Project Reoprt On SIDCO 2010 - 2013

PROJECT REPORT ON
A STUDY ON THE FINANCIAL

PERFORMANCE OF
SIDCO
Submitted to the regular fulfillment of the requirements
For the award of degree of
BACHELOR OF BUSINESS ADMINISTRATION
By
SHANAVAS.S,
SACHIN U.G,
&
ARUN J MOHAN
ANANTHU GOKUL
Under The Guidance of

Mrs.S.KUMARIPREETHA
[Lecturer in Commerce]
UNIVERSITY INSTITUTE OF TECHNOLOGY

NEYYATTINKARA CENTRE
UNIVERSITY OF KERALA
2011 2014
PROJECT REPORT ON
A STUDY ON THE FINANCIAL

PERFORMANCE OF
SIDCO
Submitted to the regular fulfillment of the requirements
For the award of degree of
BACHELOR OF BUSINESS ADMINISTRATION
By
U.G
SHANAVAS.S
SACHIN
(Reg. no:12234567)
(Reg.no:12345679)
&
GOKUL
ARUN J MOHAN
ANANTHU
(Reg. no:12345678)
(Reg.no:12345678)
Under The Guidance of
Mrs.S.KUMARIPREETHA
[Lecturer in Commerce]

2011 - 2014

CERTIFICATE
This to certify that the project report titled A STUDY ON THE
FINANCIAL
PERFORMANCE
SHANAVAS.S, SACHINU.G,
OF
SIDCO
submitted
by
ARUN J MOHAN,
ANANTHU GOKUL in partial fulfillment of the requirements for

the award of Degree of Bachelor of Business Administration,
University of Kerala, is the project work undertaken by during
the year 2011-2014 under my supervision and guidance.
Prof.
N.
Smt. S. KUMARIPREETHA
Principal
Lecturer in Commerce
SADASIVAN
NAIR
University
Institute
University Institute of Technology
University
of
University of Kerala
Neyyattinkara
Neyyattinkara Centre
of
Technology
Kerala
Centre
DECLARATION
We
undersigned,
SHANAVAS.S,SACHIN
U.G,ARUN
J
MOHAN,ANANTHU GOKUL, hereby declare that this this
project entitled A STUDY ON THE FINANCIAL

PERFORMANCE OF SIDCO, Thiruvananthapuram
has
been
done
under
the
guidance
of
S.KUMARIPREETHA LECTURER
In commerce,University Institute of Technology
Neyyatinkara Centre, Trivandrum.We also declare that
this project report has not been submitted by us fully or
partial for the award of any degree or diploma earlier.
SHANAVAS
.S
Date :
/04/2014
SACHIN U.G
Place : Thiruvananthapuram
ARUN J MOHAN
ANANTHU GOKUL
ACKNOWLEDGEMENT
Gratitude is certainly to be placed on record at the right

time with the right sense of morality.
In take this opportunity to acknowledged by indebtedness
to all those who have helped me in carrying my project work.
We express our sincere thanks to Prof. N. SADASIVAN NAIR
Principal, UIT, Neyyattinkara centre for his encouragement and
efficient help.
We are thankful to Smt. S.KumariPreetha Lecturer in
Commerce, University Institute of Technology Neyyattinkara
Centre, University of Kerala for the valuable advices and timely
assistance during the course of the study. We express my
sincere gratitude to Mr. Dinu Raj.R.P, Upper Division Accountant
of SIDCO and Mr. K. SASI, Sr. Manager for Accounts in this
Organization.
We express my thanks to all my teachers, friends and
classmates for their support and encouragement. And finally,
we bow head before GOD Almighty who blessed me with
enough physical and mental strength for successful completion
of project.
CONTENTS
Chapt
er
Description
Page No
LIST OF TABLES
LIST OF CHARTS
INTRODUCTION
18
OBJECTIVES OF THE STUDY

SCOPE AND SIGNIFICANCE OF THE
STUDY
RESEARCH METHODOLOGY
LIMITATION OF THE STUDY
REVIEW OF RELATED
LITERATURE
9 27
2.1 COMPANY PROFILE

2.2 INDUSTRY PROFILE
2.3 WORKING CAPITAL
MANAGEMENT
2.4 FINANCIAL STATEMENT
ANALYSIS AND
INTERPRETATION
28 - 70
FINDINGS
4
71 - 75
SUGGESTIONS
CONCLUSION
76 -
5 APPENDIX
6
BIBILIOGRAPHY
A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO
2014
LIST OF TABLES
Particulars
Sl no.
I
Page no.
LIQUIDITY RATIOS
a. Current Ratio
b. Quick Ratio
29 - 34
c.Absolute Liquidity Ratio

II
LEVERAGE RATIOS
35 - 38
a. Proprietary Ratio
b.
III
Fixed Asset To Net Worth
ACTVITY RATIOS
a.
IV
39 - 40
Fixed Asset Turn over Ratio
PROFITABILITY RATIOS
a. Net Profit Ratio
b. Operating Ratio
c. Return On Total Asset
d.
V
VI
VII
VIII
41 - 48
Return On Shareholders Fund
Comparative
Comparative
Comparative
Comparative
Balance
Balance
Balance
Balance
sheet
sheet
sheet
sheet
2006
2007
2008
2009
2007
2008
2009
2010
60
61
62
63
IX
X
XI
XII
XIII
XIV
XV
Comparative Balance sheet 2010 - 2011

Comparative Income Statement 2006-2007
BALANCE SHEET
a. 2007-20008
b. 2008-2009
c.2009-2010
d.
2010-2011
64
66
67
68
69
70
77-
LIST OF CHARTS
Sl NO:
I
II
PARTICULARS
LIQUIDITY RATIO
a.Current Ratio
49
b.Quick Ratio
50
c. Absolute Liquidity Ratio
51
LEVERAGE RATIOS
Proprietary Ratio
b.Fixed Asset To Net Worth
a.
III
52
53
ACTVITY RATIOS
a.
IV
Page No:
Fixed Asset Turn over

Ratio
PROFITABILITY RATIOS
54
a.
Net Profit Ratio

b.Operating Ratio
55
c. Return On Total Asset
57
d.Return On Shareholders
Fund
58
2014
CHAPTER - 1
56
INTRODUCTION
2014
INTRODUCTION OF THE STUDY

The financial statement of the company provides a rich
information about the operational result of the company and much
can be learned from a careful examination of these statement for
decision making purpose. The profit and loss account and balance
sheet are indicators of two significant factors profitability and
financial soundness.
The financial statements are mirrors which reflect the
financial position and operating strength or weakness of the
company. A proper analysis and interpretation of these statements
enable a person to judge the profitability and financial strength of
the company. Financial analysis includes detailed enquiry of financial
data. It is a grad stick which measures relationship between
variables. It is the technique to check upon the efficiency with which
working capital is being used in the company.
The company can easily perform forecasting, interfirm comparison, cost control through financial analysis. Financial
analysis is the powerful tool in the hands of the management. So it

always maintains a significant value to the management.
DESIGN OF THE STUDY
Objectives
The main objectives of the study are: To analyse liquidity position of the company.
To analyse profitability and financial soundness of the
company.
To analyse fixed asset, working capital and total asset.
To ascertain the nature of assets and liabilities of the firm.
To analyse net worth of the company.
To disclose the information according to the needs of the
user.
Scope and significance of the study

The scope of financial statement analysis is comparatively
wider than other method of analisation and this include both
analysis and interpretation of the financial data. The financial
statements are the mirror which reflects the financial position and
operating strength or weakness of the concern. Through the
interpretation anything change can be making in the financial
structure of the organization and study the running in various
situations in the economy and find out solution to the financial
position to arrived change to loss.
Collection of data
The secondary data have been used for the study. The
secondary data have been obtained from annual reports and other
published documents of the company. Besides, information has also
collected from various books connected with the subject.
Tools of Analysis
For analysing data simple mathematical and percentages
has been employed.
Period of Study
A five year period was taken for the purpose of the study
beginning from the financial year 2007 2008 and ending on the
financial year 2011 2012.
RESEARCH METHODOLOGY
Research methodology is a science. It is a way to
systematically solve the research problem. It explains why a
research has been undertaken, how the research problem has been
defined, in what way and why the hypothesis has been formulated,
what data have been collected, how to calculate various statistical
measures how to apply a particular research technique, which of the
various research method available is more relevant and so on.
Research methodology helps in studying how research is done
scientifically. Research methodology provides various steps that can
be adopted by the researcher in studying his research problems.
Research methodology explains why we are using a particular
method and why we are not using another so that research results
are capable of being evaluated either by the researcher or by others.

The research design refers to preplanning of what a researcher does
in his study. The design adopted in the study comes under
exploratory and evaluatory research. Since the data collected from
the financial statements of the company is analyzed under various
financial and tactical tools. Research design indicates the plan if
action to be carried out in connection with a proposed research
work. As such the design includes an outline of what the researcher
will do from writing hypothesis and its operational implications to
the final analysis of data in operational point of view.
DATA COLLECTION:
The study is based on the two types data is obtained from
the Kerala SIDCO, Thiruvananthapuram.
They are;
Primary Data
Secondary Data
Primary Data
Primary data obtained through the discussion with staffs of
the Kerala SIDCO, Thiruvananthapuram.
Secondary Data
Secondary data is based on the past data, i.e. [Five year
annual reports 2008 2012]
Limitations of the study

The study has the following limitations: The study is done by applying the tool of ratio analysis. So the
report may suffer from the disadvantages of ratio analysis.
The findings are arrived based only on five years under study.
The sources information for this project belongs to annual

reports published by the organization.
Time constraint is also a limiting factor.
RATIO ANALYSIS AN OVERVIEW

Ratio analysis is a powerful tool of financial analysis. A ratio is
defined as the indicated quotient of two mathematical expressions
and as the relationship between two or more things. The
relationship between the two figures expressed mathematically is
called ratio.
Significance of Ratio Analysis
Basically, ratio analysis is useful to the same extent and in the

same way, for financial analysis a statistics are useful in the study of
numerical aspect of a problem. It simplifies, summarizes and
systematizes a long array of accounting figures. The following are its
advantages:i)
ii)
iii)
iv)
v)
vi)
It is an instrument for diagnosis of the financial health of an

enterprise. It facilitates the comprehension of financial
statement and evaluation of several aspects such as
profitability and operational efficiency of the undertaking.
Ratio analysis can be of invaluable aid to management in
the discharge of its basic function of forecasting, planning,
co-operation, communication and control with the help of
trend analysis which is possible.
It provides inter-firm comparison to measure efficiency and
helps the management to make remedial measures.
It is helpful in forewarning corporate sickness and helps the
management to take remedial measures.
It helps in investment decisions in the case of investor and
lending decisions in the case of banks and financial
institutions.
It helps to ascertain the soundness of the firm.
LIMITATIONS OF RATIO ANALYSIS

Ratio analysis has a number of pitfalls and in many respects it is
equally important to have an idea of these as it is to know the
mechanization process of calculating ratios any deriving results.

They are as follows:1. Ratios are useful so far as they give expression to a study of
the relative aspect of a problem because ratio is meaningless
by itself and acquire significance only when it is studied with
other ratios.
2. Ratios are tools of quantitative analysis and it is quite possible
that quantitative factors may over ride numerical aspects.
3. The data are usually estimates. Estimates regarding the life of
the assets, the rate of depreciation, provision for doubtful
debts etc. may or may not correct.
4. Ratio analysis is only a beginning and gives just a fraction of
information needed for decision making.
5. In a way ratios are an attempt of delve in the past as financial
statements, from which they are derived, are historical
documents. On the other hand in modern business it is more
important to have an idea of the probable happening in future
rather than those in the past.
6. Ratio share with other statistical concepts all the limitations of
the later-determination of proper standard for comparison, lack
of the homogeneity of data, danger of fallacious conclusions if
accounting data is form from its context, susceptibilities of the
accounting data to manipulation etc., and to that extent, ratio
analysis becomes weak as a tool of financial analysis.
7. In the ratio analysis arithmetical window dressing is possible
and firms may be successful in concealing the real position .
CHAPTER - 2
REVIEW OF RELATED LITERATURE

2.1
2.2
2.3
2.4
COMPANY PROFILE
INDUSTRY PROFILE
WORKING CAPITAL MANAGEMENT
FINANCIAL STATEMENT
2013
2.1 PROFILE OF THE COMPANY

The Kerala SIDCO, a government owned public sector
corporation, was established in November 1975 for the development
and promotion for small scale industries. Currently, SIDCO IS
expanding its area of works by diversification to give new vision to
the small scale industries.
Gods own country, Kerala, is gifted with abundant natural
resources essential for establishing industrial units and SIDCO is
taking the initiative to set up industrial units. Kerala SIDCO is the
Total solution provider for small scale sector as it offers all facilities
and help to set up a small scale unit.
This corporation is rendering valuable assistance to small
scale units in the state, including consultancy at the beginning of
the project to the identification of industrial site, commissioning of
project, providing infrastructure facilities, distribution of essential
raw material, marketing of the small scale industrial products,
undertaking civil and electrical works, and setting up of the small
scale unit, Kerala SIDCO competently handles the necessary
requisites of any project.
Kerala SIDCO is now in the path of considerable profit and is
now granting basic facilities and marketing security to the
industrialists and new entrepreneurs through its diversified activities
and new working style.
ORGANIZATIONAL STRUCTURE
CHAIRMAN
MANAGING DIRECTOR
GM i/c
EI&P
Divisio
n
Head
(F&A)
(Accou
nts
divisio
CE i/c
AV/VO
HEAD
(Personn
el
Division)
(Product
ion
Division)
PRO
PD&M
(Public
Relations
Division)
(MDs
Sect.)
Senior
Manager
AGM
Estate
Officer
8
Productio
n
(Admn)
Vigilance
Sn.
(IT & TC
Division
)
(Head-IE
Division)
(Industrial
Estate
(Construct
ion
Division)
Manager
AGM
(Head)
R.M.
Division
AGM
(Indus
trial
Park
Divisio
n)
Senior
Manage
r
(Marketi
ng)
7 Emporia &
7 marketing
Centres &
2 Marketing
Cells
14 R.M.
Depots
17
Industrial
Estates &36
Mini
Industrial
Industri
al Parks
(7
Industri
al
10
2.2 INDUSTRIAL PROFILE

SIDCO
Ever since its establishment in 1975 by amalgamating erstwhile Kerala Small
Industries Corporation and Kerala Employment Promotion Corporation, Kerala
SIDCO caters overarching needs of Small Scale Industries in the State
-provision for land and building, supply of scarce raw materials at low cost,
marketing of MSME Products etc to name a few. SIDCO is a fully owned
Government Corporation with its registered office at Trivandrum. SIDCO owns
and operates production units, raw materials depots, Industrial Estates/ Mini
Industrial Estates, marketing cell/emporia/centers, Civil Construction Division,
IT&TC Division, Export & Import/ Project Division and Industrial Parks. Kerala
SIDCO has been distinguished as No.1 SIDCO among South Indian SIDCOs
during 2010-2011 in the wake of the achievement of an unprecedented
turnover of Rs.127.81 Crores. Add to its credential, Government of Kerala
recognized the IT&TC Division of Kerala SIDCO as a Total Solution Provider
to Government of Kerala. During
2011-12, SIDCO achieved a total
turnover of Rs. 204 crores from its activities with a profit of Rs. 2.39 crores.
The various divisions under Kerala SIDCO include;
1. Marketing Division
2. Production Division
3. Industrial Estate Division
4. Industrial Park Division
5. Raw Material Division
6. Construction Division
7. IT&TC and Trading Division
8. Export, Import & Project Division
9. Consultancy Division
11
Marketing Division
SIDCO provides marketing support to Micro Small and Medium Enterprises
functioning in the State. During 2010-11 a total of 50.71 Crore worth SSI
Products have been marketed successfully to various Government
Departments and PSUs. In the course of this mission, we have contributed
Rs.103 lakhs to state exchequer towards collections and remittance of VAT.
During 2012-13, the division achieved a turnover of Rs. 74 crores. SIDCO is
also entrusted as the nodal agency for the fixing of prices for electrical itemsone among the reserved items for MSME Sector.
Production Division
SIDCO owns 8 Production Units across the States, manufacturing Wooden
and Steel Furniture, Survey equipments, Pressure Die Cast Components, Jigs
and fixtures and machining of precision component. A major expansion and
modernization policy has set in motion to transmute the Division to enlarge the
product line.
Industrial Estate Division

SIDCO presently manages 17 major Industrial Estates and 36 Mini Industrial
Estates. These estates are the havens of numerous SSIs, where SIDCO
provides common infrastructural facilities for all the units.
Industrial Park Division

Government has devised Industrial Park as a tool for developing industries in
our State for which SIDCO is accepted as a Nodal Agency for constructing
such Parks. Government of Kerala envisages at least one IP in each
assembly constituency as a measure for employment generation. In this
venture, SIDCO has completed 7 Industrial Parks that host 218 Industrial
Units with a direct employment opportunity for nearly 1000 people.
12
Raw Material Division

This division aims to distribute scarce raw materials to small scale industries.
As low cost raw materials is inevitable to sustain the MSME in the field owing
to cutthroat competition, SIDCO sacrificing its margin while supplying
essential raw materials at the lowest possible cost. The Division achieved a
turnover of Rs.54 Crore during 2010-11 and 79 crores during 2011-12. SIDCO
seeks to widen its horizon by working in tandem with other central and state
public sector undertaking for the best help of MSME Sector.
Construction Division
Our Civil Construction Division that undertakes civil construction works caters
the needs for various PSUs, Tourism Department, various Government
Departments, Industrial Estates / Mini Industrial Estates etc. The Division is at
the behest of a Chief Engineer whose mission is assisted and supplemented
by a group of experienced civil and Electrical engineers. The Division offers a
host of integrated services-Structural design, preparation of detailed estimate,
surveying, execution and management of civil and electrical works.
IT&TC Division
The division, now conferred as a Total Solution Provider of Government of
Kerala undertakes all gamuts of activities related to the arena of information
technology. Now it ventures Telecom City, a major project with a total outlay of
Rs.600 Crores on BOT basis with a 50000 Nos of prospective employment
opportunities. The prestigious Tool Room cum Training Centre with state-ofthe art technology, set up with a total outlay of Rs. 12 crore for the
manufacture of tooling equipments and training is also functioning under the
Division.
Export, Import & Project Division

This division is created to undertake special projects. Under this division it is
proposed to start IOC/ONGC Petro/Diesel Pumps at Cherthala, Ollur,
Kanichukulangara, Olavakkode, Pachalam and Ernakulam. This division also

undertakes supply / installation of LED Street Lights, e-toilets, High Security
Number Plates etc. SIDCO is playing a vital role for the promotion of Small
Micro and Medium Industries in the State that provides more than 10000
A
STUDY
ON
THE
FINANCIAL
PERFORMANCE
OF
SIDCO
13
Direct employment opportunities and over 20,000 indirect employment
opportunities, its activities to lift this sector is very vital from social and
economic view point.
Consultancy Division
This division is mainly constituted for assisting entrepreneurs and
Government/semi Government institutions right from project development to
its execution. Consultancy extends its service for project development,
preparation of project report, assistance for obtaining term loans and finally its
implementation. So far the division has bagged a handful of prestigious project
for the consultancy services.
14
2.3 WORKING CAPITAL MANAGEMENT

Working capital refers to that part of the capital which is
required for financing short-term or current assets such as cash,
marketable securities, debtors and inventories. Funds thus invested
in current assets keep revolving fast and are being constantly
converted into cash and this cash flow out again in exchange for
other current assets. Hence, it is also known as revolving or
circulating capital or short-term capital.
The working capital requirements of a concern depend upon a
large number of factors such as:
1. Nature or character of business.
2. Size of business/ scale of operations.
3. Production policy.
4. Manufacturing process/ length of production cycle.
5. Seasonal variation.
6. Working capital cycle.
7. Rate of stock turnover.
8. Credit policy.
9. Business cycle.
10.
Rate of growth of business.
11.
Earning capacity and dividend policy.
12.
Price level changes.
13.
Other factors.
To avoid the shortage of working capital at once, an estimate
of working capital requirements should be made in advance so that
arrangements can be made to procure adequate working capital.
The working capital should be determined by estimating the
investments in current assets minus money expected from current
liabilities. The following factors should be taken into consideration
while making an estimate of working capital requirements:
1. Total assets incurred on material, wages and overhead.
2. The length of time for which raw materials are to remain
in stores before they are issued for production.
3. The time taken for conversion of raw material into
finished goods.
4. The length of sales cycle during which finished goods are

to be kept waiting for sales.
5. The average period of credit allowed to customers.
6. The amount of required to pay day-to-day expenses of
the business.
7. The average amount of required to make advance
payments, it any.
8. The average credit period expected to be allowed by
suppliers.
9. Time lag in payment of wages and other expenses.
15
From the total amount blocked in current assets estimated on
the basis of the first seven items given above, the total of the
current liabilities, i.e. the last two items deducted to find out the
requirements of working capital.
16
2.4 FINANCIAL STATEMENT

Meaning:
Financial Statement is an organized collection of data
according to logical and consistent accounting procedures. Its
purpose is to convey an understanding of some financial aspects of
a business firm. It may show apposition at a moment of time as in
the case of a balance sheet or may reveal a series of activities over
given period of time as in case of an Income statement. The
statements are the source of information on the basis of which
conclusion is drawn about the probability and financial position of
the concern. The primary objective of the financial statement is to
assist in decision making.
Thus, the term 'financial statements' generally refers to two basic
statements.
i.
The income statement and
ii.
He Balance sheet of course , a business may also prepare
iii.
A statement of Retained earnings and
iv.
A statement of changes in financial position in addition to

the above two statements.
The meaning and significance of each of the statement is being

explained below:
Financial
Statement
Statement
Of changes
in financial
position
Income
Statement
17
Income Statement
Balance
sheetstatement is generally considered to be the most
The income
Statement
useful of financial
statements. It explains what has happened to a
ofoperation between two balance sheet dates.
business as a result of
For this purpose Retained
it matches the revenue and costs incurred in the
Earnings
process of earning
revenues and shows the net profit earned or loss
suffered during a particular period.
Balance Sheet
It is a statement of financial position of a business at a specified
moment of time. It represents all assets owned by the business at a
particular moment of time and the claims of the owners and
outsider5 against those assets that time.
Statement of Retained Earnings

The term retained earnings means the accumulated excess of
earnings over loss & dividends. The statement is also termed as
Profit & Loss appropriation Account in case of companies.
Statement of Changes in Financial Position (SCFP)

The Balance Sheet shows the financial condition of the business
at a particular moment of time while the Income Statement
discloses the result of operation of business over a period of time.
18
ELEMENTS OF FINANCIAL STATEMENT
The main purpose of financial statements is to provide financial

information to the users to assist them in their economic decisions.
The financial statement basically presents the financial information
in such form that it is not only understandable but also useable. That
is why financial statements present the financial effects of different
business events that also include business transition.
In order to enhance the quality information in financial
statements, business transaction is grouped in different classes or
categories on the basis of their economic characteristics. The board
classes or categories are called elements of financial statements.
There are five elements of financial statements which are as follows.
a. Assets
b. Liabilities
c. Equity
d. Income
e. Expense
Frame work went on further to explain which combination of
elements are used to measure financial position, financial
performance and changes in financial position of the study.
The elements directly related to the measurement of financial
position of the entity are assets, liabilities and equity. There
elements are presented in the statement of financial position

which was previously known as Balance sheet.
The elements directly related to the measurement of financial
performance of the entity are income and expense. These
elements are presented in the income statement.
The element directly related to the measurement of changes in
financial position involves the elements of both balance sheet and
income statement and depends on the circumstances. So
elements that are used to measure the change in financial
position cannot be strictly specified.
19
Statement of changes in equity and statement of cash flows

collectively provide an insight into the changes in financial
position of the company. And as we how both of these statements
involves mostly all of the above five items and sometimes less
therefore, elements are not mentioned in the framework for such
measurement.
20
TYPES OF FINANCIAL ANALYSIS
Financial analysis can be classified into different categories

depending upon.
I. The material used,
ii. The modus operandi of analysis
1) On the Basis of Material Used.

i.
External analysis
This analysis is done by those who are outsiders for the

business. The term outsiders include investors, credit agencies,
government agencies and other creditors who have no access to the
internal records of the company. These persons mainly depend upon
the published financial statements. Their analysis serves only a
limited purpose. The position of these analysis has improved in
recent times on account of increased governmental control over
companies and governmental regulation requiring more detailed
disclosure of information by the companies in their financial
statements.
ii.
Internal analysis
This analysis is done by persons who have access to the books of

account and other information related to the business. Such analysis
can therefore, be done by executives and employees of the
organization or by officers appointed for this purpose by the Govt. or
the court under powers vested in them. The analysis is done
depending upon the objective to be achieved through this analysis.
2) On the Basis of Modus Operandi

According this financial analysis can also be of two types;
i)
Horizontal Analysis
In case of this type of analysis, financial statements for a number of

years are reviewed and analyzed the current year's figures are
compared with the standard or base year. The analysis statement
usually contains figures for two or more years and the changes are
shown regarding each item from the base year usually in the form of
percentage. Such an analysis - gives the management considerable
insight into levels
21
areas of strength and weakness. Since this type of analysis is based
on the data from year to year rather than on one date, it's also
termed as 'Dynamic Analysis'.
ii)
Vertical Analysis
In case of this type of analysis a study is made of the quantitative

relationship of the various items in the financial statements on a
particular date. For example, the ratios of different items of costs for
a particular period may be calculated with the sales for that period.
Such an analysis is useful in comparing the performance of several
companies in the same group, or divisions or departments in the
same company. Since this analysis depends on the data for one
period, this not very conductive to a proper analysis of the
company's financial position. It is also called 'Static Analysiss it is
frequently used for referring to ratios developed on one date or for
one accounting period.
It is to be noted that both analyses- vertical and horizontal- can
be done simultaneously also. For example, the Income Statement of
a company for several years may be given. Horizontally it may show

the change in different elements of cost and sales over a number of
years. On the other hand, vertically tie, may show the percentage of
each element of cost to sales.
22
TECHNIQUES OF FINANCIAL ANALYSIS
A financial analyst can adopt one or more following techniques/

tools of financial analysis.
Financial
Analysis
Techniques
Compara
tive
financial
Stateme
nt
Common
Size
Financial
Statemen
ts
Trend
Percenta
ges
Fund
Flow
Analysis
Cash
Flow
Analysis
CVP
Analysis
Ratio
Analysi
s
1. Comparative Financial Statements

Comparative financial statements are those statements which
have been designed in a way so as to provide time perspective to
the consideration of various elements of financial position embodied
in such statements. In these statements figures for two or more
periods are placed side by side to facilitate comparison.
Both the Income statement and Balance sheet can be prepared
in the form of comparative financial statements.
i)
Comparative Income Statement
The Income Statement discloses Net profit or Net loss on

account of operations. A comparative Income statement will show
the absolute figures for two or more periods, the absolute change
from one period to another and, if desired, the change in terms of
percentages. Since the figures for two or more periods are shown
side by side, the reader can quickly ascertain whether sales has
increased or decreased, etc. Thus only a reading of data included in
comparative income statements will be helpful in deriving
meaningful conclusions.
23
ii)
Comparative Balance sheet
Comparative Balance sheet as on two or more differentiates can be

used for comparing assets and liabilities and finding out any
increase or decrease in those items. The changes in periodic balance
sheet items reflect the conduct of the business. The changes can be
observed by comparison of the balance sheet at the beginning and
at the end of the period and those changes can help in forming an
opinion about the progress of an enterprise.
2. Common size Financial Statements
Common size financial statements are those in which figures

reported are converted into percentages to some common base. In
the Income Statement the sale figure is assembled to be100 and all
figures are expressed as a percentage of this total. It is also known
as 100% statements. Common size statement includes common size
balance sheet and common size income statement.
i)
Common size Balance sheet
A statement in which balance items are expressed as

percentage of each asset to total of assets and percentage of each
liability total of liabilities is called common size balance sheet. This
statement establishes the relationship between each asset to total
value of assets and each liability to total of liabilities.
ii)
Common size Income Statement
A common size income statement is a statement in which each

item of expense is as shown as percentage of net sales. A significant
relationship can established between items of income statement
and volume of sales.
3. Trend Percentages
Trend percentages are immensely helpful in making
comparative study of the financial statement for several years.
The method of calculating trend percentages involves the
calculation of percentage relationship that each item bears to
the same item in the base
24
year. The method of trend percentage is a useful analytical device
for the management since by substituting percentage for large
amounts; the brevity & read ability are achieved.
4. Funds Flow Analysis

Funds flow analysis has become an important tool in the
analytical kit of financial analysts, credit granting institution &
financial managers. This is because the Balance Sheet of a business

reveals its financial status at a particular point of time. Funds flow
analysis reveals the changes in working capital position. It tells
about the source from which the working capital was obtained & the
purpose of which it was used.
5. Cost Volume Profit Analysis

Cost Volume Profit Analysis is an important tool of profit
planning. It studies the relationship between cost, volume of
production, sales & profit. It tells the volume of sales at which the
firms will break-even, the effect on profit on account of variation in
output, selling price & cost, & finally, the quantity to be produced &
sold to reach the target profit level.
6. Ratio Analysis
This is the most important tool available to financial analysts for
their work. An accounting ratio shows the relationship in
mathematical terms between to inter related accounting figures.
These ratios may be compared with the previous year or base year
ratios of the same firm. A comparison may also be made with the
selection firms in the same industry.
25
CLASSIFICATION OF ACCOUNTING RATIOS
Accounting
Ratios
Traditional
P&L
A/C
Ratios
Balanc
e sheet
Ratios
Functional
Compo
site
Ratios
Profitab
ility
Ratios
Coverag
e Ratios
Turn
over
Ratios
Financi
al
Ratios
Liquidit
y
Ratios
26
LIMITATIONS OF FINANCIAL ANALYSIS
Financial statements are based on historical costs and as
such the impact of price level changes in completely ignored.
They are incurring reports. The basic nature of financial
statements is historic. These statements are neither complete
Stabilit
y
Ratios
nor exact. They reflect only monetary transactions of a

business. The following limitations may be noted.
The financial position of a business concern is affected by

several factors-economic, social and financial, but financial
factors are being recorded in these financial statements.
Economic and social factors are left out. Thus the financial
position disclosed by these statements is not correct and
accurate.
The profit revealed by the profit and loss account and the
financial position disclosed by the Balance sheet cannot be
exact. They are essentially interim reports.
Facts which have not been recorded in the financial books are
not depicted in the financial statement. Only quantitative
factors are taken into account. But qualitative factors such as
reputation and prestige of the business with the public, the
efficiency and loyalty of its employees, integrity of
management etc. do not appear in the financial statement.
Many items are left to the personal judgment of the

accountant. For example, provision of depreciation, stock
valuation, bad debts provisions etc. depend on the personal
judgment of accountant.
On account of convention of conservation the Income

Statement may not disclose true income of the business since
probable losses are considered while probable incomes are
ignored.
The fixed assets are shown at cost less depreciation the basis
of "going concern concept" (one of the accounting concept).
But the value placed on the fixed asset may not be the same
which may be realized on their sale.
The data contained in the financial statements are dumb; they

do not speak themselves. The human judgment is always
involved in the interpretation of statement. It is the analyst or
user who provides to those data and makes them to speak.
27
CHAPTER 3
ANALYSIS AND INTERPRETATION
28
ANALYSIS AND INTERPRETATION OF RATIO

A. LIQUIDITY RATIOS:
Liquidity is the ability of the firm to meet its current
liabilities as they fall due. Since liquidity is basic to continuous
operations of the firm it is necessary to determine the degree
of liquidity of the firm. The financial manager analyses the
following important ratios for this purpose:
1 CURRENT RATIO
Current ratio is the relationship between current assets
and current liabilities. It reveals how efficiently the firm can
meet the short term demand. Current assets include cash in
hand, debtors, bills receivables, short term marketable
securities and inventories. Current liabilities include creditors,
bills payable, bank overdraft, provision for taxation, unclaimed
dividend and outstanding expenses. Current ratio is also called
working capital ratio. Current ratio can be calculated by using
the formula;
Current ratio =
Current Asset
Current Liabilities
Current ratio of 2:1 is treated as ideal for

determining short term solvency of the business.
The current assets of SIDCO include inventories, sundry
debtors cash and bank balances, other current assets and loans and
advances. Current liabilities are creditors and other liabilities and
provisions.
Current assets, current liabilities and current

ratio of SIDCO is given in Table - 1
29
Table 1
CURRENT ASSETS, CURRENT LIABILITIES AND
CURRENT RATIO OF SIDCO DURING 2006-2007
TO 2010-2011
Year
2006
2007
2007
2008
2008
2009
Current Asset
Current
Liabilities
Current Ratio
232926204
433012441
0.53
252665320
419974517
0.60
311296522
475949952
0.65
396799717
559027665
0.70
482881737
631671439
0.76
2009
2010
2010
2011
Source: Complied from Annual Report
Interpretation:
In the year 2006 2007, the current ratio was 0.53 and
increased to 0.76. An increase in current ratio represents in
improvement in liquidity position of the company. The standard of
the current ratio is 2: 1.
30
2 QUICK RATIO
This ratio is a measure of judging the immediate ability of
the company to pay off its current obligations. This is calculated
by dividing quick assets by current liabilities. A quick ratio of 1:1
is considered as a standard rate.
The quick assets of the company include cash, debtors,
loans and advances and other current assets. Current liabilities
include bill payable, creditors and other liabilities and provisions.
Quick ratio =
Quick or Liquid Asset

Current Liabilities
The quick asset, current liabilities and quick

ratio of SIDCO is shown in Table 2
31
Table 2
QUICK ASSET, CURRENT LIABILITIES AND
QUICK RATIO OF SIDCO DURING 2006-2007
TO 2010-2011
Year
2006
2007
2007
2008
2008
2009
Quick or
Liquid Asset
Current
Liabilities
Quick Ratio
225109764
433012441
0.51
239920026
419974517
0.57
312935521
475949952
0.65
384079673
559027665
0.68
468736873
631671439
0.74
2009
2010
2010
2011
Interpretation:
The standard value of the quick ratio is 1: 1. This graph shows

the company can pay off current obligations immediately. In the year
2007 the quick ratio was 0.51 that is increased by 0.74 in 2011.
32
3 ABSOLUTE LIQUIDITY RATIO

This ratio helps the firm to calculate the cash percentage against
the current liabilities. This ratio is also known as cash position ratio.
The cash position ratio is the logical consequences of the elimination
of inventory from the quick ratios. Here, the debtors are eliminated
from the computation of cash position ratio.
Absolute Liquidity Ratio

=
Cash + Marketable Securities

Current Liabilities
The cash, current liabilities and absolute

liquidity ratio of SIDCO shown in Table 3
33
Table 3
CASH, CURRENT LIABILITIES AND ABSOLUTE
LIQUIDITY RATIO OF SIDCO DURING 20062007 TO 2010-2011
Year
2006
2007
2007
2008
2008
2009
Cash
Current
Liabilities
Absolute
Liquidity Ratio
33928983
433012441
0.07
52892491
419974517
0.12
87050383
475949952
0.18
71452725
559027665
0.12
86996280
631671439
0.13
2009
2010
2010
2011
Interpretation:
The acceptable norm for this ratio is 0.5:1. In 2011 the

absolute liquidity ratio is 0.13. It is not satisfactory because it is
much lower than 0.5.
34
B.
LEVERAGE RATIOS
Many financial analysts are interested in the relative use of

debt and equity in the firm. These ratios measure the long term
solvency position of the firm. The following are the important
leverage ratios:
1.PROPRIETARY RATIO
Proprietary ratio relates to the shareholders fund to total
assets. This ratio shows the long term solvency of the business. It is
calculated by dividing shareholders funds by the total assets.
Proprietary Ratio =
Funds
Shareholders
Total Assets
(Shareholders Fund = equity share capital +

preference share capital +
Reserves and surplus
Fictitious assets)
Total assets include all assets including goodwill
(excluding fictitious assets). The acceptable norm of the
ratio is 1:3 (i.e.; 0.33).
The shareholders fund, total assets and

proprietary ratio of SIDCO shown in Table 4
35
Table 4
SHAREHOLDERS FUND, TOTAL ASSETS AND
PROPRIETARY RATIO OF SIDCO DURING 20062007 TO 2010-2011
Year
2006
2007
2007
2008
2008
2009
2009
2010
Shareholders
fund
Total assets
Proprietary
Ratio
241549074
256561946
0.94
245549074
269145755
0.91
247833782
344416880
0.71
250833782
420941720
0.59
252833782
508625178
0.49
2010
2011
Interpretation:
In 2006 2007 the proprietary ratio was 0.94 and decreased
to 0.49 in 2011. It shows that the company is better to meet long
term solvency.
36
2.FIXED ASSET TO NET WORTH

This ratio shows the relationship between fixed assets
and shareholders fund. The purpose of this ratio is to find out
the percentage of the owners fund invested in fixed assets.
Fixed Assets to Net worth =

Assets_________
_______Fixed
Net
worth or Shareholders Fund
If the ratio is greater than one, it means that

creditors funds have been used to acquire a part of
the fixed assets.
The fixed assets, Net worth or Shareholders

Fund of SIDCO shown in Table 5
37
Table 5
FIXED ASSETS, NET WORTH OR SHAREHOLDERS
FUND OF SIDCO DURING 2006-2007 TO 20102011
Year
Fixed assets
Net worth or
Shareholders
fund
Fixed assets to
Net worth
23635742
241549074
0.09
16481435
245549074
0.06
18769349
247833782
0.07
24142003
250833782
0.09
25743441
252833782
0.10
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
Interpretation:
In 2006 2007 the fixed asset to net worth ratio was 0.09. It
increased to 0.10 in 2010 2011. It shows the ratio is less than one,
so the creditors funds have not used to acquire a part of the fixed
asset.
38
C. ACTIVITY RATIOS
The published accounts of a firm also provide a useful data for the
measurement of the companys level of activities. These ratios are
also called as Turnover ratios. This ratio highlights upon the
activity and operational efficiency of the business concern. Activity
ratios measure how efficiently the assets are employed by the firm.
These ratios indicate the speed with which assets are being
converted into sales. These ratios are also called as efficiency ratios.
1.FIXED ASSETS TURNOVER RATIO

This ratio indicates the extent to which the investments in
fixed assets contribute towards sales. If compared with a previous
year, its indicate whether the investment in fixed assets has been
judicious or not. The ratio is calculated as follows:
Fixed Assets Turnover Ratio =

Sales____
___Net
Fixed
Assets
The Net sales, Fixed Assets of SIDCO shown in

Table 6
39
Table 6
NET SALES, FIXED ASSETS FUND OF SIDCO

DURING 2006-2007 TO 2010-2011
Year
2006
2007
2007
2008
2008
2009
Net Sales
Fixed assets
Fixed assets
turnover ratio
514653049
23635742
21.77
517668751
16481435
31.40
505355738
18769349
26.92
890183779
24142003
36.87
917536488
25743441
35.67
2009
2010
2010
2011
Interpretation:
In 2006 2007 fixed asset turn over ratio was 21.77; it
increased up to 36.87% in 2009 2010. But it decreased 35.67 in
2010 2011. The ratio indicates the extent in which the investments
in fixed assets contribute towards sales.
40
D.PROFITABILITY RATIOS
A business firm is basically a profit earning organization.
The income statement of the firm shows the profit earned by the
firm during the accounting period. Profitability is an indication of
the efficiency with which the operations of the business are
carried on. Poor operational performance may indicate poor sales
and hence poor profits. The profit figure has, however, different
meanings to different parties interested in financial analysis. The
following are the important profitability ratios:
1.NET PROFIT RATIO

This ratio is also called as the net profit to sales or net
profit margin ratio. It is determined by dividing the net income
after tax to the net sales for the period and measures the profit
per rupee of sales.
100
Net Profit Ratio =
Net Profit x
Sales
In this context, the term net profit means net

profit after interest and tax but before dividend.
The Net profit, Sales of SIDCO shown in Table
7
41
Table 7
NET PROFIT, SALES OF SIDCO DURING 20062007 TO
2010-2011
Year
2006
2007
2007
2008
2008
2009
Net profit x100
Sales
Net profit Ratio
1601274900
514653049
3.11
435685000
517668751
0.84
229845400
505355738
0.45
343709600
890183779
0.38
1839668500
917536488
2.00
2009
2010
2010
2011
Interpretation:
In 2006 2007 net profit ratio was 3.11 decreased to 0.38 in
2009 2010. In 2009 it increased to 2.00. Net profit ratio increases
the overall profitability of the concern. In 2011 it is satisfactory.
42
2.OPERATING RATIO
Operating ratio is an indicative of the proportion that the cost of

sales bears to sales. Cost of sales includes direct cost of goods sold
as well as other operating expenses. It is an important ratio that is
sued to discuss the general profitability of the concern. It is
calculated by dividing the total operating cost by net sales. Total
operating expenses include all costs like administration, selling and
distribution expenses, etc. but do not include financing cost and
income tax.
Operating Ratio = (Cost of goods sold +

Operating expenses)x100
Net Sales
The Cost of goods sold + operating expenses,

Net Sales of SIDCO shown in Table 8
43
Table 8
COST OF GOODS SOLD + OPERATING
EXPENSES, NET SALES OF SIDCO DURING
2006-2007 TO 2010-2011
2006
2007
2007
2008
2008
2009
50505033600
511376464
98.7
46193223000
514653049
89.7
45406746600
505355738
89.8
82885542600
890183779
93.1
92528190900
988072053
93.6
2009
2010
2010
2011
Interpretation:
In 2006 2007 operating ratio was 98.7% decreased to

93.6%in
2010 2011. It shows the general profitability of the concern. Lower
the ratio shows the more profitable are operations indicating an
efficient control over cost and an appropriate selling price. It is one
of most important efficiency ratio.
44
3.RETURN ON TOTAL ASSETS

Profitability can be measured in terms of relationship between net
profit and total assets. This ratio is also known as return on gross
capital employed. It measures the profitability of investment. The
overall profitability can be known by applying this ratio.
Return on Total Assets = Net Profit x 100

Total Assets
The term Net profit stands for Net profit

before interest, tax and dividend.
The Net profit, total assets of SIDCO shown in

Table 9
45
Table 9
NET PROFIT, TOTAL ASSETS OF SIDCO DURING
2006-2007 TO 2010-2011
Year
2006
2007
2007
2008
2008
2009
Net profitx100
Total Assets
16012749
256561946
0.06
435685000
269146755
1.61
229845400
344416880
6.67
343709600
420941720
0.81
1839668500
508625178
3.59
2009
2010
2010
2011
Return on total
assets
Interpretation:
In 2006 2007 the return on total asset was 0.06, increased
up to 0.81 in 2009 2010. Then it increased 3.59 in 2011. It
measures the profitability of investment. The current amount is
satisfactory.
46
4.RETURN ON SHARE HOLDERS FUND

This ratio shows the rate of profit on share holders
fund. It relates the profit available for the share holders to their
total investment. It is also known as profit on net worth ratio.
Return on share holders fund = (Net profit after

interest and tax) x 100
Share
holders fund
Where, shareholders fund = Equity share capital +

preference share capital
+ Reserves and surplus
Fictitious assets.
The Net profit after interest and tax,

Share holders fund of SIDCO shown in Table
10
47
Table 10
NET PROFIT AFTER INTEREST AND TAX,
SHARE HOLDERS FUND OF SIDCO DURING
2006-2007 TO 2010-2011
Year
Net profit
after interest
and tax
x
100
Share
holders fund
Return on share
holders fund
2006
2007
2007
2008
2008
2009
1626107600
241549074
6.73
409325700
245549074
1.66
214218300
247833782
0.86
319063700
250833782
1.27
1823714000
252833782
7.21
2009
2010
2010
2011
Interpretation:
In 2006 2007 the return on share holders fund was 6.73, it
increased to 7.21 in 2010 2011. It shows the rate of profit on share
holders fund. It relates the profit availability of share holders total
investment. The current rate is satisfactory.
48
Exhibit No: 1
Exhibit showing position of CURRENT RATIO
0.8
0.7
0.6
0.5
0.4
Current Ratio
0.3
0.2
0.1
0
2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011
49
Exhibit No: 2
Exhibit showing position of QUICK RATIO
0.8
0.7
0.6
0.5
0.4
Quick Ratio
0.3
0.2
0.1
0
50
Exhibit No: 3
Exhibit showing position of ABSOLUTE LIQUIDITY

RATIO
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
51
Absolute Liquidity Ratio
Exhibit No: 4
Exhibit showing position of PROPRIETARY RATIO
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
52
Proprietary Ratio
Exhibit No: 5
Exhibit showing position of FIXED ASSET TO
NETWORTH
0.1
0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
Fixed Asset To Networth
53
Exhibit No: 6
Exhibit showing position of FIXED ASSET
TURNOVER RATIO
40
35
30
25
20
15
10
Fixed Asset Turnover

Ratio
54
Exhibit No: 7
Exhibit showing position of NET OPERATING
RATIO
3.5
2.5
1.5
0.5
Net Profit Ratio
55
Exhibit No: 8
Exhibit showing position of OPERATING RATIO
100
98
96
94
92
90
88
86
84
Operating Ratio
56
Exhibit No: 9
Exhibit showing position of RETURN ON TOTAL
ASSET
3
Return On Total Asset
2
57
Exhibit No: 10
Exhibit showing position of RETURN ON
SHAREHOLDERS FUND
4
Return On Shareholders
Fund
3
58
COMPARATIVE BALANCE SHEET
C.B.
C.B.
C.B.
C.B.
C.B.
1
2
3
4
5
59
C.B. 1
Comparative balance sheet during the year 2006

-2007
Year Ending
31st march
2006
2007
Increase(+) /
Decrease(-)
Amount
Rs.
Percenta
ge
(%)
Assets
3139578
51
2363574
2
4460938
07
7836874
00
3152774
41
1648143
5
4420005
50
7737594
26
-1319590
-0.42
+715430
7
+409325
7
+992797
4
+30.26
Current
Liabilities
4330124
41
4199741
57
+130382
84
+3.01
Shareholders
/loan funds
3506749
59
3537852
69
-3110310
-0.88
Total
Liabilities
7836874
00
7737594
26
+99279
74
+1.26
Current
Assets
Fixed Assets
Profit and
loss a/c
Total
Assets
Liabilities
+0.97
+1.26
Interpretation: : The current asset shows an upward trend while

comparing the data in 2006-2007,it results in a increase percentage of
0.42 percentage which amounts to 1319590,in turn increase working
capital. Fixed asset also shows an decrease amount of 2287914 depicted
the percentage of 30.26 .It is being interepted that long term funds are
utilized to purchase fixed assets. Increase in current asset shows the
satisfactory liquidity position of the firm which in turn affect the working
capital positively. The overall financial position of the company is satisfied.
60
C.B. 2

-2008
Year Ending
31st march
2007
2008
Increase(+) / Decrease(-)
Amount
Rs.
Percenta
ge
(%)
Assets
Current
Assets
3152774
41
374673
511
-18.83
59396070
Fixed Assets
1648143
5
4420005
50
7737594
26
187693
49
439858
368
833301
228
-2287914
Current
Liabilities
4199741
57
475949
952
-13.32
55975795
Shareholders
/loan funds
3537852
69
357351
276
-3566007
833301
228
-7.69
59541802
Profit and
loss a/c
Total Assets
Liabilities
Total
Liabilities
7737594
26
-13.88
+214218 +0.48
2
-7.69
59541802
-1.00
Interpretation: The current asset shows an upward trend while

capital. Fixed also shows an increase amount of 2287914 depicted the
percentage of 13.88 .It is being interepted that long term funds are
61
C.B. 3
-2009
Year Ending
31st march
2008
2009
Amount
Rs.
Percenta
ge
(%)
Assets
Current
Assets
Fixed Assets
Profit and
loss a/c
Total Assets
Liabilities
Current
Liabilities
Shareholders
/loan funds
Total
Liabilities
3746735
11
470070
222
-25.46
95396711
1876934
9
4398583
68
8333012
28
4759499
52
241420
03
436667
731
930879
956
559027
665
-5372654
3573512
76
8330122
8
371852
291
930879
956
-4.05
14501015
-11.70
97578728
-28.62
+319063 +0.72
7
-11.70
97578728
-17.45
83077713
Interpretation:
The current asset shows an upward trend while
percentage of 28.62 .It is being inetrepted that long term funds are

62
C.B. 4
-2010
Year Ending
31st march
2009
2010
Amount
Rs.
Percenta
ge
(%)
Assets
Current
Assets
Fixed Assets
Profit and
loss a/c
Total
Assets
Liabilities
Current
Liabilities
Shareholders
/loan funds
Total
Liabilities
470070
5630494
222
9297925
73
1
2414200 2574344 -1601438
3
1
418430 +182371
4366677
591
40
31
1007223 9308799
505
7634354
56
9
5590276
65
-19.77
-6.63
+4.17
-8.20
6316714 -12.99
39
7264377
4
3718522 3755520 -3699775 -0.99
91
66
9308799 1007223 -8.20
56
505
763435
49
Interpretation:
percentage of 6.63 .It is being interepted that long term funds are utilized
to purchase fixed assets. Increase in current asset shows the satisfactory
liquidity position of the firm which in turn affect the working capital
positively. The overall financial position of the company is satisfied.
63
C.B. 5
Year Ending
31st march
2010
2011
Increase(+) /
Decrease(-)
Amount Percenta
Rs.
ge
(%)
Assets
Current
Assets
5600494
73
Fixed Assets
2574344
1
Profit and
loss a/c
4184305
91
1007223
505
Total
Assets
Liabilities
Current
Liabilities
6316714
39
Shareholders
/loan funds
3755520
66
Total
Liabilities
1007223
505
7469778 24
1869283
51
1093949 59
8365151
8
4093192 +911130
91
0
1265692 074
2584685
69
7804326 74
1487612
35
-33.37
4852594 00
1097073
34
1265692 074
2584685
69
-29.21
-32.40
+2.17
-25.66
-23.55
-25.66

-2011
Interpretation:
percentage of 32.40 .It is being interepted that long term funds are
64
COMPARITIVE INCOME
STATEMENT
1.1
1.2
1.3
1.4
1.5
65
1.2
Year ending 31st
march
2006
Net sales
Increase(+)/Decrease
(-)
Amount
Percentag
e%
-14986192
-2.71
+2836930
7
6.01
2007
55229166
2
56727785
4
47128030
3
44291099
6
Gross profit:
81011359
12436685
8
-43355499
-53.51
Operating
expense
10533349
3
11391852
0
-8585027
-8.15
Operating profit
24322134
10448338
+1387379
6
57.04
479348
19620430
-19141082
-3993.14
Less:Cost of
goods sold
(GP-OE)
Less:
Prior period
expense
Add:
8788733
13528942
-4740209
-53.93
16012749
4356850
11655899
72.79
Prior period
income
Profit before tax
Less :
Income tax
Profit after tax
248327
263593
-15266
-6.14
16261076
4093257
+1216781
9
74.82
COMPARITIVE INCOME STATEMENT DURING THE

YEAR 2006-2007
Interpretation:
In the year 2006-2007 gross profit was increased

to 14986192 at a percentage of 2.71,this is due to decrease in cost of
goods sold, here net profit after interest and tax decreased due to
financial expense of the firm.
66
1.2
Year ending 31st
march
(-)
Amount
Percentag
e%
55297589
5
+1430195
9
2.52
44291099
6
43820297
0
+4708026
Gross profit:
12436685
8
11477292
5
+9593933
7.71
Operating
expense
11391852
0
10917635
9
+4742161
4.16
Operating profit
10448338
5596566
+4851772
46.43
19620430
7486774
+1213365
6
61.84
2007
Net sales
Less:Cost of
goods sold
56727785
4
2008
1.06
(GP-OE)
Less:
Prior period
expense
Add:
Prior period
income
Profit before tax
13528942
4188662
+9340280
69.03
4356850
2298454
+2058396
47.24
263593
156271
+107322
40.71
4093257
2142183
+1951074
47.66
Less :
Income tax
Profit after tax

YEAR 2007-2008
Interpretation:
67
1.2
Year ending 31st
march
(-)
Amount
Percentag
e%
93534703
1
382371136
-69.14
43820297
0
81327682
3
375073853
Gross profit:
11477292
5
12207020
8
-7297283
-6.35
Operating
10917635
12020891
-11032553
-10.10
2008
Net sales
Less:Cost of
goods sold
55297589
5
2009
-85.59
expense
Operating profit
5596566
1861296
3735270
66.74
7486774
3035168
4451606
59.45
4188662
4610968
-422306
-10.08
2298454
3437096
-1138642
-49.53
156271
246459
-90188
-57.71
2142183
3190637
-1048454
-48.94
(GP-OE)
Less:
Prior period
expense
Add:
Prior period
income
Profit before tax
Less :
Income tax
Profit after tax

YEAR 2008-2009
Interpretation
In 2009 the operating expense was 1.86% and the operating
profit was 1.89%. So the profit of the company is 0.3%.
68
1.2
Year ending 31st
march
(-)
Amount
2009
Net sales
Less:Cost of
goods sold
93534703
1
2010
99912797
1
Percentag
e%
-63780940
-6.81
-27271977
-3.35
81327682
3
84054880
0
12207020
8
15857917
1
-36508963
-29.90
Operating
expense
12020891
2
13943019
3
-19221281
-15.98
Operating profit
1861296
19148978
-17287682
-928.79
3035168
1048565
1986603
65.45
160137
4450831
96.52
18260550
-14823454
-431.27
23410
223049
90.50
18237140
-15046503
-471.58
Gross profit:
(GP-OE)
Less:
Prior period
expense
Add:
Prior period
income
4610968
Profit before tax
3437096
Less :
Income tax
246459
Profit after tax
3190637

YEAR 2009-2010
Interpretation:
profit was increased to 2.73%. When the company compared with
2009 shows the improving profitable position.
A
STUDY
ON
THE
FINANCIAL
PERFORMANCE
69
1.2
OF
SIDCO
Year ending 31st

march
(-)
Amount
Percentag
e%
13214932
59
322563768
-32.29
84079484
7
11369885
05
296193658
Gross profit:
15813464
4
18450475
4
-26370110
-16.67
Operating
expense
13909276
6
16893184
7
-29839081
-21.45
Operating profit
19041878
15572907
3468971
18.21
805330
1393363
-588033
-73.01
2010
Net sales
Less:Cost of
goods sold
2011
99892949
1
-35.22
(GP-OE)
Less:
Prior period
expense
Add:
S
160137
31654
Prior period
income
Profit before tax
Less :
80.23
128483
18396685
14211198
4185487
22.75
31881
14211198
18364804
-4153606
-29.22
Income tax
Profit after tax

YEAR 2010-2011
Interpretation:

profit was 2.55%. In previous year operating profit was 2.73%. It
shows slight improvement in the profi
STUDY
ON
THE
FINANCIAL
PERFORMANCE
70
CHAPTER 4
FINDINGS, SUGGESTIONS &

CONCLUSION
OF
SIDCO
71
FINDINGS
The current ratio of Kerala SIDCO reveals that the management of
current assets and current liabilities are satisfactory. It represents
the improvement of liquidity position of the company.
Quick ratio shows the increasing trend. In the year 2008 the quick
ratio was 0.57% that is increased in 0.79% in 2012.
Absolute liquid ratio reveals that the company has not
satisfactory. Most of the year the company has not achieved
standard norm of 0.5: 1.
Proprietary ratio reveals that the company has good solvency
position. It shows the favourable position of the company.
Fixed assets to net worth ratio shows the ratio is less than one, so
the creditor fund have not used to acquire a part of the fixed
asset.
Fixed asset turnover ratio shows a decreasing trend in 2011
2012.
Return on share holders fund reveals that the profit on share
holders fund. The current rate is satisfactory.
Net profit ratio reveals that the company is not satisfactory. In
2012 net profit decreased 1.11%.
Operating ratio of the company reveals that the favourable
condition of the company. Low rate of operating ratio indicates
efficient control over cost.
The comparative balance sheet reveals that the favourable
financial position of the company:
Liquidity position of the company is favourable.

Working capital of the company is favorable.
Solvency of the company also favourable.
The overall financial performance of the
company.
72
73
SUGGESTIONS
Formulate adequate policies and procedures to improve the
solvency and financial leverage of Kerala SIDCO.
Utilize the secured and unsecured loans provided by various
financial institutions, whether long term or short term.
74
CONCLUSION
The study on the financial performance of SIDCO was
conducted to analyse the companys financial position, profitability
and performance over the 5 years. The study incorporated the
methods of Ratio analysis, Comparative balance sheet, Comparative
income statement. Liquidity position and solvency has to improving
the concern. The objective of the study is to analyse profitability,
liquidity, solvency and leverage of the company. The liquidity
position is satisfactory condition.
75
CHAPTER 5
APPENDIX
76
Schedul
es
I .SOURCES OF FUND
1.SHARE HOLDERS FUNDS
(a) Share Capital
(b) Reserves and surplus
2.LOAN FUNDS
(a) Secured Lone
(b) Unsecured Lone
A
B
C
D
TOTAL
II. APPLICATION OF FUNDS
1. FIXED ASSETS
(a) Gross Block
(b) Less Accumulated Depreciation
(c) Net Block
(d) Capital Work in Progress
2.INVESTMENTS
3.CURRENT ASSETS,LOANS &
ADVANCES
A. CURRENT ASSETS
(a) Inventories
(b) Sundry Debtors
(c) Rent & Water charges
Receivable
(d) Cash and Bank Balances
NET CURRENT ASSETS

4.PROFIT & LOSS ACCOUNT (LOSS)
TOTAL
As at 31-032007
227691464
20142318
247833782
225381464
20167610
245549074
109517494
109517494
357351276
2536368
105699827
108236195
353785269
F
G
B. LOANS & ADVANCES

Less: CURRENT LIABLITIES &
PROVISIONS
(a) Current Liablities
(b) Provisions
As at 31-032008
54336913
36396965
17939948
829401
18769349
818300
51707448
35226013
16481435
12712010
213110042
12775096
12745294
175749076
11278459
87050383
325647531
48207679
373855211
52892491
252665320
62093821
314759141
375999836
99950116
475949952
(102094742)
(439858368)
357351276
324128451
95845706
419974157
(105215016)
(442000550)
353785269
16481435
518300
G-H
KERALA SMALL INDUSTRIES DEVELOPMENT CORPORATION LIMITED,

THIRUVANANTHAPURAM
BALANCE SHEET AS AT 31-03-2008
77
THIRUVANANTHAPURAM
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31-032008

Schedul
es
FOR THE YEAR

ENDED 31-03-
FOR THE YEAR

ENDED 31-03-
2008
2007
INCOME
Sales less Returns
Service Charges
Rent
Profit on Sale of Assets
Hire Purchase Interest
Interest on Bank Deposit and Other
Advances
(TDS NILL)
Other Income
Excess Provision Written Back
505355738
4719210
4405349
3970204
517668751
10302724
5161204
18413747
523339
4172781
1775645
28562721
1789892
552975895
7241675
6190771
567277854
K
L
M
438202970
82296538
17514324
442910996
84400502
19940712
7730083
1635414
547379329
8491315
1085991
556829516
5596566
7486774
4188662
10448338
19620430
13528942
TOTAL
EXPENDITURE
Cost Of Goods Sold /Material Consumed
Staff Expenses
Operative, Administrative and Other
Expenses
Finance Charges
Depreciation
TOTAL
PROFIT/(LOSS)
Prior Period Expenses
Prior Period Income
Net Profit /( Loss) for the year

Taxes On Income
Fringe Benefits Tax
Net Profit /( Loss)
after tax
Accumulated Losses Brought Forward
Balance Carried Forward to

Balance Sheet
2298454
4356850
156271
2142183
263593
4093257
(442000551)
(439858368)
(446093807)
(442000550
)
10
9
33
18
Earnings Per Share

Basic Earnings Per Share
Diluted Earnings Per Share
78
Schedul
es
I .SOURCES OF FUND
(c) Share Capital
(d) Reserves and surplus
2.LOAN FUNDS
(e) Secured Lone
(f) Unsecured Lone
2.INVESTMENTS
ADVANCES
A. CURRENT ASSETS
(c) Inventories
(d) Sundry Debtors
(e) Rent & Water charges
Receivable
(f) Cash and Bank Balances
B. LOANS & ADVANCES
As at 31-032008
A
B
230691464
20142318
250833782
227691464
20142318
247833782
C
D
5115114
115903395
121018509
371852291
109517494
109517494
357351276
60497555
37184953
23312602
829401
24142003
22242300
54336913
36396965
17939948
829401
18769349
818300
12720044
297845511
14481437
12712010
213110042
12775096
71752725
396799717
51028205
447827922
85871766
311296522
62558688
373855211
TOTAL
2. FIXED ASSETS
(c) Gross Block
(d) Less Accumulated Depreciation
(g) Net Block
(h) Capital Work in Progress
As at 31-032009
F
G

PROVISIONS
(c) Current Liablities
(d) Provisions
NET CURRENT ASSETS
TOTAL
G-H
454219682
104807983
559027665
(111199743)
(436667731)
371852291
375999836
99950116
475949952
(102094742)
(439858368)
357351276

THIRUVANANTHAPURAM
79
THIRUVANANTHAPURAM

Schedul
es
FOR THE YEAR

ENDED 31-03-
FOR THE YEAR

ENDED 31-03-
2009
2008
INCOME
Sales less Returns
Service Charges
Rent
Advances
(TDS NILL)
Other Income
890183779
5457057
6089133
13913300
505355738
4719210
4405349
3970204
5170571
4172781
12461740
2071451
935347031
28562721
1789892
552975895
813276823
438202970
TOTAL
EXPENDITURE
Staff Expenses
Expenses
Finance Charges
Depreciation
L
M
92862558
17400034
82296538
17514324
8204249
1742071
933485734
7730083
1635414
547379329
1861296
3035168
4610968
3437096
5596566
7486774
4188662
2298454
246459
3190637
156271
2142183
439858368
(436667730)
(442000551)
(439858368
)
15.19
14.01
10
9
TOTAL
PROFIT/(LOSS)
Prior Period Income

Taxes On Income
Fringe Benefits Tax
Net Profit /( Loss)
after tax

Balance Sheet
Earnings Per Share
80
Schedul
es
I .SOURCES OF FUND
a Share Capital
b Reserves and surplus
2.LOAN FUNDS
a Secured Lone
b Unsecured Lone
2.INVESTMENTS
As at 31-032009
A
B
23269164
20142318
252833782
230691464
20142318
250833782
C
D
428986
122289298
122718284
375552066
5115114
115903395
121018509
371852291
63863269
39103224
24760045
983396
25743441
30000
60497555
37184953
23312602
829401
24142003
22242300
TOTAL
1 FIXED ASSETS
a Gross Block
b Less Accumulated Depreciation
c Net Block
d Capital Work in Progress
As at 31-032010

ADVANCES
A. CURRENT ASSETS
a Inventories
b Sundry Debtors
c Rent & Water charges
Receivable
d Cash and Bank Balances
B. LOANS & ADVANCES

PROVISIONS
a Current Liablities
b
Provisions
14144864
365474545
16266048
12720044
297845511
14481437
86996280
482881737
80137736
563019473
71752725
396799717
51028205
447827922
547298188
84373251
631671439
(68651966)
(418430591)
375552066
454219682
104807983
559027665
(111199743)
(436667731)
371852291
NET CURRENT ASSETS

TOTAL
G-H

THIRUVANANTHAPURAM
81
THIRUVANANTHAPURAM

Schedul
es
FOR THE YEAR

ENDED 31-03-
FOR THE YEAR

ENDED 31-03-
2010
2009
INCOME
Sales less Returns
Service Charges
Rent
918072053
10723454
6487088
16904739
890183779
5457057
6089133
13913300

Advances
(TDS NILL)
Other Income
3034887
5170571
20407173
23488577
999127971
12461740
2071451
935347031
K
L
M
840548800
101977562
26589208
813276823
92862558
17400034
8324869
2538554
979978993
8204249
1742071
933485734
19148978
1048565
160137
18260550
1861296
3035168
4610968
3437096
23410
18237140
246459
3190637
436667731
(41843
0591)
439858368
(436667730
)
79.61
78.98
15.19
14.01
TOTAL
EXPENDITURE
Staff Expenses
Expenses
Finance Charges
Depreciation
TOTAL
PROFIT/(LOSS)
Prior Period Income

Taxes On Income
Fringe Benefits Tax
Net Profit /( Loss)
after tax

Balance Sheet
Earnings Per Share
82
Schedul
es
I .SOURCES OF FUND
c Share Capital
d Reserves and surplus
2.LOAN FUNDS
e Secured Lone
As at 31-032011
As at 31-032010
A
B
274691464
20142318
294833782
232691464
20142318
252833782
170123
428986
Unsecured Lone
168675221
168845344
TOTAL
122289298
122718284
375552066
463679125
2 FIXED ASSETS
c Gross Block
d Less Accumulated Depreciation
g Net Block
h Capital Work in Progress
2.INVESTMENTS
ADVANCES
A. CURRENT ASSETS
c Inventories
d Sundry Debtors
e Rent & Water charges
Receivable
f Cash and Bank Balances
F
G
B. LOANS & ADVANCES

PROVISIONS
c Current Liablities
d
Provisions
NET CURRENT ASSETS
TOTAL
67380898
41712317
25668581
60445024
86113605
518300
63863269
39103224
24760045
959209
25719254
518300
18083583
440530869
19244007
14144864
393495810
16266048
162637460
640465919
118793216
759259135
85540727
509447449
62321126
556383739
701820773
84482871
786303644
(27044509)
(404091729)
463679125
556383739
84373251
640756990
(68988415)
(418302927)
375552066
G-H

THIRUVANANTHAPURAM
83
THIRUVANANTHAPURAM

Schedul
es
FOR THE YEAR

ENDED 31-03-
FOR THE YEAR

ENDED 31-03-
2011
2010
INCOME
Sales less Returns
Service Charges
Rent
Advances
(TDS NILL)
Other Income
1274713021
9242801
8239653
15732776
917536488
10723454
6497088
30508979
4434636
3108958
7765889
1364483
132149325
9
7065947
23488577
998929491
K
L
M
1136988505
125373098
32960678
840794847
101929865
26299498
7504436
3093635
130592035
2
8324849
2538554
979887613
15572907
1393363
31654
14211198
14211198
19041878
805330
160137
18396685
31881
18237140
(418302927)
(40409
1729)
436667731
(41830
2927)
55.93
55.31
80.17
79.53
TOTAL
EXPENDITURE
Staff Expenses
Expenses
Finance Charges
Depreciation
TOTAL
PROFIT/(LOSS)
Prior Period Income

Fringe Benefits Tax
Net Profit /( Loss)
after tax

Balance Sheet
Earnings Per Share
84
85
86
CHAPTER 6
BIBLIOGRAPHY
BIBLIOGRAPHY
1. Management Accounting
K.G.C.
NAIR
2. Company Data Base
3. Research Methodology - L.R. POTTI
4. Annual Report of SIDCO
5. Magazines and Publications
6. Company Website

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PROJECT REPORT ON

A STUDY ON THE FINANCIAL

Under The Guidance of

UNIVERSITY INSTITUTE OF TECHNOLOGY

A STUDY ON THE FINANCIAL

UNIVERSITY INSTITUTE OF TECHNOLOGY

UNIVERSITY INSTITUTE OF TECHNOLOGY

ANANTHU GOKUL in partial fulfillment of the requirements for

project entitled A STUDY ON THE FINANCIAL

Gratitude is certainly to be placed on record at the right

OBJECTIVES OF THE STUDY

2.1 COMPANY PROFILE

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

c.Absolute Liquidity Ratio

Fixed Asset To Net Worth

Fixed Asset Turn over Ratio

Return On Shareholders Fund

Comparative Balance sheet 2010 - 2011

c. Absolute Liquidity Ratio

Fixed Asset Turn over

Net Profit Ratio

c. Return On Total Asset

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

INTRODUCTION OF THE STUDY

analysis is the powerful tool in the hands of the management. So it

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

DESIGN OF THE STUDY

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

Scope and significance of the study

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

are capable of being evaluated either by the researcher or by others.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

Limitations of the study

The sources information for this project belongs to annual

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

RATIO ANALYSIS AN OVERVIEW

Significance of Ratio Analysis

Basically, ratio analysis is useful to the same extent and in the

It is an instrument for diagnosis of the financial health of an

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

LIMITATIONS OF RATIO ANALYSIS

mechanization process of calculating ratios any deriving results.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

REVIEW OF RELATED LITERATURE

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

2.1 PROFILE OF THE COMPANY

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

2.2 INDUSTRIAL PROFILE

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

Industrial Estate Division

Industrial Park Division

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

Raw Material Division

Export, Import & Project Division

Kanichukulangara, Olavakkode, Pachalam and Ernakulam. This division also

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

2.3 WORKING CAPITAL MANAGEMENT

4. The length of sales cycle during which finished goods are

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO

2.4 FINANCIAL STATEMENT