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A

PROJECT REPORT
ON
STUDY OF RATIO ANALYSIS PERFOMED IN
KANSAI NEROLAC PAINTS .LTD, LOTE,
CJIPLUN 415605
REQUIRED FOR PARTIAL FULFILLMENT OF
M.M.S PROGRAMME
SUBMITTED BY
MOATASIM IMRAN PARKAR
UNDER THE GUIDANCE OF
PROF.RENAPURE L.N

SUBMITTED TO
RAJARAM SHINDE COLLEGE OF M.B.A
PEDHAMBE, CHIPLUN

FOR THE ACADEMIC YEAR


2018-2019
1
SUMMER INTERNSHIP DETAIL

Name of student: Moatasim Imran Parkar


Specialization adopted: Finance
Name of the Organization: Kansai Nerolac Paints
lote, Chiplun
Period of SIP: 2 months
Date of joining: 31st May 2018
Date of completion: 14th July 2018
Daily working hours: 8 hours
Department work: accounts

2
ACKNOWLEDGEMENT

It is my greatest pleasure to acknowledge sincere gratitude towards Mr. AMOL

AKULKAR (HR Department) who gave me a good opportunity to do my

project in theKansai Nerolac Paints ltd

I am also grateful to Mr. Anupam Garg (Commercial Head) ,Mr. Vinod

Kadam (HOD Accounts), Mr. Rajkumar Nimbalkar (Purchase

department) and Mr. Sanjay Jangam (Purchase department) and other

officers who are working in the department for their valuable advice,

cooperation and support in completion of my project.

I am thankful Prof. Laxman Renapure Sir for helping me in making this project

I would also like to thanks MES College of MBA for the support in this project

Regards,

Moatasim Imran Parkar

3
INDEX

Acknowledgement 2

Declaration 4

Executive summary 5

Introduction 6

Industry progress 9

Opportunities and threats 10

Information technology 13

Awards and recognition 15

Objective 17

Ratio analysis 18

Research mythology 33

Learning objective 45

Limitations 49

Conclusion 50
Finding and Suggestion 52
Bibliography 53

4
DECLARATION

I Mr.Moatasim Imran Parkar student of MMS second year at Mandar Education

society Rajaram Shinde Institute of Management Studies Pedhambe Chiplun,

hereby declare that I have completed my summer internship project entitled

“RATIO ANALYSIS OF KANSAI NEROLAC PAINTS LTD”, as partial

fulfillment of the requirement of the course curriculum for the year 2017 2019. The

data collected and the work done by me is truly authentic and is not borrowed or

copied from any report. The project contains true and complete information.

In Partial Fulfillment of the Requirement for the Award of the Degree of Masters

of Management Studies (MMS) 2017-2019 Through Mandar Education society

Rajaram Shinde Institute of Management Studies Pedhambe Chiplun

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EXECUTIVE SUMMARY

I work on Ratio Analysis at KANSAI NEROLAC PAINTS LTD. LOTE. It is

decisive subject to study the procedure, methods, merits and demerits of Ratio

Analysis. I referred various resources person like Mr.Vinod Kadam sir (Head of

Accounts Department); I got lot of information on the topic.

Company having both domestic and abroad customer and company is satisfying

them by providing quality material as well as quick supply of material.

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INTRODUCTION

Kansai Nerolac Paints Ltd (KNPL) was established in 1920.It is a subsidiary of

Kansai Paint Co. Ltd., Japan.

KNPL operates in India and also has operations in Nepal and Sri Lanka through

Joint Ventures with Kansai Nepal and Capital Holdings Maharaja Group

respectively. KNPL has presence in multiple market segments of the paint market

viz. Decorative, Automotive, Auto Refinish, Wood Coatings, General Industrial,

Coil Coating, Floor Coating, Performance Coatings and Powder Coatings.

In the Decorative Paint Market, Nerolac is positioned as an environmentally

conscious brand which is synonymous with Health. The tag line of the Company,

Healthy Home Paints emphasizes the focus of the Company on environment

consciousness.

KNPL is one the most preferred vendors for Industrial paints in the country. Over

the years the Company has worked tirelessly to create value for its customers and

is acknowledged as the market leader in Industrial coatings. Many of the leading

players in the Automobile industry trust Nerolac to service their paint

requirements. This leadership has been made possible

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Through a combination of customer insights, customized R&D, quality, service,

value engineering and delivery.

KNPL has 4 factories located at Jainpur (UP), Lote (Maharashtra), Bawal

(Haryana) and Hosur (Tamil Nadu). In addition, a new state of the art facility will

be commissioned at Sayakha (Gujarat) to cater mainly to automobile customers.

These factories provide customers with an unmatched range and flexibility to cater

to their requirements in the shortest possible time.

As announced earlier, the Company is setting up a Decorative Plant at Amritsar

and work is progressing satisfactorily at the site. Another Greenfield plant at

Vishakhapatnam which has been announced is being planned, and work for which

will start shortly.

The Company currently has a state-of-the-art R&D facility in Mumbai. A new

cutting edge Research & Development center at Vashi will shortly commence

operations in FY 18-19.

Customer satisfaction is the central goal around which KNPL functions. The

requirements of customers are paramount and are constantly evolving. KNPL uses

its Research and Development to develop unique

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Customized solutions for its customers. KNPL has continuously focused on

introducing new technology for the customer every year. Notable introductions this

year were products such as Anti-Graffiti coatings, Rebar Coating for Concrete and

Super durable Powder.

In a market which is growing and a strong foundation, KNPL is now looking

towards unleashing the next era of growth for the Company.

The Company continued its growth momentum in Nepal with high double digit

volume and value growth. The Company successfully completed brand migration

from ‘Nerolac’ to ‘KNP’. The company name was also changed to KNP Japan

Private Limited.

The Company entered Sri Lankan paint market by way of a joint venture with

Capital Holdings Maharaja, which is one of the biggest conglomerates in Sri

Lanka. The Company successfully started a Greenfield plant and launched entire

range of Decorative Paints (Water-based and Solvent-based).

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INDUSTRY PROGRESS

2017-18 was an eventful year for the domestic market. The introduction of GST

ushered in a new era in Indian business. The Paint industry successfully adopted

the new Tax system put in place.

The industry did feel the impact of demonetization as well as GST and demand as

a whole for the industry was subdued in both the segments. The organized players

are expected to perform better than the small and medium scale players. The

industry however views GST as positive and beneficial in the long run.

The industry witnessed inflationary pressures through-out the year. Higher prices

of crude, exchange rate volatility and the larger geo-political climate added to the

uncertainty. In addition tough environmental legislations in China impacted global

supply chains of many key ingredients adding to availability as well as inflationary

pressures.

The industry has partially been able to pass on the cost increase in the market.

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OPPORTUNITOES & THREATS

Opportunities
1. Favorable Economic Scenario

With major policy decisions such as Demonetization and GST

implementation completed, the country is now moving towards

consolidation. Infrastructure reforms, Job growth, affordable housing are

among the top priorities for the government this year.

2. Impetus to the Rural Economy

The Rural economy was given a boost with significant steps such as a

healthcare plan, and an increase in the Minimum Support Price for farmers

by 50% announced in the Budget for 18-19. This will increase income in the

hands of the rural consumer and hence be an opportunity for growth.

3. Real Estate Sector & Interest Rates

The real estate sector was expected to make a turnaround during the past

year, however, the weakness in the market continued for most of the year

despite low interest rates. During the final quarter, demand started to pick up

11
and is expected to continue this year while interest rates continue to remain

low.

4. Opportunities due to climate change

The Company has embarked upon growth agenda using climate change as an

opportunity. The Company’s innovation in products and technology has

helped to curtail energy consumption on customer production lines. Super

durable coating solutions have been helping its customers to enhance life of

their products. In its operations, the Company is taking advantage of lower

rates of renewable energy.

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Threats
1. New Competitors

New Competitors are entering the Indian Paint Market. KNPL endeavors to

be proactive in countering any challenges that may arise due to increased

competition in the market.

2. Crude Oil Prices and Inflation

Crude oil prices are putting pressure on raw material prices used for Paint

manufacturing, which is in turn putting pressure on the bottom line. Inflation

is expected to be high. KNPL is trying to offset this effect through a

combination of internal initiatives and price increases from its customers.

3. Availability of raw materials

With the tightening of environmental controls in China, there is a cascading

effect on global supply chains for key raw materials for the paint industry.

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INFORMATION TECHNOLOGY

During the year, embedded digital, Business continuity, GST readiness and

Security were the key IT initiatives. Continuing the investment made in the in-

memory computation capabilities, in the current year, KNPL has taken steps

towards leveraging new embedded digital technologies like Machine Learning,

IOTs and Advanced Analytics. These technologies would enable KNPL to have a

deeper insight into the data. This would help enhance the service capabilities of the

Sales and Manufacturing functions to the market.

To provide real time information to the customers and influencers, KNPL has

implemented the Dealer portal for the Decorative customers and enhanced the call

center to connect with the influencers. Various processes in supply chain,

procurement, Manufacturing and Finance were re-engineered to provide visibility

into the various Key Performance Indicators and enhance effectiveness. Further

KNPL aligned all its IT systems to the GST enabled Eco system.

14
As part of the Business Continuity initiative, Near Disaster Recovery site was

made operational for key applications. Taking cognizance of the changing IT

environment and to insulate against the various security risks, KNPL has

augmented its security solutions framework.

15
AWARD AND RECOGNITIONS

Awards by External Agencies


1. Lote Plant received a Certificate of Appreciation from Government of India,

Ministry of Power – New Delhi for efforts in Energy Conservation.

2. Bawal team participated in the 5th Chapter Convention of “Quality Circle

Forum of India” and won 2 Gold, 1 Silver and 1 Bronze awards for the

projects and Kaizen presented in the forum.

3. Bawal plant received a Certificate of Merit in Paints & Allied Products

sector at the National Energy Conservation Award 2017 organized by

Bureau of energy efficiency, Ministry of Power, Government of India. The

Chief Guest for the ceremony was Hon. President of India and the Guest of

Honor was the Minister of State for Power.

4. Mr. H.M. Bharuka featured at the 31st Spot in the Business Today – PWC

list of India's top 100 CEOs from non-BFSI sectors, and also awarded Rank

1 in the Chemicals category.

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Awards by Customers
1. KNPL received an award for “Overall Excellence” for FY 16-17 by Maruti

Suzuki at their vendor meet held in Singapore on 9th May’16.

2. Certificate of Appreciation for “Improvement in Process Quality” was

awarded to the team from among 24 companies by Toyota.

3. KNPL has been honored with best vendor award in New Product

Development’ category in the supplier meet organized by SML ISUZU –

Chandigarh.

17
OBJECTIVE

To Study the financial position of KNPL LOTE.

To study the Strength and weakness of KNPL LOTE.

18
RATIO ANALYSIS
Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a

quick indication of a firm's financial performance in several key areas. Financial

ratios are categorized according to the financial aspect of the business which the

ratio measures.

Financial ratios allow for comparisons

1. between companies

2. between industries

3. between different time periods for one company

4. between a single company and its industry average

Ratios generally hold no meaning unless they are benchmarked against something

else, like past performance or another company. Thus, the ratios of firms in

different industries, which face different risks, capital requirements, and

competition, are usually hard to compare.

In the analysis of financial statements, it is better to have a complete understanding

of the different types of ratios, their calculation, and interpretation.

Financial ratios can be classified into five types as follows.

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1. Liquidity ratios

2. Asset Management ratios

3. Leverage ratios

4. Profitability ratios

5. Valuation ratios

1. Liquidity ratios

Liquidity ratios asses the firm`s ability to meet its short- term obligations using

short-term assets. The short-term obligations are the ones recorded under current

liabilities that come due within one financial year. Short-term assets are the current

assets. There are three (03) important liquidity ratios.

a. Current ratio

The current ratio (CR) is equal to total current assets divided by total current

liabilities. This indicates the extent to which current liabilities can be paid off

through current assets.

current assets
current ratio =
current liabilities

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b. Quick asset Ratio

One Key problem with the current ratio is that it assumes that all current assets can

be converted in to cash in order to meet short-term obligations. We know this

assumption is highly untrue. Firms carry current assets, such as inventory and pre-

paid expenses which cannot be converted into cash quickly. To correct this

problem, the quick asset ratio (QAR) removes from current assets less liquid

current assets, such as inventory and pre-paid expenses, which cannot be converted

into cash quickly. The quick ratio, also called the acid test ratio, is equal to liquid

current assets, divided by current liabilities. It indicates the extent to which current

liabilities can be paid off through liquid current assets such as cash, marketable

securities, and accounts receivables.

Current asset
Quick asset ratio = − inventory
Current liabilities

c. Cash ratio

The cash ratio goes a step further and examines the ability of the firm to settle

short-term liabilities using only cash and cash equivalents such as marketable

securities. In other words, the cash ratio indicates the extent to which current

liabilities can be paid through very liquid assets.

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cash
cash ratio = + mareketable securities
current liabilities

2. Asset management ratio

Asset management ratios also known as efficiency ratios indicate the efficiency of

the use of assets in generating sales. There are five (05) more important efficiency

ratios: average collection period, inventory turnover, cash conversion cycle, fixed

assets turnover and total assets turnover.

a. Average collection period

The average collection period (ACP), also known as days’ sales outstanding

(DSO), indicates the average length of time the firm must wait after making

a credit sale before it collects cash. In other words, it shows the average

number of days’ accounts receivables remain outstanding. The ACP is

calculated as follows:

receviables
average collection period =
annual credit sales⁄365

b. Inventory stock/turnover ratio

The inventory turnover indicates whether inventory levels are reasonable in

relation to cost of goods sold. Inventory Turnover ratio is calculated as

follows:

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cost of goods sold
inventory stock =
averege inventory

Lower inventory turnover ratio relative to the industry standard may indicate

excessive, obsolete, or slow moving inventory, while higher turnover may

indicate inadequate inventory and perhaps possibility of inventory shortages.

c. Cash conversion cycle

The cash conversion cycle shows the average number of days the cash is tied

up in inventory and receivables. Typically, a firm buys inventory, and cash

is tied up in inventory for a number of days before they are sold and

converted in to receivables. Thus beyond the initial period in which cash is

tied up in inventory, there is an additional time period where cash is tied up

in receivables. However, firms are also able to obtain inventory on a credit

basis, to that extent, the firm does not tie up its own funds in building

inventory. Hence, the total number of days’ cash is tied up in inventory and

receivables can be determined as follows.

cash conversioncycle

= inventory processing days + averege collection period

− payables payement period

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d. Fixed asset turnover ratio

The fixed asset turnover ratio measures the efficiency of the use of fixed

assets in generating sales. It is computed as sales divided by average net

fixed assets, where the average net fixed assets is equal to the simple

average of beginning and ending balance sheet values of net fixed assets.

Net fixed assets are gross fixed assets less accumulated depreciation.

sales
fixed asset turnover ratio =
averege net fixed assets

A lower fixed asset turnover relative to the industry may indicate that the

firm carries excessive fixed assets. A higher turnover may indicate

inadequate, low, outdated or depreciated fixed assets.

e. Total assets turnover ratio

Total asset turnover ratio measures the efficiency of the use of total assets in

generating sales. Total assets are sum of current and net fixed assets. The

total asset turnover is calculated as sales divided by average total assets. The

average total assets are the simple average of total assets at the beginning

and end of the period

sales
total assets tunover ration =
averege total assets

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4. Leverage ratio

The leverage ratios, also called debt management ratios, measure two key

aspects of the use of debt financing by the firm. The use of debt financing a

called financial leverage. We want to know the level of financial leverage

used by the business as well as the ability of the firm to service its debt

obligations. The debt ratio, debt-equity ratio and interest cover is discussed

below.

a. Debt ratio

The debt ratio indicates the proportion of assets financed through both short-

term and long term debt. This ratio is computed as total debt, which is the

sum of short-term and long-term debt, as a percentage of total assets. A

higher ration indicates higher leverage. A higher ration also means lower

debt capacity in that the ability for the firm to raise funds through more debt

is lower due to already high debt levels.

total debts
debt ratio =
total assets

b. Debt –Equity ratio

The debt to equity ratio (D/E) is also widely used as an indication of the

level of financial leverage. While there are several ways of computing this

ratio, the most useful version is to express long term debt as percent of total

equity. Thus it focuses only on the long-term financing, both debt and
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equity, and it is meaningful when we want to examine the long-term

leverage. Total equity includes both preferred equity and common equity. A

higher debt equity ratio indicates greater leverage and potentially higher

financial risk.

long term debt


debt equity ratio =
total debt

c. Interest converge ratio

The interest converge ratio, also known as the times-interest earned (TIE),

measures the ability of firm`s current operating earnings (EBIT) to meet

current interest obligations. It is the ratio of EBIT to interest charge. The

ratio shows number of times the interest payment is covered by the firm`s

operating earnings. The larger the coverage the better their ability of the firm

to service interest obligations on debt.

EBIT
interest coverage ratio =
interest charge

5. Profitability ratio

The profitability ratios, also known as performance ratios, assesses the

firm`s ability to earn profits on sales, assets and equity. These are critical to

determining the attractiveness of investing in company shares, and investors

use these ratios widely. We will examine five important profitability ratios,

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namely, gross profit margin, operating profit margin, net profit margin,

return on assets, and return on equity.

a. Gross profit margin ratio

The gross profit margin (GPM) shows the firm`s profit margin after

deducting costs of goods sold but before deducting operating expenses,

interest expenses, and taxes. This ratio is also known as gross profit ratio.

sales−cost of goods sold


gross profit margin ratio =
sales

This is the first level of profitability. The GPM depends primarily on the

firm`s product pricing and cost control. The price of the product impacts

sales. Production cost such as material, labor, and overhead or the cost of

purchases affect the cost of goods sold. A firm with a better ability to price

products in line with inflation of cost of production and the ability to control

production costs or suppliers will be able to maintain or increase gross

margins.

b. Operating profit margin

The operating profit margin (OPM) shows the firm`s profit margin after

deducting cost of goods sold and operating expenses but before interest

expenses and taxes. The operating profit is the earnings before interest and

taxes or EBIT as a percent of sales.

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EBIT
operating profit ratio =
sales

The OPM reflects the true profitability of firm`s business in that it is

calculated before deducting interest costs, which are a result from firm`s

financing decision, and taxes, which are outside the control of the firm. In

other words, regardless of the way the firm is financed, whether through

debt or equity, and regardless of the taxes imposed by the government, the

firm is able to earn this margin.

c. Net profit margin ratio

This is the bottom line profitability, which most analysts and investors pay

attention to on a regular basis. The net profit margin (NPM) shows the

firm`s profit margin after all the costs and expenses. It is the profit available

for distribution to common shareholders a percentage of sales.

net income
net profit margin =
sales

Obviously, the lower operating profit margin is one reason for the lower

NPM. It is also possible that, since the firm is more debt-financed than an

average firm, it has more interest expenses as well. Since taxes are fixed, the

key difference between the OPM and NPM is interest costs, which are

linked to the firm`s financing decision.

d. Return on assets

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The return on assets (ROA) measures the return earned on total assets

employed in the business. Sometimes, this is also referred to as the return on

total capital. Since total assets are financed through both debt and equity, is

important that the return measure used for this calculation reflects income to

both shareholders and debt holders. We define the return as the net income

available for distribution to shareholders plus the interest expenses paid to

debt holders. This return is divided by the average total assets, which

represents the simple average of the total assets at the beginning and ending

balance sheets.

net income + intrest expenses


return on assets =
avg total assets

e. Return on Equity

The return on equity (ROE) measures the return earned on the capital

provided by the common stockholders (Equity holders). It is the net income

as a percent of the average common equity, where the average common

equity is the simple average of the common equity at the beginning and

ending balance sheets. The net income is the income available for

distribution to ordinary shareholders after deducting any preferred

dividends.

net income
return on equity =
avg common equity

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6. Valuation Ratios

The valuation ratios indicate the market valuation of a stock in terms of

some measure of company fundamentals such as earnings, book value, cash

flows, and dividends. These are the ratios that investors tend to look at on a

daily basis. These ratios change whenever the price of the stock changes. We

will discuss the price/earnings ratios, the price/book value ratio, the

price/cash flow ratio, and dividend yield.

a. Price/Earnings ratio

This is the most widely used valuation ratio. It indicates the market price of

a share in terms of earnings. It is the rupee amount an investor has to pay for

each rupee of earnings made by the firm for the ordinary shareholder.

𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒


𝑝𝑟𝑖𝑐𝑒 =
𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

The earnings per share (EPS) is calculated as the net income available for

ordinary shareholders divided by the number of issued shares.

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝐸𝑃𝑆 =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠

30
b. Price / Book Value Ratio (P/BV)

Price / Book Value are also a regularly reported and watched valuation ratio.

It indicates the market price of a share in terms of the book value of equity.

It is the rupee amount an investor has to pay for each rupee of book value.

𝑀𝐴𝑅𝐾𝐸𝑇 𝑃𝑅𝐼𝐶𝐸 𝑃𝐸𝑅 𝑆𝐻𝐴𝑅𝐸


𝑃𝑅𝐼𝐶𝐸 =
𝐵𝑂𝑂𝐾 𝑉𝐴𝐿𝑈𝐸 𝑃𝐸𝑅 𝑆𝐻𝐴𝑅𝐸

The book value per share is calculated as the equity divided by the number

of ordinary shares outstanding.

𝐸𝑄𝑈𝐼𝑇𝑌
𝐵𝑉 =
𝑁𝑂. 𝑂𝐹 𝑆𝐻𝐴𝑅𝐸𝑆

c. The price/cash flow

The price/cash flow indicates the price of a share in terms of the cash flow

per share. It shows the rupee amount an investor has to pay for each rupee of

cash flow generated.

𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒


𝑝𝑟𝑖𝑐𝑒 =
𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

Although not widely reported, this is in fact a more useful ratio than the P/E

and P/BV ratios discussed earlier. This is because the price of a share must

be related to the actual cash flows generated by the firm to its shareholders.

There are a number of different definitions of cash flow, and the one we use

here is the most basic definition of cash flow. The cash flow is the net

31
income available for ordinary shareholders adjusted for non-cash income

and expenses included in the income statement. Since most common non-

cash item in the income statement is depreciation of physical assets and

amortization of intangible assets, the cash flow is calculated by adding these

two items to the net income.

d. Dividend yield values

The dividend yield indicates the dividend income as a percentage of the

investment. It is calculated as the common dividend per share dividend by

the market price per share.

𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒


𝑑𝑦 = × 100
𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

This is a particularly an important valuation measure for investors seeking regular

income. Investor who depend on income from their investments include retired

persons and well as pension and mutual funds, which invest with the primary

objective of maximizing the income return. These investors like to see a higher

dividend yield. Typically, higher dividend yields are associated with more stable

and mature companies such as utilities. Growth -oriented companies tend to pay

lower dividends such as at a higher multiple, and as a result, produce lower

dividend yields. The dividend per share (DPS) is the total dividends to ordinary

32
shareholders during a specific period divided by the number of ordinary shares

outstanding.

𝑡𝑜𝑡𝑎𝑙 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑


𝑑𝑝𝑠 =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒

33
RESEARCH METHODOLOGY

Data collection is an important step in any project and success of any project will

be largely depend upon who much accurate you will be able to collect and how

much time, effort and money will be required to collect the necessary data.

Primary source Secondary Source

Observation Annual Reports

Discussion Websites

Primary data sources

The primary data source is a fresh & first hand data which is collected for the first

time & happened to be in original character. I have collected the information and

data through formal and informal discussion with my profession guide in the

organization and through observation.

Observation- With the help of observation method I observed Calculation of

various ratios.

Primary data sources

The primary data source is a fresh & first hand data which is collected for the first

time & happened to be in original character. I have collected the information and
34
data through formal and informal discussion with my profession guide in the

organization and through observation.

Observation- With the help of observation method I observed Calculation of

various ratios.

Secondary data

The data is the data which have already collected & stored. We can easily get

secondary data from records, journal, Annual reports, newsletter’s & books.

Annual reports –with the help of Annual report I easily calculated the ratios.

Websites-with the help of company website and other site I got lot of information

about company as well as ratio analysis.

35
1. Liquidity ratio

a. current ratio

Current ratio=current assets/current liabilities


Current Current Ratio
Year Current assets
liabilities
2015 1294.58 604.40 2.14

2016 2184.06 850.39 2.57

2017 2354.66 687.39 3.43

2018 2530.63 852.61 2.97

current ratio
2.97 2.14

2015
2016
2017
2018

2.57

3.43

In the above diagram shown the current ratio of four years of KNPL

LTD. The solvency position of KNPL .LTD In terms of current ratio

from the year 2015 to 2018 is good as per standard norms.

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b. Quick ratio

Quick ratio = current asset-inventories/current liabilities


Current assets- Current Ratio(1:1)
Year
inventories liabilities
1294.58- 1.25
2015 604.40
541.67=752.91
2184.06- 1.90
2016 850.39
571.71=1612.35
2354.66- 2.42
2017 687.39
691.31=1663.35
2530.63- 2.02
2018 852.61
805.76=1724.87

quick ratio
3

2.42
2.5
2.02
2 1.9

1.5
1.25 quick ratio

0.5

0
2015 2016 2017 2018

It is used as an assessment tool for testing the liquidity position of the firm the
standard value for this ratio is 1:1.KNPL LTD is good from 2015 to 2018. The
quick ratios are above the standard. It shows that the company is financially secure
in short term.

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c. Inventory /stock turnover ratio
Inventory turnover ratio = net sales / inventory

Year Net sales inventory ratio

2015 3532.41 541.67 6.52

2016 3819.29 571.71 6.68

2017 4531.05 691.31 6.55

2018 4737.01 805.76 5.88

inventory turnover ratio

5.88, 23% 6.52, 25%

2015
2016
2017
2018
6.55, 26%

6.68, 26%

This ratio indicates efficiency of management to convert stock into cash


quickly. So the ratio needs to be higher side. The ratio of 2015 was low
i.e.6.52 as compared to 2016 and 2017 i.e.6.68 and 6.55. In 2018 the ratio
is fell up to 5.88.

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d. Inventory conversion holding= no. of days in year/inventory turnover
No. of days in Inventory Ratio in days
Year
year turnover
2015 365 6.52 55.98

2016 365 6.68 54.64

2017 365 6.55 55.73

2018 365 5.88 62.07

inventory conversion holding

55.98
62.07

2015
2016
2017
2018

55.73
54.64

This ratio indicates efficiency of management to convert stock into cash


quickly. So the ratio needs to be higher side. The ratio of 2015 was low
i.e.6.52 as compared to 2016 and 2017 i.e.6.68 and 6.55. In 2018 the ratio
is fell up to 5.88.

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e. Debtors turnover ratio
Credit sales/Debtors

Year Credit sales Debtors Ratio (times)

2015 496.34 19.97 24.85

2016 524.62 90.30 5.81

2017 571.71 6.66 85.84

2018 675.69 3.32 203.52

ratio (times)
24.85, 8%
5.81, 2%

85.84, 27% 2015


2016
2017
203.52, 63%
2018

This ratio indicates more efficient collection of debt from debtors. The
higher the ratio better is the management of debt. We can easily
understand from above diagram that the ratio 2015 and 2016 is poor but
from 2017 the ratio is good.

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Average collection period=365/debtor’s turnover ratio

No. of days in Debtors turnover Collection period


Year
year ratio (days)

2015 365 24.85 14.69

2016 365 5.81 62.82

2017 365 85.84 4.25

2018 365 203.52 1.79

period in days

period in days

2015 2016 2017 2018

Average collection period shows that collection of outstanding balances


from customers i.e. debtors.
It should be minimum. 2017 and 2018 the period is good and 2015 its
satisfactory. But 2016 period is high.

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f. Net Assets Turnover Ratio
Sales/Net Assets

Year Sales Net assets Ratio

2015 3532.41 1048.78 3.37

2016 3819.29 1085.31 3.52

2017 4531.05 1242.70 3.65

2018 4737.01 1537.23 3.08

fixed asset tunover ratio

3.08, 22%
3.37, 25%

2015
2016
2017
2018
3.65, 27% 3.52, 26%

This ratio indicates efficiency of management to convert stock into cash


quickly. So the ratio needs to be higher side. The ratio of 2015 was low
i.e.6.52 as compared to 2016 and 2017 i.e.6.68 and 6.55. In 2018 the ratio
is fell up to 5.88.

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g. Profitability ratio
Gross Profit Ratio=Gross Profit/net sales*100

Year Gross profit Net sales Ratio

2015 398.90 3532.41 11.29

2016 1064.71 3819.29 27.88

2017 759.42 4531.05 16.76

2018 786.40 4737.01 16.60

GP ratio
16.6, 23%
11.29, 16%

2015
2016
2017
2018
16.76, 23%

27.88, 38%

This ratio indicates efficiency of management to convert stock into cash


quickly. So the ratio needs to be higher side. The ratio of 2015 was low
i.e.6.52 as compared to 2016 and 2017 i.e.6.68 and 6.55. In 2018 the ratio
is fell up to 5.88.

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h. Net Profit Ratio =Net Profit/Sales*100

Year Net profit Sales Ratio

2015 271.67 3532.41 7.69

2016 891.10 3819.29 23.33

2017 505.94 4531.05 11.17

2018 516.40 4737.01 10.90

net profit ratio


10.9, 21%
7.69, 14%

2015
2016
2017
2018
11.17, 21%

23.33, 44%

Net profit of the company show profitability of the company. Higher the
ratio higher the profitability. It can be seen that the net profit of the
company decreasing from 2017 to 2018.

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i. Operating profit ratio=operating profit/net sales*100

Year Operating profit Sales Ratio

2015 398.90 3532.41 11.29

2016 1064.71 3819.29 27.88

2017 759.42 4531.05 16.76

2018 786.40 4737.01 16.60

operating profit ratio

16.6, 23% 11.29, 16%

2015
2016
2017
2018
16.76, 23%

27.88, 38%

This ratio indicates efficiency of management to convert stock into cash


quickly. So the ratio needs to be higher side. The ratio of 2015 was low
i.e.6.52 as compared to 2016 and 2017 i.e.6.68 and 6.55. In 2018 the ratio
is fell up to 5.88.

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OBJECTIVES LEARNED AT KNPL LOTE

1. Quality checking / control under the guidance of Vinod Kadam Sir


(Head of accounts department)

In quality checking or control process the material is checked by the


person assigned and updates the data of the invoice in SAP.

I had to check the status of the material as it changes from inspection


pending, QA NA or freight accepted.

If the status is inspection pending then I have wait to till the material
is inspected.

If the status is freight accepted or QANA then I have to pass on the


invoice to Vniod Sir as he can proceed with payment approval
procedure for the vendor.

2. Posting bill (Bill release) under the guidance of Vinod Kadam Sir
(Head of accounts department)
This is the continuation process of the above. In this process the

assignment of current date is allotted in SAP. This process is done so

46
that the Head Office can release the payments of the vendor at the

plant.

3. Freight Support under the guidance of Rajkumar Nimbalkar Sir

(purchase department)

In this process the bills are provided by accounts department which

include freight charges but or not attached with the supporting copy.

At this point the purchase department takes a follow up by sending an

E-mail or calling, providing the invoice number and date to the

vendor. The freight supporting is equally important as the invoice,

without which payment to the vendor will be done by deducting the

freight charge amount.

After receiving the freight supporting copy from the vendor, the

invoice along with the copy is handed back to the accounts

department as they have to proceed with the payment procedure.

4. Rate checking under the guidance of Snajay Jangam sir (purchase

department)

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KNPL lote has highered contractors for the regular or monthly

maintenance of its plant. There are various vendors / contractors who

provide maintenance and other services to KNPL lote. At the time of

agreement a list is prepared for all the type of jobs with its cost which

are to be done by the contractor/ vendor. After the job is done, the

invoice is prepared by the vendor and given to the purchase

department. Then in purchase department the bill amount is verified

with list prepared at the time of the agreement (there may be changes

made after the agreement also). After the verification it is further

preceded for the payment.

5. Bank reconciliation under the guidance of Vinod Kadam Sir (Head of


accounts department)

Bank reconciliation is the process of matching the balances in an

entity's accounting records for a cash account to the corresponding

information on a bank statement. The goal of this process is to

ascertain the differences between the two and to book changes to

the accounting records as appropriate. The information on the bank

statement is the bank's record of all transactions impacting the

entity's bank account during the past month.

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Bank reconciliation should be completed at regular intervals for all

bank accounts, to ensure that a company's cash records are correct.

Otherwise, it may find that cash balances are much lower than

expected, resulting in bounced checks or overdraft fees. Bank

reconciliation will also detect some types of fraud after the fact;

this information can be used to design better controls over the

receipt and payment of cash.

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LIMITATION

At the time of doing and completing my summer internship in KNPL LOTE LTD

.I had certain limitation, because of that I was not able to access deep information

related with my project.

 My project is totally related with finance so I was only permitted to work only

in accounts and Administration department.

 Because of limited work area and limited time, it was not possible for me to

gather precise and in depth information.

 The key persons like managers and executive of every company are always

trying to maintain secrecy for their internal records as well as actual financial

records and hence they never open each and every card in front of outsider or

interns. So I have also faced such limitation of secrecy.

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CONCLUSION

On the basis of data analysis on working capital management in KNPL, the


following
Conclusions arrived.

a. The company has gross profit for the past four years (2014-15, 2015-16,

2016-17, and 2017-18) in negatives and the current liabilities are

increasing, in comparison to Current assets position. Hence, it is an

alarming sign for the smooth working capital management.

b. There is also satisfactory net cash flow from the operating, investing and

financing activities of the organization.

c. The company is in a better manageable position and the company’s

present status of maintaining current assets and current liabilities are

satisfactory.

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Finding and Suggestion

The profit Of the Company Is not in a good Position for That company
has to Take Alternative Actions such As

Increasing in Procurement

Production, and Control in Expenses Like, Administrative, selling Etc.

The firms have low current ratio so it should increase its current ratio
where it can meet its short term obligation smoothly.

Liquidity ratio of the firm is not better liquidity position in over the five
years. So I suggested that the firm maintain proper liquid funds like
cash and bank balance.

It should enhance its employee’s efficiency, more training needed to its


employees in order to increase its production capacity and minimize
mistakes while performing the tasks, also more safety precaution need to
implement to the employees who directly working on sugar production
process.

The firm high inventory so I suggested that the firm must reduce the
stock by increase sales.

The direct material cost of the firm is very high so it’s my advice to the
firm that to decrease the direct material cost by purchasing raw material
from the other suppliers.

The firms should have proper check on the manufacturing process of the
plant.

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BIBLIOGRAPHY

Websites:-
Nerolac.com
Theeconomictimes.com
Google.com

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