Venkatesh Project

LIQUIDITY MANAGEMENT
REVIEW OF LITERATURE
LIQUIDITY:
Liquidity is an attribute that signifies the capacity to meet financial obligation as
and when required. According to Oxford Advandictionary, Liquidity is The state of
owning things of value that can easily be exchanged for Cash.
Liquidity management is the most essential component of financial management. It
plays most dominant role in the successful functioning of an enterprise Liquid assets may
be defined as the money and assets that are readily convertible into money. Different
degree liquidity. Money itself, by definition, the most liquid of assets, other assets have
varying degrees of liquidity, depending on the most liquid of they can be turned into cash.
The study focus on the most liquid assets of the company, cash and marketable securities.
Liquidity management involves determining the total amount of their two types of assets
the company will hold. The day-to-day problem of liquidity management consists of the
highly important task of finding sufficient cash to meet current obligations.
A firm should ensure that it does not suffer from lack of liquidity, and also that it
is not too highly liquid. The failure of the company to meet its obligations, due to lack of
sufficient liquidity, will result in bad credit image, loss of creditors confidence, or even
in lawsuits resulting in the closure of the company. A very high degree of liquidity is also
had; idle assets earn nothing. The firms fund will be unnecessarily tied up current assent
management. It is very important for maintaining minimum liquidity position in the firm
for profitability, so that company would maintain the liquidity in their business.
Effective liquidity management is one of the requirements for the survival of an
organization. Various components of working capital should be managed in such a way
that the organization is able to maintain appropriate working capital.
Adequate working capital enables an organization to meet its obligations in time. It
avoids the organization for making payment of unnecessary interests to the creditors. The
firm has to invest enough funds in current assets for generating adequate sales capacity;
there should be proper quantity & quality of inventories for maintaining and improving
sales capacity. Working capital can be assumed as a lifeline of every concern. Without
RCR Institutes of Management & Technology- Tirupati
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adequate working capital, no progress is possible; inadequate working capital leads to

shortage of raw-materials & underutilization of machinery & finally failure of business.
The relationship between capacity utilization and inventory investment. Existing
stock of inventories was expected to adjust to the desired levels. Thus the variable,
existing stock of inventories, was essential to be negatively related with the desired stock.
The result was that there is positive relation among the ratio of inventory to sales and
inventory investment. High ratio of stocks to sales in the past suggests requirement of
high levels of inventories in the past and promising high investment in inventories in the
current period also.
Working capital originated because of the global delay in making payment for
purchase of raw material and receiving amount for the sale of finished product. He
recognized that working capital can be reduced through most fashionable information
from computers and improved professional ability of management. Reduction in length of
global delay can lead decreased working capital. Global delay can be minimized through
favorable redistribution of this global delay among the different delay centers.
Debt was divided into long-term debt and short-term debt. Short-term debt is
suggested to be used instead of long-term debt whenever their use would lower the
average cost of capital to the firm. The study also advised a business to hold short-term
marketable securities only after meeting short-term debt obligations. They further
suggested that current assets holding to be strengthened to the point where marginal
returns on increase in these assets would equal to the cost of capital required for financing
such increases
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INTRODUCTION:
Accounting is the process of identifying, measuring and communicating economic
information to present informed judgments and decisions by users of the information. It
involves recording, classifying and summarizing various business transactions.
LIQUIDITY:
Liquidity is an attribute that signifies the capacity to meet financial obligation as
and when required. According to Oxford Advandictionary, Liquidity is The state of
owning things of value that can easily be exchanged for Cash.
Liquidity management is the most essential component of financial management.
It plays most dominant role in the successful functioning of an enterprise Liquid assets
may be defined as the money and assets that are readily convertible into money. Different
degree liquidity. Money itself, by definition, the most liquid of assets, other assets have
varying degrees of liquidity, depending on the most liquid of they can be turned into cash.
The study focus on the most liquid assets of the company, cash and marketable securities.
Liquidity management involves determining the total amount of their two types of assets
the company will hold. The day-to-day problem of liquidity management consists of the
highly important task of finding sufficient cash to meet current obligations.
A firm should ensure that it does not suffer from lack of liquidity, and also that it is
not too highly liquid. The failure of the company to meet its obligations, due to lack of
sufficient liquidity, will result in bad credit image, loss of creditors confidence, or even
in lawsuits resulting in the closure of the company. A very high degree of liquidity is also
had; idle assets earn nothing. The firms fund will be unnecessarily tied up current assent
management. It is very important for maintaining minimum liquidity position in the firm
for profitability, so that company would maintain the liquidity in their business.
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RATIO ANALYSIS:
The ratio analysis is one of the powerful tools of financial analysis. A ratio is
defined as the indicated quotient of two mathematical expressions and as the.
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationships between the items of the
balance sheet and profit and loss account. Financial analysis provides reliable
financial information to management of the firm and to parties outside the firm, viz.,
owners, creditors, investors and others.
Liquidity ratios measure the firms ability to meet its current obligations
effectively and profitability ratios measure overall performance and effectiveness of the
firm.
Liquidity ratios are calculated on the basis of

various items of the balance sheet. Therefore,
they are also called balance sheet ratios.
Profitability ratios are calculated on the basis of
various items of the financial statements of the
company.
In financial analysis, the technique of ratio analysis is used to evaluate the
financial performance of the company. This study is usually carried out to find the
liquidity and profitability positions of the madras cement Ltd., and analyze the correlation
between liquidity and profitability. The study includes selective liquidity ratios and
profitability ratios, which are used as the benchmark for analyzing the tradeoff between
liquidity and profitability of the company and to evaluate its trade-off between liquidity
and profitability.
Relationship between two or more things. In financial ratios are used as a yard stick for
evaluation
financial
condition
and
performance
of
the
firm
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1. CURRENT RATIO:
Current Ratio used to measures whether or not a firm has enough resources to
meet its short-term obligation. Current Ratio defined as the relationship between current
assets and current liabilities. This ratio, also known as working capital ratio, is a measure
of general liquidity and is most widely used to make the analysis of a short-term financial
position (or) liquidity of a firm.
This ratio is calculated as follows:
Current Ratio
Current Assets
Current Liabilities
The current ratio is an indication of a firm's liquidity. Acceptable current ratios

vary from industry to industry. In many cases a creditor would consider a high current
ratio to be better than a low current ratio, because a high current ratio indicates that the
company is more likely to pay the creditor back. Large current ratios are not always a
good sign for investors. If the company's current ratio is too high it may indicate that the
company is not efficiently using its current assets or its short-term financing facilities.
A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time as and when they become due. On the other
hand a relatively low current ratio represents that the liquidity of a firm is not good and
the firm shall not able to pay its current liabilities in time. Two to one ratio is referred
to as a bankers rule of thumb (or) arbitrary standard of liquidity for a firm.
If current liabilities exceed current assets the current ratio will be less than 1. A
current ratio of less than 1 indicates that the company may have problems meeting its
short-term obligations. Some types of businesses can operate with a current ratio of less
than one however. If inventory turns into cash much more rapidly than the accounts
payable become due, then the firm's current ratio can comfortably remain less than
one. Inventory is valued at the cost of acquiring it and the firm intends to sell the
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inventory for more than this cost. The sale will therefore generate substantially more cash
than the value of inventory on the balance sheet. Low current ratios can also be justified
for businesses that can collect cash from customers long before they need to pay their
suppliers.
Current assets include cash and those can be easily converted into each with in a
short period of time generally, one year such as marketable securities, debtors,
inventories, work- in-progress etc. current liabilities are those obligations which are
payable within a short period of times generally one year and include outstanding
expenses, bills payable, sundry creditors, accrued expenses short term advances, income
tax etc.
2. QUICKRATIO:
Quick ratio is known as acid test ratio or liquid ratio is a more rigorous test of
liquidity then the current ratio. The term liquidity refers to the ability of a firm to pay its
short-term obligations as and when they become due. The two determinates of currents
ratio as a measure of liabilities. One current assets and current liabilities. Quick ratio may
be current or liquid asset because they can not be converted into cash immediately
without a sufficient loss of value. The quick ratio can he calculated by dividing the total
of the quick assets by total current liabilities. As a rule of thumb (or) as a convention
quick ratio of 1: 1 is considered satisfactory. A company with a quick ratio of less than 1
cannot currently fully pay back its liabilities.
Quick Ratio
Liquid Assets
Current Liabilities
(Liquid Assets = Cash and Cash Equivalent + Marketable Securities + Accounts

Receivable)
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The inventory is excluded from the sum of assets in the quick ratio, but included in
the current ratio. Ratios are tests of viability for business entities but do not give a
complete picture of the business' health. If a business has large amounts in accounts
receivable which are due for payment after a long period (say 120 days), and essential
business expenses and accounts payable due for immediate payment, the quick ratio may
look healthy when the business is actually about to run out of cash. In contrast, if the
business has negotiated fast payment or cash from customers, and long terms from
suppliers, it may have a very low quick ratio and yet be very healthy.
The acid test ratio should be 1:1 or higher, however this varies widely by
industry. In general, the higher the ratio, the greater the company's liquidity (i.e., the
better able to meet current obligations using liquid assets).
3. ABSOLUTE LIQUIDITY RATIO:

Absolute Liquidity extends the logic further and eliminates accounts receivable
(sundry debtors and bills receivables) also. Though receivables are more liquid as
comparable to inventory but still there may be doubts considering their time and amount
of realization. Therefore, absolute liquidity ratio relates cash, bank and marketable
securities to the current liabilities. Since absolute liquidity ratio lays down very strict and
exacting standard of liquidity, therefore, acceptable norm of this ratio is 50 percent (or)
0.5 (or) 1:2. It means absolute liquid assets worth one half of the value of current
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liabilities are sufficient for satisfactory liquid position of a business. However, this ratio is
not as popular as the previous two ratios discussed.
Absolute Liquidity Ratio
Absolute Liquid Assets

Current Liabilities
(Absolute Liquid Assets is sum of Cash, Bank and Marketable Securities)

The reason of computing absolute liquid ratio is to eliminate accounts receivables from
the list of liquid assets because there may be some doubt about their quick collection.
This ratio is useful only when used in conjunction with current ratio and quick ratio.
An absolute liquid ratio of 0.5:1 is considered ideal for most of the companies.
4. NET WORKING CAPITAL RATIO:

Net working capital is financial metric a business owner should use in order to
help measures the cash and operating liquidity position of the business. It is the sum of all
current assets and current liabilities. It is a measure of the short- term liquidity of a
business, and can also indicates the ability of company management to utilize assets in
efficient manner. It is an important metric to management, vendors and general creditors
because it shows the firms short-term liquidity and ability to pay off its current liabilities
with current assets.
The difference between current assets and current liabilities excluding short-term
bank bon-owing is called Net Working Capital. Net Working Capital is sometimes used to
measure of a firms liquidity. It is considered that, between two firms, the one having the
larger Net Working Capital has the greater ability to meet its current obligations. The
measure of liquidity is a relationship between current assets and current liabilities. It
indicates the efficiency of the company in utilizing the working capital in business.
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The net working capital metric is directly related to the current, or working capital
ratio, so called because if a company as more short-term assets than liabilities it can
work. The current ratio is a liquidity and efficiency ratio that measures a firms ability
to pay off its short term liabilities with its current assets.
Working Capital Turnover Ratio
Working Capital
Net Sales
(Working capital is Current Assets minus Current Liabilities)
5. CURRENT ASSETS TO FIXED ASSETS RATIO:

The finance manager should determine the optimum level of current assets so that
the wealth of shareholders is maximized. A company needs current assets and fixed assets
to achieve the desired level of output. If the output and sales increase, the need for current
assets increases. Increases in currents are not proportionate to the output. The level of the
current assets can be measured by relating to fixed assets. The ratio of the company
indicates that the company has followed conservative current assets policy. Which shows
that the company has liquidity and low risk.
Current Assets to Fixed Assets Ratio
Current Assets
Net Fixed Assets
6. CURRENT ASSETS TO TOTAL ASSETS RATIO:
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It expresses the fund investment in working capital and the proportion of current
assets to total assets. This ratio helps to assess the importance of current assets in total
assets. Higher proportion reveals that the company gives more importance to working
capital investments and vice versa.
Current Assets to Total Assets Ratio
Current Assets
Total Assets
The proportion of the total assets to current assets are expressed for the invested fund
against the working capital. Lower proportion against the current assets into total assets
reveals the company gives less importance to working capital investments.
7. RETURN ON IN VESTMENT:
Return on investment is also stated as Return on capital employed. It is used
measures the gain or loss generated on an investments relative to the amount of money
invested. Return on investment is usually expressed as percentage.
Return on capital employed is used to prove the value of the business gains from its
assets and liabilities. Companies create values whenever they are able to generate returns
on capital above the weighted average cost of capital. A business which owns lots of land
will have similar return on capital employed compared to a business which owns little
land but makes same profit.
The ratio is an indicator of the earning capacity of capital employed in the
business. It reflects the overall efficiency with which capital is used. The ratio is a helpful
tool for making capital budgeting decisions. A project yielding higher return is favored.
It basically can be used to show how much a business gaining or losing for its
investment or capital employed.
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Return on Investment
Earning Before Interest and Tax

X100
Capital Employed
8. RETURN ON SHARE HOLDERS FUND:

The share holders are the owners of the business. They investing their funds in
business organization by way of purchasing the shares and securities.
Return on share holders investment is popularly known as ROT return on
shareholder / proprietors funds is the relationship between net profits (after interest and
tax) and the proprietors funds. When it is desired to work out the profitability of the.
company from the share holders point of view.
It is used to identify the share in net profit of the organization.
Return on Shareholders Fund
Net Profit Interest and Tax

X100
Share holders Fund
9. RETURN ON EQUITY:
The return on equity (ROE) is the amount of net income returned as a percentage
of shareholders equity.
Return on equity measures a corporations profitability by
revealing how much profit a company generates with the money of shareholders invested.
Common or ordinary shareholders are entitled to residual profits the rate of
dividend is not fixed. The earnings may be distributed to shareholders or retained in the
business. Nevertheless, the net profit after taxes represents their return. A return on
shareholders equity or net worth will include paid-up share capital, share premium and
reserves and surplus less accumulated losses. Net worth can also found by subtracting
total liabilities from total assets.
Return on Equity
Net Profit After Tax

X100
Net Worth
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(Net Worth can be treated as shareholders equity)
10. RETURN ON TOTAL ASSETS:

This ratio is calculated to measure the profit after tax against the amount invested
in total assets to ascertain whether assets are being utilized properly or not. It is calculated
has under.
Return on Total Assets
Profit After Interest and Tax

X100
Total Assets
Above ratio used to determine the return on the total assets which includes
current assets and non-current assets employed.
11. GROSS PROFIT RATIO:

The first profitability ratio in relation to sales is the gross profit ratio. The gross
profit ratio reflects the efficiency of management in producing each unit of the product.
This ratio indicates the average between the cost of goods. sold and the sales revenue. A
high gross profit ratio relative to the industry average implies that the firm is able to
produce at relatively lower cost.
It considers the profits generated from sale of products or services before selling
and administration expenses. It is used to examine the ability of a business to create
sellable products in cost effective manner.
A high gross profit ratio is a sign of good management. A gross profit ratio may
increase due to any factors. A low gross profit ratio reflects higher cost of goods sold due
to firms inability to purchase raw materials at favorable terms, inefficient utilization of
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plant and machinery, or over-investment in plant and machinery, resulting in higher cost
of production.
Gross Profit Ratio
Gross Profit
X100
Sales
12. OPERATING RATIO:

Operating ratio establishes the relationship between the cost of goods sold and
other operating expenses with sales. The ratios show the percentage of sales absorbed by
cost of goods sold and operating expenses. A lower ratio is more favorable as it would
leave a higher margin for operating profit. Operating expenses includes selling and
distribution expenses and administration expenses.
Operating Ratio
Operating Cost
X100
Net Sales
13. OPERATING PROFIT RATIO:

This ratio establishes the relationship between operating profit and sales and it is
calculated as under.
Operating net profit ratio is calculated by dividing the operating net profit by sales. This
ratio helps in determining the ability of the management in running the business
Operating Profit Ratio
Profit Before Interest and Depreciation and Taxes

X100
Total Sales
OR
Operating profit ratio = (Operating profit / Net sales) 100

Operating profit = Gross profit - Operating Expenses
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OR
Operating profit = Net sales - Operating cost
OR
Operating profit= Net sales - (Cost of goods sold + Administrative and office expenses +
Selling and distribution exp.)
OR
(Net profit + Non-operating expenses) - (Non-operating incomes)
Any above mentioned formulas can be used for the calculation of operating profit ratio.
14. NET PROFIT RATIO:
It measures the managements ability to operate the business with sufficient
success, not only, to recover from revenues of the period, the cost of merchandise or
service, the expenses of operating the business and the cost of the burrowed funds, but
also to leave a margin of reasonable compensation to the owners for providing their
capital at risk. It is expressed as ratio of net profit to sales.
Net Profit
Net Profit After Taxes

X100
Net Sales
15. EARNING PER SHARE:

This helps in determining the market price of equity shares of the company and in
estimating the companys capacity to pay dividend to its equity Shareholders. If there are
both preference and equity share capitals, then out of net income first of all preference
dividend should be deducted in order to find out the net income available for equity
shareholders.
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Earning Per Share
Net Profit After Taxes

X100
Number of Equity Shares
16. PAYOUT RATIO:

This ratio indicates as to what proportion of earning per share has been used for
paying the dividend and what has been retained for plugging back. This ratio is very
important from share holders point of view as it tells that if a company has used whole or
substantially the whole of its earning for paying dividend and retained nothing for future
growth and expansion purposes, then there will be very less chances of capital
appreciation in the price of shares of such company. In other words, an investor who is
more interested in capital appreciation must look for the company having low payout
ratio.
Payout Ratio
Dividend per Enquity Share

X100
Net Profit After Tax and Preference Dividend
STATISTICAL ANALYSIS
The statistical analysis of data requires a number of closely related operations
such as establishment of categories the application of these categories to raw data through
coding tabulations and then drawing statistical inferences. The unwieldy data should
necessarily be condensed into a few manageable groups and tables for further analysis.
Statistical analysis may help the researcher classify the data into some. purposeful
arid useable categories. In the process of statistical analysis, relationship or difference
supporting or confluent with original or new hypothesis should be subjected to statistical
test of significance to determine with what validity data can be said to indicate any
conclusions.
The financial viability of small companies depends on their ability to meet sales
demands and collect receivables from the sales of goods and provision of services. The
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efficiency of debt recovery plays the fundamental role in determining the liquidity of a
small business. Shortages of cash in the company are rarely subsidized not from external
sources but most often from the owners own funds that such shortages are made up,
including the amounts previously accumulated as a result of the so-called excess liquidity.
The main purpose of the article is the hypothesis that application of statistical analysis in
liquidity management can be a useful tool in effective debt collection in an enterprise.We
looked at the monthly or short-term liquidity of a small business and its impact on the
defined performance metrics of debt collection. The analytical tool is a dynamic
econometric model that describes the impact of the efficiency of recovery for liquidity in
small business.
The statistical techniques adopted .to draw statistical inference and conclusions about the
study may include the following.
ARITHMETIC MEAN:
The mean or average when the context is clear, is the sum of a collection of
numbers divided by the number of numbers in the collection. The collection is often a set
of results of an experiment, or a set of results from a survey. The term "arithmetic mean"
is preferred in some contexts in mathematics and statistics because it helps distinguish it
from other means, such as the geometric mean and the harmonic mean.
The most popular and widely used for representing the entire data by One value is
what most laymen call an average and what the statistical call the arithmetic mean an
average is a single value selected from a group of values to describe them in mean is
obtained by adding together all the items and by dividing this total by number of items it
can be calculated as follows.
It is most commonly used and readily understood measure of central tendency. It is
an statistical tool, used to measure central tendency of an individual values.
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Xi
i 1
N
Where,
X
Arithmetic mean
Sum of i value of the variable X
Number of items
STANDARD DEVIATION:
The standard deviation of a random variable, statistical population, data set,
or probability distribution is the square root of its variance. It is algebraically simpler,
though in practice less robust, than the average absolute deviation. A useful property of
the standard deviation is that, unlike the variance, it is expressed in the same units as the
data. There are also other measures of deviation from the norm, including mean absolute
deviation, which provide different mathematical properties from standard deviation.
In addition to expressing the variability of a population, the standard deviation
is commonly used to measure confidence in statistical conclusions. For example,
the margin of error in polling data is determined by calculating the expected standard
deviation in the results if the same poll were to be conducted multiple times. This
derivation of a standard deviation is often called the "standard error" of the estimate or
"standard error of the mean" when referring to a mean. It is computed as the standard
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deviation of all the means that would be computed from that population if an infinite
number of samples were drawn and a mean for each sample were computed. It is very
important to note that the standard deviation of a population and the standard error of a
statistic derived from that population (such as the mean) are quite different but related
(related by the inverse of the square root of the number of observations). The reported
margin of error of a poll is computed from the standard error of the mean (or alternatively
from the product of the standard deviation of the population and the inverse of the square
root of the sample size, which is the same thing) and is typically about twice the standard
deviationthe half-width of a 95 percent confidence interval.
In science, researchers commonly[citation needed]report the standard deviation
of experimental data, and only effects that fall much farther than two standard deviations
away from what would have been expected are considered statistically significant
normal random error or variation in the measurements is in this way distinguished from
likely genuine effects or associations. The standard deviation is also important in finance,
where the standard deviation on the rate of return on an investment is a measure of
the volatility of the investment.
When only a sample of data from a population is available, the term standard
deviation of the sample or sample standard deviation can refer to either the abovementioned quantity as applied to those data or to a modified quantity that is an unbiased
estimate of the population standard deviation (the standard deviation of the entire
population).
The standard deviation concept was introduced by Karl Pearson in 1823. It is the
most widely used measure of series. Dispersion is the measurable of studying the several
of the items. The standard deviation is also known as root mean square deviation for the
reason that it is the square deviation from the arithmetic mean.
It is calculated as
d d
2
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Standard Deviation
((Xi-X) i.e. Deviation of the variable Xi from mean X
Number of items
Data dispersion of standard deviation:-
KARL PEARSONS CO-EFFICIENT OF CORRELATION:

The Pearson product-moment correlation coefficient (sometimes referred to
as the PPMCC or PCC or Pearson's r) is a measure of the linear dependence between
two variables X and Y, giving a value between +1 and 1 inclusive, where 1 is total
positive linear correlation, 0 is no linear correlation, and 1 is total negative linear
correlation.
Several sets of (x, y) points, with the correlation coefficient of x and y for each
set. Note that the correlation reflects the non-linearity and direction of a linear
relationship (top row), but not the slope of that relationship (middle), nor many aspects of
nonlinear relationships (bottom). N.B.: the figure in the center has a slope of 0 but in that
case the correlation coefficient is undefined because the variance of Y is zero.
Pearson's correlation coefficient is the covariance of the two variables divided
by the product of their standard deviations. The form of the definition involves a "product
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moment", that is, the mean (the first moment about the origin) of the product of the meanadjusted random variables; hence the modifier product-moment in the name.
Karl Pearsons co-efficient of correlation is most widely used measure of
correlation between two series and is denoted by the symbol r, it is universally used for
describing the degree of correlation between two series. This method is to be applied only
where deviations of items are taken from mean and not from assumed mean. The formula
for computing Karl Pearsons co-efficient of con-elation is given below.
R
XY
X2 X X2
r
Pearson co-efficient of con-elation
The value of the co=efficient of correlation as obtained by the above formula shall always
lie between 1, when r = 1 it means there is perfect correlate on between the variables
When r = - 1 it means there is perfect negative con-elation between the variables. When r
0 it means there is no relationship between the two variables However in practice the
value of r may lie between +2 and -1.
NEED FOR THE STUDY

The need of this study is to analyze the tradeoff between two variables such as
liquidity and profitability of SRIKALAHASTI PIPES Ltd., maintain an optimum tradeoff
among these variable for improving liquidity and profitability position of the company.
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OBJECTIVES OF THE STUDY
To evaluate financial performance of SRIKALAHASTI PIPES Limited (SPL).
To know the liquidity position of SRIKALAHASTI PIPES Limited (SPL).
To find out the profitability position of SRIKALAHASTI PIPES Limited (SPL).
To assess the correlation between liquidity and profitability.
To offer suitable suggestions based on the findings of study.
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SCOPE OF THE STUDY

The scope of the study is restricted to five years only. This study is mainly
concerned with liquidity and profitability analysis of SRIKALAHASTI PIPES Ltd.,
selective accounting ratios such as liquidity ratios and profitability of the company. This
study may help SRIKALAHASTI PIPES Ltd., to manage its financial resources effective
by determining an optimal trade-off among liquidity and profitability of the company.
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LIMITATIONS OF THE STUDY
The study was limited to only five years.
The study is purely based on secondary data which were then primarily
from published annual reports of SRIKALAHASTI PIPES Ltd.
The study is not completely generalized because limited ratios are only
calculated based on the financial information given by the company.
The interception of accounting ratios is only based on assumptions of

the researcher due to lack of fixed standard or rule of thumb.
The accounting ratios calculated may also suffer from the inherent
weakness of accounting data provided by the company.
The researcher may be provided with decorative figures because the

company may not disclose actual to the public.
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RESEARCH METHODOLOGY
SECONDARY: Company annual reports and other necessary financial
statements.
Data is collected completely from the financial annual reports of the
company.
WEB SITE: www.lancoindustrie.com
STUDY PERIOD: June 10th to July 28th 2016
TOOLS OF ANALYSIS: Ratio analysis.
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DATA PRESENTATION: The data collected for the study is presented in the
form of tables and simple bar diagrams.
INDUSTRY PROFILE
Cement, the wonder material for binding stones and bricks, together has
contributed to the development of modern civilization in a number of ways, due to which
is known as the builder of modem civilization. It is a grayish powdered lime stones as the
basic material, mixed with clay, culminated to clinker; gypsum added ground to a
powdered cement
In past historic times lime stone was roasted in hot fire to have a crude ibrm of
Jime which when mixed with water formed mortar. The use of burnt system and also lime
dates back to the fix Egyptians. The Greek civilization used some form of mortal but
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Romans developed it. The cement has thus form the very early era contributed to the
advancement of the civilization in general measure.
When one speaks of cement today it invariably refers to Portland cement only.
Portland cement has its origin in England bud until 19th century mixture of limestone
with possalona a type of volcanic earth was known as cement. It was JOSEPI-1 ASPDTN
who in 1924 took out the first sample of cement, being an improvement in the modes of
producing artificial stone and it came to bear the Portland cement. The first cement
factory was established around 1890 by Jinn at both Canada and Australia, while it was
found in 1884 in New Zealand.
CEMENT INDUSTRY IN INDIA:
Cement was produced for the first time in at Washer manpet in Madras in 1904 by
South India industries limited. This unit had an installed capacity of 30 tones per day.
Since the partial decontrol in 1989, the cement industry has witnesss secular progress
mainly due to the forces of economic liberalization and the jettisoning of price controls
and capacity restriction.
The foundation of Stable Indian cement industry was in 1914. The Indian cement
company. First manufacture cement at Porbundar in Gujarat. At the end of the march
1988 there were .20 large cement units and 136 mini cement plants with a total installed
capacity of 57 million tones and actual production of 40 tones. Over two lakh persons are
employed in the industry. India is the 41fl largest cement producer in the world with 106
large plants belonging to 34 companies. The per capital consumption of cement in India
however is one of the lowest in the world ranking i.e. 32 kgs per capita in India in car
1979) compared to 689kgs in Japan, 528kgs in West Germany, 500 kgs iii France and
483kgs in U.S.S.R.
In 1936, all the cement companies with exception of song valley Portland
Company limited merged to form the associated cement companies limited. This more
facilitated cost reduction as well as uniformity in quality by 1947 the installed capacity of
the industry rose to 2.2 million tones per annum.
PRESENT SCENARIO OF CEMENT INDUSTRY IN INDIA:
Page 26
India is the second largest producer of cement in the world. No wonder, India's
cement industry is a vital part of its economy, providing employment to more than a
million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian
cement industry has attracted huge investments, both from Indian as well as foreign
investors.
India has a lot of potential for development in the infrastructure and construction sector
and the cement sector is expected to largely benefit from it. Some of the recent major
government initiatives such as development of 98 smart cities are expected to provide a
major boost to the sector.
Expecting such developments in the country and aided by suitable government foreign
policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat
have invested in the country in the recent past. A significant factor which aids the growth
of this sector is the ready availability of the raw materials for making cement, such as
limestone and coal.
Market size:
Cement demand in India is expected to increase due to governments push
for large infrastructure projects, leading to 45 million tonnes (MT) of cement needed in
the next three to four years.
India's cement demand is expected to reach 550-600 Million Tonnes Per
Annum (MTPA) by 2025. The housing sector is the biggest demand driver of cement,
accounting for about 67 per cent of the total consumption in India. The other major
consumers of cement include infrastructure at 13 per cent, commercial construction at 11
per cent and industrial construction at 9 per cent.
To meet the rise in demand, cement companies are expected to add 56 MT
capacity over the next three years. The cement capacity in India may register a growth of
eight per cent by next year end to 395 MT from the current level of 366 MT. It may
increase further to 421 MT by the end of 2017. The country's per capita consumption
stands at around 190 kg.
Page 27
The Indian cement industry is dominated by a few companies. The top 20

cement companies account for almost 70 per cent of the total cement production of the
country. A total of 188 large cement plants together account for 97 per cent of the total
installed capacity in the country, with 365 small plants account for the rest. Of these large
cement plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.
The well developed Indian cement industry built almost totally on
domestic capital foundation is modern, efficient and reasonably new and today accounts
for a total production of around one hundred million tones. The industry is fully capable
of meeting the needs of the country.
In 1999-2000 the production of large plants was of the order of 94
million tones as against 81.66 million tones in the previous years. The capacity utilization
of cement plants also increased to 85% in 1999-2000 as against 78% in the previous year.
The cement industry witnessed a phenomenal demand growth of 15%
in fiscal year 1999-2000. However, the large scale capacity auditioned and upgraded to
the tune of around and up gradation to the tune of around 10.25 million tones in the last 2
years (4.40 million tones in the south alone) led to capacity demand mismatch. The
coupled with intense competitive pressures.
Resulted in soft process in some areas and low prices in other regions
affecting the bottom line of industry.
The year under review also saw an increased momentum in market
consolidation with major cement companies expanding their market share through the
acquisition route. In the current fiscal, growth has been lower withy production in AprilAugust 2000, being of the order of 40.09 million tones a rise of only 3.62 as against 38.69
million tones in April-August 1999. A similar trend is noticeable in respect of cement
dispatches grew by 3.66% to 39.90 million tones as against 38.49 tones in the previous
year. However, there has been over little additional new capacity increase and this is a
clear and visible signal that the capacity demand mismatch is slowly coming to an end.
With prices also firming up in the market, the cement industry can hopefully look forward
to better prospects in current fiscal.
Page 28
Over the next 2 to 3 years, with reasonable growth in demand to the tune
of around 7 to 9% sure to take place, in vies of the incentives granted to housing and
infrastructure, the ambitious plans of the Government boost rural housing and kick start
the National Highways development project, all trace of capacity demand mismatch will
vanish. As such, the overall outlook of the cement industry is good in the future years.
Investments:
On the back of growing demand, due to increased construction and
infrastructural activities, the cement sector in India has seen many investments and
developments in recent times.
According to data released by the Department of Industrial Policy and
Promotion (DIPP), cement and gypsum products attracted Foreign
Some of the major investments in Indian cement industry are as follows:
The Gujarat-based Nirma group, with presence in detergent, soap

and chemicals sector, has bought Lafarge Indias cement business,
consisting of 11 MT production capacity, for US$ 1.4 billion.
FLSmidth, a global engineering company based in Copenhagen, has signed a

contract with Indias Larsen & Toubro Limited for engineering, procurement and
supply of equipment for a complete cement production line with a capacity of
3,000 tonne in Tamil Nadu.
KKR Mauritius Cement Investments Limited acquired 8.5 per cent stake in
Dalmia Bharat Limited (DBL).
Cement maker Burnpur Cement plans to invest Rs 500 crore (US$ 74.64 million)
for expansion of its production capacity to 3 MTPA in the next three to four years.
India's largest cement maker UltraTech Cement is looking forward to acquire

Jaiprakash Associates six cement factories for a total value of Rs 16,500 crore
(US$ 2.42 billion)
Birla Corporation Ltd, a part of the MP Birla Group, has agreed to acquire two
cement assets of Lafarge India for an enterprise value of Rs 5,000 crore (US$
733.6 million).
Page 29
Dalmia Cement (Bharat) Ltd has invested around Rs 2,000 crore (US$ 293
million) in expanding its business in North East over the past two years. The
company currently has three manufacturing plants in the region one in
Meghalaya and two in Assam.
JSW Group plans to expand its cement production capacity to 30 MTPA from 5
MTPA by setting up grinding units closer to its steel plants.
UltraTech Cement Ltd has charted out its next phase of Greenfield expansion after
a period of aggressive acquisitions over the last two years. UltraTech has plans to
set up two Greenfield grinding units in Bihar and West Bengal.
UltraTech Cement Ltd bought two cement plants and related power assets of
Jaiprakash Associates Ltd in Madhya Pradesh for Rs 5,400 crore (US$ 792.3
million).
JSW Cement Ltd has planned to set up a 3 MTPA clinkerisation plant at Chittapur
in Karnataka at an estimated cost of Rs 2,500 crore (US$ 366.8 million).
Andhra Cements Ltd has commenced the commercial production in the company's
cement plants Durga Cement Works at Dachepalli, Guntur and Visakha Cement
Works at Visakhapatnam.
Government Initiatives:
In the 12th Five Year Plan, the Government of India plans to increase investment
in infrastructure to the tune of US$ 1 trillion and increase the industry's capacity to 150
MT.
The Cement Corporation of India (CCI) was incorporated by the Government of
India in 1965 to achieve self-sufficiency in cement production in the country. Currently,
CCI has 10 units spread over eight states in India.
In order to help the private sector companies thrive in the industry, the
government has been approving their investment schemes. Some such initiatives by the
government in the recent past are as follows:
Page 30
The Parliament of India has cleared amendments to the Mines and Minerals
Development and Regulation (MMDR) Act, which will enable companies to transfer
captive mines leases similar to mines won through an auction, and which is expected to
lead to increased Mergers and Acquisitions (M&A) of steel and cement companies.
he Government of India is planning to revive the state-run cement factories across India,
in order to give a boost to road and realty projects by bringing down their construction
costs.
Budget 2016-17 has proposed a slew of measures to boost infrastructure and
investment, which will be positive for the cement sector, as increased spending on
infrastructure increases the demand for cement. 100 per cent deduction for profits to an
undertaking in housing project for flats up to 30 square metres in four metro cities and 60
square metres in other cities approved during June 2016 to March 2019 and completed in
three years
Incremental spend on smart city development, the government has allocated Rs
7,296 crore (US$ 1.09 billion) towards Urban Rejuvenation Mission (AMRUT and
Mission for Development of 100 Smart Cities
Rise in allocation under Pradhan Mantri Gram Sadak Yojana (PMGSY) to Rs
19,000 crore (US$ 2.79 billion) for FY17.
The Government of India plans to enact a law that will allow the companies
which have received mining licenses without having gone through the auction process, to
transfer these leases, in a move that is expected to make mergers and acquisitions
(M&As) easier in the steel, cement, and metals sectors.
The Government of Tamil Nadu has launched low priced cement branded
'Amma' Cement. The sale of the cement started in Tiruchi at Rs 190 (US$ 2.84) a bag
through the Tamil Nadu Civil Supplies Corporation (TNCSC). Sales commenced in five
godowns of the TNCSC and will be rolled out in stages with the low priced cement
available across the state from 470 outlets.
Page 31
The Government of Kerala has accorded sanction to Malabar Cements Ltd to

set up a bulk cement handling unit at Kochi Port at an investment of Rs 160 crore (US$
23.5 million).
The Andhra Pradesh State Investment Promotion
Board (SIPB) has
approved proposals worth Rs 9,200 crore (US$ 1.35 billion) including three cement plants
and concessions to Hero MotoCorp project. The total capacity of these three cement
plants is likely to be about 12 MTPA and the plants are expected to generate employment
for nearly 4,000 people directly and a few thousands more indirectly.
India has joined hands with Switzerland to reduce energy consumption and
develop newer methods in the country for more efficient cement production, which will
help India meet its rising demand for cement in the infrastructure sector.
The Government of India has decided to adopt cement instead of bitumen for the
construction of all new road projects on the grounds that cement is more durable and
cheaper to maintain than bitumen in the long run
Road Ahead:The eastern states of India are likely to be the newer and virgin markets for
cement companies and could contribute to their bottom line in future. In the next 10
years, India could become the main exporter of clinker and gray cement to the Middle
East, Africa, and other developing nations of the world. Cement plants near the ports, for
instance the plants in Gujarat and Visakhapatnam, will have an added advantage for
exports and will logistically be well armed to face stiff competition from cement plants in
the interior of the country.
A large number of foreign players are also expected to enter the cement
sector, owing to the profit margins and steady demand. In future, domestic cement
companies could go for global listings either through the FCCB route or the GDR route.
Page 32
With help from the government in terms of friendlier laws, lower taxation, and increased
infrastructure spending, the sector will grow and take Indias economy forward along
with it.
COMPANY PROFILE
SRIKALAHASTHI PIPES LIMITED industries limited are one of the best miniblast furnace pig iron manufacturing units in our country and it was 5th plant under TATA
- KORE technology. The company was incorporated on 1st November 1991 under
company's act-1956, in the name of SRIKALAHASTHI PIPES LIMITED LTD.,
THE COMPANY started construction work in august 1993. The entire
construction work was completed in a record time of 12 months. This was achieved by
teamwork of SRIKALAHASTHI PIPES LIMITED collective and the best efforts of the
contractors. With this achievement the company started commercial productions in
September 1994.
Administration
The general administration of the company is carried out by managing director,
and general managers of finance. Commercial, operations, materials, purchase, human
resource and administration.
Page 33
The chairman and managing director are holding Overall control on

administration in all aspects, with the help of Vice-President and-other General Managers.
The board consists of five member's directors, Vice-Chairman, a Managing Director and a
Company Secretary
The name SRIKALAHASTHI PIPES LIMITED Ferro limited was changed
to SRIKALAHASTHI PIPES LIMITED
Srikalahasthi pipes limited Industries Limited is located in between Tirupathi and
Srikalahasti with an access of about 30kms from Tirupati and 7Kms from SKHT
Rachagunneri village, SrikalahastiMandal of Chittoor district Andhra Pradesh is as
follows
Cheap availability of required land.
There is more water resource.
The distance between the harbor and present work spot is less.
Proximity to raw materials.
Proximity to marketing.
Nearer to the railway sidings.
Well connected to the road, rail and port.
Availability of labour.
SRIKALAHASTHI PIPES LIMITED industries are importing coke from china,

Japan and Australia because; there is scarcity of prime cooking coal, which is the raw
material for producing coke. The coke, which is imported, comes to Chennai port. This is
approximately 100km away from the site. And from there is brought to site, and also
fluxes. Which are required to produce pig iron like Limestone, Dolomite, Quartzite and
Manganese, are available in nearby districts.
Srikalahasthi pipes limited industries limited
Established in the year of 1993. An ISO 9002 Company, it had setup a state of the
art integrated manufacturing facility for Pig Iron through mini-blast furnace route
conforming to the latest international technology with initial capacity of 1,00,000 TPA. Its
quality products of S G-Grade pig iron are being supplied to foundries in the south. As a
forward integration, it has utilized the slag produced in the Pig Iron are being supplied to
foundries in the south.
As a forward integration, it has utilized the slag produced in the Pig Iron
manufacturing process to install the cement plant is being met through a 2.5 mw cogeneration power plant. Due to severe completion and survival, company has increased
the production capacity from 90,000 TPA to 1, 50,000 TPA from 2003.
Page 34
Vision:
To empower, enable and enrich partners, business and associates.
To be the chosen vehicle of growth for the stakeholders and a source of inspiration
for the society.
Mission:
To be a leader in all areas key to the development of a nation and progress of the
world.
To be a in the field of infrastructure, manufacturing and information technology.
To become learning organization and enable people to think like geniuses.
To make association with us an enriching experience to our partners, businesses
and associates.
To work with honest purpose, strategic planning and enduring perseverance to
achieve customer satisfaction, stakeholder benefits and measurable economic
growth for the organization.
Philosophy:
Assemble best people , delegate authority and dont interfere people make the
difference
Business heads are entrepreneurs
Mistakes are facts of life. It is response to the error that counts.
Success:
Create your luck by hard work
Trust + delegation = growth.
Work Culture:
Commitment, Creativity, Efficiency, Team spirit.
Awards and Certificates:

Leadership and Excellence Award in Safety, health & Environment
2002 by co-federation of Indian Industries.
Best Environmental improvement award 2003 FAPCCI.
Certificate of Environment system with ISO 14001 (1996) from LRQA
April 2003.
Page 35
Environmental Excellence Award 2004 by Green tech Foundation,

New Delhi. Certificate of Quality System with ISO 9001 LRQM; April
2004.
25% cues Rebate on Water uses by APPCB.
OSHAS 18001 certified June 2005.
Location:
Sri kalahastri pipes Industries Limited is located in between Tirupathi and
Srikalahasti with an access of about 30kms from Tirupathi and about Rachagunneri
village, srikalahastiMandal of Chittoor District in Andhra Pradesh is as follows
Cheap availability of required land.

There is more water resource.
The distance between the harbor and present work spot is less.
Proximity to raw materials.
Proximity to marketing.
To have financial subsidy.
Nearer to the road, rail and port.
Availability of labor.
Administration:
The general administration of the company is carried out by managing Director
and general managers of finance. Commercial, operations, materials, purchase, human
resource and administration.
The chairman and managing director are holding overall control on administration
in all aspects, with the help of vice-president and other general.
Manage. The board consists of five members directors, Vice-Chairman, a Managing
Director and a Company Secretary.
Sri kalahasthi pipes Industries Limited (SPL) was incorporated on 1st November, 1991 by
SRIKALAHASTI Group of Companies to manufacture Pig Iron using Korf (German)
technology and Cement. The unit is located at Rachagunneri Village on Tirupathi /Srikalahasthiroad which is about 30 kms. From
Tirupathi and 10 kms. From
Srikalahasthi. The installed capacity of Pig Iron was 90,000 TPA and with similar
capacity 90,000 TPA for cement.
Due to the poor demand and other reasons, the operations of the cement unit of the
Company was suspended and the unit was reengineered for producing a different product
mix having potential in south India.
However, due to falling Pig Iron prices, increase additional capacity in the industry,
competition and the technical & financial assistance, the operations of both SPL and
LKCL were affected and the Company was exploring financial and technical strategic
alliance with Indian / Foreign Partner.
Page 36
During the same time M/s. Electro steel Castings Limited, was also looking for
additional capacities for producing spun pipes. Considering the synergies involved,
Srikalahasthi pipes Limited entered into a strategic alliance partnership during December
2002, with M/s. Electro steel Castings Limited (ECL), Kolkata a leading manufacturer of
CI, Pipes and DI pipes. This was win-win situation for both SPL and ECL. After takeover,
a financial re-engineering and re-structuring of SPL was undertaken by ECL by
implementing the following: Immediately after take over an amount of Rs.2200 lakhs was infused as share
capital of the Company by M/s. ECL to strengthen the equity base of the
company.
During 2002, the capacity of Pig Iron was increased from 90,000 TPA to
150,000 TPA.
With effect from 1st April, 2003 LKCL was merged with the company to take
advantage of the close synergy in the business of the two companies, since a large
part of Molten Iron / Pig Iron is consumed by LKCL for manufacture of DI Pipes.
After the merger, the share capital of SPL, the paid up share value of Rs.10/- was
reduced to Rs.2.50 per share and accordingly one share of Rs.10/- each fully paid
up in SPL was issued to all the existing shareholders for every 4 shares held by
them
During 2003, the capacity of the DI pipes was increased to 90,000 TPA.
During 2004, the company took the step of backward integration by setting up
150,000 TPA coke oven plant in the same complex, which was commissioned in June
2005.
Page 37
During 2005, the company started setting up of a Captive Power Plant of 12 MW

by using the waste heat recovered from the coke oven plant which is expected to
be commissioned by March 2006.
An additional amount of Rs.25 corers is being spent on other capital works like
revamping of bitumen coating machine, balancing equipment and facilities for
production of higher diameter DI pipes etc. to increase the capacity of DI pipes
from the present 90,000 TPA to 120,000 TPA by 2006-07.
The above has resulted in the company witnessing a profitable years after a gap of
8 years during the years ended 31st March, 2003, 2004 and 2005 and a dividend of 10%
was declared for the years ended 31st March 2004 and 2005 to the shareholders.
Step by Step Company's Growth
1991
Incorporation of Srikalahasthi pipes limited
1994
Setting up of Mini Blast Furnace with 90,000 TPA

Capacity
1995
1997 -
Setting up a 250 TPO Mini Cement Plant

Setting up of LKCL for manufacture of 40,000 TPA
castings and 35,700 TPA 01 Pipes.
2004
Strategic Alliance with Electrosteel Casting Limited
2006
Infusion of RS.2200 lakhs to the equity and financial
Page 38
restructuring
2009
Merger of LKCL with L1L for synergy
2010
Capacity of Pig Iron was increased to 90~000 TPA to

150000 TPA.
2012
Capacity of 01 Pipes was increased to 90,000 TPA.
2013
Commissioning of 150,000 TPA coke oven plant.
2013
Setting up of Captive Power Plant of 12 MW by using

the waste heat recovered from the coke oven plant .
2014
Merger of LKCL with SPL for synergy.
2014
Setting up the capacity of spun division
Committee of SRIKALAHASTHI PIPES LIMITED Executives and Directors

(COSEAD)
COSEAD is the apex review and decision-making body of SRIKALAHASTHI PIPES
LIMITED Group.
L Madhusudhan Rao
Chairman,SRIKALAHASTHI PIPES LIMITED

Group of Companies
G Bhaskara Rao
Vice
Chairman,SRIKALAHASTHI
LIMITED Group of Companies
L Sridhar
Director, SRIKALAHASTHI PIPES LIMITED

Group
G VenkateshBabu
Joint
Managing
Director,SRIKALAHASTHI
PIPES LIMITED Group
PIPES
Page 39
J Suresh Kumar
Chief Financial Officer,SRIKALAHASTHI PIPES

LIMITED Group
P Panduranga Rao
Director
and
Chief
Executive
Officer
SRIKALAHASTHI PIPES LIMITEDKondapalli
Power
Private
Limited
and ABAN Power Company Limited
D V Rao
Director
and
Chief
Executive
Officer
SRIKALAHASTHI PIPES LIMITED Green Power
Private Limited
K Raja Gopal
Director
and
Chief
Executive
Officer
SRIKALAHASTHI PIPES LIMITEDAmarkantak
Power Private Limited
D N Reddy
Director - Operations, SRIKALAHASTHI PIPES

LIMITEDInfratech Limited
KK V Nagaprasad
Director and Chief Executive Officer

Rithwik Energy Systems Limited and
Clarion Power Corporation Limited
V Sreenivas
Director
Corporate
Affairs
SRIKALAHASTHI PIPES LIMITED Groups.
Page 40
PLANT LAYOUT
Gate Entrance
Security
Administration
Block
Temple
Physical\chemical lab
Power Production
Cement Production
pig-iron
DATA ANALYSIS AND INTERPRETATION

Page 41
The data after collection have to be processed and analyzed in accordance with the
outline laid down for the purpose at the time of developing the research plan. The
processing of data implies editing, coding, Justification, tabulation and presentation of
collected data SO that they are amenable to data analysis.
Editing of data is a process of examining the collected raw data to detect errors
and omissions and to correct these when even possible. It involves a careful scouting of
the collection data. Editing is done to assure that the data are accurate, consistent with the
facts gathered, uniformly ended and well atoned to facilitate coding and tabulation. The
editing of data improves the quality of the data for coding. Coding of data refers to the
process of transforming the categories or classes of data into symbols which may be
tabulated and counted.
The classification of data refers to the process of arranging the data in groups or
classes on the basis of common characteristics. It classifies a large volume of raw data
into homogeneous, groups and classes depending upon the nature of phenomenon
involved in the study. Tabulation of data is the process of summarizing the classified data
and displaying the same in the impact form of tables further analysis. It is an orderly
arrangement of data in columns and rows. Tabulation can be done with the use of
computers which not only save time but also make it possible to study large number of
variables affecting a problem simultaneously. Data are analyzed and tabulated with the
help of percentage Analysis and chi-square test. After the data have been organized and
tabulated, they are ready for presentation. The tabulated data arc presented with the help
of diagrams, charts and graphs.
DATA ANALYSIS AND INTERERPRETATION

Page 42
LIQUIDITY RATIOS:
CURRENT RATIO
Current Ratio
Current Assets
X100
Current Liabilities
CURRENT RATIO :TABLE NO.4.1
Year
Current Assets Current

Ratio
(Rs.in Lakhs)
Liabilities (Rs.in
Lakhs)
4172.78
2895.35
1.44
11302.96
5625.29
2.01
16137.54
8676.59
1.86
26616.98
10030.68
2.65
35973.84
10883.33
3.31
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
CURRENT
3.5 RATIO 2011-2016
3.31
2.65
2.5
2.01
1.86
1.44
1.5
1
Current Ratio (Times)

0.5
0
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
Page 43
INTERPRETATION:
During 2012-2013 current ratio was 2.01 times which indicates that for every
current liability, the company equal current assets, later in 2013-2014 it has been
decreased to 1.86 times. During 2014-2015, 2015-2016 it has found to be increased to
(2.65 and 3.31). it indicates that the companys liquidity position is well it has enough
current assets to meet its current liability during the period of study. The current ratio is
said to be in satisfactory for the period of study.
Page 44
QUICK RATIO
Quick Ratio
Liquid Assets
Current Liabilities
TABLE NO:4.2
QUICK RATIO 2011-2016
Year
Quick
Assets
(Rs.in Lakhs)
2979.52
6008.91
9062.36
14524.07
21537.36
2011-12
2012-13
2013-14
2014-15
2015-16
Current Liabilities
(Rs.in Lakhs)
2895.13
5625.29
8679.59
10030.68
10883.33
Ratio
1.03
1.07
1.04
1.45
1.97
QUICK RATIO 2011-2016

2.5
1.97
2
1.45
1.5
1.03
1.07
1.04
2011-2012
2012-2013
2013-2014
1
Quick Ratio (Times)
0.5
0
2014-2015
2015-2016
Year
INTERPRETATION:
INTERPRETATION
The quick ratios standard ratio is 1:1 times. During 2012-2013 the quick ratio is
1.07 times of its current liabilities but it has been decreased in 2013-2014 was (1.03 and
1.04). Later in 2014-2015 and 2015-2016 the quick ratio has increased tol.45 andl.97
which was more than its standard ratio. The quick ratio is said to be in satisfactory level
during the period of the study. The companys liquidity position is said to be satisfactory.
Page 45
ABSOLUTE LIQUIDITY RATIO:
Absolute Liquidity Ratio
Cash in Hand and Bank Balances

Current Liabilities
TABLE NO:4.3
ABSOLUTE LIQUIDITY RATIO
Year
Cash and bank
balances
(Rs.in Lakhs)
2011-12
629.04
2012-13
447.49
2013-14
247.72
2014-15
420.10
2015-16
3463.66
Current Liabilities Ratio

(Rs.in Lakhs)
2895.13
5625.29
8676.59
10030.68
10883.33
0.21
0.08
0.03
0.04
0.31
12000
10000
8000
6000
4000
Quick Ratio (Times)
2000
0
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
INTERPRETATION:
The absolute liquidity ratios standard ratio is 0.50:1 .During 2011-2012 and 20152016 the ratio was increased to 0.21 and 0.31 and in 2013-2014, 2014-2015 the ratio was
decreased to 0.08,0.03,0.04 which was less than the standard ratio of absolute liquidity
Page 46
ratio. It assumes that the liquidity position of the company is said to be not satisfactory to
meet its day to-day activities.
NET WORKING CAPITAL TURNOVER RATIO:
Working Capital Turnover Ratio
Working Capital
Net Sales
TABLE NO:4 .4
NET WORKING CAPITAL RATIO 2011-2016
Net
Working
Capital
(Rs.in Lakhs)
1277.65
5677.67
7460.95
16586.30
25090.51
Year
2011-12
2012-13
2013-14
2014-15
2015-16
Net Sales
(Rs.in Lakhs)
Ratio
8085.85
21024.15
28607.79
46365.63
64471.61
0.15
0.24
0.26
0.36
0.38
NET WORKING CAPITAL RATIO 2011-2016
0.4
0.36
0.35
0.3
0.24
0.25
0.2
0.15
0.38
0.26
(Times)
0.15
0.1
0.05
Net Working Capital Ratio

0
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
Page 47
INTERPRETATION:
It shows clear results from the above figure that the net working capital ratio is
absolute decreased in all the five years from the period of study. It is said to be that the
liquidity position is not satisfactory and the company is not able to meet its day- to- day
financial activities of the company.
Page 48
CURRENT ASSETS TO FIXED ASSETS RATIO:
Current Assets to Fixed Assets Ratio
Current Assets
Net Fixed Assets
Table no.4.5
CURRENT ASSETS TO FIXED ASSETS RATIO PERIOD 2011-2016
Year
2011-12
Current Assets
Net Fixed Assets
(Rs. In Lakhs)
(Rs. In Lakhs)
4172.78
1130.96
4350.62
0.95
13236.37
14604.33
0.85
2012-13
16137.54
2013-14
Ratio
1.10
26616.98
26388.35
2014-15
1.01
35973.84
28239.98
2015-16
1.27
CURRENT ASSETS TO FIXED ASSET RATIO 2011-16
35000
30000
25000
20000
15000
10000
Quick Ratio (Times)
5000
0
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
Year
Page 49
INTERPRETATION:
During 2015-2016 the current assets to fixed assets ratio has increased to
1.27.later it has been fluctuating in 2012-2013 to2015-2016. it indicates that the current
assets to fixed assets is highly proportionate and it is said to be satisfactory .The company
has more current assets when compared to fixed assets .The overall liquidity position of
the company is said to be satisfactory during the period of study.
Page 50
CURRENT ASSETS TO TOTAL ASSETS RATIO:
Current Assets to Total Assets Ratio
Current Assets
Total Assets
Table no;4.6 CURRENT ASSET TOTAL ASSET RATIO2011-16

Year
Current Assets
Total Assets
Ratio
(Rs. In Lakhs)
(Rs. In Lakhs)
2011-12
4172.78
8523.40
0.48
2012-13
11302.96
24593.33
0.46
2013-14
16137.54
30741.87
0.52
2014-15
26616.98
53005.33
0.50
2015-16
35973.84
64213.82
0.56
Current Assets to Total Assets
CURRENT ASSETS TO TOTAL ASSETS RATIO 2011-2016
0.6
0.5
0.48
0.46
2011-2012
2012-2013
0.56
0.52
0.50
2013-2014
2014-2015
0.4
0.3
Ratio (Times)
0.2
0.1
0
Year Tirupati
RCR Institutes of Management & Technology-
2015-2016
Page 51
INTERPRETATION:
During 2015-2016 the current assets to total assets is increased to 0.56 and the
ratio has been fluctuating in all five years. Later the liquidity position of the company is
said to be satisfactory during the period of the study .when the company is not quite
satisfactory in maintaining the low percentage in its liquidity position of CA to TA during
the period of study.
Page 52
FINDINGS
There is a statistical relationship between liquidity (CA to TA Ratio) and

profitability (ROT) of SRIKALAHASTI Industries Ltd.
There is no significance difference between Current assets to Total assets (CA

to TA) Ratio Return On Total Assets (ROTA) Ratio of SRIKALAHASTI
Industries Ltd.,
There is no significance agreement among five sets of profitability ranks of

SRIKALAHASTI PIPES Ltd., The hypothesis that w = 0.744 is not
significant.
The correlation between liquidity position (NWCR) and profitability position

(ROE) SRIKALAHASTI Industries Ltd., is not significant.
Page 53
SUGGESTIONS
As the economy is a profit seeking one, it has directed all its resources to achieve
its goal. The company is looking towards to enhance its value and thereby its shareholders
base. There are two important elements to achieve its goal for every company is to look
for profitability and liquidity position of the company. On this basis of the analysis and
observation the following suggestions are made.
It is very clear from the above study that it is found that the over all liquidity
position of the SRIKALAHASTI PIPES Ltd., was found to be satisfactory
during the period of study. It is suggested that the company needs to maintain
its liquidity position by making all the resources available to meet its day to day
financial operations effectively in the upcoming period of time.
It is clearly observed from the study that the net working capital position of the
company is said to be satisfactory during the period of study. It is suggested that
the company needs to maintain its working capital position by showing that
every current asset has been effectively utilized by the company for meeting its
current liability.
The study reveals that the gross profit margin of SRIKALAHASTI PIPES Ltd.,
was said to be fluctuating during the period of study. It clearly indicates that the
financial expenses and depreciation of the company might have been incurred
more during the period of study. It is suggested that the company should take
the appropriate steps to control and reduce its financial expenses and
depreciation effectively.
The study clearly shows the positive relationship between the liquidity and
profitability position of the company during the period of study. The company
has to maintain the same tradeoff between the liquidity and profitability for
enhancing its value and thereby its shareholders value over a period of time.
It clearly indicates that the growth rate of fixed assets of the company is said to
be satisfactory during the period of study. It is suggested that the company has
to take appropriate
Page 54
CONCLUSION
The study has come to conclusion that the liquidity and profitability position of
SRIKALAHASTI Industries Ltd., is said to be satisfactory during the period of study
(2011-2012 to 2015 - 2016).
This study indicates the positive relationship between liquidity and profitability of
the company during the period of the study. It is found that the net working capital
position of the company was said to be satisfactory during the period of the study.
It is found that the gross profit margin was fluctuating during the period of study.
It is concluded that the net working capital position of the company should be utilized
effectively for meeting its day to day financial operations and also it is concluded that it
should take appropriate measures to control the expenses and depreciation of gross profit
margin of the company for over period of time.
Page 55
ANNEXURE
SRI KALAHASTI PIPES LIMITED BALANCE SHEET FOR THE YEAR 2011-2012
PARTICULARS
2011
2010
A) Share capital
3,976.36
3,976.36
B) Reserves and Surplus
3,993.06
3,804.74
A) Secured Loans
9,244.81
10,886.36
B) Unsecured Loans
15,069.11
9,588.74
Deferred Tax Liability (Net)
618.06
Total
32,901.40
28,680.37
A) Gross Block
25,035.99
20,021.36
B) Less: Depreciation
6,510.29
5,417.03
Net Block
18,525.70
14,604.33
Capital Work In Progress
5,604.02
6,015.09
Sources of funds:
Share holders funds:
Loan Funds:
424.17
Application of funds:
Fixed Assets:
Investment
589,83
Current Assets, Loans and Advances

A) Inventories
9,194.08
7,075.18
B) Sundry Debtors
6,706.59
7,197.89
C) Cash and Bank Balance
350.67
247.72
D) Loans and Advances
2,070.42
1,616.75
18,321.76
16,137.54
A) Current Liabilities
9,202.11
8,090.45
B) Provisions
354.42
586.14
Net Current Assets
8,765.23
7,460.95
Miscellaneous Expenditure
6.45
10.17
Total
32,901.40
28,680.37
Less: current Liabilities and Provisions
SRIKALAHASTI PIPES LIMITED BALANCE SHEET FOR THE YEAR 2012-13
Page 56
PARTICULARS
2013
2012
A) share capital
3,976.36
3,976.36
5,108.64
3,993.06
A) Secured Loans
16,382.92
9,244.81
B) Unsecured Loans
13,733.65
15,069.11
Deferred Tax Liability
1,184.79
618.06
Total
40,386.36
32,901.40
A) Gross Block
31,824.32
25,035.99
7,666.24
6,510.29
Net Block
24,158.08
18,525.70
754.45
5,604.02
Sources of funds:
Loan Funds:
Fixed Assets:
Investment

A) Inventories
10,636.86
9,194.08
B) Sundry Debtors
7,667.92
6,706.59
2,650.37
350.67
5,241.68
2,070.42
26,196.83
18,321.76
10,188.34
9,202.11
B) Provisions
538.25
354.42
10,726.59
9,556.53
Net Current Assets
15,470.24
8,765.23
3.59
6.45
Total
40,386.36
32,901.40

PARTICULARS
2014
2013
Page 57
Sources of funds:
A) share capital
3,976.36
3,976.36
7,179.70
5,108.64
A) Secured Loans
17,832.33
16,382.92
B) Unsecured Loans
12,271.32
13,733.65
Differed tax Liability (Net)
2,576.95
Total
43,836.66
40,386.36
A) Gross Block
35,516.23
31,824.32
9,127.88
7,666.24
Net Block
26,388.35
24,158.08
862.01
754.45
Loans funds
1,184.79
Fixed Assets:
Investments
A) Inventories
12,092.91
10,636.86
B) Sundry Debtors
8,814.31
7,667.92
420.10
2,650.37
5,289.66
5,241.68
26,616.98
26,196.83
9,319.38
10,188.34
B) Provisions
711.30
538.25
10,030.68
10,726.59
Net Current Assets
16,586.30
15,470.24
Miscellaneous expenditure
3.59
Total
43,836.66
40,386.36
SRI KALAHASTI PIPES LIMITED BALANCE SHEET FOR THE YEAR 2014-15
PARTICULARS
2015
2014
Page 58
Sources of funds:
A) Share capital
3,976.36
3,976.36
8,549.77
7,179.70
A) Secured Loans
22,645.54
17,832.33
B) Unsecured Loans
15,460.46
12,271.32
3,123.73
2,576.96
Total
53,755.86
43,836.66
A) Gross Block
38,974.86
35,516.23
10,734.88
9,127.88
Net Block
28,239.98
26,388.35
425.37
862.01
Investment
A) Inventories
14,436.48
12,092.91
B) Sundry Debtors
11,966.16
8,814.31
3,550.27
420.10
6,020.93
5,289.66
10,108.38
9,319.38
B) Provisions
774.95
711.30
10,883.33
10,030.68
Net Current Assets
25,090.51
16,586.30
Total
53,755.86
43,836.66
Loans funds
Fixed Assets:
Page 59
PARTICULARS
2016
2015
A) Share capital
3,976.36
3,976.36
13,713.91
8,549.77
A) Secured Loans
26,486.50
33,227.46
B) Unsecured Loans
6,130.29
4,878.54
3,435.74
3,123.73
Total
53,742.80
53,755.86
A) Gross Block
40,286.29
38,974.86
12,527.20
10.734.88
Net Block
27,759.09
28,239.98
3,441.21
425.37
Investment
A) Inventories
11,519.49
14,436.48
B) Sundry Debtors
11,845.80
11,966.16
1,516.42
3,550.27
5,581.47
6,020.93
6,853.94
10,108.38
B) Provisions
1,066.74
774.95
7,920.68
10,883.33
Net Current Assets
22,542.50
25,090.51
Total
_
53,742.80
_
53,755.86
Sources of funds:
Loan Funds
Fixed Assets:
BIBILIOGRAPHY
Page 60
1.
I.M PANDEY-2004 9th FINANCIAL MANAGEMENT Vikas Publishing

House Pvt Ltd., New Delhi.
2.
M.Y.
KHAN
&
P.K.
JAIN
2005
4th
edition,
FINANCIAL
MANAGEMENT, Tata McGraw Hill Publishing Company Ltd., New Delhi.

3.
Dr S.N. MAHESWARI, 2003,8t edition, FINANCIAL MANAGEMENT

Principles & Practices, Sultan Chand & Sons Educational Publishers, New Delhi.
4.
C.R KOTHARI, 2004, 2nd edition, RESEARCH METHODLOGY
5.
S.P GUPTA, 2004, 33Id edition, STATISTICAL METHODS, Sultan Chand,

New Delhi.
6.
S.P.
JAIN,
K.L.NARANG
MANAGEMENTACCOUNTING,
7.
2005
Kalyani
4th
edition
Publishers,
COST
New
AND
Delhi.
WEB SITES: WWW.GOOGLE.COM
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LIQUIDITY MANAGEMENT

RCR Institutes of Management & Technology- Tirupati

adequate working capital, no progress is possible; inadequate working capital leads to

RCR Institutes of Management & Technology- Tirupati

RCR Institutes of Management & Technology- Tirupati

Liquidity ratios are calculated on the basis of

RCR Institutes of Management & Technology- Tirupati

The current ratio is an indication of a firm's liquidity. Acceptable current ratios

(Liquid Assets = Cash and Cash Equivalent + Marketable Securities + Accounts

RCR Institutes of Management & Technology- Tirupati

3. ABSOLUTE LIQUIDITY RATIO:

Absolute Liquid Assets

(Absolute Liquid Assets is sum of Cash, Bank and Marketable Securities)

4. NET WORKING CAPITAL RATIO:

RCR Institutes of Management & Technology- Tirupati

(Working capital is Current Assets minus Current Liabilities)

5. CURRENT ASSETS TO FIXED ASSETS RATIO:

6. CURRENT ASSETS TO TOTAL ASSETS RATIO:

RCR Institutes of Management & Technology- Tirupati

RCR Institutes of Management & Technology- Tirupati

Earning Before Interest and Tax

8. RETURN ON SHARE HOLDERS FUND:

Return on Shareholders Fund

Net Profit Interest and Tax

Return on equity measures a corporations profitability by

This ratio is calculated as follows:

Net Profit After Tax

RCR Institutes of Management & Technology- Tirupati

(Net Worth can be treated as shareholders equity)

10. RETURN ON TOTAL ASSETS:

Return on Total Assets

Profit After Interest and Tax

11. GROSS PROFIT RATIO:

RCR Institutes of Management & Technology- Tirupati

Gross Profit Ratio

12. OPERATING RATIO:

13. OPERATING PROFIT RATIO:

Operating Profit Ratio

Profit Before Interest and Depreciation and Taxes

Operating profit ratio = (Operating profit / Net sales) 100

RCR Institutes of Management & Technology- Tirupati

Net Profit After Taxes

15. EARNING PER SHARE:

RCR Institutes of Management & Technology- Tirupati

Earning Per Share

Net Profit After Taxes

16. PAYOUT RATIO:

Dividend per Enquity Share

RCR Institutes of Management & Technology- Tirupati

Sum of i value of the variable X

RCR Institutes of Management & Technology- Tirupati

((Xi-X) i.e. Deviation of the variable Xi from mean X

Data dispersion of standard deviation:-

KARL PEARSONS CO-EFFICIENT OF CORRELATION:

Pearson co-efficient of con-elation

NEED FOR THE STUDY

RCR Institutes of Management & Technology- Tirupati

OBJECTIVES OF THE STUDY

To evaluate financial performance of SRIKALAHASTI PIPES Limited (SPL).

To know the liquidity position of SRIKALAHASTI PIPES Limited (SPL).

To find out the profitability position of SRIKALAHASTI PIPES Limited (SPL).

To assess the correlation between liquidity and profitability.

To offer suitable suggestions based on the findings of study.

RCR Institutes of Management & Technology- Tirupati