adi.(ratio analysis)
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A STUDY ON
RATIO ANALYSIS
With reference to
COROMANDEL FERTILISERS LTD
A project report Submitted to Andhra University, Visakhapatnam in
partial fulfillment for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
SURLA VARA PRASAD
!eg "o#$%&'()%%%(*+
Under the guidance of
MRS. K. SRIDEVI, M.B.A.,
aculty in -anagement Studies
DEPARTMENT OF MANAGEMENT STUDIES
ADITYA INSTITUTE OF P.G STUDIES
(Affliated to Andhara University)
SURAMPALEM, E.G. Dt
$%%./$%)%
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ADITYA INSTITUTE OF P.G STUDIESAffiliated to Andhra University+
0hones# %&&'$+ $'$$(1, $'$$'%, cell# .&22' *222$
ADB Road, SURAMPALEM!""#"$, Ea%t Goda&a'
D%t't
CERTIFICATE
3his is to certify that the project entitled A St*d+ o Rato
Aa-+%% I COROMANDEL FERTILIERS LTD,
VISAK/APATNAMis the bonafide record of work done by M'. S. Va'a
P'a%ad, R01. No. 234!#5333#$ during the period 23342353 in partial
fulfillment of the re4uirement for the award of the Degree of MASTER OF
BUSINESS ADMINISTRATION in ADITYA INSTITUTE OF P.G.
COLLEGEaffiliated to AND/RA UNIVERSITY5
P'o60t G*d0. /0ad o7 t80 D09a't:0t
M'%. K. S'd0& M.B.A., M'. ;. Na10d'a K*:a' M.B.A.,
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DECLARATION
6 here by declare that the project work entitled RATIO
ANALYSIS with reference to COROMANDEL FERTILISERS LTD,
VISAK/APATNAM is originally prepared and submitted by me to
AND/RA UNIVERSITY, V6SA78A0A3"A- in partial fulfillment of the
re4uirements for the award of the degree of MASTER OF BUSINESS
ADMINISTRATION.
3he empirical findings in the report are based on the data collected
by me while preparing this project5 6t has not been submitted to any other
university or publication at any time before5
PLACE< S.VARA PRASAD
DATEecution of
a firms activities5 3hus, while performing the inance -anager should strive
to ma>imiEe the market value of share5
Finance Decisions:-
Decision under finance function includes#
)5 6nvestment Decisions5
$5 inance Decisions5
15 Dividend Decisions
(5 =i4uidity Decision5
INVESTMENT DECISION:-
6nvestment decision involves the careful selection of profitable
investment proposals, allocation of funds to the investment proposals with a
view to obtain the net present value of the future earnings of company and
to ma>imiEe its value5
6nvestment decision involves the decision of allocation of capital to
long term assets capital budgeting decisions+ and short term assets
management of working capital+ two important aspects of the investment
decisions are evaluation of the prospective profitability of new investments5
3he measurement of cut/off rate against that the prospective return of new
investments could be compared5 6nvestment decision involves risk, because of
uncertain future investment proposals should, therefore be evaluated in terms
of both e>pected return and risk5
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FINANCE DECISION:-
inance function includes where, where and how to ac4uire funds to
meet the firm investments needs determining the proposition of e4uity and
debt i5e5, ?apital Structure of the firm5 :nce optimum capital structure is
designed finance manager raises the appropriate amount through the best
available sources5 6n this area, one must be concentrated on debt e4uity mi>,
the advantages and disadvantages of having debt component in capital mi>,
impact of ta>ation and depreciation on earning per share etc5
DIVIDEND DECISION:-
Dividend decision is where the financial manager must decide
whether the firm should distribute all profits or distribute a portion and retain
the balance5
3he optimum dividend policy is that which ma>imiEes the market
value of the shares5 or this determination of optimum dividend payment rate
is essential the payment return is e4uivalent to the percentage of dividends to
earning available to shareholders5
I!UIDIT" DECISION:-
inance decision is generally affected by current assets management,
so current assets should be managed efficiently for safeguarding the firm
against the damages of lack of li4uidity5 3he main aim of decision is that to
ensure that neither more is invested in current assets nor it should have
insufficient investment in current assets5
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DEFINITION OF CORPORATION FINANCE@FINANCE
MANAGEMENT
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=8at % F0't-0'%
Agriculture is an important economic activity and serves as a back
bone for economic development of a developing county like 6ndia5
Agriculture is a very vital sector of 6ndias economy5 3i accounts for 1$H of
the countries ;D0, provides employment to 2'H of the work force and earns
$*H of 6ndias foreign e>change5 Agriculture is helpful in accelerating the
growth and improving the economy of the people5
3herefore, growth of agriculture is an indicator of health of the
overall economy5 3he most important factor that contributes to the growth of
agriculture is the use of fertiliEers5 6ndia soil has been depleted of the
essential nutrients re4uired for the healthy growth and desired yield of crops5
3hese scarce nutrients, which help in providing nitrogen, phosphorus,
calcium and iron necessary for the healthy growth of the crop5 -any
industries in the company also depend on agricultural output, which serves as
raw materials for their plants5
8ence fertiliEer industry has been selected for study5 ?oromandel
fertiliEer is standing out position of the rest5 6t plays a major role by
contributing around )152*H of the total production of fertiliEer in 6ndia5
-oreover, total arable land being limited, the only way out for the future is to
increase yield through judicious application of fertiliEers and pesticides5 ?=
is well positioned to help the country address this challenge5
?oromandel is an enterprise that contributes its products towards
development of agriculture5 3he companys ambience and goodwill has
attracted me to select the company5 3he company has different departments
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like inance, -arketing, and -anufacturing etc5 6 have done my project in
finance department of ?oromandel ertiliEers =imited5
OB;ECTIVIES OF T/E STUDY
3he study of the ratio analysis is carried out to fulfill the following
objectives5
3o know about the business activities of ?:!:-A"D9=9!36=6I9!S =6-639D5
3o find out the li4uidity position of the company through li4uidityratios5
3o know about the long term solvency of the company from time totime5
3o find out the operating efficiency of the company through the
profitability, activity ratios5
3o find out the capacity of the company in meeting the operatinge>penses like interest on debt capital, the companys debtors
collection period and its credit terms etc5
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NEED OF T/E STUDY
3he study has various benefits to various parties directly or+ indirectly and
has great significance5
3his study gives me a practical insight into the organiEations
activities and enables me to know the practical problems and
solutions in ?oromandel ertiliEers =imited main the area of
inancial -anagement5
6t is beneficial to top -anagement of the company by providing
crystal clear picture of various aspects contributing for co+ i5e5,
inancial position etc55
3he study is also beneficial to employees and offers motivation by
showing various activities contributing for company growth5
3he investors who are interested in the companys shares will also
get benefits by going through the study and can easily take a
decision whether to invest or not in the company shares5
6t is helpful in financial as it focuses on daily cash flows
management and funds flow management in the organiEation5
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inance plans are central instruments for directing and co/ordination
the financial effort5
MET/ODOLOGY
3he information is collected through primary and secondary sources
during this project5 And some of the important 6nformation presented in this
study with respect to ?= is taken from -ethodology adopted this study is
two fold in nature5 :ne information through discussion and second
publications5 3he study period is of two months duration5
3he source of information can be categoriEed into primary and
secondary sources5
P':a'+ dataecutives and others were busy the study was
primarily focused on secondary data5
?omparison of ?orianders performance with other organiEations
was not possible since the financial statements of other organiEations
were not available5
Duration of time is also a limitation5
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C/APTERII
INDUSTRY ANALYSIS
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FERTILIER INDUSTRY AT NATIONAL LEVEL
ertiliEers are of immense value to man5 3hey help the growth of
agriculture production5 6ndia is primarily an agricultural or an agro based
country5 8ence, it provides an immense role in providing support to millions
of people of the country5
3he use of fertiliEers enables the plant to increase the crop
production by absorbing greater amount of nutrients present in the soil5
8ence, the fertiliEers sector is one of the vital sectors in the economy of the
country5
:f late, a large number of private and public sector fertiliEer plants
have come up in the country5 3hese plants engage themselves in the
production of several simple and comple> fertiliEers such as urea, ammonium
phosphate and other comple> nitrogenous and phosphate fertiliEers, which
play a strategic role in catering to the needs of the various sectors of the
society5
Some of the major fertiliEers making companies are "agarjuna
ertiliEers and chemicals =td5, ?oromondel ertiliEers =td5, are the major
0hosphoric plants in the country5 6n fact, all the other fertiliEer "agarjuna
ertiliEers and ?hemicals =td5, ?oromandel ertiliEers =td5, are the major
0hosphoric plants in the country5 6n fact, all the other fertiliEer plants in the
country are either nitrogenous or 0otash based5
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MEANING AND ESSENTIAL ELEMENTS ertiliEerC5 0rimary nutrients "itrogen "+, 0hosphorus 0$:'+ and
0otash 7$:+ are normally supplied through chemical fertiliEers5
/ISTORY OF INDIAN FERTILIER INDUSTRY the selling prices of fertiliEers
providing for distributors margins
6n ).**, the ;overnment introduced a retention price scheme for
nitrogenous fertiliEers, which was lager e>tended to other fertiliEers5
3o make ade4uate 4uality of fertiliEers available to farmers in time,
;overnment also gave a freight subsidy, which covered the
movement of fertiliEers to the block head 4uarters5
Due to ample mishandling political interference, ;overnment gave
up all those plans and gave permissions for decontrol of 0hosphate
and 0otassium fertiliEers to the block head4uarters5
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PRESENT TRENDSisting plans to enable them to
achieve a production increase of $'/1%H5 3his did not help the units because
of the policy changes in )..$ resulting in decontrol of phosphate fertiliEers5
3he major objective of .thplan )..*/$%%$+ strategy is to frame long
term feed stock and price policies for fertiliEers and the steady tapering off of
subsidies5 6t also aims to encourage inflow of fresh investments and bring
about an increase in fertiliEer consumption5 3o realiEe optimum application,
the large price disparity between the different nutrients to rely optimum
applications will also have to be corrected5 6nfrastructure will have to be
strengthened to ensure smooth rail movement of fertiliEers and port handling
of imported nutrients5
3he lack of coherent fertiliEer policy made difficult by the political
uncertainties created by coalition compulsion at the ?entre, is telling on the
health of this vital industry, through production wise it has a better year in
)..*/.& than in the previous year5 3his underlined the need for the
comprehensive fertiliEer policy5 As a response to this, a high power
committee recommended scrapping of unit wise retention price cum subsidies
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scheme for both urea and comple> fertiliEers to facilitate balanced application
by farmers5 3he pricing methodology was based on long/range marginal cost
principle to enhance production efficiency5 3his pricing formula was also
proposed to increase new investments and efficient use of feedstock5
ertiliEer Association of 6ndia welcomed the suggestions to bring the
price DA0 and other comple> fertiliEers in line with the selling price or urea
to minimiEe in balance in price ration and promote balance fertiliEer use5
8aving become the 1rdlargest producer, 6ndias production of plant nutrients
during )..*/.& registered growth of )* and )2 percent5 3he major factor
responsible for improve production was the improvement in the feedstock
supply position5
LEGAL IMPLICATIONS
6n order to enforce discipline among the fertiliEer manufacturers,
government introduced number of legislative measures for supply of standard
fertiliEers to the ultimate consumers5
ESSENTIAL COMMODITIES ACT, 5!!(ECA)
3his was enacted by 0arliament on )/(/'' to regulate the
production, supply distribution, trade and commerce of essential commodities
in 6ndia, ertiliEer defined as one of the essential commodities5
FERTILIER MOVEMENT CONTROL ORDER, 5$"
3his was promulgated under Sec/1 or 9?A to ensure e4uitable
distribution of fertiliEers in different parts of the country, movement of
fertiliEers from one state to another is possible when authoriEed by ?entral or
State ;overnment5
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FERTILIER CONTROL ORDER, 54!(FCO)
With a view to ensure that the 4uality of fertiliEers is checked at
manufacturing stage, statutory provisions have been made in the ?: that
each manufacturer has certain minimum testing facilities in their factory5
3he production of standard 4uality of fertiliEers alone does not ensure but
the fertiliEers are delivered in the same chemical and physical condition
duly protecting the nutrient contents5 -ost of fertiliEers being hygroscope
in nature, their 4uality gets deteriorated if they are not properly packed, stored
and distributed5
STANDARD OF =EIG/TS MEASURES (PACKED
COMMODITIES) RULES, 5$$
Under Section /&1 of the Act, every package shall bear thereon a
label securely affi>ed5 A definite plan and conspicuous declaration made in
accordance with the provisions of the chapter in respect of name, address, net
4uantity, month and year of manufacture, common or genetic name of the
commodity unit sale price etc5
SUBSIDIES TO FERTILIERS INDUSTRIES IN INDIAplicitly appear in the union budget,
the power and subsidies are implicitly subsidies arising on account of lower
user charged recovered from the consumers than the average cost associated
with these inputs5
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COROMANDAL FERTILIER
?oromandel ertiliEers =imited incorporated in ).2(, was the result
of the synergistic efforts of 9565D5 0arry 6ndia =imited, now belonging to the
!s5($%% core -urugappa ;roup L of the leading business houses in 6ndia,
and two major US corporations L ?hevron ?hemical ?ompany and
6nternational -inerals and ?hemical ?orporation 6-?+5 3his brought and
6ndia world Lclass technology for the production of high analysis fertiliEers5
6n )..' ?hevron ?hemical ?ompany disinvested their stake in favour of
6595D5 0arry and 6-? in end )..&5 After effecting buy/back of $% H of
?=S total shares in which the promoters did not participate, the ;roups
stake has gone up to *&51(H5 3he 6ndian inancial 6nstitutions hold about
*5'.H e4uity, the remaining )(5%*H being held by the public5
9ver since production commenced in ).2*, ?oromandel has been an
active partner of the 6ndian farmer in the filed, helping him in his efforts to
produce more from small land holdings5 6t has a crucial role in assisting 6ndia
achieve self/sufficiency in food grain production5
LOCATION OF T/E PLANTtra )(H potash5
8ighest in phosphate 1'H+
@est for cotton, groundnut, chilly, Soya beans, potato etc5,
"ot suitable for tobacco and grapes.
G'o:o' 24243 with highest "M0 in )#) ratio
Uni4ue granulation by coating prilled urea with ammonium
phosphate layer
Such granule configuration ensures efficient utiliEation for nutrients5
8ighly suitable for paddy, wheat5
G'o:o' 232335! contains 0hosphate and 0otash in the ration of )#), the
highest among the "07 fertiliEers5 6ts uni4ue features being#
PARAMFOS 5?2335"
Ammonium 0hosphate Sulphate containing "itrogen, 0hosphate and
Sulphur5
6t is the most preferred fertiliEer in drill/sown areas5
PARRY SUPER (SINGLE SUPER P/OSP/ATE)
irst chemical fertiliEer to be manufactured in 6ndia5
avoured fertiliEer for dry land areas5
?ontrols acidity in soil and increase productivity5
PARRY GOLDt in )..$5
3he @est 6! Award from A0 0roductivity council in )..'5
ACCOUNTING POLICIES
3he accounts have been prepared primarily on the historical cost
convention and in accordance with the mandatory accounting standards5 3he
significant accounting polities followed by the company are stated below5
5. F0d A%%0t% ed Assets are shown at cost or valuation less depreciation5 ?ost
comprises the purchases price and other attribute e>penses5 i>ed
assets other than leasehold landKimprovement5 :ffice e4uipment,
furniture fitting, certain vehicles and roads had been revalued on 1) st
-arch )..), based on a valuation by an approved valuer5 3he
indices, if any used are not stated in the valuation5
2. D09'0ato o F0d A%%0t%pected to be commissioned in $%%$5
"ational ertiliEers =imted, "angal 0anjab+ undertaken rebottle
necking of their ureaplant for upgrading their production levels to *
lakh tones by increasing $ lakh tonnes annually+5
A grass root urea plant is private sector by -Ks 0aharpu etiliEers,
8adia, and West @engal to produce around *5$ lakh tonnes5
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8adia, and West @engal to produce around *5$ lakh tonnes5
?oromandel ertiliEer =imited was farmed by under consortium of
two outstanding US firms and pioneer 6ndian ?ompany
6nternational minerals and ?hemicals ?orporation 6-?+, is the
worlds largest independent producer of fertiliEers5 6t manufacturers and
markets all the three major plant nutrients L "itrogen"+, 0hosphate0$:'+
and 0otash7$:+5
?hevron ranks among the worlds largest food manufacturers5 3he
company also contributes to the field of agricultural products encompassing
insecticides, fungicides and weed killers5
96D 9ast 6ndia Distilleries+ with its subsidiaries was 6ndias largest
fertiliEer producer and seller5 6t is well known in South 6ndia as compared to
"orth 6ndia do to the wide spread of Agricultural in Southern 0ort of 6ndia5
3he company ?= was fortunately incorporated on )'thuly, ).2)
but begins its operation in December, ).2*5 6t was installed with an Annual
?apacity of $5' lakh metric tonnes -3s+ of comple> fertiliEers5 3he :riginal
installed capacities assumed are#
&%,%%% -3+ metric tonnes of "itrogen
*&,%%%-3+ metric tonnes of 0hosphate
"ow, the company ?= belongs to -urugappa group a ?hemical
based industrial house who had ac4uired major holds in the year )..*/.&5
3he company has a factory at Visakhapatnam and :ffice at
@hubeneswar, @hopal, ?alcutta and "ew Delhi5 3he firm has a marketing
office at 8yderabad to lookafter the promotional activities in the state of
Andhra 0radesh5 3he company is very near to the harbour that it facilitates
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to receive raw materials5 3he company is importing li4uid Ammonia, !ock
0hosphate and Sulphur5 3he three elements which forms its raw materials5
3he company is e>tremely versatile and modern designed for easy
maintenance and efficient operations5
9ver since the ?entral ;overnment of 6ndia liberaliEed the
6ndustrial 0olicy in )..%s many companies in 6ndia in general have
struggled to face severe ;lobal ?ompletion and ?= is one the very few
companies to be able to stand up to the challenge and to do it an its own5
3his is possible because of the bread vision of the company5 3he ?ompany
that started off with an annual capacity of $5&% =akh -3 per annum in ).2*
stands with annual capacity of 25% lakh -3 of comple> fertiliEers as on today5
Another major aspect that has to be noted that the company has no
subsidiaries5
OB;ECTIVES OF CFL fertiliEers at minimum cost5
3o ma>imiEe, the efficiency of both the men and machinery
through continuous up gradation of technology and providing
training investment5
3o satisfy shareholders by giving them handsome returns on
their investment5
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S=OT ANALYSIS
ST$EN&T#S:
Very long e>perience in the field of producing and selling fertiliEers5
Up/to/date technology and continuous upgradation5
:ptimum capacity utiliEation
9njoying great brand and corporate image
Dealer and farmer loyalty5
inancially strong and firm5
"iche -arketing
Strong promotional attractive
Widespread sales network
-inimum =abour problem
Well/trained employees and good work culture5
'EA(NESS
"eglecting study based on sales promotion of retail outlets5
-arketing by intermediaries
0oor availability of product5
6mport of major raw materials
O%%O$TUNITIES
6ncreasing trend in using comple> fertiliEer areas5
=arge areas under each and oil seed crops
;rowling awareness and education among farmers community
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C/APTERIII
?OMPANY PROFILE
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Co:9a+ /%to'+
5!
6ndependent 6ndia realiEed that its largely agrarian economy needed a
thrust in the right direction for its people to benefit and prosper5 0rime
-inister awaharlal "ehru invited the ord oundation to carry out a
comprehensive study of 6ndian agriculture and give its recommendations5
3he study revealed a crucial need to produce indigenous chemical fertiliEers
to increase agricultural output to meet the countrys ever/increasing food
demand5
5?5
An industrial license was granted to three companies L 6-? the worlds
largest producer of fertiliEers then+, ?hevron ?hemical ?ompany a major
American player in fertiliEers K industrial chemicals+ and 9565D50arry 6ndia+
=imited 6ndias largest private fertiliEer producer with 2% years standing+ L
to set up a giant chemical fertiliEer comple>5
3he first @oard of Directors was constituted on :ctober )2, with 8 V !
6engar as its ?hairman5 :thers on the @oard included N ?ope, ?harles
Dennison, 7 ohn, Dr = @harat !am, A W 8orton, 3 ;ibson, S ?
Dholakia, V 7 !ao and !aja !ameswar !ao5 = = 0owell and 0 Davies were
the first -anaging Director and Dy5 -anaging Direct respectively5 Donald 6
-eikle was the first ?ompany Secretary5
5?2
-arket development commence in the form of a Bseeding programmeC5
9565D5 0arry was appointed ?=s principal sales agent in 6ndia for our
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product aptly name B;!:-:!C epitomising the idea of ;!:wing -:!e
food for the nation5
A (&15' acres site was identified at Visakhapatnam along the
B?oromandelC coast 6ndias east coast+, from where the ?ompany derived its
name5 3he land, taken under a '%/year lease from Visakhapatnam 0ort 3rust,
has a private jetty just ' km from the plant site5 With a capital investment of
!s5'% crores, =umus ?ompany undertook construction of the plant5
5?$
:n December )%, -r5 -orarji Desai, the then Deputy 0rime -inister of
6ndia, dedicated the fertiliser plant to the nation, in the presence of -r5 7asu
@rahmananda !eddy, the ?hief -inister of Andhra 0radesh5 ;randhi
!amamurthy, a local farmer, was given the honour of cutting the ribbon5
3he $(' ft high Urea prill tower was one of the tallest industrial structures
in 6ndia then5 3hough not operational today, it still presents a formidable
sight, towering against the skyline, recalling old memories for those who
were associated with its operation5
5$3
3he B;!:-:! farmerC was developed as a marketing symbol and
introduced on our bags to spread the message of Bhigher yields, bigger
profitsC5 3oday, farmer house holds across our addressable markets identify
?=s brand by this symbol5
5$5
3he B?oromandel =ectureC was instituted to provide a forum for thinkers,
economists, social and agricultural research scientists around the world to
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share their thoughts on issues of global concern such as food security,
environment and e>tension activity5
3he B@orlaug AwardC, instituted in honour of "obel =aureate Dr "orman
@orlaug father of the wheat revolution+, honours eminent men of science and
industry for their distinctive contribution to the cause of agriculture5 3his
reflects ?=s concern to develop a symbiotic interaction between
agriculture, industry and academia5
5$?
:ur fertiliser retail outlet at Secunderabad got a boost with garden lovers
fervently seeking small 4uantities of fertilisers for bigger and richer blooms
and fruit5
5$$
?= completed a decade of participation in augmenting agricultural
production for the nation5 6ts vital role covered soil nourishment, sharing
agronomic e>pertise, supporting agricultural education and rewarding
research L all of which had progressively grown in width and depth during the
decade5
543 3
0lans to diversify were afoot5 A BgroundbreakingC ceremony was
performed in "ovember ).&% at ?hilamkur Andhra 0radesh+, which is rich
in limestone deposits, to set up a one million tonne cement plant5 3he fully
computerised plant designed by world/renowned cement manufacturer
7rupp 0olysius of West ;ermany+ was commissioned in ).&(5 6t was later
sold to 6ndia ?ements in )..%1
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5!
?hevron ?hemical ?ompany divested its stake in favour of 9565D50arry 6+
=imited in )..', followed by 6-? in )...5 9565D5 0arry 6+ =imited
ac4uired majority shareholding in ?=, making it a part of the -urugappa
;roup, a highly reputed industrial conglomerate5
2333
?=s growth over the years has been punctuated with several path/
breaking modernisation K upgradation programmes5 @egun in ).*', the
programme gathered momentum in )..$/.', when the Sulphuric Acid,
0hosphoric Acid and ?omple> ;ranulation plants were debottlenecked5
0roduction capacity wend up from the original $(*,%%% -3 to (%%,%%% -35
:n September $., -r5 " ?handrababu "aidu, the then ?hief -inister of
Andhra 0radesh, inaugurated a new comple> granulation train5 3his further
augmented capacity to 2%%,%%% -3, a boon to the entire farming community5
233"
:n uly )$, ?= consolidated its business by ac4uiring controlling stake
in ;odavari ertilisers M ?hemicals =imited ;?=+5
3o optimise synergy of operations in the ;roup, the arm 6nputs Division of
9565D 0arry 6+ =imited was merged with ?= on December )5
233#
-r5 V5 !avichandran took over as 0resident M W3D on anuary $$5
-r5 A5Vellayan took over as ?hairman on September )5
:ther Directors on the @oard are -r5 5ayaraman, -r5-5-5-urugappan,
-r5 35-5- "ambiar , -r5 -5753andon, -r5 D595Udwadia, -r5
S5Viswanathan M -r575A5"air5
3he first post/merger A;- of the ?ompany was held on uly )'5
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Loato%
?=Os has fertiliser plants in Visakhapatnam, 9nnore and !anipet and 0lant
0rotection ?hemicals plant at "avi -umbai, !anipet and ammu5 6t also has
marketing branches in the following states#
-adhya 0radesh
?hattisgarh
:rissa
Andhra 0radesh
7arnataka
3amilnadu
0unjab
8aryana
!ajasthan
;ujarat
-aharashtra
7erala
3amilnadu
(2
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Aa'd% R0o1to%
3he A6 @est 0roduction 0erformance Award L $%%2 for the 0hosphoric
Acid 0lant at ViEag,
Award for $%%'/%2 @est 9nergy ?onservation in the ertiliser sector
received by ViEag 0lant on December )( $%%2, "ational 9nergy
?onservation Day5
3he A6 @est Video ilm Award L $%%2 for the film on F;romor
Sulphur for the 'th time5
"ational Award )st 0riEe+ for 8ouse ournal L $%%2 from 3he 0ublic
!elations Society of 6ndia, "ew Delhi, received for F3he Voice
house journal + for the $nd consecutive year5
"ational Award $nd 0riEe+ for Video ilm L $%%2 from 3he 0ublic
!elations Society of 6ndia, "ew Delhi received by -arketing
Department ertilisers + for the film B?heyuthaC 8elping 8and+
@ritish ?ouncil Five Star rating for Safety -anagement System in
)..&5
irst priEe for safety, among the )2$ fertiliser companies in the
6nternational ertiliser 6ndustries Sectional ?ontest5
Andhra 0radesh 0ollution ?ontrol @oards award for FWaste
-inimisation at Source and Adopting ?leaner 3echnologies for
$%%)/%$5
A6 award for F9nvironmental 0rotection in "0K"07 ertiliser 0lant
?ategory for )..'/.25
(*
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M%%o V%o
Vision:
3o be the leader in the phosphatic fertiliser industry, producing high
4uality fertilisers at low cost and giving satisfaction to all stake holders5
%)r*ose + Mission
3o enhance the prosperity of farmer through the supply of 4uality
farm inputs and related services to ensure value for money5
Va-*0% B0-07%
Adhere to ethical norms in all dealings with shareholders,
employees, customers, suppliers, financial institutions and
government
0rovide value for money to customers through 4uality
products and services
3reat our people with respect and concernJ provide opportunities to
learn contribute and advanceJ recogniEe and reward initiatives,
innovativeness and creativity5
-aintain an organiEation climate conducive to trust, open
communication and team spirit5 a style of operation befitting our
siEe, but reflecting moderation and humility
-anage environment effectively for harnessing opportunities
Discharge responsibilities to various sections of society and preserve
environment5
(&
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;row in an accelerated manner, consistent with values and beliefs,
by continuous organiEation renewal5
E,*orts
:ur products are e>ported to several countries5 We have our own
registrations for our products in several countries5 We also operate through
agents or distributors in countries where they have registered our products5
:ur e>ports presently account for about 1% H of the turnover
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C/APTERIV
T/EORETICAL FRAME =ORK
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RATIO ANALYSIS
!atio analysis is widely used tool of financial analysis5 3he term
ratio in it refers to the relationship e>pressed in mathematical terms
between two individual figures or group of figures connected to each other 6
some logical manner and are selected from financial statements of the
concern5 3he ratio analysis based on the fact that a single accounting figures
by itself may not communicate any meaningful information but when
e>pressed as a relative to some other figure, it may definitely provide
some significant information5 3he relationship between two accounting
figures in such a way that users can draw conclusions about the
performance, strengths and weaknesses of a firm5
CLASSIFICATION OF RATIOS
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!UIC( $ATIO:-
Nuick ratio is also called acid/test ratio, established a relationship
between 4uick or+ li4uid assets and current liabilities5 An asset 6s li4uid if it
can be converted into cash immediately or+ reasonably soon without a loss of
value5 ?ash is the most li4uid asset5
FO$MUA:-
?urrent Assets / 6nventories
Nuick !atio P
?urrent =iabilities
CAS# $ATIO:-
Since cash is the most li4uid asset, a financial analyst may e>amine
cash ratio and its e4uivalent to current liabilities5 3rade investment or+
marketable securities is e4uivalent of cash thereforeJ they may be included in
the computation of cash ratio5
FO$MUA:-
?ash Q -arketable Securities
?ash !atio P
?urrent =iabilities
According to conventional rule a cash ratio of %5'#) is applicable5
NET 'O$(IN& CA%ITA $ATIO:-
3he difference between current assets and current liabilities
e>cluding shot/term bank borrowing is called "et Working ?apital "W?+
or+ "et ?urrent Assets "?A+5 "et working capital is sometimes used as a
measure of a firms li4uidity5
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FO$MUA:-
"et Working ?apital
"et Working ?apital !atio P
"et Assets
EVE$A&E $ATIO:-
3he short/term creditors, like bankers and suppliers of raw material,
are more concerned with the firms current debt/paying ability5 :n the other
hand, long/term creditors like debenture holders,financial institutions etc5 are
more concerned with the firms long/term financial strength5 6n fact, a firm
should have a strong short as well as long/term financial position of the firm5
inancial leverage or+ capital structure ratios are calculate5
3hese ratios show the proportion of debt and e4uity in financing the
assets5 3hese ratios are classified in the following categories5
Debt !atio
Debt/e4uity !atio
?apital 9mployed to "et Worth !atio
:ther Debt !atios
6nterest ?overage !atio
DET $ATIO:-
Several debt ratios may be used to analyEe the long/term solvency of
firm5 3he firm may be interested in knowing the proportion of the interest
bearing debt funded debt+ in the capital structure5
6t may, therefore, compute debt ratio by dividing total debt by capital
employed or+ net assets5
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FO$MUA:-
3otal Debt 3otal Debt
Debt !atio P or+
?apital 9mployed "et Assets
NOTE:-
3he capital employed e4uals net assets that consist of net fi>ed
assets and net current assets5 "et current assets are current assets minus
current liabilities e>cluding interest bearing short/term debt for working
capital5 3hese relationships are
"et i>ed Assets Q ?urrent Assets
"A+ Q ?A+ P "W Q 3D Q ?=
"A Q ?A L ?= P "W Q3D
"A Q "?A L ?= P "W Q 3D
"A P ?9
DET E!UIT" $ATIO:-
3he relationship between the lenders contributions for each rupee of
the owners contribution is called BDebt 94uity !atioC5 3he ratio measures
the relative claims of creditors and owners against the firm assets5
3he ratio should be optimum higher ratio is profitable debt e4uity
ratio shows the relation between long/term debt and share holders funds5
FO$MUA:-
3otal Debt
Debit 94uity !atio P
''
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"et Worth
CA%ITA EM%O"ED TO NET 'O$T# $ATIO:-
3here is yet another alternative way of e>pressing the basic
relationship between debt and e4uity5 3his can be find out by using the below
formula5
FO$MUA:-
?apital 9mployed
?apital 9mployed to "et Work !atio P
"et Worth
OT#E$ DET $ATIO:-
?urrent liabilities are generally e>cluded from the computation of
=everage !atio5 :ne may like to include them on to ground that they are
important determinates of the firms financial risk since they represent
obligations and e>ert pressure on the firm and restrict its activities5
FO$MUA:-
3otal =iabilities
3otal =iabilities to =ong/term und !atio P
3otal Assets
INT$EST COVE$A&E $ATIO:-
3he interest coverage ratio or the times/interest Learned is used to
test the firms debt L servicing capacity5 3he interest coverage ratio is
computed by dividing earnings before interest and ta>es 9@63+ by interest
charges5
FORMULA
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6nterest
'*
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ACTIVITY RATIO
unds of creditors and owners are invested in various assets to
generate sales and profits5 3he better the management of assets, the larger the
amount of sales5 Activity ratios are employed to evaluate the efficiency with
which the firm manages and utiliEes its assets5 3hese ratios are also called
B3urnover !atios C because they indicate the speed with which assets are
being converted or+ turned over into sales5
Activity !atios, thus, involve a relationship between sales and
assets5 3he Activity ratios are classified into some categories such as
6nventory 3urnover !atio
Debtors 3urnover !atio
Assets 3urnover !atio
Average ?ollection 0eriod
Working ?apital 3urnover !atio
INVENTO$" TU$NOVE$ $ATIO:-
6nventory 3urnover indicates the efficiency of the firm in producing
and selling its product5 6t is calculated by dividing the cost of goods sold by
the average inventory5
FO$MUA:-
?ost of ;oods Sold
6nventory !atio P
Average 6nventory
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3he average inventory is the average of opening and closing
balances of inventory5 6n a manufacturing company inventory of finished
goods is used to calculate inventory turnover5
DETO$ TU$NOVE$ $ATIO:-
A firm sell goods for cash and credit5 ?redit is used as a marketing
tool by a number of companies5 When the firm e>tends credits to its
customers, debtors are created in the firms accounts5 Debtors are convertible
into cash over a short period and therefore, are included in current into cash
over a short period and therefore, are included in current assets5
Debts turnover is also called as Account !eceivable 3urnover5
Debtors turnover is found out by dividing credit sales by average debtors5
FO$MUA:-
?redit Sales
Debtors 3urnover !atio P
Average Debtors
Debtors turnover indicates the number of times debtors turnover each
year5 ;enerally, the higher the value of debtors turnover, the more efficient is
the management of credit5
AVE$A&E COECTION %E$IOD:-
3he average number of days for which debtors remain outstanding is
called the BAverage ?ollection 0eriodC5
"o5of Days in a year 12%+
Average ?ollection 0eriod P
Debtors 3urnover
:r+
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Debtors
R "o5 of Days in a year 12%+
Sales
3he collection period ratio thus helps an analyst in two respects5
6n determining the collectability of debtors and thus, the efficiency
of collection efforts5
6n ascertaining the firms comparative strength and advantage
relative to its credit policy and performance vis//vis the
competitors credit policies and performance5
ASSETS TU$NOVE$ $ATIOS:-
Assets are used to generate sales5 3herefore, a firm should manage
its assets efficiently to ma>imiEe sales5 3he relationship between sales and
assets is called BAssets 3urnoverC5 Several assets turnover ratios can be
discussed below.
NET ASSETS TU$NOVE$:-
3he firm can compute B"et Assets 3urnoverC simply by dividing
sales by net assets5
FO$MUA:-
Sales
"et Assets 3urnover !atio P
"et Assets
2%
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TOTA ASSETS TU$NOVE$ $ATIOS:-
Some analysts like to compute the total assets turnover in addition to
or+ instead of the net assets turnover5 3his ratio shows the firms ability in
generating sales from all resources committed to total assets5
FO$MUA:-
Sales
3otal Assets 3urnover !atio P
3otal Assets
FI.ED AND CU$$ENT ASSETS TU$NOVE$:-
3he firm may wish to know its efficiency of utiliEing fi>ed assets
and current assets separately5
FO$MUA:-
Sales
i>ed Assets 3urnover !atio P
"et i>ed Assets
3he current assets turnover is
Sales
?urrent Assets 3urnover !atio P
?urrent Assets
'O$(IN& CA%ITA TU$NOVE$ $ATIO:-
A firm may also like to relate net current assets or+ net working
capital gap to sales5 6t may thus compute net working capital turnover by
dividing sales by net working capital5
2)
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FO$MUA:-
Sales
"et Working ?apital 3urnover !atio P
"et ?urrent Assets
PROFITABILITY RATIOSimiEing profits, irrespective of concerns for customers, employees,
suppliers or+ social conse4uences5 6t its unfortunate that the word B0rofit Cis
looked upon as a term of abuse since some firms always that want to
ma>imiEe profits at the cost of employees, customers and society5
0rofit is difference between revenues and e>penses over a period of
time5 0rofit is ultimate B:utputC of a company, and will have no future if it
fails to make sufficient profits5 3he profitability ratios are calculated to
measure the operating efficiency of a company5
;enerally, two major types of profitability ratios are calculated such as
0rofitability in relation to Sales
0rofitability in relation to investment5
3he following are the some of important profitability !atios5
;ross profit -argin
"et profit -argin
!eturn on 6nvestment
!eturn on 94uity
!eturn on ?apital 9mployed
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3he conventional approach of calculating return on investment is to
divide 0A3 by 6nvestment5 6t is therefore appropriate to use one of the
following measures of !eturn on investment for comparing the operating
efficiency of firms5
FO$MUA:-
"et 0rofit After 3a>
!eturn of 3otal Assets P
3otal Assets
$ETU$N ON E!UIT":-
A return on shareholders e4uity is calculated to see the profitability
of owners investment5 3he share holder e4uity are net worth will include
paid up share capital, share premium and surpluses less accumulated losses5
"et worth can also be found by subtracting total liabilities form total assets5
FO$MUA:-
0rofit After 3a>
!eturn of 94uity P
"et Worth
O%E$ATIN& %$OFIT MA$&IN:-
3a>es are not controllable by a firm, and also, one may not know the
marginal corporate ta> rate while analyEing the published data5 3herefore, the
margin ratio may be calculated on before ta> basis5
FO$MUA:-
9@63
:perating 0rofit !atio P
"et Sales
2(
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C/APTERV
ANALYSIS AND INTERPRETATION
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CURRENT RATIO
?urrent ratio may be defined as the relationship between current
assets and current liabilities5 3his ratio, also known as working capital ratio,
is a measure of general li4uidity and is most widely used to make the analysis
of a short/term financial position or li4uidity of a firm5
?U!!9"3 ASS93S
?U!!9"3 !A36: P
?U!!9"3 =6A@6=6369S
?alculation of ?urrent !atio of ?=5 rom $%%(/%' to $%%&/%.
(R%. -aH8%)
YEA
R
C*''0t
a%%0t%
C*''0t
La-t0%
C*''0
t
'ato
$%%(/$%%' '(($%5(' $*)2)5') $5%%
$%%'/$%%2 .2.&152( (.&$'52$ )5.(
$%%2/$%%* ))*1*15.
&
'1'.&5&( $5).
$%%*/$%%& )2$**25.
)
*1).'5&& $5$$
$%%&/$%%. 1*$21&52
$
).*)125)) )5&.
3able )5&
22
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Inter*retation: -
rom the above table it is clear that the ratio is increased in the year
$%%(/%' by $H this is due to increase in current assets5 6n the year $%%'/%2
the ratio is decreased by 1H due to increase in current assets5 6n the year
$%%2/%* the ratio is increased by )$H and in the year $%%*/%& it was
increased by )H this is due to increase in current assets and it will show the
how firm maintains the margin of safety5
2*
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GRAP/ICAL REPRESENTATION
CURRENT RATIO
1.8
1.9
2
2.1
2.2
2.3
2004-2005 2005-2006 2006-2007 2007-2008
YEARS
RS
INL
AKHS
Current ratio
2008-2009
2&
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UICK RATIO
Nuick ratio is also known as =i4uid !atio or Acid 3est !atio5 3he
term li4uidity reforms to the ability of a firm to pay its short term obligation
as and when they become due5 Nuick ratio may be defined as the relationship
between NuickKli4uid assets and current or li4uid liabilities5 An asset is said
to be li4uid if it can be converted into cash within a short period without loss
of value5
NU6?7 ASS93S
NU6?7 !A36:P
?U!!9"3 =6A@6=6369S
NU6?7 ASS93S P ?U!!9"3 ASS93S/ 6"V9"3:!69S Q 0!90A6D
9T09"S9S+
Ca-*-ato o7 *H Rato o7 CFL. F'o: 233#3! to 23343
(R%. -aH8%)
Y0a' *H
A%%0t%
C*''0t
La-t0%
*H
Rato
$%%(/$%%'
)1$&15&
.
$*)2'5') %5(.
$%%'/$%%2
)1)%&5%
.
(.&$'52$ %5$2
$%%2/$%%*
11%%%5*
'
'1'.&5&( %52$
$%%*/$%%&
)2&.%5'
.
*1).'5&& %5$1
$%%&/$%%.
&&%$&5&
'
)211%252* %5'(
2.
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3able )5.
It0'9'0tato# /
rom the above table it is clear that the ratio is increased in the
year $%%(/%' by $*H due to decrease li4uid assets5 6n the year $%%'/%2 the
ratio is decreased by (*H5 6n the year $%%2/%* the ratio is increased by )1&H
due to increase in li4uid assets5 6n the year $%%*/%& the ratio is decreased by
2$H due to decrease in li4uid assets 4uick ratio not satisfactory5
*%
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GRAP/ICAL REPRESENTATION
QUICK RATIO
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
YEARS
RS
IN
LAKHS
Quick Ratio
*)
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NET =ORKING CAPITAL RATIO
3he difference between current assets and current liabilities is called
"et Working ?apital5 3he "et Working ?apital ratio is calculated by dividing
net working capital with net assets or capital employed5 ?urrent asserts
include cash and bank balances, investment, raw materials, advance
payments, consumable stores and spares, finished goods, stock in process K
semi finished goods, sundry debtors, prepaid e>penses5 ?urrent liabilities
consists of account payable, short/term notes payable, current matures of long
term debt, accrued income ta> and other accrued e>penses5 "et assets include
"et Working ?apital and finished assets5
3he ratio is used as a measure of firms li4uidity5 3he ratio measures
the firms potential reservoir of funds5
W:!76"; ?A063A=
"93 W:!76"; ?A063A= !A36: P
3:3A= ASS93S
*$
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Ca-*-ato o7 N0t =o'H1 Ca9ta- Rato o7 CFL. F'o: 233"3# to
233$34
(R%. LaH8%)
Y0a' =o'H1
Ca9ta-
Tota-
A%%0t%
N0t =o'H1
Ca9ta-
$%%(/$%%' $*$'&5.( '(($%5(' %5'%
$%%'/$%%2 (*)'&5%$ .2.&152( %5(.
$%%2/$%%* 21**'5)( ))*1*15.& %5'(
$%%*/$%%& &.'&)5%1 )2$**25.) %5''
$%%&/$%%. ).*)125)) $.$2'%5*' %52%
3able $5%
It0'9'0tato#
rom the table it is clear that the ratio is increased in the year $%%(/%' by $H
due to increase in current assets5 6n the year $%%'/%2 the ratio is increased by
$H5 6n the year $%%2/%* the ratio is increased by )%H and in the year $%%*/%&
the ratio is increased by $H due to increase currentassets and this will tell the
reservoir of funds is related to the net current assets.
*1
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0
0.1
0.2
0.3
0.4
0.5
0.6
RS IN LAKHS
2004-
2005
2005-
2006
2006-
2007
2007-
2008
2008-
2009
YEARS
NET WORKING CAPITALRATIO
GRAP/ICAL REPRESENTATION
*(
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DEBTORS TURNOVER RATIO
Debtors turnover ratio indicates the velocity of debt collection of
firm5 6n simple it indicates the number of times average debtors are turned
over during a year5 ;enerally the higher the value of debtors turnover the
more efficient is the management of debtorsKsales or more li4uid the debtors5
Similarly low debtors turnover implies inefficient management of
debtorsKrates and less li4uid debtors5
"93 ?!9D63 A""UA= SA=9S
D9@3:!S 3U!":V9! !A36: P
AV9!A;9 D9@3:!S
:09"6"; D9@3:!SQ?=:S6"; D9@3:!S
AV9!A;9 D9@3:!S P
$
Ca-*-ato o7 D0to'% T*'o&0' Rato o7 CFL. F'o: 233#3! to 23343
!s5 6n =akhs+
Y0a'N0t C'0dt
Sa-0%
A&0'a10
D0to'%
D0to'%
T*'o&0'
Rato
$%%(/$%%' ))%$&&5.. )1%'&52' &5('
$%%'/$%%2 )$(1')5(( )%11*5(& )$5%1
$%%2/$%%* )(%1.*5)$ )112151% )%5')
$%%*/$%%& $$%'.&5&( )1)''5$* )25&$
$%%&/$%%. $$%).'5*% )%(1151% $)5)%
3able $5)
Inter*retation: -
*'
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rom the above table it is clear that the ratio is decreased in the year $%%(/%'
by )H this is due to decrease in credit sales5 6n the year $%%'/%2 the ratio is
increased by ($H due to increase in credit sales5 6n the year $%%2/%* the ratio
is decreased by )1H due to decreases in credit sales and in the year $%%*/
%& the ratio is increased by 2H this is due to huge increase in credit sales5
6n the year $%%&/%. the ratio is increased by 'H due to increase in credit
sales5
*2
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GRAP/ICAL REPRESENTATION
0
5
10
15
20
25
LAKHS
2004-
2005
2005-
2006
2006-
2007
2007-
2008
2008-
2009
YEARS
DEBTORS TURNOVER RATIO
RATIO
AVERAGE COLLECTION PERIOD
**
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GRAP/ICAL REPRESENTATION
INVENTORY TURNOVER RATIO
9very firm has to maintain a certain level of inventory, so as to meet
the re4uirements of the business 5@ut the level of inventory should neither be
0
5
10
1520
25
30
35
40
45
DAYS
2004-
2005
2005-
2006
2006-
2007
2007-
2008
2008-
2009
YEARS
AVERAGE COLLECTION PERIOD
RATIO
*.
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too high nor too low5 6nventory turnover ratio is also known as stock velocity5
6t would indicate whether inventory has been efficiently used or not5
?:S3 : ;::DS S:=D
6"V9"3:!< 3U!":V9! !A36:P
AV9!A;9 6"V9"3:! or compound fertiliEers5
15 mi>ed fertiliEers5
?oromondal fertiliEers ltd was established in the year ).2( at
visakhapatnam near sriharipuram5 9T6- bank of WAS86";3:" , US and
industrial development bank of 6ndia provided the financial assistance to the
company5the plant started its production from December ).2*5
?oromandal has paid been concrn towards environment and other pollution
control measures5
3here are two concepts of working capital 5they are gross concept
and net concept5 3he gross working capital concept focuses attention on two
aspects of current assets management5
a+ optimum investment in current assets and
b+ financing of current assets5
.*
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3he net working capital concept focuses attention on two as pects of
current assets and current liabilities management5
a+ in indicates the li4uidity position of the firm and
b+suggests the e>tent to which working capital needs may be financed by
permanent sources of funds5
?oromndal is maintaining good working capital turnover5 Usually any
firm tries to decrease length of its operating cycle 5 even coromandal
fertiliEers ltd5, has made successful attempt to reduce its operating cycle5
.&
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BIBLIOGRAP/Y
BOOKSI.M.PANDEY
Faa- :aa10:0t >PRASANNA C/ANDRA
Maa10:0t ao*t1 >S.N.MA/ES=ARI
=0%t0< .7-da.o:
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