FACT Mancy Orgnal

FACT LTD ,UDYOGMANDAL
FINANCIAL PERFORMANCE ANALYSIS
MES College Marampally
CHAPTER 1
INTRODUCTION
INTRODUCTION Finance is the lifeblood and nerve center of a business. It has become so important for every business undertaking that all managerial activities are connected with it. In our present day economy finance is the provision of money at the time when it is required. Every enterprise whether it is big, medium or small needs finance to carry own its operations and to achieve its target. Without adequate finance no enterprises can possibly accomplish the objectives. Everybody associated with the business like employees, bankers, creditors, government, shareholders, management and society want to know how the finance, which is not separable from any other functional activity is being optimized. Finance refers to the management of flow of money through an organization. It concerns with the application of skills in the manipulation, use and control of money. Different authorities have interpreted the term Finance differently. However, there are three main approaches to finance: The first approach views finance as to providing of funds needed by a business on most suitable terms. This approach confines finance to the raising of funds and to study of financial institutions and instruments from where funds can be procured. The second approach relates finance to cash. The third approach views finance as being concerned with rising of funds and their effective utilization. Finance function is the most important of all business functions. It remains a focus of all activities. It is not possible to substitute or eliminate this function because the business will close down in the absence of finance. The need for money is continuous. It starts with the setting up of an enterprise and remains at all times. The development and expansion of business rather needs more commitment for funds. The funds will have to be raised from various sources. The inflow and outflow of funds should be properly matched. The finance is the nerve center of a business. It is very essential to smooth running of the business. Financial management is concerned with procurement and use of funds .Its main aim is to use
business funds in such a way that the firms value or earnings are maximized. There are various alternatives available for using business funds. The pros and cons of various decisions have to look into before making a final selection. The decision will have to take into consideration the commercial strategy of the business. Financial management provides a framework for selecting a proper course of action and deciding a viable commercial strategy. The main objective of a business is to maximize the owners economic welfare. Financial management is today recognized as the most important branch of business administration. It is that part of management which is concerned mainly raising funds in the most economic and suitable manner; using these funds as possible; planning future operations; and controlling current performance and future developments through financial accounting, budgeting statistics and other means, it guides investments where opportunity is the greatest, producing relatively uniform yardsticks for judging most of firms operations and projects and is continually concerned with achieving an adequate rate of return on investments, as this is necessary for survival and attracting new capital. Financial management implies the designing and implementation of a certain plan. Plans aim at an effective utilization of funds. Financial management is important because it has an impact on all the activities of a firm. Its primary responsibility is to discharge the finance function successfully. It touches on all the other business functions. All business decisions may financially affect different departments of an organization. Financial statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. Financial statement analysis is refers to such a treatment of the information contained in the Income statement and Balance sheet so as to afford full diagnosis of the profitability and financial soundness of the business. Financial statement analysis is a power mechanism, which helps in ascertaining the strengths and weaknesses in the operations and financial position of an enterprise. In modern times, Finance plays an extremely crucial role in the continuity and growth of the business. It is said to be the circulatory system of an
enterprise making possible the needed co-operation between diverse units of activities. Broadly speaking finance involves three important functions whether the enterprise is public or private viz. Raising of funds, investment of funds and utilization of returns earned from investment. These functions are also known as financing investment and dividend decision respectively. While performing these functions, a firm attempts to balance cash inflows and outflows which is known as liquidity decisions.
PURPOSE OF THE STUDY
To analyse and understand the financial performance, structure and position of Fertilizers And Chemical Travancore, Ltd. (FACT) from the data available in the financial statements in order to find out the financial position of the concern and to compare it with previous years results.
1.3 OBJECTIVES OF THE STUDY

1.3.1 Primary Objectives The main objective of the study is to understand the financial performance and position of Fertilizers and Chemical Travancore Limited (FACT) Books and classroom lectures give more emphasis on theoretical part of management. But in the actual practice things may not be exactly same. So a study at the organization and among its various departments especially in the finance department other than theory is really essential to have a broad out look towards the functioning and running of the organization. Following are the primary objective of this study:1. 2. To know the whole organization in detail. To understand the nature and scope of finance function in a public sector company. 3. To examine the feature of investment, financing working capital, and dividend decision in Public Sector Company.
4. 5.
To analyze the financial position of the company. To have insight on financial tools and techniques.
1.3.2 Secondary Objectives The study of financial statement analysis motivated by various objectives falls under all of the areas of enquiry below. The six areas are the building block of financial statement analysis:1. 2. 3. 4. 5. 6. Short- term liquidity Fund flow Capital structure and long term liquidity Return on investment Asset utilization Operating performance
SCOPE OF THE STUDY The main aim of this study is to understand the financial performance of the FACT Ltd and also evaluate the strength and weakness of the company.The study reviews the performance of the company for the period of 5 years from 2005-2009 as revealed from the annual reports and other accounting records of FACT Ltd.The study also provides suggestions based upon the findings. They may serve as an aid for chalking out plans in the future.
RESEARCH METHODOLOGY
TITLE OF THE STUDY: Financial Performance Analysis The research methodology is a way to solve systematically the research problems. The research methodology refers to the behavior and instruments that is used in performing the research operations and it deals with research design, data collection methods and various statistical tools.
Data is collected through both primary and secondary sources. Primary data is collected form discussion with the authorized officials of the FACT Ltd. This study is mainly based on secondary data. Information sought from the annual reports and websites of the FACT Ltd form is vital part of secondary data.
STATEMENT OF PROBLEM The problem for which the study has been undertaken is to analyse the financial performance of FACT Ltd. RESEARCH DESIGN
A Research Design is the specification of methods and procedures for acquiring the information needed to structure or to solve problem Nature of the research
design of the study is the analytical research. It is an arrangement of condition for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. In analytical research the researcher has to use the facts and information already available and analyze these to make the critical evaluations of the material.
SOURCES OF DATA Primary and secondary data are used for this study. Primary data are those data, which are collected for the first time and original in nature. Secondary data are those that have already been collected data analyzed by someone else.
Primary data: - Based on Direct interview with the concern officers of the
company Secondary data: - Based on Annual Reports of the company, Journals, Internet etc. PERIOD OF THE STUDY:
The period of the study covered by the present study is five accounting years, i.e. from 2005-06 to 20089-10.
TOOLS OF THE STUDY
Appropriate statistical tools are used for analyzing the data such as: Ratio Analysis Comparative Statement Common Size Statement Trend Analysis
STATISTICAL TOOLS: The main statistical tools used for the collection and analyses of data in this project are: A. Charts and Diagram:
Charts and diagrams are statistical methods which can be used for simplifying the complexity of quantitative data and to make them easily intelligible. It is a method of presenting the huge mass of numerical figures in such a way that they can appeal to the eye and the mind of a common man. In this study, the types of diagrams used are bar graphs
and line graphs. B. Tabulation: Tabulation is a means of recording classification in a compact form in such a way as to facilitate comparisons and show the involved relations. It is an orderly arrangement of data in columns and rows. It is of great help in the analysis and interpretation of data. In tabulation, data are arranged in the form of tables, for facilitating the statistical and mathematical operations.
LIMITATIONS OF THE STUDY

1. 2. 3. The study is based mainly on data collected through secondary sources provided by the company. Hence there are chances of errors. The reliability and accuracy of calculations depends on the information available in the Balance Sheet. In any organization, finance is a sensitive part of the internal management of the firm. Hence the authorities are reluctant to give more detailed information
regarding the same. The only data made available were the annual reports of the company.
4. The company is only provided up to 2009-10 annual reports so it is also
difficult to find out the present conditions of the firm. 5. 6. The limitations of ratio analysis are also applicable. It was not possible to get all the details of the organization especially in terms of financial matter.
CHAPTER 2
INDUSTRY PROFILE
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INDUSTRY PROFILE FERTILIZER INDUSRY Indian fertilizer industry is expected to pay a pivotal role in the economic development of India. Indian economy is likely to grow at a rate of 8% or more per annum. To achieve this economic growth, agriculture must grow at 4% per annum. Modern incentive agriculture is heavily dependent on Chemical Fertilizers for obtaining high yields and any growth in agriculture is not possible without the growth in agriculture is not possible without of Fertilizer Industry. Nitrogen, Phosphorus and Potassium are the essential elements for the better growth of plants. These elements should be provided by the soil. Agriculture has always been the mainstay of our people and we have been filling the land and reaping the harvest for hundreds of years. Naturally found us in a situation where the land was becoming lesser and lesser. In the early half of the 20-century we found that on imports to meet our minimum food grain requirement. The emergency aim was to grow more food using the wonder replenishes, chemical fertilizers. The sufficient role played by the Indian fertilizer industry is tacking the most important challenge in feeding the ever growing population, with limited sfactory, the Fertilizer And Chemical Ltd was commenced on the basis of river Periyar at Udyogamandal, Kerala in 1944. FACT was since then grown and branched out in a fantastic manner so that it is not nearly one of the biggest fertilizer enterprises in the country, but also a legend of modern items and a triumph of the public sector. India is the third largest producer and consumer of chemical fertilizer in the world and accounts for about 12% of worlds fertilizer consumption. The country produces several straight nitrogenous fertilizer such as Urea, Ammonium Sulphate, Calcium, Ammonium Nitrate etc as well as complex fertilizer such as DAP (Di Ammonium Phosphate) and several NPK complexes. Urea and DAP are the main fertilizer produced in India. Fertilizer And Chemical Industry in India is undergoing major transformation. This industry is gradually being decontrolled. Administered pricing
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is also being replaced by market determined pricing. Besides recession and consequent declined in the prices of certain inputs and finished products in international market has made its domestic products costly and uncompetitive. Fertilizer, any material organic or inorganic, natural or synthetic put in the soil to improve the quality of plant growth. Chemical Fertilizers are divided in to three natural elements. They are Nitrogen, Potassium and Phosphorous. International Scenario When there are large areas of unused frontier land in the world it was often more economical for farmers to move on to new unfarmed land than to invest additional money in fertilizers for the land they were than farming, a practice continued in the second half of the 20th century in some under developed areas of the world. The use of manure and composts is probably as old as agriculture itself and many other materials such as ground bones, wood ash from burning the fallen trees, dried blood and fish were employed long before the chemistry of soil and crops was understood. The disappearance of frontiers combined with improvements in the technology of fertilizers manufacture and more effective transportation lead to a growing role of fertilizers for producing the needed and fiber. National Scenario India is one of the worlds largest producers and consumer of fertilizers both Phosphorescent and Nitrogenous. The pesticide industry in the country is also among the fast growing sector in the world. They are around 25 chemical fertilizer used in the country at present. These fall under four categories, namely nitrogen, phosphate, potassium and complex fertilizers. 71% of total fertilizer consumption during 1994-95 was of the nitrogen variety where as phosphorous and potassium fertilizer accounted for 22% and 7% in the same year. Where urea, calcium and ammonium phosphate are the major nitrogenous fertilizer. The total fertilizer capacity in India was 12.02 million tones in nutrient terms, where as the consumption was of the order of 13.05million tones. Roughly a sum of rupees 10 million has been the total investment in this industry. The share of
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public and corporate sector in capacity is 40%, 38% and 22% respectively. The problem of the industry is the second demand for its products large working capital requirement. The long credit periods enjoyed by the buyer and the constant demur of environments lobby for slashing the use of chemical pesticides. The government of India has implemented and commissioned major fertilizer project in 1988-99 and invested Rs.4122.02 crores. The central government has always been controlled with budgetary constraints while on the other side the government political obligations never permit any realistic decisions. Lack of inter ministerial co-ordination has also joined the industry by way of recently introduced customs, the basic principles of RPS (Relation Pricing Scheme) itself has been lost and currently it appears to be a way regarding the efficiency of industry. State Scenario Kerala has high degree of land use and cropping intensity. The states agricultural productivity is decreasing year by year. The production and cultivation of rice is decreasing and the farmers are attached to commercial crops like rubber and coconut. Due to decrease in the cultivation of rice, the consumption of nitrate and potash has come down. The per hectare consumption of fertilizers in different states in India, the position of Kerala is one of the low ranking states. FACT is having a market share of 53.4% in Kerala. This is comparatively higher than the other companies in Kerala. Due to the entry of competitors in the field of fertilizers FACT has lost its market share 62.2% to 53.47%. Technological Progress The two major products namely Urea and DAP are expected to remain form of products. Their commercial developments may not prove for large-scale production and application. Even though the consumption of fertilizer in India has increased considerably during the last two to three years, there is no corresponding increase in the indigenous production capacity. As a result the country has to depend on import of fertilizers to meet the increasing demand. The steep increase in the price of raw
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materials and is limited availability in the international market pose a serious threat to Indian fertilizer industry. The Indian fertilizer industries continue to grapple with the issues, which rise out of changes in overall policy framework, liberalization and globalization of the economy. For the development of fertilizer industry in India Indian fertilizer industry has to adjust with global environment where reduction, energy efficiency cost and economies of scale are crucial. ORGANIZATION CHART
FACT
MANUFACTURIN G DIVISION ENGINEERING & FABRICATION DIVISION MARKETIN G DIVISION
UDYOGAMANDAL DIVISION
COCHIN DIVISION
PETROCHEMIC AL DIVISION
FED O
FEW
RESEARCH AND DEVELOPME NT
COMPUTER SCIENCE
MANAGEMENT DEVELOPMENT CENTRE
Source Annual report of FACT
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CHAPTER 3
COMPANY PROFILE
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COMPANY PROFILE
FERTILIZERS AND CHEMICAL TRAVANCORE, LTD (FACT) Agriculture has always been the mainstay of our people and we have been tilling the land and reaping the harvests for hundreds of years. This naturally found us in a situation where the land was becoming less and less bountiful. The yield was getting lower and lower and in the early half of this century we found we had to depend on imports to meat our minimum food grain requirement. The simple truth that land had been losing its fertility through long years of repeated cultivation dawned on as much too late. What we were putting back in the form of organic manure was hardly adequate to replenish the soil or to correct the imbalance in the fertility status of the land under cultivation. Advanced countries elsewhere have discovered the answer to this problem in chemical fertilizers and some of the large scale-farming entrepreneurs like foreign owned plantations in India also were importing chemical fertilizers for their own use. The Second World War, which cut off traditional sources of import of food gains, aggravated our problem and the famine conditions that prevailed in some parts of the country made use sit up and think. Chemical fertilizer was the answer, but we did not have the technical know-how, raw materials or the resources for setting up fertilizer plants. It was then that a daring and farsighted administrator of Travancore (Kerela), Dr.C.P.Ramaswamy Iyer, had overcome the obstacles and paved the way for setting up a chemical fertilizer factory, in a till then unheard of village in kerala with what little resource that was available then and adopting technology and raw materials that could be mustered up. The immediate objective was to grow more food using the wonder replenished chemical fertilizers. This was how FACT came to be founded in what is now known as Udyogamandal, on the banks of river periyar in 1944. It was then the first large fertilizer factory in the entire country. FACT has since then grown, expanded and branched out in a fantastic manner so that today it is not merely one of the biggest fertilizer enterprises in the
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country, but also a legend of the modern times and triumph of the public sector. FACTs annual sales turnover is around Rs. 2147 crores during 2008-`09. FACT today has three manufacturing divisions, two at Udyogamandal, and its birthplace, which has by now become an industrial complex of several chemical industries, and the other at Ambalamedu close to the Kochi Refineries Ltd. The overall production capacity of the company now is in the range of 3.24 lakhs tones of Nitrogen, 1.27 lakhs tones of Phosphate and 50,000 tones of Caprolactum. FACT has the widest range of fertilizers which is made available to the farmers spread over a wide area covering the entire south, straight fertilizers like Ammonium Sulphate, Urea, MOP and also complex fertilizers like Factamfos 20-20-0-13, FACT DAP and host of NPK mixtures to suit all crops and all soils. FACT also manufactures various grades of Bio-Fertilizers. FACT has also successfully branched out into the fields of Chemical and Fertilizer Technology, Engineering and Design Capabilities, Research and Development and Fabrication/Engineering Services. FACT Engineering and Design Organization (FEDO) and FACT Engineering Works (FEW) are well known name today not only in India but also outside the country. DIVISIONS OF FACT UDYOGAMANDAL DIVISION FACT commenced operation at Udyogamandal with the commissioning of a 50,000 tones per annum Ammonium Sulphate plant in 1947. Today the division is the mostly mix of 35 year old small capacity plants and 2 years old state of the art technology plants. The latest addition to this unit is 900 tones per day Ammonia complex set up with an investment of Rs. 642 crores was put in March 1998. FACT Udyogamandal division received ISO 14001 certification in March 2000 for conforming to the Environmental Management system standard. COCHIN DIVISION Cochin Division of FACT is located at Ambalamedu, 32 km from Udyogamandal and adjacent to the Kochi Refineries Ltd, was commissioned in
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1973; with an installed capacity for manufacture of 3,30,000 TPA Urea. Plants for manufacture of 4,85,000 TPA complex fertilizers, mainly FACTAMFOS NP 20-200-13 and DAP 18:46, where added in 1976. The division is accredited under ISO 14001 for Environmental Management System and under ISO 9002 for manufacture of complex fertilizers. PETROCHEMICAL DIVISION FACT diversified into petrochemical in 1990 for the production of Caprolactam, the raw material of Nylon-6, which is extensively used for the production of tyre-cord, Textile filament yarn and engineering plastics, thanks to its high quality the products have been acknowledge as among the best in the world. The division is located adjacent to Udyogamandal division. Co-product ammonium sulphate is transferred for processing to the fertilizer plant of Udyogamandal division. FACT, one of the only two manufactures of this product in India has the capacity to produce 50,000 MT of Caprolactam in a year. FACTs Caprolactam exported to various countries including the USA. The Caprolactam plant also produces 2,25,000 MT of Ammonium Sulphate per year as co-product and quantities of Soda Ash and Nitric Acid, as by-products. The division has been certified ISO 9001: 2002 since April 96 by RWTUV, Germany and ISO 14001 since December1999by DNV, Netherlands. FACT ENGINEERING AND DESIGN ORGANIZATION (FEDO) FACT Engineering and Design Organization (FEDO) was established in1965 for utilizing the considerable indigenous plant building expertise accumulated by FACT in its process of nurturing the nascent chemical fertilizer industry. FEDO is today one of Indias premier project engineering organization, catering to a wide spectrum of industries like Petrochemicals, refining, pharmaceuticals hydrometallurgy etc. The division undertakes project execution on consultancy and turnkey basis, handling the intricacies of the technology sourcing, design and engineering, hardware procurement and construction with practiced ease. FEDO is ISO 9001 certified.
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CORE AREAS OF FEDO Over the year, FEDO has assisted both Private Promoters and Government Corporations in setting up viable units. In this process, it has specialized in fields like: Fertilizers Refining Pharmaceuticals Petrochemicals Fine chemicals Pesticides Organic and inorganic acids Infrastructure Projects- roads Petroleum storage and handling Industrial intermediates.
FACT FABRICATION AND ENGINEERING DIVISION FACT Engineering Works (FEW), the Fabrication and Engineering
Division of FACT were established in the year 1966.FEW is one of the leading contracting firms in the country offering services through the manufacturing wing with modern fabrication and testing facilities and the project construction work. Present range of equipment fabricated by FEW include items like Class 1 Pressure Vessels, Heat Exchangers in Carbon Steel, Alloy Steel and stainless steel, Chemical Process Equipments, Penstock Pipes, Columns, Towers etc. Since 2006 FEW has also been producing ship building components such as hatch covers, bulk storage tanks, spud pipes, crane posts, hull blocks etc. The quality system of Manufacturing Wing as well as Project Wing has been certified to ISO 9001 since 1998. RESEARCH AND DEVELOPMENT
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FACTs well-equipped R & D section has advanced facilities with pilot plants, modern equipment and accessories. A team of highly motivated research scientist backs the division. Various process have been developed and patented by FACT R & D division of which several have been commercialized successfully A 150 TPA Bio Fertilizer Plant is set up at our R & D center MARKETING DEVISION FACT becomes the first fertilizers in India. The full responsibility for selling the fertilizer concept to the tradition bond farmers is also rested on the company. The farmers were reluctant to try out such new product totally unfamiliar to them. It becomes clear to fact that the role did not end with producing and selling fertilizers. Farmers had to be not only persuaded to accept fertilizers as necessary input for better production. FACT undertook that responsibility with missionary seals and enlarged its promotional objectives from marketing of fertilizers to scientific farming. This is also called multimedia publicity campaign. Fertilizer festival was a novel idea introduced by fact in fertilizer promotion. This was a real mela in which there were opportunities for farmers education program, entrainments recreation and exchange of idea knowledge and experience were all interwoven to make it an interesting, informative and effective program. The village adoption scheme was another new concept developed by FACT for the first time in the country. Whole village adopted as scheme to improve agricultural productivity and overall socio economic status of the village is launched. FACT agricultural center (FACT KRISHI VIGYAN KENDRA) was a new experiment in agricultural extension work. This Kendras operated in villages on a rotation basis and trained farmers in modern and scientific method of cultivation. The Kendras all over south India had been well accepted by the agricultural extension agencies and farmers at large. FACTS marketing network is spread over the state of Kerala, Thamilnadu, Karnadaka, Pondicheri and Andrapradesh. It generally has 150-field storage point and 7902 retail selling points in the states. FACT fertilizers are also available through the retail network of co-
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operative marketing federation and the agro industries corporation of the southern states.
VIGILANCE A Chief Vigilance Officer (C.V.O), who possesses the status rank and
perquisites of a Functional Director, heads Vigilance Department of FACT. Vigilance is an integral part of the management function. It has adopted preventive vigilance as the main theme. The stress is on transparency and accountability in the working of the company. VISION : Within a decade FACT will emerge a leader in the business of agriculture inputs, industrial intermediaries and engineering consultancy and construction of industrial infrastructure facilities. MISSION : FACTS mission is to be a globally competitive producer and supplier of agriculture inputs and extend world class engineering and technology services with maximum share holders values. The above mission statements mean FACT aims to provide the best products and services Globally competitive supplier means the products and services offered by FACT will match with the quality and prices offered by competing international firms.
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World class services means expertise gained and acquired to develop technological capabilities required for design, installation, operation and maintenance in chemical process industry and infrastructure sector.
Maximum shareholders values would mean that the company would operate profitably and generate enough resources for growth. To sustain such growth, the company would identify profitable opportunities and diversity.
PRODUCT PROFILE FACT manufactures straight fertilizers, complex fertilizer mixtures and chemicals. PRODUCT MIX a) STRAIGHT FERTILIZERS 1) Ammonium Sulphate: It is nitrogenous fertilizer containing
2o.6%nitrogen, entirely in ammonal form. It has excellent physical properties non-hygroscopic, crystalline and free flowing. It is ideal as a straight nitrogenous 2) fertilizer and also as iron ingredient in fertilizer mixture. It is the most widely preferred nitrogenous for top dressing on all crops. Another unique advantage is that it contains 24% sulpher. 3) Urea: FACT urea with its 46% nitrogen is the highest concentrated nitrogenous fertilizer. It is marketed in the form of pills and has good physical properties. It is the cheapest sources of nitrogen. There is great saving in overheads like transport, storage, handling and application charges due to its concentrated nutrient content. 4) Ultraphos: FACT markets imported Rock Phosphate containing 32% P 205 other brand name Ultraphos. This analysis fertilizer is found suitable for application especially in Coconut\Rubber\Oil Palm\Tea Plantation.
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b) COMPLEX FERTILIZERS 1) Ammonium Phosphate Sulphate (FACTAMFOS 20:20:0:15): It is a chemical blend of 40 parts of 20% N and 20% P 205. The entire N is in ammonial form and P is completely water-soluble. In addition it contains 15% sulpher, a secondary plant nutrient that is now attaining great importance in the agricultural scene. It is deal for application on all soils and crops. It can be used for foliar application. 2) Di Ammonium Phosphate: it is also an NP complex fertilizer with 18% N and 46% P 205. It is a concentrated fertilizer. As the entire N is ammonial form and Phosphorous is in water-soluble form. It is suitable for all soils and crops. The high P content of the fertilizer make it ideal for the application to crops like pulses, groundnuts etc. c) FERTILIZER MIXTURE 1) NPK Mixture: FACT prepares a very large scale of all the standard mixtures for different crops for Kerala as stipulated by the department of agriculture. In addition FACT prepares special tailor made fertilizer mixture of any required grade plantation crops like coffee, tea, rubber etc. 2) Rose Mix: it is a special tonic, the fertilizer blend, besides NP&K contains the secondary and trace elements in the required form and correct quantity for roses. Rose mix is marketed in 500 grams packet and is available at prominent fertilizer shops. 3) Vegetable Mixture: It is also a special blend exclusively prepared for the use on vegetables. It is available in 1 kg packet. 4) Garden Mixture: They are sold in 1 kg packets and are specially prepared for garden, both flower and foliage types. It is a special nutrient combination for both flowering and foliage ornamental plants. It is an imported traded product 5) Bio fertilizer: FACT produces and markets N fixing Bio Fertilizers- Rhizobium, Azospirillum and P solubilising bio fertilizerPhosphobactor.
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d) CHEMICALS 1) Anhydrous Ammonia: It is one of the basic products in the manufacture of fertilizers. FACT produces Ammonia over 99.96% purity, used mainly for the manufacture of ammonium sulphate and ammonium phosphate. Besides it also finds use mainly for rubber and explosive industries and refineries. It is also used in pharmaceutical industry. 2) Sulphuric Acid: FACT has one of the largest plants in Asia for producing sulphuric acid. It has the purity of 98%. 3) Caprolactam: It is the raw material for nylon 6, the product quality of FACT Caprolactam is among the best available in the world. 4) Nitric Acid And Soda Ash: Small quantity of nitric acid and soda ash are obtained from the caprolactam plants as by products.
PRODUCTS FINISHED PRODUCTS Ammonium Sulphate- Udyogamandal Division Ammonium Phosphate\ complex fertilizers\ factamfos- Udyogamandal & Cochin Division Caprolactam- Petrochemical Division Bio fertilizers- Research & Development Division
EXPORTED PRODUCTS Caprolactam- Petrochemical Division Ammonium Sulphate- Udyogamandal Division
BYPRODUCTS Nitric Acid & Soda Ash- Petrochemical Division Gypsum- Udyogamandal & Cochin Division Carbon Dioxide Gas- Udyogamandal
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INTERMEDIARY PRODUCTS Ammonia- Udyogamandal & Cochin Division Synthesis Gas- Udyogamandal Division Oleum- Udyogamandal Division SO2 Gas- Udyogamandal Division Phosphoric Acid- Udyogamandal & Cochin Division COMPETITORS
SPIC- Southern Petrol Industrial Chemical. MFL Madras Fertilizer Ltd NFL Nagarjuna Fertilizer Ltd MFL Mangalore Fertilizer Ltd RCF- Rastria Chemical Fertilizer Ltd. IFFCO - Indian Farmers Fertilizer Co-operate
Product Urea and di-ammonium phosphate and intermediaries
Product NPK 17:17:17 and variants Vijay Urea, Bio- fertilizer, Agrochemical.
Product Urea.
Product Urea, Complex Fertilizer.
Product Urea and di-ammonium phosphate, MOP, complex fertilizer
Product Urea and di-ammonium phosphate and Complex Fertilizers. 3.3. SWOT ANALYSIS Strength High capacity utilization. Strong dealer network in South India. Very large asset base. ISO certification is most of the division. Good engineering and consultancy design perhaps one among the best in fertilizer segment. Good support with farmers and end user segment.
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Sustaining operating parameters of the plant at good level. World class quality producers of Caprolactum. FEDO has worked in association with many international process licenses, and acquired the capacity of customizing and designing projects to the requirements of the Indian consumers.
FEDO has approved surveyors and auditors for the installation of destructive testing, energy audits, ISO audits etc.
Weakness The price of finished goods is controlled by the government but the prices of raw materials are decontrolled. So it is forced to operate in an uneconomic situation. The average ages of employees are very high. Due to freeze on recruitment the numbers of younger professions are decreasing.
Interest burden created due to the ammonia plant has significant impact on operating results.
Market shares of some products are shrinking due to increase in competition from other manufactures.
Several unskilled jobs, which could be subcontracted, are undertaken by the permanent employees at high cost.
Lack of product line diversification.
Opportunities Strong marketing network in South India. 2120 acres of land and infrastructure facilities. High demand for by-product gypsum.
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Scope of expansion and diversification. Joint ventures with other organisations for profitable business. Strong presence in the fertilizer segment.
Acquiring technology helps to utilize possible inputs resources.
Threats Steps arise in the price of Hydrocarbon and other raw materials like sulphur, rock phosphate, naphtha etc. Scarcity of raw material in the international market. Fluctuations in the prices of caprolactum and static demand from domestic customers. High cost of captive Ammonia due to alarming price increase of petroleum products. High cost of furnace oil.
CHAPTER-4
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Theoretical framework of the study
THEORETICAL FRAME WORK INTRODUCTION Finance is the fulcrum of modern business. It is essential for carrying out business activities successfully. Business finance is regarded as the King Pin of all enterprises. Finance is needed for payment of wages etc. Finance is also required for distribution of goods. Thus money is the master key of all business activities. It is said that business needs money to make money. Business finance related to the financing of business activities. It deals with rising of finance and its utilization in the business. Recent development in business have placed the financial manager in a central position is most of the big enterprises. Financial manager is in charge of the
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management of the enterprises. He is concerned with the determination of requirement of funds to particular assets- fixed and current. Financial manager presents various facts and figures regarding financial position, which help the top management in evaluating the process of the company and to amend suitably the principles of the company. The performance of the firm can be managed by its financial results, i.e. by its size of earnings. Financial decision, which increases risk, will decrease the value of the firm and on the other hand financial decisions, which increase the profitability will increase the value of the firm. Therefore in order to increase the value of the firm sound business decision must be taken, which is not possible in the absence of sound financial management. Financial management helps in ascertaining how the company would perform in future. It helps in indicating whether the firm will generate enough funds to meet its various obligations like repayment of various installments due on loans, redemption of other liabilities. Finance functions or decisions include: Investment decisionIt is also known as capital budgeting. It involves the
decision of allocation of capital or commitment of funds to long-term assets that would yield benefits in future. Its one very significant aspect is the task of measuring the prospective profitability of new investments. Future benefits are difficult to measure and cannot be predicted with certainty. Investment proposals should be evaluated of both expected return of new investment could be compared. Financing decisionIt is the second important function to be performed by the Financial Manager. He must strive to obtain the best financial mix or optimum capital structure for his firm. The firms capital structure is considered to be optimum when the market value of shares is maximized. The use of debt affects the return and risk of shareholders, it may increase the return on equity funds but it always increases risk. A proper balance will have to be struck between return and risk. When the shareholders return is maximized with minimum risk, the market value per share will be maximized and the firms capital structure would
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be considered optimum. Once the Financial Manager is able to determine the best combination of debt and equity, he must raise the appropriate amount through best available sources. Dividend decisionIt is the third major financial decision. The Financial Manager must decide whether the firm should distribute all profits or retain them or distribute a portion and retain the balance. Like the debt policy, the dividend policy should be determined in terms of its impact on the shareholders value. The optimum dividend policy is one, which maximizes the market value of the firms shares. Thus, if shareholders are not indifferent to the firms dividend policy, the financial manager must determine the optimum dividend pay out ratio. The dividend pay out ratio is equal to the percentage of dividends distributed to earning s available to shareholders. Most profitable companies pay cash dividends regularly. Periodically additional shares, called bonus shares are also issued to the existing shareholders in addition to the cash dividend. Liquidity decisionCurrent assets management that affects a firms liquidity is yet another important finances function, in addition to the management of long term assets. Current assets should be managed efficiently for safeguarding the firm against dangers of liquidity and insolvency. Investments in current assets affect firms profitability, liquidity and risk. A conflict exists between profitability and liquidity while managing current assets. If the firm does not invest sufficient funds in current assets, it may become liquid. But it would lose profitability, as idle current asset would not earn anything. Thus, a proper trade off must be achieved between profitability and liquidity. FINANCIAL MANAGEMENT Meaning and Definition Different scholars have defined financial management differently. According to the Solomon, Financial Management is concerned with efficient use of an important, economic, resources, namely capital funds. According to Phillippatus, Financial Management is concerned with managerial decision that results in the acquisition and financing of long term and short term credit of the firm.
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As such it deals with the situation that requires selection of specific liability as well as problem of size and growth of an enterprise. The analysis of these decisions is based on the expected inflows and out flows of funds and their effects upon managerial objectives. The term financial management means the acquisition of funds for the proper running of the business and proper utilization of these funds for earning profits to the firm. Sound financial management is essential for every organization. This objective can be achieved by profit maximization and wealth maximization. Profit maximization means maximizing the profit or income of the firm. According to this concept, activities, which increase the profits, should be undertaken and those that decrease profits are to be avoided. All operational functions are to be executed with the object of maximizing profit. The rationale behind profit maximization is that profit in a test of economic efficiency. The accumulated profits enables a business to face risk like fall in prices, competition from other units, adverse government policies etc. Thus, profit maximization is considered as the main objective of business. Wealth maximization is the appropriate objective of an enterprise. It is the single substitute for a stockholders utility. When the firm maximizes the stockholders wealth, the individual stockholder can use this wealth to maximize his individual utility. It means that by maximizing stockholders wealth the firm is operating consistently towards maximizing stockholders utility.
SOURCES AND USES OF FUNDS According to S. C. Kuchhal Financial Management deals with procurement of funds and their effective utilization in the business. There are, thus, two basic aspects of financial management i.e., procurement or sources of funds and an effective use or application of these funds to achieve business objectives. Hence, it is classified in to two sections, i.e., Sources of funds and Utilization of funds.
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SOURCES OF FUNDS Since the funds can be obtained from different sources therefore their procurement is always considered as a complex problem by business concerns. The sources will be selected in relation to the implications attached with them. The receiving of money is not enough, its utilization is more important. If its use is proper its return will be easy otherwise it will create difficulties for repayment. The raising of funds and its utilization should be matched. The major finance function is to assess the financial needs of an enterprise and then fining out suitable sources for raising them. The sources should be commensurate with the needs of the business. The firm can raise equity funds and borrowed funds. A firm sells shares to acquire equity funds. Share represents ownership rights of their holders. The funds raised by the issue of equity share the best from the risk point of you for the company, since there is no question of repayment of equity capital except when the company is under liquidation. A company may raise long-term finance through borrowings. The issue of debentures raises these loans. A debenture holder is the creditor of the company. Debentures as a source of finance are comparatively cheaper, since interest is paid out of profits before tax. In addition to the raising of funds by means of share capital, debentures, public deposits and internal financing form may also raise loans from for meeting their medium term or long term financial needs. Medium term loans are for periods of ranging from one to five years and long-term loans are granted for period beyond five years. A term loans granted on the basis of a formal agreement between the borrower and lending institutions.
UTILIZATION OF FUNDS All the funds are procured at a certain cost and after entailing a certain amount of risk. The funds should be used in such a way that a maximum benefit is derived from them. The return from their use should be more than their cost. It should be ensured that funds do not remaining idle at any point of time. The funds committed to various operations should be utilized. Those projects should be
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referred which are beneficial to the business. If these funds are not utilized in manner, so that they generate an income higher than the cost of procuring them there is no point in running the business. This is also an important consideration in dividend decision. Hence it is crucial to employ the funds properly and profitability. The shareholders have to provide a share of the total investment in fixed and current assets. This is required from the point of view of risk sharing. Normally financing arrangements are plant for combination of needs including capital expenditure and working capital requirement. In this long term finance is required to meet capital expenditure requirements and short-term finance is needed to meet day-to-day requirements of the business units. Thus, financial implications of each decision to invest in fixed assets are to be properly analyzed. For this, Finance Manager would be required to possess should knowledge of technique of capital budgeting. He must also keep in view the needs of adequate working capital and ensure that while the firms enjoy an optimum level of working capital they do not keep too much funds blocked in inventories, book debts and cash etc. FINANCIAL ANALYSIS Financial analysis, also known as analysis and interpretation of financial statements, is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm or by parties outside the firm, viz. owners, creditors, investors and others. The nature of analysis will differ depending on the purpose of the analysts.
Financial statement analysis Financial statements are prepared primarily for decision-making. They play a dominant role setting the framework of managerial decisions. The information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.
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Every business has several stakeholders and they are promoters, creditors, employees, government etc. Each stakeholder desires to know about the financial position of the company. It is possible with the help of financial statements namely Balance Sheet and Profit and Loss accounts. But, to understand deeply about each and every item, Financial Statement Analysis is essential and it can be a very useful tool for understanding a firms performance and condition. Objectives of Financial Statement Analysis Objectives depend on the desire of stakeholder. The basic objectives are; Evaluation of adequacy of the profit earned by the company Evaluation of the adequacy of its financial strength To judge the solvency of the firm To measure the efficiency of operation To determine the debt capacity of the firm To have inter firm and intra firm comparison of performance. Intra firm comparison provides an opportunity of self-appraisal, whereas inter firm analysis presents the operational efficiency of the firm as compared to other firms. Evaluation of the ability of the company to generate enough cash and cash equivalents and the timing and certainty of their generation. Evaluation of the future growth outlook of the company.
Types of Financial Statement Analysis External Analysis- The analysis of financial statements may be carried out on the basis of published information i.e. information made available
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in the annual report of the firm or other such available information; such analysis is called external analysis. Those who do not have access to the detailed accounting records of the company. The Investors, Government Agencies, Research Scholars, Banks, Creditors make such type of analysis. Internal Analysis- The analysis may also be done on detailed information available within the enterprise, which is not available to the outsiders; such analysis is a detailed one and is carried on behalf of the management for purpose of providing necessary information for decision making. Such analysis emphasis on the performance appraisal and assessing the profitability of different activities. Long-term Analysis- In Long term, a company must earn a minimum amount, which is sufficient to maintain a reasonable rate of return on the investment so as to provide for the necessary growth and development of the company and to meet its cost of capital. Financial planning is also desirable for the continued success of the business. Thus in the long-term analysis, the stability and earning potentiality of the concern is analyzed. Short term Analysis- This is made to determine the short-term solvency, stability and liquidity as well as earning capacity of the business. The purpose of this analysis is to know whether in the short run a business concern will have adequate funds readily available to meet contingencies in the near future. This analysis is made with reference to items of Current Asset and Current Liabilities (Working Capital Analysis) to have fairly sufficient knowledge about the firms current position, which may be helpful for short term financial planning and long term planning. Horizontal Analysis- Analysis of Financial Statements involves making comparison and establishing relationship among related items. Such comparison or establishment of relationships may be based on Financial Statements of an enterprise for a number of years or financial statements of the different enterprise for the same year. This is very useful for longterm trend analysis and planning.
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Vertical Analysis- Analysis of financial data base on relationship among items in single period of financial statements is called Vertical Analysis. From one year Balance sheet, relationship of various items may be established. For example, various assets can be expressed as percentage of total assets. The common size profit and loss account is more useful in analyzing operating results and costs during the year. It shows each element of cost as percentage of sales. Methods or Devices Used for Financial Analysis Ratio Analysis Ratio Analysis was the first financial tool developed to analyze and interpret the financial statements and is still used widely for this purpose. Ratio Analysis is defined as the systematic use of accounting ratios in order to evaluate the operating performance of a firm. Ratio is simply one number expressed in terms of another number. It refers to numerical relationship between two related figures in the financial statements. Ratio can be expressed in three ways like times, percentage and proportion. Important ratios used are Liquidity Ratios, Leverage Ratios, Efficiency/ Activity Ratios and Profitability Ratios. Trend Analysis In financial analysis, the direction of changes over a period of years is crucial importance. Time series or trend analysis of ratios indicates the direction of change. The financial statements may be analyzed by computing trends or series of information. This method determines the direction upwards and downwards and involves the computation of the percentage relationship that each statement item bears to the same item in the base year. This analysis is an important tool of horizontal financial analysis. This method is immensely helpful in making a comparative study of financial statements. Under this method trend percentages are calculated for each item of the financial statements taking the figure of base year as 100. The starting year is usually taken as base year. The trend percentages show the relationship of each item with its preceding years percentages.
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Comparative Statements Comparative financial statements are statements of the financial position of different periods of time. It is prepared so as to provide time perspective to the consideration of various elements of financial position embodied in such statements. This is done to make the financial data more meaningful. The statements of two or more years are prepared to show the absolute data of two or more years. Increase or decrease of absolute data in value and in terms of percentages. Comparative statements can be prepared for both the income statements as well as position statement. Common Size Statements This statement is shown in analytical percentages. It indicates the relationship of various items with some common item (expressed as percentage of the common item). In the income statement, the same figure is taken as base and all other figures are expressed as percentage of sales. Similarly in the balance sheet, the total assets and liabilities are taken as base and all other figures are expressed as a percentage to this goal. The percentage so calculated can be easily compared with corresponding percentage in other periods and meaningful conclusions can be drawn. Fund Flow Statements It is a very useful tool in analysis of financial statements, which analyses the changes taken place between two balance sheet dates. The fund flow statement is also called a statement of changes in financial position. The fund flow statement is a statement, which shows the movement of funds and is a report of the financial operations of the business undertaking. It indicates various means by which these funds where employed. In simple words it is a statement of sources and application of funds. Cash Flow Statement Cash plays a very important role in the entire economic life of a business. Cash flow statement is a statement, which describes the inflows (sources) and outflows (uses) of cash and cash equalents in an enterprise during a specified period of time. It is an essential tool for short-term financial analysis and is very helpful in the evaluation of current liquidity of a business concern.
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CHAPTER-5
DATA ANALYSIS & INTERPRETATION
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FINANCIAL ANALYSIS AND INTERPRETATION Financial Performance Analysis Finance is the foundation stone of every business in the present day set up. The success of every business depends upon adequate source of finance. In the present situation business are saw by big companies whose financial requirements are large volume of finance, which can not be contributed by few investors. Finance management is the managerial activity i.e. associated with planning and controlling of companies financial resources. The financial resources are always scarce and limited which need proper planning and control in order to achieve the best result out of the complex situation of risk and uncertainty prevailing in the business world. Financial management has to take decisions in various fields involving financial implications such as a new financing whether through shares or debentures or temporary borrowings through banks and sources, inventory management and capital budgeting. These decisions to be correct should be based on some reliable information. Therefore analyzing the overall performance of a concern and study the past and present information and financial records are essential in taking various decisions. In short, the technique of financial analysis is typically devoted to evaluate the past, current and projected performance of a financial firm. Broadly the term is applied to almost all kind of detailed enquiry in to financial data like evaluate the past performance, present financial position, liquidity situation, enquiry in to profitability of the firm and to plan for future operations. For all this we need to study the relationship among various financial variables in a business as disclosed to various financial statements. The analysis of financial performance is an attempt to determine significance and meaning of financial statement data. So that the forecast may be of the future prospect for earnings, ability to pay interest and debt maturities and profitability. Financial performance of an organization can be analyzed for different requirements or for different objectives. A number of people are interested in
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getting information about the organization like managers, owners, creditors, employees, suppliers and other stakeholders. Steps involved in financial analysis: The first step involved in financial analysis is to select the information relevant to the decision under consideration from the total data contained in financial statements. The second step involved in financial analysis is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing inferences and conclusions. Interpretation: After making analysis of financial statements the next step is interpretation for forming an opinion about the enterprise. This stage is known as interpretation stage. The technique is called Analysis And Interpretation of financial statements. Interpretation means explaining the financial position and earnings capacity of the business concern in simple language, which may be understood even by a layman. Interpretation on the other hand, is drawing inferences and conclusions with regard to the result of significant relationship between the variable correlated or implications of figures or statements of facts. Interpretations include both analysis and criticism. The analysis and interpretation of financial statement requires a comprehensive and intelligent understanding of their nature and limitations as well as the determination of the monitory valuation of the items. Interpretation is impossible without analysis Interpretation is not possible without analysis and without interpretation analysis has no value. Analysis and interpretation of financial statements are an attempt to determine the significant and meaning of the financial statements data so that a forecast may be made of the prospects for future earnings, ability to pay interests on loans, debt maturities both current as well as long term and profitability of a sound dividend policy.
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Analysis and Interpretation: Analysis and interpretation act as a bridge between art of recording and reporting financial information and act of using this information.
Analysis and interpretation of financial statements thus become necessary to cater to the requirements of internal as well as external users of accounting information. Analysis and interpretation are closely correlated and indispensable for decision-making by management, commerce, creditors and others interested in the working of an enterprise. The main objectives of the financial statement analysis are: To estimate the earning capacity of the firm To gauge financial position and financial performance of the firm To determine the debt capacity of the firm To determine the long term liquidity of funds as well as solvency To decide about the future prospects of the firm To know the progress of the firm To measure the efficiency of operation To determine the debt capacity of the firm
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RATIO ANLYSIS Ratio analysis is one of the most used techniques of financial analysis. It aims at making use of quantitative information for decision-making. It is a yardstick, which measures relationship between two variables. Ratios are simply means of highlighting in arithmetical terms the relationship between figures drawn from various financial statements. Robert Antony defines a ratio as simply one number expressed in terms of another. A great number of ratios can be computed from the basic financial statements i.e. Balance sheet and Profit and loss account. These are widely used as they are simple to calculate and easy to understand. A ratio makes a relationship easy to grasp, but it does not tell the reader, whether the relationship is good or bad, the analysts must draw some inferences from the ratios. Financial Ratios can be derived from the Balance sheet and Income statements. Several ratios, calculated from the accounting data, can be grouped into various classes according to financial activity or function to be evaluated. In the view of the requirements of the various users (short and long term creditors, owners and management) of ratios, we may classified them in to the following four important categories a) Liquidity Ratios b) Leverage Ratios c) Efficiency/ Activity Ratios d) Profitability Ratios Significance (Importance) of Ratio Analysis
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Ratio analysis is one of the most powerful tools of financial analysis. It is used as a device to analyze and interpret the financial health of a business enterprise. The following are the important managerial uses of ratio analysis 1) The ratio analysis simplifies the complex financial data. It reveal the change in the financial condition of the business 2) Ratio analysis helps the management in decision-making. It throws light on the degree of efficiency of management and utilization of assets. 3) It helps in forecasting and planning. Over a period of time a firm develops certain norms, which may indicate future success or failure. 4) Ratios may be used as instruments of management control. Particularly in the areas of sale and control. 5) Ratios facilitate the function of communication and enhance the value of financial statements. 6) Ratios may be used as a measure of efficiency. Since ratios bring uniformity in the financial data, inter firm comparison is made possible. Ratio analysis provides the required data for inter firm comparison. 7) The ratios are calculated based upon past results. So it help management to frame sound business policies for business in future.
LIQUIDITY RATIOS Liquidity ratio measures the ability of the firm to meet its current obligation. In fact, analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements but liquidity ratios, by establishing a relationship between cash and other current assets to current obligations provide a quick measure of liquidity and also that is does not have excess liquidity. The failure of a company to meet its obligation due to lack of sufficient liquidity, will result in poor credit worthiness, loss of creditors confidence or even in legal tangles resulting in the closure of the company. A high degree of liquidity is also bad idle assets earn nothing. The firms fund will be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance between high liquidity and lack of liquidity. CURRENT RATIO
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Current ratio may be defined as the relationship between current assets and current liabilities. Current ratio indicates the ability to repay short-term commitments promptly. It is most widely used to make the analysis of short-term financial position or liquidity of a firm. It is calculated by dividing the total of current asset by the total current liabilities. The ideal current ratio is 2:1. CURRENT RATIO = Current Asset Current Liabilities Table 5.1: Statement showing current ratio Year Year 2005-06 2006-07 2007-08 2008-09 2009-10 Current Asset Current Ratio
Current Liability
54257.91 72030.09 57746.41 82352.69 128094.64 Table 5.1
39026.40 41380.60 29011.08 39220.20 67145.81
1.39 1.74 1.99 2.10 1.91
Chart showing current ratio

CURRENT RATIO
2.5
Current Ratio
2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year
Current Ratio
Figure 5.1
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INTERPRETATION As a confessional rate, a current ratio of 2:1 or more is considered satisfactory. Here, the above table and chart shows that the firms current assets are more than current liability. Therefore it is a healthy sign. But as conventional rule it may interpret to be insufficient liquid. This rule is based on the logic that even if the value of the current asset becomes half, the firm will be able to meet its obligations. Here the optimum current ratio of 2.10 is in 2008-09, which is highest, and the lowest ratio of 1.39 is in 2005-06. QUICK RATIO Quick ratio is determined by dividing the quick assets i.e. assets, which are mostly converted into, cash by current liabilities. It is better test of the financial strength of a business than the current ratio, as it does not consider inventory, which cannot be sold at fair price immediately. This ratio lays emphasis on immediate conversion of assets into cash.
QUICK RATIO =
Quick Assets Current Liabilities
Quick Asset = Current Asset- (Stock+ Prepaid Expenses) Table 5.2: Statement showing quick ratio Year 2005-06 2006-07 2007-08 2008-09 2009-10 Liquid Asset 28055.4 37254.87 25768.06 40952.7 70351.34 Current Liabilities 37086.51 39098.07 25414.43 35122.53 57191.56 Quick Ratio 0.756 0.953 1.01 1.16 1.23
Source: Annual report of FACT Ltd

Chart showing quick ratio
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QUICK RATIO
1.5 Quick Ratio 1 0.5 0 2005-06 2006-07 2007-08 Year 2008-09 2009-10 Quick Ratio
Figure 5.2
INTERPRETATION The ideal quick ratio is 1:1. The above table and chart shows that, in the first three years the quick ratio was continuously increasing . In the last year there was a sound increase and records the higher of 1.23 in the year 2009-10.
LEVERAGE RATIOS The term solvency refers to the ability of a concern to meet its longterm obligations. Long-term solvency ratio indicates a firms ability to meet the fixed interest and repayment schedules associated with its long-term borrowings. The following ratios serve the purpose of determining the solvency of a concern.
DEBT EQUITY RATIO This ratio indicates the relationship between total debt and net worth of the company, which is known as gearing. If the proportion of debt to equity is low a company is said to be low geared and vice versa. A debt equity ratio of 2:1 is the norm accepted by financial institutions for financing of projects. Higher the debt equity ratio may be permitted for highly capital-intensive industries. DEBT EQUITY RATIO = Total Debt Net Worth
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Total debt = Debentures+ secured & unsecured loan+ Mortgage loan A high ratio shows the claims are greater than those of owners. A very high ratio is unfavorable from the point of view of the firm. A low debt equity ratio implies a greater claim of owner than creditors. From the point of view of creditors, it represents a satisfactory capital structure of the business.
Table 5.3: Statement showing debt equity ratio Year 2005-06 2006-07 2007-08 2008-09 2009-10 Total debt 29048.12 51482.87 46842.65 80983.43 107885.72 Net worth 64806.53 64802.36 64798.36 64794.23 64790.31 Table 5.3 Debt equity ratio 0.45 0.79 0.72 1.25 1.66
Chart showing debt equity ratio DEBT EQUITY RATIO

2 1.5 Ratio 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 Year Debt Equity Ratio
Figure 5.3
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INTERPRETATION A debt equity ratio, which shows a decreasing trend over the years, is usually a positive sign reflecting on the increasing cash accruals and debt repayment. Here it can be seen from the table that the debt repayment capacity has changed. PROPRIETARY RATIO It expresses the relationship between net worth and total assets. A high proprietary ratio is indicative of strong financial position of the business. The higher the ratio the better it is. PROPRIETARY RATIO = Total Assets Shareholders Fund Table 5.4: Statement showing proprietary ratio Year 2005-06 2006-07 2007-08 2008-09 2009-10 Shareholders fund 64806.53 64802.36 64798.36 64794.23 64790.31 Table 5.4
Chart showing proprietary ratio
PROPRIETORY RATIO
0.8 Ratio 0.6 0.4 0.2 0 2005-06 2006-07 2007-08 Year 2008-09 2009-10 Proprietary ratio
Total asset 105653.06 118115.36 101128.51 149776.01 194216.48
Proprietary ratio .61 .55 .64 .43 .33
Figure 5.4
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INTERPRETATION Proprietary ratio in 2005-06 was .61 and subsequently the following years the ratio fluctuate like an upward and downward basis. Finally it reaches in 2009-10 at the ratio of .33. It was not satisfactory; this indicates weak financial position of the company. ACTIVITY RATIOS Activity ratios are employee to evaluate the efficiency with which the firm managers and utilize its assets. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. Activity ratios, thus, involves a relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well. Several activity ratios can be calculated to judge the effectiveness of assets utilization.
CAPITAL TURNOVER RATIO This ratio shows the efficiency of capital employed in the business by computing how many times capital employed is turned over a stated period. The higher the ratio, greater is the profit. A low capital turn over ratio should be taken to mean that sufficient sales are not being made and profits are lower.
CAPITAL TURNOVER RATIO =
Sales
Capital Employed
Table5.5: Statement showing working capital ratio Year Sales Capital employed Capital turn over ratio 2005-06 2006-07 138495 145717 65944 74866 2.10 1.95
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2007-08 2008-09 2009-10
86612 211736 209483
69780 79343 93777

Table 5.5
1.24 2.67 2.23
Chart showing capital turnover ratio
CAPITAL TURNOVER RATIO

3 Ratio 2 1 0 2005-06 2006-07 2007-08 Year 2008-09 2009-10
Capital turnover ratio
Figure 5.5 INTERPRETATION Capital turnover ratio indicates the efficiency in utilization of capital employed in generating revenue. During the year 2005-06 capital turnover ratio 2.10 means that 2.10 times of capital employed is turned over in to sales. In the year 2007 2008 the capital turnover ratio is 1.24, which is lowest in the last five years. During the year 2009-10 the ratio is 2.23 means that FACT is efficient to covert its capital to sales as compared to 200506.
FIXED ASSET TURNOVER RATIO This ratio is the relationship between sales to fixed asset. This measures the efficiency of a firm Inventory managing and utilizing assets. The
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higher the turnover ratio the more efficient is the management and utilization of the assets.
FIXED ASSET TURNOVER RATIO =
Sales
Fixed Assets
Table 5.6: Statement showing fixed asset turnover ratio Year Sales Fixed asset Fixed asset tunover ratio 2005-06 2006-07 2007-08 2008-09 2009-10 138495 145717 86612 211736 209483 51340.51 46030.77 43327.60 39292.82 37991.69 Table 5.6 Chart showing fixed asset turnover ratio 2.69 3.17 2.0 5.49 5.51
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FIXED ASSET TURNOVER RATIO

6 5 4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 Year
Ratio
Fixed asset turnover ratio
Figure 5.6
INTERPRETATION This ratio shows how well the fixed assets are being used to generate sales in the company. This ratio is important in case of FACT because sales are produced not only by use of current assets but also by amount invested in fixed assets. Here the ratio shows an increasing trend for the last two years. Due to poor sales performance in the year 2007 2008, (2.0) ratio is decreased. When the sales progress come in effect accordingly the ratio also increases. The current year ratio 5.51 reveals that for one rupee invested in fixed assets will generate 5.51 rupees of sales.
WORKING CAPITAL TURNOVER RATIO This ratio helps to measure the efficiency of the utilization of net working capital. It signifies that for an amount of sales, a relative amount of working capital is needed. If any increase inventory sales is contemplated, working capital should be adequate and thus this ratio helps management to maintain the adequate level of working capital. A higher ratio indicates efficient utilization of working capital. This ratio can calculate as:
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WORKING CAPITAL TURNOVER RATIO =
Net Sales Working Capital
Table 5.7: Statement showing working capital turnover ratio Year Net sales Working capital 2005-06 2006-07 2007-08 2008-09 2009-10 138495 145717 86612 211736 209483 57427 40737 27360 30103 15118 Table 5.7 working capital
turnover ratio 9.16 4.84 3.17 5.19 3.65
Chart showing working capital turnover ratio
WORKING CAPITAL TYRNOVER RATIO 10 8

Ratio
6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10

Year
Working capital turnover ratio
Figure 5.7
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INTERPRETATION Higher the ratio indicates efficient utilization of working capital. But very high working capital turnover ratio is not a good solution. The above table and chart shows that there is a fluctuating tendency . The number of times working capital turnover increases the profitability also increases. In year 2008-09 company was trying to raise profitability.
TOTAL ASSET TURNOVER RATIO This ratio indicates the number of times the total assets are being turned over inventory a year. The higher the ratio indicates over trading of total assets while a low ratio indicates idle capacity.
TOTAL ASSET TURNOVER RATIO =
Net Sales Total Asset
Table 5.8: Statement showing ratio total asset turnover ratio Total year 2005-06 2006-07 2007-08 2008-09 2009-10 Net sales 138495 145717 86612 211736 209483 asset 105653.06 118115.36 101128.51 149776.01 194216.48 Table 5.8 Total asset turnover ratio 1.31 1.23 .86 1.41 1.08
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Chart showing total asset turnover ratio
TOTAL ASSET TURNOVER RATIO

1.5 Ratio 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 Year Total asset turnover ratio
Figure 5.8 INTERPRETATION FACTs asset turnover of 1.08 means that for each rupee of assets FACT is able to generate 1.08 in sales. The higher the asset turnover, the more efficient the company is at using its assets to generate sales. In evaluating FACTs asset turnover, the ratio for the year 2008-2009 & 2009-2010 is 1.41& 1.08 respectively. The standard ratio is sales two times of assets. Here the ratio is very less and it reveals idle capacity.
INVENTORY TURNOVER RATIO This ratio indicates the effectiveness and efficiency of the inventory management. The ratio shows how speedily the inventory is turned into accounts receivable through sales. The higher the ratio the more efficiently the inventory is said to be managed. INVENTORY TURNOVER RATIO = Cost of Goods Sold
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Average Inventory Table5.9: Statement showing inventory turnover ratio Year Cost of goods sold Average inventory /Sales 2005-06 2006-07 2007-08 2008-09 2009-10 138495 145717 86612 211736 209483 Table 5.9 Chart showing inventory turnover ratio 25996.71 34615.62 31844.48 41260.03 57584.37 Inventory turnover ratio 5.35 4.21 2.72 5.13 3.65
INVENTORY TURNOVER RATIO

6 Ratio 4 2 0 2005-06 2006-07 2007-08 Year 2008-09 2009-10
Inventory turnover ratio
Figure 5.9
INTERPRETATION Stock turnover ratio shows an increasing trend up to 2005-06, it started declining in 2006-07 and again increases in the year 2008-09. This implies that the inventories are managed efficiently. CURRENT ASSET TURNOVER RATIO
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A high current asset turnover ratio indicates the capacity of the organization to achieve maximum sales with minimum investment in current assets. It indicates that the current assets are turned over in the form of sales more number of times. The higher the ratio better will be the situation. CURRENT ASSET TURNOVER RATIO = Total asset Current assets
Table5.10: Statement showing current asset turnover ratio Year Total asset Current assets Current asset turnover ratio 2005-06 2006-07 2007-08 2008-09 2009-10 105653.06 118115.36 101128.51 149776.01 194216.48 54257.91 72030.09 57746.41 82352.69 128094.64 Table 5.10 1.95 1.64 1.75 1.82 1.52
Chart showing current asset turnover ratio
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CURRENT ASSET TURNOVER RATIO

2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 Year
Ratio
Current asset turnover ratio
Figure 5.10 INTERPRETATION A high current asset turnover ratio indicates the capacity of the organization to achieve maximum sales with minimum investment in current assets. . In the current year the ratio decreace up to 1.52, it is not satisfactory.
PROFITABILITY RATIOS The primary of a business undertaking is to earn profit. Profitability ratios measure the profit earning capacity of the organization. Profit earning is considered essential for the survival of the business. Profit is an index of economic progress. Profitability ratios are calculated either in relation to sales or relation to investment. The following are the important profitability ratios,
GROSS PROFIT RATIO Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as percentages. A high gross profit ratio is a sign of good management. That means higher the ratios better the results. The gross profit ratio is one of the very important ratios for measuring profitability and efficiency of the company. GROSS PROFIT RATIO = Gross profit 100 Net sales
59
Table 5.11: Statement showing gross profit ratio YEAR GROSS PROFIT 2005-06 2006-07 2007-08 2008-09 2009-10 8625.92 23108.03 12108.89 -1089.77 10714.37 138495 145717 86612 211736 209483 Table 5.11 Chart showing gross profit ratio
GROSS PROFIT RATIO
15 10 Ratio 5 0 -5 2005-06 2006-07 2007-08 Year 2008-09 2009-10 Gross profit ratio
NET SALE
GROSS PROFIT RATIO 0.23 1.59 13.98 -0.51 5.11
Figure 5.11
INTERPRETATION From the above table and chart shows the past five years gross profit ratio of the company. In 2005-06 it shows 2.23 and in 2007-08 that shows profit increasing pattern. But in 2008-09 it shows a huge loss due to the economical problems. But in the current year gross profit raises up to 5.11.
NET PROFIT RATIO Net profit ratio establishes a relationship between net profit after tax and sales and indicates the efficiency of the management inventory manufacturing, selling administrative and other activities of the firm. This ratio is the overall
60
measures of the firms profitability to turn each rupee sales inventory to net profit. If the net profit is inadequate the firm will failed to achieve satisfactory return on shareholders funds. NET PROFIT RATIO = Net profit after tax 100 Net sales Table1: Statement showing net profit ratio Year 2005-06 2006-07 2007-08 2008-09 2009-10 Net profit 23565.78 -12472.58 896.81 4295.44 -10383.51 Net sales 138495 145717 86612 211736 209483 Table 5.12 Chart showing net profit ratio
NET PROFIT RATIO
20 Ratio 10 Net profit ratio 0 2005-06 -10 Year 2006-07 2007-08 2008-09 2009-10
Net profit ratio 17.01 -8.56 1.03 2.02 -4.95
Figure 5.12
INTERPRETATION Net profit of the company is less as compared to the total investment made by the company. FACT is paying huge amount as interest and salary and other operating expenses. Company needs to reduce the number of staffs to tackle salary expenses
61
and reduce debt financing to improve its performance. The financial results for the year 2009-10 shows a loss of Rs. 103.83 crore against a profit of Rs. 42.95 crore during the year 2008-09. Previous year working results include profit on sale of land to NHAI and valuation of gypsum amounting to Rs. 199.50 crore in to stock with corresponding credit to Profit & Loss account as extraordinary items.
COMPARATIVE STATEMENTS ANALYSIS Comparative financial statements are statements of the financial position of different periods of time. It is prepared so as to provide time perspective to the consideration of various elements of financial position embodied in such statements. This is done to make the financial data more meaningful. The statements
62
of two or more year are prepared to show the absolute data of two or more years. Increase or decrease of absolute data in value and in terms of percentages. Comparative statements can be prepared for both the income statements as well as position statements. According to Prof. Foulkey comparative Balance sheet is the study of the trend of the same item, group of items and computed items in two or more Balance sheet of the same business enterprise on two dates. Comparative financial statements present the accounting information of the same business unit for two or more accounting periods. In other words comparative financial statements help to study the financial and operating trends over a period of years. Financial statements of two or more firms may also be compared for drawing inferences. This is known as inter firm comparison. In comparative statements columns are provided for more than one period so that data of one period may be compared with similar data for the previous period or periods. The length of the period may be a month, quarter or year. Any statement can be prepared in a comparative form. Both Income statement and Balance sheet can be prepared in the form of comparative financial statements.
COMPARATIVE BALANCE SHEET STATEMENT ANALYSIS Comparative Balance sheet: The balance sheet prepared on a
particular date reveals the financial position of the concern on that date. It does not reveal the trends in the business over a period of year. To study the trends of the business over a period say two or three years a comparative Balance sheet is to be prepared. Comparative balance sheet as on two or more different days can be used
for comparing assets and liabilities and finding out any increase or decrease in those items. A comparative study of balance sheet will reveal the causes of changes in the financial position on account of the numerous business transactions that took place between two periods of time in the business. The comparative study of balance sheet
63
throw light on financial policies adopted by the management during the relevant accounting period. As the income statement presents the review of the operating activities of the business, and the comparative balance sheet shows the effects of operation, on its assets and liabilities, the latter contains a connecting link between the balance sheet and the income statement. The comparative balance sheet consists of two columns for the original data. A third column is used to show increase or decrease in various items. A fourth column containing the percentages of increase and decrease may be added. Methodology for analysis of the balance sheet The following methodology may be adopted for analysis of the balance sheet. 1) In the first step changes in absolute figures i.e. increase should be calculated. 2) In the second step percentage of change should be calculated by using the following formula. Percentage of change= Change in amount x100 Base year amount 3) After calculation of percentage of change, interpretation should be made.
COMPARATIVE BALANCE SHEET OF FACT AS ON 31 MARCH 2005-06
64
Particulars
2005 amounts
2006 amounts
changes in 2005-06
% of change 2005-06
SOURCES OF FUNDS: Shareholders Fund Loan Funds

35580. 88 86737.39 64806. 53 29048.12 29225. 65 -57689.27 4 -66.51 82.1
TOTAL APPLICATION OF FUNDS: Fixed Assets: Net Block Capital work-inprogress Investments Net current assets Miscellaneous expenditure Profit & loss a/cs
122318.27
93854.65
-28463.62
-23.27
5694 1.40 450.56 54.50 11648.87 2594.71 50628.23
50826. 14 514.51 54.50 15231.51 165.54 27062.45 -6115.26 63.95 0.00 3582.64 -2429.17 -23565.78 -10.74 14.19 0.00 30.7 -93.62 -46.55
TOTAL
122318.27
93854.65 Table 5.14
-28463.62
-23.27
INTERPRETATION : The total assets have increased by 7.01% . But there was a drop in the fixed assets. The reason is the depreciation. The cumulative depreciation increased from Rs. 85057.67 lakh in 2004 2005 to Rs 91175.38 lakh in 2005 2006. A good amount of dues to the employees were paid of in the year 2005 2006., but liabilities to the suppliers, the bills payable and other liabilities also increased which overshadowed the other drops in liabilities to increase the overall liability for the year 2005-2006
COMPARITIVE BALANCE SHEET OF FACT AS ON 31 MARCH 2006-07
65
2006
2007 amounts
changes in 2006-07
% of change 2006-07
Particulars SOURCES OF FUNDS: Shareholders Fund Loan Funds TOTAL APPLICATION OF FUNDS: Fixed Assets: Net Block Capital work-inprogress Investments Net current assets Miscellaneous expenditure Profit & loss a/cs TOTAL
INTERPRETATION :
amounts
64806.53 29048.12
64802.36 51482.87
-4.17 22434.75
-6.43 77.23
93854.65
116239.31
22384.66
23.85
50826.14 627.57 54.50 15118.45 165.54 27062.45
4762.93 1267.84 54.50 30649.49 15.44 39535.03
-6063.21 640.27 0.00 15531.04 -150.1 12472.58
-11.93 102.02 0.00 102.73 -90.67 46.09
93854.65
116239.31 Table 5.15
22384.66
23.85
Similar to the financial year 2005- 2006, also in 2006 2007 there was a drop in the fixed assets attributed by the increase in the depreciation. The cumulative depreciation increased by 6. 3 % in 2006- 2007( from Rs 91175.38 lakh to Rs 96984.49). But unlike the previous year, in 2006- 2007, there was a noted increase in dues to employees as well as drop in the liabilities to the suppliers. The total assets has grown by 10.55 % which is attributed to increase in current assets.
66
Particulars
2007-08 amounts
2008-09 amounts
changes in 2007-08
% of change 2007-08
SOURCES OF FUNDS: Shareholders Fund Loan Funds

51436.95 46846.65 02.36 648 98.36 647 -4 -4590.3 -6.17 -8.92
TOTAL APPLICATION OF FUNDS: assets: Net Block Capital work- inprogress Investment Net current assets Miscellaneous expenditure Profit & loss a/cs Fixed
116239.31
111645.01
-4594.3
-3.95
44762.93 1267.84 54.50 30603.57 15.44 39535.03
42419.80 907.80 54.50 28735.33 10.29 39517.29
-2343.13 -360.04 0.00 -1868.24 -5.15 -17.74
-5.23 -28.40 0.00 -6.10 -33.35 -0.04
TOTAL
116239.31
111645.01 Table 5.16
-4594.3
-3.95
INTERPRETATION : Unlike the previous two years, in 2007 2008 the total assets dropped by 16.80 %. All the assets decreased significantly. There was a massive drop in the debtors by 153.57 % contributing significantly to the sudden decrease in the assets. All the liabilities except the dues to the employees have also decreased reducing the current liabilities also. From this, one can understand that the cash from the debtors as well as the bank balances was used by the company to pay off the liabilities in this financial year. But FACT Ltd, did not take adequate measure to pay off the dues to the employees as shown by the increase in this liability to the employees. COMPARATIVE BALANCE SHEET OF FACT AS ON 31 MARCH 2008-09
67
2008 PARTICULARS SOURCES OF FUNDS: Amounts
2009 Amounts
CHANGES IN 2008-09
% OF CHANGE 2008-09
Shareholders Fund Loan Funds
64798.3 6 46846.65
64794.2 3 80983.43 145777.66 -4.13 34136.78 34132.65 - 6.37 30.57 30.57
TOTAL APPLICATION OF FUNDS:
111645.01
Fixed Assets: Net Block Capital work- in progress Investments

28735.33 43132.49 0.0 0 35221.85 -10.29 -4295.44 -1 -10.87 14397.1 50.10 42419.80 907.80 54.50 38606.11 686.71 28130.50 -3813.69 -221.09 28076 -8.99 -24.35 515.16
Net current assets

10.29
Miscellaneous expenditure Profit & loss a/cs

TOTAL 111645.01 39517.29
145777.66 Table 5.17
34132.65
30.57
INTERPRETATION : Unlike the year 2007 - 2008, in 2008 - 2009 the companys total assets have shown considerable increase , here also attributed by the increase in the sundry debtors which increased by a significant 257.76 %. The fixed assets has reduced and so is the cash and bank balances. One interesting thing to note in this statement is the total absence of bills payable. The company took initiatives to payy off the bills in this financial year. The dues to the employees were also paid off.
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2009 PARTICULARS SOURCES OF FUNDS: 64794. 23 80983.43 1 Amounts
2010 Amounts
CHANGES IN 2009-10
% OF CHANGE 2009-10
64790.3 -3.92 26902.29 -0.006 33.22
Shareholders Fund Loan Funds
107885.72
TOTAL APPLICATION OF FUNDS:
145777.66
172676.03
26898.37
18.45
Fixed Assets: Net Block Capital work- in progress Investments

43132.49 38606.11 686.71 28130.50 60948.83 0.00 45605.36 0.00 10383.51 0.00 29.48 36349.83 1641.86 28130.15 -0.35 17816.34 -0.001 41.30 -2256.28 955.15 -5.84 139.09
Net current assets

0.
Miscellaneous expenditure Profit & loss a/cs

TOTAL
00 35221.85
145777.66
172676.03
26898.37
18.45
COMPARATIVE INCOME STATEMENT ANALYSIS Comparative Income statement: the income statement (profit and loss account) gives the results of the operations of business concern transacted during a definite period (normally one year). It reveals the profit earned/ loss
69
incurred by the concern. The comparative income statement shows the progress of the business operations over a period of years and there effect on financial position of the concern. The comparative income statement will throw light on the performance of the concern. A comparative study of income statement for more than one year may enable as to have definite knowledge about the progress of the business concern. The changes in the absolute data in money values and percentages can be determined to analyze the profitability of the business. The comparative income statement will have four columns. First two columns give figures of various items for two years. The third and fourth columns are used to show increases or decreases in figures in absolute amounts and percentages respectively. The income statement can also be prepared in the form of common size statement. If it is prepared in common size, each item of income statement is converted into percentage based on total sales. Methodology for Analysis of Income statement The following methodology may be adopted for analysis of income statement. 1) In first step find out the change in absolute figures i.e. increase or decrease should be calculated. 2) In the second step percentage of change should be calculated by the following formula
Percentage of change = Change in amount 100 Base year amount
COMPARATIVE INCOME STATEMENT AS ON 31 MARCH 2005-06
70
2005 PARTICULARS Amounts
2006 Amounts
INCREASE/ DECREASE %
Sales Cost of goods sold Gross profit Net profit
98055.28 9589 5.19 2160.09 -16796.29
101916.66 1175 68.59 8625.92 23565.78 Table 5.18
3861.33 2167 3.4 6465.83 40362.07
3.94 2 2.60 299.33 -240.30
COMPARARTIVE INCOME STATEMENT AS ON 31 MARCH 2006-07 2006 PARTICULARS Sales Cost of goods sold Gross profit Net profit Earnings per share Amounts 101916.6 6 117568.59 8625.92 23565.78 3.64 2007 Amounts 1055 00.96 125711.62 2316.03 -12472.58 -1.93 Table 5.19 84.3 8143.03 -6309.89 -36038.36 -5.57 INCREASE/ DECREASE 35 .52 6.93 -73.15 -152.93 -1.53 % 3
71
COMPARATIVE INCOME STATEMENT AS ON 31 MARCH 2007-08 2007 PARTICULARS S ales Cost of goods sold Gross profit Net profit Earnings per share Amounts 105500.9 6 125711.62 2316.03 -12472.58 -1.93 2008 Amounts 5629 6.97 71356.92 12108.89 896.81 .14 Table 5.20 -49203.99 -54354.7 9792.86 13369.39 2.07 -46.64 -43.24 422.82 -107.19 -1.07 INCREASE/ DECREASE %
COMPARATIVE INCOME STATEMENT AS ON 31 MARCH 2008-09 2008 PARTICULARS S ales Cost of goods sold Gross profit Net profit Earnings per share Amounts 5629 6.97 71356.92 12108.89 896.81 .14 2009 Amounts 7195 0.22 177328.36 -1089.77 4295.44 .66 Table 5.21 COMPARITIVE INCOME STATEMENT AS ON 31MARCH 2009-10 3.25 105971.44 -13198.66 3398.63 .52 INCREASE/ DECREASE 1565 27.80 148.51 -108.99 378.97 3.71 %
72
2009 PARTICULARS S ales Cost of goods sold Gross profit Net profit Earnings per share Amounts 71 950.22 177328.36 -1089.77 4295.44 .66
2010 Amounts 1117 88.07 177328.36 10714.37 -10383.51 -1.60
INCREASE/ DECREASE 3983 7.85 105971.44 11804.14 -14678.95 -2.26 55.36 148.51 -1083.17 -341.73 -342.42 %
Table 5.22
TREND ANALYSIS In financial analysis the direction of changes over a period of years is of crucial importance. Time series or trend analysis of ratios indicates the direction of change. This kind of analysis is particularly applicable to the items of profit and loss account. It is advisable that trends of sales and net income may be studied in the light of two factors: the rate of fixed expansion or secular trend in the growth of the business and the general price level. It might be found in practice that a number of firms would show a persistent growth over a period of years. But to get a true of growth, the sales figures should be deflated for rising price level. When the resulting figures are shown on a graph, we will get trend of growth devoid of price changes. Another method of securing trend of growth and one, which can be used instead of the adjusted sales figures or as check on them is to tabulate and plot the output or physical volume of sales expressed in suitable units of measure. If the general price level is not considered while analyzing trend of growth, it can mislead the
73
management. They may become unduly optimistic in periods of prosperity and pessimistic in dull periods. For trend analysis, the use of index numbers is generally advocated. The procedure followed is to assign the number 100 to items of the base year and to calculate percentage changes in each item of other years in relation to the base year. This procedure may be called as trend-percentage method. Trend Analysis Method: Trend can be analyzed in any of the following ways a) By calculating trend ratio or percentages b) By plotting on graph paper or chart
a) Trend Ratio or Percentages: The calculation of trend ratio analysis
involves the ascertainment of arithmetical relationship which each item of several years to the same item of base year. The method of calculating trend ratio or percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. Any year may be taken as the base year. It is usually the earliest year. The value of one particular item out of several items shown in the financial statements are converted into ratio or percentage taking of that item in base year as equal to 100
b) Plotting trend ratio on graph paper or chart: The trend ratios or
percentages calculated can be plotted on a graph paper and a line drawn through the points to give a general idea of the direction. It should be remembered that the line drawn should be smooth.
74
TREND ANALYSIS OF BALANCE SHEET AS ON 31 MARCH 2005-06
2005 PARTICULARS SOURCES OF FUNDS: Shareholders Fund Loan Funds TOTAL APPLICATION OF FUNDS: Fixed assets: Net Block Capital work-inprogress Investment Net current asset Miscellaneous expenditure Profit & loss a/cs 2594.71 50628.23 100 100 165.54 6 54.50 11648.87 56941.40 450.5 00 100 100 100 1 27.57 54.50 Amount Trend
2006 Amount Trend
35580 .88 86737.39 122318.27 100 100 100 806.53
64
182. 14 33.49 76.73
29048.12 93854.65
50826.14 6
89.26 1 39.29 100 129.78
15118.45
6.38 53.45
27062.45
TOTAL
122318.27
100
93854.65
76.73
Table 5.22
75
TREND ANALYSIS OF BALANCE SHEET AS ON 31 MARCH 2005-07 2005 PARTICULARS SOURCES OF FUNDS: Shareholders Fund Loan Funds TOTAL APPLICATION OF FUNDS: Fixed assets: Net Block Capital work-inprogress Investment Net current asset Miscellaneous expenditure Profit & loss a/cs TOTAL 94.71 50628.23 122318.27 6 54.50 11648.87 25 100 100 100 15.44 39535.03 116239.31 .60 78.09 95.03 56941.40 450.5 0 100 100 100 10 7.84 54.50 30603.57 44762.93 126 81.39 100 262.72 78.61 2 122318.27 Amount Trend 2007 Amount Trend
35580. 88 86737.39 100 100 100
648 02.36 51436.95 116239.31
182 .13 59.30
95.03
Table 5.23
76
TREND ANALYSIS OF BALANCE SHEET AS ON 31 MARCH 2005-08 2005 PARTICULARS SOURCES OF FUNDS: Shareholders Fund Loan Funds 0.88 86737.39 TOTAL APPLICATION OF FUNDS: Fixed assets: Net Block Capital work-inprogress Investment Net current asset Miscellaneous expenditure Profit & loss a/cs 2594.71 50628.23 100 100 10.29 39517.29 .40 78.05 0.56 54.50 11648.87 56941.40 45 0 100 100 100 10 07.80 54.50 28735.33 42419.80 9 44.77 100 246.68 63.95 1 122318.27 Amount Trend 2008 Amount Trend
3558 100 100 100
647 98.36 46846.65 111645.01 .12
182
54.01 91.27
TOTAL
122318.27
100
111645.01
91.27
Table 5.24
77
2005 PARTICULARS SOURCES OF FUNDS: Shareholders Fund Loan Funds TOTAL APPLICATION OF FUNDS: Fixed assets: Net Block Capital work-inprogress Investment Net current asset Miscellaneous expenditure Profit & loss a/cs TOTAL 94.71 50628.23 122318.27 50.56 54.50 11648.87 25 100 100 100 .00 56941.40 4 0 100 100 100 10 86.71 80.88 86737.39 122318.27 Amount Trend
2009 Amount Trend
355 100 100 100
647 94.23 80983.43 145777.66 82.10 93.37 119.18
38606.11 6
58.20 109 .51 51615.60 370.27 0 0 69.57 119.18 0.0
28130.50 43132.49
35221.85 145777.66
Table 5.25
78
2005 PARTICULARS SOURCES OF FUNDS: Shareholders Fund Loan Funds TOTAL APPLICATION OF FUNDS: Fixed assets: Net Block Capital work-inprogress Investment Net current asset Miscellaneous expenditure Profit & loss a/cs TOTAL 94.71 50628.23 122318.27 50.56 54.50 11648.87 25 100 100 100 .00 56941.40 4 0 100 100 100 10 641.86 80.88 86737.39 122318.27 Amount Trend
2010 Amount Trend
355 100 100 100
647 90.31 107885.72 172676.03 82.09 124.38 141.16
36349.83 1
63.83 364 .40 51614.95 523.21 0 0 90.07 341.06 0.0
28130.15 60948.83
45605.36 172676.03
CHART SHOWING TREND ANALYSIS BALANCE SHEET OF FACT LTD
79
TREND ANALYSIS 400 300

Trend
200 100 0 2005 2006 2007 2008 2009 2010

Year
Trend analysis
Table 5.14
CHAPTER -6
80
FINDINGS, SUGGESTIONS & CONCLUSIONS
FINDINGS
81
The company is having satisfactory credit worthiness because the current ratio is below the normal. Current asset has to be properly maintained to bring the current ratio to the normal. The quick ratio was very low in the first four years and improved in the last year. This is a good sign of improvement for the company. The absolute liquidity ratio was lower during the first year and kept increasing in the subsequent years. But due to unforeseen circumstances it is less than normal. The company is facing cash shortage it must be improved. The inventory turnover ratio reveals an increasing trend for the last four years. This will adversely affect the liquidity position of the company. Cash and bank balance was decreasing in the year 2004-05 and started increasing in a fluctuating rate in the following years. This will adversely affect the liquidity position of the company. Debtors turnover ratio shows a decreasing trend. This is good for the company.
Debt equity rate shows a fluctuating trend from the year 2005-06 to 2009-10.
The ratio is showing decreasing trend, which is good for the company. So the companys debt repaying capacity has changed. The gross profit ratio is very low for the company for five years but it is improving from the first and the fourth year. This shows that the company is setting of its losses and is running on its way to profit. Net profit ratio shows profit in the last year. This shows that the company is increasing the profit due to financial restructuring and financial aid from the government. Cash profit ratio shows a fluctuating trend. The change in the policies of the management made the organization to achieve profit in the fifth year and improved the operating efficiency of the company. Fixed asset turnover ratio shows an increasing trend year after year that means the companys efficiency in utilization of asset has increased. The value of net block and capital work in progress is fluctuating over the year.
82
Proprietary ratio reveals fluctuating and decreasing trend for the last five years. This means that lower the ratio indicates lower the financial strength of the business.
As a result of liberalization and globalization, the company is facing cut thought competition from within the country as well as from outside the country.
Debtors collection period shows a fluctuating trend, but in the last two years it shows highest collection period. It is not a good sign for the company.
The creditors payment period is low when compared to average collection period. As a public undertaking, profit cannot be the sole aim of the company and it has to bear a lot of special costs. As a result of this, profit of the company gets substantially reduced.
83
SUGGESTIONS
The company can plan of investing more amounts on research and development so that innovative and modern product and work designed can be developed and adopted in the coming year.
The company has to give more importance in the utilization of all the assets effectively. The company should increase the profit by reducing the operating expense. Manufacturing and other expenditure should be reduced to the minimum. Proper inventory control measures should be taken to reduce the unnecessary stock and to maintain appropriate lead-time. Company must try to increase current assets for achieving an optimum current ratio. Company should adopt suitable policies and measures to sell the scrap and byproducts obtained during the production process, so that it will generate additional source of revenues.
Adequate sale promotion efforts can be adopted to increase sales. The company is showing a fluctuating trend it is not advisable to be like this. So the company should move in a constant rate of growth. The company must think of modernization and diversification programs; otherwise it would not be able to withstand the competition. In order to reduce the cost of production the company must adopt any of the mechanism of efficient cost control. In order to increase the production efficiency of the company, performance system appraisal can be adopted. The company should study the reason for the lowest and must take necessary step to overcome the loss. The company can make pressure to the government for the alternative source of energy.
For the smooth functioning the firm must improve the working capital position to an optimum level.
84
CONCLUSION
This study was conducted to evaluate the financial performance analysis of FACT Ltd, Udyogamandal for a period of five years from 2005-06 to 2009-10. It helps to explore the strength and weakness of the company and to suggest strategies for the overall growth of the firm for liquidity, solvency and improving profitability. In this study, an attempt is made to provide an idea about ways on which a decision can be taken to plan the field of finance for better progress. Analysis and interpretation of financial statements show that the financial position of FACT is quite satisfactory.
85
BIBLIOGRAPHY Books, Journals and Periodicals:

Annual reports of FACT (2005-06 to 2009-10) Management of Accounting concepts & Applications, Rajesh Kothari& Abhishek Goha
Financial Accounting Reporting & Analysis 7th edition, Stice
Corporate Accounting S. P. Jain & K. L. Narang Fundamental of financial management (Twelfth edition) -James C. Van Horne & John M Wachowicz, JR Financial management I. M. Pandey
Web References:
http://economictimes.indiatimes.com/fertilisers-and-chemicals-travancoreltd/quotecompare/companyid-11995.cms http://www.moneycontrol.com/competition/fertiliserschemicalstravancore/co mparison/FCT http://www.faidelhi.org/ http://www.indiastat.com/agriculture/2/agriculturalprices/6527/fertiliserprice s/17825/stats.aspx http://www.fact.co.in http://www.investopedia.com
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FACT LTD ,UDYOGMANDAL

FINANCIAL PERFORMANCE ANALYSIS

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

PURPOSE OF THE STUDY

1.3 OBJECTIVES OF THE STUDY

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

TOOLS OF THE STUDY

MES College Marampally

FACT LTD ,UDYOGMANDAL

LIMITATIONS OF THE STUDY

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

RESEARCH AND DEVELOPME NT

MANAGEMENT DEVELOPMENT CENTRE

Source Annual report of FACT

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

MES College Marampally

FACT LTD ,UDYOGMANDAL

EXPORTED PRODUCTS Caprolactam- Petrochemical Division Ammonium Sulphate- Udyogamandal Division

MES College Marampally

FACT LTD ,UDYOGMANDAL

Product Urea and di-ammonium phosphate and intermediaries

Product Urea, Complex Fertilizer.