Selection of Topic for study

Topic selection is one of the most or one of the important aspects of our project. As it decides the course of action to be followed. The Topic selected should be such that it helps in understanding the ratio concepts clearly, as was given by the company itself. The topic given by my project guide was Ratio analysis as per the financial statement of MARUTI SUZUKI. This covers all the things related to the Ratio analysis provided by the company.

Introduction to Topic
Meaning and Definition: Ratio is simply one number expressed in terms of another for e.g. the current assets and current Liabilities of one company are 50,000 and 30,000 respectively then the current assets to current liability will be 5:3.Thus, ratio is the numerical presentation of two relevant items. Ratio analysis involves the use of various methods for calculating and interpreting financial ratios to assess the performance and status of business unit. It is a tool of financial analysis, which studies the

numerical and quantitative relationship between the two variables or items. Ratio analysis is a technique of ascertaining and interpreting the numerical relationship of the two relevant items presented in the financial statement.

Classification of ratio's Liquidity Ratio Solvency Ratio profitability Ratio activity Ratio CURRENT RATIO Current ratio is the relationship of current assets to current liability known as current ratio. It is also known as working capital ratio or banker's ratio. The excess of current assets of an enterprise over its current liabilities is referred to as working capital.. Current Ratio = Total current assets. Total current liabilities. Quick Ratio or Acid test ratio or liquidity Ratio.` Quick ratio expresses the relationship of a company's current assets that can be easily converted

into cash and its current liabilities. It is the measure of the instant debt paying capacity of the the business enterprise. Quick ratio= Quick assets Current liabilities. Stock to working Capital Ratio This ratio is related to quick rationality is used to point out the relative risk of working capital loss that may arise from a fall in the inventory value. Stock to working capital ratio=Stock at the end. Working capital SOLVENCY RATIO
These ratios show the ability of the business enterprises to survive and operate in the long run. This indicates the long term stability and fitness for future trading of a firm. Some of the important ratios in the regard are given in the following paragraph; PROPRIETARY RATIO =TOTAL SHAREHOLDERS FUND'S_________________________________________ TOTAL ASSETS

DEBT EQITY RATIO = TOTAL DEBTS(OUTSIDE

LIBILITIES)_____________________________________________

OWNER'S FUND

CAPITAL GEARING RATIO

The term capital gearing express the relationship between the capital equity and fixed interest /dividend bearing securities of a business enterprise .gearing ratio ,therefore, discloses the relationship between the equity share capital on the one hand and the fixed dividend capital and fixed interest loan capital on the other. Leverage ratio=Paid up amount of preference share capital Paid up amount of equity share capital.

Interest coverage ratio

This ratio establishes a relationship between profit before interest on long-term debts and taxes and the interest on long term debt.
Interest coverage ratio=profit before interest on long -term debt and income tax_________________________________________________

Interest on long-term debts.

Profitability ratio
The main purpose of business unit is to make profit. The profitability ratios are computed to throw light on the current operating performance and the efficiency of the business firm

when they are related to some other figure such as sales, cost of goods sold, operating expenses etc. Gross profit. Ratio This ratios shows the relationship between the gross profit to the net sales Gross profit ratio =Gross profit *100 Net sale.

Operating ratio
This ratio establishes the relationship between the cost of goods sold plus other operating expenses to net sales .The lower the percentage of operating ratio, the higher the net profit ratio.
Operating ratio=cost of goods dold +operating expenses *100 NET SALES OPERATING PROFIT RATIO: This ratio expresses the relationship between the operating profit and net sales.

Operating profit ratio=operating profit NET SALES

*100

NET PROPFIT RATIO: This ratio indicates the relationship between the net profit and net sales.

NET PROFIT RATIO=NET PROFIT *100 NET SALES. EARNING PER SHARE RATIO: This ratio measures the profit available to the equity shareholder on per share basis, that is, the amount of profit they can get on every share held. Earnings per share=Net profit available to equity share holder Number of equity shares outstanding. RETURN ON INVESTMENT RATIO This ratio is a basic ratio of profitability .it is calculated by establishing a relationship between the profit earned and the capital employed to earn the profit. R.O.I=Profit before interest, tax and dividend *100 Capital employed. ACTIVITY RATIO This ratio indicates the efficiency with which the resources available to the business firms are utilized .The basis for calculation for this ratio is the net sales or cost of sales. higher the turnover, better the profitability ratio. STOCK TURNOVER RATIO

The speed with which a business converts its inventory into sales is an important indicator of business activity. Stock turnover ratio: cost of goods sold Average inventory DEBTORS TURNOVER RATIO: This ratio establishes the relationship of debtors and bills receivable to net credit sales. Debtors turnover ratio=Net credit sales . Sundry debtors+B.R. CREDITORS TURNOVER RATIO The ratio shows the relationship between credit purchases and creditors including bills payable. Creditors turnover ratio=Net credit purchase Average creditors Working capital turnover ratio This ratio indicates the demand made on working capital in supporting the sales revenues of a business entrerprises.It shows the effectiveness or utilization of working capital. Working capital ratio=cost of goods sold Working capital.

Fixed assets turnover ratio This ratio is based on the relationship between the net sales and net fixed assets (fixed assets-depreciation). Fixed assets turnover ratio = NET SALES

NET FIXED ASSETS

Objectives of study: While going through any advertisement for recruitment it is realized that any organization call for candidate with the main condition of work experience is clear -cut mention in such advertisement that preference would be given to the candidate with the experience. This point out that practical exposure is extremely important has taken right step by making it mandatory for the student to do the project work in the organizations would help the student to get the practical knowledge along with the theoretical knowledge. The objective of Minor Project is as follows: To be able to apply the theoretical knowledge obtained at the institute in a practical manner in actual business environment. To get the knowledge about the organizational problems, perceptions and challenges.

To get an opportunities of real life business experience. To interact with the manager of the company and gain knowledge through their real life experience.