A Study On Overall Financial Performance Analysis

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CONTENTS CHAPTER ABSTRACT 1 INTRODUCTION

GENERAL NEED OF THE STUDY OBJECTIVES SCOPE OF STUDY LIMITATIONS
PAGE NO
11 12 12 13 14 15 16 17 30 34 37 48 50 50 62
COMPANY PROFILE INDUSTRY PROFILE
3 4 5 6
REVIEW OF LITERATURE THEORITICAL PERSPECTIVES RESEARCH METHODOLOGY DATA ANALYSIS & INTERPRETATION
COMPARTIVE BALANCE SHEET COMMON SIZE BALANCE SHEET
COMPARATIVE INCOME STATEMENT 64 CHANGES IN WORKING CAPITAL TREND ANALYSIS RATIO ANALYSIS
73 79 81 99 101 102
SUMMARY OF FINDINGS SUGGESTION CONCLUSION BIBLIOGRAPHY APPENDIX

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103 104
LIST OF TABLE
Table No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Title Table Showing Comparative Balance Sheet For The Year Ending 2005-2006 Table Showing Comparative Balance Sheet For The Year Ending 2006-2007 Table Showing Comparative Balance Sheet For The Year Ending 2007-2008 Table Showing Comparative Balance Sheet For The Year Ending 2008-2009 Table Showing Common Size Balance Sheet Table Showing Income Statement For The Year Ending 2006 2007 Table Showing Income Statement For The Year Ending 2007 2008 Table Showing Income Statement For The Year Ending 2008 2009 Table Showing Working Capital For The Year Ending 2006-2007 Table Showing Working Capital For The Year Ending 2007-2008 Table Showing Working Capital For The Year Ending 2008-2009 Table Showing Trend Analysis Table Showing Current Ratio Table Showing Liquid Ratio Table Showing Debtors Collection Period Table Showing Current Assets Turn Over Ratio Table Showing Net Profit Ratio Table Showing Stock To Current Assets Ratio Table Showing Debtors To Current Assets Ratio
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Page No 50 53 56 59 62 64 67 70 73 75 77 78 81 83 85 87 89 91 93
LIST OF CHART
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CHART NO
Title
Page No
Chart Showing Sales For The Year 2006-2007
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2 3 4 5
Chart Showing Sales For The Year 2007-2008 Chart Showing Sales For The Year 2008-2009 Chart Showing Current Ratio Chart Showing Liquid Ratio
69 72 82 84
6 7 8 9 10 11 12
Chart Showing Debtors Collection Period Chart Showing Current Assets Turnover Ratio Chart Showing Net Profit Ratio Chart Showing Stock To Current Assets Ratio Chart Showing Debtors To Current Assets Ratio Chart Showing Cash To Current Assets Ratio Chart Showing Operating Ratio
86 88 90 92 94 96 98
MANUFACTURI
NG COMPANY
Madras Rubber Factory Ltd (MRF)
ABSTRACT
Madras Rubber Factory Ltd (MRF) is The Profitable leading organization and succeeds over the competition in the Market.
The study is Necessary to look at its financial position with its own figures for the past eighteen years (2005-2009) and analyses them for its success.
The studies insist to identify the companys position and to give suggestion to improve it.
In order to find of reasons behind the above stated problems this project work has been undertaken for a period of 3 months the main objectives of this project work are to find out comparative balance sheet, income statement, common size balance sheet, trend Analysis, Ratio analysis.
The analysis done is based upon the secondary data and study period is limited to that extent at last it has been find out the company has sound financial position.
1. INTRODUCTION 1.1 GENERAL

IN our present day economy finance is defined as the provision or money at the time when it is required every enterprise whether big medium or small needs finance to carry on its operation and to achieve its target. In fact finance is so indispensable today it is rightly said that its the life blood of industry without adequate finance no enterprise can possibly accomplish its objectives. Since finance is viewed as the most important factors in every enterprise therefore the management requires special mention and attention. the conventional approach to finance function in business highlight the procurements of funds on the most economic and favorable terms to the concern but of the efficient and proper use of the needed for various venture and project how much to allocate when to allocate and how to allocate the required funds to a particular project .Deserves special attention in every concern. the management has to look in to the book and corner of each project the amount of funds necessary for them and the sources from which to arrange and the sources from which to arrange financial management plays vital role in procurement allocation and control of funds. The basis financial planning and analysis is financial Information. Financial information is needed to predict compare and evaluate the firms earning ability. It is also required to aid in economic decision making investment and financing decision statements or accounting reports. It contains summarized information of the firms financial situation to owners creditors are the general public preparation of these statement is the responsibility as possibly because they are very useful to judge .The financial efficiency of the company.
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1.2.NEED FOR THE STUDY
The need for the study is as follows:
1. The study aim at assessing profitability and solvency position of the company. 2. The liquidity and activity positions of the firm are analyzed using liquidity and turnover ratios involving current liabilities. 3. The solvency position of the company is also analyzed using ratios.
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1.3. OBJECTIVES OF THE STUDY 1. PRIMARY OBJECTIVES
To analyze the overall financial performance analysis of MRF Ltd
2. SECONDARY OBJECTIVES
1. To ascertain the short term and long term solvency position of the MRF Company limited 2. To ascertain the profitability ratio of MRF company limited during the past five financial years. 3. To know the overall financial position of MRF during the past fives financial years 4. TO Draw the significant relationship between increase or decrease of income and expenditure with respect to different activities
5. To study the changes which take place in revenue account during the years and their trends
6. To study the growth rate which take place with respect to each activity
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7. To highlight the service coming in the area of finance with the help of the trend Analysis comparative balance sheet Analysis commensurate balance sheet analysis and the view to increasing efficient of the MRF LTD
8. To assess the working capital employed by the MRF.
1.4. SCOPE OF STUDY
1. The activities as the sources are planned in on systematic manner.
2. It provides validity, objectives & reliability in business management.
3. It creates harmony in the relationship between the management & employee.
4. The management aim to control the cost of the production at the same time increase the efficiency of Employee.
5. STUDYING THE FINANCIAL STSATEMENT Analysis needs and its implication for the MRF Ltd.
6. Impact of ratio analysis for MRF Ltd.
7. To study how the short term funds and long term funds are generated.
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1.5. LIMITATIONS
1. Time has been a limit factor and it has been difficult the various aspects of finance with the prescribed time.
2. Financial statements are only in terms of reports. They are not final because the exact financial position can be known only when the business is closed.
3.Financial statement are prepare on the basis of certain accounting concepts and conventions any changes in the method or procedure of accounting limits the utility the utility of financial statements.
4. The number of parties interested in the financial statement is large and their interest differs. The financial statements cannot meet the purpose of parties interested in them. 5.The authenticity of the financial statement has not been checked with the book of accounts of the company.
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Chapter - 2
1.1. COMPANY PROFILE
The company has incorporated nearly eight years. The company was started by K.M. MAMMEN MAPILLAI (Director of the Company).The authorized capital of company is RS.4.24 Crores the directors is the experienced person He. Opened a small toy balloon manufacturing unit in a shed at Thiruvottiyur , Chennai They produce a variety of products ranging from balloons and latex-cast squeaking toys to industrial gloves and contraceptives were produced MRF ventured into the manufacture of tread rubber. And with that the first machine a rubber mill was installed at the factory. This step into tread-rubber manufacturing was later to catapult.
MRF into a league the few had imagined possible MRF soon became the only Indian-owned unit to manufacture the superior extruded non-blooming and cushion backed tread rubber, Enabling it to complete with the MNCS operating in INDIA at that time MRF had become the market leader with a 50% share of the tread-rubber market in India .So effective was MRFS hold on the market, that the large multinational had no other option but to gradually withdraw from the tread rubber business in India. With the success achieved in tread rubber, MRF entered into the manufacture of Tyres .MRF established a technical collaboration with Mansfield & Rubber Company of USA. Around the same time it also became a public company it set up a pilot plant for Tyre manufacturing at Thiruvottiyur.
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Currently Mr.K.M.Mamman is the CMD of the company. The promoters hold about 26% of the total equity in the company, while institutional investors hold about 14% and individuals hold about 34%. The registered office of the company is located at Chennai (Tamilnadu) and its plants at arkonam (TN), Gummidpoondi (TN), tiruvottiyur, medak (AP), Ponodocherry and Usgon (GOA) and Vadavathoor (kerala).
1. CHRONOLOGY
1946- A young entrepreneur, K. M. Mammen Mappillai, opened a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai). 1949 - Although the `factory` was just a small shed without any machines, a variety of products, ranging from balloons and latex-cast squeaking toys to industrial gloves and contraceptives, were produced. During this time, MRF established its first office at 334, Thambu Chitty Street, Madras (now Chennai), Tamil Nadu, India. 1952 - MRF ventured into the manufacture of tread rubber. And with that, the first machine, a rubber mill, was installed at the factory. This step into tread-rubber Manufacture was later to catapult MRF into a league that few had imagined possible. 1955 - MRF soon became the only Indian-owned unit to manufacture the superior extruded, non-blooming and cushion-backed tread-rubber, enabling it to compete with the MNC`s operating in India at that time. 1956 -The quality of the product manufactured was of such a high standard that by the close of 1956, MRF had become the market leader with a 50% share of the tread-rubber market in India. So effective was MRF`s hold on the market, that the large multinationals had no other option but to withdraw from the tread rubber business in India. 1990 - The Aruna Leathers & Exports Ltd. was amalgamated with the Company. As per the scheme one equity share of Rs 10 each of MRF Ltd. was allotted for every 10,000
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shares of Rs 10 each fully paid-up held in ALEL. Accordingly, 25 equity shares were allotted to the erstwhile shareholders of ALEL. - The Company introduced `Vapocure` colors in the market. - (6 months), the Company privately placed 15, 00,000 - 14% non-convertible Debentures of Rs 100 each (III Series). The debentures are redeemable - at a premium of 5% in three annual installments of Rs 35 each commencing from 31st July, 1997. - The Company privately placed with SBI Mutual Fund 10, 00,000 - 14% debentures (IV the Series) which are redeemable at a premium of 5% on 26th June, 1998. - During the year 5, 00,000 - 14% debentures were also privately placed with Infrastructure Leasing & Financial Services, Ltd. These debentures are redeemable in three annual installments at a premium of 5% commencing from 23rd July, 1997. 1991 - The Company promoted a new Company viz. MRF International, Ltd., in view of the tremendous growth potential in the export market. - 3,85,000 No. of equity shares issued to (prem. Rs 242 per share) to the foreign collaborators M/s. Asia Trading Services, Honking. 1992 - The Company has formed a new Company, viz., MRF INTERNATIONAL LIMITED and the Company has received the certificate of commencement of business. 1993 - K. M. Mammen Mappillai was awarded the Padmashri Award of National Recognition for his contribution to industry - the only industrialist from South India to be accorded this honor. MRF also became the first Tyre Company in India to cross the INR 10 billion mark. In addition, the company was voted by the Far Eastern Economic Review, as one of the ten leading Corporate Groups in India and a Leader in Asia, and by readers of the A & M magazine, as one of India`s most admired Marketing Companies. 1995 - The Company has received the Top Export Award for the year from All India Rubber Industries Association. 1996 - The Company has received an award from CAPEXIL - Certificate of Merit based on the export performance for the year.
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- The Far Eastern Economic Review Award was presented to MRF for the fourth year in succession in recognition of excellence. 1997 - MRF Ltd has been assigned a credit rating of `PR1+` (superior) for its proposed Rs 100 core commercial paper (CP) programme by Credit Analysis and Research Ltd (CARE). - MRF is setting up a new plant in Pondicherry for the production of radial Tyres. - The company set up the Arakonam plant in Chennai to produce bicycle Tyres and tubes. - MRF began manufacturing Tyres and tubes in technical collaboration with Mansfield Tire and Rubber Company, USA. - MRF has launched Nylogrip Zapper, a high performance Tyre for new generation bikes. - The company tied up with Uniroyal Goodrich Tire Co. of USA, a subsidiary of the French Tyre giant Michelin, which held 9.8 per cent stake in the company. 1998 - MRF Tyres has signed an OEM (original equipment manufacturer) alliance with Spiel Honda Motors and Hindustan Motors. MRF has launched a market sampling operation for the MRF Zigma. 1999 - MRF Ltd has decided to set up more such clinics in Northern and Western cities. - The Company has entered into agreements with the Depositories viz., National Securities Depository Ltd. [NSDL] & Central Depository Services (India) Ltd. - AIRIA Highest Export Award was given in recognition of our outstanding Export performance in respect of Auto Tyres & Tubes during the year. 2000 - The Company has set up shop in Dubai to target markets in the UAE as part of its export thrust. MRF has launched a steel-belted premium radial Tyre variant called `MRF ZVTS`. 2002 -MRF was ranked highest in customer satisfaction along with multinational Bridgestone in a study conducted by JD Power Asia pacific. MRF Tyres Ltd sees slump in commercial vehicle Tyre market and passenger car growth has also declined.
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-High court dismisses the writ petition filed by MRF Employees Union challenging the order of dismissal of a worker, who was the secretary of the union. -Advertising Standard Council of India Quashed the objection raised by MRF by upholding J K Industries claim of being India`s Number one tire maker in the four wheeler segment. -MRF Ltd has obtained the `Outstanding Corporate Sports Initiative` award from the Federation of Indian Chamber of Commerce and Industry. 2003 -MRF and Bridgestone are ranked highest in a tie for the second year in a row in customer satisfaction with original tries according to JD Power Asia Pacific. -Sheri K.M. Mammen Mappillai, Chairman and Managing Director expired on March 2nd. Mr.C.D Khanna has ceased to be the Director of the company. And Mr. K S Narayanan has resigned from the board of MRF. Mr. Kumar and Mr. Ranjith Issac Jesudasen have been appointed as the directors of the company. -Mr. K S Narayanan ceased to be director of the Company with effect from April 17, 2003, consequent to his resignation from the Board of Directors. -MRF Ltd. has informed the Exchange that at its meeting held on December 19, 2003 the BOD has re-designated Jt. Managing Director Mr. Arun Mammen as Managing Director of the Company i.e. April 01, 2004. 2004 -MRF Ltd. has informed that Mr. Ravi Mannish has been appointed as Additional Company Secretary of the Company i.e... January 05, 2004. MRF received the highest rankings in the study in four of the five factors determining overall satisfaction with Tyres appearance, durability, traction and handling. - MRF Tyres is the biggest consumer of natural rubber in India during 2002-03 -Ties up with Maruthi Udyog to boost motorsports in India. 2007 - MRF Ltd launches premium truck Tyre Super.
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2. VISION OF MRF
MRF will be a significant global player delighting customer worldwide Leadership in Technology
Excellence in manufacturing
World-class systems Driven by a team of motivated high performances to achieve profitable growth
3. POLICY
1. To Maintain proper book keeping. 2To standardize the accounts closing activities. 3. To reduce the document retrieval time. 4. To make the payment on due dates. 5. To maintain the vendor satisfaction.
4. MRF TEAM SPIRIT
1. Has proprietary interest.

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2. Has height Trust. 3. Faces all problems. 4. Delegates & develops. 5. Seeks help. 6. Help others succeed. 7. Creates high performance Situation. 8. Innovative. 9. Avoids surprise. 10. Has process happiness.
5. THE PRIMARY PRODUCTS BY MRF ARE AS FOLLOWS

1. Truck / Bus Tyres. 2. Light Commercial, Jeep & Utility Vehicle Tyres. 3. Passenger Cars Tyres. 4. Off the road Tyres. 5. Two-Wheelers Tyres. 6. Farm Service Tyres. 7. Jeep & utility vehicle Tyres.
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Heavy Duty Truck / Bus
Light truck
MUV/RCV/Passenger car
Motor sports
Off the road / Earth movers
Military service
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Farm service
Fork lift
Two /Three wheeler
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ARKONAM ORNIZATION MACHINARY IMPLAMENTS AND PLANT IMPLAMENTATION
2005 - MB BANBURY
2000 - DIP PLANT
1999 - EASY PLANT
1997 - TUBE PLAT
1992 - BELTING PLANT
1972
- MAIN TYRE PLANT
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ARAKONAM PLANT MAILESTONE
2006
-OHAS-18001
2005 - ISO-(TS 16949-2002)
2004- TPM (Total Productive Maintenance) KICK OFF
2002 - ISO-9001-2000
2001 - ISO-14001
1998 - ISO-9001
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8. PRESENT ACHIEVEMENT & ACTIVITIES
Formula 1 racing. T.V. serial. Sponsors Sachin Tendulkar & Steve Waugh. 12th place worldwide. Largest selling radial car Tyre- ZIGMA. Largest selling tractor Tyre- SHAKTI. Largest selling TWO Wheeler Tyre- NYLOGRIP.
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8. PRODUCTS AND BRANCHES
PRODUCTS 1.Toys 2.Paints 3.Sports goods 4.Tread Rubber 5.Tyre (radial) bias Tubless Tyre 6. Inner tubes flips 1.New Delhi 2.Maydak
BRANCHES
3.Goa (fun school toys) 4.Pondicherry 5.Arkonam 6.Thiruvottiyur (Chennai)
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2.2.INDUSTRY PROFILE
MRF Ltd. "Tyres with Muscle"
MRF Ltd. is the first Indian company to export tyres to the US, the very birthplace of tyre technology. It is the first company in India to manufacture and market Nylon tyres passenger tyres commercially. In 2004, the company's turnover crossed INR 30 billion mark. The company was given the title of most ethical company by 'Business World' magazine after a survey conducted in 1999.
Quick Facts Founder Country India
K. M. Mammen Mappillai
Year of Establishment Industry
1946 as a toy factory
Tyre Manufacturing
Listings & its codes NSE: MRF; BSE: 500290 Registered Office Chennai - 600 006 India Tel.: +(91)-(44)-28292777 Fax: +(91)-(44)-28291844/ 0562
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124, Greams Road
Website
www.mrftyres.com www.mrf-exports.com (MRF Exports)
Related Website
Segment and Brands Truck / Bus Tyres Light Commercial, Jeep & Utility Vehicle Tyres Passenger Cars Tyres Off the road tyres Two-Wheelers Tyres Farm Service Tyres Company Flashback The company, MRF Ltd., originally started as a small manufacturing unit of balloons, latex cast squeaking toys and industrial gloves. The company established its first office in 1949 at Chennai, Tamil Nadu, India. It began the manufacturing of tyres in 1961. Today, MRF has 6 manufacturing plants in India located in Tiruvottiyur and Arakonam in Tamil Nadu, Kottayam in Kerala, Ponda in Goa, Medak in Andhra Pradesh, and one in the Union Territory of Pondicherry. It has a distribution network of more than 2,500 outlets in the country and exports tyres in over 75 countries globally.
Market profile
While the tyre industry is mainly dominated by the organised sector, the unorganised sector holds sway in bicycle tyres. The major players in the organised tyre segment consist of MRF, Apollo Tyres, Ceat and JK Industries, which account for 63 per cent of
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the organized tyre market. The other key players include Modi Rubber, Kesoram Industries and Goodyear India, with 11 per cent, 7 per cent and 6 per sent share respectively. Dunlop, Falcon, Tyre Corporation of India Limited (TCIL), TVS-Srichakra, Metro Tyres and Balkrishna Tyres are some of the other players in the industry. MRF, the largest tyre manufacturer in the country, has strong brand equity. While it rules supreme in the industry, other players have created niche markets of their own
Sector specifics
The tyre industry is a major consumer of the domestic rubber production. Natural rubber constitutes 80 per cent of the material content in Indian tyres. Synthetic rubber constitutes only 20 per cent of the rubber content of a tyre in India. World wide, the ratio of natural rubber to synthetic rubber is 30:70. Apart from natural and synthetic rubber, rubber chemicals are also widely used in tyres.
Sector trends
Crossply tyres have been used in India for several decades. In these tyres, the ply cords run across each other or diagonally to the outer surface of the tyre. Rayon and nylon tyre cords are used as the reinforcing medium. These tyres can be retreaded twice during their lifetime and are hence preferred by Indian transport operators who normally overload their trucks.
Outlook
Globally, the OEM segment constitutes only 30 per cent of the tyre market, exports 10 per cent and the balance from the replacement market. In India, the scenario is quite different. Nearly 85 per cent of the total tyre demand in the country is for replacement. This anomaly has placed the retreaders in a better position than the tyre manufacturers. Simply put, rethreading is replacing the worn-out tread of the old tyre with a new one. The popularity of rethreading stems from the fact that it costs only 20 per cent of a new
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tyre but increases its life by 70 per cent to 80 per cent. Most of the transporters in India retread their tyres twice during its lifetime, while a few fleet owners even retread thrice.
The Indian Tyres Industry ICRA Sector Analysis conducted in February 2004
Structure of the Industry Background

The origin of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber Limited set up the first tyre company in West Bengal. MRF followed suit in 1946. Since then, the Indian tyre industry has grown rapidly. Transportation industry and tyre industry go hand in hand as the two are interdependent. Transportation industry has experienced 10% growth rate year after year with an absolute level of 870 billion ton freight. With an extensive road network of 3.2 million km, road accounts for over 85% of all freight movement in India.
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3.1. REVIEW OF LITERATURE

Barton and Schmidt (1986) The size of the equity pool also may depend on the rate of profitability, income distribution, and equity redemption. Decisions by cooperative management and members regarding equity investment should be based on the members cost of equity capital. The cost to the member of providing equity is the opportunity cost of investing money in a member's own operation or other alternatives. Cobia and Brewer (1988). An agricultural cooperative requires capital to finance fixed assets (such as land, buildings, and equipment) and other assets (such as investments in other cooperatives), and to provide working capital. Thus, cooperative management may follow the practice of maximizing the use of equity capital and minimizing the use of debt. Featherstone (1989) The cooperative needs to determine a leverage level and then manage equity investment and redemption to achieve this level. Cooperatives must be lie to identify optimal levels of debt and equity to operate efficiently and to guard against unexpected economic shocks, because leverage affects the probability of equity loss and bankruptcy Cobia and Brewer (1990) Cooperatives also acquire capital through debt financing. Using debt is attractive to cooperative directors who represent members' interests, because it allows for members to achieve a higher return on patronage and equity when the cost of debt is less than the cost of equity. However, acquiring too much debt subjects the cooperative to unbearable financial risk caused by varying profitability and interest rates. JL Berens and CJ Cuny (1995) corporate finance researchers have long been puzzled by Iow corporate debt ratios given debt's corporate tax advantage. This article recognizes
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that firm value typically reflects a growing stream of earnings, while current debt reflects a no growing stream of interest payments. Debt to value is therefore a distorted measure of corporate tax shielding Hopkins (1995) one of the most important and most difficult decisions cooperative management must make is the choice of capital structure. Through proper capital sln1cture, management can influence the financial performance of the business (Forster). The cost of debt is less than the cost of equity capital because of differences in risk and the tax deductibility of debt. Davis, Henry A (1998) Capital structure describes how a corporation has organized its capital-how it obtains the financial resources with which it operates its business. Businesses adopt various capital structures to meet both internal needs for capital and external requirements for returns on shareholders investments Executives Research Foundation. Vojislav Maksimovic (1999) This paper analyzes the relationship between a firm's capital structure and its information acquisition prior to capital budgeting decisions. It is found that low-growth industries can sustain a large number of levered firms. In these industries, leverage is negatively related to a firm's incentive to acquire information during the capital budgeting process. Arntzen. L. Fallan (2003) The most important arguments for what could determine capital structure is the pecking order these static trade off theory. These two theories are reviewed, but neither of them provides a complete description of the situation and why some firms prefer equity and others debt under different circumstances. Christopher J. Green (2004) capital structure and firm ownership in order to identify the leading theoretical and empirical issues in this area. The theoretical component of the survey attempts to reconcile competing theories of capital structure and appraises recent
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models which use agency theory and asymmetric information to explore the impact of managerial shareholdings, corporate strategy and taxation on the firm's capital structure. Denis (2004) The field of empirical capital structure studies is very actively researched, the large majority of studies has been conducted on samples of large firms. The relative shortage of research into private small firm capital structure is troubling because small firms provide about half of private sector employment and produce about half of private sector output in the United Even their aggregate importance as users of financing has recently surpassed that of better-known large-firm markets. Dirk hack births (2004) This paper develops a framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and financing policies to the position of the economy in the business cycle phase.
Fernandez (2004) capital structure and factor-product markets. These studies relate some elements of the modern financial theory to the stakeholder theory, industrial organization, and firms strategic management. Three main points are highlighted. First, the relevant role of non-financial stakeholders in capital structure design. Second, the interactions between capital structure and market structure. Frank Adams (2004) Capital structure theories grounded in the finance paradigm (agency theory, transaction cost theory) have contributed to our understanding of capital structure decision making. However, they do not address the intricacies of capital structure decision making from a managerial choice perspective, especially in privately held firms.
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Hovakimian (2004) This study examines capital structure decisions in a small and medium enterprise (SME) setting. Specifically, we look at two main issues. First, we test whether industry median leverage, which has been found to affect large firm capital structure decisions also guide financing patterns of SMEs.
4.1. THEORITICAL PERSPECTIVES
PARTIES INTERESTED IN FINANCIAL STATEMENT
Analysis of financial statement is not only useful to the company but also covers the wide range of different aspirants.
1. MANAGEMENT
Management is over burdened with the data rather than the Information .the analysis statement gives the information to management in brief and preside manner with this information the company can self evaluate their performance and find out any variances until budgets so these statement in term helpful for solving any deviations in the budgets.
2. SHARE HOLDER
Share holders are the real owners with the help of these statement they can analysis the growth and earnings of their own company.
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3. POTENIAL INVESTORS
The people under this category are very much keen on these statements for the return in short term and ratios these statement very much required for them.
4. DEBENTURE HOLDERS
These statements will be helpful for them to analysis how not only the companys ability to pay the interest also to redeem the same.
5. CREDIT INSTITUTION
Companies financial requirements are being fulfilled by this organization before investing. These institutions are very much required of the solvency and potentiality of the company. Preparing these statements will fulfill these needs.
6. CREDITORS
Creditors are the one who are inter over with the companies day to day operations they too need the ability of the company to discharge their debts by the company financial statement are helpful in this regard to the creditors.
7. EMPLOYEES AND TRADE UNIONS
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The profit of the company is in the term of an effect in the pay structure of the Employees. Bonus generally linked with the parties earned by the company. The financial statement gives this information to the employees of the organization or company
8. GOVERNMENT
To know whether particular industry is in progress or not can be measured by these statements. In term of the government will be in a position to the progress of the nation as a whole.
9. TAX AUTUORITIES
Financial statement are very helpful for the income tax authorities to determine revenue receivable from the companys financial statements help them a great deal.
10. RESEARCHER
These are the documents for the future projections so these are esteem value to scholars undertaking research business affairs and practices. After duly recognizing the importance of financial statement analysis this topic has been these as the focus of project. It analysis the various facts, like ratio of Working capital in MRF LTD.
11. EXPORTS
The commissioning of the main plant in 1964, MRF also made progress in the export of Tires an overseas office at Beirut (Lebanon) was established to develop the export market and it was amongst Indias very first efforts on Tyre export. This year also marketed the birth of the now famous MRF muscleman. MRF began a rapid product development programme for new vehicles entering India. MRF Tyres were the maruthi Suzuki 800.
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Indias first small modern cars MRF Nylogrip Tyres for two-wheeler vehicles were launched. MRF was award pitted against 20 Tyre companies worldwide MRF also won quality improvement award instituted by the B.F. Goodrich Tyre Company from USA.
The readers of the A & m Magazine selected MRF as one of Indias most admired marketing companies. MRF were also chosen for fitment on the ford, escort, polestar and fiat Uno .Further proof of its superior quality MRF Tyres were also chosen for fitment on the ford Escort, polestar and fiat Uno further proof of its superior quality.
The musclemen evolved in 1964 soon after MRF began manufacturing Tyres. Over the past 33 years it has evolved from a mere corporate mascot to a symbol of strength, reliability and durability embodying the very qualities of the Tyres the muscleman represent. For 16 years he grew to become Indias most trusted and well recognized symbol for Tyres in the 1960 the Indian Tyre market was completely controlled by the large multi-national companies. Around this time MRF opened a Tyre factory at Thiruvottiyur in Tamilnadu with that came the task of recognizing an appropriate corporate brand symbol one that would distinctly represent the companys culture and convey the same to everyone in country of varied languages and cultures. In this process of developing suggestion for the symbol some enterprising employees conducted an informal market survey interviewing people from all over the country about their expectations from a good Tyre.
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4.2. FINANCIAL STATEMENT

Financial statements refer to formal and original statements prepared by a business concern to disclose its financial information.
1. ACCOUNTING
Accounting process involves recording classifying and summarizing various business transactions. The Day to today transaction of a business are recorded in the different subsidiary books .the transaction are posted in to various ledger accounts and the balance are taken out at the end of financial period the aim of maintaining various records is to determine the profit ability of the enterprise from operations of the business and also to find out it financial position
DEFINITION
Hampton J.J The statement disclosing status of investment is known as balance sheet and the statement showing the result is known as profit and loss account The definition for financial statement says that the financial statement provide a summary of the accounts of a business enterprise the balance sheet reflecting the assets & liabilities and capital as on certain date and the income statement showing the result s of operation during a certain period. 1. Balance sheet
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2. Profit loss a/c 3. Working capital 4. Ratio analysis 5. Trend analysis
1. BALANCE SHEET
Balance sheet is most significance financial statement it indicates the financial condition or the statement of affairs of a business at a particular moment the time. More specially, balance sheet contains information about resources and obligation of a business entity and about its owner interest in the business at particular point of the time. Thus the balance sheet of a firm prepared on the 31 st December at every year the firm financial position on the specific date .in the language of the accounting, balance sheet communicates information about assets and liabilities and owners equity for business firm as on a specific date it provides a snapshot of the financial position of the firm close of the firm accounting period
2. COMMON SIZE BALANCE SHEET

Common size balance sheet statement indicates the relationship of various items with common items (Expressed as percentage of the common item) in the income statement the sales figure is taken as basis and all other figure are expressed as percentage of sales. Similarly in the balance sheet the total assets & liabilities are taken as base and all other figure are expressed as percentage of this total.
3. PROFIT AND LOSS ACCOUNTS
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Balance sheet is consider as a very significant statement by bankers and others lenders because it indicates the firms financial solvency and liquidity ,as measured by its resources and obligation .however ,creditors ,particularly bankers and financial analyst in India have recently started paying more attention to the firms earning capacity as a measure of its financial strength. The earning capacity and potential of a firm are reflected by its performance during a period of time .the generally accepted convention is to show one years events in the in the profit and loss account. Since the profit and loss accounts reflect the result of operation for a period of time, it is flow statement .in contrast, the balance. Sheet Is a stock, or status statement as it shows assets, liabilities and owners equity at a point of time. Profit and loss account present the summary of the revenues, expenses and net income (or net loss) of a firm. It serves as a measure of the firms profitability revenues are amounts which the customers pay to the firm for providing them goods and services to customers. The cost of the economic resources used to earn revenues during a period of time is called expenses. Thus, to determine net income (or net los), the accounting system matches expenses incurred during the accounting period against revenues earned during that period. This matching of expenses with revenues is called matching concept.
4. WORKING
CAPITAL
There are two types working capital I. Gross working capital II.Net working capital
I. GROSS WORKING CAPITAL

42
Gross working capital refers to the firms investment in current assets. Current assets are the assets which can be converted into cash within an accounting year ( or operating cycle ) and include cash , short term securities ,debtors ,( accounts receivable or book debts ) bill receivable and stock ( inventory).
II. NET WORKING CAPITAL

Net working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors payable, and outstanding expenses. (accounts payable), bills
5. TREND ANALYSIS
In financial analysis the direction of changes over a period of years is of crucial importance. Time series or trend analysis of ratio indicates the direction of changes. This kind of analysis is particularly applicable to the items of profit and loss account. It is advisable that trend of sales and net income may be studied in the light of two factors: The rate of fixed expansion or secular trend in the growth. Of the business and the general price level. It might be found in practice that a number of firms would show a persistent growth over a period of years. For trend analysis, the use of index number is generally advocated. The procedure followed is to assign the number 100 items of the year and to calculated percentage changes in each item of other years in relation to the base year. This procedure may be called as Trend Percentage Method .
6. RATION ANALYSIS
43
Analysis and interpretation of financial statement with the help of Ratio is termed as Ratio Analysis. Ratio analysis involves the process of computing determining and presenting the relationship of items or groups of items of financial statement.
MEANING OF RATIO
A ratio can be defined as Relationship expressed in quantitative terms between figures which have cause and effect relationship or which are connected with each other in some manner or the other 1. Time 2. Percentage
1. CURRENT RATIO
The ratio of current assets to current liabilities is called current ratio. In order to measure the short term liquidity or solvency of a concern, comparison of current assets and current liabilities is invisible. Current ratio indicates the ability of a concern to meet its current obligation as and when they are due for payment. An ideal current ratio 2:1 the ratio of 2 considered as a safe margin off solvency due to the fact that if the current assets is reduced to halftime. 1 instead of 2 then also the creditors will be able to get their payments in full.
Current Ratio
= Current Assets / Current Liabilities

44
2. QUICK RATIO
Quick ratio is calculated by comparing the quick assets which current liabilities. Quick assets refer to assets which are quickly convertible into cash current assets, other than stock and prepaid expenses are considered as quick assets. The ideal liquid ratio is 1:1. The ratio is also an indication of short term solvency of the company. A comparison of quick ratio with current ratio shall indicate the inventory holdups.
Quick Ratio
Quick Assets / Current Liabilities
3. NET PROFIT RATIO

This ratio also called as net profit sales ratio. It is a measure of management efficiency in operating the business successfully from the owners point of view. It indicates the return on shareholders investments. Higher the ratio better is the operational efficiency of the business concern. The net profit ratio margin is indicates of Managements ability to operate the business with sufficient success not to recover from revenues of the period. ,the cost of merchandise, the expenses of operating the business and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk .
45
Net Profit Ratio = Net Profit
/ Sales X 100
4. DEBTORS COLLECTION PERIOD

The average collection period measure the quality of debtors since it indicates the speed of their collection. The shorter the average collection, the better the quality of debtors, since a short collection period implies the prompt payment by debtors.
Debtors Collection Period = Total Receivables / Credit Sales X 365 5. CURRENT ASSETS TURN OVER RATIO
Assets are used to generate sales. Therefore, a firm should manage its assets efficiently to maximize sales. Therefore, a firm should manage its assets is called assets turnover
Current Assets Turn Over Ratio = Sales / Current Ratio
6. OPERATING RATIO
This ratio indicates the relationship between total operating expenses and sales. The operating expenses here include cost of goods sold administrative expenses and selling and distribution expenses. Generally finance expenses like interest are not included under operating expense. Net sales mean total sales minus sales return. Operating ratio measure the amount of expenditure in production sales and distribution of output. It indicates operational
46
efficiency of the concern lower the ratio more is the efficiency. The ratio should be low enough to provide fair return to the share holder are and other investors.
Operating Ratio = Cost of Sales + Operating Expenses / Net Sales X 100
47
5.1. RESEARCH METHODOLOGY
The term research is derived from French word research meaning, search back, research is a careful inquiry or examination in seeking fact or principle intelligent investigation in order to ascertain something web masters international dictionary. Research methodology is way to systematically solve the problem when we talk of research methodology we not mean the research methods. Also, consider the logic behind the methods used in the context of research study and explain why a particular method or technique is used, so that research results are capable of being evaluated.
1. RESEARCH DESIGN
Research design is purely and simply framework or plan for study that guides the collection and analysis of the data.
2. RESEARCH TYPE
The type of research used in this study is desk research.
3. DESK RESEARCH
Desk research (sometimes known as secondary data or secondary research ) involves gathering data that already exists either from internal some of the client,
48
publications of governmental institutions, free access data on the internet, in professional newspapers and magazines, in annual reports of companies and commercial databases to name but a few. In many projects, carrying out an initial desk research stage is strongly recommended to background knowledge to a subject as well as providing useful leads that will help to get the maximum from a research budget.
4. DATA COLLECTION METHOD
SECONDARY DATA
The rest of the data is collected from the annual report brochures and websites and annual reports of the organization.
5. ANALYSIS TOOL
i. ii. iii. iv. v. vi. Comparative Balance sheet Common Size Balance Sheet Comparative Income Statement Changes in Working Capital Trend Analysis Ratio Analysis
49
6.1. DATA ANALYSIS & INTERPRETATION
Table No: 1 COMPARATIVE BALANCE SHEET OF MRF LTD DURING THE PERIOD OF 2005-2006 (In Crores) ABSOLUTE INCREASE/DECR EASE ABSOLUTE INCREASE/DECRE ASE %
PARTICULAR LIABILITIES SOURCE OF FUND

Share Capital Reserve and Surplus
2005
2006
4.24 526.51
4.24 592.64 66.13 12.56
LOAN AND FUNDS

Secured Loan Unsecured Loan 142.91 351.75 147.52 292.75 4.61 -59 3.23 -16.77
CURRENT LIABILITIES AND PROVISION

Current Liabilities Provision for Tax 218.91 31.82 252.74 57.16 33.83 25.34 15.43 79.64
50
TOTAL LIABILITIES ASSETS APPLICATION OF FUND

Fixed Assets Capital Work in Progress Investment
1276.1 4
1346.5 6
70.42
5.52
383.87 54.29 32.99
384.79 30.74 75.88
0.92 -23.55 42.89
0.24 -43.38 130.01
CURRENT ASSETS , LOAN AND ADVANCES

Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loan and Advances Deferred Tax Assets 349.19 331.43 34.88 0.08 89.41 0 358 357.81 34.39 0.09 104.62 .82 8.81 26.38 -0.49 0.01 15.21 .82 2.52 7.96 -1.4 12.5 16.36 100
TOTAL ASSETS
1276.1 4
1346.5 6
70.41
5.52
Sources: projected Balance sheet of the company
51
INTERPRETATION 2005 -2006
1. There is no change in share capital. 2. The increasing reserves should have improved working capital position. 3. Fixed assets have increased to 384.79 crores which is 0.24%. 4. Investments have increased to 42.89 crores which is 130.01%. 5. Cash position of MRF LTD has not improved in 2006. 6. Current assets have increased to 49.34 crores which is 6.13% in compare 2005 to 2006. 7. The MRF LTD financial position is not that much good in 2005 to 2006.
52
Table No: 2
COMPARATIVE BALANCE SHEET OF MRF LTD DURING THE PERIOD OF 2006-2007 (In Crores) ABSOLUTE INCREASE/DECR EASE ABSOLUTE INCREASE/DECRE ASE %
PARTICULAR LIABILITIES SOURCE OF FUND

Share Capital Reserve and Surplus
2006
2007
4.24 529.15
4.24 699.96 107.81 18.21
LOAN AND FUNDS

Secured Loan Unsecured Loan 147.52 292.75 191.73 280.86 44.21 -11.89 29.96 -4.06

TOTAL LIABILITIES
1346.5 6
1506.3 6
159.8
11.87
53
ASSETS
APPLICATION OF FUND
Fixed Assets Capital Work in Progress Investment 384.79 30.74 75.88 398.47 52.07 75.11 13.68 21.33 -0.77 3.55 69.38 -1.01
CURRENT ASSETS, LOAN AND ADVANCES

Interest accrued on Investment Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loan and Advances Deferred Tax Assets 0 358 357.81 34.39 0.09 104.04 0.82 0.09 403.18 396.32 40.26 0.07 135.33 5.46 0.09 45.18 38.51 5.87 -0.02 31.29 4.64 100 12.62 10.76 17.07 22.22 30.07 565.85
TOTAL ASSETS
1346.5 6
1506.3 6
159.8
11.87

54
1. There is no change in share capital. 2. Investments have decreased to 0.77 crores which is 1.01%. 3. A fixed asset has increased in 2007. 4. Capital work in progress has increased to 21.33 crores which is 69.38 % 5. Current assets has increased to 126.38 crores which is 14.79% when compare to 2006 6. Current liabilities has also increased to 18.85 crores which is 6.06% it alarms the company go for different source of finance to meet the liabilities.
55
Table No: 3
COMPARATIVE BALANCE SHEET OF MRF LTD DURING THE PERIOD OF 2007-2008 ( In Crores ) ABSOLUTE INCREASE/DECR EASE ABSOLUTE INCREASE/ DECREASE %
PARTICULAR
2007
2008
LIABILITIES SOURCE OF FUND

Share Capital Reserve and Surplus 4.24 699.96 4.24 719.17 19.21 2.74
LOAN AND FUNDS

Secured Loan Unsecured Loan 191.73 280.86 166.32 394.04 -25.41 113.18 -13.25 40.3

TOTAL LIABILITIES
1506.3 6
1676.8 6
170.5
11.32
56
ASSETS APPLICATION OF FUND

Fixed Assets Capital Work in Progress Investment 398.47 52.07 75.11 419.22 124.01 76.21 20.75 71.4 1.1

Interest accrued on Loan Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loan and Advances Deferred Tax Assets 0.09 403.18 396.32 40.26 0.07 135.33 5.46 0.06 482.04 398.36 36.72 0.16 136.42 3.66 -0.03 78.86 2.04 -3.54 0.09 1.09 -1.8 33.33 19.55 0.51 -87.79 128.57 0.8 32.97
TOTAL ASSETS
1506.3 6
1676.8 6
170.5
11.32
INTERPRETATION 2007- 2008
57
1. The current liabilities of the company is increasing year by year . it indicates that the company Has need more finance to meet the liabilities 2. Cash and bank balance have been decreased to 3.54 crores which is 8.79% it indicates. That the cash position of the company is not satisfactory in 2008 as compare to 2007. 3. The total assets of the company have been increased to 170.5%.it indicates that there is adequate cash available in 2008 has compare to 2007 for meeting working capital equipment of the company effectively.
Table No: 4
58
COMPARATIVE BALANCE SHEET OF MRF LTD DURING THE PERIOD OF 2008-2009 ( In Crores ) ABSOLUTE INCREASE/ DECREASE LIABILITIES SOURCE OF FUND Share Capital Reserve and Surplus LOAN AND FUNDS
Secured Loan Unsecured Loan 166.32 394.04 299.57 410.39 133.25 16.35 80.11 4.12
PARTICULAR
2008
2009
ABSOLUTE INCREASE/ DECREASE %
4.24 719.17
4.24 749.81 30.64 4.26

Current Liabilities Provision for Tax 294.4 100.69 320.58 93.78 28.18 -6.91 11.24 10.61

Fixed Assets
1676.8 6
1878.3 7
201.5
12.01
419.22
536.81
117.59
59
28.05
Capital Work in Progress Investment
124.01 76.21
151.99 13.75
27.98 -62.46
22.56 -81.5

Interest accrued on Loan Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loan and Advances Deferred Tax Assets 0.06 482.04 398.36 36.72 0.16 136.42 3.66 0.06 553.56 462.34 46.02 0.21 112 1.63 71.52 63.98 9.3 0.05 -24.42 -2.03 14.83 16.06 25.32 31.25 -17.9 -55.46
TOTAL ASSETS
1676.8 6
1878.3 7
201.51
12.01
60
1.
Investment has been decrease by 62.46 crores which is 81.95 and the deferred tax asset has been decrease by 2.03 crores which is 55.46%. it indicates that the working capital of the company is not satisfactory in 2008 as compare to 2008. that
2.
Fixed assets have increased by 117.59 crores which is 28.05%.it indicate the company is buying properties during 2009.
3.
Secured loan and unsecured loan of the company is increasing year by year. This shows that the companys working capital position is not good.
Table No: 5
61
COMMON SIZE BALANCE SHEET ANALYSIS OF MRF LTD FOR THE YEAR ENDING 2007-2009
(In Crores ) PARTICULAR 2007 2008 2009
ASSETS
Fixed Assets Investment Capital Work in Progress Deferred Tax 26.45 4.98 3.45 0.36 25 4.54 7.39 0.21 28.7 0.73 8.09 0.08
CURRENT ASSETS ,LOAN AND ADVANCES

Interest accured on investment Inventories Sundry debtors Cash and Bank Balances Other Current Assets Loan And Advances 0.005 26.76 26.3 2.67 0.004 8.98 0.003 28.75 23.75 2.18 0.009 8.14 0.003 29.47 24.61 2.24 0.01 5.96
99.959 TOTAL ASSEST 100
99.972 100
99.893 100
LIABILITIES
Share Capital Reserve and Surplus 0.28 46.46
62
0.25 42.88
0.22 39.91
Secured Loan Unsecured Loan Current Liabilities Provision
12.73 18.64 17.86 4.01
9.92 23.49 17.43 6.2
15.94 21.84 17.06 4.9
99.98 TOTAL LIABILITIES 100
100 100
99.87 100
INTERPRETATIONS FOR COMMON SIZE BALANCE SHEET FOR THE YEAR ENDING 2007 -2009
1. Current assets and current liabilities have increasing from 2007 -2009 in all absolute figures and in terms of percent of all total assets. 2. Fixed assets have increasing year by year as 26.45, 28.57. But it is decreased in 2008 as 2009. 3. Total assets have been decreased in small figure which shows in which small figures which shows that the working capital position is not satisfactory. The overall financial position is good.
Table No: 6
63
COPMRATIVE INCOME STATEMENT OF MRF LTD FOR THE YEAR ENDING 2006-2007 ( In Crores ) ABSOLUT E INCREASE / DECREAS E INCOME
Sales Export Incentive Other Income 2195.62 37.34 7.7 2541.97 58.47 7.24 346.35 21.13 -0.5 15.77 56.58 -6.46
PARTICULAR
2006
2007
TOTAL INCOME EXPENSES

Raw material Purchase of tread goods
2240.7
2607.68
366.98
16.38
1006.55 4.75
1392.3 7.11 -44.49 39.62 414.92 704.21
385.75 2.36 16.08 -2.35 18.34 54.27
38.32 49.68 56.59 5.59 4.62 8.35
Increase/decrease stock 28.41 Interest Excise Duty Other expenses 41.97 396.58 649.94
TOATL EXPENSES PROFIT BEFORE TAX
2128.2 112.5
2513.67 94.01
474.45 -18.49
22.29 -16.44
64
PROVISION
Add Exceptional item Current Tax Deferred Tax 39.2 -5.16 73.71 55.01 -4.64 73.71 15.81 -0.52 100 40.33 -10.08
NET PROFIT
78.46
117.38
Chart No: 1
SALES OF MRF LTD FOR THE YEAR 2OO6-2OO7
65
YEAR SALES
2006 2195.62
2007 2541.97
Table No: 7 COMPARATIVE INCOME STATEMENT OF MRF LTD FOR THE YEAR ENDING 2007-2008
66
( In Crores ) ABSOLUT E INCREASE / DECREAS E INCOME

Sales Export Incentive Other Income 2541.97 58.47 7.24 2989.43 44.75 13.79 447.46 -13.72 6.55 17.6 -28.47 90.47
PARTICULAR
2007
2008
TOTAL INCOME
2607.68
3047.97
440.29
16.88
EXPENSES
Raw material Purchase of tread goods Increase/decrease stock Interest Excise Duty Other expenses 1392.3 7.11 -44.49 39.62 414.92 704.21 1726.02 9.58 -23.54 28.15 454.15 769.38 333.72 2.47 20.95 -11.47 65.17 39.23 23.97 34.74 -47.09 -28.95 9.25 9.45
TOATL EXPENSES PROFIT BEFORE TAX PROVISION
2513.67 94.01
2963.74 84.23
450.07 -9.78
17.9 -10.4
67
Add Exceptional item Current Tax Deferred Tax
73.71 55.01 -4.64
-14.33 12.3 1.8
-32.39 -42.71 -2.84
-43.93 -77.64 -61.21
NET PROFIT
117.38
28.8
Chart No: 2
SALES
68
YEAR SALES
2007 2541.97
2008 2989.43
Table No: 8 COPMRATIVE INCOME STATEMENT OF MRF LTD FOR THE YEAR ENDING 2008-2009 ( In Crores )
69
PARTICULAR
2008
2009
ABSOLUT ABSOLUTE E INCREASE/ INCREASE DECREASE / % DECREAS E
INCOME
Sales Export Incentive Other Income 2993.24 44.75 13.79 3410.94 16.35 28.62 421.51 -28.4 14.83 14.10 -63.46 107.54
TOTAL INCOME
3047.97
3455.9
407.93
13.38
EXPENSES
Raw material Purchase of tread goods Increase/decrease stock Interest Excise Duty Other expenses 1726.02 9.58 -23.54 28.15 454.15 769.38 2119.9 5.69 -50.07 32.66 827.11 461.09 393.88 -3.89 26.53 4.51 372.96 308.29 22.82 -40.65 112.7 16.02 82.12 40.06
TOATL EXPENSES PROFIT BEFORE TAX PROVISION

Add Exceptional item
2963.74 84.23
3396.38 59.52
1102.28 -694.34
14.6 -29.33
-14.33
4.18
70
-10.15
-89.89
Current Tax Deferred Tax Fringe benefit Tax
12.3 1.8
11.55 2.03 1.45
-0.75 0.23 1.45
-6.09 12.78 100
NET PROFIT
28.8
40.31
Chart No: 3
71
YEAR SALES
2008 2993.24
2009 3410.94
Sources: projected Balance sheet of the company Table No: 9
SCHEDULE OF CHANGES IN WORKING CAPITAL OF MRF LTD FOR THE YEAR ENDING 2006-2007
72
( In Crores ) PARTICULAR CURRENT ASSETS

Interest accrued on investment Inventories Sundry Debtors Cash and bank balances Other Current Assets --358 357.81 34.49 0.09 0.09 403.18 396.32 40.26 0.07 0.09 45.18 38.51 5.87 0.02
2006
2007
INCREASE
DECREASE
TOTAL ASSETS (A ) CURRENT LIABILITIES

Current Liabilities Provision For Tax Loan and advances
750.29
839.92
252.74 57.16 104.04
269.11 60.46 135.33
16.37 3.3 31.29
TOTAL LIAIBILITIES (B ) TOTAL (A B ) INCREASE IN WORKING CAPITAL
413.94 336.35 20.67
464.9 357.02 -----89.65 -----89.65 20.67
TOTAL
357.02
357.02
89.65
89.65

73
INTREPRETATION
Inventories has been increased 45.18 in the year 2007 compared to 2006
Cash and bank balances 5.8 has been increased in the year 2007 compared to 2006.
Other current assets decreased in the year 0.02.
In the year 2006 2007 is increasing in working capital
Table No: 10
SCHEDULE OF CHANGES IN WORKING CAPITAL OF MRF LTD FOR THE YEAR ENDING 2007-2008 ( In Crores )
74
PARTICULAR CURRENT ASSETS

Interest accrued on investment Inventories Sundry Debtors Cash and bank balances Other Current Assets
2007
2008 INCREASE
DECREASE
0.09 403.18 396.32 40.26 0.07
0.06 482.04 398.36 36.72 0.16 0.09 78.86 2.04
0.03
3.54
TOTAL ASSETS (A ) 839.92 CURRENT LIABILITIES

Current Liabilities Provision For Tax Loan and advances 269.11 60.46 135.33
917.34
292.4 100.69 136.42
23.29 40.23 1.09
TOTAL LIAIBILITIES( B ) TOTAL A- B INCREASE IN WORKING CAPITAL TOTAL
464.9 357.02 12.81
529.51 387.83 ---80.99 -----
80.99 68.18 12.81
387.83
387.83
80.99
80.99
INTREPRETATION
75
Cash and bank balances decreased 40.26 in the year 2007 compared to 2008.
Current liabilities and current assets increased to year by year.
In the year 2007 2008 is increasing working capital.
Table No: 11
SCHEDULE OF CHANGES IN WORKING CAPITAL OF MRF LTD FOR THE YEAR ENDING 2008-2009
( In Crores ) PARTICULAR CURRENT ASSETS 2008 2009 INCREASE DECREASE
76
Interest accrued on investment Inventories Sundry Debtors Cash and bank balances Other Current Assets
0.06 482.04 398.36 36.72 0.16
0.06 553.56 462.34 46.02 0.21 71.52 63.98 9.3 0.05
TOTAL ASSETS (A) 917.34 CURRENT LIABILITIES

Current Liabilities Provision For Tax Loan and advances 292.4 100.69 136.42
1062.19
320.58 93.78 112 11.14 24.42
32.41
TOTAL LIAIBILITIES ( B ) TOTAL ( A- B ) INCREASE IN WORKING CAPITAL
529.51 387.83 148
526.36 535.83 ------180.41 ---------32.14 148
TOTAL
535.83
535.83
180.41
180.41
Sources: projected Balance sheet of the company INTREPRETATION

Inventories increased to year by year.
77
Total assets increased in the year 2009 compared to 2008.
In the year 2008- 2009 is increasing working capital.
Table No: 12
TREND ANALYSIS OF MRF LTD DURING THE PERIOD OF 2005-2009 (In crores ) PARTICULARS LIABILITIES SOURCES OF FUND
Share Capital Reserve and Surplus 100 100 100 112.47 100 132.94 100 136.59 100 142.41
2005
2006
2007
2008
2009
78
LOANS FSUND
Secured L:oan Un Secured Loan 100 100 103.23 83.23 134.16 79.85 116.38 112.02 209.62 116.67
CURRENT LIABILITIES AND PROVSION

Current liabilities Provision 100 100 115.45 179.64 122.93 190.04 133.57 316.44 146.44 294.72

Fixed Assets Capital work in progress Investment
100
105.52
118.04
131.4
147.19
100 100 100
100.24 56.62 230.01
103.8 95.91 227.67
109.21 228.42 231.01
131.94 279.95 416.68
CURRENT ASSETS ,LOAN AND ADVANCES

Inventories Interest accrued on investment Sundry debtors Cash and bank balances Other current assets Loan and advances Deferred tax assets 100 100 100 100 100 100 100 102.52 0 107.96 98.6 112.5 116.36 0.82 115.46 0.09 119.58 115.42 87.5 151.36 5.46 105.28 0.06 120.58 105.28 200 152.58 3.66 131.94 0.06 128.64 131.94 262.5 125.27 1.63
TOTAL ASSETS
100
105.52
118.04
131.4
147.19
79
INTREPRETATION
1. There is no change in share capital. 2. Reserve and surplus increased to year by year. 3. Loan and fund increased to year by year. 4. Total liabilities increased to year by year. 5. Application of funds increased to year by year. 6. Total assets increased to year by year.
6.2. RATIO ANALYSIS
1. CURRENT RATIO
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES
Table No: 13
80
PARTICULAR
2005
2006
2007
2008
2009
Current assets Current liabilities
715.58 340.14
750.29 414.76
845.38 464.9
921 529.51
1063.82 526.36
Current Ratio
2.1
1.8
1.81
1.73
2.02
Chart No: 4
81
Sources: projected Balance sheet of the company INTREPRETATION

The current assets ratio is increasing and decreasing gradually. The company is good in Position .A high current ratio is an assurance that the firm will have adequate fund to pay current liabilities to make other current payments.
2. LIQUID RATIO LIQUID RATIO =LIQUID ASSETS / LIQUID LIABILITIES

82
Chart No: 14 ( In crores ) PARTICULAR 2005 2006 2007 2008 2009
Liquid as sets Liquid liabilities
366.39 340.14
392.29 414.76
442.2 464.9
435.3 529.51
510.26 526.36
Current Ratio
1.07
0.94
0.95
0.82
0.96
Chart No: 5
83
Sources: projected Balance sheet of the company INTERPRETATION

The liquid ratio is decreasing gradually from 1.07 to 0.96 from 2001 to 2005.Tis is not a good sign. The ratio should be more then 1:1 the financial position is sound and good. In this company, the liquid ratio of MRF LTD has gone for below the standard norms from 2005 to 2009. Otherwise the company has to face the problem in future.
3. DEBTORS COLLECTION PERIOD
84
DEBTORS COLLECTION PERIOD = TOTAL RECEIVABLE / CREDIT SALES x 365
Table No: 15 (In Crores ) PARTICULAR 2005 2006 2007 2008 2009
Debtors Credit Sales
331.43 2090.5
357.81 2195.62
396.32 2541.97
398.36 2989.43
462.34 3410.94
Debtors Collection Period (days )
57
59
56.91
48.64
49.47
Chart No: 6
85
The debtors collection period should be less. Company should take minimum days to collect the due amount but in 2006, it takes 59 days .so, this is not a good sign of MRF Ltd. It is suggested that the company should take steps to reduce the debtors collection period.
4. CURRENT ASSETS TURN OVER RATIO
86
CURRENT ASSETS TURN OVER RATIO = SALES / CURRENT ASSETS
Table No: 16 (In Crores ) PARTICULAR 2005 2006 2007 2008 2009
Sales Current assets
2090.5 715.58
2195.62 750.29
2541.97 845.38
2989.43 921
3410.94 1063.82
Current assets Turnover ratio
2.92
2.93
3.01
3.25
3.21
Chart No: 7
87

The current assets turnover ratio is approximately 2.93 times during the year 2006. From 2007, it started increasing .so, the current assets turnover ratio is good.
5. NET PROFIT RATIO
88
NET PROFIT RATIO = NET PROFIT /NET SALES x 100
Table No: 17 (In crores ) PARTICULAR 2005 2006 2007 2008 2009
Net profit Net Sales
26.24 2090.5
78.46 2195.62
117.38 2541.97
28.8 2989.43
40.31 3410.94
Net profit Ratio
1.25
3.57
4.62
0.96
1.18
Chart No: 8
89
INTERPRETATION
The above table obviously shows that the profitability position of the company is satisfactory. The proportion of net profit to the net sales is comparatively very low in 2005, 2008 and2009.it represent that the operating expenses of the company are more A low percentage of net profit would indicate that the company is unable to meet its financial requirement effectively.
6. STOCK TO CURRENT ASSETS RATIO
90
STOCK TO CURRENT ASSETS RATIO = STOCK / CURRENT ASSEST
Table No: 18 PARTICULAR
2005
2006
2007
( In crores ) 2008 2009
Stock Current assets
349.19 715.58
358 750.29
403.18 845.38
482.04 921
553.56 1063.82
STOCK TO CURRENT ASSETS RATIO
0.49
0.48
0.47
0.52
0.52
Chart No: 9
91

The above table infers that stock position of the company gradually decrease from 2005 to 2007. The proportion of stock to current assets is more for the year 2008 and 2009. it indicates that the stock are not fully converted into cash effectively in the last two years when compared to first three years .
7. DEBTORS TO CURRENT ASSETS RATIO
92
DEBTORS TO CURRENT ASSETS RATIO = TOTAL DEBTORS / TOTAL ASSETS Table No: 19 PARTICULAR (in crores ) 2009
2005
2006
2007
2008
Sundry debtors Total Assets
331.43 1099.45
357.81 1135.08
396.32 1243.85
398.36 1340.22
462.34 1600.63
Debtors to Current Assets Ratio
0.3
0.32
0.31
0.29
0.28
Chart No: 10
93

It is inferred from the above table debtors to current assets ratio is gradually increasing .And decreasing from 2005 2009. It clearly indicates that the cash is not properly collected from the debtors. In the year of 2006 -2009 the debtors to current assets ratio has started decreasing.
8. CASH TO CURRENT ASSETS RATIO
94
CASH TO CURRENT ASSETS RATIO = CASH / CURRENT ASSETS RATIO Table No: 20 PARTICULAR ( in crores ) 2009
2005
2006
2007
2008
Cash Current assets
34.88 715.88
34.39 750.29
40.26 845.38
36.72 921
46.02 1063.82
Cash to Current Assets Ratio
0.04
0.05
0.05
0.04
0.04
Chart No: 11
95
There is no change in cash to current assets ratio has been observed from 2005 to 2009 .This is a good sign because the company has not spent larger amount for current assets.
9. OPERATING RATIO
96
OPERATING RATIO = OPERATING EXPENSES / NET SALES Table No: 21 PARTICULAR

Operating expenses Net sales
2005
671.31 2090.5
2006
691.91 2195.65
2007
748.7 2541.97
2008
797.53 2989.43
( In crores ) 2009
859.77 3410.94
Operating Ratio
0.32
0.31
0.29
0.26
0.25
Chart No: 12
97

The table above shows that operating expenses has started from 2005 and the net sale has been increased. it clearly indicates that the company is in good position and the overall profit has been maintained.
6.3. FINDINGS
98
There is no change in share capital. The increasing reserves should have improved working capital position. Fixed assets have increased to 384.79 crores which is 0.24%. Investments have increased to 42.89 crores which is 130.01%. Cash position of MRF LTD has not improved in 2006. Current assets have increased to 49.34 crores which is 6.13% in compare 2005 to 2006. The MRF LTD financial position is not that much good in 2005 to 2006.
Investments have decreased to 0.77 crores which is 1.01%. A fixed asset has increased in 2007. Capital work in progress has increased by 21.33 crores which is 69.38 % Current assets has increased to 126.38 crores which is 14.79% when compare to 2006. Current liabilities has also increased to 18.85 crores which is 6.06% it alarms the company go for different source of finance to meet the liabilities.
The total assets of the company have been increased to 170.5%.it indicates that there is adequate cash available in 2008 has compare to 2007 for meeting working capital equipment of the company effectively. Investment has been decrease by 62.46 crores which is 81.95 and the deferred tax assets has been decrease by 2.03 crores which is 55.46% . it indicates that the working capital of the company is not satisfactory in 2008 as compare to 2008. Fixed assets have increased by 117.59 crores which is 28.05%.it indicates that the company is buying properties during 2009.
Secured loan and unsecured loan of the company is increasing year by year. This shows that the companys working capital position is not good. Current assets and current liabilities have increasing from 2007 -2009 in all absolute figures and in terms of percent of all total assets. Fixed assets have increasing year by year as 26.45, 28.57. But it is decreased in 2008 as 2009.Total assets have been decreased in small figure which shows
99
in which small figures which shows that the working capital position is not satisfactory. The overall financial position is good.
Current ratio of the year 2006, 2007, and 2008 was 1.80, 1.81, 1.73 which was lower standard r ratio of 2:1.Quick ratio indicates that for every one rupee of liabilities the company has Rs.1.70 quick assets for 2005.Debtor collection period is more during the year of 2005, 2006 and 2007.
The company has take more days to collect the due amount form the debtors. Current assets turnover ratio is more during the year of 2007, 2008 and2009. This indicates that the company is concentrated more in selling of current assets. Net profit ratio is less in 2005, 2006 and 2009. This indicates that the company has spent more amounts for expenses. Stock to current assets ratio is more in the ratio of 2008. 2008 compare to 2005, 2006, 2007. Debtors to current assets ratio is more in 2005, 2006 and 2007. Net operating ratio is less during the year of 2007, 2008 and 2009. This indicates that the company has spent large amount for the expenses.
100
6.4. SUGGESTION
1. MADRAS RUBBER FACTORY (MRF) companies showed decline trend for last 3 year. This profit is not sufficient to cover up administrative expenses of the company. Company has to increase its profit . The company try to control its expenses. So, the company can earn a minimum profit.
2. The company showed a decrease in liquid ratio. The ratio should be more than 1:1 or equal to 1:1. But, during the year of 2006, 2007, 2008 and 2009 the liquid ratio is less than 1:1. This is not a good sign.
3. Company should maintain minimum bank balance to meet the future liabilities.
4. The companys growth rate was very less during the study period. This shown the profit was very less. So, the company should control the expenses for earning the more profit.
5. Company can makes use of reserve for the purchase of properties .
101
6.5. CONCLUSION
It clearly observed that the companys profit has declined. But, it earns profit at marginal rate. The recommendation and suggestion may help the company to improve its earning Capacity through the company can achieve optimum profitability and its goodwill also. Company should try to control its expenses. By controlling expenses the company can earn maximum profit.
102
BIBLIOGRAPHY
T.S Reddy Andy Hari Prasad Reddy Management Accounting Margham Publication
I.M Pandy Financial Management Vikesh Publishing .Hpuse Pvt. Ltd
C.R Kothari Research and methodology Wishiva Prakasam Newdelhi 2004
Management accounting by (R.P. trivedi & Manoj Pankaj publications Hyd.)
Financial Management
By (I.M. Pandey) vikas publishing house ltd.
Management Accounting By (R.k. Sharma, Shashi) k.Gupta, Kalyani publication.
MRF ANNUAL REPORTS
103
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A Study On Overall Financial Performance Analysis

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CONTENTS CHAPTER ABSTRACT 1 INTRODUCTION

COMPANY PROFILE INDUSTRY PROFILE

SUMMARY OF FINDINGS SUGGESTION CONCLUSION BIBLIOGRAPHY APPENDIX

Chart Showing Sales For The Year 2006-2007

Madras Rubber Factory Ltd (MRF)

1. INTRODUCTION 1.1 GENERAL

1.2.NEED FOR THE STUDY

The need for the study is as follows:

1.3. OBJECTIVES OF THE STUDY 1. PRIMARY OBJECTIVES

To analyze the overall financial performance analysis of MRF Ltd

8. To assess the working capital employed by the MRF.

1.4. SCOPE OF STUDY

1. The activities as the sources are planned in on systematic manner.

2. It provides validity, objectives & reliability in business management.

3. It creates harmony in the relationship between the management & employee.

6. Impact of ratio analysis for MRF Ltd.

1.1. COMPANY PROFILE

4. MRF TEAM SPIRIT

1. Has proprietary interest.

5. THE PRIMARY PRODUCTS BY MRF ARE AS FOLLOWS

Heavy Duty Truck / Bus

Off the road / Earth movers

Two /Three wheeler

ARKONAM ORNIZATION MACHINARY IMPLAMENTS AND PLANT IMPLAMENTATION

2000 - DIP PLANT

1999 - EASY PLANT

1997 - TUBE PLAT

1992 - BELTING PLANT

- MAIN TYRE PLANT

ARAKONAM PLANT MAILESTONE

2005 - ISO-(TS 16949-2002)

2004- TPM (Total Productive Maintenance) KICK OFF

8. PRESENT ACHIEVEMENT & ACTIVITIES

8. PRODUCTS AND BRANCHES

3.Goa (fun school toys) 4.Pondicherry 5.Arkonam 6.Thiruvottiyur (Chennai)

MRF Ltd. "Tyres with Muscle"

Quick Facts Founder Country India

Year of Establishment Industry

1946 as a toy factory

124, Greams Road

www.mrftyres.com www.mrf-exports.com (MRF Exports)

Structure of the Industry Background

3.1. REVIEW OF LITERATURE

4.1. THEORITICAL PERSPECTIVES

PARTIES INTERESTED IN FINANCIAL STATEMENT

7. EMPLOYEES AND TRADE UNIONS

4.2. FINANCIAL STATEMENT

2. Profit loss a/c 3. Working capital 4. Ratio analysis 5. Trend analysis

2. COMMON SIZE BALANCE SHEET

3. PROFIT AND LOSS ACCOUNTS

I. GROSS WORKING CAPITAL

II. NET WORKING CAPITAL

= Current Assets / Current Liabilities

Quick Assets / Current Liabilities

3. NET PROFIT RATIO

Net Profit Ratio = Net Profit

4. DEBTORS COLLECTION PERIOD

Current Assets Turn Over Ratio = Sales / Current Ratio

Operating Ratio = Cost of Sales + Operating Expenses / Net Sales X 100

5.1. RESEARCH METHODOLOGY

The type of research used in this study is desk research.

4. DATA COLLECTION METHOD