Dilip SinghMBA 3rd sem

“A Study of Ratio analysis

in montex pens company”

Introduction Vision mission What is ratio Objectives Research methodology Types of ratio Analysis n data interpretation Findings conclusion

Contents……

Introduction

Montex is writing instrument oriented industry.

Montex was started by Mr. Raman Jain in 1976 in Mumbai

Montex has a network of 33 branch offices, 208 Customer Relation Centers and 41 depots spread across India

VISION....Our vision is to offer a wide range of writing instrument pens and ball pens for meeting the requirement of various educational areas.

MISSION….To be the leading manufacturer of writing instrument in the nationwide.Continually innovating the product.Offering internationally acclaimed product at cost effective solution.Managing all our suppliers, employees, partners and customers in a highly.Growing our value through new ideas.

What is Ratio?

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm.

The term ratio refers to the numerical or quantitative relationship between two items /variables.

Objectives

To determine the financial conditions and financial performance of the firm.

To involve comparison for a useful interpretation of the financial statements.

To find out the solution to the unfavorable financial conditions and financial conditions.

To forecast the future of the company.To analyze the firm’s relative strengths and

weakness 

Research Methodology

Primary Dataresearcher from the respondents directly.

observation and communication. 

Secondary Dataexisting records, company manual & Internet

annual reports

Types of Ratios:- Short term solvency ratio Current ratio Absolute liquid ratio Cash position ratio

Long term solvency ratio Proprietary ratio Solvency ratio Fixed assets to net worth ratio

Profitability ratio Return on equity Return on total resource Net profit ratio Operating expenses ratio

ANALYSIS AND INTERPRETATION OF DATA

Current Ratio:-

YEAR

CURRENT

ASSETS

(Rs in Cr.)

CURRENT

LIABILITIES

(Rs in Cr.)

RATI

O

2005-

06371.21 182.89 2.03

2006-

07427.74 239.37 1.78

2007-

08525.70 253.34 2.08

2008-

09

637.37 272.56 2.34

2009-

10

752.45 286.92 2.62

Current Assets Current Liabilities

0

100

200

300

400

500

600

700

800

2005-06 2006-07 2007-08 2008-09 2009-10

CURRENT ASSETS(Rs in Cr.)

CURRENT LIABILITIES(Rs inCr.)

GRAPH……

RATIO…

Current ratio indicates the firm’s commitment to meet its short term obligations.

It is an index of the short term financial stability of an enterprise because it shows the margin available after paying off current liabilities.

INTERPRETATION

YEARCASH

(Rs in Cr.)

CURRENT

LIABILITIES

(Rs in Cr.)

RATIO

2005-06 36.72 182.89 0.20

2006-07 16.76 239.37 0.07

2007-08 19.46 253.34 0.07

2008-09 24.32 289.46 0.08

2009-10 31.23 312.59 0.09

CASH POSITION RATIO…..

0

50

100

150

200

250

300

350

2005-06 2006-07 2007-08 2008-09 2009-10

CASH(Rs in Cr.)

CURRENT LIABILITIES (Rsin Cr.)

CASH POSITION RATIO

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

2005-06 2006-07 2007-08 2008-09 2009-10

RATIO

RATIO……

This ratio indicates the ability to discharge its short term liabilities with the available cash on hand.

A ratio of 1:1 is considered to be a good ratio but a rate of 0.75:1 is also good. The above ratios stated above imply that the company does not have enough cash on hand to meet all the current liabilitie

INTERPRETATION……

RETURN ON EQUITY

YEARPROFIT

(Rs in Cr.)

EQUITY SHARE CAPATAL

(Rs in Cr.)RATIO

2005-06 32.79 14.19 2.31

2006-07 34.12 14.19 2.40

2007-08 34.58 14.19 2.43

2008-09 43.56 14.19 3.07

2009-10 59.23 14.19 4.17

0

10

20

30

40

50

60

2005-06 2006-07 2007-08 2008-09 2009-10

PROFIT(Rs in Cr.)

EQUITY SHARE CAPITAL(Rsin Cr.)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2005-06 2006-07 2007-08 2008-09 2009-10

RATIO

INTERPRETATION:-

The ratio indicates that the profitability for the equity shareholders. The above figures indicate that the equity shareholders are getting better returns on their investments. The company has been able to provide good returns to its equity investors over the last five years.

RETURN ON TOTAL RESOURCE:-

YEARNET PROFIT

(Rs in Cr.)

TOTAL ASSETS

(Rs in Cr.)RATIO

2005-06 32.79 401.08 0.082

2006-07 34.12 417.71 0.082

2007-08 34.58 470.70 0.074

2008-09 36.43 483.27 0.075

2009-10 38.72 515.76 0.075

0

100

200

300

400

500

600

2005-06 2006-07 2007-08 2008-09 2009-10

NET PROFIT(Rs in Cr.)TOTAL ASSETS(Rs in Cr.)

INTERPRETATION:-

It is the ratio of net profit to total resources or total assets. Return here means net profit after taxes and total resources means all realizable assets including intangible assets, if they are realizable. This ratio measures the productivity of the total resources of a concern. On analysis of the ratio it denotes that the company is able to maintain its productivity over the five year period.

Contd…..

Finding The current liabilities of the company are increasing continuously

from year after year. But when compared to these, current assets are also increasing year after year.

Current ratio was not constant during these five years The cash balance position of the company shows a huge drop

indicating that its inability to maintain liquid assets. Loans and advances position shows an upward trend Indicating amounts locked up in small advances. The share capital of the company is constant for the five year period

indicating that the company seems not to have any major expansion plans.

The debtors position shows an upward trend. Although as stated above, the sales are improving, it is better to reduce the debtors position.

Suggestion The company has to maintain its current assets to be more so that it will be double the current liabilities and it should meet the standard ratio 2:1. This will help the company to meet its current obligations easily. Or the company can decrease its liabilities to meet the standard ratio.

Cash maintained by the company should be increased so that the cash position ratio is kept to the standard i.e. 1:1. The standard can be reached either by increasing cash maintained or by decreasing current liabilities.

Interest payout ratio of the company has to be kept low because higher the interest payout ratio will decrease the profit of the company.  The company has to maintain its fixed assets less so that to avoid large funds tie up in the fixed assets.  

Thank You