Kamlesh Prajapati SIP Ratio Analysis Report

FINACIAL RATIIO ANALYSIS
A SUMMER INTERNSHIP REPORT ON (FINANCIAL RATIO ANALYSIS)
Submitted to INDU MANAGEMENT INSTITUTE (BARODA)
In requirement of partial fulfillment of Masters of Business Administration (MBA) 2 year full time Program of Gujarat Technological University
Submitted on: 14th July 2010
Submitted by: GADHER KAMLESH T. ROLL NO. 11 MBA SEM-II Batch 2009-11 Guided by: Pro. Harshita Samrani Mr. Hiren Nayar (H.R.Manager)
Summer Internship Report-IMI
DECLARATION
I undersigned, Mr.Kamlesh Gadher the student of M.B.A. SEM-II of Indu management institute Baroda, hereby declare that this report is my own work and has been carried out under the guidance and supervision of Prof. Harshita Samrani. This work has not been previously submitted for any other university for any examination.
Date: / /2010 Place: Rajkot Signature (Kamlesh Gadher)
PREFACE
MBA is Professional course in field of management and industrial visit is part of our curriculum due to we get a chance to visit some industrial units.
The MBA study is the bridge between the world of education of commerce and management and the world practice. So, the student can more over to the professional life with facility. Learning is born out of experience and observation. Learning is most effective when it is experienced.
In order to become a perfect professional one has to gain practical knowledge. One once of the practical is worth of a thousand pounds of theory.
As a part of my MBA programs, I had an opportunity to visit ATUL AUTO LTD. In order to prepare a project on it, the primary aim of this project was to get acquainted with the ins and outs of functional departments of company and to get insight of their managerial perspective thereof. Of course, the company was proven to be the best ground one can get for the purpose of training.
However, the project has its own limitations but I have been made my part to make the relevant interpretation.
Lastly, I would like to mention that this project report contains only that information which has been provided by the company officers and that available on companys website.
Acknowledgement
It is very prestigious for me to undertake my summer training at Atul Auto Limited (Rajkot).Training holds very important position in the overall process of education because one can fill the real word of business through training.
I am greatly thankful to MR.Bharatbhai J. Chandra (Director of Atul Auto Ltd.) for giving permission to conduct my project. I would also like to say thanks for guiding me for preparing questionnaire for my project. And I would like to say thank to all other staff members of Atul Auto Ltd. for their support and help required during the project.
I would also like to highlight the contribution of our Honorable Shri J.J.Chandra (DIRECTOR OF ATUL AUTO).
I would like to thank specially to Pro. Harshita Samrani a faculty of IMI who can give me support and also give me important suggestions whenever I got confused.
I would also like to thank other faculty members like Puja Bhatt the director of IMI institute for their invaluable assistance in major part of my project work. They had been informative, supportive and completely devoted during the entire training period of my study.
I would also like to thanks my parents without their support it would be difficult to finish my task. As well as I would also like to thanks all client to whom I meet during my training.
EXECUTIVE SUMMARY
Experience is the best teacher. This saying has played a said the industry visit as a part of the curriculum of the MBA programme of IMI. This visit & consequent report on the student took practically visit the industry & study real Business area. This practical training in the MBA programme of the IMI develops the feeling of awareness among the students of management studies. Along with theoretical knowledge this training has imparted the complete education of practical world, which is the value addition in our course. To fulfill these objectives an industrial visit & project report have becomes an important part of the MBA programme. This is to have a practical outlook of the managerial aspect & witness the function of management in real business. I have tried my best to meet the requirement by producing report that is highly illustrative and clearly explaining concepts that I have learnt during the training period. I have also paid enough attention to revising and refining the discussion of major concepts customer satisfaction in Atul Auto Groups. This project really has enhanced my practical knowledge of the different management areas, which will be very much fruitful for me in future.
INDEX
CH. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 INTRODUCTION
PARTICULAR
PAGE No. 7 12 23 31 33 36 44 46 51 80 81 82 83 84 85
COMPANY PROFILE ORGANIZATION STRUCTURE SWOT ANALYSIS
LITERATURE REVIEW
THEORITICAL FRAMEWORK RESEARCH METHODOLOGY FINANCIAL DEPARTMENT RATIO ANALYSIS FINDING SUGGESTIONS FUTURE PLAN CONCLUSION BIBLIOGRAPHY ANNETURE
CHAPTER-1 INTRODUCTION
1.1 Meaning and Definition of Ratio Analysis Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two variables.
1.2Need of Ratio Analysis Financial ratio analysis is a fascinating topic to study because it can teach us so much about accounts and businesses. When we use ratio analysis we can work out how profitable a business is, we can tell if it has enough money to pay its bills and we can even tell whether its shareholders should be happy!
Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things.
In addition to ratio analysis being part of an accounting and business studies syllabus, it is a very useful thing to know anyway!
The overall layout of this section is as follows: We will begin by asking the question, What do we want ratio analysis to tell us? Then, what will we try to do with it? This is the most important question, funnily enough! The answer to that question then means we need to make a list of all of the ratios we might use: we will list them and give the formula for each of them.
Once we have discovered all of the ratios that we can use we need to know how to use them, who might use them and what for and how will it help them to answer the question we asked at the beginning?
At this stage we will have an overall picture of what ratio analysis is, who uses it and the ratios they need to be able to use it. All that's left to do then is to use the ratios; and we will do that step- by-step, one by one.
By the end of this section we will have used every ratio several times and we will be experts at using and understanding what they tell us.
1.3 Significance or Importance of Ratio Analysis
It helps in evaluating the firms performance With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firms assets correctly, to increase the investors wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets It helps in inter-firm comparison Ratio analysis helps in inter-firm comparison by providing necessary data. An inter firm comparison indicates relative position. It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be initiated immediately to bring them in line. The information given in the basic financial statements serves no useful Purpose unless its interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner. It helps in determining the financial position of the concern Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is
Summer Internship Report-IMI 8
constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling.
It is helpful in budgeting and forecasting Accounting ratios provide a reliable data, which can be compared, studied and analyzed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action.
Liquidity position: With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm.
Long term solvency: Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency is measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets.
Operating efficiency: Yet another dimension of usefulness or ratio analysis, relevant from the View point of management is that it throws light on the degree efficiency in the various activity ratios measures this kind of operational efficiency.
NEED FOR THE STUDY
1. The study has great significance and provides benefits to various parties whom directly or indirectly interact with the company. 2. It is beneficial to management of the company by providing crystal clear picture regarding important aspects like liquidity, leverage, activity and profitability. 3. The study is also beneficial to employees and offers motivation by showing how actively they are contributing for companys growth. 4. The investors who are interested in investing in the companys shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the companys shares.
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OBJECTIVES
The major objectives of the resent study are to know about financial strengths and weakness of Atul Auto Ltd 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.
OBJECTIVES
1. To study the present financial system at Gentling Atul Auto Ltd. 2. To determine the Profitability, Liquidity Ratios. 3. To analyze the capital structure of the company with the help of Leverage ratio.
4. To offer appropriate suggestions for the better performance of the organization
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CHAPTER-2 Company Profile 2.1 Introduction

Industries play an important role in the economic growth and development of any nation. ATUL AUTO LTD.Is unit producing automobile vehicles and is part of automotive industry. In todays era, unlike the earlier stage of Indian automotive sector has been transformed from sellers market to buyers market. This means there is very tough competition in the Indian automobile industry. But within this competition too. ATUL AUTO LTD. Has achieved name, fame and money and stands as one of the major and well-known manufacturers of three-wheeler in western region of our country.
2.2 History and Development of the unit

Atul Auto, an Atul group company was originally incorporate as a Atul Auto (Jamnagar) Pvt.Ltd on June 18,1986 under the Company Act 1956, iin the State of Maharashtra. Late Mr. Jagjivanbhai Karsanbhai Chandra was the founder of the company, having started the company with a small capital of only Two thousand Rupees in 1986, today it has achieved a turnover of Rs.168 cror. The Name of the Company was changed from Atul Auto (Jamnagar) Pvt Ltd. to Atul Auto Ltd. August 12, 1994. The Company was subsequently converted into Public Limited Company and fresh certificate of incorporation was obtained on August 12, 1994 from the Registrar of the Companies, Gujarat.
The Company is the leading manufacturers of 3- Wheeled Commercial Vehicles in the state of Gujarat, presently engaged in the manufacture of Three Wheelers like 6-seater Auto Rickshaws, Pick-Up Van and Chassis of Passenger Vehicles. These vehicles are marketed under the brand name of KHUSHBU, which is well established and very popular.
Atul Auto pioneered motorized rural transport in Gujarat, with multi purpose vehicle called the Khushbu. The Khushbu has been instrumental in transforming the economy of Gujarat
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by bridging the rural-urban divide. Over 1,50,000 Khushbu bran vehicles are ply on the roads of Gujarat.
For more than two decades, Atul Group is renowned as leading manufacturer of threewheeled commercial vehicles in the state of Gujarat. From common peoples favorite vehicle CHHAKADA to todays SHAKTI Atul Group had come a long way.
Back in the 1970s when transportation was a crucial problem especially in rural areas, Jagjivanbhai Karsanbhai Chandra decided to blaze a new trail. He was thinking of an affordable mode of transportation which can benefit rural folks of Saurashtra. The road conditions research and planning , he came up with a vehicle which was skillfully engineered from a motorcycle. And this is how the fist chhakada was developed which later became a way oflife for the people of Saurashtra. The improvements in technologies were done from time to time to make it a sturdy and comfortable vehicle. The company will set up second plant in the next two years. Currently Atul Auto dishes out 16 models of its vehicles from its only factory in Rajkot which produces 24000 units per year. The company has upcoming launches of CNG and LPG variants by 2010 end targets to double the Rajkot plant capacity by 2012. It projects a six to seven percent market share by end-this fiscal.
SO far, the company has sold around 2 lakh vehicles, both passenger and goods variants. The company also plans to scale-up its dealership network to 120 from the present 85 by this year end.
The company had already obtained CMVR and Roadworthiness Certificates for the existing range of products viz. Chassis for goods carriage/ 6-passebger Atul Rickshaw with steering wheel and pick Up.
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2.3 Location
The location of a industry plays an important role in success of failure of the organization. The plant of Atul Auto Ltd. is located on the outskirt of the village Shapar
(Veraval) in the taluka Kotada Sangani about 18 km away from the city Rajkot. This unit is also registered office in the company. The corporate office of Atul Auto Ltd. is situated in the Jimmy Tower, which are nearly 2 km away from the S.T. Bus station of Rajkot (on Gondal Road). Atul Auto Ltd. is a working very successfully which directly implies that the location of company is an ideal one. This means raw material required by the company is really available. It is also has all best infrastructural facilities such as communication, transportations, water supply, and electricity supply etc.
2.4 Contribution of the unit to Industry

Atul Auto, the Rajkot-based three-wheeler maker is increasing capacity to 48,000 units annually, with an eye on exports. The company sells 12,000 vehicles a year in the domestic market, of which two-thirds are sold in Gujarat alone. It has six products in the passenger and goods carrier segments and will be investing Rs 30 crore in new capacity. Atul is expanding its presence in Andhra Pradesh, Rajasthan and Maharashtra while entering new markets such as Kerala, Karnataka, Bihar and Assam. We have targeted 50 per cent growth in the local market this fiscal and plan to export our three-wheelers to parts of Asia and Africa, said Mr. Vijay Kedia, Director. Atul's share in the three-wheeler market is just three per cent of the 4.4 lakh units sold annually. Bajaj Auto leads the pack with 3.41 lakh units and is also a dominant player in the export market with 1.65 lakh units last year. In a span of six years, three-wheeler exports for the industry would have gone up to 1.73 lakh from 68,000 units.
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All major players are trying to tap demand for India-made three-wheelers in Egypt, Sudan, Nigeria, Bangladesh, Sri Lanka, Ethiopia and Kenya. Our medium term target is to sell an equal number of three-wheelers in the domestic and export market, said Mr Kedia. In 2009, the company had a one-time export order of 4,500 units to Nigeria. Atul reported a net profit of Rs 4.2 crore profit on a Rs 120-crore turnover last fiscal. Its scrip has been trading in the Rs 110-116 range on the BSE.
Goals
Each and every activity of human life is having a goal. Business is also a human activity and so it has some goals. A business is essentially an organic entity which has its own infancy, childhood, adulthood and maturity. A man like and enterprise fires works towards the objectives of survival, if this objective is achieved, in a reasonable measure, he looks forward to growth through and with goodwill, prestige and recognition. The common objectives that generally a business firm is having which Atul Auto Ltd. also accepts are as under: y y y y y y y y y y Profit maximization Optimum use of resources Creation of customers Innovation Supply of the desired quality of goods Providing employment Fair deal to employees Create healthy society Development of regional area Export development
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Moreover, Atul Auto Ltd. accepts the goal of continues improvement and effective utilization of available resources. A very important thing about it is that it is versatile to adapt change. These various goals show that the company is improving day by day and can achieve higher and higher place in its field.
Vision:
o To empower, enable and enrich partners, business and associates. o To be the chosen vehicle of growth for the Stakeholders and a source of inspiration for the society.
Mission
1. To be a leader in all areas key to the development of a nation and progress of the world. 2. To be a leader in the field of Infrastructure, Manufacturing and Information Technology. 3. To become learning organization and enable people to think like geniuses.
o o
Where every associate achieves outstanding results. Where capabilities are nurtured and stretched beyond boundaries for new understandings, high performance, quality relations and attainment of peace and happiness.
Where an employee makes transaction from an old world to a new world, from an old understanding to a desired understanding and from a subordinate to an associate.
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4. To constantly evolve and seek synergies between the interests of employers and those of employees and to work intelligently towards empowerment of associates. 5. In view of global competition and knowledge explosion infusion in the market place with complex, cognitive work, we seek to build efficiencies in such an uncertain environment through empowerment of employees.
o o
Where decision-making is at frontline levels Where decision-making responsibility vests with self-directing teams close to internal and external customers and associates take charge of their own jobs.
Where the organization is built, sleek, for speed, flexibility, quality and service that are essential for global competition.
6. To make association with us an enriching experience to our partners, businesses and associates. 7. To work with honest purpose, strategic planning and enduring perseverance to achieve customer satisfaction, stakeholder benefits and measurable economic growth for the organization.
Philosophy
1. Assemble best people, delegate authority and dont interfere people make the difference 2. Business heads are entrepreneurs 3. Mistakes are facts of life. Its is response to the error that counts.
Success
1. Create your luck by hard work 2. Trust + delegation = growth.

Work culture
1. Commitment, creativity, efficiency, team spirit.
2.5 ENVIRONMENT POLICY
We are committed to achieve satisfaction of interested parties and protect environment by 1. Generation of power by implementation of prudent Eco friendly methods. 2. Conservation of natural resources like natural gas and water. 3. Complying to all the legal requirements. 4. Continual improvement in the environmental performance by minimizing the emission and discharges & prevention of pollution. 5. Enhancing environmental awareness among employees contractors and surrounding society.
2.6 QUALITY POLICY
We are committed to continually improve the quality of our performance through the application of our Quality policy.
1. Utilizing Commercial, Engineering and Human Resources, to Minimize Risks to Personnel, Plant & Equipment and Maximize plant Availability for Generation of Power. 2. Providing the best policies level of commercial performance for the benefit of all Stake Holders.
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3. Implementing prudent utility practices and providing Healthy and Excellent Working Environment in all Disciplines of Engineering and Business as documented in the Quality System. 4. Treating all staff & families fairly and with respect while encouraging personnel growth.
2.7 OCCUPATIONAL HEALTH & SAFETY (OH&S) POLICY The Management is committed to maintain high standards of health and safety in the workplace and shall consider OH&S in all its business activities. 1. Provide a safe working place to all of our direct and indirect employees by minimizing Occupational Health & Safety Risks and practicing National Standards. 2. Monitor and maintain health, safety and welfare of all employees and comply with all applicable statutes.
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ATUL GROUP OF COMPANIES ATUL AUTO LTD. Flagship company of the group Manufacturing and marketing diesel 3-wheelers ATUL AUTO INDUSTRIES Manufactures diesel 3-wheelers ATUL INTERNATIONAL Export Import House ATUL MOTORS Marketing of MARUTI range of cars and 4-wheelers ATUL BUILDING PVT. LTD. Real Estate developer and Builders ATUL AUTO AGENCY PVT. LTD. Marketing of HONDA range of 2-wheelers KHUSHBU AUTO FINANCE LTD. Atul finance company KHUSHBU AUTO PVT. LTD. Centralized marketing organization
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Offices Address Registered Office & factory Survey No.86 Plot No. 1 to 4 N H 8-B, Kotdasangani Shapar (Verval) Rajkot Dist. - 360002 Gujarat - India Phone : 253299, 254499, 252996, 252998, 252999 Fax : 252254 Email : info@atulauto.co.in Internet : N.A. Corporate Office Jimmy Tower, Gondal Road, Opp. Swaminarayan Gurukul Rajkot - 360002 Gujarat - India Phone : 2374991, 2374992, 2374993, 6546999 Fax : 2374994 Email : N.A. Internet : N.A. Factory/plant Three Wheel Manufacturing Unit Sector 2 Plot No 5, IIE SIDCUL Ranipur Haridwar Uttaranchal - India Phone : Fax : Email : N.A. Internet : N.A. Factory/plant Wind Turbine Generator Village Soda-Mada Jaisalmer Rajasthan - India
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Phone : Fax : Email : N.A. Internet : N.A. Factory/plant Wind Turbine Generator Village Gandhvi Lamba, Kaiyanpur, Jamnagar Gujarat - India Phone : Fax : Email : N.A. Internet : N.A.
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CHAPTER-3 ORGANIZATION STRUCTURE
Organization is a group of people working together co-operative under authority towards achieving goals and objectives that mutually benefits the participants and the organization. The formal organization structure attempts to give order and unity to the action and efforts of those who work together.
There are six types of organization which are follows: i. ii. iii. iv. v. vi. Line organization Line and Staff organization Committee organization Staff organization Functional organization Formal and Informal organization
Atul Auto Ltd. Has adopted line organization. Line organization means the structure in a direct line and authority flow vertically downward from management to bottom.
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3.1 SIZE & FORM OF THE ORGANIZATION
SIZE OF THE ORGANIZATION ATUL AUTO LIMITED is a Medium scale industry as the investment in fixed assets is more than 3 crore.
FORM OF THE ORGANIZATION
ATUL AUTO LIMITED is a public limited company because it has all the element of the public limited company. It is an incorporate associated which an artificial person is created by the laws, having a common seal, common capital, different name, limited liabilities, transferable shares, wide distribution of risk and large membership.
BOARD OF DIRECTORS
NAME OF BORD OF DIRECTORS Shri Jayantilal J. Chandra Chairman and managing Director
Shri Mahendrabhai J. Patel Joint Managing director Shri Bharatbhai J. Chandra Whole time Director Shri Rajendrabhai S. Kukreja Director Shri Rajesh H. Dhruva Director
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Shri Shriharsh S. Jogalekar Director CHAIRMAN Shri Jayantilal J. Chandra
BANKERS State Bank of India State Bank of saurashtra The Laxmivilas Bank Ltd. Citizens Co-operative Bank Ltd.
AUDITORS - Mohohshi & CO.
3.2 TIME KEEPING SYSTEM
The time keeping system in Atul Auto Ltd. is as follows. y The working hours for both workers and administrative and staff are 8 hours.
General Shift: 9:00 am to 5:30 pm
The employs have a lunch break in between these 8 hours.
Lunch Break: 12:30 to 1:30
Generally there is only one shift for the employees. But if there is overload of work then there is extra shift (This is in very rare case).
Extra shift: 6:00 pm to 9 pm

ORGANIZATION CHART
CEO
DIRECTOR SALES HEAD BUSINESS DEVELOPMENT MANAGER
REGIONAL SALES MANAGER
CLUSTER HEAD
TERRITORY MANAGER
BRANCH MANAGER
CUSTOMER CARE
DEALER
TELECALLER
DIRECT SALES EXCUTIVE
ASST. MGR.
TRAINEE
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PRODUCTION 4-Passenger 1 driver Delivery Van Passenger Deluxe Pick up Van angel body Atul Shakti Super Deluxe Pick up soft Drink Carrier Driver Away Chassis Pick up Standard 3 Passenger + 1 Driver
price 1,21,000+Tax 1,91,000+Tax 1,15,000+Tax 1,14,000+Tax 1,10,000+Tax 1,18,000+Tax 99,000+Tax 1,12,000+Tax 1,10,000+Tax
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3.3Material Used & Resources Of Material

Materials used by the Atul Auto Ltd. the production of vehicles are steel handles, bars, pipes, lights, electrical circuits, spare parts, tires, steering gearbox, bearings, etc. these materials are purchase from different places in India.
ITEM Engine
PLACE Greaves (India) Ltd.Aurangabad
Head Light, Electric Circuits Steel Handles, Bars Pipes Spare Parts Tires Colors Bearings Steering Gear Box
Poona Ahmadabad Attica, Rajkot MRF Rajkot NBR Co. Poona XLO (India) Ltd. Kalsi Auto, Ambala
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3.4 Machines Used

The machineries used by Atul Auto Ltd. are: (1) VMC Machine: The machine is used in CMC shop. The function of this machine is to prepare gear box. It is a computerized machine and is purchased from kirlosker co. (2) Lathe Machine: This is machinery used in machine shop. It is used cutting of irons pipes, sheets etc. for making the appropriate to the vehicle size. (3) Drilling Machine: This machine is also a machinery of machine shop. It is used for making holes. It is material for bottling procedure. (4) Gear Shaper: A machinery of machine shop. This is used for the teeth cutting of gears and giving them a proper shape. (5) Gridding Machine: This machine is used in machine shop. The grinding machine is of 3-types. ID Grinding machine OD Grinding machine Surface Grinding machine
(6) This machine is used in fabrication shop. This machine is used for the joining procedures of different parts of the vehicles which are joined permane
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3.5Competition
If this opens market, there are various companies producing products of same kind. The lists of companies which are in the competition with Atul Auto Ltd. are: Bajaj Mahindra and Mahindra Piaggio New Shriji
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Chapter:-4 SWOT ANALYSIS:
Strength:
Atul Auto Ltd. is having Sound financial position. The Management of Atul Auto Ltd. is very professional. Atul Auto Ltd. has larger proportion of reserves and surplus and further it has no debt capital. Atul Auto Ltd. has long standing reputation in the Indian Automobile Market. Staff of Atul Auto Ltd. is very co-operative and hard working. Atul Auto Ltd. is having skilled employees staff. Good cooperation between employees. Atul Auto Ltd. is having own Training Center for training of employees as well as apprentice students of different discipline. It is having a full support of the Government of India. Atul Auto Ltd. having strong and wide marketing network towards country. High Production capacity of Atul Auto Ltd. leads to low production cost. Capacity Utilization more than 100%. Atul Auto Ltd. has extra land and fully developed infrastructure facilities so it can be further developed. Thus, we can say that the position of Atul Auto Ltd. in the Market is Satisfactory.
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Weaknesses:
Government interference in the management is more comparatively private units. Due to Governments interference it takes longer time in decision-making. So the decisions delayed and thus sometimes bias decisions are also taken. Atul Auto Ltd. is having overstaffing. Atul Auto Ltd. is having demotivated employees because of job security and safety. Atul Auto Ltd. is having no debt capital so the advantage leverage cannot be taken. Thus, we can say that the Atul Auto Ltd. will must be careful regarding its staff and to government also.
Opportunities:
Company has opportunities in produce a new products in the market. Look for newer Market with diversified product. Diversifying the business.
Threat:
Company should be alert about the competitors in the market. Company should keep every information of movement of competitors in the market. This company should face to some competitors such as Bajaj, New Shriji etc. The price of the Row material is increasing continuously. There is a chance of sharp reduction in Government subsidy in near future. Atul Auto Ltd. is having very little market share.
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CHAPTER-5
LITERATURE REVIEW
If you happen to be on the roads of Saurashtra in Gujarat, it is very likely that you will come across a three-wheeler called 'Khusbu Chakkdo'.
There are more than 100,000 of these quaint vehicles serving as a means of livelihood for numerous families, and thus contributing to the economic development of the region.
By manufacturing this multi-utility vehicle in fact, by identifying the necessity for such a vehicle and fulfilling it the manufacturer of this vehicle has played an important role in the regionsprogress.
This Rajkot-based manufacturer Atul Auto Limited is today an established name in the motorised transportation in Gujarat. Presently, it manufactures many variants of the threewheeler vehicle. Though today Atul Auto is a listed company (worth Rs 168 crore), it started small - with an initial capital of Rs 2000 only.
There's no doubt that the SME sector forms an important component of any emerging economy and companies like Atul Auto exemplify this fact in the Indian context. "...It is impossible to downplay the role of SMEs in India's economic development," says Hiren Doshi, Dy GM (Finance), Atul Auto Limited. One look at the statistics and you know that he is absolutely right.
"SMEs generally account for a bulk of the nation's commercial activities and they act as catalysts in upholding and encouraging the creation of the innovative spirit and entrepreneurship in the economy, thereby helping in laying the foundation for rapid industrial development," says Mr Doshi elaborating on the role of SMEs in the overall economic scenario. Importantly, SMEs are also one of the biggest generators of employment in a country like India.
Its true that the SME sector is being encouraged by the government as well as by many banks.
In fact in the context of companies like Atul Auto the government is also currently encouraging the auto industry through a policy framework. The aim is to project India as an attractive destination for small cars and auto components manufacturing.
This has been proving quite beneficial for the SMEs in the auto sector, particularly the ones into auto components manufacturing. But, despite an atmosphere conducive to growth, the SMEs in the country also have to face certain challenges.
Mr Doshi enumerates some of the key challenges. According to him, these include nonavailability of adequate capital for investment, difficulty in accessing the capital market, inadequate institutional framework for assistance, terms dictated by the large corporates on whom the SMEs depend and so on.
Since many SMEs in the country are family run, reluctance in changing the methods of functioning is also a major issue in many cases says Mr Doshi. Though quite a few SMEs have adopted technological advancements, technology adoption still remains a chief concern for many others.
And how can the SMEs overcome the challenges? "Incentivise the SMEs on technical upgradation or assist them in to various technical tie-ups/collaboration," says Mr Doshi.
According to him, SMEs should also get financial assistance at concessional or reduced rate of interest as compared to others. Also, he feels, it is important to help SMEs for exports and in easy availability of raw material in domestic as well as in case of imports.
With a little help, the SMEs could really bring about an economic transformation. It is essential to note that as Mr Doshi also says SMEs are the fastest to adopt changes and innovations. They assist in creation of new industries and also facilitate competition in the market.
Innovation keeping in mind the market demands is very necessary to maintain a competitive edge in any market. For example, Atul Auto has a full-fledged R&D department run by qualified
personnel. It upgrades its products as per the market requirement, subject to the performance of the vehicle.
"We are consistently in the process of giving better products to the end-user. Market studies confirm that our products perform better than those of our peers in terms of mileage, price, maintenance and so on. The company has successfully launched the petrol/CNG/LPG vehicles in the market," informs Mr Doshi.
Having established itself in Gujarat, Atul Auto is now ready to venture into other territories. It is a commendable achievement having started on a very small scale. It also encapsulates the spirit and craving for growth among Indian SMEs
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CHAPTER-6 THEORETICAL FRAMEWORK
6.1 Classification of Ratios Different ratios are used for different purposes; these ratios can be grouped into various classes according to the financial activity. Ratios are classified into four broad categories. 6.1.1ProfitabilityRatio 6.1.2EfficiancyRatio 6.1.3LiquidityRatio 6.1.4Stability Ratio 6.1.5Investor Ratio
6.1.1 Profitability Ratio A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.
Some examples of profitability ratios are profit margin, return on assets and return on equity. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios.
These ratios tell us whether a business is making profits-and if so whether at an acceptable rate. The key ratios are:
(1)Gross Profit Margin [Gross Profit / Revenue] x 100 (expressed as a percentage) This ratio tells us something about the business's ability consistently to control its production costs or to manage the margins its makes on products its buys and sells. Whilst sales value and volumes may move up and down significantly, the gross profit margin is usually quite stable (in percentage terms). However, a small increase (or decrease) in profit margin, however caused can produce a substantial change in overall profits.
(2)Operating Profit Margin [Operating Profit / Revenue] x 100 (expressed as a percentage)
Assuming a constant gross profit margin, the operating profit margin tells us something about a company's ability to control its other operating costs or overheads.
(3)Return on capital employed (ROCE)
Net profit before tax, interest and dividends ("EBIT") / total assets (or total assets less current liabilities
ROCE is sometimes referred to as the "primary ratio"; it tells us what returns management has made on the resources made available to them before making any distribution of those returns.
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6.1.2 Efficiency Ratios Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of liabilities, the quantity and usage of equity and the general use of inventory and machinery. Some common ratios are accounts receivable turnover, fixed asset turnover, sales to inventory, sales to net working capital, accounts payable to sales and stock turnover ratio. These ratios are meaningful when compared to peers in the same industry and can identify business that are better managed relative to the others. Also, efficiency ratios are important because an improvement in the ratios usually translate to improved profitability.
These ratios give us an insight into how efficiently the business is employing those resources invested in fixed assets and working capital.
(1)Sales/Capital Employed Sales / Capital employed A measure of total asset utilization. Helps to answer the question - what sales are being generated by each pound's worth of assets invested in the business. Note, when combined with the return on sales (see above) it generates the primary ratio - ROCE.
(2)Stock turnover Cost of Sales / Average Stock Value Stock turnover helps answer questions such as "have we got too much money tied up in inventory"?. An increasing stock turnover figure or one which is much larger than the "average" for an industry, may indicate poor stock management.
(3)Credit given/ Debtor Days (Trade debtors (average, if possible) / (Sales)) x 365 The "debtor days" ratio indicates whether debtors are being allowed excessive credit. A high figure (more than the industry average) may suggest general problems with debt collection or the financial position of major customers. (4)Credit taken/ Creditor Days ((Trade creditors + accruals) / (cost of sales + other purchases)) x 365 A similar calculation to that for debtors, giving an insight into whether a business it taking full advantage of trade credit available to it.
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6.1.3 Liquidity Ratios
A class of financial metrics that is used to determine a company's ability to pay off its shortterms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.
Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency.
A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.
(1)Current Ratio Current Assets / Current Liabilities A simple measure that estimates whether the business can pay debts due within one year from assets that it expects to turn into cash within that year. A ratio of less than one is often a cause for concern, particularly if it persists for any length of time.
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(2)Quick Ratio Cash and near cash (short-term investments + trade debtors)
Not all assets can be turned into cash quickly or easily. Some - notably raw materials and other stocks - must first be turned into final product, then sold and the cash collected from debtors. The Quick Ratio therefore adjusts the Current Ratio to eliminate all assets that are not already in cash (or "near-cash") form. Once again, a ratio of less than one would start to send out danger signals.
6.1.4Stability Ratio These ratios concentrate on the long0term health of a business particularly the effect of the capital/finance structure on the business:
(1)Gearing Borrowing (all long-term debts + normal overdraft) / Net Assets (or Shareholders' Funds)
Gearing (otherwise known as "leverage") measures the proportion of assets invested in a business that are financed by borrowing. In theory, the higher the level of borrowing (gearing) the higher are the risks to a business, since the payment of interest and repayment of debts are not "optional" in the same way as dividends. However, gearing can be a financially sound part of a business's capital structure particularly if the business has strong, predictable cash flows.
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(2)Interest Cover Operating profit before interest / Interest
This measures the ability of the business to "service" its debt. Are profits sufficient to be able to pay interest and other finance costs?
6.1.5Investor Ratio There are several ratios commonly used by investors to assess the performance of a business as an investment:
(1)Earnings per Share Earnings (profits) attributable to ordinary shareholders / Weighted average ordinary shares in issue during the year A requirement of the London Stock Exchange - an important ratio. EPS measures the overall profit generated for each share in existence over a particular period.
(2)Price Earnings Ratio Market price of share / Earnings per Share At any time, the P/E ratio is an indication of how highly the market "rates" or "values" a business. A P/E ratio is best viewed in the context of a sector or market average to get a feel for relative value and stock market pricing.
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(3)Dividend Yield (Latest dividend per ordinary share / current market price of share) x 100 This is known as the "payout ratio". It provides a guide as to the ability of a business to maintain a dividend payment. It also measures the proportion of earnings that are being retained by the business rather than distributed as dividends.
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CHAPTER-7 RESEARCHMETHODOLOGY 7.1 Aims and Objective of the study Gain an in-depth knowledge about various corporate valuation techniques. Standardize financial information for comparisons Evaluate current operations Study the efficiency of operations To know the future prospect of business. To determine if there has been an improvement or deterioration or no change over time. To get an overview on Company producing a products. To know how ratio analysis helps an analyst to make an informed business or investment decision. Study the risk of operations
METHODOLOGY
The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made.
Sources of secondary data: 1. Most of the calculations are made on the financial statements of the company provided statements. 2. Referring standard texts and referred books collected some of the information regarding theoretical aspects. 3. Method- to assess the performance of the company method of observation of the work in finance department in followed.
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LIMITATIONS 1. The study provides an insight into the financial, personnel, marketing and other aspects of Atul Auto Ltd. Every study will be bound with certain limitations. 2. The below mentioned are the constraints under which the study is carried out. 3. One of the factors of the study was lack of availability of ample information. Most of the information has been kept confidential and as such as not assed as art of policy of company. Time is an important limitation. The whole study was conducted in a period of 45 days, which is not sufficient to carry out proper interpretation and analysis.
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CHAPTER-8 FINANCE DEPARTMENT 8.1 Introduction
The Finance Department provides a comprehensive financial accounting and reporting system that meets the information requirements of all of its users, and that complies with all applicable laws and regulations. It is managed in accordance with Generally Accepted Accounting Principals (GAAP). The department safeguards all city assets and promotes their efficient use, while adhering to prescribed City Council and management policies. The information provided by the Finance Department not only allows the public to monitor the city finances, but also provides the city management with a valuable financial planning tool. The Finance Department performs the following major functions for the city:
y y y y y y y y y y y
Financial accounting and reporting Budget preparation and analysis Purchasing Accounts payable Fixed asset management Treasury and investment management Accounts receivable Receipt of cash payments Business and other licensing Utility billing, collections and accounting Payroll
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8.2 FINANCIAL PLANNING
Planning means to assess the future and make provision for it. Financial planning is necessary for the control of inflow and outflow of cash so that necessary funds may be made available as and when required. Sound financial planning is necessary to achieve the long term and short term objectives of the firm and to protect the interest of all parties concerned i.e. firm, creditors, shareholders and public.
Atul Auto Ltd. has implemented expansion plan. This expansion includes setting up an additional capacity to manufacture diesel three wheeler auto rickshaws, pick up van and passenger vehicles and setting up a project to manufacture CNG and LPG gas driven vehicles. This project has been appraised by Gujarat venture and Gujarat Industrial Corporation limited.
8.3SOURCES OF FINANCE
Finance is the life blood of business. Funds have to be procedure from different sources such as rising of capital through new issues, bank borrowings, term loans from finance institutions, sales of debentures and so on. Business house have sell on credit and on the other hand it has to pay expenses of business in cash. There are many different ways to procure shot term and long term loans.
Atul Auto Ltd. has adopted very simple way to procure both short and long term funds.
LONG TERM FUNDS: For long term funds, Atul Auto Ltd. depends on the retained profits, long term loan from bank and mainly on the equity capital.
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SHORT TERM FUNDS: The objective behind procurement of short term fund is to meet day-to-day business needs as working capital. Short term fund is more important as far as day-to-day business in concern. Atul Auto Ltd. satisfies its needs of short term funds through short term loans from bank and other financial instruction.
8.4CAPITAL BUDGETING
Capital budgeting is a process of making decision regarding loan term investment in fixed asset, such as land building, machinery or furniture, which is not meant for sales. A capital expenditure involves a huge investment in fixed assets.
Capital budgeting decisions are to paramount importance in financial decision making. The system of capital budgeting is likely to produce benefits over a period of time longer than one year. These benefits may be either in the form of increased revenues or reduces costs. There are various techniques or proposals, Atul Auto Ltd. has chosen pay back method for capital budgeting purpose implementing expansion loan. This expansion loan includes setting up additional capacity to manufacture diesel three wheelers Auto rickshaw; pick up van and CNG auto rickshaw.
8.5 MANAGEMENT OF WORKING CAPITAL
Working capital is defined as the excess of current assets over current liabilities. Working capital is that part of capital which is required to meet the day-to-day needs in running the business. It is also known as revolving or circulating capital.
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Working capital management is significant in financial management due to the fact that it plays a pivotal role in keeping the wheels of business enterprise running. Shortage of funds for working capital has caused many businesses to fail or has retarded their growth. Lack of efficient and effective utilization of working capital leads to earn low rate of return on capital employed or even compels to sustain losses. Working capita= current assets current liabilities
8.6 MANAGEMENT OF CASH
Cash management is one of the key areas of working capital management. Cash is the common denominator to which all current assets can be reduced because the other major liquid assets, that is, receivables and inventory get eventually converted into cash. This underlines the significance of cash management.
The term cash with reference to cash management is used in two senses. In a narrow sense it is used broadly to cover and generally accepted equivalents of cash, such as cheques, drafts and demand deposits in banks. The broad view of cash also includes near cash assets, such as marketable securities and time deposits in banks.
8.7 FINANCIAL DEPARTMENT AT GLANCE LONG TERM FUNDS State Bank Of India HDFC Bank The Laxmivilas Bank Ltd. Citizens Co-Operative Bank Ltd.
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AUDITORS: M/S Maharishi and Co. (C.A.Jamnagar)
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ACCOUNTING SYSTEM: Double Entry System
ACCOUNTING PERIOD: 1ST April to 31st March (Financial year)
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CHAPTER-9 RATIO ANALYSIS FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account.
Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. The information in the statements is used by
Trade creditors, to identify the firms ability to meet their claims i.e.liquidity position of the company. Investors, to know about the present and future profitability of the company and its financial structure. Management, in every aspect of the financial analysis. It is the responsibility of the management to maintain sound financial condition in the company.
RATIO ANALYSIS The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as Percentages Fractions Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment.
STEPS IN RATIO ANALYSIS
The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.
To compare the calculated ratios with the ratios of the same firm
relating to the pas6t or
with the industry ratios. It facilitates in assessing success or failure of the firm.
Third step is to interpretation, drawing of inferences and report
writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.
BASIS OR STANDARDS OF COMPARISON
Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types.
Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the some most progressive and successful same point of time. Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or statements pro forma financial competitor firm at the
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NATURE OF RATIO ANALYSIS
Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis.
Selection of relevant data from the financial statements depending analysis.
upon the objective of the
Calculation of appropriate ratios from the above data.
Comparison of the calculated ratios with the ratios of the same firm in
the past, or the ratios
developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.
INTERPRETATION OF THE RATIOS
The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways. y y y y y Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison
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GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are y y y y y Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis
IMPORTANCE OF RATIO ANALYSIS y y y y y y y y y Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool
LIMITATIONS OF RATIO ANALYSIS y y y Differences in definitions Limitations of accounting records Lack of proper standards
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y y y y y y y
No allowances for price level changes Changes in accounting procedures Quantitative factors are ignored Limited use of single ratio Background is over looked Limited use Personal bias
CLASSIFICATIONS OF RATIOS The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows: 1. Traditional Classification 2. Functional Classification 3. Significance ratios
1. Traditional Classification It includes the following. y Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. y Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc., y Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.
2. Functional Classification These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.
3. Significance ratios Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.
Long term solvency ratios These ratios measure long term solvency of the firm (A) 1. Debt-equity Ratio 2. Capital gearing Ratio. 3. Interest Coverage Ratio. 4. Proprietary Ratio 5. Debt service coverage Ratio.
Efficiency or turnover ratios These ratios indicate the degree of efficiency in utilization of various assets deployed in the firm. Various efficiency ratios are:
1. Stock turnover Ratio. 2. Debtors turnover Ratio. 3. Creditors turnover Ratio. 4. Total assets turnover Ratio. Following parties are 5. Fixed assets turnover Ratio. interested in the above ratio: 6. Capital turnover Ratio. Long term lenders including debenture Following parties are holders interested in the above ratio : Following parties are Share holders existing Shareholders interested in the above ratio : and prospective Bankers and other Potential takeover lenders Shareholders bidders. Management Investors Management Prospective shareholders Lenders Competitors Management
Profitability ratios These ratios measure profit earning capacity of the firm. Various profitability ratios are: 1. Gross profit Ratio. 2. Operating ratio. 3. Net profit Ratio. 4. Operating profit Ratio 5.Expenses Ratio 6. Return on Capital employed 7. Return on Share holders equity. 8.EPS
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In this project on the basis of the following Ratios I have tried my level best analysis the current financial position of ATUL AUTO LTD. with its competitors:
1) Current Ratio 2) Quick Ratio 3) Inventory Turnover Ratio 4) Inventory Turnover Period 5) Debtors Turnover Ratio 6) Average Collection Period 7) Total Assets Turnover Ratio 8) Fixed Assets Turnover Ratio 9) Gross Profit Ratio 10) Net Profit Ratio 11) Operating Profit Ratio
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1. LIQUIDITY RATIOS Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with shortterm current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be calculated y y Current ratio Quick (or) Acid-test (or) Liquid ratio
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(A) CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm.
Current assets Current ratio = Current liabilities
Components of current ratio CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable
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Year
Current Assets
Current Liabilities
Ratio
2005 2006 2007 2008 2009
14.55 20.28 29.05 23.45 22.57
7.59 17.52 13.64 11.55 14.63
1.92 1.16 2.13 2.03 1.54
2.50% 2.13% 2.00% 1.92% 1.54% 1.50% 1.16% 1.00% 2.03%
0.50%
0.00% 2005-06 2006-07 2007-08 2008-09 2009-10
CURRENT RATIO
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Interpretation As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position of the firm. When compared with 2008, there is an decrease in the provision for tax, because the debtors are raised and for that the provision is created. The current liabilities majorly included Atul Auto company for consultancy additional services. The sundry debtors have decreased due to the decrease to corporate taxes. In the year 2009, the cash and bank balance is increaced because that is not payment of dividends. In the year 2007, the loans and advances include majorly the advances to employees and deposits to government. The loans and advances reduced because the employees set off their claims. The other current assets include the interest attained from the deposits. The deposits reduced due to the declaration of dividends. So the other current assets decreased. The huge increase in sundry debtors resulted an increase in the ratio, which is above the benchmark level of 2:1 which shows the comfortable position of the firm.
(B) QUICK RATIO Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash with in a short period without loss of value.
Quick or liquid assets Quick ratio = Current liabilities
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Components of quick or liquid ratio QUICK ASSETS Cash in hand Cash at bank Bills receivable Sundry debtors Marketable securities Temporary investments CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable
(Amount in Cr.) Quick Ratio
Year
Quick Assets
Current Liabilities
Ratio
2005 2006 2007 2008 2009
13.08 19.79 14.71 11.96 13.23
7.76 19.09 15.18 12.93 15.77
1.69% 1.04% 0.97% 0.92% 0.84%
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1.80% 1.60% 1.40% 1.20%
1.69%
1.04% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2005-06 2006-07
0.97%
0.92% 0.84%
2007-08
2008-09
2009-10
QUICK ACID RATIO
Interpretation Quick assets are those assets which can be converted into cash with in a short period of time, say to six months. So, here the sundry debtors which are with the long period does not include in the quick assets. Compare with 2008, the Quick ratio is decreased because the sundry debtors are decreased due to the decrease in the corporate tax and for that the provision created is also decreased. So, the ratio is also decreased with the 2009.
The quick ratio for the year 2005-06 was 1.69 and it was increased by 0.65 it was 1.04 in the year 2006-07 than the quick ratio was increased by 0.068 i.e. 0.97 in 2007-08. The quick ratio was 0.92 and 0.84 in the year 2008-09 and 2009-10 respective and it was increased by 2008-09 0.04 and decreased 2009-10 0.086 respectively. We can see the ratio was maximum in the year 2005-06 and minimum in the year 2009-10.
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2. ACTIVITY RATIOS Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly effect the volume of sales. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are converted or turned over into sales. y y y y y y Inventory Turnover Ratio Inventory Turnover Period Debtors Turnover Ration Average Collection Period Total Assets Turnover Ratio Fixed Assets Turnover Ratio
(A) Inventory Turnover Ratio Inventory turnover ratios indicate the no. of times the stock has been turned over the period and evaluate the efficiency with which a firm is able to manage its inventory. It indicates whether the inventory is efficiently used or not. It is also known as stock turn over ratio. This can be calculated by dividing the sales by average inventory. A ratio showing how many times a company's inventory is sold and replaced over a period. the
Net Sales ITR = Total Inventory

Year
Net sales
Total Inventory
Ratio
2005 2006 2007 2008 2009
114.98 151.02 141.95 92.12 125.64
7.23 10.04 20.76 19.36 17.68
15.90% 15.04% 6.84% 4.76% 7.11%
18.00% 15.90% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005-06 2006-07 2007-08 2008-09 2009-10 6.84% 4.76% 7.11% 15.04%
INVENTORY TURNOVER RATIO
Interpretation
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The inventory turnover ratio for the year 2005-06 was 15.90 and in the year of 2006-07 was 15.04 and which is highest in this five year. In the year 2008-09 was 4.76 which is very less than the year 2007-08 as well as2009-10.
(B) Inventory Turnover Period This inventory turnover period can be calculated by dividing month or days in a year by stock turnover ratio. It indicates the time period to turnover the stock.
Days ITP = Inventory Turnover Ratio
Year
Days
Inventory Turnover Ratio
Ratio(Days)
2005 2006 2007 2008 2009
360 360 360 360 360
15.90 15.04 6.84 4.76 7.11
22.64 23.94 52.63 75.63 50.63
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80 70 60 52.63 50 40 30 20 10 0 2005-06 2006-07 2007-08 22.64 23.94
75.63
50.63
2008-09
2009-10
INVENTORY TURNOVER PERIOD
Interpretation The inventory turnover ratio increasing in the year 2008-09 with compare to the year 200910.The maximum increasing periods is 2008-09 and minimum periods is 2005-06.
(C) Debtors Turnover Ratio Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.
Net Credit Sales Debtors Turnover Ratio = Average Trade Debtors
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Year
Net Credit Sales
Average Trade Debtors
Ratio
2005 2006 2007 2008 2009
99.05 130.00 123.02 81.25 117.53
6.29 8.74 8.17 3.96 3.52
15.75% 14.87% 15.06% 20.52% 33.39%
40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005-06 2006-07 2007-08 2008-09 2009-10 15.75% 14.87% 15.06% 20.52% 33.39%
DEBTOR TURNOVER RATIO
Interpretation The debtors turnover ratio for the year 2005-06 was 15.75 and the year 2006-07 was 14.87. Here no more fluctuation in this ratio. But in the year 2009-10 this ratio was highest 33.39 and in the year 2008-09 this ratio increased by 12.87.
(D) Average Collection Period It represents the average no. of days during which debtors are recovered. This Average collection period can be calculated by dividing months or days in a year by debtors turnover ratio. Days Average Collection Period = Debtors Turnover Ratio
Year 2005 2006 2007 2008 2009

30 25 20 22.86
Days 360 360 360 360 360
Debtors Turnover Ratio 15.75 14.87 15.06 20.52 33.39
Ratio(Days) 22.86 24.21 23.90 17.54 10.78
24.21
23.9
17.54 15 10.78 10 5 0 2005-06 2006-07 2007-08 2008-09 2009-10
AVERAGE COLLECTION PERIOD
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Here we can see in the year 2009-10 ratio was 10.78 and in the year2008-09 ratio was 17.54 which is better than the 2008-09.years2005-06 it was22.86, 2006-07 it was 24.21 and 2007-08 it was 23.90 so the best comparative ratio is 2006-07.
(E)Total Assets Turnover Ratio A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.
Net Sales Total Assets Turnover Ratio = Net Property
Year
Net Sales
Net Property
Ratio
2005 2006 2007 2008 2009
99.05 130.0 123.02 81.25 117.53
31.28 39.32 53.90 60.49 62.22
3.17% 3.31% 2.28% 1.34% 1.89%
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3.50% 3.17% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2005-06
3.31%
2.28% 1.89% 1.34%
2006-07
2007-08
2008-09
2009-10
Total Assets Turnover Ratio2
Interpretation In the year 2005-06, 2006-07 and 2007-08, ratio seeing in a good position, ratio was 3.17, 3.31, and 2.28. But more fluctuation found in the year 2008-09 and 2009-10,in this year ratio was 1.34 and 1.89 respectively.
(F) Fixed Assets Turnover Ratio It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.
Cost of Sales Fixed assets turnover ratio = Net fixed assets
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(Amount in Cr.) Fixed Assets Turnover Ratio Year Cost of Sales Net Fixed Assets Ratio
2005 2006 2007 2008 2009
99.05 130.0 123.02 81.25 117.53
20.34 30.34 39.11 39.94 42.64
4.87% 4.28% 3.15% 2.03% 2.76%
6.00% 5.00% 4.00% 3.15% 3.00% 2.03% 2.00% 1.00% 0.00% 2005-06 2006-07 2007-08 2008-09 2009-10 2.76% 4.87% 4.28%
FIXED ASSETS TURNOVER RATIO
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Interpretation Fixed assets are used in the business for producing the goods to be sold. This ratio shows the firms ability in generating sales from all financial resources committed to total assets. The ratio indicates the account of one rupee investment in fixed assets. The income from services is greaterly increased in the current year due to the increase in the Operations & Maintenance fee due to the increase in extra invoice and the net fixed assets are reduced because of the increased charge of depreciation. Finally, that effected a huge increase in the ratio compared with the previous years ratio. In the year 2005-06, 2006-07 and 2007-08, ratio seeing not a good position, ratio was 4.87, 4.28, and 3.15. But more fluctuation found in the year 2008-09 and 2009-10, these time ratio was 2.03 and 2.76 respectively.
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3. PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. y y y Net profit ratio Gross Profit Ratio Operating profit ratio
(A) NET PROFIT RATIO Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm. It also indicates the firms capacity to face adverse economic conditions such as price competitors, low demand etc. Obviously higher the ratio, the better is the profitability. Net profit after tax Net profit ratio= Net sales
(Amount in Cr.) Net Profit Ratio Year 2005 2006 2007 2008 2009 Net Profit After Tax 3.02 4.20 3.14 1.27 0.46 Net Sales 99.05 130.0 123.02 81.25 117.53 Ratio 3.05% 3.23% 2.55% 1.56% 0.39%
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3.50% 3.23% 3.05% 3.00% 2.55% 2.50% 2.00% 1.56% 1.50% 1.00% 0.50% 0.00% 2005-06 2006-07 2007-08 2008-09 2009-10 0.39%
NET PROFIT PERIOD
Interpretation The net profit ratio is the overall measure of the firms ability to turn each rupee of income from services in net profit. If the net margin is inadequate the firm will fail to achieve return on shareholders funds. High net profit ratio will help the firm service in the fall of income from services, rise in cost of production or declining demand. The profit of the year 2009-106 is 0.39 is lower from the year 2008-09 and 2007-08 by 1.16 and 2.17 respectively. The net profit is decreased because the income from services is decreased.
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(B) Gross Profit Ratio The basic components for the calculation of gross profit ratio are gross profit and net sales. Net sales mean that sale minus sales returns. Gross profit would be the difference between net sales and cost of goods sold. Cost of goods sold in the case of a trading concern would be equal to opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases. In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials, wages, direct expenses and all manufacturing expenses. In other words, generally the expenses charged to profit and loss account or operating expenses are excluded from the calculation of cost of goods sold.
Gross profit after tax Gross profit ratio= Net sales (Amountin Cr.) Net Profit Ratio Year Gross Profit Net Sales Ratio
2005 2006 2007 2008 2009
5.74 9.19 8.74 7.00 5.93
99.05 130.0 123.02 81.25 117.53
5.79 7.06 7.10 8.62 5.05
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10 9 8 7.06 7 6 5 4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 5.79 5.05 7.1 8.62
GROSS PROFIT RATIO
Interpretation The Gross profit ratio is the overall measure of the firms ability to turn each rupee of income from services in net profit. If the net margin is inadequate the firm will fail to achieve return on shareholders funds. High Gross profit ratio will help the firm service in the fall of income from services, rise in cost of production or declining demand. In 2009-10 the Gross profits decreasing in compare to the year 2008-09 by 3.57 and compare to 2005-06, 2006-07.and 2007-08 are decreasing by0.74, 2.01 and, 2.05 respectively.
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(C) OPERATING PROFIT RATIO Operating ratio establishes the relationship between cost of goods sold and other operating expenses on the one hand and the sales on the other.
Operating cost Operation ratio = Net sales
However 75 to 85% may be considered to be a good ratio in case of a manufacturing under taking. Operating profit ratio is calculated by dividing operating profit by sales.
Operating profit Operating profit ratio = Sales
(Amount in Cr.) Operating Profit Year 2005 2006 2007 2008 2009 Operating Profit 5.14 8.02 7.25 6.32 2.61 Income From Services 99.05 130.0 123.02 81.25 117.53 Ratio 5.19% 6.17% 5.89% 7.78% 2.22%
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9.00% 8.00% 7.00% 6.17% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2005-06 2006-07 2007-08 2008-09 2009-10 2.22% 5.19% 5.89% 7.78%
Operating Profit Ratio2
Interpretation The operating profit ratio is used to measure the relationship between net profits and sales of a firm. Depending on the concept, it will decide. The operating profit ratio is increased compared with the last year. The earnings are increased due to the increase in the income from services because of Operations & Maintenance fee. So, the ratio is increased slightly compared with the previous year. In 2009-10 the Operating profits decreasing in compare to the year 2008-09 by 5.56 and compare to 2005-06, 2006-07.and 2007-08 are decreasing by2.97, 3.95 and, 3.67respectively. The operating profit ratio is used to measure the relationship between net profits and sales of a firm. Depending on the concept, it will decide. The operating profit ratio is decreased compared with the last 4 year. The earnings are decreased due to the decrease in the income from services because of Operations & Maintenance fee. So, the ratio is decreased slightly compared with the previous year.
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CHAPTER-10 FINDING: In all five year the current ratio is higher with compare to the standard ratio but if we will compare the component with Inventory turnover ratio than we can come to know that money is blocked in stock and finished goods which is not converted into sale. So we are loosing the opportunity cost.
If we will take the reference of quick ratio than we can come to know that the much more money is blocked in Inventory rather than the cash, bank or marketable security.
Debtors turnover ratio increasing it has given negative impact on stoke turnover ratio.
The debtors turnover ratio is increasing it means the company has adopted financial stringency policy.
The fixed turnover ratio and total turnover ratio both are decreasing which indicate that the assets are not used optimally to increase the sell.
Net profit ratio is continuous decreasing to the all year, so that is not good mater of company. Here we find gross profit because it is doing manufacture from the purchase, raw material from other industry but it is doing exploration development and drilling the well.
Here the company has not issued preference share and debenture so the leverage benefit has not been receivable by the company.
All over the company has good financial position.
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CHAPTER-11 SUGGESTIONS
Atul Auto Ltd with the help of other Atul Group of companies has established strong business house. The functioning and management of Atul Auto Ltd. is very good.
Being a student just standing on the threshold of studies of management as discipline. But considering this as an initiative give out my view mention some of the suggestion as per my knowledge.
Some of the suggestions are under: The capital investment of Atul Auto Ltd. is less compared to its competitive industries Atul Auto Ltd. can explore more my investing more and getting high returns. Atul Auto Ltd. must also increase its activities in research and development activities.
It must try to active and expand its activities in foreign market Also as it covers the loan market and is a more popular brand in local market keeps aside very less funds for advertisement purpose. Thus it must try to increase advertisement activities so that it can also cover the markets in other states of the country.
Here company applied liberalized credit policy. So company requires more working capital for day to day expenditure so company should applied conservative credit policy.
The optimum investment is to be made in the inventories to make liquidity position of the company more sophisticated.
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CHAPTER-12 FUTURE PLANS
Planning is in integral part of every organization. Planning means what to do, when to do, how to do, and who to do it. It is the estimation and forecasting of the risk factors along with better development prospects in future. Thus each and every company plans for its expansion and development in future.
Atul Auto Ltd. has also designed some plans for future. The future plans of Atul Auto Ltd are as follows. Atul Auto Ltd have developed 240 cc petrol engine 1+3 passengers vehicles with LPG & CNG kits. Atul Auto Ltd. is expanding its assembly line.
Also an advance paint shop is been erected at the company site. In order to facilitate its raise I production capacity. To develop rear engine 1 turner vehicle.
To improve the research and development centre.
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CHAPTER-13 CONCLUSION:
Following paragraph is an attempt is an attempt to highlight the result of this study:
It appears from the study of financial organization structure and working of Atul Auto Ltd. that product is local famous brand having brighter future in local market. Atul Auto Ltd. has close customer links for better marketing practices. The production of Atul Auto Ltd. has low cost as compare to their competitors.
Moreover Atul Auto Ltd. has entered the export market and has vast possibility to hunt overseas market in near future.
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CHAPTER-14 BIBLIOGRAPHY
REFERENCE BOOK: I.M. Pandey, Financial Management, Ninth Edition, Ambrish Gupta Third Edition.
REFERENCE REPORT: Annual Report, Atul Auto Limited. National High way 8-B,Near Microwave Tower, Shaper(veraval) , Rajkot- 360002
REFERENCE WEBSITE: www.atulautolimited.com
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CHAPTER-15 ANNETURE PROFIT & LOSS ACCOUNT (In Rs. Cr.)
Particulars
March 2005
March 2006
March 2007
March 2008
March 2009
Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses 84.01 0.59 2.89 3.54 2.37 2.85 0.00 96.25 107.69 0.64 3.93 4.18 2.04 4.08 0.00 122.56 104.21 0.93 5.90 2.65 2.38 4.58 0.00 120.65 62.14 0.28 6.02 1.36 3.81 1.30 0.00 74.91 95.30 0.36 5.89 2.19 4.12 1.94 0.00 109.80 114.98 15.93 99.05 0.60 2.34 101.99 151.02 21.02 130.00 1.17 0.58 131.75 141.95 18.93 123.02 1.49 4.88 129.39 92.12 10.87 81.25 0.68 -0.02 81.91 125.64 8.11 117.53 3.32 -5.12 115.73
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Particulars
March 2005
March 2006 8.02 9.19 1.34 7.85 1.40 0.00 6.45 0.03 6.48 2.29 4.20 14.88 0.00 0.54 0.08
March 2007 7.25 8.74 1.95 6.79 1.95 0.00 4.84 0.09 4.93 1.80 3.14 16.43 0.00 0.54 0.09
March 2008 6.32 7.00 2.81 4.19 2.29 0.00 1.90 0.00 1.90 0.64 1.27 12.78 0.00 0.59 0.10
March 2009 2.61 5.93 2.81 3.12 2.46 0.07 0.59 0.34 0.93 0.13 0.46 14.51 0.00 0.29 0.05
Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs)
5.14 5.74 0.50 5.24 0.79 0.00 4.45 0.02 4.47 1.45 3.02 12.24 0.00 0.00 0.00
53.52 5.63 0.00 37.37
53.52 7.84 10.00 44.08
53.52 5.87 10.00 48.78
53.52 2.37 10.00 49.83
58.52 0.79 5.00 52.08
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BALANCE SHEET OF ATUL AUTO LIMITED (In Rs. Cr.) Particulars March 2005 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 5.58 5.58 0.00 0.00 14.41 0.00 19.99 11.28 0.01 11.29 31.28 5.58 5.58 0.00 0.00 18.00 0.00 23.58 15.74 0.00 15.74 39.32 5.58 5.58 0.00 0.00 20.52 0.00 26.10 27.80 0.00 27.80 53.90 5.58 5.58 0.00 0.00 21.08 0.00 26.66 33.83 0.00 33.83 60.49 6.08 6.08 0.00 0.00 24.39 0.00 30.47 31.73 0.00 31.73 62.20 March 2006 March 2007 March 2008 March 2009
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Application Of Funds Gross Block (fixed assets) Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 20.34 4.88 15.46 0.97 2.30 7.23 6.29 1.03 14.55 5.65 0.11 20.31 0.00 7.59 0.17 7.76 12.55 0.00 31.28 10.36 37.37 30.34 6.28 24.06 2.22 2.30 10.04 8.74 1.50 20.28 9.44 0.11 29.83 0.00 17.52 1.57 19.09 10.74 0.00 39.32 35.22 44.08 39.11 8.19 30.92 0.39 2.30 20.76 8.17 0.12 29.05 6.30 0.12 35.47 0.00 13.64 1.54 15.18 20.29 0.00 53.90 66.09 48.78 39.94 10.42 29.52 10.28 2.30 19.36 3.96 0.13 23.45 7.63 0.24 31.32 0.00 11.55 1.38 12.93 18.39 0.00 60.49 82.22 49.83 42.64 12.56 30.08 14.70 2.30 17.68 3.52 1.67 22.87 7.84 0.20 30.91 0.00 14.63 1.14 15.77 15.14 0.00 62.22 70.06 52.08
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Kamlesh Prajapati SIP Ratio Analysis Report

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FINACIAL RATIIO ANALYSIS

A SUMMER INTERNSHIP REPORT ON (FINANCIAL RATIO ANALYSIS)

Submitted to INDU MANAGEMENT INSTITUTE (BARODA)

Submitted on: 14th July 2010

Summer Internship Report-IMI

FINACIAL RATIIO ANALYSIS

Date: / /2010 Place: Rajkot Signature (Kamlesh Gadher)

Summer Internship Report-IMI

FINACIAL RATIIO ANALYSIS

Summer Internship Report-IMI

FINACIAL RATIIO ANALYSIS

Summer Internship Report-IMI

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Summer Internship Report-IMI

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CH. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 INTRODUCTION

COMPANY PROFILE ORGANIZATION STRUCTURE SWOT ANALYSIS

Summer Internship Report-IMI

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FINACIAL RATIIO ANALYSIS

1.3 Significance or Importance of Ratio Analysis

FINACIAL RATIIO ANALYSIS

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FINACIAL RATIIO ANALYSIS

NEED FOR THE STUDY

Summer Internship Report-IMI

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The main objectives of resent study aimed as:

4. To offer appropriate suggestions for the better performance of the organization

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CHAPTER-2 Company Profile 2.1 Introduction

2.2 History and Development of the unit

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2.4 Contribution of the unit to Industry

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FINACIAL RATIIO ANALYSIS

1. Create your luck by hard work 2. Trust + delegation = growth.

FINACIAL RATIIO ANALYSIS

2.5 ENVIRONMENT POLICY

2.6 QUALITY POLICY

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CHAPTER-3 ORGANIZATION STRUCTURE

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Shri Shriharsh S. Jogalekar Director CHAIRMAN Shri Jayantilal J. Chandra

AUDITORS - Mohohshi & CO.