A Summer Training Report On

RATIO ANALYSIS OF ZOLOTO INDUSTRIES

Submitted to PUNJAB TECHNICAL UNIVERSITY JALANDHAR In partial fulfillment of the requirement for the Award of degree of Master of Business Administration (MBA)

Submitted by
Harjot Singh

Project Guide Mr. Kuldeep Sehgal Senior Manager

Session (2012-2014)

APEEJAY INSTITUTE OF MANAGEMENT TECHNICAL CAMPUS JALANDHAR

CERTIFICATE

This is to certify that the project report entitled RATIO

ANALYSIS OF ZOLOTO
piece of work conducted

INDUSTRIES submitted by Mr. Harjot Singh. is a bona fide

under my direct supervision and guidance. No part of this work has been submitted for any other degree of any other university. The data sources have been duly acknowledged. It may be considered for evaluation in partial fulfillment of the requirement for the award of degree of Master of Business Administration.

Date:

(Signature)

. Kapil Gupta Punjab Institute of Technology Kapurthala

PREFACE
Our institutions has given us opportunity through training to be aware of and cope with fast rate changing technology, management policies, quality and productivity etc. This is a bold attempt to bridge the gap between the world of work and studies imparted in the institutions. This training enables us to apply theoretical knowledge to practical situations, appreciate the sense of responsibility, importance of discipline, punctuality and the psychology of worker and their habits which make us more professional and near to the world of technology and team work. Industrial training brings out better citizens, better technocrats and better diplomats out of us.

I was lucky to get an opportunity to work in one of the top limited sector industries, i.e.(Zoloto House, 11th Mile Stone , Lambra ,Nakodar Road Jalandhar-144026) . The purpose of this training was to gain knowledge about the industry, how it works and also to see the environment of the industry. I joined the training not only for these purposes, but also to learn something about operation of the machines. This report is a written account of what I learnt and experienced during this period. I wish, those going through it, will not only find it readable but will also find useful information for future references.

ACKNOWLEDGEMENT
We would like to express our deep and sincere gratitude to our capstone guide Mr. Rahul Handa Assistant Professor Apeejay Institute of Management Technical Campus. His wide knowledge & his logical way of thinking has been of great value for us, his understanding, encouraging & personal guidance have provided a good basis for present capstone project. We wish to express our warm and sincere thanks to Finance Manager Mr. Kuldeep Sehgal who introduced us to the practical concept of our capstone project. His ideas and concepts have had a remarkable influence on our entire capstone project period.

During this work we have collaborated with many colleagues for whom we have great regard and we wish extend our warmest thanks to all those who have helped in our work.

Harjot Singh (107)

TABLE OF CONTENTS

Title Page

I.

Certificate

II.

Preface

III.

Acknowledgement

IV.

CHAPTER NO. 1 2 3 4 5 6 7 8 References

CHAPTER TITLE Introduction Review of Literature Need, Scope and Objectives of the Study Research Methodology Ratio Analysis Data Analysis and Interpretation Observation and Findings of the Study Conclusion and Recommendations

PAGE NO. 1-17 17-19 19-21 21-25 25-41 41-54 54-57 58-60 62

Annexure

64

LIST OF TABLES

TABLE NO. 1. 2. 3. 4.

TABLE TITLE Current ratio Quick ratio Debt Equity ratio Absolute Liquidity ratio

PAGE NO. 52 53 54 55

5.

Net Profit ratio

56

6.

Gross Profit ratio

57

7. 8. 9.

Operating Profit ratio Inventories Debtors

58 59 60

10.

Current assets

61

11.

Current liabilities

62

LIST OF FIGURES

FIGURE NO.

FIGURE TITLE

PAGE NO.

1.

Current ratio

52

2.

Quick ratio

53

3.

Debt Equity ratio

54

4.

Absolute Liquidity ratio

55

5.

Net Profit ratio

56

6.

Gross Profit ratio

57

7.

Operating Profit ratio

58

CHAPTER-1

INTRODUCTION

1. Introduction (Financial Management)

Financial Management is the specific area of finance dealing with the financial decision corporations make, and the tools and analysis used to make the decisions. The discipline as a whole may be divided between long-term and short-term decisions and techniques. Both share the same goal of enhancing firm value by ensuring that return on capital exceeds cost of capital, without taking excessive financial risks. Capital investment decisions comprise the long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders.

Short-term corporate finance decisions are called working capital management and deal with balance of current assets and current liabilities by managing cash, inventories, and short-term borrowings and lending (e.g., the credit terms extended to customers). Corporate finance is closely related to managerial finance, which is slightly broader in scope, describing the financial techniques available to all forms of business enterprise, corporate or not. Role of Financial Managers: The role of a financial manager can be discussed under the following heads:
1. 2. 3. 4. 5. 6. 7.

Nature of work Working conditions Employment Training, Other qualifications and Advancement Job outlook Earnings Related occupations

Let us discuss each of these in a detailed manner.

1. Nature of work Almost every firm, government agency and organization has one or more financial managers who oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. As computers are increasingly used to record and organize data, many financial managers are spending more time developing strategies and implementing the long-term goals of their organization. The duties of financial managers vary with their specific titles, which include controller, treasurer or finance officer, credit manager, cash manager, and risk and insurance manager. Controllers direct the preparation of financial reports that summarize and forecast position, the such organisation as income statements, balance sheets, and analyses of future earnings or expenses. Regulatory authorities also in charge of preparing special reports require

controllers. Often, controllers oversee the accounting, audit, and budget departments. Treasurers and finance officers direct the organizations goals, objectives, and budgets. They oversee the investment of funds and manage associated risks, supervise cash management activities, execute capital-raising strategies to expansion, support and deal with amergers firms and acquisitions. Credit managers oversee the firms issuance of -rating credit. Criteria, determine credit ceilings, and monitor the collections of past-due accounts. Managers specializing in international finance development financial and accounting systems for the banking transactions of multinational organizations. Cash managers monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the firm. For example, cash flow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invested in interest-bearing instruments. Risk and insurance managers oversee programs to minimize risks and losses that might arise from financial transactions and business operations undertaken by the institution. They also manage insurance the organisation budget. Financial institutions, such as commercial banks, savings and loan associations, credit unions, and mortgage and finance companies, employ additional financial managers who oversee various functions, such as lending, trusts, mortgages, and investments, or programs, including sales, operations, or electronic financial services. These managers may be required to solicit business, authorize loans, and direct the investment of funds, always adhering to State laws and regulations. Branch managers of financial institutions administer and manage all of the functions of a branch office, which may include hiring personnel, approving loans and lines of credit, establishing a rapport with the community to attract business, and assisting customers with account problems. Financial managers who work for financial institutions must keep abreast of the rapidly growing array of financial services and products. In addition to the general duties described above, all financial managers perform tasks unique to their organization or industry. For example, government financial managers must be experts on the government appropriations and budgeting processes, whereas healthcare financial managers must be knowledgeable about issues surrounding healthcare financing. Moreover, financial managers must be aware of special tax laws and regulations that affect their industry. Financial managers play an increasingly important role in mergers and consolidations and in global expansion and related financing. These

areas require extensive, specialized knowledge on the part of the financial manager to reduce risks and maximize profit. Financial managers increasingly are hired on a temporary basis to advise senior managers on these and other matters. In fact, some small firms contract out all accounting and financial functions to companies that provide these services. The role of the financial manager, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management. Financial managers need to keep abreast of the latest computer technology in order to increase the efficiency of their firms. 2. Working conditions Financial managers work in comfortable offices, often close to top managers and to departments that develop the financial data these managers need. They typically have direct access to state-of-the-art computer systems and information services. Financial managers commonly work long hours, often up to 50 or 60 per week. They generally are required to attend meetings of financial and economic associations and may travel to visit subsidiary firms or to meet customers.

3. Employment While the vast majority is employed in private industry, nearly 1 in 10 works for the different branches of government. In addition, although they can be found in every industry, approximately 1 out of 4 are employed by insurance and finance establishments, such as banks, savings institutions, finance companies, credit unions, and securities dealers.

4. Training, Other qualifications and Advancement A bachelors degree in finance, business administration is the minimum academic preparation for financial managers. However, many employers now seek graduates degree, preferably in business with a m administration,

economics, finance, or risk management. These academic programs develop analytical skills and provide knowledge of the latest financial analysis methods and technology. Experience may be more important than formal education for some financial manager positionsnotably, branch managers in banks. Banks typically fill branch manager positions by promoting experienced loan officers and other professionals who excel at their jobs. Other financial managers may enter the profession through formal management training programs offered by the company. Continuing education is vital for financial managers, who must cope with the growing complexity of global trade, changes in State laws and regulations, and the proliferation of new and complex financial instruments. Firms often provide opportunities for workers to broaden their knowledge and skills by encouraging employees to take graduate courses at colleges and universities or attend conferences related to their specialty. Financial management, banking, and credit union associations, often in cooperation with colleges and universities, sponsor numerous national and local training programs. Persons enrolled prepare extensively at home and then attend sessions on subjects such as accounting management, budget management, corporate cash management, financial analysis, international banking, and information systems. Many firms pay all or part of the costs for employees who successfully complete courses. Although experience, ability, and leadership are emphasized for promotion, this type of special study may accelerate advancement. In some cases, financial managers also may broaden their skills and exhibit their competency by attaining professional certification. There are many different associations that offer professional certification programs. For example, the Association for Investment Management and Research confers the Chartered Financial Analyst designation on investment professionals who ha degree, pass three sequential Examinations, and meet work experience requirements. The Association for Financial Professionals (AFP) confers the Certified Cash Manager credential to those who pass a computer-based exam and have a minimum of 2 years of relevant experience. The Institute of Management Accountants offers a Certified in Financial Management designation to members with a BA and at least 2 years of work experience who-part examination pass and the fulfill institution continuing education requirements. Also, financial managers who specialize in accounting may earn the Certified Public Accountant (CPA) or Certified Management Accountant (CMA) designations. Candidates for financial management positions need a broad range of skills. Interpersonal skills are important because these jobs involve managing people and working as part of a team to solve problems. Financial managers must have excellent communication skills to explain complex financial data. Because financial managers work extensively with various departments in their firm, a

broad overview of the business is essential. Financial managers should be creative thinkers and problem solvers, applying their analytical skills to business. They must be comfortable with the latest computer technology. As financial operations increasingly are affected by the global economy, financial managers must have knowledge of international finance. Proficiency in a foreign language also may be important. Because financial management is critical for efficient business operations, well-trained, experienced financial managers who display a strong grasp of the operations of various departments within their organization are prime candidates for promotion to top management positions. Some financial managers transfer to closely related positions in other industries. Those with extensive experience and access to sufficient capital may start their own consulting firms. 5. Job outlook Some companies may hire financial managers on a temporary basis, to see the organization through a short-term crisis or to offer suggestions for boosting profits. Other companies may contract out all accounting and financial operations. Even in these cases, however, financial managers may be needed to oversee the contracts. Computer technology has reduced the time and staff . Required to produce financial reports. As a result, forecasting earnings, profits, and costs, and generating ideas and creative ways to increase profitability will become a major role of corporate financial managers over the next decade. Financial managers who are familiar with computer software that can assist them in this role will be needed.

6. Earnings The Association for Financial compensation survey Professional showed that financial compensation officersin2006,including average bonuses and deferred compensation, was $261,800. Selected financial manager Positions had average total compensation as follows: Vice president of finance 367,000 US$ Treasurer 301,200 Assistant vice president-finance 282,600

Controller/comptroller 268,600 Director 227,200 Assistant treasurer 223,800 Assistant controller/comptroller 231,000 Manager 167,000 Cash manager 129,400 Large organizations often pay more than small ones, and salary levels also can depend on the type of industry and location. Many financial managers in both public and private industry receive additional compensation in the form of bonuses, which also vary substantially by size of firm. Deferred compensation in the form of stock options is becoming more common, especially for senior level executives. 7. Related occupations Financial managers combine formal education with experience in one or more areas of finance, such as asset management, lending, credit operations, securities investment, or insurance risk and loss control. Workers in other occupations requiring similar training and skills include accountants and auditors; budget analysts; financial analysts and personal financial advisors; insurance underwriters; loan counselors and officers; securities, commodities, and financial services sales agents; and real estate brokers and sales agents.

1.1

Introduction to the Industry:

Zolotos extensive voyage from a traditionally family owned unit in 1966, to a contemporary solution provider for professionally manufacturing products to impede the leakage of virtually all service fluids & gases, has surely not gone unnoticed. Our innate forethought to study & identify consumer needs by offering well-designed & engineered products has made us one of the countrys leading manufacturers of Bronze, Brass, Cast Iron, Cast, Forged and Stainless Steel Valves. The relentless commitment of Zoloto to quality with absolute ardour to manufacture world-class products, stands reaffirmed by the encouraging response to Zoloto in todays highly competitive market and our inherent strength lies in our passion for innovation; our commitment to provide top quality products & service, as well as our work culture of thorough transparency and fair dealing with all our customers. We have superlative manufacturing techniques and testing facilities. Each Zoloto product is made from

the finest of material and is subjected to stringent and rigorous checks while being continually inspected by highly qualified personnel at each stage. So much so, that in todays valves industry, Zoloto is not only redefining performance, but also setting the world standard. Our system of functioning and quality is certified by various quality institutions including ISO 9001:2008 by UL of U.S.A, B.I.S, I.B.R, Quality Marking and prestigious establishments like Engineers India Ltd. (E.I.L), Projects & Development India Ltd. (P.D.I.L), Hindustan Shipyard Ltd., Steel Authority of India Ltd. (S.A.I.L), Salem Steel Plant, IFFCO (Kalol Unit), TOYO Engineering India Ltd., DGQA, as well as SQCA, Bhutan to name a few.At Zoloto, we have placed product quality and customer's needs on a paramount plinth and always strived to better serve our valued customers. We respect, cherish and treasure employees hard work and share with them the value thus created. Our domestic dealer network coupled with the back up support that we provide for all our products has made certain that we keep touching lives, everyday and everywhere. In a highly competitive and aggressive international market, the encouraging response to our growing Exports is another feather in our cap, as we have fast emerged as a frontrunner in this facet of business, too. We whole-heartedly believe in the dictum that Vision without Action is merely a dream; Action without vision just wastes time; but Vision with Action can transform the World. We endeavor to keep persevering on our traditional strengths and fulfill our vision of becoming a global player, dedicated to professionalism and excellence while striving for the highest levels of satisfaction for our customers.

1.2

VISION 2020
Zoloto Valves is currently in the process of rapidly expanding its vast range of products while focusing its impetus on domestic as well as international markets. With a boost in sales after having received regular & repeat orders, the company is in the continuous process of upgrading its eco-friendly manufacturing facility spread over more than 12,00,000 sq. ft. of area, while not forgetting its firm commitment for the cause of environment. The company has also allocated funds for the full swing working of Operation Green City aiming to plant more than 10,000 trees of assorted species as a small step & a very humble contribution for a cleaner, greener world for each one of us.

1. 3 Enjoying Patronage
Zolotos Brand Valves reputed for unique features and exclusive quality, enjoy wide approval and active patronage of numerous Government, Semi Government departments, Eminent Industrial Houses, Consultants, Builders with certificates, a few of whom are listed below for general information. 01. The Chief Engineer, P.W.D. West Bengal 02. The Chief Engineer, P.H.E.D. West Bengal. 03. The Corporation of Calcutta Water Works Department, Calcutta. 04. The Chief Engineer, P.H.E.D. Bihar, Patna. 05. The Chief Public Health Engineer, M.E.S, Jorhat, Assam.

07. Municipal Corporation of Greater Bombay Water Works Maintenance. 08. Assistant Engineer, Water Works, Municipal Corporation Jabalpur. 09. New Delhi Municipal Committee. 10. The Tamil Nadu Public Works Engineering Corporation Limited. 11. Housing Commissioner, Rajasthan Housing Board, Jaipur. 12. Water Supply and Sewerage Board, Kathmandu (Nepal). 13. Oil and Natural Gas Commission, Sibsagar (Assam). 14. Government Quality Marking Centre. 15. N.S.I.C Limited (Government Purchase Division). 16. Director General of Supplies & Disposal. 17. UNICEF (United Nations Children Fund). 18. U.P. State Sugar Corporation Limited. 19. Ministry of Communication, Royal Government of Bhutan. 20. National Federation of Co-operative Sugar Factories Limited. 21. Engineering Export Promotion Council. 22. Director General of Quality Assurance. 23. Bharat Petroleum Corporation Limited

1.4 BOARD OF DIRECTORS 1 From the Chairman's Desk

My profound blessings & sincere good wishes have always & will continue to remain with all of you. It has only been by your plenteous and unstinted faith in ZOLOTO as well as the unfathomable Grace of the Almighty, which we have today been able to become a name to reckon

with, in the Valves industry. Looking forward to your benefaction, as always.

God Bless. S.V Hans Chairman

2From the President's Desk

As I look back, I am humbled by the response that ZOLOTO has got in all its diverse fields of operations. This has only been made possible with the support, solidarity, dedication, commitment and camaraderie of all my dear colleagues, who have worked as a vigilant family, with an incessant commitment to high quality, dependability & consistency in all our products and services. What we are today is due to the optimum utilization of our human resources & the aegis that we have received from you, the true affiliates of the ZOLOTO family. In our continuous resolute towards excellence, we would also deeply appreciate your invaluable suggestions & guidance in making ZOLOTO a saluting base for Valves in our nation. With all your love & blessings, may ZOLOTO continue touch lives, ever yday...everywhere Namie Hans President

3From the President's Desk (Sales & Mktg.)

In todays bold & steadfast market, we at ZOLOTO have stood firm like a rock and fiercely endured the competition. We must bear in mind that the Valves market has split into an ever increasing, ever changing set of micro markets that continually demands expanding marketing options and as a committed company, we have honed to withstand loads of competition & also resolved to keep providing the best of services.

Buntie Hans President (Sales & Mktg.)

4From the Vice President's Desk

ZOLOTO, as has always been in the past also, even today, stands for meticulous precision, assiduousness & diligence. Our relentless efforts in making the best value engineered products have been made possible only through our state of the art infrastructure coupled with the sharp ingenuity of our people. We firmly believe that the race for quality indeed, has no finishing line. Even as our production volumes continue to increase, the dictum never forgotten by us is that quality is never an accident; it is always the result of noble intentions, sincere efforts, intelligent direction & skillful execution. We have etched in our minds that perseverance is not a single long race but many short races, one after the other. Ashu Hans Vice President

1.5

ZOLOTO VARIOUS DEPARTMENTS AND ITS FUNCTION

1.5.1 PURCHASE DEPARTMENT:

Purchase department deals with production planning and raw material required for production. Purchase department also works according to the forecasting done by marketing department.

Main functions of purchase department:

Working according to production planning.

Fulfilling the requirement. Providing guidance for purchase of material requirement. Concerning with payments for purchase.

Purchase categories:

Raw material. Capital goods. Laboratory equipments. Mechanical instrumentation and Electric items. Miscellaneous material.

The sources of purchase are chemical weekly, existing customers, Internet searching new supplier, existing supplier etc.

1.5.2 MARKETING DEPARTMENT:

Marketing department is responsible for establishing and maintaining the procedure for contract review and co-ordinates the activities.

To understand the needs of the customers and communicate it to the concerned department. To carry out the contract reviews and get it approved the commercial director. To receive and record the customers complaints and communicate them to all

concerned department.

To organised the dispatch activities as per dispatch schedule. Department is concerned or responsible for the overall communication with customers.

1.5.3 SERVICES:

Credit pay facility depends upon customers requirements may be for the 90 days, 60 days, 30 days etc. Transportation expenses added in the bills to the same extend. 365 days continuous service. Exhibition for marketing. Benefits-sales tax due to industry situated in D+ area.

1.5.4 PRODUCTION DEPARTMENT:

Production department is a responsible for handling the production activity, function of production department are explain as below, To executive planned range of production. To implement and follow the rules essential for a purpose of safety.

To control the production activity. To implement safety equipollents as per need. To control the performance of department. To take correct actions on customers complaint, if any. To maintain the interlink between production department and store department.

1.5.5 QUALITY ASSURANCE DEPARTMENT

To perform inspection and testing of raw material intermediates in process materials and finished products in accordance with the quality plans and documented procedures.

To maintain inspection and test records up to date. To ensure that calibration of inspection, measuring and testing equipments in Q.A.D. (Quality Assurance Department) is done as per the plan.

To process the customer complaint to take necessary corrective actions. To report production department on the non-conformity in intermediate, in process and finished product.

1.5.6

STORES AND MATERIAL HANDLING

To receive, store and issue spare parts and other material to the respective department. To maintain all purchase and store related records. Take carefull precautions for leak safety and spillage for raw material, finished products and storage tanks.

Manages the loading and unloading operation of raw material and finished products. Carried out his calibration of weighing machine.

1.5.7 HUMAN RESOURCE DEPARTMENT

To conduct and arrange training for employees as per training needs. To evaluate training programmers. To appraise the performance of employees. To provide safety requirement as per need. It responsible for all welfare activities.

1.5.8 MAINTAINANCE AND INSTRUMENT DEPARTMENT:

To carry out breakdown maintenance and to put the equipment back in operation without affecting the product.

To prepare preventive maintenance plan and to make appropriate changes Whenever necessary.

To prepare preventive maintenance plan and to maintain records for the same. To co-ordinate with purchase department for the material required for the same.

Calibration and control of inspection, measuring and test equipments. Electric department activities are covered under instrument department.

1.5.9 EXPORT DEPARTMENT:

Find out the potential customers through various sources.

Contact and negotiate with selected customers. Preparation of various documents which are necessary for the export of product. Find out the various govt. schemes for getting the incentives.

1.5.10 FINANCE DEPARTMENT:

This department keeps the record of the following things,

Sales volume of production. Raw material cost. Combination after raw material. Gross profit. Interest.

1.6 1.6.1

IMPLEMENTATION OF ERP: ERPEnterprise Resource Planning:

All the functions carried out at BAL are integrated by the implementation of the ERP System. The implementation of the ERP system is been started from the financial year 2013.Enterprise resource planning is a software technology that helps to integrate all the functions of the organization. ERP system helps in avoiding the duplication of work. For example, if the customer places an order with the marketing department and as the marketing

manager accepts the order, the information of the same is been passed on to the production department.( at the factory). And the production dept. will accordingly prepare the production schedule. The information of the production schedule will be passed on to the purchase dept. and accordingly the latter will plan for the purchase of raw material. Any purchase of raw material made is noted by the finance dept. and accordingly the payments are released. The staff at BAL is undergoing training for the operation of the ERP system. However, the ERP system provides the information required but the ultimate decision is to be taken by the managers. .

CHAPTER - 2 REVIEW OF LITERATURE

LITERATURE REVIEW -

Many researchers have studied financial ratios as a part of working capital Management; however, very few of them have discussed the working capital Policies in specific. Some earlier work by Gupta and Heffner (1972) examined the differences in financial ratio averages between industries. The Conclusion of both the studies was that differences do exist in mean profitability, Activity,

leverage and liquidity ratios amongst industry groups. Pinches et al. (1973) used factor analysis to develop seven classifications of ratios, and found that the classifications were stable over the 1951-1969 time periods. In a regional study, Pandey and Parera (1997) provided an empirical evidence of working capital management policies and practices of the private sector manufacturing companies in Sri Lanka. The information and data for the study were gathered through questionnaires and interviews with chief financial officers of a sample of manufacturing companies listed on the Colombo Stock Exchange. They found that most companies in Sri Lanka have informal working capital policy and company size has an influence on the overall working capital policy (formal or informal) and approach (conservative, moderate or aggressive). Moreover, company profitability has an influence on the methods of working capital planning and control. Chu et al. (1991) analyzed the hospital sectors to observe the differences of financial ratios groups between hospital sectors and industrial firms sectors. Their study concluded that financial ratios groups were significantly different fromthose of industrial firms ratios as w five years period. A significance relationship for about half of industries studied indicated that results might vary from industry to industry. Another aspect of working capital management has been analyzed by Lamberson (1995) who studied how small firms respond to changes in economic activities by changing their working capital positions and level of current assets and liabilities. Current ratio, current assets to total assets ratio and inventory to total assets ratio were used as measure of working capital while index of annual average coincident economic indicator was used as a measure of economic activity. Contrary to the expectations, the study found that there is very small relationship between charges in economic conditions and

changes in working capital. However, Weinraub and Visscher (1998) have discussed the issue of aggressive and conservative working capital management policies by using quarterly data for a period of 1984 to 1993 of US firms. Their study looked at ten diverse industry groups to examine the relative relationship between their aggressive/conservative working capital policies. The authors have concluded that the industries had distinctive and significantly different working capital management policies. Moreover, the relative nature of the working capital management policies exhibited remarkable stability over the ten-year study period. The study also showed a high and significant negative

correlation between industry asset and liability policies and found that when relatively aggressive working capital asset policies are followed they are balanced by relatively conservative working capital financial policies. Sathyamoorthi (2002) focused on good corporate governance and in turn effective management of business assets. He observed that more emphasis is given to investment in fixed assets both in management area and research. However, effective management working capital has been receiving little attention and yielding more significant results. He analyzed selected Cooperatives in Botswana for a period of 1993-1997 and concluded that an aggressive approach has been followed by these firms during all the four years of study. Filbeck and Krueger (2005) highlighted the importance of efficient working capital management by analyzing the working capital management policies of 32 non-financial industries in USA. According to their findings significant differences exist between industries in working capital practices over time.

CHAPTER - 3 NEED, SCOPE& OBJECTIVES

3.1 NEED FOR THE STUDY

1. The study has great significance and provides benefits to various parties whom

directly or indirectly interact with the company.

2. It is beneficial to management of the company by providing crystal clear picture

regarding important aspects like liquidity, leverage, activity and profitability.

3. The study is also beneficial to employees and offers motivation by showing

how actively they are contributing for companys growth. 4. The investors who are interested in investing in the companys shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the companys shares.

3.2 OBJECTIVES OF STUDY

The major objectives of the resent study are to know about financial strengths and weakness of ZOLOTO INDUSTRIES LTD through RATIO ANALYSIS. The main objectives of resent study aimed as: 1. To study the present financial system at ZOLOTO INDUSTRIES LTD. 2. To know the financial condition of the company. 3. Interpret the financial statement so that the strength and weakness of a firm Historical performance and current financial condition can be determined. 4. To analyze the liquidity position of the company 5. Throw light on a long term solvency of a firm. 6. To offer appropriate suggestions for the better performance of the organization.

CHAPTER - 4
RESEARCH METHODOLOGY

4.1 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the problems. It may be understood to study how research is done scientifically. In this, we study various steps that are generally adopted by the researcher in studying research problems along with the logic behind them, to understand why we are using particular method or technique so that the research results are capable of being evaluated. During my project work, I have used a lot of

data to understand concept of Ratio Analysis. The data collected was interpreted and then used as information in project.

DEFINITION
a.

Redman and Mory:-

Systematized effort to gain new knowledge

b.

sliesinger and M.stephonson:-

The manipulation of things, concept or symbol for the purpose of generalizing

to the extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in practice of an art.
c.

The Advanced Learners Dictionary of Current English:-

A careful investigation or inquiry especially through search for new facts in any branch of knowledge.

4.2 RESEARCH DESIGN

A research design is the specification of method and procedure for accruing the information needed. It is overall operational pattern of frame work of project that stipulates what information is to be collected for source by that procedures descriptive Research design is appropriate for this study. Descriptive study is used to study the situation. This study helps to describe the situation. A detail descriptive about present and past situation can be found out by the descriptive study. In this involves the analysis of the situation using the secondary data.

4.3 DATA COLLECTION

This research study is based on secondary data, means data that are already available i.e. the data which have been already collected and analyzed by someone else. Secondary data are used for the study of Ratio analysis of this company. To collect the data I have refer Company annual report, annual magazine, last 5 year balance sheet, and cash flow statements.

4.4 METHODOLOGY
The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made.

4.4.1 Sources of secondary data:

1. Most of the calculations are made on the financial statements of the company provided

statements.
2. Referring standard texts and referred books collected some of the information

regarding theoretical aspects.

3. Method- to assess the performance of the company method of observation of the work

in finance department in followed.

4.5 FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived from financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition attractiveness as an investment. The information in the statements is used by
Trade creditors, to identify the f liquidity position of the company.

 Investors, to know about the present and future profitability of the company and its

financial structure.
Management, in every aspect of the financial analysis. It is the responsibility of the

management to maintain sound financial condition in the company.

CHAPTER - 5 RATIO ANALYSIS

5.1

RATIO ANALYSIS -

The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as

Percentages Fractions Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined Ratio reflects a quantitative relationship helps to form a quantitative judgment.

5.2 STEPS IN RATIO ANALYSIS

The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.

To compare the calculated ratios with the ratios of the same firm relating to the past or with the industry ratios. It facilitates in assessing success or

failure of the firm.

Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action

5.3 BASIS OR STANDARDS OF COMPARISON

Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratio tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types.

Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the sum 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.

5.4 NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis.

Selection of relevant data from the financial statements depending upon the objective of the analysis.

Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.

5.5 INTERPRETATION OF THE RATIOS

The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways.

Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison

5.6 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 is

Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS

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

LIMITATIONS OF RATIO ANALYSIS

Differences in definitions Limitations of accounting records

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

5.7 CLASSIFICATIONS OF RATIOS

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

1. Traditional Classification
It includes the following.
Balance sheet (or) position statement ratio: They deal with the relationship

between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc., Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.
2.

Functional Classification

These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.

3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.

5.8 IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ANALYSES ARE:

2.

Liquidity ratio Leverage ratio Activity ratio Profitability ratio

LIQUIDITY RATIOS

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

(b)

CURRENT RATIO:

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

Current Ratio =

Current Assets Current Liabilities

Components of Current Ratio:CURRENT ASSETS

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

CURRENT LIABILITITES
Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

(b) QUICK RATIO

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash within a short period without loss of value.

Quick Ratio =

Quick Assets Current Liabilities- Bank OD

Components of Quick or Liquid Ratio QUICK ASSETS

Cash in hand Cash at bank Bills receivable Sundry debtors Marketable securities Temporary Investments

CURRENT LIABILITITES
Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

(c) ABSOLUTE LIQUID RATIO

Although receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or

in time. Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.

Quick Ratio =

Quick Assets Current Liabilities- Bank OD

Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth current liabilities in time as all the creditors are nor accepted to demand cash at the same time and then cash may also be realized from debtors and inventories.

Components of Absolute Liquid Ratio ABSOLUTE LIQUID ASSETS

Cash in hand Cash at bank Interest on Fixed Deposit

CURRENT LIABILITITES
Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term

obligations. Accordingly, long term solvency ratios indicate firms meet the fixed interest and costs and repayment schedules associated with its long term borrowings. The following ratio serves the purpose of determining the solvency of the concern.

(a) PROPRIETORY RATIO

A variant to the debt-equity ratio is the proprietary ratio which is also known as equity ratio. This ratio establishes relationship between share holdersfundsto total assets of the firm.

Proprietory ratio=

Shareholders fund Total Assets

Components of Proprietory Ratio SHARE HOLDERS FUND

Share Capital Reserves & Surplus

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

3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly affect the volume of sales. Activity ratios measure the efficiency (or) effectiveness with which a firmmanages its resources (or) assets. These ratios are also calle because they indicate the speed with which assets are converted or turned overinto sales.

Working capital turnover ratio Fixed assets turnover ratio Capital turnover ratio Current assets to fixed assets ratio

(b)

WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales.

Working capital = Current assets - Current liabilities

It indicates the velocity of the utilization of net working capital. This indicates the no. of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio indicates inefficient utilization. Working capital turnover ratio=cost of goods sold/working Capital.

Components of Working Capital Ratio CURRENT ASSETS

Cash in hand Cash at bank

CURRENT LIABILITITES
Outstanding or accrued expenses Bank over draft

Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses

Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

(b) FIXED ASSETS TURNOVER RATIO

It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.

Fixed assets turnover ratio =

Cost of Sales Net fixed assets

Cost of Sales = Income from Services Net Fixed Assets = Fixed Assets Depreciation

Component of Current Assets to Fixed Assets Ratio CURRENT ASSETS FIXED ASSETS

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

Machinery Buildings Plant Vehicles

4. PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. Net profit ratio Return on total assets Reserves and surplus to capital ratio Earnings per share Operating profit ratio Price earnings ratio

(A)

NET PROFIT RATIO -

Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm.

Net profit ratio=

Net profit after tax Net sales

Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax

Net Sales = Income from Services

It also indicates the firmsconditionscapacitysuchas price competitors, low demand etc. Obviously higher the ratio, the better is the profitability.

(B)

RETURN ON TOTAL ASSETS -

Profitability can be measured in terms of relationship between net profit and assets. This ratio is also known as profit-to-assets ratio. It measures the profitability of investments. The overall profitability can be known.

Return on assets =

Net profit Total assets

Net Profit = Earnings before Interest and Tax Total Assets = Fixed Assets + Current Assets (C) RESERVES AND SURPLUS TO CAPITAL RATIO

It reveals the policy pursued by the company with regard to growth shares. Avery high ratio indicates a conservative dividend policy and increased ploughing back to profit. Higher the ratio better will be the position.

Reserves & surplus to capital =

Reserves& surplus Capital

(D) EARNINGS PER SHARE Earnings per share is a small verification of return of equity and is calculated by dividing the net profits earned by the company and those profits after taxes and preference dividend by total no. of equity shares.

Earnings per share =

Net profit after tax Number of Equity shares

The Earnings per share is a good measure of profitability when compared with EPS of similar other components (or) companies, it gives a view of the comparative earnings of a firm.

(E) OPERATING PROFIT RATIO Operating ratio establishes the relationship between cost of goods sold and other operating expenses on the one hand and the sales on the other.

Operating ratio =

Operating cost Net sales

However 75 to 85% may be considered to be a good ratio in case of a manufacturing under taking. Operating profit ratio is calculated by dividing operating profit by sales.

Operating profit = Net sales - Operating cost

Operating Profit ratio =

Operating Profit

Sales

(F) PRICE - EARNING RATIO

Price earnings ratio is the ratio between market price per equity share and earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether (or) not to buy shares in a particular company. Generally, higher the price-earnings ratio, the better it is. If the price earnings ratio falls, the management should look into the causes that have resulted into the fall of the ratio.

Price Earnings Ratio =

Market Price per Share Earnings per Share

Market Price per Share =

Capital + Reserves & Surplus Number of Equity Shares

Earnings per Share =

Earnings before Interest and Tax Number of Equity Shares

(G) RETURN ON INVESTMENTS

Return on share holders investment, popularly known as Return on investments (or) return on share holders or proprietors funds is the relationship between net profit (after interest and tax) and the proprietors funds.

Return on investment =

Net profit (after interest and tax) Shareholders funds

The ratio is generally calculated as percentages by multiplying the above with 100.

CHAPTER - 6

DATA ANALYSIS & INTERPRETATION

6.1 DATA ANALYSIS AND INTERPRETATION

LIQUIDITY RATIO 1. CURRENT RATIO:(Amount in Cr...)

Table no: 1 Current ratio

For Year
2009

Ratio
0.65 : 1

2010 2011 2012 2013

0.84 : 1 1.17 : 1 0.95 : 1 1.71 : 1 Figure no: 1 Current ratio

Current Ratios
1.8 1.6 1.4 1.2 1 0.8 Current Ratios 0.6 0.4 0.2 0 2009 2010 2011 2012 2013

Interpretation:
The ideal level of current ratio is 2:1.we shown too much higher ratio its good for the company. Higher the current ratio, the larger is the amount of rupees available per rupees of current liabilities, the more is the firms ability to meet current obligation and greater is safety of fund of short term creditors. Companys current ratio is not better than its ideal level. But if we see the current ratio of the company for last five years it has decreased from 2009 to 2012. The current ratio of company is near the ideal ratio. This depicts that companys liquidity position is much better in previous years. Its current assets are more than its current liabilities in 2013.

3.

QUICK RATIO: (Amount in Cr...)

Table no: 2 Quick ratio

For Year
2009 2010 2011 2012 2013

Ratio
0.98 : 1 1.35 : 1 1.37 : 1 1.31 : 1 1.12 : 1 Figure no: 2 Quick ratio

Quick Ratio
1.6 1.4 1.2 1 0.8
Quick Ratio

0.6 0.4 0.2 0 2009 2010 2011 2012

2013

Interpretation:
Quick assets are those assets which can be converted into cash within a short period of time, say to six months. So, here the sundry debtors which are with the long period does not include in the quick assets. A quick ratio is an Indication that the firm is liquid and the ability to meet its current liabilities in time. The Ideal quick ration is 1:1, Company Quick ratio is more than the ideal ratio. So, The Quick ratio is increased because the sundry debtors are increased due to the increase in the corporate tax and for that the provision created is also increased. So, the ratio is also increased from 2009 and the ration is more than ideal ration from 2009 to 2012. This shows Company has strong liquidity position.

3. DEBT EQUITY RATIO:(Amount in Cr...)

Table no: 3 Debt Equity ratio

For Year
2009 2010 2011 2012 2013

Ratio 1.27 0.55 0.61 0.60 0.55

Figure no: 3 Debt Equity ratio

Debt Equity Ratio

1.5

1 Debt Equity Ratio 0.5 0 2009 2010 2011 2012 2013

Interpretation:
The ratio suggests the claims of creditors and owners over the assets of the company. Suppose the ratio comes to be 1:2 or 0.5:1, it says that for every Rs 1 financed by debts, there is Rs 2 being brought in by the equity shareholders. The debt-to-equity ratio shows the best pictures (growth) of a company's leverage. The higher the figure, the higher is the leverage the company enjoys. The calculate figure is 0.55 in 2013 which means that the company has been constructive in the growth of their financial control in Previous Years but as compare with 2012 the company DER is 0.60 which is lesser than previous year so the company focus on this ratio to improve its market position but overall the company leverage is good. This means that the company growing is in fluctuation every year. On the other hand, at a lower D/E ratio, the lenders enjoy a better margin of safety. If the ratio is higher, the lenders will have interference in the management as they have higher stake in the business. By taking into consideration the debt equity ratio in 2011 to 2013 is more than the ideal Ratio, so the company leverage is good.
4.

ABSOLUTE LIQUIDITY RATIO: (Amount in Cr...)

Table no: 4 Absolute Liquidity ratio

For Year
2009 2010 2011 2012 2013

Ratio
0.011 0.053 0.082 0.043 0.018

Figure no: 4 Absolute Liquidity ratio

Absolute Liquidity Ratio

0.1 0.08 0.06 0.04 0.02 0 2009 2010 2011 2012 2013 Absolute Liquidity Ratio

Interpretation:
According to the rule of thumb the absolute liquid assets is 0.5/1. But when we calculate the figure is less 0.011 in 2008, 0.082 in 2011 and 0.018 in 2013 that means the company was not able to satisfy its primary cash requirement with cash generation by operation. Because of in both years the company Liquidity ratio is extremely lower in each year for that company has not sufficient Assets to meet the requirement of its liabilities. According to the balance sheet the company has less cash and its assets were increase but in other side its liability was also increases due to the credit purchase and credit sales. So the company must focus on its Debtor and its cash transaction and also minimize its liability. These ratio shows that company carries a small amount of cash. But there is nothing to be worried about the lack of cash because company has reserve, borrowing power & long term investment. In India, firms have credit limits sanctioned from banks and can easily draw cash.

PROFITABILITY RATIOS 5. NET PROFIT RATIO:(Amount in Cr.)

Table no: 5 Net Profit ratio

For Year
2009 2010 2011 2012 2013

Ratio
6.58 15.60 8.11 11.25 Figure no: 5 Net Profit ratio

Net Profit Ratio

18 16 14 12 10 8 Net Profit Ratio 6 4 2 0 2009 2010 2011 2012 2013

Interpretation:
The net profit ratio is the overall me of income from services in net profit. If the net margins inadequate the firm will fail to achieve return on shareholders funds. High net profit firm service in the fall of income from services, rise in cost of production or declining demand. This ratio shows whether the company has good gross profit or not. So the figure 8.11 % in 2011 and 11.25 in 2012 which shows that is quiet unimpressive and the company is not making good profit. Here the gross profit increase in 2012 but still the company has not enough gross profit and Zoloto industries Ltd profit margin increase every year because of its inventory turnover ratio but it is not enough.

6. GROSS PROFIT RATIO:(Amount in Cr.)

Table no: 6 Gross Profit ratio

For Year
2009 2010 2011 2012 2013

Ratio
16.02% 13.44% 12.50% 14.41% 9.90%

Figure no: 6 Gross Profit ratio

Gross Profit Ratio

18.00% 16.00% 14.00% 12.00% 10.00% 8.00% Gross Profit Ratio 6.00% 4.00% 2.00% 0.00% 2009 2010 2011 2012 2013

Interpretation:
Gross profit is the result of the relationship between prices, sales volume and costs. A change in the gross margin can be brought about by changes in any of these factors. The gross margin represents the limit beyond which fall in sales prices are outside the tolerance limit. In this company in 2009 gross profit margin is 16.02%, its good for the every company, but after one year it was fallen down to 9.90%. In 2012-13 margin was very low compare to previous year. So the figure 16.02 % in 2009, 12.50% in 2011 and 14.41% in 2012 which shows that is quiet unimpressive and the company is not making good profit.

7. OPERATING PROFIT RATIO:(Amount in Cr.)

Table no: 7 Operating Profit ratio

For Year
2009 2010 2011 2012 2013

Ratio
18.96% 20.30% 18.20% 20.76% 16.36%

Figure no: 7 Operating Profit ratio

Operating Profit Ratio

25.00% 20.00% 15.00% Operating Profit Ratio 10.00% 5.00% 0.00% 2008 2010 2011 2012 2013

Interpretation:

This ratio shows that effectiveness of a company's management by comparing operating expense to net sales. Here the operating Ratio is 18.96 % in 2009 and 18.20% in 2011 which is less. In compare the operating ratio is decrease in 2013 that means decrease in operating cost that increase total productivity. This means that the company has not able to generate more margin as it expense in operating sector. Using this ratio the invertors not interested in investing more in money in the company if its operating Ratio l being debt.

8. INVENTORIES:(Amount in Cr...)
Table no:8 Inventories

For Year
2009 2010 2011 2012 2013

Ratio
101.29 93.33 164.15 215.78 209.95

Interpretation:
Inventories are a major part of current assets. If any company wants to manage its working capital efficiency, it has to manage its inventories efficiently. The Table shows that inventory in 2009 is 101.29 Cr. in 2011 is 164.15 Cr. and in 2013 is 209.95 Cr. of their current assets. The company should try to reduce the inventory upto 10% or 20% of current assets.

9.

DEBTORS:-

(Amount in Cr...)
Table no:9 Debtors

For Year
2009 2010 2011 2012 2013

Amount
92.17 89.77 164.50 227.19 220.10

Interpretation:
Debtors constitute a substantial portion of total current assets. In India it constitute one third of current assets. The above Table is depicting that there is increase in debtors. It represents an extension of credit to customers. The reason for increasing credit is competition and company liberal credit policy.

10. CURRENT ASSETS:(Amount in Cr...)

Table no: 10 Current assets

For Year
2009 2010 2011 2012 2013

Amount
194.83 183.74 344.86 454.15 434.61

Interpretation:
This Table shows that there is increase in current assets in 2010 to 2012. This increase is arising because there is approx. 50% increase in inventories. Increase in current assets shows the liquidity soundness of company.

11. CURRENT LIABLITITES:(Amount in Cr.)

Table no: 11 Current liabilities

For Year
2009 2010 2011 2012 2013

Amount
118.44 118.83 195.93 258.53 246.31

Interpretation:
Current liabilities shows company short term debts pay to outsiders. In 2009 to 2012 the current liabilities of the company increased. But still increase in current assets is more than its current liabilities.

CHAPTER 7 OBSERVATIONS & FINDINGS

7.1 OBSERVATIONS AND FINDINGS -

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the company for last three years it has increased from 2010 to 2012... This depicts that companys liquidity position is sound. Its current assets are more than its current liabilities. A quick ratio is an indication that the firm is liquid and has the ability to meet its current liabilities in time. The ideal quick ratio is 1:1. Companys quick ratio is more than ideal ratio. This shows company has no liquidity problem.

Inventory conversion period shows that how many days inventories take to convert from raw material to finished goods. In the company inventory conversion period is decreasing. This shows the efficiency of management to convert the inventory into cash. Current liabilities shows company short term debts pay to outsiders. In 2012 the current liabilities of the company increased. But still increase in current assets is more than its current liabilities.

Working capital is required to finance day to day operations of a firm. There should be an optimum level of working capital. It should not be too less or not too excess. In the company there is increase in working capital. The increase in working capital arises because the company has expanded its business.

Chapter 8 CONCLUSIONS & RECOMMENDATIONS

8.1 LIMITATIONS OF THE STUDY

Non monetary aspects are not considered making the results unreliable. Different accounting procedures may make results misleading. In spite of precautions taken there are certain procedural and technical limitations. Accounting concepts and conventions cause serious limitation to financial analysis. Lack of sufficient time to exhaust the detail study of the above topic became a hindering

factor in my research.

8.2 SUGGESTIONS -

After interpretation and analysis, I am giving certain suggestions to the company which I hope may be helpful for the company.

The company should utilize its stock more efficiently.

The company should pay attention towards the proper and efficient utilization of working

capital.

The company can reduce the time for purchase order. The buffer should be maintained in

case of emergency. Insurance should be covered especially fire in case of transit journey also.

8.3 CONCLUSION -

In the present study I have analyzed the working management of ZOLOTO INDUSTRIES Ltd. I found that inventory is increasing which shows that company has sufficient stocks to meet up out production of the company. Inventory Turnover Ratio measures the velocity of conversion of stock into sales. Usually, a high inventory turnover indicates efficient management of inventory because more frequently the stocks are sold; the lesser amount of money is required to finance the inventory. The Inventory Turnover Ratio is decreasing which is not a good sign for the company. The business firm has adequate internal control procedure commensurate with the size of the firm and nature of its business for the purchase of stores, machinery, equipment and other assets and with regards to sale of goods. From the comparative study of inventory turnover it is clear that stock velocity indicates inefficient management of inventory during the year 2010. So the companys performance Outlook continuous to be positive and optimistic outlook. The company remains confident of delivering of strong operating and financial performance. Efficient stock velocity indicates efficient management of inventory of the firm and no slow movement of the stock due to damaged goods.

REFERENCES

REFERENCES -

Gupta MC and RJ Huefner (1972), A Cluster Analysis Study of Financial Ratios and Industry Characteristics. Journal of Accounting Research 10(1): 77-95. Pinches GE, KA Mingo and JK Caruthers (1973), the Stability of Financial Patterns in

Industrial Organizations. Journal of Finance 28(2): 389-396. Pandey IM and KLW Parera (1997), Determinants of Effective Working Capital Management - A Discriminant Analysis Approach, IIMA Working Paper # 1349, Research and Publication Department Indian Institute of Management Ahmedabad India. Lamberson M (1995), Changes in Working Capital of Small Firms in Relation to Changes in Economic Activity. Mid-American Journal of Business 10(2): 45-50. Weinraub HJ and S Visscher (1998), Industry Practice Relating To Aggressive Conservative Working Capital Policies. Journal of Financial and Strategic Decision 11(2): 11-18. Sathamoorthi CR (2002), The Management of Working Capital in selected co-operatives in Botswana. Finance India Dehli 16(3): 1015-1034. Filbeck G and T Krueger (2005), Industry Related Differences in Working Capital Management. Mid-American Journal of Business 20(2): 11-18.

ANNEXURE