“Patson Chemical Pvt. Ltd.”

A Project Report Submitted in Partial fulfillment

of award of MBA Degree

Project Guide

Prof.Parnika Jha

Submitted By

Ketan P. Dhameliya

Roll No : 22

S. K. PATEL INSTITUTE OF MANAGEMENT AND

COMPUTER STUDIES

Gandhinagar, India

December 2011

1

2

CERTIFICATE

This is to certify that Mr.Ketan Dhameliya of S.K.Patel Institute of Management and

Computer Studies, Gandhinagar has submitted his Winter Project titled, “The Project

Report on Patson Chemical Pvt. Ltd.” in the year 2011-2012 in the partial fulfillment of

Master of Business Administration.

Dr. N N Jani Prof. Sonu Gupta Prof.Parnika jha

Director HOD Project Guide

DECLARATION

3

I, hereby declare that the Winter Project titled, “The Project Report on Patson

Chemical Pvt. Ltd” is original to the best of our knowledge and has not been published

elsewhere. This is for the purpose of partial fulfillment of Kadi Sarva Vishvavidhyalaya

requirements for the award of the title of Master of Business Administration, only.

Signature

Ketan P. Dhameliya

MBA SEM-I

PREFACE

4

The career of the person depends upon many things. One of them is the

knowledge. He/she acquires through theory is not sufficient to develop. His/her

personality and to develop some skills, but now a days, it is no more. Practical training is

necessary to implement the theories & acquire the knowledge, so far this purpose our

institute s k patel institute of management and computer studies affiliated by Kadi

university, Gandhinagar arranged 4 day’s of summer training programmed which is

necessary for any M.B.A. student. That is in order to sharpen our skills and to bridge the

gap of the theory and practice. I completed my training at “PATSON CHEMICALS”.

The training report is made with clear objective of study of “PATSON

CHEMICALS”. How it’s working. The report will give the brief details of all the

department of PATSON CHEMICALS. My report provides you all the information

related to the various departments of PATSON CHEMICALS. Its current affaires and

working. I receive all information and co-operation from the staff members. I hope so,

these reports fulfill need of the educational requirements.

Hence, this report is designed with the objective to gain practical knowledge is

undertaken on a chemical industry. How it’s working and it’s finance department.

5

ACKNOWLEDGEMENT

I am glad to express my profound sentiments of gratitude to all who rendered

their valuable help for the successful completion of this project report titled, “financial

performance of PATSON CHEMICALS”. And to know the functions of Finance and

Accounts department.

I record my deep sense of gratitude to Mr.Mitul Patel, who had given me a chance

to do a project under this root of PATSON CHEMICALS, and given opportunity to know

the functions of finance & accounts department.

I want to say specially thanks to Dr.N N Jani to allow me to under go training the

“PATSON CHEMICALS” and Prof.Parnika Jha provides me to guideline how to make a

good report.

I am very thankful to all the member of the company for giving me necessary

information related to the department at which they are working and giving their valuable

time for guiding and providing lots of information concerning.

My genuine sense of gratitude goes to the respective universities that gave me a

chance to brighten my academic qualification that provided me this opportunity to have a

practical knowledge of relevant fields.

6

EXECUTIVE SUMMARY

This Winter Project Report of the Patson Chemical Pvt. Ltd. includes various

functions like production, marketing, finance and human resource. This report is prepared

after the training of 4 days at the company’s location at Bhavnagar. It includes the

financial analysis of the company and at the end conclusion is given.

The term “Financial Analysis” also known as analysis and interpretation of

financial statements refers to the process of determining financial strength and

weaknesses of the firm by establishing strategic relationship between the items the

balance sheet, profit and loss account and other operative data.

7

INDEX

Sr.

No.PARTICULAR

Page

No.

1 COMPANY PROFILE 9

2 HISTORY OF THE PATSON CHEMICALS 10

3 ABOUT ‘PATSON CHAMICALS’ 11

4 PRODUCT PROFILE 12

5 MANUFACTURING PROCESS 13

6 ORGANISATION STRUCTURE 15

7 OBJECTIVE OF RESEARCH 16

8 SCOPE OF THE STUDY 17

9 LIMITATION OF THE STUDY 18

10 WORKING CAPITAL 19

10.1 CURRENT ASSETS 20

10.2 CURRENT LIABILITIES 21

10.3 WORKING CAPITAL 22

11 COMMON SIZED STATEMENT OF PROFIT & LOSS A/C 23

12 COMMON SIZED STATEMENT OF BALANCE SHEET 24

13 PROFITABILITY RATIOS 25

14 LIQUIDITY RATIOS 28

15 ACTIVITY RATIOS 30

16 SUGGESTIONS 35

17 CONCLUSION 36

18 BIBLIOGRAPHY 37

8

COMPANY PROFILE

Name : PATSON CHEMICALS

Factory Address : Plot no. 92, Phase- 1

G.I.D.C. Chitra,

Bhavnagar 364004

Office Address : As above.

Type of Business : Partnership Firm

Names of Partner : Mr. Mitul M. Mavani,

Mr. Damjibhai M. Patel,

Mr. Valjibhai L. Lathiya,

Mr. Govindbhai D. Malaiya,

Mr. Pankajbhai N. Lathiya,

Miss. Bhanuben C. Malaiya.

Banker : State Bank of India. (Chitra Branch)

Establish : 1981

Contacts (O) : (0278) - 2446097, 2448139

(R) 2447417

Fax : (0278) 2445097

Website : www.patsonchemical.com

E-mail : contact@patsonchemical.com

9

HISTORY OF THE PATSON CHEMICAL

PATSON CHEMICALS has been a leader unit in manufacturing of Bulk Drugs

and Fine chemical since it commenced in 1981. The founder of this unit Mr. D.M. Patel

continuously upgraded the quality of product to the satisfaction of renowned customers

all round India and abroad. Continuous progress has been achieved through the skills of

their workforce, commitment to new technologies and dedication to good customer

service. This has leaded the company to expand its business in Singapore, Canada,

Germany, Bangkok and South Africa. 

      

The Sister concern of Patson Chemical is Patson Laboratories Pvt. Ltd been

engaged in manufacturing of tablets, capsules and liquid orally.

“PATSON CHEMICALS” production unit of the chemicals is sited in the industrial

spot of Bhavnagar i.e. G.I.D.C. Chitra for getting the advantage of locality. It is not

having any branch, offices, factory and warehouse.

The company has been documented as a partnership firm in 1981 by Mr.

N.H.LATHIYA. He was a main founder of PATSON CHEMICALS. Then the control of

the firm was given to DAMJIBHAI PATEL. He had worked hard to accelerate the growth

of the firm and is doing well for the development of the firm. After the smooth function

of the firm, Mr. M. M. Mavani joined the firm in the year of 2000.

10

ABOUT ‘PATSON CHAMICALS’

Young and dynamic technocrats manage the company. They persevere to provide

the best quality and service to their customers. To achieve the highest standards of

quality, and thoroughly inspect the inward goods, in-process materials and finished

products. PATSON CHEMICALS have a well equipped laboratory where they use

modern techniques for research and development of new products. PATSON

CHEMICALS one of the most important strategy is "qualitative business". We

consciously put these actions in our everyday lives.            

Achieving customer’s satisfaction is fundamental to business.

Provide products and services of the highest quality.

Practice dignity and equity in relationship, and provide opportunities for people to

realize their full potential.

Foster mutually beneficial relations with all business partners.

Manage operations with high concern for safety and the environment.

Be a responsible corporate citizen.

11

PRODUCT PROFILE

Basically the firm manufactures chemicals for the purpose of making drugs for the

disease. The firm use very complicated process for getting this chemical. Thus procedure

takes 5 days to get prepared.

The PATSON CHEMICALS provide the raw material to the large scale industries.

The products of the firm are as bellow:-

N-BUTILE BROMIDE (chemical)

DIE-ETHILE EMINE (chemical)

OXIPHINE BUTAZONE (drug)

PHENYL BUTAZONE (drug)

The products are raw material for large scale. They made the pain-killer tablet and

drug.

The production of the PHENYL BUTAZONE was initiated in 1987. It was sold in

‘tons’ to pharmaceutical companies. It was exported also in many countries.

As we know that 1992 to 1998 was the golden era of the company. These chemicals

were demanded very much.

12

MANUFACTURING PROCESS

PATSON CHEMICALS manufactures the product as per the UNITED STATE

PHARMACOPOIEA (USP) for the production of PHENYL BUTAZONE. Various raw

materials such as N-BUTYL, DIETHYL MELOLATE, HYDRO BENZENE and

SODIUM METAL are required. Manufacturing process consists of following steps.

N-BUTYL HYDRO SODIUM SODIUM

DIETHYL MELONATE BENZENE METAL SALICYLAIN

---------------------------------------------------------------------------------------

REACTOR

|

CARBON TOWER

|

ACIDIFICATION

|

CENTRIFUGAL FILTER

|

TRAY DRIER

|

GRINDER

|

PACKAGING

WEIGHT INSPECTION

13

1. Mixing of various raw materials

Firstly various raw like N-BUTYL, DIETHYL MELOLATE, HYDRO BENZENE

and SODIUM METAL, SODIUM METANOL, COSTIC SODA, GLACIAL ACIDIC

ACID are mixed.

2. Reacting

In the reactor, different types of chemical reactions are performed on the mixture of

raw material listed in the step1

3. Carbon tower

After the reacting process, the mixture is passed through the carbon tower which

give 99% pure PHENYL BUTAZONE.

4. Acidification

Next acidification is performed on the water link solicitor of PHENYL

BUTAZONE. It gives white colored PHENYL BUTAZONE.

5. Centrifugation

In this step, soft lumpy of PHENYL BUTAZONE are obtained.

6. Drying

In the tray drier “PHENYL BUTAZONE” is passed through

7. Grinding

In the grinder the granules are crushed into fine power.

8. Packaging

After all the earlier steps have been performed, “PHENYL BUTAZONE” is

packaged in the layered bag. Then they are placed in to HDPP (HYDENCITY POLY

PROPALIN) solar resistant drums. These drums are known as CRAFTED DRUMS.

9. Weight inspections

When the PHENYL BUTAZONE powder is to be dispatched, it is packed in the

HDPP bags, because the company is engaged bulk drugs production transporting. So, it is

packed in the powder form in the HDPP bags that have capacity of 25 kg. For the proper

weighting the company uses the electronic weighting machines.

Then these drums are dispatched from the company.

14

ORGANISATION STRUCTURE

Every company’s most important part is organization structure and it plays major

role for any of the successful company.

In PATSON CHEMICAL organization structure is functional type. The authority

line with the top level & flows from top level to bottom level. The responsibility moves

from bottom level to top level. In PATSON CHEMICAL every partners have the

responsibility in the proportion of their authority.

15

PARTNERS

PRODUCTION

MANAGER

PRODUCTION

MANAGER

PRODUCTION

MANAGER

SUPERVISOR SALESMEN ACCOUNTANT

OBJECTIVE OF RESEARCH

Calculate ratio of Patson chemical Ltd. and analyze their financial

situation.

Take into account Patson Chemicals five year’s balance sheet and ratio

to analyze them.

Developing & analyzing Common size income statement.

Determine whether investment in this company is profitable or not.

Determine the financial weakness and strength of the company.

To measure the enterprise's short-term and long-term solvency.

To measure the enterprise's operating efficiency and profitability.

16

SCOPE OF THE STUDY

This project is vital to us in a significant way. It does have some importance for the

company too. These are as follows.

This project will be a learning device for the finance student.

Through this project we would study the various methods of the Financial Analysis.

The project would also be an effective tool for analyzing the company’s position.

This will show the liquidity position of the company and also how do they maintain

a particular liquidity position.

This study will be useful for seeing at what extent of the stage , company is going.

17

LIMITATION OF THE STUDY

Percentages shown in common – size statement analysis give only the change in

proportion of one item to one item. It fails to indicate whether the financial position or

performance over a period of different years is improving or deteriorating.

Final results of the firm also depend upon a number of factors such as general economic

conditions, competition and the policy framed by the government. Hence, before giving

any opinion on the basis of accounting ratios, all such factors must be kept in mind. But

ratio analysis does not take into consideration these factors.

Some accounting ratios are not taken due to lack of information

When comparing performance over time, there is need to consider the changes in price,

changes in technology and changes in accounting policy.

On the basis of only last five year’s balance sheet company’s performance and it’s

evaluation may not be appropriate.

18

WORKING CAPITAL OF PATSON CHEMICAL

PARTICULARS 2007 2008 2009 2010 2011

current assets:

Inventories 4361404 2842430 1386110 2612451.59 3355921.91

Sundry debtors 2061029 4272202 1257662 2549772 2467034

Bank & cash 186403.02 242077.4 2324687.8 658249.99 776850.91

Loan &

advances870167.38 1910605.02 968699.3 965984.16 625687.52

total current

assets7479009.4 9267314.42 5937159.09 6786457.74 7225494.34

less

current liability:

Sundry creditors

for goods1711954 3590915 1261064 1777147 166114

Other current

liabilities- 31434 21423 35220.50 60803

Provisions 49529 57957 65701 66563 91023

total current

liabilities:1761483 3680306 1348188 1878930.50 317940

working capital

total application

of funds

5717526.4 5587008.42 4588971.09 4907527.24 2194946.22

19

20

1).Current assets

A current asset means the assets in the form of cash or can be readily converted

in to the cash within a shorter time. They include cash, bank balance, stock,

debtors, bills receivable, prepaid expenses, accrued income, and readily

marketable securities etc.

Current assets

As the current asset is given in the above table. We can see that in the

year 2007 the current asset is of Rs.7479009.4.then in next year in 2008 the

current asset is increase to 9267314.42.it increases in compare to the previous

year.In the year 2009 current assets again decrease by 3330155.33 and reaches

to 5937159.09.And in the year 2010 current assets increase by 849298.65 and

reaches to 6786457.74. And finally in the year 2011 current assets increase by

439036.6 and reaches to 7225494.34.

So we can find that the in the Patson chemical the current assets is the

fluctuating year by year that shows poor working capital management in Patson

chemical. Company should improve its working capital.

YEAR RS.

2007 7479009.4

2008 9267314.42

2009 5937159.09

2010 6786457.74

2011 7225494.34

21

2).Current liability

Current liability includes the liability which company has to pay

within the period of one year. It includes creditors, deposits, provision for tax, and

all other provisions.

CURRENT LIABILITY

From the above table we find that in the year 2007 the current

liability was1761483, in the 2008 it increase by 1918823 and reaches to

3680306. The next year in 2009 it decreases by 2332118 and reaches to

1348188. And in the year 2010 it increase by 530742.50 and reaches to

1878930.50. And finally in the year 2011 it decreases by 1560990.5 and reaches

to 317940.

From 2010 to 2011 current liability decrease by 1560990.5. It

ensures the negative effect to the progress of the company.

Patson chemical should try to reduce its current liabilities so as to

have the effective working capital for the smooth operating of the business.

YEAR RS.

2007 1761483

2008 3680306

2009 1348188

2010 1878930.50

2011 317940

22

3).Working capital

Business capital is broadly divided in to two groups fixed capital

and working capital. fixed capital refers to the funds invested in to such fixed or

permanent asset as land, building, machinery etc.

WORKING CAPITAL

As shown in the above table we can see that in 2007 the

working capital of Patson chemical is 5717526.4, and the next year in 2008 we

can see that the working capital decreases and reaches to 5587008.42.and the

next year 2009 we can see that the working capital decreases and reaches to

4588971.09. And in the year 2010 it can be increases and reaches to

4907527.24. And finally in the year 2011 it can be decreases and reaches to

2194946.22.

Form the above statement of working capital we can understand

that the working capital decrease day by day in Patson chemical. Patson

chemical should try to increase its working capital.

YEAR RS.

2007 5717526.4

2008 5587008.42

2009 4588971.09

2010 4907527.24

2011 2194946.22

23

COMMON SIZED STATEMENT OF PROFIT & LOSS ACCOUNT

OF PATSON CHEMICAL

PARTICULAR

31-Mar-1131-Mar-10 31-Mar-09 31-Mar- 08 31-Mar-07

Amount % Amount % Amount % Amount % Amount %

Income

Sales 2020985785.6

217728587 86.76 21488292 93.36 14648225 83.64 14841475

97.3

6

Closing stock 3355921.9114.2

22612451.59 12.79 1386110 6.02 2842430 16.23 314554 2.06

Other income 37588.18 0.16 92045.06 0.45 142809.66 0.62 22249 0.12 87049 0.57

Total

income(A)23603367.09 100 20433103.65 100 23017212 100 17512904 100 15243078 100

Expenditure

Opening stock 2612451.5911.8

91386110 7.51 2842430 13.19 4361404 25 723997 5.12

Purchase of

raw material16472155.75

74.9

914644766.26 79.39 15869254 73.64 10932378 62.69 11283719

79.7

9

Manufacturing

exp.1593956.84 7.26 1281419.83 6.95 1516759.5 7.04 1365776 7.83 1478981.1

10.4

6

Administration

& other exp.910492.11 4.14 698301.15 3.78 1059175 4.91 418306.6 2.4 295044.27 2.08

Finance exp. 69480 0.32 121000 0.66 31277.16 0.14 187929 1.07 155672 1.1

Depreciation 308390 1.40 315107 1.71 231925 1.08 173233 1 203835 1.44

Total

expenditure(B)21966926.29 100 18446704.24 100 21550821 100 17439027 100 14141248 100

NET PROFIT

(A-B)1636440.80 7.45 1986399.41 10.77 14,66,391 6.8 73,877 0.42 11,01,829.7 7.79

24

COMMON SIZED STATEMENT OF BALANCE SHEET OF PATSON

CHEMICAL

PARTICULAR31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07

Amount % Amount % Amount % Amount % Amount %

Capital account

of partner8076065.21 85.73 6926305.41 75.04 5994112.44 72.83 5208681.84 48.78 5586603.15 61.71

Secured loan 911435.35 9.67 309483.05 3.35 773226.87 9.39 1673912.8 15.68 1566758.3 17.31

Un secured loan 115000 1.22 115000 1.25 115000 1.40 115000 1.08 137485 1.52

Current

liabilities &

Provision

Sundry creditor

for goods166114 1.76 1777147 19.25 1261064 15.32 3590915 33.63 1711954 18.91

Other liabilities 60803 0.65 35220.50 0.38 21423 0.26 31434 0.29 - -

Provision 91023 0.97 66563 0.72 65701 0.80 57957 0.54 49529 0.55

TOTAL

LIABILITIES9420440.56 100 9229718.96 100 8230527.31 100 10677900.64 100 18240072.45 100

Fixed asset2194946.22 23.30 2443261.22 26.47 2293368.22 27.86 1410586.22 13.21 1573320.05 17.38

Current asset

Inventories 3355921.91 35.65 2612451.59 28.30 1386110 16.84 2842430 26.62 4361404 48.18

Sundry debtors 2467034 26.19 2549772 27.63 1257662 15.28 4272202 40 2061029 22.77

Cash & Bank 776850.91 8.25 658249.99 7.13 2324687.79 28.25 242077.4 2.27 186409.02 2.06

Loan & Advance

& Deposits625687.52 6.64 965984.16 10.47 968699.3 11.77 1910605.02 17.89 870167.38 9.61

TOTAL ASSETS 9420440.56 100 9229718.96 100 8230527.31 100 10677900.64 100 9052329.45 100

(A) PROFITABILITY RATIOS

25

1). Gross profit ratio

Gross Profit Ratio = Gross Profit * 100

Sales

2007 2008 2009 2010 2011

1669331.72

*100/14841475

831097.08*100

/14648225

2645958.59*100

/21488292

3028742.5*100/

17728587

2887214.73*100

/20209857

11.23% 5.67% 12.31% 17.08% 14.29%

From the above calculation of ratio that shows in 2006-07 the ratio is

11.23% , in 2007-08 the ratio is 5.67% we can see that the ratio is decrease in 2007-

08.And in 2008-09 the ratio is 12.31 %.the gross profit ratio is increase in 2008-09. In the

year 2009-10 the ratio is 17.08%, so the gross profit ratio is increased in 2009-10.And

finally in the year 2010-11 the ratio is 14.29%, so the gross profit ratio is decreased in

2010-11.

This ratio of Patson chemical is low it indicates that the cost of sales is

high or that the purchasing is inefficient. In such case the management of Patson chemical

must investigate the causes and try to bring up this ratio.

26

2).Operating ratio

Operating ratio= Cost of goods sold + operating expenses * 100

Net sales

2007 2008 2009 2010 2011

13622859.55*100/

14841475

14423358.49*100/

14648225

19932785.56*100/

21488292

17032565*100/

17728587

15939561.84*100/

20209857

91.79% 98.46% 92.76% 96.07% 78.87%

The ratio displayed in above table we find that in 2006-07 the operating ratio

is 91.79% then it increases to 98.46% and in the year 2008-09 it increases to 92.76%.In

the year 2009-10 it increased to 96.07%.And finally in the year 2010-11 it decreased to

78.87%.There is no specific trend in above 3 year in Patson Chemical.

In year 2006-07 the operating ratio shows that is 91.79% it means that the

operating expense is 92 rs. per 100rs goods .in 2007-08 the ratio is 98.46% that shows not

good operating position the high ratio will be gives lower profit. in 2008-09 the ratio

decreases to 92.76% so it is not good position Patson Chemical should try to decreases

operating ratio.

27

3). Net profit ratio

Net Profit Margin = Profit after Tax* 100

Sales

2007 2008 2009 2010 2011

1101829.45 * 100/

14841475

73877.52 * 100/

14648225

1466391.1* 100/

21488292

1986399.41* 100/

17728587

1636440.80*100/

20209857

7.42% 0.50% 6.82% 11.20% 8.10%

From the above calculation we find that in 2006-07 the ratio is 7.42 and in

2007-08 is 0.50 and in the year 2008-09 the net profit ratio is 6.82.In the year 2009-10

the ratio is 11.20.And finally in the year 2010-11 the ratio is 8.10, so the ratio is

decreased in 2010-11.

We can find that the ratio trend slaps down and up word from the above

figure. The higher ratio, the batter will be the profitability in order to have batter idea

of profitability

(B) LIQUIDITY RATIOS

28

1) Current assets ratio

Current asset ratio = Current assets

Current liability

2007 2008 2009 2010 2011

7479009.4/

1761483

9267314.42/

3680306

5937159.09/

1348088

6786457.74/

1878930.50

7225494.34/

317940

4.24 2.52 4.40 3.61 22.73

In 2006-07 the current assets ratio is 4.24 and it is decreases to 2.52 in the year

2007-08.The current assets ratio in 2008-09 it increases to 4.40. In the year 2009-10 the

ratio is 3.61, so the ratio is decreased in 2009-10.In the year 2010-11 the ratio is 22.73, so

the ratio is increased in 2010-11.

The adequacy of this ratio depends upon a number of factors like the nature of

business, the efficiency of collection department etc. if the turnover is quick and the

collection is efficient, the business may be successfully carried on with a low current

ratio.

The current ratio of Patson chemical is considered as satisfactory level the ratio of

4.40 shows that for the payment of the one liability the company had 4.40 rs. it’s shows

the strong financial position of Patson chemical.

2) Quick ratio or acid-test ratio

29

Quick Ratio = Quick Assets

Quick Liabilities

2007 2008 2009 2010 2011

870167.38/

1761483

1910605.02/

3680306

968699.30/

1348188

965984.16/

1878930.50

625687.52/

317940

0.49 0.52 0.72 0.51 1.97

The above table shows that in 2006-07 the quick ratio is 0.49 in 2007-08

the ratio increases and become 0.52 and in the year 2008-09 the ratio is 0.72. In the year

2009-10 the ratio is 0.51. In the year 2010-11 the ratio is 1.97, so the ratio is increased in

2010-11.

The measure of absolute liquidity may be obtained by comparing only

cash and bank balance as well as readily marketable securities with liquid liabilities this is

very exacting standard of liquidity and it is satisfactory if the ratio is 0.5:1.

(C) ACTIVITY RATIOS

1). Fix asset turnover ratio

30

Fix assets turnover ratio = sales

Fixed assets

2007 2008 2009 2010 2011

14841475/

1573320.05

14648225/

1410586.22

21488292/

2293368.22

17728587/

2443261.22

20209857/

2194946.22

9.43 times 10.38 times 9.37 times 7.26 times 9.21 times

From the above table we can see that in the year 2006-07 the fixed asset turn over

ratio is 9.43. In the year 2007-08 it becomes 10.38. And in the year 2008-09 is 9.37. In

the year 2009-10 the ratio is 7.26 and in the year 2010-11 the ratio is 9.21, so the ratio is

increased in 2010-11 in compare to 2009-10.

This ratio is higher it means the fixed assets are being used effectively to earn

profit in Patson Chemical. The ratio in the year 2009-10 increases in compare to the

previous year 2008-09 and in the current year ratio become increased to 9.21 this ratio is

good for position in Patson Chemical.

2).stock turnover ratio

Stock turnover = cost of goods sold

Average stock

31

2007 2008 2009 2010 2011

1054210/

519275.5

69877190/

3601917

13637041/

2114270

29469399/

1999280.80

32546112/

11411154.29

2.03 times 19.40 times 6.45 times 14.74 times 2.85 times

Stock turnover in 2006-07 is 2.03 it means that total turnover of goods is 2 times

in a year and in 2007-08 the ratio is 19.40 and in the year 2008-09 the ratio is 6.45. In the

year 2009-10 the ratio is 14.74 and finally in the year 2010-11 the ratio is 2.85.

The higher turnover, the more profitable the business would be. The firm in such a

case will be able to trade on small margin of gross profit.

3). Debtors ratio

Debtors ratio = Debtors + Bills receivable

Average daily sales

32

2007 2008 2009 2010 2011

2061029/

40661.57

4272202/

40132.12

1257662/

58872.03

2549772/

48571.47

2467034/

55369.47

51 Days 106 Days 21 Days 52 Days 45 Days

Debtors’ ratio in 2006-07 is 51 days it means that they credit sales is collected in

51 days. 2007-08 the ratio is 106 days it means that credit collection policy is weak. In

2008-09 the ratio is 21 days and in 2009-10 the ratio is 52 days.And finally in the year

2010-11 the ratio is 45 days it means that credit collection policy is good.

The higher this ratio, the more unsatisfactory position it shows. It suggests that the

credit and collection policy is weak. This would result into unsatisfactory state of working

capital and weak liquid position.

4). Creditors ratio

Creditors ratio = Creditors + Bills payable

Average daily purchase

2007 2008 2009 2010 2011

33

1711954/

30914.30

3590915/

29951.72

1261064/

43477.41

1777147/

40122.65

166114/

45129.19

55 Days 120 Days 29 Days 44 Days 3 Days

Creditor’s ratio in 2006-07 is 55 days it means that they do not take full advantage

of credit period. 2007-08 the ratio is 120 days it means that they take full advantage of

credit period. 2008-09 the ratio is 29 days and in 2009-10 the ratio is 44 days. And finally

in the year 2010-11 the ratio is 3 days it means that they do not take full advantage of

credit period.

5).Total assets turnover ratio

Total assets turnover ratio = Sales

Total assets

2007 2008 2009 2010 2011

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14841475/

9052329.45

14648225/

10677900.64

21488292/

8230527.31

17728587/

9229718.96

20209857/

9420440.56

1.64 times 1.37times 2.61 times 1.92 times 2.15 times

From the above table we can see that in the year 2006-07 the total assets turn

over ratio is 1.64 times. In the year 2007-08 it becomes1.37 times And in the year 2008-

09 is 2.61 times. In the year 2009-10 the ratio is 1.92 times. And finally in the year 2010-

11 the ratio is 2.15 times, So the ratio is increased in compare to 2009-10.

This ratio is important to know the over-all efficiency of the business. The

higher this ratio, it shows that with less amount of investment in total assets, the business

has a capacity to sell more and as such its profitability is also more.

SUGGESTIONS

Company’s profit margin is very fluctuating year-on-year. There should be

consistency in the up or down of the profit. A huge fluctuation is not healthy for

the company.

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PATSON CHEMICALS needs to decrease its operating expanses so that the net

profit can be enhanced.

Company should increase the proprietors capital than borrowings. As it reduces

the burden of interest.

Currently, company is selling their products only in domestic market. But

company should also go in the international market. So that company’s products

can be sold at premium rate.

Company should try to reduce finance expenses. Because it has been increasing

every year, which absorbs a part of the net profit.

CONCLUSION

The focus of financial analysis is on key figures contained in the

financial statements and the significant relationship that exits. In company there is a vast

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amount of data available. But it’s very difficult to see each & every data to analyze them.

As a alternative Ratio Analysis will be a very useful devices to make the efficient and

rapid utilization of available data to interprets.

BIBLIOGRAPHY

The following sources become very much helpful for me to prepare this project

report.

ADVANCED ACCOUNTANCY

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WWW.PATSON CHEMICAL.COM

WWW.WIKIPEDIA.COM

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