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A STUDY ON

FINANCIAL ANALYSIS THROUGH RATIOS


With special reference to
MADDI LAKSHMAIAH GROUP OF INDUSTRIES, CHILAKALURIPETA, GUNTUR
A project report submitted to

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY,


KAKINADA

In partial fulfillment of the requirements for the award of the degree of


MASTER OF BUSINESS ADMINISTRATION

Submitted by
K.MURALI KRISHNA
Regd. No. 142W1E0032

Under the guidance of


MS.M.TEJASWI
Assistant Professor

DEPARTMENT OF MASTER OF BUSINESS ADMINSTRATION

G.V.R. & S COLLEGE OF ENGINEERING & TECHNOLOGY


(AFFILIATED TO JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY, KAKINADA)
GANGINENI PURAM, NEAR BUDAMPADU, GUNTUR 522013
(2014-2016)

COLLEGE CODE: 2W
G.V.R. & S COLLEGE OF ENGINEERING & TECHNOLOGY
(Affiliated to Jawaharlal Nehru Technological University, Kakinada)
Ganginenipuram, Near Budampadu, Guntur-522013

DEPARTMENT OF
MASTER OF BUSINESS ADMINISTRATION

CERTIFICATE

This is to certify that this is a bonafide record of the project work


entitled RATIO ANALYSIS with special reference to MADDI
LAKSHMAIAH GROUP OF COMPANIES, CHILAKALURIPETA,
GUNTUR carried out by K.MURALI KRISHNA (142W1E0032) during
the academic year 2014-2016 in partial fulfillment of the requirements for
the award of the degree of MASTER OF BUSINESS
ADMINISTRATION by JAWAHARLAL NEHRU
TECHNOLOGICAL UNIVERSITY, KAKINADA.

(MS.M.TEJASWI) (Mr. T.Vasantharao)


PROJECT GUIDE H.O.D of M.B.A

External Examiner
DECLARATION

I, K.MURALI KRISHNA student of MBA in G.V.R & S. College of

Engineering and Technology declare that the project entitled A STUDY

ON RATIO ANALYSIS with special reference to MADDI

LAKSHMAIAH GROUP OF COMPANIES, CHILAKALURIPETA,

GUNTUR has been prepared by me under the guidance of

MS.M.TEJASWI for the partial fulfillment of the requirements for the award

of degree in MASTER OF BUSINESS ADMINISTRATION by

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY,

KAKINADA. Further, I declare that this project report is the result of my

own efforts and it has not been submitted to any university or organization for

the award of any degree or diploma.

Place: Guntur K.MURALI KRISHNA


Date: Reg. No: 142W1E0032
ACKNOWLEDGEMENT
I am extremely grateful to our Director Dr. G. Venkateswara Rao for providing
me a platform to do my M.B.A Program.

I am very thankful to Dr.S.H.V Prasad Rao, Principal of G.V.R. & S


College of Engineering and Technology, Guntur for providing me an opportunity to
complete my project work in COMPANY NAME, LOCATION.

I wish to express my sincere thanks to Mr. T.Vasantha Rao, Head of


Department of MASTER OF BUSINESS ADMINISTRATION, G.V.R. & S College
of Engineering and Technology, Guntur for his encouragement in the completion of
my project work.

My special thanks to MS.M.TEJASWI Project Guide in G.V.R. & S College of


Engineering and Technology, Guntur for giving an excellent guidance, Valuable
suggestions and who motivated me.
I am thankful to my faculty members, Ms.m.anusha, Ms.p.s.s.lakshmi kavya and
Mr.M.aresh babu and P.saritha andP.naga raja who helped me to complete my project
succefully.

I am blessful to express my deep sense of gratitude to M.LAKSHMI for his


splendid guidance and encouragement that inspired me to complete this project
successfully and then finally I thank to all employees in the company who extended their
cooperation during my work in MADDI LAKSHMAIAH GROUP OF

COMPANIES, CHILAKALURIPETA, GUNTUR.


11111111
I express my deep sense of gratitude to my Family members, and friends who
helped me for the completion of project work.

K.MURALI KRISHNA
INDEX

CONTENTS PAGE NO

INTRODUCTION 1-2

OBJECTIVES AND NEED AND STUDY 3-5


CHAPTER-1
RESEARCH METHODOLOGY 6

LIMITATION OF STUDY 7

INDUSTRIAL PROFILE
8-15
CHAPTER-2 PROFILE OF MADDI LAKSHMAIAH
16-49
GROUP OF COMPANIES

THEORITICAL FRAME WORK ON


CHAPTER-3 50-62
RATIO ANALYSIS

DATA ANALYSIS AND


CHAPTER-5 63-81
INTERPRETATION

FINDINGS 82

CHAPTER-6 SUGGESTIONS 83

CONCLUSION 84

BIBLIOGRAPHY
Chapter I

Introduction
1.1 INTRODUCTION OF RATIO ANALYSIS

Ratio analysis is a widely used of financial analysis. It is defined as the systematic


use of ratio to interpret the financial statements so that strengths and weakness of a firm as
well as its historical performance and current financial condition can be determined. The
term ratio refers to the numerical or quantitative relationship between two items variables.

The alternative, methods of expressing items, which are related to each other, are for
purposes of financial analysis, referred to as ratio analysis. It should be noted that
computing the ratio does not add any information not already inherent in the above
figures of profits and sales. What ratios do is that they reveal the relationship in a more
meaningful way so as to enable us to draw conclusions from them.
The rational of ratio analysis lies in the fact that it makes related information comparable.
A single figure by itself has no meaning but when expressed in terms of a related figure,
it yields significant inferences. For instance, the fact that net profits of a firm amount to
say, Rs. 10 lacks throws no light on its adequacy or otherwise. Figure of net profit has to
be considered in relation to other variables. How does it stand relation to sales? What
does it represent by way of return on total assets used or total capital employed? If therefore
net profits are shown in terms of their relationship with items such as sales, assets, capital
employed equity capital and so on; meaningful conclusions can be drawn regarding their
adequacy.

Ratio is very useful to for grasping the message of the financial statement and
understanding them. It helps to enlarge and understand the financial health and travel of
the business, it past performance makes it possible to forecast about future state of the
business.

1
Meaning of Ratio

A ratio is the simple arithmetic expression of the relationship of one number to


another. Accounting ratios are relationships expressed in mathematical forms between
figures which have connected with each other in some manner, obviously no purpose will
be served by comparing the two sets of figures are also unfit for a comparison, and ratio
analysis shows the relationship between the different items in the data. For example, on a
day, a firm is having 10 lakhs of current assets and 5 lakhs of current liabilities; the ratio
of the current assets to the current liabilities is 10/5 2:1.

As the current assets are double the amount of current liabilities the firm could able
to discharge all current liabilities without any difficulties. So the ratio can be expressed in
the form of a simple ratio or as a percentage. In the above illustration the relationship is
expressed by simple ratio, this simple ratio can be converted into a percentage. Instead of
saying that, the current assets are double the amount of current liabilities.

2
1.2 OBJECTIVES OF THE STUDY

The main objective of ratio analysis is to show the firms relative strengths and weakness. The objectives
of ratio analysis are as follows:

It determines the financial condition and financial performance of the firm.

It involves comparison for a useful interpretation of the financial statements.

It helps in finding solutions to unfavorable financial statements.

It helps to take suitable corrective measures when the financial conditions and performance are
unfavorable to the firm, in comparison to other firms in the same industry.

With the help of this analysis, an analyst can determine the financial position ..

The ability of the firm to meet its obligations.

The efficiency with which the firm is utilizing its various assets in generating sales.

The overall operating efficiency and performance of the firm.

To analyze the liquidity position of the firm.

3
1.3 NEED AND IMPORTANCE OF THE STUDY1

The financial statements refer to the two statements, which are prepared by the
business concern at the end of the year. They are income statement/ trading & profit and
loss account, which are prepared by the business concern in order to know the profit and
loss earned during the specified period.
Position statement / balance sheet, which is prepared by business concern on a
particular date in order to know the financial position. Financial analysis is prepared in
order to know the strength and weakness of business under taking.
As future is nothing but the extension to past through present. The analysis of
past information helps us to forecast the future accurately. Since financial statements
provide valuable and genuine information concerning the past. Hence financial analysis
will help us in arriving at meaning full solution.
The analyses, as individual has a very limited personal experience. He can easily
understand the complexities of business activities and their length and mutual
multidirectional relationship only by observation and external experience. Thus is becomes
necessary that financial statements, which contains the above.

Tobacco is one of the largest agro based industry in Indian located in rural areas.
About 30 million farmers, their dependents and a large number of agricultural laborers are
involved in tobacco cultivation harvesting and ancillary activities, constituting 5.5% of
rural population. Besides the industry provides employment to acts is an implicit form,
should rather must be analyzed in an intelligible way.

4
1.4 SCOPE OF THE STUDY
This study is about the ratio analysis of MADDI LAKSHMAIAH & CO, which is a part of
financial analysis.
Ratio analysis is perhaps the first financial tool developed to analyze and interpret the financial
statement and is still used widely for this purpose. Financial performance analysis is a well-researched area
and innumerable studies have proved the utility and usefulness of this analytical technique
The study concentrates on the financial statement of the company. The required
data for the study of ratio analysis is collected from the annual financial statements of the
firm. The duration of the study period 2009-2014.

5
1.5 METHODOLOGY OF THE STUDY
All the data required for completion of the study has been collected from both
primary and secondary sources.
Primary Data
The original data collected specifically for a current research is known as primary
data. Primary data consists of information collected through interaction with the collective
staff either individually or officially of the company, and through any personal
observations. As for the study primary data is gathered through a series of detailed
discussions with managers, workman and executives of the company.
Secondary Data
Secondary data is the data which is already present in the form of books, annual
reports, magazines etc., it is nothing but a printed material.
It is collected from the balance sheets and profit and loss accounts of the
organization-required data will be taken from the various reports and other documents and
data will be analyzed with the help of guide.

6
1.6 LIMITATIONS OF THE STUDY

The present study is subject to the following limitations such as;

The entire study of based on financial data that is provided by the company
financial statements.
Therefore the limitations of financial statements equally applicable to the study.

Results are not universally accepted performance of financial condition.

The smaller time frame i.e., eight weeks available for understanding for this study
is one of the significant limitations of the study.

7
Chapter II

Industry Profile
and
Company Profile
2.1 INDUSTRY PROFILE

Tobacco is a plant that grows natively in north and South America. It is in the same
family as the potato, pepper and the poisonous nightshade, a very dead plant. The seed of
a tobacco plant is very small. A 1 ounce sample contains about 300,000 seeds! It is
believed that tobacco began growing in the America about 6,000 B.C.! As early as 1 B.C.,
American Indians began using tobacco in many different ways, such as in religious and
medicinal practices. Tobacco was believed to be a cure-all, and was used to dress wounds,
as well as a pain killer. Chewing tobacco was believed to relieve the pain of a toothache.
Soon after, sailors brought tobacco back to Europe, and the plant was being grown
all over Europe. The major reason for tobaccos growing popularity in Europe was its
supposed healing properties. Europeans believed that tobacco could cure almost anything,
from bad breath to cancer. In 1571, a Spanish doctor named Nicolas Monads wrote a book
about the history of medicinal plants of the new world. In this he claimed that tobacco
could cure 36 health problems.
In 1588, a Virginian named Thomas Harriet promoted smoking tobacco as a viable
way to get ones daily dose of tobacco. Unfortunately, he died of nose cancer (because it
was popular then to breathe the smoke out through the nose).
During the 1600s, tobacco was so popular that it was frequently used as money!
Tobacco was literally as good as gold! This was also a time when some of the dangerous
effects of smoking tobacco were being realized by some individuals. In 1610 sir Francis
Bacon noted that trying to quit the bad habit was really hard!

In 1632, 12 years after the mayflower arrived on Plymouth Rock, it was illegal to
smoke publicly in Massachusetts! This had more to do with moral beliefs of the day, than
health concerns about smoking tobacco.
In 1760, Pierre Lorillard establishes a company in New York City to process
tobacco, cigar, and snuff. Today, Lorillard is the oldest tobacco company in the U.S.

8
TOBACCO A GROWTH INDUSTRY:

In 1776, during the American revolutionary war, tobacco helped finance the
revolution by serving as collateral for loans the Americans borrowed from France! Over
the years, more and more scientists began to understand the chemical in tobacco, as well
as the dangerous health effects smoking produces.

In 1826, the pure form of nicotine was finally discovered. Soon after, scientists
concluded that nicotine was dangerous poison.

In 1836, New Englander Samuel Green stated that tobacco was an insecticide, a
poison, and can kill a man.

In 1847, the famous Phillip Morris was established, selling hand rolled Turkish
cigarettes.

Soon after in 1849, J. E. Liggett and Brother were established in St. Louis, Mo. (the
company that has settled out of the big lawsuits recently). Cigarettes became popular
around this time when soldiers brought it back to England from the Russian and Turkish
soldiers.

9
WAR & CIGARETTES: A DEADLY COMBO:

The cigarette exploded during world war (1914-1918), where cigarettes were called
the soldiers smoke. By 1923, Camel controls 45% of the U.S. market! In 1924, Phillip
Morris began to market Marlboro as a womans cigarette that is a Mild as May!
To battle this, American Tobacco Company, maker of the lucky strike brand, began
to market its cigarettes to women and gains 38% of the market. Smoking rates among
female teenagers soon tripled during the years between 1925-1935. In 1939, American
Tobacco Company introduced a new brand, Pall Mall, which allowed American to become
the largest tobacco company in the U.S.

During World War II (1939-1945), cigarette rates were at an all-time high.


Cigarettes were included in a soldiers C-Rations (like food). Tobacco companies sent
millions of cigarettes to the soldiers for free, and when these soldiers came home, the
companies had a steady stream of loyal customers. During the 1950s, more and more
evidence was surfacing that smoking was linked to lung cancer.

In 1952 P. Lorillard markets its Kent brand with the Micronized filter, which
contained asbestos! This was fortunately discontinued in 1956. In 1953, Dr. Ernst L.
Winders find that putting cigarette tax on the backs of mice causes tumors! In 1954, RJ
Reynolds introduced the Salem brand, which was the first filter-tipped menthol cigarette.

10
HEALTH HAZARDS REVEALED:

In 1964, the Surgeon Generals Report on Smoking and Health came out. This
report assisted in allowing the government to regulate the advertisement and sales of
cigarettes. The 1960s in general was a time when much of health hazards of smoking were
reported.

In 1965, television cigarette ads were taken off the air in Great Britain. In 1966,
those health warnings on cigarette packs began propping up. In 1968, Bravo, a non-tobacco
cigarette brand was marketed made primarily of Lettuce, it failed miserably!

Because of the negative press about tobacco, the major tobacco companies began
to diversify their products. Phillip Morris began to buy into the Miller Brewing company,
makers of Miller Beer, Miller Lite, and Red Dog Beer. RJ Reynolds Tobacco Company
drops the Tobacco Company in its name, and becomes RJ Reynolds industries.

It also began to buy into other products, such as aluminum. American Tobacco
Company also drops Tobacco from its name, becoming American Brands, Inc. In 1971,
television ads for cigarettes are finally taken off the air in the U.S. cigarettes, however,
were still the most heavily advertised product second to automobiles. In 1977, the first
national great American Smoke out took place.

In 1979, the surgeon general reported on the health consequences of smoking for
women. This is in light to the increasing number of women who were taking up the bad
habit. Some attribute is to slick and campaign of the Virginia Slims brand, youve come
a long way baby.

11
THE RECENT PAST:

During the 1980s there were many lawsuits filed against the tobacco industry
because of the harmful effects of its products. Smoking became politically incorrect, with
more public places forbidding smoking.
In 1982, the surgeon general reported that second hand smoke may cause lung
cancer. Smoking in public areas was soon restricted, especially at the work place. In 1985,
lung cancer became the No.1 killer of women, beating out breast cancer! Phillip Morris
continued to diversify into other products, buying into General Foods Corporation and
Kraft Inc in 1985. R. Reynolds also diversified, buying Nabisco and becoming RJR /
Nabisco.

In 1987, congress banned smoking on all domestic flights lasting less than 2 hours.
In 1990, smoking is banned, except to Alaska and Hawaii. In 1990, Ben & Jeerys (of ice
cream fame) boycotts RJR / Nabisco, and dropped Oreos from its ice cream products.

During the 80s and 90s, the tobacco started marketing heavily in areas outside the
U.S., especially developing countries in Asia. Marlboro is considered the worlds no.1 most
valuable brand of any product with a value over $30 billion! Over this period, there is a
battle between Coca Cola and Marlboro as the No.1 brand in the world.

In the recent years there is growing evidence that the tobacco industry has known
all along that cigarettes are harmful, but continue to market and sell them. There is also
evidence that they know that nicotine was addictive and exploited this hidden knowledge
to get millions of people hooked on this dangerous habit!

Tobacco industry is an agro based industry. Tobacco is cultivated mainly in the


states of Andhra Pradesh and Karnataka most of the tobacco is used for the manufacture of
cigarettes and for exports. Tobacco is also grown in Tamilnadu, West Bengal, Uttar
Pradesh, Gujarat, Madhya Pradesh, Maharashtra and Orissa also.

12
However the tobacco grown in these states is of very less quality and is not used
for manufacture of cigarettes and exports. Several varieties of tobacco such as Virginia
flue cured ,Virginia air cured light soil burley, sun cured Virginia ,nature, chewing.
Tobacco, HDBRG, wrapper tobacco, beady tobacco and hookah tobacco etc. are grown
in India. Virginia flue cured is a major variety grown in India. More than 80% of Indian
tobacco crop belongs to this variety.

The tobacco cultivation exports and some other industrial activities are regulated
by central government (ministry of commerce) through Tobacco board. Tobacco board is
headed by I.A.S officer of senior category generally from the central government. The
board consists of several central govt- officers, state govt- officers, political leaders,
representatives of farmers and reputed industrialists. One of the directors of ML group is
always representing the industrialists in the tobacco board.

Tobacco board issues licenses to the farmers who are permitted to grow tobacco.
The licenses regulate the cultivations area the farmers have to restrict the cultivation to the
given area and must sell the grown tobacco through tobacco board auctions only any
violation is an offence and is punishable.

In Virginia flue cured variety the tobacco leaves are separated from the plant and
are cured in tobacco barns. Tobacco barns are like a furnace where the fumes are used to
cure the green leaves of tobacco plant. tobacco barns appear like small go downs with firing
chambers at the bottom fixed to the walls .the green tobacco leaves of the plant will be
arranged in the form of rows inside the barns .the temperature inside the barn will be
regulated by means of flow of hot air through the firing chambers .

13
Table no: 2.1
The major players in tobacco industry in India are as under

Name of the company Occupation % of business


in India

Cigarette manufacturing & un-


ITC Ltd manufactured tobacco exports 50%

Cigarette manufacturing & un-


VST industries Ltd manufactured tobacco exports 12%

Cigarette manufacturing & un-


GTC industries Ltd manufactured tobacco exports 6%

Godfrey Phillips India Ltd Cigarette manufacturing & un-


manufactured tobacco exports 8%

The consumption is linked with the habits of the people; the tobacco usage cannot
be eradicated, even in countries like USA where anti-tobacco campaign started in 1962,
the production of cigarettes and consumption of cigarettes is still progressing.

14
Table no: 2.2
Exporters:
S. No Name of the Occupation % of business in
Company India

Cigarette manufacturing
A ML group & 5%
Un manufactured
tobacco
Exports

Cigarette manufacturing
B Polisetty group & 5%
un manufactured tobacco
exports

Cigarette manufacturing
C Bommidala group & 3%
un manufactured tobacco
exports

Cigarette manufacturing
D Mittapalli group & 3%
un manufactured tobacco
exports

Cigarette manufacturing
E Other companies & 8%
un manufactured tobacco
exports

15
2.2 COMPANY PROFILE

Maddi Lakshmaiah group of companies was founded by Mr. Maddi Lakshmaiah in


1970, Maddi Lakshmaiah & Co. Ltd., was set up at Chilakaluripeta, a village in Guntur
District, State of Andhra Pradesh, India that produces some of the best tobacco in the
country. He joined in his family business in 1952. After completing of his Engineering
degree. The joint family business started payback in 1943, dealing with tobacco exports,
well before India.
Today it has evolved into a diversified, multiproduct conglomerate known as ML
Group that is recognized world over for its excellence. The company processes tobacco
and other agro based products that are used both in the country and exported to the most
quality conscious of world markets.
An emphasis on Total Quality and dedication to the interests of its clients
worldwide is a hallmark of ML Group.
Maddi Lakshmaiah Group of companies (Maddi Lakshmaiah Group) a pioneer in
Indian un-manufactured Tobacco Industry has been exporting tobacco to all over the world
for the past 3 decades. It has solidified its relationship with overseas tobacco merchants
and manufacturers.
The Group is performing excellently well from the date of its incorporation and has
been exporting large volumes of tobacco to Russia, CIS countries, UK, Europe, African
countries, Chain, Latin American countries, Middle east countries, Bangladesh and Nepal
etc.
The Group established its branches in Russia and European countries and has strong
ties up with African and Latin American countries and especially with the neighbor giant
china.

16
The past five decades have been a time of creation, consolidation and
diversification. ML Group sits strong on foundations that have been carefully laid by its
visionary founder, foundations of quality, commitment to ethical transactions and the top
of the line services. ML Group constantly striving for perfection, setting standards through
innovation, high quality and efficient services.

ML group was a multifaceted corporate leader of which the group consists of five
concerns namely.

Maddi Lakshmaiah and Co Ltd:- (ML Co)


Tobacco threshers, packers & exporters, real estate &leasing.
ML Agro Products:- (MLAP)
Tobacco threshers, packers &exporters.

KS Subbaiah Pillai & Co (India) ltd: - (KSSP)


Tobacco export.
ML Exports:- (MLE)
Export House Recognized by Govt. of India
Coromandal Agro Products & Oils ltd: - (CAPOL)
Bulk producers of oils.

Excepting CAPOL which is engaged in edible oils, all are engaged in tobacco industry.
MLCO and MLAP have concentrated on processing activities where as KSSP and MLE
are leading exporters and are recognized by Govt of India as Export House.

17
ML GROUP:-

The highly competitive tobacco market represented tremendous growth potential to


Mr. Maddi Lakshmaiah. Foreseeing the and for quality Indian tobacco a long term strategy
was formulated. Right from its inception, the company adhered to international standards
and made rapid in roads to global tobacco markets.

A sophisticated threshing plant of international standards was commissioned in


1976 first in Andhra Pradesh. It created a revolution in tobacco processing and led to a
huge upsurge in demand. This led to the commissioning of two modern plants with
threshers, redress and other sophisticated equipment for the processing of quality tobacco.

ML Group has taken its credo of total quality to the furthest, whether in the quality
of process, products or working conditions for the vast workforce. The foresighted
innovation of Sri Maddi Lakshmaiah has given the group strong edge. The personal
involvement of the directors in all aspects of the business has resulted in high quality
operational parameters.

The company can proudly claim some of the most skilled work force and a highly
efficient management people who have contributed significantly to the prominent position
the company. The company has earned recognition from apex institutions and is a
recognized leader in tobacco markets the world over. The quantum growth in ML Co:
Spread of investment in infra-structure and diversification into other business.

ML GROUP under its umbrella, various companies have an annual turnover of


RS 1550 million and an asset base of Rs 2000 million. A real estate development wing was
setup to develop and lease commercial properties with working environment that rival the
best internationally. The information about the establishment of the group which consists
of five concerns as displayed on the preceding pages, let us have a look on the various
concerns of ML Group individually:

18
Maddi Lakshmaiah & Co Ltd:-

ML & company Limited, the fore runner of all the companies of ML group, the
company enjoys a preeminent standing in the world of tobacco, exporting to China, Russia,
Western Europe, Africa and Bangladesh among others.
Supported by a team of experts, technicians, engineering and a skilled world force,
the company has forged a head setting standards that have become benchmarks in the
industry. Today Chilakaluripet is a well-known name in the global tobacco business in no
little measure due to the pioneering efforts of the intrepid founder, Sri Maddi Lakshmaiah.

ML AGRO PRODUCTS LTD:-

ML agro products ltd was born of a increase in demand for quality tobacco in both
the domestic and foreign markets. Building on the rich experience of running a profitable
operation, a new plant was set up in 1976 at Mature, Parkas district. It is fully self-sufficient
with modern threshers, lamina redress, automatic double ram press, sophisticated quality
control laboratory and mammoth ware houses. It ranks among the largest threshing units
in the country apart from its export commitments.

The company also processes tobacco for domestic cigarette manufactures. The
company today has a global vision.

KS Subbiah Pillai & Co (India) ltd:

K.S.S.P & Co Ltd was acquired in 1982 with all its assets K.S Subbaiah Pillai &
Co (India) Ltd is the group with leading tobacco exporting unit. In a field that is extremely
competitive, the excellent performance of the company is an indicator of the trust that it
enjoys across the globe

19
COROMANDAL AGRO PRODUCTS & OILS LTD (CAPOL):
CAPOL started in 1976, extracts and refines cotton seed oil. Today it is a multi-
products company with equipment to process all kinds of oil seeds. The plant has a storage
capacity of 2100 tones for different types of oil.
Extreme care is taken to ensure that at every stage in the process of production right
from selection of the raw material to packing the products, only the best is passed.
Minimum human intervention and rigorous application of quality control process
ensures the final product conform to all appropriate standards. The by-products, hulls and
de-oil cakes are in high demand in many parts of the world.

ML EXPORTS:
ML exports is a totally export oriented unit, with clients in a variety of markets
around the world. The company enjoys a reputation for excellent delivery schedules and
transparent business practice in global markets.

Share holding pattern and management of the group:


Sri Maddi Lakshmaiah and his family members are holding 100% of shares of all
the Group companies expect CAPOL where the Group is holding 66% shares. All the
partners of Maddi Lakshmaiah Exports are the family members of Sri Maddi Lakshmaiah.
The Group is totally managed and controlled by Sri Maddi Lakshmaiah and his family members only.

Maddi Lakshmaiah Groups Infrastructure:


The Grout has been successfully improving its business in all of its activities such
as domestic sales, export sales, tobacco processing and other tobacco development
activities, ware housing facilities etc. The Group has 2 tobacco processing plants and one
solvent Extraction plant in South India. The Group owns around 1, 00,000 sq. mts of ware
housing complexes in South India.

20
TURN OVER OF THE GROUP:

The Group has sound asset base having assets spread in most of the prime centers
and ports of South India.

The Group has developed excellent infrastructure during the past 30 years.

1. Threshing Plants:

Threshing Lines

The Group has 2 most modern tobacco threshing plants. One is situated at
Ganapavaram, Chilakalutipet and another at Mature, Prakash Dist., AP having a combined
capacity of 150 million kilos per annum and also has 4 independent refrying plants for
processing tobaccos of their own as well as on commercial basis.

2. Power generation:

The Group has in House Power generation up to 6.8 m w with the help of imported
generator sets to meet the power fluctuations, power cut and power failure etc.

21
3. Tobacco Manual Processing Facility:
The Group has grading centers to process tobacco manually engaging nearly 5,000
labour. Each center has a minimum area of 20,000 sq. feet of ware housing and processing
pendulous.
4. The Group has port go downs at Kakinada.
5. The Group has warehousing complex at Senath Nagar.

Maddi Lakshmaiah Group in Information Technology:

To grab the growing needs and development of IT industry in India, the Group is
proposing to develop IT parks in India 100 cores investment.

The Group is developing initially in Navy Mumbai around 13,866 sq. mts, of IT
Park at millennium Business Park. This project is undertaken in association with the
Maharashtra Industrial Development Corporation (MIDC) a corporation of Maharashtra
State Government.

Maddi Lakshmaiah Group has got good name in export for raw material because of
sound financial resources.

22
Finance Profile:

The initial investment of Maddi Lakshmaiah company is 10, 00,000/-

Authorized Initial Investment:

10,000 equity shares of Rs 100/- each


Secures Loans:

Union bank of India, Guntur


Current A/c - 1, 77, 1, 77-09
Cash current A/c - 3, 50,000-00
Shipping loan A/c - 10,000,000
Investment fixed deposit with UBI - 50,000

NATURE OF ACTIVITY

This factory products good quality tobacco.

The production capacity per each day is 1 lakh 20 tonnes

The production current assets capacity per year is around

1.5 million tonnes.

23
TURN OVER OF THE GROUP

The turnover of the group for the financial year 1989-99 standards at around Rs 800

million. The net earnings after taxes of the group have been maintained at Rs 150/200

million per annual. The group has sound assets base having assets spread in most of the

prime centres & ports of south India.

The group has development excellent infrastructure during the past 30 years which

have been yielding a promising regular income of more than Rs 225 million every year.

TURN OVER OF THE COMPANY

The turnovers of ML Company for the following years of 2007-2011 are as follows.

TABLE NO: 1

S NO NO OF YEARS AMOUNT IN RS IN

LAKHS

1 2009-2010 3,963

2 2010-2011 2,966

3 2011-2012 2,557

4 2012-2013 3,606

5 2013-2014 4,285

24
Profit after tax

SNO NO OF YEARS AMOUNT IN Rs. IN

LAKHS

1 2009-2010 123

2 2010-2011 477

3 2011-2012 202

4 2012-2013 421

5 2013-2014 1,516

The above table represents the profit for the following years after paying
Production capacity:
The production capacity per each day is 1 lac 20 tones.
The production capacity per year is around 15/16 million tones

Incorporation:
The factory was established in Jan 1970.
It was a private Ltd company
The purpose of establishment of the industry in a particular place was, since it was a
rural area, there are plenty of tobacco fields
Through it was situated at national high way, Transport facilities may be held at
minimum cost
Though it was a slum area plenty of availability of labour
It was the first tobacco un-manufacturing industry in India

25
Objectives

To serve the nations vital interest in the tobacco related sectors. To maintain
vicinity of supplies through M.L is tobacco & marketing network at optimum costs
and provide up to date technical assistance to the consumer to conceive the valuable
energy resources. To earn a reasonable return on investment.

To work towards achievement of self-reliance in the field of tobacco, threshing


formulation& distribution system.

To create strong research& development in the field of tobacco and Stimulate R&D
of development of exports.

To maximise utilisation of the existing facilities in order to improve Efficient and


increased productivity.

To import training, conduct seminary, workshop and educational courses on


computers. Computer maintenance software development and software exports and
to develop and design software in India.

Abroad and to start software technology part in India or abroad and to Offer
relationship management solutions for individuals and organisations both
individually and through strategic alliances with others companies.

To employ experts to investigate and examine into the conditions, Prospects,


value character and circumstance of any business concern and under taking and
generally of any assets property or right.

To carry on all kinds of agency business

26
Competitors to this organization:
The competitors to Maddi Lakshmaiah Group are

ITC Group
Mittapalli Group
Bommidala Group
Polisetty Group

The products of the M.L Company & their main uses

The various products of the ML Company and their economic uses are as follows.

Karnataka light soil-Mysore:

This tobacco is preferred for low nicotine content, high filling capacity and
suitability to blend well with any tobacco.
Monsoon burley:

Used in U.S. blended cigarettes


Traditional burley:

Used for pipe mixture, chewing plugs and hookah tobacco paste.

Kurnool and Telangana (natu):


Primarily used for cigarette blending and for hookah tobacco paste making.

27
Eluru (natu tobacco):

Mainly used for cheroots, snuff pipe tobacco, cigarette blending and for hookah
paste making.

Oriental:
Used for cigarette blending.

Century fire cured tobacco:


Used in pipe mixtures and hookah tobacco paste.
Bide tobacco:
Used in the manufacture of bides, a hand rolled smoking products made by
wrapping tobacco with natured bony leaves.
Cigar wrapper tobacco:
Mainly used for wrapping the cigars.
Cigar filler tobacco:
Mainly used in the manufacture of cigars &exported to some countries for use in
hookah tobacco paste.
Cheroot tobacco:
Used for the manufacture of cheroots and hookah tobacco paste.
Lanka tobacco:
Used for the manufacture of cigars & cheroots.
Tamilnadu:
Used for chewing & cheroot.
Black Chopadia:
Used as chewing tobacco.

28
Red Chopadia:
Mostly used for chewing also called let Chopadia and safna. The export packing ranges
from 250gms-1000gms and is available in bales of up to 100kg.

Rustic tobacco:
Used as chewing tobacco, hookah tobacco for tobacco sheet making, for kreteks in
Indonesia, pipe mixers& cigarette blending to some extent

Molinari:
Used in manufacture of various tobacco products such as chewing tobacco,
hookah paste, bides etc.

Southern light soil:


Blends with any tobacco.

Black soil (traditional):


Blends well with any tobacco.

Northern light soil (nls):

This tobacco is flavored to semi flavored with excellent ageing properties.

29
1. Planting Tobacco Operations Leaf Early- May
to End June
Septemb
er to
January

2.KARNATA
Marketing LIGHT SOIL - MYSORE
3. Physical Characteristics
Lemon to
a) Colour Orange
b) Leaf Size Large
0.13
c)Pore Volume 2.9 to 3.8
M1/Gm)
d) Filling Value
4. Chemical Characteristics
1.25 to 2.5
a) Nicotine % 8 to 22
b) Reducing Sugars % 0.2 to 0.6
c) Chloride %
Economic Use This
tobacco
is
preferre
1. Planting Mid-October to Mid-November
d for
2. Marketing February to May low
3. Physical Characteristics
nicotine
a) Color Lemon to Orange
content,
b) Leaf Size Small to medium
high
c) Pore Volume (M1/Gm) 0.13
filling
d) Filling Value 2.6 to 3.5
capacity
4. Chemical Characteristics
and
%
suitabilit
a) Nicotine 1.25 to 2.3
%
y to
b) Reducing Sugars 8 to 19
c) Chloride % 0.5 to 0.9
blend
well
Economic Use This tobacco is preferred for low
with any
nicotine content, high filling capacity
and suitability to blend well withtobacco.
any
tobacco.

30
BLACK SOIL (TRADITIONAL)

BLACK SOIL (TRADITIONAL)

31
NORTHERN LIGHT SOIL (NLS)
1. Planting Early-October to End-
November
2. Marketing February to May
3. Physical Characteristics
a) Color Lemon Orange to Orange
b) Leaf Size Large
c) Pore Volume (M1/Gm.) 0.13
2.2 to 2.8
d) Filling Value

4. Chemical Characteristics

a) Nicotine % 1.5 to 3.5


b) Reducing Sugars % 7 to 18
c) Chloride % 0.7 to 1.5
Economic Use This tobacco is flavorful to
semi-flavorful with excellent
ageing properties.

32
MONSOON BURLEY
1. Planting July 2nd week to August 1st week

2. Marketing November to January


3. Physical Characteristics

a) Color Rich tan to Brown


b) Leaf Size Medium to Large
0.18 to 0.28
c) Pore Volume (M1/Gm.)
5 to 6.2
d) Filling Value
4. Chemical Characteristics

a) Nicotine % 0.6 to 1.8


0.8 to 2
b) Reducing Sugars %
0.15 to 1.45
c) Chloride %

Economic Use Has got very good filling character.


Used in US blended cigarettes.

33
TRADITIONAL BURLEY
1. Planting October 1st week to November 4th
week
2. Marketing May to June
3. Physical Characteristics
a) Color Rich tan to Brown
b) Leaf Size Medium to large
c) Pore Volume (M1/Gm.)
d) Filling Value 3.5 to 5.5
4. Chemical Characteristics
a) Nicotine % 2 to 4
b) Reducing Sugars % 1.5 to 3
c) Chloride % 0.5 to 2

Economic Use For use as blend in cigarettes along


with burley tobacco or by itself. It is
also used for pipe mixtures, chewing
plugs and hookah tobacco paste.

34
ELURU (NATU TOBACCO)
1. Planting October to November
2. Marketing April to August
3. Physical Characteristics
a) Color Brown to Dark Brown
b) Leaf Size Medium to large
c) Pore Volume (M1/Gm.)
3.2 to 5
d) Filling Value

4. Chemical Characteristics

a) Nicotine % 2.5 to 4.5


b) Reducing Sugars % 1.1 to 2.6
c) Chloride % 1 to 2
Economic Use Mainly used for cheroots, snuff pipe
tobacco, cigarette blending and for
hookah paste making.

35
ORIENTAL
1. Planting September to November
2. Marketing March
3. Physical Characteristics

a) Color Lemon Yellow to Light Yellowish


b) Leaf Size Green
Small
c) Pore Volume (M1/Gm.)

d) Filling Value
4. Chemical Characteristics

a) Nicotine % 0.5 to 0.8


8 to 17
b) Reducing Sugars %
0.7 to 1.5
c) Chloride %

Economic Use Cigarette blending.

36
KENTUCKY FIRE CURED TOBACCO

1. Planting End-August to Mid-September

2. Marketing Early March


3. Physical Characteristics
a) Color Brown to Dark Brown
b) Leaf Size Medium to large

c) Pore Volume (M1/Gm.)

d) Filling Value
4. Chemical Characteristics

a) Nicotine % 2.5 to 3.75


b) Reducing Sugars % 3.5 to 5
c) Chloride % 1 to 1.5
Economic Use Pipe mixtures and hookah tobacco
paste.

37
BIDI TOBACCO (GUJARAT AND KARNATAKA)

1. Planting August to September


2. Marketing April to May
3. Physical Characteristics
a) Color Orange Brown to Light Greenish
b) Leaf Size Brown
Medium to large
c) Pore Volume (M1/Gm.)

d) Filling Value

4. Chemical
Characteristics
a) Nicotine % 4 to 6
b) Reducing Sugars % 1.5 to 5
c) Chloride % 0.8 to 1.8

Economic Use Used in the manufacture of bidis, a


hand rolled smoking product made by
wrapping tobacco with natural ebony
leaves.

38
CIGAR WRAPPER TOBACCO (WEST BENGAL)

1. Planting Mid-October to November 1st week

2. Marketing April to May


3. Production
4. Physical Characteristics The leaf is shade-cured, cured leaf is large in
size, thin bodied, light brown with greenish
tinge and with light veins in the lamina.

5.Chemical Characteristics

a) Nicotine % 0.6 to 1.4 %


b) Chloride %

Economic Use Mainly used for wrapping the cigars.

39
CIGAR FILLER TOBACCO

CIGAR FILLER TOBACCO


1. Planting Mid-October to November 1st
week
2. Marketing June to July
3. Production
4. Physical Characteristics The leaf is sun-cured and
fermented in bulks for a period of
25-35 days by breaking and
remaking the bulks 6-7 times. It
is graded based on the length and
blemish of the leaf. The leaf is
light to medium in body and
brown to dark brown in color.
5. Chemical Characteristics

a) Nicotine % 0.9 to 1.9 % (WB) 2 to 4 %


b) Chloride % (Tamilnadu)

Economic Use Used in the manufacture of cigars


& exported to some countries for
use in hookah tobacco paste.

LANKA TOBACCO

1. Planting November
2. Marketing June to August
3. Production Godavari area in Andhra Pradesh

4. Physical Characteristics The leaf is initially air-cured (shade-


cured) for 2 months followed by pit
curing for 4 to 5 days and then
bulked till the leaf develops brown
color and has a pungent odor.

5. Chemical Characteristics

a) Nicotine % 2 to 4 %
b) Chloride % 0.5 to 0.7 %
Economic Use For the manufacture of cigars and
cheroots.

40
ORGANIZATION CHART
Managing Director

Director

General Manager

Personal Manager

Leaf Manager

Finance Manager

Export Manager

Production Manager

Personal Officer

Welfare Officer

Safety Officer

Circle Manager

Branch Manager

Buyers

Factory Co-Coordinator

Shift In charge

Supervisors

A/c Officer

Accountant

Plant Engineer

Asst. Plant Engineer

41
Administrative Office Storage Facilities

ORGANISTION STRUCTURE

The company (ML Company) is under the complete administrative control of the

managing director and he is reported by the director and he is reported by general

manager.

The general manager (ML Company) is assisted by 5 general managers.

Manager personnel.

Manager leaf department.

Manger finance.

Manager exports.

Manager production.

The personnel department is headed by personnel manager who reports


directly to G.M. he looks after the areas of personnel& administration under may by a
personnel officer, welfare officer and a safety officer.

The leaf manager is headed by G.M and assisted by circle manager, a branch
manager, buyers, factory co-ordinator and shift in charge

42
Personnel department

This department deals with the matters of industrial relations, HRD, welfare activities,

labour legislations, recruitment and issues of wages etc. which is the main department in

the organisation.

Leaf department

This department deals with the matters of tobacco leaf .if looks after buying of

tobacco from the farmers for the processing of tobacco.

Export department

It looks after the export matters of the organisation. This organisation exports

tobacco leaf to china, Bangladesh & U.K

Production department

This department takes care to produce quality tobacco to customers.

Marketing department

This department takes care of marketing the company Tobacco to others countries

such as Russia, Europe, CIS, countries, Middle East Bangladesh, African countries etc at

the time of requirement. They sell varieties of tobacco in market and maintain good

relationship with the customers. This is one of the main/important departments in this

organisation.

1 .M.L group was concentrating on domestic market.

2 .It ties up with Indian strongest cigarette manufacturing company, ITC.

3 .Monopoly in L.S.B variety-producing 3-4 millions of tobacco.

43
Future plans

The company (Maddi lakshmaiah) for an ECB for 50 million dollars and development of

regular trade and also infrastructure projects in India.

1. Maddi Lakshmaiah Company is also working on joint venture basis with UK based

Commodities Company for supply of agaric products to south Sian countries.

2. The company already entered into joint venture with an US based company by name

CARGIL for the south Indian need.

3. They have worked for joint venture arrangements with Yugoslavian gout for their require

event for India.

4. This for above 5milloon dollars of investment in supply of 5,000 tonnes every year.

Achievements/awards

Maddi Lakshmaiah Company has no particulars /peculiar/, achievements/ awards.

Other than that are of the concern of maddi lakshmaiah group i.e. (carol)

(Chirala, parkas dist.) Got several achievement awards.

44
CAPOL

All India cotton feed crushers association, Mumbai it was III highest exporter and

II highest domestic seller of cotton seed extraction for the year 1992-93.

CAPOL is the highest exporter and III highest domestic set of cotton seed extraction

for the year 1993-94.

CAPOL is the III highest domestic seller of cotton seed extraction in the year 1994-

95.

CAPOL is the II highest domestic seller of cotton seed extraction in the year 1995-

96.

CAPOL is the II highest domestic seller of cotton seed extraction in the year 1997-

98

CAPOL is the III highest domestic seller of cotton seed extraction for the year

1999-2000.

CAPOL is the II highest extraction of cotton linter for the year 2000-01.

CAPOL is the III highest exporter of cotton linter and III highest domestic seller of

cotton seed extraction for the year 2001-02.

The company (CAPOL) has been awarded may commendation led by govt of AP

for its continuous harmonious relations with its employees in the years

1994,95,96,97.

The company (CAPOL) M.D has been facilitated by honourable president of India,

Dr Shankar dayal saran.

The company got productivity council awards.

45
Track record

The company has 30 years of performance.

It never failed in meeting the scheduled repayments of loans with the bank. Rather

it postpones most of the loans with the lenders.

From the date of incorporation 1977, till date uninterruptedly running in fleshing

field.

It was the first company in India (UN manufacturing tobacco industry trusting

field).

LAND MARKS

Maddi Lakshmaiah Company was the first India Company entered with china to do

business.

It was the first company to import tobacco and export tobacco.

Ambassadors have already come here and 4th one is coming in this august.

GRADING POINTS

Maddi Lakshmaiah Company has 3 grading points at Chilakaluripet i.e. mature

muppavaram and some other on national highway bet Guntur and Chilakaluripet 3 more in

Guntur city.

46
NEGOTIATIONS

The company is trying to develop world class information technology building in


Bangalore, china and Hyderabad in the coming 5 years time

The company is going for sheet tobacco plant in joint venture with one of the Indian
best tobacco cigarette manufacture.

The company is also contemplating for 100% tobacco joint venture association with
one of the best cigarette manufacture.

The company exports with the second strongest country china, Russia and India.

The finance manager is assisted by a team of experienced management and non-


management staff who takes care of the finance & accounts activities of the
organisation.

The export manager (ML Company) deals all the matters regarding the exports
department and directly reports to the managing director.

METHODS OF PURCHASING OF TOBACCO

In ML Company the methods of purchasing of tobacco is of various types i.e.

Which tenders rise in market document will be filled up by various companies or


merchants can purchase them.

They have good contracts with various merchants (mediators between manufacture
& exporters) in reputed companies Gnter.

Every year they were producing 1000 tonnes of various varieties /grades of tobacco.

They usually do their business with the international reputed companies like. The
company have some direct contracts with other countries and they directly ask them
at the time of requirement.

47
MARKETING CHANNELS

Normally they send samples/verities.

At the time of requirement, they send samples through carriers.

Participating in exhibitions- every year ML Company was taking participation in


5-6 exhibitions.

The people who have connection in tobacco may visit tobacco stalls usually, even
from Europe, Russia & china.

People like manufactures, dealers, bankers, merchants of tobacco may visit the
tobacco exhibitions.

ANOTHER MODE

The other mode of marketing (channel) is through business delegations

tobacco board of central govt, ministry of commerce govt of India, Guntur. The tobacco

board usually.

Regulation crop.

They register the foreigners.

They fix the crop size.

The board explore marketing possibilities with the help of exporters.

Another type of business mode is tobacco trade delegations from different countries
(usually every year 5-6 delegations may takes place).

The tobacco delegations meet exporters and inspect all the tobacco.

They get the business through reputation.

Customers usually approach them because of the good will of the Company.

48
MODE OF PAYMENT

Exporters normally receive payment from their buyers through L.CS (letters of
credit).

Sometime through advance payment ion terms of D.A&D.P.

Document against payment

Document against acceptance.

After customers checkers in the madras port it may send to abroad.

Shipment of tobacco is through Chennai port only.

At the same time shipment of tobacco the pay/buyers send payment to bank in the
companys account

CREDIT

Some parties asks/needs some time for payment with in certain period from the date
of bill of payment (up to 180 days).

In India there is a rule that on credit basis, the payment must be done within 180
days from the date.

MARKET RANGE

ML Company was marketing 7-10 million kilos of tobacco every year. But the

market range is not fixed. The market range depends on supply &demand forces. When

there is demand, the company produces more. In the tobacco field, the marketing/market

range may be flexible internationally supply demand.

49
Chapter III

Theoretical Framework
3. THEORETICAL FRAME WORK

Ratio Analysis enables the business owner/manager to spot trends in a business


and to compare its performance and condition with the average performance of similar
businesses in the same industry. To do this compare your ratios with the average of
businesses similar to yours and compare your own ratios for several successive years,
watching especially for any unfavorable trends that may be starting. Ratio analysis may
provide the all-important early warning indications that allow you to solve your business
problems before your business is destroyed by them.

The Balance Sheet and the Statement of Income are essential, but they are only
the starting point for successful financial management. Apply Ratio Analysis to
Financial Statements to analyze the success, failure, and progress of your business.

Importance of financial statement analysis in an organization.

In our money-oriented economy, Finance may be defined as provision of money


at the time it is needed. To everyone responsible for provision of funds, it is problem
of securing importance to so adjust his resources as to provide for a regular outflow
of expenditure in face of an irregular inflow of income.

1. The profit and loss account (Income Statement).


2. The balance sheet
In companies, these are the two statements that have been prescribed and their
contents have been also been laid down by law in most countries including India.

There has been increase in emphasis on

(a) Giving information to the shareholder in such a manner as to enable them to


grasp it easily.
(b) Giving much more information e.g. funds flow statement, again with a view to
facilitating easy understanding and to place a year results in perspective through
comparison with post year results.

50
(c) The directors report being quite comprehensive to cover the factors that have been
operating and are likely to operate in the near future as regards to the various functions
of production, marketing, finance, labor, government policies, environment in general.

Financial statements are being made use of increasingly by parties like Bank,
Governments, Institutions, and Financial Analysis etc. The statement should be
sufficiently informative so as to serve as wide a curia as possible.

The financial statement is prepared by accounts based on the activities that take
place in production and non-production wings in a factory. The accounts convert
activities in monetary terms to the help know the position.

OBJECTIVE OF RATIO ANALYSIS


Ratios provide to the financial position of the concern. The major objective of ratio
analysis is to know the financial strength, position, soundness or weakness of the
enterprise. One can draw conclusions about the exact financial position of the concern with
the help of ratio analysis.

RATIO
A ratio is an arithmetical expression of the relationship of one number in terms of
another. Accounting ratios present interrelationship among various accounting data. Ratios
can be expressed as integers or percentages.

Types of ratios:-
LIQUIDITY RATIOS

TURNOVER RATIOS

LEVERAGE RATIOS

PROFITABILITY RATIOS

51
1. LIQUIDITY RATIOS
Suppliers of goods on credit and commercial banks providing short term
loans are interested in learning about the companys ability to meet its current or
short term obligations as when they become due. To meet these short term
obligations the company should possess, sufficient liquid assets failing which, the
company losses its credibility in the market. However, a high degree of liquidity is
not good for a firm because such a situation represents excessive funds of the firm
being tied up in current assets. These ratios are calculated to judge short term
financial position of a concern.

a) Current ratio (Working Capital ratio)

This ratio establishes the relationship between the current assets and current
liabilities. It is calculated as follows:
Current assets
Current ratio = -------------------------
Current liabilities

Generally 2:1 is considered to be ideal for a concern If the ratio is less than 2:1
the firm experiences difficulty in meeting its current obligations. On the other hand, if the
ratio is higher than 2:1 there will be the idle assets in the firm.

52
b) Absolute liquid ratio
Though receivables are generally more liquid than inventories, there may be debts
having doubt regarding their real stability in time. So, to get an idea about the absolute
liquidity of a firm, both receivables and inventories are exculpated from current assets and
only absolute liquid assets such as cash, bank and realizable securities are taken into
consideration. It is calculated as follows:

Cash + bank + short term marketable securities


Absolute liquid ratio = -----------------------------------------------------------------
Current liabilities
The desirable norm for this ratio is 1:2.

c) Ratio of inventory to working capital

This ratio establishes the relation between inventory and working capital. With
the help of this ratio it is possible to assess the extent of over stocking in the firm. It is
calculated as:
Inventory
Ratio of inventory to working capital = --------------------------
Working capital
Here working capital is the excess of current assets over current liabilities.
Generally a ratio of 1:1 is desirable.

TURNOVER RATIOS / EFFICIENCY / ACTIVITY RATIOS


These ratios judge how well facilities at the disposable of a concern are being
used. They help us to measure the effectiveness with which a concern uses its resources.
The ratios are usually computed on the basis of sales or cost of goods sold and it is
expressed in integers.
Higher the turnover ratio, the better the profitability and use of resources will be.
The following are the important turnover ratios usually calculated by a concern.

53
a) Capital turnover ratio
The ratio reveals the efficiency of capital employed in a business. It is
calculated as follows:
Sales or cost of goods sold
Capital turnover ratio= -------------------------------------
Capital employed

Higher the ratio, the greater would be the profits. On the other hand a lower capital
turnover ratio indicates poor sales performance leading to lower profits.

b) Fixed assets turnover ratio


This ratio expresses the number of times fixed assets are being turned over in a
given period. It is calculated as follows:

Sales or cost of goods sold


Fixed assets turnover ratio = ----------------------------------------
Net fixed assets

This ratio reveals how well the fixed assets are being used in the business. Higher
the ratio better is the performance and vice versa.

c) Working capital turnover ratio

This ratio reveals the numbers of times working capital is turned over in a
given period. It is computed as follows:
Sales or cost of goods sold
Working capital turnover ratio = -----------------------------------------
Net working capital
A higher ratio indicates lower investment in working capital and vice versa.
However, a very high turnover of working capital is a sign of over trading and may cause
difficulties.

54
d) Total assets turnover ratio

This ratio is calculated to find out the efficiency at which the total assets are being
utilized. A higher ratio is an indicator of over trading of total assets, while a lower ration
reveals idle capacity. It is calculated as follows:
Sales or cost of goods sold
Total assets turnover ratio = ---------------------------------------
Total assets

e) Stock turnover ratio

This ratio is also called as Inventory turnover ratio. This ratio establishes the
relation between cost of goods sold during a given period and the average amount of
inventory held during that period. This ratio reveals the number of times finished stock is
turned over during a given accounting period. Higher the ratio better it is, as it shows that
finished stock is rapidly turned over. On the other hand a lower ratio indicates the
accumulation of obsolete stock or carrying of excessive stock. This is calculated as follows:

Sales or cost of goods sold


Stock turnover ratio = ------------------------------------------------
Avg. stock held during that period

Cost of goods sold = Opening stock + purchases + manufacturing


Expenses Closing stock or sales gross profit

Average stock = (Opening stock + Closing stock) / 2

55
f) Debtors turnover ratio

This ratio measures the accounts receivables (trade debtors and bills receivables)
in terms of number of days of credit sales during a particular period. This ratio is calculated
as:
Net credit sales
Debtors turnover ratio = ---------------------------
Average debtors
365
Average debtors = -------------------------------------
Debtors turnover ratio

This ratio indicates the efficiency of credit management. Higher the ratio means,
more the chances of bad debt and vice versa.
g) Creditors turnover ratio

This ratio is also known as Accounting payable turnover ratio. It gives the
average credit period enjoyed from the creditors and is calculated as follows:

Average credit purchases


Creditors management ratio = --------------------------------------
Accounts payables

Days in a year
Average payment period = ---------------------------------
Creditors turnover ratio
A high ratio indicates that creditors are not paid in times while a low ratio gives
an idea that the business is not taking advantage of credit period allowed by the creditors.

56
SOLVENCY RATIOS
The term solvency refers to the ability of a concern to meet its long term
obligations which includes funds mobilized through debentures, financial institutions and
long term loans. These people are interested in knowing the firms ability to pay regular
interest on their long term funds and repayment of principal amount at the maturity and
security of the loans. Therefore solvency ratios indicate the firm ability to meet the fixed
interests and costs and repayment schedules associated with its long term borrowings. The
following are the important solvency ratios usually computed by concern:
a) Debt equity ratio
This ratio establishes the relation between external equities and internal equities.
While the external equities belong to outsiders, internal equities belong to the shareholders.
This ratio measures the relative claims of outsiders against the firms assets. It is calculated
as:

External equities
Debt equity ratio = ----------------------------
Internal equities

b) Proprietary ratio or Equity ratio

It establishes the relationship between shareholders funds and total assets of


affirm. It is calculated as follows:

Shareholders funds
Proprietary ratio = -------------------------------- X 100
Total assets

57
C) Fixed assets ratio

This ratio establishes the relation between fixed assets and long term funds of a
firm. It is calculated as under:

Fixed assets
Fixed assets ratio = -------------------------- X 100
Long term funds

d. Debt service ratio or Interest coverage ratio

This ratio measures the debt servicing capacity of a firm. It is calculated as follows:
Net profit before interest and tax
Debt service ratio = ------------------------------------------------
Fixed interest changes

e) Capital gearing ratio

The ratio establishes the relationship between fixed interest bearing securities and
equity shares of a firm. It is calculated as follows:

Fixed interests bearing securities


Capital gearing ratio = -------------------------------------------------
Equity shareholders funds

58
PROFITABILITY RATIOS

These ratios are calculated to learn about the end results of business activities.
With the help of these ratios the overall efficiency of a business concern can be assessed.
The following are the important profitability ratios:
a) Gross profit ratio
This ratio tells us the gross margin on trading and is calculated as under

Gross profit
Gross profit ratio = ---------------------------------- x 100
Net sales

(OR)
Net sales Cost of goods sold
= -------------------------------------------- x 100
Net sales

Gross profit ratio indicates the efficiency with which a firm produces its products.
A low gross profit indicates high cost of goods sold due to unfavorable purchasing policies,
lesser sales, lower purchasing prices, excessive competition, over investment in plant and
machinery etc., On the other hand higher the ratio, it would have a smaller margin of
operating profit for the payment of dividends and creation of ratios.

59
b) Operating ratio
This ratio establishes the relationship between cost of goods sold and other
operating expenses on one hand and sales on other hand. Thus it measures the cost of
following formula:

Operating cost
Operating ratio = ----------------------- x 100
Net sales
(OR)
Cost of goods sold + operating expenses
= --------------------------------------------------------- x 100
Net sales
Operating cost can be found by adding operating expenses to cost of goods sold.
Operating expenses include administrative and selling expenses like rent, salaries,
insurance, directors fee and selling and distribution expenses like advertisement, salaries
of salesmen etc.,

Higher the operation ratio the less it is as it would have a small margin to cover
interest, income tax, dividend and reserves. However, it should be used cautiously as it
may be affected by a number of uncontrollable factors.

c) Operating profit ratio


This ratio establishes the relationship between operating profit and sales. It is
calculated as follows:

Operation profit
Operating profit ratio = --------------------------------- x 100
Net sales
Where,
Operating profit = Net profit non operating expenses non operating income. The ratio
indicates the portion remaining out of every rupee worth of sales after, all operating costs
and expenses have been met. Higher the ratio better it is.

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d) Expenses ratio
Expenses ratio indicates the relationship of various expenses to net sales. These
ratios are calculated by dividing each item of expenses or group of expenses with the net
sales. The lower the ratio, the greater is profitability and vice versa.
Particular expense
Particular expense ratio = --------------------------------- x100
Net sales

e) Net profit ratio


Net profit ratio indicates the relationship between net profit (after tax) and sales.
With the help of this ratio the efficiency of the management in manufacturing, selling,
administrative and other activities of the firm can be assessed. This ratio is the overall
measures of firms profitability. It is calculated as follows:
Net profit (after tax)
Net profit ratio =----------------------------------- x 100
Net sales

f) Return on capital employed ratio

This ratio is an indicator of the earning capacity of capital employed in the


business. By capital employed, we mean not only the equity share capital, but also in
addition to the various fixed liabilities representing borrowed amounts as also capital
reserves, revenue reserves, undistributed profits as reduced by the fictitious assets. This
ratio is calculated as follows:

Net profit
Return on capital employed ratio= ----------------------------------- x 100
Capital employed

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g) Return on equity capital ratio

This ratio reveals that the relationship between profits of a company and its equity
capital. This is calculated as follows:
Net profit after tax preference dividends
Return on equity capital ratio=------------------------------------------------x 100
Paid up equity share capital

h) Earnings per share

This ratio reveals a small variation of ratio of return on equity share capital. This
is calculated as follows:

Net profit after tax preference dividends


Earnings per share = --------------------------------------------------------x 100
Number of equity shares

62
Chapter IV

Data Analysis
and
Interpretation
4. DATA ANALYSIS AND INTERPRETATION

1) Current Ratio = Current Assets / Current Liabilities

Years Current Current Ratio


Assets Liabilities
2009-2010 25,93,15,914 10,83,91,431 2.39

2010-2011 26,95,33,435 13,96,24,184 1.93

2011-2012 35,26,63,980 20,24,49,314 1.74

2012-2013 38,09,20,419 15,84,52,146 2.40

2013-2014 57,52,34,209 14,33,60,960 4.01

INTERPRETATION

The above table that shows the current ratio. The ratio was 2.39 during the year
2009-10 which was continuously decreased to next two years that is 1.93 in the year 2010-
1 and 1.74 in the year 2011-12. It was slightly increased to 2.40 in the year 2012-113. But
it was increased to 4.01 in the year 2014-15.

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2) Liquid Ratio or quick turnover Ratio or test Ratio = Quick Assets /
Current liabilities
Years Quick Assets Current Ratio
Liabilities

2009-2010 23,43,78,890 10,83,91,431 2.16

2010-2011 24,26,72,895 13,96,24,186 1.74

2011-2012 31,66,71,294 20,24,49,314 1.56

2012-2013 34,46,61,828 14,33,60,960 2.17

2013-2014 552872711 15,84,52,146 3.86

INTERPRETATION
The ratio was 2.16 in the year 2009-10 which was decrease next two years that is
1.74 in the 2010-11 and was 1.56 in the year 2011-12. But it was slightly increased to 2.17
in the year 2012-13. The highest liquid ratio was recorded as 3.86 in the year 2014-15.

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3) Working Capital Turnover Ratio = Net Sales / Working Capital

Year Net Sales Working Capital Ratio

2009-2010 13,17,72,745 15,09,24,483 0.87

2010-2011 9,66,95,127 12,99,09,251 0.74

2011-2012 25,57,62,587 15,02,14,666 1.70

2012-2013 25,79,93,866 22,24,68,273 1.16

2013-2014 28,06,78,564 43,18,73,249 0.65

INTERPRETATION
The ratio was 0.87 in 2009-2010 which decreased to1.74in 2010-2011.The highest

Working capital ratio was recorded as 1.70 during the year 2011-2012 and decrease the

Working capital ratio in the years 2012-2013 and 2013-2014.

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4) Fixed Assets Turnover Ratio = Net sales/ Fixed Assets

Year Net Sales Fixed Assets Ratio


2009-2010 13,17,72,745 13,03,65,742 1.01

2010-2011 9,66,95,127 71,15,51,528 0.13

2011-2012 25,57,62,587 72,61,14,635 0.35

2012-2013 25,79,93,866 73,89,03,208 0.34

2013-2014 28,06,78,564 77,25,53,600 0.36

INTERPRETATION
The table shows the fixed assets turnover ratio. The ratio was 1.01 in the year 2009-
10. It was decreased to 0.13 in the year 2010-11. But it was increased to remaining three
years.

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5) Current Assets to Working Capital

2009-2010
Assets Working Capital Ratio

2010-2011
25,93,15,914 15,09,24,483 1.72

2011-2012
26,95,33,435 12,99,09,251 2.07

2012-2013
35,26,63,980 15,02,14,666 2.35

2013-2014
38,09,20,419 22,24,68,273 1.71

2013-2014
57,52,34,209 43,18,73,249 1.33

INTERPRETATION

The table shows the ratio of current assets to working capital.

From the table it is found that the ratio in the years 2009-10, 2010-11 is higher than
the remaining years

On the whole, the ratio in the year 2010-11 is showing decreasing position

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6) Current Liabilities to Working Capital

Current
Year Working Capital Ratio
Liabilities
2009-2010
10,83,91,431 15,09,24,483 0.72

2010-2011
13,96,24,184 12,99,09,251 1.07

2011-2012
20,24,49,314 15,02,14,666 1.35

2012-2013
15,84,52,146 22,24,68,273 0.71

2013-2014
14,33,60,960 43,18,73,249 0.33

INTERPRETATION

The table shows the ratio of current liabilities to working capital.

The above table shows the current liabilities to working capital ratio during the
study period 2009-10. The ratio was 0.72 percent in 2010-11 which increases from 1.07
percent in 2011-02 to 1.35 percent in 2012-13 and it was decreased to remaining two years.

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7) Current Assets to Sales Ratio

Year Current Assets Sales Ratio

2009-2010
25,93,15,914 13,17,73,745 1.97

2010-2011
26,95,33,435 9,66,95,127 2.79

2011-2012
35,26,63,980 25,57,62,587 1.38

2012-2013
38,09,20,419 25,79,93,866 1.47

2013-2014
57,52,34,209 28,06,78,564 2.04

INTERPRETATION
The ratio was 1.96 percent in 2009-10 which was increased to 2.78 percent in the
year 2010-11. It is the highest current assets ratio. In the year 2011-12 it was decreased to
1.37 percent. But it was increased from 1.47 percent in the year 2012-13 to 2.04 percent in
the year 2014-15.

69
8) Debtors Turnover Ratio

Year Sales Debtors Ratio

2009-2010
13,17,73,745 2,49,37,024 5.28

2010-2011
9,66,95,127 2,68,60,540 3.60

2011-2012
25,57,62,587 3,59,92,686 7.11

2012-2013
25,79,93,866 3,62,58,591 7.12

2013-2014
28,06,78,564 2,23,61,498 12.55

INTERPRETATION

The above table showing the debtors turnover ratio.

In the year 2009-10 the debtors turnover ratio was 5.28. It was decrease to 3.60 in
the year 2011-12. But it was increase remaining three years the highest turnover ratios is
12.5 in the year 2013-2014

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9) Creditors Turnover Ratio

Year Sales Creditors Ratio

2009-2010
13,17,73,745 7,96,63,526 1.65

2010-2011
9,66,95,127 9,51,18,974 1.02

2011-2012
25,57,62,587 13,05,85,661 1.96

2012-2013
25,79,93,866 12,11,57,551 2.13

2013-2014
28,06,78,564 11,07,46,450 2.53

INTERPRETATION

This ratio reveals the relationship between the sales and creditors.

The table explains the creditors turnover ratio of ML agro products private limited.
In the year 2009-10 the creditors turnover ratio was 1.65 percent in the year 2010-11. It
was decreased to 1.02 percent in the year 2011-12. It was increase to 1.96 percent but is
increased remaining years that is 2.13 percent in the year 2002-13 and 2.53 percent in the
year 2014-15.

71
10) Net Working Capital to Net Assets Ratio

Year Working Capital Net Assets Ratio

2009-2010
15,09,24,483 18,95,22,402 0.80

2010-2011
12,99,09,251 1,31,76,25,035 0.10

2011-2012
15,02,14,666 1,30,71,96,133 0.11

2012-2013
22,24,68,273 1,30,53,04,690 0.17

2013-2014
43,18,73,249 1,32,66,05,568 0.33

INTERPRETATION

The above table showing the networking capital during the study period 2009-2010.
The ratio was 0.80 percent in the year 2010-11. It was decreased to 0.10 in the year 2011-
02. But is was increased to 0.11 percent in the year 2012-13 and also increased remaining
two years that is 0.17 percent in the year 2009-10 ad was 0.33 percent in the year 2014-15.

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11) Cash as a Percentage of Total Assets Ratios

Year Cash Total Assets Ratio


2009-2010
3,34,65,753 18,95,22,402 17.66
2010-2011
60,59,037 13,76,25,035 0.46
2011-2012
71,50,276 1,30,71,96,133 0.55
2012-2013
1,39,98,932 1,30,53,04,690 1.07
2013-2014
7,38,91,461 1,32,66,05,568 5.57

INTERPRETATION
The above table showing the cash as a percentage of total assets. The highest
ratio was 17.66 percent in the year 2009-10. It was decreased to 0.46 percent in the year
2010-11. But it was increased 0.55 percent in the year 2011-12. It was increase to 1.07 in
the year 2012-113. It was increase to 5.57 in the year 2014-15.

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12) Total Assets Turnover Ratio

Total assets turnover ratio = sales/total assets

Year Sales Total Assets Ratio


2009-2010
1,37,72,745 1,89,52,402 6.95

2010-2011
9,66,95,127 1,31,76,25,035 0.07

2011-2012
25,57,62,587 1,30,71,96,133 0.19

2012-2013
25,79,93,866 1,30,53,14,690 0.19

2013-2014
28,06,78,564 1,32,66,05,568 0.21

INTERPRETATION
The above table explains total assets turnover ratio. From the table it is found that

highest ratio was 6.95 percent in 2009-10 which decrease to 0.07 percent in 2010-11 and

again it has increased remaining years.

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13) Return on Assets
Return on assets = net profit after tax / total assets

Year Net profit Total Assets Ratio

2009-2010
1,91,23,888 1,89,52,402 1.00

2010-2011
7,00,365 1,31,76,25,035 0.00

2011-2012
74,29,00,638 1,30,71,96,133 0.56

2012-2013
4,32,00,158 1,30,53,14,690 0.03

2013-2014
1,51,61,67,926 1,32,66,05,568 1.14

INTERPRETATION
The above table shows the return on assets during the study period 2009-10. In the

year 2010-11 the return on asset was 1.00 percent. It was absolutely decreased in the year

2011-12. But it was increased to 0.56 in the year 2012-13. It was decreased to 0.03 in the

year 2014-15. The highest ratio of return on asset is 1.14 in the year 2012-13.

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14) Gross Profit Margin
Gross profit margin = gross profit / sales * 100

Year Net profit Total Assets Ratio


2009-2010
1,14,76,88,328 1,37,72,745 8.70
2010-2011
5,35,39,978 9,66,95,127 0.55
2011-2012
72,61,14,635 25,57,62,587 2.83
2012-2013
41,92,31,698 25,79,93,866 1.62
2013-2014
18,54,09,939 28,06,78,564 0.66

INTERPRETATION
The above table shows the gross profit margin during the study period 2009-10. In
the year 2010-11 the profit margin during was 8.70 percent. It was absolutely decreased
in the year 2010-11. But it was increased to 2.83 in the year 2012-09. It was decreased to
remaining two years.

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BALANCESHEET AS AT 31 MARCH, 2010
Particulars 2010
Schedule No.
Sources Of Funds:
Shareholders Funds
Share Capital A 1,30,00,000
Reserves & Surplus B 13,51,67,525 14,81,67,525
Loan funds
Secured Loans C 46,52,13,017
Unsecured Loans D 17,55,51,214 64,07,64,231
Differed Tax 55,23,622
Total 79,44,55,378
Application of funds E
Gross Block 13,03,65,742
(-)Depreciation 7,12,09,082
Net Block 5,91,56,660
Capital Work in Progress 57,29,83,185 63,21,39,845
Investment F 37,19,965
Current assets, Loans & Advances
Inventories G 17,22,56,321
Sundry Debtors H 2,49,37,024
Cash & Bank Balances I 3,34,65,753
Other current Assets J 2,86,56,816
Loans & Advances K 14,92,012
Total 27,42,43,926
(-)Current Liabilities & Provisions
Current Liabilities L 10,83,91,431
Provisions M 72,56,927
Net Current Assets 15,85,95,568
Total 79,44,55,378

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BALANCESHEET AS AT 31 MARCH, 2011
Schedule 2011

Particulars No.
Sources Of Funds:
Shareholders Funds
Share Capital A 1,30,00,000
Reserves & Surplus B 13,02,70,036 14,32,70,036
Loan funds
Secured Loans C 39,03,64,244
Unsecured Loans D 19,92,39,493 58,96,03,737
Deferred Tax 57,96,209
Total 73,86,69,982
Application of funds
Fixed Assets E
Gross Block 71,15,51,528
Less Depreciation 10,54,78,021
Net Block 60,60,73,507 60,60,73,507
Investment F 29,83,165
Current assets, Loans & Advances
Inventories G 18,79,34,012
Sundry Debtors H 2,68,60,540
Cash & Bank Balances I 60,59,037

Other current Assets J 7,86,79,846

Loans & Advances K 11723019


Total 28,12,56,454
(-)Current Liabilities & Provisions
Current Liabilities L 13,96,24,184
Provisions M 1,20,18,960
Net Current Assets 1,51,643,144 12,96,13,310
Total 73,86,69,982

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BALANCESHEET AS AT 31 MARCH, 2012
Schedule 2012
Particulars No.
Sources Of Funds:
Shareholders Funds
Share Capital A 1,30,00,000
Reserves & Surplus B 15,11,36,957 16,41,36,957
Loan funds
Secured Loans C 37,94,75,270
Unsecured Loans D 19,30,40,880 57,25,16,150
Deferred Tax 62,47,531
Total 74,29,00,638
Application of funds
Fixed Assets E
Gross Block 72,61,14,635
Less Depreciation 14,50,33,137
Net Block 58,10,81,498
Capital Work in Progress 51,65,551
Investment F 29,83,165
Current assets, Loans & Advances
Inventories G 23,98,80,075
Sundry Debtors H 3,59,92,686
Cash & Bank Balances I 71,50,276
Other current Assets J 696,40,943
Loans & Advances K 125,29,745
Total 36,51,93,725
(-)Current Liabilities & Provisions
Current Liabilities L 20,24,49,314
Provisions M 90,73,986
Net Current Assets 21,15,23,300 15,36,70,425
Total 74,29,00,639

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BALANCESHEET AS AT 31 MARCH, 2013
Schedule 2013
Particulars No.
Sources Of Funds:
Shareholders Funds
Share Capital A 1,30,00,000
Reserves & Surplus B 19,42,00,158 20,72,00,158
Loan funds
Secured Loans C 47,86,82,475
Unsecured Loans D 8,15,95,729 56,02,78,204
Deferred Tax 55,23,986
Total 77,30,02,348
Application of funds
Fixed Assets E
Gross Block 73,89,03,208
Less Depreciation 18,24,91,726
Net Block 56,64,11,482
Capital Work in Progress 18,55,829
Investment F 29,83,165
Current assets, Loans & Advances
Inventories G 23,69,75,762
Sundry Debtors H 3,62,58,591
Cash & Bank Balances I 1,39,98,934
Other current Assets J 9,36,87,132
Loans & Advances K 1,08,64,119
Total 39,17,84,538
(-)Current Liabilities & Provisions
Current Liabilities L 15,84,52,146
Provisions M 2,15,80,520
18,00,32,666
Net Current Assets 21,17,51,872
TOTAL 77,30,02,348

80
BALANCESHEET AS AT 31 MARCH, 2014
Schedule 2014
Particulars No.
Sources Of Funds:
Shareholders Funds
Share Capital 1,30,00,000
Reserves & Surplus B 34,59,01,071 35,89,01,071
Loan funds
Secured Loans C 42,91,26,132
Unsecured Loans D 8,33,86,203 51,25,12,385
Deferred Tax 4,21,51,888
Total 91,35,65,294
Application of funds
Fixed Assets E
Gross Block 77,25,53,600
Less Depreciation 21,85,01,632
Net Block 55,40,51,968
Capital Work in Progress 15,50,361
Investment F 29,83,165
Current assets, Loans & Advances
Inventories G 32,74,12,543
Sundry Debtors H 2,23,61,498
Cash & Bank Balances I 7,38,91,461
Other current Assets J 15,15,68,707
Loans & Advances K 1,39,66,691
Total 58,92,00,900
(-)Current Liabilities & Provisions
Current Liabilities L 14,33,60,960
Provisions M 9,08,60,140
2,34,22,100
Net Current Assets 35,49,79,800
TOTAL 91,35,65,294

81
Chapter V

Findings
Suggestions
Conclusion
5. FINDINGS & SUGGESTIONS

FINDINGS
It is found that the current ratio was 4.01 in the year 2010-11 which is double than
the standard ratio i.e. 2.1

The liquid ratio was 3.86 in the year 2010-11 which is higher than the standard ratio
that is 1.1

It is observed that the Working capital turnover ratio was 0.65 in the year 2010-11.
It indicates the firm is investing insufficient amount in the current assets.

It is found that the gross profit position in this company is not favorable. It is very
low in the year 2007-08 that is 0.55. Later we can found a little improvement in this
ratio

The debtors turnover ratio in the company is effective.

It is found that the company failed to utilize the fixed assets in efficient manner.

Creditors turnover ratio is fluctuating more. It reflects the credit worthiness of the
company.

It is observed that the return on assets decreasing year by year. This is not good
sign for the organization.

The firm is in good financial position. It is in a position to meet its daily obligations.

82
SUGGESTIONS

It is suggested that the company should focus on decreasing the current assets
because of unnecessary investment taken place in current ratio.

High degree of liquid ratio is not good for firm because such a situation represents
excessive funds of the firm being tied up in quick assets, so company focus decrease
the investment in liquid assets.

It is better the management should take necessary steps to improve working capital
position.

The company is advisable to reduce operating expenses to increase the level of


gross profit.

It is suggested that the company should try to utilize credit facilities by reducing
risks in working capital.

It is suggested that the company should try to increase the utilization capacity for
fixed assets by increasing sales.

It is suggested that the company should focus more on current assets than on fixed
assets for improving total assets turnover ratio.

The company can also find out some suitable and better big companies for
collaboration.

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CONCLUSION

Ratios make the related information comparable. A single figure by itself has no
meaning, but when expressed in terms of a related figure, it yields significant
interferences. Thus, ratios are relative figures reflecting the relationship between
related variables. Their use as tools of financial analysis involves their comparison
as single ratios, like absolute figures, are not of much use.

Ratio analysis has a major significance in analyzing the financial performance of a


company over a period of time. Decisions affecting product prices, per unit costs,
volume or efficiency have an impact on the profit margin or turnover ratios of a
company.

Financial ratios are essentially concerned with the identification of significant


accounting data relationships, which give vie the decision-maker insights into the
financial performance of a company.

The analysis of financial statements is a process of evaluating the relationship


between component parts of financial statements to obtain a better understanding
of the firms position and performance.

The first task of financial analyst is to select the information relevant to the decision
under consideration from the total information contained in the financial
statements. The second step is to arrange the information in a way to highlight
significant relationships. The final step is interpretation and drawing of inferences
and conclusions. In brief, financial analysis is the process of selection, relation and
evaluation.

Ratio analysis in view of its several limitations should be considered only as a


tool for analysis rather than as an end in itself. The reliability and significance
attached to ratios will largely hinge upon the quality of data on which they are
based. They are as good or as bad as the data itself. Nevertheless, they are an
important tool of financial analysis

84
Bibliography
BIBLIOGRAPHY

SL.NO BOOK NAME AUTHOR NAME PUBLICATION


NAME
1. Financial Management I.M.Pandey Vikas Publishing
House Pvt Ltd.
2. Financial Management Khan & Jain Tata McGraw Hill
Publishing Company
Ltd.
3. Financial Management S.N.Maheswari Sultan Chand & Sons
(Principals & Practice) Educational
Publishers.
4. Fundamentals of Financial Prasanna Chandra Tata McGraw Hill
management Publishing Company
Ltd.

Annual Reports for the Year 2006-2011.

Website:

www.investopedia.com

www.managementstudyguide.com

www.mlgroup.com

www.wikipedia.org