Вы находитесь на странице: 1из 60

Executive Summary:

Ratio Analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives a better understanding of financial condition
and performance of firm. Trend ratios indicate the direction of change in the performance
improvement, deterioration or constancy- over the year.
Objectives:
1. To study the present financial system at Omkar Speciality Chemicals Ltd
2. To analyze the capital structure of the company with the help of Leverage ratio.
3. To evaluate operational efficiency, liquidity, and solvency of OSCL.
4. To compare the previous years and present year performance of the company.
5. To give suggestion based on the study.
Deliverables:Ratio analysis is a technique of analyzing the financial statement of industrial concerns. Now
a day this technique is sophisticated and is commonly used in business concerns. Ratio
analysis is not an end but it is only means of better understanding of financial strength and
and weakness of a firm.
Ratio analysis is one of the most powerful tools of financial analysis which helps in
analyzing and interpreting the health of the firm. Ratios are proved as the basic instrument in
the control process and act as back bone in schemes of the business forecast.
With the help of ratio we can determine : The ability of the firm to meet its current obligation.
The limit or extent to which the firm has used its borrowed funds.
The efficiency with which the firm is utilizing in generating sales revenue.
The operating efficiency and performance of the company.

CHAPTER 1
INTRODUCTION

1.1 INTRODUCTION
OSCL Company was originally incorporated as Omkar Speciality Chemicals Private Limited
on February 24, 2005 and took over business of the Proprietorship Firm M/s.Omkar
Chemicals which was in operation since 1983 with Mr.Pravin S. Herlekar as the Proprietor.
The Private Limited Company was converted into a Public Limited Company on March 18,
2010. OSCL is mainly engaged in the manufacture and sale of Speciality Chemicals and
Intermediates for Chemical and Allied Industries. Our has four Units at MIDC, Badlapur (E),
Dist: Thane, Maharashtra, India. The locations of our Units are as under:

Unit No.1 W-92(A), MIDC, Badlapur(E), Dist: Thane-421503, State: Maharashtra.


Unit No.2 F-24, MIDC, Badlapur (E), Dist: Thane-421503, State: Maharashtra.
Unit No.3 B-34, MIDC, Badlapur (E), Dist: Thane-421503, State: Maharashtra.
Unit No.4 F-10/1, MIDC, Badlapur (E), Dist: Thane-421503, State: Maharashtra.

1.2 HISTORY
Omkar Speciality Chemicals Limited is primarily involved in the production of Speciality
Chemicals and Pharma Intermediates.They manufacture a range of Organic, Inorganic and
Organo Inorganic Intermediates. The Inorganic Intermediates include Molybdenum
derivatives, Selenium derivatives, Iodine derivatives, Cobalt derivatives, Bismuth and
Tungsten derivatives and the organic intermediates include Tartaric acid derivatives and other
intermediates. These products find applications in various industries like Pharmaceutical
Industry, Chemical Industry, Glass Industry, Cosmetics, Ceramic Pigments and Cattle and
Poultry Feeds.
They are exporting their products to Europe, Canada, Asia, South America and Australia.
Companys association with leading organizations in India and abroad has enabled to broaden
the business, to expand the existing product range and to develop new molecules as per the
specific demands of valued customers. The Company has basic research capabilities and has
recently acquired M/S.RISHICHEM RESEARCH LTD., [W-83(C), MIDC, Badlapur] as a
wholly owned subsidiary which is expected to provide a total RandD back-up to the
Company for all its future expansion and diversification programmes.

1.3 MAJOR MILESTONES


Milestones
1983 Total installed capacity of 6 MTPA for manufacture of Molybdenum Derivatives.
1983
1986
1995
2005

Mr. Pravin S. Herlekar started a proprietary concern in name of Omkar Chemicals


Launch of new Selenium Derivatives.
Launch of Iodine Derivatives.
Incorporated Omkar Speciality Chemicals Private Limited which took over entire
business of Omkar Chemicals, a proprietary concern of Mr Pravin Herlekar. The
installed capacity after takeover stood at 318 MT.

2005 Launch of organic intermediaries.


2009 Commenced commercial production started at Unit no. II, with an installed
2009
2010
2010
2010

capacity of 375 MTPA.


Increased the total installed capacity upto 750 MTPA.
Converted into a Public Limited Company.
Set up Unit no. III of the Company .
Rishichem Research Limited became a wholly owned subsidiary. The Company is
engaged in manufacturing and RandD of speciality chemicals and pharma

intermediaries.
2011 Set up a Technology Centre for developing innovative processes and CRAMS
activities.
2011 Company got listed with Bombay Stock Exchange Limited (BSE) and National
Stock Exchange of India Limited (NSE).
2011 A successful Initial Public Offer whereby Company raised Rs. 7938 Lakhs.
2011 Got FDA approval for manufacturing Selenium Sulphide U.S.P. in Unit no. III.
2011 Received ISO-9001-2008 certification for our Unit no. - II in respect of quality
management systems.
2012 OSCL gets Star Export House status from Ministry of Commerce and Industry

1.4 OUR STRENGTH


We are dedicated to achieving excellence in our work. Omkar Speciality Chemicals Limited
maintains the highest ethical and professional standards and strives to stay on the leading
edge in technology, in an ever-changing environment.
While our greatest strength is the ability to understand the client goals, our success is very
much attributed to strong teamwork, continuous R&D and the dedication and commitment
5

of each and every member of the OSCL family to deliver unsurpassed quality and reliable
products & services to the total satisfaction of all our customers.
We believe that our historical success and future prospects are directly related to a
combination of strengths, including the following
Multi product capability :- Our Company has a diverse product range comprising a mix of
organic, inorganic and organo inorganic intermediates Our Companys product portfolio
comprises of more than 90 products in these segments. The products include inorganic
intermediates like derivatives of Molybdenum, Selenium, Iodine, Cobalt, and Bismuth ;
organic intermediates like Tartaric acid derivatives and various other organo inorganic
intermediates like Iodobenzene Diacetate, Dess Martin Periodinane, Vanadyl Sulphate etc.
Customer base:- We have a diverse customer base from different industry segments like
pharmaceutical, chemical, glass, cosmetics, ceramic pigments, etc. Further, we export our
products to various countries in Europe, Asia, North America, South America and Australia.
We focus on expanding our customer base by catering to the requirements of customers
from various industry segments.
Cost advantage: - We believe that we have developed processes for manufacture of pro
ducts in a cost effective manner. Our R&D team is continuously working on the processes
for our existing products in order to improve the production with optimum utilization of
resources and cost saving. This provides us a competitive edge over others and helps us to
widen our customer base.
Our quality control:- We have quality control departments at our Unit 1 and Unit 2 each,
the activities of which comprise of collection and preparation of samples, testing of raw
materials and other process inputs inspection, testing and quality certification of finished
products, preparation of technical information sheet and issue of certificate of analysis. Our
quality control laboratory is equipped with various equipments such as High Performance
Liquid Chromatographs (HPLC), Gas Chromatographs (GCs), vacuum dryer, sonicator,
Atomic Absorption Spectroscopy (AAS), spectrophotometer, etc. Our Unit 2 has been
granted ISO 9001:2008 for its quality management systems.

1.5 VISION
6

To create total satisfaction among our valuable customers by way of providing


desired quality & quantity at most competitive prices & with timely deliveries
To become a prominent player in innovative technologies for a wide cross-section of
product segments
To continue achieving a YoY growth rate of 40% or more for next five years.

1.6 OMKAR SPECIALITY CHEMICALS LTD CUSTOMERS


Divi's Laboratories Ltd
Dr.Reddy's Laboratories Ltd
Mylan Laboratories Ltd
Cipla Ltd
Hetero Labs Ltd.

Wockhardt Ltd
Glenmark Generics Ltd
Sandoz Pvt. Ltd
Jubilant Life Sciences Ltd
MSN Laboratories Ltd

1.7 OMKAR SPECIALITY CHEMICALS LTD PRODUCTS


Products
Iodine Derivatives:Methyl Iodide
Ethyl Iodide
n-Butyl Iodide
N-propyl Iodide
2-Ethylhexyl Iodide
Diiodomethane
Chloroiodomethane
5-Iodo-2-methylbenzoic Acid
2-chloro-5-iodobenzoic acid
Methyl-2-Iodobenzoate
2-Iodobenzoic Acid
3,5-Diiodosalicylic Acid
N -Iodosuccinimide
Trimethylsulfoxonium Iodide
Iodine Monochloride
5-Iodoanthranilic acid
Iodoform
Potassium iodide
Sodium Iodide
Ammonium Iodide
Cuprous Iodide
Zinc Iodide
Sodium Metaperiodate
Potassium Iodate

Cas No
74-88-4
75-03-6
542-69-8
107-08-4
1653-16-3
75-11-6
593-71-5
54811-38-0
19094-56-5
610-97-9
88-67-5
133-91-5
516-12-1
1774-47-6
7790-99-0
5326-47-6
75-47-8
7681-11-0
7681-82-5
12027-06-4
7681-65-4
10139-47-6
7790-28-5
7758-05-6
7

Calcium Iodate
Iodic acid
Periodic acid
Hydriodic Acid
Iodobenzene Diacetate
Dess Martin Periodinane
1,4-Diiodobenzene
4-Bromoiodobenzene
4-Chloroiodobenzene
Iodobenzene
4-Iodoaniline
4-Iodotoluene
4-Iodoanisole
4-Iodophenol
4,4'-Diiodobiphenyl
Tetrabutylammonium Iodide
Intermediaries:1,3-Acetonedicarboxylic Acid
2,4-thiazolidinedione
Benzeneseleninic Anhydride
Bromoform
Pyridinium-P-Toluenesulfonate
Pyridinium Chlorochromate
Pyridinium Dichromate
Vanadyl Acetylacetonate
Vanadyl Sulphate
Methyl Isobutyryl Acetate
3' Chloropropiophenone
Lasamide
1,4-dioxane
potassium phthalimide
4-Methylcyclohexanone
Cadmium Sulfide
Indole-3-acetic acid
2-Bromopyridine
Triflic Anhydride
Cerium(III) Chloride
Selenium Derivatives:Selenium Dioxide
Selenium Sulfide (USP)
Selenous Acid
Sodium Selenate
Sodium Selenite
Zinc Selenite
Diphenyl Diselenide
Sodium Selenite Pentahydrate
Cadmium Selenide
Molybdenum Derivatives:-

40563-56-2
7782-68-5
10450-60-9
10034-85-2
3240-34-4
87413-09-0
624-38-4
589-87-7
637-87-6
591-50-4
540-37-4
624-31-7
696-62-8
540-38-5
3001-15-8
311-28-4
542-05-2
2295-31-0
17697-12-0
75-25-2
24057-28-1
26299-14-9
20039-37-6
3153-26-2
27774-13-6
42558-54-3
34841-35-5
2736-23-4
123-91-1
1074-82-4
589-92-4
1306-23-6
87-51-4
109-04-6
358-23-6
7790-86-5
7446-08-4
7488-56-4
7783-00-8
13410-01-0
10102-18-8
13597-46-1
1666-13-3
26970-82-1
1306-24-7

Ammonium Molybdate
Molybdenum Disulfide
Molybdenum Trioxide
Molybdic Acid
Phosphomolybdic Acid
Sodium Molybdate
Resolving Agent:Dibenzoyl-D-Tartaric Acid
Dibenzoyl-L-Tartaric Acid
Di-p-Anisoyl-D-Tartaric Acid
Di-p-Anisoyl-L-Tartaric Acid
Di-p-Toluoyl-D-Tartaric Acid
Di-p-Toluoyl-L-Tartaric Acid
Cobalt Derivatives:Cobalt Acetate
Cobalt Carbonate
Cobalt Chloride
Cobalt Nitrate
Cobalt Oxide
Cobalt Sulphate
Bismuth Derivatives :Bismuth Ammonium Citrate
Bismuth Citrate
Bismuth Hydroxide
Bismuth Nitrate
Bismuth Oxide
Bismuth Oxychloride
Bismuth Subcarbonate
Bismuth Subsalicylate
Bismuth Subnitrate

12054-85-2
1317-33-5
1313-27-5
7782-91-4
12026-57-2
7790 - 28 5
80822-15-7
62708-56-9
191605-10-4
50583-51-2
32634 68-7 / 71607-32-4
32634-66-5 / 71607-31-3
6147-53-1
513-79-1
7791-13-1
10026-22-9
1308-06-1
10026-24-1
31886-41-6
813-93-4
10361-43-0
10035-06-0
1304-76-3
7787-59-9
892-10-4
14882-18-9
1304-85-4

1.8 PLANT & CAPACITY


In June 2005, the company took over the over the business of Omkar Chemicals, a
proprietary concern with an installed capacity of 318 MT, which was engaged in the
manufacture of cobalt, selenium and iodine derivatives in addition to molybdenum
derivatives. During the year 2006-07 Pursuant to a Share Purchase Agreement dated May
14, 2010 between our Company and the shareholders of Rishichem Research Limited, we
have purchased 1078 Equity Shares of Rishichem Research Limited thereby holding
99.82% and making it our wholly owned Subsidiary. In January 2006, the company
expanded the total installed capacity from 318 MT to 325 MT. In March 2007, they further
increased the installed capacity from 325 MT to 375 MT. In March 2009, the company set
up a new manufacturing facility, namely Unit 2 at MIDC, Badlapur (E) in Maharashtra

with an installed capacity of 375 MT. With this, the total installed capacity increased to
750 MT. In March 18, 2010, the company was converted into public limited company and
the name was changed to Omkar Speciality Chemicals Ltd. In May 2010, as per the share
purchase agreement, the company purchased 1078 equity shares of Rishichem Research
Ltd, and thus Rishichem Research Ltd became a wholly owned subsidiary company. The
company set up a new manufacturing facility, namely Unit 3 through their internal
accruals, at MIDC, Badlapur in Maharashtra with an installed capacity of 200 MT. The
commercial production at Unit 3 is likely to start in the month of March 2011. The
company proposes to expand their existing manufacturing facilities at Unit 1, Unit 2 and
Unit 3 located at MIDC, Badlapur in Maharashtra. This will enable them to increase the
capacity of their existing operations and further expand their product range. With this
proposed expansion, the company intends to expand their existing product lines in
Selenium, Molybdenum, Cobalt, Bismuth, etc. Further, they intend to create a facility for
new products in the field of metal oxides such as Cobalt Oxide, Molybdenum Trioxide,
Molybdenum Disulfide, etc. The company proposes to set up a new manufacturing facility,
namely Unit 4 at MIDC, Badlapur in Maharashtra with an installed capacity of 1250 MT
per annum. They propose to manufacture new molecules in Iodine derivatives and pharma
intermediates with new technologies comprising of catalytic high pressure reactions. In
view of the above proposed expansion, the total installed capacity of the company would
aggregate to 3650 MT per annum from the existing installed capacity of 950 MT per
annum.
Manufacturing

Capacity(June2012)

Utilization

Unit

Products
manufactured

Unit 1, Badlapur, ~600 mtpa

~67.6% in

Iodine,

selenium,

Thane

Q1FY13

molybdenum
compounds and
other derivatives
Organic synthesis

Unit 2, Badlapur, ~1025 mtpa


Thane
Unit 3, Badlapur, ~75 mtpa

Selenium sulphide

Thane
10

Unit 4, Badlapur, -

Proposed for new

Thane

facility of organic
chemicals.
Presently used as
warehouse.

1.8 FINANCE PROCESS

Internal Audit
Start

Receipt of invoices from Vendor

Scrutinising the invoices with Delivery Challan,


Purchase Order, Goods Received Note

Transfer to concerned person/vendor for necessary correction


Query?

Sent for bill booking

STOP
11

Bill Booking

Start

Bill Book-ERP

Tally

Match Tally & ERP Amount entry

STOP

12

Tax Deducted At Source Management: -16 A

Start

Entry-Tally-ERP

Monthly Return File-TDS Payable

27 A Quarterly Return
[FUV File Submit]

Download Forum 16 A

Prepared Covering Letter

Stop
13

Vendor Payment
Start

In Tally Checking Outstanding

Due Date

Fund Availability

Cheque

Stop

14

CHAPTER 2
LITERATURE REVIEW & METHODOLOGY

15

2.1 LITERATURE REVIEW

Review of literature refers to the collection of the results of the various researches relating to
the present study. It takes into consideration the research of the previous researchers which
are related to the present research in any way. Here are the reviews of the previous researches
related with the present study.
Bollen (1999):Conducted a study on Ratio Variables on which he found three different uses of ratio
variables in aggregate data analysis:
As measures of theoretical concepts,
As a means to control an extraneous factor, and
As a correction for heteroscedasticity.
In the use of ratios as indices of concepts, a problem can arise if it is regressed on other
indices or variables that contain a common component. For example, the relationship
between two per capita measures may be confounded with the common population
component in each variable. Regarding the second use of ratios, only under exceptional
conditions will ratio variables be a suitable means of controlling an extraneous factor. Finally,
the use of ratios to correct for heteroscedasticity is also often misused. Only under special
conditions will the common form forgers soon with ratio variables correct for
heteroscedasticity.
Cooper (2000):Conducted a study on Financial Intermediation on which he observed that the quantitative
behaviour of business-cycle models in which the intermediation process acts either as a
source of fluctuations or as a propagator of real shocks. In neither case do we find convincing
16

evidence that the intermediation process is an important element of aggregate fluctuations.


For an economy driven by intermediation shock consumption is not smoother than output,
investment is negatively correlated with output, variations in the capital stock are quite large,
and interest rates are pro cyclical. The model economy thus fails to match unconditional
moments for the US economy. We also structurally estimate parameters of a model economy
in which intermediation and productivity shocks are present, allowing for the intermediation
process to propagate the real shock. The unconditional correlations are closer to those
observed only when the intermediation shock is relatively unimportant.
2.2 RESEARCH METHODOLOGY
Research Methodology is a systematic way to solve any research problem. It may be
understood as a science of studying how research is done scientifically.
Methodology of Study:This study was aimed by systematic design. Collection analysis, reporting of data and finding
relevant for ratio analysis of Omkar Speciality Chemicals Ltd, Badlapur. A descriptive study was
done to obtain an accurate description. The information is collected through secondary sources
during the project. That information was utilized for calculating performance evaluation and
based on that, interpretations were made.
Sources of secondary data:
1. Most of the calculations are made on the financial statements of the company provided
statements.
2. Referring standard texts and referred books collected some of the information regarding
theoretical aspects.
3. Method- to assess the performance of he company method of observation of the work in
finance department in followed.

Limitations :
1. The study provides an insight into the financial, personnel, marketing and other aspects of
OSCL. Every study will be bound with certain limitations.
2. The below mentioned are the constraints under which the study is carried out.

17

3. One of the factors of the study was lack of availability of ample information. Most of the
information has been kept confidential and as such as not assed as art of policy of company.
Time is an important limitation. The whole study was conducted in a period of 60 days,
which is not sufficient to carry out proper interpretation and analysis

CHAPTER 3
PROJECT PROFILE

18

3.1 PROJECT PROFILE


Meaning of Ratio:- The term Ratio refers to the numerical or quantitative relationship
between two items or variables. This relationship can be exposed as

Percentages
Fractions
Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial
statements. So 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 judgment.

Steps 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 past or
with the industry ratios. It facilitates in assessing success or failure of the firm.

Nature of Ratio Analysis:Ratio analysis is a technique of analysis and interpretation of financial statements. It is the
process of establishing and interpreting various ratios for helping in making certain decisions.
It 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
19

statements, but the analyst has to select the appropriate data and calculate only a few
appropriate ratios.
Interpretation of the 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 mind
when attempting to interpret ratios. The interpretation of ratios can be made in the following
ways.

Single absolute ratio


Group of ratios
Historical comparison
Projected ratios
Inter-firm comparison

Guidelines Or Precautions For Use of Ratio:The calculation of ratios may not be a difficult task but their use is not easy Following
guidelines or factors may be kept in mind while

Interpreting various ratios are


Accuracy of financial statements
Objective or purpose of analysis
Selection of ratios
Use of standardsRatio may be expressed in the following three ways :

Pure Ratio or Simple Ratio :- It is expressed by the simple division of one number
by another. For example , if the current assets of a business are Rs. 200000 and its
current liabilities are Rs. 100000, the ratio of Current assets to current liabilities will

be 2:1.
Rate or So Many Times :- In this type , it is calculated how many times a figure
is, in comparison to another figure. For example , if a firms credit sales during the
year are Rs. 200000 and its debtors at the end of the year are Rs. 40000 , its Debtors
Turnover Ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times

in comparison to debtors.
Percentage :- In this type, the relation between two figures is expressed in hundredth.
For example, if a firms capital is Rs.1000000 and its profit is Rs.200000 the ratio of
profit capital, in term of percentage, is 200000/1000000*100 = 20%
20

Advantages Of Ratio Analysis:

Helpful in analysis of Financial Statements.


Helpful in comparative Study.
Helpful in locating the weak spots of the business.
Helpful in Forecasting.
Estimate about the trend of the business.
Fixation of ideal Standards.
Effective Control.
Study of Financial Soundness.

Limitation of Ratios Analysis:

Comparison not possible if different firms adopt different accounting policies.


Ratio analysis becomes less effective due to price level changes.
Ratio may be misleading in the absence of absolute data.
Limited use of a single data.
Lack of proper standards.
False accounting data gives false ratio.
Ratios alone are not adequate for proper conclusions.
Effect of personal ability and bias of the analyst.

Classification 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. Various accounting ratios can be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratio

21

1.Traditional Classification:- It includes the following.

Balance sheet (or) 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.


Profit and loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit and loss account items, e.g. the ratio of gross profit to

sales etc.
Composite (or) inter statement ratios: These ratios exhibit the relation between a
profit and loss account or income statement item and a balance sheet items, e.g. stock
turnover ratio, or the ratio of total assets to sales.

2.Functional Classification:- These include


Liquidity Ratios
Solvency Ratios
Activity Ratios
Profitability Ratios.
3.Significance Classification:- Some 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 The View of Functional Classification The Ratios Are: Liquidity Ratios
Solvency Ratios
Activity Ratios
Profitability Ratios.

1.Liquidity Ratios:- It refers to the ability of the firm to meet its current liabilities. The
liquidity ratio, therefore, are also called Short-term Solvency Ratio.These ratio are used to

22

assess the short-term financial position of the concern. They indicate the firms ability to meet
its current obligation out of current resources.
In the words of Saloman J. Flink, Liquidity is the ability of the firms to meet its current
obligations as they fall due.
Liquidity Ratios Include Three Ratios :a. Current Ratio
b. Quick Ratio or Acid Test Ratio
c. Super Quick Ratio
a. Current Ratio:- This ratio explains the relationship between current assets and current
liabilities of a business.
Formula:-Current Assets/Current Liabilities
Current Assets:-Current assets includes those assets which can be converted into cash with
in a years time.
Current Assets:-Cash in Hand + Cash at Bank + B/R + Short Term Investment +
Debtors(Debtors Provision) + Stock(Stock of Finished Goods + Stock of Raw Material +
Work in Progress) + Prepaid Expenses, Marketable Securities, Short Term Loans and
Advances, Advance Payment of Income Tax.
Current Liabilities :- Current liabilities include those liabilities which are repayable in a
years time.
Current Liabilities:-Bank Overdraft + B/P + Creditors + Provision for Taxation + Proposed
Dividend + Unclaimed Dividends + Outstanding Expenses + Loans Payable with in a Year,
Income Received in Advance.

23

Current Ratio
(Amount In Lakhs)

(Amount In Lakhs)

Year

Current Assets

Current Liabilities

Ratio

2011

13305.49

3425.56

3.88

2012

13762.12

10390.12

1.32

2013

15,961.62

12360.99

1.29

3.88
4
3

Current
1.32 Ratio

1.29

1
0

2011

2012

2013

Interpretation:According to accounting principles, a current ratio of 2:1 is supposed to be an ideal ratio. It


means that current assets of a business should, at least , be twice of its current liabilities. The
higher ratio indicates the better liquidity position, the firm will be able to pay its current
liabilities more easily. If the ratio is less than 2:1, it indicate lack of liquidity and shortage of
working capital.
When compared with 2012, it implies that for every one rupee of current liabilities 1.29 are
available to met them in others words current assets are one- and half more times then current
liabilities. There is an increase in the provision for tax, because the debtors are raised and for
that the provision is created. The sundry debtors have increased due to the increase to
corporate taxes.

24

From the current ratio it is derived that the ratio is not satisfactory because the % increase in
current assets is less than the increase in current liabilities during the year 2011-2013. The
highest ratio recorded in 2.82 in 2011 and the lowest ratio recorded is 1.29 in the year 2013
and plus it is less than the standard ratio.
The other current assets include the interest attained from the deposits. Though there is an
increase in current assets or the ratio is less than 2:1 it indicate lack of liquidity and shortage
of working capital.

b. Quick Ratio or Acid Test Ratio:- Quick ratio indicates whether the firm is in a position to
pay its current liabilities with in a month or immediately.
Quick Assets means those assets, which will yield cash very shortly.
Quick Liability means to those liabilities those were a companys debt or obligations that
are due within a year.
Formula:-Quick Asset/Quick Liability

Quick Ratio
(Amount In Lakhs)

(Amount In Lakhs)

Year

Quick Assets

Quick Liabilities

Ratio

2011

10297.74

3425.56

3.01

2012

8495.87

10390.12

0.82

2013

9605.57

12360.99

0.78

25

3.5

3.01

3
2.5
2

Quick Ratio

1.5

0.82

0.78

1
0.5
0
2011

2012

2013

Interpretation:Quick assets are those assets which can be converted into cash with in a short period of time,
say to six months. This ratio is a better test of short-term financial position of the company.
From the quick ratio it is found that the ratio is not satisfactory because the ratios recorded
during the year were less than the standard ratio. In the year 2011 the ratio recorded was 3:1
which came down to 0.82 and 0.78 in 2013 and the current year ratio then the standard ratio.
An ideal quick ratio is said to be 1:1. If it is more, it is considered to be better As there is an
decrease in quick assets then quick liabilities this ratio is less then then 2:1. So there are less
possibility of providing funds at short term.
c. Super Quick Ratio:- Super Quick Ratio measures the relationship between cash and
marketable securities and current liabilities.
Formula:-Cash + Marketable Securities /Current Liabilities

Super Quick Ratio


26

(Amount In Lakhs)

(Amount In Lakhs)

Year

Cash + Marketable Securities

Current Liabilities

Ratio

2011

3860.19

3425.56

1.13

2012

3140.36

10390.12

0.30

2013

2157.47

12360.99

0.17

1.13
1.2
1
0.8

Super Quick Ratio


0.3

0.6
0.4

0.17

0.2
0
2011

2012

2013

Interpretation:An ideal super quick ratio below 1 is said to be fine. This ratio measures the ability of the
enterprise to meet its short term obligation as & when due without relying upon the
realisation of the stock & debtors.
This indicates cash & marketable securities available for each rupee of current liability. A
very high super quick ratio indicates high liquidity at the cost of profitability since ideal cash
does not generate any return & marketable securities generate a return at a lower rate. From
the super quick ratio it is derived that this ratio is also decreasing over period of time it came
down to 0.17 in 2013 from 0.30 in 2012 & 1.13 in 2011 as no standard is set but below 1 is
said to be fine
Since cash is more in this case there are know return but even cash is less then current
liability it is below 1 it is said to be fine.

27

2. Solvency Ratios:- This ratio disclose the firms ability to meet the interest costs regularly
and Long term indebtedness at maturity.
Solvency Ratios Include Five Ratios:a. Debt Equity Ratio
b. Total Assets to Debt Ratio
c. Proprietary Ratio
d. Interest Coverage Ratio
a. Debt Equity Ratio:- This ratio expresses the relationship between long term debts and
shareholders fund.
Formula:-Debt/Equity
Debt:-These refer to long term liabilities which mature after one year. These include
Debentures, Mortgage Loan, Bank Loan, Loan from Financial institutions and Public
Deposits etc.
Equity:- These include Equity Share Capital, Preference Share Capital, Share Premium,
General Reserve, Capital Reserve, Other Reserve and Credit Balance of Profit and Loss
Account.

Debt Equity Ratio


(Amount In Lakhs)

(Amount In Lakhs)

Year

Debt

Equity

Ratio

2011

4535.64

9223.97

0.49

2012

7384.36

10583.49

0.70

2013

11638.96

12677.66

0.92

28

0.93
1

0.7

0.8
0.6

0.49
Debt Equity Ratio

0.4
0.2
0
2011

2012

2013

Interpretation:This Ratio is calculated to assess the ability of the firm to meet its long term liabilities.
Generally, debt equity ratio of is considered safe .If the debt equity ratio is more than that, it
shows a rather risky financial position from the long-term point of view, as it indicates that
more and more funds invested in the business are provided by long-term lenders.
The lower this ratio, the better it is for long-term lenders because they are more secure in that
case. Lower than 2:1 debt equity ratio provides sufficient protection to long-term lenders.
From the debt equity ratio it is found that the ratio recorded during the year 2011,2012,&
2013 is not satisfactory as the ratios are not nearer to the standard ratio though there is
increase in the debt equity ratio it increase to 0.92 in 2013 from 2012 it was 0.70.
Debt Equity Ratio establishes a relationship between long term debts & shareholders funds.
The objective of computing this ratio is to measure the relative proportion of debt & equity in
financing the assets of the firm & this can be seen by the above graph as it is less then 2:1.
b. Total Assets to Debt Ratio:- Total Assets to Debt Ratio establishes relationship between
total assets and total long term debts.
Formula:-Total Assets/Long Term Debts
Total Assets:-Fixed Assets + Current Assets
Long Term Debt:-Debentures, Other Borrowed Funds

29

Total Asset to Debt Ratio


(Amount In Lakhs)

(Amount In Lakhs)

Year

Total Assets

Long Term Debts

Ratio

2011

17250.16

4535.64

3.8

2012

21666.62

7384.36

2.93

2013

28254.60

11638.96

2.43

3.8
4
3.5
3
2.5
2
1.5
1
0.5
0

2.93
2.43
Total Asset to Debt Ratio

2011

2012

2013

Interpretation:Total Asset to Debt Ratio indicates the margin of safety to long term debts. The above graph
shows that the company has the ability to pay off its long term debts. A high total assets to
debt ratio implies the use of more equity then debt. From the total assets to debt ratio is
satisfactory of 2013 as it has decreased from the previous year that is from 2.93 to 2.43. The
ratio recorded in 2011 was 3.8 it implies that in 2011 the use of more equity is done then
debt.
c. Proprietary Ratio:-This ratio measures a relationship between equity and total assets. This
ratio indicates the proportion of total funds provide by owners or shareholders.
Formula:-Proprietors Funds/Total Assets*100
Proprietors Funds:- Total Assets:-Fixed Assets + Current Assets

30

Proprietary Ratio
(Amount In Lakhs)

(Amount In Lakhs)

Year

Proprietors Funds

Total Assets

Ratio

2011

9223.97

17250.16

0.54

2012

10583.49

21666.62

0.49

2013

12677.66

28254.60

0.45

0.6
0.5
0.4
0.3
0.2
0.1
0

0.54

0.49

0.45

Proprietory Ratio

2011

2012

2013

Interpretation:This ratio should be 33% or more than that. In other words, the proportion of shareholders
funds to total funds should be 33% or more. A higher proprietary ratio is generally treated an
indicator of sound financial position from long-term point of view, because it means that the
firm is less dependent on external sources of finance. If the ratio is low it indicates that longterm loans are less secured and they face the risk of losing their money. From the proprietary
ratio it is derived that the ratio is decreasing from 0.49 in came down to 0.45 in 2013. The
highest ratio recorded was in the year 2011 indicating larger safety for creditors & vice versa.
The proprietary ratio establishes the relationship between shareholders funds to total assets. It
determines the long-term solvency of the firm. This ratio indicates the extent to which the
assets of the company can be lost without affecting the interest of the company. Comparing
all three years the shareholders are more then 33% of its total funds even though there is
31

decline from 2011 to 2013 it shows that there long term loans are less secured and they face
the risk of losing their money.
d..Interest Coverage Ratio:- Interest Coverage Ratio establishes relationship between net
profit before interest and tax on long term debt.
Formula:-Net Profit Before Interest and Tax/Interest on Long Term

Interest Coverage Ratio

Year

(Amount In Lakhs)

(Amount In Lakhs)

Net Profit Before Interest &

Interest on Long Term

Times

Tax

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

2011

2481.07

527.62

4.70

2012

2759.80

809.53

3.41

2013

3064.24

743.16

4.12

4.7
4.12
3.41

Interest Coverage Ratio

2011

2012
.

Interpretation:32

2013

This ratio indicates how many times the interest charges are covered by the profits available
to pay interest charges. This ratio measures the margin of safety for long-term lenders.
The higher the ratio, more secure the lenders is in respect of payment of interest regularly. If
profit just equals interest, it is an unsafe position for the lender as well as for the company
also , as nothing will be left for shareholders. From the interest coverage ratio it is found that
the ratio has increased from 3.41 times in 2012 to 4.12 times in 2013. As the ratio is high the
firms ability to pay interest is high but in 2011 it was 4.70 implying lesser use of debt & very
efficient operations were carried out.
The company has the servicing capacity so far as the fixed interest on long term debt is
concerned as there is an increase in profit before tax then the previous year also there is an
increase then the previous year it is considered appropriate.
3.Activity Ratios:- These ratio are calculated on the bases of cost of sales or sales, therefore,
these ratio are also called as Turnover Ratio. Turnover indicates the speed or number of times
the capital employed has been rotated in the process of doing business. Higher turnover ratio
indicates the better use of capital or resources and in turn lead to higher profitability.
Activity Ratio Includes Three Ratios:a .Stock Turnover Ratio
b. Debtors Turnover Ratio
c. Average Collection Period
d. Creditors Turnover Ratio
e. Average Payment Period
a .Stock Turnover Ratio:- This ratio indicates the relationship between the cost of goods during
the year and average stock kept during that year.
Formula:-Cost of Goods Sold/Average Stock
Cost of goods sold = Net Sales Gross Profit

33

Average Stock = Opening Stock + Closing Stock/2


OR
Stock Turnover Ratio:- Sales/Stock

Stock Turnover Ratio


(Amount In Lakhs)

(Amount In Lakhs)

Year

Sales

Stock

Times

2011

10676

3007.75

3.55

2012

16694.80

5266.25

3.17

2013

20153.12

635.05

3.17

3.55
3.6
3.5
3.4
3.3
3.2
3.1
3
2.9

3.17
Stock Turnover
Ratio

2011

2012

3.17

2013

Interpretation:This ratio indicates whether stock has been used or not. It shows the speed with which the stock
is rotated into sales or the number of times the stock is turned into sales during the year.
The higher the ratio, the better it is, since it indicates that stock is selling quickly. In a business
where stock turnover ratio is high, goods can be sold at a low margin of profit and even than
34

the profitability may be quit high. From the inventory turnover ratio it is derived that the ratio
is satisfactory as the inventory holding period is good, compared during the financial year
2011.
Stock turnover of Omkar Speciality Ltd is same as compare to the previous year and it has a
high speed in rotating stock into share. As it can rotate the stock quickly profit will be achieved
even at low margin.
b. Debtors Turnover Ratio:- Debtors Turnover Ratio indicates relationship between credit sales
and average debtors and average bills receivable during the year.
Formula:- Net Credit Sales/Average Debtors

Debtors Turnover Ratio


(Amount In Lakhs)

(Amount In Lakhs)

Year

Net Credit Sales

Average Debtors

Times

2011

10676

2721.44

3.92

2012

16694.80

3848.52

4.34

2013

20153.12

6147.11

3.28

35

4.34

3.92

3.28

4
3

Debtors Turnover Ratio

2
1
0
2011

2012

2013

Interpretation:This ratio indicates the speed in which the amount is collected from debtors. The higher the
ratio the better it is, since it indicates that the amount from debtors is being collected more
quickly. From the debtors turnover ratio it s derived that the ratio is satisfactory as there is
decline from 4.34 times in 2012 to 3.28 in 2013.
From the above graph it can be seen that as there is an decrease in the speed from the previous
year in collecting from debtors but as appropriate standard is not set it is fine to have 3.20 times
as a speed.
c. Average Collection Period:- This ratio indicates the time with in which the amount is
collected from debtors and bills receivables.
Formula:- Average Debtors *365 / Net Credit Sales
This ratio may also be calculated as follows :12 months or 365 days / Debtors Turnover Ratio.
Average Collection Period
(Amount In Lakhs)
Year

(Amount In Lakhs)

Days

DebtorsTurnover

Days

Ratio
2011

365

3.92

93 days

2012

365

4.34

84 days

36

2013

150

365

111 days

111

93

100

3.28

84
Average Collection Period

50
0
2011

2012

2013
Interp

retation:This ratio shows the time in which the customers are paying for credit sales. A higher debt
collection period is thus, an indicates of the inefficiency and negligence on the part of
management. From average collection period shows that there is a incline in collection from
debtors from 84 days in 2012 to 111 days in 2013 as compare to the previous year
comparison there was an decline from 93 days in 2011 to 84 days in 2012.
On the other hand, if there is decrease in debt collection period, it indicates prompt payment
by debtors which reduces the chance of bad debts. As there is an increase in collection from
the previous year it increases the companys chance of bad debts.
d. Creditors Turnover Ratio:- Creditors Turnover Ratio indicates relationship between credit
purchase and average creditors and average bills payable.
Formula:- Credit Purchase/Average Creditors

Creditors Turnover Ratio


(Amount In Lakhs)

(Amount In Lakhs)

Year

Net Credit Purchase

Average Creditors

Times

2011

8514

2214.96

3.84

37

2012

11874.19

2526.30

4.70

2013

11217.64

2765.93

4.05

4.7
5
4
3
2
1
0

3.84

4.05

Creditors Turnover Ratio

2011

2012

2013

Interpretation:This ratio indicates the speed in which the amount is being paid to the creditors. The higher
ratio the better it is, since it will indicate that the creditors are being paid more quickly which
increases the credit worthiness of the firm. From creditors turnover ratio it is found that in
2012 the ratio has increase as compared to 2011 that is from 3.84 times to 4.7 times which
came down to 4.05 in 2013.
Since there is slight decrease then the 2012 but better then 2011 there is considerable good
speed in paying out to creditors .
e. Average Payment Period:- This ratio indicates the period which is normally taken by the firm
to make payment to its creditors.
Formula:- Creditors / Credit Purchase
This ratio may also be calculated as follows :
Average Payment Period = 12 months or 365 days / Creditors Turnover Ratio

Average Payment Period


38

Year

(Amount In Lakhs)

(Amount In Lakhs)

Days

Creditors Turnover

Days

Ratio
2011

365

3.84

95 days

2012

365

4.70

78 days

2013

365

4.05

90 days

95
100

90

78

80
60
40

Average Payment Period

20
0
2011

2012

2013

Interpretation:- :From average payment period it is derived that there is a decline in paying off to creditors as
compared to the previous year from 78 days it came down to 90 days. The lower the ratio, the
better it is, because a shorter payment period implies that the creditors are being paid rapidly.
Since there is an increase in the payment period from last year it implies that the creditors are
not being paid rapidly.
4.Profitability Ratios:- The main object of every business is to earn profits. A business must
be able to earn adequate profits in relation to the risk and capital invested in it. The efficiency
and the success of a business can be measured with the help of profitability
Profitability Ratio can be determined on the basis of sales or on the basis of investment into
business.
A)

Profitability Ratio In Relation To Sales:-

39

a. Gross Profit Ratio


b. Net Profit Ratio
c. Operating Profit Ratio
d. Operating Cost Ratio
a. Gross Profit Ratio:- Gross Profit Ratio shows the relationship between gross profit to net
sales.
Formula:- Gross Profit/Net Sales*100
Here, Net Sales= Sales Sales Return
Gross Profit Ratio
(Amount In Lakhs)

(Amount In Lakhs)

Year

Gross Profit

Net Sales

Ratio

2011

2671.93

10676

0.25

2012

4670.70

16694.80

0.24

2013

4702.41

20153.12

0.23

0.25
0.25
0.25

0.24

0.24
0.24

Gross Profit Ratio

0.23

0.23
0.23
0.22
2011

2012

Interpretation-

40

2013

This ratio measures the margin of profit available on sales. The higher the gross profit the
better it is, no ideal standard is fixed for this ratio but, the gross profit should be adequate
enough not only to cover the operating expenses but also to provide for depreciation and
interest on loans ,dividends and creation of reserves. The gross profit is fluctuating from 2011
to 2012 it declines 1 percent & from 2012 it fluctuates 2 percent in 2013 though there is
decline it shows that gross profit is 23 % of sales then if deducting from 100 the result 77 %
is the ratio of cost of goods sold.
b. Net Profit Ratio:- Net Profit Ratio shows the relation between net profit and sales
Formula:- Net Profit/Sales* 100

Net Profit Ratio

0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0

(Amount In Lakhs)

(Amount In Lakhs)

Year

Net Profit

Net Sales

Ratio

2011

1547.34

10676

0.15

2012

1644.07

16694.80

0.09

2013

2080.10

20153.12

0.10

0.15
0.1

0.09
Net Profit Ratio

2011

2012

Interpretation:-

41

2013

This ratio measures the rate of net profit earned on sales. It helps in determining the overall
efficiency of the business operations. An increase in the ratio of the previous year shows
improvement in the overall efficiency and profitability of the business. From the net profit it
is found that there is a satisfactory result from the last year that is increased from 0.9 to 0.10
but the highest was recorded in the year 2011 that is 0.15. As shown in the above graph there
is an increase in the net profit from 2012 which was decrease then the previous year also .So
the overall efficiency of the firm is profitable.
c. Operating Profit Ratio:- Operating Profit Ratio shows the relation between operating profit
and net sales.
Formula:- Operating Profit/Net Sales*100
Operating Profit:- Gross Profit Operating Expenses such as Office and Administrative
Expenses, Selling and Distribution Expenses, Discount, Bad Debts, Interest on Short Term
Debts.

Operating Profit Ratio


(Amount In Lakhs)

(Amount In Lakhs)

Year

Operating Profit

Net Sales

Ratio

2011

1953.45

10676

0.18

2012

1950.27

16694.80

0.12

2013

2321.08

20153.12

0.12

42

0.18
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0

0.12

0.12

Operating Profit Ratio

2011

2012

2013

Interpretation:This ratio measures the rate of net profit earned on sales. It helps in determining the overall
efficiency of the business operations. An increase in the ratio of the previous year shows
improvement in the overall efficiency and profitability of the business.
As there is not any change in the operating profit from the previous year i.e 2012 as their was 5
points decline in 2012 as compared to 2011 there is normal profit efficiency in the company.
d. Operating Cost Ratio:- Operating Cost Ratio measures the relationship between operating
cost and net sales.
Formula:- Cost of Goods Sold + Operating Expenses/Net Sales* 100
Cost of Goods Sold:- Opening Stock + Purchase + Carriage + Wages + Other Direct Expenses
Closing Stock
Operating Expenses:- Office And Administration + Selling And Distribution Expenses +
Discount + Bad Debts + Interest on Short Term Debts.

43

Operating Cost Ratio

Year

(Amount In Lakhs)

(Amount In Lakhs)

Cost of Goods Sold+

Net Sales

Ratio

Operating Expenses
2011

8747.43

10676

0.82

2012

13892.7

16694.80

0.83

2013

16870.99

20153.12

0.84

0.84
0.84
0.83

0.84
0.83
0.83

0.82

Operating Cost Ratio

0.82
0.82
0.81
2011

2012

2013

Interpretation:Operating Cost Ratio is a measurement of the efficiency and profitability of the business
enterprise. This ratio indicates the extent of sales that is absorbed by the cost of goods sold
and operating expenses. Lower the operating cost ratio is the better, because it will leave
higher margin of profit on sales. From operating cost ratio it is derived that the ratio
calculated for the considered financial years is not good as there is increase in ratios from
2011-2013 that is 0.82-0.83 & 0.83-0.84.
B) Profitability Ratio In Relation To Investment:- This ratio reflects the true capacity of the
resources employed in the enterprise. Sometimes the profitability ratio based on sales are
high whereas profitability ratio based on investment are low. Since the capital is employed

44

to earn profit, this ratios are the real measure of the success of the business and managerial
efficiency.

a. Return on Total Assets


b. Return on Capital Employed
c. Return on Equity Shareholders Funds
d. Earnings Per Share
e. Price Earning Ratio
a. Return on Total Assets:- Return on total assets measures a relationship between net profit
before interest and tax and total assets.
Formula:- Net Profit Before Interest and Tax /Total Assets *100
This ratio may also be calculated as follows :
Formula:- Net Profit After Tax + Interest Tax Advantage/Total Assets*100

Return on Total Assets

Year

(Amount In Lakhs)

(Amount In Lakhs)

Net Profit After Tax + Interest

Total Assets

Ratio

+ Tax Advantage
2011

1903.75

17250.16

0.11

2012

2191.20

21666.62

0.10

2013

2582.10

28254.60

0.09

45

0.11
0.12

0.1

0.09

0.1
0.08

Return On Total Assets

0.06
0.04
0.02
0
2011

2012

2013

Interpretation:
This ratio helps to find out how efficiently the assets have been used by the management. An
indicator of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings. Calculated by dividing a
company's annual earnings by its total assets From return on total assets it is derived that the
ratio is not satisfactory as it is declining year after year that is from 0.11-0.10 & from 0.100.09 in the financial year.
b. Return on Capital Employed:-

Return on Capital Employed ratio reflects the overall

profitability of the business. It is calculated by comparing the profit earned and the capital
employed to earn it and is usually in percentage.
Formula:- Profit Before Interest And Tax/Capital Employed * 100
Where Capital Employed= Equity Share Capital + Preference Share Capital + All Reserves + P
& L A/C Balance + Long Term Loans Fictitious Assets Non Operating Assets.
Capital Employed= Fixed Assets + Working Capital Or Long Term Borrowings + Long Term
Provisions + Short Term Borrowing.

46

Return on Capital Employed

Year

(Amount In Lakhs)

(Amount In Lakhs)

Net Profit Before Interest &

Capital Employed

Ratio

Tax
2011

2481.07

4158.58

0.59

2012

2757.20

7486.95

0.36

2013

3064.24

11752.10

0.26

0.59
0.6
0.5
0.36

0.4
0.3

Return On Capital Employed

0.26

0.2
0.1
0
2011

2012

2013

Interpretation:Since profit is the overall objective of the business enterprise, this ratio is the barometer of the
overall performance of the enterprise, it measures how efficiently the capital employed is being
use. With the help of this ratio shareholders can also find out whether they will receive regular
or higher dividend or not.
There is an decrease in ratio from previous year it is doubtful whether the company will be in a
position to pay off dividends to shareholders
c. Return on Equity Shareholders Funds:- Equity Shareholders Funds of a company are more
interested in knowing the earning capacity of their funds in the business. As such, this ratio
measures the profitability of the funds belonging to the equity shareholders.

47

Formula:- Earnings After Tax Preference Dividend/Equity Share Capital + Reserves and
Surplus Fictitious Assets* 100

Return on Equity Shareholders Funds

Year

(Amount In Lakhs)

(Amount In Lakhs)

Earnings After Tax

Equity Shareholders

Ratio

Funds
2011

1014.04

9223.97

0.11

2012

1644.67

10583.49

0.16

2013

2080.10

12677.66

0.27

0.27

0.3
0.25
0.16

0.2
0.15

0.11 On Equity Shareholders' Funds


Return

0.1
0.05
0
2011

2012

2013

Interpretation:This ratio measures how efficiently shareholders funds are being used in the business. It is a
true measure of the efficiency of the management since it shows what the earning capacity of

48

the shareholders .If the ratio is high , it is better, because in such a case equity shareholders
may be given higher dividend.
There is an increase in return on equity shareholders funds from 2011 to 2013 this shows that
the firm has good earning capacity.
d. Earnings Per Share:- :- This ratio measure the profit available to the equity shareholders on a
per share basis. All profit left after payment of tax and preference dividend are available to
equity shareholders.
Formula:- Earnings After Tax Preference Dividend/ Number of Equity Shares

Earning Per Share

Year

(Amount In Lakhs)

(Amount In Lakhs)

Earnings After Tax

Number of Equity

Rs

Shares

12
10
8
6
4
2
0

2011

1014.04

196.28

5.16

2012

1644.67

196.28

8.38

2013

2080.10

196.28

10.60

10.6
8.38
5.16

Earning Per Share

2011

2012

2013

Interpretation:This ratio helpful in the determining of the market price of the equity share of the company.
The ratio is also helpful in estimating the capacity of the company to declare dividends on
49

equity shares. From the earning per share it is derived that the result is satisfactory that is the
ratio is increasing that is from Rs 5- Rs8.38 & from Rs 8.38 Rs 10.60.
This ratio represent profit earned by the company on the number of equity shares issued. As
there is an increase in earning from share from 2011 to 2013 it s estimated that the firm has
the capacity to declare dividends.

e. Price Earning Ratio:- This ratio is between market price of equity shares & earning per
share. This ratio is calculated to estimate of appreciation in the value of a share of a company
& widely used by investors to decide whether or not to buy shares in a particular company.
Formula:- Market Price of Share/Earning Per Share
Price Earning Ratio

30

(Amount In Lakhs)

(Amount In Lakhs)

Year

Market Price of Share

Earning Per Share

Times

2011

140

5.00

28

2012

140

8.38

16

2013

140

13.2

13

28

25
16

20
15

13

Price Earning Ratio

10
5
0
2011

2012

Interpretation:-

50

2013

This ratio shows how much is to be invested in the market in this companys share to get each
rupee of earning in its shares. This ratios is used to measure whether the market price of share
is high or low. From the price earning ratio it is found that the result is not satisfactory as the
ratio is decreasing year after that is from 28times- 16.7 times & from 16.7 times 13.2 times
in the financial year. The above graph show that there is an decrease in market price of the
share from 2011 to 2013 it means that the company is not growing & has no good prospects.

51

CHAPTER 4
FINDINGS, SUGGESTIONS & CONCLUSION

4.1 FINDINGS
1. The company may improve its current ratio by decreasing the current liabilities
because in the year 2012-2013 current assets are decreased and it may also improve
its quick ratio
2. The company may decrease its total debt as there is increase in total debt the year
2012-2013 the company may increase its investment in current assets.
3. Long terms solvency of the company has to be improved by limiting amount invested
by outsiders to the amount invested by the owner of the company . this can be
achieved by purchasing the shares gradually.
4. The proper management of the inventory can improve liquidity position and
efficiency of the company.
52

4. 2 SUGGESTIONS
Decrease in Current ratio: According to accounting principles, a current ratio of 2:1 is
supposed to be an ideal ratio. It means that current assets of a business should, at least, be
twice of its current liabilities. The firm should start increasing their stock for the current
requirement & to improve credit management in terms of under accounts receivable at the
same time the firm should not make full use of its current borrowing capacity also long-term
borrowing to repay the short-term debt can also improve this ratio. Therefore a firm should
have a reasonable current ratio.
Operating cost ratio has increase considerably:- Operating Cost Ratio or OCR is a percentage
(%) and is perhaps the best indicator of the overall efficiency of a lending institution. For this
53

reason, the Ratio is also commonly referred to as the efficiency Ratio: it measures the
institutional cost of delivering loan services. The lower the Operating Cost Ratio, the higher
the efficiency of an institution. It is affected by increasing or decreasing operational costs
relative to the average loan portfolio outstanding. The firm should start using cost cutting
technique so that their cost of goods sold will decrease plus their operating expense should be
decrease. Operating leverage can be measured through the following ratios: (1) fixed costs to
total costs; (2) percentage change in operating income to the percentage change in sales
volume; and (3) net income to fixed charges. An increase in fixed costs to total assets and
percentage change in operating income to the percentage change in sales volume or a
decrease in net income to fixed charges shows higher fixed charges, resulting in greater
instability.

4.3 CONCLUSION
Study of ratio analysis of Omkar Speciality Ltd reveals the performance of the company in
terms of financial aspects. It is found that there is increase in net profit after tax during 2011
to 2013. The cash balance is also increased for the above said years this is due to companys
revised policy in debt collection. It is also observed that the current ratio is not so satisfactory
which creates chunks in the current assets in the form of sundry debtors and inventory.
Particularly the current years position is well due to raise in the profit level from the last year
position.

54

Learning from Project:It is very important to utilize the resources and to reduce losses in efficient manner. While
finding downtime we understand that every minute is very important for any organization.
To find out the deficiencies along with their root causes in any process is quite difficult. But
while finding the deficiencies and their constraints we have come across many industrial
problems. Sometimes ignorance while working was cause of losses and it can hampers the
organization
Progress and by bringing down the product quality. Sometimes operator knew the causes of
losses more than the executive/engineer, but they still do not want to check their ignorance,
So motivation of such worker became important.
55

Problems faced during Project:


Due to their company work, the actual interaction to the manager was very less. There was
also infrastructure problem because of which we could not get access to a lot of company
data. Because of these reasons. Our project time was reduced to a great extend the above
material is developed under the above constraints.

BIBLIOGRAPHY
Websites:http://www.omkarchemicals.com/
http://www.moneycontrol.com/
http://www.investopedia.com/

Books:Financial Management by Khan M and P.K. Jain


Financial Management by Prasanna Chandra
Annual Report of Omkar Speciality Chemicals Ltd 2013
Annual Report of Omkar Speciality Chemicals Ltd 2012
56

Annexure:BALANCE SHEET AS AT MARCH 31, 2013


(Rupees in Lakh, except for share if otherwise stated)

EQUITY AND LIABILITIES


Shareholders Funds
Share Capital
Reserves And Surplus
Money Received Under Warranty
Non Current Liabilities
Long Term borrowings
Deferred tax liabilities (Net)
Long-term provisions

57

As on 31st March

As on 31st March

2013

2012

1,962.80
10,358.61
356.25
12,677.76

1,962.80
8,620.69
10,583.49

2,990.05
112.67
113.23
3,215.95

467.66
122.76
102.59
693.01

Current Liabilities
Short-term borrowings
Trade payables
Other current liabilities
Short-term provisions
TOTAL
ASSETS
Non Current Assets
Fixed Assets
Tangible Assets
Intangible Assets
Capital Work-in-Progress
Intangible Assets under Development
Non Current Investments
Long-term Loans and Advances
Current Assets
Inventories
Trade Receivables
Cash and Cash Equivalents
Short-term Loans and Advances
Other Current Assets
TOTAL

58

8,648.91
2,765.93
391.97
554.18
12,360.99
28,254.60

6,916.70
2,526.30
658.11
289.01
10,390.12
21,666.62

4,393.34
53.11
4,017.97
1.50
1,086.39
2,740.67
12,292.98

3,625.38
3.49
3,047.38
17.71
212.08
998.29
7,904.50

6,356.05
6,147.11
2,157.47
43.10
1,257.89
15,961.62
28,254.60

5,266.25
3,848.52
3,140.36
408.01
1,098.98
13,762.12
21,666.62

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2013
(Rupees in Lakh, except for share if otherwise stated)
For the year ended

For the year ended

March 31, 2013

March 31, 2012

INCOME
Revenue from Operation

20,153.12

16,694.80

579.40

369.86

20,732.52

17,064.66

11,935.71

10,773.33

3,509.26

1,817.96

(1,808.51)

(1,157.10)

Employee benefits expense

800.54

638.34

Finance Costs

743.16

809.53

Depreciation and Amortization expense

568.43

562.09

2,083.45

1,302.93

17,832.04

14,747.08

Other income
Total Revenue

EXPENDITURE
Cost of Material Consumed
Purchase of stock in trade
Changes in inventories of Finished Goods,
Work in progress and Stock in Trade

Other Expenses
Total Expenditure

59

Profit before tax

2,900.48

2,317.58

27.59

2.44

Current Tax

802.91

612.70

Deferred Tax

(10.12)

Tax Expenses
Previous year adjustments

Profit for the period

57.77

2,080.10

1,644.67

Basic

10.60

8.38

Diluted

10.59

8.38

Face Value of Equity Shares (in Rs.)

10-00

10

Earnings per equity share (in Rs.)

60