DECLARATION

I, D. MENAKA had undergone the field training for the period of eight weeks from may 5th 2009 to July 5th 2009 in Kusalava International Ltd. Company. In partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION. This project report, written and submitted to the Department of Management Studies, Sir C.R. Reddy College, Eluru under the guidance of Mr. T. RAJESH is an original work carried out by me. The findings of this report are based on the information collected by me during the study period. I further state that I am alone responsible for omissions and commissions, if any

Place: Adavinekkalm Date:

(D. MENAKA)

CONTENTS
CHAPTER 1: Objectives of the study Scope of the study Methodology of the study Limitation of the study CHAPTER II: Industry profile CHAPTER III: Company Profile CHAPTER IV: Data Analysis & Interpretation. CHAPTER V: Summary, Findings and Suggestions Bibliography

LIST OF THE TABLES

Table No. 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 Table No. Current ratio Quick ratio Cash ratio Debt equity ratio Fixed turnover ratio Total assert turnover ratio Debtors turn ratio Creditors turnover ratio Working capital turn over ratio Inventory turn over ratio Gross profit ratio Net profit ratio Return on total assert Page No.

CHAPTER I INTRODUCTION

Introduction
Financial statements are prepared primarily for decision making. They play a dominant role in setting the frame work of managerial decisions. Financial analysis is the process of identifying the financial strengths and weaknesses of one firm by properly establishing relationship between the items of the balance sheet and be profit and loss account. There are various methods of techniques used in analyzing financial statements, such as comparative schedule of changing in working capita, trends analysis common size statements, funds flow and cash flow analysis, cost-volume-profit analysis ratio analysis, one ratio analysis is the most powerful tool of financial analysis.

Need for the Study

Financial analysis must require for a company in this cut through competition. Because of that reason ratio analysis is used in analyzing the firms position known that fact that success of an organization depends upon the financial statements. This situation has created an Internet to study and analysis some of the financial aspects of the organization. financial analysis through ratio. Hence a study may be undertaken of

Objectives of the Study

The ratio analysis if one of the most powerful tools of the financial analysis ratio analysis one of the process of establishing and interpreting various ratios (quantitative relationship between figures and groups of figures). The purpose of preparation of ratio analysis it to optimize and facilitate comparison with references methods. Another organization or industry organization.

Primary Objective
The primary objective of the study is to analyze the financial performance through ratio analysis.

Secondary Objectives:
To study the financial strengths and weakness of the firm. To examine the short-term solvency of the firm. To study the techniques of ratio analysis for decision-making To study the profitability of the firm over the years To study the operating efficiency of the firm
To find out the reasons of the deviations and to evaluate possible way of the

resolving the problems.

Scope of the Study

The scope of the study is limited to collect the financial data published in the annual reports of the company with reference to the objectives stated above and way analysis of the data with a view to suggest favorable solution to various problems related to financial performance. The project RATIO ANALYSIS OF KUSALAVA INTERNATIONAL LIMITED provides information with regards to the comparative, common size recent trends and development and comprehensive review of the financial performance of the company. This project gives an insight of the various tools evaluated the critical performance of the Kusalava International Limited. The magnitude and scope of the project generally defined by its objectives constraints and methodology that has adapted to analys the information. However the scope of the present study is at macro level that is the total performance of the Kusalava International Limited.

Methodology of the Study

To achieve a object of research methodology, the following methodology has been adapted. The information for this report has been collected through the primary and secondary sources.

1) Primary Data
It is also called as first handed information the data is collected the observation in the organization and interviews with officials. By asking questions these some information is collected from Financial Department, which were held by KSIL.

2) Secondary Data
These secondary data is existing which is collected data by others that is sources of financial journals, annual reports of the KSIL, website and other publications of KSIL.

Limitations of the Study

Every study will be limitations. The below mentioned are the constrains under which the study carried out. Some of the information was not available due to the confidential matters. Since officials, executive and other were busy so the study was primarily focused on secondary data Time is also a major constraint of the study. i.e. eight weeks.

CHAPTER II INDUSTRY PROFILE

INDUSTRY PROFILE History

The automobile market around the globe with no notable competitors. However, after the end of the end of Second World War in 1945, the automobile industry gained momentum and within a very short period, beginning in the early 1980s, the U.S. automobile industry was flooded with foreign automobile companies especially those of Japan and Germany. The current trend of the global automobile industry reveal that in the developed countries the automobile industries are stagnating as a result of the drooping car markets, where as the automobile industry in the developing the nations have been consistently registering higher growth rats every passing year for their flourishing domestic automobile markets. Society of Indian automobile manufacturers (SIAM) is the apex industry body representing 38 vehicles and vehicular engine manufacturer in India. SIAM is an important channel of communication for the automobile industry with government, national and international organizations. The society works closely with all the concerned stakeholders and actively participates in formulation of rules, regulations and policies related to the automobile industry.

Indian Automible Industry

This industry aims to enhance and exchanges and communication expand economics, trade and technical cooperation between the automotive industry and its international counter parts. The regular continuous interaction with international bodies and organizations it aims to facilitate up graduation of technical capabilities of the Indian industry to match the best practice worldwide.

Some Interesting Facts

Indian automobile industry is the Largest three wheeler market in the world Second largest two wheeler market in the world Forth largest passenger vehicle market in Asia Forth largest tractor market in the world Fifth largest commercial a vehicle market in the world

Production
Growth in consumer spending habits has reshaped the industry which has spurred an enormous cost advantage in manufacturing, R&D, skilled labor, software, encouraging leading automakers to perceive India as a global player in this sector market by consistent growth at a frantic pace. The automobile industry recovered production of a wide variety of vehicles including over 1.76 million passenger vehicles and over 8.52 million two and three wheelers in 2007-08.

Interpretation
The overall industry growth shows as negative because of three and two wheelers segment but commercial vehicles and passengers vehicles growth shows positive side.

Analysis
The inventories have steadily increased in the level of inventory for the year 2004 has been mainly due to higher level of inventory mainly copper, zinc, lead, iron, ore etc. the inventory level was reduced through the inventory had come down in terms of value these had gone up marginally as a percentage.

Auto Component Industry

The auto component industries add to contend with a much more moderated growth of 11% during the year. The negative impacts of raising interest rates on export of auto components was quite significant. Export growth slipped from 20% In 2006-07 to about 15% in 2007-08 as a result of the raising rupee and Raw materials costs with continuously declining exporting margins.

Auto Ancillary Industry

The Indian ancillary industry has witnessed marked changes over the year the auto component industry in 2003-04 grew by 18% to Rs. 310 billion and the exports crossed the US$ 1 billion mark and the top line revival in the demand of automobiles in the domestic market to witnessed a higher growth rate than previous year in auto ancillary industry.

Technology Absorption
Internal control system Quality management system

Internal Control System

The company maintains the system of internal control including system of internal control including adequate monitoring procedures the internal auditors operational control at various locations of the company on a regular basis an irregularity or significant issues or brought to the attention of the audit committee of the board and the M.D of the company.

Quality Management System

The company continuous its relentless efforts implementation of total productive maintenance (TPM) lean concepts in all costs of inventories comprises all costs of purchases, costs incurred in brining the inventories to their to their present location and condition.

Technology Up Gradation
Kusalava has developed the basic technical requirement for the manufacturing of their products, and in line to develop the technical strength hires experts from Germany for upgrading the foundry technology in line to the International practices. Till Kusalava has taken 3 rounds of experts views to validate their process and to fine tune their existing process for better productivity. Most significantly, Kusalava deputes their technical managerial personal for the training in different institutes for betterment of their knowledge and practices. Mr. Prasad R.K Chukkapalli, Managing Director of the company has visited Japan under AOTS programmed for 15 days technical training in Quality Systems during the first week of October 02.

ERP Software
Kusalava has in house software development Center, and presently implementing self developed ERP System of KOnline integrating Finance Manufacturing, Distribution and HR Activities across INDIA and USA offices. At KOnline, we understand the strategic role supply managemtn must play in a corporation today and the significant impact a supply chain management strategy can have on earnings. Supply chain management solutions help companies transform supply strategy into a competitive advantage. We combine expertise, technology and information to help you bring immediate value and profit your companys bottom line.

Vision
To produce Quality auto component products the matching best available in the world in terms of innovative design features and endues at competitive cost deliverable in time and maximize customer satisfaction to ensure constant increase in market share and global presence for the company.

Mission
1. To constantly strive for automation and technology up gradation of company plant process and product to maximize customer satisfaction and efficient use of resources at companys disposal to optimize production and minimize cost. 2. To trigger higher demand for companys products both in Domestic and International Market and there by improve market share. 3. To improve both top line and Bottom Line of the company to ensure optimum returns for all stakeholders of the company.
4. To make Kusalava a true global conglomerate through professional

management, corporate governance initiatives and strict adherence to regulatory compliances.

Table 2.1 Total manpower in Kusalava International Limited

Designation MANAGING DIRECTOR & DIRECTORS VICE PRESIDENTS CHIEF INFORMATION OFFICER GENERAL MANAGERS ENGINEERS SALES OFFICERS SKILLED WORKERS SEMI SKILLED WORKERS UNSKILLED WORKERS ADMINISTRATIVE STAFF TOTAL 2003-04 6 0 0 5 30 26 59 106 970 158 1360 Manpower Details 2004-05 2005-06 2006-07 10 7 7 0 0 6 27 32 58 104 1104 196 1537 0 1 6 26 40 53 99 1071 199 1502 2 1 6 28 35 53 131 1223 211 1697 2007-08 7 2 1 7 28 49 53 123 1060 226 1556

Functions of Different Departments Production

Production department takes the raw materials and melts it down in the electrical induction furnace. It makes rough casting through centrifugal dice. In production department production engineer does operations according to all the liners drawing. These operations will be finished on different machines. It takes 8-10 operations. After completion of these operations finished liners will be sent to quality control department to check the quality of the liner manufactured.

Materials
Material department purchases the raw material on the parameters like good quality in time delivery, credit facility and on the right time acquiring the raw materials cost variability.

Marketing
Marketing departments sells the products through marketing representatives, sales offices and distributors. This department gets the orders from the customers through the representatives, sales officers and distributors. This department sends the senior engineers to check complaints of the customers. provides incentives to sell the product in the market. This department

Finance
This department makes economic plans and helps in decision making through MIS, which are needed in survival and profitability of the organization. This departments work to the requirements of loans and take necessary steps to acquire them from banks and other financial institutions. It also prepares and sends yearly expenditure and net profits to the management it took into the matters like fluctuations of profits, change in Got policies and sales, market conditions and orders being placed.

CHAPTER III COMPANY PROFILE

COMPANY PROFILE Origin & Growth

Kusalava International was established in the year 1964. It was earlier known as Bharat Industries where it was started as a small work shop. It was started to manufacture cylinder liners under the brand name of Tiger power the chairman of Kusalava International Limited is MR. Chukkaplli Kusalava. It is nearly 40 years of industrial manufacturing experience in the field nealy 50% of production goes to original equipment. Kusalava international limited had geared up to meet the technological changes and world quality standards. It also in the stood the competition in the market which arose done to the establishment of WTO. Kusalava international limited has consistently delivered quality automotives components in line with the specific of automobiles major in India ad for the artier market spare parts segments to various countries like U.S, ITALY, NEW ZELAND, BANGLADESH, AUSTRALLIA, MALAYSIA, THAILAND and the middle east. It was awarded ISO 9002 in the year 1995 and it was also awarded QS9000 in the year 1998 it is an international certificate.

Technological Strengths
Automated foundry Spectral check (German make) for instant chemical analysis Century cost pipes up to 3.0mts length
Hardness testing (rock well and brinell)

 Tensile and bending yield strength percentage of alongation (40mt) Micro scopes, graphitic monophology upto 500 Cnc machines for machining complicated profiles Plateam honing machine wit auto size control WMW grinding / honing machines for maintaining stringent tolerance. Quality control equipped with penewmatic / electronic ganges and profile projectors Geo metrical accuracies taylor hbson roughtness testing equipment optional profile projectors.

Product Development and Out Sourcing

New thrust it identified in the developing sourcing group of products related to the automotives engineering industry. In this line Kusalava has achieved a significant development in the domestic and international sourcing requiremtn highlighted some if the product developed in Tiger power brand and bulk supplied for after market customers are piston assemblies value guides TP springs etc.

Network And Logistics

Vijayawada Chennai
Vizag

In Vijayawada terminal it has to main branches are there is autonager in Vijayawada and second one is adavinekkalam near to 15 kms to the Vijayawada. Autonager branches is the big branch in Kusalava Interanal Limited. The main administration is at Advinekkalam unit which is in the city of Vijayawada and other branches at Visakhapatnam and Rudrapur.

Through Sea
Bring an established 2 preferred brand in US Tiger Powr Kusalava Internal limited supplies 2 to 3 containers per month for replenishing the parts and new parts developed for both existing and new customers having movement infrewuent containers from factory to US mae us to prove an economical sourcing to compenisate the high freight cost for different customers in USA.

Products Manufactured
Tiger power = the tough parts Most of the vehicles manufacturers in the Indian domestic market ahs a tie up with internal manufactures like mazda, rhino, Mercedes benz, mistubishi etc. Kusalava International Limited suppliers their products the below OEMs in India who has international collaboration. Table 3.1 Kusalava International Limited supply share
MANUFACTURER Ashok ley land limited Telco Eicher motors Bajaj tempo limited Swaraj mazda Mahindra Vst tiller s.tracotrs Commuims Indai limited COLLABORATION Hino Japan British lay land Mercedes Benz Mistubishi Daimler Benz Mazda Missan Mistibishi Commins inc USA SUPPLY SHARE 50% 70% 100% 100% 100% 100% 100% 10%

The above OEMs of Kusalava International Limited turnover technical offices play a vital role in Kusalava International Limited.

Kusalava International Limited Supplying Liner to Ford Certified Rebuiders at USA: AER manufacturing INC corrol to tx Frannklin engine and parts INC pobox# 991293(a) Seminole sales birmighan AL To madr engine company capital avenue CA

Company Products
Kusalava International manufacturers liners / sleeves in both cast iron and g. iron centry cast value seats insets and alfin inserts as a ew development Kusalava has started manufacturing the engineering items out of its own technology like 4mts pipes for ash disposal for the thermal power plant sugar crusher materials and motors frames for the heavy electrical motors.

At USA
Our central warehouse at Houston Tx with 10000 sq.ft area has facility to stock and distribute parts across US and Canada. Tiger power has around 24 factory where houses for easy to lift option for customer across us and Canada. Growth of the Company Kusalava International Limited belongs to Kusalava group of companies. Its honorable chairman and promoter is Mr. Chukkapalli Ramakrishna Prasa. The group of companies and their activities. Kusalava Motors (P) Ltd: The company is involed in the activity of trading 2 Wheelers and 4 Wheelers, it). Kusal is the official delr for TVS Motors and Hyundai Cars in the cities of Vijayawada, Guntur Ongole, Bhimavaram and Gudivada. Kusalava Informatics: Started of as an in-house software arm for developing an integrated ERP solution, the division has been spun off into a separate company in 2006. Since then the company has been working on many projects with overseas clients and has been unprecedented growth. Please visit www.kusalavainfo.com

Kusalava Finance: The company has been established way back in 1970 and is engaged in the business of financing automobiles. The company has been able to carve a niche of itself in the automotive sector by offering clients customized financing options as per their needs. Kusalava Power: The company is involved in the business of power generation and ahs a total generating capacity of 3 MW. Kusalava Realty: The Company is involved in the business of developing housing, apartments and shopping malls. Bharat Automobiles: The company activities involve trading is automobile spare and represents a host of reputed manufacturers like Bharat Forge for Chrank Shafts, Timken for Bearing, Maple for Pistons and Kusalava for Liners. The company operations and netweok spread across entire South India. Kusalava Inc: The Company is a trading firm located in Houston, Texas, USA and is involved in the activity of sourcing automotive components from India and China to OEMs in USA. The company has products stocked in 22 warehouses across USA to supply to customers on a JIT basis. Sneha Biotech: The Company is research firm, which focuses on development of products using biotechnology for agriculture, marine industry and humans as well. The products are used as a substitute to chemicals & fertilizers in agriculture and aqua industries and are used as substitutes to drugs for humans. Milestones in Tiger Power Manufacturing: 1964: Kusalava International Limited comes into existence as M/S Bharat Industries. Products: Brake drums During the inception year itself supplies were started to OEM, Bajaj Tempo. 1972: Started production of grey iron cylinder liners. Started supplies to major road transport corporations (STUs) 1982: Supplies to replacement market with TIGER POWER-ROUGH PARTS Bran name.

1986: Installed the first Dual Track Induction Furnace in India. 1987: Became the major source for Defense Vehicle Factory 1990: Exported its first consignment to New Zealand. 1992: Tiger Power became the major supplier of cylinder liners in After Market 1994: Emerged as the Largest cylinder liner manufacturer in India. 1995: Kusalava commissions it first overseas office in Houston, Texas, USA ISO: 9002 certified. 1996: Sales figures crossed of 1 million USD 1998: QS-9000 certified 1999: Started production of Ductile Iron castings. 2000: ISO/TS 16949 certified 2002: Turn Over crosses 10 millions USD. 2003: Introduced Six Sigma Process. Awarded by ACMA for Best Six Sigma Project in 2003 2004: Introduced Lean Manufacturing Practices. Received the best supplied award from EICHER MOTORS, for outstanding contribution to supply chain management. Awarded by ACMA for Best Six Sigma Project in 2004 again. 2005: Entered into an agreement with the Market Leader Darton Sleeves, USA for supplying High Grade Ductile iron liners to the Drag Racing Market. 2006: Total PMKick off on July 3rd 2006. Kusalava commissions new plant at pantnagar, Uttarakhand. 2007: Turnover crosses 20 million USD. Kusalava commissions new plant at Visakhapatnam, Andhra Pradesh.

ORGANIZATIONAL CHART OF KUSALAVA INTERNATIONAL LIMITED

MANAGING DIRECTOR

Director Technical

Director Production

Vice President Operations

Director Marketing Vice President International Business Director Purchase

Director Finance

General Manager Information & Technology Director Human Resources

Nature of Activity: Manufactured 1. Product Cylinder Liners

Cylinder liner is a cylindrical part to be fitted into an engine block to form a cylinder. It is one of the most important functional parts to make up the interior of an engine the cylinder liner, serving as the inner wall of a cylinder, forms a sliding surface for the piston rings while retaining the lubricant withn. The most important function of cylinder liners is the excellent characteristic a as sliding surface and these four necessary points. High anti-galling properties Less wear on the cylinder liner itself Less wear on the partner piston ring Less consumption of lubricant The cylinder liner receives combustion heat through the piston and piston rings and transmits the heat to the coolant. A cylinder wall in an engine is under high temperature and high pressure, with the piston and piston rings sliding at high speeds. In particular, since longer service life is required of engines for trucks and buses, cast iron cylinders that have excellent wear-resistant properties are only used for cylinder parts. Also, with the recent trend of lighter engines, materials for engine blocks have been shifting from cast iron to aluminum alloys. However, as the sliding surface for the inner For that reason, cast iron cylinder, the direct sliding motion of aluminum alloys has drawbacks in deformation during operation and wear-resistance. cylinder liners are used in most cases.

2. Cylinder Liners For Aluminum Blocks

Global warming has started to show its adverse effects on the environment. To improve the fuel efficiency and adhere to latest Euro norms automobile manufactures are shifting towards aluminum engines. These engines have as cast cylinder liners with special surface on the outer diameter commonly referred to as spiny lock or stipple finish. To improve rigidity and high thermal conductivity properties of engine blocks, Kusalava has developed different specifications of cylinder liners that have high adherence to aluminum blocks at the time of die casting by controlling the coarseness of the outer casting surface with the special coating materials and in-process controls.

3. Grey & Ductile Iron Piston Rings

Kusalava has developed materials with special properties in grey and ductile iron by centrifugal casting process for critical sealing applications. These rings are being supplied to automotive, Locomotive, Marine, Power generation, Aircraft Aerospace and Hydrocarbon processing Applications. We also supply rough machined rings manufactures around the world in ductile and grey iron materials.

4. Centrifugal Castings
Centrifugal casting method was developed after the turn of the 20th century to meet the need for higher standards. Spinning molds generate centrifugal force on molten metal to position the metal within a mold. As the molten metal solidifies from the outside in, a casting with dense, close grain structure is created. As a result of close grain structure the centrifugal process offers products with better physical properties than castings made using the static casting method. Proper mold design, mold coatings, mold spinning speeds, pouring speeds, cooling rates and metal chemistry results in castings with higher Yields, fewer impurities and greater strength.

Quality Six Sigma

A method or set of techniques, Six Sigma has also become a movement focused on business process improvement. It is a quality measurement and improvement program originally developed by Motorola that focuses on the control of a process to the point of + six sigma (standard deviations) from a centerline, or put another way, 3,4 defects per million items. capability of the business process. Kusalava had started implementing these techniques in 2002. The company had 5 Black belts and 14 Green Belts. And it was awarded twice for its best projects. It had tangible results in terms of quality and production. A Six Sigma systematic quality program provides businesses with the tools to improve the

Infrastructure 1. Plants
Location Plant 1 Address Adavinekkalam, Vijayawada Adavinekkalem, Agiripalli Mandalam, Krishna Dt. AP 521 212, India Cylinder Liners, Piston Rings, Valve Seats & centrifugal casings 14.43 acres Casting & Machining Autonagar, Vijayawada B-4, Industrial Estate, Vijayawada 520 007, India Cylinder Liners, Valve Seats. 2.6 Acres Machining. Rudrapur, Uttaranchal Plot No. 10, Sector-2, IIE Pant Nagar, Rudrapur, Uddam Sing Nagar, Uttaranchal-263 153, India Cylinder Liners 3.35 Acres Casting & Machining Special Economic Zone, Visakhapatnam. Kusalava International Ltd., VSEZ, Duvvada, Visakhapatnam 530 046, India Cylinder Liners 7.16 Acres Machining

Products Areas Operations Location Plant 2 Address Products Areas Operations Location Plant 3 Address Products Areas Operations Location Plant 4 Address Products Areas Operations

DOMESTIC AFTER MARKET:

KUSALAVA had started supplying its products to the after market under the brand name TIGER POWER since 1982. It has a dominating presence in the after market and enjoys the confidence of major engine rebuilders/reborers, OEMs and mechanics. Currently it possesses a market share of 35% in India and 30% in USA. Even Exports a major share of its production to various countries across the globe viz., Italy, U.K., France, New Zealand, Bangladesh, Australia, Malaysia, Thailand, Mauritius and the Middle East. It had wide-spread, well established networks in India, USA, Canada and Europe to serve its clients on 24x7 bases. Tiger Power offers a wide range of The Tough Parts like Cylinder Liner/Sleeves, Valve Seat Insets, Valve Guides, Tappets, Pistons, Piston Pins, Gaskets, Alfin Nickel Inserts, cast sleeves for aluminum blocks, cast iron/Ductile Iron, Pipes, Inertia Rings.

CHAPTER III DATA ANALYSIS & INTERPRETATION

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

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

Price level Challenges

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

Different definitions of variables

Comparisons are also made difficult due to differences in definitions. The terms like gross profit, operating profit, net profit etc, have not got precise definitions are there is a considerable diversity in practice as to how they should be measured.

Changing situations
A balance sheet may fail to reflect or typical situation, as it is prepared as of one moment of time. It ignores short-term fluctuations in assets and that may occur with in the period covered by the two balance sheet dates.

Types of ratios
Ratio can be grouped into various classes according to financial activity or functional to be evaluated. The parties interested in financial analysis are short and long term creditors, owners and management. Short-term creditors main interest is in the liquidity position or the short-term solvency of the firm. Long term creditors on the other hand are more interested in the long term solvency and profitability of the firm. Owners interest is in firs profitability and financial condition. Management is interested in evaluation every aspect of the firms performance. They have to protect the interest of all parties and see that the firm grows profitability. In view to of the requirement of the various users of ratio the ratios are classified into four important categories. 1. Liquidity ratios 2. Leverage ratios 3. Activity ratios 4. Profitability ratios

A liquidity ratio
Liquidity refers to the ability of a firm meet its obligations in the short run usually one year. The liquidity ratios reflect the short-term financial strength and solvency of a firm. In fact, analysis is liquidity needs the preparation of cash budgets and cash and funds flow statement. But liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure or liquidity. A firm should ensure that is does not suffer from lack of liquidity, and also that it does not have excess liquidity, The failure of the company to meet its obligations due to lack of sufficient liquidity will result in a poor credit worthless, loss of creditor confidence or even in legal tangles resulting in the closure of the company. A very high degree of liquidity is bad, as idle assets earn nothing. The firms funds will be unnecessarily ties up in current assets.

The most common ratios, which indicate the extent of liquidity of lack of it, are the following: Current ratio Quick ratio Cash ratio Net working capital ratio

1. Current ratio
The current ratio calculated by current Liabilities Current Assets Current Ratio = Current Liabilities The Current assets of a firm represent those assets which can be converted cash with in a short period of time, normally not exceeding one year and include cash and bank balances, marketable securities, inventory of raw materials, semi-finished goods, debtors, bills receivables and prepaid expenses. The Current liabilities include creditors, bills payable, accrued expenses short-term bank loan, income tax liability and long term debt maturing in the current year. The current ratio is a measure of the firms short-term solvency. It indicates the ability of current asset in rupees for every one rupee of current liability.

2. Quick ratio
Quick ratio establishes a relationship between quick or liquid assets and current liabilities. An assets is liquid is can be converted into cash immediately or reasonable soon with out loss of value. Cash is the most liquid assets. Other assets that are consider to be relatively liquid and including in quick assets are debtors and bill receivable and marketable securities. Inventories are consider to be less liquid as they normally requires some time for realizing into cash and their value also has a tendency to fluctuate. The quick ratio is calculated by dividing quick assets by current liabilities. Current Assets-Inventors Quick Ratio = Current Liabilities Quick ratio is rigorous measure of a firm ability to service short them liabilities.

3. Cash Ratio
Cash is the most liquid assets. Cash ratio is the ratio cash and its equivalent to current liabilities. Trade inventions of marketable securities are equivalent of cash. Therefore, they may be including in the computation of ratio. Cash + Marketable Securities Cash Ratio or super quick ratio = Current Liabilities

4. Net working capital ratio

The difference between current assets and current liabilities excluding shortterm borrowings is called Net working capital (NWC) or Net Current Assets (NCA). Net working capital measures the firms potential reservoir of funds. It is considered that, between two firms, the one having the larger net working capital has greater ability to meet its current obligations. This is not necessarily so that measure of liquidity is a relationship, rather than the difference between assets and current liabilities. Net working capital Net Working Capital Ratio = Net Assets

a) Leverage Ratio
Leverage refers to the use of debt finance debt capital is a cheaper source of finance and it is also a risky source of finance leverage ratios help in assessing the risk arising from the use of debt capital. The short-term creditors like bankers and suppliers of raw materials are more concerned with the firms current debt-paying ability. On the other hand long term creditors, like debenture holders, financial institutions etc. are more concerned with the firms long-term financial strength. So a firm should have a strong shot as well as long-term financial position. Owners and lenders calculate financial leverages of capital structure ratios to judge the long-term financial position of the firm leverages ratios indicate mix of fund provided. There should be an approximate mix of debt and owner equality in financing firm assets.

The use of debt is advantages for shareholders in two ways: They can retain control of the firm with a limited stake. Their earnings will be magnified, when firm earns a rate of return on the total capital employed higher than the interest rate on the borrowed funds. However if cost of debt is higher than the forms over all rate of return the earnings of the shareholders will be reduced. In addition, there is a threat of insolvency. Thus, use of debt magnifies the shareholders earnings as well as increases their risk. A highly debt burdened firm will find difficulty I raising funds from creditors and owners in future. Creditors threat the owners equity as a margin of safety. If the equity base in thin, the creditors risk will be high. Thus, leverage ratio is calculated to measure the financial risk and the firms ability of using debt to share holders advantage. 1. Debt ratio 2. Debt-equity ratio 3. Capita employed to net work 4. Interest coverage ratio 5. Fixed charges coverage ratio

1. Debt ratio
Deb ratio is used to analyze the long-term solvency of a firm. It helps in knowing the proportion of the interest bearing debt tin the capital structure. Debt ratio is computed by dividing total debt capital Employed (CE) or Net Assets (NA). Total debt will include short and long-term borrowings from financial institutions, debentures bonds, and differed payment arrangements for buying capital equipment, bank borrowing, public deposits and any other interest bearing loan. Capital employed will include total debt and net work. Total Debt Debt ratio = Total Dept + Net Worth (OR) Debt Ratio = Net Assets Total Debt

2. Debt Equity Ratio

The debt equity ratio shows the relative contribution of creditors and owners debt ratio is measure of the long-term financial solvency of a firm. This ratio indicated the relative proportions of debt equity in financial the assets of the firm. The relationship between outsides claim and capital can be shown in different ways and accordingly, there are many variations of the debt equity ratio. One approach is to express debt equity ratio in terms of the relative proportion of long-term debt and shareholders equity. Thus Ling Term Debt Debt Equity ratio = Share holders equity The debt considered here is exclusively of current liabilities. The shareholders equity includes 1. Equity and share capital
2. Past accumulated profits excludes fictitious

Another approach to the calculation of the debt equity ratio is to relate the total debt to the shareholders equity. Total Debt Debt Equity ratio = Share holders equity

2. Capital Employed to net Word

The ratio is another way to expressing the basic relation ship between debt and equity. Through this ratio one can know the amount of funds that are being contributed together by lenders and owners for each rupee of the owners contribution. Capital Employed Capital Employed to net worth = Net Worth

3. Interest coverage ratio

The interest coverage ratio or the times, interest earned is used to test the film debt servicing capacity. The interest coverage ratio is computed by dividing earnings before interest and taxes (EBIT) by interest charges. EBIT Interest Coverage = Interest The interest coverage ratio shows the number of times the interest charges are covered by funds that are ordinarily available for their payment Depreciation is a non-cash item. There for funds available to depreciation are also available to pay interest charges. Hence interest coverage ratio is earnings before depreciation interest and taxes (EBDIT) divided by interest. EBDIT Interest coverage = Interest

4. Fixed Charges coverage Ratio

EBIT Fixed charges coverage ratio = Repayment of loan Interest +1-Tax rate This ratio measures debt-serving ability comprehensively because considers both the interest and the principal repayment obligations. It shows how many times the pretax operation. Income covers all fixed financing charges.

b) Activity ratio:
Activity ratios are concerned with measuring the efficiency in asset management. These ratios are also called efficiency rations or asset utilization ratios. The efficiency with which the assets are used would are reflected in the speed and rapidity with which assets are converted into sales. The greater is the rate of turnover or conversion, the more efficient is the utilization, other things being equal. For this reason, such ratios are also designated as turnover ratios. Turnover is the primary mode for measuring the extent of efficient employment of assets by relating the assets to sales. An activity ratio may there for be defined as a test of the relationship between sales and the various assets of a firm. Depending upon the various types of assets, there are various types of activity ratios.

B. Accounts Receivable Turn Over Ratio:A firm sells goods for cash and credit. Credit is used as a marketing tool by a number of companies. When the firm extends credit to its customers accounts receivable (debtors) are created in the firms accounts. Debtors are expected to be converted into cash over a short period and there fore included in current assets. The liquidity position of the firm depends on the quality of debtors to a great extent. Accounts receivable turn over indicates how many times accounts receivables turn over during the year Accounts receivable turn over is found out by dividing credit sales by averaged accounts receivables. Credit Sales Account Receivables Turnover = Average accounts receivables Account Receivable turnover ratio measures the efficient of credit management.

2. Average collection period:The average collection period represents the number of days worth credit sales that is locked in accounts receivables (Debtors). It measures the quality of debtors since it indicates the speed of their collection. The average collection period and. Accounts receivables turnover is related as follows: 365 Average Collection period = Accounts receivable Turnover The average collection period may be compared with the firms to judge the efficiency of credit management.

The Collection period Ratio in two aspects

It determining the collect ability of debtors and thus, the efficiency of collection efforts and in ascertaining the firms comparative strength and advantage relative to its credit policy and performance.

3. Fixed Assets Turnover

Fixed Assets turnover ratio measures sales per rupee of investments in fixed assets. This ratio measures the efficiency with which fixed assets are employed it is defined as Sales Fixed Assets turnover = Net Fixed Assets

4. Total Assets Turnover

Assets are used to generate sales. A firm should manage its assets efficiency to maximize sales. The relation ship between sales and assets is called assets turn over. Assets turnover ratio is computed by dividing sales by total assets. Sales Assets Turnover = Total Assets

C) Profitability Ratio
A company should earn profits to survive and grow over a long period of time profitability reflects the final result of business operations. Profit must be earned to sustain the operation of the business, to be able to funds from investors and for expansion and growth and to contribute toward social overheads for the welfare of the society. The profitability Ratio is calculated to measure the operating efficiency of the company. Besides management of the company, creditors and owners are also interested in the profitability of the firm. Creditors want to get interest and repayment of principal regularly. Owners want to get a required rate of return on their investment. This is possible only when the company earns sufficient profits. Generally two types of profitability ratios are calculated. Profitability in relation to sale. Profitability in relation to investment.

The Profitability ratios are as follows

1. Gross profit margin 2. Net profit margin 3. Operating Expenses ratio 4. Return on investment
5. Return on equity

6. Return on Total assets 7. Earnings per share 8. Divided per share

1. Gross Profit Margin

The first profitability ratio in relation to sales is the Gross profit margin. It is calculated by dividing the gross profit by sales. Gross profit Gross profit margin = Sales Gross profit is the difference between net sales and cost of goods sold. The gross profit margin reflects the efficiency with which the management products each unit of product. This ratio indicates the average spread between the cost of goods sold and sales revenue. Gross profit margin shows the margin left manufacturing costs. It measures the efficiency of production well as pricing.

2. Net Profit Margin

The net profit margin ratio is computed by dividing net profit by sales. Profit after tax Net profit margin = Sales Net profit margin establishes a relationship between net profit and sales indicates managements efficiency in manufacturing administrating and selling the product. This ratio is over all measure of the firms ability to turn each rupee sales into net profit.

A net profit margin shows the earning left for shareholders as a percentage of net sales. This ratio indicates the firms capacity to with stand adverse economic conditions gross and net profit margin ratios provide a valuable under standing of the cost and profit structure of the form and enable to identify the sources of business efficiency/inefficiency.

3. Operating Expenses Ratio

The operating expense ratio is a yardstick of operating efficiency. Dividend operating expenses computer this ratio by sales. Operating Expenses Operating Expenses Ratio = Net Sales Operating expense include cost of goods sold plus selling expenses and general and administrative expenses. The operating ratio indicates the average aggregate variations in expenses, where some of the expenses may be increasing while other may be falling. Operating expenses ratio is affected it by a number of factors, such an internal factors, employees, managerial efficiency and external uncontrollable factors.

4. Return on Investment
The term investment may refer to total assets or net assets. The funds employed in net assets are known as a capital employed. Net assets net fixed assets plus current assets minus current liabilities excluding bank loans capital employed is equal to net worth plus debt. Return on investment is calculated by dividing earnings before interest and tax by assets or capital employed. EBIT Return on Investment (ROI) = Net Assets (or) Capital Employed

5. Return on Equity
Return on equity is of great interest to equity shareholders ordinary are entitled to the residual profits if rate of divided is not fixed the earnings may be distributed to shareholders or retained in the business. A return on shareholders equity is calculated to see the profitability of owners investment. The return on equity is net profit after taxes divided by shareholders equity or net worth. Profit after Tax Return on Equity (ROE) = Net Worth The shareholders equity or net worth will include paid up share premium and surplus less accumulated losses. Return on equity measures the profitability of equity funds unvested in the firm. It is very important measure because of it reflects the productivity of the ownership capital employed in the form. It is influenced by several factors like earning power debt equity ratios, and average cost of debt funds and tax rate.

6. Return on Assets (ROA)

The profitability ratio is measured in terms of the relationship between net profits and assets. The Return on Assets may also be called profit to asset ratio. There are various approaches possible to define net profit and assets. Profit after Tax Return on Total Assets = Total Assets The return on asset based on this ratio would be an under estimate as the interest paid the credit of is excluded from the net profits in point of fact the real return on total assets is the net earnings available to owners and interest as assets are financed by owners as well as creditors. x 100

CURRENT RATIO
Formula: Current Ratio = Current Assets / Current Liabilities Table - 4.1 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Current Assets 8253249.54 9739221.04 13733889.55 22187293.79 24584574.84 Current liabilities 15317152 14009570.35 12718155.8 20826752.12 21054785.98 Ratio 0.54 0.695 1.08 1.065 1.676

Current ratio

30000000

Ratio

25000000 20000000 15000000 10000000 5000000 0 2005-06 2006-07 2007-08 2008-09 2009- 10

Current A s s ets Current liabilities Ratio

Year

Interpretation of current ratio

The current ratio is the ratio of total current assets to total current liabilities. It is calculated by dividing current Assets by Current Liabilities, conventionally, a current ratio of 2:1 (Current Assets twice, Current Liabilities one) is considered satisfactory. The logic underlying the conventional rule is that even with a drop out of 50% in the value of current Assets, a firm can meet its obligation, i.e. a 100% margin of safety is assumed to be sufficient toward off the worst of situations. The current ratio of a firm measures its short tem solvency, i.e., ability to meet short-term obligation. As a measure of current Assets available for each rupee of current Liability/obligation. The higher Current Ratio, the larger the amount of rupees available per rupee of current Liability, the more the firms ability to meet current obligations and the greater safety of funds of short-term cretit. Conclusion: The current ratio of the SL GEW Ltd-is ranged between 0.34 times and 0.93 times during the study period. This ratio never reached the standard norm of 2.1. This indicates that the solvency position to meet short-term obligations.

QUICK ASSET RATIO (OR) ACID TEST RATIO:

Formula: Quick Ratio = Liquid Assets / Current Liabilities (Or) = (Current Assets Inventories) / Current Liabilites Table - 4.2 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Quick Assets 3643196.54 4082485.04 4972763.55 6665173.79 7494057.84 Current liabilities 15317152 14009570.35 12718155.8 208226752.1 262292022.4 Ratio 0.237 0.291 0.391 0.32 0.351

Quick ratio

300000000 250000000 200000000

Quick Assets Current liabilities Ratio

Ratio

150000000 100000000 50000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year

Interpretation of Quick Ratio

It is also known as liquid ratio. It is measure of judging the immediate ability of the company to pay off its current obligations. It is obtained by dividing Quick Current Assets by Current Liabilities. Quick Current would comprise those assets. This can be liquidated immediately and at minimum loss in order to meet pressing financial obligations. Thus, quick current asset consist of cash, These are called liquid asset, marketable securities, and accounts receivable.

because they can be converted into cash promptly or very shortly inventories are excluded from quick assets because they are slower to convey into cash and generally exhibit more uncertainly as to conversion price. The quick ratio of 1:1 usually considered ability to pay off its short-term obligation, liquidity of receivables must be kept in mind, for receivables adequate. But again while using this ratio as a measure of immediate, which are not collectibles, are not adequate to support the liquidity of the concern. decision. Conclusion The quick ratio of the society has varied from 0.164 times to 0.391 times with an average of 0.281 times. It is above the standard norm of 1:1 for the period of the study. It confirms that the liquidity position of the society is good. Therefore, factors such as size, age and location of the accounts receivables must be analyzed before reaching any final

CASH RATIO
Cash + marketable Securities Cash Ratio = Current Liabilities Table - 4.3 Cash+ Marketable Current liabilities securities (in Rs) (in Rs.) 253236.03 15317152 248091.99 14009570.35 522748.05 12718155.8 124023.11 20826752.12 153696.50 18745854.43

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Ratio 0.016 0.017 0.041 0.059 0.081

Cash ratio

25000000

Ratio

20000000 15000000 10000000 5000000 0

Cash+ Marketable securities (in Rs) Current liabilities (in Rs.) Ratio

Year
2005-06 2006-07 2007-08 2008-09 2009-10

Year

Interpretation of Cash Ratio

Although receivables, debtors and bills receivables are generally more liquid than inventories, yet there may be doubts regarding their realization of cash immediately or in time. Hence, some authorities are of the opinion that are absolute liquid ratio should also be calculated together with current ratio and acid test ratios. So as to exclude even receivables from the current assets and find out the absolute liquid assets. Absolute liquid assets include cash in hand in bank and marketable securities of temporary investments. The acceptable norm for this ratio is 50% or 0.5:1 or 1:2 i.e., Rs. 1 worth absolute liquid assets are considered in time as well as the creditors are not expected to demand cash and the same time then cash may also be realized from debtors and inventories. Conclusion: The satisfactory norm of cash ratio is 0.5:1 during the entire period of study the cash of ratio of KUSALAVA is at satisfactory level. Thus it is marinating as good cash balance.

DEBIT EQUITY RATIO

Long Term Debt Debt Equity Ratio = Share Holder Fund Table - 4.4 Share Holders Fund 19968160.38 22788607.97 27468231.32 26805693.38 26574581.55

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Long Term Debt 16734697.2 18960288 23340588.23 22165306 24156542.15

Ratio 0.838 0.832 0.849 0.826 0.909

Debt equity ratio

30000000 25000000 20000000 Long Term Debt 15000000 10000000 5000000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Share Holders Fund Ratio

Ratio

Year

Year

Interpretation of Debt-equity Ratio

The relationship between borrowed funds and owners capital is a popular measure of the long-term financial solvency of a firm. This relationship is shown by the debt-equity ratios. This ratio reflects the relative claims of creditors and share holders against the assets of the firm. Alternatively, this ratio indicated the relative proportions of debt and equity in financing the assets of a firm. The debt Equity ratio is an important structure of a firm. It has important implications from the viewpoint of the creditors, owners and the firm itself. A high ratio shows a large share the financing by the creditors relatively to the owners an, therefore a larger claim against the assets of the firm a low ratio implies a smaller claim of creditors. The debt equity ratio indicates the margin of safety to the creditors. If for instance the debt equity ratio is 1:2 it implies that for every rupee of outside liability, the firm has two rupees of owners capital or the stake of creditors in only half of the owners. There is therefore, a safety margin of 50% available to the creditors of the firm. Conclusion Normally 1:2 is a satisfactory level of debt-equity ratio. It is showing a normal position from the year 2003-2004 to 2008-2009.

FIXED ASSETS TURNOVER RATIO

Net Sales Fixed assets turnover ratio = Fixed assets Table - 4.5 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Sales 18232245 15300313 27879593 61886294.5 65435175.75 Fixed Assets 21743471.55 25215187.8 24743048.94 23785597.14 25758490.43 Ratio 0.84 0.61 1.13 2.6 2.54

Fixed asset turn over ratio

70000000 60000000 50000000 40000000 30000000 Sales Fixed Assets Ratio

Ratio

20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year

Interpretation of fixed Assets

Fixed assets turnover ratio s supposed to measure the efficiency with fixed assets are employed. The higher the turnover ratio that shows the management and utilization of assets. Low turnover ratio shows that of under utilization of available assets and presence of idle capital calculation the firm would normally required other things to change additional capital investment to operate at high level of activity. When fixed assets of the firm are old and substantially depreciated the fixed asset turn over ratio tends to be high. In such case fixed assets turnover ratio shows that ratio impression regarding the relative efficiency with where they are bring used. Conclusion A high fixed assets turnover ratio indicates efficient management utilization of Fixed assets. The fixed assets turnover ratio of KUSALAVA is satisfactory.

TOTAL ASSETS TURNOVER RATIO

Sales Total assets turn over ratio = Total assets Table - 4.6 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Sales 18232245 15300313 27899593 61886294.5 64858425.84 Total Assets 35285312.38 36798178.32 40186387.12 47632445.5 45254845.85 Ratio 0.52 0.41 0.69 1.3 1.43

Total asset turn over ratio

70000000 60000000 50000000

Ratio

40000000 30000000 20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Sales Total Assets Ratio

Year

Year

Interpretation of Total Assets Turnover Ratio

A firm ability to produce a large volume of sales for a given amount of assets is the most important aspect of its operating performance unutilized and under utilized assets increase the firms need for costly financing as well as expenses for maintenance and up keep. Assets turnover ratio measures firms efficiently the assets are employed. The higher the turnover ratio they show efficient the management, and utilization of assets. The low turnover ratios are indicative of under utilization of available resources and presence of firm capacity. The assets referred in assets turnover ratio include current also so assets turnover ratio indicates the efficiently of both fixed assets and current in generating sales. Conclusion The total assets turnover ratio of KUSALAVA is showing a fluctuation trend.

Debtors Turnover Ratio Credit sales Debtors turnover ratio = Ave. debtors Table - 4.7 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Sales 18232245 15300313 27879593 61886294.5 66858458.45 Debtors 3399960.51 3782871.05 3871877.25 6304993.68 6854524.15 Ratio 5.36 4.04 7.2 9.82 9.75

Debtor turn over ratio

80000000 70000000 60000000 50000000 Sales Debtors Ratio

Ratio

40000000 30000000 20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year

Year

Interpretation of Debtors Turnover Ration

The debtors turnover ratios analyze the total credit sales and average debtors amount. The debtors turnover ratio in SLGEW. Conclusion The debtors turnover ratio is shown in fluctuation trend the firm sould standardize the norm.

CREDITORS TURNOVER RATIO

Total Credit Purchase Creditors Turnover Ratio = Average Creditors Table - 4.8 Total Credit Purchase 8586961.78 7947144.05 22932364.92 57508244.41 58450584.54 Average Creditors 11461325.71 11118649.14 12186482.8 20703682.04 22845745.95 Ratio 0.75 0.71 1.88 2.78 2.55

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Creditors turnover ratio

70000000 60000000 50000000 40000000 Total Credit Purchase Average Creditors Ratio

Ratio

30000000 20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year

Interpretation of creditors turnover ration

This ratio analyzed by purchases and creditors. The creditors turnover ratio in KUSALAVA is fluctuation trend. Conclusion This ratio had sown some years lower position and some years higher position so the firm should standardize that one.

WORKING CAPITAL TURNOVER RATIO

Sales Working capital turnover ratio = Networking Capital Table - 4.9 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Sales 18232245 15300313 27879593 61886294.5 64584575.64 Working Capital -7063902.46 -4270349.31 1015733.75 1360541.67 1458245.85 Ratio -2.58 -3.58 27.44 45.48 44.28

Working capital turn over ratio

70000000 60000000

Ratio

50000000 40000000 30000000 20000000 10000000 0 -10000000 -20000000 2005-06 2006-07 2007-08 2008-09 2009-10 Sales Working Capital Ratio

Year

Interpretation of working capital Turnover Ratio

This ratio is analyzed by working capital and sales this ratio must be an increase in way. The working capital turnover ratio in SLGEW is negative trend and also positive trend. The firm should standardize the working capital. Conclusion This ratio is analyzed by working capital and sales this ratio must be an increase in way. The firm should standardize the working capital.

INVENTORY TURNOVER RATIO

Cost of Goods Sold Inventory Turnover Ration = Avg Inventory Table - 4.10 Year 2005-06 2006-07 2007-08 2008-09 2009-10 cost of Goods Sold -9687881.43 8656596.21 -20173871.11 -53034912.06 -34589825.45 Avg. Inventory 5056830.7 5133226 7208931 12141623 15478542 Ratio -1.92 1.68 -2.79 4.36 -2.23

Inventory turn over ratio

20000000 10000000

Ratio

0 -10000000 -20000000 -30000000 -40000000 -50000000 -60000000 2005-06 2006-07 2007-08 2008-09 2009-10 Series1 Series2 Series3

Year

Interpretation of inventory turnover ratio

It is also called stock turnover ratio. It helps us to know that the rate of inventories are converted into sales and then into cash. A low inventory turnover ratio indicates dull business. performance of the business. The inventory turnover ratio in SLGEW is negative trend and also positive trend. The firm should standardize the working capital. Conclusion The inventory turnover ratio is showing the negative trend in some years and positive trend in some years. So, the firm should standardize that one. A high inventory turnover ratio indicates good

GROSS PROFIT RATIO

Gross Profit Gross profit ratio = Sales Table - 4.11 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Gross Profit 8544363.7 6643716.79 7705721.89 8851382.44 8945728.74 Sales 18232245 15300313 27879593 61886294.5 58784752 Ratio 46.864 43.422 27.639 14.303 15.21 x 100

Gross profit ratio

70000000

Ratio

60000000 50000000 40000000 30000000 20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Gross Profit Sales Ratio

Year

Interpretation of profit Ratio

This is also known as gross margin. It is calculated by dividing gross profit by sales. A high ratio of gross profit to sales is a sign of good management as it implies that the cost of production of the firm is relatively low. A relatively low gross margin is definitely a danger signal, warranting a careful and detailed analysis of the factors responsible for it. The important contributory factors may be.
1. A high cost of production reflecting acquisition of raw materials and other

inputs on unfavorable terms inefficient utilization of current as well fixed assets and so on. 2. A low selling price resulting from severe competition inferior quality of the products, lack demands it. Conclusion The gross profit ratio of KUSALAVA is satisfactory i.e., it is effectively managing the manufacturing cost.

NET PROFIT RATIO

Net Profit x 100 Net Profit Ratio = Sales Table - 4.12 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Net Profit 16988.41 197089.04 247305.77 464627.47 526854.74 Sales 18232245 15300313 27879593 61886294.5 60584258 Ratio 0.093 1.288 0.887 0.751 0.869

Net profit ratio

70000000

Ratio

60000000 50000000 40000000 30000000 20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Net Profit Sales Ratio

Year

Interpretation of net profit Ratio

This ratio is also known as net margin. This measure the relationship profits and sales a firm. Depending on the concept of net profit employed ratio can be computed in 2 ways. The net profit margin of the firms managements ability to operate the business with sufficient success profit recovers from revenues of the period. The cost of merchandize of the expenses of operating the business (including deprecation) and the firms barrowed funds but also to leave a margin of reasonable compensation to owners for providing their capital risk. The ratio of net profit to sales is to margin shows ensure adverse economic conditions. When selling price is decreasing production is rising and demand for the product is falling. A low net profit margin has the opposite implications. However, a firm with a low profit margin capable then rate of return on investments, if it has a higher inventory turnover.

Net profit ratio

The net profit ratio of KUSALAV is almost all showing a negative of the study period expect in the year 2004-2005. It is negative factor in 2003-2004. Conclusion The net profit ratio of KUSALAV is not at all satisfactory. The performance of the society is good for the 2003-2004. So it should be improved.

RETURN ON TOTAL ASSET

Profit after Tax Return on Total Asset = Total Assets Opening Stock + Close Stock Avg Stock = 2 Table - 4.13 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Profit After Tax 8544363.57 6643716.79 7705721.89 8851382.44 9158458.54 Total Assets 35285312.38 36798178.32 40186387.12 47632445.5 48525458.25 Ratio 24.21 18.05 19.17 18.58 18.87 x 100

Return on total asset

60000000 50000000 40000000

Ratio

Profit After Tax Total As s ets R atio

30000000 20000000 10000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year Year

Interpretation of Return on Total Asset

The objective of computing the return on assets is to find out how effectively the funds pooled together have been used. Return on total assets indicates the productivity of total assets. The return on measures the profitability of funds/investments of the firm. A high ratio of net income to total assets in a sign of efficient utilization of assets. A low ratio would indicate that the assets of the firm are being under utilized or not being utilized properly in separating profit.

CHAPTER III FINDINGS AND SUGGESTIONS

Summary Financial statements are prepared primarily for decision making. They play a dominant role in setting the frame work of managerial decisions. Financial analysis is the process of identifying the financial strength and weaknesses of one firm by properly establishing relationship between the items of the balance sheet and be profit and loss account. There are various methods of techniques used in analyzing financial statements, such as comparative schedule of changing in working capital, trends analysis common-size statements, funds flow and cash flow analysis, cost-volume-profit analysis ratio analysis, one ratio analysis is the most powerful tool of financial analysis. The automobile markets around the globe with no notable competitors. However, after the end of the Second World War in 1945, the automobile industry gained momentum and within a very short period, beginning in the early 1980s, the US automobile industry was flooded with foreign automobile companies especially those of Japan and Germany. The current trend of the global automobile industry reveal that in the developed countries the automobile industries are stagnating as a result of the drooping car markets, where as the automobile industry in the developing the nations have been consistently registering higher growth rates every passing year for their flourishing domestic automobile markets. Society if Indian automobile manufacturers (SIAM) is the apex industry body representing 38leading vehicles and vehicular engine manufacturer in India. SIAM is an important channel of communication for the automobile industry with the government, national and international organizations. The society works closely with all the concerned stakeholders and actively participates in formulating of rules, regulations and policies related to the automobile industry.

Findings Current ratio of the company is good study on. So the margin of safety to the creditors is more.

The current ratio of the year 2003-2004 is 2.17 which refers to the current assets are more than the current liabilities. As sufficient idle current ratio is 2:1. So that current ratio of Kusalava International Limited is less than the standard norms through out the periods of study. So the current ratio is to be maximized.

Liquidity position of the company is satisfactory as it has more quick assets when compared to its current liabilities.

The quick ratio of the Kusalava International Limited for the year 20052006 is 3.10. The quick ratio standard norm is 1:1. So the quick ratio of Kusalav international limited is more than the standard norms through out the period of study. Hence, the quick ratio is to be minimized.

The inventory turnover ratio of Kusalava International Limited in the yar 2005-2006 is 9.63. The inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory turnover ratio indicates efficient management of inventory because of more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. Te inventory turnover ratio of Kusalava international Limited is improved year by year in 2003 to 2009.

There is a progressive change in holding the inventory during the year 20052006 compared to the previous years, as there is increase in sales. Inventory holding period is the period with in which stock will be converting into sales. So it was observed that management has good efficiency in handling the inventory.

Suggestions

From the financial statements it was observed that investments it was observed that investments made in current assets are more. So in order to reduce the idle funds and to utilize the working capital effectively. regarding investments in short-term assets. It suggested that the company should concentrate more in taking decisions

The investments in cash and bank balances should be minimized to the possible extent.

Kusalava International Limited having more number of sales on credit basis that will be loss in the form of costs like collection cost, capital cost. So the company should make a revision on its credit standards and policies to reduce the debtors and in order to increase the efficiency in collection performance.

The Kusalava International Limited should increase the profits by reducing manufacturing, office and administration, selling and distribution expenses.

The quick ratio of the Kusalava International Limited for the year 20052006 is 3.10. The quick ratio standard norm is 1:1. So the quick ratio of Kusalava International Limited is more than the standard norms through out the period of study. minimized. So it is suggested that the quick ratio is to be

It is suggested that, properly maintain the inventory turnover ratio is also very good symbol for the organization. Therefore, it is advised to maintain the same and it should try to increasing the same year by year. This ratio shows the inner strength and capability of the company.

BIBLIOGRAPHY
BOOKS: FINANCE MANAGEMENT FINANCE MANAGEMENT FINANCE MANAGEMENT FINANCE SENSE FINANCE MANAGEMENT (Theory and Practice) FINANCIAL ACCOUNTING : FINANCIAL SERVICES Booklets and other : S.J. JAIN AND K.L. NARANG SHASKI K. GUPTA NISHA AGARWAL on the progress of KUSALAVA : : : : : R.K. SHRMA SHAHS K. GUPTA KHAN AND JAIN I.M. PANDEY PRASANNA CHANDRA PRASANNA CHANDRA

publications

INTERNATIONAL LIMITED. Journal: Annual audit Report of KUSALAVA INTERNATIONAL LIMITED. Websites: www.kusalava.com