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Peoples Education Society and Trusts

Belgaum Institute of Management Studies, MBA, Belgaum.


(Approved by AICTE & Affiliated to Karnatak University Dharwad)

A STUDY ON ANALYSIS OF FINANCIAL STATEMENTS OF POLYHYDRON PVT. LTD AND SUGGEST LONG TERM PLANNING. A Report Submitted in Partial Fulfillment of the Requirement for the Award of

MASTERS DEGREE IN BUSINESS ADMINISTRATION


2006-2007

Submitted by

Anuja R. Madhumath
Exam No: MBA05006004

Institute Guide: Mr. Vinay Bangare Finance Faculty


PESTs BIMS, MBA, BELGAUM Macche, Belgaum.

Company Guide: Miss. Tejashwini S. Hundre Management Trainee


Polyhydron Pvt. Ltd.

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

Peoples Education Society and Trusts

Belgaum Institute of Management Studies, MBA


Adjacent to KUD PG Center, Bhutramanhatti, Belgaum.
(Recognized by AICTE, New Delhi & Affiliated to Karnatak University Dharwad.)

Certificate

This is to certify that Miss. Anuja R. Madhumath K.U.D. Examination No. MBA05006004 of MBA 4th Semester has successfully completed his Major Concurrent Project 2006-2007 for the period of 60 days from 2nd December 2006 to 31st December 2006 and 16 weeks (2 days in a week from Jan 07 to April 07).

Project Guide

Director

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

ACKNOWLEDGEMENT

The completion and drafting is a solitary task but one which has been made smoother with the help of many. Here I take this opportunity to thank those who have made a vital contribution in shaping this study I would like to express my profound gratuity to Mr. Suresh Hundre (Chairman) and Miss. Tejashwini S. Hundre (Management Trainee) for giving me an opportunity to take my Major Concurrent Project at Polyhydron Pvt. Ltd, Macche, Belgaum. Any accomplishment requires the efforts of many people. I am indebted to all the Employees of Polyhydron Pvt. Ltd who extended their help and cooperation in collecting data for my project Regardless of the source I wish to express my gratitude to those who have contributed to my project, even though anonymously I extend my thanks to our Director, Dr. S. R. Bharamanaikar, and Mr. Vinay Bhangare for providing me an opportunity to work for Polyhydron Pvt. Ltd, Macche, Belgaum. I would also like to thank my parent and friends for their infinite love, valuable guidance, support and help during my project. This project wouldnt have seen the light of the day, if it wasnt for the cooperation of all these people.

Place: Belgaum. Date:

Mahendrakumar. S. Konkane.

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Sl. No. I

Contents Titles Chapter 1 Introduction Literature Review Statement of the Problem Purpose of the Study Scope of the study 6 9 26 27 28 28

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Objectives of the Study Chapter 2 Organization Profile Organization Chart Research Design Data Collection Method

30 46 47 48 48 50 91

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Measuring tools Chapter 3 Results & discussion with Charts & graphs

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Recommendations and Conclusion Chapter 4 Appendix Balance Sheets

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Bibliography

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CHAPTER 1

Introduction Literature Review Statement of the Problem Purpose of the Study Scope of the study Objectives of the Study

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1 - INTRODUCTION:

This is brief summary of the project A study on analysis of financial statements of polyhydron pvt ltd and suggest long term planning. Belgaum and to find the financial position of the company. Polyhydron Pvt. Ltd is the flag ship company of Polyhydron Group of Industries. Polyhydron is known for its Ethical management. People from all over India visit the company to interact and understand the systems. It has become a kind of Pilgrimage centre for the corporate world of India. The study was conducted with an objective of finding out the financial standing and its managerial efficiency in generating adequate operating profits on the firms assets and to study how the firm finances its assets. The study of the financial position of a company was accomplished by various tools and techniques like Cash flow and fund flow analysis, Financial planning with financial ratios to support the above with the appropriate graphs and tables.

Title of the Study:


A study on analysis of financial statements of polyhydron pvt ltd and suggest long term planning.

Statement of problem:
Financial analysis being an integral part of overall corporate management and it is one of the powerful tools of financial performance analysis. The analysis of financial statement of PPL is done in order to know the companys financial position of the year.

Management Problem: To gauge the adequacy of returns/cash flows with respect to investment, liquidity and growth and ascertain the opportunity for expansion BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 6

7 Research Problem A study on analysis of financial statements of polyhydron pvt ltd and suggest long term planning.

Objectives:
1. To analysis the firms financial statements 2. Is management generating adequate operating profit on the firms assets. 3. To know how is the firm financing its assets 4. Are the owners getting adequate returns? 5. To determine the progress of the company.

Recommendations and Conclusion


Suggestions The firm is performing well and its sales are increasing over the years. But still the following is the suggestion if considered will prove to be beneficial to the company. There is huge investment in the current assets of the concern. The current ratio of the firm is very much higher than the normal standards. The firm should not unnecessarily block excess money in the current assets than normal requirement of the business. The cost of goods sold had increased continuously from 2004 to 2005. The firm should give attention to maximize the sale and minimize the direct costs. The company can invest in mutual funds, which is more promising for higher yield. Polyhydron has net working capital more than requirements an unhealthy sign of profitability of the company.

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8 Under the light of the inferences drawn from the analysis, it is no exaggeration to conclude with information that the over all the financial analysis is fair and reasonably good and that promising future awaits the company. Conclusion Earning position of the company is continuously and positively increasing. The gross, operating and net profit margins are favorable. It makes uses some Japanese techniques, like kanban cards, net work system, jit etc. to manage its inventories. Various discount schemes to control and manage the accounts receivable. The company has to keep an eye on its liquidity position. As the liquidity position shows funds are lying idle, since they are idle, they are not being properly utilized. Thus profitability of the income may be affected. So high a liquidity position should be avoided in order to maintain and improve the profitability.

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2 - LITERATURE REVIEW:

Financial analysis Financial analysis is the selection, evaluation and interpretation of financial data, along with other pertinent information, to assist in investment and financial decision- making. Financial analysis may be used internally to evaluate issues such as employee performance, the efficiency of operations, and credit policies, and externally to evaluate potential investments and the credit-worthiness of borrowers, among other things. The analyst draws the financial data needed in financial analysis from many sources. The primary source is the data provided by the firm itself in its annual report and required disclosures. The annual report comprises the income statements, the balance sheet, and the statement of cash flows. Certain businesses are required by securities law to disclose additional information. The financial analyst must select the pertinent information, analyze it, and interpret the analysis, enabling judgments on the current and future financial condition and operating performance of the firm. In this reading, we introduce you to financial ratios------ the tool of financial analysis. In financial ratio analysis we select the relevant information---- primarily the financial statement data--- and evaluate it. We show how to incorporate market data and economic data in the analysis and interpretation of financial ratios and we show how to interpret financial ratio analysis, Financial statements The financial statements are the end product of the financial accounting process. The financial statements are nothing but the financial information presented in concise and capsule form, and the financial information is the information relating to the

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10 financial position of any firm. Therefore the financial statements are the depiction of the financial position of firm. The basic source which provides the financial information is the annual report of the company, which is presented by the company to its shareholders at the annual general meeting. This annual report contains the chairmans report, the balance sheet, the income statement , the auditors report together with number of schedules, annexure etc. Every firm prepares the following financial statement. 1. The balance sheet 2. The income statement Balance sheet The balance sheet is regarded as the most significant and basic financial statement of any firm. The balance sheet is prepared by a firm to present a summary of financial position at a given point of time, usually at the end of a financial year. It shows the state of affairs of the firm and the contribution of the owners of the firm. The total value of the assets must be equal to the total claims against the firm and this can be stated as Total assets = total claims (debt + shareholders) = liabilities + shareholders equity The balance sheet includes: Assets and Liabilities Assets: Assets are the monetary value of the resources that owned by the concern at a measurable cost. A resource is valuable if it is in form of the cash or convertible into cash or expected to benefit in the future operation of the business, assets includes a) physical resources like land, machinery, plant, building, stocks etc. B) non physical resources like cash, securities, accounts receivables etc.) Intangible resources like

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11 goodwill, trademark and d) future benefit like expenses paid in advance. Some time some fictitious assets also show like as incorporation cost of the company discount on issue of debentures etc. Fixed assets Current assets

Fixed assets Fixed assets are held in business for use not for sale. These assets provide longterm benefits to the concern. Fixed assets will be higher in manufacturing concern. The fixed assets involves tangible assets includes land, building, machinery, equipment, furniture, fixtures etc. These assets are shown the balance sheet deducting the depreciation there on. a) Intangible fixed assets: These assets include the patents, copyright, trademarks, trade name goodwill etc. b) Long-term investment: These assets represent the firms long term investments like investments in share, investments in debenture and bonds of other firms or government bodies. c) Other non current assets: These assets are those which represent the deferred charges etc. d) Current assets: Current assets consist of cash and other sources of cash which get converted into cash during the period of operating cycle of the firm. These assets are owned for a short period of time. The other name of the current assets includes cash, debtors, bills receivables, stock of work in progress, bank balance, advance payment of expenses like taxes and insurance, loan and advances to customers and employees.

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12 2) Liabilities Liabilities are the obligations of the concern that is to pay to the outsiders. Importance of the position statement a. It helps to calculate the working capital of the concern. b. It indicates the long term as well as short-term financial position of the concern. c. With the help of this the various ratios will be calculated. d. It indicates the value of the concern and helpful in calculating the value of the shareholders equity and total assets. e. It helps to make the arrangement for losses, which are expected to occur in the future. The balance sheet is relevant at a particular point of time. It is like a financial snapshot at a point of time, before and after which the position may be different. So, the balance sheet is a status report Contents of annual report: The Polyhydron Pvt. Ltd annual report for the year 2004-2005 contains a) Report of the board of directors b) Auditors report c) Accounting policies Report of the board of directors: Directors report provides a summary of profits made and appropriated by the company and other relevant information such as industrial relations, investments, financing, organization, appointment of auditors and directors etc. The report of the PPL board of directors gives a brief account of the company profit and dividend during the 2003-2004. Auditors report: Auditors report to shareholders verifies whether the balance sheet and profit and loss account provides a true and fair view of the state of a companys affairs.

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13 Auditors should obtain all necessary informations and explanations and ensure that proper books of accounts as required by law have been prepared by the company. Accounting policies: Companies adopt different accounting policies for preparing their balance sheet and profit and loss account. Annual reports incorporate major accounting policies as well as changes made in current year.

Income statements This is also known as the profit and loss account or the statement of earnings, summarizes the revenues and expenses of the firm for an accounting period. It gives a detail of sources of income and expenses and thus it provides the summery of the operating results of the firm for a specific period. It matches the revenues with the costs that are incurred in generating the revenues, and shows the difference between the two as the net profit made or net loss incurred during the period. This shows the results of the operations of the firm during the period. The is therefore, is a flow report against the balance sheet which is a stock report or a status report. This depicts the earning capacity of the firm during the period under consideration. Profit and loss account presents the summary of revenues, expenses and net income of a firm. It serves as a measure of the firms profitability. The main content of the income statement are: Net sales, Cost of goods sold, Gross profit, operating expenses, Operating profit, Non operating surplus/deficit, Profit before interest and tax, Interest, Profit before tax, Tax and Profit after tax. Analysis of financial statement Analysis of financial statement refers to the process of the critical examination of the financial information contained in the financial statement in order to understand and make decisions regarding the operations of the firm. The Analysis of financial

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14 statement is basically a study of the relationship among various financial facts and figures as given in a set of financial statements. The basic financial statements i.e. The balance sheet is, already discussed in the preceding section contain a whole lot of historical data. It is very important to analysis of financial statement to know the different factors that are behind the change in the figures of the financial statement. Analysis of financial statements contains comparison between different figures of different periods, comparison. Significance of the financial statement analysis: The analysis of financial statement is very important for the different parties related to the concern i.e. internal users and external users. The significance of the financial statement analysis will be clear from the following points: This analysis simplifies and summarizes the accounting figures system that the organization can provide information to the different parties. Financial statement analysis is provides the management in basic functions like forecasting, planning, directing, coordinating and control. This analysis diagnose the financial health of the concern by evaluating different facts of the business i.e. Liquidity, solvency, profitability, capital gearing etc. The analysis of financial statements provides important and useful information to the management as well as other users. If this analysis in not done than it is difficult to take decision concerned to financial matters. Techniques/tools of the Analysis of financial statement The methodology adopted for the Analysis of financial statement may vary from one situation to another. However, the following are some of the common techniques of the Analysis of financial statement:

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15 1. Comparative financial statements 2. Common-size financial statements 3. Trend percentage analysis , and 4. Ratio analysis. The last technique i.e., Ratio analysis is the most common, comprehensive and powerful tool of the Analysis of financial statement. Statement of changes in financial position Two basic financial statements important to owners, management and investors are balance sheet and profit and loss account. Balance sheet gives a summary of firms resources (assets) and obligations (liabilities and owners equity) at a point of time, the profit and loss account reflects the result of the business operations by summarizing revenues and expenses during a period of time. Both these statement fail to explain the changes in assets and liabilities and owners equity. This statement is intended to summarize: Changes in assets and liabilities resulting from financial and investment

transactions during the period, as well as those changes which resulted due to change in owners equity. The usage of firms financial resources during the period.

The statement of changes in financial position deals with the flow of funds during the year i.e., the flow of funds in and out of the firm. It summarizes the sources from where the funds might have been arranged by the firm and the uses for which the funds might have been used by the firm during the year. The following are the important concepts of funds: The term funds may be taken to refer to cash only. This is a general notation of this

the term funds and is used for expressing the liquidity of a firm. Therefore,

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16 concept of funds will report and include only those transactions which are affecting the cash balance; this will be just a summary of the cash transactions. Hence, nonmonetary transaction such as purchase of fixed assets by issue of debenture will not be reported in a seep. The term funds may also be used to denote the net working capital of the firm.

The net working is the difference between the total current assets and total current liabilities. Since, cash is only one of the several current assets; this view of the term funds is broader than the preceding concept. A sheet is prepared on the basis of the net working capital concept of funds will include all those transactions which affect the net working capital of the firm. So, any transaction affecting current assets or current liabilities will find place in the sheet. However, there may be different transaction which do not affect the net working capital and therefore, will be outside the scope of sheet. Because of the limitation of the above two concepts, the term funds is also used

to denote all the financial resources of the firm. In such a case, the term funds are used in the broadest possible sense and the inherent short-comings of the other two concepts are eliminated. Based on the concept of total financial resources, the sheet will report ail the important and relevant transactions during a year? Based on these three concepts of the term funds, the sheet can be prepared as follows: 1. sheet ( cash basis ) also known as a cash flow statement 2. sheet net working capital ) also known as a fund flow statement Cash flow statement Cash flow statement provides information about the cash receipts and payments of a firm for a given period. It provides important information that compliments the profit and loss account and balance sheet. The information about the cash flows of a

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17 firm is useful in providing users or financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalent and the needs of the enterprise to utilize these cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation. Scope Cash flow statement provides information about the cash receipts and

payments of enterprises for a given period. It provides important information that supplements the profit and loss account and balance sheet. The statement of cash flow is required to be issued by the institute of

chartered accountants of India in March 1997 which replaces the changes in financial position as per as-3. There are certain changes in the preparation of cash flow statement from the

previous methods as a result of the introduction of as-3. Cash comprises cash on hand and demand deposit with banks. Cash equivalents are short term highly liquid investments that are readily

convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Examples of cash equivalents are, treasury bills, commercial paper etc. Cash flows are inflows and outflows of cash and cash equivalents. It means

the movement of cash into the organization and movement of cash out of the organization. Classification of cash flows The cash flow statement relating to a particular period is classified into the following three main categories of cash inflows and cash outflows:

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18 1. Cash flows from operating activities 2. Cash flows from investment activities 3. Cash flows from financing activities Cash flow from operating activity Operating activity are the principle revenue producing activities of the enterprise and other activities that are not investing or financing activities. Operating activities include cash effects of those transactions and events that enter into the determination of net profit or loss. Following are examples of cash flows from operating activities. Cash receipt from the sale of goods and the rendering of services. Cash receipt from royalties, fees, commission, and other revenue. Cash payments to suppliers for goods and services. Cash payments to and on behalf of employees. Cash receipts and payments of an insurance enterprise for premiums and

claims, annuities and other policy benefits. Cash payments or refunds of income tax unless they can be specifically

identified with financing other policy benefits. Cash receipts and payments relating to future contracts, forward contracts,

option contracts and swap contracts are held for dealing or trading purposes. Cash flows from investments activities Investing activities are the acquisition and disposal of long terms assets and other investments not included in cash equality. Investing activities include transactions and events that involve the purchase and sale of long-term productive assets not held for resale and other investments. The following are examples of cash flows arising from investing activities:

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19 Cash payments to acquire fixed assets (including intangibles). These payments include those relating to capitalized research and development costs and selfconstructed fixed assets. Cash payments to acquire shares, warrants, or debt instruments of other enterprises and interests in joint ventures. Cash receipts from disposal of fixed assets. Cash receipts from disposal of shares, warrants, or debt instruments of other enterprises and interests in joint ventures. Cash advances and loans made to third parties. Cash receipts from the repayments of advances and loans made to third parties. Cash receipts and payments relating to futures contracts, forward contracts, option contracts, and swap contracts except when the contracts are held for dealing or trading purposes, or the receipts and payments are classified as financing activities. Cash flows from financing activities Financing activities are activities that result in changes in the size and composition of the owners capital and borrowings of the enterprise. Following are the examples of cash flows arising from financing activities: Cash proceeds from issuing shares or other similar instruments. Cash proceeds from issuing debentures, loans, notes, bonds and other short term

borrowings. etc. Cash payments to redeem preference shares. Payment of dividend 1) Ability to generate future cash flows. BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 19 Cash repayments of amounts borrowed, i.e., redemption of debentures, bonds,

20 2) Ability to pay dividends and meet obligations. 3) Reasons for the difference between net income and net cash provided (used) by operating activities. 4) Cash invested and financing transactions during the period. Information to prepare this statement Usually comes from 3 sources: Comparative balance sheet. Current income statement. Additional information. The state of cash flow deals with cash receipts and Payments, so the accrual concept is not used in the preparation of the state of cash flow. Fund flow statement The profit and loss account and balance sheet statements are the common important accounting statements of a business organization. The profit and loss account provides financial information relating to only a limited range of financial transactions entered into during an accounting period and which have impact on the profits to be reported. The balance sheet contains information relating to capital or debt raised or assets purchased. But both the above two statements do not contain sufficiently wide range of information to make assessment of organization by the end user of the information. The fund flow statement is also called as the statement of sources and application of funds and statements of changes in financial position. The fund flow statement contains all the details of the financial resources have been used up. This statement discloses the amounts raise from various sources of finance during a period and then explains how that finance has been used in the business.

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21 It is very useful tool in analysis of financial statements which analysis the changes taking place between two balance sheet dates. The statement analysis the changes between the opening and closing balance amounts of the all items of balance sheet for the period. A balance sheet sets out the financial position at a point of time, setting liabilities from which funds have been raised against assets acquired by the use of those funds. A fund flow statement analysis the changes which have taken place in the assets and liabilities during certain period as disclosed by a comparison of the opening and closing balance sheets. Concept of fund The term fund has been defined and interpreted differently by the different experts. The fund refers to all the financial resources of the company. On the other extreme, fund has been understood as cash only. The most acceptable meaning of the fund is working capital. Concept of flow The flow of funds refers to transfer of economic values from one asset equity to another. When funds mean working capital, flow of funds refers to movement of funds which cause a change in working capital of the organization. Identification of flow of funds: A flow of funds takes place only if a current account is involved. To identify a flow, journalize the transaction, identify the two accounts involved as current and noncurrent and apply the general rule. General rule Transactions which involve only current accounts do not result in a flow. Transactions which involve only non-current accounts do not result in a flow.

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22 Transactions which involve one current account and one non-current account

results in a flow of funds. The sources and application of the working capital or the funds may be examined as follows: Sources of fund A firm numerous transactions during a year and most of these transactions may affect one or the other current account i.e., most of these transactions may result in the flow of the working capital. Neither it is necessary nor practical to identify the effect of each and every transaction on the working capital. These transactions, instead, are considered and analyzed In a collective forms and then their effect on the working capital is identified. Some of the major sources of working capital can be noted down as follows. The funds generated by the operation of funds in term of the profits. Issue of

additional share capital or debenture for cash. It may be noted that the funds generated in this case, are equal to the issue price of the securities. The face value of share/debenture is irrelevant. Borrowings made by the firm for a long term. Sale of fixed assets, investment or intangible assets such as goodwill, patent etc. Non-operating incomes such as income from investment or profits from the sale

of assets/investments. Any other source e.g. Subsidy received from the government, claims received

from insurance company for the loss of a property etc. Applications of funds As already noted in the above list of sources of funds, that if there is business loss to the firm then this tantamount to decrease or use of funds.

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23 Purchase of new assets/investments/patent rights/trade marks or any other property reduces the working capital of the firm. The redemption of preference share capital or debentures during a year also utilizes the funds. Repayment of a long term loan during the year. Payment of dividends to the shareholders.

Sources of funds 1. Increase in liabilities 2. Increase in capital 3. Decrease in assets and investments Applications of funds 1. Decrease in liabilities 2. Decrease in capital 3. Increase in non-current assets and investments Financial planning Financial manger must be able to analyze the current position of their own firms as well as that of their competition. They must also plan for the companys financial future. Growth in sales is an important objective of most firms. An increase in a firms market share will lead to higher growth. The firm would need assets to sustain the higher growth in sales. It may have to invest in additional plant and machinery to increase its production capacity. Also, it would need additional current assets to produce and sell more goods or services. The firm would have to acquire raw materials and convert them into finished goods after incurring manufacturing expenses. It may have to sell goods on credit because of the industry norms or to push up sales. The supplier of raw materials may

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24 extend credit to the firm. The firm may use its internally generated funds to finance current and fixed assets. When the firm grows at higher rate, internal, funds may not be sufficient. The process of estimating the funds requirements of a firm and determining the sources of funds is called financial planning. Steps in financial planning Financial forecasting is the basis for financial planning. Forecasts are merely estimates based on the past data. Historical performance may not occur to the future, planning means what a company would like to happen in the future and includes necessary action plans for realizing the predetermined intensions. The following steps are involved in financial planning: Past performance: Analysis of the firms past performance to ascertain the

relationship between financial variables, and the firms financial strengths and weaknesses. Operating characteristics; Analysis of the firms operating characteristics-

product, market, competition, production and marketing policies, control systems, operating risk etc. To decide about its growth objective. Corporate strategy and investment needs: Determining the firms

investments needs and choices, given its growth objective and overall strategy. Cash flow from operations Forecasting the firms revenues and expenses and

need for funds based on its investment and dividend policies. Financial alternatives: Analyzing financial alternatives within its financial

policy and deciding the appropriate means of raising funds. Consequences of financial plans Analyze the consequences of its financial plans for the long-term health and the survival to firm.

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25 Consistency Evaluate the consistency of financial policies with each other and with the corporate strategy. Financial planning involves the questions of a firms long-term growth and profitability and investments and financial decisions. It focuses on aggregative capital expenditure programs and debt-equity mix rather than the individual projects and sources of finance.

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3 - STATEMENT OF THE PROBLEM:

Financial analysis being an integral part of overall corporate management and it is one of the powerful tools of financial performance analysis. The analysis of financial statement of PPL is done in order to know the companys financial position of the year.

Management Problem: To gauge the adequacy of returns/cash flows with respect to investment, liquidity and growth and ascertain the opportunity for expansion

Research Problem A study on analysis of financial statements of polyhydron pvt ltd and suggest long term planning.

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4 - PURPOSE OF THE STUDY

The purpose of doing this project is mainly to make a thorough study of the financial analysis of the company.

To assess the companys trends for the last five years with regard to liquidity performance.

The purpose also includes assessing the impact of financial analysis on liquidity strength of the company.

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5 - SCOPE OF THE STUDY

The scope of the study is conducted is only for organizational level. It is done through the Balance sheet of the company, for the periods 1999-2000, 2000-01, 200102, 2002-03, 2003-04, 2004-05 and 2005-06.

6 - OBJECTIVES OF THE STUDY:

1.To analysis the firms financial statements 2.To know whether management generating adequate operating profit on the firms assets. 3.To know how is the firm financing its assets 4.To know whether owners getting adequate returns? 5.To determine the progress of the company.

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CHAPTER 2

Organization Profile o Polyhydron Pvt. Ltd. Organization Chart Research Design Data Collection Method

Measuring tools

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1 - ORGANIZATION PROFILE (POLYHYDRON PVT. LTD.)


POLYHYDRON is known for its ETHICAL MANAGEMENT. People from all over India visit the company to interact and understand the systems. It has become a kind is PILGRIMAGE CENTRE for the corporate world of India. It is established in 1981.it is located in Belgaums new industrial area at Mache. Polyhydron manufactures hydraulic equipments like hydraulic valves, radial piston pumps etc. The range of products spans over 30 types and 700 models. PPL have won a national award for entrepreneurship in 1985 and NACOSU-SIMA award for excellence in management instituted by the national confederation of small industry madras in 1992. Polyhydron, natural business is performed to the customer is offered a range of products manufactured by the company. Polyhydron customer includes OEMs and Stockiest. HISTORY The Three young enthusiastic engineers Mr. S.B.Hundre, Mr. Chitins and Mr. V.K Samant together started Hydrotechnic, a hydraulic tube fittings and accessories manufacturing unit in the year 1974. With the toe in the hydraulic market door began to pen for newer concept and the next logical step was to sell valves and pumps. Sooner the expansion was necessary to keep up with the demand. Following table summarizes how Polyhydron Group of Companies has developed: 1974M/s Hydrotechnic was established to manufacture, hydraulic tube

coupling for metric tubes, flanged fittings shut offs, needle valves, throttle check valves etc.

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31 1981M/s Polyhydron was set up for manufacturing radial piston pumps ,

relief valves , directional control valves , check valves etc. 1986M/s Polyhydron System was started to manufacture oil hydraulic

systems, hydraulic actuators and piston type accumulators. 1989Polyhydron become private limited company. 1991Polyhydron Systems become private limited company. 1993Polyhydron System Pvt. Ltd. went in collaboration with oil gear touter

of USA to become Oil gear touter Pvt. Ltd (OTPL) M/s Polyhydron is considered to be one among the very few plants in India which has been practicing JIT concept over last several years apart from employee involvement and similar other quality management concepts. PPL is the only company, which is manufacturing pumps and valves without any collaboration. MISSION We will nurture an ethically managed organization, We will not exploit our customers, Employees, suppliers, government, society and nature. VISION We will create an island of excellence Through Focus on customer, Employees empowerment And continuous improvement The Vision and Mission at PPL came into being before ISO came to India. The Vision statement emerged in 1995 and the Mission statement in 1996. the mission statement is used as a constant guide for action of managers and workers.

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32 MANUAL PROCEDURE When the order for the product is received from the customer, the assembly Coordinator has to convey the ordered quantity of the product to the monitor of the workstation where that particular product is assembled. Then monitor has to start the assembling of the product of mentioned quantity. At the evening (that is when working hours of the company are going to finish ) the monitor has to inform the assembly coordinator about the quantity of the product assembled throughout the day and the name and quantity of the items which are used to assemble the product as well as the Stock of the items. Then assembly coordinator has to see, how many items are below reorder level on the workstation. If there are items below reorder level then he has to generate the purchase orders to the suppliers. Since there is no any purchase department in the company the assembly coordinator has to do all these things. There is only one supplier for one item but one supplier may have many items to supply. Again, the assembly coordinator has to see how many items are rejected from the workstation and how many products are rejected from the customer; and he has to update the stock of items and products on the workstation. AWARDS AND ACHIVEMENTS National award to small scale entrepreneur in the year 1984. NACOSI-SIMA award in the year 1992 as certificate of excellence. The presidents award for entrepreneurship in the year 1984. The Belgaum chamber of commerce and industries conferred on them an award

for outstanding performance in the field of industry in the year 2002.

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33 The Rotary club of Belgaum gave them vocational award for HIGH ETHICAL

STANDARDS IN VOCATION in the year 1993-1994. The commissioner of commercial Taxes, Belgaum declared PPL as the Deligent tax payer. Rotary club, Bangalore, vijaynagar in July 2000 conferred vocational excellence award to shri. Suresh B. Hundre for conviction in Ethical values and practicing these values. They have said he has translated his industry into a temple of ethics, an industrial pilgrimage may this honor people him to create further awareness of ethical management practices, and hereby inducing in more and more people that ethics is the only lasting measure of ones success and satisfaction. The institute of Engineers (India) local centre, Belgaum has honored shri. Suresh. B. Hundre for excellence achieved and outstanding services rendered in the field of Engineering on 15th Sep 1998. PRODUCTION SYSTEM QUALITY POLICY: We at polyhydron, strive to achieve Quality by increasing the rate of Improvement better than the rise in Customer expectations PPL emphasizes on the quality of the product. If any customer is dissatisfied with the product, then every arrangement is made to replace that product with the new one. Next comes into the pictures, the reason for the product failure which would be either the fault of R and D Types of Hydraulic systems and companies Hydraulic systems 1. SERVO TECH 2. Proportional technology 3. Basic Hydraulic MCKINSEY 7S MODEL Companies Moog controllers, Rexroth controllers, Vickers controllers Vickers, Rexroth, Yukers, Denfoss Vickers, Rexroth, Bosch, Herion, Yulker, Denfoss

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34

The Seven-Ss is a framework for analyzing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful, or not: strategy; structure; systems, or not: strategy; structure; systems; style; skill; staff; and shared values. Consultants at McKinsey & Company developed the 7S model in the late 1970s to help managers address the difficulties of organizational change the model shows that organizational immune systems and the many interconnected variables involved make change complex, and that an effective change effort must address many of these issues simultaneously

COMPANY PROFILE WITH RESPECT TO 7S MODEL Strategy: The direction and the scope of the company over the long term. Based on market research, competitive analysis and self analysis, the crucial differentiating competencies or strong sides of the company are identified and BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 34

35 formulated. Business strategy of PPL.We shall develop and continuously improve our products which shall be offered to our customers at reasonable price. Structure: The basic organization of the company, its departments, reporting lines, areas of expertise, and responsibility (and how they inter-relate). Systems The Company safeguards its assets and ensuring that its usage is authorized and is done in the right manner. The company also maintains proper accounting records as statutorily required and as per pre prescribed accounting standards and generally accepted accounting practices so as to ensure reliability of financial information. The company has the following general system in place. Accounting (Accounts, Budgets etc.) Manuals, Administrative manuals and other functional manuals have been complied and are updated periodically. The company has a well organized management information system. Skills: Skills include those characteristics company believes its members in a key position. It includes such as: Technical skill: (Sophisticated measuring and calibrating instruments, CAD

facility and special testing facility, Well equipped R and D center. Qualified personnel.) Management skills: (Just-in-time production system implemented has bourn

unimaginable, Benefits in spite of the non conductive environment in the country. Holds a very good collection of technical (hydraulic) and management books

Temple of Ethics. Business Ashram.) Shared Values: Originally called super ordinate goals; the guiding concepts and principles of the organization values and aspirations, often unwritten - that go beyond the conventional statements of corporate objectives; the fundamental ideas around

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36 which a business is built; the things that influence a group to work together for a common aim. The Values shared by the employees of PPL are: Respect for individuals, Customer orientation, Leveraging technological development, Desire for excellence, Ethical way of doing business, Financial acumen , Passion for excellence, Live quality, Integrity, Honesty, Trust, Transparency, Delegation of authority. Staff: Staff means that the company has hired able people, trained them well and assigned them to the right jobs. Selection , training reward and recognition, retention, motivation and assignment to appropriate work are all key issues. Total employees: 60. Style: we will grow together we will provide you opportunities to learn, to be involved, to practice new skills, to have responsibilities to be respected and valued, and to be rewarded and recognized for your contribution. In return we seek your commitment to our companys mission. Your association with our company will certainly ensure that you will be a more talented, responsible, self confident and wellmannered person. To encourage, Team spirit, Creativity, Ingenuity, Develop talent. Thus the management aims at reducing direct control on individuals to promote motivation, quality improvement and productivity

PRODUCT PROFILE Polyhydron manufactures Hydraulic Radial Piston Pumps, Mobile Valves, Directional Control Valves, Solenoid Valves, Pressure Controls, Manifolds, Covers, Logic Cartridges, Pressure Switches, and Check Valves.Polyhydron products are priced

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37 at unbeatably low and PPL has changed the prices very marginally in last 15 years. The following products of Polyhydron

Hand Pumps HP10 Heavy duty construction. Renewable internal parts by replacement. Integral Relief and Release valves. Nominal flow and pressure ratings Model HP10 Max. working pr. (bar) 350 Flow capacity c.c./stroke 1.25 Oil tank capacity (cc) 250

Feed and Power Hand Pumps - HP5012 & HP5016

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38 Automatic change-over from high discharge at low pressure to low discharge at high pressure. Renewable internal parts by replacement. Collapsible Hand lever for compact size and short hand movement. Flow Flow Maximum capacity capacity Oil tank Model working upto 30 above 30 capacity pr. (bar) bar bar (ltrs.) c.c./stroke c.c./stroke HP5012 700 HP5016 350 49 49 2.8 5 13

Radial Piston Pumps - 2R Radial piston arrangement, with 3, 5 or 7 Pumping elements each per pump section. Fixed delivery, Oil immersed type, Open execution, face mounting, Valve controlled. Bi-directional rotation of shaft. Flows can be combined internally, externally to feed one circuit or used independently to feed Two circuit

Radial Piston Pumps - 2RC / 2RCE Radial piston arrangement, with 3, 5 or 7 pumping elements. External mounting type. Face mounting, Valve controlled, Fixed delivery. Bi-directional rotation of shaft. Available with extension shaft for through drive. With extension bracket assembly for coupling a low pressure pump having standard flange.

Pumping Element - 1R / 2R Pumping Element Assembly for 1R / 2R. Oil immersed type, open execution, face mounting, valve controlled, fixed delivery.

Radial Piston Pump - 12R

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39 Radial piston arrangement, with 5 or 7 pumping elements each per pump section. Oil immersed face mounting. Valve controlled. Fixed delivery. Bidirectional rotation of shaft. With extension shaft for through drive. Available with extension bracket assembly for coupling a low pressure pump having standard flange.

Bell Housing Assembly (Factory Standard) - BHP The bell housing series BHP are designed for coupling hydraulic pumps having flanges to electric motors having metric flanges. These bell housings are precisely machined to reduce misalignment of coupled shafts. The correct alignment of the shafts along with the cushioned power transmission through a resilient spider increases the life of the bearings of the pump/motor coupled. The construction also reduces the noise generation considerably. Direct Operated Pressure Relief Valve - DPR Direct acting with guided cushioned poppet. Available in Cartridge, Threaded and Subplate types. Nominal pressure and flow ratings Model DPR 06 DPR 10 DPR 20 Max. working pr. (bar) 700 400 400 Max. flow in l / min 30 80 160

Direct Operated Pressure control Valve - DPC Hydraulically cushioned valves, used to control sequencing, relieving, unloading or counterbalancing operations. Nominal flow and pressure ratings Max. flow capacity handling 160 l/min 160 bar

Max. setting pressure

Max. working pressure 350 bar Pilot Operated Pressure Relief Valves (Cartridge Type) - PPR 06K

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40 Two stage Spool type Relief / Reducing Valve Cartridge Low pressure override due to larger flow area. Two options for pressure adjustment, - With set screw and lock nut. - With hand knob and lock nut. Internal drain valves can be converted to external drain Pilot Operated Pressure Relief cum Unloading Valve - PPRU Two stage pilot operated construction. These valves are normally open type valves. When the pressure in the secondary port ( port B ) increases to set pressure, the valve closes against the spring. PPM10 adjustable 80 PPM20 PPM30 315 upto 5 to 315 200 300

Pressure Control Modules - PCM 06-06 Designed to control double pumps of a Hi-Low system. Unloads low pressure pump when system pressure rises above the pressure set on unloader valve. Relieves high pressure pump when system pressure reaches the value. Nominal flow and pressure ratings Max. for High relief (bar) pr. High Low pr. Max. pr. For pr. pr. Flow unloading Flow (l/mi (bar) (l/mi n) n) 25 50 25

Model

PCM 06-06 400

Pressure Control Modules - PCM 20-16 Designed to control Double pumps of a Hi-Low system. Consists of a High pressure relief valve, a Check valve and a low pressure unloading valve. Unloading of pumps by Solenoid valve / Valves as an optional feature. Nominal flow and pressure ratings PCM20-16 315 100 100 160

Counter Balance Valve - CB Design series 30

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41 Counter balance valves are seat type valves. They offer free-flow from their port B to A and give leak free closure in opposite direction upto a predetermined pressure. This predetermined cracking pressure can be adjusted within its maximum specified range. Flow handling capacity 200 lpm Max. Set Pressure Operating pressure 50 bar 315 bar

Solenoid Operated Directional Control Valve (CETOP 03) - DE 06 Direct solenoid operated,spool type, mounting on ISO 4401-03-02. Five chamber body and spool design provides low-pressure drop, with maximum performance. Balanced spool design ensures proper shifting force for maximum reliability and long life. All spools and bodies are interchangable, simplifying maintenance. Wet pin DC solenoids ensure better heat dissipation, quitter operation, there by increasing solenoid life. Moulded solenoid coils eliminate moisture problems and ingress of dust. Plug-in-coils for ease of maintenance. Indicator lights are a standard option. Lever Operated Directional Control Valve (Old Series) - DL10 ( Series 10 ) Completely encapsulated control mechanism for protection against dirt. Five chamber design. Flexibility in rotating the operating mechanism by 90 x 4. Wide variety of spools available in subplate model only. Nominal flow and pressure ratings Mod Max. flow Max. working pr. (bar) el l/min. Port P, A and B ..... 4DL 350 100 10 Port T ................ 100 Pilot Operated Directional Control Valve (New Series) - DP 10

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42 Pilot operated directional control valves are hydraulically operated spool valves. They control the start, stop & direction of fluid flow. Available in 19 spool configurations. Available as spring centered and spring offset. Mounts on standard ISO 4401, IS10187. Nominal flow and pressure ratings Mode Max. working pr. (bar) l 4DP 10 Max. flow l/min.

Port P, A and B ...... 350 Port T ................... 250 120 Port X and Y .......... 150

Solenoid Pilot Operated Directional Control Valve - DEP 20 Available as spring centered, spring offset Valve mounting interface conforms to International and National standards. Minimum pilot pressure is 5 bar.

Lever Operated Pressure Holding D.C.V. - DLS 20 Specially designed to control Up-stroking, gravity return, single acting hydraulic cylinders, where pressure holding, smooth decompression and quick return of the ram is desired. These valves are totally encapsulated for trouble-free operations. valves with quick exhaust feature has large return passage to achieve extra fast return of the ram. Monoblock Directional Control Valve - MDL 10 Monoblock directional control valve consisting of body, the control spool, incorporated with built-in non-return valve ( Anti-cavitation ) and Direct acting pressure relief valve. The valve is available in spring centred or detented model. In order to have flexibility in mounting, the operating head can be rotated by 90x4 positions around the spool axis. Port configuration and valve mounting interface conforms to factory standards. Pressure compensated flow control valve - PF

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43 Pressure compensated. Check valve option for reverse-free flow. Four rotations of hand knob to facilitate the setting with ease. Thumb screw provision to retain valve setting. Stroke limiter available as an option. Max. working pr. 315 bar Flow controlling Min. 0.25 to 4, 8, capacity 16 or 32 l/min.

Flow divider valve - FD Flow divider valves provide dual flow from a single source at a predetermined ratio, regardless of load. Maximum dividing error is <5%, Threaded port body. Max. Pr. 315 (bar) Dividing Ratio 50 : 50 (%) Check Valve, SCREW-IN CARTRIDGE - KSC / KSD Two port screw-in cartridge valves that are designed to fit in a cavity confirming to ISO 7789 : 1998 (E). These are seat type vales, available in four different sizes and with five different cracking pressure in each size. Check valves allow free flow in one direction while providing leak-free closure in reverse direction. Check Valve - C (ISO) Seat type valves. Allow free flow from port A to port Band offer leakage free closure in opposite direction. Available in four sizes of standard interfaces conforming to ISO 5781 IS 10187 DIN 24340 Each model available with options of four cracking pressures: 0.5, 1.5, 3 and 5 bar.

Check Valve - CL

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44 Seat type valves, CL with external drain. Threaded or Sub-plate mounting construction. Nominal flow and pressure ratings Model Max. working Max. flow pr. (bar) l/min. 80 160 350

CL10 315 CL20 315 CL30 315

Check Valve - 2CI These valves are available with the pilot operated check valve facility on either A or B or both A and B threaded ports. The hydraulic opening operation for free flow in reverse direction is achieved by means of internal pilot pressure available from the other working port. Check Valve (Modular) - CM 10 These are seat type valve in sandwich plate design for use in vertical stacking assemblies. Its hardened metallic seat ensures leakage free closure. Porting pattern conforms to ISO 44015, IS 10187, DIN 24340. Available in 8 configurations with 4 cracking options for each configurations. Size Flow 10 100 lpm

Pilot operated check valve (Modular) - CIM 06 These modular valves are available with the pilot operated check valve facility on either 'A' or 'B' ports. The hydraulic opening operation for free flow in reverse direction is achieved by means of internal pilot pressure available from the other working port. Shuttle Valves - SL Seat type construction. Automatically connects it's P port to either A or B depending upon whichever of the two ports is at higher pressure level. Isolates port A and B from each other. Port P gets connected to tank, only if, port A and port B are connected to tank. Available both in Threaded and Sub-plate type.

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45 Prefill valve ( PV 40 - 80 ) Intended for prefilling and exhausting of large hydraulic cylinders. Can be used as anticavitation check valves. Decompression feature is optional up to size 80.

Prefill valve ( PV 100 - 200 ) Intended for prefilling and exhausting of large hydraulic cylinders. Can be used as anticavitation check valves.

Cartridge Valves - CV 16 to CV 40 These valves are suitable for mounting in manifold cavities machined as per ISO 7368. By selecting suitable cartridge and cover, it is possible to achieve functions like

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46

2 - ORGANIZATION CHART
Shareholders

Chairperson

Managing Director

Finance

Production

R & D Dept

Sales Administration Assembly

Design

Accountant

Manager

Design Engineer A/c Officer Manage r Machine Shop Manager Assistant Administrative assistent Engineer

Sales Assistant

Engineer

Excise sales Tax billing Sales Coordinator Draft men

3 - RESEARCH DESIGN:
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Title of the Study:


A study on analysis of financial statements of polyhydron pvt ltd and suggest long term planning.

Statement of problem:
Financial analysis being an integral part of overall corporate management and it is one of the powerful tools of financial performance analysis. The analysis of financial statement of PPL is done in order to know the companys financial position of the year. Management Problem: To gauge the adequacy of returns/cash flows with respect to investment, liquidity and growth and ascertain the opportunity for expansion Research Problem A study on analysis of financial statements of polyhydron pvt ltd and suggest long term planning.

Objectives:
6. To analysis the firms financial statements 7. Is management generating adequate operating profit on the firms assets. 8. To know how is the firm financing its assets 9. Are the owners getting adequate returns? 10. To determine the progress of the company.

4 - DATA COLLECTION METHOD

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48 Secondary data: The major source of data for this project was collected from annual reports, profit and loss account, manuals & some more information collected through the internet.

5 - MEASUREMENT TOOLS:

This study is conducted with the help of statistics figures & techniques like Graphs & charts for better comparison and interpretation. This project is an analytical research where in the researcher has to use the available facts as information and analyze these to make a critical evaluation of materials. This is also an applied research with an aim to find a solution for immediate problems facing industry or the firm. The methodologies followed in the analysis of the financial statement are comparative statement, Common size statement, Trend analysis and Ratio analysis. The following are the methods of financial analysis used in general. Comparative financial statements Common-size financial statements Trend percentage analysis Ratio analysis

Limitations The study is done only on the Balance sheet and Profit and loss account.

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49 Study is based on information provided by the company. The limitation of ratio analysis is itself a limitation in achieving the set objective

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50

CHAPTER 3

Results & discussion with Charts & graphs Recommendations

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51

Comparative Financial Statement


In Comparative Financial Statement (CFS), two or more Balance Sheet and/ or the Income Statement (IS) of a firm are presented simultaneously in columnar form. The financial data for two or more years are placed and presented in adjacent columns and thereby the financial data is provided a times perspective in order to facilitate periodic comparison. The preparation of the CFS is based on the premise that a statement covering a period of a number of years is more meaningful and significant than for a single year only, and that the financial statement for one period represent only 1 phase of the long and continuous history of the firm. The CFS can be prepared for both the BS and the IS.

Comparative Balance Sheet (CBS)


The CBS shows the different assets and liabilities of the firm on different dates to make comparisons of absolute balances and also of changes if any, from one date of another. The CBS may be helpful in analyzing and evaluating the financial position of the firm over a period of number of years.

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52 Comparative Balance Sheet Particulars Liabilities and capital Current liabilities Deferred liabilities Share capital Reserves and surplus Total Assets Current assets Net fixed assets Investments Total 2004 2005 Increase/ Decrease (amount) (+) 2951805.45 (+) 1275893.00 (+) 0.00 (+)24026881.10 28254579.50 (+)14199215.60 (+)14123388.95 (+) 0.00 28254579.50 Increase/ Decrease (percentage) (+) 39.36% (+) 8.78% (+) 0% (+) 22.02% (+) 20.98% (+) 30.95% (+) 15.92% (+) 0% (+) 20.98%

7498212.45 14522346.00 3487500.00 109107265.2 134615323.80 45873660.62 88669138.15 4500.00 134615323.80

10450017.90 15798239.00 3487500.00 133134146.42 162869903.30 60072876.22 102792527.10 4500.00 162869903.30

Comparative Balance Sheet PARTICULARS Liabilities and Capital Assets Current Assets Net Fixed Assets Investment 60072876.22 102792527.10 4500.00 162869903.32 90110670.72 123436138.06 4500.00 213551308.78 30037794.50 50.00 20643610.96 20.08 0.00 0.00 50681405.46 31.12 Current Liabilities Deferred Liabilities Share Capital 10450017.90 15798239.00 3487500.00 162869903.32 11913873.50 16340996.00 3487500.00 181808939.28 213551308.78 1463855.60 542757.00 0.00 14.01 3.44 0.00 2005 2006 Increase/ Decrease (Amount) Increase/ Decrease (Percentage)

Reserves and Surplus 133134146.42

48674792.86 36.56 50681405.46 31.12

TOTAL

TOTAL INTERPRETATION Current assets

The investments in the current assets are very high and it has increasing trend over the period under study. The current assets have increased by Rs. 30037794.50 i.e., 50.00% in 2006 when compared to 2005. So it is significantly effects on the liquidity BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 52

53 position of the company and it also increase the working capital of the company. These shows there are huge investments in the inventories and debtors. Net fixed assets The net fixed assets increased by 14123388.95 i.e., almost 15.92% in 2005 when compared to 2004. In the year 2005-06 in has increased to 20.08%. This is due to capacity expansion in Plant II. Investments There is no change in investments for comparing the previous year and the current year. The company will spend lot of money on the current assets only. So there is no change in investments in the company. For previous year it will be Rs. 4500 and for current year also it will be Rs. 4500. Current liabilities Current liabilities include current liabilities and provisions. Current liabilities and provisions increased by 2951805.45 i.e., about 39.36% in 2005 when composed to 2004. in the year 2005-06 current liabilities have increased by 14.01 Since the increase in current assets is more than increase in current liabilities, therefore the net working capital has increased. Deferred liabilities Deferred liabilities increased by 1275893.00 i.e., about 8.78% in current year when compared to previous year i.e, in the year 2004-05. But in the year 2005-06 it has just increased by only 3.44%. Reserve and surplus The Reserve and Surplus has increased by Rs. 24026881.10 i.e, about 22.02% in 2005 as compared to 2004. In the year 2005-06 reserves and surplus have increased by 36.56%.

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54 COMPARATIVE INCOME STATEMENT (CIS) A CSI shows the figure of different items of the IS of the firm in absolute terms, the absolute changes from one period to another and if desired, the changes in percentage form. The CIS is helpful in deriving meaningful conclusions regarding changes in sales volume, cost of goods sold, different expenses items etc. from the CIS, a financial analyst can quickly ascertain whether sales are increasing or decreasing and by how much amount or by how much percentage

Comparative income statement


Particulars 2004 2005 Increase/ Decrease Inamount 31564934 29510957 2053977 -1515478.4 33719572 1524731.9 5094187.3 0 5094187.3 2000000 -585277 3678464.3 Increase/ Decrease (%) 23.24 32.3 4.56 -13.16 100.65 80.92 14.39 0 14.39 18.18 30.35 16.38

Net sales less: Cost of goods sold Gross profit Less: selling and administrative exp Operating income Add: other income EBIT Less: interest PBT less: Taxes Deferred tax adjustments PAT

136364336.3 91352117.1 45012219.2 11512089.16 33500130.04 1884091.8 35384221.84 0 35384221.84 11000000 1928195 22456026.84

167929269.9 120863073.7 47066196.2 9996610.74 37069585.46 3408823.66 40478409.12 0 40478409.12 13000000 1342918 26134491.12

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55

Comparative income statement


PARTICULARS Net sales Less: Cost of Goods Sold 2005 167929269.9 110445067.7 2006 219589944.9 125833343.3 93756601.57 21024256 72732345.57 4149147.89 76881493.46 0 76881493.46 25000000 150000 542757 973553.9 52162290.36 Increase/ Decrease (Amount) 51660674.96 Increase/ Decrease % 30.76

15388275.57 13.93 36272399.39 63.10 609639.26 740324.23 0 12000000 150000 -801161 973553.9 2.99 21.72 0.00 92.31 0.00 -59.61 0.00

Gross profit 57484202.18 Less: Selling and Admin. exps 20414616.74 Operating income Add: Other Income EBIT Less: Interest PBT Less: Taxes Prov. for FBT for 2006 37069585.44 3408823.66 40478409.1 0 40478409.1 13000000 0

35662760.13 96.20 36403084.36 89.93 36403084.36 89.93

Deferred tax adjustments 1343918 Add: Excess/short Prov. for I.T. 0 PAT 26134491.1

26027799.26 99.59

Interpretation On the basis of comparative income statement it can be said that gross profit for the year 2006 has increased by 63.10% over the profit for the year 2005. The Net sales during the same period have increased by 30.76%. The cost of goods sold increased by 13.93%. The selling and Administrative expenses increased by 2.96%. Other income for the year 2006 is increased by 21.72. The EBIT is increased by 75.54% during the year 2006. The Net profit is increased 89.93%. COMMON SIZE STATEMENT The CCS represents the relationship of different items of a financial statement with some common item by expressing each item as a percentage of the common item.

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56 In common size Balance sheet, each item of the Balance sheet is stated is stated as a percentage of the total of the Balance sheet. Similarly in common size income statement, each item is stated as percentage of the net sales. The percentage for different items is computed by dividing the absolute amount of that item by the common base and then multiplying by 100. The percentage so calculated can be easily compared with the corresponding percentages in some other period.

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57 Common Size Income statement

PARTICULARS Net sales Cost of Goods Sold

2004 100.00 66.99 33.01

2005 100.00 65.77 34.23 12.16 22.07 2.03 24.10 0.00 24.10 7.74 16.36 100.00 57.30 42.70 9.57 33.12 1.89 35.01 0.00 35.01 11.70 23.31

2006

Gross Profit

Less: Selling and Admin. exps 8.44 Operating Income Add: Other Income EBIT Less: Interest PBT Less: Taxes PAT 24.57 1.38 25.95 0.00 25.95 9.48 16.47

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58 COMMON SIZE BALANCE SHEET 2003 Current liabilities current liabilities provisions Total Loan fund secured loan Unsecured loan Deferred tax liability Total Total liabilities Net worth share capital reserves and surplus Total Total funds Current assets Inventory Trade debtors Cash and Bank balance Others Loans and advances Total Fixed assets Gross block Less: depreciation Net block Capital work-in-progress Total Total Assets 5.30 8.10 15.86 0.03 1.77 31.06 83.89 17.05 66.84 2.07 68.94 100.00 6.45 8.69 22.93 0.05 2.63 40.75 97.21 20.44 76.77 2.04 78.81 100.00 8.03 10.94 14.57 0.06 3.26 36.86 77.66 15.76 61.90 1.20 63.10 100.00 4.07 1.47 5.54 0.00 0.00 11.85 11.85 17.39 3.15 79.96 83.11 100.00 2004 4.02 1.54 5.56 0.00 0.00 10.78 10.78 16.34 2.59 81.05 83.64 100.00 4.80 1.60 6.40 0.00 0.00 9.69 9.69 16.09 2.14 81.74 83.88 100.00 2005

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59 COMMON SIZE BALANCE SHEET

Liabilities CURRENT LIABILITIES Provisions Total Loan Fund Secured Loan Unsecured loan Deferred Tax Liability Total Liabilities NET WORTH Share Capital Reserves & Surplus Total TOTAL FUNDS Assets Inventory trade Debtors Cash & Bank Balance Others Loans & Advances Total Fixed Assets Gross Block Less: Accumulated Dep. Net Block Capital work in progress Total TOTAL ASSETS

2004 4.02 1.54 5.56 0.00 0.00 10.78 16.34 21.71 2.59 81.05 83.64 100.00 2004 6.45 8.69 22.93 0.05 2.63 40.75 77.65 20.44 57.21 2.04 59.25 100.00

2005 4.80 1.60 6.40 0.00 0.00 9.69 16.09 45.94 2.14 81.74 83.88 100.00 2005 8.03 10.94 14.57 0.06 3.26 36.86 77.66 15.76 61.90 1.20 63.10 100.00

2006 3.05 2.53 5.58 0.00 0.00 7.65 13.23 93.21 1.63 85.14 86.77 100.00 2006 8.07 12.45 19.10 0.11 2.46 42.20 67.74 13.03 54.71 3.09 57.80 100.00

INTERPRETATION

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60 The common size BS and the common size IS reveal that proportion of fixed assets out of total assets has reduced from 63.10 to 57.80 whereas the proportion of current assets has increased from 36.86 to 42.20. Out of total liabilities the proportion of current liabilities has decreased from 6.40 to 5.58 and the proportion of deferred tax liabilities has decreased from 9.69 to 7.65. The Net worth has increased from 83.88 to 134.77%. Further, the cost of goods sold has decreased from 65.77% to 57.30%. The Gross profit has increased from 34.23% to 42.70%. EBIT has also increased from 24.10% to 35.01% in the year 2005 to 2006. The Profit after tax has also increased from 16.36 to 23.31%. It can be observed that the CSS can be used for analyzing and comparing the financial position of a firm for two different periods or between two firms for the same year. This comparability was not available in the CFS because of difference in firms sizes or in different years. Of course, in order to make the CSS more meaningful, the analyst should ensure that accounting policies of different firms being compared or for different year are unchanged or not significantly different. TREND PERCENTAGE ANALYSIS The TPA is a technique of studying several financial statements over a series of years. In TPA the trend percentage are calculated for each item by taking the figure of that item for some base year as RS. 100. So, the trend percentage is the percentage relationship which each item of different years bears to the same item in the base year. Any year may be taken as the base year, but generally the starting/initial year is taken as the base year. So, each item for base year is taken as 100 and then the same item for other years is expressed as a percentage of the base year.

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61 TREND ANALYSIS IN (AMOUNT) 2003 2004 2005 Net sales Gross profit Operating income EBIT PBT PAT Current assets Current liabilities Fixed assets Net worth Dividend 106434777.90 38391735.28 28474596.45 29601699.35 29584724.35 18367679.35 34366668.45 6134656.75 76202825.74 104439337.44 1220625.00 136364336.34 45012219.20 33500130.04 35384221.84 35384221.84 22456026.84 23749400.78 7498212.45 88669138.15 127117111.32 1569375.00 167929269.91 47066196.20 37069585.46 40478409.12 40478409.12 26134491.12 60072876.22 10450017.90 102792527.10 152419885.42 1848375.00

2006 219589944.87 93756601.57 72732345.57 76881493.46 76881493.46 52162290.36 84857213.72 6504252.88 123436138.06 201793598.90 3058537.50

Trend analysis (in percentages) 2003 Net sales Gross profit Operating income EBIT ( Earning before interest and Taxes) PBT ( Profit before taxes) PAT ( Profit after taxes) Current assets Current liabilities Fixed assets Net .worth Dividend 100 100 100 100 100 100 100 100 100 100 100 2004 128.12 117.24 117.64 119.53 119.60 123.31 69.10 122.22 116.35 121.71 128.57 2005 157.77 122.59 130.18 136.74 136.82 143.51 174.79 170.34 134.89 145.94 151.42 2006 120.63 244.21 255.42 259.71 259.86 283.98 246.91 106.02 161.98 193.21 250.57

ANALYSIS OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET The Net sales of the company have been increased by 130.76 in the year 200506 to Rs.219589944.87 being the highest sales in the last year. The increase in sales is because of high prospects of the company. The Gross profit of the company is increased from 122.59 in 2005 to 163.10 in the year 2006.

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62 Operating income has increased by 192.92 in the year 2006 as compared to 130.18 in the 2005. EBIT (earning before interest and taxes) has increased 119.53 in 2004 and 136.74 in the 2005.

ANALYSIS OF FINANCIAL STATEMENT

SALES: sales
250000000 200000000 sales 150000000 100000000 50000000 0 1 2 3 years 4 5 years sales

Interpretation There is an increase in the sales of a company compared to other sales stations. The company registered a growth of 130.76 in 2005-2006 as compared 157.77 to the year 2004-05 The impact of turnover is indicated by the increased profits of the company.

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63 GROSS PROFIT:

Gross Profit
100000000 80000000 Gross Profit 60000000 40000000 20000000 0 1 2 years 3 years gross profit

Interpretation The gross profit for the year 2003-2004 was 45012219.20 it has increased 93756601.57 in the year 2005-2006as compared to 2004-2005 was 47066196.20. Gross profit includes sales- cost of goods sold. The gross profit is increased because of increase in sales and service of the company..

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64

OPERATING INCOME:

operating profit
80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 1 2 years 3

operating profit

years OI

Interpretation The operating income of the company was Rs. 93756601.57 in the year 20052006 and Rs.37069585.46 in the year 2004-2005. The company has increased its incomes for the last few years. In the year 2003-2004 it was Rs.33500130.04. The increase in operating income of the company is due to increase in sales.

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65 PROFIT BEFORE TAX: Profit before Tax


90000000 80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 1 2 years 3

PBT

years pbt

Interpretation The profit before tax is showing very good progress in their profit taxes during the few years. The companies profit before tax increased from Rs.35384221.84 in 2003-2004 & 40478409.12 in 2004-2005 and in 2005-2006 it was 76881493.46. That is increased by 119.60, 136.82, and 259.86 in the year 2003-2004, 2004-2005 & 2005-2006 respectively.

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66 PROFIT AFTER TAX: Profiit After Tax


60000000 50000000 40000000 PAT 30000000 20000000 10000000 0 1 2 years 3 years pat

Interpretation The company is showing very good progress in their net profit during the few years. The companys net profit increased from Rs. 22456026.84, 26134491.12, 52162290.36 in 2003-2004, 2004-2005 & 2005-2006. That is increased by 123.31, 143.51 & 283.98 in 2003-2004, 2004-2005 & 2005-2006 respectively.

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67 CURRENT ASSETS:

Current Assets
90000000 80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 1 2 years 3

CA

years CA

Interpretation The current assets and loans and advances all put together for the year 20042005 were Rs. 60072876.22. In the year 2005-06 it amounts to 84857213.72, current assets consists of inventories, cash & Bank balance and sundry debtors.

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68 CURRENT LIABILITIES:

current Liabilities
12000000 10000000 8000000 CL 6000000 4000000 2000000 0 1 2 years 3 years CL

Interpretation The current liabilities and provisions of the company stood at Rs. 10450017.90 in 2004-2005. it was Rs. 6134656.75 in 2003-2004. Compared to 2004-2005 the current liabilities have increased from 170.34 to 122.22 in 2003-2004.And in the year 2005-06 the liability have decreased to 106.02

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69 FIXED ASSETS:
Fixed Assets

Fixed assets

120000000 100000000 80000000 60000000 40000000 20000000 0 1 2 3 4 5 years

year fixed assets

Interpretation The fixed assets needs of the company have increased from 116.35 to 134.89 in 2003-2004 & 2004-2005. For the year 2005-06 it is 161.98. The total fixed assets are arrived after deducting depreciation from the gross block & net block is calculated capital. Fixed assets include: land & building, Furnitures etc.

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70 NET WORTH:

Net Worth
250000000 200000000 Net Worth 150000000 100000000 50000000 0 1 2 Years 3 years NW

Interpretation The net worth has increased from 121.71 to 145.94 in the year 2003-2004 & 2004-2005. for the year 2005-06 it is 193.21 The net worth includes share capital, Reserves and loans.

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71 DIVIDEND:

Dividend
3500000 3000000 Dividend 2500000 2000000 1500000 1000000 500000 0 1 2 Years 3 years Dividend

Interpretation The dividend of the company has increased from 1848375 in the year 20042005. That is in 2003-2004 it was 128.57 & 151.42 in 2004-2005. In the last year the dividend declare was 3058537.50 and the percentage increase is upto 250.57%.

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72 RATIO ANALYSIS Meaning Ratio analysis is a widely-used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements to that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. A ratio is relationship expressed in mathematical terms between two individual and groups of figures connected with each other in some logical manner. The relationship between two or more accounting figures/groups is called financial ratio. A financial ratio helps to summarize a large mass of financial data into a concise form and to make meaningful interpretation and conclusion about the performance and positions of a firm.

Types Of Ratio Ratio can be classified into four broad groups: Liquidity ratios, Leverage ratios, Activity ratios and Profitability ratios. Liquidity ratio 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 ratio, by establishing a relationship between cash and other current assets to current obligation, provide a quick measure of liquidity. The most common ratios which indicate the extent of liquidity are: Current ratio and Quick ratio Current Ratio: The current ratio is calculated by dividing current assets by current liabilities:

Current ratio =

Current assets

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73 Current liabilities

Current assets include cash and those assets which can be converted into cash within a year, such as marketable securities, debtors and inventories. The current ratio gives the margin by which the value of the current assets may go down without creating any payment problem for the firm. This represents a margin of safety for the liabilities. The higher the current ratio, the greater is the margin available and the less is the chance of firms failure to meet its commitments in time. It must be noted that the current ratio considers only the quantity of current assets ignores the quality of current assets. Chart showing current assets to current liabilities:

8 7 6 5 4 3 2 1 0 year 19992000 20002001 20012002 20022003 20032004

Interpretation

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74 As a matter of policy or as referred to as bankers rule of thumb, the current ratio of 2:1 is considered to be satisfactory. The analysis is proved that the current ratio position of the PPL is excellent. That is 2.50 times in 2000, 3.09 times in 2001, 7.45 times in 2002, 5.60 times in 2003 and in 2004 it was 6.12 times. Quick Ratio Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Inventories are considered to be less liquid. Inventories normally require some time for realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick asset by current liabilities. Quick ratio = Current assetsInventories _______________________ Current liabilities

A Chart Showing That Quick Assets To Current Liabilities


6 5 4 3 2 1 0 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

Series1

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75 Interpretation As a rule of thumb or as a conversion, quick ratio of 1:1 is considered satisfactory. The company having an excellent liquidity. That is in the years 2000,2001,2002,2003 and 2004 the quick conversion ratio is 1.97, 2.35, 5.54, 4.65 and 5.15 times respectively of the current liabilities. However the satisfaction or unsatisfaction of the liquidity position will entirely depend on debtors the company cannot be liquid in spite of its liquidity ratio if it has slow paying ratio. Calculation of Liquidity Ratios Explanation (a) CURRENT RATIO Current assets Current liabilities (b) QUICK RATIO Current assets-inventories Current liabilities Fixed Assets to Net Worth Fixed assets = Net fixed assets ______________ Net worth 19992000 2.50 20002001 3.09 20012002 7.45 20022003 5.60 20032004 6.12

1.97

2.35

5.54

4.65

5.15

Chart Showing Net Fixed Assets to Net Worth


8 0 7 8 7 6 7 4 7 2 7 0 6 8 6 6 6 4 6 2 ya er 1999 20 00 2000 20 01 2001 20 02 2002 20 03 2003 20 04 Sr s eie 1

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76 Interpretation The fixed assets to net worth ratio are continuously decreasing. In 1999-2000 it was very high. In 2000-2001 it was constant. coming to 2001-2002, 2002-2003 and 2003-2004 it is come down. Current Assets To Net Worth Current assets _____________ Net worth Chart Showing Current Assets to Net Worth
40 35 30 25 20 15 10 5 0 year 19992000 20002001 20012002 20022003 20032004 Series1

Current assets =

Interpretation The ratio of PPL is fluctuating for all this years. It was 30.00 for the year ending 2000. In the year 2001 increased to 31.7 and for the year 2002 it was decreased to 29.02 and it was increased to 32.90 for the year 2003.again it is largely increased to 36.10 for the year ending 2004.maintaining the efficient utilization current assets for this year.

Current Liabilities To Net Worth

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77

Current liabilities To net worth

Current liabilities _________________ Net worth

Chart Showing Current Liabilities To Net Worth


1 4 1 2 1 0 8 6 4 2
0 0 0 1 0 2 0 3 r

Sr s eie 1

0
y e

-2

-2

-2

-2

Interpretation This ratio is higher in the year 1999-2000. It is continuously decreased it is a good sign for the company. In the year 2001-2002 this ratio is very low i.e. 3.89. Again it increased in the year 2002-2003 and 2003-2004 it was 5.87 and 5.90. Calculation Of Ratios Explanation

FIXED ASSETS TO NET WORTH Net fixed assets * 100 Net worth CURRENT ASSETS TO 30.00 NET WORTH Current assets * 100 Net worth CURRENT LIABILITIES TO NET WORTH 11.95 Current liabilities * 100 Net worth Activity Ratio

19992000 78.53

20002001 77.47

-2

0 4

20012002 72.31

20022003 70.76

20032004 67.97

31.75

29.02

32.90

36.10

10.27

3.89

5.87

5.90

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78 Funds of creditors and owners are invested in various assets to generate sales and profits. Better the management of assets, the larger the amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. This ratio also called turnover ratio because they indicate the speed with which assets are being converted or turned over between sales and assets generally reflects that assets are managed well. Types of Activity Ratio Cash turnover ratio, Debtors turnover ratio, Collection period, Working capital ratio and Total asset ratio Cash Turnover Ratio

Formula: Cash turnover ratio = Net annual sales ______________ Cash

Chart Showing Net Annual Sales to Cash

14 12 10 8 6 4 2 0 1 year 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

Interpretation

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79 The ratio of PPL was 5.28 for the year ending 2004. It is increased to 12.62 for the year ending 2000. Again it decreased to 9.51, 7.38 & 6.06 for the year ending 2001, 2002 and 2003 respectively. The cash turnover ratio is continuously decreasing. Debtors Turnover Ratio It indicates the velocity of debt collection of the firm. In simple words, it indicates the number of times average debtors are turned over during a year. Debtors turnover ratio = Net annual sales __________________ Average Debtors

Chart Showing Debtors To Sales

18 16 14 12 10 8 6 4 2 0 year 19992000 20002001 20012002 20022003 20032004

Series1

Interpretation The PPL Debtors turnover ratio has been continuously decreasing from past four years i.e. 2000, 2001, 2002 and 2003. This means that the company is not realizing its money from its debtors or it can also mean that the company is not generating more cash sales. Working Capital Turnover Ratio

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80 Working capital of a concern is directly related to sales. The current assets like debtors, bills receivables, cash, stock etc. change with the increase or decrease in sales. The working capital is taken as Working capital = current assets current liabilities. Working capital Turnover ratio = Net annual sales ___________________ Working capital

Chart Showing Net Annual Sales To Working Capital


9 8 7 6 5 4 3 2 1 0 ya er 1999 20 00 2000 20 01 2001 20 02 2002 20 03 2003 20 04 S rie e s1

Interpretation The working capital turnover ratio is 6.61 times in 2000 & the same is reduced by 5.38 times in 2001. In 2002 and 2003 it is further reduced by 3.61 & 3.77. In 2004 it is increased from 8.39 times. The working capital turn over ratio is low in 2000, 2001, 2002, and 2003 when compared to 2004. Total Assets Turnover This ratio shows the firms ability in generating sales from all financial resources committed to total assets. Total assets turnover = Sales _________ Total asset 80

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Chart Showing Sales To Total Asset


1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 y ear 19992000 20002001 20012002 20022003 20032004 Series1

Interpretation The Total assets turnover ratio of PPL has been increasing for the last two years i.e. 2003 and 2004. The higher assets turnover ratio being in the year 2004 i.e. 1.40 & lowest being in the year 2002 i.e. 1.00. The company is utilizing its fixed assets effectively than earlier years.

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82

Calculation Of Activity Ratios Explanation (b) CASH TURNOVER Net annual sales Cash (c ) WORKING CAPITAL TURNOVER Net annual sales Working capital (d) DEBTORS TURNOVER Net annual sales Debtors (e) TOTAL ASSETS TURNOVER Sales ________ Total assets

199920002001200220032000 2001 2002 2003 2004 12.62 6.61 9.51 5.38 7.38 3.61 6.06 3.77 5.28 8.39

16.55

15.65

14.33

11.87

13.93

1.16

1.13

1.00

1.11

1.40

Profitability Ratio Profit is the difference between Revenues and Expenses over a period of time. Profit is the ultimate output of a company and it will have no future if it fails to make sufficient profits. The profitability ratios are calculated to measure the operating efficiency of the firm. Besides the management, the creditors and the owners are also interested in the profitability of the firm. This is possible only when the company earns enough profits.

Types Of Profitability Ratios Gross profit margin, Net profit margin, Earning per share, Dividend payout ratio, Dividend earning ratio and Price earning ratio

Gross profit margin BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 82

83 The Gross profit ratio is also called the average mark up ratio. It is calculated by comparing the Gross profit of the firm with the Net sales as follows: GP ratio = Gross profit ______________ * 100 Net sales

Chart Showing Gross Prof To Net Sales

35 30 25 20 15 10 5 0 year 1999- 2000- 2001- 2002- 20032000 2001 2002 2003 2004 Interpretation: The operating profit margin is high in the year 2001 and 2003. and then the operating profits has reduced in the year 2000, 2002, 2004 that is because of increase in the inventory high cost of production and inefficient utilization of current as well as fixed assets. The highest being in the year 2003 i.e. 31.19 & the lowest being in the year 2002 is 27.94. Net Profit Margin Net profit margin ratio establishes between net profit and sales and indicates Manufacturing, Administration and selling the products. Series1

Net profit margin =

Profit after taxes _______________

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84 Sales

Chart Showing Profit after Tax To Sales


ratio 20 18 16 14 12 10 8 6 4 2 0 19992000 20002001 20012002 20022003 20032004

ratio

Interpretation The Net profit margin behaves same as the operating profits/Gross profits margin. The higher operating expensive being in the year 2003 and the lowest in the year 2000. Earning Per Share Earning per share shows the profitability of the firm on a per share basis, it does not reflect how much is paid as dividend and how much is retained in the business. Earning per share = Profit after taxes ___________________ Number of common share

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85

Chart Showing Profit After Taxes To Number Of Common Shares

700 600 500 400 300 200 100 0 year 19992000 20002001 20012002 20022003 20032004 Series1

Interpretation EPS as a measure of profitability of a firm from the owners point of view, should used. The EPS is continuously increasing. In the year 1999-2000 it was 305. in the year Dividend Payout Ratio Earnings not distributed to the shareholders are retained in the business. Thus retention ratio is 1 payout ratio. Dividend payout ratio = Dividend per share ___________________ Earnings per share

Chart Showing Dividend Per Share To Earning Per Share

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86

ra tio 0 9 .0 0 8 .0 0 7 .0 0 6 .0 0 5 .0 0 4 .0 0 3 .0 0 2 .0 0 1 .0 0 1999 20 00 2000 20 01 2001 20 02 2002 20 03 2003 20 04

ra tio

Interpretation The dividend payout ratio is an important and widely used ratio. In the year 1999-2000 it was 0.077 it was continuously decreased for the year 2000-2001, 20012002, 2002-2003, & 2003-2004. it was 0.072, 0.060, 0.066, & 0.069. Dividend Earnings/Yield Ratio The dividend yield and the earnings yield evaluate the shareholders return in relation to the market value of the share. The earnings yield is called the earnings price ratio. Dividend earnings ratio = Dividend per share ____________________ Market value per share

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87 Chart Showing Dividend Per Share To Market Value Per Share

0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 year 1999- 2000- 2001- 2002- 20032000 2001 2002 2003 2004 Series1

Interpretation The dividend earning ratio is fluctuating. In the year 1999-2000 it was 0.061 it was increased in the year 2000-2001 was 0.071, in the year 2001-2002, 2002-2003 and 2003-2004 it was 0.055, 0.090 & 0.116. Price Earnings Ratio The reciprocal of the earnings yield is called the price earning ratio. Price earning ratio = Market value per share/ Book value per share _____________________________________ Earning per share

P/E Ratio reflects investors expectations about the growth in the firms earnings.

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88 Chart Showing Market Value Per Share To Earning Per

140 120 100 80 60 40 20 0 Year 1999- 2000- 2001- 2002- 20032000 2001 2002 2003 2004
Interpretation This ratio is popularly used by security analyst to assess a firms performance as expected by the investors. It is continuously decreasing from the year 2000-2001 to 2003-2004.

Series1

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89 Calculation Of Profitability Ratios Explanation Gross Profit Gross profit * 100 Net sales Net Profit Net profit * 100 Net sales Earning Per Share Profit after tax * 100 No of common shares Dividend Payout Ratio Dividend per share Earning per share Dividend Earning Ratio Dividend per share Market value per share Price Earning Ratio Market value per share/book Earning per share Calculation Of Net Worth Particulars Fixed Assets Investments Current Assets Less: Payment of Advance tax Less: Outside Liabilities Secured Loans Unsecured Loans Current liabilities & provisions Less: Provision for tax Net worth 1999-2000 2000-2001 2001-2002 51235135.49 58614758.98 6443831.90 9500.00 9500.00 4500.00 18762894.52 23749400.78 24979849.06 0.00 70007530.01 0.00 0.00 2002-2003 76202825.74 4500.00 34366668.45 0.00 19992000 28.82 14.24 305 20002001 30.69 15.48 384 20012002 27.94 15.87 356 20022003 31.19 17.25 526 20032004 28.55 16.46 644

0.077 0.061 126.14

0.072 0.071 100.19

0.060 0.055 108.07

0.066 0.090 73.14

0.069 0.116 59.74

82373659.76 89428180.96 110573994.2

0.00 0.00 7477234.04 0.00

0.00 0.00 7682954.36 107475.00

0.00 0.00 3354562.37 0.00 86073618.09

0.0 0 0.0 0 6134656.7 5 0.0 0 104439337.5

62530295.97 74798180.40

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90

Particulars Fixed Assets Investments Current Assets Less: Payment of Advance tax Less: Outside Liabilities Secured Loans Unsecured Loans Current liabilities & provisions Less: Provision for tax Net worth

2003-2004 88669138.15 4500.00 45873660.62 0.00 134547298.80

2004-2005 102792527.10 4500.00 54760716.02 0.00 157557743.12

2005-2006 123436138.06 4500.00 84857213.72 0.00 208297851.78

0.00 0.00 7498212.45 0.00 127049086.4

0.00 0.00 7828695.91 0.00 149729047.21

0.00 0.00 6504252.88 0.00 201793598.90

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91 Findings The sales of the company are increasing so is the profits. In 2003-2004 the company earned the higher turnover. Profit in the last five years of comparison, the major portion is contributed by sales of the company. The companys profit over the last few years is increasingly high. The income of the company is increasing at a steady rate. The Share capital of the company has remained constant. The current assets of the company have decreased in 2002-2003 and it increased in the year 2001-2002 & 2003-2004. Debtors are the major current assets that the company holds. The debtors turnover ratio is 13.93 times in 2003-2004. The current ratio is increasing continuously. In the year 1999-2000 it was 2.50. It is increased to 7.45 in the year 2001-2002. The profitability ratio has improved over the years due to increase sales and profits.

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92

2 - RECOMMANDATION AND CONCLUSSION

Suggestions The firm is performing well and its sales are increasing over the years. But still the following is the suggestion if considered will prove to be beneficial to the company. There is huge investment in the current assets of the concern. The current ratio of the firm is very much higher than the normal standards. The firm should not unnecessarily block excess money in the current assets than normal requirement of the business. The cost of goods sold had increased continuously from 2004 to 2005. The firm should give attention to maximize the sale and minimize the direct costs. The liquidity ratio of the company is too high, so the company can invest its ideal funds in short-term securities, which can yield a favorable return to the company. The company can invest in mutual funds, which is more promising for higher yield. Polyhydron has net working capital more than requirements an unhealthy sign of profitability of the company. Under the light of the inferences drawn from the analysis, it is no exaggeration to conclude with information that the over all the financial analysis is fair and reasonably good and that promising future awaits the company.

Conclusion BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 92

93 Earning position of the company is continuously and positively increasing. The gross, operating and net profit margins are favorable. It makes uses some Japanese techniques, like kanban cards, net work system, jit etc. to manage its inventories. Various discount schemes to control and manage the accounts receivable. The company has to keep an eye on its liquidity position. As the liquidity position shows funds are lying idle, since they are idle, they are not being properly utilized. Thus profitability of the income may be affected. So high a liquidity position should be avoided in order to maintain and improve the profitability.

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94

CHAPTER - 4 Appendix Bibliography

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95

APPENDIX
Polyhydron Pvt. Ltd. Profit & Loss Account for the year ended 31st March 2000 Sch Income Sales Less: Trade Discount Other Income Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Net Profit Short provision for Income Tax Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Dividend Proposed(Final) Interim Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet I J K L M N O Amount (Rs) 81,455,069.80 6,782,668.44 74,662,401.36 492005.75 75,154,407.11 43,986,206.48 4,973,424.14 2,221,983.47 5,551,158.60 5,580.00 2,463,515.45 59,201,868.14 15952538.97 5325000.00 10627538.97 19023.00 495130.00 11,103,645.97 9312500.00 0.00 825000.00 90750.00 875395.97 11,103,645.97

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95

96 Polyhydron Pvt. Ltd. Profit & Loss Account for the year ended 31st March 2001 Sch Income Sales Less: Trade Discount Other Income Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Net Profit Less: Short Provision for Income tax Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Proposed Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet 12,000,000.00 966,037.50 98,536.00 1,035,805.40 14,100,378.90 I

Amount (Rs) 93,819,359.25 7,315,522.44 86,503,836.81 498,691.73 87,002,528.54 49,584,125.39 5,964,329.60 2,154,133.99 5,621,735.00 1,357.00 3,041,673.63 66,367,354.61 20,635,173.93 7,240,000.00 13,395,173.93 170,191.00 875,395.97 14,100,378.90

J K L M N O

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

96

97 Polyhydron Pvt. Ltd. Profit & Loss Account for the year ended 31st March 2002 Sch Income Sales Less: Trade Discount Other Income Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton I

Amount (Rs) 90,176,177.50 11,933,579.00 78,242,598.50 880,895.72 79,123,494.22 44,779,400.33 6,274,616.00 1,989,378.56 4,736,170.33 1,605.00 3,615,369.81 613,965,540.03

J K L M N O

Profit before Taxation Provision for Taxation Excess/ Short Provision for Income Tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Dividend Proposed(Final) Interim Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet

17,726,954.19 (5,500,000.00) 191,501.00 12,418,455.19 1,035,805.40 13,454,260.59

12,000,000.00 209,250.00 749,812.50 76,480.00 418,718.09 13,454,260.59

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

97

98 Polyhydron Pvt. Ltd. Profit & Loss Account for the year ended 31st March 2003 Particulars Sch Income Sales Less: Trade Discount Other Income Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton I

Amount (Rs)

123,058,719.90 16,623,942.00 106,434,777.90 1,127,102.90 107,561,880.80 59,518,046.01 6,021,954.20 2,503,042.41 5,984,892.69 16,975.00 3,932,246.14 77,977,156.45

J K L M N O

Profit before Taxation Provision for Taxation Deferred Tax Adjustment Excess/ Short Provision for Income Tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Dividend: Proposed(Final) Interim Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet

29,584,724.35 (10,000,000.00) 1,375,058.00 158013.00 18,367,679.35 418,718.09 18,786,397.44

16,000,000.00 1,220,625.00 0.00 156,393.00 1,409,379.44 18786,397.44

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

98

99 Polyhydron Pvt. Ltd. Profit & Loss Account for the year ended 31st March 2004 Particulars Sch Income Sales Less: Trade Discount Other Income Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton I

Amount (Rs) 157630517.34 21266181.00 136364336.34 1884091.80 138248428.14 79956380.80 8019583.30 3376153.00 7087973.87 0.00 4424115.29 102864206.26

J K L M N O

Profit before Taxation Provision for Taxation Deferred Tax Adjustment Excess/short provision for Income tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Proposed Dividend Corporate dividend Tax Balanced Carried to Balance Sheet

35384221.88 11000000.00 1928195.00 0.00 22456026.88 1409379.44 23865406.32

20000000.00 1569375.00 205098.00 2090933.32 23865406.32

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

99

100 Polyhydron Pvt. Ltd. Profit & Loss Account for the year ended 31st March 2005 Particulars Sch Income Sales Less: Trade Discount Other Income I Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Deferred Tax Adjustment Excess/short provision for Income tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Proposed Dividend Corporate dividend Tax Balanced Carried to Balance Sheet J K L M N O

Amount (Rs)

194,391,257.91 26,461,988.00 167,929,269.91 3,408,823.66 171,338,093.57 101613720.51 10418006.00 8831347.22 4904786.16 0.00 5091824.58 130859684.47 40478409.10 13000000.00 1343918.00 0.00 26134491.10 2090933.32 28225424.42 23151068.00 1848375.00 259235.00 2966746.42 28225424.42

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 100

101 Polyhydron pvt. Ltd. Balance Sheet as at 31st March 2000 Particulars Sources of Funds Shareholders Funds a) Share Capital b) Reserve & Surplus Loan Fund Secured Loans Unsecured Loans Total Application of Funds Fixed Assets Gross Block Depreciation Net Block Capital work in progress Investments Current Assets Loans & Advances Inventory Sundry Debtors Cash & Bank balance Other current Assets Loans & Advances Current Liabilities & Provisions Current Liabilities Provision Net Current Asset Total

Sch. A B C D

Amount 3,487,500.00 59,042,795.97 __ __

Amount

62,530,295.97 _____________ 62,530,295.97

61,022,127.91 11,914,795.82 49,107,332.09 2127803.40

51,235,135.49 9500.00

F 3,982,026.84 4509093.46 5913957.80 28,341.77 4,329,474.65 18,762,894.52 6438784.04 1038450.00 7,477,234.04

11285660.48 62530295.49

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 101

102 Polyhydron pvt. Ltd. Balance Sheet as at 31st March 2001 Particulars Sources of Funds Shareholders Funds a) Share Capital b) Reserve & Surplus Loan Fund Secured Loans Unsecured Loans Total Application of Funds Fixed Assets Gross Block Depreciation Net Block Capital work in progress Investments F Current Assets Loans & Advances Inventory Sundry Debtors Cash & Bank balance Other current Assets Loans & Advances Current Liabilities & Provisions Current Liabilities Provision Net Current Asset Total 5,636,731.45 5,524,714.27 9,092,050.55 58,444.77 3437459.74 23,749,400.78 6,358,245.86 1,324,708.50 7,682,954.36 16,066,446.42 74,690,705.40 9500.00

Sch. A B C D

Amount 3,487,500.00 71,203,205.40 __ __

Amount

74,690,705.40 _____________ 74,690,705.40

72,445,401.06 14,492,454.98 57,952,946.08 661,812.90

58,614,758.98

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 102

103 Polyhydron pvt. Ltd. Balance Sheet as at 31st March 2002 Particulars Sources of Funds Shareholders Funds a) Share Capital b) Reserve & Surplus Loan Fund Secured Loans Unsecured Loans Total Application of Funds Fixed Assets Gross Block Depreciation Net Block Capital work in progress Investments Current Assets Loans & Advances Inventory Sundry Debtors Cash & Bank balance Other current Assets Loans & Advances Current Liabilities & Provisions a)Current Liabilities b)Provision Net Current Asset Total E 78,535,008.97 16,288,541.97 62,246,467.00 2,197,364.90

Sch. A B C D

Amount 3,487,500.00 82,586,118.09 __ __

Amount

86,073,618.09 _____________ 86,073,618.09

64,443,831.90 4500.00

F 6383108.91 5458492.54 10,598,594.61 9024.00 2530629.00 24,979,849.06 29,59,930.87 394,632.00 3,354,562.87

21,625,286.19 86,073,618.09

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 103

104 Polyhydron pvt. Ltd. Balance Sheet as at 31st March 2003 Particulars Sources of Funds Shareholders Funds a) Share Capital b) Reserve & Surplus Loan Fund Secured Loans Unsecured Loans Deferred Tax Balance Deferred Tax liabilities [less] Deferred Tax assets Application of Funds Fixed Assets Gross Block Depreciation Net Block Capital work in progress Investments Current Assets Loans & Advances Inventory Sundry Debtors Cash & Bank balance Other current Assets Loans & Advances Current Liabilities & Provisions Current Liabilities Provision Net Current Asset Total

Sch. A B C D

Amount 3,487,500.00 88,425,711.44 ____ 13,106,352.00 580,226.00

Amount

91,913,211.44

12,526,126.00 104,439,337.44

92,764,524.16 18859757.32 73904766.84 2298058.90 76,202,825.74 4500.00 5,862,566.50 8,963,006.29 17,539,009.88 43,024.00 1,959,061.78 34,366,668.45 4502472.75 1632184.00 6,134,656.75 28,232,011.70 104,439,337.44

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 104

105 Polyhydron pvt. Ltd. Balance Sheet as at 31st March 2004 Particulars Sources of Funds Shareholders Funds a) Share Capital b) Reserve & Surplus Loan Fund Secured Loans Unsecured Loans Deferred Tax liabilities Total Application of Funds Fixed Assets Gross Block Depreciation Net Block Capital work in progress Investments Deferred Tax Asset Current Assets Loans & Advances Inventory Sundry Debtors Cash & Bank balance Other current Assets Loans & Advances Current Liabilities & Provisions Current Liabilities Provision Net Current Asset Total 109361707.52 22998420.27 86363287.25 2305850.90 88669138.15 4500.00 F 68025.00 7257595.91 9785217.36 25804229.25 63930.00 2962688.10 23,749,400.78 5421145.45 2077067.00 7498212.45 38375448.17 127117111.32

Sch. A B C D

Amount 3,487,500.00 109107265.32 __ __

Amount

112594765.32 _____________ 112594765.32 14522346.00 127117111.32

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 105

106 Polyhydron pvt. Ltd. Balance Sheet as at 31st March 2005 Particulars Sources of Funds Shareholders Funds a) Share Capital b) Reserve & Surplus Loan Fund Secured Loans Unsecured Loans Deferred Tax liabilities Total Application of Funds Fixed Assets Gross Block Depreciation Net Block Capital work in progress Investments Current Assets Loans & Advances Inventory Sundry Debtors Cash & Bank balance Other current Assets Loans & Advances Current Liabilities & Provisions Current Liabilities Provision Net Current Asset Total F 13,089,152.00 17,827,350.73 23,739,746.57 104,467.08 5312,159.84 60,072,876.22 7,828,695.91 2621321.99 10450017.90 49622858.32 152,419885.32

Sch. A B C D

Amount 3,487,500.00 133,134,146.42 __ __

Amount

136,621,646.42

15,798,239.00 152,419,885.42

126,494,000.79 25,671,425.59 100,822,575.20 1,969,951.90

102,792,527.10 4500.00

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 106

107

2 - BIBLIOGRAPHY

1. Prasanna Chandra,

Financial management Tata MC Grew Hill Publishing. Pp 557- 580

2. I.M pandey,

Financial management Vikas publishing, PP 108 180.

3. R.P Rustagi,

Financial management Galgotia Publishing Company

4. M.Y Khan

Financial management

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 107

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