Ratio Analysis Main Project 2

A STUDY ON RATIO ANALYSIS AT KS&DL
INTRODUCTION
PART: A:-INDUSTRY PROFILE BACK GROUND OF THE INDUSTRY:
The early days of civilization shows us that mankind was aware of the importance of cleanliness and hygienic. The great bath of Indus valley civilization is testimony for this. The roam were known to be considerable users for the soaps. During the period roman enterprise stale wine was collected as a source of ammonium carbonate for cleaning purpose. The mankind knew about soap 2000 years back i.e. in 70 A.D when Mr.Piliny and leader accidentally discovered soap when roasted meal overflowed on ashes. It was in 1831 AD, that for the first time detergent was discovered by Mr.Fremy when he supplanted olive oil and almond oil, the consumption of soap in the world in 1884 AD was said to be 2lakhs tonnes per annum and it was in this year Mr. W.H. Lever entered the field of soap by making in big way. Soap is a lamp like product, had foaming and cleaning character. Soap is a product that many people might take for granted or consider rather ordinary, but for some, lathering up can be treasured part of morning or nightly routing. Scented or unscented, in bars, gets and liquids, soap is a part of our daily lives. Since then in 1972 AD at first commercial batch of soap was made and marketed by M.S.Bristol soap was then taken to London. India is a vast country having a population more than 100 crores. Household penetration of soap is 98% people belonging to different income levels use different SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL brands, which fall under different segments, but all income levels use soaps, making it the second largest category in India and detergents being number one. Rural demand is growing at an increasing rate compare to urban because rural consumers in India constitute about 60-70% of the population.
DEVELOPMENT IN MANUFACTURING OF SOAP:

The credit of making soap affordable to common man goes to Nicolas Leblance, a French scientist. The early settlers in North America made their own soap by pouring hot water over wood ash to make an alkali called potash. The potash was boiled with animal fats in large. Iron kettles to make soap. But it was crude to look at and it had a bad odour. It was in this century development in soap making led to the making of soaps with fragrance, mildness and colour. Mr. Twitched developed a process called Fat splitting in the year 1890 AD. In 1899 again it was Mr. Twitched who took out an American plant claiming manufacturing of sodium salt of petroleum sulphonates. In 1930 Mr. Reychler, a Belgium scientist produced for the first time sodium Cheryl sulphonated which had similar properties to that of soap. Soap cannot be in acid solution and it forms precipitate with the calcium and magnesium in hard water. Hence, although soap is good all round detergent. During the middle ages soaps were made in various countries such as Italy, France, Spain and England etc.
SOAP INDUSTRY IN INDIA:

SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL Northwest Soap Company established the first soap industry in 1897 at Merut. Following the Swadeshi movement in 1905 onwards few more factories were setup. Soap industries in India began with MIS Godrej, setting up their manufacturing unit during 1918 at Mumbai and MIS Government Soap factory in Bangalore. During the year 1930, MIS TATA oil Mills Company. Setup Hindustan Lever Limited setup their manufacturing unit at Mumbai and Calcutta. The industry continued to flourish very well unit 1967-1968, when the industry stagnated due to informal price control. The industry soon recovered and experienced a sharp up swing during 1974. Before there World War I, Soap requirement of India was met by imports from the west, especially from United Kingdom. The big companies like lever Brother introduced Soap and the use became more common even in villages. The soap supplied was of good quality and low price. Second World War give stimulus to indigenous soap industry, by 1994, the capacity established was 1, 26,000 tons and actual output was 1, 16,000 tons. By 1957 the capacity went up to 2.53lakhs tons. Today the production the production capacity is around 6lakhs tons (Toilet Soap market estimated to 5.4lakhs tons). In India, the per capita consumption of soap is 500gm compared to 1200gm in countries like Brazil. In case of detergents the per capita consumption is 1.60kg in India compared to 1.5kg in urban Europe and 18.5kg in Australia. In the organized sector, 88 units are manufacturing soaps with an installed capacity of 7, 05,963 (46 units only) tons per year production of Soap in this sector was of the order of 3, 53,232 tons during 1994-95 and 3, 88,087 tons during 1995-96. There are SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL 33 units in the organized sector for manufacturing of detergents with an installed capacity of 5, 09,020 (22 units only) tons per annum.
HISTORY:
Until 1916, Karnataka, then the princely state of Mysore, was exporting sandalwood to France and other European countries for the extraction of oil. However, during World War I when huge stocks of wood piled up in the state, an oilextraction unit in Mysore and another one at Shimoga was set up. Since then, Mysore became synonymous with sandalwood oil.
LEGENDS:
A popular saying is that no other tree can grow where the sandalwood does. The reason for this belief could be the fact that the root of the tree is supposed to suck in all the required nutrients needed for its growth from the nearly trees. Another belief says that the smell of the wood is so intoxicating that snakes are said to wrap themselves around the tree.
USES:
The inner wood or heartwood is used for carving and the bark when powdered is
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A STUDY ON RATIO ANALYSIS AT KS&DL an important raw material in the manufacturing of agarbathis. For the extraction of oil, used by the cosmetic and soap industry, the tree has to be uprooted, for it is the roots that have the highest percentage of oil. Even spent wood after oil extraction is an important raw material in agarbathi manufacture. Sandalwood scrapings are powdered and sold in pouches. The powder makes an excellent face and skin pack. A Hindu home usually has a billet of the wood that is rubbed on a stone plate sprinkled with water and the resulting paste is applied to the foreheads of idols during pooja. An ancient Indian remedy for prevention of sunstroke is a glass of cold milk scented with drop of sandalwood oil. This drink is also supposed to prevent boils and other skin ailments caused, according to the Indian school of medicine, by excessive heat in the body.
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PART: B: - ABOUT SUBJECT FINANCE:

Finance can be defined as the activity concerned with planning, raising, controlling
and Administering of funds and in the business.
FINANCIAL MANAGEMENT:
Financial management entails planning for the future of a person or a business
enterprise to ensure a positive cash flow. It includes the administration and
maintenance of financial assets. Besides, financial management covers the process of
identifying and managing risks.
FINANCIAL DECISION:
Decisions that involve: Determining the proper amount of funds to employ in a firm. Selecting projects and capital expenditure analysis. Raising funds on the most favourable terms possible.
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A STUDY ON RATIO ANALYSIS AT KS&DL Managing working capital such as inventory and accounts receivable.
There are different types of financial decisions. They are:
1) INVESTMENT DECISIONS: This decision involves deciding the pattern of
investment. It covers both capital assets and current assets. It has to show how
the funds can be invested in assets which would yield maximum return to the
business concern.
2) FINANCING DECISIONS: It is another important decision where business
concern has to take maximum care in financing different proposals. The
appropriate mix of finance with debt to equity directly contributes to the
profitability of a business unit. The decision regarding selection of instrument
that aim in maximizing the returns to the investors and to protect the interest of
creditors has to be taken.
3) DIVIDEND DECISION: It means decision regarding the divisible profit of
the company. The dividend decision involves the determination of the
percentage of profit earned by the enterprise which is to be paid to the share
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A STUDY ON RATIO ANALYSIS AT KS&DL holders.
4) CURRENT ASSET MANAGEMENT: To have the liquidity in the business
the finance manager should manage the current asset to maintain optimum
production through which he must achieve efficiency and increasing the
operating cycle to meet the short term obligations.
FINANCIAL STATEMENT:
Financial Statements provide an overview of a business or person's financial condition in both short and long term. All the relevant financial information of a business enterprise presented in a structured manner and in a form easy to understand, is called the financial statements.
PURPOSE OF FINANCIAL STATEMENT:

Owners and managers require financial statements to make important business
decisions that affect its continued operations. Financial analysis is then
performed on these statements to provide management with a more detailed
understanding of the figures. These statements are also used as part of
management's annual report to the stockholders. SSMRV DEGREE COLLEGE

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Employees also need these reports in making collective bargaining agreements
(CBA) with the management, in the case of labour unions or for individuals in
discussing their compensation, promotion and rankings. Prospective investors make use of financial statements 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 decisions. 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 other
significant expenditures. Government entities (tax authorities) need financial statements to ascertain the
propriety and accuracy of taxes and other duties declared and paid by a
company.
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THE NATURE OF FINANCIAL STATEMENTS:

Allow the manager or analyst to track the financial condition and operating results of the business. Assist in understanding the cash flow patterns in more specific terms. Transactions are recorded at values prevailing at the time. Adjustments to recorded values are made only if values decline. Revenues and costs are recognized when committed to, not when cash actually changes hands. Periodic matching of revenues and costs is achieved via accruals, deferrals, and accounting allocations. Allowances for negative contingencies are required in the form of estimates that reduce both profits and recorded value, usually affecting shareholders equity or special set-asides.
FINANCIAL STATEMENT ANALYSIS:

Financial statement analysis involves analyzing the firms financial statements to
extract information that can facilitate decision-making.
For example, an analysis of the financial statement can reveal whether the firm will be
able to meet its long-term debt commitment, whether the firm is financially distressed,
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A STUDY ON RATIO ANALYSIS AT KS&DL whether the company is using its physical assets efficiently, whether the firm has an
optimal financing mix, whether the firm is generating adequate return for its
shareholders, whether the firm can sustain its competitive advantage While the
information used is historical, the intent is clearly to arrive at recommendations and forecasts for the future rather than provide a picture of the past.
STEPS INVOLVED IN FINANCIAL STATEMENT ANALYSIS:

These are basic steps you may use when evaluating company cases in my graduate
and undergraduate business strategy and business policy courses. STEP 1: Acquire the companys financial statements for several years. These may be
found in your assigned case study; in a recent annual report. As a minimum, get the
following statements, for at least 3 to 5 years. Balance sheets. Income statements. Shareholders equity statements. Cash flow statements. SSMRV DEGREE COLLEGE
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STEP 2: Quickly scan all of the statements to look for large movements in specific
items from one year to the next. For example, did revenues have a big jump, or a big
fall, from one particular year to the next? Did total or fixed assets grow or fall? If you
find anything that looks very suspicious, research the information you have about the
company to find out why. For example, did the company purchase a new division, or
sell off part of its operations, that year?
STEP 3: Review the notes accompanying the financial statements for additional
information that may be significant to your analysis.
STEP 4: Examine the balance sheet. Look for large changes in the overall
components of the company's assets, liabilities or equity. For example, have fixed
assets grown rapidly in one or two years, due to acquisitions or new facilities? Has the
proportion of debt grown rapidly, to reflect a new financing strategy? If you find
anything that looks very suspicious, research the information you have about the
company to find out why. SSMRV DEGREE COLLEGE

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STEP 5: Examine the income statement. Look for trends over time. Calculate and
graph the growth of the following entries over the past several years. Revenues (sales). Net income (profit, earnings).
Are the revenues and profits growing over time? Are they moving in a smooth and
consistent fashion, or erratically up and down? Investors value predictability, and
prefer more consistent movements to large swings.
For each of the key expense components on the income statement, calculate it as a
percentage of sales for each year. For example, calculate the percent of cost of goods
sold over sales, general and administrative expenses over sales, and research and
development over sales. Look for favourable or unfavourable trends. For example,
rising G&A expenses as a percent of sales could mean lavish spending. Also, determine whether the spending trends support the companys strategies. For example,
increased emphasis on new products and innovation will probably be reflected by an
increased proportion of spending on research and development.
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A STUDY ON RATIO ANALYSIS AT KS&DL Look for non-recurring or non-operating items. These are "unusual" expenses not
directly related to ongoing operations. However, some companies have such items on
almost an annual basis. How do these reflect on the earnings quality?
If you find anything that looks very suspicious, research the information you have
about the company to find out why.
STEP 6: Examine the shareholder's equity statement. Has the company issued new
shares, or bought some back? Has the retained earnings account been growing or
shrinking? Why? Are there signals about the company's long-term strategy here?
If you find anything that looks very suspicious, research the information you have
about the company to find out why.
STEP 7: Examine the cash flow statement, which gives information about the cash
inflows and outflows from operations, financing, and investing. While the income
statement provides information about both cash and non-cash items, the cash flow
statement attempts to reconstruct that information to make it clear how cash is
obtained and used by the business, since that is what investors and creditors really SSMRV DEGREE COLLEGE
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care about.
STEP 8: Calculate financial ratios in each of the following categories, for each year.
A summary of some useful ratios appears at the end of this document. Liquidity ratios. Leverage (or debt) ratios. Profitability ratios. Efficiency ratios. Value ratios.
Graph the ratios over time, to find the trends in the ratios from year to year. Are
they going up or down? Is that favourable or unfavourable? This should trigger
further questions in your mind, and help you to look for the underlying reasons.
STEP 9: Obtain data for the companys key competitors, and data about the industry.
For competitor companies, you can get the data and calculate the ratios in the same
way you did for the company being studied. Compare the ratios for the competitors
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A STUDY ON RATIO ANALYSIS AT KS&DL and the industry to the company being studied. Is the company favourable in
comparison? Do you have enough information to determine why or why not? If you dont, you may need to do further research.
STEP 10: Review the market data you have about the companys stock price, and the
price to earnings (P/E) ratio.
Try to research and understand the movements in the stock price and P/E over time.
Review the evaluations of stock market analysts.
STEP 11: Review the dividend payout. Graph the payout over several years. Determine whether the companys dividend policies are supporting their strategies.
For example, if the company is attempting to grow, are they retaining and reinvesting
their earnings rather than distributing them to investors through dividends? Based on
your research into the industry, are you convinced that the company has sufficient
opportunities for profitable reinvestment and growth, or should they be distributing
more to the owners in the form of dividends?
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A STUDY ON RATIO ANALYSIS AT KS&DL STEP 12: Review all of the data that you have generated.
BENEFITS:
The investors get enough idea to decide about the investments of their funds in
the specific company. Regulatory authorities like International Accounting Standards Board can
ensure through financial statements analysis whether the company is following
accounting standards or not.
Financial statements analysis can help the government agencies to analyze the
taxation due to the company.
Company can analyze its own performance over the period of time through
financial statements analysis.
It helps to see improvement over time by comparing financial statement
analysis number over time to spot trends and changes that affect the business.
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LIMITATIONS:
It ignores the productivity and the skills of the employees in an organization. Balance Sheet does not give timely and relevant information because it is based
on historical costs and it does not give a fair idea about the current position of
the company. There are different accounting measurement systems therefore; use of different
techniques by different companies can make the comparisons of financial
statements difficult. Without the notes to the financial statements, credit managers cannot get a
clear picture of the scope of the credit risk they are considering. Unless the customer financial statements are audited, there is no assurance they
conform to generally accepted accounting principles. As a result, the statements
may be misleading or even completely fraudulent.
TOOLS OF FINANCIAL ANALYSIS:

Comparative Statement. SSMRV DEGREE COLLEGE
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Trend analysis. Common Size Statement. Fund Flow Analysis. Cash Flow Analysis. Ratio Analysis.
COMPARATIVE STATEMENT: The comparative financial statement of

the financial position at different periods of time. The elements of financial position
are shown in a comparative so as to give idea of financial position at two or more
periods. Any statement prepared in a comparative form will be covered in
comparative statement.
The comparative statement may show: Absolute changes. Changes in absolute figures. Absolute data in terms of percentage. Increase or decrease in terms of percentage.
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TREND ANALYSIS: The financial statements may be analyzed by computing

trends of series of information. This method determines the direction upwards or
downwards and involves the computation of the percentage relationship that each
statement item bears to the same item in the base year. The information for a number
of years is taken up and one year, generally the first year is taken as a base year. The
Figure of base year is taken as 100and trend ratios for other years are calculated on the
basis of base year.
COMMON SIZE STATEMENT: The common size statement, balance

sheet and income statement are shown in analytical percentages. The figures are
shown as percentage of total assets, total liabilities and total sales. The total assets are
taken as 100 and different assets are expressed as a percentage of the total. Similarly,
various liabilities are taken as a part of total liabilities. These statements are also
known as component percentage or 100 per cent statements because every individual
item is stated as a percentage of the total
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A STUDY ON RATIO ANALYSIS AT KS&DL 100.
FUND FLOW STATEMENT: 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 the ways in which these funds were employed.
CASH FLOW STATEMENT: Cash flow statement is a statement which

describes the inflow (sources) and outflow (uses) of cash and cash equivalent in an
enterprise during a specified period of time. Such a statement enumerates net effect of
the various business transactions on cash and its equivalents and takes into account
receipts and disbursements of cash. Cash flow statement summarizes the causes of
changes in cash position of a
Business enterprise between two balance sheet dates.
RATIO ANALYSIS:
A ratio can be used as yardstick for evaluating the financial position and SSMRV DEGREE COLLEGE
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performance of a concern, because the absolute accounting data cannot provide
meaningful and interpretation. A ratio is the relationship between two accounting
items expressed mathematically. Ratio Analysis helps the analyst to make quantitative judgement with regard to concerns financial position and performance.
DEFINITION:
According to MYERS, "Ratio analysis of financial statements is a study of
relationship among various financial factors in a business as disclosed by a single set
of statements and a study of trend of these factors as shown in a series of statements."
The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. Financial ratio analysis groups the ratios into categories which tell us about different facts of a companys finances and operations. An overview of some of the categories
of ratios is given below. LEVERAGE FINANCIAL RATIOS: Those financial ratios that show the percentage of a companys capital structure that is made up on debt or liabilities SSMRV DEGREE COLLEGE
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owed to external parties. LIQUIDITY FINANCIAL RATIOS: Those financial ratios that show the
solvency of a company based on its assets versus its liabilities. In other words it
lets you know the resources available for a firm to use in order to pay its, keep the
lights on, and pay the staff.
OPERATING FINANCIAL RATIO: These financial ratios measure the return earned on a companys capital and the financial cushion relative to each
dollar of sales. A firm that has high gross profit margin, for instance, is going to be
much harder to put out a business when the economy turns down than one that has
razor-thin margins. Likewise, a company with high returns on capital, even with
smaller margins is going to have a better chance of survival because it is so much more profitable relative to the shareholders contributed investment.
SOLVENCY FINANCIAL RATIOS: These financial ratios tell you the chances of a company going bankrupt. Theres really no elegant way to say that.
The whole point of calculating. SSMRV DEGREE COLLEGE

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STEPS INVOLVED IN RATIO ANALYSIS:

Selection of relevant data from the financial statement 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 of ratios of the industry to which the firm belongs. Interpretation of the ratios.
OBJECTIVES OF RATIO ANALYSIS:

Ratio analysis is an important tool of financial analysis. The relationship that exists among different items in the financial statements is
revealed by accounting.
In accounting financial, management, ratios are regarded as the real test of
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A STUDY ON RATIO ANALYSIS AT KS&DL earning capacity, financial soundness and operating efficiency of an
organisation.
It allows various interested parties like management, shareholders, potential investors, creditors, government and other analysiss to make an evaluation of the various aspects of companys performance from their own point of view
and interest. It helps to analyze the past performance of a company and to make future
projections.
INTERPRETATION OF THE RATIOS:

INTERPRETATION OF A SINGLE RATIO: A single ratio may be
itself conveying some useful idea about the company. For instance, Return on
Investment (ROI) ratio is capable of conveying some useful hints about companys profitability. To extract the maximum benefit, the actual ROI
accomplished by a company may be compared with its weighted average cost
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A STUDY ON RATIO ANALYSIS AT KS&DL of capital or it may be compared with the actual ROI achieved by the industry. INTERPRETATION OF A GROUP RATIOS: Interpretation of a single
ratio will not be of much help to the analysis as a number of ratios are to be used, compared and interpreted to get a clear idea about the companys
performance in a particular area. For instance, ROI ratio is a product of two
ratios, viz. profit ratio and capital turnover ratio to find out the factor
responsible for increase or decrease in ROI ratio, its determinant ratios are to
be computed and to find out the reasons for increase or decrease in a profit
ratio, a large number of cost ratios are to be computed and interpreted.
Therefore, interpretation of a group of interpreted ratios is usually undertaken
by the analysis whether they are internal or external parties.
INTERPRETATION OF TREND RATIOS: In this case, a single ratio or
a group of interrelated ratios are computed for a number of years and used for
interpretation. Consequently, the analyst is in a position to find out whether the
corporate entity has improved its performance in that area during the current
year when compared to the immediate preceding year. SSMRV DEGREE COLLEGE
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INTERPRETATION OF RATIOS FOR MORE THAN ONE
COMPANY: Besides the use of ratios for assessing and inferring about a
companys performance, the ratios are being widely used for comparing
performance of one company within that of another company in the industry.
IMPORTANCE OF RATIO ANALYSIS:

Ratio analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. It is an important technique of financial analysis.
USEFUL IN SIMPLIFYING ACCOUNTING FIGURES:

Accounting ratios simplify summarize and systematize the accounting
figures in order to make them more understandable and in lucid form. They
highlight the interrelationship which exists between various segments of the
business as expressed by accounting statements. Often the figures standing
alone cannot help them convey any meaning and ratios help to relate with other
figures.
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USEFUL IN ASSESSING THE OPERATIONAL EFFICIENCY:

If accounting ratio helps to have an idea of the working of a concern. The
efficiency of the firm becomes evident when analysis is based on accounting
ratios they diagnose the financial health by evaluating liquidity, solvency,
profitability etc, this helps the management to assess financial requirements
and the capabilities of various business units.
USEFUL IN FORECASTING PURPOSE:
If accounting ratios are calculated for a number of years, then a trend is
established. This trend helps in setting up future plans and forecasting.
USEFUL IN LOCATING THE WEAK SPOTS OF THE BUSINESS:
Accounting ratios are of great assistance in locating the weak spots in the
business even though the overall performance may be efficient. Weakness in
financial structure due to incorrect policies in the past or present are revealed
through accounting ratios.
USEFUL IN COMPARISON OF PERFORMANCE:

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Accounting ratios comparison can be made between one departments of a
firm with another of the same in order to evaluate the performance of various
departments in the firm.
LIMITATIONS OF ACCOUNTING RATIOS:

Ratio analysis is very important in revealing the financial position and soundness of the business. But, in spite of its advantages, it has some limitations which restrict its use. These limitations should be kept in mind while making use of ratio analysis for interpreting the financial statements.
FALSE RESULTS BASED ON INCORRECT ACCOUNTING
DATA:
Accounting ratios can be correct only if the data are correct. Sometimes, the
information given in the financial statements is effected by window dressing,
i.e. showing positions better than what actually is. So the analyst must always
be on the lookout for signs of window dressing, if any.
NO IDEA OF PROBABLE HAPPENING IN FUTURE:
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A STUDY ON RATIO ANALYSIS AT KS&DL Ratios are an attempt to make an analysis of the past financial statements. So
they are historical documents. Nowadays keeping in view the complexities of
the business, it is important to have an idea of the probable happenings be in
future.
VARIATION IN ACCOUNTING METHODS:

The two firms results are comparable with the help of accounting ratios only
if they follow the same accounting methods. Comparison will become difficult
if the two concerns follow the different methods of providing depreciation or
valuing stock. Comparison of financial statements of such firms by means of
ratios is bound to be misleading.
PRICE LEVEL CHANGES:

Changes in price level make comparison for various years difficult. For
examples, the ratio of sales to asset in current year would be much higher than
the previous years due to raising prices.
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ONLY ONE METHOD OF ANALYSIS:

Ratio analysis is only a beginning and gives just a fraction of information
needed for decision making. Therefore, to have a comprehensive analysis of
financial statements, ratios should be used along with other methods of
analysis.
NO USE IF RATIOS ARE WORKED OUT FOR INSIGNIFICANT
AND UNRELATED FIGURES:

Accounting ratios may be worked for any two insignificant and unrelated
figures as ratios of sales and investment in government securities. Such ratios
may be misleading. Ratios should be calculated on the basis of cause and effect
relationship. One should be clear as to what effect is before calculating a ratio
between two figures.
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RESEARCH DESIGN
TITLE OF THE STUDY.

A STUDY ON RATIO ANALYSIS WITH SPECIAL REFERENCE TO
KARNATAKA SOAPS AND DETERGENTS LIMITED, BANGALORE.
MEANING OF RESEARCH DESIGN.

It is a logical and systematic plan prepared for directing a research study and
it is an outline that specifies the sources and types of information relevant to
the research questions.
STATEMENT OF THE PROBLEM.

The analysis and interpretation of financial data highlights upon the significance facts and relationship concerning various aspects of financial life of a business entity. The analysis of financial performance is necessary because: It discloses the facts like liquidity position, credit solvency position etc. It helps to take effective decisions. It provides adequate information for planning and controlling the affairs of the business. SSMRV DEGREE COLLEGE
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It is helpful in the comparative study. It measures operational efficiency. Serving the need of interested parties.
OBJECTIVES OF THE STUDY.

To study the overall financial performance by using selective ratio in the areas
of liquidity, solvency and profitability. To know the growth and development of the KS&DL. To analyses the financial statements from 2009-2012. To study the short and long term solvencies of the concern and liquidity
position of the company. To know the profits and expenses of the company.
SCOPE OF THE STUDY.

This project contains the profile of the company i.e. KS&DL where the
project work was undertaken. It provides details regarding financial statements,
cash receivables, working capital and inventory management at KS&DL. This SSMRV DEGREE COLLEGE
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study gives the information about financial aspects of KS&DL from 2007-
2012.
RESEARCH METHODOLOGY.
The criteria for the validity of any research study lies in its methodology. An
inquiry would prove a failure if it is not done along certain methodical lines.
The method of study adopted to carry out this project work is mainly
through personal interview with the accounts manager. The study comprises of the companys operations and the technique followed by them.
This study is entirely based on Personal interviews. Annual reports of KS&DL.
TOOLS FOR DATA COLLECTION.

The data required was collected from the primary and secondary sources. PRIMARY DATA: The tools used for primary data collection is purely
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A STUDY ON RATIO ANALYSIS AT KS&DL based on personal interview with the executives and staff of the entire
departments for collecting data about company.
SECONDARY DATA: The secondary has been collected from the
previous annual reports of the board, company broachers and websites.
LIMITATIONS.
Study of ratio analysis is limited to the information gathered through the
interview and discussions with the company officials and executives. Information which is collected and analyzed is only restricted to five years. Ratio analysis is used for analyzing, which has its own limitations. The study deals with the profitability ratio, solvency ratio and turnover
ratios. These techniques have own limitations. As some are important
working capital ratios. Lack of time to conduct study. The analysis doesnt include current financial year statement.
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TOOLS OF THE ANALYSIS.

Tables, Graphs, Ratio Analysis, Receivables and Payable Management and
cash management are to be used to analyze the 5 years ratios and financial
performance of KS&DL.
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COMPANY PROFILE.
JAYACHAMARAJENDRA WODEYAR.
S.G. SHASTRI.
SIR.M.VISVESVARAYA.
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HISTORY.
India is rich land of forest, ivory, silk, sandal; precious gems etc are magical charm of centuries. The most enchanting perfumes of the world got their exotic spell with a twist of sandal. The worlds richest sandalwood resource is from one isolated stretch of forests land in south India that is Karnataka. The origin of sandalwood and its oil in Karnataka, which is used in making of Mysore sandal soaps, is well known as Fragrant Ambassador of India and sandalwood oil is in fact known as liquid gold. By the inspiration of his highness Maharaja of Mysore late Jayachamarajendra Wodeyar, the trading of sandalwood logs started which was exported to Europe and new destinations, but with commencement of First World War India faced severe crisis on todays famous Mysore sandal soaps credit goes to late Sri Sosale Garalapuri Shastri who incorporated the process of soap making using sandalwood oil. He was an eminent scientist in the field working at the Tata Institute, Bangalore. He was sent to England to master the fine aspects of soap manufacturing. The Maharaja of Mysore and Diwan Sir.M.Visvesvaraya established the Government soap factory during the year 1918. The factory was started as a very small unit near K.R.Circle, Bangalore with the capacity of 100 tonnes P.A. In November 1918, the Mysore sandal soap was put into the market after sincere effort and experiments were undertaken to evolve a soap perfume blend using sandalwood oil as main base to manufacture toilet soap. The factory shifted its operations to
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A STUDY ON RATIO ANALYSIS AT KS&DL Rajajinagar industrial area, Bangalore in July 1957, where the present plant is located. The plant occupies an area of 39 acres (covering soaps, detergents and fatty acid divisions), on the BangalorePune highway, easily accessible by transport services and communication. Another sandalwood oil division was established during the year 2000 for want of Natural sandalwood. This factory started at a moderate scale in 1916. The first product was washing soap in addition to the toilet soap in the year 1918. The toilet soap of the company was made up of sandalwood oil. In 1950, Government decided to expand the factory in two stages. The first stage of expansion was done to increase the output to 700 tonnes per year and was completed in the year 1952 in the cold premises. The next stage of expansion was implemented in 1954 to meet growing demand for Mysore sandal soap and for this purpose, Government of India sanctioned license to manufacture 1500 tonnes of soaps and 75 tonnes of Glycerine per year. The expansion project worth of Rs 211 lakhs include the shifting of the factory to a newly laid industrial sub urban of Bangalore. The factory started functioning in this new premise [i.e. present one] from 1st July 1957. From this year onward until date the factory had never looked back, it has achieved growth and development in production scales and profits. The industry has two more divisions one at Shimoga and another at Mysore where sandalwood oil is extracted. The Mysore division started functioning from 1917 and only during 1984 manufacturing of perfumed and premiere quality, Agarbathies was started. Right from the first log of sandalwood that rolled into the boiled room in SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL 1916, the company has been single-minded pursuit of excellence. The project took shape with the engineering skills and expertise of top level team under the leadership of Sir.M.Visvesvaraya, Prof.Watson and Dr.Sudbrough. Like this soap factory was started as a small unit and now, it has grown up to a giant size.
RENAMING:On 1st October 1980, the Government soap factory was renamed as Karnataka Soaps and Detergent Limited. The company was registered as a public limited company. Today company produces varieties of products in the Toilet soaps, Detergent, Agarbathies and Cosmetics.
OBJECTIVES OF KS&DL: To attain self-reliance. To promote and uphold its image as symbol of traditional products. To promote purity and quality products and thus enhance age old-charm of
sandalwood oil.
To build upon the reputation of Mysore sandal soap based on pure sandal oil. To maintain the brand loyalty of its customer.
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A STUDY ON RATIO ANALYSIS AT KS&DL To supply the products mentioned above at most reasonable and competitive
rate.
VISION STATEMENT: Keeping pace with globalization, global trends and the states policy for using
technology in every aspect of Governance.
Ensuring global presence of Mysore sandal products while leveraging its
unique strengths to take advantage of the current technology scenario by
intelligent and selective diversification.
Secure all assistance and prime status from Government of India, all
technology alliances.
Making all out efforts to achieve reasonable profits. Most importantly to earn the invaluable foreign exchange, both to the state and
to the country.
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MISSION STATEMENT: To serve the national economy. To attain self-reliance. To promote purity and quality products. To maintain the brand loyalty of its customers. To build upon the reputation of Mysore sandal soap based on pure sandal oil.
COMPETITORS OF KS&DL PRODUCTS & SERVICES:KS&DL is facing cut-throat competition in national and international market some of its main competitors are: M/S. Hindustan Lever Ltd., M/S. Godrej Soaps Private Ltd., M/S. Proctor And Gamble. M/S. Wipro. M/S. Nirma Soaps Private Ltd., M/S. Jyothi Laboratories.
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KS&DL HAS THE FOLLOWING DEPARTMENTS: Human Resource Dept. Production Dept. Marketing Dept. Finance Dept. Materials and Stores Dept. R&D Dept. Quality Control Dept. Environment and Safety Dept.
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ORGANISATION CHART
FUNCTIONAL HEADS CHAIRMAN
MANAGING DIRECTOR
GENERAL MANAGER (FINANCE)
GENERAL MANAGER (HRD)
GENERAL MANAGER (PRODUCTION & MAINTANCE)
DEPUTY GENERAL MANGER (MARKETING & EXPORT
DEPUTY GENERAL MANAGER (PROJECTS)
DEPUTY GENERAL MANAGER (MATERIALS
DEPUTY GENERAL MANAGER (QAD)
DEPUTY GENERAL MANAGER (FINANCE& HRD)
DEPUTY GENERAL MANAGER (R&D&PUBLIC RELATION)
ASSISTANT GENERAL MANAGER (E&S/ STORES)
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A TYPICAL ORGANISATION CHART OF FINANCE DEPARMENT.
MANAGING DIRECTOR
GENERAL MANAGER
AGM (COSTING)/ AGM (BILLS)
MANAGER (PR & PF)
MANAGER
AGM (ACCOUNTS)
JUNIOR OFFICER
JUNIOR OFFICER
JUNIOR OFFICER
SENIOR ASSISTANT
SENIOR ASSISTANT
SENIOR ASSISTANT
JUNIOR ASSISTANT
JUNIOR ASSISTANT
JUNIOR ASSISTANT
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TRADEMARK OF KS&DL.
The SHARABHA The carving on the cover is the sharabha, the trademark of KS&DL.
The sharabha is a mythological creation from the puranas which has a body of a lion and head of elephant, which embodies the combined virtues of wisdom and strength. It is adopted as an official emblem of KS&DL to symbolize the philosophy of the company. The sharabha thus symbolized a power that removes imperfections and impurities. The maharaja of Mysore as his official emblem adopted it. And soon took its pride of place as the symbol of the Government soap factory of quality that reflects a standard of excellence of KS&DL.
SLOGAN.
NATURAL PRODUCTS WITH EXOTIC FRAGRANCES KS&DL has a long tradition of maintaining the highest quality standard, right
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A STUDY ON RATIO ANALYSIS AT KS&DL from the selection of raw materials to processing and packing of the end product. The reasons why its products are much in demand globally and are exported regularly to UAE, Behrens, Saudi-Arabia, Kuwait, Qatar, South America. The entire toilet soaps of KS&DL are made from raw materials of vegetable origin and are totally free from animal fats.
POLICY OF KS&DL.
Seek purchase of goods and services from environment responsible suppliers. Communicate its environment policy and best practices to all its employees
implications.
Set targets and monitor progress through internal and external audits. Reuse and recycle materials wherever possible and minimize energy
consumption and waste.
BIRDS EYE VIEW OF KS&DL.

1980 Government soap factory was converted into a public sector enterprise and the company incorporated on 9th July 1980 and re-named as KS&DL Manufacturing facilities, which was available at that time to produce 2600MTs /annum of toilet soaps with different variants. Company has taken over the marketing activities from m/s MSIL and
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1981 1987
A STUDY ON RATIO ANALYSIS AT KS&DL established its own marketing network by opening seven branches all over India. Company has faced very stiff competition after liberalization in the country from different multi- national companies. Company was registered with the board for industries and financial reconstruction [BFR] new Delhi, as the company suffered heavy losses. The BIFR approved the rehabilitation package in September and company has taken stringent measures for the cost control and improving the productivity and sales. Company started making profits. Company was certified wit ISO 9001:1994 certification by BSI for its effective implementation of quality management system company has launched MYSORE SANDLE GOLD-125GMS and MYSORE SANDAL BABY -75gms in the premium segment. Company was certified with ISO 14001 certification by BSI for the effective implementation environmental management system. Company has wiped out entire carry forward losses of 98.00crores and come out from BIFR company has made profits continuously every year and it is the only state public sector unit which has come out of BIFR and making continuously profits in the State. The ISO certification was upgraded to ISP 991:2000. Company has introduced hand was liquids the trade name of herbal hand was and rose hand was liquids company has also introduced liquid detergents under the trade name of KLLENOL liquid with different variants for floor wash dish wash and automobiles wash. Company has established in-house state of the art manufacturing facilities for manufacturing and filling of Mysore sandal talcum powder and Mysore sandal baby powder company has re-introduced the talcum powder variants new outlook of company. The ISO certification was upgraded to ISO 9001:2008. Company launched Mysore Sandal Dhoop. Launched Super Premium Mysore Sandal Millennium Soap. Company reached highest sales turnover and profit.
1992
1996
1999
2000 2003
2004 2008
2009
2010 2010 2012 2012
PRESENT STATUS OF THE COMPANY.

The company is mainly dependent on southern market. The product availability in retail outlets particularly for Mysore Sandal Soap is almost comparable to any other SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL similar industries products in the premium segment in the south. Whereas in other parts like Eastern and Northern markets penetration of KS&DL product is relatively poor, which depends on the companys distribution structure, stockiest and field personnel strength with the increased trust on distribution, the company does not foresee any problems to achieve the projected sales through the redistribution package. Further, the policy of Indian Government also sees the public sector enterprises enter the industry in a large way there by making the products available to the consumers at reasonable prices.
Being located in the centre of southern part of India the Government Soap Factory claims preferential treatment for expansion programme in view of availability of exotic natural sandalwood oil.
AN ISO 9002 COMPANY.

KS&DL with the tradition of excellence of over eight decades is committed to customer delight, through total quality management and continuous improvement through involvement of all employees. KS&DL has ISO-9002 certificate. To improve the quality management system and to facilitate total quality management in the process of soap and detergent, the management took decision to obtain ISO-9002 by end of March 1999. Accordingly, action plan was drawn and a committee was set up for the purpose during October 1998 with a mission statement. The company gives SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL initial training including conducting system procurement. In this direction, company obtained the guidance from consultancies, Bangalore and Bureau of Indian standards registered for ISO-9002 by the end of March 1999 itself. This is to project in the national and international market and to improve quality of products offered to the consumers with the assurance of quality in the message. The company got itself upgraded to ISO-9001-2004, quality system in the year 2004-05.
ISO - 14001.
The company is located in the heart of Bangalore city. The management of the company took a decision to get the ISO-14001 and became model to other public sector for the techniques used to other Government units to spread the message of maintenance of environment. ISO-14001 and ISO-9001 will facilitate to improve the corporate brands in the global market and it will help the company to improve the profits, year after year on longterm basis. The environment management system adopted in the company through this motive as follows. Construction of energy. Conservation of surrounding. Conservation of resources.
Equipped with latest technology and backed by full-pledged quality control and
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A STUDY ON RATIO ANALYSIS AT KS&DL R&D support, KS&DL is marching confidentially ahead in the new
millennium. The company is developing new products to meet the changing
preferences of its customers and to meet the global standards of FDA and
EURO guidelines.
KSDL AT GLANCE:
Incorporated name: Karnataka Soaps and Detergents Ltd Address: Karnataka soap and detergents ltd Bangalore pune high way Post box no 5331, Rajajinagar Ph: 080-3377691\3370469\23371108 to 06 E-mail: Mysore sandal@Vsnl.com Year of establishment: 1918 Constitution: wholly owned by government of Karnataka under taking three Management: government of Karnataka nominates/appoints board Directors, Chairman, managing directors Trade mark: the trade mark is SHARABHAH. It is the body of lion with the head and an elephant means blending the intelligence of lion with strength on an elephant
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A STUDY ON RATIO ANALYSIS AT KS&DL Production range: toilet soap, bar soaps, detergents, Agarbathies, Cosmetics, body products sandal wood oil, Process know how: the facilities is a pioneer in the manufacturing of various soaps and technology imported from Italy Capacity of the unit: licensed capacity is 26000 metric tons of soaps and 10000 m tons of detergents per annum Plant: at Bangalore Soap plant Detergent plant Fatty acid plant
At Mysore Sandal wood oil Agarbathies At Shimoga Duty paid goes down
THE BIRTH OF A LEGEND.

The early year of the 20th century witnessed the birth of a magical formula created from the finest and purest sandal wood oil, better known as Liquid gold, distilled exclusively at our divisions in Karnataka Mysore. A fragrant gift to the world from SSMRV DEGREE COLLEGE
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A STUDY ON RATIO ANALYSIS AT KS&DL the first government soap factory in India natured by the maharaja of Mysore enriched with all the goodness of natural sandal wood oil, this unique soap captured heart and marketing at home as well as right across the globe creating a fragrant legacy for the state of Karnataka. Karnataka soap and detergent ltd [KS&DL] in the tune of excellence for over eight gold legacy of India continuing the traditional of excellence for over eight decades, using only the best grade sandal wood oil in its product range , KSDL today in one of the largest procedures of sandal wood oil & sandal wood soap in the world.
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PRODUCT MANUFACTURED BY KS&DL.

TOILET SOAPS.
Name of the product Mysore sandal soap Mysore sandal classic soap Mysore sandal gold soap Mysore sandal baby soap Mysore special sandal soap Mysore rose soap Mysore sandal herbal care soap Mysore jasmine soap Wave soap Mysore lavender soap Mysore sandal bath tablet Mysore sandal classic bath tablet Mysore jasmine bath tablet Mysore special sandal tablet Mysore sandal rose tablet Mysore sandal guest tablet Units of Grams 75,125 75 75,125 75 75 100 100,125 100 100 150 150 150 150 150 150 17
SBT SJR 06IN0i GOLD SIXER
OTHERS Washing Half Bar Washing Sandal Baby Wash.
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DETERGENTS.
Name of the product Mysore detergent powder Mysore detergent powder Mysore detergent cake Mysore detergent cake Units in Grams 1000 500 125 250
TALCUM POWDER.
Name of the product Mysore sandal talc Mysore sandal baby talc Units in Grams 20,50,100,300 100,200,400
AGARBATHIES:Name of the product Mysore sandal premium Mysore sandal regular Mysore rose Nagachampa Suprabhatha Mysore jasmine Parijata Sir M.V. 100 Bodhisattva Venkateshwara
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A STUDY ON RATIO ANALYSIS AT KS&DL Durga Ayyappa Alif laila Meditation
PRODUCT PROFILE.
KS&DL is the true inheritor of golden legacy of India. Continuing the tradition of excellence for over eight decades, using only the best East Indian grade sandalwood oil and sandalwood soaps in the world. The products produced at KS&DL are the soaps, Detergents, Agarbathies and Sandalwood oil.
Product Range from the house of Mysore sandal soap

a) Mysore sandal soap (75gm, 125gm & 150gm)
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b) Mysore sandal special soap(75gm)
c) Mysore sandal baby soap(75gm)
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d) Three-in-one gift pack-(SJR)3 Tabs (150gm Each)
e) Mysore sandal gold soap (125gm)
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f) Mysore rose soap (100gm)
g) Six-in-one gift pack-6 Tabs (150gm Each)
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h) Mysore sandal gold sixer 6 Tabs (125gm Each)
i) Mysore sandal soap bath tablet Trio 3 nos. (150gm Each)
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j) Mysore sandal classic soap (75gm)
k) Mysore sandal Millennium
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DETERGENTS.
KS&DL also manufactures high quality detergents applying the latest spray drying technology with well balanced formulation of active matters and other builders; they provide the ultimate washing powder.
1. Sensor Detergent Powder (1kg/2kg).
2. Mysore Detergent Powder (1kg/500gms).
3. Mysore Detergent Bar (250gms).
4. Mysore Detergent Cake (125gms/250gms).
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SANDALWOOD OIL.
In 5ml, 10ml, 20ml, 100ml, 500ml, 2kg, 5kg, 20kg, and 25kg packing.
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AGARBATHIES.
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POWDERS.
Mysore sandal talk: cooling and healing, fragrant freshness, net, wt 20gm, 60gm, 300gm and 1kg. Mysore sandal baby powder. Tender loving care for baby And mummy. Net wt 100-4000gms.
OWNERSHIP PATTERN.
Wholly owned by Government of Karnataka.
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WORK FLOW MODEL.

SILOS
SOAP NOODLES
CONTAINER MIXER
SIMPLEX PLODDER
MILLING
IT BECOMES SOAP RIBBONS
DUPLEX PLODDER
CUTTING MACHINE
CAKES ARE LED THROUGH THE CONVEYOR BELT
SAMPLING MACHINE
WRAPPING MACHINE
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FUTURE GROWTH AND PROSPECTOUS.

Introduction of anti bacteria, herbal transparent soap, made out of 33 essential
based perfume, Aloevera, vitamin-e etc as additive and suitable for all types
of skin and all seasons. Improvement in existing products Mysore sandal classic improved
moisturizers and skin condition. Introduction of sandalwood powder is 50gm, 100gms to meet the growing
demand for religious purpose. Introduction of new higher powered detergents powder for institutional sales
in bulk packaging. To attain market leadership. Introduction of new trade schemes to increases sales. Aggressive advertisement and publicity as part of sales promotion. Reduction in distribution expenses. Cost reduction in all areas. Instant decision making in certain procurement activities. SSMRV DEGREE COLLEGE
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Timely introduction and implementation of market driven decision.
Ensuring effective internal control.
MANUFACTURING LOCATIONS.
Karnataka soaps and detergents ltd has got manufacturing location at Bangalore, Mysore, Shimoga.
Toilet soap
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Detergents.
Cosmetics.
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SWOT ANALYSIS OF KSDL.

STRENGTHS:
1) Only soap in India that contains pure sandal and almond oil.
2) Certified by ISO.
3) World largest production of sandal wood oil.
4) 4 brand name from decades in soap market.
5) Diversified product range helps the company to maintain stability.
WEAKNESS:
1) Distribution network in north and east.
2) Absence of TV advertisement.
3) Neglecting freshness aspect.
4) High oriented cost due to excessive labour force.
5) Low turnover resulting in low profit.
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OPPORTUNITIES:
1) Traditional benefits that sandal is good for skin.
2) Skin care is just gaining important among consumers.
3) Government support and large production capacity.
4) Advantages of being in the industry for long time existence of vase market
and huge demand.
THREADS:
1) Other competitors product such as REXONA, LUX, SANTOOR etc.
2) There is a need for renovation of plant and machinery.
3) Government policy may reduce growth potential.
4) Other sandal soaps in the market.
CLASSIFICATION OF EMPLOYEES AT KSDL.

1) Permanent Employee: One who has been engaged for work on a permanent
basis.
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A STUDY ON RATIO ANALYSIS AT KS&DL 2) Temporary Employee: One who has been engaged for work, which is
essentially of temporary nature and likely to be finished within a limited
period.
3) Probationary Employee: One who is provisionally employed to fill a
permanent vacancy.
4) Casual workmen: One who is engaged on day to day basis, for casual or non
recurring work.
MAN POWER DETAIL Group Bangalore Mysore Marketing- Shimoga branches Total
Executives Nonexecutives
112 479
13 23
63 36
1 13
189 551
Total
591
36
99
14
740
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DATA ANALYSIS AND INTERPRETATION

CLASSIFICATION OF RATIOS.
Each organisation/financial institution has its own problems. Different ratios are computed to analyze these problems. Ratio expert, Spencer A Tricker, P.E. has analyzed such 429 ratios in his book Successful Management Control by Ratio Analysis. Significant financial ratio based on balance sheet and profit and loss accounts are classified on the following basis.
1) TRADITIONAL CLASSIFICATION.
This is the conventional mode of classification of ratios where the ratios are
classified on the basis of information given in the financial statements.
2) FINANCIAL CLASSIFICATION.
Now days, it is the most popular mode of classifying the ratio; accordingly,
the ratios may be grouped based on certain tests which satisfies the needs of the
parties having a financial interest in the business concern.
LIQUIDITY RATIOS.
1) CURRENT RATIO: Current ratio in a business concern indicates the
availability of current assets to meet it current liabilities. Higher the ratio better SSMRV DEGREE COLLEGE
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is the coverage. Traditionally, it is also called 2:1 ratio, i.e. 2 is the standard for current asset for each unit of current liabilities. It is used to measure the firms
short term solvency.
CURRENT RATIO =
CURRENT ASSETS
CURRENT LIABILITIES
2) LIQUID RATIO: It is also called as Quick ratio or Acid test ratio. It
establishes a relationship between liquid assets and current liabilities. An asset
is liquid if it can be converted into cash immediately or reasonable soon without
loss of value. Cash considered relatively liquid and included in quick assets, are
book debts on marketable securities.
LIQUID RATIO
LIQUID ASSETS
CURRENT LIABILITIES
3) ABSOLUTE LIQUID RATIO: It includes cash in hand and at bank and
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A STUDY ON RATIO ANALYSIS AT KS&DL marketable securities or temporary investments. The acceptable norm for this
ratio is 50% or 0.5:1.
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES
ACTIVITY RATIOS.
1) INVENTORY TURNOVER RATIO: It is also called as Stock turnover
ratio. It establishes the relationship between the cost of goods sold during the
year. It is calculated as follows.
INVENTORY TURNOVER RATIO = COST OF GOODS SOLD AVERAGE INVENTORY
AVERAGE INVENTORY = OPENING STOCK + CLOSING STOCK 2
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A STUDY ON RATIO ANALYSIS AT KS&DL 2) DEBTORS TURNOVER RATIO: It supplements the information regarding the liquidity of one item of current assets of the firm. The debtors
turnover ratio is found out by dividing the net credit sales by average debtors
outstanding during the year.
DEBTORS TURNOVER RATIO = NET CREDIT SALES AVERAGE DEBTORS
3) CREDITORS TURNOVER RATIO: The creditors turnover ratio is an
important tool of analysis, as a firm can reduce its requirements of current assets by relying on suppliers credit. It is determined by dividing net credit purchases
and the average amount of credits outstanding during the year.
CREDITORS TURNOVER RATIO = TOTAL PURCHASES AVERAGE CREDITORS
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A STUDY ON RATIO ANALYSIS AT KS&DL 4) WORKING CAPITAL TURNOVER RATIO: A firm may also like to
relate net current assets (on net working capital gap) to sales. It may thus
compute net working capital turnover by dividing sales by net working capital.
WORKING CAPITAL TURNOVER RATIO = NET SALES NET WORKING CAPITAL
5) FIXED ASSETS TURNOVER RATIO: A fixed assets turnover ratio
indicates efficient utilization of fixed assets in generating sales. A firm whose
plant and machinery are old may show a higher fixed assets turnover ratio than
the firm, which has purchased them recently.
FIXED ASSETS TURNOVER RATIO = NET SALES FIXED ASSETS
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LEVERAGE RATIOS.
1) DEBT EQUITY RATIO: It is also known as External Internal equity ratio
is calculated to measure the relative claims of outsiders and the owners against the firms assets. This ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders
funds.
DEBT EQUITY RATIO = OUTSIDERS FUNDS SHAREHOLDERS
2) PROPRIETARY RATIO: A variant to the debt equity ratio is the
proprietary ratio which is also known as equity ratio. This ratio establishes the
relationship between shareholders funds to total assets of the firm.
PROPRIETARY RATIO = SHAREHOLDERS FUNDS TOTAL ASSETS 3) SOLVENCY RATIO: This ratio is a small variant of equity ratio and can be
simply calculated as 100 equity ratio. The ratio indicates the relationship
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A STUDY ON RATIO ANALYSIS AT KS&DL between the total liabilities to outsiders to total assets of a firm and can be
calculated as follows.
SOLVENCY RATIO = TOTAL LIABILITIES TO OUTSIDERS X 100 TOTAL ASSETS
4) FIXED ASSETS TO SHAREHOLDERS FUND RATIO (FASR): The
ratio of fixed assets to shareholders fund ratio indicates the extent to which
shareholders fund are sunk into the fixed assets. The ratio establishes the
relationship between fixed assets and share capital plus reserves, surpluses and
retained earnings.
FASR = FIXED ASSETS (AFTER DEPRICATION) X 100 SHAREHOLDERS FUND
5) INTEREST COVERAGE RATIO: This ratio is also known as Debt
service ratio. Net income to interest coverage ratio is used to test the debt
servicing capacity of a firm. Higher the ratio better is the coverage. The firm
may not fail on its commitments to pay interest even if profits fall substantially.
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INTERST COVERAGE RATIO = EBIT FIXED INTEREST CHARGES
6) DEBT COLLECTION PERIOD RATIO: The average number of days
for which book debts remain outstanding is called Average collection period or
Debt collection period ratio. This ratio can be calculated as follows.
DEBT COLLECTION PERIOD RATIO = DEBTORS CREDITORS SALES
X 365
PROFITABILITY RATIOS.
1) GROSS PROFIT RATIO: Gross profit ratio measures the relationship of
gross profit to net sales and it usually represented as a percentage. Thus, it is
calculated by dividing the gross profit by sales.
GROSS PROFIT RATIO = GROSS PROFIT NET SALES
X 100
2) OPERATING PROFIT RATIO: This ratio establishes the relationship
between operating profit and total income. This ratio can be calculated as SSMRV DEGREE COLLEGE
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follows.
OPERATING PROFIT RATIO = OPERATING RATIO X 100 TOTAL INCOME
3) NET PROFIT RATIO: This ratio establishes 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. This
ratio tells the overall measure of firms profitability and is calculated as
NET PROFIT RATIO = NET PROFIT AFTER TAX NET SALES
X 100
4) RETURN ON EQUTIY CAPITAL: This ratio establishes the relationship
between profits of a company and its equity capital. This can be calculated as
follows.
RETURN ON EQUITY CAPITAL RATIO = NET PROFIT AFTER TAX EQUTIY SHAREHOLDERS
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A STUDY ON RATIO ANALYSIS AT KS&DL 5) RETURN ON INVESTMENT: This ratio is popularly known as Net worth
ratio. It is the relationship between net profits (after interest and tax) and the
shareholders fund.
RETURN ON INVESTMENT = NET PROFIT (AFTER INTEREST & TAX) SHAREHOLDERS FUND
6) EARNINGS PER SHARE [EPS]: EPS is a small variation of return on equity capital and is calculated by dividing the net profit after tax preference
dividend by the total number of equity share.
EPS = NET PROFIT AFTER TAX PREFERENCE DIVIDEND NO OF EQUITY SHARES
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A STUDY ON RATIO ANALYSIS AT KS&DL 7) CAPITAL TURNOVER RATIO: This ratio indicates the firms ability of
generating sales per rupee of long term investment. The higher the ratio the more efficient the utilization of owner has and long term creditors funds.
CAPITAL TURNOVER RATIO =
SALES CAPITAL EMPLOYED
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TABLE NO: 1 SHOWING CURRENT RATIO.

CURRENT RATIO: Current ratio in a business concern indicates the availability of current assets to meet it current liabilities. 2:1is the standard norm.
CURRENT RATIO =
CURRENT ASSETS CURRENT LIABILITIES
YEAR 2009-10 2010-11 2011-12
CURRENT ASSETS 1,23,95,60,593 1,20,11,40,120 1,12,06,40,446
CURRENT LIABILITIES 56,15,27,841 56,34,47,217 37,35,57,127
RATIO 2.21 2.13 3
ANALYSIS: The above table represents the consistency of the current ratio from the year 2009-12. In the years 2009-10, 2010-11 and 2011-12 the ratio was 2.21, 2.13 and 3 respectively.
INTERPRETATION: The above analyzed data shows the current ratio. The thumb rule for current ratio is 2:1. However the ratios in the year 2009-10, 2010-11 and 2011-12 were 2.21, 2.13 and 3. Thus the above ratio is shows that the company has maintained standard and it is also satisfactory.
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CHART NO: 1 SHOWING CURRENT RATIO.
3 3 2.21 2.5 2 1.5 1 0.5 0 2009-10 2010-11 2011-12 2.13
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TABLE NO: 2 SHOWING LIQUID RATIO.

LIQUID RATIO: It establishes a relationship between liquid assets and current liabilities. The standard norm is 1:1.
LIQUID RATIO
LIQUID ASSETS CURRENT LIABILITIES
YEAR 2009-10 2010-11 2011-12
LIQUID ASSETS 72,19,54,754 67,59,05,562 63,11,26,126
RATIO 1.29 1.20 1.69
ANALYSIS: The above table represents the consistency of the current ratio from the year 2009-12. In the years 2009-10, 2010-11 and 2011-12 the ratio was 2.21, 2.13 and 3 respectively.
INTERPRETATION: The above ratio represents the liquid ratio. The standard norm of this ratio is 1:1. The liquid ratio was 1.29, 1.20 and 1.69 in the years 2009-10, 2010-11 and 2011-12. In 2010-11 it slightly decreased by 0.09 as compared to 200910 but in 2011-12 it increased to 1.69. The KS&DL shows that liquid position is good.
Page 87
CHART NO: 2 SHOWING LIQUID RATIO.
1.69 1.8 1.6 1.4 1.29 1.2
1.2
1 0.8 0.6 0.4 0.2 0 2009-10 2010-11 2011-12
Page 88
TABLE NO: 3 SHOWING ABSOLUTE LIQUID RATIO.

ABSOLUTE LIQUID RATIO: This ratio shows relationship between absolute liquid assets and current liabilities. The acceptable norm for this ratio is 50% or 0.5:1.
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES
YEAR 2009-10 2010-11 2011-12
ABSOLUTE LIQUID ASSET 28,53,59,727 24,03,14,138 37,78,03,712
RATIO 0.51 0.42 1.01
ANALYSIS: From the above analyzed table it shows the Absolute liquid ratio for the years 2009-2012. The ratio was 0.50, 0.42 and 1.01 in years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data represents the Absolute liquid ratio of KS&DL for 3 years. The acceptable norm for this ratio is 0.5:1 or 50%. In the year 2009-10 it was 0.51 which was acceptable norm but in the year 2010-11 it decreased to 0.42 and in 2011-12 it increased to 1.01 which was satisfactory and the concern has sufficient liquid position to pay off its short term liabilities.
Page 89
CHART NO: 3 SHOWING ABSOLUTE LIQUID RATIO.
1.2 1 0.8 0.6 0.4 0.2 0
1.01
0.51
0.42
2009-10 2010-11 2011-12
Page 90
TABLE NO: 4 SHOWING INVENTORY TURNOVER RATIO.

INVENTORY TURNOVER RATIO: It establishes the relationship between the cost of goods sold during the year. Increase in ratio shows efficient management of company.
INVENTORY TURNOVER RATIO = COST OF GOODS SOLD AVERAGE INVENTORY
AVERAGE INVENTORY = OPENING STOCK + CLOSING STOCK 2 YEAR 2009-10 2010-11 2011-12 NET SALES 1,64,77,74,737 1,64,97,23,232 2,11,84,38,529 AVERAGE INVENTORY 11,88,06,403 16,90,14,641 21,40,16,643 RATIO 13.87 9.76 9.89
ANALYSIS: From the above table it represents the inventory turnover ratio for the years 2009-12. The ratio was 13.87, 9.76 and 9.89 in the years 2009-10, 2010-11 and 2011-12. The ratio increased in 2009-10 but started decreasing in the years 20102012. INTERPRETATION: The above analyzed data shows the inventory turnover ratio for 3 years. This shows how the company will manage its inventory. The company had 13.87 in 2009-10 which indicates efficient management of inventory but it decreased in 2010-11 and 2011-12 to 9.76 and 9.89 which indicate inefficient management of inventory which the company has to improve in next coming years.
Page 91
CHART NO: 4 SHOWING INVENTORY TURNOVER RATIO.
13.87 14 12 10 8 6 4 2 0
9.76
9.89
2009-10 2010-11 2011-12
Page 92
TABLE NO: 5 SHOWING DEBTORS TURNOVER RATIO.

DEBTORS TURNOVER RATIO: It shows the relationship between net credit sales and average debtors. Increase in ratio means the company has efficiently managed its debtors.
DEBTORS TURNOVER RATIO = NET CREDIT SALES AVERAGE DEBTORS
YEAR 2009-10 2010-11 2011-12
NET CREDIT SALES 1,64,77,74,737 1,64,97,23,232 2,11,84,38,529
AVERAGE DEBTORS 16,80,85,689 16,92,50,472 14,19,02,642
RATIO 9.80 9.74 14.93
ANALYSIS: The above table shows the debtors turnover ratio for the years 20092012. The ratio was 9.80, 9.74 and 14.93 in years 2009-10, 2010-11 and 2011-12 respectively. The ratio was low in the year 2009-10 and 2010-11 but it was high in 2011-12.
INTERPRETATION: The above ratio indicates Debtors turnover ratio for years 2009-2012. This shows how the company will manage the debtors. The company has low ratio of 9.80 and 9.74 in the years 2009-10 and 2010-11 which indicates inefficient management of debtors but it increased in 2011-12 to 14.93. It shows that company is more efficient in management of debtors.
Page 93
CHART NO: 5 SHOWING DEBTORS TURNOVER RATIO.
14.93 15 9.8 10 5 0 2009-10 2010-11 2011-12 9.74
Page 94
TABLE NO: 6 SHOWING CREDITORS TURNOVER RATIO.

CREDITORS TURNOVER RATIO: It shows relationship between total assets and average debtors. Increase in ratio indicates how efficiently the company will utilize its credit period.
CREDITORS TURNOVER RATIO = TOTAL PURCHASES AVERAGE CREDITORS
YEAR 2009-10 2010-11 2011-12
NET CREDIT PURCHASES 74,01,34,407 77,72,29,026 98,06,28,009
AVERAGE CREDITORS 56,15,27,841 56,34,47,217 37,35,57,127
RATIO 1.32 1.38 2.62
ANALYSIS: From the above analyzed table it shows the creditors turnover ratio for 3 years. The ratio was 1.32, 1.38 and 2.62 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above ratio represents the Creditors turnover ratio of the KS&DL for 3 years. This shows how the company will enjoy its credit period. In the year 2009-10 and 2010-11 the ratio was 1.32 and 1.38 which indicates that the company has not enjoyed the credit period given by the creditors. But in 2011-12 the ratio was 2.62 which shows that credit period was enjoyed by the firm which is a good sign to company.
Page 95
CHART NO: 6 SHOWING CREDITORS TURNOVER RATIO.
3 2.5 2 1.5 1 0.5 0 2009-10 2010-11 1.32 1.38
2.62
2011-12
Page 96
TABLE NO: 7 SHOWING WORKING CAPITAL TURNOVER RATIO.

WORKING CAPITAL TURNOVER RATIO: This ratio shows how efficiently the company utilized its working capital. The increase in ratio indicates efficient utilization of working capital.
WORKING CAPITAL TURNOVER RATIO = NET SALES NET WORKING CAPITAL
YEAR 2009-10 2010-11 2011-12
NET SALES 1,64,77,74,737 1,64,97,23,232 2,11,84,38,529
NET WORKING CAPITAL 67,80,32,752 63,76,92,903 74,70,83,319
RATIO 2.43 2.59 2.83
ANALYSIS: The above table represents the working capital turnover ratio for 3 years. The ratio was 2.43, 2.59 and 2.83 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data shows working capital turnover position for the years 2009-2012. This ratio indicates how efficiently working capital is utilized. The ratio is fluctuating year to year it refers to the increase in sales. The ratio is 2.4., 2.59 and 2.83 for the years 2009-10, 2010-11 and 2011-12. The increase in ratio indicates the company has efficiently utilised its working capital which is a good sign to the company.
Page 97
CHART NO: 7 SHOWING WORKING CAPITAL TURNOVER RATIO.
2.9 2.8 2.7 2.6 2.5 2.4 2.3 2.2
2.83 2.59 2.43
2009-10
2010-11
2011-12
Page 98
TABLE NO: 8 SHOWING FIXED ASSETS TURNOVER RATIO.

FIXED ASSETS TURNOVER RATIO: A fixed assets turnover ratio indicates efficient utilization of fixed assets in generating sales.
FIXED ASSETS TURNOVER RATIO =
SALES NET FIXED ASSETS
YEAR 2009-10 2010-11 2011-12
SALES 1,78,90,59,796 1,81,06,81,627 2,31,12,32,797
NET FIXED ASSETS 8,58,30,957 9,29,83,953 9,69,57,604
RATIO 20.84 19.47 23.84
ANALYSIS: From the above analyzed table it represents the fixed assets turnover ratio for the 3 years. The ratio was 20.84, 19.47 and 23.84 for the years 2009-10, 2010-11 and 2011-12 respectively. The peak achieved was 23.84 in the year 2011-12.
INTERPRETATION: The above analyzed data represents fixed assets turnover ratio for the years 2009-12. It shows how the company will utilize its fixed assets. The ratio was 20.84 in the year 2009-10 and slightly decreased in 2010-11 to 19.47 but the company increased its ratio in successive year at else in 2011-12 to 23.84 it means the company has utilized fixed assets properly.
Page 99
CHART NO: 8 SHOWING FIXED ASSETS TURNOVER RATIO.
25 20 15 10 5 0
20.84
23.84 19.47
2009-10
2010-11
2011-12
Page 100
TABLE NO: 9 SHOWING DEBT EQUITY RATIO.

DEBT EQUITY RATIO: This ratio indicates the relationship between the outsiders funds and the shareholders funds. Generally 1:1 is considered as satisfactory.
DEBT EQUITY RATIO = LONG TERM DEBTS SHAREHOLDERS FUND
YEAR 2009-10 2010-11 2011-12
LONG TERM DEBT 16,35,98,904 8,35,06,504 8,35,06,504
SHAREHOLDERS FUND 66,17,00,146 70,97,41,693 81,28,22,955
RATIO 0.25 0.11 0.10
ANALYSIS: The above table represents the debt equity ratio for the years 2009-2012. The ratio was 0.25, 0.11 and 0.10 for the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data shows the debt equity ratio of the KS&DL for 3 years. A ratio of 1:1 is considered as satisfactory. The ratio was 0.25, 0.11 and 0.10 for the years 2009-10, 2010-11 and 2011-12. As the ratios are low it is considered as favourable to the company.
Page 101
CHART NO: 9 SHOWING DEBT EQUITY RATIO.
0.25 0.25 0.2 0.15 0.1 0.05 0 2009-10 2010-11 2011-12 0.11 0.1
Page 102
TABLE NO: 10 SHOWING PROPRIETARY RATIO.

PROPRIETARY RATIO: This ratio establishes the relationship between shareholders funds to total assets of the firm.
PROPRIETARY RATIO = SHAREHOLDERS FUNDS TOTAL ASSETS
YEAR 2009-10 2010-11 2011-12
SHARHOLDERS FUND 66,17,00,146 70,97,41,693 81,28,22,955
TOTAL ASSETS 1,38,68,26,891 1,35,66,95,414 1,48,80,37,248
RATIO 47.71 52.31 54.62
ANALYSIS: From the above table it shows the proprietary ratio of the KS&DL for 3 years. The ratio was 47.71, 52.31 and 54.62 in the years 2009-10, 2010-11 and 201112 respectively.
INTERPRETATION: The above analyzed data represents the proprietary ratio. Usually higher the ratio it indicates better long term solvency position of the company. In the year 2009-10 the ratio was 47.71. It increased in 2010-11 and 2011-12 to 52.31 and 54.62. The KS&DL has better solvency position which is good sign to the company.
Page 103
CHART NO: 10 SHOWING PROPRIETARY RATIO.
56 54 52 50 48 46 44 2009-10 2010-11 47.71 52.31
54.62
2011-12
Page 104
TABLE NO: 11 SHOWING SOLVENCY RATIO.

SOLVENCY RATIO: The ratio indicates the relationship between the total liabilities to outsiders to total assets of a firm.
SOLVENCY RATIO = TOTAL LIABILITIES TO OUTSIDERS X 100 TOTAL ASSETS
YEAR 2009-10 2010-11 2011-12
OUTSIDERS FUND 16,35,98,904 8,35,06,504 30,16,57,166
TOTAL ASSETS 1,38,68,26,891 1,35,66,95,414 1,48,80,37,248
RATIO 11.79 6.15 20.27
ANALYSIS: The above table represents the solvency ratio of the company for the years 2009-2012. The ratio was 11.79, 6.15 and 20.27 for the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analysed data represents the solvency ratio. Generally lower the ratio is more satisfactory. This ratio indicates the relationship between total liabilities to outsiders and total assets. The KS&DL has 11.79, 6.15 and 20.27 ratios in the years 2009-10, 2010-11 and 2011-12. Thus company has to reduce its solvency position.
Page 105
CHART NO: 11 SHOWING SOLVENCY RATIO.
25 20 15 10 5 0 2009-10 2010-11 11.79 6.15
20.27
2011-12
Page 106
TABLE NO: 12 SHOWING FIXED ASSETS TO SHAREHOLDERS FUND.

FIXED ASSETS TO SHAREHOLDERS FUND RATIO (FASR): The ratio establishes the relationship between fixed assets and share capital plus reserves, surpluses and retained earnings.
FASF = FIXED ASSETS (AFTER DEPRECIATION) X 100 SHAREHOLDERS FUND
YEAR 2009-10 2010-11 2011-12
FIXED ASSETS 8,58,30,957 9,29,83,953 9,69,57,604
RATIO 12.97 13.10 11.93
ANALYSIS: The above table shows the fixed assets to shareholders fund of the KS&DL for the years 2009-2012. The ratio was 12.97, 13.10 and 11.93 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analysed data represents the fixed assets to shareholders fund. It indicates how the company utilizes shareholders fund towards fixed assets. The ratio was 12.97 in 2009-10 and increased to 13.10 in the year 201011 which indicates the shareholders fund is sufficient to finance its fixed assets but in 2011-12 it decreased to 11.93 which is not a good sign to the company.
Page 107
CHART NO: 12 SHOWING FIXED ASSETS TO SHAREHOLDERS FUND.
13.5 13 12.5 12 11.5 11
12.97
13.1
11.93
2009-10
2010-11
2011-12
Page 108
TABLE NO: 13 SHOWING INTEREST COVERAGE RATIO.

INTEREST COVERAGE RATIO: This ratio indicates relationship between EBIT and fixed interest charges. Higher the ratio better is the coverage.
INTEREST COVERAGE RATIO =
EBIT FIXED INTEREST CHARGES
YEAR 2009-10 2010-11 2011-12
EBIT 14,31,83,403 9,79,85,018 20,17,47,457
FIXED INTEREST CHARGES 82,97,546 52,39,449 67,08,472
RATIO 17.25 18.70 30.07
ANALYSIS: The above analyzed table shows the interest coverage ratio of the KS&DL for 3 years. The ratio was 17.25, 18.70 and 30.07 in the years 2009-10, 201011 and 2011-12 respectively.
INTERPRETATION: The above ratio represents the interest coverage ratio of KS&DL for the 3 years. Generally higher the ratio is better and safe. The ratio was 17.25 and 18.70 in the years 2009-10 and 2010-11 but it increased randomly to 30.07 in the year 2011-12. This indicates that company is in good position and also safe.
Page 109
CHART NO: 13 SHOWING INTEREST COVERAGE RATIO.
35 30 25 20 15 10 5 0
30.07 18.7
17.25
2009-10
2010-11
2011-12
Page 110
TABLE NO: 14 SHOWING DEBT COLLECTION PERIOD RATIO.

DEBT COLLECTION PERIOD RATIO: The average number of days for which book debts remain outstanding is called debt collection period.
DEBT COLLECTION PERIOD RATIO = DEBTORS
X 365
CREDIT SALES
YEAR 2009-10 2010-11 2011-12
DEBTORS 17,26,41,760 16,58,59,183 14,19,02,642
SALES 1,78,90,59,796 1,81,06,81,627 2,31,12,32,797
RATIO 35 DAYS 33DAYS 22 DAYS
ANALYSIS: The above table represents the debt collection period ratio of KS&DL for 3 years. The ratio was 35 days, 33 days and 22 days for the years 2009-10, 201011 and 2011-12 respectively.
INTERPRETATION: From the above analyzed ratio it shows the debt collection period ratio of the company. Generally it indicates how the company has managed the debtors. The ratio was increased in the year 2009-10 by 35 days and it decreased to 33 days and 22 days in the years 2010-11 and 2011-12. It means that the debtors are not efficiently managed as it is not a good sign to the company.
Page 111
CHART NO: 14 SHOWING DEBT COLLECTION PERIOD RATIO.
35 35 30 25 20 15 10 5 0 2009-10
33 22
2010-11
2011-12
Page 112
TABLE NO: 15 SHOWING GROSS PROFIT RATIO.

GROSS PROFIT RATIO: Gross profit ratio measures the relationship of gross profit to net sales and it usually represented as a percentage.
GROSS PROFIT RATIO = GROSS PROFIT NET SALES
X 100
YEAR 2009-10 2010-11 2011-12
GROSS PROFIT 87,23,91,298 87,24,94,206 1,13,78,10,520
NET SALES 1,64,77,74,737 1,64,97,23,232 2,11,84,38,529
RATIO 52.94 52.89 53.71
ANALYSIS: The above table shows the gross profit ratio of the company for 3 years. The ratio was 52.94, 52.89 and 53.71 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: From the above analyzed data it represents the gross profit ratio. This ratio says how the company will cover its operating expenses from gross profit. In 2009-10 the ratio was 52.94 and there was slight decrease in 2010-11 to 52.89. But the ratio increased in 2011-12 to 53.71 which indicates that the company has adequate gross profit to cover the operating expenses of the company.
Page 113
CHART NO: 15 SHOWING GROSS PROFIT RATIO.
53.8 53.6 53.4 53.2 53 52.8 52.6 52.4
53.71
52.94
52.89
2009-10
2010-11
2011-12
Page 114
TABLE NO: 16 SHOWING OPERATING PROFIT RATIO.

OPERATING PROFIT RATIO: This ratio establishes the relationship
between operating profit and total income.
OPERATING PROFIT RATIO = OPERAITNG PROFIT X 100 TOTAL INCOME
YEAR 2009-10 2010-11 2011-12
OPERATING PROFIT 14,31,83,403 9,79,85,018 20,17,47,457
TOTAL INCOME 1,72,33,49,221 1,64,93,98,091 2,15,64,83,526
RATIO 8.30 5.94 9.35
ANALYSIS: The above table represents the operating profit ratio of KS&DL for the years 2009-2012. The ratio was 8.30, 5.94 and 9.35 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data shows the operating profit ratio of the company. Generally higher ratio is good. The ratio in the 2009-10 was 8.30 but it decreased to 5.94 in the year 2010-11 which was not good for the company. But the company increased its operating profit to 9.35 in 2011-12 which was good for the company.
Page 115
CHART NO: 16 SHOWING OPERATING PROFIT RATIO.
9.35 10 8 6 4 2 0 2009-10 2010-11 2011-12 8.3 5.94
Page 116
TABLE NO: 17 SHOWING NET PROFIT RATIO.

NET PROFIT RATIO: This ratio establishes relationship between net profit
after tax and net sales.
NET PROFIT RATIO = NET PROFIT AFTER TAX X 100 NET SALES
YEAR 2009-10 2010-11 2011-12
NET PROFIT AFTER TAX 9,31,12,149 6,39,52,597 13,45,18,037
NET SALES 1,64,77,74,737 1,64,97,23,232 2,11,84,38,529
RATIO 5.65 3.27 6.35
ANALYSIS: The above table represents the net profit ratio of the company for 3 years. The ratio was 5.65, 3.27 and 6.35 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: From the above analyzed data it shows the net profit ratio. Generally increase in ratio indicates increase in sales and profit. In 2009-10 the ratio was 5.65 and decreased in the year 2010-11 to 3.27 which was not much profitability for the company. But it increased in 2011-12 to 6.35 which was better profitability compared to the other previous years.
Page 117
CHART NO: 17 SHOWING NET PROFIT RATIO.
6.35 7 6 5 4 3 2 1 0 5.65 3.27
2009-10
2010-11
2011-12
Page 118
TABLE NO: 18 SHOWING RETURN ON EQUITY CAPITAL.

RETURN ON EQUTIY CAPITAL: This ratio establishes the relationship
between profits of a company and its equity capital.
RETURN ON EQUITY CAPITAL = NET PROFIT AFTER TAX EQUITY SHARE CAPITAL
YEAR 2009-10 2010-11 2011-12
EQUITY SHARE CAPITAL 35,00,00,000 35,00,00,000 35,00,00,000
RATIO 26.60 18.27 38.43
ANALYSIS: The above table shows the return on equity capital of the KS&DL for the years 2009-2012. The ratio was 26.60, 18.27 and 38.43 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data represents the return on equity capital of the company. Usually higher ratio is satisfactory. In 2009-10 the ratio was 26.60 but decreased in the year 2010-11 to 18.27 which was not good to the company. But the ratio increased to 38.43 in the year 2011-12 this indicates good sign to the company.
Page 119
CHART NO: 18 SHOWING RETURN ON EQUITY CAPITAL.
38.43 40 35 30 25 20 15 10 5 0
26.6 18.27
2009-10
2010-11
2011-12
Page 120
TABLE NO: 19 SHOWING RETURN ON INVESTMENT.

RETURN ON INVESTMENT: It is the relationship between net profits (after
interest and tax) and the shareholders fund.
RETURN ON INVESTMENT = NET PROFIT (AFTER INTEREST AND TAX) SHARHOLDERS FUND
YEAR 2009-10 2010-11 2011-12
NET PROFIT (AFTER INTEREST AND TAX 7,57,60,017 4,80,41,547 13,45,18,037
RATIO 11.45 6.77 16.55
ANALYSIS: The above table represents the return on investment ratio for 3 years. The ratio was 11.45, 6.77 and 16.55 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data shows the return on investment ratio of KS&DL. Generally high ratio is satisfactory. In 2009-10 the ratio was 11.45 and decreased to 6.77 in the year 2010-11. But the ratio has increased to 16.55 that is 10 times more profitability position in 2011-12 as compared to other previous years.
Page 121
CHART NO: 19 SHOWING RETURN ON INVESTMENT.
18 16 14 12 10 8 6 4 2 0
16.55
11.45 6.77
2009-10
2010-11
2011-12
Page 122
TABLE NO: 20 SHOWING EARNINGS PER SHARE.

EARNINGS PER SHARE [EPS]: It shows relationship between net profit after
tax and preference dividend with no of equity shares.
EPS = NET PROFIT AFTER TAX PREFERENCE DIVIDEND NO OF EQUITY SHARES
YEAR 2009-10 2010-11 2011-12
NO OF EQUITY SHARES 3,50,000 3,50,000 3,50,000
RATIO 266.03 182.72 384.34
ANALYSIS: The above table shows the earnings per share of KS&DL for the years 2009-2012. The ratio was 266.03, 182.72 and 384.34 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: From the above analyzed data represents the Earnings per share of the KS&DL. The bank has earned 266.03, 182.72 and 384.34 in the years 2009-10, 2010-11 and 2011-12. This ratio indicates KS&DLs EPS ability was up in 2009-10 by 266.03 but decreased to 182.72 in 2010-11 and it increased to 384.34 in 2011-12 which say that funds are efficiently used.
Page 123
CHART NO: 20 SHOWING EARNINGS PER SHARE.
384.34 400 350 300 250 200 150 100 50 0
266.03
182.72
2009-10
2010-11
2011-12
Page 124
TABLE NO: 21 SHOWING CAPITAL TURNOVER RATIO.

CAPITAL TURNOVER RATIO: This ratio indicates the firms ability of
generating sales per rupee of long term investment.
CAPITAL TURNOVER RATIO =
NET SALES CAPITAL EMPLOYED
YEAR 2009-10 2010-11 2011-12
NET SALES 1,64,77,74,737 1,64,97,23,232 2,11,84,38,529
CAPITAL EMPLOYED 82,52,99,050 79,32,48,197 89,63,29,459
RATIO 2.00 2.08 2.36
ANALYSIS: The above table shows the capital turnover ratio of KS&DL for 3 years. The ratio was 2.00, 2.08 and 2.36 in the years 2009-10, 2010-11 and 2011-12 respectively.
INTERPRETATION: The above analyzed data represents capital turnover ratio. Usually higher the ratio is satisfactory. The ratio was 2.00, 2.08 and 2.36 in the years 2009-10, 2010-11 and 2011-12. There is fluctuation in ratio year by year which indicates the efficient utilization of resources in the company.
Page 125
CHART NO: 21 SHOWING CAPITAL TURNOVER RATIO.
2.36 2.4 2.3 2.2 2.1 2 1.9 1.8 2009-10 2010-11 2011-12 2 2.08
Page 126
FINDINGS AND CONCLUSIONS.

FINDINGS.
Current assets and liabilities are increased in past 3 years. The fixed asset turnover ratio is high which indicates the better utilization of the fixed assets. The gross profit ratio is seen to be slightly increasing trend in the past 3 years. The company has slow moving stocks as indicated by its decreasing trend in stock turnover ratio. The company has increased its debtors turnover ratio it indicates efficient management of debtors. The creditors turnover ratio is slightly increased in the past 3 years it shows the firm has enjoyed its credit period given by creditors. The companys ability to create working capital through the sales is satisfactory. The working capital is efficiency utilized. The cash ratio is quite more then compared to standard ratio i.e. 0:5:1 and it shows that firms commitment to meet its short term liabilities. The net profit ratio is increased in year 2011-12, which indicates that the firms profitability is increasing. The debt equity ratio is also favourable to the firm as it has low ratios. The proprietary and solvency ratio indicates better long term solvency position SSMRV DEGREE COLLEGE
Page 127
of the company. The fixed asset to shareholders fund is sufficient to finance fixed assets. The company has good and safe interest coverage ratio. The return on equity and return on investment is in profitability position. Finally the overall position of the company is good and strong enough to give them good profit from last few years.
CONCLUSION.
The KS&DL soap plant has one of the largest production units in the country with an installed capacity of 2, 6000 tons. The KS&DL is shining today as one of the largest producer in sandalwood oil and sandalwood soaps in the world. It exports to Europe, USA, UAE, Russia and Germany and it is also used by leading perfume houses of the world like IFF, Givvadan and Firmeerch. KS&DL will remain a household name to the people in India. Their ambition has always been and will continue, to make soaps for the family of all around the country. And bringing new brands extension to suit the need of traditional and modern scenario. The organization firmly believes that giving its people the right encouragement yield in comparable rewards. Emphasis is given to man, management and every opportunity so that people can grow with the organization. Its giant infrastructure and network people working toward a common goal to give the customer service and value that he deserve through relentless search for quality and pursuit of excellence looking toward the next century. SSMRV DEGREE COLLEGE
Page 128
A STUDY ON RATIO ANALYSIS AT KS&DL Ever the future of KS&DL factory, Bangalore is quite bright, when we find that performance has been really satisfactory. Over the last three years there has been a continuous growth in the pair age, not only of the estimated but also for the actual pair age. The standard cost comparison of the factory however shows that cost is increasing at slow pace over the year. All in all the company should put much emphasis on modern advertising in order to increase sales and profitability of the concern. A study of ratio analysis of KS&DL in this project financial performance of the company is analyzed and the study found s that the financial position of the company is satisfactory.
Page 129
SUGGESTIONS.
The liquidity position of the company is depicted from current ratio to liquidity ratio. This shows excess of idle funds I the company. So, the company should make sincere attempts to make use of current assets more effectively. Reduce the wastages and idle time of labour and machines. Enforcing stringent discipline among the employees. The firm should think over new policy to generate income by sufficient utilization of existing assets. Reduces the excessive use of outsiders fund in financing the assets of the company. The profits are the measure of overall efficiency of the business, higher the profits, the more efficient is the business considered. So they have to increase profitability through reducing the expenses. The company has to increase its current assets and quick assets adequately. The company should increase its investment in working capital from sales so that they can meet the current liabilities in future. Company has to take corrective steps towards proper usage of short term assets for making sales. The cash position has to be maintained adequately even in future which help
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A STUDY ON RATIO ANALYSIS AT KS&DL company to meet short term commitments. Company can try to have future plans as for as production and business activities are concerned and also to forecast the future requirement of working capital so that it can increase its sales and profit. The company should maintain stable rate of current ratio.
Page 131

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A STUDY ON RATIO ANALYSIS AT KS&DL

DEVELOPMENT IN MANUFACTURING OF SOAP:

SOAP INDUSTRY IN INDIA:

SSMRV DEGREE COLLEGE

SSMRV DEGREE COLLEGE

A STUDY ON RATIO ANALYSIS AT KS&DL

PART: B: - ABOUT SUBJECT FINANCE:

and Administering of funds and in the business.

enterprise to ensure a positive cash flow. It includes the administration and

maintenance of financial assets. Besides, financial management covers the process of

identifying and managing risks.

SSMRV DEGREE COLLEGE

There are different types of financial decisions. They are:

1) INVESTMENT DECISIONS: This decision involves deciding the pattern of

2) FINANCING DECISIONS: It is another important decision where business

concern has to take maximum care in financing different proposals. The

appropriate mix of finance with debt to equity directly contributes to the

profitability of a business unit. The decision regarding selection of instrument

creditors has to be taken.

3) DIVIDEND DECISION: It means decision regarding the divisible profit of

the company. The dividend decision involves the determination of the

percentage of profit earned by the enterprise which is to be paid to the share

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A STUDY ON RATIO ANALYSIS AT KS&DL holders.

4) CURRENT ASSET MANAGEMENT: To have the liquidity in the business

production through which he must achieve efficiency and increasing the

operating cycle to meet the short term obligations.

PURPOSE OF FINANCIAL STATEMENT:

decisions that affect its continued operations. Financial analysis is then

performed on these statements to provide management with a more detailed

understanding of the figures. These statements are also used as part of

management's annual report to the stockholders. SSMRV DEGREE COLLEGE

A STUDY ON RATIO ANALYSIS AT KS&DL

Employees also need these reports in making collective bargaining agreements

prepared by professionals (financial analysts), thus providing them with the

SSMRV DEGREE COLLEGE

A STUDY ON RATIO ANALYSIS AT KS&DL

THE NATURE OF FINANCIAL STATEMENTS:

FINANCIAL STATEMENT ANALYSIS:

extract information that can facilitate decision-making.

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STEPS INVOLVED IN FINANCIAL STATEMENT ANALYSIS:

A STUDY ON RATIO ANALYSIS AT KS&DL

sell off part of its operations, that year?

information that may be significant to your analysis.

company to find out why. SSMRV DEGREE COLLEGE

A STUDY ON RATIO ANALYSIS AT KS&DL

consistent fashion, or erratically up and down? Investors value predictability, and

prefer more consistent movements to large swings.

increased emphasis on new products and innovation will probably be reflected by an

increased proportion of spending on research and development.

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almost an annual basis. How do these reflect on the earnings quality?

about the company to find out why.

about the company to find out why.

statement attempts to reconstruct that information to make it clear how cash is

A STUDY ON RATIO ANALYSIS AT KS&DL

they going up or down? Is that favourable or unfavourable? This should trigger

SSMRV DEGREE COLLEGE

price to earnings (P/E) ratio.

Review the evaluations of stock market analysts.

opportunities for profitable reinvestment and growth, or should they be distributing

more to the owners in the form of dividends?