Tvs Financial Wealth

ANALYSIS OF FINANCIAL WEALTH
V.S.T. TILLERS TRACTORS LTD
INTRODUCTION
PART A: ABOUT INDUSTRY: 1.1 Introduction about the Tractor Industry The Indian tractor industries were as follows history of the company. 1945 to 1960: War suppliers tractors and bulldozers were imported for land reclamation and cultivation in mid 1940`s in 1947 central and state tractors organizations were setup to develop and promote the supply and age of tractors in agriculture and unto 1960 the demand met entirely through imports. There were 8500 tractors in age in1951-20000 is 1955 and 37000 by 1960. 1961 to 1970: Local production began in 1961 with five manufactures producing total of880 units per day by 1965 this had increased to over 5000 unites per pear and the total in use had rise to our 52000 by 1970 annual production had exceeded 20000 units over 146000 units working in the country. 1971 to 1980 Six new manufactures were established during this period although three companies (Kriloscar tractors, Harshor and Pittie tractors) did not survive. Escorts ltd., began location manufacture of ford tractors in 1971 in collection with Ford UK and total production climbed steadily to 33000 in 1975 reaching 71000 by1980 credit facilities for farmers continued to improve and the tractor market expanded the half million mark by 1980.
LORVEN EDUCATIONAL CENTRE 1
1981 to 1990 A further five manufacture began to production during this period but only one of these survived in the increasingly competition market place. Annual production exceeded 75000 units by 1985 and reaching 14000 in 1990 when the total in use was about 1 to 2 million. The Indian net importer up to the mid seventies become an exporter in the 80`s mainly to countries in Africa. 1991 to 1997 Science 1992 it has not been necessary to obtain an industrial license for tractor manufacture in India by 1997 annual production exceeded 255000 units and the national tractor park and passed the two million mark. India as emerged as one of the world leaders wheeled tractors production. The Industry Today Tractors manufacture in now firmly established in India and is highly competitive with repaid advanced being made in technical design and quality with increasing attention to export markets of the 16 companies that began operation before 1990 six are considering before major manufactures (Eicher, Escorts ltd., HMT, Mahindra and Mahindra, PTC and TAFE). Mahindra and Mahindra have emerged as a larger manufacture producing68000 unites in 1997 followed TAFE, Escort ltd., and Punjab tractors with 49000, 48000 and 40000 units respectively.
LORVEN EDUCATIONAL CENTRE
The average size of the tractor in the country is currently 35hp which following trends in other parts of the world, seems likely to increase steadily to around 45hp by 2020. By which time total tractor population may have increased from the present two million with annual production up to 3200000. Power Tillers By comparison with other parts of south East Asia demand for power tillers in India has been slow to take off. However the current population of around 66000 units with an average size of the 10hp is expected to rise steadily to around production reaching our 50000 units. Tractor is a vehicle intended for drawing, towing, pushing or pulling something which cannot propel itself and, often, powering it too. Most commonly the word is used to describe a vehicle intended for pulling some other vehicle or object (see traction unit). The word comes from the Latin trahere "to pull". A conflicting history of the name suggests that steam tractors were originally referred to as traction engines, with the word "tractor" eventually deriving from a contraction of 'traction' and 'motor'.
In Britain, Australia, India, Spain, and Poland the word "tractor" usually means "farm tractor", and the use of the word "tractor" to mean other types of vehicles is familiar to the vehicle trade but unfamiliar to much of the general public. In Canada and the US the word is also used to refer to a road tractor . Farm tractor
A modern John Deere 8110 Farm Tractor plowing a field using a chisel plow. The most common use of the term is for the vehicles used on farms. The farm tractor is used for pulling or pushing agricultural machinery or trailers, for plowing, tilling, disking, harrowing, planting, and similar tasks. History The first powered farm implements in the early 1800s were portable engines steam engines on wheels that could be used to drive mechanical farm machinery by way of a flexible belt. Around 1850, the first traction engines were developed from these, and were widely adopted for agricultural use. Where soil conditions permitted, such as the US, steam tractors were used to direct-haul ploughs, but in the UK, ploughing engines were used for cable-hauled ploughing instead. Steam-powered agricultural
engines remained in use well into the 20th century, until reliable internal combustion engines had been developed. [2] In 1892, John Froelich built the first practical gasoline-powered tractor in Clayton County, Ohio. Only two were sold, and it was not until 1911, when the Twin City Traction Engine Company developed the design, that it became successful. In Britain, the first recorded tractor sale was the oil-burning HornsbyAckroyd Patent Safety Oil Traction engine, in 1897. However, the first commercially successful design was Dan Albone's three-wheel Ivel tractor of 1902. In 1908, Saundersons of Bedford introduced a four-wheel design, and went on to become the largest tractor manufacturer outside the USA. While unpopular at first, these gasoline-powered machines began to catch on in the 1910s as they became smaller and more affordable. Henry Ford introduced the Fordson, the first mass-produced tractor in 1917. They were built in the U.S., Ireland, England and Russia and by 1923, Fordson had 77% of the U.S. market. The Fordson dispensed with a frame, using the strength of the engine block to hold the machine together. By the 1920s, tractors with a gasoline-powered internal combustion engine had become the norm. The classic farm tractor is a simple open vehicle, with two very large driving wheels on an axle below and slightly behind a single seat (the seat and steering wheel consequently are in the center), and the engine in front of the driver, with two steerable wheels below the engine compartment. This basic design has remained unchanged for a number of years, but enclosed
cabs are fitted on almost all modern models, for reasons of operator safety and comfort. Originally, plows and other equiptment were connected via a drawbar, or a proporietary connecting system; prior to Harry Ferguson patenting the three-point hitch. Recently, Bobcat's patent on its front loader connection has expired; and compact tractors are now being outfitted with quickconnect attachments for their front-end loaders. There are also lawn tractors. Cub Cadet, Husqvarna, John Deere, Massey Ferguson and Toro are some of the better-known brands.
Tractor
Ford 75 HP tractor VST Mitsubishi Shakti MT 180 D Tractor Swaraj 744 FE OX 45 Tractor (45 HP) OX-35 Tractor (35 HP)
Ford 75 HP tractor
Specifications:Powerful Engine 75HP (BS). 4 cylinder engines give the power required to tackle the toughest soil conditions. Direct injection (DI). Easy start even in cold conditions Rated engine rpm-2500 Bosch Rotary FI pump for high fuel efficiency Dry type replaceable sleeves enables the use of standard size piston after replacing the liners. VST Mitsubishi Shakti MT 180 D Tractor

More powerful and fuel efficient Direct Injection Diesel Engine Micron Engine Oil Filter for long life Rotary changing device for ease and safety
Adjustable tail wheel for superior field operation Optional wheel carrier for easy field operation
CHANNIES TRACTORS Hubei Machinery & Equipment Import & Export Corporation was established as a major machinery and equipment exporter. Today, we are proud to be one of the worlds foremost suppliers of industrial products especially in the agricultural machinery and industrial equipment markets such as tractors, ATVs, Gocarts, bulldozers, diesel/gasoline generators etc.
With our beginnings in the early 1970s, we have since established 24 subsidiaries both inside and outside of China. These include 9 subsidiaries in the provincial cities, 5 enterprises in chinese cities such as Zhuhai, Shengzhen, Guangzhou, Shanghai, Beijing and 4 overseas enterprises in the USA, UKRAINE, SYRIA and Hongkong. We also have set up 6 joint ventures and hundreds of coordinate factories all over China. We have traded in over 100 countries in the world market providing thousands of products. Our annual product turnover ranks among Chinas top 200 largest companies. We will be glad to work with the partners worldside. HMT TRACTORS Commenced manufacturing Agricultural Tractors in 1972 with technology acquired from ZETOR, Czech Republic and continues to upgrade the products. Our Tractor Plants in Pinjore, Mohali and Hyderabad with capacity of 20,000 per annum, produces wide range of Tractors from 25 HP to 75 HP to suit various farming requirements. HMT Tractor manufacturing units have ISO 9001 certification. Our products are reliable, simple to operate with safety features and are well accepted in the international market. We have exported our Tractors to USA, Czech Republic, Croatia, Sri Lanka, Bangladesh, South Africa, Senegal, Nigeria, Malaysia, and Liberia etc.
The Tractors have:

Powerful, fuel efficient engines. Roll Over Protective Structure for safety Hydraulic and Mechanical Disc Brakes Dual Clutch for travel and PTO operations Low maintenance and operational cost We also offer Primary & Secondary Tillage Implements, Land
Shaping, Planting and Harvesting Equipment. MAHINDRA GUJARAT Mahindra Gujarat Tractor Limited was formed in 2001 after Mahindra and Mahindra Limited purchased sixty percent of the remaining shares in Gujarat Tractor Corporation Limited, from the Govt. of Gujarat. It is based in Vadodara, Gujarat, India. Their tractors, now called Shaktimaan were originally named Hindustan and are based on the Zetor tractor under licensing agreements.
PART-B: ABOUT SUBJECT FINANCIAL STATEMENT DEFINITION In the words of John .N. Myer The Financial statements provide a summary of the accounts of a business enterprise, the balance reflecting the assets, liabilities and capital as on a certain date and the income statement showing the results of operations during a certain period. Financial statements are prepared primarily for decision-making. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements MEANING OF FINANCIAL STATEMENTS The term Financial Statement refers to the Two Statements 1. The position statement or the Balance Sheet. 2. The Income statements or the Profit and loss account. These statements are used to convey to management and other interested outsiders the profitability and financial position of a Firm.
10
FINANCIAL ANALYSIS
Financial analysis is The process of identifying the Financial Strengths and Weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques used in analyzing financial statements, such as comparative statements, trend analysis, common size statements, schedules of changes in working capital, funds flow statement and cash flow analysis, costvolume-profit analysis and ratio analysis. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm, a financial analyst analyses the financial statements with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. The analysis and interpretation of financial statements is essential to bring out the mystery behind the figures in financial statements. Financial statement analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay interest and debt maturities (both current and long term) and profitability of a sound dividend policy.
11
The Significance or Importance of Financial Analysis:

1. To know the Present and Future Profitability of their Concern 2. To know the Earning Per Share and the Dividend Per Share, which have an impact on the market prices of their shareholdings. 3. To know the Financial Position of the Concern. 4. To know the stake or risk undertaken by firm. 5. To Analyze the Financial Statements which helps the management to ascertain the profitability of the enterprise. 6. To ascertain the Trend of Progress of the Concern. 7. To forecast future sales, Production, Expenses, Profits etc on the basis of the past data. 8. To ascertain the adequacy of Capital Structure of the Concern. 9. To know whether the Short-term Financial Position of the concern is good to Pay Bonus Increased wages, etc. 10.To have correct assessment of Taxes, such as Excise duties, Sales tax, Income tax etc. 11.To regulate the prices of goods produced by the enterprise. 12.To determine its Financial Policies.
12
TYPES OF FINANCIAL ANALYSIS 1. ON THE BASIS OF MATERIAL USED A) Externa1 analysis B) Internal analysis A) EXTERNAL ANALYSIS: Outsiders who do not have access to the detailed internal accounting records of the business firm do this analysis. These outsiders include investors, potential investors, creditors, potential creditors, government agencies, credit agencies and the general public. For financial analysis these external parties to the firms depend almost on the published financial statements. B) INTERNAL ANALYSIS: The analysis conducted by persons who have access to the internal accounting records of a business firm is known as internal analysis, such an analysis can, therefore be performed by executives and employees of the organization as well as government agencies which have Statutory powers vested in them. Financial analysis for managerial purposes is the internal type of analysis that can be affected depending upon the purpose to be achieved. 2. ON THE BASIS OF MODUS OPERANDI A. Horizontal analysis B. Vertical analysis.
13
A) HORIZONTAL ANALYSIS Horizontal analysis refers to the comparison of financial data of a company for several years. The figures for this type of analysis are presented horizontally over a number of columns. The figures of the various years are compared with standard or base year. A base year is a year chosen as beginning point. This type of analysis is also called Dynamic analysis as it is based on the data from year to year rather than on data of any one year. Comparative statements and trend percentages are two tools employed in horizontal analysis. B) VERTICAL ANALYSIS. Vertical analysis refers to the study of relationships of the various items in the financial statements of one accounting period. In this type of analysis the figures from financial statements of a year are compared with a base selected from the same years statement. It is also known as static analyses. Common-size financial statements and financial ratios are the two tools employed in vertical analysis.
PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

There are three steps involved in the analysis of financial statements. These are 1. Selection 2. Classification and 3. Interpretation.
14
The first involves selection of information (data) relevant to the purpose of analysis of financial statements. The second step involved is the methodical classification of the data and the third step includes drawing of intervenes and conclusions.
METHODS OR DEVICES OF FINANCIAL ANALYSIS.

The analysis and interpretation of financial statements is used to determine the financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. The following methods of analysis are generally used 1. Comparative statements. 2. Trend analysis. 3. Common-size statements. 4. Funds flow analysis. 5. Cash flow analysis. 6. Ratio analysis. 7. Cost-volume-profit analysis.
1. COMPARATIVE STATEMENTS.
The Comparative Financial statements are statements of the financial position at different periods of time. The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods. Two financial statements (balance sheet and income statement) are prepared in Comparative form for financial analysis purposes. Not only the comparison of the figures of the two periods but also the
15
relationship between balance sheet and income statement enables an in depth study of financial position and operative results. The two Comparative statements are A. Balance sheet. B. Income statement.
A. COMPARATIVE BALANCE SHEET.

The Comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of the same business enterprise on different dates. The changes in periodic balance sheet items reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the progress of an enterprise.
B. COMPARATIVE INCOME STATEMENT.

The income statement gives the results of the operations of a business. The Comparative Income statement gives an idea of the progress of a business over a period of time. The changes in absolute data in money values and percentages can be determined to analyze the profitability of the business.
2. TREND ANALYSIS.
The financial statements may be analyzed by computing trends of series of information. This method determines the direction upwards or downwards and involves the computation of the percentage relationship that each statement item bears to the same item in base year.
16
3.
COMMON SIZE STATEMENT.

The common size statements, balance sheet and income statement are
shown in analytical percentages. The common size statements may be Prepared in the following way. The Total of Assets or Liabilities is taken as 100, The individual assets are expressed as a percentage of total assets that is 100 and different liabilities are calculated in relation to total liabilities.
A. COMMON SIZE BALANCE SHEET.

A statement in which balance sheet items are expressed as the ratio of each asset to total and ratio of each liability is expressed as a ratio of total liabilities is called common size balance sheet. The common size balance sheet can be used to compare companies of differing size. The comparison of figures in different periods is not useful because total figures may be affected by a number of factors. It is not possible to establish standard norms for various assets. The trends of figures from year to year may not be studied and even they may not give proper results.
B. COMMON SIZE INCOME STATEMENT.

The items in income statement can be shown as percentages of sales to show the relation of each item to sales. A significant relationship can be established between items of income statement and volume of sales. The increase in sales will certainly increase selling expenses and not administrative or financial expenses. In case the volume of sales increases to a considerable extent, administrative and financial expenses may go up. In case the sales are declining, the selling expenses should be reduced at once.
17
So a relationship is established between sales and other items in Income statement and their relationship is helpful in evaluating operational activities of the enterprise.
2. FUNDS FLOW STATEMENT

According to SMITH and BROWN' Funds flow statement Is a method by which we study changes in the financial position of a business enterprises between beginning and ending financial statement dates. Meaning of funds Funds are usually called as working capital for the purpose of funds flow statement It is a statement showing sources and application of funds for a period of time. The funds flow statement, which shows the movement of funds and is a report of the financial operation of the business undertaking. It indicates various means by which funds were obtained during a particular period and the ways in which these funds were employed. In simple words, it is a statement of sources and application of funds.
Advantages of Funds Flow Statement

1. It helps in providing proper guideline for of available Funds. 2. Acts as a basis for financial plan budgeting. 3. It gives early warning for the financial dangers. 4. It helps in borrowing funds from others sources.
5. CASH FLOW ANALYSIS.

Cash flow statement is a Statement, which describes the Inflows (sources) and Outflow (uses) of cash and cash equivalent in an enterprise during a specified period of time.
18
Advantages: 1. Cash flow statement is very useful in the evaluation of cash position of a firm. 2. It helps in planning the repayment of loans, replacement of fixed assets and other similar long term planning of cash. 3. Cash flow statement is more suitable for making comparisons than the funds flow statement, as there is no standard format for the same. 4. Cash flow statement provides information of all activities classified under operating, investing and financing activities.
6. RATIO ANALYSIS.
The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (quantitative relationship between figures and groups of figures) it is with the help of ratios that the financial statements can be analyzed more clearly and decisions made from such analysis. Ratio analysis is a technique of analysis and interpretation of financial statements. Advantages: 1. It helps in decision-making. 2. It helps in financial forecasting and planning. 3. It helps in communicating. The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios. 4. It helps in co-ordination and control. 5. It use full in inter- firm comparison
TYPES OF RATIOS I). LIQUIDITY RATIO.

These are the ratios, which measure the short-term solvency or financial position of a firm. These ratios are calculated to comment upon the Short term paying capacity of a concern or the firms ability to meet its current obligations. To measure the liquidity of a firm, the following ratios can be calculated. Liquidity Ratios A). Current ratio. B). Quick ratio or acid test or liquid ratio. C). Absolute liquid ratio. A). CURRENT RATIO It is the ratio, which matches current assets with the firms current liabilities
Current Ratio =
Current Assets Current Liabilities
This ratio throws good light on the short-term financial position and its policies. It is an indicator of a firms ability to promptly meet its shortterm liabilities.
20
B). QUICK RATIO OR ACID TEST OR LIQUID RATIO This ratio more severe test of liquidity of a firm. It shows the ability of a business to meet its immediate financial commitments.
Quick Ratio =
Quick Assets Current Liabilities
C). ABSOLUTE LIQUID RATIO. This also known as super quick ratio
Absolute Liquid Ratio =
Cash Current Liabilities
II) ANALYSIS OF LONG-TERM FINANCIAL POSITION OR TESTS OF SOLVENCY:

The term solvency refers to the ability of a concern to meet its longterm obligations. The long-term indebtedness of a firm includes debenture holders, financial institutions providing medium and long-term loans and other creditors selling goods on installment basis. Long-term solvency ratios indicate a firms ability to meet the fixed interest and costs and repayment schedules associated with its long-term borrowings. The following ratios serve the purpose of determining the solvency of the concern. A) Debt-equity ratio B) Proprietary ratio or equity ratio C) Fixed assets to net worth or proprietors funds ratio
21
A). DEBT-EQUITY RATIO: Debt-equity ratio also known as external-internal equity ratio. It is calculated to measure the relative claims of outsiders and the owners (that is share holders) against the firms assets. This ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders funds.
Debt - Equity Ratio =
Long Term Debts Shareholde rs Equity
Where outsiders funds include all debts/Liabilities to outsiders whether long term or short term or whether in the form of debentures, bonds, mortgages or bills. The shareholders funds consist of equity share capital, preference share capital, capital reserves, revenue reserves and reserves representing accumulated profits and surplus like reserves for contingencies, sinking funds etc The debt- equity ratio is calculated to measure the extent to which debt financing has been used in business. The ratio indicates the proportionate claims of owners and the outsiders against the firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. Generally a low ratio (debt being low in comparison to shareholders funds) is considered as favorable from the long-term creditors point of view because a high proportion of owners funds provide a larger margin of safety for them. A high debt equity ratio which indicates that the claims of outsiders (creditors) are greater than those of owners, may not be considered by the creditors because it gives a lesser margin of safety for them at the time of liquidation of the firm.
22
B) PROPRIETORY RATIO: A variant to the debt-equity ratio is the proprietary ratio, which is also known as equity ratio or shareholders to total equities ratio or net worth to total assets ratio. This ratio establishes the relationship between shareholders funds to total assets of the firm.
Proprietor y Ratio =
Shareholdres Funds Total Assets
Where shareholders fund is equity share capital, undistributed profits, reserves and surplus out of this amount, accumulated losses should be deducted. As equity represents the relationship of owners funds to total assets, higher the ratio or the share of the shareholders in the total capital of the company. This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of creditors of the company.
C). FIXED ASSETS TO NET WORTH RATIO OR FIXED ASSETS TO PROPRIETORS FUNDS:
This ratio establishes the relationship between fixed assets and shareholders funds that is share capital, reserves and surplus and retained earnings.
Fixed Assets to Networth Raio =
Fixed Assets Networth
23
III) PROFITABILITY RATIOS:

The primary objective of a business undertaking is to earn profits. Profit earning is considered essential for the survival of the business. A business needs profits not for its existence but also for expansion and diversification. Generally, profitability ratios are calculated either in relation to investment General profitability ratios. A. Gross profit ratio. B. Operating ratio C. Operating profit ratio D. Expenses ratio E. Net profit ratio A) GROSS PROFIT RATIO: Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage.
Gross Profit Ratio =
Gross Profit X100 Net Sales
The gross profit ratio indicates the extent to which selling prices of goods per unit may decline without resulting in losses on operations of a Firm. As the gross profit is found by deducting cost of goods sold from the net sales, higher the gross profit better the result. A low gross profit ratio indicates high cost of goods sold due to unfavorable purchasing policies, lesser sales, lower selling prices, excessive competition, over- investment in plant and machinery etc
24
A comparison of gross profit ratio overtime or for different firms in the same industry is a good measure of profitability, yet the gross profit ratio is one of the very important ratios for measuring profitability of a firm. B). OPERATING RATIO: Operating ratio establishes the relationship between the cost of goods sold and other operating expenses on the one hand and the sales on the other. In other words, it measures the cost of operations per rupee of sales.
Operating Ratio =
Operating Cost X 100 Net Sales
C) OPERATING PROFIT RATIO This ratio is calculated by dividing operating profit by sales
Operating Profit Ratio =
Operating Profit X 100 Net Sales
Where operating profit = Net sales Operating profit D) EXPENSES RATIO: Expenses ratio indicates the relationship of various expenses to net sales. Expenses ratio are calculated by dividing each item of expenses or group of expenses with the net sales to analyze the cause of variation if the operating profit.
25
Expenses ratio can be calculated as follows: a) Total cost to Sales =
Cost of sales X 100 Net Sales
Administra and Office tion
b).
expensesto Sales Ratio
Adiminsrat & Office Expenses ion X 100 Net Sales
Selling and Distribution

c). d).
Expenses to SalesRatio
Selling and Distribution expenses X100 Net Sales
Non OperatingExpenses to Sales Ratio =
Non Opertaing Expenses X 100 Net Sales
E) NET PROFIT RATIO Net profit ratio establishes a relationship between net profit (after taxes) and sales and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of firms profitability and is calculated as. a) Net Profit Ratio =
Net Profit After Tax X 100 Net Sales
IV OVERALL PROFITABILITY RATIO

Profits are the measure of overall efficiency of a business. The higher the profit, the more efficient is the business considered. Thus, overall profitability or efficiency of a business can be measured in terms of profits related to investments made in the business.
A. Return on shareholders investment or net worth ratio. B. Return on equity capital C. Earning per share D. Dividend yield ratio E. Dividend pay-out ratio F. Price earning (earning yield) ratio. A) RETURN ON SHAREHOLDERS INVESTMENT OR NET WORTH RATIO Return on shareholders investment popularly known as return on investment or return on shareholder. Proprietors fund is the relationship between net profits (after interest and tax) and the proprietors funds
Return on Investment =
Net Profit After Interest and Tax Shareholders Funds
B) RETURN ON EQUITY CAPITAL: Ordinary shareholders are the real owners of the company. They assume the highest risk in the company. Ordinary shareholders are more interested in the profitability of a company and the performance of a company should be judged on the basis of return on equity capital of a company.
Return on Equity Capital = Net Profit After Tax - Preference Dividend Equity Share Capital
27
C) EARNING PER SHARE: Earning per share is a small variation of return on equity capital and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares.
Earnings Per Share = Net Profit After Tax - Prefernce Dividend No Equity Shares
D) RETURN ON CAPITAL EMPLOYED: Return on capital employed establishes the relationship between profits and the capital employed. It is the primary ratio and is most widely used to measure the overall profitability and efficiency of a business. The term capital employed refers to the total of investments made in a business and can be defined in a number of ways. The three most widely used definition of this term is I. II. III. Gross capital employed Net capital employed Proprietors net capital employed
GROSS CAPITAL EMPLOYED: The term gross capital employed usually comprises the total assets used in a business. Gross capital employed = fixed assets+ current assets NET CAPITAL EMPLOYED The term net capital employed comprises the total used in a business less its current liabilities Net capital employed = Total assets- current liabilities
PROPRIETORS NET CAPITAL EMPLOYED: Proprietors net capital employed means shareholders funds or investment in the business. Proprietors net capital employed = fixed assets = current assets outside liabilities. D) DIVIDEND YIELD RATIO: Shareholders are the real owners of a company and they are interested in real sense in the earnings distributed and paid to them as dividends. Therefore, dividend yield ratio is calculated to evaluate the relationship between dividend per share paid and the market value of the share
Dividend Yeild Ratio =
Dividend Per Equity Share Market Pr ice Per Equity Share
Dividend Per Share =
Dividend Paid to Shareholders Number of Equity Shares
E) DIVIDEND PAY OUT RATIO: Dividend pay out ratio is calculated to find the extent to which earnings per share have been retained in the business. It is an important ratio because Pouching back of profits enables a company to grow and pay more dividends in future.
Dividend Pay Out Ratio = Dividend Per Equity Share Earnings Per Share
29
F) PRICE EARNING RATIO: Price earning ratio is the ratio between market price per equity share and earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company.
Price Earning Ratio =
Market Price Per Share Earnings Per Share
G) EARNING YIELD RATIO: This ratio is also shows a relationship between earnings per share and market value of shares.
Earnings Yield Ratio = Earnings Per Share Market Price Per Share
7. COST-VOLUME-PROFIT ANALYSIS:
Cost-volume-profit analysis is a technique for studying the relationship between cost, volume and profit. The CVP relationship is an important tool used for the profit planning of a business. The study of costvolume-profit analysis is often referred to as break-even analysis. The term break-even analysis is used in two senses, narrow sense and broad sense. In its broad sense, break-even analysis refers to the study of relationship between costs, volume and profit at different levels of sales or production. In its narrow sense, it refers to a technique of determining that levels of operations where total revenues equal total expenses that are the point of no profit no loss.
30
RESEARCH METHODLOGY TITLE OF THE STUDY:

PROJECT REPORT ON A STUDY ON RATIO ANALYSIS OF FINANCIAL WEALTH OF VST TILLERS TRACTORS LTD.
STATEMENT OF THE PROBLEM

Financial statements are the reports of stewardship (that is the performance of management). They are the basis for formulation of economic and financial policies and guide to dividend decision. Financial statements help to determine the legality of dividend payment. They act as the basis for granting credit and are very informative to prospective investors. Financial statements serve as a proper guide to value the investments already made in an enterprise and serve as a basis for taxation and act as a basis for price regulation by the government. They serve as an aid to government interference and supervision of a business enterprise. Financial statements are useful to various parties like the owners, prospective investors, management, creditors, employees, government, tenera1 public etc.
31
OBJECTIVES OF THE STUDY

1. To analyze the financial position of a VST tillers tractors ltd from the financial statement using tools of management accounting. 2. To make detail analysis of each and every component of balance sheet of VST tillers tractors ltd. 3. To Know the Operating Expenses of the VST tillers tractors ltd 4. To assess the Profitability condition of the Company through analyzing the Balance sheet of the Company. 5. To Assess the Rate of return of the Company
SCOPE OF THE STUDY:

The study covers the financial analysis of the statement, which is disclosed by the annual report of the Company. Overall performance of the Company is assessed.
LIMITATIONS OF THE STUDY:

1. Study restricted to2 to 3 years financial statement of the Company. 2. The overall performance of the Company is analyzed and not branch wise. 3. Few tools for analysis are used to analyze the financial statement. 4. In-depth study of items of profit or loss account and balance sheet are not made. 5. They say little about the firms prospects in an absolute sense.
32
6. Their insights about relative performance require a reference point from other time periods or similar firms. 7. One ratio holds little meaning. 8. As indicators, ratios can be logically interpreted in at least two ways. One can partially overcome this problem by combining several related ratios to paint a more comprehensive picture of the firms performance.
METHODOLOGY OF THE STUDY:

All information for preparations of project is collected through annual report of the Company and some information is collected through the books maintained by Company and also through the employees of the Company and some information from the website of the VST tillers tractors ltd.
SOURCES OF DATA 1. Primary DataPrimary data are the original data which originally collected by direct interview with the Company for the 1st time, about the statistical investigation & and used by them in statistical analysis are formed as Primary Data.
2. Secondary DataThese are the Data which might be published or unpublished have already been collected and processed by same agency or person and take over from some other agency. ExampleBalance sheet, Profit & Loss account, Cash Flow Statement.
33
RESEARCH INSTURMENTS
The technique used for the Analysis is Ratio Analysis and Comparative Balance Sheet etc. It is a most widely used and powerful tool for Financial Statements Analysis. The ratios used for the study are Liquidity ratio, Profitability Ratios, Solvency Ratios. Which includes Liquid assets to total assets ratio and Liquid assets to total investments? Profitability ratios such as Return on Assets, Return on Equity, Net Profit Ratio etc. Long term solvency ratios such as Proprietary Ratio etc.
34
COMPANY PROFILE:
History of the company VST Tiller Tractors Ltd (VTTL) was incorporated in the year 1967 in Bangalore India. It was promoted by the VST group, a well-known business house in south India, in technology collaboration and joint venture with Mitsubishi Heavy Industries and Mitsubishi; corporation Japan for the manufacture of Tillers and diesel engines. The plant went into production in the year 1970. In 1970, an additional technical and financial collaboration with Mitsubishi Agriculture of 18.5 HP, 4-wheel drive tractor was entered into. The manufacturing plan is located in Whitefield industrial area near Bangalore. It has 75,000 sq. meters, of land and a built up area of 15,000 sq. meters (approx). The company has total personnel strength of about 500 employees as on date. The manufacturing capacity of the company is 12,000 power tillers, 16,000 engines and 2,500 tractors. Now, the company has come out of collaboration and joint venture partnership. It has in house design and development section for upgrading and updating the level of technology in line with current requirements. The company is certified to ISO-9001 quality management system. Since Jan 1998 our company follows ISO-9001-2000 Quality Systems requirements to satisfy all out customer needs.
35
The main product of the company namely Power tillers and Tractors are used in the agriculture sector all over the country. Power Tillers, Tractors are component parts are exported to countries such as Srilanka, Tanzania, Zambia Ghaha, Cryprus, Europe, Austria, USA, Japan and Thailand. The company has set up a nation wide network of Dealers supported by sales and service Organization. Adequate supply of spare parts, provision of service tools and equipment, making available service information through technical literature, instruction manuals etc, and imparting training to dealers personnel as well as end users namely the farmers, are some of the effective steps taken by the company towards customer satisfaction. With this objective, company was formulated its quality policy achievement of an international quality standard is not a single event but an ongoing commitment which remains as a continuous obligation and process. The plans set in place are designed to ensure that the continuous commitment is a part of the operational policy of the company, with the help of its people. The company will provide the best possible service to the customers and strive for excellence in performance. Way back in 1920 the VST Group made a humble start by dealing in petroleum products. Using this strong base, the Group quickly diversified into automotive marketing and after-sales service. From this activity grew the network of the organization throughout the southern states of Karnataka and Tamil Nadu.
36
The tradition and culture of the VST Group continues in this Company in spite of it having adopted new management techniques to face global challenges. Over the years, VST Tillers Tractors Ltd. has established an extensive and efficient countrywide sales and after-sales service network backed by easy availability of spare parts. Periodic training programmes for Dealers and customers are taken up to keep them constantly updated on improvements on its products. Type: The company is manufacturing sectors. It is located in white field road. Nature: The company is manufacturing the tractors, tillers and diesel engines. The company has produced the goods and gives to dealers and increases the sales. Board of Directors: The board comprises of a Non-Executive Chairman, two whole time Directors and six Non-Executives Directors. The constitution of the Board is given below. During the year 2005-06, four Meeting of Board Of Directors were held i.e., on November 2005 and 30th January 2006. Mr. V.P. Mahendra Mr. A.T. Nahender Mr.v.v.Vijayandra Mr.v.k. Surendra Mr.V.T.Velu Mr.A.Hishikawa Managing Directors Directors (Operations) Non-executive Non-executive Non-executive Non-executive
37
Mr.M.Tanaka Mr. R.Subbramanian Mr.M.V.Bannerjee Mr.V.Ramachandran
Non-executive Non-executive/independent Non-executive/independent Non-executive/independent
ORGANIZATION CHART:
Directors (Operations)
Vice President
General Manager
Manager
Officer
Junior Officer
Supervisor
Workers
THE COMPANY' S VISION

VST Tillers Tractors Ltd. believes that the foundation of its business is to
provide EXCELLENCE in its products through: High Quality and Reliability. Economical and Competitive Prices. Efficient Services to the satisfaction of the customers. In order to achieve these goals and attain market leadership, it shall be the objective of every employee to strive to be
Future planes a) Higher horsepower Tractor as a variant to MT180D. b) Aesthetical improvement on power Tiller engines. c) Emission compliance of new series of engines for varied applications.
39
PRODUCT PROFILE Consequent to its long and close association with the Mitsubishi Group of Companies, VST Tillers Tractors Ltd. Has effectively absorbed the latest technology and work culture. This has resulted in the company's achievement in perfecting every product it manufactures, meeting even the most exacting requirements of the customer.
Tillers Tillers are classified as follows:
Tractors
Diesel Engines
VST-Shakti 130 DI Power Tiller
Mitsubishi-Shakti VWH-120 Power Tiller
40
Tractors are classified as follows:
Euro tractors VST 180 Features of Euro tractors:
Mitsubishi-Shakti MT180D Tractor
Compact, Light weight, Four Wheel drive multipurpose tractor. Fully confirms to safety regulations as specified by the Council of European Communities (EEC) with the following features: - EEC approved Roll Over Protection System (ROPS) for operators safety. Options: Regular ROPS - 'e' mark No. e11-0933. Foldable ROPS - 'e' mark No. e4-VI-028. - Independent hand operated brake system for additional safety. - 'e' Marked electrical signaling devices. Option of two & Four Wheel drives for optimum engine power utilization.
Overriding PTO clutch to facilitate use of high inertia implements. Live hydraulic system with adjustable implements position, and lowering speed control. Elegant dash board with all necessary instruments Diesel engines are classified as follows:
130 DI
AD8V
K3C
VWH 120
42
FINANCIAL HIGHLIGHTS
The financial results are summarized below
(Rs.in lakhs) Year 2004-05 11086 186 11272 1346 171 299 876 290 586 575 1161 144 20 500 497
Particulars
TURNOVER OTHER INCOME TOTAL INCOME PROFIT BEFORE DEPRECIATION & INTREST INTRESET
Year 2005-06 1299 165 13164 1563 137 271
DEPRECIATION 1155 PROFIT BEFORE TAX 414 INCOME TAX 741 PROFIT AFTER TAX 497 BALANCE B/F 1238 SURPLUS AVAILABLE FOR APPROPRATION TO: DIVIDENT TAX ON DIVIDENT TRANSFER TO GENERAL RESERVE BALANCE CARRIED FORWARD 173 24 500 541
43
Market share: The stock exchange or the Securities Exchange Board of India (SEBI) and / or any other statutory authority have not imposed any strictures / penalties on the company on any matters relating to capital market during the last three years Market Price Data: Month Apr - 05 May - 05 Jun - 05 Jul - 05 Aug- 05 Sept- 05 Competitors: 1. Channies From China 2. Campco Kerla 3. Sun Brand 4. Hmt Highest price(Rs). 71.90 106.25 121.6 145.2 128.95 152.05 Lowest Price(Rs). 66.15 70.00 102.05 117.55 112.55 116.55 Month Oct- 05 Nov- 05 Dec- 05 Jan- 06 Feb- 06 Mar- 06 Highest price(Rs) 122.60 113.05 114.10 116.60 110.60 105.30 Lowest price(Rs) 91.85 97.75 98.60 106.25 101.30 91.75
Functional chart
ANALYSIS OF FINANCIAL WEALTH MANAGEING DIRECTOR
V.S.T. TILLERS TRACTORS LTD DGMMKV
DIRECTOR (OPERATION)
GM-MK VP (BUSINESS DEPATMENT) VP (CHARMAN) GM-FI MKS FIA FIC FII DGM-SPS DGM-MF MFA GM-EN ENE /ENE DGM-QA QAC GM-IM GM-HR
HRD HRW
SPS
MFM
MFP
ENP
QAV
QAM
DGM-IM ISC IMC/IMD
PGD / PDS (HR)
PDT CE GAF
Growths and Prospect
GA
GAA
GAS
45
During the year under report, your company has been on a consistent upward path in sales, profit and margins. The turnover increased by 17% from Rs.111 crores in 2004-2005 to an all time high of 130 crores. The operating profit increased by over 16% to 1563 lakhs due to higher realization and lower interest cost. The profit after tax was higher by 26% from 586 lakhs to 586 lakhs. Consequently, earnings per share grew from Rs.10.17 to Rs.13.10 for 2005-2006. On the backdrop of the year with a good financial performance your company is presently dept free. The sale of power tillers increased to 8489 units as against the previous year sales of 7625 units. With respect to Tractors, your company sold 1249 unit as against 933 units an increase of 33%. This improvement in sales has been achieved in line with the overall increase in demand complemented by better government support prices for crops, opening new markets, normal monsoons and availability of finance to farmers. The last factor plays a key role since more then 80% of tractor sales are on credit. The performance of precision components division located continued to be challenging due to lack of consistency in overseas orders. Due to a sudden order cancellation, this division suffered losses on account of underutilization of capacity during the year. In addition, the substantial reduction in DEPB benefits on exports and increase in the price of steel and other input material has had an adverse impact on margins. However a subsequent increase in orders for supply of crankshafts and connecting rods to one of its customers during the year has shored up its revenues thereby achieving optimal production.
About VST Group:

Way back in 1920 the VST Group made a humble start by dealing in petroleum products. Using this strong base, the Group quickly diversified into automotive marketing with after sales service. From this activity grew the network of the Organization throughout the southern states of Karnataka and Tamil Nadu.
The VST Group has over 2000 employees and has a turnover of U.S. $500 million p.a.
QUALITY POLICY
The Company will supply reliable products at competitive price with improved technology to the satisfaction of customers. The Company shall ensure prompt and efficient after sales service backed by quality spare parts.
47
All employees in every function and level shall strive to achieve high quality of work through continuous improvement Guided by global quality system standards. Product costs shall be minimized without lowering quality and sustained efforts shall be made to reduce quality costs at all times Sales and service of product: Over the years, VST Tillers Tractors Ltd., has established an extensive and efficient countrywide sales and after-sales service network backed by easy availability of spare parts. Periodic training programmes for dealers and customers are taken up to keep them constantly updated on improvements in its products.
Keeping in line with India's liberalized economic policies and guided

by the conviction that quality products are marketable world wide, VST Tillers Tractors Ltd., has successfully launched global marketing of its products. It is marketing Diesel Engines, Power Tillers and Tractors to regions of Asia, Middle East, Africa, Europe and United States of America.
SWOT ANALYSIS STRENGTH

During the year review, the Indian economy witnessed a GDP growth rate of 8% with agriculture contributing around 2.4% and is estimated to grow to 3.2%. The central and state governments continue to give priority to agriculture through various subsidy schemes.
48
This apart, Banks have promoted farm mechanization by providing timely finance which has generated good demand for power tillers and your company continues to maintain its lead in the power tiller industry in India by delivering a superior value product. The performance is even more satisfying when viewed in the light of the competitive pressure from low cost Chinese brand power tillers.
WEAKNESS
In the domestic tractor segment, the industry as a whole grew to 262000 units during 2005-2006 from226000 units in the previous year. The western and southern states of Maharashtra, Gujarat, AP, Karanataka and Kerala primarily contributed to the above growth. Your company commands a niche market share in Maharashtra and Gujarat in the smaller HP tractor and sales in this segment are expected and sales in this segment are expected to grow in the coming year. To cater to newer markets, the manufacturing capacities and aesthetics for tractors are being upgraded that will lead to higher revenue streams for the current year.
OPPORTUNITIES
The growth of the power tiller and tractor industry could be direly linked to the GDP growth of the Indian economy. As mentioned above, the countrys GDP grew by a robust 8% making it one of the faster growing large economies in the world.
49
Easier and cheaper credit availability to farmer and awareness of the benefits to farmer mechanization provided opportunities for higher sales and optimum utilization of capacities. The governments policy on agriculture and the introduction of the Bharat Nirman Programme for creating massive rural infrastructure will directly benefit demand for your companys product.
THREATS
Several importers realizing the business potential for power tillers have commenced imports to quickly capitalize on this front. These tillers are low cost unit and qualify under subsidy schemes that could intensify competition thereby affecting demand in the future various strategies have been planned including a tie up with a Chinese tiller manufacture for marketing power tillers. Your company is continuing to pursue strategies such as cutting casts, including manufacturing efficiencies, strengthening marketing initiatives and garner greater economies of scale to stay ahead. During the year, importing duties have been reduced and further reduction in line with WTO obligations may affect demand in this price sensitive may affect demand in this price sensitive market which could bring down price further that may affect the demand pattern.
50
RATIO ANALYSIS AND INTERPRETATION TABLE-1

Table showing the Current Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Current Ratio =
Current Assets Current liabilities

(Rs in Lakhs)
Year 2003-2004 2004-2005 2005-2006
Current Assets 4534.88 5184.93 5088.99
Current liabilities 2056.55 2094.54 2558.01
current Ratio 2.21 2.48 1.99
ANALYSISThe Current ratio of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 2.21 %, for the Year 2004-2005 was 2.48%, and for the Year 2005-2006 was 1.99%.
INFERENCE2:1 is considered as standard for the ratio. In all three years, it is far above than the ideal level. The Current Assets of the VST TILLERS TRACTORS LTD for the Year 2004-2005 was 2.48% which much higher when compared other two-year 2003-2004, 2005-2006.
GRAPH -1
Graph Showing the Current Ratio for the years 2003-2004 to 2005-2006
52
Current Ratio
3 Ratios 2 1 0 2003-2004 2004-2005 years 2005-2006 2.21 2.48 1.99
TABLE-2
Table showing the Liquid Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Liquid Assets to current liabilities Ratio =
Liquid Assets Current liabilities

(Rs in Lakhs)
53
Year 2003-2004 2004-2005 2005-2006
Liquid Assets 2506.02 3178.15 2926.66
Liquid Ratio 1.22 1.52 1.14
ANALYSIS
The Liquid Assets of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 1.22 %, for the Year 2004-2005 was 1.52%, and for the Year 2005-2006 was 1.14%.
INFERENCE
The company has maintained its liquidity ratio above the standard level in all the three years 2004-2005 was 1.52% more as compared to the year 2003-2004 and 2005-2006.
GRAPH -2
Graph Showing the Liquid Assets to Current Liabilities Ratio for the years 2003-2004 to 2005-2006
54
Liquid Ratio
1.6 1.4 1.2 Ratios 1 0.8 0.6 0.4 0.2 0 2003-2004 2004-2005 years 2005-2006 1.22 1.52 1.14
TABLE-3
Table showing the Cash Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006 Cash Ratio = Cash + Marketable Securities
Current Liabilities Cash & Bank Balances
=
Current Liabilities & Provisions
[Rupees in lakhs]
55
Year 2003-2004 2004-2005 2005-2006 ANALYSIS:
Cash 363.18 535.18 647.597
Cash Ratio 0.177 0.255 0.253
The above table indicates that the Cash ratio in the year 2003-04 was 0.177 in the year 2004-05 it was 0..255 and in the year 2005-06 it was 0.253. INFERENCE: The Cash ratio of the firm shows decreasing flow in the year 2003-2004 as compared to 2004-2005 and increasing from in the year 2004-05 as compared to 2005-06
GRAPH -3
Graph Showing the Cash Ratio for the years 2003-2004 to 2005-2006
56
C ash R atio
0.3 Ratios 0.2 0.1 0 2003-2004 2004-2005 2005-2006 ye a rs 0.177 0.255 0.253
TABLE-4
Table showing the Liquid Assets to Total Assets Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Liquid Assets to Total Assets Ratio =
Liquid Assets Total Assets
(Rs in Lakhs) Year 2003-2004 2004-2005 2005-2006 Liquid Assets 2506.02 3178.15 2926.66 Total Assets 7049.85 7991.91 7967.95 Liquid Assets to Total Assets Ratio (%) 35.547 39.767 36.73
ANALYSISThe Liquid Assets to Total Assets Ratio of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 35.54%, for the Year 20042005 was 39.767%, and for the Year 2005-2006 was 36.73%.
INFERENCEThe Liquid Assets to Total Assets Ratio of the VST TILLERS TRACTORS LTD for the Year 2004-2005 was 39.767% which much higher when compared other two-year 2003-2004, 2005-2006.
GRAPH -4
Graph Showing the Liquid Assets to Total Assets Ratio for the years 2003-2004 to 2005-2006
58
Liquid Assets to Total Assets

42 40 38 36 34 32
39.767 35.547
36.73
2003-2004 2004-2005 2005-2006
ye a rs
TABLE-5
Table showing the Liquid Assets to Total Investments Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
59
Liquid Assets to Total investments Ratio =
Liquid Assets Total investments

(Rs in Lakhs)
Year 2003-2004 2004-2005 2005-2006
Liquid Assets 2506.02 3178.15 2926.66
Total investments 49.50 50.77 83.54
Liquid Assets to Total investments 50.63 62.60 35.03
ANALYSIS:
The Liquid Assets to Total Investments Ratio of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 50.63%, for the Year 20042005 was 62.60%, and for the Year 2005-2006 was 35.03%.
INFERENCEThe Liquid Assets to Total Investments Ratio of the VST TILLERS TRACTORS LTD for the Year 2004-2005 was 62.60% which much higher when compared to other two years 2003-2004, 2005-2006.
GRAPH-5
Graph Showing the Liquid Assets to Total Investments Ratio for the years 2003-2004 to 2005-2006
60
Liquid Assets to Total Investments Ratio

Ratios 100 50 0 50.63 2003-2004 62.6 2004-2005 ye a rs 35.03 2005-2006
TABLE-6
Table showing the Debt- Equity Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
61
Debt - Equity Ratio =
Long Term Debts Share holders Equity

(Rs in Lakhs)
Year 2003-2004 2004-2005 2005-2006
Debt 2056.59 2094.54 2558.01
Equity 3780.86 4193.33 4758.72
Debt- Equity Ratio 53.75 49.94 53.74
ANALYSIS:
Debt Equity Ratio of VST TILLERS TRACTORS LTD for the Year 20032004 was 53.75%, for the Year 2004-2005 was 49.94%, and for the Year 0506 was 53.74%.
INFERENCE:
When the Firms Debt-Equity Ratio is high it indicates that the firm has to face difficulty in meeting its fixed obligation. Lower the Ratio it is less difficult to meet its fixed obligation. In the Year 2004-2005 the Debt Equity Ratio of VST TILLERS TRACTORS LTD is 49.94% which much lower when compared to the other two year 2003-2004, 2005-2006.
GRAPH-6
Graph Showing the Debt Equity Ratio for the years 2003-2004 to 2005-2006
Debt- Equity Ratio

56 54 52 50 48 46
Ratios
54.39 2003-2004
49.94 2004-2005 years
53.75 2005-2006
TABLE-7
Table showing the Proprietary Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
63
Proprietory Ratio =
Shareholders Funds Total Assets
(Rs in Lakhs) Year 2003-2004 2004-2005 2005-2006 Share Holders Funds 3780.86 4193.33 4758.72 Total Assets 7099.89 8020.97 8116.95 Proprietary Ratio (%) 53.25 52.27 58.63
ANALYSIS
The Proprietary Ratio of the VST TILLERS TRACTORS LTD for the year 2003-2004 was 53.25% the year 2004-2005 was 52.27%, and for the year 2005-2006 was 58.63%.
INFERENCE
Higher the Proprietary Ratio, Greater the Long Term stability for the Firm, the firms Proprietary Ratio in the year 2005-2006 is 58.63% which is Higher when compared to the other two years 2003-2004, 2004-2005.
64
GRAPH-7
Graph Showing the Proprietary Ratio for the years 2003-2004 to 20052006
propretory ratio
60 ratios 55 50 45 2003-2004 2004-2005 ye a rs 2005-2006 53.25 52.28 58.63
TABLE-8
Table showing the Fixed Assets to Net worth Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
65
Fixed Assets to Networth Ratio =
Fixed Assets Networth

(Rs in Lakhs)
Year 2003-2004 2004-2005 2005-2006
Fixed Assets 2514.98 5184.93 5088.99
Net worth 3780.86 4193.33 4738.72
Fixed Assets to Net worth Ratio (%) 66.52 123.64 107.39
ANALYSIS
The Fixed Asset to Net worth Ratio of the VST TILLERS TRACTORS LTD for the year 2003-2004 was 66.52%, for the Year 20042005 was 123.64%, and for the Year 2005-2006 was 107.39%.
INFERENCEThe Fixed Asset to Net worth Ratio of the VST TILLERS TRACTORS LTD for the year 2004-2005 was 123.64%, which is higher when compared to other two years 2003-2004, 2005-2006.
66
GRAPH-8
Graph Showing the Fixed Assets to Net worth Ratio for the years20032004 to 2005-2006
F ixe d Asse ts to N e tw o rth R atio

140 120 100 80 60 40 20 0
ratios
1 2 3 .6 4 6 6 .5 2
1 0 7 .3 9
2 0 0 3 -2 0 0 4
2 0 0 4 -2 0 0 5 Ye a r s
2 0 0 5 -2 0 0 6
TABLE-9
Table showing the Liquid Asset to Net worth Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
67
Liquid Assets to Networth Ratio =
Liquid Assets Networth

(Rs in Lakhs)
Year 2003-2004 2004-2005 2005-2006
Liquid Assets 2506.02 3178.15 2926.66
Net worth 3780.86 4193.33 4738.72
Liquid Asset to Net worth Ratio .6652 1.2364 1.0739
ANALYSISThe Liquid Asset to Net worth Ratio of the VST TILLERS TRACTORS LTD for the year 2003-2004 was .6652 Times, for the Year 2004-2005 was 1.2364 Times and for the Year 2005-2006 was 1.0739 Times.
INFERENCEThe Liquid Asset to Net worth Ratio of the VST TILLERS TRACTORS LTD for the year 2004-2005 was 1.2364 Times which is much higher when compared to other two year 2003-2004, 2005-2006.
68
GRAPH-9
Graph Showing the Liquid Assets to Net worth Ratio for the years 2003-2004 to 2005-2006
L iq u id A s s e t to N e tw o r th R a tio
1 .4 1 .2 1 ratios 0 .8 0 .6 0 .4 0 .2 0 2 0 0 3 -2 0 0 4 2 0 0 4 -2 0 0 5 Y e a rs 2 0 0 5 -2 0 0 6 0 .6 6 5 2 1 .2 3 6 4 1 .0 7 3 9
TABLE-10
Table showing the Net Profit Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
69
Net Profit =
Net Profit *100 Sales

(Rs In Lakhs)
Year 2003-2004 2004-2005 2005-2006
Net Profit 578.56 585.84 741.66
Sales 10313.75 11272.43 13164.67
Net Profit Ratio (%) 5.60 5.19 5.633
ANALYSISThe Net Profit Ratio of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 5.60%, for the year 2004-2005 was 5.19%, and for the year 2005-2006 was 5.633%.
INFERENCENet Profit ratio indicates the efficiency of the firms. Higher the Net Profit it indicates the firm is Positive and in an advantageous position. The Net Profit Ratio of the VST TILLERS TRACTORS LTD during the year 2005-2006 was 5.633% which much higher when compared to other two years 20032004, 2004-2005.
70
GRAPH-10
Graph Showing the Net Profit Ratio for the years 2003-2004 to 20052006
N e t p ro fit ra tio
5 .7 5 .6 5 .5 5 .4 5 .3 5 .2 5 .1 5 4 .9
ratios
5 .6 1 5 .1 9 2 0 0 3 -2 0 0 4 2 0 0 4 -2 0 0 5 y e a rs
5.6
2 0 0 5 -2 0 0 6
TABLE-11
71
Table showing the Inventory Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Inventory Ratio =
Inventory *100 Current Assets
(Rs in Lakhs) Year 2003-2004 2004-2005 2005-2006 Inventory 2028.86 2006.77 2162.33 Current Assets 4534.88 5184.93 5088.99 Inventory Ratio in % 44.74 38.7 42.49
ANALYSIS: The above table indicates that the inventory ratio in the year 2003-04 was 44.74%, in the year 2004-05 it was 38.70% and in the year 2005-06 it was 42.49%. INFERENCE: The ratio shows the up and downfall trend. In the year 2003-04, it is recorded the highest (44.74%) and lowest (38.7%) in the year 2004-05.
72
GRAPH-11
Graph Showing the Inventory Ratio for the years 2003-2004 to 20052006
Inventory Ratio
50 Ratios 45 40 35 2003-2004 44.74 38.7 2004-2005 years 42.49 2005-2006
73
TABLE-12
Table showing Operating Profit Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Gos rs
Poit rf
Rtio a
Gos rs poi r ft = S le a s
*1 0 0
(Rs in Lakhs) Year 2003-2004 2004-2005 2005-2006 Gross profit 3717.59 3599.35 21709.17 Sales 10403.92 11272.43 13164.67 Operating Profit Ratio (%) 35.73 31.93 164.91
ANALYSISThe Operating Profit Ratio the VST TILLERS TRACTORS LTD for the year 2003-2004 was 35.73%, for the year 2004-2005 was 31.93%, and for the year 2005-2006 was 164.91%.
INFERENCE
The Gross Profit Ratio of the VST TILLERS TRACTORS LTD during the year 2005-2006 was 164.91% which much higher when compared to the other two year 2003-2004, 2004-2005.
74
GRAPH-12
Graph Showing the Operating Profit Ratio for the years2003-2004 to 2005-2006
G ro s s p ro fit ra tio
20 0 15 0 Ratios 10 0 50 0 3 5.73 2003-2 004 31.9 3 200 4-200 5 Ye a rs 200 5-200 6
16 4.91
TABLE-13
Table showing Return on Equity funds Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Return on Equity Funds =
Profit After Tax Equity Shareholde rs fund
Year 2003-2004 2004-2005 2005-2006
Profit After Tax 578.56 585.84 741.66
Net worth 3780.86 4193.33 4738.72
(Rs in Lakhs) Return on Equity funds (%) 15.3 13.97 15.65
ANALYSISThe Return on Equity Ratio of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 15.3%, for the year 2004-2005 was 13.9%, and for the year 2005-2006 was 15.65%.
INFERENCEThe Return on Equity Ratio shows the profit percentage of the Equity shareholders. The investors favor higher Return on Equity Ratio. The Return on Equity Ratio of the VST TILLERS TRACTORS LTD for the Year 20052006 was 15.65%, which is higher when compared to the other two years 2003-2004, 2004-2005.
76
GRAPH-13
Graph Showing the Return on Equity funds Ratio for the years20032004 to 2005-2006
R e tu rn o n E q u ity fu n d s R a tio
16 1 5 .5 15 Ratios 1 4 .5 14 1 3 .5 13 2 0 0 3 -2 0 0 4 2 0 0 4 -2 0 0 5 y e a rs 2 0 0 5 -2 0 0 6 15.3 1 3 .9 7 1 5 .6 5
77
TABLE-14
Table showing Earnings Per Share Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Earnings Per Share =
Net Profit After Tax Number of Equity Shares

(In Rs)
Year 2003-2004 2004-2005 2005-2006
Net Profit After tax 57855631 58583878 74166443
No of Equity Shares 5759685 5759685 5759685
Earnings Per Share Ratio (In Rs) 10.04 10.17 12.88
ANALYSIS
The Earnings per Share Ratio of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 10.04 Rs, for the year 2004-2005 was 10.17 Rs, for the year 2005-2006 12.88 Rs.
INFERENCEThis Ratio measures the Profitability in terms of the Earnings per share. The earnings per share of the VST TILLERS TRACTORS LTD in the year 2005-2006 was 12.88 which is higher than the other two years 20032004, 2004-2005.
78
GRAPH-14
Graph Showing the Earnings per Share Ratio for the years2003-2004 to 2005-2006
E arn in g s P er S h are
14 12 10 8 6 4 2 0 2003-2004 2004-2005 2005-2006 12.88 10.04 10.17
79
TABLE-15
Table showing Return on Assets Ratio of the VST TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006
Return on Assets = Net Profit after Tax Total Assets
(Rs in Lakhs) Net Profit after Year 2003-2004 2004-2005 2005-2006 Tax 578.56 585.84 741.66 7099.89 8020.97 8116.95 Total Assets Return on Assets Ratio (%) 8.15 7.30 9.14
ANALYSISReturn on Assets of the VST TILLERS TRACTORS LTD for the Year 2003-2004 was 8.15%, for the Year 2004-2005 was 7.30%, and for the year 2005-2006 was 9.14%.
INFERENCESThe Return on Assets Ratio of the VST TILLERS TRACTORS LTD for the year 2005-2006 was 9.14% which much higher when compared to other two year 2003-2004, 2004-2005.
80
GRAPH-15
Graph Showing the Return on Assets Ratio for the years 2003-2004 to 2005-2006
R e tu rn o n As s e ts R a tio
10 8 6 4 2 0 2003-2004 2004-2005 Ye a rs 2005-2006 8.15 7.3 9.14
SUMMARY OF FINDINGS AND CONCLUSION

FINDINGS
1. The Current Ratio of the company has fall down in year 2004-2005 compare to previous year 2003-2004 and proceeding year 2005-2006. This indicates that the company has ability to pay its current liabilities without getting into any financial commitments. 2. The quick ratio of the company has decreased when compare to previous year 2003-04 and 2004-2005. This shows that the company meets this emergence requirement through most liquid assets. 3. The liquid assets to the total investment ratio as gradually decreased from 2005-2006 compare to previous year, 2003-2004 and 2004-2005. This indicates that the companys investors earn less than investments. 4. The debt-equity ratio of the company has decreased from the year to year. The net worth increased for the year 2004-2005 which compare to previous year of the fixed assets of the company assets has decreased gradually for the year to year. This shows the company maximum utilized their fixed assets. They do not provide any funds to the purchase fixed assets. 5. The debt-equity ratio of the company has decreased from the year to year. It indicates that debt has increased as proportion increased to the shareholder funds. 6. The net profit of the company has better for the year 2005-2006 and 2003-2004. The net profit for the year 2004-2005 is very low compare to 2003-2004 and 2005-2006. This indicates the company sales have been increased.
82
7. The return on shareholders funds ratio the company has increased from the year to year except 2004-2005. It shows more the profit shareholders ratio and return also high. It shows the company has in better condition to pay the return on investment of their shareholders. 8. The fixed assets ratio of the company has decreased for the year 20042005, when compare to 2003-2004 and 2005-2006. The fixed assets of the company as used fully and efficiently. 9. Earning per share of the company has increased from year to year. It indicates that dividend of the shareholders will be secured. 10.The liquid assets to net worth ratio of the company has increased for the year 2004-2005 when compare to year 2003-2004 and 2005-2006. The company has not better in net worth position. But sales have increases in good condition.
83
REOMMENDATION
1. The company should maintain an adequate cash and bank balance in
order to meet the emergence requirements. 2. The current ratio of the company has been increased from the last 2year. The current ratio is more the standard levels but the current year has maintained standard level, it has to be maintained in the future also. 3. The sales of the company go on increasing, better to increase to sales for more profit in future. 4. Net profit of the company is high when compare to last year. Better to decrease the unnecessary expenses of the company to increase the profit. 5. The working capital of the company has maintained the standard levels. It must to maintain the same for future years. 6. The loan of the company decrease from the year to year. It shows that the profit was not distributed to the interest, better it must maintain the same. 7. For the smooth of operation of company is must make sure that it is made liquid in the coming year, because right now a lot rests on the operation of the business.
84
CONCLUSION
The company has been doing their activity effectively and efficiently. The company has sound long-term solvency. The company can rise from financial crush it is in right now by taking proper steps to increase its sales of production. Already knows there is a thin between profitability and liquidity and the company previous made a profit has low and current year has slide increase in profit. This shows the company in a good position and the management of the company has much as better.
85

Tvs Financial Wealth

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tvs Financial Wealth

Uploaded by

Copyright:

Available Formats

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

The Tractors have:

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

The Significance or Importance of Financial Analysis:

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

METHODS OR DEVICES OF FINANCIAL ANALYSIS.

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

A. COMPARATIVE BALANCE SHEET.

B. COMPARATIVE INCOME STATEMENT.

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

COMMON SIZE STATEMENT.

A. COMMON SIZE BALANCE SHEET.

B. COMMON SIZE INCOME STATEMENT.

LORVEN EDUCATIONAL CENTRE

ANALYSIS OF FINANCIAL WEALTH

V.S.T. TILLERS TRACTORS LTD

2. FUNDS FLOW STATEMENT

Advantages of Funds Flow Statement

5. CASH FLOW ANALYSIS.

LORVEN EDUCATIONAL CENTRE