Madhu FM Print 1

A STUDY OF RATIO ANALYSIS
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DECLARATION
I, student of M.Com. (Part - I) Roll No. : 20hereby declare that the project
title AN ANLATICAL STUDY OF RATIO ANALYSIS W.R.T

KANSAI NEROLAC PAINTS LTD. (KNPL) for the subject Financial
Management submitted by me for semester - III of the academic year 2016-17, is based on
actual work carried out by me under the guidance and supervision of PROF. NEELAM
SHAIKH. I further state that this work is original and not submitted anywhere else for any
examination.
PLACE:-THANE MADHURI JADHAV
DATE:- / / ROLL NO-20
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ACKNOWLEDGEMENT
I take this opportunity to express my gratitude and acknowledge to all the individuals
involved both directly for their valuable help and guidance.
This project has been an attempt to give information about the study of AN
ANLATICAL STUDY OF RATIO ANALYSIS W.R.T KANSAI

NEROLAC PAINTS LTD. (KNPL)I expressed my deep sincere gratitude to the
founder and president of Vidysa Prasarak Mandal. I express my heartfelt thanks to our
honourable Principal Dr. Mrs Shakuntala.A.Singh, for her constant support and motivation.
I am also thankful to Mr Mundeshwar Sir, co-ordination of self-financed courses for giving

us valuable guidance and information time to time.
I would also like to thank my project guide NEELAM SHAIKH under whose guidance
the project conceived, planned and executed.
I take this opportunity to thank the teaching and non-teaching staff of the college for their
timely help and co-operation rendered by them.
Finally I would also like to thank my parents and friends who helped me a lot in finalizing
this project within the limited time frame.
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INDEX
Chapter Sub Particular Page no

no chapter
1 1.1 Introduction 7
1.2 Objectives 9
1.3 Importance of ratio analysis 10
1.4 Advantages of ratio analysis 11
2 2.1 Types of ratio analysis 13
2.2 Key financial ratio 15
3 3.1 Objective of the study 22
3.2 Research methodology 23
3.3 Literature review 25
4 4.1 Company profile 27
4.2 History of company 28
4.3 Managements of the good less company 30
4.4 Customer of the kansai nerolac paints ltd 32
5 5.1 Data analysis 33
5.2 Finding 42
6 6.1 Conclusion 43
6.2 Bibliography 45
6.3 Annexure 46
CHAPTER NO:-1
1.1: Introduction
Financial Management is the specific area of finance dealing with the financial
decision corporations make, and the tools and analysis used to make the decisions. The
discipline as a whole may be divided between long-term and short-term decisions and
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techniques. Both share the same goal of enhancing firm value by ensuring that return on
capital exceeds cost of capital, without taking excessive financial risks.
Capital investment decisions comprise the long-term choices about which projects
receive investment, whether to finance that investment with equity or debt, and when or
whether to pay dividends to shareholders. Short-term corporate finance decisions are called
working capital management and deal with balance of current assets and current liabilities by
managing cash, inventories, and short-term borrowings and lending (e.g., the credit terms
extended to customers).
Corporate finance is closely related to managerial finance, which is slightly broader in

scope, describing the financial techniques available to all forms of business enterprise,
corporate or not.
A sustainable business and mission requires effective planning and financial

management. Ratio analysis is a useful management tool that will improve your
understanding of financial results and trends over time, and provide key indicators of
organizational performance. Managers will use ratio analysis to pinpoint strengths and
weaknesses from which strategies and initiatives can be formed. Funders may use ratio
analysis to measure your results against other organizations or make judgments concerning
management effectiveness and mission impact.
Definition ratio:-
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A ratio shows the relative sizes of two or more values.
Ratios can be shown in different ways. Using the ":" to separate example values, or as a
single number by dividing one value by the total.
Example: if there is 1 boy and 3 girls you could write the ratio as:-
1:3 (for every one boy there are 3 girls)

1/4 are boys and 3/4 are girls
0.25 are boys (by dividing 1 by 4)
25% are boys (0.25 as a percentage)
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1.2: Objectives of Ratio Analysis
Ratio analysis is indispensable part of interpretation of results revealed by the financial

statements. It provides users with crucial financial information and points out the areas which
require investigation. Ratio analysis is a technique which involves regrouping of data by
application of arithmetical relationships, though its interpretation is a complex matter. It
requires a fine understanding of the way and the rules used for preparing financial statements.
Once done effectively, it provides a lot of information which helps the analyst:
To know the areas of the business which need more attention;

To know about the potential areas which can be improved with theeffort in the desired
direction;
To provide a deeper analysis of the profitability, liquidity, solvencyand efficiency
levels in the business;
To provide information for making cross-sectional analysis bycomparing the
performance with the best industry standards; and
To provide information derived from financial statements useful formaking
projections and estimates for the future.
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1.3:Importance of ratio analysis
Ration analysis stands for the process of determining and presenting the relationship of items
and groups of items in the financial statements. It is an important technique of financial
analysis. It is a way by which financial stability and health of a concern can be judged. The
following are the main points to highlight the importance of ration analysis.
1. Useful in financial position analysis: accounting rationsreveal the financial position of
the concern. It helps the banks, insurance companies and other financial institutions in
lending and making investment decision.
2. Useful in simplifying accounting figures: accounting rations simplify, summarize and

systematize the accounting figures in order to make them more understandable, often the
figures standing alone cannot help them convey any meaning but rations help them to relate
with other figures.
3. Useful in assessing the operational efficiency:accounting rations helps to have an idea

of the working of a concern. The efficiency of the firm can be measured by the rations. It
analysis management to asses financial requirement and operational efficiency.
4. Useful in forecasting purposes: ration analysis is very much useful in financial

forecasting and planning. It tabulates the financial information of past years for analysis the
financial performance which helps for estimating thetrend for the future.
5. Useful in locating weaknesses of the business:accounting rations are of great assistance
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in locating the weakness of the business even though the overall performance may be
efficient. Management can then pay attention to the weaknesses and take remedial measure to
overcome them.
6. Useful in comparison of performance: accounting rations facilitate the comparison
between one with another firm in order to evaluate the financial performance. Management is
interested in such comparison in order to know the proper and smooth functioning of a firm.
Ration analysis also helps to make the necessary charges in the organizational structure
1.4: Advantages of Ratio Analysis

The ratio analysis if properly done improves the users understanding of efficiency with
which the business is being conducted. The numerical relationships throw light on many
latent aspects of the business. If properly analysed, the ratios make us understand various
problem areas as well as thebright spots of the business. The knowledge of problem areas
help management take care of them in future. The knowledge of areas which are working
better helps you improve the situation further. It must be emphasised that ratios are means to
an end rather than the end in themselves. Their role is essentially indicative and that of a
whistle blower. There are many advantages derived from ratio analysis.
These are summarised as follows:
Helps to understand efficacy of decisions: The ratio analysis helps you to understand
whether the business firm has taken the right kind of operating, investing and
financing decisions. It indicates how far they have helped in improving the
performance.
Simplify complex figures and establish relationships: Ratios help in simplifying the
complex accounting figures and bring out their relationships. They help summarise
the financial information effectively and assess the managerial efficiency, firms credit
worthiness, earning capacity, etc.
Helpful in comparative analysis: The ratios are not be calculated for one year only.
When many year figures are kept side by side, they help a great deal in exploring the
trends visible in the business. The knowledge of trend helps in making projections
about the business which is a very useful feature.
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Identification of problem areas: Ratios help business in identifying the problem areas
as well as the bright areas of the business. Problem areas would need more attention
and bright areas will need polishing to have still better results.
Enables SWOT analysis: Ratios help a great deal in explaining the changes occurring
in the business. The information of change helps the management a great deal in
understanding the current threats and opportunities and allows business to do its own
SWOT (Strength- Weakness-Opportunity-Threat) analysis.
Various comparisons: Ratios help comparisons with certain bench marks to assess as
to whether firms performance is better or otherwise. For this purpose, the
profitability, liquidity, solvency, etc. of a business, may be compared:
a. over a number of accounting periods with itself (Intra-firm Comparison/Time
Series Analysis),
b. with other business enterprises (Inter-firm Comparison/Cross-sectional
Analysis) and
c. with standards set for that firm/industry (comparison with standard
(or industry expectations).
CHAPTER NO:-2
2.1: Types of Ratios
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There is a two way classification of ratios:

(1) traditional classification, and
(2) functional classification.
The traditional classification has been on the basis of financial statements to which the
determinants of ratios belong. On this basis the ratios are classified as follows
1. Statement of Profit and Loss Ratios:A ratio of two variables from the statement of
profit and loss is known as statement of profit and loss ratio. For example, ratio of
gross profit to revenue from operations is known as gross profit ratio. It is calculated
using both figures from the statement of profit and loss. Balance Sheet Ratios: In case
both variables are from the balance sheet, it is classified as balance sheet ratios. For
example, ratio of current assets to current liabilities known as current ratio. It is
calculated using both figures from balance sheet.
2. Composite Ratios:If a ratio is computed with one variable from the statement of
profit and loss and another variable from the balance sheet, it is called composite
ratio. For example, ratio of credit revenue from operations to trade receivables
(known as trade receivables turnover ratio) is calculated using one figure from the
statement of profit and loss (credit revenue from operations) and another figure (trade
receivables) from the balance sheet. Although accounting ratios are calculated by
taking data from financial statements but classification of ratios on the basis of
financial statements is rarely used in practice. It must be recalled that basic purpose of
accounting is to throw light on the financial performance (profitability) and financial
position (its capacity to raise money and invest them wisely) as well as changes
occurring in financial position (possible explanation of changes in the activity level).
As such, the alternative classification (functional classification) based on the purpose

for which a ratio is computed, is the most commonly used classification which is
as follows:
a. Liquidity Ratios: To meet its commitments, business needs liquid funds. The
ability of the business to pay the amount due to stakeholders as and when it is
due is known as liquidity, and the ratios calculated to measure it are known as
Liquidity Ratios. These are essentially short-term in nature.
b. Solvency Ratios: Solvency of business is determined by its ability to meet its
contractual obligations towards stakeholders, particularly towards external
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stakeholders, and the ratios calculated to measure solvency position are known
as Solvency Ratios. These are essentially long-term in nature.
c. Activity (or Turnover) Ratios: This refers to the ratios that are calculated for
measuring the efficiency of operations of business based on effective
utilisation of resources. Hence, these are also known as Efficiency Ratios.
d. Profitability Ratios: It refers to the analysis of profits in relation to revenue

from operations or funds (or assets) employed in the business and the ratios
calculated to meet this objective are known as Profitability Ratios.
2.2: KEY FINANCIAL RATIOS
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The thorough valuation analyst will consider and compute five categories of ratios:
1. Internal liquidity ratios
2. Operating efficiency ratios
3. Operating profitability ratios
4. Business risk (operating) analysis ratios
5. Financial risk (leverage) analysis ratios
The following section provides a summary of the five categories of financial ratios, along with descriptions of
how each ratio is calculated and its relevance to financial analysis. Remember, the ratios themselves may not
be entirely meaningful unless used in trend analysis or comparative analysis.
A. INTERNAL LIQUIDITY RATIOS

The internal liquidity ratios (also referred to as solvency ratios) measure a firms ability to pay its near-term
financial obligations.
1. Current Ratio
Current Ratio = Current Assets
Current Liabilities
This ratio provides a good measure of solvency if accounts receivable and inventories are liquid.
2. Quick Ratio
Quick Ratio = Cash + Marketable Securities + Receivables
Current Liabilities
If inventories are not easily liquidated, the quick ratio provides a better indicator of the firms financial
solvency vis--vis the current ratio.
3. Cash Ratio
Cash Ratio = Cash + Marketable Securities
Current Liabilities
The cash ratio is the most conservative measure of solvency; it is used if neither accounts receivables nor
inventories are liquid
4. Receivable Turnover
Receivable Turnover = Net Sales
((Beginning A/R + Ending A/R) 2)
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This calculation finds the ratio between the net sales for the period and the average balance in accounts
receivable. The resulting ratio is a measure of how many times accounts receivable are collected (or turned
over) during the period being examined. For example, a ratio of 6 indicates that accounts receivable, on
average, were completely collected 6 times over the past year, or every two months.
The analyst can further convert the turnover ratio by dividing it into 365. This yields a rough indication of the
average time required to convert receivables into cash. Ideally, a monthly average of receivables should be
used and only sales on credit should be included in the sales figure. The interpretation of the average age of
receivables depends upon a companys credit terms and the seasonable activity immediately before yearend.
If a company grants 30 days credit terms to its customers, for example, and a turnover analysis indicates
average collection time of 41 days, then accounts receivable collections are lagging. If the terms were for 60
days, however, it appears collections are being made ahead of schedule. Note, if the sales volume in the last
month of the year is unusually large, the average age of receivables as computed above can be misleading.
5. Inventory Turnover
Inventory Turnover = Cost of Goods Sold
((Beginning Inventory + Ending Inventory) 2)
This ratio measures the number of times a company sells (or turns) its inventory during the year. The
relationship between inventory turnover and the gross profit rate may be important. A high inventory turnover
and a low gross profit rate frequently go hand in hand. This, however, is merely another way of saying if the
gross profit rate is low a higher volume of business is necessary to produce a satisfactory return on total assets.
Although, a high inventory turnover is usually regarded as a good sign, a rate that is high in relation to that of
similar firms may indicate the company is losing sales by failing to maintain an adequate stock of goods to
serve its customers promptly.
High inventory turnover can also indicate better liquidity or superior merchandising. Conversely, it can
indicate a shortage of needed inventory for sales. Low inventory turnover can indicate poor liquidity, possible
overstocking or obsolete inventory. In contrast to these negative interpretations, however, a planned inventory
buildup may be occurring to avoid material shortages.
6. Payables Turnover
Payables Turnover = Cost of Goods Sold
((Beginning AP + Ending AP) 2)
The payables turnover ratio measures the number of times a year that a company pays its average accounts
payable balance. If the ratio is too high, the firm may be paying too quickly and not taking advantage of the
interest free credit available from accounts payable. If the ratio is low, then the firm may be a credit risk and/or
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losing valuable discounts. Once again, this ratio can be divided into 365 to estimate the number of days the
average account payable is outstanding before being paid.
7. Cash Conversion Cycle
Cash Conversion Cycle = Inventory Turnover Period + Days to Collect Receivables Payable Payment
Period
The cash conversion cycle measures the time between the outlay of cash for inventory and the collection of
cash from the sale of that inventory.
B. OPERATING EFFICIENCY RATIOS

1. Net Fixed Asset Turnover
Net Fixed Asset Turnover = Net Sales
((Beginning F/A + Ending F/A) 2)
This ratio can be an indication of managements ability to effectively utilize fixed assets. Additionally, a low
ratio can often be an indication of obsolete or impaired fixed assets.
2. Total Asset Turnover

Total Asset Turnover = Net Sales
((Beginning Total Assets + Ending Total Assets) 2)
This ratio is an indication of managements ability to effectively utilize total assets; however, it is important to
note the asset turnover ratio can be affected by factors other than a firms efficiency. A firm with newer and
less depreciated assets will cause the ratio to fall relative to the firms with older or more depreciated assets.
Additionally, a low ratio can often be an indication of obsolete or impaired assets.
C. OPERATING PROFITABILITY RATIOS
Operating ratios are used in the evaluation of management performance.
1. Cost of Sales/Sales (%)
Cost of Sales = Cost of Sales
Net Sales
This ratio is an indication of the subject companys operating environment and operating efficiency. For
example, if the companys cost of sales/sales ratio is increasing, it may indicate competition is forcing the
company to cut profit margins or it may indicate the company is unable to pass its increasing costs to its
customers.
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2. Gross Margin (%)

Gross Margin = Net Sales - Cost of Sales
Net Sales
This ratio expands on the issues found by analyzing the cost of sales ratio. Note that the sum of the two ratios
(cost of sales and gross margin) equals 100%.
3. Operating Expenses/Sales (%)

Operating Expenses = Operating Expenses
Net Sales
Management generally has greater control over operating expenses than it has over revenue. This ratio is often
used as a measure of managements ability to control its operating expenses.
4. Operating Margin (%)

Operating Margin = Income from Operations
Net Sales
This ratio expands on the issues identified by analyzing the operating expense ratio.
5. Return on Assets (%) (ROA)

ROA = Net Income
((Beg. Total Assets + Ending Total Assets) 2)
This ratio is an important test of managements ability to earn a return on assets funded from all sources (debt
and equity). The income figure used in computing this ratio should be income before deducting interest
expense, since interest is a payment to creditors for funds used to acquire assets. Income before interest reflects
earnings throughout the year; therefore it should be related to the average investment in assets during the year.
6. Return on Equity (%) (ROE)

ROE = Net Income
((Beg. Common Equity + Ending Common Equity) 2)
Because interest and dividends paid to creditors and preferred stockholders are fixed in amount, a company
may earn a greater or lesser return on the common stockholders equity than on its total assets. Financing with
fixed-return securities is often called trading on the equity. Results may be favorable or unfavorable to holders
of common stock. For example, if the rate of return on total assets is greater than the average rate of payment
to creditors and preferred stockholders, the common stockholders will gain from trading on the equity and
return on common equity will increase.
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D. BUSINESS RISK (OPERATING) ANALYSIS
Business risk refers to the volatility of earnings over time. (See the formal definition in the International
Glossary of Business Valuation Terms in Chapter Eight.) There are three ratios (two of these require
knowledge of basic statistics to derive) used to asses the business risk.
1. Coefficient of Variation of Operating Income (EBIT)
Coef. of Var. Operating. Inc. = EBIT
EBIT
is the symbol for the standard deviation
the symbol for the Mean (or average). Note. It is important to recognize that there is a difference between
the mean and median, notwithstanding that these numbers may be the same. Median is the mid-point in a
sequence of numbers.
Valuation analysts will usually compute the coefficient of variation (C of V); data from one or more business
cycles is used to derive the data for the formula [In day 3 (Case) and day 5 (CVTA) the C of V will be
revisited].
2. Sales Volatility
Coef. of Sales Volatility = Sales
Sales
Again, sales volatility is measured in one or more business cycles..
3. Degree of Operating Leverage (DOL)

DOL = Sales%
EBIT%
DOL measures the inherent risks of operations of the business and is largely a function of a firms cost
structure and level of capital intensity. It is important to note that DOL is independent of the risk that is due to
financial leverage.
E. FINANCIAL RISK (LEVERAGE) RATIOS

The inclusion of debt in a firms financial structure increases its earnings volatility in relation to sales, thus
increasing risk. Financial leverage ratios should be interpreted in conjunction with a firms degree of operating
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leverage (DOL) and sales volatility. As a general rule, valuation analysts will see that firms with high DOL
and sales volatility tend to have low financial leverage ratios, while firms with low DOL and sales volatility
tend to have high financial leverage ratios.
1. Long-Term Debt-to-Equity Ratio (or Debt/ Equity Ratio)

Debt/Equity = Long-Term Debt + Deferred Tax Liabilities
Total Equity
This ratio is controversial. Some valuation analysts will exclude deferred tax liabilities if they believe these
liabilities will not eventually be paid. Some analysts will include the effect of operating leases, especially if the
lease should have been capitalized.
2. Total Debt-to-Total Invested Capital Ratio

Debt/Capital = Current Liabilities + Long-Term Debt
Total Liabilities + Total Capital
This ratio measures what percentage of a firms assets is financed with debt.
1. Total Debt-to-Total Assets Ratio = Current Liabilities + Long-Term Debt
Total Assets
The debt/asset ratio shows the proportion of a companys assets which are financed through debt. If the ratio is
less than one, most of the companys assets are financed through equity. If the ratio is greater than one, most of
the companys assets are financed through debt. Companies with high debt/asset ratios are said to be highly
leveraged.
4. Interest Coverage Ratio

Interest Coverage = Earnings Before Interest and Taxes (EBIT)
Interest Expense
This ratio is a measure of a firms ability to meet its interest payments. A high ratio may indicate a borrower
would have little difficulty in meeting the interest obligations of a loan. This ratio also serves as an indicator of
a firms capacity to take on additional debt.
5. Operating Cash Flow Ratio (OCF Ratio or CFO Ratio)

OCF Ratio = OCF
Current Liabilities
This ratio measures a firms ability to generate the resources required to meet its current liabilities.
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6. Operating Cash Flow to Long-Term Debt (OCF/ LTD)

OCF/LTD = OCF
Book Value of Long-Term Debt + PV of Lease Obligations
This ratio measures the ability to service total long-term debt, including lease obligations. Since operating cash
flows already reflect interest expense, payment of interest expense is reflected in the ratio.
7. Operating Cash Flow to Total Debt Ratio (OCF/ TD)

OCF/TD = OCF
Total Long-Term Debt + Current Interest Bearing Liabilities
This ratio measures the ability to service total interest bearing debt. Since operating cash flows already reflect
interest expense, payment of interest expense is reflected in the ratio.
CHAPTER NO:-3
3.1: OBJECTIVES OF STUDY
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The major objectives of the resent study are to know about financial strengths and weakness
of KANSAI NEROLAC PAINTS LIMITED through FINANCIAL RATIO ANALYSIS.
The main objectives of resent study aimed as:
To evaluate the performance of the company by using ratios as a yardstick to measure
the efficiency of the company.
To understand the liquidity, profitability and efficiency positions of the company
during the study period.
To evaluate and analyze various facts of the financial performance of the company. To
make comparisons between the ratios during different periods.
Secondary Objectives:
To study the present financial system at KANSAI NEROLAC PAINTS LIMITED.
To determine the Profitability, Liquidity Ratios.
To simplifies and summarizes a long array of accounting data and makes them
understandable.
3.2: RESEARCH METHODOLOGY
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Research methodology is a way to systematically solve the research problem.
it may be understood as a science of studying how research is done scientifically. So, the
research methodology not only talks about the research methods but also considers the logic
behind the method used in the context of the research study.
6.1 Research Design:
Descriptive research is used in this study because it will ensure the minimization of
bias and maximization of reliability of data collected. The researcher had to use fact and
information already available through financial statements of earlier years and analyze these
to make critical evaluation of the available material. Hence by making the type of the
research conducted to be both Descriptive and Analytical in nature.
From the study, the type of data to be collected and the procedure to be used for this
purpose were decided.
Data Collection:
The required data for the study are basically secondary in nature and the data are
collected from the audited reports of the company.
Sources of Data:
The sources of data are from the annual reports of the company from the year 2012 to
2016
Methods of Data Analysis:
The data collected were edited, classified and tabulated for analysis. The analytical
tools used in this study.
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Analytical Tools Applied:
The study employs the following analytical tools:
Comparative statement.
Common Size Statement.
Trend Percentage.
Ratio Analysis.
3.3: LITERATURE REVIEW
Review of Literature
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Review of Literature refers to the collection of the results of the various researches relating to
the present study. It takes into consideration the research of the previous researchers which
are related to the present research in any way. Here are the reviews of the previous researches
related with the present study:
Bollen (1999) conducted a studyon Ratio Variables on which he found three different uses of
ratio variables in aggregate data analysis:
(1) as measures of theoretical concepts,
(2) as a means to control an extraneous factor, and
(3) as a correction for heterosexuality. In the use of ratios as indies of concepts, a problem
can arise if it is regressed on other indies or variables that contain a common component. For
example, the relationship between two per capital measures may be confounded with the
common population component in each variable. Regarding the second use of ratios, only
under exceptional conditions will ratio variables be a suitable means of controlling an
extraneous factor. Finally, the use of ratios to correct for heteroscedasticity is also often
misused. Only under special conditions will the common form forgers soon with ratio
variables correct for heterosexuality. Alternatives to ratios for each of these cases are
discussed and evaluated.
Cooper (2000)conducted a study on Financial Inter mediation on which he observed that

the quantitative behavior of business-cycle models in which the inter mediation process acts
either as a source of fluctuations or as a propagator of real shocks. In neither case do we find
convincing evidence that the inter mediation process is an important element of aggregate
fluctuations. For an economy driven by inter mediation shocks, consumption is not smoother
than output, investment is negatively correlated with output, variations in the capital stock are
quite large, and interest rates are procyclical. The model economy thus fails to match
unconditional moments for the U.S. economy. We also structurally estimate parameters of a
model economy in which intermediation and productivity shocks are present, allowing for the
intermediation process to propagate the real shock. The unconditional correlations are closer
to those observed only when the inter mediation shock is relatively unimportant.
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Gerrard (2001) conducted a studentship Financial Performanceon which he found that Using
ratio analysis the financial performance of a sample ofindependent single-plant engineering
firms in Leeds is examined with regard to structural and locational differences in
establishments.A number of determinants of performance are derived and tested against the
constructed data base. Inner-city engineering firm sperform relatively less well on all
indicators of performance compared with outer-city firms. The study illustrates the
importanceof using different measures of performance since this affectsthe magnitude and
significance of the results. Financial support is necessary to sustain engineering in the inner
city in thelong run.
Schmidgall (2003)conducted a studyon Financial Analysis Using the Statement of Cash

Flows on which he observed that Managers use many financial ratios to judge the health of
theirbusinesses. With the recent requirement of a statement of cash flow (SCF) by the
Financial Accounting Standards Board, manager snow have a new set of ratios that will give
a realistic pictureof the business. The ratios include cash flow-interest coverage,cash flow-
dividend coverage, and cash flow from operations tocash flow in investments. These ratios
are particularly usefulbecause they show changes in a hotel or restaurant's cash positionover
time, rather than at a given moment, as is the case withmany other ratios.
Murinde (2003)) conducted studyon Corporate Financial Structures on which he observed

that the financial structure of a sample of Indian non-financialcompanies using a new and
unique dataset consisting of a panelcontaining the published accounts of almost 900
companies thatpublished a full set of accounts every year during 1989-99.In a new departure
in the literature, the dataset includes quotedand unquoted companies. We compare the
sources-uses approachto analyzing company financial structures with the asset-
liabilityapproach. We use both approaches to characterize and to comparethe financial
structures of Indian companies over time; betweenquoted and unquoted companies; and
between companies whichbelong to a business group and those that do not. Finally,
wecompare our results to those obtained previously for India andfor the industrial countries.
CHAPTER NO:4
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4.1: COMPANY PROFILE
ABOUT KANSAI NEROLAC PAINTS LTD. (KNPL)
Kansai Nerolac Paints ltd is Indias second largest paint company with group turnover
of about Rs.1170/- crore per annum. It is market leader in industrial coating business in India
and second largest in the Decorative Paints market. KNP Co. Ltd of Japan holds 69.27%
equity of KNPL. Kansai Paint is one of the top ten companies in the world. The company has
technical tie ups with reputed foreign collaborations such as Oshima Kogyo,E.I. Du Pont,
NTT, Nihon Parkerizing and Ameron in the field of speciality & High performance coatings.
Kansai Nerolac Paints Ltd. has the reputation in being innovative, creating value, delivering
quality and service.
KNPL has manufacturing locations at Lote in Maharashtra, Perungudi in Tamil Nadu,
Jainpur in Uttar Pradesh, Bawal in Haryana and Hosur in Tamil Nadu. The corporate office is
situated at Lower Parel in Mumbai.
The total strength of the employees is about 2000 spread over in corporate office,
manufacturing plant, zonal, regional, and area offices.
Nerolac is well established brand in Decorative Coatings. It has widespread
distribution/ marketing network with over 11000 dealers and 65 depots. Product ranges of
Decorative Coatings include exterior and interior finishes, wood finishes, auto refinishes, and
certain speciality products. The product range in automotive coating includes Pre-treatment
Chemicals, Electro Deposition Primers, PVC sealers, Mono coats & Metallics finishes, Clear
Coatings etc. KNPL has very good research and development set up. It engages over 175
paint technologists for continuous developing superior products. KNPL is a professionally
managed company with young and vibrant team with an average age of 37 years.
4.2: History of Kansai Nerolac Paints Ltd. (KNPL)
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Kansai Nerolac is one of the largest paints companies in India having a significant
presence in industrial as well as decorative sectors.
Kansai Nerolac embarked their journey in 1920 as Gahagan Paints and Varnish Co.
Ltd. at Lower Parel in Bombay.
In 1930, three British companies merged to formulate Lead Industries Group Ltd.
In 1933, Lead Industries Group Ltd. acquired entire share capital of Gahagan Paints in 1933
and thus, Goodlass Wall (India) Ltd. was born.
Subsequently, by 1946, Goodlass Wall (India) Ltd. was known as Goodlass Wall Pvt.
Ltd.
In 1957, Goodlass Wall Pvt. Ltd. grew popular as Goodlass Nerolac Paints (Pvt.) Ltd.
Also, it went public in the same year and established itself as Goodlass Nerolac Paints Ltd.
In 1976, Goodlass Nerolac Paints Ltd. became a part of the Tata Forbes Group on
acquisition of a part of the foreign shareholding by Forbes Gokak.
In 1983, Goodlass Nerolac Paints Ltd. strengthened itself by entering in technical
collaboration agreements with Kansai Paint Co. Ltd., Japan and Nihon Tokushu Toryo
Co.Ltd.Japan.
In 1986, Goodlass Nerolac Paints Ltd. turned into a joint venture of the Tata Forbes
andthe Kansai Paint Co. Ltd., with the latter acquiring 36% of its share capital.
In 2000, Kansai Paint Company Ltd., Japan took over the entire stake of Tata Forbes
group and thus GNP became a wholly owned subsidiary of Kansai Paint Company Ltd.
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In 2006, on the 11th of July, Goodlass Nerolac Paints Ltd. name has been changed to
Kansai Nerolac Paints Ltd.
Vision of KNPL:
KNPL its unique vision to leverage global technology for servicing customer with
superior coating system built on innovative and superior product and world class solution to
strengthen its leadership in industrial coating and propel for leadership in architectural
coating all to the delight of its stake holder.
4.3: MANAGEMENT OF THE GOODLESS NEROLAC PAINTS LTD
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Being the second largest paint company in India, it spread over the country with
employee strength of around 2000. An efficient management provides the conducive work
atmosphere to develop and grow.
BOARD OF DIRECTORS:
Name Of Person Designation
Dr. Jamshed Jiji Irani Chairman
Mr. Devendra Motilal Kothari Vice Chairman
Mr. Hiroshi Ishino Director
Mr. Yuzo Kawamori Director
Mr. Pradip Shah Director
Mr. Harishchandra Meghraj Managing Director
Bharuka
Mr. Susim Mukul Datta Director
Mr. Noel Tata Director
Mr. Yaso Tajiri Director
Mr. Pravin Chaudhari Director
MANAGEMENT COMMITTEE MEMBERS:
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9
Name Of The Person Designation
Mr. H.M. Bharuka Managing Director
Mr. Pravin Chaudhari Director
Mr. Shrikant Dikhale Vice President Hr
Mr. Anuj Jain Vice President - Marketing
(Decorative
Mr. Mahesh Mehrotra Vice President Technical
Mr. Hitoashi Nishibayashi Director Supply Chain & Auto
Marketing
Mr. P.D. Pai Vice President Finance
Mr. Jason Gonsalves Vice President - Corporate
Planning & It
4.4: CUSTOMERS OF KANSAI NEROLAC PAINTS LTD.:
I. Bajaj Auto Ltd.
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II. Maruti Udyog Ltd.
III. Godrej & Boyce
IV. Mahindra & Mahindra
V. Samsung
VI. Ashok Leyland
VII. Toyota Kirloskar Motors Ltd.
VIII. Aditya Birla Group
IX. Hero Honda
Quality and EHS certifications received by KNPL (LOTE) plant:
TS 16949 June 2006
ISO 9000-2000 May 2004
ISO 14000 September 2002
OHSAS 18000 January 2005
4.5: AWARD AND RECOGNITION TO KNPL (LOTE) PLANT:
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Golden Peacock Environment Management Award 2009- Winner

Symbiosis centre for management Lean and six sigma excellence
-As a participant
Greentech Environment Excellence Award 2008 in chemical sector- Awarded by
Greentech foundation, New Delhi.

ECS Manufacturing Excellence Level 2 Certificate in April 2008
Goodlass Nerolac Paint Ltd C2E- Commitment to Excellence in May 2006
Lote has achieved recognition to their outstanding performance in commitment for
excellence in Human Resource Care in May 2006 .
Functions of Finance & Accounts Department of KNPL (lote):
Accounting function is necessary is a necessary input into the finance function
i.e. accounting is a sub-function of finance. Accounting generates information \ data relating
to operations/ activities of the firm. The end product of accounting constitutes financial
statements such as Balance sheet, The Income Statement and The Statement of changes in
Financial position/ sources and uses of funds statement/ Cash flow statement. The
information contained in these statements and reports assists Financial Managers in assessing
the past performance & future direction of the firm and meeting the legal obligation, such as
payment of taxes and so on. Thus Accounting and Finance are functionally closely related
CHAPTER NO:-5
5.1: DATA ANALYSIS
Management efficiency ratio
FIXED ASSETS RATIO

Diagram :-
3
2
FIXED ASSET RATIO

3
2.5
1.5
0.5
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

Fixed 1.94 2.28 2.24 2.31 2.45
assets
ratio
Interpretation :-
It indicates the efficiency with which the assets of the company has been utilised.
A low Ratio indicates that there is an efficient utilisation of the assets.
Fixed assets of the company is precisely increasing but there is a sharp decline in the sales in
the year 2014 and 2015 made fixed assets less efficient.
Sales / Average Fixed Assets
Debt equity ratio:-

Diagram :-
3
3
DEBT EQUITY RATIO

0.12
0.1
0.08
0.06
0.04
0.02
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

Debt 0.1 0.02 0.03 0.04 0.06
equity ratio
Interpretation:-
It compares the portion of debt to equity.
It's ideal Ratio is 2:1 i.e. for every once portion of equity, two portion of debt is ideal in the
capital structure of the company.
There is sharp decline in companies reserves and surplus as the loss incurred in the year 2015
made equity lesser than previously held and also tremendous increase in unsecured loans and
also some increase in secured loans. Hence debt equity Ratio increased in the year 2015 huge
amount of loans also results in higher financial costs.
Debt / Equity
LIQUID RATIO
Current ratio
Diagram :-
3
4
CURRENT RATIO
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2016 2015 2014 2013 2012
Series 2
year 2016 2015 2014 2013 2012

Current 1.85 1.67 1.59 1.54 1.69
ratio
Interpretation: -
The ratio indicates the current assets available for each rupee of current liability.
It Indicates the ability of the company to pay off its short term liabilities.
Traditionally, the current ratio of 2:1 is considered to be satisfactory
Current assets / current liabilities
Quick ratio
Diagram :-
3
5
QUICK RATIO
1.4
1.2
0.8
0.6
0.4
0.2
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

Quick 1.25 0.90 0.76 0.79 0.87
ratio
Interpretation: -
Indicates the amount of liquid assets that are available for paying off the quick liabilities.
Ideal Ratio is 1:1
Decline in sales results in low investment in quick assets which makes quick Ratio
comparatively lower than initial years
Quick assets / quick liabilities
Payout ratio:-
Dividend payout ratio
Diagram :-
3
6
divdend payout ratio

35
30
25
20
15
10
5
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

Dividend 18.44 27.77 28.69 20.28 27.45
payout
ratio
Interpretation: -
It is analysis of dividend payout ratio, 2014 the rate of dividend is higher. In 2013 rate of dividend low is
compared to other yeas
Earning profit margine :

Diagram :-
3
7
EPS
80
70
60
50
40
30
20
10
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

EPS ratio 53.80 72.23 71.31 66.56 72.55
Interpretation :
It is analysis of equity profit margin , 2012 the rate of dividend is higher. In 2016 rate of profit low is
compared to other years.
PROFITABLE RATIO:-
OPERATING MARGIN
Diagram :-
3
8
OPERATING RATIO
16
14
12
10
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

Operating 14.94 12.53 11.97 11.76 12.97
ratio
Interpretation: -
Due to increase in sales In year 2016 the operating profit is higher than privies years .in the
year 2015,2014,2013,2012 the operating profit is reduces compared to 2016.for the reasons is
operating expenses is reduced.
GROSS PROFIT MARGINE

Diagram :-
3
9
GROSS PROFIT MARGIN

14
12
10
0
2016 2015 2014 2013 2012
year 2016 2015 2014 2013 2012

Gross profit 13.17 10.62 9.41 10.11 10.80
ratio
Interpretation :
Due to increase in sales In year 2016 the operating profit is higher because of increasing in
sales .in the year 2015,2014,2013,2012 the operating profit is reduces compared to 2016.for
the reasons is reducing sales
5.2: FINDING
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1. The current ratio has shown in a fluctuating trend as 1..86,1.67,1.69,1.54,1.69during 2016
of which indicates a continuous increase in both current assets and current liabilities.
2. The quick ratio is also in a fluctuating trend through out the period 2012 TO 2016 resulting
as 1.25,0.90,0.76,0.79,0.87 . The companys present liquidity position is satisfactory..
3. The fixed assets turnover ratio is in decreasing trend from the year2016is
1.94,.2.28,2.24,2.31,2.45 It indicates that the company is not efficiently utilizing the fixed
assets.
4. earning retention ratio is decrease in 2016 amounting rs. 53.80,72.23,71.31,66.56,72.55
In 2012 earning retention ratio is higher. Compared to other years
5.Inventory turnover ratio is increases in ( 7.59,7.40,4.89,6.03,6.34) 2016. it is an
satisfactory ratio
6.Dividend payout ratio (net profit) decreases in 2016 (18.44,27.77,28.69,20.28,27.45)it
is fluctuating in all years.
7.Long term debt/equity is (0.01,0.02,0.03,0.04,0.06) decrease. It is continually decrease
in all years.
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CHAPTER NO:-6
6.1: CONCULTION
Finance is the life blood of every business. Without effective financial
management a company cannot in this competitive world. A Prudent financial Manager has to
measure the working capital policy followed by the company.
The companys overall position is at a good position. Through the losses were
there in the FY 2003-2004, they were able to come out of it successfully and regain into
profitable scenario. Particularly the last three years position is well due to raise in the profit
level from the FY 2007 to FY 2009. It is better for the firm to diversify the funds to different
sectors in the present market scenario.
On a whole Kansai Nerolac Paints Limited has once again demonstrated its
potential to ride through the difficult times. Despite the slowdown in its growth, it has
determined to grab numerous opportunities that are facing Indian Paint Industry.
As mentioned earlier, other opportunities in India are pegged to the transport
sector. Car ownership in India stands at little more than one percent. However, rising
affordability and the launch of economical cars such as the Tata Nano are expected to propel
the market for OEM coatings and refinishes in the coming years.
Higher demand for marine paints can be expected in the next decade, once
investments in ports and port development have started to reach fruition. As India is hopeful
of competing with other established shipbuilding nations, the multinationals are likely to find
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plentiful opportunity in India, given the compliance requirements imposed by effects of
international legislation on marine paints.
Also other segments are showing promising opportunities to grow. With these
many opportunities at hand along with the potential player who would be able to make use of
the situation well, I would rather start looking at a career in KNPL.
So from this we can conclude that there is a better opportunities for investors
to invest in this company.
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6.2: BIBLOGRAPHY
Financial Management: M Y KHAN AND P K JAIN Fifth Edition
FINANCIAL MANAGEMENT - I. M. PANDEY
Financial Management (BMS): MR. Kale.
Kansai Nerolac Paints magazines, brochures etc.
www.nerolac.com
Search Engine : www.google.com
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6.3: ANNEXURE
Balance Sheet For Kansai Nerolac Paints Ltd.
(Rs in Cr)
Mar' 16 Mar' 15 Mar' 14 Mar' 13 Mar' 12
SOURCES OF FUNDS
Owners' Fund
Equity Share Capital 53.89 53.89 53.89 53.89 53.89
Share Application Money 0.00 0.00 0.00 0.00 0.00
Peference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves & Surplus 2,235.27 1,542.93 1,369.30 1,232.09 1,009.26
Loan Funds
Secured Loans 0.00 0.90 0.90 0.90 2.96
Unsecured Loans 28.79 40.60 50.81 59.59 66.01
Total 2,317.95 1,638.32 1,474.91 1,346.47 1,132.13
USES OF FUNDS
Fixed Assets
Gross Block 1,471.99 1,389.00 1,328.34 1,141.83 844.54
Less: Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Less: Accumulated Depreciation 545.43 484.00 418.76 367.36 448.21
Net Block 926.56 905.00 909.58 774.47 396.32
Capital Work-in-progress 41.95 43.94 48.16 123.49 161.49
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Investments 542.50 215.58 56.47 60.60 183.51
Net Current Assets
Current Assets, Loans & Advances 1,758.36 1,178.84 1,240.92 1,103.66 956.81
Less : Current Liabilities & Provisions 951.42 705.04 780.22 715.76 565.99
Total Net Current Assets 806.94 473.80 460.70 387.90 390.82
Miscellaneous Expenses not written 0.00 0.00 0.00 0.00 0.00
Total 2,317.95 1,638.32 1,474.91 1,346.47 1,132.13
Note
Book Value of Unqouted Investment 509.24 211.44 52.34 56.46 183.51
Market Value of Qouted Investment 33.96 4.87 4.53 4.83 40.64
Contingent liabilities 86.74 8.31 6.32 89.07 24.48
Number of Equity shares outstanding (in Lacs) 5,389.20 5,389.20 538.92 538.92 538.92
Profit & Loss For Kansai Nerolac Paints Ltd.
(Rs in Cr)
Income :
Operating Income 3,830.22 3,549.06 3,154.35 2,856.62 2,600.57
Expenses
Material Consumed 2,367.69 2,382.08 2,150.92 1,959.64 1,755.65
Manufacturing Expenses 69.43 65.22 66.68 45.48 34.79
Personnel Expenses 177.65 143.30 135.88 118.14 106.94
Selling Expenses 0.00 0.00 0.00 0.00 0.00
Adminstrative Expenses 643.13 513.64 438.79 397.26 365.89
Expenses Capitalised 0.00 0.00 0.00 0.00 0.00
Cost Of Sales 3,257.90 3,104.24 2,792.27 2,520.52 2,263.27
Operating Profit 572.32 444.82 362.09 336.10 337.30
Other Recurring Income 24.84 21.79 10.33 16.32 24.27
Adjusted PBDIT 597.16 466.61 372.42 352.42 361.57
Financial Expenses 0.00 0.02 0.45 0.02 0.09
Depreciation 67.79 67.69 64.98 47.11 56.35
Other Write offs 0.00 0.00 0.00 0.00 0.00
Adjusted PBT 529.37 398.90 306.99 305.29 305.13
Tax Charges 173.61 127.23 100.42 128.04 89.24
Adjusted PAT 355.76 271.67 206.57 177.26 215.89
Non Recurring Items 535.34 0.00 0.00 114.93 0.00
Other Non Cash adjustments 0.00 0.00 0.00 0.00 0.00
Reported Net Profit 891.10 271.67 206.57 292.18 215.89
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6
Earnigs Before Appropriation 1,969.08 1,203.19 1,021.54 913.54 711.84
Equity Dividend 129.98 59.67 49.21 49.21 49.66
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Dividend Tax 34.39 15.78 10.08 10.08 9.62
Retained Earnings 1,804.71 1,127.74 962.26 854.26 652.56
Ratios For Kansai Nerolac Paints Ltd.
PER SHARE RATIOS
Adjusted E P S (Rs.) 6.60 5.04 38.33 32.89 40.06
Adjusted Cash EPS (Rs.) 7.86 6.30 50.39 41.63 50.52
Reported EPS (Rs.) 16.53 5.04 38.33 54.22 40.06
Reported Cash EPS (Rs.) 17.79 6.30 50.39 62.96 50.52
Dividend Per Share 3.05 1.40 11.00 11.00 11.00
Operating Profit Per Share (Rs.) 10.62 8.25 67.19 62.37 62.59
Book Value (Excl Rev Res) Per Share (Rs.) 42.48 29.63 264.08 238.62 197.28
Book Value (Incl Rev Res) Per Share (Rs.) 42.48 29.63 264.08 238.62 197.28
Net Operating Income Per Share (Rs.) 71.07 65.86 585.31 530.06 482.55
Free Reserves Per Share (Rs.) 0.00 0.00 0.00 0.00 0.00
PROFITABILITY RATIOS
Operating Margin (%) 14.94 12.53 11.47 11.76 12.97
Gross Profit Margin (%) 13.17 10.62 9.41 10.11 10.80
Net Profit Margin (%) 23.26 7.65 6.54 10.22 8.30
Adjusted Cash Margin (%) 10.98 9.50 8.58 7.80 10.37
Adjusted Return On Net Worth (%) 15.54 17.01 14.51 13.78 20.30
Reported Return On Net Worth (%) 38.92 17.01 14.51 22.72 20.30
Return On long Term Funds (%) 22.83 24.34 20.84 22.67 26.95
LEVERAGE RATIOS
Long Term Debt / Equity 0.01 0.02 0.03 0.04 0.06
Total Debt/Equity 0.01 0.02 0.03 0.04 0.06
Owners fund as % of total Source 98.75 97.46 96.49 95.50 93.90
Fixed Assets Turnover Ratio 1.94 2.28 2.24 2.31 2.45
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7
LIQUIDITY RATIOS
Current Ratio 1.85 1.67 1.59 1.54 1.69
Current Ratio (Inc. ST Loans) 1.85 1.67 1.59 1.54 1.69
Quick Ratio 1.25 0.90 0.76 0.79 0.87
Inventory Turnover Ratio 7.59 7.40 4.89 6.03 6.34
PAYOUT RATIOS
Dividend payout Ratio (Net Profit) 18.44 27.77 28.69 20.28 27.45
Dividend payout Ratio (Cash Profit) 17.14 22.23 21.83 17.47 21.77
Earning Retention Ratio 53.80 72.23 71.31 66.56 72.55
Cash Earnings Retention Ratio 61.20 77.77 78.17 73.58 78.23
COVERAGE RATIOS
Adjusted Cash Flow Time Total Debt 0.06 0.12 0.19 0.26 0.25
Financial Charges Coverage Ratio 0.00 23,330.50 825.76 22,025.94 4,204.27
Fin. Charges Cov.Ratio (Post Tax) 0.00 16,969.00 603.10 21,206.56 3,166.56
COMPONENT RATIOS
Material Cost Component(% earnings) 62.17 65.37 70.74 70.63 69.36
Selling Cost Component 0.00 0.00 0.00 0.00 0.00
Exports as percent of Total Sales 0.03 0.01 0.04 0.02 0.04
Import Comp. in Raw Mat. Consumed 46.45 39.51 35.58 36.23 33.15
Long term assets / Total Assets 0.46 0.49 0.44 0.46 0.43
Bonus Component In Equity Capital (%) 78.97 78.97 78.98 78.98 78.98
Cash Flow For Kansai Nerolac Paints Ltd.
(Rs in Cr)
Profit Before Tax 1,064.71 398.90 306.99 420.22 305.13
Net CashFlow-Operating Activity 389.59 307.00 189.21 223.70 102.26
Net Cash Used In Investing Activity 145.30 -238.74 -112.46 -141.84 -12.15
NetCash Used in Fin. Activity -91.12 -89.09 -81.94 -80.98 -70.64
Net Inc/Dec In Cash And Equivlnt 443.77 -20.83 -5.19 0.89 19.47
Cash And Equivalnt Begin of Year 33.48 54.88 60.07 59.18 39.16
Cash And Equivalnt End Of Year 477.25 34.05 54.87 60.07 58.63
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Quarterly Financial Results For Kansai Nerolac Paints Ltd.
(Rs in Cr)
Mar' 16 Jun' 16 Mar' 15 Jun' 15 Sep' 15
Sales 891.07 1,047.05 807.84 999.76 971.33
Other Income 6.38 21.09 5.82 6.46 6.10
Stock Adjustment -23.42 24.63 18.37 28.06 -22.83
Raw Material 505.56 554.31 474.51 565.91 576.76
Power And Fuel 0.00 0.00 0.00 0.00 0.00
Employee Expenses 45.77 45.89 36.80 40.33 46.27
Excise 0.00 0.00 0.00 0.00 0.00
Admin And Selling Expenses 0.00 0.00 0.00 0.00 0.00
Research And Devlopment Expenses 0.00 0.00 0.00 0.00 0.00
Expenses Capitalised 0.00 0.00 0.00 0.00 0.00
Other Expeses 230.26 235.45 178.97 216.41 217.25
Provisions Made 0.00 0.00 0.00 0.00 0.00
Operating Profit 132.90 186.77 99.19 149.05 153.88
Interest 0.00 0.00 0.01 0.00 0.00
Gross Profit 139.28 207.86 105.00 155.51 159.98
Depreciation 17.10 17.24 16.75 16.75 17.02
Taxation 41.75 64.12 27.88 44.73 46.08
Net Profit / Loss 615.77 126.50 60.37 94.03 96.88
Extra Ordinary Item 535.34 0.00 0.00 0.00 0.00
Prior Year Adjustments 0.00 0.00 0.00 0.00 0.00
Equity Capital 53.89 53.89 53.89 53.89 53.89
Equity Dividend Rate 0.00 0.00 0.00 0.00 0.00
Agg.Of Non-Prom. Shares (in lacs) 0.00 0.00 1,656.22 1,656.22 1,656.22
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Agg.Of Non PromotoHolding(%) 0.00 0.00 30.73 30.73 30.73
OPM(%) 14.91 17.84 12.28 14.91 15.84
GPM(%) 15.52 19.46 12.90 15.45 16.37
NPM(%) 68.61 11.84 7.42 9.34 9.91
EPS (in Rs.) 11.43 2.35 1.12 1.74 1.80
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A STUDY OF RATIO ANALYSIS

title AN ANLATICAL STUDY OF RATIO ANALYSIS W.R.T

PLACE:-THANE MADHURI JADHAV

DATE:- / / ROLL NO-20

ANLATICAL STUDY OF RATIO ANALYSIS W.R.T KANSAI

I am also thankful to Mr Mundeshwar Sir, co-ordination of self-financed courses for giving

Chapter Sub Particular Page no

1.3 Importance of ratio analysis 10

1.4 Advantages of ratio analysis 11

2 2.1 Types of ratio analysis 13

2.2 Key financial ratio 15

3 3.1 Objective of the study 22

3.2 Research methodology 23

3.3 Literature review 25

4 4.1 Company profile 27

4.2 History of company 28

4.3 Managements of the good less company 30

4.4 Customer of the kansai nerolac paints ltd 32

5 5.1 Data analysis 33

Corporate finance is closely related to managerial finance, which is slightly broader in

A sustainable business and mission requires effective planning and financial

A ratio shows the relative sizes of two or more values.

1:3 (for every one boy there are 3 girls)

1.2: Objectives of Ratio Analysis

Ratio analysis is indispensable part of interpretation of results revealed by the financial

To know the areas of the business which need more attention;

1.3:Importance of ratio analysis

2. Useful in simplifying accounting figures: accounting rations simplify, summarize and

3. Useful in assessing the operational efficiency:accounting rations helps to have an idea

4. Useful in forecasting purposes: ration analysis is very much useful in financial

5. Useful in locating weaknesses of the business:accounting rations are of great assistance

1.4: Advantages of Ratio Analysis

There is a two way classification of ratios:

As such, the alternative classification (functional classification) based on the purpose

d. Profitability Ratios: It refers to the analysis of profits in relation to revenue

2.2: KEY FINANCIAL RATIOS

A. INTERNAL LIQUIDITY RATIOS

B. OPERATING EFFICIENCY RATIOS

2. Total Asset Turnover

2. Gross Margin (%)

3. Operating Expenses/Sales (%)

4. Operating Margin (%)

5. Return on Assets (%) (ROA)

6. Return on Equity (%) (ROE)

D. BUSINESS RISK (OPERATING) ANALYSIS

3. Degree of Operating Leverage (DOL)

E. FINANCIAL RISK (LEVERAGE) RATIOS

1. Long-Term Debt-to-Equity Ratio (or Debt/ Equity Ratio)

2. Total Debt-to-Total Invested Capital Ratio

4. Interest Coverage Ratio

5. Operating Cash Flow Ratio (OCF Ratio or CFO Ratio)

6. Operating Cash Flow to Long-Term Debt (OCF/ LTD)

7. Operating Cash Flow to Total Debt Ratio (OCF/ TD)

3.1: OBJECTIVES OF STUDY

of KANSAI NEROLAC PAINTS LIMITED through FINANCIAL RATIO ANALYSIS.

The main objectives of resent study aimed as:

To evaluate the performance of the company by using ratios as a yardstick to measure

the efficiency of the company.

To understand the liquidity, profitability and efficiency positions of the company

during the study period.

make comparisons between the ratios during different periods.

To study the present financial system at KANSAI NEROLAC PAINTS LIMITED.

To determine the Profitability, Liquidity Ratios.