INTRODUCTION

Finance is scarce. It is also the most important aspect of a business. There for, finance requires
proper planning and control to achieve the objectives of the business.This give birth to financial
management as a separate discipline. Financial management simply means management of
finance. Ti define financial management, we should define two terms-finance and management.
Finance refers to money available to a firm. Management means planning, organizing, directing
and controlling activities. Thus financial management may be defined as planning, organizing
directing and controlling financial activities in a business enterprise.

For managing the finance first and foremost step is financial analysis. Financial analysis is the
process of evaluation between components parts of financial statements to obtain better
understanding of the firm position and performance. It is the process of identifying the strength
and weakness of the company with the help of accounting information provided by the profit and
loss a/c and balance sheet. Financial analysis mainly measures the liquidity, solvency and
profitability of the business concern. The term interpretation means explaining the meaning and
significance of data so arranged.

Finances are important consideration for both individuals and organizations. On as personal level
financial well being enables people to purchase goods and service, either as needs or wants. For
business, governments and other large organizations, health fianc are vital for survival and
success.

Much in the same way that personal fianc are converted with survival, so is the case with
corporate fiancs. Companies ultimately need to earn a profit to stay in business and this means
keeping a close eye on expense verses income. Unlike personal finances, though, corporate
finance have a far greater input on society as a whole. The financial actions of corporations do
not merely affect their own employees. Investors depend in the physical health of companies and
this in turn affects board sectors of the economy.

Finance consists of rising, providing and meaning of money, capital of funds of any kind to be
use in connection with the business. The finance department is an organization which is
responsible for managing financial activities of the firm. The fianc department deals with wide

1
range of activities like planning, raising, controlling and administrating g the funds of the
business.
The term interpretation means explain the meaning and significance of data so arranged.
Analysis and interpretation are closely related interest not possible without analysis and
interpretation has no value. So first the data in the financial statement are to be analyzed for
analysis of data, draw conclusion which means interpretation. Interpretation is this drawing of
inference and starting with that figure in the financial statement really mean, The most important
objective of analysis and interpretation of financial statement data are to know the financial
performance of a business undertaking.

The study is entitles A study on financial performance in Pinarayi Industrial central co-
operative society for the 5 year period extending form 2011-12 to 2015-16.

2
OBJECTIVES OF THE STUDY

To analyze the financial performance of Pindaryi Industrial central co-operative society

of the 5 year period extending from 2011-12 to 2015-16.
To understand the financial trend during the period of the study
To examine the liquidity, solvency and profitability positions of the society.

3
SCOPE OF THE STUDY

Finance is the life blood of any business. To have a very clear understanding about financial
position of the business, the financial statement will have to be analyzed and interpreted.
Financial analysis is the process of identifying the strength and weakness of the company with
help of accounting information by the balance sheet.

Data are obtained format he records of the company and form the staff and seekers of PICCOs
Ltd. Various financial techniques are sued for analysis. The study also provides suitable
suggestions and conclusion based on findings.

4
RESEARCH METHODOLOGY

RESEARCH DESIGN

The research is a large desktop analysis and it involves scanning and absorbing tools and
ideas from standard texts, journals website and other related materials to get hold on theories of
financial control

SOURCES OF DATA

Data are mainly collected from two sources

1. Primary Data
Primary data are collect through formal and informal discussions and exchange of views
with the company personnel
2. Secondary data
The secondary data one collected from balance sheet and annual report of five years of
PICCOS Ltd.

DATA ANALYSIS TOOL

1. Ratio analysis
2. Trend analysis

5
COLLECTION OF DATA

FINANCIAL ANALYSIS

Financial statement contains lots accounting figures or data. But the figures contained in the
financial statements cannot speak by themselves. Financial statements cannot speak by
themselves. Financial statements do not reveal important conclusions such as efficiency of the
management, strength and weakness of the firm, future progress etc but if we analyze the
financial statements we can draw conclusions from them. On the basis of these conclusions, it is
possible to understand more about the business. Thus it became necessary to analyze the
financial statements in order to understand more about profitability and financial position of
business.

Meaning of Financial Analysis

The analysis of financial statements provides valuable information for managerial decisions.
Financial analysis is commonly called analysis and interpretation of financial statements.
Analysis of financial statement means establishing relationship between the item in the financial
statements for determining the financial strength and weakness of the firm.

Financial analysis is the use of financial statements to analyze a company's financial position
and performance, and to assess future financial performance in short, financial analysis is the
process of evaluation and relation of information contained in the financial statements with a
view to interpreting them for arriving at conclusions.

Definition of Financial Analysis

In the word of Metcaff and Titard, "Analyzing financial statement is a process of evaluating the
relationship between component parts of financial statement to obtain a better understanding of a
firm's position and performance".

6
Purpose of financial analysis

Following are the important objective of analysis and interpretation of financial statement.

To helps in economic decision making.

To estimate the earning capacity of the business

To ascertain the operating performance of the business >> To determine the

debt paying capacity of the firm

To measure managerial efficiency of the firm

To assess the financial position and financial performance of the business.

To determine the solvency and liquidity of the business

To decide about the future prospects of the firm

Techniques of financial statement analysis

A number of techniques or devices are used to undertake financial analysis. The fundamental
objective of any analytical method is to simplify the data to more understandable terms. The
following are the important tools of analysis.

Ratio analysis

Trend analysis

RATIO ANALAYSIS

Ratio analysis is one of the powerful tools of the financial analysis. A ratio can be defined as "the
indicated quotient of two mathematical expressions and as the relationship between two or more
things" Ratio is. thus, the numerical or can arithmetical relationship between two figures. It is
expressed where one figure is divided by another. A ration can be used as yardstick for
evaluating the financial position and performance of a concern, because the absolute accounting
data cannot provide meaningful understanding and interpretation. A ratio analysis helps the

7
 analyst to make quantitative judgment with regard to concerns financial position and
performance.

Absolute figures are valuable but the standing alone covey no meaning unless compared with
another. Accounting ratios shows interrelationship which exist among various accounting data
supplied by financial statements are worked out, they are known as accounting ratios.

Accounting ratios can be expressed in various ways such as:

i) A pure ratio of current assets to current liabilities is 2:1

ii) A rate say current assets are two times of times of current liabilities

iii) A percentage say current assets are 200% of current liabilities.

IMPORTANCE OF RATIO ANALYSIS

Ration analysis stands for the process of determining and presenting the relationship of items and
group if items in the financial statement. 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 of important of ratio analysis.

1. Useful in financial position analysis

2. Useful in simplifying accounting figures.

3. Useful in assessing the operational efficiency

4. Useful in forecasting purpose

5. Useful in locating the week spots of the business

6. Useful in comparison of performance.

ADVANTAGES OF RATIO ANALYSIS

The use of ratio analysis as a tool of financial analysis has been considerably increased in
these days. Ratio analysis can be of invaluable aid to management in the discharge of its basic
functioning of the planning, forecasting, co-ordination, communication and control. It is device
to diagnose the diseases of an enterprise. It is a powerful tool of analysis. The advantages of ratio
analysis are summarized as follows.
8
1. Ratios are helpful in judging the financial performance of an enterprise over a period of time.

2. A study of the trend of the strategic ratios may help the management in the task of
planning and forecasting.

3. The ratios measure the efficiency of enterprise. Hence they can be used as a tool of
management control.

4. Ratios facilitate interim comparison.

5. It is possible to test the liquidity, solvency and profitability of the enterprise through the
technique of ratio analysis.

6. Sometimes investment decisions are guided by certain ratios.

7. Ration analysis simplifies the comparison of financial statement.

8. Ratio analysis communicates the financial strength or weakness of a firm in a more easy
and understandable manner.

Thus, ratio analysis gives valuable information not only to management but also to creditors,
investors and shareholders. Following are the four steps involved in ratio analysis.

1. Selection of relevant data from the financial statement depending upon the objective of
the analysis.

1. Calculation of ratio from the available data.

2. Comparison of calculated ratio with the ratio of the same firm in the past, or the
developed from projected financial statements or the ratio of some other firms or the
comparison with ratios of the industry to which the firm belong.

2. Interpretation of ratios

9
TREND ANALYSIS

Trend simply means general tendency. Analysis of these general tendencies is called trend
analysis. In the context of financial analysis, trend analysis means analyzing general tendencies
in each item of the financial statements on the basis of the base year. In short, comparing the past
data over a period of time with a base year is called trend analysis. Under this technique,
information for a number of year is taken up and one year (usually the first year) is taken as the
base year. Each item of the base year is taken is 100 and on that basis the percentages for other
years are calculated. It helps in understanding the direction in which the organization is moving.
The trend percentages are generally computed for major items in the statement.

Steps in Computation of Trend Percentage

1. Select the base year. Generally, the first year is taken as base year

2. Select the figures of base year as 100

3. Calculate trend percentage in relation to base year. Each year's figure is divided by
the base year's figure. If the amount of the same items in the other statement is more
than that in the base statement, the trend percentage would be more than 100% and if
the amount is less than the base amount the percentage would be less than 100%.

Advantages of Trend Analysis;

a) It is a simple technique

b) It is an easy method to indicate the future trends.

c) Information can be summary form.

Limitations of Trend Analysis;

1. The trend ratio is a single item has no significance unless it is compared with
the trend ratio of related figures.

10
 2. If the accounting principles and practices are not uniform through the period
of analysis, comparison of trend ratio may be unscientific.

3. There may be no normal base year.

CLASSIFICATION OF RATIOS

Ratio may be classified in a number of ways keeping in a view the particular purpose. Ratios
including profitability are calculated on the basis of balance sheet and those which show
operating profit and loss account and balance sheet.

The accounting ratios are classified into various categories via:

A) On the basis of financial statements used

1. Income statement Ratio: These ratios are compound from the statements of trading,
profit & loss account of the enterprise. Some

of the major ratios are following viz. GP ratio, NP ration, NP ratio and expense ratio and soon.

1. Balance sheet or positional statements Ratios:- These types of ratios are calculated form
balance sheet of the enterprise, which normally reveals financial status or the position ie.
Short term, long terms financial position, shares of the owners on the total assets of the
enterprises and so on.

2. Inter statement or composite mixture of Ratio: These ratios are calculated by extracting
the accounting information from both the financial statements, in order to identify stock
turnover ratio, debtor turnover ratio, return on capital employed so on.

B) On the basis of importance

1. Primary ratios: primary ratios are the ratios which are not significant for managerial
decisions, profitability are example for primary ratio.

2. Secondary Ratios: Secondary ratios are those ratios which are used to support the primary
ratios, activity ratios and liquidity ratios are examples for secondary ratios.

C) On the basis of function

11
In this case ratios are classified on the basis of nature and type of information they provide to the
management. In this case the ratios are classified into following categories.

1. Liquidity Ratios

2. Capital Structure or leverage Ratios

3. Activity Ratios

4. Profitability Ratios

It is convenient to classify various ratios on the basis of functions with a view to provide
valuable information to the management.

1. LIQUIDITY RATIOS

Liquidity ratios are used to measure the short term solvency position of a business in other words
it measures whether a firms is able to discharge its short term obligation or not. This ratio helps
to know the liquidity of the firm i.e. ability to meet short term obligations or current liabilities.
The most basic liquidity ratio measures a companys ability to meet debt obligation. In other
words, solvency ratios have to prove that business firms can service their debt or pay the interest
on their debt as well as pay the principal when debt matures.

It is used to determine ability to pay off its short terms debt obligations. Generally, the
higher value of the ratio, the larger the margin of safety that the company possesses to cover
short term debts. Liquidity of the firm can be determined in the following ratios.

1. Current ratio

2. Quick /liquidity/Acid Test Ratio

3. Super quick ratio

1. Current Ratio

12
Current ratio is defined as the ratio of current assets to current liabilities. It shows the
relationship between total current assets to total current liabilities. Current ratio indicates the
firm's capability to pay its current liabilities on time. It is calculated by dividing the total of

current assets by total of the current liabilities. An ideal ratio is 2:1.

Current assets

Current Ratio=

Current liabilities

2. Quick/Liquid/Acid Test Ratio:

Quick ratios may be defined as the relationship between quick assets and quick liabilities
liquidity refers to the ability of a concern to meet its current obligations as and when they
become due. The term "quick Assets" refers to those current assets which can be converted into
cash immediate and without much loss. It is calculated by dividing the quick assets by quick
liabilities. An ideal liquid ratio is 1:1.

Quick Assets =Current Assets Inventory

Quick Ratio = Quick Assets

Current liabilities

3. Super Quick Ratio:

The ratio considers only the absolute liquid assets (cash and marketable securities) and quick
liabilities. Quick liabilities represent current liabilities as reduced by amount of overdraft.

Quick Liabilities= current liability- bank overdraft

Cash and marketable securities

13
Super quick ratio=

Quick liabilities

2. LEVERAGE RATIOS (SOLVENCY RATIO)

The term solvency refers to the ability of concern to meet long term obligations. The long term
indebtedness of a firm includes debenture holders, financial institutions providing medium and
long term loans and other creditors selling goods on installments basis. Long term solvency ratio
indicates a firms ability to meet the fixed interest and costs and repayment scheduled associated
with its long term borrowings. To measure the solvency of the firm, the following ratio can be
calculated.

Debt equity ratio

Proprietary ratio

Solvency ratio

Fixed asset ratio

Interest coverage ratio

Dividend coverage ratio

Debt equity ratio

Debt equity ratio is also known as external internal equity ratio. It is calculated to measure the
relative claims of outsiders and the owners against the firm's assets. The ratio indicates the
relationship between the outsiders fund and shareholders fund. This ratio indicates the relative
proportions of debt and equity in financing the assets of a firm.

14
 Debt Equity Ratio = Total Debt

Equity

Proprietary Ratio

Proprietary ratio is also known as Equity Ratio. It is a variant to the dept equity ratio. This ratio
establishes the relationship between share holders fund and total assets. This ratio shows how
much fund has been contributed by the share holders in the total assets of the firm. It can be
calculated as

Proprietary ratio = share holders fund

Total assets

Solvency Ratio :-

This ratio expresses the relationship between total assets and total liabilities of a business. The
components of this ratio are total asset and total debt. Total asset include fixed assets, and current
assent and total debt include both long term liabilities and short term liabilities. It can be
calculated as:-

Solvency ratio = Total Assets

Total debt

Fixed asset Ratio :-

The fundamental principle of sound financing policy is that all fixed asset should be financed out
of long term funds. If short term funds are used in the purchase of fixed assets it will effect the
liquidity position of the firm. To know whether this fundamental principle is followed or not,

15
 fixed asset ratio is calculated. It is the ratio of fixed assets to long term funds or capital
employed. It is calculated as

Fixed asset ration = Fixed assets (after depreciation)

Long term fund

Interest coverage ratio :-

Interest coverage ratio is also known as debt service ratio. It is used to test the debt servicing
capacity of firm. This ratio shows the relationship between the earnings before interest and tax
and interest charges on fixed loans and other loans. It can be calculated :-

Interest coverage ratio = EBIT

Interest charges

Dividend coverage ratio :-

Dividend coverage ratio measures the ability of a company to pay dividend on preference shares
carrying of fixed rate of dividend. It is obtained by dividing the net profit after tax by the amount
of dividend. It may be expressed as:

Dividend coverage ration = Earnings after tax

Preference dividend

16
 3. Profitability ratios:

The primary objective of a business undertaking is to earn profit. Profit earning is considered
essential for the survival of the business the profitability of a firm can easily measured by its
profitability ratios. The profitability ratios are calculated to measure the overall efficiency of the
business. The ratios are generally calculated in relation to sale or in relation to investments. The
various profitability ratios are:-

a. Gross Profit Ratio

b. Net profit Ratio

c. Operating profit ratio

d. Return on investment ratio

e. Return on equity.

a. Gross Profit Ratio : -

Gross Profit ratio is a profitability ratio that shows the relationship between gross profit and total net
sales revenue. This is used to evaluate the operational performance of the business. The ratio is
computed by dividing the gross profit figure by net sales.

Gross Profit

Gross Profit Ration = x 100

Net sales

a. Net profit ratio :-

Net profit ratio establishes the relationship between net profit and sales. It

Indicates the efficiency of the management in manufacturing, selling, administrative

and other activities of the firm. This ratio is the overall measure of the firms

profitability and is calculated as :-

17
 Net Profit

Net profit ratio = X 100

Net sales

a. Operating Profit ratio :-

Operating profit ratio explains the relationship between operating profit and net sales. It is the profit
before adjusting known operating expenses purely financial charges like interest on loan and
debenture and known operating incomes. It can be calculated as:

Operating Profit

Operation profit ratio = X 100

Net sales

d. Return on investment ratio;

Return on investment ratio shows the relationship between net profit (EB1T) and the total
investment. This is used for measuring the overall efficiency of the firm. It can be calculated as:

Net Profit

Return on investment ratio = X 100

Total investment

e. Return on equity ratio;

The amount of net income retuned as a percentage of share holders equity. Return on equity
measures profitability by reveling how much profit a company generates with the money
shareholders have invested.

18
Return on Equity = Net profit

Share holders fund

4. Activity/Turnover/Efficiency Rations:-

Activity ratio measures the efficiency or effectiveness with which a firm manages its resources
or assets. They indicate the speed with which assets are converted or turned over to sales. To
measure the efficiency of the firm, the following ratios can be calculated.

i. Inventory or Stock Turnover Ratio

ii. Fixed Assets Turnover Ratio
iii. Work Capital turnover Ratio
iv. Debtors Turnover Ratio
v. Average collection period ratio
vi. Total Assets Turnover Ratio

i. Inventory stock turnover ratio:-

Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet
the requirements of the business. But the level of inventory should neither bee too high or too
low. This ratio is calculated by dividing cost of goods sold by average memory

Inventory Turnover Ratio = Cost of Goods sold

` Average inventory

ii. Fixed assets Turnover Ratio:-

19
This ratio shows the relationship between sales and fixed assets. It shows whether fixed are fully
utilized. This ratio shows the efficiency with which a firm is utilizing is fixed assets in generating
sales. This ratio is calculated by dividing sales by fixed assets.

Fixed assets turnover ratio = Sales

Fixed assets

iii. Working capital Turn Ratio:-

Working capital of a concern is directly to sales if indicates the velocity of the utilizing of net
working capital. This ratio measures the efficiency with which the working capital is being used
by a firm. This ratio is calculated by dividing net sales by net working capital.

Working capital Turnover Ratio = Net sales

Net working capital

iv. Debtors Turnover ratio:-

Debtors Turnover Ratio indicates the velocity of debtors of debt collection of the firm. It
measures how fast debtors are collected. It can be calculated as :

Debtors Turnover Ratio= Net credit sales

Average debtors

20
 i. Average collection period Ratio:

The average collection period represents the average number of days for which a firm has to wait
before its receivables are converted into cash it can be calculated as:

Average collection period ratio = Number of period

Debtors Turnover Ratio

i. Total Assets Turnover Ratio :

It shows the relationship between the net Sales and Total assets it can be calculated by dividing
net sales by total assets.

Total assets turnover ratio = Net Sales

Total Assets

LIMITATIONS OF THE STUDY

21
Following are the main limitations of the study:

The study is based on published and unpublished financial records. So the accuracy of the
report depends upon the accuracy of financial records of the company
This study emphasis only on the financial performance of the industry. Thus the firms
efficiency cannot be measure.

REVIEW OF LITERATURE

22
Review of the literature has vital reference with any research work due to literature review the
possibility of representation of study can be eliminated and other dimension can be selected for
the study. The literature review helps researches to remove limitation of existing work or may
assists to extend prevailing study. Financial ration analysis can help investors in making
investment decision and predicting firms financial condition. The literature review helps
researcher to remove limitation of existing work or may assist to extend prevailing study.

Ahindra Chakrabati published articles in the year 1988-89 performance of public sector
enterprises, a case study on fertilizers in India journal of public enterprises in the year 1988-89.
He made analysis of consumpt5ion and production of cattle feeds by public sector, he also made
analysis of profit and loss statement. He gave suggestion to improve the overall performance of
public enterprises.

Dr.Pramod Kumar published a book in 1991 Analysis of financial statement of Indian

industries. The study covered the 17 private sector 5 state owned public sector and one central
public sector company. He studied analysis of activities assessment of profitability, return on
capital investment, analysis of financial structure, analysis of fixed assets and working capital. In
his research he revealed various problems of industries suggested for the movement of
profitability and technique of cost control.

Prameelas [1996] conducted a study on the analysis of financial statement of the Trivandrum co-
operative Agriculture development Bank. In her study, she suggested that the success and
survival of any credit institution depends upon the mobilization, development and proper
recovery of funds. The study also revealed that, the lack of diversified activities and labiality to
identify the new and potential areas stands as way to poor performance of the bank.

Shankhayan and Pankaj 1996 while analyzing the performance of central co operative bank had
examined the viability aspects of banks such as credit deposit ration, profit and loss return or
equity shareholders.

Recently in the year 1998 a study was made by SJ Parmer on Financial efficiency Model
method, tool and technique for this period from 1988-89 to 1994-95. He had made analyze

23
financial strength liquidity profitability, cost and sales trend and social welfare trend by using
various ratio analysis and value added analysis. He made several suggestions of improvement in
profitability of industry. In his analysis, he indicates various reasons for higher cost, low
profitability and inefficient use of internal resources.

In the year of 2001, Dr.Sugan C Jain has written a book on performance appraisal of Public
sector corporation in his study he has analyzed the performance of public sector and present
comparative study of some national and international units. The operational efficiency and
probability had been analyzed using composite index approach. He made several suggestions
from the strengthening the financial soundness improving profitability, working capital to
performance of fixed assets.

Dr.Sanjay Bhayani published a book in 2003, practical financial statement analysis. The study
covers 16 public limited companies in private sector. He made study of analysis of profitability
working capital, capital structure and activity of Indian cement industry. In his research the
revealed various problems of cement industries and suggested remedies of problems. It also
suggested for the improvement of profitability and technique of cost control.

A study on financial analysis on canning industry cochin Ltd was done in the year 2013 by
Mr.Joju John. This research was done using tools such as ration analysis, trend analysis, fund
flow analysis etc.

The findings were based on calculation made using tools. The conclusion was that the company
has to achieve a stability in earning in order to enable smooth functioning of company. He also
conducted that the company should acquire maximum borrowed funds at low rate of interest and
should try to increase its financial leverage.

Singla HK [2008], in his paper, financial analysis of bank ICFAI journal of bank management
no.7 has examined that how financial management plays a crucial role in the growth of banking.
It is of the selected sixteen banks of bankers index of special of six year [2003-2006]; the study
reveals that the profitability position was recoverable during the period of study when compared
with the previous year. Strong capital position and balance sheet place, banks in better position is
deal with and about the economic constant over a period of time.

24
DWI martini, Malone Rafink Khaivurzikal [2009] studies the effect to financial ration, firm size
and cash flow operating activities in the interim report to the stock return using 39 manufacturing
companies listed on Indonesia stock marketing. The result shows that profitability, turnover and
market ration has significant impact to the stock return.

Virambhai [2010] textile industry productivity and financial efficiency focused on industrys
current position and its performance. It concluded the company or management should try to
increase the production, minimize the cost and operating expenses, exercise proper control on
liquidity position, reduction of power, fuel, borrowing funds, overheads, interest burden etc. Ajay
kumar[2011] discussed on Indian textile industry analysis with inflection, textile production,
sales, income, PAT etc and found the export and import performance in crisis period.

INDUSTRY PROFILE

25
Co-operation is the very foundation of society. No society can service without the spirit of co-
operation. Co-operative societies are economic organizations differ from other types of business
concern in so far as or they keep their doors open and allow every person to obtain the benefit of
association. It aims at providing employment and rural credit to people and plays a vital role in
the welfare of the society.

The manufacturer of building materials is an established industry in many countries and the use
of these materials is typically segmented as carpenters insulation, plumbing and roofing work
etc. They provide the makeup of habitants and structure including homes. Most of the building
and construction materials required by the industry one manufactured locally. However imports
are readily available across the products groups, and are particularly important in high value
inspirational products such as ceramic wall and floor tiles, taps and mixtures and sanitary wears.
Imports are typically firm countries with large production capacities and low costs and one
particularly prevalent form chine, and Eastern European countries.

The success of delivery of the government and the private sector infrastructural programmers
depends on the effective functioning of many state holders including building and consumption
being available and delivered timely, and at an appropriate price and quality this infrastructural
delivery programmed could be factor.

The market for building and construction materials is derived form primary building and
construction activities. The construction industry is the second largest industry in India after
agriculture. It accounts for 11% of India as GDP. It makes significant contribution to the national
economy and provides employment to large number of people.

The construction activity involved in different segments differs from segment to segment.
Construction of houses and roads involves about 75% and 60% of civil construction respectively.
Building of airports and port shave construction activity in the range of 40-50%. For industrial
projects, construction component ranges between 15-20 % within a particular sector also
construction component varies from project to project. Indian construction industry, which is
ranked 12th in the world, has the potential to emerge as a front runner if construction activity
unleashed in all the sectors. The resultant spin offs to industry and employment will drive
economic growth. The industry is one of the worlds largest industrial employers. The annual

26
output worldwide is estimated to be $3400 billion. Indian accounts for 1.75 percent of the world
it possess over steel. There had been so much advancement in concrete technology over the last
two decades with different types of cement and admixtures easily available in the market. The
construction sector in India, accounting for 5 percent of GDP, is the second highest employer
after agriculture and provides direct or indirect employment to about 32 million people.

COMPANY PROFILE

27
The PICCOS is an industrial co operative society established in the year 1979 and registered
under the industrial co-operative societies act Sri Samuel Avon, one of the pioneers of
industrialization. In Malabar started Tellicherry Tiles company during the late 19 th century. Later
he sold the company to Mr.Hassna Muhammead haji, who started a saw mill in the shore of
Anjarakkandy river on companies land. After some decades the company started margin losses
and failed to pay taxes. The laborers of the company formed a co-operative society in the name
of Pinarayi Tile and Saw Mill workers industrial co-operative society by contributing their
statutory benefits as its share capital with the local political support. The works society took over
the company along with the land and machinery.

This co-operative society was registered in 1979. Due to non availability of raw materials they
stopped the production of tiles and started a saw mill unit. Saw mill is the first unit of the society,
which was started in the year 1982. The pole casting unit was established in the year 1992 which
supplied concrete poles to Kerala Electricity Board [KSEB].

Then they started the Hollow Bricks, interlocks, furniture section and wood crat unit. The Pinaryi
Industrial co-operative society was formed in the year 2000 for the incorporation of these five
units and is known as PICCOS Ltd NS IND c 237.

The establishment of Pinarayi tiles and saw mill workers industrial co-operative society was land
mark in the history of co-operative movements in Pinarayi.

The Pinaryi industrial central co operative society is designed as a central society ot co ordinate
and regulate the business activities of five primary societies put under it. The members directly
elect two representatives from each of the five primary co-operative societies to the general body
which elects five directors of the central co-operative. In dealership of cement and steel to supply
the same to the unit.

The first president of this co-operative society is the respected Chief Minister Sri.Pinaryi
Vijayan. In 2003 PICCOS entered into the construction fields also. Now it is the accredited
agency of Kerala Government to take construction work of local bodies.

28
Stages of Growth

It owns 15.67 acres of land

29
 Cores of assets including fourteen vehicles, plants etc
Society is undertaking construction works of corers as accredited agency in Kannur
district
It has signed agreements with KSEB for supplying concrete poles for Rs 25 crores for the
next 5 years
A furniture job work center is functioning in the society in corporation with RUBCO
The Hollow type equation here. Bricks, interlocks unit is modernized on demand
A modern lab facility is available to check the strength of concrete poles
The office of the society is computerized and well equipped.

GENERAL INFORAMTION OF PICCOS

Name : Pinaryi Industrial central co-operative society

Date of Registration : 17-02-1979

30
Type of company : Co-operative

Location : Rural Area [Company Metta]

Pinaryai.P.O

Kannur-670741

Kerala

Products : Pole casting, Hollow Bricks, Interlock, Saw mill,

Roofing tiles, crusher

Management and Administration of the Society

Management plays an important role in the society. The management body consist of the General
body, Board of directors Managing directors chairman and other management personnel. The
management body coordinates the activities of the o society and primary unit. There is a separate
constitution with the entity. General body of each society elects their board of directors. And
form the Board of directors one person is elected the chairman.

General Body

The general body o9f the society is conducted every action of the society and all things related to
its governance. General body meeting shall be conducted once in a year and when necessary. It
will take well decisions about the society. The quorum of the general body shall be held of the
members. The notice must be given every members before seven days of general body meeting.
The general body has the full power to elect and remove members of directors. All members in
general body had voting right.

Board of directors

31
The board of directors of PICCOS consists of five members one form different five units of the
society. Among these five members one person elected as chairman. The members are elected
form a time period of five years. These members one also entitle to take the decisions of the
society. At the time of board meeting each directors have to vie a vote on any dispute matter.

Chairman

Chairman is the supreme authority of the society. He is member of board of directors of the
society. The chairman is elected by the members of the society. It is the ex offcio treasurer of the
society is Alakkandy Rajan.

Managing director

Managing director is present full time in the society. He is an ex officio members in the directors
board meeting. He must attend the general body meeting of the society. The present director is
Mr.K.Babu.

Capital Structure

Huge amount is required to invest infrastructural foundation. Such a huge amount cannot be
collected by issuing shares, bonds, debentures etc. Now the society issued 211 shares to the
public.

They are 4 types of shares issued by the society

They are:

A Class shares

32
 It is issued to the public

B Class shares
It is issued to Kerala government and corporation

C Class shares
It is issued to district co operative bond and other co-operative society

D class shares
It is issued to temporary employees. These kinds of shares have no voting right.

Authorized Capital

Authorized capital of each class is listed below

A class share 2500 shares @ 100-250000

B class shares 3000 shares @ 100-300000

C class share 4500 shares @ 100-450000

D class shares 20000shares @ 25-500000

FUNCTIONAL DEPARTMENT

FINANCIAL DEPARTMENT
Finance is the life blood of the business in the modern money oriented economy. Finance
is one of the basic foundations of all kind of economic activities. It's the master key which
provides access to the entire source of beginning employed in manufacturing and merchandising

33
actives. Business need money to make more money. Finance is the art and science handling
money. Finance requires proper planning and control and achieves the objective of the business.
Day today finance matters are handled in this department. Scrutiny of sale-bills, purchase
bills of raw materials etc. From various suppliers are checked and put up for payments in time,
financial planning is done with regarding to purchase of raw materials in bulk quantity. All other
matter like sales tax, service tax and statutory returns to various Govt departments are done by
this department.

PRODUCTION DEPARTMENT
Production activities is the conversion of raw materials into finished goods, is mainly
done by production department. Production department produces monthly production. The
production plan is prepared based on the report of marketing department. Production department
is interrelated, based on this report, the product target will be decided. This company has a well
built production department, under production in charge and site or plant supervisor which is
under the control and supervision of project engineer. It will contains target fixed by the
production department and fixed percentage of achievement by each worker. This will help in
evaluating the companys performance.

The main function of the production department is to produce the products on time, to the
required quality and quantity levels at the defined products costs are dependent on the price we
pay for components, materials, and equipments etc. Suring sale is outside the direct control of
production and sales intense. If sales level gets slide down, the largest cannot be met on the
other hand if production fails to meet the complaints from customers for late delivery and it
effects the good will of the organization.

DISPATCH DEPARTMENT
Dispatch department is society is responsible for the dispatch or send off finished good to
various deal stretched across Kerala as per the direction from the marketing department.

34
 Dispatching may be defined as setting production activities in motion through the release
of orders and instructions in accordance with the previously planned time schedules and routings.
Dispatching also means for comparing actual progress with planned production process.

STORES DEPARTMENT
Generally there is a time group between production of goods and their sale; Goods are
produced in anticipation of demand. So they are to be stored fill demand raises. Express supply
of goods is stored to avoid fill in pr.ces.
The stores department implies holding or preservation of goods from the items of their
production of purchase unit their consumption or sale. It involves making suitable'and effective
arrangements for retaining the goods in proper condition.

MARKETING DEPARTMENT
Marketing department is headed by the marketing manager. The main aim of this
department is to supply good quality products at a reasonable price regarded to the marketing of
roofing tiles hollow bricks etc. The quality is very high therefore purchasing price also high
process. The society has made a contract with KSEB of sell all the produced poles to KSEB. As a
construction activity is growing day to day there is a good demand for hollow bricks and
concrete cement. These blocks have a wide applicability and construction cost is largely
deducted. It is also observed that there is good demand for housing activity among tribal.

Marketing is a social and managerial process whereby individuals and groups obtain what they
went by creating and exchanging products and value with others. The marketing is the art and
science of choosing target markets and building profitable relation with them. It is a system of
interacting business activities decide to plan price, promote and distribute want satisfying
products and services to present and potential customers.

35
 MAINTENANCE DEPARTMENT
Maintenance is a set of activities which help to keep plant, machinery, and other facilities in
good condition. The main objective of plant maintenance is to achieve minimum break down and
to keep the plant in good working condition and reduce the losses to the company through
production delay at the lowest possible cost.
Proper maintenance is prepared and implement suitable check list is prepared for the
maintenance. Maintenance is carried out on the basis of information signs received from the
production department. So it shouldn't interrupt the performance of the company. The breakdown
chat shows the details of maintenance.

ACCOUNTING DEPARTMENT
Accounting is the language of business organization. It is the art of recording, classifying,
and summarization in a significant manner in terms of many transactions and events which are at
least financial character and result thereof. The primary objective of accounting is to record
business transaction it helps to identify and understand the result of business transaction.
Accounting provides into the related parties such as share holders, management, government etc.

PICCOS pole casting unit follow double entry system in accounting. It records day to day
transactions. This department will make necessary entry in cash book, Bank book and journal
entry according to the nature of transactions. Personal register of all assets are prepared by
accounting department finalization of accounts.

QUALITY DEPARTMENT
Quality department should be arranged for regular testing of concrete a well equipped
technology for concrete testing is set out in the society. The poles are also required to be the
tested as by codes. Production quality products create goodwill to the company and it creates
increase in demand for products produced.

36
 PURCHASE DEPARTMENT

The main function of purchase department is to purchase the essential Raw materials
equipments such as machines etc required for the various departments of the company. The
purchase department always keep an interaction with the other departments to determine needs
and wants of departments. The head of purchase department is the purchase committee as
constituted under central society. It is responsible for all the purchase department is also
responsible supply of all items required with all the purchase related to the factory, purchase
department also responsible for final supply of all items required within the society.

ADMINISTRATION DEPARTMENT

It is an organizational unit that performs management activities benefits and effects entire
organization includes top management personal and organization head quarters. The
administration department has to pay building tax every year and responsible for the renewal of
factory license every year.
The administration department is responsible to submit a half year return report and
annual report to the office of the society inspector at Kannur. Office administration is a set of day
to day activities related to financial planning, billing and record keeping, personnel and physical
distribution and logistics, within an organization.

PRODUCT PROFILE

Hollow bricks

Hollow bricks and dense cement concrete blocks known as hollow block, have been
developed as an alternative to bricks. The products are widely used in construction activity. The
hollow bricks are made of cement, stone chips, stone dust and sand are not only cheaper than

37
bricks but have other specialties as well. These blocks have more tensile strength, the walls
constructed from these blocks act as thermal insulators because of their hollowness.

As the construction activity is growing day by day. there is a good demand for hollow and
cement concrete bricks. These blocks find wide applicability and construction cost is largely
reduced.

Interlock

Interlock is a paving-stone, or brick-like piece of concrete commonly used as exterior

flooring. An inter locking concrete commonly used as exterior flooring. An interlocking concrete
is a type of paver. The mechanism inside the interlocking pavers is that they interlock though the
use of sand. The dissembles the use of bricks and stones suggesting that to interlock pavers can
be a faithful alternative to the classic means of pavement and road construction. The company is
producing interlocks with various colour and shapes. A special type of chemical material is used
for coloring the products. The moving colour includes red. block, and ash.

Roofing File

A roofing file is a manufactured piece of hardwearing material used for covering roots.
These are made out of concrete materials. The company is producing number of colours of
roofing tiles. They also provide tiles with mixture of colours. These are one of the most moving
products in the society.

COMPETITORS
Malabar tiles

Balipatam tile works ltd, Pappinissery, Mattannur, Kannur

V K Stone crusher, vellarvally (Po) Kannur

Vismaya Interlocks, (PO) Chavassery, Mattannur, Kannur.

38
.

ANALYSIS OF PROFITABILITY

1. GROSS PROFIT RATIO

Gross Profit ratio is a profitability ratio that shows the relationship between gross profit and total
net sales revenue. This is used to evaluate the operational performance of the business. The ratio
is computed by dividing the gross profit figure by net sales ratio.

Gross Profit
39
Gross profit ratio = x 100

Net sales

TABLE NO 5.1

Year Gross Profit Net Sales Gross profit

ratio[%]
2011-12 24955318 55916463 44.62%
2012-13 21125680 52321924 40.37%
2013-14 8614750 43537111 19.78%
2014-15 20041281 57795098 34.6%
2015-16 25469376 79404895 32.07%
Source: Audited Annual Report

Interpretation:

A high gross profit is a sign of efficient production and purchase management of a business. On
the other hand low gross profit ratio is danger signal. The above table shows that the company is
earning a high gross profit and there is a decreasing trend for the first 3 years. And reached
34.6% in 2014-15. Thus, the company shows a satisfactory gross profit.

Chart showing Gross profit ratio of PINARYI INDUSTRIAL CENTRAL CO-OPERATIVE

SOCEITY

CAHRT NO 5.1

40
 50.00%

45.00%

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2011-12 2012-13 2013-14 2014-15 2015-16

2. THE NET PROFIT RATIO

Net profit ratio establishes the relationship between net profit and sales. It indicates the
efficiency of the management in manufacturing, selling, administrative and other activities of the
firm. This ratio is the overall measure of the firms profitability and is calculated as ;

41
 Net profit

Net profit ratio = x 100

Net sales

TABLE NO 5.2

Year Gross Profit Net Sales Gross profit

ratio[%]
2011-12 2153095 55916463 3.85
2012-13 4508332 52321924 8.62
2013-14 -4291588 43537111 -9.8
2014-15 1269684 57795098 2.19
2015-16 2179406 79404895 2.85
Source : Audited Annual Report

Interpretation:

The above table indicates that there is a gradual increase in the first two years. In 2013-14 there
is sudden declaim. In the fourth year it reached to 2.19. It increased to 2.85% in the year 2015-
16. So the table shows that apart form 2013-14 the company is maintaining a satisfactory net
profit during the period of study.

Chart showing Net profit ratio of PINARYI INDUSTRIAL CENTRAL CO-OPERATIVE

SOCIETY

CHART NO 5.2

42
10

0
2011-12 2012-13 2013-14 2014-15 2015-16

-5

-10

-15

3. RETURN ON INVESTMENT RATIO

43
Return on investment ratio shows the relationship between net profit (EB1T) and the total
investment. This is used for measuring the overall efficiency of the firm. It can be calculated as:

Return on investment = Net profit [after interest & tax]

Share holders fund

TABLE NO 5.3

Year Net Profit Share holders fund Return on investment

[%]
2011-12 2153095 89644650 2.4
2012-13 4508332 94177682 4.78
2013-14 -4291588 96048474 -4.46
2014-15 1269684 27999569 4.53
2015-16 2179406 26534592 8.2
Source: Audited Annual Report

Interpretation

The higher the return on investment, greater will be the overall profitability and more is the
efficient use of capital employed. The above table shows that the first two years R01 is higher.
But in 2013-14 it declined to -4.46 due to net loss. The standard R01 is 15%, as per the analysis
the biggest R01 is 8.2%. So the firm is inefficient.

Chart showing Return on investment of Pinaryi Industrial Central Co-operative society

CHART NO 5.3

44
 10

0
2011-12 2012-13 2013-14 2014-15 2015-16
-2

-4

-6

Test of Liquidity

1. CURRENT RATIO

45
 Current ratio is defined as the ratio of current assets to current liabilities.. Current ratio is
the measure of the ability of a firm to pay its current liabilities out of current assets
generally current ratio of 2:1 is considered satisfactory or ideal.

Current Ratio = Current Assets

Current Liabilities

TABLE NO 5.4

Year Current Assets Current Liabilities Current Ratio [%]

2011-12 133871664 49386281 2.71
2012-13 153687848 45655877 3.37
2013-14 164285888 48918283 3.35
2014-15 26342523 10451436 2.52
2015-16 32070625 1262780 2.53
Source: Audited Annual Report

Interpretation

The current ratio measures the ability of a firm to pay its current liabilities out of current assets
and it is a measure of liquidity. The above table shows that the firm is highly liquid and the ratios
are satisfying standard current ration 2.1

Chart showing Current Ratio of PINARYI INDUSTRIAL CENTRAL CO-OPERATIVE

SOCIETY

CHART NO 5.4

46
 3.37 3.35
3.5

3 2.71
2.52 2.53
2.5

1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

2. QUICK RATIO/ACID TEST RATIO

The quick ration is the ratio of liquid assets to current liabilities. It establishes the relationship
between quick assets and current liabilities. Standard quick ratio is 1:1. It can be calculated as
follows.

47
Current Ratio = Current Assets

Current Liabilities

Quick assets = Current Assets [stock & prepaid expenses]

TABLE NO 5.5

Year Quick Assets Current Liabilities Current Ratio [%]

2011-12 459158 49386281 0.009
2012-13 262511 45655877 0.005
2013-14 603867 48918283 0.06
2014-15 655889 10451436 0.06
2015-16 1255349 1262780 0.09
Source: Audited Annual Report

Interpretation: Liquid ratio is more rigid test of liquidity than the current ratio. The above table
shows that in 2011-12 the company had high liquidity position. An in 2013-14 the liquidity ratio
increased to 0.06% Generally 1:1 is an acceptable norm of liquidity ration. So there exist and idle
liquid asset.

Chart showing quick ratio of PINARAYI INDUSTRIAL CENTRAL CO-OPERATIVE

SOCIETY

CHART NO 5.5

48
 0.1

0.09 0.09

0.08

0.07

0.06 0.06 0.06

0.05

0.04

0.03

0.02

0.01 0.01
0.01
0
2011-12 2012-13 2013-14 2014-15 2015-16

Current Assts Movement or Efficiency or Activity Ratio

The relationship between sales and working capital called working capital turnover ratio. This
ratio shows how many times the working capital is turned over to produce sales. It can be
calculated as follows;

Working capital turn over ration = Sales

Working capital

49
 TABLE NO 5.6

Year Sales Working capital Working capital turnover ratio

[%]
2011-12 55916463 84485383 0.66
2012-13 52321924 108031971 0.48
2013-14 43537111 28173544 1.54
2014-15 4856125 22249302 0.21
2015-16 44450902 62990627 0.71
Source: Audited Annual Report

Interpretation

The table shows that the working capital position of the firm is in a danger situation. It is very
law compared to standard. It shows the inefficiently of utilizing working capital to produce sales.
In 2013-14 there is an increase in the ratio but declined in the following years

Note working capital = current assets-current liabilities

Chart showing working capital turnover ratio of PINARYI INDUSTRIAL CENTRAL CO-
OPERATIVE SOCIETY

CHART NO 5.6

50
 working capiatl turnover ratio (%)
1.6

1.4

1.2

1 working capiatl turnover

ratio (%)
0.8

0.6

0.4

0.2

0
2011-12 2012-13 2013-14 2014-15 2015-16

Test of solvency
a. LONG TERM DEBT TO SHAREHOLDERS FUND OR DEBT EQUITY RATIO

The ratio indicates the relationship between the outsiders fund and shareholders fund. This
ratio indicates the proportion of debt and equity in financing the assets of a firm. It can be
calculated as follows;

Debt equity ration = Total Debt

Equity

51
 TABLE NO 5.7

Year Total Debt Equity Debt equity ratio

2011-12 31727002 45155000 0.70
2012-13 30168786 45155000 0.67
2013-14 31578253 45155000 0.70
2014-15 30900032 45155000 0.68
2015-16 33466724 45155000 0.74
Source audited annual report

Interpretation:

From the analysis of the table it can be seen that the use of debt in capital structure is less than
the equity. The ratio are fluctuating the first 4 years shows the down ward trend. The standard
ratio is 1:1 the company is not financially sound and the use of debt in the capital structure also
decides the earning per share of the share holders.

Chart showing debt equity ratio of PINARYI INDUSTRIAL CENTRAL CO-OPERATIVE

SOCIETY

CHART NO 5.7

52
0.76

0.74

0.72

0.7

0.68

0.66

0.64

0.62
2011-12 2012-13 2013-14 2014-15 2015-16

53
b. PROPRIETARY RATIO

Proprietary ratio is also known as Equity Ratio. It is a variant to the debt equity ratio. This
ratio establishes the relationship between shareholders fund and total assets. This ratio shows
how much fund has been contributed by the shareholders in the total assets of the firm. It can be
calculated as follows:

Proprietary ratio = Share holders fund

Total assets

TABLE NO 5.8

Year Share holders fund Total asset Proprietary ratio

2011-12 52567561 85211097 0.62
2012-13 52369859 92128069 0.57
2013-14 51613741 84319705 0.61
2014-15 51118254 83074426 0.62
2015-16 49676478 84157669 0.59
Source: Audited annual report

Interpretation:

The above table shows that the share holders fund constitute the major portion of the total assets
of the firm. It shows a fluctuating trend over the period of study. In the first year 2011-12 the
ratio was 0.62 and then it falls in the next 2 years. Then it rose to 0.62. Generally a ratio of 1:2 or
more is satisfactory. Thus the firm has a satisfactory proprietary ratio.

Chart showing Proprietary ratio of PINARYI INDUSTRIAL CENTRAL CO-OPERATIVE

SOCIEITY.

54
 CHART NO 5.8

0.63
0.62 0.62
0.62
0.61
0.61

0.6
0.59
0.59

0.58
0.57
0.57

0.56

0.55

0.54
2011-12 2012-13 2013-14 2014-15 2015-16

CONCLUSIONS

55
The study was conducted to measure the financial performance and effectiveness of the
company. Even though the financial performance of the company is satisfactory future
improvements has to be made in certain years.

Co-operative societies have assumed importance in the state and as instrument of social change.
Co-operatives have been successful in many fields including processing and marketing of the
products, procurement of credit facilities, purchase of equipment, raw materials and like to be of
common benefits to the members

It the management of PICCOS considers the above suggestions and implement them at the
earliest it will definitely lead to the companys progress.

FINDINGS

56
 The Gross Profit, Net Profit ratio, Return on investment ratio shows a satisfactory
profitability to the concern. It reflects the efficiency in production and sales of the
concern.
The analysis of Liquidity ratio shows that the firm is efficient.
The Solvency and Proprietary ratio shows that the concern is able to meet its outside
liabilities. The investment in shareholders fund and total assets are high and this shows a
high safety to the creditors.
The analysis of liquidity shows that the firm is highly liquid and the ratios are satisfying
standard current ratio 2:1.
The Debt Equity ratio shows that less contribution of debt capital in the structure of the
company. This will affect the earning per share of the shareholders.

SUGGETIONS

57
 The company should try to increase the portion of debt capital in the capital structure in
order to improve the earning per share.
The firm should evaluate and improve its performance.
The company should try to increase its profit by reducing cost.
There are different products producing in the organization, the loss of one unit may offset
by profit of another unit. Adequate measures need to be taken to improve the quality and
performance of each unit.

58