Contents

Chapter No.

Chapter I

Chapter II

Description

Page No.

Introduction

1-2

Industry profile

3-5

Company profile

6 - 10

Research Methodology

11 - 13

Need for the study

Objectives of the study
Sources of data
Scope & Limitations of the study
Chapter III

Data Analysis and Interpretation

14 54

Chapter IV

Findings & Suggestions

55 56

Conclusion
Annexure
Bibliography

57
58 59
60

INTRODUCTION
Financial Management is that managerial activity which is concerned

with the planning and controlling of the firms finance. Finance is one of the
foundations of all kinds of economic activities. Finance is the life-blood of a
business. The financial management study deals with the process of procuring
necessary financial resource and their judicious use with a view to maximizing
the value of the firm and there by the value of the owners i.e. equity share
holders in a company. Practicing managers are interest in this subject
because among the most crucial decisions of the firm are those which relate
to finance, and an understanding of the theory of financial management
provides them with conceptual and analytical insights to make those decisions
skillfully.

FINANCIAL MANAGEMENT
Financial Management emerged as a distinct field of study at the turn
of this century many eminent persons defined it in the following ways.

DEFINITIONS: According the BONNEVILE AND DEWEY: Financing consists in the

rising, providing and managing of all the money, capital or funds of any kind to
be used in connection with the business.
According

to

Prof.EZRA

SOLOMAN:Financial

Management

is

concerned with the efficient use of any important economic resource, namely
capital funds.

FINANCE FUNCTIONS: It may be difficult to separate the finance functions from production,
marketing and other functions, but the functions themselves can be readily
4

identified. The functions of raising funds investing them in assets and

distributing returns earned from assets to shareholders are respectively
known as.
1. Long term assets-mix (or) Investment Decision
2. Capital Mix (or) Financing Decision
3. Profit allocation (or) Dividend Decision
4. Short term asset Mix (or) Liquidity Decision

GOALS OF FINANCIAL MANAGEMENT:-

Maximize the value of the firm to its equity shareholders.

Maximization of profit

Maximization of earnings per share.

Maximization of return on equity (defined as equity earnings/net worth)

Maintenance of liquid assets in the firm.

Ensuring maximum operational efficiency through planning directing and

controlling of the utilization of the funds.

Building up of adequate reserves for financing growth and expansion.

INDUSTRY PROFILE
Sugarcane is one of the important crops for the Indian Farmer. Sugar
and Jiggery are the main products that we get from sugarcane. Sugarcane

belongs to the genus SACCHARAM. The word Sugar is derived from the
Sanskrit word SHARKARAM from which the word SACCHARAM seems to
have been derived indicates the antiquity of knowledge of sugarcane in India.
Sugar Industry is the second largest agro-based industry in India, next to
textiles, producing an all time record of 186.22 lakh tones of direct plantation
sugar as on 30th Arial, 2003. It has emerged as the largest vacuum pan sugar
producer in the world.
Sugarcane is grown in about 102 countries in the world and India
occupies the first rank from the point of area followed by Brazil and Cuba.
Andhra Pradesh occupies the fifth place with regard to cane and cane
production in the country. There are around 490 sugar mills across the country
with an aggregate installed capacity of 16.2 million tones.
The history of sugar industry in India begins in 1903 when a sugar
factory was set up in Bihar and U.P each. In 1932 there were 32 factories
operating in the country. In India, the cultivation of sugarcane is 10,000 miles
tones. The average yield being 56 tones per acre of total cultivating land is
occupied by sugarcane cultivation. Sugarcane is grown in almost all part of
India, except in colder regions and extreme North Jammu& Kashmir, Himachal
Pradesh. The industry has developed at a fast rate in Maharashtra, Andhra
Pradesh, Karnataka and Tamil Nadu. In India U.P leads other States in
Sugarcane production, followed by T.N and Maharashtra.
Sugar comes under the Essential Commodities Act. Ipso facto, there
has been control on all facets of the sugar trade. The licensing regime that
regulates the installed capacity, the minimum support price for cane, the
6

reservation of can area for mills and the control over price and movement of
sugar as well its byproduct molasses, have all triggered a situation totally out
of sync with market realities.
The Central Government will allot monthly sales sugar quota for each
factory based on the stock available in the concerned factory Godown. The
Central Government removed the controls imposed under the Essential
Commodities Act, 1955 on stocking and movement and requiring licensing of
dealers in respect of specified commodities with effect from 14 th March, 2002
vide government of Indias Notification No. GSR 104(E), dated 15 th February,
2002. With the coming into effect of the above order any dealer may freely by,
stock, sell, transport, distribute, dispose, acquire, use or consume any quantity
of wheat, paddy/rice, coarse grains, sugar, edible oil seeds and edible oil and
shall not require a permit or license therefore under any order issued under
the Essential Commodities Act, 1955.

Area wise distribution of sugar industry in A.P.

S.No
1

Sector

No. of
Industries

Costal
Area

Rayalaseem
a

Co-operative

18

12

Telangana
2
7

2
3

Public sector
Private sector
Total

7
11
36

1
8
21

1
2
7

5
1
8

The list of Co-operative Sugar factories in A.P.

1. The Chittoor Co-operative sugars ltd, Chittoor.

2. The Chodavaram Co-operative sugars ltd, Chodavaram.

3. The Anakapalle Co-operative sugars ltd, Anakapalle.
4. The Etikuppaka Co-operative agricultural of industrial society ltd,
Ethikuppaka.
5. Sir Vijayarama Gajapathi Co-operative sugars ltd.
6. The Amadavalasa Co-operative agricultural industrial society ltd,
Srikakulam.
7. The West Godavari Co-operative sugars ltd, Eluru.
8. Palakollu Co-operative agricultural & industrial society ltd, Palakollu.
9. The Thandara Co-operative sugars ltd, Visakapatnam.
10. Nizamabad Co-operative sugars ltd, Nizamabad.
11.Sir Venkateswara Cooperative sugars ltd, Renigunta.
12. The Cuddapah Co-operative sugars ltd, Chennur.
13. The Nandyal Co-operative sugars ltd, Ponnapuram.
14. The Kovur Co-operative sugars ltd, Nellore.
15. Nagarjuna Co-operative sugars mills ltd, Gurzala.
16.

Nampaneni Venkata Rao Co-operative sugars ltd,

Hanuman Junction.
17. Sri Hanuman Co-operative sugars ltd, Hanuman Junction.
18. Palair Co-operative sugars ltd, Ammagudem.

COMPANY PROFILE
INTRODUCTION: The Chittoor Co-operative Sugars Limited, Chittoor is the first agrobased major Industry in Rayalaseema area. It was first registered on
22.08.1955 under the APCS Act. Its area of operation comprises of 192
villages in 21 Mandals. Factory is located along Cudalore - Kurnool National
High way No 18, 3 KM towards Kurnool from Chittoor town. It owns 85.96
acres of land. It was first commissioned on 18.1.1963 with a licensed and
installed capacity of 1000 tones cane crushing per a day. During 1974 its cane
crushing capacity has been expanded to 1600 tones a day. Since 1989
modernization is being done in phases. Presently factory is working at an
average cane crushing of 1800-2000 tones a day.

Capital Structure: Original project cost was RS.128.50 lakhs.

Present value of the Assets as on 31.3.2000
Rs.lakhs
a) Land

497.19

b) Buildings

423.85

c) Plant & Machinery

1155.70

d) Other Assets

34.73

e) Transport Vehicles

19.94

f) Total

2131.41

Management: At present the elected board has assumed charge on 06.04.2000.

The present board of Directors as detailed below:
President
Board of Directors
Employees Director
Total

1
14
1
16

Chief Executive & Functioning of various Departments: a) Chief executive of the society is Managing Director having a seat on the
Board.
b) There are five major departments:
1. Administrative
2. Engineering
3. Manufacturing
4. Agriculture
5. Accounts & finance
c) All aspects of Accounting, sugar cane weighment and laboratory analysis
reports are computerized during 1989-90. For better cane regulation,
wireless System was also introduced during 1989. At all 8 division Head
Quarters and at Administrative Office Wireless Stations and sets are
installed.
d) All policy matter is decided by Board/person-in-charge.

10

Cane price: Before commencement of sugar cane crushing season, Government of

India notifies statutory minimum cane price payable by each sugar factory.
This is to be paid with in 14 days from the date of purchases. Over and above
the statutory minimum cane price state Government announces a State
advisory price payable by each Sugar Factory. This SAP is being paid by us.
We have crushed cane for the season 1999-2000 is 2, 82,202,592 Mts with
an average recovery 9.03%.

Sugar: Out of total sugar production of each season, 30% shall be delivered to
Government nominees for public distribution system at notified levy price. For
every season Government of India Notifies levy sugar price applicable to each
Sugar Factory. Every month. Open market sugar is sold on tender system and
is delivered against payment of cost plus duties.

Molasses: Molasses is a by product in the courses of manufacture of sugar. From

1993 June molasses prices are decontrolled. Molasses is sold by inviting
tenders on All India basis by publishing Tender notice.

Engineering & Manufacturing Departments: During off season engineering and manufacturing departments attend
to overhauling and preventive maintenance and keep ready the plant for Cane
Crushing. During season factory works round the Clock in three shifts.

11

Cane Department:Cane department is provided with sufficient executive staff. They collect
cane supply offers, from cane growers. Offers are being accepted restricting
the quantities to individual member's 5 years supply average. Crop loans are
sanctioned by Banks under tie up arrangements with factory. One month
before commencement of Cane crushing, prepares maturity survey is
conducted by drawing cane samples from agreement Cane fields. They are
analyzed in Factorys laboratory. Based on the analysis, cane harvest &
supply permits are issued to cane supply members limiting to factories daily
cane crushing capacity. Factory provides about 60 to 80 hired Lorries to needy
growers. 50% of transport charges up to 40km distance are subsidized by
factory. Transport charges beyond 40 km are subsidized 100%.

Liaison Farm: Factory is having a sugar cane liaison farm in an extent 4.80 Hec.
Factory brings improved varieties from sugar Cane research stations
multiplies in its liaison farm and supplies seed to growers.

Total Strength of the Establishment:1. Permanent (Non Seasonal)

68

2. Seasonal Permanent

94

3. Consolidate Wages (Seasonal)

167

4. Daily Wager (NMR)

244

5. Total

573

12

Wage Structure: The Wages of workers are covered by "Sugar Wage Board"
recommendations at All India level". The minimum monthly wage of an
unskilled worker at starting of timescale is Rs.3901/-.Sugar year (season) is
recorded from 1st Oct to 30th Sep next year. Generally cane crushing
operations are commenced during 3rd week of November and continued up to
end of April next year. From May to October is off-season.

13

14

RESEARCH METHODOLOGY
NEED OF THE STUDY
Financial statements are prepared for the purpose of presenting a
periodical review or report by the management and deal with the state of
investment in business and result achieved during the period under review.
They reflect a combination of recorded facts, accounting conventions and
personal judgments.
The Ratio Analysis is the most powerful tool of the financial analysis.
These people use rations to determine those financial characteristics of the
firm in which they are interested. With the help of ratios, one can determine:
1. The ability of the firm to meet its current obligations.
2. The extent to which the firm has used its along-term solvency by
borrowing

funds.

3. The efficiency with which the firm is utilizing its assets ingenerating sales
revenue.
4. The overall operating efficiency and performance of the firm.

OBJECTIVES OF THE STUDY

The following are the objectives of the study:

To assess the liquidity and profitability of CCS Ltd.

To study financial position of the CCSL Ltd.

To analyses the turn over efficiency of The CCS Ltd.

To know the impact of liquidity solvency and turnover efficiency on the

shareholders of The CCS Ltd.

To suggest feasible solution to improve the overall efficiency of The

15

CCS Ltd.

SOURCES OF DATA
Primary Data
The primary data was collected mainly with the interactions and
discussions with the companys executives.

Secondary Data
Most of the calculations are made on the financial statements of the
company and the company provided financial statements for 5 years.
Some of the information regarding to the theoretical aspects were
collected by referring standards texts and through internet.

SCOPE OF THE STUDY

This project is as a reference guide or as a source of information. It gives

the idea about the financial analysis of a firm.

The study aims to study the liquidity position of the firm. Ratio Analysis has
been used to analyses the financial position of a firm.

It deals with analysis an interpretation of data collected through the

sources primary and secondary data. Graphs and diagrams and tabulation
method are used to analyze and interpret the data collected.

LIMITATIONS OF THE STUDY

The information used is primarily from historical reports available to the

16

public and the same doesnt indicate the current situation of the firm.

Detailed analysis could not be carried for the project work because of the
limited time span.

Since financial matters are sensitive in nature these same could not be
acquired easily.

17

RATIO ANALYSIS
Ratio Analysis is one of the powerful tools of the financial analysis. A
ratio can be defined as The indicated quotient of two mathematical
expressions and as the relationship between two or more things. Ratio is

18

thus, the numerical or an arithmetical relationship between two figures. Ratio

is, thus, the numerical or an arithmetical relationship between two figures. It is
expressed where on figure is divided by another. In finance analysis ratio is
used as a benchmark of a firm.
A ratio is the relationship between two accounting items expressed
mathematically. Ratio analysis helps the analyst to make quantitative
judgment with regard to concerns financial position and performance. This
relationship can be expressed as a percentage or as quotient.
Ratio analysis is the systematic use of ratio to interpret the financial
statements so that the strengths and weakness of a firm as well as its
historical performance and current financial position can be determined.
Undisputedly the ratio analysis occupies place of prime importance.

DEFINITION:According to Prof. Spring field, Prof. Mass & Merrium, a ratio is defined
as The indicated quotient of two mathematical impression and as The
relationship between two (or) more things

SIGNIFICANCE OF RATIO ANALYSIS

Ratio analysis is of great help of commercial bankers, trade creditors
and institutional lenders. They judge the ability of borrowing enterprises by
observing various ratios like the current ratio, acid test ratio, and turnover of

19

receivables, inventory turnover, and coverage of interest by the level of

earnings.
Ratio analysis also helps long term creditors in knowing the ability of a
borrowing enterprises to pay interest principal in case earnings decline they
find valuable the ratios of total debt to equity and total debt to total assets.
Investors in shares judge the performance of the company by
observing the per share into ratios like earnings per share, book value per
share, market price per share, dividends per share etc.
Lastly, ratio analysis is of great use of the management of the firm.
Management of the firm is interested in every aspect of ratio analysis as it is
their over all responsibility to see that the resources of the firm are used most
efficiently and effectively and that the firms financial conditions is sound.

STANDARDS FOR COMPARISON

For making a proper use of ratios, it is essential to have fixed standard
for comparison. A ratio by itself has very little meaning unless it is compared
to some appropriate standard. Selection of proper standards of comparison is
a most important element is ratio analysis. The four most common standard
used in ratio analysis are as follows:
1.Absolute

2.Historical

3.Horizontal

4.Budgeted

1. Absolute: Absolute standards are those, which become generally recognized as

being desirable regardless of the type of the company, the time, stage of
business cycle, or the objectives of the analyst.

20

2. Historical: Historical standards involve comparing a companys own past

performance as a standard for the present or future. But this standard may not
provide sound basis for judgment, as the historical figure a may not have
represented an acceptable standard.

3. Horizontal: Incase of horizontal standards one company is compared with another

or with average of other companies of the same nature. It is also called as
intra-firm comparison.

4. Budgeted: The budgeted standard is arrived at after preparing the budget for a
period. Ratios developed from actual performance are compared to the
planned ratios in the budget to examine the degree of accomplishment to the
anticipated targets of the firms.

ADVANTAGES OF RATIO ANALYSIS

1. It facilitate inter firm comparison. It reveals how well it serves. As a useful
aid in financial forecasting future trends can be known in advance based
on ratios relating to part sales, profits and financial position.
2. It facilitates comparative study of the performance and, progress of a firm
over a period of years. Such a study will reveal the directions in which the
firm is moving.
3. It serves as a useful tool for cost control. It reveals now efficiently a

21

firm is managed and how effectively its assets are utilized.

It serves as a means of communication to report on the strength and

financial standing of a firm to the management and external parties.

It facilitates trend analysis. It reveals the progress or decline of a firm over

the years.

It serves as diagnostic too to assess the financial health of a firm. It

through light on its liquidity, solvency, profitability and capital gearing
position.

OBJECTIVES OF RATIO ANALYSIS

Ratio Analysis is the principal tool for analysis of financial statements.
Other conducts it not only by management but also like suppliers, banks
tending, and institutions, prospective investors etc.
The following are usually the objectives for which ratio analysis
is conducted.
I. To evaluate financial position and performance of a firm.
AI. To indicate the trend or progress or down fall of a firm.
BI. To assess the credit worthiness of a firm,
IV.

To assess the efficiency with which working capital is being used in

a firm.

LIMITATIONS OF RATIO ANALYSIS

Standards for Comparison
Ratios of a company have meaning only when they are compared with
some standards and it is always a challenging job to find and adequate

22

standard.

Company Differences
Situations of two companies are never same. Similarly the factors
influencing the performance of a company in one year change in another year.
Thus, the comparison of the ratios of two companies becomes difficult and
meaning less when are operating in different situations.

Price Level Challenges

The interpretation and comparison of the ratios are also rendered
invalid by the changing value of money; a change in the price level can
seriously affect the validity of comparison of ratios computed for different time
periods.

A STUDY OF RATIO ANALYSIS

Several ratios, calculated from the accounting date, can be grouped
into various classes according to financial activity or function to be evaluated.
Ratios are complied and studied for profitabilitys, assessment of financial
position sufficiency of working capital strategies perused by the organization
short term and long term solvency. Liquidity etc

TYPES OF RATIOS
Classification according to nature of accounting statements is divided
into three categories there are:

23

1. Balance sheet Ratios

2. Profit and Loss A/C Ratios

3. Combined Ratios

24

1. Balance sheet Ratios: These ratios are calculated to judge the financial position of the
concern from long-term as well as short-term solvency point of view. These
ratios can be divided into two broad categories.

A. Liquidity Ratios: If it is decided to study the liquidity position of the concerns, in order to
highlight the relative strength of the concerns in meeting their current
obligations to maintain sound liquidity and to pin point the difficulties if any in
it, then liquidity ratios are calculated. These ratios are used to measure the
firms ability to meet short-term obligations. The important liquidity ratios are:

CURRENT RATIO:This is the most widely used ratio. It is the ratio of current assets to
current liabilities. It shows a firms ability to cover its current liabilities with its
current assets. This is also known as Working Capital Ratio. It is expressed as
follows:
25

Current Assets
Current Ratio =
Current Liabilities

Generally current ratio of 2:1 is considered ideal for a concern i.e.,

Current Assets should be twice of the Current Liabilities.
TABLE 4.1
Year Wise Total Current Assets and Current Liabilities of
The CCSL Ltd., Chittoor.
YEAR

CURRENT ASSETS

CURRENT LIABILITIES

2002-2003

28,77,42,756

18,91,05,178

RATIO
IN %
1.52

2003-2004

17,58,61,331

14,23,09,387

1.20

2004-2005

20,80,30,364

14,87,32,016

2005-2006

38,19,73,121

18,96,05,315

2.00

2006-2007

37,30,29,183

27,31,27,341

1.40

1.40

(Source: Annual Reports of the CCSL)

26

RATIOS
2.5
2

2006-07

1.5

2005-06
2004-05

2003-04
2002-03

0.5
0
2003

2004

2005

2006

2007

INTERPRETATION: Current ratio measures the firms short-term solvency. The standard norm
for current ratio is (2:1). It is evident that in the year 2005-06 Current Ratio 2.00 is
satisfactory. In remaining years current ratio is less then 2 is not satisfactory.
There fore it can be calculated that the liquidity performance of the company is
poor.

QUICK RATIO: -

It shows a firms ability to met current Liabilities with its

most liquid (quick) Assets. Liquid Assets are those assets, which
are readily converted

27

into cash. This is also known as Liquid Ratio and Acid Test Ratio. It is
calculated as under;

LiquidAssets
LiquidRatio CurrentLiabilities

TABLE 4.2
Year Wise Liquid Assets and Current Liabilities of
The CCSL Ltd., Chittoor.

YEAR

LIQUID ASSETS

CURRENT
LIABILITIES

RATIO

0.36

IN %

2002-2003

6,80,79,952

18,91,05,178

2003-2004

7,90,11,591

14,23,09,387

2004-2005

9,79,87,205

14,87,32,016

0.66

2005-2006

7,66,08,657

18,96,05,315

0.40

2006-2007

9,34,86,511

27,31,27,341

0.34

0.55

(Source: Annual Reports of the CCSL)

28

RATIOS

YEARS

0.7
0.6
0.5

2006-07
2005-06
2004-05
2003-04
2002-03

0.4
0.3
0.2
0.1
0
2003

2004

2005

2006

2007

INTERPRETATION: This is the more penetrating test of liquidity than the current
ratio. Generally a quick ratio is 1:1 it considered to represent a
satisfactory current financial condition. The quick ratio has never
exceeded the standard ratio. Empirically the quick ratio has
increased from 0.36 to 0.66 in 2002-03 to 2004-05 and declined
from 0.40 to 0.34 in 2005-06 to 2006-07. Therefore it can be
concluded the liquidity performance of the company is absolutely
poor.

CASH RATIO: -

Cash is most liquid Asset, a financial analyst may examine

cash ratio and its equivalent to current liabilities. Trade
investment or marketable

29

securities are equivalent of cash; therefore, they may be included in the

computation of cash ratio. This Ratio also known as Absolute and Super
Quick Ratio.

SecuritiesCashRatio CashandBankBalance Short termmarketable

CurrentLiabilities

TABLE 4.3
Year Wise Cash and Bank Balance plus short term securities and
Current Liabilities of
The CCSL Ltd., Chittoor.

RATIO
YEAR

CASH AND BANK

CURRENT LIABILITIES
IN %

2002-2003

53,79,219

18,91,05,178

0.028

2003-2004

1,59,03,765

1,23,09,387

2004-2005

2,00,18,969

14,87,32,016

0.13

2005-2006

73,90,813

18,96,05,315

0.03

2006-2007

1,79,39,018

27,31,27,341

0.11

0.06

(Source: Annual Reports of the CCSL)

30

RATIOS

YEARS

0.14
0.12
0.1

2006-07

0.08

2005-06

0.06

2004-05
2003-04
2002-03

0.04
0.02
0
2003

2004

2005

2006

2007

INTERPRETATION: The desirable norm for cash ratio is 1:2. The cash ratio is very low in
2002-03, 2005-06 and 2006-07 years. There after it is increased slightly that is
0.028, 0.11 and 0.13 on the years 2002-03 to 2004-05 respectively and
declined in 2005-06 to 0.03 then increases in 2006-07 to 0.06. Anyway finally
the company failed in keeping sufficient cash and bank balance and
marketable securities.

B. CAPITAL STRUCTURE RATIOS: These ratios help in ascertaining the long term solvency of a firm which
depends on firms adequate resources. To meet its long term funds

31

requirements, appropriate debt equity mix to raise long term and earnings to
pay interest and installment of long term loans in time. The following ratios
can be calculated for this purpose:
DEBT EQUITY RATIO: This ratio is calculated to measure the relative proportions of outsiders
funds and shareholders funds invested in the company. This ratio is
determined to ascertain the soundness of long-term financial policies of the
company and is also known as external equity ratio. It is calculated as follows.

Term liabilities + Current Liabilities

Total Debt Ratio =
Equity
Debt to equity Ratio of 2:1 in case of (i) and 2:3 in cases (ii) are acceptable.
TABLE 4.6
Year Wise Fixed Assets and Capital Employed of
The CCSL Ltd., Chittoor.
YEAR

LONG TERM DEBTS

2002-2003
2003-2004
2004-2005
2005-2006
2006-2007

26,44,52,746
25,26,34,919
29,52,27,768
43,53,64,852
44,09,04,310

SHAREHOLDERS

RATIO

FUNDS

IN %

36,03,55,888
36,96,88,184
38,90,49,404
39,30,37,111
39,81,47,818

0.73
0.68
0.76
1.10
1.10

(Source: Annual Reports of the CCSL)

IOS

32

1.2
1
0.8

2006-07
2005-06
2004-05

0.6
0.4

2003-04
2002-03

0.2
0
2003

2004

2005

2006

2007

INTERPRETATION: This ratio gives results relating to the capital structure of the
firm. 2:3 is the acceptable Debt Equity Ratio. Empirically the debt
equity ratio declined only in the year of 2003-04 (0.68) remaining
that all years were increased from 0.78 to 1.10. Therefore 1.10
means lenders have financed of CCSL Capital Employed in 200607.

PROPRIETORY RATIO: A variant of debt to equity ratio is the proprietary ratio, which
shows the relationship between shareholders funds and total
tangible assets. It focuses the attention on the general financial
strength of the business enterprise. This ratio is worked out as
follows:

33

Shareholders Funds
Proprietary Ratio =
Total tangible Assets

TABLE 4.7
Year Wise Shareholders funds and Tangible Assets of
The CCSL Ltd., Chittoor.

YEAR

SHAREHOLDERS

TOTAL TANGIBLE

RATIO

FUNDS

ASSETS

IN %

2002-2003

36,03,55,888

44,71,78,755

0.80

2003-2004

36,96,88,184

33,48,90,237

2004-2005

38,90,49,404

35,26,39,909

1.10

2005-2006

39,30,37,111

53,78,62,810

0.73

2006-2007

39,81,47,818

51,71,71,520

0.76

1.19

(Source: Annual Reports of the CCSL)

IOS

34

1.2
1
0.8

2006-07
2005-06
2004-05

0.6
0.4

2003-04
2002-03

0.2
0
2003

2004

2005

2006

2007

INTERPRETATION:The proprietary ratio is variant of Debt Equity ratio. The

standard norm for proprietary Ratio is 1:3. The shareholder funds
are high then compare to total tangible assets. Empirically in the
years 2003-04 and 2004-05 it is very high that is 1.19 and 1.10.
Therefore the company having a poor proprietary ratio.

2) PROFITABILITY RATIO: Profitability is the overall measure of the companies with

regard to efficient and effective utilization of resources at their
command.

35

A company should earn profits to survive and grow over a long period
of time. Profitability reflects the final result of business operation of the
business, to be able to funds from investors and for expansion and growth
and to contribute toward social overheads for the welfare of the society.
GROSS PROFIT RATIO: The gross profit should be adequate to cover fixed expenses dividends
and building up of reserves. Higher the ratio, the better it is. A low ratio
indicates unfavorable trend in the form of reduction in selling prices. This ratio
tells gross margin on trading and is calculated as under:

GrossPr ofitRatio

GrossPr
ofit
100
NetSales
TABLE 4.25

Year Wise Gross Profit and Net Sales of

The CCSL Ltd., Chittoor.

YEAR

GROSS PROFIT

NET SALES

2002-2003
2003-2004
2004-2005
2005-2006
2006-2007

-3,76,45,558
-2,50,57,043
-53,23,482
4,96,30,153
-3,64,74,371

20,14,86,573
13,05,17,437
6,99,20,394
12,40,87,187
36,88,53,567

RATIO
IN %
-0.186
-0.191
-0.07
0.399
-0.098

(Source: Annual Reports of the CCSL)

TIOS

36

0.4
0.3
0.2

2006-07
2005-06
2004-05

0.1
0

2003-04
2002-03

-0.1
-0.2
2003

2004

2005

2006

2007

INTERPRETATION: It expresses the relationship of gross profit on sales. A high

gross profit ratio indicates a sign of good management as it implies
that the cost of production is kept at low level. The GP Ratio seems
negative balance accept the year 2006-07 of 39.9. The CCSL is
maintaining poor grass profit ratio.

OPERATING RATIO:This ratio indicates the proportion that the cost of sales
bears to sales. Cost of sales includes direct cost of goods sold as
well as other operating

37

expenses (i.e., Administration, Selling and Distribution Expenses) which have

matching relationship with sales. It is calculated as Follows:

OperatingRatio Costof GoodsSold OperatingExpenses 100

NetSales

TABLE 4.26
Year Wise Cost of Goods Sold, Operating Expenses and Net Sales of The CCSL
Ltd., Chittoor.

YEAR

COST OF GOODS SOLD +

NET SALES

OPERATING EXP.,

RATIO
IN %

2002-2003

180854056

201486573

0.897

2003-2004

43149294

130517437

2004-2005

126380237

69920394

1.807

2005-2006

297068848

124087187

2.394

2006-2007

399471811

368853567

1.083

0.330

(Source: Annual Reports of the CCSL)

IOS

38

2.5
2
2006-07
2005-06
2004-05

1.5
1

2003-04

0.5

2002-03

0
2003

2004

2005

2006

2007

INTERPRETATION: The lower ratio is better then higher the ratio, the less
favourable it is because it would have a smaller margin of
operating profit for the payment of dividends and the creation of
reserves. The above table shows in the year 2005-06 is high
operating ratio 239.4. The less operating ratio was recorded in
2003-04 33. Therefore the poor performance of CCSL in Operating
Ratio.

3) COMBINED RATIOS: NET WORKING CAPITAL RATIO: -

39

The difference between Current Assets and Current Liabilities

excluding short-term bank borrowing in called Net Working Capital or Net
Current Assets. Net Working Capital is some times used as a measure of a
firms Liquidity.
Net WorkingCapitalRatio

Net WorkingCapital
Net Assets

TABLE 4.5
Year Wise Net Working Capital and Net Assets of
The CCSL Ltd., Chittoor.
NET WORKING

YEAR

NET ASSETS

CAPITAL

RATIO
IN %

2002-2003

9,86,37,579

62,48,08,634

0.158

2003-2004

3,35,51,944

6,22,32,103

2004-2005

5,92,98,349

68,42,77,172

0.86

2005-2006

19,23,69,866

82,84,01,963

0.23

2006-2007

9,99,01,841

83,53,54,221

0.20

0.54

(Source: Annual Reports of the CCSL)

IOS

40

0.9
0.8
0.7
0.6

2006-07

0.5
0.4
0.3

2005-06
2004-05
2003-04
2002-03

0.2
0.1
0
2003

2004

2005

2006

2007

INTERPRETATION: The Net Working Capital Ratio declined from 0.86 in 200405 to 0.12 in 2006-07 and increased 0.16 in 2002-03 to 0.86 in
2006-07. The company has not sufficient working capital. The
lowest ratio in the year 2006-07 is 0.20 and the highest ratio in the
year 2004-05 is 0.86.

FIXED ASSETS TURNOVER RATIO: It measures the efficiency of the Assets use. The efficient
use of assets will generate greater sales per rupee invested in all
the Assets of a

41

concern. This ratio shows how well the fixed assets are being used to
generate sales in the business.
The ratio expresses the number of times fixed assets are being
turnover in a stated period. It is calculated as under:
Sales
FixedAssetsTurnoverRatio NetFixedAssets
TABLE 4.11
Year Wise Sales and Net Fixed Assets of
The CCSL Ltd., Chittoor.
RATIO
YEAR

SALES

NET FIXED ASSETS

IN %

2002-2003

20,14,86,573

22,21,36,732

0.91

2003-2004

13,05,17,437

22,21,36,732

2004-2005

6,99,20,394

22,25,77,781

0.31

2005-2006

12,40,87,187

22,51,07,533

0.55

2006-2007

36,88,53,567

23,58,34,849

1.56

0.59

(Source: Annual Reports of the CCSL)

TIOS

42

1.8
1.6
1.4

2006-07
2005-06
2004-05
2003-04
2002-03

1.2
1
0.8
0.6
0.4
0.2
0
2003

2004

2005

2006

2007

INTERPRETATION: This ratio measures the efficiency of the assets use. The
high ratio is the better performance. On the other hand, a low ratio
indicates that fixed assets are not being efficiently utilized.
Therefore the CCSL did not utilize well. Only in the years 2002-03
and 2006-07 utilized the fixed Assets effectually.

TOTAL ASSETS TURNOVER RATIO: This ratio is calculated by dividing the net sales by the
value of total assets. A higher ratio is an indicator of over-trading
of total assets while a low

43

reveals idle capacitor. The traditional standard for the ratio is two times.

TotalAssetsTurnoverRatio TotalAssets

NetSales

TABLE 4.12
Year Wise Net Sales and Total Assets of
The CCSL Ltd., Chittoor.
RATIO
YEAR

SALES

TOTAL ASSETS
IN %

2002-2003

20,14,86,573

51,46,60,808

0.39

2003-2004

13,05,17,437

40,27,85,783

2004-2005

6,99,20,394

43,59,05,864

0.16

2005-2006

12,40,87,187

60,98,74,373

0.20

2006-2007

36,88,53,567

61,16,60,751

0.60

0.32

(Source: Annual Reports of the CCSL)

44

RATIOS
0.7
0.6
0.5

2006-07
2005-06
2004-05

0.4
0.3

2003-04
2002-03

0.2
0.1
0
2003

2004

2005

2006

2007

INTERPRETATION: The traditional standard for the ratio is two times. In the year 2006-07 got
the higher total Assets Turnover ratio 0.60 on other hand lower ratio got in the
year 2004-05 of 0.16. Therefore the CCSL indicates idle capacity of total Assets.

CURRENT ASSETS TURNOVER RATIO: By calculating this ratio we can that, for generating a sale of
one rupee

45

we can know how much they company invested in current assets .

Sales
Current AssetsTurnoverRatio Current Assets

TABLE 4.13
Year Wise Sales and Current Assets of
The CCSL Ltd., Chittoor.
RATIO
YEAR

SALES

CURRENT ASSETS
IN %

2002-2003

20,14,86,573

28,77,42,756

0.70`

2003-2004

13,05,17,437

17,58,61,331

2004-2005

6,99,20,394

20,80,30,364

0.34

2005-2006

12,40,87,187

38,19,73,121

0.32

2006-2007

36,88,53,567

37,30,29,183

0.99

0.74

(Source: Annual Reports of the CCSL)

IOS

46

1.2
1
2006-07
2005-06
2004-05
2003-04
2002-03

0.8
0.6
0.4
0.2
0
2003

2004

2005

2006

2007

INTERPRETATION: The higher CATR more efficient in management and

utilization of assets. Empirically the current asset turnover ratio is
declined from 0.74 to 0.32 in years 2003-04 to 20005-06. The
higher turnover recorded in the year 2006-07 i.e. 0.99. Therefore
we conclude that the current Asset turnover ratio of company
shows poor results.

INVENTORY TURNOVER RATIO: It denotes the speed at which the inventory will be
converted into sales, thereby contributing for the profits of the
concern. When all other factors remain constant, greater the
turnover of inventory more will be efficiency of its

47

management. This ratio is calculated as follows:

Costof GoodsSold
Inventory TurnoverRatio AverageStockheldduringthePeriod

TABLE 4.14
Year Wise Cost of Goods Sold and Average Stock held during
the period of
The CCSL Ltd., Chittoor.
COST OF GOODS

YEAR

AVERAGE STOCK

SOLD

RATIO
IN %

2002-2003

16,82,44,221

23,41,47,891

0.718

2003-2004

3,26,16,707

13,75,97,982

2004-2005

1,15,24,675

8,28,84,312

0.139

2005-2006

26,08,49,917

18,27,22,687

1.427

2006-2007

38,23,18,650

26,48,82,289

1.443

0.237

(Source: Annual Reports of the CCSL)

IOS

48

1.6
1.4
1.2

2006-07

2005-06

0.8
0.6

2004-05
2003-04

0.4

2002-03

0.2
0
2003

2004

2005

2006

2007

INTERIPRETATION: The inventory turnover ratio indicates the efficiency of the

firm in producing and selling its products. A low inventory turnover
implies excessive inventory levels than required for production.
The company have high ratio of inventory except in the 2005-06
i.e. 0.139 it is not good. That is all stock stored in god owns.

CAPITAL TURNOVER RATIO: It shows the efficiency of capital employed in the business
by

49

computing how many times capital employed is turned-over in a stated period.

The ratio is ascertained as follows:Sales
CapitalTurnoverRatio CapitalEmployed

TABLE 4.15
Year Wise Sales and Capital Employed of
The CCSL Ltd., Chittoor.
RATIO
YEAR

SALES

CAPITAL EMPLOYED
IN %

2002-2003

20,14,86,573

62,48,08,634

0.32

2003-2004

13,05,17,437

62,23,23,103

2004-2005

9,69,20,394

68,42,77,172

0.14

2005-2006

12,40,87,187

82,84,01,963

0.15

2006-2007

36,88,53,567

83,90,52,028

0.44

0.21

(Source: Annual Reports of the CCSL)

TIOS

50

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0

2006-07
2005-06
2004-05
2003-04
2002-03

2003

2004

2005

2006

2007

INTERPRETATION: The high capital turnover ratio it indicates greater profit on

other hand when it is low it indicates sufficient sales are not being
made and profits and lower. Empirically, the actual capital turnover
ratio has declined from 0.32 to 0.14 and increased from 0.15 to
0.44 in 2005-06 to 2006-07. Finally the CCSL capital Turnover
Ratio is not Satisfactory. In the year 2006-07 is 0.44 the CTR
recorded.

WORKING CAPITAL TURNOVER RATIO: This ratio is also known as Sales to Working Capital. It
shows the number of times working capital is turned-over in a
stated period. The higher

51

is the ratio, the lower is the investment in working capital and the greater are
the profits. It is calculated as follows.
Sales
WorkingCapitalTurnoverRatio Net WorkingCapital

TABLE 4.16

Year Wise Sales and Net Working Capital of

The CCSL Ltd., Chittoor.

YEAR

SALES

NET WORKING

RATIO

CAPITAL

IN %
2.04

2002-2003

20,14,86,573

9,86,37,578

2003-2004

13,05,17,437

3,35,51,944

2004-2005

6,99,20,394

5,92,98,348

1.18

2005-2006

12,40,87,187

19,23,67,806

0.64

2006-2007

36,88,53,567

9,99,01,842

3.69

3.89

(Source: Annual Reports of the CCSL)

TIOS

52

4.5
4
3.5
3
2.5

2006-07
2005-06
2004-05
2003-04
2002-03

2
1.5
1
0.5
0
2003

2004

2005

2006

2007

INTERPRETATION: This ratio measures the relationship between sales and net
working capital. In the years2003-04 and 2006-07 recorded as the
highest working capital turnover ratio i.e. 3.89 and 3.69
respectively. In the year 2005-06 recorded as the lowest working
capital turnover ratio. The higher indicates more favorable it is for
the company. In CCSL WCTR is highly fluctuating in the ratios

DEBTORS TURNOVER RATIO: It indicates the number of times on the average the
receivable is turn over in each year. The higher the value of ratio,
the more is the efficient
53

management of debtors. It measures the accounts receivables in terms of

number of days of credit sales during a particular period. It is calculated as
follows;

CreditSales
DebtorsTurnoverRatio AverageDebtors

TABLE 4.18
Year Wise Credit Sales and Average Debtors of
The CCSL Ltd., Chittoor.
RATIO
YEAR

SALES

AVERAGE DEBTORS
IN %

2002-2003

20,14,86,573

5,38,40,312

3.74

2003-2004

13,05,17,437

5,46,53,535

2004-2005

6,99,20,394

6,09,75,610

1.15

2005-2006

12,40,87,187

6,28,32,487

1.97

2006-2007

36,88,53,567

5,90,67,738

6.24

2.39

(Source: Annual Reports of the CCSL)

TIOS

54

7
6
5

2006-07

2005-06
2004-05
2003-04

3
2

2002-03

1
0
2003

2004

2005

2006

2007

INTERPRETATION: The debtors turnover ratio indicates the rate of which cash
is generated by turnover of debtors. The debtor turnover ratio
indicates a non-satisfactory collection program. Empirically the
debtors turnover ratio was declined from 3.74 to 1.15 in the years
2002-03 to 2004-05. Then it is increased form 1.97 to 6.24 in the
years 2005-06 and 2006-07 respectively. The high value of DTR
was more efficient in management of credit. Therefore we
conclude that there is being poor debtors turnover ratio
maintained by CCSL.

DEBTORS COLLECTION PERIOD:It indicates on an average that credit sales are pending
uncollected by

55

the concern. The also reflects the credit policy and terms of the concern. It
shows the quality of debtors since it ventilates the speed at which debtors are
collected. The collection period will be calculated as under.
Daysina year
CollectionPeriod DebtorsTurnoverRatio
TABLE 4.19
Year Wise Days in a year and Debtors Turnover Ratio of
The CCSL Ltd., Chittoor.

DEBTORS TURNOVER

RATIO

YEAR

DAYS IN A YEAR

2002-2003

365

0.74

2003-2004

365

2.39

2004-2005

365

1.15

317.39

2005-2006

365

1.97

185.28

2006-2007

365

6.24

58.49

RATIO
97.59
152.72

(Source: Annual Reports of the CCSL)

TIOS

56

350
300
250

2006-07
2005-06
2004-05
2003-04

200
150
100

2002-03

50
0
2003

2004

2005

2006

2007

INTERPRETATION: Collection period measures the rapidity or slowness with

which money is collected from them. The average number of days
for which the debtors remain outstanding. Empirically the average
collection period rose from 97.9 to 317.39 in the years from 200203 to 2004-05. Then reduced slightly from 185.28 to 58.49 in the
years from 2005-06 to 2006-07

CREDITORS TURNOVER RATIO:This ratio gives the Average Credit period enjoyed from the
creditors. A low ratio indicates that creditors are not paid in time
while a high ratio gives an

57

idea that the business is not taking full advantages of credit period allowed by

RATIOS

the creditors.
2

CreditorsTurnoverRatio

1.5

CreditPurchases
2006-07

Aberage AccountsPayable

2005-06
2004-05

TABLE 4.20
2003-04
Year Wise Credit Purchases and Average2002Account-03 Payable of

0.5

YEARS

The CCSL Ltd., Chittoor.

0
2003

2004
YEAR

2005
2006 2007
PURCHASES

Average Accounts

RATIO

Payable

IN %
1.12

2002-2003

10,57,81,021

9,45,03,276

2003-2004

4,74,68,010

7,11,05,381

2004-2005

5,68,36,705

7,43,16,695

0.80

2005-2006

17,43,54,860

9,47,53,345

1.84

2006-2007

24,08,95,871

13,65,14,358

1.76

0.66

(Source: Annual Reports of the CCSL)

INTERPRETATION: The creditors turnover ratio on the basis of credit purchases. Low ratio
indicates that creditors are not paid in time. In the period of 2003-04 company
did not purchase raw material so in that period the creditors ratio is nil.

In

58

2004-05 recorded low ratio i.e. 0.80 it is not good. In the year 2005-06 and
2006-07 recorded high ratio 1.84 and 1.76 respectively

59

FINDINGS
The standard cash ratio is 0.50:1. The company is not able to maintain
sufficient cash at bank and cash in hand. In 2005-06 company is
having the ratio 0.07 only.
The CCSL is not maintaining the sufficient working capital. It is more
fluctuating in net working capital ratio.
Lenders have contributed more funds then owners. Lenders
contribution is 1.10 times of owner contribution.
Total Liabilities have increased year by year except in 2004-05. The
total Liability is 1.65 times more than the total asset.
The current Assets are used very will in the year 2006-07 is 0.99. And
the years from 2004-05 to 2005-06 is decreased to 0.32. Remaining
that two years current Assets utilization is satisfied.
The Inventory turnover ratio has increased in this study but it has
declined to 0.139 in 2004-05. The company failed to maintain the
efficiency of selling and producing its products.
The Gross Profit margin is in very poor position in this study and it was

60

increased to 39.90 in 2005-06, but it was not sufficient to the company.

It is shows very poor performance of the company. Remaining years
are shows loss.
The operating expenses are too high in this study. The operating
expenses are very large than the sales. The position is very danger to
the CCSL.

SUGGESTIONS
The CCSL has to increase its current asset such as cash in hand and cash
at bank etc. By disposing off the unutilized assets such as old machinery
and there by increase its liquidity position. The company has to maintain
standard liquidity ratios to meet the liquidity obligation.
The company is maintaining the lower equity fund. But, the CCSL having
the insolvency position for increasing the debt fund. It is suggest that the
company has to convert the reserves to assets.
The Debtor Turnover Ratio has decreased from 5.07 times to 1.98 times.
Generally, the higher the value of Debtor Turnover, the more efficient to the
management of credit. The CCSL has to improve the debt collection ratio.
The lower gross profit margin might reflect higher cost of goods sold due to
the firms inability to purchase raw material (can etc.,) at favorable term,
inefficient utilization of plant and machinery of over investment in plant and
machinery, resulting in higher cost of production. It suggests the Chief
Account Officer has detected the causes of a falling Gross margin and
initiate action to improve the Gross Margin.
61

The CCSL has the higher operating Expenses. A higher Operating

Expenses Ratio is unfavorable. The Operating Expenses are more than
the sales are danger to the company; the CCSL must decrease the
operating expenses.

62

CONCLUSION
The Preponderance of current liabilities over the current assets has
escalated the net working capital requirement of CCSL. Substantial amount
capital is blocked in the inventory sugar of longer period partially due to
policies of government and partially associated with tender quotations. CCSL
turns its fixed assets faster than current assets. In fact it is because of such a
relative faster turnover of fixed assets that it becomes break even long ago.
Despite the companys lifetime sourcing strategy where by its purchases
sugar cane from the farmer in the vicinity of CCSL on ensured long term basis
so as to have smooth inflow of raw materials sugar as quite prequel for its
assistance to farmers such as finance and provision of agricultural inputs such
as fertilizers seeds and pesticide profit of CCSL escalated because of
excessive overhead and polling up interest on. Remain due to erection of new
sugar factories in the vicinity of CCSL, there has been a shortage of sugar
cane and as a result a significant chunk of its capacity unutilized.

63

64

BALANCE SHEET OF THE CHITTOOR COOPERATIVE SUGARS

LTD.,
AS ON 31ST MARCH 2003 TO 1ST APRIL 2007.

Liabilities
Share Capital

2003

2004

2005

2006

2007

14,09,58,700

14,09,60,300

14,09,61,400

2,88,36,536

2.88.12.457

2,91,54,180

3,10,24,046

3,52,01,887

23,56,12,210

.22,38,22,462

26,60,73,588

40,43,40,806,

405702423

60,94,478

2,71,90,688

4,05,25,798

4,90,24,989

4,69,27,852

18,29,12,074

11,50,20,074

10,81,07,592

14,04,81,701

22,61,00,864

21,93,57,188

22,87,27,884

24,80,88,004

2,51,896,411

25,55,94,218

64,227

64,227

64,227

64,227

64,227

9,695

9,695

9,695

9,695

9,695

24,703

24,703

24,703

24,703

24,703

29,92,13,004

36,18,46,708

39,71,03,323

40,81,32,905

50,05,18,718

60,98,74,373

611660751

14,11,40700 14,25,53,600

Deposits &
Borrowings
Deposits
Borrowings
Outstanding
Interest Payable
Adjusting Heads
Due by
Reserves
Undistributed
Profits
Audit Fund
Reserve Fund yet
to be Invested
Difference between
Assets & Liabilities

Total

Assets

51,46,60,807 40,27,85,782

2003

43,59,05,864

2004

2005

2006

2007
65

Cash on Hand
Balance with Bank:-

12,83,980

22,575

18,78,931

141,219 95,083

Current Account

17,15,099

13,49,422

91,72,861

1,66,827

Saving Account
Shares in other Co-

23,80,140

1,45,31,768

89,67,176

70,82,767

2,28,550

2,28,550

2,28,550

2,28,550

2,28,550

12,54,826

12,61,226

12,71,226

12,67,226

12,67,226

2,50,000

22,50,000

27,50,000

2,50,000

2,50,000

Members
Loans to other Co-op.,

64,61,883

63,86,630

90,85,236

87,82,893

1,41,93,990

Sugar Factories
Adjusting Heads Due to

30,00,000

10,00,000

10,00,000

10,00,000

10,00,000

5,44,12,361
18,26,489
12,62,06,460

5,48,94,708
18,26,489
12,62,06,460

6,70,56,512
18,26,489
1266,47,509

586,08,462
18,26,489
12,91,77,261

5,95,27,013
18,26,489
13,99,04,578

operative Institutions
Deposits with various
Agencies
Fixed Deposits with Banks

33,68,313

Loans & Advances to

Interest Receivable
Value of Assets
Value of Closing Stock
1. Stores Stocks
2. Packing Material
3. Stationery
4. Sugar
5. Sugar in Process
6. Molasses

2,02,69,709
1,78,240

2,01,00,2
65

2,00,46,5
21

200,66,210

1,88,

6,85,016 22,314

26,375

1,78,240

93,100

28,366

22,784

19,19,96,948

18,671

43,727

26,77,46,257

40,809

2,54,382

7,60,05,445

7,88,6,404

82,93,497

24,67,11,289

69,07,475

2,34,802

00

82,22,629

62,98,461

2,86,092

1,06,60,683

7. Molasses in
Process

66,19,003
3,02,613

8. FMP Raw Material

9,200

& Feed

5,7
50

8,01,5
00

20,474 97

9. Pesticides

20,474

10. Fertilizers

00

20,474

20,474

00

00

362250

00

00

00

205940

Deficits

Total

00

20,4

00 74

47,944
47,944
47,944
47,944
47,944
51,46,60,807 40,27,85,782 43,59,05,864 60,98,74,333 611660751

66

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