pix project
TRANSCRIPT
Chapter:I
Introduction
1.1 Introduction of project
1.2 Objective of project
1.3 Research methodology
1.4 Scope of the project
1.5 Limitations of the project
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1.1 INTRODUCTION OF THE PROJECT
In the present world, practical knowledge is of greater important over theoretical one. Thus the B-Schools of today give more emphasis on learning practically with direct interaction with the industry. Project undertaken in PIX TRANSMISSION LTD. is one sucexperience.The project incorporates general analysis of ratios to understand the financial ratios.In a better way. My training at PIX TRANSMISSION LTD. has made me aware about the Internal working of the company which has a lot of exposure in the functioning of a manufacturing unit. The Industrial Training that I have undergone at PIX TRANSMISSION LTD. has really been an enriched experience.
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1.2 OBJECTIVE OF THE PROJECT
o To evaluate the financial performance of the company based on various ratios for period of 2006 to 2010 of Pix transmissions limited.
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1.3 METHODOLOGY OF THE PROJECTREASEARCH METHODOLOGYResearch methodology includes various steps. There should be a Systematic way of collection data & presentation of research. Methodology is the systematic way of solving the problem.it includes the Research methods.
MEANING OF RESEARCH
Research is a part and parcel of any systematic knowledge it has occupied The realm of human understanding in some form or the other from times Immemorial.The human urge for new areas of knowledge has developed A Faculty for search and re-searches in him. The scanty way of seacrch in The Path has achieved an evolution to the more judgemental areas of Operations Research, through analytical and scientific methods of investigation.Research has now become an integral part,not only of academic pursuits, But also of all the areas of human activity.sociologist, economists,Physical scientists, natural scientists and nuclear scientists all would Advocate an extensive use of research for the sake of their academic Advancement, while practitioners like industrial engineers, physicians,Surgeon, managers and businessmen emphasize the great utility of Research in their day to day decision making. Even in agriculture and Religious pursuits, research plays a very vital role. To be prescribing,No Academic body of knowledge and no
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functional area of activity would Progress without adequate advancement in terms of research.
RESEARCH DEFINITION
Research is the manipulation of things, concepts or symbols for purpose Of generalizing to extend, correct or verify knowledge, whether that Knowledge aids in construction of theory or in the practice of an art.
UTILITY OF RESEARCH
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1. Research is an aid to decision-making. 2. Research facilitates the process of thinking, analysis, evaluation, interpretation of business environment, and of the various business situations.
3. Research provide a basis for innovation.
4. Research and development helps to develope new products and to Modify the existing products.
5. Research identifies problem areas.
6. Research establishs the relationship not only between variables in Each functional area,but also between the various functional areas.
7. Research is an aid to forcasting which is an effective tool in the Hands of managers.
8. Researcher helps all the managerial functions.
9. Research helps in the economical utilization of resources.
10.Market and marketing analysis may be based on research.
11.Research is an aid to management information system,and
12.Research is helpful in the formulation of policy and strategy, However, despite its great utility,managerial research is subject to Certain limitations also.
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MEANING OF RESEARCH METHODOLOGY
Research in common sense refers to a search for knowledge. Research simply puts is an endeavour to discover the answer to problems Through the application of scientific method to the knowledge universe. Research is important for systematic enquiry seeking facts through Objective and eligible methods in order to discover the relationship among Them and from broad principles or laws. It is really a method of critical Thinking. The defining and redefining problems,formulating hypothesis or Suggested solution and at last,carefully testing the conclusion to Determine whether they are fit the hypothesis. Thus, the term research Experimentation or examination or examination having as its aim the Revision of accepted conclusions, in the light of facts discovered newly.
DATA COLLECTION1) Primary data- the primary data those,which are collected fresh and For, first time & thus happen to be original in character.
2) Secondary data- These are sources containing data which have Been collected & compiled laid for another purpose. The secondary source Statements & reports whose data may be used by researchers for their studies. Secondary sources consist of not only published records but also Unpublished data. Internet Books
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PRIMARY DATA COLLECTION:
Information and data collected through discussions with account department and Other related department which was made to expand the frontier knowledge about the project.
SECONDARY DATA COLLECTIONAll the information is collected from PIX TRANSMISSIONS LIMITED. First of all SHREE SHYBU VARGHESE (C.S.) Wanted me to study the theoretical part of the ratioAnalysis properly which made me easier to do my calculations and draw a properConclusion from them. Because my concepts where very much clear them.Information regarding the topic was collected from financial report(balance Sheet & profit and loss account) of four years.Information regarding the profile of the company was collected by referring To Manual and also had discussion with the officer of HR department to extent Of their full co-operation.
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1.4 SCOPE
The study will help the company to review the financial performance & its strength & weakness. It will also help the companys management for determining the financial health and profitability.
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1.5 LIMITATIONS
Due to excess responsibility on management staff there is a lack of Frequent interaction. Analysis is done on the basis of four years data provided by the company.
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CHAPTER-II
PROFILE OF THE ORGANISATION
2.1 History of the organization 2.2.Product/services of the organization 2.3 Organization chart
History of the company:11
Established in 1982, PIX TRANSMISSIONS LIMITED is one of the pioneering names in the field of manufacturing and exports of world class V-belts, Hoses, Hose assemblies and End fittings.Pix Transmissions limited is a professionally managed company with Hi-tech ultra modern facilities for the manufacturing of Belts and Hoses. The company is the largest manufacturer and exporter of V-Belts in India. It is the first Indian company to establish an overseas subsidiary in UK by the name "Pix Europe Limited". The company's products are known for efficiency, reliability and trouble free operation And can be performed in most adverse environments. Kema, Netherlands has awarded Pix Transmissions Limited with the ISO 9001:2000 and TS 16949 certifications. The company has a well-established infrastructure. The company possesses a team of highly qualified and dedicated engineers. The company keeps itself up-to-date with the latest technologies needed. R & D effort is the philosophy of the company, which it follows stringently. The company operates from Nagpu and Bazargaon works.
PRODUCTION FACTORY OF PIX TRANSMISSINS.LTD.
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MAIN OFFICE OF PIX TRANS.LTD.
The in-house of both the factories consists of hi-tech machines with latest hose braiding technology from Mayer & CIE GMbH, Germany. The top most priority of Pix Transmissions Limited is "Quality". Due to the consistency in the quality of products, the company is renowned as one of the most trusted and reliable manufacturer of V- Belts and Hoses. The company is known for its efficiency, reliability and quality of products. The main motto of the company is the satisfaction of the customers PIX TRANSMISSIONS LIMITED is India's only company to receive the special award for "Outstanding Export Performance" given by Export Promotion Council, Govt. Of India, consistently over last several years.
Establishment Year:1982 Firm Type: Public.Ltd. Nature of Business: Manufacturer,Export/Import Level to Expand:International
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MISSION STATEMENT OF COMPANY:
Vision :PIX Transmissions Limited is committed to the up-gradation and continuous improvement of technology and processes to maximize customer satisfaction. The company is dedicated and committed to work round-the-clock to fulfill its Motto of A Delighted Customer.
Mission:The mission of PIX Europe is to create delighted customers through rapid development and delivery of innovative, high quality and cost effective solutions to meet end-to-end Power & Fluid Transmissions requirements backed with customer care of the highest standard.
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COMPANY PROFILE:BOARD OF DIRECTORS: SHRI AMARPAL SETHI(Chairman&Managing director) SHRI SONEPAL SETHI (Joint Managing Director) SHRI SUKHPAL SING SETHI SHRI RISHIPAL SETHI SHRI JOE PAUL SHRI DARSHAN SINGH CHADHA SHRI JOSE JACOB SHRI HARESH EIDNANI SHRI PRADEEP HAVNUR SHRI AQUEELA MULLA SHRI KARANPAL SETHI SHRI OM PRAKASH ARORA
COMPANY SECRETARY: SHRI SHYBU VARGHESE
AUDITORS:
M/s.S.C.BANDI &CO. [Chartered accountants,Mumbai]
BANKERS:
1.STATE BANK OF INDIA 2.STATE BANK OF HYDERABAD 3.IDBI BANK LTD.
REGISTERED OFFICE & WORKS:
(UNIT NO.1)
J-7,MIDC,HINGANA ROAD,NAGPUR-440016 Tel:(07104)236501-504 Fax:(07104)236505/506 Website:http://www.pixtrans.com
(UNIT NO.2)
K-36,K-37&K-38,MIDC,HINGANA ROAD,NAGPUR440016
(UNIT NO.3)
BAZARGAON,AMRAVATI ROAD,NAGPUR-440023
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(UNIT NO.4)
KHASRA NO.57,MOUZA NAGALWADI, TEHSIL-HINGNA NAGPUR-440016 PALS BUILDING.1st ROAD,TPS IV, BANDRA-[WEST],MUMBAI-400050 TEL:(022)26404556/26402229 FAX:(022)26402225
MUMBAI OFFICE:
SHARE TRANSFER AGENT: LINK INTIMEINDIA PVT.LTD. C-13,PANNALAL SILK MILLS COMPOUND, L.B.S.MARG,BHANDUP(WEST),MUMBAI400078. TEL.:(022)25963838,FAX:25946969 E-MAIL: [email protected]
PIX Transmissions Limited is the fastest emerging Global Leader in Power & Fluid Transmission Business. It is engaged into the manufacturing of World Class Quality Industrial & Automotive Belts, Hoses, Hose Assemblies and End Fittings to suit various Power Drive needs.
Product Range: PIX manufactures entire range of V-Belts in several constructions such as Wrap, Cut Edge, Ribbed / Poly, Synchronous / Timing and application specific: special construction belts such as Double Cogg, Double Poly, Poly + Timing, Honey Comb, PT-0, PT-6, PT-7, 2TP Belts, Variable Speed Belts, Elasticated Belts, Banded Belts, Kevlar Cord Belts, Antistatic Oil and Heat Resistant Belts, Dry Cover Belts and many more.
Its range in Hoses include Medium & High Pressure Hydraulic Hoses, Industrial Hoses, Spiral Hoses, Performer, Performer/T, Proflex, Ultraflex, Brute/K, Brute/ K+, Brute, Thermal, Optimal, Mining PRO, Aquawash, Geyser, Gas, Freezer, Krishi, Rock Drill, Gasoline, Fuel Dispensing, CNG, Jack, Pulsar, Impetus, Thermal Rig,
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Fiery, Armour.
PIX is the only Indian company to manufacture Hoses and Fittings in-house, and can cater to its customers by providing a complete fluid power transfer solution, in terms of Hose Assemblies of various types and sizes.
Overseas Offices: It is also the first Indian company to establish JV's in United Kingdom, Brasil, Germany, Northern Ireland, UAE & China, as a result it is able to serve its customers better and market its products extensively to various parts of the world.
Distribution Network: PIX has got the widest network of Channel Partners overseas. With distribution network in 45 countries and its products being exported to over 70 countries globally, it has got a niche over its counterparts in terms of reach and market penetration.
Infrastructure: PIX has got the best infrastructure in the industry which is not only taking care of its existing expanding needs but is also sufficient to accommodate its further expansion plans.
The company is also going ahead with its fully-automated mixing plant, which is going to be operational by June 2009. Also its upcoming state-of-the-art facility of Rigid Mandrel Hose at Bazargaon will help in attaining an extra edge over its competitors in terms of added product range at competitive price.
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Research & Development: PIX?s R&D wing is one of the best in the industry, equipped with latest hi-tech equipment and machinery for the testing of its products. As a result it has got a niche in terms of innovation and continuous development of its products.
Corporate Governance: PIX is known as a company which helps to foster a culture of good corporate governance, keeping high the interests of its customers, employees, investors and stakeholders, by following best practices, processes and ethics towards achieving stability and growth.
PIX's stress on consistency in quality has qualified it as a trusted and reliable manufacturer of V-Belts and Hoses as a result it also counts some of the world's largest OEMs to its account.
PIX Transmissions Limited is committed to the up-gradation and continuous improvement of technology and processes to maximize customer satisfaction.
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HISTORY OF PIX FLEXEQUIP LTD UK:PIX-Flexequip Hydraulics Ltd. is the Hydraulics arm of PIX Transmissions Ltd., the rapidly emerging, global power in the Fluid and Mechanical Power Transmission industry. Since inception in 1971, PIX-Flexequip (formerly Flexequip Hydraulics Ltd.) has been involved in the manufacturing of Hydraulic End-fittings and related products. With several years of experience and know-how in hydraulic products, the company has been renownedfor its quality, product range, and competitive pricing.
PIX Transmissions acquired Flexequip Hydraulics Ltd. in May 2007 in an effort to expand its core activities and market share. Since the acquisition, the Lisburn (Northern Ireland) registered company has moved key operations to Ipswich in an effort to enhance its service offering to both its UK/Eire as well as continental European customers. The move also allows PIX-Flexequip to optimise resources and achieve greater efficiencies, by co-locating itself
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with its parent company, which is a key player in the mechanical Power Transmissions industry. The acquisition helped create a company that maximized the synergies between an Endfitting manufacturer and a Hose & Belt manufacturer. In the process, PIX-Flexequip not only enhanced its product range, production capacity, cost-efficiency, testing capabilities, sales, marketing, and technical resources, but also its market
access, along with cross-selling opportunities in the Fluid and Mechanical Power Transmission market. Besides Ipswich, the company also supports its customers through existing distribution centres in Lisburn for Northern Ireland and Ireland, as well as Cardiff. Both these centres are equipped to handle hose assemblies in addition to the distribution for hydraulic components.
HISTORY OF PIX EUROPE:
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Company Profile
PIX Europe Ltd. is the European subsidiary of PIX Transmissions Ltd, one of the fastest growing Power and Fluid Transmissions products manufacturers in the world. PIX, a public limited company has 4 manufacturing plants in India and employs over 1300 people. PIX, was established in 1969 and manufactures an extensive range of Belts, Hydraulic Hoses, Hose Assemblies, End-Fittings, and other Power Transmission products to suit a host of Industrial, Automotive, Agricultural, and Domestic Appliance applications. PIX products are ISO 9001, ISO14001 and TS-16949, with quality ranking among the best in the industry.
PIX Europe was established in 1999 as a joint-venture between PIX Transmissions Ltd. and the Deacon family of the Distag Group. With Distribution Centres in England, Wales, Northern Ireland, and Germany, PIX provide high product-availability and exceptional service to its Distribution Partners spanning over 25 countries across Europe, Middle-East and North Africa. Experienced and well-trained staff is fully equipped to handle all customer queries, allowing direct access to manufacturers resources. PIX Europe has engineered a comprehensive package that offers the following benefits: Extensive infrastructure in Europe to minimize delivery lead time, while ensuring the highest level of service (logistical, technical, commercial) Unparalleled manufacturing range consisting of Hydraulic Hose & Fittings, Industrial Hose, Thermoplastic Hose, Belts & Pulleys, Couplings, Chain & Sprockets. Long term commitment to the market with an emphasis on partnerships based on trust and mutual performance Coherent market strategy centred on working with select OEM and channel partners. Ease of doing business by offering several sourcing options such as Just-In-Time (call-off from Distribution Centre) in component, sub-assembly, or kit form, or direct Ex-factory shipments
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In a nutshell, PIX Europe is a one-stop shop for high-quality and competitively priced range of end-to-end Power & Fluid Transmission solutions, backed with prompt delivery and exceptional customer care. History April 1999 - established PIX Europe Ltd.
July 1999 - commenced trading
April 2002 - acquired Distag Euro Ltd. in UK
April 2004 - established PIX Germany GmbH
June 2004 - completed purchase of new 33,000 sq. ft. unit at Ipswich
December 2004 - relocated to new premises
May 2007 - acquired Flexequip Hydraulics Ltd.
April 2008 - established PIX Hydraulics & Transmissions (Hangzhou) Ltd. in China
February 2008 - Introduced Hydraulic products for Distribution from Ipswich
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Quality Certifications:PIX Facilities/Products are certified to: 1. ISO/TS 16949:2002 2. ISO 9001:2000 3. DNV 4. DGMS 5. MSHA 6. ATEX 7. OHSAS 18001:2007 8. ISO 14001:2004
Certifications & Awards:Its decades of extensive interaction with the customers all over the world has perfected it into the art of making Belts and Hoses as a result it has distinguished itself in the Power & Fluid Transmissions Industry by having number of approvals from various Global Certifying authorities It is an ISO/TS 16949:2002, ISO 14001 & OHSAS 18001 certified company. It is the recipient of ATEX certification from Germany, certifying its belts meeting with the essential Health and Safety norms for its entire range of fire-resistant antistatic belts. It has achieved prestigious approval for Hoses such as MSHA, GL, DGMS & DNV. It is the only Indian company to receive the special award for 'Outstanding Export
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Performance' given by Export Promotion Council, Govt. of India, consistently for last several years.
PIX is also the recipient of the prestigious 'Niryat Shree' award for achieving outstanding performance in the export of its products.
PIX Transmissions Limited Bags AIRIAs Highest Export AwardPIX Transmissions Limited, the Indian multinational Company was conferred with the Highest ExportAward for the year 2008-2009 for excellence in exports of V-Belts, Timing Belts and Hydraulic Hoses. PIX has bagged this award for the second year in succession. The award was given by Prof. Saugata Ray, (Minister of State for Urban Development, Govt. of India) on 23rd September, 2009 at Kolkata.
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2.2PRODUCT/SERVICES OF ORGANIZATION
Products
1.PIX BELTS:
Air Conditioning Part
made up of r-134a compatible synthetic rubber consists of high tensile steel wire which is capable to withstand pressure, vacuum and flexibility cover is made up of weather, ozone and heat resistant synthetic rubber used both for discharge and suction applications
Air Conditioning Part
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Features : made up of r-134a compatible synthetic rubber consists of high tensile steel wire which is capable to withstand pressure, vacuum and flexibility cover is made up of weather, ozone and heat resistant synthetic rubber used both for discharge and suction applications applications : general air conditioning product features : range : 5/16", 3/8", 1/2", 5/8", 3/4", 7/8" & 1-1/8" standard : sae j 2064 : july 1999 & iso 8066-2 grade : b (iso) equivalent to type-b (sae) group - 2&4 (iso) equivalent to class ii (sae) pressure : 24 bar (maximum), burst pressure : 120 bar temperature range : -400c to 1250c
Auto Belts
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the high tensile polyester cord enables the maximum power transmission possesses moulded cogs for extra flexibility they are oil and heat resistant these belts are capable of working on high speed engines these belts are good abrasion resistant these belts have low stretch and offer high power transmission even on small pulley diameters
Banded Belts
high stability eliminating the possibility of belts turning over in pulleys greater power transmission in less space high efficiency due to reduced slippage ideal for pulsating loads low vibration for smooth running on even the toughest drives stringent length tolerance available in wrapped or moulded raw edge cogged construction optional kevlar cord belts available
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Belts
description : suitable for highly specialised applications under stringent operations, such as drives where take-up allowance is not provided, continuous duty drives where re-tensioning is not possible, overloaded drives having space limitations.
Double Cog Belts
this special construction allows the use of belt on small pulley diameters to increase flexibility
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Double Poly Belts
these belts are recommended to be used on applications demanding clockwise and anticlockwise rotations. Belts can be used from both sides. suitable for very small pulley diameters.
Dry Cover Belts
they are suitable for drives having clutch applications. Lawn movers, chemical industries where contamination is not acceptable. basically manufactured in blue cover. can also be supplied in green, brown, red, black and white colours. available in polyester and aramid or kevlar cord constructions.
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Fire Resistant & Anti-Static Belts
fire resistant & anti-static it is suitable in certain working environments such as coal mines & sensitive petrochemical installations require v-belts having fire resistant properties in addition to normal anti-static properties.
Hexagonal Belts
hexagonal belt or double v-belt is a special construction belt which can give wedging action from both the sides of the belt. The shape of hexagonal belt is like two v-belts bonded back to
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back, which enable it to give the wedging action from both the sides of the belt. The tensile member lies exactly at the center of the belt height. The family includes sections as aa, bb, cc and 25 confirming to the standards is 11038, iso 5289, rma ip 21. The belt is wrapped with strong wear resistant bias cut neoprene rubberized fabric.
Raw Edge Cogged Belts
extremely small pulley diameters high belt speed extraordinary power transmissions are required high ambient temperatures render the use of wrapped v-belts uneconomical and impractical
pix make cut edge belts offers the best technical and economic solution for above mentioned conditions through their use of high grade components coupled to the most advanced production machinery.
Ribbed Belts
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uniform load distribution all over the cross section only one belt required. No matching. Uniform tension constant speed ratio, the ribs never sink inside the pulley suitable for drives with inside and outside idlers extremely flexible with reduced thickness can be used on drives from reverse side and in compact layout high surface speed combined with high speed ratios smaller pulley diameters
Rubber Belts
features : the high tensile polyester cord enables the maximum power transmission possesses moulded cogs for extra flexibility they are oil and heat resistant these belts are capable of working on high speed engines these belts are good abrasion resistant these belts have low stretch and offer high power transmission even on small pulley diameters
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standards : pix automotive belts confirms to the following standards: din 7753, bs au 150b, iso 2790, is 5635, sae 636, rma ip-26, iso 9981 pix power performance automotive belts are available in wrapped, cut edge and ribbed constructions. sections : 3pk, 4pk, 5pk, 6pk, 7pk, 8pk, avx10, avx13, avx17
Synchronous Belts
specially designed curvilinear tooth profile reduced tooth jump due to higher teeth shear resistance high power rating compared to pix - x'act htd belts less backlash, long life, excellent abrasion resistance less noise, no maintenance or equipment downtime.
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V Belts
pix power wrap belts are the first of the v-belts to enter the power transmission scenario. The continued effort of the r&d of pix has enabled to achieve the power ratings considerably higher than most of the available brands in the market. the compound used to build up these belts are well chosen to match the stipulated power ratings, thus offering distinct advantages regarding the increased factor of safety on critical drives.
2.PIX END FITTINGSPIX End Fittings are manufactured according to the valid industrial standards, the geometry of end fittings is the backbone of a reliable and leak free assemblies. PIX make fittings are offered in EN1A (leaded) steel. Other material can be used based on customer's requirements. All fittings are designed to perform toughest worldwide industrial application and stringent customer requirements. Available for hose size from 6 mm to 50 mm ID. Fittings are supplied with surface protection and it features excellent resistance to corrosion and other environmental impacts. Range: Standard fittings BSP, Metric, ORFS, JIC, NPT etc. SAE flange fittings Connection for hollow bolts (banjo nipple) Interlock fittings - BSP, Metric, ORFS.JIC;NPT etc
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Ferrules for standard, interlock & reusable fittings. Accessories such as double insert & wash-cleaner female Adapters used internationally such as NPTF, JIC and BSP etc
STANDARD FITTINGS FERRULES
FERRULE FOR R1A HOSE SKIVE, TYPE (PF 11)
FERRULE FOR R2A & 4SP HOSE, SKIVETYPE (PF 12)
COMMON FERRULE FOR R1AT / R2AT & 2SC NO SKIVE (PF 22)
FERRULE FOR 1SC NO SKIVE (PF 23)
BSP FITTINGS
BSP FEMALE 600 CONE (DKR)
450 BSP FEMALE 600 CONE (DKR 45)
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900 BSP FEMALE 600 CONE (DKR 90)
BSP MALE PARALLEL 600 CONE (AGR)
BSP MALE FLAT SEAT (AGR F)
BSP FEMALE 600 CONE WITH O-RING (DKOR)
450 BSP FEMALE 600 CONE WITH O-RING (DKOR 45)
900 BSP FEMALE 600 CONE WITH O-RING (DKOR 90)
BSP FEMALE - 600 CONE - DOUBLE HEXAGONAL (DKRH)
BSP MALE
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3. PIX HOSES:
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Hose with One & Two Wire Braidings confirming to :
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Application: PIX WELDMAST HOSE is used for the conveying welding gases such as oxygen, acetylene & other combustible gases. It is recommended for use with welding and gas cutting in a workshop, manufacturing industries, steel mill, ship building, power stations and repair yards etc.
Construction: Tube: Black synthetic rubber of low gas permeability Reinforcement: One high tensile steel wire braid for good rupture strength Cover: Blue and red synthetic rubber with high weather / UV / ozone & abrasion resistant, pin pricked.
Operating Temperature Range: -40 C to +65 C
Standards: IS 447
Features: 1. Special rubber compound compatible with oxygen, acetylene and other combustible gases. 2. Easy identification for hoses as blue color for oxygen and red color for acetylene & other combustible gases. 3. Low gas permeability. 4. Special wire braided construction for adequate burst protection. 5. High abrasion, UV and ozone resistant hose. 6. Rodent proof, crush and kink resistant. 7. Special wire braid construction ensures, low radial expansion and hence, constant flow of gas. 8. Pin pricked cover ensures no cover blister. 9. Exceeds IS:447 requirements.
Range:
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2.3 ORGANISATION CHART
M.D. (AMARPAL SING) VICE PRESIDENT(B.D.) SHIRLEY PAUL
DIRECTOR (OPERATIONS) JOE PAUL
GENERAL MANAGER (CORP) RAJESH KALLA
DEPT UNDER DIRECT CONTROL OF M.D.
H.R.D.
MKT &SUPPORT DEPTS.
OTHER
ADMIN
PURCHASE & STORES
MANUFACTU RING
MKT & C.S.
ACCOUNTS
EXCISE
PROJECTS
ENGINEERING
OEM
SYSTEMS
SECURITY
COSTING &MIS
CORPORATE QUALITY
TECHNICAL SERVICES
DESPATCH
R&D
CAC
DOCUMENTASTION (EXP. &DOM)
MKT ACCOUNTS & OPD(ORDER PROCESSING DEPT)
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CHAPTER-III
RELATED THEORY
3.1 THEORY OF THE PROJECT. 3.2 TYPE OF RATIO. 3.3 ADVANTAGES AND DISADVANTAGES OF RATIO ANALYSIS
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3.1 THEORY OF THE PROJECT
Ratio Analysis:
A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios. Accounting ratios are very useful as they briefly summaries the result of detailed and complicated computations. Absolute figures are useful but they do not convey much meaning. In terms of accounting ratios, comparison of these related figures makes them meaningful. According to Kennedy and Macmillan, "The relationship of one item to another expressed in simple mathematical form is known as ratio." Robert Anthony defines a ratio as "simply one number expressed in terms of another."
Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures. According to Myers, "Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."
Ratios provide an easy way to compare present performance with past. Ratios depicts the areas in which a particular business is competitively Advantaged or disadvantaged through comparing ratios to those of Other business of the same size within the same industry.
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3.2 TYPES OF RATIO
Liquidity Ratio
Leverage Ratio
Growth Ratio
Activity Ratio
Profitability Ratio
Current Ratio
Liquid Ratio
IRG Ratio
SGR Ratio
Based on relationship Between borrowed funds & Owners capital
Based on Inventory Coverage Turnover Ratio
Debtors Turnover Ratio
Assets Turnover Ratio
Debt-equity Ratio
Debt to total assets ratio
Interest coverage Dividend coverage Ratio Ratio
Total fixed charge coverage Ratio
Related to Investment
Related to Sales
ROA
ROCE
DPS
EPS
BPS
Return on Shareholders equity
Gross Profit Margin
Net Profit Margin
Expenses Ratio
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THE RATIO ANALYSIS IS MADE UNDER SIX BROAD CATEGORIES AS FOLLOWS: LIQUIDITY RATIOS LEVERAGE RATIOS ASSETS MANAGEMENT RATIOS PROFITABILITY RATIOS OPERATING RATIOS MARKET BASED RATIOS
1.LIQUIDITY RATIOS:
Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.
CURRENT RATIO QUICK RATIO
Current Ratio: Current ratio is calculated in order to work out firms ability to pay off its short-term liabilities. This ratio is also called working capital ratio. This ratio
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explains the relationship between current assets and current liabilities of a business. Where current assets are those assets which are either in the form of cash or easily convertible into cash within a year. Similarly, liabilities, which are to be paid within an accounting year, are called current liabilities.
Current Ratio = Current Assets/Current LiabilitiesCurrent Assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Stock of Goods, Short-term Investments, Prepaid Expenses, Accrued Incomes etc. Current Liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc. Objective and Significance: Current ratio shows the short-term financial position of the business. This ratio measures the ability of the business to pay its current liabilities. The ideal current ratio is suppose to be 2:1 i.e. current assets must be twice the current liabilities. In case, this ratio is less than 2:1, the short-term financial position is not supposed to be very sound and in case, it is more than 2:1, it indicates idleness of working capital.
QUICK LIQUID/ACID TEST RATIO:
Liquid ratio shows short-term solvency of a business in a true manner. It is also called acid-test ratio and quick ratio. It is calculated in order to know how quickly current liabilities can be paid with the help of quick assets. Quick assets mean those assets, which are quickly convertible into cash.
Liquid Ratio = Liquid Assets/Current LiabilitiesWhere liquid assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Short-term Investments etc. In other words, all current assets are liquid assets except stock and prepaid expenses.
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Current liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc. Objective and Significance: Liquid ratio is calculated to work out the liquidity of a business. This ratio measures the ability of the business to pay its current liabilities in a real way. The ideal liquid ratio is suppose to be 1:1 i.e. liquid assets must be equal to the current liabilities. In case, this ratio is less than 1:1, it shows a very weak shortterm financial position and in case, it is more than 1:1, it shows a better short-term financial position.
2.LEVERAGE RATIOSThe long-term financial stability of the firm may be considered as dependent upon Its ability to meet all its liability to meet all its liabilities,including those not Currently payable. The ratios which are important is measuring the financial leverage Of the company is as follows:
Debt-Equity Ratio:
Debt equity ratio shows the relationship between long-term debts and shareholders funds. It is also known as External-Internal equity ratio. Debt Equity Ratio = Long-termsDebt/Shareholders fund Where Debt (long term loans) include Debentures, Mortgage Loan, Bank Loan, Public Deposits, Loan from financial institution etc. Equity (Shareholders Funds) = Share Capital (Equity + Preference) + Reserves and Surplus Fictitious Assets Objective and Significance: This ratio is a measure of owners stock in the business. Proprietors are always keen to have more funds from borrowings because:
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(i) Their stake in the business is reduced and subsequently their risk too (ii) Interest on loans or borrowings is a deductible expenditure while computing taxable profits. Dividend on shares is not so allowed by Income Tax Authorities. The normally acceptable debt-equity ratio is 2:1. SHAREHOLDERS EQUITY RATIO: A ratio used to help determine how much shareholders would receive in the event of a company-wide liquidation. The ratio, expressed as a percentage, is calculated by dividing total shareholders' equity by total assets of the firm, and it represents the amount of assets on which shareholders have a residual claim. The figures used to calculate the ratio are taken from the company's balance sheet.
DEBT SERVICE COVERAGE RATIO(DSCR): The debt service coverage ratio (DSCR), is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity's (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio is, the easier it is to obtain a loan. The phrase is also used in commercial banking and may be expressed as a minimum ratio that is
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acceptable to a lender; it may be a loan condition or covenant. Breaching a DSCR covenant can, in some circumstances, be an act of default.
PROFIT AFTER TAXES+DEPRECIATION+INTEREST ON LOAN INTEREST ON LOAN+LOAN REPAYMENT IN A YEAR
3.ASSET MANAGEMENT RATIOS
INVENTORY TURNOVER RATIO
Inventory turnover ratio is one of the Accounting turnover ratios, a financial ratio. This ratio measures the number of times, on average, the inventory is sold during the period. Its purpose is to measure the liquidity of the inventory. A popular variant of the Inventory turnover ratio is to convert it into an average days to sell the inventory in terms of days. Remember that the Inventory turnover ratio is figured as "turnover times" and the average days to sell the inventory is in "days".
Inventory turnover ratio = Cost of goods sold / Average inventory Average days to sell the inventory = 365 / Inventory Turnover Ratio
INVENTORY RATIOThe level of the inventory in a company may be assessed by the use of the inventory ratio ,which measures how much has been tied up in Inventory.
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INVENTORY*100/CURRENT ASSETS
DEBTORS TURNOVER RATIO
Debtors Turnover Ratio: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors Velocity. Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables Where Average Accounts Receivables = [Opening Debtors and B/R + Closing Debtors and B/R]/2 Credit Sales = Total Sales Cash Sales Objective and Significance: This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio, better it is as it proves that the debts are being collected very quickly.
CREDITORS TURNOVER RATIO
In the course of business operations, a firm has to make credit purchases and incur shortterm liabilities. A supplier of goods i.e. creditor is naturally interested in finding out how much time the firm is likely to take in repaying its trade creditors. The analysis for creditors turnover is basically the same as of debtors turnover ratio except that in place of average daily sales, average daily purchases are taken as the other component of the ratio and in place of average daily sales
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Credit Purchases/average creditors
Fixed Assets Turnover Ratio: Fixed assets turnover ratio establishes a relationship between net sales and net fixed assets. This ratio indicates how well the fixed assets are being utilised.Fixed Assets Turnover Ratio = Net Sales/Net Fixed Assets
In case Net Sales are not given in the question cost of goods sold may also be used in place of net sales. Net fixed assets are considered cost less depreciation.Objective and Significance:
This ratio expresses the number to times the
fixed assets are being turned over in a
stated period. It measures the efficiency with which fixed assets are employed. A high ratio means a high rate of efficiency of utilisation of fixed asset and low ratio means improper use of the assets.
TOTAL ASSETS TURNOVER RATIO:
Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.
"Sales" is the value of "Net Sales" or "Sales" from the company's income statement
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"Average Total Assets" is the value of "Total assets" from the company's balance sheet in the beginning and the end of the fiscal period divided by 2.
WORKING CAPITAL TURNOVER RATIO:
Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is turned over in the course of year and is calculated as follows:
Formula of Working Capital Turnover Ratio: Following formula is used to calculate working capital turnover ratio [Working Capital Turnover Ratio = Cost of Sales / Net Working Capital] The two components of the ratio are cost of sales and the net working capital. If the information about cost of sales is not available the figure of sales may be taken as the numerator. Net working capital is found by deduction from the total of the current assets the total of the current liabilities
Significance: The working capital turnover ratio measure the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation.
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4.PROFITABILITY RATIOS:The profitability ratios are used to measure how well a business is performing in terms of profit. The profitability ratios are considered to be the basic bank financial ratios. In other words, the profitability ratios give the various scales to measure the success of the firm.
The profitability ratios can also be defined as the financial measurement that evaluates the capacity of a business to produce yield against the expenses and costs of business over a particular time period. If a company is having a higher profitability ratio compared to its competitor, it can be inferred that the company is doing better than that particular competitor. The higher or same profitability ratio of a company compared to its previous period also indicates that the company is doing well. The return on assets, profit margin and return on equity are the examples of profitability ratios.
The profitability ratio should be compared with the relevant time period. The profitability ratio of the industries that experience operations on the seasonal basis should be compared properly. For example, in case of the retail industry, high revenue is earned during the Christmas season. Hence comparing the profit margin of the 4th quarter with the 1st quarter of a retailer will not give clear picture of the profitability of the retail business. Hence in order to judge the profitability of the retailer perfectly, the profit margin of the 4th quarter of a retailer should be compared with the profit margin of the 4th quarter of the previous year.
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GROSS PROFIT MARGIN: Gross margin, Gross profit margin or Gross Profit Rate is the difference between the sales and the production costs excluding overhead, payroll, taxation, and interest payments. Gross margin can be defined as the amount of contribution to the business enterprise, after paying for direct-fixed and direct-variable unit costs, required to cover overheads (fixed commitments) and provide a buffer for unknown items. It expresses the relationship between gross profit and sales revenue. It is a measure of how well each dollar of a company's revenue is utilized to cover the costs of goods sold.[1] It can be expressed in absolute terms: Gross margin = Net Sales - Cost of goods sold + annual sales return or as the ratio of gross profit to sales revenue, usually in the form of a percentage:
Gross Margin Percentage = (Revenue-Cost of goods sold)/RevenueCost of Sales (also known as Cost of Goods (CoGs)) includes variable costs and fixed costs directly linked to the sale, such as material costs, labor, supplier profit, shipping costs, etc. It does not include indirect fixed costs like office expenses, rent, administrative costs, etc. Higher gross margins for a manufacturer reflect greater efficiency in turning raw materials into income. For a retailer it will be their markup over wholesale. Larger gross margins are generally good for companies,
with the exception of discount retailers. They need to show that operations efficiency and financing allows them to operate with tiny margins.
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RETURN ON TOTAL ASSETS:
The return on assets (ROA) percentage shows how profitable a company's assets are in generating revenue. ROA can be computed as:
This number tells you what the company can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets
RETURN ON CAPITAL EMPLOYED(ROCE) Return on capital employed is a ratio used in finance, valuation, and accounting. The formula
ROCE compares earnings with capital invested in the company. It is similar to Return on Assets (ROA), but takes into account sources of financing.
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Operating Income In the numerator we have pre-tax operating profit or operating income. However, it is also possible to adjust the EBIT by deducting the sum of the taxes. In the absence of nonoperating income, operating income agrees with EBIT; otherwise, it can be derived from EBIT by subtracting non-operating income. Capital Employed In the denominator we have net assets or capital employed instead of total assets (which is the case of Return on Assets). Capital Employed has many definitions. In general it is the capital investment necessary for a business to function. It is commonly represented as total assets less current liabilities or fixed assets plus working capital. ROCE uses the reported (period end) capital numbers; if one instead uses the average of the opening and closing capital for the period, one obtains Return on Average Capital Employed (ROACE). Application ROCE is used to prove the value the business gains from its assets and liabilities, a business which owns lots of land but has little profit will have a smaller ROCE to a business which owns little land but makes the same profit. It basically can be used to show how much a business is gaining for its assets, or how much it is losing for its liabilities
5.OPERATING RATIOS The ratios of all operating expenses(i.e.materials used,labour,factory overheads, Overheads,and administration and selling expenses) to sales are the operating ratio. The cost ratio as:
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Materials Cost Ratio = Sales
Material consumed*100
Labor Cost Ratio = Labour Cost*100 Sales
Factory Overheads Ratio = Factory Expences*100 Sales
Administrative Expences Ratio = Administrative Expences*100 Sales
6.MARKET BASED RATIO:
EARNING PER SHARE(EPS) Earnings per share (EPS) are the earnings returned on the initial investment amount. In the United States, the Financial Accounting Standards Board (FASB) requires companies' income statements to report EPS for each of the major categories of the income statement: continuing operations, discontinued operations, extraordinary items, and net income. Calculating EPS The EPS formula does not include preferred dividends for categories outside of continued operations and net income. Earnings per share for continuing operations and net income are more complicated in that any preferred dividends are removed from net income before calculating EPS. Remember that preferred stock rights have precedence over common stock. If preferred dividends total
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$100,000, then that is money not available to distribute to each share of common stock. Earnings Per Share (Basic Formula)
Earnings Per Share (Net Income Formula)
Earnings Per Share (Continuing Operations Formula)
Only preferred dividends actually declared in the current year are subtracted. The exception is when preferred shares are cumulative, in which case annual dividends are deducted regardless of whether they have been declared or not. Dividends in arrears are not relevant when calculating EPS. EPR=N.P A.T OR P.D divided by number of equity share.
CASH EARNING PER SHARE: A measure of financial performance that looks at the cash flow generated by a company on a per share basis. This differs from basic earnings per share (EPS), which looks at the net income of the company on a per share basis. The higher a company's cash EPS, the better it is considered to have performed over the period. A company's cash EPS can be used to draw comparisons to other companies or to the company's own past results.
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DIVIDENT PAYOUT RATIO:
The percentage of earnings paid to shareholders in dividends.
DIVIDENT YIELD: A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows:
PRICE EARNING RATIO(P/E RATIO):
The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E", or simply "multiple") is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share.[2] It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio. The P/E ratio has units of years,[note 1] which
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can be interpreted as "number of years of earnings to pay back purchase price", ignoring the time value of money. In other words, P/E ratio
shows current investor demand for a company share. The reciprocal of the PE ratio is known as the earnings yield Definition There are various P/E ratios, all defined as:
The price per share in the numerator is the market price of a single share of the stock. The earnings per share in the denominator depends on the type of P/E:
"Trailing P/E" or "P/E ttm": Earnings per share is the net income of the company for the most recent 12 month period, divided by number of shares outstanding. This is the most common meaning of "P/E" if no other qualifier is specified. Monthly earning data for individual companies are not available, so the previous four quarterly earnings reports are used and earnings per share is updated quarterly. Note, companies individually choose their financial year so the schedule of updates will vary.
"Trailing P/E from continued operations": Instead of net income, uses operating earnings which exclude earnings from discontinued operations, extraordinary items (e.g. one-off windfalls and writedowns), or accounting changes. Note, longer-term P/E data such as Schiller's uses net earnings.
"Forward P/E", "P/Ef", or "estimated P/E": Instead of net income, uses estimated net earnings over next 12 months. Estimates are typically derived as the mean of a select group of analysts (note, selection criteria is rarely cited). In times of rapid economic dislocation, such estimates become less relevant as "the situation changes" (e.g. new economic data is published and/or the basis of their forecasts become obsolete) more quickly than analysts adjust their forecasts.
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3.3 ADVANTAGES &DISADVANTAGES OF RATIO ANALYSISAdvantages and Uses of Ratio Analysis There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to workout a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: -
To workout the profitability To workout the solvency Helpful in analysis of financial statement Helpful in comparative analysis of the performance To simplify the accounting information To workout the operating efficiency To workout short-term financial position Helpful for forecasting purposes
Limitations of Ratio AnalysisIn spite of many advantages, there are certain limitations of the ratio analysis techniques and they should be kept in mind while using them in interpreting financial statements. The following are the main limitations of accounting ratios:
Limited Comparability False Results Effect of Price Level Changes Qualitative factors are ignored Effect of window-dressing Misleading Results Absence of standard university accepted terminology
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Chapter-IV
Data Analysis
4.1 Data analysis &Interpretation of RATIO ANALYSIS IN PIX TRANSMISSION LTD. 4.2 Data Analysis & Interpretation TREND ANALYSIS OF PIX TRANSMISSION LTD. 4.3 Findings & Recommendation 4.4 Conclusion
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4.1 A) LIQUIDITY RATIO1) CURRENT RATIO: CURRENT RATIO=CA/CL YEAR CA CL 2006-2007 669700000 212200000 2007-2008 846180486 208523215 2008-2009 1227573424 219413440 2009-2010 1142624000 414900000 Source: Company Records RATIO 3.16 4.06 5.59 2.75
Chart 1- Current Ratio
6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 12006-2007 2007-2008 3.16 4.06
5.59
2.75
RATIO
2008-2009
2009-2010
INTERPRETATION: Above graph shows that current ratio in 2006-2007 is 3.16,in2007-2008 is 4.06, in 2008-2009 is 5.59 and in 2009-2010 is 2.75.
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2)QUICK RATIO:QUICK RATIO=CA-INVENTORY/CL-BOD
YEAR CA-STOCK CL-BOD 2006-2007 389800000 212200000 2007-2008 479758154 208523215 2008-2009 722499098 219413440 2009-2010 576733000 414900000 Source: Company Records
RATIO 1.84 2.30 3.29 1.39
Chart 2- QUICK RATIO
RATIO3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 1.84 1.39 RATIO 2.3 3.29
INTERPRETATION: Above graph shows that quick ratio in 2006-2007 is 1.84,in2007-2008 is 2.3, in 2008-2009 is 3.29 and in 2009-2010 is 1.39.
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B)LEVERAGE RATIO 1)DEBT EQUITY RATIO: DEBT EQUITY RATIO=LT DEBTS/SH FUNDS
YEAR LT DEBT SH FUNDS 2006-2007 678100000 346300000 2007-2008 916900658 388952940 2008-2009 1701680832 382691766 2009-2010 2021998000 474745000 Source: Company Records
RATIO 1.96 2.36 4.45 4.26
RATIO5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 1.96 2.36 RATIO 4.45 4.26
INTERPRETATION: Above graph shows that debt equity ratio in 2006-2007 is 1.96,in2007-2008 is 2.36, in 2008-2009 is 4.45 and in 2009-2010 is 4.26.
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2)SHARE HOLDERS FUND TO EQUITY:SHARE HOLDERS FUND TO EQUITY=SHARE HOLDERS FUND/TA
YEAR 2006-2007 2007-2008 2008-2009 2009-2010
SH FUNDS TA 346300000 1373300000 388952940 1793930775 382691766 2619357734 474745000 2594820000 Source: Company Records
RATIO 0.25 0.22 0.15 0.18
RATIO0.3 0.25 0.25 0.2 0.15 0.15 0.1 0.05 0 2006-2007 2007-2008 2008-2009 2009-2010 RATIO 0.22 0.18
INTERPRETATION: Above graph shows that shareholders fund to equity ratio in 2006-2007 is 0.25,in2007-2008 is 0.22,in 2008-2009 is 0.15and in 2009-2010 is 0.18.
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3)FIXED ASSET TO LT :FIXED ASSET TO LT= FA/LT FUNDS
YEAR FA LT FUNDS 2006-2007 881700000 346300000 2007-2008 1038404264 388952940 2008-2009 1182794383 382691766 2009-2010 1847599000 474745000 Source: Company Records
RATIO 2.55 2.67 3.09 3.89
RATIO4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 RATIO 2.55 2.67 3.09 3.89
INTERPRETATION: Above graph shows that fixed asset to LTfund ratio in 2006-2007 is 2.55,in2007- 2008 is 2.67, in 2008-2009 is 3.09 and in 2009-2010 is 3.89.
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C)ACTIVITY RATIOS:
1)NUMBER OF DAYS INVENTORY: NUMBER OF DAYS INVENTORY =360/INVENTORY TURNOVER YEAR NUMBER INVENTORY OF DAYS TURNOVER INVENTORY RATIO 76 4.73 80 4.51 97 3.70 114 3.16 Source: Company Records
2006-2007 2007-2008 2008-2009 2009-2010
NUMBER OF DAYS INVENTORY120 100 80 60 40 20 0 2006-2007 2007-2008 2008-2009 2009-2010 NUMBER OF DAYS INVENTORY
INTERPRETATION: Above graph shows that Number of days inventory in 2006-2007 is 76 days,in 2007-2008 is 80 days,in 2008-2009 is 97days and in 2009-2010 is 114 days.
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2)INVENTORY TURN OVER RATIO:INVENTORY TURN OVER RATIO=SALES/AVG.INVENTORY
YEAR
SALES
AVG.INVENTORY RATIO
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2006-2007 1324000000 279900000 2007-2008 1654516026 366422332 2008-2009 1870876094 505074326 2009-2010 1789872000 565891000 Source: Company Records
4.73 4.51 3.70 3.16
RATIO5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 4.73 4.51 3.7 3.16
RATIO
2006-2007
2007-2008
2008-2009
2009-2010
INTERPRETATION: Above graph shows that inventory turnover ratio in 2006-2007 is 4.73 ,in2007-2008 is 4.51 in 2008- 2009 is 3.7 and in 2009-2010 is 3.16.
3)DEBTORS TURNOVER RATIO:DEBTORS TURNOVER RATIO=SALES/AVG.DEBTORS
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YEAR SALES AVG.DEBTORS 2006-2007 1324000000 219800000 2007-2008 1654516026 265388990 2008-2009 1870876094 466025829 2009-2010 1789872000 354002000 Source: Company Records
RATIO 6.02 6.23 4.01 5.06
RATIO7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 6.02 6.23 5.06 4.01 RATIO
2006-2007
2007-2008
2008-2009
2009-2010
INTERPRETATION: Above graph shows that detors turnover ratio in 2006-2007 is 6.02, In 2007-2008 is 6.23, in 2008-2009 is 4.01 and in 2009-2010 is 5.06.
4)FIXED ASSET TURNOVER RATIO:FIXED ASSET TURNOVER RATIO=SALES/FA
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YEAR SALES FA 2006-2007 1324000000 881700000 2007-2008 1654516026 1038404264 2008-2009 1870876094 1182794383 2009-2010 1789872000 1847599000 Source: Company Records
RATIO 1.50 1.59 1.58 0.97
RATIO1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006-2007 2007-2008 2008-2009 2009-2010 0.97 RATIO 1.5 1.59 1.58
INTERPRETATION: Above graph shows that fixed asset turnover ratio in 2006-2007 is 1.5, In 2007-2008 is 1.59,in 2008-2009 is 1.58 and in 2009-2010 is 0.97.
5)WORKING CAPITAL TURNOVER RATIO:
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WORKING CAPITAL TURNOVER RATIO=SALES/WORKING CAPITAL
YEAR 2006-2007 2007-2008 2008-2009 2009-2010
SALES 1324000000 1654516026 1870876094 1789872000
WORKING CAPITAL 457500000 637657271 1008159984 727724000
RATIO 2.89 2.59 1.86 2.46
Source: Company Records
RATIO3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 1.86 RATIO 2.89 2.59 2.46
INTERPRETATION: Above graph shows that working capital turnover ratio in 2006-2007 is 2.89,in2007-2008 is 2.59, in 2008-2009 is 1.86 and in 2009-2010 is 2.46.
6)SALES TO CAPITAL EMPLOYED:
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SALES TO CAPITAL EMPLOYED=SALES/CAPITAL EMPLOYED
YEAR 2006-2007 2007-2008 2008-2009 2009-2010
SALES 1324000000 1654516026 1870876094 1789872000
CAPITAL EMPLOYED 74100000 75454925 75368063 98077000
RATIO 17.86 21.93 24.82 18.25
Source: Company Records
RATIO30 25 20 15 10 5 0 2006-2007 2007-2008 2008-2009 2009-2010 17.86 24.82 21.93 18.25 RATIO
INTERPRETATION: Above graph shows that sales to capital employed ratio in 2006-2007 is 17.86, in2007-2008 is 21.93 in 2008-2009 is 24.82 and in 2009-2010 is 1825.
D)PROFITABILITY RATIO1)RETURN ON EQUITY: RETURN ON EQUITY=PAT*100/NET WORTH
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YEAR 2006-2007 2007-2008 2008-2009 2009-2010
PAT 14100000 15111437 (37750363) 6963000
NET WORTH 346300000 388952940 382691766 474745000
RATIO 4.07 3.89 (9.86) 1.47
Source: Company Records
RATIO5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 4.07 3.89 1.47
2006-2007
2007-2008
2008-2009
2009-2010 RATIO
-9.86
INTERPRETATION: THE RETURN ON EQUITY IS HIGHER IN THE YEAR 2006-2007 IS 4.07. AFTER THAT IT IS DECREASING.IN2007-2008 IT IS 3.89,IN 2008 TO 2009 IT IS LOSS i.e.(9.86) AND IN 2009-2010 IT IS 1.47.
E)OPERATING RATIO1)ADMINISTRATIVE EXPENSES RATIO:
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ADMINISTRATIVE EXPENSES RATIO=AD EXPENSES/SALES YEAR 2006-2007 2007-2008 2008-2009 2009-2010 AD EXPENSES 1156500000 1515160145 1735969473 1431140000 SALES 1324000000 1654516026 1870876094 1789872000 RATIO 0.87 0.80 0.93 0.80
Source: Company Records
RATIO0.95 0.9 0.85 0.8 0.8 0.75 0.7 2006-2007 2007-2008 2008-2009 2009-2010 0.8 RATIO 0.93
0.87
INTERPRETATION: THE RATIO IS LESS IN THE YEAR 2007-2008 &2009-2010 i.e.0.8, IN 2008-2009 IT IS HIGHTEST i.e.0.93 AND IN 2006-2007 IT IS 0.87
2.EARNING PER SHARE:
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YEAR EPS 2006-2007 1.85 2007-2008 1.44 2008-2009 1.49 2009-2010 3.93 Source: Company Records
EPS4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 2008-2009 2009-2010 1.85 1.44 1.49 EPS 3.93
INTERPRETATION: Above graph shows that in 2006-2007 earning per share is 1.85,in 2007-2008 is 1.44, In 2008-2009 is 1.49 & in 2009-2010 is 3.93.
4.2 TREND ANALYSIS
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The trend analysis of the companies ratios add considerable significance to The financial analysis because its studies ratio of several years and isolate The Exceptional instances occurring in one or two periods. In financial analysis Changes.In direction of financial performances over period of years is of crucial Importance.
Trend analysis indicates the direction of changes(upward & downward).
The information for a number of year is taken up and one year generally The First year, is taken as a base year.
1)LIQUIDITY RATIO:
YEAR 2006-2007
CURRENT RATIO 3.16
QUICK RATIO 1.84
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2007-2008 2008-2009 2009-2010
4.06 5.59 2.75
2.30 3.29 1.39
Source: Company Records
6 5.5 5 4.5 4.06 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 1.84 2.3 3.16
5.59
3.29 2.75 CURRENT RATIO QUICK RATIO
1.39
2008-2009
2009-2010
INTERPRETATION: Above graph shows that after 2006-2007 liquidity ratio Is Increasing upto 2008-2009 year then in 2009-2010 it start decreasing.
2)ACTIVITY RATIO
YEAR
INVENTORY TURNOVER RATIO
DEBTORS TURNOVER RATIO
FIXED ASSET TURNOVER RATIO
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2006-2007 2007-2008 2008-2009 2009-2010
4.73 4.51 3.70 3.16
6.02 6.23 4.01 5.06
1.50 1.59 1.58 0.97
Source: Company Records
7 6.02 6 5 4 3 2 1 0 2006-2007 1.5 4.73
6.23 5.06 4.51 4.01 3.7 3.16 IT RATIO DT RATIO FAT RATIO 1.59 1.58 0.97
2007-2008
2008-2009
2009-2010
INTERPRETATION: Above graph shows that after 2007-2008 activity ratio is decreasing.
3)PROFITABILITY RATIO
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YEAR 2006-2007 2007-2008 2008-2009 2009-2010
GROSS PROFIT 3.06 1.68 0.51 2.00
NET PROFIT 0.99 0.91 (2.02) 0.39
Source: Company Records
3.5 3 2.5
3.06
2 2 1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 -2.02 2006-2007 2007-2008 2008-2009 2009-2010 0.99 0.91 0.51 0.39 GROSS PROFIT NET PROFIT 1.68
INTERPRETATION: Above graph shows that after 2006-2007 profitability ratio Is decreasing upto 2008-2009 year then in 2009-2010 it start increasing.
4)SOLVENCY RATIO:
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YEAR 2006-2007 2007-2008 2008-2009 2009-2010
SHF TO EQUITY 0.25 0.22 0.15 0.18
DBT EQ RATIO 1.96 2.36 4.45 4.26
FA TO LT FUNDS 2.55 2.67 3.09 3.89
Source: Company Records
5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006-2007 2007-2008 0.25 0.22 2.55 1.96 2.67 2.36
4.45
4.26 3.89
3.09 SHF TO EQ DBT EQ RATIO FA TO LT FUND
0.15 2008-2009
0.18 2009-2010
INTERPRETATION: Above graph shows that Increasing trend.
4.3 FINDINGS AND RECOMMENDATION:
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FINDINGS:1) As the Current ratio and Quick ratio are not within the acceptable limits, company's liquidity position and short term solvency is not satisfactory.The ratio has constantly increased from 2006-2007 to 2008-2009 mainly due to increase in the long-term borrowings from the outsiders.
2) Here solvency of the firm is not favourable because the company is depending more On outside borrowings.
3) From activity ratio it is found that fixed asset turnover,debtors turnover and inventory Turnover is not effective and needs improvement various working capital turnover ratio Depicts a better position because average inventory, fixed asset and debtors are increasing.
4) The main reason for the decrease in quick ratio was the increase in the quick liabilities. 5) High debt equity ratio indicates that, the long term solvency of the company is not satisfactory. The Debt equity ratio indicates a high financial risk and low borrowing capacity.
6) Fix Assets turnover ratio is declining over the years, indicating that the firm is not effectively utilizing its resources in Fixed Assets.
RECOMMENDATION:
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1) Company is having a significant portion of slow paying debtors, company should take necessary actions so that to improve the Debtors turnover ratio.
2) Company has to take steps to reduce its Debt equity ratio and bring it within acceptable limits
3) Net Profit Margin of the company is steadily deteriorating; in fact the company has made a loss in 2008-2009. The company activities to turn around its operations.
4) The low fixed assets turnover ratio indicates declining trend in Capacity utilization, company should take it seriously.
5) The company should improve its inventory management system. 6) The company should take effective a measure to improve its by controlling the operating cost.
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CONCLUSION:From the analysis and interpretation of financial statements, it is clear that the company's liquidity position is not Satisfactory. Profitability ratios show that the firm is decreasing its profit year after year. From the analysis we can conclude that companys short term solvency is not comfortable. Company should take actions to secure the long term solvency position. From the management point of view, we can conclude that the management should take effective measures to improve its profitability by controlling the operating cost.
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