You are on page 1of 72

Finance Ratio Analysis

CHAPTER - 1
INDUSTRYPROFILE
Chemical industry is one of Indias oldest industries, contributing significantly towards the industrial and economic growth of the nation. The Indian Chemical Industry forms the backbone of the industrial and agricultural development of India and provides building blocks for several downstream industries. According to the Department of Chemicals and Petrochemicals, the Indian chemical industry is estimated to be worth approximately US$ 35 bn, which is about 3% of Indias total GDP. The total investment in the Indian chemical industry is approximately US$ 60 bn and total employment generated was about 1 mn. In terms of volume, it is 12th largest in the world and 3rd largest in Asia.Exports of chemicals from India have increased significantly and account for about 14% of total exports and 9% of total imports of the country. The Indian chemical industry comprises both small and large-scale units. Fiscal concessions granted to the small sector in the mid-eighties led to the establishment of a large number of units in the Small Scale Industries (SSI) sector. The major sub segments of this industry include alkali, organic chemicals, inorganic chemicals, pesticides, dyes & dyestuffs and specialty chemicals. The Indian chemical industry deals in products like fertilizers, bromine compounds, catalyst, sodium and sodium compounds, dye intermediates, inks and resins, phosphorous, paint chemicals, coatings, isobutyl, zinc sulphate, zinc chloride, water treatment chemicals, organic surfactants, pigment dispersions, industrial aerosols and many more. The commodity chemicals are the largest segment in the chemical market. Some of the major markets for chemicals are North America, Western Europe, Japan and emerging economies in Asia and Latin America. The Indian chemical industry is matured and is in the midst of a major restructuring and consolidation phase. Globalization has opened the doors for this sector to capture a major part of the global market pie.

VCR Institute Of Management Studies Page - 1

Finance Ratio Analysis The sector has experienced many reforms in India and is expected to grow at 15% p.a. in the near future. The investment in R&D will also play a vital role in this sector. In a nutshell, the Indian chemical industry has a large potential to grow in domestic as well as in export markets. In the current market conditions, with an appreciating rupee, pricing will be a crucial factor while competing with other exporting countries. Chemical Cluster Insights The ownership pattern of the chemical companies was inclined largely towards the private limited category that account for 69% of the total sample. It is followed by 11% of partnership firms indicating the huge gap between the largest and the second largest category in the sample. However, public limited entities account for 10% while 8% are proprietary concerns.

53% of the private limited companies deal in organic chemicals, 9% deal in specialty chemicals while 15% are involved in inorganic chemicals

58% of the public limited companies deal in organic chemicals 77% companies from the sample are established before 1990 while 21% are established after 1990

Sub Segment Manufacturing of organic chemicals seems to be the most popular sub segment with around 34% of the sample companies involved in manufacturing of organic products. It is followed by 14% of the sample companies involved in the production of inorganic chemicals, 12% in specialty chemicals and 5% in dyes and dyes and dye stuffs. 35% of the companies dealing in other chemical sub segments that comprise of industrial gases, solvents etc. Display the high demand of products in this segment. 16% of the companies dealing in organic chemical s generate 100% of their revenue exclusively through the domestic market.

VCR Institute Of Management Studies Page - 2

Finance Ratio Analysis Nature of Operations 79% of the companies are engaged exclusively in manufacturing, while 21% are engaged in manufacturing as well trading. 58% of the manufacturing companies have single manufacturing facility while 42% operate with two or more plants. 31% of the companies involved exclusively in manufacturing activity have invested up to Rs 50 mn in plant and machinery.

18% of the companies utilize 100% of their installed plant capacity while 42% utilize between 70 - 99% of the installed capacity

More than 75% of the companies involved exclusively in manufacturing activity operate at more than 50% of the capacity utilization

9% of the companies have their manufacturing facility situated in the heart of Mumbai city while 25% have their plants in the vicinity of Mumbai such as Dombivli, Kalyan, Ambernath and Badlapur area

2% have their plants in the Navi Mumbai while 15% have their plants in Tarapur and Boisar

33% of the total sample companies showed more than 33% revenue growth in the last two years. 60% of the private companies accounted for the majority of revenue growth displaying more than 33% in the last two years. Future Plans 82% chemical companies have envisaged strategies for future growth. The plans range from capacity expansion, modernization to new market entry and diversification.

Companies operating in organic chemicals are keen for capacity expansion and diversification

Of the companies interested in capacity expansion, 80% belong to the private limited category

Of the companies interested in diversification, 65% are private limited companies.

VCR Institute Of Management Studies Page - 3

Finance Ratio Analysis

CHAPTER - 2
COMPANY PROFILE
Since its inception in 1999, Riya Chemy has been a pioneer and market leader in retail segment specializing in the supply of high performance Adhesives & Construction Chemicals in Karnataka for Building Construction, Automobile, Electrical and Engineering Industries branded as R*SEAL. Over the years, the company has established its own presence in the market and is successfully catering to the need of thousands of satisfied customers. The company is promoted by Mrs. S.Babita who has over a decade of experience in manufacturing these products under the supervision and guidance of Indias leading Polymer Technologist Mr. Vijay Datta of M/S. Aster Vinyls Ltd., who are having their manufacturing activities in Karnataka, Tamil Nadu and Maharashtra & many other States.

R*SEAL ranges of products enjoy a very popular name in the market and R*SEAL Water Proofing Compounds are certified by Bureau of Indian Standards as per IS: 2645 2003. All R*SEAL Products are backed by best in house built Laboratory, Research and Development facilities. Specialist having decades of experience understanding the tropical conditions in India adhere to strict quality control and produce consistent materials from batch to batch

VCR Institute Of Management Studies Page - 4

Finance Ratio Analysis

a. Background and Inception of the Company:


Since its inception in 1999, Riya Chemy has been a pioneer and market leader in retail segment specializing in the supply of high performance Adhesives & Construction Chemicals in Karnataka for Building Construction, Automobile, Electrical and Engineering Industries branded as R SEAL.

Over the years, the company has established its own presence in the market and is successfully catering to the need of thousands of satisfied customers.

The company is promoted by Mrs. S. Babita who has over a decade of experience in manufacturing these products under the supervision and guidance of Indias leading Polymer Technologist Mr. Vijay Datta of M/S. Aster Vinyls Ltd., who are having their manufacturing activities in Bangalore, Chennai, and Tamil Nadu & Maharashtra. We have recently opened our companys office at Hyderabad to cater to the requirements ofAndhra Pradesh market.

R SEAL range of products enjoy a very popular name in the market and R SEAL Water Proofing Compounds are certified by Bureau of Indian Standards as per IS : 2645 - 2003. All R SEALProducts are backed by best in house built Laboratory, Research and Development facilities. Specialist having decades of experience understanding the tropical conditions in India adhere to strict quality control and produce consistent materials from batch to batch.

VCR Institute Of Management Studies Page - 5

Finance Ratio Analysis

b. Nature of the Business Carried:


1. R*SEAL Fast Curing Epoxy Putty 2. R*SEAL Tile grouts 3. R*SEAL Crack Filling Compound 4. R*SEAL Tile Fixing Adhesive 5. R*SEAL Integral Water Proofing Compounds for Cement Mortar & Concrete (Liquid) 6. R*SEAL Integral Water Proofing Compounds for Cement Mortar & Concrete (Powder) 7. R*SEAL Paint remover 8. R*SEAL Wood preservative for wood care 9. R*SEAL Wood Bond 10. R*SEAL Tile cleaning agent 11. R*SEAL Latex rubber additive 12. R*SEAL SBR Latex 13. R*SEAL Super Glue 14. R*SEAL Tile Cleaning Agent 15. R*SEAL CP Fitting and Sanitary Ware Cleaner 16. R*SEAL Premium Floor Cleaner 17. R*SEAL Glass Cleaner (Non - Ammonia) 18. R*SEAL Automate range of Auto Detailing Products.

VCR Institute Of Management Studies Page - 6

Finance Ratio Analysis

c. Vision, Mission and Quality Policy:


Vision: To be the Key Player, Earning Customers' Delight through Constant Innovation, Embracing Best Technologies and offering world class services.Tobe the international technology leader in sustainable construction chemicals and Adhesives. We will consider sustainability and the environment is everything we do and create a customer delight.

Mission: At Bluecoat we shall always strive to ensure utmost sense of delight of all our clients and customers, to envision our customers' needs and translate them into concrete environmental friendly products through integrated efforts of the entire R Seal Team, setting the highest standards of quality. Each of our actions shall always be intended to ensure best services to the customers, best job satisfaction of our employees, and highest admiration as corporate citizens.

VCR Institute Of Management Studies Page - 7

Finance Ratio Analysis Quality Policy: Keeping in mind that quality service to the customer is of utmost importance Riya Chemy has revised its quality system to comply with a well-known international standard, ISO 9001:2008, thus making it an ISO 9001:2008 certified company. Riya Chemy is thoroughly committed to superior quality in the construction chemicals that they manufacture. The standard requires companies to formalize their processes to ensure consistent performance and encourage continuous improvement. RiyaChemy's ISO documentation includes a quality policy manual, operating procedures, and work instructions. To maintain ISO certification, they would be audited annually and recertified every three years. Internal audits of each element are conducted once a year by their employees. The driving force behind our success is the consistent team work of our employees, with our shared value system of commitment to excellence, closeness to customers and the spirit of innovation we have been able to build with our customer, dealers and distributors. Total customer satisfaction has been the company's motto. The customer's convenience is our comfort and hence we offer a range in packing, starting from 30 g customized packing to bulk packing in temper proof containers. In view of the growing business potential in construction industry we are now entering in to the market of bulk buyers with our experienced technical team to assist our customers of any information about our products etc. Riya Chemy - Sunil Datta C.E.O,

VCR Institute Of Management Studies Page - 8

Finance Ratio Analysis

d. Products/Services Profile:
1. R*SEAL Crack Filling Compound 2. R*SEAL Tile Fixing Adhesive 3. R*SEAL Integral Water Proofing Compounds for Cement Mortar & Concrete (Liquid) 4. R*SEAL Integral Water Proofing Compounds for Cement Mortar & Concrete (Powder) 5. R*SEAL Paint remover 6. R*SEAL Wood preservative for wood care 7. R*SEAL Wood Bond 8. R*SEAL Tile cleaning agent 9. R*SEAL Latex rubber additive 10. R*SEAL SBR Latex 11. R*SEAL Super Glue 12. R*SEAL Tile Cleaning Agent 13. R*SEAL CP Fitting and Sanitary Ware Cleaner 14. R*SEAL Premium Floor Cleaner 15. R*SEAL Glass Cleaner (Non - Ammonia) 16. R*SEAL Fast Curing Epoxy Putty 17. R*SEAL Tile grouts 18. R*SEAL Crack Filling Compound 19. R*SEAL Tile Fixing Adhesive

VCR Institute Of Management Studies Page - 9

Finance Ratio Analysis 20. R*SEAL Integral Water Proofing Compounds for Cement Mortar & Concrete (Liquid) 21. R*SEAL Integral Water Proofing Compounds for Cement Mortar & Concrete (Powder) 22. R*SEAL Paint remover 23. R*SEAL Wood preservative for wood care 24. R*SEAL Wood Bond 25. R*SEAL Tile cleaning agent 26. R*SEAL Latex rubber additive 27. R*SEAL SBR Latex 28. R*SEAL Super Glue 29. R*SEAL Tile Cleaning Agent 30. R*SEAL CP Fitting and Sanitary Ware Cleaner 31. R*SEAL Premium Floor Cleaner 32. R*SEAL Glass Cleaner (Non - Ammonia) 33. R*SEAL Automate range of Auto Detailing Products:

i. ii. iii. iv. v. vi.

R*SEAL Automate Auto Shampoo R*SEAL Automate Auto Polish R*SEAL Automate Tyre Shine R*SEAL Automate Auto Glass cleaner R*SEAL Automate Auto Dashboard Cleaner R*SEAL Automate Auto Dashboard Polish

VCR Institute Of Management Studies Page - 10

Finance Ratio Analysis vii. viii. R*SEAL Automate Auto Leather Cleaner R*SEAL Automate Auto Windshield Washer Fluid

Product Code: (TFA)Tile Fixing Adhesive


VCR Institute Of Management Studies Page - 11

Finance Ratio Analysis Description:

R SEAL Tile Fixing Adhesive is in powder form which consists of Portland cement, imported Polymers and Minerals.

Application:

Mix TFA and water in volumetric proportions of 3 volumes TFA to 1 volume water. Mix it well to form a creamy paste. Allow 10 minutes to mature and apply this paste to the surface to be tiled and press the tile in firmly. Adhesion thickness of 3mmis enough to create a good bond. Allow tiles to set for 24 hours before grouting.

Advantages:

Excellent Adhesion to smooth surface such as existing tiles, mosaic surface etc. TFA also waterproofs the surface. Tiles need no soaking and can go directly from box to the wall minimizing breakages during soaking. This also saves labour. The surface to be tiled need not be made wet as TFA functions best on dry and clean surfaces. No curing is required as TFA is self-curing type.

Coverage:

On smooth even surface TFA gives coverage of 2.5 square feet per kg approximately.

Shelf Life:

12 months from the date of packing, if stored in tight packed condition.

Packing:

R SEAL TFA is available in 1 Kg , 5Kgs , and 25 Kgs packing.

VCR Institute Of Management Studies Page - 12

Finance Ratio Analysis Fast Curing Epoxy Putty

Application Procedure:

R SEAL is available in fast type (GPFC) , which sets in 30-45 minutes 27 C. after mixing R SEAL is two components RESIN and HARDNER epoxy formulations in putty consistency supplied in equal stick form. Cut equal length from each stick and mix together by kneading with the hand till the mixture acquires a uniform colour. Use the mix at the earliest on a dry, clean, and oil free surface. Smoothen the putty while still tacky with the cloth or by pressing a polythene sheet and peel off after complete curing. R SEAL (GPFC) is versatile product with excellent bonding properties and resistance to chemicals etc., It is useful for sealing, repairing, joining, grouting, building, insulating and water proofing ferrous and non-ferrous metals, glass, asbestos, concrete, ceramics etc.

Note:

Wash hands with soap and water after use R SEAL should not be used in items/areas which come into direct and contact with flame, high temperature or drinking water.

Remove and mix quantity as per your requirements. Unmixed quantity kept in respective wrappers has 12 months shelf life. This information intended only for general guidance in the application of our products. Because of the large number of possible methods of application and

VCR Institute Of Management Studies Page - 13

Finance Ratio Analysis processing, we are unable to accept responsibility in anyone particular case or application.

R SEAL is available at all leading Hardware, Automobile, General and Electric Stores.

R SEAL is available in 30g, 50g, 90g, and 800g packing. Crack Filling Compound

How to Use:

Develop the cracks in V shaped groove. Sprinkle water on prepared groove to remove loose particles. Mix 3.5 to 4 volumes of CFC to one part of water to get uniform consistency. Apply this paste to a clean groove and press properly. Finish the surface as desired.

Where to Use:

Repairing of cracks in internal and external plaster. To give a thin render coat to the even out surface.

VCR Institute Of Management Studies Page - 14

Finance Ratio Analysis Advantages:


High tensile strength Non shrink Very good adhesion Smooth Finish Product developed and manufactured in India by a leading polymer technologist understanding the tropical condition in India.

Coverage:

40 Mtr/kg.To fill 6 mm x 6mm "V" shaped groove / 3sq Ft/Kg . For 3mm render.

Tile Grouts

Description:

R SEAL tile grout is a polymer based tile joint filler used in filling gaps and levels itself to give hard wearing, non-dusting tile joints.

R SEAL tile grout does not allow water or moisture to seep into the back of the tile and cause its dislocation.

VCR Institute Of Management Studies Page - 15

Finance Ratio Analysis

R SEAL tile grout firmly holds the tiles together to give long life to the floor tiles.

Application:

R SEAL tile grout is used as a tile filler in domestic floor and wall tiles , commercial establishments , laboratories , super markets, service stations, hospital , automobile showrooms etc.

Advantages: R SEAL (WPL) significantly reduces water demand to enable production of good workability concrete with minimum water cement ratio.

Imported Polymer base Non dusting Very high compressive Tensile and Flexural strengths ensure carefree joints upto the life of the tile

Waterproof Economical Easy to use and clean

Directions to Use:

Add 1 part of water to 3 parts of R SEAL TILE GROUT by volume and mix well to obtain a smooth and uniform paste. Let the paste stand for 7 minutes before the use. Fill and tool the mixed material firmly without any breaks or gaps in the tile joint using a squeegee. Use the mixed paste within 20 minutes of mixing. After approximately 30 minutes of initial setting, remove the excess material on the tile edges with a sponge or wet cloth. Allow 24 hours for the filling to dry and then polish the tile with a clean, dry cloth.

VCR Institute Of Management Studies Page - 16

Finance Ratio Analysis Caution:

R SEAL TILE GROUT MUST BE FILLES WITHIN 24 HOURS OF FIXING THE TILES R SEAL TILE GROUT UTILITY CHART Coverage per kg of R SEAL TILE GROUT in square feet Tile Sizes Width of Joint 2mm 3mm 4mm 6mm 6x6 95 65 50 32 6x12 130 87 66 45 4x4 90 60 45 31 8x8 130 87 66 45 12x12 186 126 95 64

Colours:

R SEAL TILE GROUTS are available in 16 popular shades.

Available Colours:

WHITE, IVORY, GREY, DRAK BROWN, PINK, BURGUNDY, TERRA, RED, BLUE, COPPER CLOUDY, ALPINE BLUE, MUSHROOM, GREEN, BEIGE, YELLOW, DARK GREY & BLACK.

Special shades can be developed against bulk order. Storage:

2 Years from the date of packing, if stored in tight container away from heat and sunlight.

Super Plaster Master

Product Code: Super Master (SPM)


VCR Institute Of Management Studies Page - 17

Finance Ratio Analysis

Description:

After a prolonged laboratory research and practical tests, R SEAL (SPM) is developed to get over the demerits and deficiencies of both richer and leaner mortar mixes.

R SEAL (SPM) contains highly concentrated mixture of very active ingredients which make the richer concrete mixture resistant to shrinkage, cracking, crazing and dramatically improves the adhesion of learner mixes apart from imposing overall workability, strength, rebound losses and surface finish

Integral Water Proofing Compoundsfor Cement Mortar & Concrete (Liquid).

Product Code: (WPL) Water Proofing Liquid

Description:

R*SEAL WPL a concrete / mortar admixture in liquid form that acts both as a highly efficient plasticizer and waterproofing compound. R*SEAL WPL is specially formulated additive composed of cement compatible, surface active agent, polymers & additives. It is used as an additive for cement concrete/ mortar/plasters, because plasticizing properties, makes concrete cohesive and prevents segregation. It improves the integral waterproofing properties of cement concrete & plasters after curing.

R*SEAL WPL is a chloride free water reducing admixture based on selected sugar-reduced lignosulphonates. It is supplied as a brown solution which instantly disperses in water R*SEAL WPL disperses the fine particles in the concrete mix, enabling the water content of the concrete to perform more effectively and improving the consistency of the concrete. This produces higher levels of workability for the same water content, allowing benefits such as water reduction and increased strengths to be taken.

VCR Institute Of Management Studies Page - 18

Finance Ratio Analysis Fast Curing Epoxy Putty

Application Procedure:

R SEAL is available in fast type (GPFC), which sets in 30-45 minutes 27 C. after mixing . R SEAL is two components RESIN and HARDNER epoxy formulations in putty consistency supplied in equal stick form. Cut equal length from each stick and mix together by kneading with the hand till the mixture acquires a uniform colour. Use the mix at the earliest on a dry, clean, and oil free surface. Smoothen the putty while still tacky with the cloth or by pressing a polythene sheet and peel off after complete curing. R SEAL (GPFC) is versatile product with excellent bonding properties and resistance to chemicals etc., It is useful for sealing, repairing, joining, grouting, building, insulating and water proofing ferrous and non-ferrous metals, glass, asbestos, concrete, ceramics etc.

VCR Institute Of Management Studies Page - 19

Finance Ratio Analysis

e. Area of Operation:
HEAD OFFICE & FACTORY RIYA CHEMY Magadi Road, Bangalore Bangalore -560091 Tel: 65959955 / +919845057606 Email:ccs@rsealautomate.com

f. Ownership Pattern:
Riya Chemy is I so undertaking under and administrative control by the government of Karnataka. The bore headed by the chief minister of the state. Who is the chairperson, comprises senior officers of the state government, environment technical experts and efficient management professionals of the organization.

MANAGEMENT TEAM:
Name S.Babita Sunil Datta Gaurav Datta Designation Proprietor C.E.O Assistant C.E.O

VCR Institute Of Management Studies Page - 20

Finance Ratio Analysis

g. Competitors information:
Each and every Company needs competition to strive hard and stay for long in the market. Riya Chemy has many competitors amongst which the main competitor is: 1. Pidilite Industries Limited

g. Infrastructure:
Their manufacturing facilities are spread over 11000 sq. feet in an industrial location Bangalore, to ensure good manufacturing practices, segregation of production facilities for every grade and elaborate quality control measures are followed as per rigid internal systems. The plant has been set up with total indigenous R&D and expertise. The state of art manufacturing unit is ISO: 9001:2008 certified. They have in house full-fledged R&D and Quality Assurance Laboratory for undertaking basic research and application testing, equipped with modern analytical instruments and supported by India's leading Polymer technologist Mr. Vijay Datta and qualified chemists to ensure quality of their products batch after batch. Their dedication towards quality in all the products has made "R*SEAL" a well acknowledged brand.

i. Achievement:
From the survey the feedback of the Company is good and they have positive response from its customer.

VCR Institute Of Management Studies Page - 21

Finance Ratio Analysis Work-Flow Model (End to End)

Engineering Department

Planning Department

Production

Testing

Packing

Dispatch

VCR Institute Of Management Studies Page - 22

Finance Ratio Analysis I. ENGINEERING DEPARTMENT According to the customer requirements engineers will design the product with the help research department. Company has got good technical knowledge. The designing is done by using Auto CAD (Computer Aided Designing), inventor and Solid Edge 3D modeling which helps for accuracy in designing. II. PLANNING DEPARTMENT 1) Planning of required product with engineering department 2) After taking assembly and sub-assembly designs, the item required are categorized into parts; one; which are to be purchased from vendors outside and, second; which are to be manufactured in-house. 3) Placing order for items which have to be purchased from vendors 4) Calculating cost of components. 5) Spares requirement and management. 6) Process of production prepared with designs. III. PRODUCTION The marketing department will send an order forwarding memo to production department. In response to this production department will send order acknowledgement and delivery schedule to respective order. IV.PACKING After production the products will be packing. After packing the products will be sent to Testing department. V.TESTING After Packing Rseal products and are tested according to the customer requirement.

VCR Institute Of Management Studies Page - 23

Finance Ratio Analysis

k. Future Growth
Business Opportunity

we are one of the leading manufacturers of ISI mark Construction Chemicals & Adhesives under the well-knownbrand .

Our products carry good image and have vast dealers and distributor network throughout Karnataka, Tamil Nadu & Andhra Pradesh in India.

We are regularly developing new products in our respective field.

To increase our network further we want to appoint distributors at un-represented areas of India.

Parties already in distribution of Paints, Hardware, Building Materials, Cement or allied products with sound financial strength may contact us.

New entrepreneurs willing to make big in business may also contact us for a successful venture.

We shall provide you with a strong company support.

Approx. investment is around

2 to 3.Crore.

VCR Institute Of Management Studies Page - 24

Finance Ratio Analysis

CHAPTER-3
MCKINSEYS 7S MODEL
The MckinseysSeven-Ss is a frame work for analyzing organization and their effectiveness. It looks at the seven key elements that make the organization successful, or not; strategy; structure; system; style; skills; staff and shared valves.

Consultants at Mckensey and company developed the 7S model in the late 1970s to help managers address the difficulties of organizational change. The model shows that organizational immune system and many interconnected variables involved make change complex and that an effective change effort must address many of these issues simultaneously. The 7-S model is tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organizations problems may be diagnosed and a strategy may be developed and implemented.

VCR Institute Of Management Studies Page - 25

Finance Ratio Analysis The 7-S diagram illustrates the multiplicity interconnectedness of elements that define an organizations ability to change. The theory helped to change managers thinking about how companies could be improved. It says that it is not just a matter of devising a new strategy and following it through, nor is it a matter of setting up new systems and letting them generate improvement. To be effective, your organization must have a high degree of fit or internal alignment among all the seven Ss. All S are interrelated, so a change in one has a ripple effect on all the others. It is impossible to make progress on one without making progress on all. Thus, to improve your organization, you have to master system thinking and pay attention to all of the seven elements at the same time. There is no starting point or implied hierarchy. Different factor may drive the business in any one organization
1)

STRUCTURE The structure of framework in which the activities of the organizations members are coordinated. The four basic structural forms are the functional form, divisional structure, matrix structure and network structure.

i. PURCHASE AND STORES DEPARTMENT


Functions:

Making the availability of materials Reasonable price Information about the availability Investigation and selection sources of supply Fallowing up of order to ensure prompt deliveries Ensure proper packing, transportation Documentation and flow of activities of purchase department: Materials requirement slips (MRS) from production department. MRS received by purchase and stores department.
VCR Institute Of Management Studies Page - 26

Finance Ratio Analysis Enquiries sent to vendors or advertisement issued calling for seated offers within specified time. Offers/quotations received all opened on the specified date by representatives of purchase, user department, audit or finance. Tabulation of quotation and recommendation of purchase department. Credit and duration: Normally Riya Chemy will get 30days credit from suppliers. This period varies from 30 to 90 days; according to the value of the materials purchased and the demand for the product, which is received by the user department. Sometimes Riya Chemy pays advances to suppliers. Riya Chemy collects 20% of the values of tender which is termed as safety deposit, this is collected because some supplier quote for less amount and late they wont supply the goods. STORES: Material management Material management is one of the areas covered by the whole process of management for balanced growth and efficient running of the enterprise. It is necessary to control the management cost, material supply utilization such a way that they can lead to: Proper handling of material. Maximum utilization of production. Minimizing the cost of production Maximizing the margin of profit.

ii. PRODUCTION DEPARTMENT Production department plays a very important role in the organization as such; it acts as main centre of whole organization by converting the raw material into finished products. This department is responsible in carrying out the production activity evenly and in most efficient manner.
VCR Institute Of Management Studies Page - 27

Finance Ratio Analysis Objectives: To follow up the daily production schedule as per the plan To maintain the ethical standards and safety of employees To maintain cost of production as low as possible To upgrade technical efficiency of production To maintain integrated relationship with all other departments to maintain the quality of the product.

Production Department Hierarchy


Manager

Supervisor / Executive

Engineer

Workers

Trainee

iii. HUMAN RESOURCE DEPARTMENT Objective: To maintain good relationship between the employer and the employees; To maintain good industrial relation; To assist employees in attaining their personal goals so as the organization goal; To select right position for right person and number of employees; To help individual growth;
VCR Institute Of Management Studies Page - 28

Finance Ratio Analysis Working Hours: General shift : 09:30-18:00 Break : 13:00-14:00

Human Resources Department Hierarchy

HR Manager

Executive

Officer

Assistant

Trainee

IV. FINANCE DEPARTMENT Objectives: Maintenance of adequate liquid assets Profit Maximization b. Increase In Revenue c. Controlling Costs d. Minimizing Risk Wealth Maximization

VCR Institute Of Management Studies Page - 29

Finance Ratio Analysis Functions: Planning and organizing the funds. Directing and controlling the funds. Minimizing the loss. V.WORKING CAPITAL: Working capital is daily requirement of funds to carry out all operation and function of company smoothly and efficiently without interruption. RIYACHEMY is hypothecated with the bank, drawing of working capital requirements. Drawing of money from depends on stock, cost and margin. This percentage of margin is decided by bank, i.e. how much to lend to the company. Excessive working capital impairs profitability and on other hand inadequate amount of working capital can threaten the solvency of the firm. The working capital requirement changes according to the change in business activity

Finance department hierarchy

Manager

Executive

Officer

Assistants

VCR Institute Of Management Studies Page - 30

Finance Ratio Analysis VI.MARKETING DEPARTMENT Objectives:

To analyse marketing opportunities. To satisfy the customer wants as the business exists only due to existence of customer demands. To distribute the products in time.

Functions: The function included and performance in the marketing process and called marketing functions are: A. PRODUCT PLANNING The product planning is most tangible and important single components of marketing. The product policy, product planning and strategy are cornerstone of marketing program. Product planning is companys strategy for marketing its product.
MARKET SEGMENTATION

Market segmentation gives format recognition to facts the requirement of customers is different in quality and quantity. So we can formulate specific segment of the market so that supply will have best co-relation with demand. Each market segment can be selected as market target to be reached.

PRICING POLICY

The pricing policy provides general framework within which managerial decisions are made on pricing the products. These are guidelines to carry out pricing strategy. Pricing policy may change or adopt themselves with the changing objectives and changing environment of the market.

VCR Institute Of Management Studies Page - 31

Finance Ratio Analysis

B. CHANNELS OF DISTRIBUTION: The channels of distribution is set of interdependent institutions participating in marketing activities involved in movement of goods from primary producer to ultimate customers. There are several routes, which can be used for distribution of product. They are: Direct sales. Sales through industry distributor Sales through agents and distributors Sales through agent

C. ADVERTISING The following are the various modes of advertising media used by Riya Chemy Internet Media ( News Papers & Add Agency )

D. PACKING Packing is very important to make sure the product safety till it reaches the customer. Packing of products will be handled by packing sections. For packing, boxes and covers will be used.

E. LABELING: Labelling is one of the major roles of marketing department. This tells about products briefly and other information about the same labelled boxes are prepared at packing companies under the contract.

VCR Institute Of Management Studies Page - 32

Finance Ratio Analysis

Marketing Department Hierarchy:


HOD Marketing

Market Managers

Marketing Executive

Marketing Sales person

ee

STRATEGY:
Strategy is the systematic action allocation of resources to achieve company goals. A strategy is defined as a coherent set of action aimed at gaining a sustainable advantage over competitors by improving market position and effective allocation of resources viceversa. Thetwo important areas which determine achievement of objective of the organizations. 1. 2. Pricing Waste elimination

STAFF:
Riya Chemy is organizing several training and development programs. It acquires engineering graduates, diploma, and ITI and multi skilled qualification to utilize their skills.

VCR Institute Of Management Studies Page - 33

Finance Ratio Analysis STYLE: Riya Chemy follows democratic style of leadership. The elected representative will try to do what the majority of subordinates desire. Decision making process is decentralized so the lower level employees are contributing towards the decision making process in the organization. By decentralizing, the individuals at lower levels are closer to the problem area in the organization. The employees are given importance in considering their opinions for any organizational issues. SKILLS: Skills refer to the distinctive capabilities of an organization. Skills possessed by the employees in the organization are one of the important factors determining the success of the organization. These skills of the employees will have a direct impact on the on their productivity and performance. A highly skilled employee can perform his work both effectively and efficiently. SHARED VALUES: Shared values are the super ordinate goals of the organization. The shared values govern and regulate the behavior of the member of the organization. These are the values shared by the all members in the organization. Organization develops the mission statement to share the ultimate aim of the organization with its employees and customers. A clear thoughtful mission statement provides employees with a shared sense of purpose, direction and opportunity. SYSTEMIt means set of protocols which are identified to carry out the activates in a prescribed manner. This should be carried out by the organization in all situation, systems differ from organization to organization. There are various systems like performance management system, production system, information s.

VCR Institute Of Management Studies Page - 34

Finance Ratio Analysis

CHAPTER-4
SWOT ANALYSIS
Appraising a companys resource strengths and weakness and its external opportunities and threats, commonly known as SWOT analysis, provides a good overview of whether its overall situation is fundamentally healthy or unhealthy. STRENGHTS The company has a good brand name. There are highly skilled and committed employees. There are large numbers of customers spread all over the country. Worlds class quality management and control. RiyaChemy by Schneider electric offer a unique combination and innovation and Legendary Reliability. Reliability, Productivity and Availability of information systems worldwide by protecting hardware and data from the On-going threat of power disturbances.

WEAKNESS Under-utilization of resources because of overstaffing. There is less coordination between different departments. The employees have become less productive because of job security. OPPORTUNITIES Growth through mergers: The Company can tie-up with other company which have Strong distribution channel so that it would be possible to increase its which in turn brings profit to the company.

VCR Institute Of Management Studies Page - 35

Finance Ratio Analysis Superior customer service: The companys aim should not only to produce good products but it should satisfy its customers who are using their products by getting feedback, so that the company would come to know the taste and preferences of its customers. To give stiff competition to its competitors: The Company must understand the market condition and should bring out new products at a reasonable price with good quality. Utilizing the skilled manpower to maximum extent.

THREATS Competition: The Company is facing stiff competition from its rivals. Threat due to globalization, privatization and liberalization: Since more number of foreign companies is also entering into this segment, the company is finding difficult to withstand its position in the market by facing competition with foreign as well as national companies. Increase in cost of raw materials: The Company is finding it difficult to maintain the price levels of its products due to increase in cost of raw materials. Emergence of substitutes.

VCR Institute Of Management Studies Page - 36

Finance Ratio Analysis

CHAPTER 5
ANALYSIS OF FINANCIAL STATEMENT
Sl.No 1 2 3 4 5 6 7 8 9 Current ratio Cash ratio Fixed asset turnover ratio Return total assets Quick ratio Gross profit margin Net profit margin Current assets to fixes asset ratio Solvency ratio Ratios 2009-2010 1.67 0.01 6.27 0.12 0.97 22.52 4.92 1.3 1.00 2010-2011 2.17 0.03 5.62 0.11 1.53 21.09 4.54 1.34 0.73 2011-2012 1.45 0.03 4.69 0.12 1.01 20.65 4.37 1.11 1.00

VCR Institute Of Management Studies Page - 37

Finance Ratio Analysis

ANALYSIS
The table shows that the current ratio of Riya Chemy in all three financial year was increasing The above tables shows that the ratio was 1.67 in the year 2009-10 & it increase to 2.17 in the year 2010-11, 1.45 in 2011-12. Except the fluctuation in few years, it is 0.1, 0.3, and 0.3 in the three financial years. The ratio in the year 2010 was 6.27 in the year 2011 is 5.62 in the year 2012 was 4.69 The above analysis indicates that the fixed assets are not efficiently used in the year 2009-10& 2010-11.It kept on increasing for next 3 year i.e. 2009-10, 201011, 2011-12. Here the ratio is more than 100% it shows that the investment on fixed assets is more.

In the year 2009-10 0.97 the ratio is & it has increased to 1.53 in the year 201011& it increased in the year 2011-12 as 1.01 In the year 2009-10 the ratio is 22.752 & it has decreased to 21.01 in the year 2010-11& it has increased in the year 2008-09 as 20.65 In the year 2009-10 the ratio is 3.7 & it has increased to 5.05 in the year 2010-11 & it has decreased to 6.04 in the year 2011-12. In the year 2009-10 the ratio is 14.29& it has increased to 14.57, in 2011-12 decreased to 8.53.

VCR Institute Of Management Studies Page - 38

Finance Ratio Analysis

CHAPTER-6
LEARNINGEXPERIENCE
The main objective of the summer project was to have brief study of organization, its background, nature of business, its working, analyses the various product profiles of the organization etc. This is the first experience to me in Riya Chemy when I undergone summer project training in that company for ten weeks. This training helped me a lot to understand how the classroom theories are applied in the organizations. Staying in Riya Chemy for almost ten weeks gained me basic knowledge to know more details about how and when it was started, how its function, its business conditions in the initial stage and its ground growth. Riya Chemy gave me the immense opportunity to study the behavior, policies, practices, strategy and their operations. It helped me gain knowledge about the companys operations, products, competitors etc. To begin with the introduction part that, as RiyaChemy being Iso Company. I got to know the working of the company and how the staff and people work and how is their work culture. It was the second best experience for a fresher like me. The management was very co-operative and it was a great experience with the staff as they helped me all my queries and needs and they supported me a lot. To begin with the training, I had to report to the company everyday sharp at 9.30 am and had to sort the files in their cabins. Then I came to know about the integrity part and how well we should be in a formal context with other people. I learnt a lot about the manufacturing sector, how Product is generated where it is transmitted and stored. What processes are involved and who are the major producers. How the financing of the products manufacturing projects go on.

VCR Institute Of Management Studies Page - 39

Finance Ratio Analysis

PART-B CHAPTER 1
General Introduction: This report deals with the financial performance of Riya Chemy For the financial years 2009 to2012. This report briefly explains the subject matter (financial performance) of the study conducted. The basis for the financial planning, analysis and decision- making is the financial information. Financial planning, analysis and decision -making is the financial information. Financial information is needed to predict, compare and evaluate the firms earning ability. it is also required to aid in economic decision making investment and financing decision- making. The first task in the analysis is the selection of the information relevant to the decision under consideration from the total information contained in the financial statements. The second task is to arrange the information in a way to highlight comparison among different variables from balance sheet and income statement of different years. The final step is that of drawing inferences and conclusions. The best tool used for finding out trends of an organizations growth over a period of time is ratio analysis. The variables in the balance sheet provides considerable information which is eventually helpful for the organization as the trends can be studied and it forms the basis of drawing important inferences .

VCR Institute Of Management Studies Page - 40

Finance Ratio Analysis Statements of the Problem: Statement: - A study on financial performance of Riya Chemy The study is undertaken to ascertain the companys past present and future financial conditions, through the use of financial statements analysis techniques such as ratio analysis, comparative analysis and trend analysis. The companys profitability and liquidity positions are the two major parameters to be understood and validated. The profitability can be found through the use of profitability ratios and the liquidity can be ascertained through the use of the liquidity ratios. Need of the study: Financial performance is used to identify the trends and relationships between financial statement items. Both internal management and external users (such as analysts, creditors and investors) of the financial statements need to evaluate a companys profitability, liquidity and solvency. The objective of financial statement is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statement analysis makes financial statement understandable, relevant, reliable and comparable. Thus reported assets, liabilities, equity, income and expenses are directly related to an organizations financial position and performance using financial statement analysis. Financial statement analysis are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. Financial statement analysis reports may be used by users for different purposes. Financial statement analysis are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently . Financial statement analysis report may be used by users for different purposes:
VCR Institute Of Management Studies Page - 41

Finance Ratio Analysis Owners and managers require financial analysis report to make important business decisions that affect its continued operations. Financial analysis performed on financial statements provides the managements with a more detailed understanding of the stockholders. Prospective investors make use of financial report to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts) , thus providing them with the basis for making investment decision . Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and significant expenditures. Media and the general public are also interested in financial analysis reports for a variety of reasons. As a tool of financial management, ratios are of crucial significance. With the help of financial statement analysis conclusion can be draw regarding the liquidity position of the firm. Financial statements analysis is equally useful for assessing the long term financial viability of a firm. This aspect of financial position of a borrower is of concern to the long-term creditors, security analyst, and the present and potential owners of a business. Another dimension of the financial statement analysis, relevant from the viewpoint of management, is that it throws light on degree of efficiency in the management and utilization of its assets. Financial statements analysis not only throws light on the financial position of the firm but also serves as a stepping to remedial measures. This is made possible due to inter firm comparison.

VCR Institute Of Management Studies Page - 42

Finance Ratio Analysis Objectives of the Studies: To evaluate the liquidity position of company. To analyze the profitable position of the company. To offer suggestion if necessary. To analyze the long term solvency and leverage position. To make overall performance analysis. Scope of the Study: Financial statements analysis covers the following aspects: The study is confined only to Riya Chemy. The scope of the study pertaining in for the last four years i.e. 2009-2010, 2010-2011 , 2011-2012 and the analysis is done on the basis of published data obtained from the annual reports by using financial ratios, trend analysis , tables and graphs. Ratio analysis is used to evaluate financial condition of the firm. The study determines firms ability to meet its short term and long term obligations. The study determines firms ability to generate profits.

Methodology: Research methodology Exploratory research An exploratory research focuses on the delivery of ideas and is generally based on secondary data. It is a preliminary investigation a preliminary investigation, which does not have a rigid, design. This is because a researcher engaged in exploratory study may have to change his focus as a result of new ideas and relation among the variables.

VCR Institute Of Management Studies Page - 43

Finance Ratio Analysis

The study conducted through exploratory research with the help of data obtain from secondary data, there is no specific sample design made or questionnaire used to obtain information Data collection technique Data collection to perform financial analysis was obtained from secondary data sources. The research involved analysis of secondary data and interpretation the results. The secondary data sources provided reliable, suitable adequate and specific knowledge to complete the research. Secondary sources of data collection employed in the research were obtained from; The companys audited report for the last four years. Broachers of Riya Chemy Companys website Research databases Standard reference books for the theoretical information about the analysis techniques. Data analysis technique: Financial analysis can be conducted using several techniques and tools. The secondary data collected was edited, classified and tabulated for analysis. The financial analysis

conducted employs the following analytical tools to perform data analysis;

VCR Institute Of Management Studies Page - 44

Finance Ratio Analysis Ratio analysis Comparative balance sheet Trend analysis and percentage

Limitations of the studies:


The study is restricted to Riya Chemy only The study is based on the financial statements of the company for the last 3 years only. The past performance is not indicative for future results. This study holds significant only in the present situation. Ratios are based on the summarized year- end information, which may not be a true reflection of the overall years results. Ratios alone are not adequate for proper conclusions. Ratios may be misleading in the absence of absolute data. All the information provided by the company is assumed correct. There were some restrictions in assessing the information in the company. The study of financial performance can be only a means to know about the financial condition of the company and cannot show a through picture of the activities of the company.

VCR Institute Of Management Studies Page - 45

Finance Ratio Analysis

CHAPTER-2
DATA ANALYSIS AND INTRPRETATION Meaning of financial statements: Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: The balance sheet Profit and loss account They provide some extremely useful information to the extent that balance sheet mirrors the financial position on a particular date in term of the structure of assets , liabilities and owners equity , and so on and the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial positions and operations of a firm. Financial analysis is largely a study of relationship among the various financial factors in a business as closed by a single set of statements , and a study of the trend of those factors as shown in series of statements. Features of financial analysis: To present a complex data contained in the financial statements in simple and understandable form.

VCR Institute Of Management Studies Page - 46

Finance Ratio Analysis To classify the items contained in the financial statements in convenient and rational groups.1 To make comparison between various groups to draw various conclusions. Procedure of financial statements analysis: The following procedure is adopted for the analysis and interpretation of financial statements. The analysis should acquaint him with principals and postulated of accounting. He should know the plans and policies of the management so that he may be able to find out whether these plans are properly executed or not. The extent of analysis should be determined so that the sphere of work may be decided. If the aim is find out. Earning capacity of the enterprise then analysis of income statements will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary. Steps involved in the analysis of financial statements: Analysis Comparison Interpretation

Objectives of financial statements: Financial statements are generally analysis with the following objectives To determine the profitability or earning capacity of the concern To know the progress of the concern To judge the financial position of the concern To know the trends of the business i.e. purchases, sales, profits, liquidity, solvency, etc. To measure the financial performance of the concern
VCR Institute Of Management Studies Page - 47

Finance Ratio Analysis To assess the debt-capacity of the concern To measure the efficiency of operations To estimate the future prospects of the concern To facilitate decision-making and policy formulation To judge managerial performance and efficiency To facilitate analytical presentation data Meaning of financial analysis: The term financial analysis is also known as analysis and interpretation of financial statements refers to the process of determining financial strength and weakness of the firm by establishing strategic relationship between the items of the balance sheet , profit and loss account and other operative data. The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection, relation and evaluation. Purpose of analysis of financial statements To know the earning capacity or profitability To know the solvency To know the financial strengths To know the capacity of payment of interest and dividends To make comparative study with other firms To know the trend of business To know the efficiency of management

VCR Institute Of Management Studies Page - 48

Finance Ratio Analysis Types of financial analysis: A).Classification on the basis of users External analysis: Outsiders, who dont have access to the detailed internal accounting records of the business firm, do this analysis. These outsiders parties are potential investor, creditors, government agencies, credit agencies and general public. Internal analysis: The analysis conducted by person who has access to the internal accounting records of a business firm is known as internal analysis B). On the basis of modus operand Horizontal analysis:Also known as dynamic analysis portrays, here figures for a particular no of years chosen. And one year is taken as a base or standard year. Changes from the figures of the base year, represented as percentage , give us a clear idea of the trend, during the years, i.e. whether there is an increasing trend, decreasing trend or violent fluctuations, so that, it is possible to analysis the reasons for the same Vertical analysis:This analysis aims at making a static analysis of financial statement, for the one year only. This method of analysis is useful in studying the inter-relationship of different figures, as for instance, the relationship of gross or net profit to total deposit and also for inter-firm comparison. Methods / Tools of financial analysis: A number of methods can be used for the purpose of analysis of financial statements. These are also termed as techniques or tools of financial analysis. Out of these, and
VCR Institute Of Management Studies Page - 49

Finance Ratio Analysis enterprise can choose those techniques which are suitable to its requirements. The principle techniques of financial analysis are : Comparative financial statements Ratio analysis Comparative financial statements: When financial statements figures for two or more years are placed side-side to facilitate comparison, these are called comparative financial statements. Such statements not only show the absolute figures of various year but also provide for columns to indicate to increase or decrease in these figures from one year to another. In addition, these

statements may also show the changes from one year to another on percentage form. Such cooperative statements are of great value in forming the opinion regarding the progress of the enterprise. Functions of comparative financial statements To simplify data To make inter period/ inter-firm comparison To indicate the trends To enable forecasting To indicate the strength and weaknesses of the firm Compare the performance To analyze expenses Analyze profits Tools for comparative of financial statements: Comparative financial statement is a tool of financial analysis that depicts change in each item of the financial statements in both absolute amount and percentage term, taking the item in preceding accounting period as base. Comparison and analysis of financial statements may be carried out using the following tools:
VCR Institute Of Management Studies Page - 50

Finance Ratio Analysis Comparative balance sheet: - The comparative balance sheet shows increase and decrease in absolute terms as well as percentages, in various assets, liabilities and capital. A comparative analysis of balance sheet of two periods provides information regarding progress of the business firm. The main purpose of comparative balance sheet is to measure the short-term and longterm solvency position of the business. Ratios analysis: Meaning: Absolute figures expressed in financial statements by themselves are meaningfulness. These figures often do not convey much meaning unless expressed in relation to other figures. Thus, it can be say that the relationship between two figures, expressed in arithmetical terms is called a ratio. Types of ratios: Proportion or pure ratio or simple ratios Rate or so many times Percentage Fraction Functions of ratio analysis: Helpful in analysis of financial statements Simplification of accounting data Helpful in comparative study Helpful in locating the weak spots of the business Helpful in forecasting Estimate about the trend of the business Fixation of ideal standards Effective control Study of financial soundness
VCR Institute Of Management Studies Page - 51

Finance Ratio Analysis Classification of ratios: In view of the financial management or according to the tests satisfied, Various ratios have been classified as below:

Liquidity ratios: These are the ratios, which measures the short-term solvency or financial position of a firm. These ratios are calculated to comment upon the short-term paying capacity of a concern or the firms ability to meet its current obligations. These ratios measure the ability of the company to meet its financial obligations. In liquidity ratios by establishing a relationship between cash and other current assets to current obligation, provide a quick measure of liquidity. Debt equity ratio Net worth ratio Fixed assets to proprietors ratio Current assets to net worth ratio Fixed assets ratio Activity ratios: These ratios are employed to evaluate the efficiency with which the company manages and utilizes its assets. These ratios are also called turnover ratio because they indicate the speed with which assets are being covered or turned over into sales. Activity ratios, thus involved a relationship between sales and assets are managed well. The better management of assets, the larger the amount sales. Several ratios can be calculated to the judge effectiveness of assets utilization. These ratios are: Stock turnover ratio Debt turnover ratio Creditors turnover ratio Current assets turnover ratio Fixed assets turnover ratio
VCR Institute Of Management Studies Page - 52

Finance Ratio Analysis Total assets turnover ratio Proprietors fund turnover ratio Profitability ratios: These ratios are calculated to the measures the operating efficiency of the company. Besides management of the company, creditors and owners are also interested in the profitability of the company. Creditors want to get interest and repayment of the principal regular. Owners want to get a required rate of returns on their investment. This is possible only when company earns sufficient profits. The ratios that can be calculated under profitability ratio are: Operating ratio Return on capital employed Return on proprietors fund ratio Net profit to total assets ratio Gross profit ratio Net profit ratio Cash- flow statement: A cash- flow statement is a statement showing inflows (receipts) and outflows (payments) of cash during a particular period. In other words, it is a summary of sources and applications of each during a particular span of time. Functions of cash-flow statement Useful for short-term financial planning Useful in preparing the cash budget Comparison with the cash budget Study of the trend of cash receipts and payments It explains the deviations of cash from earnings. Helpful in ascertaining cash flow from various separately Helpful in making dividend decisions Fund-flow statements
VCR Institute Of Management Studies Page - 53

Finance Ratio Analysis The fund-flow statement is a statement which shows the movement of funds and is a report of the financial operations of the business undertaking. It indicates various means by which funds were obtained during a particular period and ways in which these funds were employed. The word fund is used to denote working capital. Common-size statements: The common-size statements consist of balance sheets and income statements are Shown in percentages. The figures are shows as percentage of total assets, total liabilities and total sales. The different assets are expressed as percentage of the total asset, similarly various liabilities are expressed as percentage of the total liabilities. These statements are also known as component percentage. The shortcoming of the comparative statements and trend percentages where changes in items could not be compared with the total can cover up. The analysis is able to assess the figures in relation to total values. Trend analysis: The financial analysis may be analyzed by computing trends of series of information. This method determines the directions upward and downwards and involves the computation of the percentage relationship that each statements item bears to the same item in base year. The information for a number of years is taken up and one year generally the first year, is taken as base year. The figure of the base year is taken as hundred and trend ratio for other year are calculated on basis of base year and trend is analyzed. C .V.P analysis C. V. P analysis is an analytical technique for studying the relationship between cost, volume, and price of profits. It is a device used and to determine the influence of the profit planning process of the firm. The formal profit planning and control involves the use of budget and forecast. C.v.p. Analysis provides an overview of the profit planning process and helps to evaluate the purpose of reasonableness of such budgets and forecasts. It helps the management to seek most profitable combination of cost and volume.
VCR Institute Of Management Studies Page - 54

Finance Ratio Analysis RATIO ANALYSIS: 1. Current Ratio: The current ratio expresses the relationship between the current assets and current liabilities. The current ratio of a firm measures its short term solvency. I.e. is the ability to meet short-term obligations. It indicates the rupee to current asset available for each rupee of current liability

Current Ratio = Current Assets Current Liabilities

Table 1 Current Ratio:


Current Year Assets Lakhs 2009-10 3094561.73 Current Rs.in Liabilities Rs. In Ratio Lakhs 1856358.35 1.67

2010-11

3444046

1587081.55

2.17

2011-12

3734486.01

2570534

1.45

VCR Institute Of Management Studies Page - 55

Finance Ratio Analysis

Current Ratio
4000000.00 3500000.00 3000000.00 2500000.00 2000000.00 1500000.00 1000000.00 500000.00 0.00 Current Current Assets Rs.in Liabilities Rs. Lakhs In Lakhs 2009-10 2010-11 Ratio

2011-12

Interpretation: The current ratio of Riya Chemy for the year 2009 is 1.67 times &it increased to times in the year 2010 In the year 2010 it is 2.17 times in the year 2010 it is 1.45times &in the year 2011 it is 10.79times. The graph shows that the current ratio of Riya Chemy in all five financial year was increasing

VCR Institute Of Management Studies Page - 56

Finance Ratio Analysis 2. Fixed assets Turnover Ratio: It is also called as sales to fixed assets ratio. It measures the efficient use of fixed assets. This ratio is a measure of efficient use of fixed assets.

Fixed assets turnover Ratio =

Cost of Goods sold Net Fixed Assets

Table: 2

Year

Sales

Net fixed assets

Ratio

2009-10

15035735

2396151.51

6.27

2010-11

13828565

2461377

5.62

2011-12

15638187

3336405.97

4.69

Fixed Assets Turnover Ratio


16000000 14000000 12000000 Axis Title 10000000 8000000 6000000 4000000 2000000 0 Sales Net fixed assets Ratio 2009-10, 2010-11, 2011-12, 6.27 5.62 4.69

VCR Institute Of Management Studies Page - 57

Finance Ratio Analysis Interpretation: The above analysis indicates that the fixed assets are not efficiently used in the year 2006-07 & 2010-11. It kept on increasing for next 3 year i.e. 2007-08, 2008-09, 2009-10. 3. Quick Ratio: This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of liquidity of a company. It shows the ability of a business to meet its immediate financial commitments. It is used to supplement the information given by the current ratio The quick assets include cash, debtors (excluding bad debts) and securities which can be realized without difficulty. Quick liabilities refers to all current liabilities expect bank overdraft.

Quick Ratio =

Quick Assets Current Liabilities

Table: 3

Year

Quick Assets

Current Liabilities

Ratio

2009-10

1804061.73

1856358.35

0.97

2010-11

2424546

1587081.55

1.53

2011-12

2589486.01

2570534

1.01

VCR Institute Of Management Studies Page - 58

Finance Ratio Analysis

Quick Ratio
3000000 2000000 1000000 0 Quick Assets Current Liabilities 2010-11 Ratio

2009-10

2011-12

Interpretation:
to the standard ratio 0.97 though in year 2010-11 it has reached 1.53 which is highest in the study period which indicates the firm does not have the ability to meet its short term ability therefore the quick ratio is not satisfied. 4. GROSS PROFIT RATIO: Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. Thus, it is calculated by dividing the gross profit by sales:

Gross Profit Ratio = Gross Profit *100 Sales

VCR Institute Of Management Studies Page - 59

Finance Ratio Analysis Table: 4

Year

Gross profit

Sales

Ratio

2009-10

3114660

13828565

22.52

2010-11

3171698.5

15035735

21.09

2011-12

3228737

15638187.08 20.65

Gross Profit Margin

20000000 15000000 10000000 5000000 0 Gross profit 2009-10 Sales 2010-11 Ratio 2011-12

Interpretation: In the year 2009-2010 is 22.25 times&it decreased to times in the year 2011 In the year 2011 it is 21.09 times in the year 2012it is 20.65 times.

VCR Institute Of Management Studies Page - 60

Finance Ratio Analysis 5. NET PROFIT RATIO: Net profit ratio establishes a relationship between net profit (after taxes) and sales, and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. The ratio is the overall measure of firms profitability and is calculate.

Net Profit Ratio = Net Profit *100 Sales

Table: 5
Earnings Year interest taxes 2009-10 680066 after and Net Sales Ratio

13828565
15035735

4.92

2010-11

682043

4.54

2011-12

684019

15638187.08

4.37

VCR Institute Of Management Studies Page - 61

Finance Ratio Analysis

Net Profit Margin


20000000 15000000 10000000 5000000 0 Earnings after interest and taxes 2009-10 Net Sales Ratio

2010-11

2011-12

Interpretation: The current ratio of Riyachemy for the year 2010 is 4.92 times&it decreased to times in the year 2011 In the year 2011 it is 4.54 times, in the year in the year 2012 is4.37 it is times. 6. Cash Ratio: Although receivables, 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, some authorities are of the opinion that the absolute Liquid ratio should also be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.

Absolute liquid Ratio = Absolute Liquid Assets *100 Current Liabilities

VCR Institute Of Management Studies Page - 62

Finance Ratio Analysis Table: 6


Cash in hand Year and at bank + Marketable securities 2009-10 22540.3

Current Liabilities In Lakhs Rs. Ratio

1856358.35

0.01

2010-11

51701

1587081.55

0.03

2011-12

64972.66

2570534

0.03

Cash Ratio
3000000 2500000 2000000 1500000 1000000 500000 0 Cash in Current hand and Liabilities at bank + Rs. In Lakhs Marketable securities Ratio 2009-10 2010-11 2011-12

In the year 2011 it is 0.03 times, in the year 2012 it is 0.03 times.

VCR Institute Of Management Studies Page - 63

Finance Ratio Analysis 7. Return on total assets: Table: 7


Net Year profit Ratio

after Interest Total Assets and Tax

2009-10

680066

5490713.24

0.12

2010-11

682043

5981423

0.11

2011-12

684019

7070891.98

0.10

Return on Total Assets


8000000 6000000 4000000 2000000 0 Net profit after Interest and Tax 2009-10 Total Assets Ratio

2010-11

2011-12

Interpretation: The current ratio of Riya Chemy for the year 2010 is 0.01 times&it decreased to times in the year 2011 In the year 2011 it is 0.03 times, In the year in the year 2012 is 0.03 it is times

VCR Institute Of Management Studies Page - 64

Finance Ratio Analysis 8. Current Assets to Fixed Assets Ratio: The current ratio is the ratio that expresses the relationship between current assets and fixed asset. Current assets refer to all those assets that change into cash within a year. Fixed assets refer to net assets i.e., fixed assets to minus depreciation. The fixed assets of a concern have contributed to sales. The current assets to fixed assets ratio is generally expressed as a rate. It can be calculated using the following formula.

Currentsassets to Fixed AssetRatio = Current Assets Fixed Assets

Table: 8 Fixed assets 2396152 2461377 3336906

Year

Current Assets

Ratio

2009-10 2010-11 2011-2012

3094561.73 3444046 3734486.01

1.3 1.34 1.11

VCR Institute Of Management Studies Page - 65

Finance Ratio Analysis

4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 1 2 3 Current Assets Fixed assets Ratio

Interpretation: The current ratio of Riya Chemy for the year 2010 is 1.3 times&it decreased to times in the year 2011 In the year 2011 it is 1.34 times, in the year in the year 2012 is 1.11 times. 99. Solvency Ratio: This ratio is a small variant of equity ratio and can be simply calculated as 100-equity ratio, i.e., continuing the example taken for the equity ratio, solvency ratio = 100-66.67 or say 33.33%. The ratio indicates the relationship between the total liabilities to out sider to total assets of a firm and can be calculates as follows:

Solvency Ratio = Tax Liabilities to Outsiders Total Assets

VCR Institute Of Management Studies Page - 66

Finance Ratio Analysis Table: 9

Year

total liabilities

total assets

Ratio

2009-10

5490713.24 5490713.24 1.00

2010-11

2570534

3520046.00 0.73

2011-12

7070891.98 7070891.98 1.00

8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 toyal lialabilities total assets Rato Series1 Series2 Series3

Interpretation: The current ratio of Riya Chemy for the year 2010 is 1.00 times&it decreased to times in the year 2011 In the year 2011 it is 0.73 times, in the year in the year 2012 is 1.00 times

VCR Institute Of Management Studies Page - 67

Finance Ratio Analysis

Trend Analysis: FOR THE YEAR 2009 T0 2012 IN THOUSANDS:


2009-10 Liabilities proprietors Capital Secured loan Other liabilities Current liabilities Total liabilities Assets Fixed assets Deposits Closing stock Sundry debtors Cash Bank Total Assets 2396151.51 31000 1290500 1666239.68 22540.30 84281.75 5490713.24 2461377 1995500 1996129 51701 300716 6805423 3336405.97 31000 1145000 100% 100% 100% 154.62 119.79 229.37 356.79 123.94 102.72 139.24 100 88.72 123.18 288.25 499.53 128.77 1,671,160.22 1847601 699,639.83 740000 1856358.35 4967158.4 1453654 2570534 1947319.35 1478511.06 300000 159140.00 100% 100% 100% 100% 100% 138.47 320.54 110.55 207.77 116.52 211.32 40.54 8.57 78.21 2010-11 2011-12 2010% 2011% 2012%

15922013 3884970.41

2052494..37 100% 64972.66 421018.98 7070891.98 100% 100% 100%

VCR Institute Of Management Studies Page - 68

Finance Ratio Analysis


6

4 Series 1 3 Series 2 Series 3 2

0 Category 1 Category 2 Category 3 Category 4

1111111111

VCR Institute Of Management Studies Page - 69

Finance Ratio Analysis

CHAPTER-3 FINDINGS
The current ratio i.e. 1.67% of the company higher than the ideal ratio. It shows a good financial position of the company. The quick ratio i.e. 0.97% of the company lower than the standard ratio. It shows company good liquidity position. The working capital turnover ratio of the company is much lower which indicates efficient management of working capital. The debtors turnover ratio of the company is decreasing from year to year which indicates that more steps should be taken by the company so as to realize the debt from the customers. Fixed assets turnover ratio is good for the company it indicates efficient utilization of fixed assets in generating sales. But there was decline in the current year. The net profit ratio talks about the firms business affairs and RiyaChemys net profits have increased and in the current year decreased this is due the reason that the net profits are not increased proportionately to sales. The fixed assets net worth ratio measures the profit earning capacity of the business and it is showing an increasing which is very good for the company. The cash flow statement shows that in the 2011 more cash is being used for the financing activities than in the year2010. The inventory turnover ratio of the company maintain inefficient manner.

VCR Institute Of Management Studies Page - 70

Finance Ratio Analysis

CHAPTER-4
SUGGESTIONS It is suggested Riya Chemy to continue the same with respect to the current ratio. It is estimated to Riya Chemy to improve fixed assets ratio. It is suggested for Riya Chemy to keep the same increasing trend in order to make its shareholder happy. Riya Chemy should plan while purchasing the assets about their returns so that it can move positive every upcoming year. The firm should try to improve its net profit because to sustain in the sector and to have a good profitability it must improve on this region. The fixed assets turnover ratio is considerably increasing and the firm should continue to do so in the near future. To curb power thefts and losses arising out of it Riya Chemy should devise new technology to check on power thefts.

VCR Institute Of Management Studies Page - 71

Finance Ratio Analysis

CHAPTER-5
CONCLUSION As per the study of analysis conducted on the financial performance of Riya Chemy for the last 3 years i.e. 2009 to 2012 it is seen that the public sector company its liquidity position has been good over the last 3 years. The profitability of the firm has also been fluctuating over the years. Being a public sector company the firm should concentrate on providing better service to the public rather than increasing its profits from this point of view Riya Chemy has been doing a remarkable job and it is having a well-respected, trusted, brand and brand equity in the market. Riya Chemy has adopted a unique technique in the organization compare to any other power generation organizations. The shareholders are also enjoying an increasing trend in the dividend payout. As per the overall study it can be conclude that the financial position of the firm during the last five years is satisfactory. The income of Riya Chemy is steadily increasing and it shows some increase and decrease and the company should try to increase its income and reduce its expenses to increase its profitability. The shareholders are also enjoying an increasing trend in the dividend payout and the company should try to increase this future

VCR Institute Of Management Studies Page - 72

You might also like