1. INTRODUCTION TO PRECISE ENGINEERS PVT. LTD.

We are supplying components for direct export to many exporters and export houses and O.Es for
exports to Germany, Italy, Syria, U.K etc items manufactured are hobbed/spline rolled, shafts, and pins,
center pins and top link assy. Components leveling rod assy. Components flanges, gear blanks, bushes,
cast pulleys machined S.G iron castings, con rods and axles etc

1.1. ABOUT PEPL:

Suppliers and manufacturers of tractor spare parts like cross shaft, hook, fork, arm, pull rod.

1.2.

PEPL specializes:

PEPL specializes in precision machining of casting, forgings & bar stock from a variety of metal type.
We provide engineered solutions for our customers, minimizing set-up time, reducing cycle time &
scrap and providing synchronous material flow.

1.3.

Services of PEPL:

PEPL provide tailor made solutions to end users, by designing and manufacturing of Metallic and NonMetallic Bellows, Expansion Joints, Dampers, Flange Adaptors, Dismantling Joints etc through our
ethical philosophy to maintain solid bond with them by commitment in the quality, timely delivery of
our products at most competitive price and rendering after sale services at all the time

1.4.

Company Profile:

1.5.

Business type : Manufacturers/Suppliers

Year established : 1976
Members affiliates: Mohali industries association (MIA)
Standard certification: ISO 9001:2000
Product suppliers and manufacturer : tractor spare parts like cross shaft, hook, fork, arm, pull
rod.

Contact information:

Company name: Precise Engineers Pvt. Ltd

Address: plot no. E-83 industrial area, phase-8. S.A.S Nagar Mohali - 160059 Punjab, India.
Contact person : Mr. M.P Dogra (Managing Director)

1.6.

PEPL serves the following customers:

Govt. and defense/ railways
Tractors and combines
Automotives
LCVs and heavy truck
Medicare

1.7. History of precise engineers Pvt. Ltd.

Established in 1976, with years of exclusive experience, Precise Engineers Pvt. Ltd (PEPL) specializes
in precise machining of castings, forgings bar, stock items; for customers in tractors, automotives, heavy
trucks, LCVs, defense and railways.
The company is ISO 9001:2000 certified

1.8.

PEPL Capabilities overview:

PEPL is a precision CNC machining and manufacturing business that serves customers in a variety of
industries including tractors, defense, automobiles, railways, and heavy trucks.
PEPL dedicated to the principles and disciplines of six sigma quality and manufacturing facilities are
ISO 9001:2000 certified.

1.9.

Mission & vision of Precise Engineers Pvt. Ltd:

To become our customers preferred supply partners.

To achieve breakthrough performance and continuous improvement in meeting customers objectives.
To achieve global competitiveness on quality, service, delivery, and value.
To form an alliance with professionally managed innovative product manufacturers, engineering
consultants, contractors and indenting agents and importers/distributors for their sourcing and
marketing needs.

1.10.

Board of directors:

Set-up reduction team:

Members:
M.P Dogra [Engineering manager/ company director (team leader)]
Manjitsingh [Engineering/system co-ordinator/ programmer]
Tilak raj kondal [General plant foreman]

ISO 9001:2000 quality system audit team:

Members:
M.P Dogra [Engineering manager/company director (team leader)]
Balwinder Singh [Engineer, M.R/system co-ordinator]
Gautam Sharma [Engineer, Q.C, section incharge]

5s factory organization team:

Members:

M.P Dogra [Engineering manager/company director (Team leader)]

Balwindersingh [Engineer, M.r/system co-ordinator]
Bidhichand [Engineer, quality control]
R.kjoshi [Manager accounts]

2. RESEARCH METHODOLODY:
5

It can be define as a systematic and orderly procedure or process for attaining some objective.
These processes constitute a generic framework. They may be broken down in sub-processes, they
may be combined or their sequence may change. However any task exercise must carry out these
processes in one form or another. It may be description of process or may be expanded to include a
philosophically collection of theories, concept or ideas as they related to a particular discipline or
field of inquiry.

2.1.

OBJECTIVE OF STUDY:

To study the origin and growth of Precise Engineers Pvt. Ltd.

To study the financial Position and solvency position of precise engineers Pvt. Ltd.
To study the progress of the firm over a period of time.

*Time period of study three years (2010-2013)*

2.2. RESEARCH DESIGN:
It can be define as a framework for conducting research project. A research design lays the
foundation to facilitate the smooth flow of various researchers. A research design involves the
following components:
Develop a plan of data analysis.
Specify the sampling process
Construct an appropriate form of data collection
It defines the information needed
Some important characteristics of a good research design are flexibility, efficiency and
adaptability.

*A descriptive research design is used in this study*

2.3.

DATA COLLECTION:
The term data refers to qualitative or quantities attribute of a variable or set of variables. Data are
typically the result of measurement and can be basis of observation of a set of variable. Data
collection is atom used to describe a process of preparing and collectively data. For example as a
part of process of improvement or similar. The purpose of data collection is to obtained
6

information to keep on record, to make decisions about important issues, to pass information onto
others.
Data collection is the act of assembling and gathering the needed information in the context of a
specified research. There are many techniques of data collection but the way used in the present
research is the best suitable. The data required for analysis may be primary or secondary.

2.4.

SECONDARY DATA:
Secondary data is the data that have been already collected by and readily available from the other
sources. Such data are cheaper and more quickly obtainable than the primary data and also may be
available when primary data cannot be obtained at all.

2.5. ADVANTAGES OF SECONDARY DATA:

1. It Is Economical
2. It Saves Efforts and inexpensive
3. It is time saving.
4. It helps to improve the understanding of the problem.
5. It provides a basis for comparison for the data that is collected by researcher.

2.6.

DISADVANTAGES OF SECONDARY DATA

1. Secondary data is something that seldom fits in the framework of the marketing research factors.
Reasons for its on- fitting are, Unit of secondary data collection suppose you want information
on disposable income, but the data is available on gross income. The information may not be same
as we require.
2. Accuracy of data is not known.
3. Data may be outdated.

2.7.

SOURCES OF SECONDARY DATA

Books
Magazines
Research reports
Journals
Official Records of Companies
7

2.8.

2.9.

Un-official Data Banks

SOURCES USED IN THE STUDY.

Balance sheets
Annual reports
Journals
Books
Research Reports

STATISTICAL TOOLS USED IN THE STUDY:

The Statistical tools used in the study are Accounting Ratios, Bar Diagrams, Pie Charts, Line
charts etc.

2.10. LIMITATION OF THE STUDY:

It is important to state the limitation to know the extent of reliability of the study. The main
limitations are as:
Due to shortage of time it was difficult to collect data.
The study is based on secondary data, thus there are a few limits because of this.

3. INTRODUCTION OF STATEMENT FINANCIAL ANALYSIS:

Financial Statement Analysis is the classification of data in simple form given in financial statements
and compare the data with each other to find out the strong points and weakness of the business and to
take decisions for future. For instance, if all items relating to current assets are placed in one group while
all items relating to current liabilities are placed in another group, the comparison between the two
groups will provide useful information. Actually the figures given in financial statements do not speak
anything themselves. The analysis of these figures helps the interested reader by giving tongue to these
mute heaps of figures.
8

3.1.

Financial Analysis may also be explained as:

The assessment of the effectiveness with which funds which are employed in a firm,
Efficiency and profitability of its operations,
The value and safety of debtors' claims against the firm's assets.

It employs techniques such as 'funds flow analysis' and financial ratios to understand the
problems and opportunities inherent in an investment or financing decision.
In the words of Finney and Miller
Financial analysis consists in separating facts according to some definite plan,
arranging them in groups according to certain circumstances and then presenting them
in a convenient and easily read and understandable form.
In the words of John N. Myres
Financial statement analysis is largely a study of relationships among the various
financial factors in a business, as disclosed by a single set of statements and a study of
the trends of these factors as shown in a series of statements.

Particulars

March 2010

March 2011

March 2012

Revenue from
operations
Other income (II)
Total revenue
(I+II)
Expenses:
Cost of materials
consumed
work-in-progress
and stock-in-trade
Employee benefits
expense
Finance costs
Depreciation and
amortization
Other expenses

58,201,321.10

65,105,643.32

86,799,235.86

90,118,846.42

182,051.00
58,383,372.10

214,192.00
65,319,835.32

34,902.00
86,834,137.86

22,079.00
90,140,925.42

48,411,441.03

44,722,781.16

62,693,352.65

60,776,346.39

5,410,331.44

-4,820,552.88

-6,707,813.83

-3,565,869.03

3,243,034.00

3,586,067.00

4,001,062.00

4,351,504.00

3,704,310.35

4,817,510.69
2,968,908.00

3,936,070.95
4,691,587.00

4,596,527.31
4,943,239.00

3,534,504.00

14,159,546.01

18,182,717.07

19,002,840.40

Total expense
Profit before tax
Tax expense:
1. current tax
2. deferred tax
Profit/Loss
Profit(loss) from
discontinuing
operation(after
tax)
Profit(loss) for
the period

94,983,776.95
-102.212.30

65,434,259.98
-114,424.66

86,796,975.84
37,162.02

90,104,588.07
36,337.35

20,442.231
-122,654.53
-122,654.53

25,871.00
-140,295.66
-140,295.66

37162.02
37,162.02

36,337.35
36,337.35

-122,654.53

-140,295.66

37,162.02

4.1. Profit & Loss Account of Precise engineers Pvt. Ltd. (2010-2013)

Source: Annual reports of precise engineers Pvt. Ltd.

10

March 2013

36,337.35

4.2. Balance sheet of Precise Engineers Pvt. Ltd. (2010 2013)

The table below shows the consolidated Balance Sheets of precise engineers Pvt. Ltd. for four consecutive
years i.e. 2009-10, 2010-11, 2011-12 & 2012-13.

Particulars

2010

2011

2012

2013

6,002,600.00
2,004,420.00
-

6,002,600.00
2,148,840.00
-

9,002,600.00
2,186,002.76
-

9,002,600.00
2,222,340.11
-

10,079,696.54

9,666,980.00

13,031,969.36

9,130,360.36

15,224,252.01

16,336,393.54

18,657,924.21

15,964,971.96

12,210,212.00

18,412,437.54

24,094,859.68

30,629,454.63

16,341,200.35
3,112,850.12

19,682,701.31
2,234,890.46

17,220,725.65
3,037,285.69

20,054,107.84
2,258,119.04

709,1300.21

727,351.40

762,822.83

1,051,916.58

64,977,655.23

75,212,204.35

87,994,190.18

90,313,870.52

16,511,340.21
10,532,200.35

18,922,680.33
8,964,400.69

26,562,957.33
6,242,263.96

28,949,898.29
-

353,085.00

353,085.00

353,085.00

353,085.00

Equity and liabilities

1. (a)
Shareholders
funds
(a) Share capital
(b) Reserves and
surplus
(c) Money received
against share
warrants
2. Share
application
money pending
allotment
(b) Non-current
liabilities
(a) Long-term
borrowings

(c) Current liabilities

(a) Short-term
borrowings
(b) Trade payables
(c) Other current
liabilities
(d) Short-term
provisions

Total
Assets
1. Non-current
assets

(a) Fixed assets

(1) Tangible assets
(2) Capital work -inprogress
(a) Long-term loans
and advances
2. (b) Current
assets

11

(a) Inventories
(b) Trade receivables
(c) Cash and Cash
Equivalents
(d) Short term loans
and advances
(e) (c) Other
current assets

Total

30,105,533.00
5,511,034.54
531,042.01

35,319,956.00
7,922,167.97
863,074.02

38,434,522.83
12,055,809.31
1,208,767.29

42,534,938.86
13,952,581.51
22,079.88

1,433,420.12

2,866,840.34

3,136,784.46

4,501,286.98

64,977,655.23

75,212,204.35

87,994,190.18

90,313,870.52

Source: Annual reports of precise engineers Pvt. Ltd.

5. COMPARATIVE ANALYSIS:
Under comparative statement analysis, financial statements like balance sheet and income statement are
prepared in comparative form for financial analysis. The items of financial statements are shown in a
comparative form to give an idea of financial position of the business at two or more periods. As the items are
shown in a comparative form, the analysts are able to draw useful conclusions out of it. For example when sales
figure of current period is compared with the previous periods then the analysts will be able to study the trend of
sales over different period of time.
The two comparative statements are:
Comparative balance sheets
Comparative income statements

5.1.

COMPARATIVE BALANCE SHEET:

In comparative balance sheet items of two or more balance sheets of the same business concern are shown on
different dates. Changes in items between two or more balance sheets make analysts to draw conclusions about
the progress of the concern. Comparative balance sheet helps to study the aspects such as current financial and
liquidity position, long term financial position and the profitability of the concern.

Current financial position of the concern can be known from the changes in working capital of the business
firm. Working capital is the excess of current assets over current liabilities. An increase in working capital
shows the improvement of current financial position. But if the increase of working capital were mainly for the
increase of inventory due to accumulation of stock for want of customers, decrease in demand or inadequate
sales promotion then it is not a good financial position of the business.
12

5.2.

Particulars

2011

2012

Absolute
change

%
change

Equity and liabilities

Shareholders funds
Share capital
Reserves and surplus
Share application
money pending
allotment
Non-current liabilities
Long-term borrowings

Current liabilities
Short-term borrowings
Trade payables
Other current liabilities
Short-term provisions
Total liabilities
Assets
Fixed assets
Tangible assets
Intangible assets
Capital work -in-progress
Long-term loans and
advances

Current assets
Current investments
Inventories
Trade receivables
cash and cash equivalents

short term loans and

advances
Total assets

6,002,600.00
2,148,840.00

9,002,600.00
2,186,002.76

(3,000,000)
(37,162.76)

(49.97)
(1.72)

9,666,980.00

13,031,969.36

(3364989.36)

(34.8)

16,336,393.54
34,154,813.54

18,657,924.21
42,878,496.33

(2321530.67)
(8,723,682.79)

(14.2)
(25.54)

18,412,437.54
19,682,701.31
2,234,890.46
727,351.40
41057380.71
75,212,204.35

24,094,859.68
17,220,725.65
3,037,285.69
762,822.83
45115693.85
87,994,190.18

(5682422.14)
2461975.66
(802395.23)
(35471.43)
(4058313.14)
(12781985.83)

(30.86)
12.5
(35.9)
(4.8)
(9.8)
(16.9)

18,922,680.33
8,964,400.69
353,085.00

26,562,957.33
6,242,263.96
353,085.00

7640277
(2722136.73)
-

40.3
(30.36)
-

28240166.02

33158306.29

4918140.27

17.41

35,319,956.00
7,922,167.97
863,074.02
2,866,840.34

38,434,522.83
12,055,809.31
1,208,767.29
133,136,784.46

3114566.83
4133641.34
345693.27
269944.12

8.8
52.17
40
9.4

46972038.33
75,212,204.35

54835883.89
87,994,190.18

7863845.56
12781985.83

16.74
16.99

6. 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 the same
Year.

6.1.

Expenses:

Expenses
100,000,000.00
86,796,975.84

90,000,000.00

90,104,588.07

80,000,000.00
70,000,000.00

64,983,776.95

60,000,000.00

65,434,259.98
Expenses

50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
0.00
2010

Particulars
Expenses

2010
64,983,776.95

2011

2011
65,434,259.98

2012

2012
86,796,975.84

2013

2013
90,104,588.07

Interpretation:
The above figure represents the total expenses in precise engineers pvt. Ltd. for the period of four years
i.e. 2010-2013. The expenses of the company are moving in an upward direction year to year.

14

6.2.

Revenue:

revenue
100,000,000.00
86,799,236

90,000,000.00

90,140,925

80,000,000.00
70,000,000.00

64,983,777

65,319,835

60,000,000.00

revenue

50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
0.00
2010

Particulars
Revenue

2010
64,983,776.9
5

2011

2012

2011
65,319,835.32

2013

2012
86,799,235.86

2013
90,140,925.42

Interpretation:
The above figure represents the total revenue of precise engineers Pvt. Ltd. for the period of four years
i.e. 2010-2013. The revenue of the company are moving in an upward direction year to year.

15

6.3.

Inventory:

inventory
45,000,000.00

42,534,938.86
38,434,522.83
35,319,956.00

40,000,000.00
35,000,000.00
30,000,000.00

30,105,533.00
inventory

25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
2010

Particulars
Inventories

2010
30,105,533.00

2011

2012

2011
35,319,956.00

2013

2012
38,434,522.83

2013
42,534,938.86

Interpretation:
The above figure represents the inventories of precise engineers pvt. Ltd. for the period of three years
i.e. 2010-2013. The inventories of the company are moving in an upward direction year to year.

16

6.4.

Current assets:

current assets
70,000,000.00
61,010,887.23
60,000,000.00

54,835,883.89
46,972,038.33

50,000,000.00

40,000,000.00 37,581,029.67

current assets

30,000,000.00
20,000,000.00
10,000,000.00
0.00
2010

Particulars
Current
assets

2011

2010
37,581,029.6
7

2012

2013

2011
46,972,038.33

2012
54,835,883.89

2013
61,010,887.23

Interpretation:
The above figure represents the current assets of precise engineers Pvt. Ltd. for the period of three years
i.e. 2010-2013. The current assets of the company are moving in an upward direction year to year.

17

6.5.

Current liabilities:

current liabilities
60,000,000.00

53,993,598.09

50,000,000.00

45,115,693.85
41,057,380.71

40,000,000.00
32,373,194.96

current liabilities

30,000,000.00
20,000,000.00
10,000,000.00
0.00
2010

Particulars
Current
liabilities

2011

2010
32,373,194.9
6

2012

2011
41,057,380.71

2013

2012
45,115,693.85

2013
53,993,598.09

Interpretation:
The above figure represents the current liabilities of precise engineers Pvt. Ltd. for the period of three
years i.e. 2010-2013. The current liabilities of the company are moving in an upward direction year to
year.

7. Ratio analysis:
18

7.1.

Meaning of ratio:

A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the
indicated quotient of two mathematical expressions.
According to KOTLER, A ratio is the relationship of one amount to another.
For e.g. We take two variables a & b. When they are expressed as ratio of a to b; a:b or as a simple
fraction of percentage it is termed as a ratio.

7.2.

Ratio analysis:

Ratio analysis is the technique of analysis and interpretation of financial statement. In other words it is the
process of identifying the financial strength and weaknesses of the firm by properly establishing, relationships
between the items of balance sheet and profit & loss account. It is the process of establishing and interpreting
various ratios for helping in making certain decisions. However ratio analysis is not an end in itself. It is only a
means of better understanding of financial strength and weaknesses of the firm. Calculations of mere ratios do
not serve any purpose, unless several appropriate ratios are analyzed and interpreted.
According to Batty J Ratio can assist management in its basic functions of forecasting, planning
coordination, control and communication.

7.3.

Need & importance of ratio analysis:

Ratio analysis is one of the most common and important technique to analyze the financial position of the firm.
It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is
helpful tool to aid in applying judgment, otherwise complex situations.
19

1. Analyzing financial statements:

Ratio analysis is an important technique of financial statement analysis. Accounting ratios are useful for
understanding the financial position of the company. Different users such as investors, management, bankers
and creditors use the ratio to analyze the financial situation of the company for their decision making purpose.

2. Judging efficiency:
Accounting ratios are important for judging the company's efficiency in terms of its operations and
management. They help judge how well the company has been able to utilize its assets and earn profits.

3. Locating weakness:
Accounting ratios can also be used in locating weakness of the company's operations even though its overall
performance may be quite good. Management can then pay attention to the weakness and take remedial
measures to overcome them.

4. Formulating plans:
Although accounting ratios are used to analyze the company's past financial performance, they can also be used
to establish future trends of its financial performance. As a result, they help formulate the company's future
plans.

5. Comparing performance:
It is essential for a company to know how well it is performing over the years and as compared to the other
firms of the similar nature. Besides, it is also important to know how well its different divisions are performing
among themselves in different years. Ratio analysis facilitates such comparison.

7.4.

Limitations of ratio analysis:

Ratios are simple to calculate and easy to understand, they suffer from serious limitations:

1. Limited use of single ratio:

A single ratio usually does not convey much of a sense. To make a better interpretation a number of
ratios have to be calculated, which is likely to confuse the analyst then help him in making meaningful
conclusion.
20

2. Lack of adequate standard:

There are no rule accepted standards on rules of thumb for all ratios which can be accepted as norms.
It renders interpretation of the ratios difficult.

3. Inherent limitation of accounting:

Like financial statements ratios also suffer from the inherent weakness of accounting records such as
their historical nature. Ratios of the past are not necessarily true indications of the future.

4. Change of accounting procedure:

Change in accounting procedure by a firm often makes ratio analysis misleading e.g. a change in the
valuation of methods of inventories from FIFO to LIFO increases the cost of sales and reduces
considerably the value of closing stock which makes stock turnover ratio to be lucrative and an
unfavorable gross profit ratio.

5. Window dressing:
Financial statements can easily be window dressed to prevent a better picture outside. Hence one has to
be very careful in making a decision from ratios calculated from such financial statements. But it may
be very difficult for an outsider to know about the window dressing made by a firm.

6. Personal bias:
Ratios are only means of financial analysis and not an end in itself. Ratios have to be interpreted and
different people may interpret the same ratio in different ways.
7.

Incomparable:
Not only industries differ in their nature but also the firms of the similar business widely differ in their
size and accounting procedures. It makes comparison of ratios difficult and misleading. Moreover
comparisons are made difficult due to differences in definition of various financial terms used in ratio
analysis.

8. Absolute figures distorted:

Ratio devoid of absolute figures may prove distort as ratio analysis is primarily quantitative analysis
and not a qualitative analysis.

9. Price level changes:

While making ratio analysis no consideration is made to the changes in price levels and this makes the
interpretation of ratios invalid.

10.Ratios no substitutes:
21

Ratio analysis is merely a tool of financial statement. Hence, ratios become useless when separated
from the statements from which they are computed.

8. Classification, analysis & interpretation of ratios:

8.1.

Functional classification of ratios:

Liquidity
ratios

Solvency/leverage
ratios

22

1. Current
Ratio
2. Quick
Ratio

1. Debt Equity Ratio

2. Equity Ratio
3. Solvency Ratio

On the basis of liquidity :

Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations.
These ratios measure the ability of a company to pay off its short-term liabilities when they fall due.
The liquidity ratios are a result of dividing cash and other liquid assets by the short term borrowings and current
liabilities. They show the number of times the short term debt obligations are covered by the cash and liquid
assets. If the value is greater than 1, it means the short term obligations are fully covered.

LIQUIDITY RATIOS

i)

Current ratio:
The current ratio indicates a company's ability to meet short-term debt obligations. The current ratio
measures whether or not a firm has enough resources to pay its debts over the next 12 months. Potential
creditors use this ratio in determining whether or not to make short-term loans. The current ratio can also
give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash.
The current ratio is also known as the working capital ratio.

Current ratio

= CURRENT ASSET/ CURRENT LIABILITIES

23

Financial
years

2009-10

2010-11

2012-13

2013-14

Current
ratio

1.16%

1.14%

1.21%

1.12%

Current
assets

37,581,029.67

46,972.038.33

54,835,883.89

61,010,887.23

Current
liabilities

32,373,194.96

41,057,380.71

45,115,693.85

53,993,598.09

current ratio
1.22%

1.21%

1.20%
1.18%
1.16%

1.16%
current ratio

1.14%

1.14%

1.12%

1.12%
1.10%
1.08%
1.06%
2009-10

2010-11

2011-12

2012-13

Interpretation: A current ratio of 2:1 is considered an ideal ratio, if it is less than 2:1, it indicates lack of
liquidity. Higher current ratio shows the ability of the firm to pay short- term liabilities.
ii)
Liquid ratio:
The liquid ratio is a measure of a company's ability to meet its short-term obligations using its most
liquid assets (near cash or quick assets). Liquid assets include those current assets that presumably
can be quickly converted to cash at close to their book values. Liquid ratio is viewed as a sign of a
company's financial strength or weakness; it gives information about a companys short term
liquidity. The ratio tells creditors how much of the company's short term debt can be met by selling
all the company's liquid assets at very short notice.

Liquid ratio = quick assets/current liabilities

Where, liquid Assets = Current assets - (stock+ prepaid expenses)
24

Financial
years

2009-10

2010-11

2011-12

2012-13

Liquid
ratio

0.23%

0.28%

0.36%

0.34%

Liquid
assets

7,475,496.67

11,652,082.33

16,401,361.06

184,759,48.37

Current
liabilities

32,373,194.96

41,057,380.71

45,115.693.85

53,993,598.09

liquid ratio
0.40%

0.36%

0.35%
0.28%

0.30%
0.25%

0.34%

0.23%

liquid ratio

0.20%
0.15%
0.10%
0.05%
0.00%
2009-10

2010-11

2011-12

2012-13

Interpretation:
Quick ratio of 1:1 is considered as an ideal ratio. This ratio is better test of short-term debt paying capacity
of the business firm than the current ratio. A little higher value of this ratio is considered favorable.

Solvency/leverage ratios
i)

Debt equity ratio:

This ratio also known as external- internal equity ratio is calculated to measure the relative claims of
outsiders and the owners against the firm asset. This ratio indicates the relationship between external
equities or the outsiders funds and the internal funds or the stake holders funds.

Debt equity ratio= long term debt/shareholder funds

Financia
l years

2009-10

2010-11
25

2011-12

2012-13

Debt
equity
ratio

4.04%

5.036 %

4.032%

5.43%

External
equity

32,373,194.96

41,057,380.71

45,115,693.85

61,010,887.23

Internal
equity

8,007,020.00

8,151,440.74

1,118,8602.76

11,224,940.11

debt equity ratio

6.00%
5.00%
4.00%

5.43%

5.04%
4.04%

4.03%
debt equity ratio

3.00%
2.00%
1.00%
0.00%
2009-10

2010-11

2011-12

2012-13

Interpretation:
Debt-equity ratio of the firm is highest in 2013 which indicates that amount from debtors are collected
more quickly. It shows less risk of bad debts, lesser expenses of collection and more liquidity.

ii)

Proprietary ratio:
This ratio indicates the proportion of the total assets which are financed by owners. It is calculated by
dividing proprietors funds by total assets.

Proprietary (equity) ratio = shareholder funds/total assets

Financial years

2009-10

2010-11

2011-12

2012-13

Proprietary
ratio

0.123%

0.10%

0.127%

0.124%

26

Share
holder
funds

8,007,020.00

Total
assets

64,977,655.23

81,51,440.74

11,188,602.76

11,224,940.11

75,212,204.35

87,994,190.18

90,313,870.52

proprietary ratio
0.14%

0.13%

0.12%

0.12%

0.12%
0.10%

0.10%

proprietary ratio

0.08%
0.06%
0.04%
0.02%
0.00%
2009-10

2010-11

2011-12

2012-13

Interpretation:
This ratio shows the extent to which shareholders own the business. Proprietary ratio of 1:1 is
considered as an ideal ratio.

iii)

Solvency ratio:
This ratio is a small variant of equity ratio and can be simply calculated. This ratio indicates the
relationship between the total liabilities to outsiders to total assets of the firm

Solvency ratio = total liabilities to outsiders/ total assets

Financial
years

2009-10

2010-11

2011-12

2012-13

Solvency
ratio-

0.73%

0.75%

0.72%

0.77%

27

Total
liabilities

47,597,446.7

56,739,158.25

63,773,618.06

69,958,570.05

Total
assets

64,977,655.3

75,212,204.35

87,994,190.18

90,313,870.52

solvency ratio
0.78%
0.77%
0.76%
0.75%
solvency ratio

0.74%
0.73%
0.72%
0.71%
0.70%
0.69%
2009-10

2010-11

2011-12

2012-13

Interpretation:
This ratio helps to ascertain the ability of the firm to pay its long-term liabilities in time. Generally, lower the
ratio, more satisfactory or stable is the long-term solvency position of a firm. Here solvency ratio of the firm has
remained more or less constant over the period of analysis which indicates a stable solvency position of the firm
in the long term.

Suggestions:
The profit Of the Company Is not in a good Position For That company has to Take Alternative Actions such
as:
i.
ii.
iii.
iv.

Production, and control in expenses like, administrative, selling etc.

The firms have low current ratio so it should increase its current ratio where it can meet its short
term obligation smoothly.
. Liquidity ratio of the firm is not better liquidity position in over the three years. So i suggested
that the firm maintain proper liquid funds like cash and bank balance.
It should enhance its employees efficiency, more training needed to its employees in order to
increase its production capacity and minimize mistakes while performing the tasks, also more safety
precaution need to implement to the employees who directly working on sugar production process.
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v.
vi.
vii.

The firm is having high inventory so i suggested that the firm must reduce the stock by increase
sales.
The direct material cost of the firm is very high so its my advice to the firm that to decrease the
direct material cost by purchasing raw material from the other suppliers.
The firms should have proper check on the manufacturing process of the plant.

29

Conclusion :This project of financial statement analysis in the production concern is not merely a work of the project. But a
brief knowledge and experience of that how to analyze the financial performance of the firm. The study
undertaken has brought in to the light of the following conclusions. According to this project I came to know
that from the analysis of financial statements it is clear that precise engineer Ltd. Have been incurring
loss during the period of study. So the firm should focus on getting of profits in the coming years by taking care
internal as well as external factors

30