

35 Ratio (in Days) 30 25 20 15 10 5 0 2007-08 2008-09 2009-10 2010-11 Year 27 23 29 33

64

Analysis on the basis of Past years :Average collection period of the company is higher than last three years, which indicates the liberal collection policy of the company and more funds locked up in the debtors. The credit period of the company should be short and collection of debts should be made timely. Comparison with competitors Debtors Turnover Average Collection Period Bell 10.84 33 days Orient 7.18 50 days Somany 5.49 66 days

Average collection Period 70 60 Ratio (in days) 50 40 30 20 10 0 Bell Orient Som any Com pany 33 50

66

Analysis on the basis of Competitors :Average collection period of the Bell Ceramic is better than its competitors. Whether it is higher than 30 days, it is satisfactory for the company.

4 ) FIXED ASSET TURNOVER RATIO :The company may wish to know its efficiency of utilizing fixed assets. To compute this ratio Net fixed assets are used. Net Fixed Asset = Fixed Asset Depreciation It measures sales per rupee of investment in fixed asset and efficiency with which fixed assets are employed. The high ratio indicates a high degree of efficiency of company in asset utilization. The low ratio indicates inefficient use of assets.

Formula :-

65

Net Sales Fixed Asset Turnover = --------------------Net Fixed Asset Comparison with past years Year Net Sales Net Fixed Asset Fixed Asset Turnover 2007- 08 16184.2 12645.4 1.28times 2008- 09 18880.8 11890.7 1.59times 2009-10 15330.2 10806.9 1.41times 2010-11 14677.5 16307.9 0.90times

Fixed Asset Turnover Ratio

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1.59 1.28 1.41

Ratio (in Times)

0.9

2007-08

2008-09 Year

2009-10

2010-11

Analysis on the basis of Past years :The Fixed asset turnover of the company for current year reflects the lower ratio than the past three years, which indicates the inefficient use of fixed asset by the management. Comparison with competitors Net Sales Net Fixed Asset Fixed Asset Turnover Bell 14677.5 16307.9 0.90 times Orient 28964.00 8063.13 3.59 times Somany 71058.00 17593 4.04 times

66

Fixed Asset Turnover

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

4.04 3.59

Ratio (in times)

0.9

Bell

Orient

Som any

Com pany

Analysis on the basis of Competitors :Fixed Asset turnover ratio of the Somany Tiles is better in compare to its competitors. Bell Ceramic has very lower fixed asset turnover ratio. It is indicate that the Bell Ceramic is not used its fixed asset properly. The management of the company is inefficient in using the fixed asset against its sales.

5 ) TOTAL ASSET TURNOVER :Total asset turnover is meant to measure a company's efficiency in using its assets and ability in generating sales from all financial resources committed to total asset. The higher the number, the better for the company, although investors must be sure compare a business to its industry. The higher a company's asset turnover, the lower its profit margin tends to be (and visa versa).

Formula :Net Sales Total Asset Turnover = --------------------Total Asset Comparison with past years Year Net sales Total Asset Total Asset Turnover 2007- 08 16184.2 14115.82 1.15times 2008- 09 18880.8 12887.25 1.47times 2009-10 15330.2 12410.79 1.24times 2010-11 14677.5 17949.23 0.82times

67

Total Asset Turnover Ratio

1.6 1.4 Ratio (in Times) 1.2 1 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 Year 1.15 1.47 1.24 0.82

Analysis on the basis of Past years :The companys total asset turnover ratio for 2010-11 is lower than past years, which indicates less ability of the company in generating sales from total asset. Ability of the management of the company is decreasing. Comparison with Competitors Net sales Total Asset Total Asset Turnover Bell 14677.5 17949.25 0.82 times Orient 28964.00 17624.67 1.64 times Somany 71058.00 32257 2.20 times

Total Asset Turnover

2.5

2.2 1.64 0.82

Ratio (in times)

2 1.5 1 0.5 0 Bell Orient Som any

Company

Analysis on the basis of Competitors :Total Asset turnover of Bell Ceramic is lower than its competitors, which shows inefficiency of the management in generating sales by its total asset.

6 ) WORKING CAPITAL TURNOVER :The company may like to relate working capital with the sales. Working

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capital is the difference of current assets and current liabilities. It is also known as the Net Current Asset. Working capital tells how much money is on hand for the company to use in day to day operations. The low working capital ratio indicates the good balance of cash on hand. The high ratio indicates less balance of cash on hand against sells.

Formula :Net Sales Working Capital Turnover = ---------------------Working Capital Working Capital = Current Asset Current Liabilities Comparison with past years Year Net Sales Working capital Working Capital Turnover 2007- 08 16184.2 36.37 445 Times 2008- 09 18880.8 539.03 35.03Times 2009-10 15330.2 306.47 50.02Times 2010-11 14677.5 917.27 16 Times

Working Capital Turnover

450 400 350 300 250 200 150 100 50 0 445

Ratio (in Times)

35.03 2007-08 2008-09

50.02 2009-10

16 2010-11

Year

Analysis on the basis of Past years :The companys current years ratio is much lower than last three years, which

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indicates good cash balance on hand of the company for day to day operations. The company may need much cash to purchase the raw material for making the tiles. Working capital of the company is increasing, which is good sign for the company. Comparison with competitors Net Sales Working capital Working Capital Turnover Bell 14677.5 917.27 16 times Orient 28964.00 7553.72 3.83 times Somany 71058.00 14492 4.90 times

Working Capital Turnover

16 14 16

Ratio (in times)

12 10 8 6 4 2 0 Bell Orient Som any 3.83 4.9

Company

Analysis on the basis of Competitors :In compare to Orient and Somany, Bell Ceramic has less cash on hand. Bell Ceramic has to increase its working capital to increase the cash balance on hand.

CHAPTER 8 SWOT ANALYSIS

Strength :
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 Usage of natural gas as fuel for its Gujarat plant. Well-established Marketing Network across the country. Flexibility to switch production between wall and floor tiles at Dora to capture market as and when required. Good acceptance of the products in domestic markets. The usage of dry process technology at the Banglore plant is at full capacity utilization, which is first of its kind in India, has helped Bell to reduce fixed cost per Square meter. Goodwill of Bell Ceramic Ltd is very good in south India.

Weaknesses :
Paid high interest charges. Usage of LPG gas at Banglore unit. Fewer Design for production at Banglore unit in floor tile segment. Continuous losses may affect its goodwill. Market price of the share is already affected due to loss.

Opportunities :
The company has introduced trading market. Acquisition with the Orient Ceramic & Industries Ltd. Increase in Real Estate market, therefore company can increase its sells in big projects. The company has introduced new designs of wall tiles and floor tiles. If the company has its own transportation, it can reduce the cost.

Threats :
Competition is very high in tile industry.

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 Increase the bank interest charges. Bargaining power of customers. Increase in the charges of Gas. Excessive losses incurred by company can have bad impression in the mind of customer. High cost of transportation may affect the sales.

CHAPTER 9

72

FINDINGS & INTERPRETATION

After doing the ratio analysis of Bell Ceramic Ltd. I have finded following things: The company is done loss from last two years. Bell ceramic has to improve its distribution network in North India, because in North India companys business is not spread. Company has to improve its marketing strategies to spread the business. Companys distribution network in south and west India is very good. Companys credit policies are not good. In the payment of creditors, they are taking long time. This period is very long because of long supply chain. They purchase the inventory in advance before monsoon start. Thus, inventory blocked more space of the factory. Companys cost of goods sold is higher than its sales. Therefore companys gross profit is lower. Companys manufacturing expenses are higher than its sales. Therefore its operating profit is lower. Now a days company is doing its sales on advance basis. It means company takes advance payment form the new buyers of tiles. In some cases, company is giving 10 days period of payment.

CHAPTER 10 CONCLUSION & LIMITATIONS

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Conclusion drawn from the study of Ratio Analysis in Bell Ceramic Ltd. Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company. 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 analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the companys position and performance. Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an important tool of financial analysis.

LIMITATIONS OF THE STUDY: Ratio analysis is based on only mathematical interpretation of the figures. Therefore it ignores the factors such as management style, motivation of workers, leadership styles, etc. It is affected by changes in price level. It is affected by changes in accounting procedures. It is also affected by limited information of competitors.

CHAPTER 11 RECOMMENDATIONS & SUGGESTION

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 Ratio Analysis is the best tool to measure the companys performance. Bell Ceramic has to use Economic Order Quantity method for purchasing its raw material. It has to use more equity fund than debts for the business operations. If the company used the equity funds more, its debt can be decreased. Credit policy of the company can be improved by reducing the supply chain. As the company is taken over by Orient Ceramic & Industries Ltd, it has to good opportunity to work under good management. It is not using its assets very well. It has to used its assets properly for business purpose. It has good debtors turnover ratio. It shows it collects its receivables in short period. But all this collection is paid to the bank against its cash credit. If the company use this fund for other activities which is helpful in improving itself, it can get good returns. It can buy its own vehicles to reduce its transportation cost.

APPENDICES :-

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1 ) BALANCE SHEET

Balance Sheet of BELL CERAMIC for four years (RS. In Lakhs)

Particulars SOURCES OF FUNDS SHAREHOLDER'S FUND Share Capital Reserve & Surplus Total Shareholders fund LOAN FUNDS Secured Loan Unsecured Loan Total Debt Total Capital Employed APPLICATION OF FUNDS FIXED ASSETS Gross Block Less: Depreciation Net Block Capital Work in progress Total Net Fixed Asset INVESTMENTS DEFERRED TAX ASSET (NET) CURRENT ASSETS, LOANS & ADVANCES Inventories Sundry Debtors Cash and Bank Balances Loans and Advances 5 23536.2 10902.5 12633.7 11.71 12645.4 6 0.01 56.63 7 3077.06 1196.7 49.31 675.46 4998.53 LESS: CURRENT LIABILITIES & PROVISIONS Current Liabilities Provisions 8 4850.83 111.33 4962.16 4889.9 115.9 5005.8 4306.35 66.91 4373.26 4261.32 0 4261.32 3720.33 1225.52 40.43 558.55 5544.83 2984.12 1248.06 47.16 400.39 4679.73 3412.84 1354.45 56.15 355.15 5178.59 23899.8 12010.6 11889.3 1.47 11890.7 0.01 46.05 23930.8 13123.9 10806.9 0 10806.9 0.01 248.62 30536.5 14228.6 16307.9 0 16307.9 0 570.81 Sch. No. 2007-08 2008-09 2009-10 2010-11

1 2

3652.14 958.3 4610.44

3652.14 25.57 3677.71 8217.59 991.95 9209.54 12887.25

3652.14 25.57 3677.71 7527.33 1205.75 8733.08 12410.79

1217.38 7684.90 8902.28 6390.72 2656.23 9046.95 17949.23

3 4

8792.94 712.44 9505.38 14115.82

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NET CURRENT ASSETS PROFIT AND LOSS ACCOUNT Total Asset No. of Equity Shares (in Lakhs) Market value of Equity share 9

36.37 1377.45 14115.82 365.21

539.03 411.42 12887.25 365.21

306.47 1048.75 12410.79 365.21

917.27 153.27 17949.23 121.74

Balance Sheet of Bell, Orient & Somany for 2010-11

Particulars For the year ended BELL 31.3.11

(Rs. In Lakhs)
For the year ended ORIENT 31.3.11 For the year ended SOMANY 31.3.11

SOURCES OF FUNDS SHAREHOLDER'S FUND Share Capital Reserve & Surplus

1217.38 7684.9 8902.28 9046.95 0 17949.23

1053 5829.2 6882.2 10280.41 462.06 17624.67

690 9557 10247 19444 2566 32257

LOAN FUNDS Defferd Tax Liability Total Capital Employed APPLICATION OF FUNDS FIXED ASSETS Net Fixed Asset INVESTMENTS Deffered tax Asset CURRENT ASSETS, LOANS & ADVANCES Inventories Sundry Debtors Cash and Bank Balances Loans and Advances

16307.9 0 570.81

8063.13 2007.82 0

17593 172 0

3412.84 1354.45 56.15 355.15 5178.59

6905.24 4031.7 189.42 3013.65 14140.01

9764 12933 1472 6024 30193

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LESS: CURRENT LIABILITIES & PROVISIONS Current Liabilities Provisions

4261.32 0 4261.32

6291.65 294.64 6586.29

12493 3208 15701

NET CURRENT ASSETS PROFIT AND LOSS ACCOUNT Total Asset No. of Equity Shares (in Lakhs)

917.27 153.27 17949.25 121.74

7553.72 0 17624.67 1053

14492 0 32257 345

2 ) INCOME STATEMENT :-

Income Statement of Bell Ceramic Ltd. (RS. In Lakhs)

Particulars INCOME Sales Excise duty paid Net Sales Other Operating Income Total Income EXPENDITURE Inventory Variance Purchases ( Traded Goods) Material Depreciation Personnel Manufacturing, Administration & Selling Prior Period Adjustment Amortization of Miscellaneous Expenditure Total Expenditure Operating Profit EBITDA Level 2007-08 17371.6 1187.43 16184.2 0 16184.20 2008-09 20063.3 1182.54 18880.8 0 18880.80 2009-10 16456.5 1126.28 15330.2 0 15330.20 2010-11 16049.8 1372.33 14677.5 148.99 14826.49

986.82 0 5514.27 1132.79 1622.86 7697.88 6.21 23.34 16984.17 -799.97 332.82

-693.13 0 6069.02 1119.27 1682.38 9639.66 12.62 0 17829.82 1050.98 2170.25

616.76 0 4585.74 1114.6 1611.8 7258.02 2.54 0 15189.46 140.74 1255.34

-116.54 159.97 4506.69 1109.52 1757.40 7487.55 -78.20 0.00 14826.39 0.10 1109.62

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Other Income Gross Profit Interest Profit after Interest but before Exceptional items Exceptional Items Profit(+)/Loss(-)from Ordinary Activities before tax Tax Expenses Net Profit(+)/Loss(-)from Ordinary Activities after tax Extra Ordinary items-Depreciation written back/Others PROFIT / (LOSS) AFTER TAX

234.03 -565.94 1295.48

184.99 1235.97 1163.21

209.65 350.39 1088.02

533.24 533.34 1534.30

-1861.42 0

72.76 0

-737.63 0

-1000.96 201.64

-1861.42 90.23

72.76 -39.46

-737.63 100.31

-799.32 317.39

-1771.19

33.30

-637.32

-481.93

411.25 -2182.44

0 33.30

0 -637.32

0 -481.93

Income Statement of Bell, Orient & Somany for 2010-11 (Rs.in Lacs)
Particulars INCOME Sales Excise duty paid Net Sales Other Operating Income Total Income EXPENDITURE Inventory Variance Purchases ( Traded Goods) Material Depreciation Personnel Manufacturing, Administration & Selling Prior Period Adjustment Total Expenditure Bell 16049.8 1372.33 14677.5 148.99 14826.49 Orient 31197.00 2233.00 28964.00 220.00 29184.00 Somany 75178.00 4120.00 71058.00 430.00 71488.00

-116.54 159.97 4506.69 1109.52 1757.40 7487.55 -78.20 14826.39

-1185 6594.00 6348.00 978.00 3297.00 11551.00 0.00 27583.00

-2108 28410.00 10364.00 1726.00 5431.00 22503.00 0.00 66326.00

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Operating Profit EBITDA Level Other Income Gross Profit Interest Profit after Interest but before Exceptional items Exceptional Items Profit(+)/Loss(-)from Ordinary Activities before tax Tax Expenses Net Profit(+)/Loss(-)from Ordinary Activities after tax Extra Ordinary items-Depreciation written back/Others PROFIT / (LOSS) AFTER TAX

0.10 1109.62 533.24 533.34 1534.30

1601.00 2579.00 220.00 1821.00 832.00

5162.00 6888.00 4.00 5166.00 1795.00

-1000.96 201.64 -799.32 317.39

989.00 678.00 1667.00 471.00

3371.00 0.00 3371.00 1028.00

-481.93

1196.00

2343.00

0 -481.93

0 1196.00

0 2343.00

BIBLIOGRAPHY : http//www.investopedia.com http//www.bellceramic.com http//www.orientceramic.com http//www.somanytiles.com http//www.iccts.com

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