98012285 Mba Finance Project

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Chapter – 1 Introduction 1

Chapter - I INTRODUCTION ABOUT THE STUDY 1.1.INTRODUCTION Financial Management is the specific area of finance dealing wi th 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 a nd short-term decisions and techniques. Both share the same goal of enhancing fi rm value by ensuring that return on capital exceeds cost of capital, without tak ing excessive financial risks. Capital investment decisions comprise the long-te rm choices about which projects receive investment, whether to finance that inve stment with equity or debt, and when or whether to pay dividends to shareholders . Short-term corporate finance decisions are called working capital management a nd deal with balance of current assets and current liabilities by managing cash, inventories, and short-term borrowings and lending (e.g., the credit terms exte nded to customers). Corporate finance is closely related to managerial finance, which is slightly broader in scope, describing the financial techniques availabl e to all forms of business enterprise, corporate or not.One of the most importan t 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 financi al figures over a period of time, a method sometimes called trend analysis. Thro ugh trend analysis, you can identify trends, good and bad, and adjust your busin ess practices accordingly. You can also see how your ratios stack up against oth er businesses, both in and out of your industry. 2

1.2. OBJECTIVE OF THE STUDY 1. To appraise financial position using the ratio an alysis. 2. To determine the level of profit generated 3. To determine the expens e and investments of the company 4. To study the liquidity position of the conce rn 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 co urse, money. A high-quality decision process requires that our choices are doabl e 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 invest ment. Investment is the purchase or creation of assets with the objective of mak ing gains in the future. Typically investment involves using financial resources to purchase a machine/ building or other asset, which will then yield returns t o 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 ta ke to pay back the investment? 4. What are the expected profits from the investm ent? 5 3

1.4. INDUSTRY OVERVIEW Construction In the fields of architecture and civil engineering, construction is a process t hat consists of the building or assembling of infrastructure. Far from being a s ingle activity, large scale construction is a feat of human multitasking. Normal ly, the job is managed by a project manager, and supervised by a construction ma nager, design engineer, construction engineer or project architect. For the succ essful execution of a project, effective planning is essential. involved with th e design and execution of the infrastructure in question must consider the envir onmental impact of the job, the successful scheduling, budgeting, construction s ite 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. Ind ustrial 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 a rea, AICPA Accounting Research Bulletin (ARB) No. 45, Long-Term Construction-Typ e Contracts, (1955) and AICPA Statement of Position (SOP) 81-1, Accounting for P erformance of Construction-Type and Certain ProductionType Contracts, (1981) add ress it specifically. There is also an excellent AICPA Audit and Accounting Guid e, Construction Contractors. 4

Because most construction contracts by their nature are long-term, the underlyin g accounting principle known as matching — expenses follow revenues — would be viola ted 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 u nder the preceding pronouncements for construction contractors. One is percentag e of completion (PC) method and the other is completed contract (CC) method. Und er the PC method, the construction contractor recognizes revenue over the life o f the construction contract based on the degree of completion: 50% completion me ans 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 constr uction project, ordinarily at the end of the construction contract. SOP 81-1 req uires that the PC method be used in lieu of the CC method when all of the follow ing are present: 1. Reasonably reliable estimates can be made of revenue and cos ts; 2. The construction contract specifies the parties‘ rights as to the goods, co nsideration to be paid and received, and the resulting terms of payment or settl ement; 3. The contract purchaser has the ability and expectation to perform all contractual duties; and 4. The contract contractor has the same ability and expe ctation to perform. The CC method is used in rare circumstances, which are set f orth in SOP 81-1 to be any of the following: 1. The contract is of a short durat ion (not defined), Such as 24 months or less. As a result, the recognized revenu e would not differ under the PC or CC methods; 2. The contract violates any one of the items 1 through 4 above; or 5

3. The contract‘s 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 optio ns, for example, create the issue of whether to combine contracts into one profi t 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 ge neral rule, the more interrelated and cohesive a project — for example, through su bstantial common costs, a single buyer, or concurrent performance of steps in th e project — the more the scales tip in favor of combining. In contrast, when 1) se parate project components have bids distinct from the entire project; 2) the buy er 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 pr oject, then segmenting the contract is permissible. For such segmentation, SOP 8 1-1 has additional requirements that should be reviewed. GAAP requires that the accrual method be used for all reported billings and costs and losses. Cost allo cation is based on direct and indirect costs as well as construction period inte rest. Assets are represented by under billings (estimated costs and earnings exc eed billings) whereas liabilities are shown as overbillings (billings exceed est imated costs and earnings). 6

History The first huts and shelters were constructed by hand or with simple tools. As ci ties grew during the Bronze Age, a class of professional craftsmen, like brickla yers and carpenters, appeared. Occasionally, slaves were used for construction w ork. In the Middle Ages, these were organized into guilds. In the 19th century, steam-powered machinery appeared, and later diesel- and electric powered vehicle s such as cranes, excavators and bulldozers. Modern-day Construction involves cr eating awesome structures that can show the beauty and creativity of the human i ntellect. 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 a t 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 Ku njali 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 visio n of the company is: To become a global player committed to international qualit y, standards, efficient pricing and provide excellent service. MISSION The missi on 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 off ice is situated at Real Wedding centre Complex Ootty Road, vaduvanchal, wayanad District. The auditors of the company is T.P. Poul and Associates, Kalpetta, way anad. The bankers are Vijaya Bank, South Indian Bank, Indian Bank and State Bank of In dia 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 8

Chapter – II Concept and Review literature 9

Chapter – II CONCEPT AND REVIEW OF LITERATURE 2.1. CONCEPT RATIO ANALYSIS FINANCIAL ANALYSIS Financial analysis is the process of identifyi ng the financial strengths and weaknesses of the firm and establishing relations hip between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived fr om the information in a company‘s financial statements. The level and historical t rends of these ratios can be used to make inferences about a company‘s financial c ondition, its operations and attractiveness as an investment. The information in the statements is used by Trade creditors, to identify the firm‘s ability to meet their claims i.e. liquidity position of the company. Investors, to know about t he 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 relationshi p between two items or variables. This relationship can be exposed as Percentage s Fractions Proportion of numbers 10

Ratio analysis is defined as the systematic use of the ratio to interpret the fi nancial statements. So that the strengths and weaknesses of a firm, as well as i ts historical performance and current financial condition can be determined. Rat io reflects a quantitative relationship helps to form a quantitative judgment. S TEPS IN RATIO ANALYSIS The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements an d calculates appropriate ratios. To compare the calculated ratios with the ratio s of the same firm relating to the pas6t or with the industry ratios. It facilit ates in assessing success or failure of the firm. Third step is to interpretatio n, drawing of inferences and report writing conclusions are drawn after comparis on in the shape of report or recommended courses of action. BASIS OR STANDARDS O F COMPARISON Ratios are relative figures reflecting the relation between variabl es. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with rela ted facts. This is the basis of ratio analysis. The basis of ratio analysis is o f four types. Past ratios, calculated from past financial statements of the firm . Competitor‘s 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 11

NATURE OF RATIO ANALYSIS Ratio analysis is a technique of analysis and interpret ation of financial statements. It is the process of establishing and interpretin g 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 numbe r 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 onl y a few appropriate ratios. The following are the four steps involved in the rat io analysis. Selection of relevant data from the financial statements depending upon the objective of the analysis. Calculation of appropriate ratios from the a bove 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 whic h 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 chang es, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be ma de in the following ways. Single absolute ratio Group of ratios Historical compa rison Projected ratios Inter-firm comparison 12

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 sta tements Objective or purpose of analysis Selection of ratios Use of standards Ca liber of the analysis

IMPORTANCE OF RATIO ANALYSIS Aid to measure general efficiency Aid to measu nancial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Ev aluation of efficiency Effective tool LIMITATIONS OF RATIO ANALYSIS Differences in definitions Limitations of accounti ng records Lack of proper standards 13

No allowances for price level changes Changes in accounting procedures Quantitat ive factors are ignored Limited use of single ratio Background is over looked Li mited 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 account ing ratios can be classified as follows: 1. Traditional Classification 2. Functi onal Classification 3. Significance ratios 1. Traditional Classification It includes the following. Balance sheet (or) posi tion 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 it ems must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two p rofit & 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 r atios Some ratios are important than others and the firm may classify them as pr imary and secondary ratios. The primary ratio is one, which is of the prime impo rtance 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 cur rent obligations as & when there becomes due. The short term obligations of a fi rm can be met only when there are sufficient liquid assets. The short term oblig ations are met by realizing amounts from current, floating (or) circulating asse ts The current assets should either be calculated liquid (or) near liquidity. Th ey should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by compa ring them with short-term current liabilities. If current assets can pay off cur rent liabilities, then liquidity position will be satisfactory. 15

To measure the liquidity of a firm the following ratios can be calculated Curren t ratio Quick (or) Acid-test (or) Liquid ratio Absolute liquid ratio (or) Cash p osition ratio (a) CURRENT RATIO: Current ratio may be defined as the relationship between curr ent assets and current liabilities. This ratio also known as Working capital rat io is a measure of general liquidity and is most widely used to make the analysi s 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-pr ogress Marketable securities Short-term investments Sundry debtors Prepaid expen ses CURRENT LIABILITIES Out standing or accrued expenses Bank over draft Bills payab le Short-term advances Sundry creditors Dividend payable Income-tax payable 16

(b) QUICK RATIO Quick ratio is a test of liquidity than the current ratio. The t erm 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 betwee n 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. Compo nents of quick or liquid ratio QUICK ASSETS Cash in hand Cash at bank Bills rece ivable Sundry debtors Marketable securities Temporary investments CURRENT LIABIL ITIES 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 shoul d also be calculated together with current ratio and quick ratio so as to exclud e even receivables from the current assets and find out the absolute liquid asse ts. Absolute liquid assets include cash in hand etc. The acceptable forms for th is 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 ar e nor accepted to demand cash at the same time and then cash may also be realize d from debtors and inventories. 17

Components of Absolute Liquid Ratio ABSOLUTE LIQUID ASSETS Cash in hand Cash at bank Interest on Fixed Deposit CURRENT LIABILITIES Out standing or accrued expen ses 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 con cern to meet its long term obligations. Accordingly, long term solvency ratios i ndicate firm‘s ability to meet the fixed interest and costs and repayment schedule s associated with its long term borrowings. The following ratio serves the purpose of determining the solvency of the concer n. Proprietory ratio 18

(a) PROPRIETORY RATIO A variant to the debt-equity ratio is the proprietory rati o which is also known as equity ratio. This ratio establishes relationship betwe en 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 sale s 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 calle d ―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 19

(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 t urned over in the course of a year. A higher ratio indicates efficient utilizati on of working capital and a lower ratio indicates inefficient utilization. Compo nents of Working Capital CURRENT ASSETS Cash in hand Cash at bank Bills receivab le Inventories Work-in-progress Marketable securities Short-term investments Sun dry debtors Prepaid expenses CURRENT LIABILITIES Out standing or accrued expense s Bank over draft Bills payable Short-term advances Sundry creditors Dividend pa yable 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. Hig her 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 c ost of sales or sales with amount of capital invested in the business and not wi th 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 Cap ital. All Capital Turnovers are calculated to study the uses of various types of capital. 20

(d) CURRENT ASSETS TO FIXED ASSETS RATIO This ratio differs from industry to ind ustry. The increase in the ratio means that trading is slack or mechanization ha s 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 w ith the corresponding increase in profit, it will show that the business is expa nding. Component of Current Assets to Fixed Assets Ratio CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable secur ities Short-term investments Sundry debtors Prepaid expenses 4. PROFITABILITY RA TIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. Net profit ratio Re urn on total assets Reserves and surplus to capital ratio Earnings per share Ope rating profit ratio Price – earning ratio Return on investments 21 FIXED ASSETS Ma chinery Buildings Plant Vehicles

(a) NET PROFIT RATIO Net profit ratio establishes a relationship between net pro fit (after tax) and sales and indicates the efficiency of the management in manu facturing, selling administrative and other activities of the firm. It also indi cates the firm‘s capacity to face adverse economic conditions such as price compet itors, low demand etc. Obviously higher the ratio, the better is the profitabili ty. (b) RETURN ON TOTAL ASSETS Profitability can be measured in terms of relatio nship between net profit and assets. This ratio is also known as profit-to-asset s ratio. It measures the profitability of investments. The overall profitability can be known. (c) RESERVES AND SURPLUS TO CAPITAL RATIO It reveals the policy p ursued by the company with regard to growth shares. A very high ratio indicates a conservative dividend policy and increased ploughing back to profit. Higher th e ratio better will be the position. (d) EARNINGS PER SHARE Earnings per share i s 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 divi dend 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 RAT IO Operating ratio establishes the relationship between cost of goods sold and o ther operating expenses on the one hand and the sales on the other. However 75 t o 85% may be considered to be a good ratio in case of a manufacturing under taki ng. 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 esti mate 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. Gene rally, higher the price-earning ratio, the better it is. If the price earning ra tio falls, the management should look into the causes that have resulted into th e fall of the ratio. (g) RETURN ON INVESTMENTS Return on share holder‘s investment , popularly known as Return on investments (or) return on share holders or propr ietor‘s funds is the relationship between net profit (after interest and tax) and the proprietor‘s funds. The ratio is generally calculated as percentages by multip lying the above with 100. 2.2. REVIEW OF LITERATURE Ratios are a valuable analyt ical 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 ji gsaw puzzle that makes up a complete analysis. (Leslie Rogers, 1997) Financial r atios are widely used to develop insights into the financial performance of comp anies‘ by both the evaluators‘ and researchers‘. The firm involves many interested par ties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financi al statement analysis in their evaluations. Evaluators‘ use financial ratios, for instance, to forecast the future success of companies, while the researchers' ma in interest has been to develop models exploiting these ratios. Many distinct ar eas 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 averag es. These averages are developed by statistical services and trade associations and are updated annually. (Ezzamel, Mar-Molinero and Beecher, 1987) Financial ra tios can also give mixed signals about a company's financial health, and can var y significantly among companies, industries, and over time. Other factors should also be considered such as a company's products, management, competitors, and v ision for the future. (Fieldsend, Longford and McLeay, 1987) There are many diff erent 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 N ew York Stock Exchange, American Stock Exchange, and NASDAQ. These quotations sh ow 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 dividen d 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 ea rnings (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 ear nings to determine the value of a share of the stock in the market. The priceear nings ratio is influenced by the earnings and sales growth of the company, the r isk (or volatility in performance), the debt equity structure of the company, th e dividend policy, the quality of management, and a number of other factors. A c ompany's P/E ratio should be compared to those of other companies in the same in dustry. (Garcia-Ayuso, 1994) 24

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 inc ludes the method of research, source of data, treatment of data, and tools, whic h 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 natu re and partially analytical in nature as efforts are taken to describe as well t o 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 report s, articles, web sites, and books. 3.4. SOURCE OF DATA COLLECTION The related in formation was collected from published annual reports of Grace Field Builders an d Developers Pvt. Ltd. The annual reports contain the results of Grace Field Bui lders and Developers Pvt. Ltd. The annual reports containing the results of past performance is considered to be the most important & most reliable. Data requir ed for the analysis is to obtain purely from secondary sources. The data with re spect 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 f or which are resorted to the annual reports of Grace Field Builders and Develope rs Pvt. Ltd. The study was carried out in accounts Department of Grace Field Bui lders and Developers Pvt. Ltd. 26

3.5. FINANCIAL TOOLS Ratio analysis Ratio Analysis is a technique of analysis and interpretation of financial statem ent. 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 r atio is used to describe significant relationship which exist b/w figure shown i n balance sheet and profit and loss account in budgetary entry control system an y part of accounting organization. Correlation Correlation is a statistical meas urement of the relationship between two variables. Possible correlations range f rom +1 to –1. A zero correlation indicates that there is no relationship between t he variables. A correlation of –1 indicates a perfect negative correlation, meanin g that as one variable goes up, the other goes down. A correlation of +1 indicat es 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 relationsh ip between different variables through correlation There is no relationship betw een Net sales Vs. Net profit There is no relationship between Net sales Vs. Tota l 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 betw een Net Profit Vs. Working Capital 27

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 c urrent liabilities. Table No: 4.1 CURRENT RATIO Current Assets 2006 2007 2008 20 09 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 A s a rule, the current ratio with 2:1 (or) more is considered as satisfactory pos ition of the firm. The huge increase in sundry debtors resulted an increase in t he ratio, which is above the benchmark level of 2:1 which shows the comfortable position of the firm. 29

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 30

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 1 154.31 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 considere d as satisfactory position of the firm. This is above the benchmark level of 1:1 which shows the comfortable position of the firm. 31

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 32

4.3. ABOSULTE LIQUIDITY RATIO The following table shows that the ratio of absolute liquid assets to current li abilities Table No. 4.3 ABOSULTE LIQUIDITY RATIO ‘000) Year 2006 2007 2008 2009 2010 Average Absolute Liquid Assets 310.04 108.59 394.6 6 538.50 356.49 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 a bsolute liquid ratio is 2.46, 2010 the absolute liquid ratio is 1.18, in 2009 th e absolute liquid ratio is 1.14 and in the year of 2007 the absolute liquid rati o is 0.34. The acceptable norm for this ratio is 1:2; this is above the benchmar k level of 1:2 which shows the comfortable position of the firm, except in the y ear of 2007. 33

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 34

LEVERAGE RATIOS 1.3 PROPRIETORY RATIO The following table showing that the proprietory ratio. Table No. 4.4 PROPRIETOR Y 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 holder‘s 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 th e increase of income from sales 35

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 ra tio 0.6 0.53 0.86 0.79 0.75 36

ACTIVITY RATIOS 4.5 WORKING CAPITAL TURNOVER RATIO The below table shows that the working capital turnover ratio of five years. Tab le 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 Capit al 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 37

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 38

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. 39

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 rati o 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 Ca pital Employed 371.75 533.01 702.31 564.73 970.60 (Rs in ‗000) Ratio 0.98 1.01 1.0 4 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 41

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 43

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 Rat io 8.17 44

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 96 6.54 (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 n et profit ratio is 0.23 45

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 0.2 3 0.33 Ratios 0.59 46

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 Int erpretation 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 47

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 48

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 ra tio is 0.19, in 2007 the ratio is 0.18 and in the year of 2009 the return on tot al assets ratio is 0.17. 49

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 0.1 9 0.17 Ratios 0.27 0.31 . 50

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 200 7 2008 2009 2010 Average Interpretation In the year of 2006 the reserve and surp lus to capital ratio is 31.54, in the year of 2010 the ratio is 4.19, in the yea r of 2008 the ratio is 2.75, in 2009 the ratio is 2.02, in 2007 the ratio is 1.8 5 The reserves & surplus is decreased in the year 2009, due to the payment of di vidends and in the year 2010 the profit is increased. But the capital is remaini ng constant from the year 2007. So the increase in the reserves & surplus caused a greater increase in the current year‘s 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 51

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 Ratio s 31.54 1.85 52

4.13. RETURN ON INVESTMENT The below table showing the return on investment ratio for the period of five ye ars Table No: 4.13 Return on investment ratio Year 2006 2007 2008 2009 2010 Aver age Net Profit After Tax 211.23 161.25 169.29 182.59 405.86 Share Holders Fund 6 76.79 533.01 702.31 564.73 970.60 (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 53

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 54

4.14 GROSS PROFIT RATIO The below table showing the gross profit ratio for the p eriod 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 rati o 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 55

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 56

4.15 OPERATING COST RATIO The below table showing that the operating cost Ratio for the period of five yea rs. 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 t he operating cost ratio is 0.32 57

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 58

4.16 RETURN ON GROSS CAPITAL EMPLOYED The below table showing that the ratio of return on grass capital employed for t he 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 2 010 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 59

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 60

4.17 EXPENSE RATIO The below table showing that the expense ratio for the period of five years. Tab le No: 4.17 Expense Ratio Year 2006 2007 2008 2009 2010 Average Expenses 181.93 234.51 253.80 262.49 318.6 0 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 20 07 the ratio is 0.43, in 2008 the ratio is 0.34 and in the year of 2010 the expe nse ratio is 0.32 61

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 62

4.18 RATIO OF CURRENT LIABILITIES TO PROPRIETORS FUND The below table showing that the ratio of current liabilities to proprietors fun d for the period of five years. Table No: 4.18 Ratio of current liabilities to p roprietors 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 200 6 the ratio is 0.11. 63

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 64

4.19. RATIO OF CURRENT ASSETS TO PROPRIETORS FUND The below table showing that t he ratio of current assets to proprietors fund for the period of five years. Tab le No: 4.19 Ratio of Current Assets to Proprietors Fund Years 2006 2007 2008 200 9 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. I n ‗000) Interpretation In the year of 2009 the ratio of current assets to proprietors fu nd is 1.6, in 2007 the ratio is 1.3, in 2010 the ratio is 1.19, in 2008 the rati o is 1.02, in 2006 the ratio is 0.86. 65

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 66

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 i s no relationship between Net sales vs. Net profit. H1: There is relationship be tween 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 ation result is 0.73 there hesis was rejected. Hence, ionship between profit and 67 INTERPRETATION Based on the above analysis the correl for null hypothesis is accepted and alternative hypot it has proven that there will be no significant relat sales

4.21. Testing of relationship between net sales vs. Total assets The relationshi p between net sales vs. total assets is showing in the following table. Ho: ther e is no relationship between net sales vs. total assets H1: there is relationshi p 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 68

4.22. Testing of relationship between net sales vs. Gross profit The relationshi p between Net sales Vs. Gross Profit is showing in the following table. Ho: ther e is no relationship between Net sales vs. Gross Profit H1: there is relationshi p between Net sales Vs. Gross Profit Year 2006 2007 2008 2009 2010 Net Sales 360 398 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 profi t and sales 69

4.23. Testing of relationship between net sales vs. Current assets The relations hip 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 rela tionship 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 correl ation result is 0.83 there for null hypothesis is accepted and alternative hypot hesis was rejected. Hence, it has proven that there will be no significant relat ionship between current assets and sales 70

4.24. Testing of relationship between net profit vs. Working capital The relatio nship 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 correl ation result is 0.94 there for null hypothesis is accepted and alternative hypot hesis was rejected. Hence, it has proven that there will be no significant relat ionship between working capital and Net Proft 71

4.25. Testing of relationship between net profit vs. Total assets The relationsh ip between Net profit Vs. Total assets is showing in the following table. Ho: Th ere is no relationship between Net profit Vs. Total Assets H1: There is relation ship 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 72

Chapter – V Findings, summary & conclusion 73

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 a ssets 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 company‘s present liquidity position is satisfactory. 3. The absolute liquid rati o 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 i s 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 200 6 – 10 (1.26, 1.82, 4.24, 3.69, and 6.82). It indicates that the company is effici ently 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 t he 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 cu rrent assets are increased than fixed assets. 9. The net profit ratio is in fluc tuation 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 yea r. So the return on total assets ratio is increased from 0.17 to 0.31. 11. The R eserves 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 decr eased 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, becau se the earnings per share is increased. 15. The return on investment is increase d from 0.32 to 0.42 compared with the previous year. Both the profit and shareho lders funds increase cause an increase in the ratio. 75

5.2 SUMMARY 1. After the analysis of Financial Statements, the company status is better, bec ause the Net working capital of the company is doubled from the last year‘s positi on. 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, whi ch majorly help to the growth of the organisation. The company should maintain t hat perfectly. 4. The company fixed deposits are raised from the inception, it g ives the other income i.e., Interest on fixed deposits. 76

5.3 CONCLUSION The company‘s overall position is at a good position. Particularly the current year‘s 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 diff erent sectors in the present market scenario. 77

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