Chapter 1

Introduction

Chapter - I INTRODUCTION ABOUT THE STUDY

1.1.INTRODUCTION Financial Management is the specific area of finance dealing with the financial decision corporations make, and the tools and analysis used to make the decisions. The discipline as a whole may be divided between long-term and short-term decisions and techniques. Both share the same goal of enhancing firm value by ensuring that return on capital exceeds cost of capital, without taking excessive financial risks. Capital investment decisions comprise the long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. Short-term corporate finance decisions are called working capital management and deal with balance of current assets and current liabilities by managing cash, inventories, and short-term borrowings and lending (e.g., the credit terms extended to customers). Corporate finance is closely related to managerial finance, which is slightly broader in scope, describing the financial techniques available to all forms of business enterprise, corporate or not.One of the most important long term decisions for any business relates to investment. Investment is the purchase or creation of assets with the objective of making gains in the future. Typically investment involves using financial resources to purchase a machine/ building or other asset, which will then yield returns to an organisation over a period of time. Ratio analysis is primarily used to compare a company's financial figures over a period of time, a method sometimes called trend analysis. Through trend analysis, you can identify trends, good and bad, and adjust your business practices accordingly. You can also see how your ratios stack up against other businesses, both in and out of your industry.

1.2. OBJECTIVE OF THE STUDY 1. To appraise financial position using the ratio analysis. 2. To determine the level of profit generated 3. To determine the expense and investments of the company 4. To study the liquidity position of the concern by considering the position of current liabilities.

1.3.

SCOPE FOR THE STUDY

Making big investment decisions means that we must allocate substantial amounts of major resources of people, time, technology, intellectual capital, and, of course, money. A high-quality decision process requires that our choices are doable and well formulated, that consequences are understood and well explored, that our preferences are included when comparing the full array of costs and benefits of the proposed decisions, and that any actions we take are focused on getting results.

One of the most important long term decisions for any business relates to investment. Investment is the purchase or creation of assets with the objective of making gains in the future. Typically investment involves using financial resources to purchase a machine/ building or other asset, which will then yield returns to an organisation over a period of time. Key considerations in making investment decisions are:

1. What is the scale of the investment - can the company afford it? 2. How long will it be before the investment starts to yield returns? 3. How long will it take to pay back the investment? 4. What are the expected profits from the investment? 5 3

1.4. INDUSTRY OVERVIEW

Construction
In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking. Normally, the job is managed by a project manager, and supervised by a construction manager, design engineer, construction engineer or project architect. For the successful execution of a project, effective planning is essential. involved with the design and execution of the infrastructure in question must consider the environmental impact of the job, the successful scheduling, budgeting, construction site safety, availability of building materials, logistics, inconvenience to the public caused by construction delays and bidding, etc.

Types of construction projects

In general, there are two types of construction: 1. Building construction 2. Industrial construction Each type of construction project requires a unique team to plan, design, construct and maintain the project. GAAP has carved out a special niche for construction contractors. While there is no FASB Statement for this area, AICPA Accounting Research Bulletin (ARB) No. 45, Long-Term Construction-Type Contracts, (1955) and AICPA Statement of Position (SOP) 81-1, Accounting for Performance of Construction-Type and Certain ProductionType Contracts, (1981) address it specifically. There is also an excellent AICPA Audit and Accounting Guide, Construction Contractors.

Because most construction contracts by their nature are long-term, the underlying accounting principle known as matching expenses follow revenues would be violated if the revenue from the contract were recognized upon contract execution or sale of the services. There are two methods of revenue recognition are allowed under the preceding pronouncements for construction contractors. One is percentage of completion (PC) method and the other is completed contract (CC) method. Under the PC method, the construction contractor recognizes revenue over the life of the construction contract based on the degree of completion: 50% completion means recognition of one-half of revenues, costs, and income. Under the CC method, all revenues, costs, and income are recognized only at completion of the construction project, ordinarily at the end of the construction contract. SOP 81-1 requires that the PC method be used in lieu of the CC method when all of the following are present: 1. Reasonably reliable estimates can be made of revenue and costs; 2. The construction contract specifies the parties rights as to the goods, consideration to be paid and received, and the resulting terms of payment or settlement; 3. The contract purchaser has the ability and expectation to perform all contractual duties; and 4. The contract contractor has the same ability and expectation to perform. The CC method is used in rare circumstances, which are set forth in SOP 81-1 to be any of the following: 1. The contract is of a short duration (not defined), Such as 24 months or less. As a result, the recognized revenue would not differ under the PC or CC methods; 2. The contract violates any one of the items 1 through 4 above; or

3. The contracts project exhibits documented extraordinary, nonrecurring business risks (such as extinguishing oil well fires in a country while hostilities are continuing). In applying these revenue recognition methods, it is important that the following five items be kept in mind: Generally, each construction contract is treated as a profit center, with its own revenues, costs, and income. There are, however, circumstances in which multiple contracts, change orders, or options, for example, create the issue of whether to combine contracts into one profit center or to segment the contracts into separate profit centers. SOP 81-1 sets forth the criteria for combining and segmenting construction contracts. As a general rule, the more interrelated and cohesive a project for example, through substantial common costs, a single buyer, or concurrent performance of steps in the project the more the scales tip in favor of combining. In contrast, when 1) separate project components have bids distinct from the entire project; 2) the buyer may choose to accept any, all, or more of the bids; and 3) the components of the project have the approximate revenues, costs, and income of a stand-alone project, then segmenting the contract is permissible. For such segmentation, SOP 81-1 has additional requirements that should be reviewed. GAAP requires that the accrual method be used for all reported billings and costs and losses. Cost allocation is based on direct and indirect costs as well as construction period interest. Assets are represented by under billings (estimated costs and earnings exceed billings) whereas liabilities are shown as overbillings (billings exceed estimated costs and earnings).

History
The first huts and shelters were constructed by hand or with simple tools. As cities grew during the Bronze Age, a class of professional craftsmen, like bricklayers and carpenters, appeared. Occasionally, slaves were used for construction work. In the Middle Ages, these were organized into guilds. In the 19th century, steam-powered machinery appeared, and later diesel- and electric powered vehicles such as cranes, excavators and bulldozers. Modern-day Construction involves creating awesome structures that can show the beauty and creativity of the human intellect.

1.5.

COMPANY OVERVIEW

Grace Field Builders and Developers Pvt. Ltd is engaged in construction business and manufacturing of Cement Product. The company was incorporated during 2004 at Rippon, wayanad district located in Kerala. The constitution of the company in the beginning was a partnership, which was later a limited company .The founder chairman Mr. Ashraf.P and Managing Director of the company and K. Shihab and Kunjali are the board of directors. They have businesses in textile industry ,Tea leaf agencies, whole sale dealer in Tea Powder and Real estate. VISION The vision of the company is: To become a global player committed to international quality, standards, efficient pricing and provide excellent service. MISSION The mission of the company is: To optimize the value like customer satisfaction, creating share holders wealth through human resource department 7

PLANT LOCATION

The factory is situated at Rippon, meppadi, wayanad district. The registered office is situated at Real Wedding centre Complex Ootty Road, vaduvanchal, wayanad District. The auditors of the company is T.P. Poul and Associates, Kalpetta, wayanad.

The bankers are Vijaya Bank, South Indian Bank, Indian Bank and State Bank of India

OTHER GROUP OF INDUSTRIES Real Wedding Centre - Textile Business Real Associates suppliers in Tea Leaf Real Agencies - whole sale distributer in Tea dust

THE ORGANISATIONAL STRUCTURE

The Organization has 5 departments which are as follows.

Production Departments Marketing Departments Finance Departments Human Resource Departments Purchase Departments

Chapter II

Concept and Review literature

Chapter II CONCEPT AND REVIEW OF LITERATURE 2.1. CONCEPT

RATIO ANALYSIS FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. The information in the statements is used by Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position of the company. Investors, to know about the present and future profitability of the company and its financial structure. Management, in every aspect of the financial analysis. It is the responsibility of the management to maintain sound financial condition in the company.

RATIO ANALYSIS The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as Percentages Fractions Proportion of numbers 10

Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment. STEPS IN RATIO ANALYSIS The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm. Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action. BASIS OR STANDARDS OF COMPARISON Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types. Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the some most progressive and successful competitor firm at the same point of time. Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or pro forma financial statements

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NATURE OF RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis. Selection of relevant data from the financial statements depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs. INTERPRETATION OF THE RATIOS The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways. Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison

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GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool

LIMITATIONS OF RATIO ANALYSIS Differences in definitions Limitations of accounting records Lack of proper standards 13

No allowances for price level changes Changes in accounting procedures Quantitative factors are ignored Limited use of single ratio Background is over looked Limited use Personal bias

CLASSIFICATIONS OF RATIOS The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows: 1. Traditional Classification 2. Functional Classification 3. Significance ratios

1. Traditional Classification It includes the following. Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,

14

Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios. 3. Significance ratios Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE

1. Liquidity ratio 2. Leverage ratio 3. Activity ratio 4. Profitability ratio

1. LIQUIDITY RATIOS Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-term current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. 15

To measure the liquidity of a firm the following ratios can be calculated Current ratio Quick (or) Acid-test (or) Liquid ratio Absolute liquid ratio (or) Cash position ratio

(a) CURRENT RATIO: Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm.

Components of current ratio

CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses

CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

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(b) QUICK RATIO Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash with in a short period without loss of value. Components of quick or liquid ratio QUICK ASSETS Cash in hand Cash at bank Bills receivable Sundry debtors Marketable securities Temporary investments CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

(c) ABSOLUTE LIQUID RATIO Although receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets. Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth current liabilities in time as all the creditors are nor accepted to demand cash at the same time and then cash may also be realized from debtors and inventories.

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Components of Absolute Liquid Ratio ABSOLUTE LIQUID ASSETS Cash in hand Cash at bank Interest on Fixed Deposit CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

2. LEVERAGE RATIOS The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations. Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings.

The following ratio serves the purpose of determining the solvency of the concern. Proprietory ratio

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(a) PROPRIETORY RATIO A variant to the debt-equity ratio is the proprietory ratio which is also known as equity ratio. This ratio establishes relationship between share holders funds to total assets of the firm.

SHARE HOLDERS FUND Share Capital Reserves & Surplus

TOTAL ASSETS Fixed Assets Current Assets Cash in hand & at bank Bills receivable Inventories Marketable securities Short-term investments Sundry debtors Prepaid Expenses

3. ACTIVITY RATIOS Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly effect the volume of sales. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are converted or turned over into sales. Working capital turnover ratio Fixed assets turnover ratio Capital turnover ratio Current assets to fixed assets ratio

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(a) WORKING CAPITAL TURNOVER RATIO It indicates the velocity of the utilization of net working capital. This indicates the no. of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio indicates inefficient utilization. Components of Working Capital CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

(b) FIXED ASSETS TURNOVER RATIO It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. (c) CAPITAL TURNOVER RATIOS Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of sales or sales with amount of capital invested in the business and not with assets held in the business, though in both cases the same result is expected. Capital invested in the business may be classified as long-term and short-term capital or as fixed capital and working capital or Owned Capital and Loaned Capital. All Capital Turnovers are calculated to study the uses of various types of capital.

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(d) CURRENT ASSETS TO FIXED ASSETS RATIO This ratio differs from industry to industry. The increase in the ratio means that trading is slack or mechanization has been used. A decline in the ratio means that debtors and stocks are increased too much or fixed assets are more intensively used. If current assets increase with the corresponding increase in profit, it will show that the business is expanding. Component of Current Assets to Fixed Assets Ratio CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses 4. PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. Net profit ratio Return on total assets Reserves and surplus to capital ratio Earnings per share Operating profit ratio Price earning ratio Return on investments 21 FIXED ASSETS Machinery Buildings Plant Vehicles

(a) NET PROFIT RATIO Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm. It also indicates the firms capacity to face adverse economic conditions such as price competitors, low demand etc. Obviously higher the ratio, the better is the profitability. (b) RETURN ON TOTAL ASSETS Profitability can be measured in terms of relationship between net profit and assets. This ratio is also known as profit-to-assets ratio. It measures the profitability of investments. The overall profitability can be known. (c) RESERVES AND SURPLUS TO CAPITAL RATIO It reveals the policy pursued by the company with regard to growth shares. A very high ratio indicates a conservative dividend policy and increased ploughing back to profit. Higher the ratio better will be the position. (d) EARNINGS PER SHARE Earnings per share is a small verification of return of equity and is calculated by dividing the net profits earned by the company and those profits after taxes and preference dividend by total no. of equity shares. The Earnings per share is a good measure of profitability when compared with EPS of similar other components (or) companies, it gives a view of the comparative earnings of a firm. (e) OPERATING PROFIT RATIO Operating ratio establishes the relationship between cost of goods sold and other operating expenses on the one hand and the sales on the other. However 75 to 85% may be considered to be a good ratio in case of a manufacturing under taking. Operating profit ratio is calculated by dividing operating profit by sales. 22

(f) PRICE - EARNING RATIO Price earning ratio is the ratio between market price per equity share and earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether (or) not to buy shares in a particular company. Generally, higher the price-earning ratio, the better it is. If the price earning ratio falls, the management should look into the causes that have resulted into the fall of the ratio. (g) RETURN ON INVESTMENTS Return on share holders investment, popularly known as Return on investments (or) return on share holders or proprietors funds is the relationship between net profit (after interest and tax) and the proprietors funds. The ratio is generally calculated as percentages by multiplying the above with 100. 2.2. REVIEW OF LITERATURE Ratios are a valuable analytical tool when used as part of a thorough financial analysis. They can show the standing of a particular company, within a particular industry. However, ratios alone can sometimes be misleading. Ratios are just one piece of the financial jigsaw puzzle that makes up a complete analysis. (Leslie Rogers, 1997) Financial ratios are widely used to develop insights into the financial performance of companies by both the evaluators and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Evaluators use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be differentiated. (Barnes, 1986) Financial ratios can be divided into several, sometimes overlapping categories. . Trend analysis works best with three to five years of ratios. The second type of ratio analysis, cross-sectional analysis, compares the ratios of two or more companies in similar lines of business. One of the most popular 23

forms of cross-sectional analysis compares a company's ratios to industry averages. These averages are developed by statistical services and trade associations and are updated annually. (Ezzamel, Mar-Molinero and Beecher, 1987) Financial ratios can also give mixed signals about a company's financial health, and can vary significantly among companies, industries, and over time. Other factors should also be considered such as a company's products, management, competitors, and vision for the future. (Fieldsend, Longford and McLeay, 1987) There are many different ratios and models used today to analyze companies. The most common is the price earnings (P/E) ratio. It is published daily with the transactions of the New York Stock Exchange, American Stock Exchange, and NASDAQ. These quotations show not only the most recent price but also the highest and lowest price paid for the stock during the previous fifty-two weeks, the annual dividend, the dividend yield, the price/earnings ratio, the day's trading volume, high and low prices for the day, the changes from the previous day's closing price. The price to earnings (P/E) ratio is calculated by dividing the current market price per share by current earnings per share. It represents a multiplier applied to current earnings to determine the value of a share of the stock in the market. The priceearnings ratio is influenced by the earnings and sales growth of the company, the risk (or volatility in performance), the debt equity structure of the company, the dividend policy, the quality of management, and a number of other factors. A company's P/E ratio should be compared to those of other companies in the same industry. (Garcia-Ayuso, 1994)

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Chapter III

Research and methodology

25

CHAPTER III RESEARCH METHODOLOGY 3.1. RESEARCH METHODOLOGY

This chapter presents the basic methodology and requirements in research. It includes the method of research, source of data, treatment of data, and tools, which were used in the study. 3.2. RESEARCH DESIGN Research design can be fixed as a framework or blue print for conducting the research project. A research without research design will be just like a doing work without any idea about it. So it is very much vital in research work. The study is partially descriptive in nature and partially analytical in nature as efforts are taken to describe as well to analyses the various areas of functions in financial affairs of the company.

3.3. RESEARCH INSTRUMENT

This research is based on secondary source of data and consists of annual reports, articles, web sites, and books. 3.4. SOURCE OF DATA COLLECTION The related information was collected from published annual reports of Grace Field Builders and Developers Pvt. Ltd. The annual reports contain the results of Grace Field Builders and Developers Pvt. Ltd. The annual reports containing the results of past performance is considered to be the most important & most reliable. Data required for the analysis is to obtain purely from secondary sources. The data with respect to current assets, current liabilities, sales, Purchases and other balance sheet items were collected from the published annual reports and reports of the company. The study is mainly conducted on the basis secondary sources of data for which are resorted to the annual reports of Grace Field Builders and Developers Pvt. Ltd. The study was carried out in accounts Department of Grace Field Builders and Developers Pvt. Ltd. 26

3.5. FINANCIAL TOOLS Ratio analysis

Ratio Analysis is a technique of analysis and interpretation of financial statement. It is a process of establishing and interpreting various ratios for helping in making certain decision Ratio analysis is not an end in itself. Accounting ratio is used to describe significant relationship which exist b/w figure shown in balance sheet and profit and loss account in budgetary entry control system any part of accounting organization. Correlation Correlation is a statistical measurement of the relationship between two variables. Possible correlations range from +1 to 1. A zero correlation indicates that there is no relationship between the variables. A correlation of 1 indicates a perfect negative correlation, meaning that as one variable goes up, the other goes down. A correlation of +1 indicates a perfect positive correlation, meaning that both variables move in the same direction together.

3.6. HYPOTHESIS The following hypothesis were established to test the relationship between different variables through correlation There is no relationship between Net sales Vs. Net profit There is no relationship between Net sales Vs. Total Assets There is no relationship between Net sales Vs. Gross Profit There is no relationship between Net sales Vs. current assets There is no relationship between Net Profit Vs. Working Capital

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Chapter IV

Data analysis & Interpretation

28

CHAPTER - IV 4.1. RATIO ANALYSIS

LIQUIDITY RATIO
4.1. CURRENT RATIO The following table shows the ratio of current asset to the current liabilities. Table No: 4.1 CURRENT RATIO Current Assets 2006 2007 2008 2009 2010 Average 585.74 697.65 720.21 913.28 1156.42 Current Liabilities
79.04 318.84 160.65 471.17 302.66

(Rs in 000) Ratio 7.41 2.19 4.48 1.94 3.82 3.87

Interpretation In the year of 2006 current ratio 7.41, in 2008 the ratio is 4.48, in 2010 the ratio is 3.82, 2007 the ratio is 2.19 and 2009 the ratio is 1.94 As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position of the firm. The huge increase in sundry debtors resulted an increase in the ratio, which is above the benchmark level of 2:1 which shows the comfortable position of the firm.

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CHART NO: 4.1. CURRENT RATIO

8 7 6 5 RATIOS 4 3 2 1 0

7.41

4.48 3.82 ratio 2.19 1.94

2006

2007

2008 YEAR

2009

2010

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4.2. QUICK RATIO The following table shows the ratio of quick assets to current liabilities

Table No:4.2 Quick Ratio

Year 2006 2007 2008 2009 2010 Average Quick Assets 585.74 524.70 698.83 894.33 1154.31 Current Liabilities 79.04 318.84 160.65 471.17 302.66

(Rs in 000)
Ratio 7.41 1.65 4.35 1.9 3.81 3.82

Interpretation In the year of 2006 the quick ratio is 7.41, 2008 the quick ratio is 4.35, 2010 the quick ratio is 3.81, 2009 the quick ratio is 1.9 and 2007 the quick ratio is 1.65. As a rule, the quick ratio with 1:1 (or) more is considered as satisfactory position of the firm. This is above the benchmark level of 1:1 which shows the comfortable position of the firm.

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Chart No. 4.2 QUICK RATIO

Ratio
8 7 6 Ratios 5 4 3 2 1 0 2006 2007 2008 Years 2009 2010 1.65 1.9 4.35 3.81 Ratio 7.41

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4.3.

ABOSULTE LIQUIDITY RATIO

The following table shows that the ratio of absolute liquid assets to current liabilities Table No. 4.3 ABOSULTE LIQUIDITY RATIO 000)
Year 2006 2007 2008 2009 2010 Average Absolute Liquid Assets 310.04 108.59 394.66 538.50 356.49 Current Liabilities 79.04 318.84 160.65 471.17 302.66 Ratio 3.92 0.34 2.46 1.14 1.18

(Rs in

Interpretation In the year of 2006 the absolute liquid ratio is 3.92, 2008 the absolute liquid ratio is 2.46, 2010 the absolute liquid ratio is 1.18, in 2009 the absolute liquid ratio is 1.14 and in the year of 2007 the absolute liquid ratio is 0.34. The acceptable norm for this ratio is 1:2; this is above the benchmark level of 1:2 which shows the comfortable position of the firm, except in the year of 2007.

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Chart No: 4.3 ABSOLUTE LIQUID RATIO

4.5 4 3.5 3 Ratios 2.5 2 1.5 1 0.5 0 2006 2007 2008 years 2009 2010 0.34 1.14 1.18 2.46 3.92

Category 1

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LEVERAGE RATIOS 1.3 PROPRIETORY RATIO

The following table showing that the proprietory ratio. Table No. 4.4 PROPRIETORY RATIO Year 2006 2007 2008 2009 2010 Average Share Holders Funds 676.79 533.01 702.31 564.73 970.60 Total Assets 785.72 884.38 891.58 1063.85 1298.05 (Rs in 000) Ratio 0.86 0.6 0.79 0.53 0.75 0.71

Interpretation In the year of 2006 the proprietory ratio is 0.86, in 2008 0.79, in 2010 0.75, in 2007 0.6, and in the year of 2009 the proprietory ratio is 0.53 There is no increase in the capital from the year 2007. The share holders funds include capital and reserves and surplus. The reserves and surplus is increased due to the increase in balance in profit and loss account, which is caused by the increase of income from sales

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Chart No: 4.4 PROPRIETORY RATIO

1 0.9 0.8 0.7 0.6 ratios 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 Years 2009 2010 ratio 0.6 0.53 0.86 0.79 0.75

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ACTIVITY RATIOS 4.5 WORKING CAPITAL TURNOVER RATIO

The below table shows that the working capital turnover ratio of five years. Table No: 4.5 Working capital turnover ratio Year 2006 2007 2008 2009 2010 Average Interpretation In the year of 2007 the working capital turn over ratio is 1.42, in 2008 1.31, in 2009 1.26, in 2010 1.13 and in the year of 2006 the ratio is 0.72 The average working capital ratio of five years is 1.17, which is comfortable for the firm Income From Sales 363.09 538.99 727.28 555.50 966.54 Working Capital 506.70 378.80 553.55 442.11 853.75 (Rs in 0000) Ratio 0.72 1.42 1.31 1.26 1.13 1.17

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Chart No: 4.5 WORKING CAPITAL TURNOVER RATIO

1.6 1.42 1.4 1.2 1 Ratios 0.8 0.6 0.4 0.2 0 2006 2007 2008 years 2009 2010 0.72 ratio 1.31 1.26 1.13

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4.6.

FIXED ASSETS TURNOVER RATIO

Table No: 4.6 Fixed Assets Turnover Ratio (Rs in 000) Ratio 1.26 1.82 4.24 3.69 6.82 3.57

The following table shows that the fixed assets turnover ratio of five years.

Year 2006 2007 2008 2009 2010 Average

Cost of sales 363.09 538.99 727.28 555.50 966.54

Net Fixed Assets 288.34 295.68 171.37 150.56 141.63

Interpretation
In the year of 2010 the fixed assets turnover ratio is 6.82, 4.24 in 2008, 3.69 in 2009, 1.82 in 2007 and 1.26 in 2006.

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Chart No: 4.6. Fixed Assets Turnover Ratio

8 7 6 5 ratios 4 3 2 1 0 2006 2007 2008 Years 2009 2010 1.82 1.26 4.24 3.69 ratio 6.82

40

4.7.

CAPITAL TURNOVER RATIO

The following table showing the ratio of cost of goods sold to capital employed for the period of five years Table No: 4.7 Capital Turnover Ratio Year 2006 2007 2008 2009 2010 Average Cost of goods sold 363.09 538.99 727.28 555.50 966.54 Capital Employed 371.75 533.01 702.31 564.73 970.60 (Rs in 000) Ratio 0.98 1.01 1.04 0.98 0.99 1.00

Interpretation
The above table shows that, in the year of 2008 the capital turnover ratio is 1.04, 1.01 in 2007, 0.99 in 2010, 0.98 in 2009 and 2006

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Chart No: 4.7 CAPITAL TURNOVER RATIO

1.05 1.04 1.03 1.02 Ratios 1.01 1 0.99 0.98 0.97 0.96 0.95 2006 2007 2008 Years 2009 2010 0.98 0.98 0.99 1.01 1.04

Ratio

42

4.8 CURRENT ASSETS TO FIXED ASSETS RATIO

The below table showing the current assets to fixed assets ratio for the period of five years Table No: 4.8 Current assets to fixed assets Ratio Year 2006 2007 2008 2009 2010 Average Current Assets 585.24 697.65 720.21 913.28 1156.42 Fixed Assets 199.98 186.72 171.37 150.56 141.63 (Rs in 000) Ratio 2.93 3.74 4.20 6.07 8.17 5.02

Interpretation
In the year of 2010 the current assets to fixed assets ratio is 8.17, in 2009 6.07, in 2008 4.20, in 2007 3.74, in 2006 2.93

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Chart No: 4.8 CURRENT ASSETS TO FIXED ASSETS RATIO

9 8 7 6.04 6 5 ratios 4 3 2 1 0 2006 2007 2008 years 2009 2010 2.93 3.74 4.2 Ratio 8.17

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GENERAL PROFITABILITY RATIOS

4.9. NET PROFIT RATIO

The below table showing the net profit ratio for the period of five years. Table No: 4.9 Net profit ratio Year 2006 2007 2008 2009 2010 Average Net Profit After Tax 211.23 161.25 169.29 182.59 405.86 Net sales 360.39 538.99 727.28 555.50 966.54 (Rs in 000) Ratio 0.59 0.30 0.23 0.33 0.42 0.37

Interpretation
In the year of 2006, the net profit ratio is 0.59, in 2010 the ratio is 0.42, in 2009 the ratio is 0.33, in 2007 the ratio is 0.30 and in the year of 2008 the net profit ratio is 0.23

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Chart No. 4.9 NET PROFIT RATIO

0.7 0.6 0.5 0.42 ratios 0.4 0.3 0.3 0.2 0.1 0 2006 2007 2008 years 2009 2010 0.23 0.33 Ratios 0.59

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4.10. OPERATING PROFIT

The below table showing the operating profit ratio for the period of five years. Table No: 4.10 Operating Profit Ratio Year 2006 2007 2008 2009 2010 Average Interpretation In the year of 2006 the operating profit ratio is 0.99, in 2010 the ratio is 0.70, in 2009 the ratio is 0.57, in 2007 the ratio is 0.51, in the year of 2008 the operating profit ratio is 0.41. Operating Profit 360.94 275.76 295.40 315.86 671.92 Net sales 363.09 538.99 727.28 555.50 966.54 (Rs in 000) Ratio 0.99 0.51 0.41 0.57 0.70 0.64

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Chart No: 4.10 OPERATING PROFIT

1.2 1 0.8 Ratios 0.6 0.4 0.2 0 2006 2007 2008 years 2009 2010 0.57 0.41 Ratios 0.99

0.7 0.51

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4.11. RETURN ON TOTAL ASSETS RATIO

The below table showing the Return on Total Assets Ratio for the period of five years. Table No: 4.11 Return on total assets ratio Year 2006 2007 2008 2009 2010 Average
INTERPRETATION

(Rs in 000) Ratio 0.27 0.18 0.19 0.17 0.31 0.22

Net Profit After Tax 211.23 161.25 169.29 182.59 405.86

Total Assets 785.72 884.38 891.58 1063.85 1298.05

In the year of 2010 the ratio is 0.31, in 2006 the ratio is 0.27, in 2008 the ratio is 0.19, in 2007 the ratio is 0.18 and in the year of 2009 the return on total assets ratio is 0.17.

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Chart No: 4.11 RETURN ON TOTAL ASSETS RATIO

Ratios
0.35 0.3 0.25 Ratios 0.2 0.15 0.1 0.05 0 2006 2007 2008 Years 2009 2010 0.18 0.19 0.17 Ratios 0.27 0.31

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4.12. RESERVES & SURPLUS TO CAPITAL RATIO

The below table showing the reserve and surplus to capital ratio for the period of five years. Table No: 4.12 Reserve and surplus to capital ratio Year 2006 2007 2008 2009 2010 Average Interpretation In the year of 2006 the reserve and surplus to capital ratio is 31.54, in the year of 2010 the ratio is 4.19, in the year of 2008 the ratio is 2.75, in 2009 the ratio is 2.02, in 2007 the ratio is 1.85 The reserves & surplus is decreased in the year 2009, due to the payment of dividends and in the year 2010 the profit is increased. But the capital is remaining constant from the year 2007. So the increase in the reserves & surplus caused a greater increase in the current years ratio compared with the older. Reserves & Surplus 655.99 345.82 515.11 377.54 783.40 Capital 20.79 187.19 187.19 187.19 187.19 (Rs. In 000) Ratio 31.54 1.85 2.75 2.02 4.19 8.47

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Chart No. 4.12 RESERVE & SURPLUS TO CAPITAL RATIO

35 30 25 Ratios 20 15 10 5 0 2006 2007 2008 Years 2009 2010 2.75 4.19 2.02 Ratios 31.54

1.85

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4.13. RETURN ON INVESTMENT

The below table showing the return on investment ratio for the period of five years Table No: 4.13 Return on investment ratio Year 2006 2007 2008 2009 2010 Average Net Profit After Tax 211.23 161.25 169.29 182.59 405.86 Share Holders Fund 676.79 533.01 702.31 564.73 970.60 (Rs. In 000) Ratio 0.31 0.3 0.24 0.32 0.42 0.32

Interpretation
In the year of 2010 the return on investment ratio is 0.42, in 2009 the ratio is 0.32, in 2006 the ratio is 0.31, in 2007 the ratio is 0.30, in 2008 the return on investment ratio is 0.24

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Chart No: 4.13 RETURN ON INVESTMENT

0.45 0.4 0.35 0.3 Ratios 0.25 0.2 0.15 0.1 0.05 0 2006 2007 2008 Years 2009 2010 0.24 Ratios 0.31 0.3 0.32 0.42

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4.14 GROSS PROFIT RATIO The below table showing the gross profit ratio for the period of five years. Table No: 4.14 Gross profit Ratio Year 2006 2007 2008 2009 2010
Average

(Rs. In 000) Ratio 0.99 0.51 0.41 0.56 0.69

0.63

Gross profit 360.94 275.76 295.40 315.86 671.92

Net sales 363.09 538.99 727.28 555.50 966.54

Interpretation
In the year of 2006 the gross profit ratio is 0.99, in the year of 2010 the ratio is 0.69, in 2009 the ratio is 0.56, in 2007 the ratio is 0.51 and in the year of 2008 the gross profit ratio is 0.41

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Chart No: 4.14 GROSS PROFIT RATIO

1.2 1 0.8 Ratios 0.6 0.4 0.2 0 2006 2007 2008 Years 2009 2010 0.56 0.41 Series 1 0.99

0.69 0.51

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4.15 OPERATING COST RATIO

The below table showing that the operating cost Ratio for the period of five years. Table No: 4.15 Operating cost Ratio
Year 2006 2007 2008 2009 2010 Average Operating cost 181.93 234.51 253.80 26249 318.60 Net sales 363.09 538.99 727.28 555.50 966.54 Ratio 0.50 0.43 0.34 0.47 0.32 0.41

(Rs. In 000)

Interpretation
In the year of 2006, the operating cost ratio is 0.50, in 2009 the ratio is 0.47, in 2007 the ratio is 0.43, in 2008 the ratio is 0.34 and in the year of 2010 the operating cost ratio is 0.32

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Chart No: 4.15 Operating cost Ratio

0.6 0.5 0.5 0.43 0.4 Ratios 0.3 Ratio 0.2 0.1 0 2006 2007 2008 Years 2009 2010 0.34 0.47

0.32

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4.16 RETURN ON GROSS CAPITAL EMPLOYED

The below table showing that the ratio of return on grass capital employed for the period of five years.

Table No: 4.16 Return on Gross Capital Employed

Years 2006 2007 2008 2009 2010 Average Adjusted net profit 211.23 161.25 169.29 182.59 405.86 Gross capital employed 371.75 533.01 702.31 564.73 970.60

(Rs. In 000)
Ratio 0.56 0.30 0.24 0.32 0.41 0.37

Interpretation
In the year of 2006, the ratio of return on gross capital employed is 0.56, in 2010 the ratio is 0.41, in 2009 the ratio is 0.32, in 2007 the ratio is 0.30, in 2008 the ratio is 0.24

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Chart No: 4.16 RETURN ON GROSS CAPITAL EMPLOYED

0.6 0.5 0.41 0.4 Ratios 0.3 0.3 0.2 0.1 0 2006 2007 2008 years 2009 2010 0.24 0.32 Ratio 0.56

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4.17 EXPENSE RATIO

The below table showing that the expense ratio for the period of five years. Table No: 4.17

Expense Ratio
Year 2006 2007 2008 2009 2010 Average Expenses 181.93 234.51 253.80 262.49 318.60 Net sales 363.09 538.99 727.28 555.50 966.54 Ratio 0.50 0.43 0.34 0.47 0.32 0.41

(Rs. In 000)

Interpretation
In the year of 2006, the expense ratio is 0.50, in 2009 the ratio is 0.47, in 2007 the ratio is 0.43, in 2008 the ratio is 0.34 and in the year of 2010 the expense ratio is 0.32

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Chart No: 4.17 EXPENSE RATIO

0.6 0.5 0.5 0.43 0.4 Ratios 0.3 Ratio 0.2 0.1 0 2006 2007 2008 years 2009 2010 0.34 0.47

0.32

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4.18 RATIO OF CURRENT LIABILITIES TO PROPRIETORS FUND

The below table showing that the ratio of current liabilities to proprietors fund for the period of five years. Table No: 4.18 Ratio of current liabilities to proprietors fund Years 2006 2007 2008 2009 2010 Average Current liabilities 79.03 318.84 160.65 471.17 302.66 Share holders fund 676.79 533.01 702.31 564.73 970.60 Ratio 0.11 0.59 0.22 0.83 0.31 0.41 (Rs. In 000)

Interpretation

In the year of 2009 the current liabilities to proprietors fund is 0.83, in 2007 the ratio is 0.59, in 2010 the ratio is 0.31, in 2008 the ratio is 0.22, in 2006 the ratio is 0.11.

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Chart No: 4.18 RATIO OF CURRENT LIABILITIES TO PROPRIETORS FUND

0.9 0.8 0.7 0.6 Ratios 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 Years 0.11 0.22 0.59

0.83

0.31

Ratio

2009

2010

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4.19. RATIO OF CURRENT ASSETS TO PROPRIETORS FUND The below table showing that the ratio of current assets to proprietors fund for the period of five years. Table No: 4.19 Ratio of Current Assets to Proprietors Fund Years 2006 2007 2008 2009 2010 Average Current assets 585.74 697.65 720.21 913.28 1156.42 Share holders fund 676.79 533.01 702.31 564.73 970.60 Ratio 0.86 1.3 1.02 1.61 1.19 1.2 (Rs. In 000)

Interpretation In the year of 2009 the ratio of current assets to proprietors fund is 1.6, in 2007 the ratio is 1.3, in 2010 the ratio is 1.19, in 2008 the ratio is 1.02, in 2006 the ratio is 0.86.

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Chart No. 4.19 RATIO OF CURRENT ASSETS TO PROPRIETORS FUND

1.8 1.61 1.6 1.4 1.2 Ratios 1 0.8 0.6 0.4 0.2 0 2006 2007 2008 Years 2009 2010 0.86 Ratio 1.3 1.19 1.02

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4.2. CORRELATION
4.20. Testing of relationship between net profit vs. Net sales. The relationship between Net profit vs. Net sales is showing in the following table. Ho: There is no relationship between Net sales vs. Net profit. H1: There is relationship between Net sales vs. Net profit.

Year 2006 2007 2008 2009 2010

Net profit 211234 161259 169292 182596 405864

Net sales 360398 538990 727287 555506 966549

Results: Correlation= 0.73 INTERPRETATION Based on the above analysis the correlation result is 0.73 there for null hypothesis is accepted and alternative hypothesis was rejected. Hence, it has proven that there will be no significant relationship between profit and sales

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4.21. Testing of relationship between net sales vs. Total assets The relationship between net sales vs. total assets is showing in the following table. Ho: there is no relationship between net sales vs. total assets H1: there is relationship between Net sales Vs. Total Assets

Year 2006 2007 2008 2009 2010

Net sales 360398 538990 727287 555506 966549

Total Assets 785721 884381 891583 1063852 1298051

Results: Correlation = 0.83

INTERPRETATION Based on the above analysis the correlation result is 0.83 there for null hypothesis is accepted and alternative hypothesis was rejected. Hence, it has proven that there will be no significant relationship between assets and sales

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4.22. Testing of relationship between net sales vs. Gross profit The relationship between Net sales Vs. Gross Profit is showing in the following table. Ho: there is no relationship between Net sales vs. Gross Profit H1: there is relationship between Net sales Vs. Gross Profit Year 2006 2007 2008 2009 2010 Net Sales 360398 538990 727287 555506 966549 Gross profit 360948 275768 295405 315867 671926

Results: Correlation= 0.72

INTERPRETATION Based on the above analysis the correlation result is 0.72 there for null hypothesis is accepted and alternative hypothesis was rejected. Hence, it has proven that there will be no significant relationship between gross profit and sales

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4.23. Testing of relationship between net sales vs. Current assets The relationship between Net sales Vs. Current Assets is showing in the following table. Ho: There is no relationship between Net sales Vs. Current Assets. H1: There is relationship between Net Sales Vs. Current Assets

Year 2006 2007 2008 2009 2010

Net Sales 360398 538990 727287 555506 966549

Current assets 585741 697653 720210 913282 1156420

Results: Correlation= 0.83 INTERPRETATION Based on the above analysis the correlation result is 0.83 there for null hypothesis is accepted and alternative hypothesis was rejected. Hence, it has proven that there will be no significant relationship between current assets and sales

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4.24. Testing of relationship between net profit vs. Working capital The relationship between Net profit Vs. Working capital is showing in the following table. Ho: There is no relationship between Net profit Vs. Working capital H1: There is relationship between Net profit Vs. working Capital.

Year 2006 2007 2008 2009 2010

Net Profit 211234 161259 169292 182596 405864

Working Capital 506701 378807 553554 442111 853754

Results: Correlation= 0.94 INTERPRETATION Based on the above analysis the correlation result is 0.94 there for null hypothesis is accepted and alternative hypothesis was rejected. Hence, it has proven that there will be no significant relationship between working capital and Net Proft

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4.25. Testing of relationship between net profit vs. Total assets The relationship between Net profit Vs. Total assets is showing in the following table. Ho: There is no relationship between Net profit Vs. Total Assets H1: There is relationship between net profits Vs. total assets

Year 2006 2007 2008 2009 2010

Net Profit 211234 161259 169292 182596 405864

Total Assets 785721 884381 891583 1063852 1298051

Results: Correlation= 0.81

INTERPRETATION Based on the above analysis the correlation result is 0.81 there for null hypothesis is accepted and alternative hypothesis was rejected. Hence, it has proven that there will be no significant relationship between net profit and total assets

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Chapter V

Findings, summary & conclusion

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CHAPTER V FINDINGS, SUMMARY AND CONCLUSION 5.1 FINDINGS OF THE STUDY

1. The current ratio has shown in a fluctuating trend as 7.41, 2.19, 4.48, 1.98, and 3.82 during 2006 of which indicates a continuous increase in both current assets and current liabilities 2. The quick ratio is also in a fluctuating trend through out the period 2006 10 resulting as 7.41, 1.65, 4.35, 1.9, and 3.81. The companys present liquidity position is satisfactory. 3. The absolute liquid ratio has been decreased from 3.92 to 1.18, from 2006 10.

4. The proprietory ratio has shown a fluctuating trend. The proprietory ratio is increased compared with the last year. So, the long term solvency of the firm is increased. 5. The working capital increased from 0.72 to 1.13 in the year 2006 10. 6. The fixed assets turnover ratio is in increasing trend from the year 2006 10 (1.26, 1.82, 4.24, 3.69, and 6.82). It indicates that the company is efficiently utilizing the fixed assets 7. The capital turnover ratio is increased form 2006 08 (0.98, 1.01, and 1.04) and decreased in 2006 to 0.98. It increased in the current year as .99 8. The current assets to fixed assets ratio is increasing gradually from 2006 10 as 2.93, 3.74, 4.20, 6.07 and 8.17. It shows that the current assets are increased than fixed assets. 9. The net profit ratio is in fluctuation manner. It increased in the current year compared with the previous year form 0.33 to 0.42. 10. The net profit is increased greaterly in the current year. So the return on total assets ratio is increased from 0.17 to 0.31. 11. The Reserves and Surplus to Capital ratio is increased to 4.19 from 2.02. The capital is constant, but the reserves and surplus is increased in the current year 12. The earnings per share was very high in the year 2006 i.e., 101.56. That is decreased in the following years because number of equity shares are increased 74

and the net profit is decreased. In the current year the net profit is increased due to the increase in operating and maintenance fee. So the earnings per share is increased 13. The operating profit ratio is in fluctuating manner as 0.99, 0.51, 0.41, 0.57 and 0.69 from 2006 10 respectively. 14. Price Earnings ratio is reduced when compared with the last year. It is reduced from 3.09 to 2.39, because the earnings per share is increased. 15. The return on investment is increased from 0.32 to 0.42 compared with the previous year. Both the profit and shareholders funds increase cause an increase in the ratio.

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5.2 SUMMARY

1. After the analysis of Financial Statements, the company status is better, because the Net working capital of the company is doubled from the last years position. 2. The company profits are huge in the current year; it is better to declare the dividend to shareholders. 3. The company is utilising the fixed assets, which majorly help to the growth of the organisation. The company should maintain that perfectly. 4. The company fixed deposits are raised from the inception, it gives the other income i.e., Interest on fixed deposits.

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5.3 CONCLUSION The companys overall position is at a good position. Particularly the current years position is well due to raise in the profit level from the last year position. It is better for the organization to diversify the funds to different sectors in the present market scenario.

77