INTRODUCTION

MEANING OF RATIO ANALYSIS

MEANING:
The ratio analysis is one of the most useful and common method of analyzing financial
statements. As compared to other tools of financial analysis, the ratio analysis provides very
useful conclusions about various aspects of the working, like financial position, solvency,
stability, liquidity and profitability of an enterprise.
The term Ratio refers to the numerical or quantitative relationship between two
items!variables.
NATURE:
Ratio analysis is a powerful tool of financial analysis. "n financial analysis, a ratio is used as a
benchmark. #or evaluating the financial position and performance of a firm. The relationship
between two accounting #igures, e$pressed mathematically, is known as a financial ratio.
Ratios help to summaries large quantities of financial data and to make qualitative %udgment
about the firm&s financial performance.
This relationship is an inde$ or yardstick, which permits a qualitative %udgment to be formed
about the firm&s ability to meet its current obligations. "t measures the firm&s liquidity .The
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greater the ratio, the (reater the firm&s liquidity and vice)versa. The point to note is that a ratio
reflecting a quantitative relationship helps to form a qualitative %udgment. *uch is the nature of
all financial ratios.
ROLE OF RATIO ANALYSIS:
'+ Aid in financial forecasting,Ratio analysis is very helpful in financial forecasting. Ratios
relating to past sales, profits and financial position form the basis for setting future trends.
-+ Aid in comparison,.ith the help of ratio analysis, ideal ratio can be composed and they
can be used for comparing a firm&s progress and performance. "nter firm comparison or
comparison with industry averages is made possible by the ratio analysis.
/+ #inancial solvency of the firm,Ratio analysis indicates the trends in financial solvency of
the firm.
*olvency has two dimensions) long)term solvency 0 short)term solvency. 1ong term solvency
refers to the #inancial viability of a firm. *hort)term solvency is the liquidity position of the
firm.
2. 3ommunication value,4ifferent financial ratios communicate the strength and financial
standing of the form to the internal and e$ternal parties. They indicate the over all profitability
of the firm.
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5.6ther uses,#inancial ratios are very helpful in the diagnosis and financial health of a firm.
They highlight the liquidity, solvency, profitability and capital gearing etc. of the firm. They
are useful tool of analysis of financial performance.
USERS OF RATIO ANALYSIS
' Trade creditors are interested in firm&s ability to meet their claims over a very short period
of time.
-. *uppliers of long)term debts are concerned with the firm&s long)term solvency and
survival. They analyze the firm&s profitability over time, its ability to generate cash to be able
to pay interest and repay principal and the relationship between various sources of funds.
/. "nvestors, who have invested their money in the firm share , are most concerned about the
firm&s earning.
2. 7anagement of the firm would be interested in every aspect of the ratio analysis. "t is their
overall responsibility to see that the resources of the firm are used most effectively and
efficiently, and that the firm&s financial condition is sound.
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FINANCIAL RATIOS AND UTILITY
A ratio may be defined as a fied re!ations"i# in de$ree or n%mber bet&een t&o n%mbers'
In finan(e) ratios are %sed to #oint o%t re!ations"i#s t"at are not ob*io%s from t"e ra&
data' Some %ses of ratios are fo!!o&in$: +
'. To compare different companies in same industry. Ratios can highlight the factors
associated with successful and unsuccessful firms. They can reveal strong firms and weak
firms, overvalued undervalued firms.
-. To compare different industries. 8very industry has its own unique set of operating and
financial characteristics. These can be identified with the help of ratios.
/. To compare performance in different time periods. 6ver a period of years, a firm or a
industry develop certain norms That may indicate future success or failure. "f relationship
changes in firm9s data over different time periods, the ratio may provide clues and trends of
future problems.
FINANCIAL ANALYSIS
#inancial analysis is the process of identifying the financial strengths and
weaknesses of the firm and establishing relationship between the items of the balance sheet and
profit 0 loss account.
#inancial ratio analysis is the calculation and comparison of ratios, which are
derived from the information in a company&s financial statements. The level and historical
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trends of these ratios can be used to make inferences about a company&s financial condition, its
operations and attractiveness as an investment. The information in the statements is used by
Trade creditors, to identify the firm&s ability to meet their claims i.e. liquidity position
of the company.
"nvestors, to know about the present and future profitability of the company and its
financial structure.
7anagement, in every aspect of the financial analysis. "t is the responsibility of the
management to maintain sound financial condition in the company.
RATIO ANALYSIS
T"e term ,Ratio- refers to t"e n%meri(a! and .%antitati*e re!ations"i#
bet&een t&o items or *ariab!es' T"is re!ations"i# (an be e#osed as
:ercentages
#ractions
:roportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the
financial statements. *o that the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined. Ratio reflects a quantitative
relationship helps to form a quantitative %udgment.
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STE/S IN RATIO ANALYSIS
The first task of the financial analysis is to select the information relevant to the
decision under consideration from the statements and calculates appropriate ratios.
To compare the calculated ratios with the ratios of the same firm relating to the pas;t or
with the industry ratios. "t facilitates in assessing success or failure of the firm.
Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.
0ASIS OR STANDARDS OF COM/ARISON
Ratios are relative figures reflecting the relation between variables. They enable
analyst to draw conclusions regarding financial operations. They use of ratios as a tool of
financial analysis involves the comparison with related facts. This is the basis of ratio analysis.
The basis of ratio analysis is of four types.
:ast ratios, calculated from past financial statements of the firm.
3ompetitor&s ratio, of the some most progressive and successful competitor firm at the
same point of time.
"ndustry ratio, the industry ratios to which the firm belongs to
:ro%ected ratios, ratios of the future developed from the pro%ected or pro forma financial
statements
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NATURE OF RATIO ANALYSIS
Ratio analysis is a technique of analysis and interpretation of financial
statements. "t is the process of establishing and interpreting various ratios for helping in
making certain decisions. "t is only a means of understanding of financial strengths and
weaknesses of a firm. There are a number of ratios which can be calculated from the
information given in the financial statements, but the analyst has to select the appropriate data
and calculate only a few appropriate ratios. The following are the four steps involved in the
ratio analysis.
*election of relevant data from the financial statements depending upon the ob%ective of
the analysis.
3alculation of appropriate ratios from the above data.
3omparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from pro%ected financial statements or the ratios of some other firms or
the comparison with ratios of the industry to which the firm belongs.
INTER/RETATION OF T1E RATIOS
The interpretation of ratios is an important factor. The inherent limitations of
ratio analysis should be kept in mind while interpreting them. The impact of factors such as
price level changes, change in accounting policies, window dressing etc., should also be kept in
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mind when attempting to interpret ratios. The interpretation of ratios can be made in the
following ways.
*ingle absolute ratio
(roup of ratios
=istorical comparison
:ro%ected ratios
"nter)firm comparison
GUIDELINES OR /RECAUTIONS FOR USE OF RATIOS
The calculation of ratios may not be a difficult task but their use is not easy.
#ollowing guidelines or factors may be kept in mind while interpreting various ratios are
Accuracy of financial statements
6b%ective or purpose of analysis
*election of ratios
>se of standards
3aliber of the analysis
IM/ORTANCE OF RATIO ANALYSIS
Aid to measure general efficiency
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Aid to measure financial solvency
Aid in forecasting and planning
#acilitate decision making
Aid in corrective action
Aid in intra)firm comparison
Act as a good communication
8valuation of efficiency
8ffective tool
LIMITATIONS OF RATIO ANALYSIS
4ifferences in definitions
1imitations of accounting records
1ack of proper standards
@o allowances for price level changes
3hanges in accounting procedures
Auantitative factors are ignored
1imited use of single ratio
Background is over looked
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1imited use
:ersonal bias
CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are
different parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Darious accounting ratios can be classified as follows+
'. Traditional 3lassification
-. #unctional 3lassification
/. *ignificance ratios
2' Traditiona! C!assifi(ation
"t includes the following.
Balance sheet EorF position statement ratio+ They deal with the relationship between two
balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the
items must, however, pertain to the same balance sheet.
:rofit 0 loss account EorF revenue statement ratios+ These ratios deal with the
relationship between two profit 0 loss account items, e.g. the ratio of gross profit to
sales etc.,
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3omposite EorF inter statement ratios+ These ratios e$hibit the relation between a profit
0 loss account or income statement item and a balance sheet items, e.g. stock turnover
ratio, or the ratio of total assets to sales.
-. #unctional 3lassification
These include liquidity ratios, long term solvency and leverage ratios, activity
ratios and profitability ratios.
3' Si$nifi(an(e ratios
*ome ratios are important than others and the firm may classify them as primary
and secondary ratios. The primary ratio is one, which is of the prime importance to a concern.
The other ratios that support the primary ratio are called secondary ratios.
IN T1E 4IE5 OF FUNCTIONAL CLASSIFICATION T1E RATIOS ARE
'. 1iquidity ratio
-. 1everage ratio
/. Activity ratio
2. :rofitability ratio
2' LI6UIDITY RATIOS
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1iquidity refers to the ability of a concern to meet its current obligations as 0
when there becomes due. The short term obligations of a firm can be met only when there are
sufficient liquid assets. The short term obligations are met by realizing amounts from current,
floating EorF circulating assets The current assets should either be calculated liquid EorF near
liquidity. They should be convertible into cash for paying obligations of short term nature. The
sufficiency EorF insufficiency of current assets should be assessed by comparing them with
short)term current liabilities. "f current assets can pay off current liabilities, then liquidity
position will be satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
3urrent ratio
Auick EorF Acid)test EorF 1iquid ratio
Absolute liquid ratio EorF 3ash position ratio
7a8 CURRENT RATIO:
3urrent ratio may be defined as the relationship between current assets
and current liabilities. This ratio also known as .orking capital ratio is a measure of general
liquidity and is most widely used to make the analysis of a short)term financial position EorF
liquidity of a firm.

C%rrent assets
C%rrent ratio 9
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C%rrent !iabi!ities
Com#onents of (%rrent ratio
CURRENT ASSETS CURRENT LIA0ILITIES
3ash in hand 6ut standing or accrued e$penses
3ash at bank Bank over draft
Bills receivable Bills payable
"nventories *hort)term advances
.ork)in)progress *undry creditors
7arketable securities 4ividend payable
*hort)term investments "ncome)ta$ payable
*undry debtors

:repaid e$penses
7b8 6UIC: RATIO
Auick ratio is a test of liquidity than the current ratio. The term liquidity refers
to the ability of a firm to pay its short)term obligations as 0 when they become due. Auick
ratio may be defined as the relationship between quick or liquid assets and current liabilities.
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An asset is said to be liquid if it is converted into cash with in a short period without loss of
value.
6%i(; or !i.%id assets
6%i(; ratio 9
C%rrent !iabi!ities
Com#onents of .%i(; or !i.%id ratio
6UIC: ASSETS CURRENT LIA0ILITIES
3ash in hand 6ut standing or accrued e$penses
3ash at bank Bank over draft
Bills receivable Bills payable
*undry debtors *hort)term advances
7arketable securities *undry creditors
Temporary investments 4ividend payable
"ncome ta$ payable
7(8 A0SOLUTE LI6UID RATIO
Although receivable, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash immediately or in
time. =ence, absolute liquid ratio should also be calculated together with current ratio and
quick ratio so as to e$clude even receivables from the current assets and find out the absolute
liquid assets.
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Abso!%te !i.%id assets
Abso!%te !i.%id ratio 9
C%rrent !iabi!ities
Absolute liquid assets include cash in hand etc. The acceptable forms for this
ratio is 5GH EorF G.5+' EorF '+- i.e., Rs.' worth absolute liquid assets are considered to pay Rs.-
worth current liabilities in time as all the creditors are nor accepted to demand cash at the same
time and then cash may also be realized from debtors and inventories.
Com#onents of Abso!%te Li.%id Ratio
A0SOLUTE LI6UID ASSETS CURRENT LIA0ILITIES
3ash in hand 6ut standing or accrued e$penses
3ash at bank Bank over draft
"nterest on #i$ed 4eposit Bills payable
*hort)term advances
*undry creditors
4ividend payable
"ncome ta$ payable
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<' LE4ERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long
term obligations. Accordingly, long term solvency ratios indicate firm&s ability to meet the
fi$ed interest and costs and repayment schedules associated with its long term borrowings.
The following ratio serves the purpose of determining the solvency of the
concern.
:roprietory ratio
7a8 /RO/RIETORY RATIO
A variant to the debt)equity ratio is the proprietory ratio which is also known as
equity ratio. This ratio establishes relationship between share holders funds to total assets of
the firm.
S"are"o!ders f%nds
/ro#rietory ratio 9
Tota! assets
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S1ARE 1OLDERS FUND TOTAL ASSETS
*hare 3apital #i$ed Assets
Reserves 0 *urplus C%rrent Assets
3ash in hand 0 at bank
Bills receivable
"nventories
7arketable securities
*hort)term investments

*undry debtors
:repaid 8$penses
3' ACTI4ITY RATIOS
#unds are invested in various assets in business to make sales and earn profits.
The efficiency with which assets are managed directly effect the volume of sales. Activity
ratios measure the efficiency EorF effectiveness with which a firm manages its resources EorF
assets. These ratios are also called Turn over ratios because they indicate the speed with
which assets are converted or turned over into sales.
.orking capital turnover ratio
#i$ed assets turnover ratio
3apital turnover ratio
3urrent assets to fi$ed assets ratio
7a8 5OR:ING CA/ITAL TURNO4ER RATIO
.orking capital of a concern is directly related to sales.
5or;in$ (a#ita! 9 C%rrent assets + C%rrent !iabi!ities
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"t indicates the velocity of the utilization of net working capital. This indicates
the no. of times the working capital is turned over in the course of a year. A higher ratio
indicates efficient utilization of working capital and a lower ratio indicates inefficient
utilization.
.orking capital turnover ratioIcost of goods sold!working capital.
Com#onents of 5or;in$ Ca#ita!
CURRENT ASSETS CURRENT LIA0ILITIES
3ash in hand 6ut standing or accrued e$penses
3ash at bank Bank over draft
Bills receivable Bills payable
"nventories *hort)term advances
.ork)in)progress *undry creditors
7arketable securities 4ividend payable
*hort)term investments "ncome)ta$ payable
*undry debtors

:repaid e$penses
7b8 FI=ED ASSETS TURNO4ER RATIO
"t is also known as sales to fi$ed assets ratio. This ratio measures the efficiency
and profit earning capacity of the firm. =igher the ratio, greater is the intensive utilization of
fi$ed assets. 1ower ratio means under)utilization of fi$ed assets.
Cost of Sa!es
Fied assets t%rno*er ratio 9
Net fied assets
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Cost of Sa!es 9 In(ome from Ser*i(es
Net Fied Assets 9 Fied Assets + De#re(iation
7(8 CA/ITAL TURNO4ER RATIOS
*ometimes the efficiency and effectiveness of the operations are %udged by
comparing the cost of sales or sales with amount of capital invested in the business and not
with assets held in the business, though in both cases the same result is e$pected. 3apital
invested in the business may be classified as long)term and short)term capital or as fi$ed
capital and working capital or 6wned 3apital and 1oaned 3apital. All 3apital Turnovers are
calculated to study the uses of various types of capital.
Cost of $oods so!d
Ca#ita! t%rno*er ratio 9
Ca#ita! em#!oyed
Cost of Goods So!d 9 In(ome from Ser*i(es
Ca#ita! Em#!oyed 9 Ca#ita! > Reser*es ? S%r#!%s
7d8 CURRENT ASSETS TO FI=ED ASSETS RATIO
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This ratio differs from industry to industry. The increase in the ratio means that
trading is slack or mechanization has been used. A decline in the ratio means that debtors and
stocks are increased too much or fi$ed assets are more intensively used. "f current assets
increase with the corresponding increase in profit, it will show that the business is e$panding.
C%rrent Assets
C%rrent Assets to Fied Assets Ratio 9
Fied Assets
@' /ROFITA0ILITY RATIOS
The primary ob%ectives of business undertaking are to earn profits. Because
profit is the engine, that drives the business enterprise.
@et profit ratio
Return on total assets
Reserves and surplus to capital ratio
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8arnings per share
6perating profit ratio
:rice J earning ratio
Return on investments
7a8 NET /ROFIT RATIO
@et profit ratio establishes a relationship between net profit Eafter ta$F and sales
and indicates the efficiency of the management in manufacturing, selling administrative and
other activities of the firm.
Net #rofit after ta
Net #rofit ratio9
Net sa!es
Net /rofit after Ta 9 Net /rofit 7A8 De#re(iation 7A8 Interest 7A8 In(ome Ta
Net Sa!es 9 In(ome from Ser*i(es
"t also indicates the firm&s capacity to face adverse economic conditions such as
price competitors, low demand etc. 6bviously higher the ratio, the better is the profitability.
7b8 RETURN ON TOTAL ASSETS
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:rofitability can be measured in terms of relationship between net profit and
assets. This ratio is also known as profit)to)assets ratio. "t measures the profitability of
investments. The overall profitability can be known.
Net #rofit
Ret%rn on assets 9
Tota! assets
Net /rofit 9 Earnin$s before Interest and Ta
Tota! Assets 9 Fied Assets > C%rrent Assets
7(8 RESER4ES AND SUR/LUS TO CA/ITAL RATIO
"t reveals the policy pursued by the company with regard to growth shares. A
very high ratio indicates a conservative dividend policy and increased ploughing back to profit.
=igher the ratio better will be the position.
Reser*es? s%r#!%s
Reser*es ? s%r#!%s to (a#ita! 9
Ca#ita!
7d8 EARNINGS /ER S1ARE
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8arnings per share is a small verification of return of equity and is calculated by
dividing the net profits earned by the company and those profits after ta$es and preference
dividend by total no. of equity shares.
Net #rofit after ta
Earnin$s #er s"are 9
N%mber of E.%ity s"ares
The 8arnings per share is a good measure of profitability when compared with
8:* of similar other components EorF companies, it gives a view of the comparative earnings
of a firm.
7e8 O/ERATING /ROFIT RATIO
6perating ratio establishes the relationship between cost of goods sold and other
operating e$penses on the one hand and the sales on the other.

O#eratin$ (ost
O#eration ratio 9
Net sa!es
=owever <5 to ?5H may be considered to be a good ratio in case of a
manufacturing under taking.
6perating profit ratio is calculated by dividing operating profit by sales.
O#eratin$ #rofit 9 Net sa!es + O#eratin$ (ost
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O#eratin$ #rofit
O#eratin$ #rofit ratio 9
Sa!es
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7f8 /RICE + EARNING RATIO
:rice earning ratio is the ratio between market price per equity share and
earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a
share of a company and is widely used by investors to decide whether EorF not to buy shares in
a particular company.
(enerally, higher the price)earning ratio, the better it is. "f the price earning
ratio falls, the management should look into the causes that have resulted into the fall of the
ratio.
Mar;et /ri(e #er S"are
/ri(e A Earnin$ Ratio 9
Earnin$s #er S"are
Ca#ita! > Reser*es ? S%r#!%s
Mar;et /ri(e #er S"are 9
N%mber of E.%ity S"ares
Earnin$s before Interest and Ta
Earnin$s #er S"are 9
N%mber of E.%ity S"ares
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7$8 RETURN ON IN4ESTMENTS
Return on share holder&s investment, popularly known as Return on investments
EorF return on share holders or proprietor&s funds is the relationship between net profit Eafter
interest and ta$F and the proprietor&s funds.
Net #rofit 7after interest and ta8
Ret%rn on s"are"o!derBs in*estment 9
S"are"o!derBs f%nds
The ratio is generally calculated as percentages by multiplying the above with
'GG.
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O0CECTI4E ? SCO/E OF STUDY
O4ER4IE5 OF FINANCE FUNCTIONS
Ro!e of finan(e f%n(tions+
#inance function is the backbone of any organization. The finance function plays a very critical
role in the ma$imization of shareholders who provide the funds to the company. This ob%ective
is being achieved by the finance department, which provides the carious information on the
financial parameters such as cash flows, profitability, cost and margin, assets, working capital
and shareholder value for the purpose of efficient utilization of resources resulting in better
profitability of the company. The importance of the finance functions cannot be undetermined
in any organization as
many companies have perished not due to bad production management but due to poor
financial management function acts like radar of the ship, which guides the direction of the
ship and saves it from the perils of the sea. "n the same way finance department provides
timely and relevant information to various levels of management for the purpose of decision)
making.
The various activities undertaken by the finance department achieve the aforesaid ob%ectives,
may be summarized as follows)
7aintenance of account books, cost records.
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:reparation of salary bills and other related payment to employees+ ::, bonus, TA,
departmental advances of :# accounts etc.
:reparation of :rofit 0 1oss a!c and Balance *heet.
(eneration of various 7"Rs for management use+ 7"Rs relating to turnover, profitability,
cash requirements, inventory.
3oordination with company auditors, (ovt. auditors, cost auditors and ta$ auditors.
4ecisions relating to purchase and sales.
"nvestment decisions+ capital investment decisions and working capital management
decisions.
#inancing decisions+ decisions relating to financing)mi$ or capital structure or leverage.
4ividend policy decisions.
COST SECTION
3ost) section of the company is divided into following two sections viz,
:R64>3T 36*T 0 38@TRA1 36*T and these deals with the following functions+ )
EiF 4etermination of periodic profits including inventory valuation.
EiiF 4etermination of pricing policy of the company.
EiiiF .ork related to capital e$penditures of the company.
EivF 4eveloping variance 7anagement "nformation report for different parts of management
for purpose of cost control and reduction.
EvF Daluation of work in progress and finished goods.
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EviF "nteraction with management of top management link for achieving cost control and
cost reduction and thereby improving bottom line of the company.
EviiF :reparation of cost sheet of different product and their analysis for future planning.
0OO:S AND 0UDGET SECTION
This section deals mainly with the following+)
EiF :reparation of operating budget for the company as a whole.
EiiF 3o)ordination with various functions of organization with regard to generation and
submission of important 7"R9s to corporate office.
EiiiF :reparation of annual accounts of the company.
EivF 3oordination with company auditors with regard to company accounts.
EvF 7aintenance and accounting of fi$ed assets accounts.
EviF :reparation of long term profit plans based on broad ob%ectives of the company.
SALES SECTION
*ales accounts section will deal mainly with the following items +)
EiF *crutiny and vetting of estimates ! quotation for sale of products ! services, wherever
financial concurrence is required.
EiiF *crutiny and vetting of agreements for sales of products and services
EiiiF "nvoicing for sale ! advance or progressive payment ! erection income and other.
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EivF 7aintenance of subsidiary records like sales %ournals ! sales daybook, sundry debtors
ledgers, advances from customer ledger etc.
EvF :ayments, recovery and accounting of sales ta$, e$cise duty.
EviF Accounting of claims on carriers! insurance companies for missing items ! damages on
outward consignments.
EviiF *crutiny, payments and accounting of bills of carriers and insurers and other
miscellaneous claims relating to the outwards consignments.
EviiiF 3alculation and scrutiny of data for payments of royalties to the collaborators.
Ei$F Review and reconciliation as well as follow up of recovery of outstanding dues from
the customers in coordination with the commercial department.

STORES SECTION
#or the convenience of performance of various function it is divided in to further three
sections which are as follows+ )
aF *tores bills.
bF *tores review.
cF #oreign payment.
They deal mainly with the following items of works+
EiF :ayment of supplier&s bills including bills for advances )indigenous and foreign.
EiiF :ricing of stores receipt vouchers including fi$ed assets vouchers and fi$ed assets
receipt vouchers.
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EiiiF 7aintenance of accounts of advances to suppliers, claims recoverable, claims for short
suppliers, re%ections and rectifications of materials and sundry creditors.
EivF 6pening of letter of credit and arranging payments to foreign suppliers under foreign
credit ! differed payment agreements.
EvF :ayment of bills for ocean freight, port trust dues, custom duty, local agents
commission and clearing agents bills, transit insurance bills, bills of contractors for
transport !handling etc. and accounting of such payments are made at regional offices.
EviF 7aintenance of accounts of material issued on loan and materials issued to
subcontractors.
/AYROLL SECTION
This section deals mainly with the following functions+
EiF :reparation of monthly wage bills.
EiiF All account work related to personal payments and disclose profit and loss account of
the company.
EiiiF 4ealing with income ta$ authority with regard to personal ta$ation of employee.
EivF 4ealing with other statutory authority such as :.#. 3ommissioner, 8*" Eemployee state
insuranceF.
EvF To ensure correct payment of salary and wages and other benefits to employees in,
telephone and miscellaneous payments.
EviF :reparation of monthly wage bills.
EviiF All account work related to personal payments and disclose profit and loss account of
the company.
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EviiiF 4ealing with income ta$ authority with regard to personal ta$ation of employee.
Ei$F 4ealing with other statutory authority such as :.#. 3ommissioner, 8*" Eemployee state
insuranceF.
5OR:S SECTION
.orks section of the company is dealing with the following functions+
EiF :ayments of contractor&s bills including bills for advance.
EiiF 7aintenance of accounts of contractors with regard to security deposits, earnest money,
progressive payments.
EiiiF -'5 maintenance of accounts of materials issued on loans to contractors.
EivF All accounting work related to capital e$penditure in progress on erection of plant 0
machinery and building.
EvF All other miscellaneous work relating to hiring of various facilities.
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COM/ANY /ROFILE
Na"ar Ind%stria! Enter#rises Ltd'
ahar "ndustrial 8nterprises 1imited E@"81F was incorporated on -<th *eptember, 'C?/ as
6swal #ats 0 6ils 1td. @"81 is a vertically)integrated te$tile manufacturer, with operations
ranging from spinning, weaving 0 processing and also having sugar unit with -5GG T34 per
day. @"81 is evolution of amalgamation of different group companies with it. @"819s strategic
ob%ective is to capitalize on the growth opportunities that it believes are available in the
domestic and global te$tile industry. At the same time the company recognizes the competitive
nature of the industry, especially with pressure from Asia, and that to maintain growth it must
continue to improve production process and reduce costs.

T"e Co%rney

Mana$ement
The Board of
4irectors of the
3ompany
comprises e$perienced industrialists businessmen, financial e$perts and professionals. The
2DE3 "ncorporated as 6swal #ats 0 6ils 1imited.
2DD@ @ame changed as @ahar "ndustrial 8nterprises 1imited.
2DDF 7erged @ahar #abrics 1imited Emanufacturer of greige fabricF.
<GG<
7erged 6swal 3otton 7ills 1imited Emanufacturer of :rocessed
fabrics and finished garmentsF.
<GGH
7erged @ahar "nternational 1imited Emanufacturer of yarnF 0
@ahar sugar 0 Allied "ndustries 1imited Emanufacturer of sugar
0 steelF.
//
Board has the support of Technocrats, qualified 8ngineers, 3hartered Accountants, Business
7anagement e$perts and other e$perienced personnel, employed by the company to look after
production, marketing and finance etc., separately for their different units. 7r. K.1. 6swal is the
3hairman of the company, who has long and varied business e$perience and is also associated
with various other companies. The day to day affairs are looked after by Mr' :ama! Os&a!
4i(e C"airman+(%m+Mana$in$ Dire(tor, who has a vast e$perience in business

LIST OF DIRECTORS
/2
/5
3apacities

@"81 is a vertically)integrated te$tile manufacturer, with operations ranging from spinning,
weaving and processing. The 3ompany9s manufacturing facilities are spread at different
locations with latest world class technology. The installed capacity of the company as a whole
is as under+)

Yarn
Name of t"e Unit S#ind!es Rotors
Arham *pinning 7ills, Bhiwadi ERa%F 55;/- -GGG
*pinning >nit)", 1alru E:bF 2?;-2 'G?G
*pinning >nit)"", 1alru E:bF 222GG 2/-
*pinning >nit)""", 1alru E:bF -?--2 'G?G
*pinning >nit)"D, 1alruE:bF
#urther implementation of ';?GG spindles is in progress and shall
be completed by 4ecember, -G'/
25;C;
)
*ambhav *pinning 7ills, 7undian E:bF /'<-? /-2G
Tota! <H@3G@ FE3<
Yarn Dyin$ Ca#a(ity
Name of t"e Unit Ca#a(ity /er Day
Arham *pinning 7ills, Bhiwadi ERa%F ;5GG Lgs
@ahar #abrics J :rocessing >nit)"" 1alru E:bF ;5GG Lgs
Tota! 23GGG :$s

5ea*in$ ? /ro(essin$ Ca#a(ity
Name of t"e Unit 6%antity #er Ann%m
@ahar #abrics J .eaving >nit, 1alru E:bF ;G 7illion 7eters E5G; loomsF
@ahar #abrics J :rocessing " 0 "" ) >nits, 1alru E:bF 5?.2 7illion 7eters
/;

S%$ar Ca#a(ity
Name of t"e Unit 6%antity #er Ann%m
@ahar *ugar, Amloh E:bF -5GG Tonnes

CA/ACITY
:ower E3o)generationF
1ocation 3apacity
La!r% 7/b8 -C 7.
Am!o" 7/b8 '; 7.

/o&er 7Ca#ti*e8
0"i&adi 7RaI8 ? 7.
/<
/RODUCT /ROFILE
2GGJ Cotton Yarns
3arded yarn count range @8 G; to @8 /2. 3ombed yarn count range @8 G; to @8 2G 0 fine
counts up to @8 ?Gs both from premium "ndian 3otton and also (iza blends.
2GGJ Cotton Dyed Yarns
4yed yarns in 'GGH cotton as per count range as above.
Com#a(t S#%n Yarns
3ompact spun yarns in 3ount @8 ';s and above 'GGH cotton yarns as above.
2GGJ 0!ended Yarns
.e manufacture cotton)blended yarns with blends of polyester and viscose in the count range
@8 'G to @8 2G in different ratios as per requirement. These yarns are available as
(rey and 4yed.
2GGJ /o!yester Yarn
3ount range @8 G; to @8 -G.
Ind%stria! Yarns
1ike T#6 manufactured Tyre 3ord, 3arpet, Rugs Marns etc.
O#en End Yarns
3ount range @8 G5 to @8 -G.
O#en End S!%b Yarns
3ount range @8 G5 to @8 -G.
TFO Yarns
/?
All product range is available in single, double and multiple plies also as per requirements. end
use .eaving, 4enims ,Terry towels,Rugs,3arpets and =osiery.
S#e(ia!iKed Yarns
Ring *lub yarns. Also 7ulticount!7ulticount *lub yarns& count range is from @8 G5 to @8 5G.
*pecialized end use in 4enims, .eaving and =osiery also
E!i T&ist Yarns
3ount range -!-G to -!?G combed weaving, hosiery yarns.'GGH 3otton and :olyster 3otton
blends
Core S#%n Yarn
.e supply 3otton 3ore *pun yarn with 4upont lycra and spanda$. .e also offer core spun
slub yarns also. count range @8 'G to @8 ;G. *pecialized end use in 4enims,
.eaving and =osiery also
4orte Yarns
.e supply various blends on Dorte$ 7D* . 'GGH Discose ,3otton Discose Blends, 'GGH
:olyster, :olyster Discose and :olyester)3otton Blends.
S#e(ia!ity Yarns
'GG H 6rganic, #air Trade E#16 3ertification "4 N 5-';, -/'/< 0 -25?<F, B3" 3otton and
Re)cycled 3otton
/C
FA0RICS
:iece 4yed, Marn 4yed and :rints
Blends
'GGH 3otton 0 3otton Blends E:oly)cotton, 3otton)*tretch etc.F
(*7
?G gms to //G gms
.oven Dibrancy
Twills, 4obby *tructure, Broken Twills, Ripstop, 6ttoman, 3hinos, *atins, Tussors, Bedford
3ord, 3avallery Twill, 3anvas, (abardine
Marns >sed
*ingle 0 4ouble 3ount with different counts E<&s and 'GG&sF technologies such as open end,
Ringspun, 3ombed, 3ompact, 3ore)*pun, 7ulti count 0 *lubs etc with *pecial 3otton #ibres
i.e :"7A and ("OA 3otton 8tc.
8nd >se
Apparels ) #ashion, >niform 0 .ork .ear ETops, Bottom 0 6uterwearF and =ome
#urnishing.
*pecialty #abrics
'GG H 6rganic, #air Trade, B3" 3otton and Re)cycled 3otton #abrics
:erformance #abrics
Apparels ) #ashion, >niform 0 .ork .ear ETops, Bottom 0 6uterwearF and =ome
#urnishing.
P =igh 4ensity 3onstructions
P A"R6 #inish
P Bio :olish
P .ater Repellent
P @ano 3are
P *oil Release
2G
P 7icrosanding
P Anti Bacteria
P #rost #ree
P .rinkle #ree
P *tain (uard
P Teflon
S5OT ANALYSIS
STRENGT1S 7S8:
1ow cost producer of quality equipment due to cheap labour and fully depreciated plants.
#le$ible manufacturing set up.
8ntry barrier due to high replacement cost of its manufacturing facilities.
3omprehensive turnkey e$perience from product design to commissioning.
3ommitted and skilled work force.
Relatively stable industrial relationship.
Access to contemporary technologies with back up support from renowned collaborators.
3apabilities to manufacture 25GG 7. of thermal T( sets. 2GGG 7. of boilers, '/25 7.
of =ydro sets and 'GGG ) -GGG 7. of (as Turbines annually.
Ability to set up power plants on turnkey basis, complete know)how for manufacture of
entire equipment is available with the company.
Ability to manufacture or procure to supply spares.
#ully equipped to take capital maintenance and servicing of power plants.
2'
1argest share of domestic business leading toQ ma%or presence and influence in the market.
"*6 CGG' international companies.
Ability to successfully overhaul and renovate power station equipment of different
international companies.
Regional centers for services for easy accesses to customers.
5EA:NESSES 758:
=igh working capital requirement due to its e$posure to cash starved *8Bs E*tate
electricity boardsF.
"nability to provide pro%ects financing.
4ifficulty in keeps up commitments on products delivery and desired sequences of
supplies.
1onger delivery cycle in comparison with "nternational suppliers of similar equipment.
"nability to provide supplier&s credit, soft loans for financing of power pro%ect.
1ack of effective marketing infrastructures.
"nadequate banking infrastructure.
O//ORTUNITIES 7O8:
=igh)e$pected growth in power sectors E<GGG 7.! p.a. needs to be addedF.
2-
=igh growth forecast in "ndia&s inde$ of industrial production would increase demand for
industrial equipment such as motors and compressors.
4emand for power and hence power plant equipment market is e$pected to grow.
:rivate sector power plant to offer e$panded market as utilities suffer resource crunch.
Aging of power plants would give rise to more spares and service business.
1ife e$tension programs for old power stations.
8$port opportunities.
8asy processing of ventures!collaboration! imports! acquisition of new technology.
T1REATS 7T8:
Technical suppliers are becoming competitors with the opening up of the "ndian economy.
#all in global power equipment prices can effect profitability.
Reduced allocation for power sector.
"ncreased competition both national and international.
7ultilateral agencies reluctant to lend to power sector because of poor financial
management by *8B&s.E*tate 8lectricity BoardsF
"nadequacy of availability of gas would reduce gas turbines business prospects.
1evel playing ground not available. #oreign 3o. *pending much more on business
promotion tactics.
:rivate sector power companies may not follow so transparent evaluation procedure for
bids
2/
O//ORTUNITIES ? CONSTRAINTS
4uring this summer training " got the following opportunities 0 constraints+
O##ort%nities
P To work in #riendly 8nvironment.
P =elpful staff of the 3ompany.
P To interact with more 7BA&s guys of different "nstitutes.
P To enhance the knowledge.
P Team *pirit.
Constraints
.orking hours for trainees were allotted from '.GG :7 to 2.GG :7 only, according to
Na"ar Ind%stria! Enter#rises Ltd'.. "ncrease in the allotted hours could have further
improved the quality of the pro%ect.
4ue to non)availability of concerned e$ecutives during the allotted hours the time of
interaction available was limited.
22
CORRELATION OF T1E CONCE/TS OF MANAGEMENT 5IT1
REAL+LIFE SITUATION
There are so many important concepts of 7anagement, which are directly applicable on
real life situations such as+ )
LEADERS1I/
4uring my *ummer Training, " had found that what an effective leader could do for any
firm. =ow an effective leader with good communication skills and e$cellent motivation
techniques can improve the performance of the group leading to an overall development of the
organization.
" have also found that markets scenario the near participative style of leadership is the best one,
as it allows every staff member from top to bottom to lead.
COORDINATION
The coordination also plays an efficient role in the development of any organization.
Any organization is set to be successful when its entire staff coordinates together and work as
one. The coordination applied during my *ummer Training, students of different institutes
25
shared their views in)group discussions. " have learnt so many concepts by them and the
coordination between us was really good.
MOTI4ATION
As we have learnt in the #irst *emester that 7otivation plays an important role in the
development of any organization. " was motivated with the sincerity and hard working of my
reporting officer *hri Divek (oel and other finance personnel. "n #inance 4epartment of
Na"ar Ind%stria! Enter#rises Ltd', everybody appreciated *hri Divek (oel for his e$cellent
role especially in 8conomic Dalue Added.
COMMUNICATION
#or being an effective leader the basic need is effective communication skills. " had
seen that our training in charge had e$cellent communication skills with top to bottom. The
3ommunication also helped me in communicating the senior officials and employees of Na"ar
Ind%stria! Enter#rises Ltd'. when " went for an "nteractive *ession regarding my :ro%ect
2;
RESEARC1 MET1ODOLOGY
After recession with my locality member. " choose the pro%ect of .orking capital management.
" discussed the pro%ect with my instructor and coordinator 7rs. *A@T6*= A@A@4 E*r.A!GF
at 6R"R A>T6 "@#RA*TR>3T>R8 *8RD"38* 1T4.
*he approved the pro%ect. After that, a simple course of action has been followed
for working on this pro%ect. 8ntire information and data were gathered from the respective
annual report of Na"ar Ind%stria! Enter#rises Ltd'. All the figures are taken from their
balance sheet, profit 0 loss account of the respective years and the other internal documents,
which were personally shown by the members of company in our interest.
The research methodology that " undertook for the purpose of this study is enumerated below)
SECONDARY RESEARC1:
*ources of secondary data were primarily the "nternet , %ournals , newspaper, annual report,
database available in the library, catalogues and presentations.
2<
RESEARC1 DESIGN: DESCRI/TI4E
4escriptive studies are well structured, they tend to be rigid and its approach can not be
changed every now and then. 4escriptive study can be divided in two categories+
EAF 3ross sectional
EBF 1ongitudinal
4escriptive study are undertaken in many circumstances+
'. when the researcher is interested in knowing the characteristics of certain groups such
as age , profession.
-. when the researcher is interested in knowing the proportion of people in given
population who have behaved in a particular manner, making pro%ection of certain
things.
The ob%ective of this kind of study is to answer the why, who, ,what ,when and how of the
sub%ect under consideration.
"t will be taking descriptive because my research includes the knowing the behavior of
customer towards advertisement. " will be working on to know how people of various age
group respond to different advertising or there perception towards advertisement.
2?
FINDIGN ? ANALYSIS
MACOR FINANCIAL RATIOS
A ratio is an arithmetical relationship between tow figures. #inancial ratio is a study of ratios
between various items or groups of items in financial statements. #inancial ratios have been
classified in several ways. #or our purposes, we divide them into five broad categories as
follows+ )

LI6UIDITY RATIOS
LE4ERAGE RATIOS
TURNO4ER RATIOS
/ROFITA0ILITY RATIOS
2C


5G
LI6UIDITY RATIO
2' CURRENT RATIO
7Amo%nt in Rs'8
C%rrent Ratio

Year Current Assets Current Liabilities Ratio

<GG3 5?,5<2,'5' <,CG/,C5- <.2'
<GG@ ;C,<;5,/2; /',??2,;'; -.'C
<GGH <-,G-',G?' ';,G;5,;-' 2.2?
<GGL C',/-?,-G? 2<,''<,'CC '.C2
<GGF ''5,;2-,G;? /G,-;;,;;' /.?-

Inter#retation
As a rule, the current ratio with -+' EorF more is considered as satisfactory
position of the firm.
.hen compared with -GG;, there is an increase in the provision for ta$, because
the debtors are raised and for that the provision is created. The current liabilities ma%orly
included 1anco (roup of company for consultancy additional services.
The sundry debtors have increased due to the increase to corporate ta$es.
"n the year -GG;, the cash and bank balance is reduced because that is used for
payment of dividends. "n the year -GG<, the loans and advances include ma%orly the advances
to employees and deposits to government. The loans and advances reduced because the
employees set off their claims. The other current assets include the interest attained from the
deposits. The deposits reduced due to the declaration of dividends. *o the other current assets
decreased.
The huge increase in sundry debtors resulted an increase in the ratio, which is
above the benchmark level of -+' which shows the comfortable position of the firm.
5'
GRA/1ICAL RE/RESENTATION
5-
<' 6UIC: RATIO
7Amo%nt in Rs'8
6%i(; Ratio

Year Quick Assets Current Liabilities Ratio

<GG3 5?,5<2,'5' <,CG/,C5- <.2'
<GG@ 5-,2<G,//; /',??2,;'; '.;5
<GGH ;C,??/,-;? ';,G;5,;-G 2./5
<GGL ?C,2//,5C; 2<,''<,'CC '.C
<GGF ''5,2/',?;? /G,-;;,;;' /.?'

Inter#retation
Auick assets are those assets which can be converted into cash with in a short
period of time, say to si$ months. *o, here the sundry debtors which are with the long period
does not include in the quick assets.
3ompare with -GG;, the Auick ratio is increased because the sundry debtors are
increased due to the increase in the corporate ta$ and for that the provision created is also
increased. *o, the ratio is also increased with the -GG;.
5/
GRA/1ICAL RE/RESENTATION
52
3' A0OSULTE LI6UIDITY RATIO
7Amo%nt in Rs'8
Abso!%te Cas" Ratio

Year Absolute Liquid Assets Current Liabilities Ratio

<GG3 /',GG2,G-< <,CG/,C5- /.C-
<GG@ 'G,?5C,<<? /',??2,;'; G./2
<GGH /C,2;;,52- ';,G;5,;-G -.2;
<GGL 5/,?5G,?5- 2<,''<,'CC '.'2
<GGF /5,;2C,G<G /G,-;;,;;' '.'?

Inter#retation
The current assets which are ready in the form of cash are considered as
absolute liquid assets. =ere, the cash and bank balance and the interest on fi$ed assts are
absolute liquid assets.
"n the year -GG;, the cash and bank balance is decreased due to decrease in the
deposits and the current liabilities are also reduced because of the payment of dividend. That
causes a slight increase in the current year&s ratio.
55
GRA/1ICAL RE/RESENTATION
5;
LE4ERAGE RATIOS
@' /RO/RIETORY RATIO
7Amo%nt in Rs'8
/ro#rietory Ratio

Year Share Holders unds Total Assets Ratio

<GG3 ;<,;<C,-'C <?,5<-,'<' G.?;
<GG@ 5/,/G',?/2 ??,2/?,'G< G.;
<GGH <G,-/',G;' ?C,'5?,/C' G.<C
<GGL 5;,2</,;5- 'G;,/?5,-G' G.5/
<GGF C<,G;G,G'/ '-C,?G5,'G- G.<5

Inter#retation
The proprietary ratio establishes the relationship between shareholders funds to
total assets. "t determines the long)term solvency of the firm. This ratio indicates the e$tent to
which the assets of the company can be lost without affecting the interest of the company.
There is no increase in the capital from the year-GG2. The share holder&s funds
include capital and reserves and surplus. The reserves and surplus is increased due to the
increase in balance in profit and loss account, which is caused by the increase of income from
services.
Total assets, includes fi$ed and current assets. The fi$ed assets are reduced
because of the depreciation and there are no ma%or increments in the fi$ed assets. The current
assets are increased compared with the year -GG;. Total assets are also increased than precious
year, which resulted an increase in the ratio than older.
5<
GRA/1ICAL RE/RESENTATION
5?
ACTI4ITY RATIOS
H' 5OR:ING CA/ITAL TURNO4ER RATIO
7Amo%nt in Rs'8
5or;in$ Ca#ita! T%rno*er Ratio

Year !ncome rom Ser"ices #orkin$ Capital Ratio

<GG3 /;,/GC,?/2 5G,;<G,'CC G.<-
<GG@ 5/,?CC,G?2 /<,??G,</G '.2-
<GGH <-,<-?,<5C 55,/55,2;G './'
<GGL 55,55G,;2C 22,-'',GGC '.-;
<GGF C;,;52,CG- ?5,/<5,2G< '.'/

Inter#retation
"ncome from services is greatly increased due to the e$tra invoice for
6perations 0 7aintenance fee and the working capital is also increased greater due to the
increase in from services because the huge increase in current assets.
The income from services is raised and the current assets are also raised
together resulted in the decrease of the ratio of -GG< compared with -GG;.
5C
GRA/1ICAL RE/RESENTATION
;G
L' FI=ED ASSETS TURNO4ER RATIO
7Amo%nt in Rs'8
Fied Assets T%rno*er Ratio

Year !ncome rom Ser"ices %et i&ed Assets Ratio

<GG3 /;,/GC,?/2 -?,?/2,/'< '.-;
<GG@ 5/,?CC,G?2 -C,5;?,-<C '.?-
<GGH <-,<-?,<5C '<,'/<,/'G 2.-2
<GGL 55,55G,;2C '5,G5;,CC/ /.;C
<GGF C;,;52,CG- '2,';/,G/2 ;.?-

Inter#retation
#i$ed assets are used in the business for producing the goods to be sold. This
ratio shows the firm&s ability in generating sales from all financial resources committed to total
assets. The ratio indicates the account of one rupee investment in fi$ed assets.
The income from services is greaterly increased in the current year due to the
increase in the 6perations 0 7aintenance fee due to the increase in e$tra invoice and the net
fi$ed assets are reduced because of the increased charge of depreciation. #inally, that effected a
huge increase in the ratio compared with the previous year&s ratio.
;'
GRA/1ICAL RE/RSENTATION
;-
F' CA/ITAL TURNO4ER RATIO
7Amo%nt in Rs'8
Ca#ita! T%rno*er Ratio

Year !ncome rom Ser"ices Capital 'mployed Ratio

<GG3 /;,/GC,?/2 /<,'<5,?C- G.C?
<GG@ 5/,?CC,G?2 5/,/G',?/2 '.G'
<GGH <-,<-?,<5C <G,-/',G;' '.G2
<GGL 55,55G,;2C 5;,2</,;5- G.C?
<GGF C;,;52,CG- C<,G;G,G'/ '.GG

Inter#retation
This is another ratio to %udge the efficiency and effectiveness of the company
like profitability ratio.
The income from services is greaterly increased compared with the previous
year and the total capital employed includes capital and reserves 0 surplus. 4ue to huge
increase in the net profit the capital employed is also increased along with income from
services. Both are effected in the increment of the ratio of current year.
;/
GRA/1ICAL RE/RESENTATION
;2
E' CURRENT ASSETS TO FI=ED ASSETS RATIO
7Amo%nt in Rs'8
C%rrent Assets To Fied Assets Ratio

Year Current Assets i&ed Assets Ratio

<GG3 5?,5-2,'5' 'C,CC?,G-G -.C/
<GG@ ;C,<;5,/2; '?,;<-,<;' /.<2
<GGH <-,G-',G?' '<,'/<,/'G 2.-G
<GGL C',/-?,-G? '5,G5;,CC/ ;.G<
<GGF ''5,;2-,G;? '2,';/,G/2 ?.'<

Inter#retation
3urrent assets are increased due to the increase in the sundry debtors and the net
fi$ed assets of the firm are decreased due to the charge of depreciation and there is no ma%or
increment in the fi$ed assets.
The increment in current assets and the decrease in fi$ed assets resulted an
increase in the ratio compared with the previous year
;5
GRA/1ICAL RE/RESENTATION
;;
/ROFITA0ILITY RATIOS
GENERAL /ROFITA0ILITY RATIOS
D' NET /ROFIT RATIO
7Amo%nt in Rs'8
Net /rofit Ratio

Year %et (rofit After Ta& !ncome from Ser"ices Ratio

<GG3 -','-/,2<2 /;,G/C,?/2 G.5C
<GG@ ';,'-5,C2- 5/,?CC,G?2 G./G
<GGH ';,C-C,--< <-,<-?,<5C G.-/
<GGL '?,-5C,5?G 55,55G,;2C G.//
<GGF 2G,5?;,/5C C;,;52,CG- G.2-

Inter#retation
The net profit ratio is the overall measure of the firm&s ability to turn each rupee
of income from services in net profit. "f the net margin is inadequate the firm will fail to
achieve return on shareholder&s funds. =igh net profit ratio will help the firm service in the fall
of income from services, rise in cost of production or declining demand.
The net profit is increased because the income from services is increased. The
increment resulted a slight increase in -GG< ratio compared with the year -GG;.
;<
GRA/1ICAL RE/RESENTATION
;?
2G' O/ERATING /ROFIT
7Amo%nt in Rs'8
O#eratin$ /rofit

Year )peratin$ (rofit !ncome rom Ser"ices Ratio

<GG3 /;,GC2,?<< /;,/GC,?/2 G.CC
<GG@ -<,5<;,?'2 5/,?CC,G?2 G.5'
<GGH -C,52G,5CC <-,<-?,<5C G.2'
<GGL /',5?;,<'? 55,55G,;2C G.5<
<GGF ;<,'C-,;<< C;,;52,CG- G.<G

Inter#retation
The operating profit ratio is used to measure the relationship between net profits
and sales of a firm. 4epending on the concept, it will decide.
The operating profit ratio is increased compared with the last year. The earnings
are increased due to the increase in the income from services because of 6perations 0
7aintenance fee. *o, the ratio is increased slightly compared with the previous year.
;C
GRA/1ICAL RE/RESENTATION
<G
22' RETURN ON TOTAL ASSETS RATIO
7Amo%nt in Rs'8
Ret%rn on Tota! Assets Ratio

Year %et (rofit After Ta& Total Assets Ratio

<GG3 -','-/,2<2 <?,5<-,'<' G.-<
<GG@ ';,'-5,C2- ??,2/?,'G< G.'?
<GGH ';,C-C,--< ?C,'5?,/C' G.'C
<GGL '?,-5C,5?G 'G;,/?5,-G' G.'<
<GGF 2G,5?;,/5C '-C,?G5,'G- G./'

Inter#retation
This is the ratio between net profit and total assets. The ratio indicates the return
on total assets in the form of profits.
The net profit is increased in the current year because of the increment in the
income from services due to the increase in 6perations 0 7aintenance fee. The fi$ed assets
are reduced due to the charge of depreciation and no ma%or increments in fi$ed assets but the
current assets are increased because of sundry debtors and that effects an increase in the ratio
compared with the last year i.e. -GG;.
<'
GRA/1ICAL RE/RESENTATION
<-
2<' RESER4ES ? SUR/LUS TO CA/ITAL RATIO
7Amo%nt in Rs'8
Reser*es ? S%r#!%s To Ca#ita! Ratio

Year Reser*es ? S%r#!%s Ca#ita! Ratio

<GG3 ;5,5CC,-CC -,G<C,C-G /'.52
<GG@ /2,5?-,552 '?,<'C,-?G '.?5
<GGH 5',5'',<?' '?,<'C,-?G -.<5
<GGL /<,<52,/<- '?,<'C,-?G -.G-
<GGF <?,/2G,<// '?,<'C,-?G 2.'C

Inter#retation
The ratio is used to reveal the policy pursued by the company a very high ratio
indicates a conservative dividend policy and vice)versa. =igher the ratio better will be the
position.
The reserves 0 surplus is decreased in the year -GG;, due to the payment of
dividends and in the year -GG< the profit is increased. But the capital is remaining constant
from the year -GG2. *o the increase in the reserves 0 surplus caused a greater increase in the
current year&s ratio compared with the older.
</
GRA/1ICAL RE/RESENTATION
<2
O4ERALL /ROFITA0ILITY RATIOS
23' EARNINGS /ER S1ARE
7Amo%nt in Rs'8
Earnin$s /er S"are

Year %et (rofit After Ta& %o of 'quity Shares Ratio

<GG3 -','-/,2<2 -G<,CC- 'G'.5;
<GG@ ';,'-5,C2- ',?<',C-? ?.;'
<GGH ';,C-C,--< ',?<',C-? C.G2
<GGL '?,-5C,5?G ',?<',C-? C.<5
<GGF 2G,5?;,/5C ',?<',C-? -'.;?

Inter#retation
8arnings per share ratio are used to find out the return that the shareholder&s
earn from their shares. After charging depreciation and after payment of ta$, the remaining
amount will be distributed by all the shareholders.
@et profit after ta$ is increased due to the huge increase in the income from
services. That is the amount which is available to the shareholders to take. There are ',?<',C-?
shares of Rs.'G!) each. The share capital is constant from the year -GG2. 4ue to the huge
increase in net profit the earnings per share is greaterly increased in -GG<.
<5
GRA/1ICAL RE/RESENTATION
<;
2@' /RICE EARNINGS 7/ME8 RATIO
7Amo%nt in Rs'8
/ri(e Earnin$ 7/ME8 Ratio

Year *arket (rice (er Share 'arnin$s (er Share Ratio

<GG3 /-.52 'G'.5; G./-
<GG@ -?.2< ?.;' /./G
<GGH /<.5- C.G2 2.'5
<GGL /G.'< C.<5 /.GC
<GGF 5'.?5 -'.;? -./C

Inter#retation
The ratio is calculated to make an estimate of application in the value of share
of a company.
T=8 7ARL8T :R"38 :8R *=AR8 "* "@3R8A*84 4>8 T6 T=8
"@3R8A*8 "@ T=8 R8*8RD8* 0 *>R:1>*. T=8 8AR@"@(* :8R *=AR8 AR8 A1*6
"@3R8A*84 (R8AT8R1M 367:AR84 ."T= T=8 1A*T M8AR B83A>*8 6#
"@3R8A*8 "@ T=8 @8T :R6#"T. *6, T=8 RAT"6 "* 483R8A*84 367:AR84 ."T=
T=8 :R8D"6>* M8AR.
<<
GRA/1ICAL RE/RESENTATION
<?
2H' RETURN ON IN4ESTMENT
7Amo%nt in Rs'8
Ret%rn on In*estment

Year %et (rofit After Ta& Share Holders und Ratio

<GG3 -','-/,2<2 ;<,;<C,-'C G./'
<GG@ ';,'-5,C2- 5/,/G',?/2 G./
<GGH ';,C-C,--< <G,-/',G;' G.-2
<GGL '?,-5C,5?G 5;,2</,;5- G./-
<GGF 2G,5?;,/5C C<,G;G,G'/ G.2-

Inter#retation
This is the ratio between net profits and shareholders funds. The ratio is
generally calculated as percentage multiplying with 'GG.
The net profit is increased due to the increase in the income from services ant
the shareholders funds are increased because of reserve 0 surplus. *o, the ratio is increased in
the current year.
<C
GRA/1ICAL RE/RESENTATION

?G
AD4ANTAGES OF RATIOS
The ratio analysis is one of the most powerful tools of financial analysis. "t is use as a device
to analysis and interprets the financial health of enterprise. Kust like a doctor e$amines his
patient by recording his body temperature, blood pressure etc. Before making his conclusion
regarding the illness and before giving his treatment, a financial analyst analyses the financial
statement with various tools of analysis before commenting upon the financial health or
weaknesses of an enterprise. 9A ratio is known as a symptom like blood pressure, the pulse rate
or the temperature of the individual.9 "t is with help of ratios that the financial statements can be
analyzed and decision made from such analysis.
2' 1EL/S IN DECISION+MA:ING:
#inancial statements are prepared primarily for decision)making. But the information provided
in financial statements is not an end in itself and no meaningful conclusions can be drawn from
these statements alone. Ratio Analysis helps in making decisions from the information
provided in these financial statements.
<' 1EL/S IN FINANCIAL FORECASTING AND /LANNING: Ratio
analysis is of much help in financial forecasting and planning. :lanning is looking ahead
and the ratios calculated for a number of year9s work as a guide for the future. 7eaningful
conclusions can be drawn for future from these ratios. Thus, ratio analysis helps in
forecasting and planning.
?'
3' 1EL/S IN COMMUNICATING:
The financial strength and weaknesses of a firm are communicated in a easier and
understandable manner by the use of ratios the information contained in a financial
statement is conveyed in a meaningful manner to the one for whom it is meant. Thus, ratios
help in communication and enhance the value of financial statements.
@' 1EL/S IN CO+ORDINATION:
Ratios even help in coordination, which is utmost importance in effective business
management. Better communication of efficiency and weakness of an enterprise results in
better co)ordination in the enterprise.
H' 1EL/S IN CONTROL:
Ratio analysis even helps in making effective control of the business. *tandard ratios can
be based upon :erforma financial statements and variance or deviations, if any, can be
found by comparing the actual with the standards so as to take corrective action at the right
time. The weaknesses or otherwise, if any, come to the knowledge of the management
which helps in effective control of the business.
?-
USES OF FINANCIAL STATEMENTS TO DIFFERENT
/ARTIES
The analysis and interpretation of financial statements is an important accounting activity. The
end users of business statements are interested in these statements primarily as an aid to
determine the financial position and the results of the operations. There are different parties
interested in the financial analysis of their statements and their aims and their ob%ectives also
differ significantly. The following are the use of statement analysis to different parties+
TO T1E FINANCIAL E=ECUTI4ES: +
The first party interested in the financial statement analysis is the finance department of the
business concern itself to the financial managers such analysis provides a deep insight into the
financial condition of the enterprises and the view of the past performance which helps in
future decision making. The financial statements give vital information concerning the
position of the enterprise as well the result of the operations.
TO T1E TO/ MANAGEMENT: +
The top management of the concern is also increased in the analysis of these statements
because it helps them reaching conclusions regarding+
:erformance appraisal of overall business activities.
8nquiry about current financial position and long term strategic planning.
?/
Aueries concerning the relationships of earnings to trends in sales etc.
Aueries concerning the relationships of earnings to investment.
TO T1E CREDITORS: +
The analysis of these statements is very essential to the creditors. Also some aspects of
enterprise operations are of interest to creditors in regard to liquidity of funds, soundness of
financial structure, profitability of the operations, effectiveness of working capital
management etc.
TO T1E IN4ESTORS AND OT1ERS: +
"nvestors& presents as well as prospects are also interested in the measurement of earning
capacity of the securities. "nvestors have been increasingly concerned with the cash
generation capability of an enterprise, primarily in terms of the fle$ibility available to such
enterprises to acquire other business and new assets on an advantage basis for this purpose.
?2
/RO0LEMS OF FINANCIAL STATEMENTS
There are certain problems and issues encountered in financial analysis, which call for care and
%udgment in such e$ercise.
DE4ELO/MENT OF 0ENC1MAR:S: +
(iven the diversity of Na"ar Ind%stria! Enter#rises Ltd'product lines, it is difficult to
find suitable benchmarks for evaluating its financial performance and conditions. =ence
even for such firm, the financial analyst may run into difficulty. "f information is available
only about industry average or some other standard and not about the entire dispersion of
ratios for various firms in the industry, it may not be possible to draw meaningful
inferences.
5INDO5 DRESSING: +
#irm may resort to window dressing to pro%ect a favorable financial picture. .hen window
dressing is suspected, the financial analyst should look at the average data available as per
resource.
/RICE LE4EL C1ANGES: )
"n "ndia financial accounting takes into consideration price level changes. As a result,
balance sheet figures are distorted and profits are misreported. =ence financial statement
analysis can be vitiated.
?5
4ARIATIONS IN ACCOUNTING /OLICIES: +
Business firms have some latitudes in accounting treatment like depreciation, valuation of
stocks research and development e$penses, foreign e$change transactions, installment
sales, preliminary and preoperative e$penses, and provision of reserve and revaluation of
assets. 4ue to diversity of accounting practices found in practice, comparative financial
statement analysis may be vitiated.

?;
CONCLUSION
6n seeing the leverage position of the Na"ar Ind%stria! Enter#rises Ltd'" conclude that it
is very good as the stake of owners in company is continuously increasing and its long)term
debt continuously decreasing it means that company is paying its debt promptly and creditors
will not face any risk in investing in Na"ar Ind%stria! Enter#rises Ltd'as also Na"ar
Ind%stria! Enter#rises Ltd' is giving assured R6".
6n seeing turnover, fi$ed assets and current assets turnover of company goes on increasing
which is a good indicator as it brings commensurate gain and also the average collection
goes on decreasing but management should take more efficient steps to reduce it.
6n seeing the profitability of the Na"ar Ind%stria! Enter#rises Ltd'overall performance
is very good. A continuous increase in the values of 8:* Ee$cept year 'CCCF and 4:*
results, investors feel safe to invest money in Na"ar Ind%stria! Enter#rises Ltd'
?<
SUGGESTIONS
" have obtained some weak and strong points of the company during the analysis of financial
statements, which are as follows+ )
As %ust only the analysis financial statement is not only mean to reach at conclusions we cannot
substitute it for sound %udgment. #urthermore good %udgment depends upon the intelligence
and ability of the analyst.
6n seeing the liquidity position of Na"ar Ind%stria! Enter#rises Ltd'. " conclude that it is not
very good as the current assets are in the form of inventories and debtors. The debt collection
period is high and inventories are least liquid current assets. *o maintaining the inventories are
relatively costly affair for the company and the management must have to investigate properly.
"t is very necessary so that fund should not be blocked unreasonably. 8fficient inventory
management is required in Na"ar Ind%stria! Enter#rises Ltd'
??
LIMITATIONS
There may be limitations to this study because the study duration Esummer placementF is very
short and it&s not possible to observe every aspect of financial management practices.
?C
0I0LIOGRA/1Y
0OO:S:
#inancial 7anagement by *.@. 7aheshwari
7anagement Accounting by *.@. 7aheshwari
Lothari 3.R Research 7ethodology *econd 8dition, .ishwa :rakashan.
MAGANINES
6utlook
Business .orld
"ndia Today
NE5S/A/ERS
The =indu
The Time of "ndia
8conomics Times
5E0LIOGRA/1Y :
http:/ www.ori&india.com/aboutus.asp
OT1ER
Na"ar Ind%stria! Enter#rises Ltd'.) Annual Report
Na"ar Ind%stria! Enter#rises Ltd'BA1A@38 *=88T
CG
ANNE=URE
A//ENDI=
0a!an(e s"eet as on 32
st
Mar(" <GGF
7Amo%nt in Rs'8
/arti(%!ars <GGL + GF <GGH + GL
SOURCES OF FUNDS :
28 S1ARE1OLDERSO FUNDS
EaF 3apital '?,<'C,-?G '?,<'C,-?G
EbF Reserves and *urplus <?,/2G,<// /<,<52,/<-
C<,G;G,G'/ 5;,2</,;5-
<8 DEFFERED TA= LIA0ILITY -,2<?,2-? -,<C2,/5G
TOTAL CC,5/?,22' 5C,-;?,GG-
A//LICATION OF FUNDS :
28 FI=ED ASSETS
EaF (ross Block /',G5<,5C; -C,<;<,C<C
EbF 1ess+ 4epreciation ';,?C2,5;- '2,<'G,C?;
EcF @et Block '2,';/,G/2 '5,G5;,CC/
<8 CURRENT ASSETS) LOANS AND AD4ANCES
EaF *undry 4ebtors ?G,<'-,?G2 /<,?5;,2-G
EbF 3ash and Bank Balances /2,G2/,5-G 5',;CG,/-;
EcF 6ther 3urrent Assets '5-,--? ?5<,<5/
EdF 1oans and Advances <//,5'; C-/,<GC
''5,;2-,G;? C',/-?,-G?
LESS : CURRENT LIA0ILITIES AND /RO4ISIONS
EaF 1iabilities -',5C;,C'; /?,5C',-;5
EbF :rovisions ?,;;C,<25 ?,5-5,C/2
/G,-;;,;;' 2<,''<,'CC
NET CURRENT ASSETS ?5,/<5,2G< 22,-'',GGC
TOTAL CC,5/?,22' 5C,-;?,GG-
C'
/rofit and Loss A((o%nt for t"e #eriod ended on 32
st
Mar(" <GGF
7Amo%nt in Rs'8
/arti(%!ars <GGL + GF <GGH A GL
I'INCOME
"ncome from *ervices C;,;52,CG- 55,55G,;2C
6ther "ncome -,/C?,--G -,-?5,?C;
TOTAL CC,G5/,'-- 5<,?/;,525
II'E=/ENDITURE
Administrative and 6ther 8$penses ?',//2,<5G <5,5CC,<'C
?',//2,<5G <5,5CC,<'C
1ess+ 8$penditure Reimbursable under 6perations
and 7aintenance Agreement 2C,2<2,/G5 2C,/2C,?C-
TOTAL /',?;G,225 -;,-2C,?-<
III' /ROFIT 0EFORE DE/RECIATION AND TA=ATION ;<,'C-,;<< /',5?;,<'?
:rovision for 4epreciation -,'?/,5<; -,-<C,C'<
I4' /ROFIT 0EFORE TA=ATION ;5,GGC,'G' -C,/G;,?G'
:rovision for Ta$ation
) 3urrent -2,-C-,GGG 'G,;?G,22G
) 4eferred E/'5,C--F E;<,/5CF
) #ringe Benefits 22;,;;/ 2/2,'2G
4' /ROFIT AFTER TA=ATION 2G,5?;,/5C '?,-5C,5?G
*urplus brought forward from :revious Mear -;,;CC,-5< 22,C5',?5'
4I' /ROFIT A4AIALA0LE FOR A//RO/RIATIONS ;<,-?5,;'< ;/,-'',2/'
Transfer to (eneral Reserve ) 2,2C5,'?5
"nterim 4ividend Rs.'5 per equity *hare E-GG5) @"1F ) -?,G<?,C-G
:rovision for 4ividend 4istribution Ta$ ) /,C/?,G;C
4II' 0ALANCE CARRIED TO 0ALANCE S1EET ;<,-?5,;'< -;,;CC,-5<
C-