A STUDY ON “RATIO ANALYSIS”

WITH REFERENCE TO

MADDI LAKSHMAIAH & CO. LTD.,

CHILAKALURIPET

A Project report submitted to Acharya Nagarjuna University, Guntur In partial fulfillment of the

Requirements for the Award of the degreeOf

MASTER OF BUSINESS ADMINISTRATION

Submitted byK.VENGALA RAO

(Reg. No. Y11BU11052)

Under the Guidance of Sri R.RAJASEKHAR,

M.Sc. (CSC), M.Tech. (CSE.)

P G DEPARTMENT OF MANAGEMENT STUDIESV.R.S. & Y.R.N.COLLEGE, CHIRALA

(Affiliated to Acharya Nagarjuna University)2010 – 2012

P.G.DEPARTMENT OF MANAGEMENT STUDIESV.R.S. & Y.R.N.COLLEGE, CHIRALA – 523 157

(Affiliated to Acharya Nagarjuna University)(2010-2012)

CERTIFICATE

This is to certify that the Project entitled A STUDY ON “RATIO

ANALYSIS” with reference to “MADDI LAKSHMAIAHA & CO.

LTD.,” CHILAKALURIPET submitted by K.VENGALA RAO

(Y11BU11052) to the V.R.S. & Y.R.N. COLLEGE, CHIRALA Affiliated

to Acharya Nagarjuna University, Guntur in partial fulfillment of the

requirements for the award of degree in MASTER OF BUSINESS

ADMINISTRATION is a record of bonafied work carried out by him under

my guidance and supervision.

Head of the Department Project Guide

Sri D. GUNA SANKAR Sri R. RAJASEKHARM.B.A., M.Com. D.F.M., M.Phil. (Ph.D.,) M.Sc.,(CSc.), M.Tech.,(CSE.,)

DECLARATION

I hereby declare that this Project report entitled “RATIO

ANALYSIS” at “MADDI LAKSHMAIAH & CO.,” has been prepared by

me in partial fulfillment of the requirement for the award of Post graduate

degree of Master of Business Administration.

I also declare that this Project report is the result of my own effort and

it has not been submitted to any other university for the award of any Degree

or Institution.

Place:

Date:

K.VENGALA RAO

(Y11BU11052)

ACKNOWLEDGEMENT

The successful completion of any task is not possible without proper

suggestion, guidance and environment. Combination of these three factors

acts like backbone to my “RATIO ANALYSIS” Project.

It is great pleasure and privilege for me to express my graduate to

Dr. C.PAPARAO, Director PG Unaided Cources, V.R.S. & Y.R.N.COLLEGE,

CHIRALA for his continuous co-operation and encouragement during my

Project Work.

I am also grateful to Sri. D.GUNASANKAR, M.B.A., M.Com. D.F.M., M.Phil.,

(Ph.D.,) Asso. Professor & Head of the Department of Management Studies

for his continuous co-operation.

I am highly indebted to Sri R.RAJASEKHAR, M.Sc., (CSC), and M.Tech.

(CSE), Asst. Professor, P.G.Department of Management Studies, Project

Guide, for his valuable and constructive suggestions and guidance and who

has been a constant source of encouragement and guidance to make this

project work quite realistic and comprehensive.

I would like to express my special appreciation all my lecturers in

V.R.S. & Y.R.N.College for their valuable support and suggestions.

Thanks to one and all.

K.VENGALA RAO

CONTENTS

CHAPTER 1

INTRODUCTION

NEED OF THE STUDY

OBJECTIVE OF THE STUDY

SCOPE OF THE STUDY

METHODOLOGY OF THE STUDY

LIMITATIONS OF THE STUDY

CHAPTER 2

INDUSTRY PROFILE

CHAPTER 3

COMPANY PROFILE

CHAPTER 4

THEORITICAL FRAME WORK

CHAPTER 5

DATA ANALYSIS & INTERPRETATION

CHAPTER 6

FINDINGS AND SUGGESTIONS

GLOSSARY

ABBREVIATIONS

ANNEXURE

BIBLIOGRAPHY

CHAPTER – I

INTRODUCTION

INTRODUCTION TO FINANCIAL MANAGEMENT

Financial Management is an integral past of overall Management is

not a totally independent area. It draws on related disciplines and field of

study such as economics, accounting. These disciplines are interrelated.

These are key reference among them.

Financial management refers to its relationship with closely related

field, it function, scope and objectives. Finance is an academic discipline has

undergone fundamental changes in scope and coverage. In the easily years of

its evaluation it was treated synonymously with the rising of funds. In the

current literature pertaining to financial management in addition to

procurement of funds efficient use of resources is universally recognized.

DEFINITIONS:

Ezra Solomon has defined “The financial management deals with the

efficient use of an important economic resource namely capital funds.”

“Financial management is the activity concerned with the planning

raising, controlling and administrating the funds used in business.”

-Guthman and Dougall.

“Financial management is that managerial activity which is concerned

with the planning and controlling of the firm’s financial resources”.

-I.M.PANDAY.

“Financial management is concerned with the efficient use of an

important economic resource namely capital funds.”

-EZRA SOLOMAN.

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“Financial management is the operation activity of a business that is

responsible for obtaining and effectively utilizing the funds necessary for

efficient operations.”

-JOSEPH AND MASSIE.

SCOPE OF FINANCIAL MANAGEMENT

The approach to the scope and the functions of financial management

is divided for the purpose of expositions into two broad categories.

A) Traditional Approach:

Traditional approach to the finance function relates to the initial stages

of its evolution during 1920’s and 1930’s when term corporate finance was

used to describe in the academic world today as the financial management.

The approach was focused on procurement of long-term funds. In that

issue allocation of funds which is so important today is completely ignored.

The utilization of funds was considered beyond the pure view of finance

function.

B) MODERN APPROACH

The Modern approach views finance function in broader sense. It

includes both rising of funds as well as this effective utilization under the

preview of finance. The cost of raising and the returns from their use should

be compared. The utilization of funds requires decision making.

Finance functions covers financial planning rising of funds, allocation

of funds, financial control etc. Modern approach is an analytical way of

dealing with financial problems of firms.

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In that approach considers there are three basic management decisions

i.e., investment decisions, financing & dividend decisions with in the scope

of finance functions.

OBJECTIVES OF FINANCIAL MANAGEMENT

The objectives of financial management are

A) Profit Maximization:-

According to this approach actions that increase profits should be

under taken and those that decrease profits are to be avoided. In specific

operational terms as applicable to financial management, the profit

maximization implies that the investment financing and dividend policy

decisions of affirm should be oriented to the maximization of profits.

B) Wealth Maximization:

This is also known as value maximization or net present wealth

maximization. In current academic literature value maximization is almost

universally accepted and appropriate operational criterion for financial

management divisions as it removes the technical limitation criterion. It

operational features satisfy all the three requirements of a suitable

operational objective of financial courses of actions namely exactness,

quality of the benefits and the time value of money.

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AN OVERVIEW OF FINANCIAL MANAGEMENT

4

Financial Management

Maximization of share value

Financial Decision

Investment Decision

Financing Decision

Dividend Decision

Liquidity Decision

Return RiskTrade - Off

The financial manager, in a bid to maximize owner’s wealth, should

strive to maximize returns in relation to given risk. To ensure maximum

return, funds flowing in and out of the firm should be constantly monitored

to assure that they are safe guarded and properly utilized.

FINANCE FUNCTIONS:

It may be difficult to separate the finance functions from production,

marketing and other functions, yet the functions themselves can readily

identify. The function of raiding funds, investing them in assets and

distributing returns earned from assets to shareholders are respectively

known as financing, investing and dividend decisions. While performing

these functions, a firm attempts to balance cash inflows and outflows. This is

called liquidity decision.

Finance functions or decisions include:

Investment or long term – mix decision.

Financing or capital – mix decision.

Dividend or profit allocation – mix.

Liquidity or short – term asset – mix decision.

Investment Decision:

Investment decision or capital budgeting, involves the decision

of allocation of capital or commitment of funds to long-term assets that

would yield benefit in the future. Two important aspect of investment

decision are:

a) Evaluation of prospective return on new investment.

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b) The measurement of a cut-off rate against that the prospective return

of new investment. Investment proposal should therefore be evaluated in

terms of both expected return and risk.

Financing Decision:

Financing decision is the second important function to be

performed by the financial manager. The main issue is to determine the

proportion of equity and debt. The mix of debt and equity is known as the

firm’s capital structure. The financial manager must strive to obtain the best

financing mix or the optimum capital structure for the firm. The firm’s

capital structure is considered to be optimum when the market value of share

is maximized. A proper balance has to be struck between return and risk.

Dividend Decision:

The financial manager must decide whenever the firm should

distribute all profits, or retain them, or distribute a portion and retain the

balance. Like the debt policy, the dividend policy should be determined in

terms of its impact on shareholders’ value.

The optimum dividend policy is one that maximizes the market

value of the firm’s share. The financial manager must determine the

optimum dividend payout ratio.

Liquidity Decision:

Investment in current assets affects the firm’s profitability and

liquidity. Current assets management that affects a firm’s liquidity is yet

another important finance function.

Current assets should be managed efficiently for safeguarding the

firm against the risk of illiquidity. Lack of liquidity (or illiquidity) in

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extreme situations can lead to the firm’s insolvency. A conflict exists

between profitability and liquidity while managing current assets.

If the firm does not invest sufficient funds in current assets, it may

become illiquid and therefore, risky. But it would lose profitability, as idle

current would not earn anything.

Thus, a proper trade-off must be achieved between profitability and

liquidity. The profitability-liquidity trade-off requires that the financial

manager should develop sound techniques of managing current assets.

RATIO ANALYSIS:

Fundamental Analysis has Avery broad scope. One aspect looks at the

general factors of company. The other side considers tangible and

measurable factor. This means crunching and analyzing numbers from the

financial statements. If used in conjunction with other methods, quantitative

analysis can produce excellent results.

Ratio analysis isn’t just comparing different numbers from the balance

sheet, income statement. It’s companies, the industry, or even the economy

in general. Ration look at the relationships between individual values and

relate them to how a company has performed in the past, and might perform

in the future.

MEANING OF RATIO ANALYSIS:

A ratio is one figure express in terms of another figure. It is a

mathematical yardstick that measures the relationship two figures, which are

related to each other and mutually interdependent. Ratio is express by

dividing one figure by the other related figure. Thus a ratio is an expression

relating one number to another. It is simply the quotient of two numbers. It

can be expressed as a fraction or as a decimal or as pure ratio or in absolute

7

figures as “so many times”. As accounting ratio is an expression relation two

figures or group contain in the financial statements.

Ratio analysis is the method or process by which the relationship of

items or group or items in the financial statement are computed, determined

and presented.

Ration analysis is an attempt to derive quantitative measure or guides

concerning the financial health and profitability of business enterprises.

Ratio analysis can be used both in trend and static analysis. There are several

ratios at the disposal of an analyst but their group of ratio he would prefer

depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of

this section, we will focus on technique. This is easy to use. It can provide

you with a valuable investment analysis tool.

This technique is called cross-sectional analysis. Cross-sectional

analysis compares financial ratio of several companies from the same

industry. Ratio analysis can provide valuable information about a company’s

financial health. A financial ratio measures a company’s performance in a

specific area. For example, you could use a ratio of company’s determine

which company uses greater debt in the conduct of its business. A company

whose leverage ratio is higher than a competitor’s has more debt per equity.

You can use this information to make a judgment as to which company is a

better investment risk.

8

How ever, you must be careful not to place too much importance on

one ratio. You obtain a better indication of the direction in which a company

is moving when several ratios are taken as a group.

OBJECTIVE OF RATIOS

Ratio is work out to analyze the following aspects of business organization

A) Solvency

1) Long Term

2) Shore Term

3) Immediate

B) Stability

C) Profitability

D) Operational efficiency

E) Credit Standing

F) Structural Analysis

G) Effective utilization of resources

H) Leverage or external financing

FORMS OF RATIO:

Since a ratio is a mathematical relationship between to or more

variables/accounting figures, such relationship can be expressed in different

ways as follows.

A) As a pure ratio:

For example the equity share capital of a company is Rs.20, 00,000 &

the preference share capital of a company Rs.5, 00,000. The ratio of equity

share capital to preference share capital is 20, 00,000: 5, 00,000 or simply

4:1.

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B) As a rate of times:

In the above case the equity share capital may also be described as 4

times that of preference shred capital similarly the cash sales of a firm are

Rs.2.5 [30,00,000/12,00,000] or simply by saying that the credit sales are 2.5

times that of cash sales.

C) As a percentage:

In such a case, on item may be expressed as a percentage of some

other item, for example, net sales of the firm are Rs.50,00,000 & the amount

of the gross profit is Rs.10,00,000 then the gross profit may be described as

20% of sales [10,00,000/50,00,000].

Steps in ratio analysis:

The ratio analysis required two steps as follows:

1. Calculation of ratio

2. Comparing the ratio with some predetermined standards.

The standard ratio may be the past ratio of the same firm or industry’s

average ratio of a projected ratio or the ratio of the ratio of the most

successful firm in the industry. In interpreting the ratio of a particular firm,

the analyst cannot reach any fruitful conclusion unless the calculated ratio is

compared with some predetermined standard. The importance of a cross

standard is oblivious as the conclusion is going to be based on the standard it

self.

Types of Comparisons:

The ratio can be compared in three different ways

1) Cross section analysis:

One of the way of comparing the ratio or ratios of the firm is to

compare them with the ratio or ratios of some other selected firm in the same

industry at the same point of time, so it involves the comparison of two or

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more firms financial ratio at the same point of find out as to how a particular

firm has performance may be compared with the performance of the leader

in the industry in order to uncover the major operational in efficiencies. The

cross section analysis is easy to be under taken as most of the data required

for this may be available in financial statement of the firm.

2) Time Series Analysis:

The analysis is called time series analysis when the performance of a

firm is evaluated over a period of time. By comparing the present

performance of a firm with the performance of the same firm over the last

few years, an assessment can be made about the trend in progress of the firm.

Time series analysis helps to the firm to assess whether the firm is

approaching he long-term goals or not. The time series analysis looks for 1)

important trends in financial performance 2) shift in trend over the years 3)

significant deviation any from the other set of data.

3) Combined Analysis:

If the cross section & time analysis, both are combined together to

study the behavior & pattern of ratio, then meaningful & comprehensive

evaluation of the performance of the firm can definitely be made. A trend of

ratio of a firm compared with the trend of the ratio of the standard firm can

give good result, for example, the ratio of operating expenses to net sales for

firm may be higher than the industry average however, over the years if has

been declining for the firm, where as the industry average has not shown any

significant changes.

Figure 2:1: combined analysis of cross-section and time series.

The combined analysis as depicted in the above diagram, which

clearly show that the ratio of the firm is above the industry average, but it is

decreasing over the years & is approaching the industry average.

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Pre-requisites to ratio analysis:

In order to use ratio analysis as device to make purposeful conclusion,

there are certain pre-requisites. This must be taken care of it may be noted

that these prerequisites are not conditions fro calculations for meaningful

conclusions. The accounting figures are in active in them can be used for any

ratio but meaningful & correct inter predation & conclusion can be arrived at

only if the following points are well considered.

1) The dates of different financial statements from where data is taken

must be same.

2) If possible, only audited financial statements should be considered,

other wise there must be sufficient evidence that the data is correct.

3) Accounting policies followed by different firms must be same in case

of cross section analysis would be distorted.

4) One ratio may not throw light on any performance of the firm.

Therefore, a group of ratios must be preferred. This will be conductive

to counter checks.

5) Last but not least, the analyst must find out that the two figures being

used to calculate a ratio must be related to each other, otherwise there

is no purpose of calculating a ratio.

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NEED FOR THE STUDY

The main need of the study is to analyze the financial information of the ML

group of industries.

To find out the liquidity or short term solvency of the ML limited.

To know the different types of ratio analysis how it shows impact on

different Organizations.

To allow the relationship among various aspects in such a way that it

allows drawing conclusion about the performance, strength, and

weaknesses of the company.

To know the short term surviving ability of the company.

13

OBJECTIVES OF THE STUDY

The main objective of the study is to analyze the financial information of the ML

Group of companies.

To know the performance of the company in different time periods.

To know the future liquidity of the company.

To verify liquidity and its impact on ratio analysis.

To know the profitability and activity position of ML group of

industries.

To know the accurate financial position of the company

To make appropriate suggestions and measures for the effective

working of the Company

To analysis the financial performance of the company from the point

of ratio analysis is through various ratios.

14

SCOPE OF THE STUDY

An extensive study is done on the financial transactions and

financial information of the ML Group of industries. The study covers the

historical financial information of the company to find.

Growth, strategy and weakness of the company. The study

covers all the transactions of the ML Group of industries in the Ratio

analysis. The study covers the measurement of profitability of the firm and its

operating Efficiency and the relationship among different financial aspects.

15

METHODOLOGY OF THE STUDY

Methodology is scientific and systematic search for pertinent

information on specific Topic. The reliability of management decision depends up

on the quality of data. Basically we have two types of data.

Primary data Secondary data

Primary Data:-

Primary data can be collected either through experience or through survey.

That which is collected afresh and for the first time and thus happens to be original

in character is called primary data. Primary data can be collected in the following

ways.

By Observation

Through personal interview

Through telephone interviews.

Secondary Data:-

Secondary data means data that is already available which was

collected and analyzed by some one else and which have already been passed

through the statistical process. Secondary data May either is published data or UN

published data.

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LIMITATIONS OF THE STUDY

While the study is undertaken about the ratios of the ML Groups of

industries the Following were encountered.

Due to shortage of time the overall analysis of the financial information

of ML Group of industries becomes difficult.

Some of the information was with registered office of the company due

to some Statuary requirements, so it became difficult to get the overall

information of the company.

Since we are new to the company, company refused to provide its

financial Information.

The calculated ratios are not compared with competitor’s ratios.

The smaller time frame available for understanding this study is also one

of the significant limitations of the study.

Due to lack of information my study is limited to some selected ratios

only.

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CHAPTER – II

INDUSTRY PROFILE

INDUSTRY PROFILE

IN THE BEGINNING:

Tobacco is a plant that grows natively in north and South America. It is in

the same family as the potato, pepper and the poisonous nightshade on very dead

plant. The seed of a tobacco plant is very small. A “1” ounce sample contains

about 3, 00,000 seeds. It is a believed that tobacco began growing in the America

about 6,000 B.C., American Indians began using tobacco in many different ways.

Such as in religious and medicinal practices. Tobacco was believed to be a cure all

and was used to dress wounds, as well as a pain killer. Chewing tobacco was

believed to relieve the pain of a toothache. Soon after, sailors brought tobacco

back to Europe and the plant was being grown all over Europe. The major reason

for tobaccos growing popularity in Europe was its supposed healing properties.

Europeans believed that tobacco could cure almost anything, from bad breath.

In 1571, a Spanish doctor named Nicolas Monardes wrote a book about the

history of medicinal plants of the new world. In this he claimed that tobacco could

cure 36 health problems. In 1588, a Virginian named Thomas Harriet prompted

smoking tobacco as a viable way to get ones dose of tobacco. Unfortunately, he

died nose cancer (because it was popular them to breath the smoke out through the

nose).

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During the 1600’s, tobacco was so popular that it was frequently used as money!

Tobacco was literally “as good as gold”! This was also a time when some of the

dangerous effects of smoking tobacco were being realized by some individuals. In

1610 Sir Francis Bercon noted that trying to quit the bad habit as really hard.

In 1632, 12 years after the mayflower arrived on Plymouth Rock, it was

Illegal to smoke publicly in Massachusetts! This had more to do with moral

benefits of the day than health cancers about smoking tobacco. In 1760, Pierre

Lorillard established a company in New York City to process tobacco, cigar and

snuff. Today P.Lorillard is the oldest tobacco company in the U.S.

TOBACCO: A GROWTH INDUSTRY:

In 1776, during the American revolutionary war, tobacco helped

finance the Revolution by serving as collateral for loans the American borrowed

from finance! Over the years, more and more scientists began to understand the

chemical in tobacco, as well as the dangerous health affects smoking produces.

In 1826, the pure form of nicotine was finally discovered. Soon after,

Scientists concluded that nicotine was dangerous poison.

In 1836, New Englander sacral green stated that tobacco was an

insecticide, a poison and can kill a man.

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In 1847, the famous Phillip Morris was established selling hand rolled Turkish

cigarettes. Soon after in 1849, J.E.Liggette and brother was established in stylus,

MO- (the company that has settled out of the big lawsuits recently) cigarettes

became popular around this when soldiers brought it back to England from the

Russian and Turkish soldiers. Cigarettes in the U.S. were mainly made from scraps

left over after the production of other tobacco products, especially chewing

tobacco. Chewing tobacco became quite popular at this time with the “Cowboys”

of the American west.

In 1875, R.J.Reynolds Tobacco Company (better known for its Reynolds

wrap aluminum foil) was established to produce chewing tobacco. It was not until

the 1900’s that the cigarette became the major tobacco product made and sold.

Still, in 1901, 3.5 billion cigarettes were sold, while 6 billion cigars were sold.

Along with the popularity of cigarettes however, was a small but growing anti-

tobacco campaign, with some states proposing a total ban on tobacco?

In 1902, the British Phillip Morris set up a New York headquarters to

market its cigarettes including a new famous Marlboro brand. The demand for

cigarettes grew however, and in 1913 R.J.Reynolds began to market a cigarette

brand called camel.

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WAR & CIGARETTES: A DEADLY COMBO:

The cigarette exploded during world war (1914-1918), where

cigarettes were called “soldiers smoke”. By 1923, camel controls 45% of the U.S.

market! In 1924, Phillip Morris began to market Marlboro as a woman’s cigarette

that is a “Mild as May”! To battle this, American tobacco company, maker of the

lucky strike brand, began to market its cigarettes to women and gains 38% of the

market. Smoking rates among female teenagers soon tripled during the years

between 1925-1935. In 1939, American Tobacco Company introduced a new

brand, Pall Mall, which allowed American to become the largest tobacco

company in the U.S. During World War II (1939-1945), cigarette rates were at an

all time high. Cigarettes were included in soldiers C-Rations (like food). Tobacco

companies sent millions of cigarettes to the soldiers for free, and when these

soldiers came home, the companies had steady stream of loyal customers. During

the 1950’s, more and more evidence was surfacing the smoking linked to lung

cancer

I n 1952, P.Lorillard markets its Kent brand with the ‘Micronite’ filter,

which contained asbestos! This was fortunately discontinued in 1956. In 1953,

DR.Ernst L.Wynders fined that putting cigarette tar on the back of mice causes

tumors! In 1954, RJ Reynolds introduced the Salem brand, which was the first

filter tripped menthol cigarette.

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HEALTH HAZARDS REVEALED

IN 1964, the surgeon Generals Report on “smoking and health” came

out. This report assisted in allowing the government to regulate the advertisement

and sales of cigarettes. The 1960’s in general was a time when much of health

hazards of smoking were reported.

In 1965, television cigarette ads were taken off the air in Great

Britain. In 1966, those health warnings on cigarette packs began propping up. In

1968, Bravo a non tobacco cigarette brand was marketed made primarily of

Lettuce, it failed: miserably. Because of the negative press about tobacco, the

major tobacco companies began to diversity their products Phillip Morris began to

buy in to the Miller Brewing company, makers of Miller Beer, Miller lite, and Red

Dog Beer. RJ Reynolds Tobacco Company drops the “tobacco company” in its

name, and becomes RJ Reynolds industries.

It also began to buy into other products, such as aluminum.

American Tobacco Company also drops “tobacco” from its name, becoming

American brands, Inc. In 1971, television ads for cigarettes are finally taken off the

air in the U.S.cigarettes. However, was still the most heavily advertised product

second to automobiles? In 1977, the first national great American smoke art took

place. In 1979, the surgeon general reported on the health consequences of

smoking for women. This is in light to the increasing number o women who were

taking up the bad habit. Some attribute is to slick and campaign of the Virginia

slims brand, “you‘ve come a long way baby”.

22

THE RECENT PAST”

During the 1980’s there were many lawsuits failed against the

tobacco industry because of the harmful effects of its products. Smoking became

politically in correct, with more public places forbidding smoking. In 1982, the

surgeon general reported that second hand smoke may cause lung cancer. Smoking

in public areas was soon restricted, especially at the work place. In 1985, lung

cancer became the No.1 killer of women, beating out breast cancer! Phillip Morris

continued to diversity into other products, buying into general foods corporation

and Kraft Inc in 1985. R Reynolds also diversified, buying Nabisco and becoming

RJR/NABISCO.

In 1987, congress banned smoking on all domestic flights lasting less

than two hours. In 1990, smoking is banned, expect to Alaska and Hawaii. In

1990, Ben & Jerry’s (of ice cream fame) boy cots RJR/ NABISCO, and dropped

Oreos from its ice cream products.

During the 80’s and 90’s the tobacco started marketing heavily in

areas outside the U.S, especially developing countries in Asia. Marlboro is

considered the worlds No1 most valuable brand of any product with a value over $

30 billion! Over this period, there is a battle between coca cola and Marlboro as

the No1 brand in the world.

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In the recent years there is growing evidence that the tobacco industry has known

all along that cigarettes are harmful, but continue to market and sell them. There is

also evidence that they know that nicotine was addictive and exploited this hidden

knowledge to get millions of people hooked on this dangerous habit. Tobacco

industry is an agro based industry. Tobacco is cultivated mainly in the states of

Andhra Pradesh and Karnataka. Most of the tobacco used for the manufacture of

cigarettes and for exports (is produced from these two states).Tobacco is also

grown in Tamilnadu, West Bengal, Uttar Pradesh, Gujarat, Madhya Pradesh,

Maharashtra and Orissa also. However the tobacco grown in these states is of very

less quantity and is not used for manufacture of cigarettes and exports. Several

varieties of tobacco such as Virginia flue cured, Virginia air cured, light soil burly,

sun cured Virginia, nature, chewing tobacco, HDBRG, Wrapper tobacco, Bidi

tobacco and Hookah tobacco etc., are grown in India. Virginia flue cured is a

major variety grown in India. More than 80% of Indian tobacco crop belongs to

this variety.

The tobacco cultivation exports and some other industrial activities

are regulated by central government (Ministry of commerce) through tobacco

board. Tobacco board is headed by I.A.S officer of senior category generally from

the central government.

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The board consists of several Central government officers, state government

officers, political leaders, representatives of farmers and reputed Industrialists. One

of the directors of ML Group is always representing the industrialists in the

tobacco board.

Tobacco board issues licenses to the farmers who are permitted to

grow tobacco. The license regulates the cultivation area. The farmers have to

restrict the cultivation to the given area and must sell the grown tobacco through

tobacco board auctions only. Any violation is an offence and is punishable.

In Virginia flue cured variety the tobacco leaves are separated from

the plant and are cured in tobacco barns are like a furnace when the fumes are used

to cure the green leaves of tobacco plant. Tobacco barns appear like small

godowns with firing chambers at the bottom fixed to the walls. The green tobacco

leaves of the plant will be arranged in the form of rows inside the barns. The

temperature inside the barn will be regulated by means of flow of hot air through

the firing chambers.

This is a simple technical process by which the green leaf exposed

to hot air at high temperature and cooled slowly over a period of time. After the

curing process, the primary leaf tobacco turns into leman yellow colour, gold

colour, brownish yellow colour, brown colour and dark brown colour. This

tobacco is called katcha tobacco leaf and is ready for sale. The formers pack

different colours in different packages as each colour generally will be classified as

a separate grade which will have a separate price in the market?

25

Tobacco must be sold only through tobacco board auction platforms

under strict rules and regulations. Former or buyer as permitted to transact in

tobacco board auction platforms. Central Government has also established several

tobacco research institutes for betterment of quality of tobacco in India. The other

varieties of tobacco are not regulated by tobacco board.

The tobacco purchased from the tobacco board auction platforms will

be graded further whenever required. Grading is a process of manual separation of

one variety of leaf from the other and is done mainly on the basis of colour. Each

grade will generally have unique quality parameters. The graded tobacco is further

processed either manually or on machines. The processing is called DEBUTTING

and SRRIPPING. Workers separate the butt of the tobacco leaf from the leaf. This

process can also be done on machines. The machine processing is called

THRESHING. After stripping/ threshing, the tobacco will be further processed for

stabilization of moisture. The process is called “REDRYING”. In the process the

tobacco first of all will be derived completely then it will be given stream at the

required temperature. After redrying process, the tobacco will be packed in the

required packing say bale packing/ case packing etc. The packed tobacco is ready

for export. In India, the first threshing plant which is working uninterruptedly for

the last 25/30 years an imported one by Maddi Lakshmaiah and co.ltd. This was

installed at Ganapavaram and the plant is still running at high efficiency levels in

the country with 98% average efficiency level for the last three years. There are

two plants owned by ITC which can be compared with this plant in the country.

ITC uses their threshing plants for their own consumption.

26

Tobacco industry is fetching more than Rs 9,000 crores of revenue to

the central Government. It is providing employment two lakhs of people directly

and millions of people indirectly and is also contributing Rs 1,000 crores of forex

reserves to the country. The central Government is announcing several restrictions

on advertisement and consumption of cigarettes in the country. It is encouraging

the formers by providing several subsidized fertilizers and by supporting through

tobacco board.

The major players in tobacco industry in India are as under:

Name of the company Occupation % of business in India

ITC LTD Cigarette manufacturing and unmanufacturing tobacco exports

50%

VST INDUSTRIES LTD Cigarette manufacturing and unmanufacturing tobacco exports

12%

GTC INDUSTRIES LTD Cigarette manufacturing and unmanufacturing tobacco exports

6%

GODFREY PHILLIPS INDIA LTD

Cigarette manufacturing and unmanufacturing tobacco exports

8%

27

The consumption is linked with the habits of the people; the tobacco usage

cannot be eradicated. Even in countries like USA where anti tobacco campaign

started in 1962. The production of cigarettes and consumption of cigarettes is still

progressing.

EXPORTERS:

S.No Name of the company

Occupation % of business in India

A ML GROUP Cigarette manufacturing and unmanufacturing tobacco exports

5%

B POLISETTY GROUP

Cigarette manufacturing and unmanufacturing tobacco exports

5%

C BOMIDALA GROUP

Cigarette manufacturing and unmanufacturing tobacco exports

3%

D MITTAPALLI GROUP

Cigarette manufacturing and unmanufacturing tobacco exports

3%

E OTHER EXPORTES

Cigarette manufacturing and unmanufacturing tobacco exports

8%

28

Our ML Company has developed strong relationship with overseas manufacturing

in Europe, Russian and Middle East. Through there is very good demand from

Russian market. Our company is not exporting much because of poor economic

conditions of the country. M.L.company as now exporting cigarettes to Middle

East and USA by manufacturing the cigarettes on job work basis. The company

foresees a very bright future for this company in tobacco in the coming years.

M.L. Group is the first tobacco company who exported tobacco to China

and is the first company who imported from China. There was no imported

tobacco in Indian tobacco history before this and after this till now. The group

maintains good relationship with the Chinese tobacco monopoly.

One of the trade delegates that accompanied our honorable prime minister

during his recent visit to china is from ML Company. Three ambassadors of china

have visited our company in the past as our guests and expressed their satisfaction

on our infrastructure facilities.

29

CHAPTER – III

COMPANY PROFILE

COMPANY PROFILE

ML Group was a multifacilitated corporate leader of which the group

Consists of five concerns namely.

ML Agro Products LTD -- Tobacco threshers, packers

and Exporters.

K.S.Subbiah Pillai and co (India) Ltd --- Tobacco Export

M.L.Exports --- Export house

Coramandal Agro Products and oils Ltd --- Bulk producers of oils

ML GROUP:-

The highly competitive tobacco market represented tremendous growth

potential to Mr.Maddi Lakshmaiah. Foreseeing the demand for quality Indian

tobacco, a long term strategy was formulated. Right from its inception, the

company adhered to international standards and made rapid into global tobacco

markets. A sophisticated threshing plant of international standards was

commissioned in 1976 first in Andhra Pradesh. It created a revaluation in tobacco

processing and led to a huge Upsurge in demand. This led to the commissioning of

two modern plants with threshers, redryers and other sophisticated equipment for

the processing of quality tobacco.

30

ML Group has taken its credo of total quality to the furthest, whether in the

Quality of processes, products or working conditions for the vast workforce. The

foresighted Innovations of Sri Maddi Lakshmaiah have given the group a strong

edge. The personal involvement of the directors in all aspects of the business has

resulted in high quality operational parameters.

The company can proudly claim some of the most skilled workforce and a

Highly efficient management, who have contributed significantly to the prominent

position. The Company has earned recognition from apex institutions and is a

recognized leader in tobacco markets the world over. The quantum growth in of

ML Company spread of investment in infrastructure And diversification in to other

business.

“ML Group” under its umbrella the various companies has an annual

turnover of Rs 1550 million and an asset base of Rs 200 million. A real estate

development wing was set up to Develop and lease commercial properties with

working environments that rival the best internationally.

The information about the establishment of the group which consists of five

Concerns are as follows displayed on the preceding pages. Let us have a look on

the various concerns of ML Group individually.

31

MADDI LAKSHMAIAH AND COMPANY LTD:-

ML and company limited, the fore runner of all the companies of ML

Group, the Company enjoys a pre-eminent standing in the world of tobacco,

exporting to china, Russia, Western Europe, Africa and Bangladesh among others.

Supported by a team of experts, technicians, engineers and a skilled workforce,

The Company has forged a head setting standards that have become benchmarks in

the industry. Today

Chilakaluripet is a well known name in the global tobacco business in no little

measure due to the Pioneering efforts of the intrepid founder, Sri Maddi

Lakshmaiah.

ML AGRO PRODUCTS LTD:

ML Agro products ltd was born of a increase in demand for quality tobacco

in Both the domestic and foreign markets. Building on the rich experience of

running a profitable operation A new plant was set up in 1976 at Martur, Prakasam

district. It is fully self-sufficient with modern threshers, lamina redryers, automatic

double ram press, sophisticated quality control laboratory and mammoth

warehouses. It ranks among the Largest threshing unity in the country. Apart from

its export commitments. The company also processes tobacco for domestic

cigarette manufacturers. The Company today has a global vision.

32

K.S. SUBBIAH PILLAI AND COMPANY (INDIA) LTD:-

K.S.S.P and company limited was acquiring in 1982 with all its assets K.S.

Subbaiah pillai and company (India) limited is the groups leading tobacco

exporting unit. In a field that Is extremely competitive, the excellent performance

of the company is an indicator of the trust that it Enjoys across the globe.

CORAMANDAL AGRO PRODUCTS OILS LIMITED (CAPOL):-

CAPOL started in 1976, extracts and refines cotton seed oil. Today it is a

multi Product Company with equipments to process all kinds of oil seeds. The

plant has a storage capacity of 2100 tonnes for different types of oil. Extreme care

is taken to ensure that at every stage in the process of production Right from

selecting of the raw material to packaging the products, only the best is passed.

Minimum human intervention and rigorous application of quality control

Processes to ensure that the final product conforms to all appropriate standards.

The by products of the Process in the form of linters, Hulls and De-oiled cakes are

in high demand in many parts of the world.

ML EXPORTS:

ML Exports is a totally export oriented unit, with clients in a

variety of markets around the world. The company enjoys a reputation for

excellent delivered schedules and transparent Business practices in global markets.

33

SHARE HOLDING PATTERN AND MANAGEMENT OF GROUPS:

Sri Maddi Lakshmaiah and his family members are holding 100% of shares

of the entire group. The group is totally managed and controlled by Sri Maddi

Lakshmaiah and his family Members only. The group has been successfully

improving its business in all of its activities such As domestic sales, export sales,

tobacco processing and other tobacco development activities, Warehousing

facilities etc. The group has two tobacco processing plants and one solvent

extraction Plant in south India. The group owns around 1 00,000 square meters of

warehousing complexes in south India.

IN CORPORATION:

ML Company is a limited company (M/s Maddi lakshmaiah and company

limited) Which was originally incorporated on 8th day of October 1970 under the

name, Maddi lakshmaiah and Company private limited having passed the

necessary special resolution on the 23rd day of March 2002, In terms of sec

31(1)/44 of the companies act 1956 the name of the company changed to Maddi

Lakshmaiah and company limited.

34

NATURE OF ACTIVITY:

o This factory produces good quality tobacco

o The production capacity per each day is one lakh 20 tonnes.

o The production capacity per year is around 15/16 million tonnes

o The current assets capacity per year is around 1.5 million tonnes.

FINANCIAL STRUCTURE:

The initial investment of ML company is 10, 00,000.

TURNOVER OF THE GROUP:

The turnover of the group for the financial year 1989-99 standard is at

around Rs800 millions. The net earnings after taxes of the group have been

maintained at Rs150/200 millions per anum. The group has second asset base

having assets spread in most of the prime centers and parts of south India.

The group has developed excellent infrastructure during the past 30 years.

Which have been yielding a promising regular income of more than Rs 225

millions every year?

35

THE PRODUCTS OF THE M.L.COMPANY AND THEIR MAIN USES:

The various products of the M.L. Company and their economic uses are as

follows.

1. Karnataka light soil-My sore:

This tobacco is preferred for low nicotine content, high filling capacity and

Suitability to blend well any tobacco.

2. Monson burly:

Used in us blended cigarettes..3...Traditional burly:

Used for pipe mixtures, chewing plugs and hookah tobacco paste.

4. Kurnool and telangana (NATU):

Primarily used for cigarette blending and for hookah tobacco paste making.

5. Eluru (Natu tobacco):

Mainly used for cheroots, snuff pipe tobacco, cigarette blending and for

hookah Paste making.

6. Oriental:

Used for cigarette blending.

7. Century fire cured tobacco:

Used in pipe mixtures and hookah tobacco paste.

8. BIDI Tobacco:

Used in the manufacture of Bidis, a hand rolled smoking products made by

Wrapping tobacco with natural bony leaves.

36

9. Cigar wrapper tobacco:

Mainly used for wrapping the cigars.

10. Cigar filters tobacco:

Mainly used in the manufacture of cigars and exported to some countries

for use in hookah tobacco paste.

11. Cheroot tobacco:

Used for the manufacture of cigars and hookah tobacco paste.

12. Lanka tobacco:

For the manufacture of cigars and cheroots.

13. Tamilnadu:

Chewing and cheroot.

14. Black chopadia:

Used as chewing tobacco.

15. Red chopadia:

Mostly for chewing also called lal-chopadia and safna. The export packing

Ranges from 250 grams- 100 grams and is available in bales of up to 100

kages

16. Rustica tobacco:

Used as chewing tobacco, hookah tobacco, for tobacco sheet making for

kreteks In Indonesia, pipe mixers and cigarette blending to some extent.

37

17. Motihari:

Used in the manufacture of various tobacco products such as chewing

tobacco, Hookah paste, bidies etc.

18. Southern light soil:

Blend with any tobacco.

19. Black soil (Traditional):

Blends well with any tobacco.

20. Northern light soil:

This tobacco is flavored to semi flavored with excellent ageing properties.

OBJECTIVES OF THE COMPANY:

To serve the nations vital interest in the tobacco related sectors.

To earn a reasonable return on investment

To create a strong research and development in the field of tobacco and

stimulate research and development of developing of exports

To maximize utilization of the existing facilities in order to improve

efficient and increased productivity.

To work towards achievement of self reliance in the field of tobacco,

threshing Formulation and distribution systems.

To import training, conduct seminars, workshops and educational courses

on computers, Computer maintenance, software development and

software export and to develop and Design software in India

38

A broad and to start software technology park in India or abroad and to

other relationship Management solutions for individuals and organizations

both individually and through Strategic alliances with other companies.

To employ experts to investigate and examine in to the condition,

prospects, value, Character and circumstances of any business concern

and under takings and generally of Any assets property or rights.

To carry on all kinds of agency business.

To carry on business as merchants in all kinds of goods.

To improve, manage, work, develop, lease, mortgage, abandon or

otherwise deal with all Or any part of the property, right and concessions

of the company.

To maintain victinity of suppliers through M.L. tobacco and marketing

network at Optimum costs and provide up to date technical assistance to

the consumer to conceive the Valuable energy resources.

ORGANIZATION STRUCTURE:

Departmentalization of function: - The group has following different

departments.

Personal Department:

This department deals with the masters of industrial relations, HRD, welfare

activities, Labour legislations, recruitment and issues of wages etc. This is the

main deparment in the organization.

39

Leaf Department:

This department deals with the matters of tobacco leaf. It looks after buying

of tobacco from the formers for the processing of tobacco.

Export Department:

It looks after the export matters of the organization. This organization

exports tobacco Leaf to China, Bangladesh and U.K.

Production Department:

This department takes care to produce quality tobacco to customers.

.Marketing Department:

This department takes care of marketing the company tobacco to other

countries such as Russian, Europe, Middle East, Bangladesh, African countries etc.

They sell varieties of tobacco in market and maintain good relations with the

customers. This is one of the main/ important departments in this organization.

M.L.Group was concentrating on domestic market.

It ties up with Indian strongest cigarette manufacturing company, ITC.

MARKET EXPORTS:

M.L.Company was exporting tobacco to Russia, Europe, Middle East,

Bangladesh, African countries etc. These are the various countries in which M.L.

Company is exporting their tobacco.

40

FUTURE PLANS:-

The company (Maddi Lakshmaiah) for an ECB fro 50 million dollars

and development of regular trade and also infrastructure projects in

India.

ML Company is also working on joint venture basis with U.K.based

Commodities Company for supply of agro products to South Asian

countries.

The company already entered in to joint venture with an U.S. based

company by name CARGIL for their entire South Indian needs.

They have worked for joint venture arrangement with Yugoslavian

Government for their Requirement for India.

This is for above five million dollars of investment in supply of 5000

tones every year.

The company is working with Chinese Government for long term

association in tobacco.

Negotiation of ambassador level which are completed and favorable

reports are submitted to respective Government.

The only delegating from tobacco industry that is permitted along with

P.M (Mr.Atal Bihari Vajpayee) to the recent tole to china is from M.L.

Company.

41

ACHIEVEMENTS / AWARDS:-

M.L.Company has no particular / peculiar achievements / awards.

M.L.Group (CAPOL Chirala, Prakasam Dt.) got several achievements

and awards.

CAPOL:-

All Indian cotton seed crushers association, Mumbai awarded CAPOL

as III highest Exporter and III highest domestic seller of cotton seed

extraction for the year 1992-1993.

CAPOL is the highest exporter and III highest domestic set of cotton

seed extraction for the year 1993-1994.

CAPOL is the III highest domestic seller of cotton seed extraction for

the year 1994-95.

CAPOL is the II highest domestic seller of cotton seed extraction for the

year 1995-96.

CAPOL is the II highest domestic seller of cotton seed extraction for the

year 1997-98

CAPOL is the III highest domestic cotton seeds in the year 1999-2000.

CAPOL is the II highest exporter of cotton linter in the year 2000-2001.

CAPOL is the III highest exporter of cotton linters and II highest

domestic seller of Cotton seed extraction in the year 2001-2002.

The Company (CAPOL) has been awarded may commendation led by

Government of AP For its continuous harmonious relations with its

employees in the years 1994-1997.

42

The Company (CAPOL) received “Gold Udyoga Patra” award for its

best quality and Productivity through Sri Pranam Mukharhee, honorable

union commerce minister in 1993 and on this Occasion, the company

(CAPOL) M.D. has been facilitated by honorable president of India,

Dr.Sankar Dayal Sharma.

The company got productivity council awards.

The company goy II best sport persons in companies in prakasam

district.

MARKETING CHANNELS:

Normally they send samples and varieties.

At the time of requirement they send samples through couriers.

Participating in exhibitions every year M.L.company was taking

participation in 56years.

The people who have connection in tobacco may visit tobacco stalls

usually, even from Europe, Russia and china.

People like manufacturers, dealers, bankers, merchants of tobacco may

visit the tobacco exhibitions.

43

TOBACCO EXPORTERS IN INDIA & COMPETITORS OF

M.L.COMPANY:-

In India, the tobacco exporters as well as the same exporters are the

competitors of M.L. Group.

TOBACCO EXPORTERS IN INDIA:-

The important tobaccos exported in our country are,

o ML GROUP

o Mittapalli Group mmidal

o Boa group

o I.T.C. and some other small companies.

In tobacco exports, I.T.C and out of countries (other countries) like China comes

as competitors to this company.

In which China produces 50 times more of tobacco than India.

During exporting of tobacco to other countries freight charges may

be bared by the Company it self.

For door delivery some other charges may be bared by the company.

Tobacco is usually stored in warehouses, redrying plants, threshing

plants.

44

MODE OF TRANSPORTATION:-

Generally the mode of transportation may be four types.

o FOB: Free on board -- The responsibility may be on the board.

o C & F; Cost & freights -- Responsibility of boat and freight

o CIF: Cost insurance and freight -- ware house insurance other

o DDC: Door delivery up to.

FINANCE DEPARTMENT:-

In this department deals with,

Cash payments will be checked by cashiers.

Cash bills and credit bills may get from threshing factory engineering

department.

Concerned accounts may be generalized by the accountants and may be sent

to concerned heads.

Credit bills payments will be given in the form of cheques / D.D

In season tobacco may be purchased through action platforms

Tobacco board will rise invoices

Before purchasing they have to give bank guarantee.

The company will give payments by encase the cheques to tobacco boards.

45

CHAPTER – IV

THEORITICAL

FRAME WORK

THEORETICAL FRAME WORK

Financial Analysis the process of determining the significant

operating and financial characteristics of a firm from an accounting data and

financial statements. Financial analysis is the process of identifying the financial

strengths and weakness of the firm. It is done by establishing relationship between the

items of financial statements viz. balance sheet and profit and loss account. Financial

statement analysis is a process of evaluating the relationship between the

component parts of the financial statements to obtain a better understanding of a firm's

position and performance.

The analysis and interpretation of financial statements reveal each and

every aspect regarding two well being financial soundness, operational efficiency and

credit worthiness of the concern concerned. It may be made for a particular purpose in

view. However the following are generally considered to the object of financial analysis.

To find out the financial stability and soundness of the business enterprise.

To estimate and evaluate the earning capacity of the business.

To evaluate the administrative efficiency of the business enterprise.

TYPES OF ANALYSIS:

Two types of analysis are undertaken to interpret the position of an

enterprise they are

1. Vertical analysis

2. Horizontal analysis

46

VERTICAL ANALYSIS:

It is the analysis of relationships as between different individual

components. It is also the analysis between these components and their totals for a

given period of time. It does not focus light on changing behavior of the above

relationships. It is also regarded as static analysis. The vertical analysis can be made in

the following ways.

By preparations of common size statements of the two similar units.

By preparing common size statements of different years of the same

business unit.

HORIZONTAL ANALYSIS:

It is the analysis of changes in different components of the financial

statements over different periods. With help of a series of statements. Such an

analysis makes it possible to study periodic fluctuations in different components of

the financial statements. It is also known as 'dynamic analysis' it reflect changes in

financial position of the company over a long period of time.

Comparison of the financial statements of different years of the same

business unit.

Comparison of financial statements of a particular year of different business

unit.

47

INTERNAL USERS:

Financial Executions

Top management

EXTERNAL USERS:

Investors

Creditors

Workers

Customers Government Public

Researchers

TOOLS & TECHNICS OF FINANCIAL ANALYSIS:

1. Ratio analysis

2. Cash flow analysis or cash flow statements

3. Funds flow analysis or funds flow statements

4. Comparative statements

Comparative income statements

Comparative balance sheet statement

5. Common size statements

Common size Income statements

Common size balance sheet statements

6. Trend analysis

48

Ratio analysis is widely used tool of financial analysis. This analysis

establishes the numerical or quantitative relationships between to items or

variables of financial statements. So that the strength and weaknesses of a firm as

well as its historic performance and current financial position can be determined.

Ratio helps to summarize large quantitative of financial data and to make

Quantitative judgment about firm’s financial performance.

MEANING:

A ‘Ratio’ is defined as “the desired quotient of two mathematical

expressions”.

Ratio is defined as a fixed relationship in degree or number between two

items. The term “Ratio” refers to the Quantitative relationship between the variable

in the numerator and the variable in the denominator. It is a mathematical

relationship between two quantities. It engages qualitative measurement and show

precisely how adequate is one key item in relation to another.

Ratio Analysis is a powerful tool of financial analysis; it is a widely used

tool of financial analysis and interpretation of ratios should give experienced,

skilled analysts a better understanding of the financial. Condition and performance

of the firm than they would obtain from the analysis of financial data alone. A

ratio analysis is analyzing the information by comparing two different variables.

49

RATIO:

Ratio Analysis lies in the fact that it makes related information comparable.

A simple figure itself has no meaning but when expressed in terms of related

figure, it yields significant inferences. For instance, the fact that the net profits has

be considered in relation to other variables is, how does it stand in relation to sales.

What does it represent by way of return on total assets used or capital employed?

If net profits are shown in terms of their relationship with sales, assets, capital

employed etc., a meaningful conclusion can be drawn regarding their adequacy. A

ratio indicates a quantitative relationship which intern helps in qualitative

judgment.

Financial ratio is an index that relates two accounting numbers and is

obtained by dividing one accounting variable with another variable. Financial

Ratio analysis is the principal tool of financial statement analysis. It is the process

of analyzing the relation between two financial variables. It is also defined as the

systematic use of ratio is to interpret the financial statements so that the strengths

and weaknesses of a firm as well as its historical performance and current financial

condition can be determined. The relationship can be expressed as percentages,

fractions or stated comparison between numbers. These methods of expressing

items that are related with each other are for the purpose of financial analysis,

referred to as ratio analysis.

But comparing ratios merely doesn’t add any information of profits and

sales. They reveal the relationship in more meaningful way which enables to draw

better conclusions.

50

PROCESS:

Financial Ratio Analysis involvers 3 steps.

1. Calculation of appropriate ratios from the financial statements.

2. Comparison of ratios with standard and past ratios.

3. Drawing the final conclusion so to make suitable better decisions regarding

the firm’s profit maximization.

SIGNIFICANCE AND USES:

Used to analyze and interpret the financial health of the firm.

Analysis of financial statements with the aid of ratios helps the

management in decision-making and control.

Use of ratio analysis in not confined to financial managers only but also

to investors, creditors and financial executives.

Ratios can highlight the factors associated with successful &

unsuccessful firms.  They can reveal strong & weakness firms,

overvalued & undervalued firms.

Unique set of operating and financial characteristics of an industry can

be identified.

51

Importance of analysis for which people seek differs considerably reflecting

the purpose that the statements to serve. Investors are concerned with the firm’s

earning capacity where as creditors including Bankers and financial institutions are

interested in knowing the ability of the enterprise to meet its financial obligations

timely. Financial executives are concerned with evolving analytical tools that will

measure and compare costs efficiency, liquidity and profitability with a view to

making intelligent decisions. Thus ratio analysis has wiser applications and is of

immense use.

As a tool of financial management, ratios are of crucial significance. The

importance of ratio analysis lies in the fact that it presents facts on a comparative

basis and enables the drawing of inferences regarding the performance of a firm.

USERS OF RATIOS:

These ratios are used by different people and organizations based upon

their specific need and convenience.

Trade creditors use ratios in measuring the firm’s liquidity position

while granting short-term loans where as bondholders analyze the firm’s

capital structure as their claims are long-term.

Investors are concerned primarily with present and expected future

earnings and its stability.

Management also employs financial analysis for the purpose of internal

control.

52

Government regulatory agencies are concerned with the rate of return a

company earns on its assets as well as the proportion of non-equity

funds employed in the business.

TYPES OF RATIOS:

Broadly speaking the operations and financial position of a firm can be

described by studying a short term and long term liquidity position, profitability

and its operational activities.

Therefore ratios can be classified in to following categories.

Liquidity Ratios

Capital Structure Ratios

Activity Ratios

Profitability Ratios.

Liquidity Ratios:

Conclusions regarding liquidity position of a firm can be drawn with the

help of liquidity ratio analysis. The liquidity position of a firm would be

satisfactory if it is able to meet its short-term or current obligations when they

become due. A firm can be said to have the ability to meet its short-term liabilities

if it has sufficient liquid fund to pay the interest on its short-term maturing debt

usually within a year as will as to pay the principal. This ability is reflected in the

liquidity ratios of a firm. The liquidity ratios are particularly useful in credit

analysis by banks and other suppliers of short- term loans. The important liquidity

ratios are,

53

Current ratio

Quick ratio

Absolute liquidity ratio

Current Ratio:-

Current Ratio is also called as working capital ratio. It establishes

relationship between total current assets and current liabilities. The current assets

of a firm represent those assets this can be converted into cash with in a short

period of time. The current ratio is a measure of the Firm’s short time solvency.

Current Assets

Current Ratio =

Current Liabilities

Quick Ratio:-

Quick Ratio is also called as acid test ratio or liquid ratio. It is concerned

with Relationship between liquid assets and liquid liabilities. An assets is liquid it

can be converted into cash immediately on reasonable soon with out loss of value.

Cash is the most liquid assets. Other assets that a Are considered to be relatively

liquid and included in quick assets are debtors and bills receivable and Marketable

securities.

Quick Assets

Quick Ratio = ------------------------

Current Liabilities

54

Absolute Liquid Ratio :-

This Ratio establishes a relationship between absolute liquid assets to quick

Liabilities. Which can not included bills receivable, sundry debtors and marketable

securities.

Absolute Liquid AssetsAbsolute Liquid Ratio = ------------------------------

Quick Liabilities

Capital Structure Ratios:-

Conclusions regarding the long-term solvency or long-term financial

Viability of a firm can also be assessed through ratio analysis. This aspect of the

financial position of a borrower is concerned with long-term creditors, security

analysts, present and potential owners of a business. The long-term solvency is

measured by the leverage / capital structure and profitability ratios, which focus on

earning power and operating efficiency. Ratio analysis reveals the firm’s strengths

and weaknesses in this aspect. The leverage ratios will indicate whether a firm has

a Reasonable proportion of various sources of finance or if it is heavily loaded

with debt in which case its solvency is exposed to serious strain. The

important leverage ratios are:

Debt – Equity Ratio

Debt Ratio

Fixed Assets Ratio

Proprietary Ratio

55

Uses of Leverage Ratios:

To identify sources of funds

To measure financing risk

To forecast borrowing prospects.

Debt – Equity Ratio

This Ratio indicates proportion of debts fund in relationship to equity.Debt

ratio shows the relative contribution of creditors and owners debt equity ratio is

measure of the long term Financial solvency of a firm. This ratio indicated the

relative proportion of debt and equity in financing the assets of the firm.

Debt

Debt Equity Ratio = ------------

Equity

Debt Ratio:-

This Ratio indicates proportion of owners funds to total fund invested in the

Business. Debt ratio is used to analyse the long term solvency of a firm. It helps in

knowing the Proportion of the interest bearing debt in the capital structure. Debt

ratio is computed by dividing total Debt by capital employed or net assets.

Owner’s Fund

Owners Ratio = --------------------

Total Equity

56

Proprietary Ratio:-

It establishes the relationship between the proprietary funds and total assets.

The total share holder’s funds are compared with the total tangible assets of the

company. The ratio indicates the general financial strength of the concern.

Proprietary Funds

Proprietary Ratio = -------------------------

Total Assets

Activity Ratios

These are also called as turnover ratios or asset management ratios. The

other Dimension of the use of ratio analysis from the viewpoint of management is

that, it throws light on the degree of operating efficiency in the management and

utilization of its assets. The various activity ratios measure this kind of operational

efficiency. These are based on the relationship between the levels of activity and

the level of various assets. In fact, the solvency of a firm is in the ultimate analysis,

dependent upon the sales revenues general by the use of the assets total as well as

its component. The important activity ratios are:

Inventory Turnover Ratio

Debtor’s Turnover Ratio

Creditors Turnover Ratio

Total assets Turnover Ratio

Fixed Assets Turnover Ratio

Working Capital Turnover Ratio

57

Fixed Assets Turnover Ratio:-

This Ratio establishes the relationship between fixed assets and sales. This

Ratio Is a measure of ratio is a measure of how well the firm was its long term

(fixed) assets and shows how many rupees of sales are supported one rupee of

fixed assets.

Sales

Fixed assets Turnover Ratio = ---------------

Fixed Assets

Debtors Turnover Ratio:-

It is also called as receivables turnover ratio. The purpose of this ratio is to

Measure the liquidity of the receivables or to find out the period over which

receivables remain Uncollected.

Total Net Sales

Debtors Turnover Ratio = -----------------------

Avg Net Debtors

Creditors Turnover Ratio:-

This Ratio shows the velocity of debt payment by the firm.

Net Credit Purchases

Creditors Turnover Ratio = -----------------------------

Avg Creditors

58

Total Assets Turnover Ratio:-

Total assets turnover measure the turnover of the all the company’s assets

and is Calculated by total assets average.

Net Sales

Total Assets Turnover Ratio = ----------------

Total Assets

Inventory Turnover Ratio:-

Inventory turnover ratio indicates the efficiency of the firm in producing

and Selling its product. It is called by dividing net sales by average stock. The

average

Stock is the average of Opening and closing balances of stock.

Net Sales

Inventory Turnover Ratio = --------------------

Avg Stock

59

Profitability Ratios :

The overall profitability and effectiveness of the firm cane assessed with the

help of profitability ratios. Unlike the outside parties which are interested in one

aspect of the financial position of a firm, the management is constantly concerned

about the overall profitability of the enterprise. The parties are concerned about the

ability of the firm to meet its short-term as well as long- term obligations to its

creditors in order to ensure a reasonable return to its owners and secure optimum

Utilizations of the assets of the firm. This is possible if an integrated view is taken

and all the ratios are considered together. These reflect the final result of business

operations. The profitability ratios would reveal whether the firm is able to offer

adequate return to its owners in consistent with the risk involved. The important

profitability ratios are:

Gross Profit, Ratio

Net Profit Ratio,

Operating Expenses Ratio

60

Gross Profit Ratio:-

This Ratio is measure of general profitability of the business. This ratio

helps to find the gross margin of the company over its sales. Grass Profit is the

differences between net sales and Cost of goods sold. The gross profit margin

reflects the efficiency with which the management Producers each unit of product.

This ratio indicates the average spread between the costs of goods sold and sales

revenue.

Gross Profit

Gross Profit Ratio = ----------------- * 100

Sales

Net Profit Ratio:-

This Ratio is widely used as a measure of overall profitability.Net profit

margin establishes a relationship between net profit and sales. It indicates

management’s efficiency in Manufacturing and administrations and selling the

product. This ratio is the overall measure of the firms Ability to turn each rupee

sales in to net profit.

Net Profit

Net Profit Ratio = --------------- * 100

Sales

61

Operating Expenses Ratio:-

The operating expenses ratio depending the office and administrative and

selling and distribution expenses.

Operating expensesOperating Expenses ratio = ----------------------------

Sales

62

CHAPTER – V

DATA ANALYSIS &

INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

(A). Liquidity Ratios

1. Current Ratio:

Current assets include cash and those assets which can be converted in to

cash within a year, such marketable securities, debtors and inventories. All

obligations within a year are include in current liabilities. Current liabilities

include creditors, bills payable accrued expenses, short term bank loan income tax

liabilities and long term debt maturing in the current year. Current ratio indicates

the availability of current assets in rupees for every rupee of current liability.

Year Current Assets Current Liabilities Ratio

2006-07 274243926 115648358 2.37

2007-08 281256454 151643144 1.85

2008-09 365193725 211523300 1.73

2009-10 391784538 180032666 2.17

2010-11 399857758 89728008 4.45

63

Current Assets

Current Liabilities

INTERPRETAION:

The above table shows the current ratio of ML Company for the successful

five years i.e., 2006-07, 2007-08, 2008-09, 2009-2010, and 2010-11.

The current of ML Company is decreased for the past three years and in the

next two years it is increased i.e. the current liabilities are increased from the year

2007 to 2009 and in the next two years i.e. from 2010 and 11 the current liabilities

are decreased.

64

Ratio

00.5

11.5

22.5

33.5

44.5

5

2006-07

2007-08

2008-09

2009-10

2010-11

Ratio

2. Quick Ratio:

Quick ratios establish the relationship between quick or liquid assets and

Liabilities. An asset is liquid if it can be converting in to cash immediately or

reasonably soon without a loss of value. Cash is the most liquid asset .other assets

which are consider to be relatively liquid and include in quick assets are debtors

and bills receivable and marketable securities. Inventories are considered as less

liquid. Inventory normally required some time for realizing into cash. Their value

also is tendency to fluctuate. The quick ratio is found out by dividing quick assets

by current liabilities

Year Quick Assets Current Liabilities Ratio

2006-07 101987605 115648358 0.08

2007-08 93322442 151643144 0.62

2008-09 125313650 211523300 0.59

2009-10 154808776 180032666 0.86

2010-11 297543660 89728008 3.31

65

Quick Assets

Current Liabilities

INTERPRETAION:

The above table shows the quick ratio of ML Company for the successful

five years i.e., 2006-07, 2007-08, 2008-09, 2009-2010, and 2010-11. The quick

ratio of ML Company is decreased from the year 2007 to 10 due to the increase in

the current obligations; this ratio is increased in the current year.

66

Ratio

0

0.5

1

1.5

2

2.5

3

3.5

200

6-07

200

7-08

200

8-09

200

9-10

201

0-11

Ratio

3. Cash Ratio:

Even though debtors and bills receivables are considered as more liquid

then inventories, it can not be converted in to cash immediately or in time.

Therefore while calculation of absolute liquid ratio only the absolute liquid assets

as like cash in hand cash at bank, short term marketable securities are taken in to

consideration to measure the ability of the company in meeting short term financial

obligation. It calculates by absolute assets dividing by current liabilities.

Year Cash + Bank balance Current Liabilities Ratio

2006-07 33465753 115648358 0.29

2007-08 6059037 151643144 0.04

2008-09 7150276 211523300 0.03

2009-10 13998934 180032666 0.07

2010-11 61538293 89728008 0.68

67

Cash + Bank balance

Current Liabilities

INTERPRETATION:

Absolute liquid ratio indicates the availability of cash with company is

sufficient because company also has other current assets to support current

liabilities of the company. When observe the above graph absolute liquid ratio of

the company is decreased from the year 2007-10. In terms of this ratio the

company is unsatisfactory in those four years and this company maintained

standard ratio in the current year.

68

Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2006

-07

2007

-08

2008

-09

2009

-10

2010-11

Ratio

(B). LEVERAGE RATIOS

4. Debt Equity Ratio:

The term external equities refers to total outside liabilities that

consists of both short term and long term liabilities and the term internal equities

refer to share holders funds that consists of both equity and preference capital. In

case the ratio 1(i.e., outsiders funds are equal to shareholders funds it is considered

to be quite satisfactory). The debt equity ratio is determined to ascertain the sound

ness of the long term financial policies of the company. It is also known as

“external internal” equity ratio. It may be calculated as follows:

Year Debt Equity Ratio

2006-07640764231 148167525 4.32

2007-08589603737 143270036 4.11

2008-09572516150 164136957 3.48

2009-10560278204 207200158 2.70

2010-11161283036 215747706 0.74

69

Debt

Equity

INTERPRETATION:

The general norm for debt equity ratio is 1:2 (or) 1:1 this is applicable only

for developed countries. In case of developing countries like India, a general norm

of 3:1 or 2:1 is maintained by the firms. Because the firms are depending on

borrowed capital rather than equity capital. The debt position of the company is

decreased from the 2007to 2011. The company did not maintain idle ratio of debt

equity ratio.

70

Ratio

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

5. Debt to total funds ratio:

This ratio is also called solvency ratio. A measurement of a

company's financial leverage, calculated as the company's debt divided by its

total capital. Debt includes all short-term and long-term obligations. Total capital

includes the company's debt and shareholders' equity, which includes common

stock, preferred stock, minority interest and net debt.

Year Debt Total funds Ratio

2006-07640764231 794455378 0.95

2007-08589603737 738669982 0.74

2008-09572516150 742900639 0.77

2009-10560278204 773002348 0.75

2010-11161283036 380869464 0.20

71

Debt

Total funds

INTERPRETATION:

The solvency ratio of the ML Company is decreased from the past five

years i.e. this ratio decreased in the years 2007, 2008, 2009, 2010 and in 2011

respectively.

72

Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

(C). TURNOVER RATIOS

6. Inventory turnover ratio:

In accounting, the Inventory turnover is a measure of the number of

times inventory is sold or used in a time period such as a year. The equation for

inventory turnover equals the cost of goods sold divided by the average inventory.

Inventory turnover is also known as stock turnover ratio.

Year C.G.S Inventory Ratio

2006-07131772745 1416708465 0.09

2007-0896695127 168188152

0.57

2008-09255762587 202872507

1.26

2009-10257993866 224758820

1.14

2010-112412201369 104506584 2.87

73

Cost of goods sold

Inventory

INTERPRETATION:

The above table shows that the company maintained its inventory turnover

ratio was increased gradually from 2007 to 2011. In the year 2011 the company

increased its inventory turnover ratio highly. A high inventory turnover ratio

indicates efficient management of inventory because the stocks are sold more

frequently and lesser amount of money is required to finance the inventory.

74

Ratio

0

0.5

1

1.5

2

2.5

3

3.5

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

7. Creditors turnover ratio:

This Ratio is similar to the debtor’s turnover ratio. It compares

creditors with the total credit purchases. It signifies the credit period enjoyed by

the firm in paying creditors. Accounts payable include both sundry creditors and

bills payable.

Year N.C.P Avg N.W Ratio

2006-07 155880478 86606810 1.79

2007-08 111121750 111350819 0.99

2008-09 280314175 140578048 1.99

2009-10 211640666 136973736 1.54

2010-11 209030297 65662487 3.18

75

Net Credit Purchases

Average Creditors

INTERPRETATION

By observing the above table, it is clear that the creditor’s turnover

ratio of ML Company has some fluctuations. In the year 2011 it was highly

increased.

76

Ratio

0

0.5

1

1.5

2

2.5

3

3.5

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

8. Debtors turnover ratio:

Debtors turnover ratio or accounts receivable turnover ratio  indicates the

velocity of debt collection of a firm. In simple words it indicates the number of

times average debtors (receivable) are turned over during a year.

Year Credit Sales Debtors Ratio %

2006-07131772745 24937024 4.80

2007-0896695127 26860540

3.32

2008-09255762587 35992686

6.42

2009-10 257993866 36258591 5.64

2010-11 2412201369 206323026 1.54

77

Credit Sales

Debtors

INTERPRETATION:

The above graph shows that the debtor’s turnover ratio of the company

increased in the year 2009 and 2010 and in the years 2007, 08 and 11 it was

decreased. The higher the value of debtor’s turnover the more efficient is the

management of debtors or more liquidity. So the company having good position in

management of debt.

78

Ratio

0

1

2

3

4

5

6

7

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

9. Capital Turnover ratio:

The Capital turnover ratio measures the ability of a company to use its

assets to generate sales. The total asset turnover ratio considers all assets including

fixed assets, like plant and equipment, as well as inventory and accounts

receivable.

Year Sales Capital employed Ratio

2006-07 131772745 670968363 0.14

2007-08 96695127 794455378 0.16

2008-09 255762587 738669982 0.13

2009-10 257993866 742900639 0.34

2010-11 2412201369 773002348 0.33

79

Sales

Capital employed

INTERPRETATION:

The above graph shows that, the capital turnover ratio of ML

Company is decreased from the past three years i.e. from 2007 to 2009 and in the

next two years this ratio was increased.

80

Ratio

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

(D). PROFITABILITY RATIOS

10. Gross profit ratio:

It is calculated by dividing the gross margin by sales. This ratio shows the

profits relative to sales after three direct production costs are deducted. It may be

used as an indicator of the efficiency of the production operation and the relation

between production costs and selling price.

Year Gross Profit Net sales Ratio %

2006-07 964760800 131772745 7.32

2007-08 485264700 96696127 5.01

2008-09 2553785100 255762587 9.98

2009-10 4009638900 257993866 15.54

2010-11 1169730000 2412201369 48.49

81

Gross Profit X 100

Net sales

INTERPRETATION:

The gross profit ratio is increased from the year 2007 to 2011 this ratio has

increased slightly in the years 2007, 08 and 09 but in the years 2010 and 11, this

ratio has increased highly.

82

Ratio

0

10

20

30

40

50

60

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

48.49

11. Net Profit ratio:

Net profit margin establishes a relationship between net profit and sales

indicates management’s efficiency in manufacturing administrating and selling the

product. This ratio is the overall measure of the firm’s ability to turn each rupee

sales into net profit. The net profit margin shows the earning left for shareholders

as a percentage of net sales. This ratio also indicates the firm’s capacity to

withstand adverse economic conditions. Gross and net profit margin ratios provide

a valuable understanding of the cost and profit structure of the firm and enable to

identify the source of business efficiency / inefficiency.

Year Net profit Net sales Ratio

2006-07 1928493 131772745 14.63

2007-08 560882 96696127 0.58

2008-09 25141569 255762587 9.83

2009-10 60103469 257993866 23.29

2010-11 52759783 2412201369 21.87

83

Net profit

Net sales X 100

INTERPRETAION:

This net profit ratio of ML Company is decreased from the year 2007 to 2009

and it decreased highly in the year 2007, in the next two years this ratio has

increased highly.

84

Ratio

0

5

10

15

20

25

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

48.49

12. Earning per share

The EPS is the total profits of a company divided by the number of shares. It's also

important to remember that if a company issues more shares of stock, it "dilutes"

the EPS figures.  So investors are usually not happy when companies announce

secondary offerings.  Unless, of course, the money the company rises will be put to

use well.

Year Net Profit after I &T No of Equity Shares Ratio

2006-07 1928493 790000 2.4

2007-08 560882 790000 0.7

2008-09 25141569 790000 31.8

2009-10 66103469 790000 76.0

2010-11 52759783 790000 66.7

85

Net profit after I & T

No of Equity Shares

INTERPRETATION:

The above graph shows that the earning per share of the ML Company is

increased from the year 2007 to 2010 and this ratio is decreased slightly in the year

2011.

86

Ratio

0

0.5

1

1.5

2

2.5

3

3.5

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

Ratio

13. Return on investment:

ROI (Return on Investment) is probably the most important calculation one

needs to make to ensure the long-term viability of their business. It is not enough

to build in a profit margin on the product or service being offered. One must track

with proficiency the amount of dollars being invested into attracting sales and how

much ROI those dollars put back into the business. If the investment meets too

little return, a product line is doomed to fail in the long-term.

Year E.B.I.T Shareholders equity Ratio

2006-07 560882 670968363 0.08

2007-08 25141569 794455378 3.16

2008-09 60103469 738669982 8.13

2009-10 260447088 742900639 35.05

2010-11 120583786 773002348 15.5

87

Earning before I&T

Shareholders equity

INTERPRETATION:

The above graph shows that the return on investment of ML

Company is increased for the last four years i.e. in the years 2007, 08, 09 and 10

respectively and this ratio is decreased slightly in the year 2011.

88

Ratio

0

5

10

15

20

25

30

35

40

2006-07 2007-08 2008-09 2009-10 2010-11

Ratio

CHAPTER – VI

FINDINGS&

SUGGESTIONS

FINDINGS

The current ratio of the company is decreased slightly in the past four years and

it is increased in the current year.

The quick ratio is increased highly in the current year and decreased in the

remaining past four years.

The average debtors of ML Company are increased in the last four years and

decreased in the current year.

The creditor turnover ratio is decreased for the last four years and is has

increased in the present year.

The capital turnover ratio of the company is increased in the current year as

compared to its previous years.

The solvency ratio of the company is decreased year by year i.e. its debt is

decreased.

The return on investment is increased for the past four year and decreased in

the current year.

The earnings per share ratio of the company are increased year wisely.

It is found that the absolute liquidity ratio has been very high in the year 2007.

The absolute liquidity ratio of the company on a whole is not said to be

satisfactory.

89

SUGGESTIONS

As the current ratio was satisfactory, the company has to maintain the

standard current ratio in the future also.

The company has to reduce its quick assets especially debtors as the ratio is

fluctuating near in the ideal mode.

The company should utilize its idle cash assets towards appropriate

investment to maintain an optimal absolute liquid ratio.

The inventory is in a good position, it has to maintain same in the future

also.

The company should maintain the optimal proportion of debtors.

The company should decrease its credit purchased in the current year and

has to maintain the optimal level of credit purchases.

90

GLOSSARY

GLOSSARY

FINANCIAL MANAGEMENT:

In the words of Howard and Upton “Finance may be defined as that as that

administrative area or set of administrative function in an organization which relate

with the arrangement of each and credit so that the organization may have the means

to carry out its objectives as satisfactory as possible’:

SCENARIO:

Synthetic Description of An Event or Series of Actions.

PROXIMITY

Nearness to something

RATIO:

Ratio is defined as the “the indicated quotient of two mathematical expressions

and the relationship between two or more things.

91

ABBREVIATIONS

92

BIBILOGRAPHY

BIBILOGRAPHY

FINANCIAL MANAGEMENT -- I.M. PANDEY

FINANCIAL MANAGEMENT THEORY AND PRACTICE -- M.Y.KHAN

P.K.JAIN

COST AND MANAGEMENT ACCOUNTING -- R.P.TRIVEDI MANON TRIVEDI

FINANCIAL MANAGEMENT -- K.GUPTHA

WEBSITES:

http://www.mlgroups.com

www.google.com

www.encyclopedia.com

93

ANNEXURE

ANNEXURE

BALANCE SHEET AS AT 31 MARCH 2007PARTICULARS 31 March 2007

Sources of Funds:

Share capital 13000000

Reserves and surplus 135167525 148167525

Loan funds:

Secured Loans 465213017

Un Secured Loans 175551214 640764231

Differed Tax Liability 5523622

Total 794455378

Application of Funds:

Fixed Assets (Gross Block) 130365742

Less: Depreciation 71209082

Net Block 59156660

Add: Capital work in progress 572983185 632139845

Investments 3719963

Current Assets, Loans and

Advances:

Inventories 172256321

Sundry Debtors 24937024

Cash and Bank Balances 33465753

Other Current Assets 28656816

Loans and Advances 14928012

Total Current Assets 274243926

Current Liabilities and

Provisions:

Current Liabilities 108391431

Provisions 7256927

Total Current Liabilities 115648358

Net Current Assets 158595568

TOTAL 794455378

94

BALANCE SHEET AS AT 31 MARCH 2008

PARTICULARS 31 MARCH 2008

Sources of Funds:

Share capital 13000000

Reserves and surplus 130270036 143270036

Loan funds:

Secured Loans 390364244

Un Secured Loans 199239493 589603737

Differed Tax Liability 5796209

Total 738669982

Application of Funds:

Fixed Assets (Gross Block) 711551528

Less: Depreciation 105478021

Net Block 59156660

Investments 2983165

Current Assets, Loans and

Advances:

Inventories 187934012

Sundry Debtors 26860540

Cash and Bank Balances 6059037

Other Current Assets 48679846

Loans and Advances 11723019

Total Current Assets 281256454

Current Liabilities and

Provisions:

Current Liabilities 139624184

Provisions 12018960

Total Current Liabilities 151643144

Net Current Assets 129613310

TOTAL 738669982

95

BALANCE SHEET AS AT 31 MARCH 2009

PARTICULARS 31 MARCH 2009

Sources of Funds:

Share capital 13000000

Reserves and surplus 151136957 164136957

Loan funds:

Secured Loans 379475270

Un Secured Loans 193040880 572516150

Differed Tax Liability 6247531

Total 742900638

Application of Funds:

Fixed Assets (Gross Block) 726114635

Less: Depreciation 145033137

Net Block 581081498

Capital work in progress 5165551

Investments 2983165

Current Assets, Loans and

Advances:

Inventories 239880075

Sundry Debtors 35992686

Cash and Bank Balances 7150276

Other Current Assets 69640943

Loans and Advances 12529745

Total Current Assets 365193725

Current Liabilities and Provisions:

Current Liabilities 202449314

Provisions 9073986

Total Current Liabilities 211523300

Net Current Assets 153670425

TOTAL 742900638

96

BALANCE SHEET AS AT 31 MARCH 2010

PARTICULARS 31 MARCH 2010

Sources of Funds:

Share capital 13000000

Reserves and surplus 194200158 207200158

Loan funds:

Secured Loans 478682475

Un Secured Loans 81595729 560278204

Differed Tax Liability 5523986

Total 773002348

Application of Funds:

Fixed Assets (Gross Block) 738903208

Less: Depreciation 182491726

Net Block 556411482

Capital work in progress 1855829

Investments 2983165

Current Assets, Loans and

Advances:

Inventories 236975762

Sundry Debtors 36258591

Cash and Bank Balances 13998934

Other Current Assets 93657132

Loans and Advances 10864119

Total Current Assets 391784538

Current Liabilities and Provisions:

Current Liabilities 158452146

Provisions 21580520

Total Current Liabilities 180032666

Net Current Assets 211751872

TOTAL 773002348

97

BALANCE SHEET AS AT 31 MARCH 2011

PARTICULARS 31 MARCH 2011

Sources of Funds:

Share capital 12679000

Reserves and surplus 203068706 215747706

Loan funds:

Secured Loans 154680558

Un Secured Loans 6602478 161283036

Differed Tax Liability 3838722

Total 380869464

Application of Funds:

Fixed Assets (Gross Block) 137659762

Less: Depreciation 80840512

Net Block 56819250

Capital work in progress ---------

Investments 139204644

Current Assets, Loans and

Advances:

Inventories 102314098

Sundry Debtors 20632326

Cash and Bank Balances 61538293

Other Current Assets 4371041

Loans and Advances 25311300

Total Current Assets 399857758

Current Liabilities and Provisions:

Current Liabilities 89728008

Provisions ---------------

Total Current Liabilities 89728008

Net Current Assets 310129750

TOTAL 380869464

98