1.1 INTRODUCTION Financial management has vital and an integrated part of business management. Financial management is concerned with the planning and controlling of the firms financial resource. It is often said that the financial management has received less emphasis as compared to topics like production and marketing. However, the task of financial planning and controlling will assume relative more important role than in the past due to certain changes that have taken place or will take place in economy. Factors such as increasing pace of industrialization, technological innovations land inventions, raising price levels, increasing influence of government in financial matters etc...DEFINATION OF FINANCIAL MANAGEMENT: Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resources.OBJECTIVES OF FINANCIAL MANAGEMENT: The financial objective of a company is to maximize owners economic welfare. However, there is disagreement as to how the economic welfare of owners can be maximized. They are mainly two points discussed.1. Profit maximization2. Wealth maximization

OBJECTIVES OF PROFIT MAXIMIZATION:1. An individual or firm performing any economic activity rationally aims at utility maximization. Utility can be measure in terms of profit.2. Profit maximization assumes perfect competition.3. Enhancement of personal power and individual wealth.4. The modern business environment is characterized by limited liability and a divorce between management and ownership.5. Profit maximization is regarded as unrealistic, difficult, inappropriate and immoral.6. A market economy, characterized by a high degree of competition, would certainly ensure efficient production of goods and services desired by society.Profit maximization suffers from the following limitations1. It is vague 2. It ignores the timing of returns3. It ignores risk.

WEALTH MAXIMIZATION: Wealth maximization means maximizing the net present value of a course of action to shareholders. Wealth of a course of action is the difference between that present value of its benefits and the present value of its costs.1. Questions of the timing and risk of the expected benefits.2. Wealth maximization objective is an appropriate and operationally feasible criterion to choose among the alternative financial actions.3. Maximize in making investment and financing decisions on behalf of shareholders.

1.2 RATIO ANALYSISFinancial Analysis is the process of identifying the financial strengths and weaknesses of the firm by the properly establishing relationship between the items of the Balance Sheet and the Profit and Loss Account. Financial Statement Analysis is managerial interpretation of financial statements for parties demanding financial information. Ratio Analysis is a widely used tool financial analysis. The term ratio in it refers to the relationship expressed in mathematical terms between two individual figures or group of figures connected with each other in some logical manner and are selected from Financial Statements of the concern. A financial Ratio helps to express the relationship between two accounting figures in such a way that users can draw conclusions about the performance, strength and weaknesses of a firm. A ratio reflecting a quantitative relationship helps to from a qualitative judgment.A single ratio does not convey much meaning and has to be compared with some standard. Standard of comparison may consist of:1. Past Ratios2. Projected Ratio3. Competitors Ratios4. Industry ratios

Time Series Analysis:When financial ratios over a period are compared, it is known as the time series analysis. The performance of a firm is evaluated by comparing its present ratios with past ratios.

Cross-Sectional Analysis:Comparing the ratios of one firm with some selected firms in the same industry at the same pint in time is known as the cross-sectional analysis. Pro Forma Analysis: The comparison of current (or) past ratios with future ratios is projected analysis or pro forma analysis. It shows the firms relative strengths and weaknesses in the past and future. Future ratios can be developed from the projected or pro forma, financial statements. Utility of Ratio Analysis:The Ratio analysis is the most powerful tool of financial analysis with the help of ratios one can determine: The ability of the firm to meet its current obligations; The extent to which the firm has used its long-term solvency by borrowing funds; The efficiency with which of the firm is utilizing its assets in generating sales revenue. The overall operating efficiency and performance of the firm.

Performance Analysis: A short-term creditor will be interested in the current financial position of the firm, while a long-term creditor will pay more attention to the solvency of the firm. He will also be interested in the profitability of the firm. The equity shareholders are generally concerned with their return and also about the financial conditions only when their earnings are depress. Credit Analysis: In credit analysis, the analyst will usually select a few important ratios. He may use the current ratio or quick-ratio to judge the firms liquidity or debt-paying ability debt-equity ratio to determine the stake of the owners in the business and the firms capacity to survive in the long run and any one of the profitability ratios. Security Analysis: The ratio analysis is also useful in security analysis. The major focus in Security Analysis is on the long-term profitability. The detailed analysis of The earning power is important for security analysis. Comparative Analysis:The ratio of a firm by themselves does not reveal anything. For meaningful Interpretation, the ratios of a firm should be compared with the ratios of similar firms and industry. This comparison will reveal whether the firm is significantly out of line with its competitors. If it is significantly out of line, the firm should undertake a detailed analysis to spot out the trouble areas. Trend Analysis: Trend analysis of the ratios adds considerable significance to the financial analysis because it studies ratios of several years and isolates the exceptional instances occurring In one or two periods. Although the trend analysis of the companys ratios itself is Informative, but it is more informative to compare the trends in the companys ratios with the trends in industry ratios. Management has to protect the interest of all the conditional parties, creditors, Owners and others. They have to ensure some minimum operating efficiency and keep the risk of the firm at a minimum level. Their survival depends upon their operating Performance.RATIO ANALYSISThe term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as Percentages Fractions Proportion of numbersRatio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment.STEPS IN RATIO ANALYSIS The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm. Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action

BASIS OR STANDARDS OF COMPARISONRatios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types. Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the some most progressive and successful competitor firm at the same point of time. Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or pro forma financial statements.NATURE OF RATIO ANALYSISRatio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis. Selection of relevant data from the financial statements depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.

INTERPRETATION OF THE RATIOSThe interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways. Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparisonGUIDELINES OR PRECAUTIONS FOR USE OF RATIOSThe calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

OBJECTIVES (OR) PURPOSE OF RATIO ANALYSIS: The nature of analysis will differ depending on the purpose of the analyst. It can be undertaken by management of the firm, or by parties outside the firm namely owners, creditors, investors and others Trade Creditors: They are interested in firms ability to meet their claims over a very short period of time. Hence their analysis is confined to evaluation of the firms liquidity position. Suppliers of long-term debt: They are concerned with firms long-term solvency and survival. They analyze the firms profitability over time, its ability to generate cash to be able to pay interest and repay principal and the relationship between various sources of funds. Investors: They are most concerned about the firms earnings. They are also interested in every aspect of the firms financial structure to the extent it influences the firms earnings ability and risk. Management: They would be interested in every aspect of Financial Analysis. It is their overall Responsibility to see that the resources of the firm are used most effectively and efficiently, and that the firms financial condition is sound.

USERS OF RATIO ANALYSIS:a) Financial analysis is the process of identifying the financial strength and weakness of firm by properly establishing relationship between the items of balance sheet and the profit and loss account.b) Trade creditors are interested in firms ability to meet their claims over a very short period of time. Their analysis will therefore, confine to the evaluation of the firms liquidity position.c) Suppliers of long-term debt are concerned with firms long-term solvency and survival. They analysis the firms profitability overtime. Its ability to generate cash to be able to pay interest and repay principal and relationship between various sources of funds.d) Investors, who have interested their money in the firms. Shares are almost concerned about the firm earnings. They restore more confidence in thos3e firms that shows steady growth in earnings.e) As such, they concentrate on the analysis of the firms financial structure to the extent it influence the firms earnings ability and risk.f) Management of the firm would be interested in every aspect of the financial analysis. It is their overall responsibilities to see that the resources of the firm are used most effectively and efficiently, and that the firms financial condition is sound.

MANAGERIAL USES OF RATIO ANALYSIS:1. Help in decision making: Financial statements are prepared preliminarily for decision making. But the information provided in financial statements is not an end in itself and no meaningful conclusion can be drawn from these statements alone. Ratio analysis helps in decision making decisions from the information provided in these financial statements.1. Helps in financial forecasting and planning:Ratio analysis is of much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of years work as a guide for future. Meaningful conclusions can be drawn for future from these ratios. Thus ratio analysis helps in forecasting and planning.

2. Helps in communication: The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios. The information contained in the financial statements is conveyed in a meaningful manner to the one for even if it meant. thus, ratios help in communication and enhance the value of the financial statements.3. Helps in co-ordination : Ratios even in co-ordination which is of at most importance in effective business management. Better communication of the efficiency and weakness of an enterprise results in better co-ordination in the enterprise.4. Helps in control:Ratio analysis is also helps in making effective control of the business. Slandered ratios can be based upon Performa of financial statements and variances or deviations, if any, can be found by comparing the actual with the standard so as to take a corrective action at the right time.

IMPORTANCE OF RATIO ANALYSIS In the preceding discussions, we have illustrated the computation and the implication of the important ratio that can be calculated from the balance sheet and profit and loss accounts of the firm. As a tool of financial management, they are of crucial significance. The importance of ratios analysis lies in his fact that it presents facts on a comparative basis and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects. Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool

LIQUIDITY POSITION: With the help of ratio analysis conditions can be drawn regarding the liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. A firm can be said to have the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short-maturing debt usually within a year as well the principal. The liquidity ratios are particularly useful in credit analysis by bank and other suppliers of short-term loans.LONG-TERM SOLVENCY: Ratio analysis is equally useful for assessing the long-term financial liability of a firm. The long-term solvency is measured by the leverage and capital. Structure and profitability ratios which focus on earning power and operating efficiency. Ratio analysis reveals and weakness of a firm in this respect.OPERATING EFFICIENCY: Yet another dimension of his usefulness of the ratio analysis, relevant from the viewpoint of management, hates it brows light on the degree of efficiency in the management and utilization of its assets. It would be recalled that the various activity ratios measure this kind of operational efficiency. INTER-FIRM COMPARISON: Ratio analysis not only throws light on the financial position of a firm but also serves as a stepping stone to remedial measures. This is made possible due to inter firm comparison would demonstrate the relative position vis--vis its competitors.TREND ANALYSIS: Ratio analysis enables a firm to take the time dimension into account in other words, whether the financial position of a firm is improving or deteriorating over the years. The significance of the trend analysis of ratios lies in the fact that the analysis cans now direction of improvement i.e. whether the movement is favorable or unfavorable.

LIMITATIONS OF RATIO ANALYSIS Ratio analysis is a widely used tool of financial analysis. But it suffers from various limitations. The operational implication of his is that while using ratios, the conclusions should not be taken their fact values. Some of the limitations which characterized analysis are;DIFFICULTY IN COMPARISION: Once serious limitation of ratio analysis arises out of the difficulty associated with their comparison to draw inferences. One technique that is employed is inter-firm comparison. But such comparisons are vitiated by different procedure adopted by various firms. The differences may relate to estimation of assets and amortization of intangible assets etc..IMPACT OF INFLATION: The second major limitation of the ratio analysis as a tool of financial analysis is associated with price level changes. This, in fact, is a weakness of the traditional financial statements which are based on historical costs. The one implication of this future of the financial statements as regards ratio analysis in the price level. As a result, ratio analysis will not adjust for changes in the price level. As a result, ratio analysis will not yield strictly comparable and, therefore, dependable results.CONCEPTUAL DIVERSITY: Yet another factory which affects the usefulness of ratios is that there are differences of opinion regarding the various concepts used to compute the ratios. In brief, ratio analysis suffers from serious limitations. The reliability and significance attached to ratios will largely depend on the quality of data on which they are based.LIMITED SCOPE: Ratio analysis is not suitable for sound judgment rather is useful tool to aid in applying judgment to complex situation. But its scope is limited.

1.3 NEED FOR THE STUDY The analysis helps company to assets its position which is to be introduced and standardized for this organization. Which is looking ahead and the ratios calculated for a number of years work as a guide for the future. The financial strengths and weakness of firm are communicated in a more easy and understandable manner by the user of ratios. Ratio analysis also helps in effective control of the business.

2.1 INDUSTRY PROFILEINTRODUCTION Brass is a metal composed primarily of copper and zinc. Copper is the main component, and brass is usually classified as a copper alloy. The color of brass varies from dark reddish brown to a light silvery yellow depending on the amount of zinc present; the more zinc, the lighter the color. The zinc content can vary between 10% to about 45 %.HISTORY OF THE BRASS INDUSTRY The discovery of metal changed the lives of the people in the ancient world. Metal and its alloy made agriculture easier, providing farmers with more efficient tools to work their land. Armies that possessed metal kanives, swords, and shields were no match for those that did not. The first two metal and its alloy widely used by humans, copper (and its alloy brass) and gold are still important in peoples lives today. Romans were the first to use brass, as alloy of copper and zinc, on any significant scale, although Greeks were already well acquainted with the metal in Aristotles time (330 B.C.) Greeks knew it as Oreichalcos a brilliant white copper, which was made by mixing tin and copper with a special earth called Calmia or calamine. Calamine was an impure zinc carbonate, which was rich in silica and found on the shores of the black sea. To make brass, ground calamine ore and copper were to the metallic state but not high enough to melt copper. However, zinc vapor permeated the copper and formed the copper and formed brass, which then melted.

In antiquity the words bronze and brass did not exist. Brass is an English word derived from braes (Old English) and bras or bras (Middle English) about 1200 AD26 In the language of Tudor England, brass stood for any copper alloy, and the King James Bible uses the word in that context. Joseph Smith, favoring the King James Bible, translated the Book of Mormon using brass in the same manner.The Industrial Revolution The industrial revolution brought about a tremendous change in the production of copper and its alloy, beginning with a demand for more and better raw material. Mine production rose as steam driven pumps were applied to remove water from diggings. Smaller throughput increased as well, largely due to faster remove of impurities from ore. Brass has long been the first material of choice in the construction of measuring instrument for use of sea or in any moist, salt-laden atmosphere. This is due not only to the corrosion resistance of brass but also to its good machinability.The Modern Era The enormous growth in world copper demand between 1850 and 2000, this growth was initiated by a series of advances in copper using technologies, Whereas total demand at the end of the 19th century was about 500,000 mT. 1992 forecasts of world copper consumption were 14,630,000 mT. For the year 2000 and 17, 900,000mT. For 2005.World Reserves The largest and commercially most important deposits are those in the mountainous spine of south America and western north America, principally in the United State and Chile but also include Canada, Mexico and Peru, large and important deposits are located in south central Africa, principally in Zaire and Zambia. Together, north and South America and Africa contain more than one half of the known copper deposits in the world. However, Europe (primarily Russia and the confederation of Independent states of CIS) and the Pacific Rim (Chiefly Australia and Papua New Guinea) also contain copper mineralization. South America holds the largest shares of both reserves (31.1% if the world total) and reserve base (18.5%). North and Central America follow, with 22.7% and 24.9% of world reserves and reserve base, respectively. Among individual countries, Chile has the largest fraction of the total reserve base at 19%, the United States ranks 2nd with 18%; the C.I.S and Zambia each have 7%; while Canada Peru, and Zaire each account for 6%.Brief History of brass industries in India The story of Indian Brass as is generally known began during the age of the Indus Valley civilization i.e. around 2400BC to 1700BC.38 the extraction of this spread to other sites such as Kalibangan in Rajasthan, Lothal in Gujarat and Laimabad in Maharashtra. The two most well known sites are of course Mohanjodaro and Harappa. The Harappan figure of a dancer, with her carfree stance, is one of the first metal sculpture pieces discovered in India.39 The large Buddha figure at Sultanganj is possibly the largest surviving metal work of ancient time and is a monument to the skill of Indian craftsmen in melting and casting metal. The important clusters of the brass in the Southern and Western regions are Pembertha and Hyderabad in Andhra Pradesh; Bidar, Negamangala, Mysore and Gadag in Karnataka (Bidriwar); Swamimalai, Nachiarkoil, Madurai, umbakonam, Tirupur and Tanjore in Tamil Nadu; Ambarnath, Thana, Kalyan and Nasik in Maharashtra; Trichur in Kerala; Jamnagar in Gujarat and Pondicherry, etc. Moradabad in Uttar Pradesh is world famous for its range of brass items. A wide range of household items like pots, trays, bowls and decorative pieces are made here and are decorated with intricate etching. Electroplated brass and copper items and items made of white metal are also created in Moradabad. Banaras is known for cast sculptures of deities and household utensils made of brass and copper. Varanasi, in Uttar Pradesh is the first city in India for the multitude of its cast and sculptured mythological images and emblematic in brass and copper as well as household utensils. Mirzapore is now one of the most important centers of the brass utensils industry in Uttar Pradesh. It supplies the needs of a large part of the State and even exports articles of household use to other Countries.

Raw Materials The main component of brass is copper. The amount of copper varies between 55% and 95% by weight depending on the type of brass and its intended use. Brasses containing a high percentage of copper are made from electrically refined copper that is at least 99.3% pure to minimize the amount of other materials. Brasses containing a lower percentage of copper can also be made from electrically refined copper, but are more commonly made from less expensive recycled copper alloy scrap. When recycled scrap is used, the percentages of copper and other materials in the scrap must be known so that the manufacturer can adjust the amounts of materials to be added in order to achieve the desired brass composition. The second component of brass is zinc. The amount of zinc varies between 5% and 40% by weight depending on the type of brass. Brasses with higher percentages of zinc are stronger and harder, but they are also more difficult to form and have less corrosion resistance. The zinc used to make brass is a commercial grade sometimes known as spelter. Some brasses also contain small percentages of other materials to improve certain characteristics. Up to 3.8% by weight of lead may be added.Further Alloying Additions Alloying additions are made to the basic copper-zinc alloys for a variety of reasons:-1. To improve mach inability1. To improve strength1. To improve corrosion resistance1. For other special reasons

The Manufacturing Process The manufacturing process used to produce brass involves combining the appropriate raw materials into a molten metal, which is allowed to solidify. The shape and properties of the solidified metal are then altered through a series of carefully controlled operations to produce the desired brass stock. Brass stock is available in a variety of forms including plate, sheet, strip, foil, rod, bar, wire, and billet depending on the final application. For example, brass screws are cut from lengths of rod. The zigzag fins used in some vehicle radiators are bent from strip. Pipes and tubes are formed by extruding, or squeezing rectangular billets of hot brass through a shaped opening, called a die, to form long, hollow cylinders.1. Melting1. Hot rolling1. Annealing and cold rolling1. Finish rolling1. Quality ControlFEATURES OF BRASS Brass has a combination of strength, corrosion resistance, and formability that will continue to make it a useful material for many applications in the foreseeable future.68 Brass also has an advantage over other materials in that most products made from brass are recycled or reused, rather than being discarded in a landfill, which will help ensure a continued supply for many years.1. Excellent Machinability1. Good Strength1. Ductility1. Conductivity1. Easily Joining1. Non-sparking1. Good Corrosion Resistance1. Wear Resistant1. Plating1. Attractive Colour1. Hygiene1. Magnetic permeability1. Cast ability

2.2 COMPANY PROFILE M/S Jyothi Brass metal works is a renowned company located in Anantapur city of ANDHRA PRADESH. It is proprietorship based company. It was started or established in the year 2000. The main bankers of the company are State Bank of India, Main Branch, Sainagar, and Anantapur with the work force numbering up to 45. Brass metal works has made tremendous inroads in to the Builders Hardware in India. They manufacture various hardware products of Builders Hardware from extruded brass such as Tower bolts, hinges, Door handles, Window Rings, Doorstoppers, Baby latches etc under the brand name called JYOTIBRASS the quality and perfect brass. Jyoti brass brand enjoys 25% of the market share in the brass industry. The company is manufacturing the products catering to the needs of particular and specific customers. The target market changes from place to place like special extruded brass and gold coated products catering to the needs of the customers in coastal place, South-Eastern parts of India where the chances of corrosion of the hardware material is very high.Due to superior quality the Jyoti brass Brand has made an everlasting impact in the minds of the customers. Though the products are highly prices Jyotibrass Brand is increasing its market share, this is possible due to its superior quality and the excellent after sales service. The product got ISI marked licenses granted by M/S. Bureau of Indian standards is the first company to get ISI mark in brass.1) Tower Bolts : CM/L 63729762) BUTT HINGES : CM/L 6387787An ISO 9001:2000 certified company The company has a wide network of dealers of up to 60 and a strong sales force. These sales persons shall target the dealers and produce the orders from them. The turnover of the company is over 1 crore during 2006 -07. The basic raw material of the company is the Brass extruded sections. The raw material is bought from various companies like Jindal, Balco, Hindalco etc after succeeding in the hardware industry the company lying with the ideas of manufacturing the basic raw material of the hardware industry Brass extrusions. Extruded brass outstands in quality and strength than conventional cast and machine draw hardware. Extruded hardware will have more molecular strength and better surface finish. Extrusions are made from a uniform combination of alloys giving high tensile strength with micro sized molecules giving no chance for blowholes. When the alloy is in uniform combination there will not be impurities and the extrusion becomes harder in comparison with cast materials. "JYOTIBRASS" hinges are recommended for heavy doors and shutters. JYOTIBRASS offers a better protective finish by giving ELECTRO-PHORETIC coating which is ever coat and the latest technology in surface finish rendering the product weather resistant, durability of the finish depends on the coating and at "JYOTIBRASS" gives a polished brass finish with ever coat. This is a "state-of-the-art" process depositing hardwearing material on the brass surface. This microscopic layer protects the product from discoloration, even at the harshest of environments such as sunlight, pollution and humidity etc, Hence "JYOTIBRASS" products are introduced with added strength better surface finish and weather resistant requiring no maintenance at all.

LIST OF MAJOR PROJECTS SUPPLIED1) Seabird Township of Indian Navy Project, Karwar (Larsen & Toubro Ltd.,)2) Larsen & Toubro Ltd., A1, B1, C1 & C2, C3, C4, D1 & D2 Towers of Serene County Project, Hyderabad.3) L & T Ltd., South City PDD, Renka, Bannerghatta Road, Bangalore.4) Surya city, Bangalore and other different projects of Karnataka Housing Board, Bangalore.5) Leo Meridian, Hyderabad.6) India Heritage Foundation, ISKON, Bangalore.7) Ramky Infrastructure Ltd., Cuddapah.8) D.S.R. Constructions, Bangalore.9) Subham Developers, Hyderabad.10) Aparna Constructions, Hyderabad.11) NCL (Jampana Constructions), Bangalore.12) M/s. B.G. Shirke Const. Technology Ltd., Bangalore, Mysore and Pune.13) Karnataka State Housing Board Projects through Contractors.14) Medical Colleges, Belgaum and Hassan, Shimoga and Mandya under PWD.15) Ambience Properties, Secunderabad.16) APR Constructions, Hyderabad.17) Omega Constructions, Hyderabad.18) P.L. Raju Constructions, Hyderabad.19) Venser Constructions, Hyderabad20) Ramky Constructions, Hyderabad.21) Sreenivasa Constructions, Hyderabad.22) DLF Constructions, Hyderabad.23) Alience Construction Ltd., Hyderabad.24) IVRCL Infrastructure Medical College, Bidar.25) IVRCL Navel Project, Payyanur, Kerala State.26) Navayuga Construction Navel Project, Payyanur, Kerala State.27) Nagarjuna Constructions, Ernakulam.28) RDS Constructions, Ernakulam.

3.1 RESEARCH METHODOLOGYFor the preparation of a project the collection of data is very essential.(1) PRIMARY DATA In view of the objectives of the study, data collected mainly interactions and discussions with the companys executives, an expletory research is one, which largely interprets the already available information, and it lays particulars emphasis on analysis and interpretation of the existing and available information. It makes use of secondary data. (2) SECONDARY DATA Secondary data is collected from the annual reports of jyothi brass metal works during for the last five years and various other reports like companys magazines journals published books and journals and web sites.

LITERATUREBooks: The information, which are required for the net working capital and ratio analysis from I.M.Pandey, Prasanna Chandra & M.Y.Khan & P.K. Jain books.Journals:Journals are used for finding out new ideas and information required for the research work.Internet:Internet has been used to get more information for the research from various web sites like, www.Moneycontrol.com & www.google.com to explore new ideas to be implemented in the statistical tools Company records: Made a thorough investigation about the companys existing ventures, new additions to capture the attention towards Ratio Analysis.

3.2 OBJECTIVES OF THE STUDY To study the financial performance of the jyothi brass metal works. To analyze he liquidity position of the company. To study the financial leverage of the company over a period of five years. To analyze the profitability of the company. To conduct an in depth study in the working of the organization. The comparison of past and present performance helps to understand the companys efficiency level.

3.3 SOURCE OF DATAResearch Design: To analyze the working capital, trends and for the purpose of ratio analysis, Financial Analysis has to be carried out. Financial analysis is the analysis and interpretation of financial statements and a proper financial analysis can give the users better insight about financial strengths and weakness of the firm. Financial analysis is the starting point for making plans, before using any sophisticated forecasting and planning procedure. For the purpose first the required information has to be collected like for ratio analysis and owing capital management analysis, income statements, trading and profit and loss accounts, balance sheet, funds flow statement, etc. are to be collected the, the data in the statements is to be properly organized and arranged and then relationship is established between financial statements and finally conclusions are drawn from the interpreted information and presented in the form of reports.

Research Methodology: Research involves getting tools, ideas from texts, journals, books, records, Websites. The collection of data is an important aspect of Research.The sources of information fall under two categories.Internal Sources: - Every company keeps certain records such as accounts, records, reports, etc. These records provide sample information for research.External Sources: - When internal records are insufficient and required information is not available the organization the organization depends on eternal sources. The external sources of data are:I. Primary DataII. Secondary Data(I) Primary Data: - The data collected for a purpose in original and for the first time is known as primary data. The data collected by the researcher himself to study a particular problem.The primary data of the study is collected through interaction and discussion with the officials and the staff an M/S JYOTHI BRASS METAL WORKS ANANTAPUR.(II) Secondary Data: - The data which is collected from the published sources that is for the first time is called secondary data. The secondary data for the study is collected from the annual reports of M/S JYOTHI BRASS METAL WORKS ANANTAPUR from 2008 to 2012

Data Analysis: - Data analysis is done by implementing various tools like ratio analysis, trend analysis, etc.3.4 CLASSIFICATIONS OF RATIOSThe use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows:1. Traditional Classification2. Functional Classification3. Significance ratios1. Traditional ClassificationIt includes the following. Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc., Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional ClassificationThese include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.3. Significance ratiosSome ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.TYPES OF RATIOS Several ratios, calculated from the accounting data, can be grouped into various classes according to financial activity of function to be evaluated. The management is interested in evaluating every aspect of the firms performance. They have to protect the interest is in the liquidity position or the short-term solvency of the firm; Long-term creditors are more interested in the long-term profitability and financial condition. IN the view of the requirements of the various users of ratios, we may classify them into the following categories. Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationship between items on two financial statements. After calculating ratios for each years financial data, the analyst can then examine trends for the company across years. Since ratios adjust for size, using this analytical tool facilities intercompany as well intercompany comparisons. Ratios are often classified using the following terms: Liquidity Ratios Leverage Ratios Activity Ratios ProfitabilityProfitability ratios are gauges of the companys operating success for a given period of time.

Liquidity ratios are measures of the short term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Solvency ratios indicate the ability of the company to meet its long term obligations on a continuing basis and thus to survive over a long period of time. In judging how well on a company is doing, analysts typically compare a companys ratios to industry statistics as well as to its own past performance.

Goals A. Managerial uses of ratio analysis: Helps in decision making. Helps in financial forecasting and planning. Helps in communicating Helps in co-ordination. Helps in Control. Utility to share holders.B. Utility to creditors.C. Utility to employees.D. Utility to government.

CLASSIFICATION OF RATIOSLIQUIDITY RATIO1. Current ratio

2. Liquidity ratio

3. Absolute ratio

LEVERAGE RATIO1. Debt equity ratio2. Debt to total capital ratio3. Interest coverage ratio.4. Capital gearing ratio5. Equity ratio6. Fixed assets to net worth ratio7. Fixed assets ratio8. Current assets to proprietors ratio.9. Solvency ratio

ACTIVITY RATIO1. Inventory turnover ratio2. Debtors turnover ratio3. Fixed assets turnover ratio4. Total assets turnover ratio5. Working capital ratio6. Payable turnover ratio

7. Capital employed ratio

PROFITABILITY RATIOS1. Gross profit ratio

2. Operating ratio

3. Operating profit ratio4. Net profit ratio

5. Return on investment ratio6. Return on equity capital

7. Return on total resources8. Earnings per share9. Price earnings ratio

A.LIQUIDITY RATIOS Liquidity Ratios measure the ability of the firm to meet its current obligations. In fact, analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements; but liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity. The failure of a company to meet its obligations due to lack of sufficient liquidity, will result in a poor creditworthiness, loss of credit worthiness, loss of creditors confidence, or even in legal tangles resulting in the closure of the company. A very high degree of liquidity is also bad; idle assets earn nothing. The most common ratio which indicates the extent of liquidity or lack of it is;1. Current ratio2. Quick ratio (or) acid-test ratio3. Absolute liquid ratio (or)cash ratio 1. CURRENT RATIO:The current ratio is a measure of the firms short-term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims against them.Current ratio is calculated by dividing current assets by current liabilities. Current AssetsCurrent Ratio= ------------------------------ Current Liabilities

Components of current ratioCURRENT ASSETSCURRENT LIABILITIES

Cash in handOutstanding or accrued expenses

Cash at bankBank over draft

Bills receivableBills payable

InventoriesShort-term advances

Work-in-progressSundry creditors

Marketable securitiesDividend payable

Short-term investmentsIncome-tax payable

Sundry debtors

Prepaid expenses

. The two basic components of this ratio are current assets and current liabilities. Current assets include Cash and these assets which can be easily converted into cash within a short period of time generally one year. Current assets are those obligation which are payable within a short period of generally one year. An ideal current ratio in 2:1. As a convention the minimum of two to one ratio is referred to as a bankers rule of thumb or arbitrary standard of liquidity for a firm. A ratio equal or near to the rule of thumb of 2:1 be current assets double the current liabilities is considered satisfactory. A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligation in time as when they become due. On the other hand relatively low current ratio represents that the liquidity position of the firm is not good and the a ratio equal or near to the rule of thumb of 2:1 be current assets double the current liabilities is considered satisfactory. A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligation in time as and when they become due. On the other hand a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties.

2. QUICK RATIO: Quick ratio is also called acid test ratio, establishes a relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonable soon without a loss of value cash is the most liquid asset. Quick assets are debtors and bills receivables and marketable securities. Quick ratio is found out by dividing quick assets by current liabilities. Quick AssetsQuick Ratio = --------------------------------- Current Liabilities

Components of Quick (or) Liquid RatioQUICK ASSETSCURRENT LIABILITIES

Cash in handOutstanding or accrued expenses

Cash at bankBank over draft

Bills receivableBills payable

Sundry debtorsShort-term advances

Marketable securitiesSundry creditors

Temporary investmentsDividend payable

Income tax payable

The quick ratio is very useful in measuring the liquidity position of firm. It measures the firms capacity to pay off current obligations immediately and is a more rigorous test of liquidity than ratio. It is used as a complementary ratio to the current ratio. A quick ratio may be defined as the relationship between quick assets and current liabilities. Quick asset is found by subtracting inventories and prepaid expenses from current ratio. As a rule of thumb or as convention quick ratio of 1:1 is considered satisfactory. It is generally thought that if quick assets are equal to current liabilities than the concern may be able to meet its short-term obligations. Usually, a light acid test ratio is an indication that the firm is liquid and has the ability to meet it current or liquid liabilities in time and on the other hand a low quick ratio represent that the firm liquidity position is not good.3. CASH RATIO (OR) ABSOLUTE LIQUID RATIO: Cash is the most liquid asset a financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investment or marketable securities are equivalent of cash. Cash + Marketable SecuritiesCash Ratio = ----------------------------------------------------------- Current Liabilities

Components of Absolut Liquid RatioABSOLUTE LIQUID ASSETSCURRENT LIABILITIES

Cash in handOut standing or accrued expenses

Cash at bankBank over draft

Interest on Fixed DepositBills payable

Short-term advances

Sundry creditors

Dividend payable

Income tax payable

Although receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, some authorities are of the opinion that absolute liquid ratio should also be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find at the absolute liquid assets. Absolute liquid assets include cash in hand and at bank and marketable securities or temporary investments. The acceptable norm for this ratio is 50% or 5:1 or 1:2 i.e. Re.1 worth absolute liquid assets are considered adequate to pay Rs.2 worth Current liabilities in time as all creditors are not expected to demand cash at the same time and then cash may also be realized from debtors and inventories.B. LEVERAGE RATIOS: The short-term creditors, like bankers and suppliers of raw material, are more concerned with the firms current debt-paying ability. Long-term creditors like debenture holders, financial institutions etc. are more concerned with the firms long-term financial strength. To know the long-term financial position of the firm, financial leverage, or capital structure ratios are calculated. These ratios indicate mix of funds provided by owners and lenders. It has number of implications those area) Between debt and equity, debt is more risky from the firms point of view.b) Use of debt is advantageous for shareholders in two ways.1. They can retain control of the firm with a limited stake.2. Their earning will be magnified.3. A highly debt burdened firm will find difficulty in raising funds from Creditors and owners in future. Leverage Ratios are calculated to measure the financial risk and firms ability of using debt to shareholders advantage. Leverage ratio may be calculated from the balance sheet items to determine the proportions of debt in total financing.1. Debt ratio2. Debt equity ratio3. Capital employed to net worth ratio4. Interest coverage ratio5. Fixed charge coverage ratio

1. DEBT RATIO: Several debt ratios may be used to analyze the long-term solvency of a firm. The firm may be interested in knowing the proportion of the interest-bearing debt in the capital structure. Total debt includes short and long-term borrowings from financial institutions, debentures, deferred payment arrangements for buying capital equipments, bank borrowings, public deposits and any other interest-bearing loan. Capital employed will include total debt and net worth (NW).Debt ratio is calculated as dividing total debt (TD) by capital employed (CE) or net assets (NA). Total DebtDebt Ratio = -----------------------------------------Total Debt +Net Worth

2. 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 b the debt-equity ratios. This ratio reflects the relative claims of creditors and shareholders against the assets of the firm. The debt considered here is exclusive of current liabilities. The debt equity ratio is an important tool of financial analysis to appraise the financial structure of firm. The ratio reflects the relative contribution of creditors and owners of business in is financing. A high ratio shows a large share of financing by the creditors relatively to the owners and therefore a larger claim of creditors. The ratio is 1:2; it implies that for every rupee of outside liability, the firm has two rupees of owners. There is therefore a safety margin of 50% available to the creditors of the firm. Total DebtDebt Ratio = ----------------------------------------------- Share Holders equity

A high debt-equity ratio has equally serious implications from the firms point of view. The high proportion of debt in the capital structure would lead to inflexibility in the operations of the firm. A low debt-equity ratio has just the opposite implications.3. CAPITAL EMPLOYED TO NET WORTH RATIO There is yet another alternative way of expressing the basic relationship between debt and equity. It describes how much funds are being contributed together by calculating the ratio of capital employed or net assets to net worth. Capital EmployedCapital Employed To Net Worth Ratio = ------------------------------- Net Worth

4. INTREST COVERAGE RATIO:Interest coverage ratio is also called as debt service ratio or fixed charges cover. This ratio is valuable in providing information as regards the no. of times interest charges are covered by funds available for interest payment. It is calculated by dividing the net profit before interest and taxes (operating profit or earnings before interest and taxes or EBIT) by fixed interest charges. EBITDAInterest Coverage Ratio = ----------------------------------------------- Fixed Interest Charges

5. FIXED CHANGE COVERAGE RATIO: This ratio measure debt servicing ability comprehensive because it considers both the interest and principal repayment obligations .it shows how many times the pretax operating .income covers all fixed financing charges. EBIT+ Depreciation Interest Coverage Ratio = ---------------------------------------------------------- Interest + Repayment of loan Tax rate

C. ACTIVITY RATIOSActivity ratio are employed to evaluate the efficiency with which the firm manages and utilities its assets. These ratios are also called turnover ratios or efficiency ratios. The efficiency with which the assets are used would be reflected in the speed and rapidity with which assets are converted into sales. Such ratios are also designated as turnover ratios. An activity ratio may, therefore, be defined as a test of the relationship between sales and the various assets of the firm. We illustrate below the important activity ratios.1. Stock turnover ratio2. Inventory turnover ratio3. Debtors turnover ratio4. Average collection period5. Fixed Assets turnover ratio6. Creditors turnover ratio7. Current assets ratio1. STOCK TURN OVER RATIO: This ratio indicates the no. of times the stock sold out during the year. The cost of goods sold is compared with the stock in the trade. This ratio indicates the efficiency in inventory management. If the turnover is higher, than it means lesser amount of capital is blocked up in the form of working capital.

Cost Of Goods SoldStock Turnover Ratio = ------------------------------------------- Average Stock

2. INVENTORY TURN OVER RATIO This ratio plays the vital role in the firm and it indicates the efficiency of the firm in producing and selling its products. It measures the relationship between the costs of goods sold by the inventory level. It is calculated by dividing the cost of goods sold by the average inventory. Cost Of Goods Sold Inventory Turnover Ratio = ---------------------------------------------- Average Inventory

The inventory turnover shows how rapidly is turning into receivable though sales. A high inventory turnover is indicative of goods inventory management. A low inventory turnover implies excessive inventory levels then warranted by production and sales activities. A high level of sluggish inventory amounts to unnecessary tie-up of funds reduced profit and increased costs.3. DEBTORS TURN OVER RATIO: This ratio indicates the average time lag in number of days between sales and cash collection form debtors. It explains the number of days of credit enjoyed by the debtors. IT is also called as receivable turnover. Higher ratio considers management is efficient and vice versa. Net Credit Sales Debtors Turnover Ratio = -----------------------------------------------Average Debtors

4. AVERAGE COLLECTION PERIOD: It indicates the time taken to collect money from the debtors. If this average collection period is more than credit period. Granted to the debtors, it indicates liberal policy and the firm is in efficient in collecting the dues and vice versa. No. Of Working DaysAverage Collection Period = -------------------------------------------------------- Debtors Turnover Ratio

5. FIXED ASSETS TURN OVER RATIO This ratio will reflect the relationship between fixed assets and proprietors funds. This ratio is also called as fixed assets to net worth ratio. It is calculated as follows: Net SalesFixed Assets Turnover Ratio = ---------------------------------- Net Fixed Assets

Component of Current Assets to Fixed Assets RatioCURRENT ASSETSFIXED ASSETS

Cash in handMachinery

Cash at bankBuildings

Bills receivablePlant

InventoriesVehicles

Work-in-progress

Marketable securities

Short-term investments

Sundry debtors

Prepaid expenses

6. CREDITORS TURNOVER RATIO: This ratio indicates the average time lag in no. of days between the purchases and cash payment to creditors. It indicates the no of days credit enjoy b the firm from its creditors. It is also called as payable ratio. This ratio is also called as fixed assets to net worth ratio. It is calculated as follows. Net Credit PurchasesCreditors Turnover Ratio = ------------------------------------ Average Accounts Payable

7. CURRENT ASSETS TURN OVER RATIO: This ratio is calculated to indicate the relation between sales and current assets. It is calculated to know the current assets are used in generating the turnover. It is calculated by dividing sales with current assets. This ratio is also called as fixed assets to net worth ratio. It is calculated as follows: Net SalesCurrent Assets Turn Over Ratio = ---------------------------- Total Current Assets

8. TOTAL ASSETS TURN OVER RATIO:This ratio indicative of the efficiency in utilizing total assets in generating sales. . This ratio is also called as fixed assets to net worth ratio. It is calculated as follows: Net SalesTotal Assets Turn Over Ratio = ------------------------ Total Assets

D. PROFITABILITY RATIOS:Profit is the difference between revenues and expenses over a period of time. The profitability ratios are calculated to measure the operating efficiency of the company. Generally two major types of profitability ratios are calculated i.e. profitability in relate to sales and profitability relate to investment. Profitability ratios related on each rupee of sales. Profitability ratios related to sales are classified below: Gross profit ratio Net profit ratio Operating expense ratio Return on investments ratio

1. GROSS PROFIT RATIO The profit margin measures the relationship between profit and sales. It is the result of the relationship between prices, sales volume and cost. The gross profit or gross margin represents the limit beyond which fall in sales Price is outside the tolerance limit. A high ratio of gross profits to sales is a sign of good management and a low gross margin may reflect higher cost of goods due to the firms inability to purchase raw materials at favorable terms, inefficient utilization of plant machinery or over investment in plant and machinery resulting in higher cost of production. Gross ProfitGross Profit Ratio = ---------------------- X 100 Sales

Gross profit margin is calculated by dividing the gross profit by sales. This ratio indicates the average the averaged spread between the cost of goods sold and the sales revenue.

2. NET PROFIT RATIO Net profit margin ratio establishes a relationship between net profit and sales and indicates managements efficiency in manufacturing, administering and selling the product. This ratio is the overall measure of the firms ability to turn each rupee sales into net profit. This also indicates the firms capacity to withstand adverse economic conditions. Net Profit After TaxNet Profit Ratio = --------------------------------------- 100 Net Sales

Taxes are not controllable by the firm, and also, one may not now the marginal corporate tax rate while analyzing the published data. Therefore, the ratio may calculate on before tax basis.

3. OPERATING EXPENSE RATIO The operational expense ratio explains the changes in the profit margin ratio. This ratio is computed by dividing operating expenses by sales. The operating expense ratio is a yardstick of operating efficiency and this ratio indicates the average aggregative variations in expenses. A low operating ratio is large a test of operational efficiency.

4. RETURN ON INVESTMENTS RATIOReturn on share holders investment, popularly known as Return on investments (or) return on share holders or proprietors funds is the relationship between net profit (after interest and tax) and the proprietors funds. Net profit (after interest and tax)Return on investment = ------------------------------------------------------- Shareholders funds

The ratio is generally calculated as percentages by multiplying the above with 100.SHRI SAI INISTITUTE OF ENGINEERING AND TECHNOLOGY ATPPage 22