A Analytical study of Financial Analysis

On
EME Technologies, Mohali

In the partial fulfillment of Post-Graduation Degree of

MASTER OF BUSINESS ADMINISTRATION

Under Guidance of

()

Submitted to
Submitted By

Through

Director

Date: -

Place: -

1
 CERTIFICATE

Under my guidance and supervision. To the best of my knowledge and belief

the work presently was not been submitted earlier for degree of Master of
Business Administration or any other degree or diploma.

Date: - / /
Place: -

(Project Guide)

2
 DECLARATION
I undersigned Miss (MBA-
II) here by state that this research report entitled An Analytical
study of Financial Analysis on EME Technologies,Mohali is genuine and
bonafied work prepared by me under the guidance of . The empirical
findings in this report are based on data collected by myself. The matter
presented in this report is not copied from any source.

I understand that, any such copy is liable for punishment in any

way the institute authorities deem to be fit.

Date: / /

Place:

Signature
(Research Student)

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 ACKNOWLWDGEMENT

This research project bears the imprint of many persons cooperation & it gives
me great pleasure to egress my heartiest gratitude towards them.

First of all I would like to own my sincere gratitude to the honorable

for giving me an opportunity to undergo this summer training and project work.

I am deeply thankful to for her constant encouragement, unending support and

valuable guidance.

I sincerely thank the Management of EME Technologies, Mohali for

giving me an opportunity to work on this project & providing with all the
necessary information.

I am sincerely thankful to & Staff Members of EME Technologies for

their wholehearted support & help during my training period.

Lastly I would like to convey my reverential salutations to my parents and

friends for their unending support.

Date: / /

Place:

(Research Student)

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 CHAPTER 1

INTRODUCTION

5
 INTRODUCTION OF THE TOPIC

1 INTRODUCTION

The financial statement provides the basic data for financial performance analysis. The
financial statements provide a summarized view of the financial position and operations of a
firm. Financial analysis (also referred to as financial statement analysis or accounting analysis)
refers to an assessment of the viability, stability and profitability of a business. The analyst first
identifies the information relevant to the decision under consideration from the total information
contained in the financial statements. Therefore, much can be learnt about a firm from a careful
examination of its financial statements as invaluable documents and performance reports.

The analysis of financial statements is an important aid to financial analysis. They

provide information on how the firm has performed in the past and what is its current financial
position. Financial analysis is the process of identifying the financial strengths and weakness of
the firm from the available accounting data and financial statements. The analysis is done by
establishing relationship between the different items of financial statements.

The focus of financial analysis is on key figures in the financial statements and the
significant relationship that exists between them. The analysis of financial statements is a process
of evaluating relationship between component parts of financial statements to obtain a better
understanding of the firms position and performance.

The first task of financial analyst is to select the information relevant to the decision
under consideration from the total information contained in the financial statement. The second
step involved in financial analysis is to arrange the information in a way to highlight significant
relationships. The final step is interpretation and drawing of inferences and conclusions. In brief,
financial analysis is the process of selection, relation, and evaluation.

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1.1 INDUSTRIAL PROFILE

1.1.1 NON-BANKING FINANCIAL COMPANIES (NBFCS)

Non-bank financial companies (NBFCs) are financial institutions that provide

banking services without meeting the legal definition of a bank, i.e. one that does not hold a
banking license. Operations are, regardless of this, still exercised under bank regulation.

According to Reserve Bank Amendment of Act 1997, A Non-Banding Financial Company

(NBFCs) means,

A financial institution which is a company

A non-banking institution which is a company which has its principal business receiving
of deposits under any scheme of arrangement or in any other manner or lending in any
manner

The non-banking financial sector in India has tremendous growth in recent years. NBFCs
attracted a large number of small investors since the rate of return on deposits with them was
relatively high. NBFCs are quite flexible sectors like equipment leasing, hire-purchase, housing
finance, consumer finance and so on, where gaps between the demand and supply of funds have
been high. The growth in number of NBFCs was facilitated by the case of entry, limited fixed
assets and absence of any need to hold inventories.

1.1.2 CURRENT SCENARIO OF NBFCS

The base of todays feebleness of Non-Banking Finance Companies can perhaps be

traced back to early nineties. The buoyant capital market, in the first flush liberalization
welcomed every issue with huge premiums and massive over subscription. This was the signal
for several unscrupulous promoters to set up high profile finance companies and raise money
from both the capital markets and through public deposits.

The Reserve Bank of India for its past, progressively relaxed its regulatory hold over
the industry and made it possible for the companies with little financial strength and even fewer
scrupulous to raise large amounts of money from an unsuspecting public. Hardly anyone knew

7
or questioned how these moneys were deployed. Soon afterward, the stock market scam broke
claiming its first victim from the non-banking finance companies sector. With the capital market
in disarray, it was no longer possible for continue of fund flow, from investors who had burnt
their fingers in the stock markets. It was thus convenient fresh deposits. In July1996, the RBI,
perhaps the most sweeping changes in the non-banking finance companies regulation, virtually
pulled out all the stock, enabling companies to raise deposits with minimum number and more
significantly, removed the ceiling on interest rate.

At the point, when the government was faced with grim situation and responding to the
plea of the industry, the government set up a special task force headed by Mr. C.M. Vasudev to
recommend the steps for the orderly growth of finance companies while keeping investor
protection as its key priority. The committee in its final report recognized the important role
played by these companies and warned against the tendencies to tar all the companies with the
same brush. The silent recommendations of the Vasudev committee were

Review of minimum capital requirement of Rs. 25lakhs for registration purposes

Higher capital adequacy ratio for non-banking finance companies seeking public deposits
without credit rating
Preview of prudential norms with ceiling for exposure to real estate and capital markets
Differential ceiling on public deposit acceptance for companies with and without credit
ratings
A separate instrument to regulate and supervise non-banking finance companies.

1.1.3 ADVANTAGE OF NBFCs

1. Lower transaction costs

2. Higher rate of interest on deposits compared to banks

3. Quick financial decision caking

4. Customer orientation

5. Prompt provision of services

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1.1.4 RBI GUIDELINES FOR NBFCs
The nineties witnessed a dramatic increase in the number of NBFCs and it was thought
necessary to have a regulatory framework for NBFCs. RBI came out with set of guidelines for
NBFCs specifically aimed at protecting the depositors.

To encourage the NBFCs that is running on sound business principals, on July 24th
1996, NBFCs were divided into two classes,

i. Equipment leasing and hire purchase (finance company)

ii. Loan and investment companies

1.1.5 CATEGORIES OF NBFCs

i. Loan Companies
ii. Investment Companies
iii. Hire Purchase Companies
iv. Equipment Leasing Companies
v. Mutual Benefits Finance Companies
vi. Housing Finance Companies

Equipment leasing company Any company, which is a financial institution, carrying on its
principal business. The activities of leasing of equipment of the financing of such activity.

1. Hire purchase finance company A company, which is a financial institution, carrying on

its principal business, hire purchase transaction.

2. Investment Company A company, which deals with acquisition of securities.

3. Loan Company A company, which is a financial institution and carries on its principal
business of providing finance by any activities other than its own.

4. Mutual benefit finance company A company, which is a financial institution. This is

notified by the central government under section 620 (a) of The Companies Act 1956.

9
1.2 COMPANY PROFILE

EME Technologies, locateed at Mohali is one of the leading software company at Mohali. It was
the researchers privilege that she could complete hers summer internship there and learn about
their recruitment process.
When the required number and kind of manpower is determined by the firm, the role of
management is to find places where they require that manpower and how many out of them are
available. The management also finds the different ways of attracting the probable human
resource towards the organization before the process of selecting them for the job. This entire
process is known as recruitment. Recruitment is not employment, but it is a part of employment.
Recruitment is also not selection, but an activity carried out before selection of candidates takes
place. To speak in the technical context, the process of recruitment is carried out before the
function of selection and comprises of only finding the sources of probable employees,
developing those sources and arousing interest in them to apply for the job vacancies in the firm.

EME Technologies a software company is managed by a team of dedicated, committed and

highly qualified software & hardware professional.The company is fortunate enough to have
been associated with expert and experienced faculty in the fields of Software, Hardware and
WebTechnologies,Embedded System, PCB
Designing,Networking,Autocad,automationandmanymore.
One of the areas of our specializations is Project study, analysis, development and its live
implementation.The computer faculty in our computer institute has hands-on experience in
software development and has a proven track record in training and guiding the students.
They takeintensive care from the very first step of selecting the Project titleand encouraging the
student to venture a distinct project, involve themselves in the Project by putting their own
effort, time and subject to write programs to execute the same.
In case of any problems, the faculty in-charge willingly guides the student and helps them in
successfully executing the Project.Faculty give their support 24/7 toclient.

The institutes objectives is to empower the future computer Professionals by providing them
decent work atmosphere, individual attention, creating confidence in them by encouraging
them take-up the Project on their own, right from selection of topic until its implementation,
facilitating its submission, under the supervision and guidance of experienced and expert
faculty.EME delivers an integrated portfolio of solutions and services reflecting a broad range of
technology and business practices.

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1.1.2 EME-Overview

The EME Technologies, is located in Mohali in 7 Phase and in Chandigarh.

EMETECHNOLOGIES are Offshore Outsourcing Consultantswith a leading edge technology
focus on deliveringthe best and most cost-effective solutions to their clients in various areas of
web development services and solutions

The team at EME Technologies consists of over 30 highly skilled professionals

associated with Information Technology. EMETechnologies delivers total solutions for software
development and maintenance needs, serving companies from the smallest of start-ups to the
largest of the Global 2000. We specialize in offshore software development and web
applications.

At EME Technologies a talented group of designers and interface engineers are masters at
effectively conveying a consistent corporate message and brand while concentrating on ensuring
a pleasant and useful user experience. They help in effectively market the company by utilizing
their skills in web strategy, creative interface design, corporate branding and logo design, online
marketing strategy and copywriting.

1.1.3 Vertical practices

1.1.3.1 Service Practices

The various types of services that are offered by this company are as follows

1.1.3.1.1. Custom web applications

1.1.3.1.2. Web designing

1.1.3.1.3. Complete e-business solutions

1.1.3.1.4. Ecommerce business

1.1.3.1.5. SEO Service

1.1.3.1.6. Web Data Mining

1.1.3.1.7. Training and Consulting Services for the Development of

Embedded Systems

1.3.1.1.1. Custom application development

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 It is meant for designing a software that has been designed and programmed for a specific
function/need. Custom application development is capable of producing practically any
feature you may desire for your site.

EME TECHNOLOGIES provide total flexibility in terms of Custom application

development - the process is essentially "Client Driven". It is important to remember that
a well-designed database should provide the end product that is tailored to meet both your
professional and practical business needs and therefore serve its intended purpose

1.3.1.1.2. Web Designing

EME TECHNOLOGIES has a team of experienced multi media and web designers for
professional web site designing who work closely with our programming team to
integrate the various components with a consistent look and feel that represents your
corporate brand image. We know the importance of a "first web impression" in web site
design and our experienced team will advise you on how best to take advantage of
changing trends and expectations

1.3.1.1.3. Complete e-business solutions

EME Technologies ' Complete e-business solutions offer a powerful combination of

design and technology. This comprehensive set of online e-commerce technology is
designed to help you make the most of your new or existing business. Their complete e-
business solutions will help you increase your sales and improve your bottom line.

1.3.1.1.4. E-commerce business development

Their shopping cart solutions are all you need to be a successful online store. Meet any
growing e- commerce requirements with our shopping cart solutions for all sectors of the
market. With the advent of technology, business has increased manifold.

If you are not updating your business in accordance to the changing scenario then a
realization factor might follow showing your performance during the past time. There
cannot be any short cut to success for your retail business. All you can do is to provide
best offer to your customers by using Ecommerce solutions.

1.3.1.1.5. Search Engine Optimization Firm

It offers the facility of Optimizing and Positioning of your website in the Major Search
Engines. They initiate the SEO Service process by determining the Keyword/Phrase that
best describe your Website/Business. Then they build META Tags, for the few search
engines that still use these.

The placement and maintenance of your website is monitored through out the year. This
becomes even more important whenever the search engines changes their specifications.
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 Maintenance is an extremely important aspect of a quality web site, not just for the
benefit of search engines, but also for overall accuracy of your company's information.

1.3.1.1.6. Web Data mining

It is a proven technology for advanced analysis that detects key patterns and trends. But
the time-consuming complexity of preparing Web data with the business context
necessary for data mining has hampered its use in Web analysisuntil now.

EMETechnologies creates, maintains, and runs Internet robots that retrieve data from the
Web. The robots feed extractors that pick out useful information and can deliver it to you
in a format for processing and analysis.

1.3.1.1.7. Training and Consulting Services for the Development of Embedded Systems

EME Technologies is pioneer in Establishing Embedded systems in Chandigarh. Our

expertise covers several microcontroller architectures and their development tool chains.
In addition we focus on topics such as time-to-market, quality improvement , complete
PCB Designing and embedded applications using Atmel MCS51,Atmel AVR,Microchip
PICcontroller, NXP ARM,Arduino and Raspberry pi Our training and consulting services
include prototyping and customized software and hardware developments.Training,
consulting or prototyping services include applications on technologies from Atmel ,
microchip , NXP , Maxim etc.

Embedded Systems Development involve Microcontroller families, these Microcontroller

families require programming in Embedded C language.

EME is providing embedded system Development services and Training in Embedded

systems, Robotics, VLSI,AUTOCAD since 2010.

1.2.6 VALUES

A set of values have governed their growth over the years. Among them are transparent
in their business practices, dedicated customer service fair, efficient and safe financial policies.

1.2.7 STRENGTH

Support of the group companies.

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 Involvement of the directors on major policy matters.

High employee morale.

Good initial system for operation and control.

Efficiency and sophisticated software system for decision support system.

Investors trust and faith in the company.

Simple documentation, quick processing and speedy approval.

Customized schemes, personalized service.

Direct dealing between customer and company.

No hidden costs.

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15
NEED, OBJECTIVES AND SCOPE OF THE STUDY

2.1 NEED FOR THE STUDY

The Financial Statements are mirror which reflects the financial position and strengths or
weakness of the concern. The Non- Banking Financial Company has been witnessed intense
competition from domestic banks and international banks. Every business needs to view the
financial performance analysis.

The study on effectiveness of operational and financial performance of EME

Technologies is conducted to measure the overall performance of company. The financial
analysis strengths the firms to make their best use, and to be able to spot out financial weakness
of the firm to state suitable corrective actions.

This study aims at analyzing the overall financial performance of the company by using
various financial tools like Comparative Analysis, common size statement analysis, Ratio
Analysis, and Cash Flow Analysis.

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2.2 OBJECTIVES OF THE STUDY

2.2.1 PRIMARY OBJECTIVE:

o To study the financial performance analysis of EME Technologies,Mohali.

2.2.2 SECONDARY OBJECTIVES:

o To compare and analyze the financial statements for the past three financial years
(2015,2016 and 2017)

o To know the profitability, liquidity and solvency position of EME Technologies.

o To compare and interpret financial statements of the EME Technologies with
comparative and common-size statement analysis.

o To forecast the annual growth rate of income of the company with the help of
regression analysis.

17
 o To provide suggestions for improving the overall finance performance of the
company.

2.3 SCOPE OF THE STUDY

The study is based on the accounting information of the EME TECHNOLOGIES,

MOHALI. The study covers the period of 2008-2010 for analyzing the financial statement such
as income statements and balance sheet.

The scope of the study involves the various factors that affect the financial efficiency
of the company. To increase the profit and sales growth of the company. This study finds out the
operational efficiency of the organization and allocation of resources to improve the efficiency of
the organization.

The data of the past three years are taken into account for the study. The performance
is compared within those periods. This study finds out the areas where EME Technologies can
improve to increase the efficiency of its assets and funds employed.

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CHAPTER 3
LITERATURE
REVIEW

19
3 LITERATURE REVIEW

3.1 REVIEW OF LITERATURE

Literature Review was done by referring previous studies, articles and books to know
the areas of study and analyze the gap or study not done so far. There are various studies were
conducted relating to operational performance of the company from which most relevant
literatures were reviewed.

Kennedy and Muller (1999), has explained that The analysis and interpretation of financial
statements are an attempt to determine the significance and meaning of financial statements data
so that the forecast may be made of the prospects for future earnings, ability to pay interest and
debt maturines (both current and long term) and profitability and sound dividend policy.

T.S.Reddy and Y. Hari Prasad Reddy (2009), have stated that The statement disclosing status
of investments is known as balance sheet and the statement showing the result is known as profit
and loss account

20
Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot about good
sense and understanding of the difficulties that a company will face. We have to make sure that
people know exactly how we arrived to the final financial positions. We have to show the
calculation but we have to avoid anything that is too mathematical. A business performance
analysis indicates the further growth and the expansion. It gives a physiological advantage to the
employees and also a planning advantage.

I.M.Pandey (2007), had stated that the financial statements contain information about the
financial consequences and sources and uses of financial resources, one should be able to say
whether the financial condition of a firm is good or bad; whether it is improving or deteriorating.
One can relate the financial variables given in financial statements in a meaningful way which
will suggest the actions which one may have to initiate to improve the firms financial condition.

Chidambaram Rameshkumar & Dr. N. Anbumani (2006), he argue that Ratio Analysis
enables the business owner/manager to spot trends in a business and to compare its performance
and condition with the average performance of similar businesses in the same
industry. To do this compare your ratios with the average of businesses similar to yours and
compare your own ratios for several successive years, watching especially for any unfavorable
trends that may be starting. Ratio analysis may provide the all-important early warning
indications that allow you to solve your business problems before your business is destroyed by
them.

Jae K.Shim & Joel G.Siegel (1999), had explained that the financial statement of an enterprise
present the raw data of its assets, liabilities and equities in the balance sheet and its revenue and
expenses in the income statement. Without subjecting these to data analysis, many fallacious
conclusions might be drawn concerning the financial condition of the enterprise. Financial
statement analysis is undertaken by creditors, investors and other financial statement users in
order to determine the credit worthiness and earning potential of an entity.

Susan Ward (2008), emphasis that financial analysis using ratios between key values help
investors cope with the massive amount of numbers in company financial statements. For
example, they can compute the percentage of net profit a company is generating on the funds it

21
has deployed. All other things remaining the same, a company that earns a higher percentage of
profit compared to other companies is a better investment option.

M Y Khan & P K Jain (2011), have explained that the Financial statements provide a
summarized view of the financial position and operations of a firm. Therefore, much can be
learnt about a firm from a careful examination of its financial statements as invaluable
documents / performance reports. The analysis of financial statements is, thus, an important aid
to financial analysis.

Elizabeth Duncan and Elliott (2004), had stated that the paper in the title of efficiency,
customer service and financing performance among Australian financial institutions showed that
all financial performance measures as interest margin, return on assets, and capital adequacy are
positively correlated with customer service quality scores.

Jonas Elmerraji (2005), tries to say that ratios can be an invaluable tool for making an
investment decision. Even so, many new investors would rather leave their decisions to fate than
try to deal with the intimidation of financial ratios. The truth is that ratios aren't that intimidating,
even if you don't have a degree in business or finance. Using ratios to make informed decisions
about an investment makes a lot of sense, once you know how use them.

Carlos Correia (2007), had explained that any analysis of the firm, whether by management,
investors, or other interested parties, must include an examination of the companys financial
data. The most obvious and readily available source of this information is the firms annual
report. The financial statements shall, in conformity with generally accepted accounting practice,
fairly present the state of the affairs of the company and the results of operations for the financial
year.

Greninger et al.(1996), identified and refined financial ratios using a Delphi study in the areas
of liquidity, savings, asset allocation, inflation protection, tax burden, housing expenses and,
insolvency. Based on the Delphi findings, they proposed a profile of financial well-being for the
typical family and individual.

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Rachchh Minaxi A (2011), have suggested that the financial statement analysis involves
analyzing the financial statements to extract information that can facilitate decision making. It is
the process of evaluating the relationship between component parts of the financial statements to
obtain a better understanding of an entitys position and performance.

Salmi, T. and T. Martikainen (1994), in his "A review of the theoretical and empirical basis of
financial ratio analysis", has suggested that A systematic framework of financial statement
analysis along with the observed separate research trends might be useful for furthering the
development of research. If the research results in financial ratio analysis are to be useful for the
decision makers, the results must be theoretically consistent and empirically generalizable.

John J.Wild, K.R.Subramanyam & Robert F.Halsey (2006), have said that the financial
statement analysis is the application of analytical tools and techniques to general-purpose
financial statements and related data to derive estimates and inferences useful in business
analysis. Financial statement analysis reduces reliance on hunches, guesses, and intuition for
business decisions. It decreases the uncertainty of business analysis.

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 CHAPTER 4

RESEARCH
METHODOLOGY

4. RESEARCH METHODOLOGY

Research can be defined as A Scientific and Systemic Search for pertinent

information on a specific topic. Therefore, research could be understood as an organized
activity with specific objectives on a problem or issues supported by compilation of related data
and facts, involving application of relevant tools of analysis and deriving logically on originality.

4.1 RESEARCH DESIGN

Research Design is the arrangement of condition for collection and analysis of data in
manner that aims to combine relevance to the research purpose with the economy in procedure.
Research Design is important primarily because of the increased complexity in the market as
well as marketing approaches available to the researchers. A research design specifies the
methods and procedures for conducting a particular study.

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4.2 TYPE OF RESEARCH

ANALYTICAL RESEARCH

In this type of research has to use facts or information already available, and analyze
these to make a critical evaluation of the material. The researcher depends on existing data for
his research work. The analysis revolves round the material collected or available.

4.3 SOURCE OF DATA

SECONDARY DATA

Secondary Data refers to the information or facts already collected such data are collected with
the objectives of understanding the past status of any variable or the data collected and reported
by some source is accessed and used for the objective of a study. Normally in research, the
scholars collect published data, journals, annual reports and websites.

4.4 TOOLS USED FOR ANALYSIS

(1) Ratio Analysis

(2) Comparative Statement Analysis

(3) Common-size Statement Analysis

(4) Cash Flow Statement Analysis

(5) Regression Analysis

4.4.1 RATIO ANALYSIS

A ratio is the process of determining and presenting the relationship of items and groups of items
in the financial statements. The ratios can be classified into the following types:

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4.4.1.1 PROFITABILITY RATIO

Profitability Ratio measured as a ability to make maximum profit from optimum utilization of
resources by a business concern is termed as profitability.

o GROSS PROFIT RATIO

This ratio is also known as Gross Margin or Trading Margin Ratio. Gross Profit Ratio includes
the difference between sales and direct costs.

Gross Profit Ratio = ( Gross Profit / Net Sales ) * 100

o NET PROFIT RATIO

It measures of management efficiency in operating the business successfully from the owners
point of view. Higher the ratio better is the operational efficiency of business concern.

Net Profit Ratio = ( Net Profit After Tax / Net Sales ) * 100

o RETURN ON EQUITY OR RETURN ON NET WORTH

This ratio signifies the return on equity shareholders funds. The profit considered for computing
the ratio is taken after payment of preference dividend.

Return on Equity = ( Net Profit After Interest And Tax / Shareholders funds ) * 100

4.4.1.2 ACTIVITY RATIO OR TURNOVER RATIOS:

Activity ratios highlight the operational efficiency of the business concern. The term operational
efficiency refers to effective, profitable and rational use of resources available to the concern.

o WORKING CAPITAL TURNOVER RATIO

26
Working capital ratio measures the effective utilization of working capital. It also measures the
smooth running of business. The ratio establishes relationship between cost of sales and working
capital.

Working Capital Turnover Ratio = ( Sales / Net Working Capital )

o CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost of sales or
sales with the amount of capital invested in the business.

Capital Turnover Ratio = (Sales / Capital Employed)

o FIXED ASSET TURNOVER RATIO

This ratio determines efficiency of utilization of fixed assets and profitability of a business
concern.

Fixed Asset Turnover Ratio = (Sales / Net Fixed asset)

4.4.1.3 SOLVENCY OR FINANCIAL RATIOS

Solvency or Financial Ratios include all ratios which express financial position of the concern.
The term financial position generally refers to short-tem and long-term solvency of the business
concern, including safety of different interested parties.

o CURRENT RATIO

In order to measure the short-term liquidity or solvency of a concern, comparison of current

assets and current liabilities is inevitable. Current ratio indicates the ability of a concern to meet
its current obligations as and when they are due for payment.

Current Ratio = ( Current asset / Current liabilities )

27
o DEBT EQUITY RATIO

The debt equity ratio is determined to ascertain the soundness of the long term financial policies
of the company and also to measures the relatives proposition of outsiders funds and
shareholders funds investments in the company.

Debt-Equity Ratio = ( Total Long-term Debt / Shareholders Funds )

o DEBT TO TOTAL FUNDS RATIO

This ratio gives same indication as the debt equity ratio as this is a variation of debt equity ratio.
This ratio is the relationship between long term debts and total long term funds.

Debt to Total Funds Ratio = ( Long-term Debt / Total Funds)

o EQUITY TO TOTAL FUNDS

Equity to total funds explains the relationship between equity and total funds.

Equity to Total Funds = ( Equity / Total Funds)

4.4.2 COMPARATIVE STATEMENT ANALYSIS

Comparative balance sheet as on two or more different dates can be used for comparing
assets and liabilities and findings out any increase or decrease in the items. Thus while in single
balance sheet the emphasis is on present position, it is on change in the comparative balance
sheet.

4.4.3 COMMON SIZE STATEMENT ANALYSIS

Common size statements indicate the relationship of various items with some common
items. In the income statements, the sales figure is taken as basis and all other figures are
expressed as percentage of sales. Similarly, in the balance sheet the total assets and liabilities is
taken as base and all other figures are expressed as percentage of this total.
28
4.4.4 CASH FLOW STATEMENT

Cash flow includes cash inflows and out flows - cash receipts and cash payments during a
period. A cash flow statement is a statement which portrays the changes in the position between
two accounting period. Cash flow analysis can reveal the causes for even highly profitable firms
experiencing acute cash shortages.

4.4.5 REGRESSION ANALYSIS

A fundamental and versatile research technique that seeks to explain an outcome variable
in terms of multiple predictor variables. This analysis reveals the nature and strength of the
relationship between each predictor variable and the outcome, independent of the influence from
all other predictors.

Regression Equation Y on X is given as:

Y = a + bX
Equations to find constants a and b are given as:
Y = Na + bX
XY = aX + b

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 CHAPTER - 5
DATA ANALYSIS AND
INTERPRETATION

5 DATA ANALYSIS AND INTERPRETATION

5.1 RATIO ANALYSIS

5.1.1 PROFITABILITY RATIOS

5.1.1.1 Gross Profit Ratio:

This ratio is also known as Gross Margin or Trading Margin Ratio. Gross Profit Ratio
includes the difference between sales and direct costs.

Gross Profit
Gross Profit Ratio = X100
Net Sales

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 Table No 5.1.1 GROSS PROFIT RATIO

Years Gross Profit Net sales Ratio

(Rs.) (Rs.) (In %)
2007-2008 30289.71 90176.44 33.58
2008-2009 21971.03 108277.62 20.29
2009-2010 32347.63 118189.37 27.37

Chart No 5.1.1 GROSS PROFIT RATIO

RATIO (IN PERCENTAGE)

40
30
20
10
0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

The Gross Profit for the financial year 2007-2008 was recorded as per the ratio is
33.58%, where as the years between 2008-2009 went through a change in the ratio of 20.29%
and the companies profit went upward in 2009-2010 with the ratio of 27.37%. Thus, it is
showing the steady growth in the company profile.

5.1.1.2 NET PROFIT RATIO

It measures of management efficiency in operating the business successfully from the

owners point of view. It indicates the return on shareholders investment. Higher the ratio better
is the operational efficiency of business concern.

Net Profit after Tax

Net Profit Ratio = X 100

31
 Net Sales

Table No 5.1.2 NET PROFIT RATIO

Years Net Profit Net sales Ratio

(Rs.) (Rs.) (In %)
2007-2008 21254.24 90176.44 23.56
2008-2009 15073.14 108277.62 13.92
2009-2010 22674.86 118189.37 19.18

Chart No 5.1.2 NET PROFIT RATIO

RATIO (IN PERCENTAGE)

25
20
15
10
5
0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

The Net Profit Ratio depicts that the company had a good profit in 2007-2008 where it
had a good yield profit. Comparing to the year 2008-2009 is 13.92%, the sales of the company
have a steady attitude and increase upwards to 19.18%. This indicates that there is an
improvement in the operational efficient of the business and it leads to the increase in the
profitability of the firm.

32
5.1.1.3 RETURN ON EQUITY OR RETURN ON NET WORTH

This ratio signifies the return on equity shareholders funds. The profit considered for computing
the ratio is taken after payment of preference dividend.

Net profit after interest and tax

Return on Equity = X 100
Shareholder fund

Table No 5.1.3 RETURN ON EQUITY

Years Net profit after Shareholder Ratio

interest and tax Fund (Rs.) (In %)
(Rs.)
2007-2008 21254.24 231280.81 9.18
2008-2009 15073.14 268538.97 5.61
2009-2010 22674.86 333318.07 6.80

Chart No 5.1.3 RETURN ON EQUITY

RATIO (IN PERCENTAGE)

10
8
6
4
2
0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

Return on shareholder fund determines the profitability from the shareholders point of
view. From the above, it shows that in the year 2008-2009, the company shows 5.61% of ratio
and it has risen to 6.80%. This is a clear indication of overall operation is efficient.

5.1.2 TURNOVER RATIO

33
5.1.2.1 WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working capital. It also
measures the smooth running of business. The ratio establishes relationship between cost of sales
and working capital.
Sales
Working Capital Turnover Ratio =
Net Working Capital

Table No 5.1.4 WORKING CAPITAL TURNOVER RATIO

Years Sales Net Working Capital Ratio

(Rs.) (Rs.) (In Times)
2007-2008 90176.44 645733.44 0.13
2008-2009 108277.62 666319.18 0.16
2009-2010 118189.37 898497.54 0.13

Chart No 5.1.4 WORKING CAPITAL TURNOVER RATIO

16
0.
RATIO (IN TIMES)

12
0.
08
0.
04
0.
0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

A higher ratio is the indication of lower investment of working capital and more profit.
In 2007-2008, the sales of the company are low at 0.13 times but in the year 2008-2009, it gone
upward of sales to 0.16 times.
5.1.2.2 CAPITAL TURNOVER RATIO

34
 Managerial efficiency is also calculated by establishing the relationship between
cost of sales or sales with the amount of capital invested in the business.

Sales
Capital Turnover Ratio =
Capital Employed

Table No 5.1.5 CAPITAL TURNOVER RATIO

Years Net Sales Capital Employed Ratio

(Rs.) (Rs.) (In Times)
2007-2008 90176.44 536009.27 0.16
2008-2009 108277.62 533288.26 0.20
2009-2010 118189.37 720052.92 0.17

Chart No 5.1.5 CAPITAL TURNOVER RATIO

0.25
RATIO (IN TIMES)

0.2

0.15

0.1

0.05

0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:
In the year 2007-2008, the sales comparing to 2008-2009 it is increased to 0.20 times and
it shows that efficient methods are adopted to use the capital employed. In 2009-2010, which
compares to the year 2007-2008 it indicates higher ratio of 0.17 times. The capital of the
company has utilized efficiently comparing to 2007-2008.

5.1.2.3 FIXED ASSET TURNOVER RATIO

35
 This ratio determines efficiency of utilization of fixed assets and profitability of a
business concern.
Sales
Fixed Asset Turnover Ratio =
Net Fixed asset

Table No 5.1.6 FIXED ASSET TURNOVER RATIO

Years Sales Fixed Asset Ratio

(Rs.) (Rs.) (In Times)

2007-2008 90176.44 17264.30 5.22

2008-2009 108277.62 20241.05 5.35
2009-2010 118189.37 23237.80 5.09

Chart No 5.1.6 FIXED ASSET TURNOVER RATIO

5.4
5.35
RATIO (IN TIMES)

5.3
5.25
5.2
5.15
5.1
5.05
5
4.95
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

Higher the ratio is more than the efficiency in utilization of Fixed Assets. Lower ratio
indicates the under utilization of fixed assets. From the above table it indicates in the year 2008-
2009, the sales have been increased comparing to the next year 2009-2010. And its gradually
declining over the next year 2009-2010 for 5.09 times.
5.1.3 SOLVENCY OR FINANCIAL RATIOS:

5.1.3.1 CURRENT RATIO

36
 In order to measure the short-term liquidity or solvency of a concern, comparison of
current assets and current liabilities is inevitable. Current ratio indicates the ability of a concern
to meet its current obligations as and when they are due for payment.

Current asset
Current Ratio =
Current liabilities

Table No 5.1.7 CURRENT RATIO

Years Current Asset Current Liabilities Ratio
(Rs.) (Rs.) (In Times)
2007-2008 56187.53 53034.57 1.06
2008-2009 68876.04 50360.94 1.36
2009-2010 166489.36 55084.13 3.02

Chart No 5.1.7 CURRENT RATIO

3.5
3
RATIO (IN TIMES)

2.5
2
1.5
1
0.5
0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:
A high current ratio is an assurance that the firm will have adequate funds to pays
current liabilities and other payment. During the year 2009-2010, the current ratio is 3.02 times
and it is more when compared with previous year 2008-2009 is 1.36 times.

5.1.3.2 DEBT EQUITY RATIO

37
 The debt equity ratio is determined to ascertain the soundness of the long term
financial policies of the company and also to measures the relatives proposition of outsiders
funds and shareholders funds investments in the company.

Total Long-term debt

Debt Equity Ratio =
Shareholders Funds

Table No 5.1.8 DEBT EQUITY RATIO

Years Long term debts Shareholders funds Ratio
(Rs.) (Rs.) (In Times)

2007-2008 431716.93 104292.34 4.13

2008-2009 418021.26 115267 3.62
2009-2010 588417.27 131635.65 4.47

Chart No 5.1.8 DEBT EQUITY RATIO

5
RATIO (IN TIMES)

4
3
2
1
0
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

38
 From the above table, during the year 2007-2008 the debt equity ratio is 4.13 times and it is
decreased to 3.62 times then it shows the uptrend from the year 2009-2010 as 4.47 times.
Suggest that the debt from the company has increased over the years with increase in shareholder
funds as well.
5.1.3.3 DEBT TO TOTAL FUNDS RATIO

This ratio gives same indication as the debt equity ratio as this is a variation of debt
equity ratio. This ratio is also known as solvency ratio. This ratio is the relationship between long
term debts and total long term funds.

Long Term Debts

Debt to Total Funds Ratio =
Total Funds

Table No 5.1.9 DEBT TO TOTAL FUNDS RATIO

Years Long Term Debts Total Funds Ratio

(Rs.) (Rs.) (In Times)
2007-2008 431716.93 712389.16 0.60
2008-2009 418021.26 742843.84 0.56
2009-2010 588417.27 981013.79 0.59

Chart No 5.1.9 DEBT TO TOTAL FUNDS RATIO

0.61
0.6
RATIO (IN TIMES)

0.59
0.58
0.57
0.56
0.55
0.54
0.53
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

39
 During the year 2007-2008, the debt to total funds ratio is 0.60 times and it was
decreased. And in 2009-2010 again it had an increase in the companys sales comparing to
previous year 2008-2009 is 0.56 times to 0.59 times in 2009-2010.

5.1.3.4 EQUITY TO TOTAL FUNDS

Equity to total funds explains the relationship between equity and total funds.

Equity
Equity to Total Funds =
Total Funds

Table No 5.1.10 EQUITY TO TOTAL FUNDS

Years Equity Total Funds Ratio

(In Rs.) (In Rs.) (In Times)
2007-2008 104292.34 712389.16 0.14
2008-2009 115267.00 742843.84 0.15
2009-2010 131635.65 981013.79 0.13

Chart No 5.1.10 EQUITY TO TOTAL FUNDS

0.16
0.15
RATIO (IN TIMES)

0.15
0.14
0.14
0.13
0.13
0.12
2007-2008 2008-2009 2009-2010
YEARS

INFERENCES:

40
 In the year 2014-2015, the total funds was Rs.712389.16 (in lakhs) and it shows
upward trend of Rs.981013.79 (in lakhs) and during the year 2009-2010 comparing to the year
2008-2009 is Rs.742843.84 (in lakhs).

Particulars 2009 2010 Amount Increase / Percentage

(Rs.) (Rs.) Decrease during Increase / Decrease
2009-2010 (Rs.) during
2009-2010 (In %)

41
Income from Operation 108277.62 118189.37 +9911.75 +9.15
Less: Financial Expense 64544.09 63379.55 (1164.54) (1.80)

Gross Profit (A) 43733.53 54809.82 +11076.29 +25.33

Other Income:
Profit on Sale of Shares - 2538.90 - -
Other Income 3199.28 4142.57 +943.29 +29.48

Total (B) 3199.28 6681.47 +3482.19 +108.84

Total Income 46932.81 61491.29 14558.48 +134.17

(A+B) = C

Expense:
Operating Expense:

Administration Expense (1118.64) (15.62)

7160.91 6042.27
Establishment Expense 9407.97 10011.23 +603.26
+6.41
Provision 4616.80 8608.59 +3991.79
+86.46
Depreciation 3776.10 4481.57 +705.47
+18.68

Total Operating +4181.88

29143.66 +16.75
Expense (D) 24961.78

Operating Profit 32347.63 +10376.6

+47.23
(C-D) 21971.03

Non-Operating Expense:
9672.77 +2774.88 +40.23
Taxation 6897.89

Total Non-Operating +2774.88 +40.23

9672.77
Expense (F) 6897.89
22674.86 +7601.72 +50.43
Net Profit (E-F) 15073.14

5.2.1 COMPARATIVE INCOME STATEMENT OF EME TECHNOLOGIES FOR THE

YEAR ENDED 31.03.2017

42
INFERENCES:

The comparative income statement shows income from operation amount increase during
the year 2016-2017 was Rs.9911.75 and increase in percentage of 9.15.

For the year 2016-2017, the total income indicates Rs.14558.48 and percentage increase
during the year 2016-2017 was 134.17.

The operating profit has been increased is Rs.32347.63 in the year 2017 which is
comparing to the previous year was Rs.21971.03 and the percentage shows increase by 47.23.

The Net profit amount increases during 2016-2017 is Rs. 7601.72 and shows percentage
increase by 50.43.

43
 5.2.2 COMPARATIVE BALANCE SHEET OF EME TECHNOLOGIES FOR THE
YEAR ENDED 31.03.2017
Amount Increase / Percentage
2009 2010 Decrease during Increase /
Particulars
(Rs.) (Rs.) 2009-2010 Decrease during
(Rs.) 2009-2010 (In %)
Assets:

Current Assets 68876.04 166489.36 +97613.32 +141.72

Loans & Advance
653955.77 799363.96 +145408.19 +21.98
Deferred Tax Asset
Investment 5691.36 6124.40 +433.04 +7.61
Fixed Asset 51188.87 53744.80 +2555.93 +4.99
20241.05 23237.80 +2996.75 +14.80
Total Asset
799953.09 1048960.32 +249007.23 +31.13
Liabilities and
Capital:

Current Liability
Unsecured Loan
Secured Loan 58478.77 67946.53 +9467.76 +16.19
208479.20 260960.87 +52481.67 +25.17
Total Liabilities 417728.12 588417.27 +170689.15 +40.86
(A)
684686.09 917324.67 +232638.58 +33.98
Capital and
Reserve:

Share Capital
Reserve & Stock
Options
5555.19 5555.19 - -
Total Shareholders
Funds (B) 109711.81 126080.46 +16368.65 +14.92

Total Liabilities 16368.65 +14.20

115267.00 131635.65
and Capital (A+B)

799953.09 1048960.32 249007.23 +31.13

========== ========== ============= =============

44
INFERENCES:

In the year 2016-2017, the investment it shows the uptrend for the year 2017 as
Rs.53744.80 and it has increased by 4.99%.

45
 Fixed assets has been increased was Rs.23237.80 in the year 2017 which is comparing to
the previous year and the percentage shows increase by 14.80.

During the year 2016, the shareholders fund amount to Rs.115267.00 it has been increased
to the amount of Rs. 131635.65 and percentage increased was 14.20.

Secured loans shows uptrend by Rs.588417.27 over the previous year of Rs.417728.12 and
increase in percentage of 33.98.

5.3.1 COMMON SIZE INCOME STATEMENT OF EME TECHNOLOGIES FOR THE

YEAR ENDED 31.03.2009
2008 2009
Particulars
Amount Percentage Amount Percentage
(Rs.) (%) (Rs.) (%)

Income from Operation 90176.44 100 108277.62 100

46
Less: Financial Expense 49699.52 55.1 64544.09 59.6

Gross Profit (A) 40476.92 44.88 43733.53 40.39

Other Income:
- -
Profit on Sale of Shares - - 2.95
3199.28 3.54 3199.28
Other Income
3.54
Total (B) 3199.28 3199.28 2.95

48.43
43676.20 43.34
Total Income 46932.81
(A+B) = C

Expense:
Operating Expense:
7.98 6.61
7198.81
Administration Expense 9.78 7160.91 8.68
8821.90
Establishment Expense 3.66 9407.97 4.26
3308.02
Provision 3.34 4616.80 3.48
3012.19
Depreciation 3776.10

24.77
23.05
Total Operating 22340.92
24961.78
Expense (D)

23.65
Operating Profit 20.29
21335.28
(C-D) = E 21971.03

Non-Operating Expense:
10.01
9035.47 6.37
Taxation 6897.89

10.01
Total Non-Operating 9035.47 6.37
Expense (F) 13.63 6897.89
13.92
12299.81
Net Profit (E-F) 15073.14

INFERENCES:

47
 The operating profit of the EME Technologieshas been increased during the year 2015-
2016, the operating profit shows Rs.21335.28 in 2015 and Rs.21971.03 in the financial year
2016.

For the year 2015, the establishment expense shows Rs.8821.90 and it has been
increased to Rs.9408.97 during the year 2016.

In 2015, provision is 3.66% and it indicates increase during the year 2016 was 4.26%.

The operating expenses incurred to the Sundaram Finance Limited during the financial
year 2015 which shows Rs.22340.92 and it has risen to Rs.24961.78 during the financial year
2016.

The net profit percentage recorded as 13.63 in 2015 where as in the year 2016 the
companies profit went upward with the percentage of 13.92.

48
5.3.2 COMMON SIZE BALANCE SHEET OF SUNDARAM FINANCE LIMITED FOR
THE YEAR ENDED 31.03.2009
2008 2009
Particulars
Amount Percentage Amount Percentage
(Rs.) (%) (Rs.) (%)
Assets:

Current Assets 56187.53 7.24 68876.04 8.61

Loans & Advance
652655.00 84.10 653955.77 81.74
Deferred Tax Asset
Investment 4263.67 0.54 5691.36 0.71
Fixed Asset 45645.50 5.88 51188.87 6.39
17264.30 2.22 20241.05 2.53
Total Asset
776016.00 100 799953.09 100
=========== =============
Liabilities and
Capital:

Current Liability
Unsecured Loan
Secured Loan 63626.84 58478.77
8.19 7.31
176379.89 208479.20
22.72 26.06
Total Liability (A) 431716.93 417728.12
55.63 52.21

671723.66 86.56 684686.09 85.59

Capital and Reserve:

Share Capital
Reserve & Stock
Options
2777.60 0.35 5555.19 0.69

Total Shareholders 101514.74 13.08 109711.81 13.71

Funds (B)

104292.34 13.43 115267.00 14.40

Total Liabilities and
Capital (A+B)

100 100
776016.00 799953.09

49
 ========== =========== ============ =============

INFERENCES:

The current assets have increased during the financial year 2009 is 8.61% which is
comparing to 2008 was 7.24% of the Sundaram Finance Limited.

50
 There was an increase in fixed assets of Rs.20241.05 comparing to the year 2009. Higher
the ratio is more than the efficiency in utilization of fixed assets.

The current liabilities have been decreased to 7.31% of the total liabilities of the
Sundaram finance Limited during the year 2009. The current liability was 8.91% of the total
liabilities during the year 2008.

Reserves and stock options has been increased was in the year 2009 which is
Rs.109711.81 comparing to the previous year and the percentage shows increase by 13.71%.

During the year 2008-2009, the shareholders fund amount to Rs.104292.34, it has been
increased to the amount of Rs.115267 and the percentage increased was 14.40% in 2009.

1.4 CASH FLOW STATEMENT OF SUNDARAM FINANCE LIMITED FOR THE YEAR
ENDED 31.3.2010

Particulars 2009-2010
(In Rs.)

51
(A)CASH FLOW FROM OPERATING ACTIVITIES
Net Profit
Add: Lease Equalization Account 226,74.86
Provision for Taxation (Including Wealth Tax) (91.85)
96,72.77
Add: Financial Expenses 322,55.78
Depreciation 633,79.55 956,35.33
Provision against Investments 45,80.23
Provision against Non - Performing assets 1,44.64
General Provisions on Standard Assets 4,79.98
Employee Stock Option Compensation Expenses 31,61.69
(Profit) loss on sale of assets 23.28
(Profit) loss on sale of Investments 34.21
Interest / Dividend Income (53,36.95)
Effect of Foreign Exchange rates on Cash and Cash Equivalents, (22,00.38)
net 0.18
OPERATING PROFIT BEFORE WORKING CAPITAL
CHANGES 965,22.21
Increase in Net Stock on hire 67,08.38
Decrease in Leased assets - net of sales (60,87.57)
Increase in Trade Bills purchased 15,44.60
Decrease in Net Investment in Lease (32.25)
Decrease in Loans and Advances (1465,04.17)
Increase in Other Receivables 13.29
Decrease in Bank Deposits (net) (1079,89.81)
Decrease in SLR Investments - net of sales (22,40.77)
Increase in Current Liabilities 32,87.01
Cash generated from Operations
Financial Expenses (619,43.37)
Direct Taxes Paid (709,48.53)
(90,05.16)
NET CASH FROM OPERATING ACTIVITIES (A)
(2257,27.61)
B) CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets
(15,38.40)
Sale of Fixed Assets
96.09
Purchase of Investments
(12677,85.28
Purchase of Investments in Subsidiaries/Joint Venture
)
Sale of Investments
(18,33.50)
Interest Received
12746,00.34
Dividend Received
2.75
NET CASH FROM INVESTING ACTIVITIES (B)
52
 21,97.65
C) CASH FLOW FROM FINANCING ACTIVITIES 57,39.65
Proceeds from Issue of Debentures
Debentures Redeemed
Increase (Decrease) in Long Term Borrowings 3475,75.18
Increase (Decrease) in Fixed Deposits (2686,00.00)
Increase (Decrease) in Short Term Loans and Advances 869,13.98
Dividend paid (including Corporate Dividend Tax) 154,84.84
NET CASH FROM FINANCING ACTIVITIES (C) 417,96.83
(53,51.34)
D) Effect of Foreign Exchange rates on Cash and Cash 2178,19.49
Equivalents, net (D)

NET INCREASE IN CASH AND CASH EQUIVALENTS (A)+ (0.18)

(B)+(C)+(D)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF (21,68.65)

THE YEAR

CASH AND CASH EQUIVALENTS AT THE END OF THE 48,39.35

YEAR

COMPONENTS OF CASH AND CASH EQUIVALENTS 26,70.70

AT THE END OF THE YEAR

Current Account with Banks

Cash, Stamps and Stamp Papers on Hand
13,50.13
13,20.57
26,70.70

53
INFERENCES:

In the year 2009-2010, the operating profit before working capital changes show the
profit amount of Rs.96522.

The employee stock option compensation expenses of the Sundaram finance Limited
has shown 31,61.69 (Rs. in lakhs) during the year 2009-2010.

While the Net Cash from investing activities depicts Rs.5739.65 in the year 2009-2010.

There was a increase in net stock on hire during the financial year 2009-2010 of
67,08.38 (Rs. in lakhs).

The financial year 2009-2010 depicts the Net cash from financing activities amount of
Rs.217819.49 shows upward profit in the company.

Cash and cash equivalents at the end of the year were Rs.4839.35 it shows that the
company position in the year 2009-2010.

54
5.5 REGRESSION ANALYSIS FOR SALES

Sales
Year X Rs XY X2
( in Lakhs )
Y
2008 1 90176.44 90176.44 1
2009 0 108277.62 0 0
2010 1 118189.37 118189.37 1
Total x = 0 y= 316643.43 x y= 28012.93 X2 =2

Y=Na+bX

XY = a X + b X2

Y=a+bX

3 a + 0 b = 316643.43 --------------- ( 1 )

0 a + 2 b = 28012.93 --------------- ( 2 )

Solving ( 1 ) and ( 2 ) We get,

a = 105547.81

b = 14006.46

When X = 2, Y2011 = 105547.81 + 14006.46( 2 )

Y2011 = Rs. 133560.73 ( in Lakhs )

When X = 3, Y2012 = 105547.81 + 14006.46( 3 )

Y2012 = Rs. 147567.19 ( in Lakhs )

55
INFERENCE:

The net sales during the year 2008 were 90176.44 (Rs. in Lakhs) which has been
increased to 108277.62 (Rs. in Lakhs) during 2009 which also raised to 118189.37 (Rs. in Lakhs)
during 2010.

The projection is made for the fore coming years 2011 and 2012 where the net sales
would be 133560.73 (Rs. in Lakhs) during the year 2011 and the net sales during the financial
year 2012 will be 147567.19 (Rs. in Lakhs).

56
CHAPTER - 6
CONCLUSION
AND
SUGGESTIONS

57
6 SUMMARY AND CONCLUSION

6.1 FINIDNGS

The Gross Profit Ratio shows that increasing in sales has maintained the companies profit
level. In the year 2008-2009, the percentage shows 20.29 it has been increased during the
year 2009-2010 to 27.37.

The net profit ratio has been increased to 19.18 during the financial year 2009 2010 to
13.92 during 2008 2009 which indicates that there is an improvement in the operational
efficient of the business and it leads to the increase in the profitability of the firm.

It has found that the return on equity during the year 2008-2009, the company shows
5.61% of ratio and it has risen to 6.80%. This is a clear indication of overall operation is
efficient.

The Working capital in the year 2008-2009, the sales of the company is low at
Rs.666319.18 and it is increased to Rs.898497.54 in 2009-2010. It measures the effective
utilization of working capital.

The capital turnover of capital employed in the financial year 2008-2009 it shows
Rs.533288.26 and during the year 2009-2010 it is increased to Rs.720052.92. It has
effective utilization of capital employed under the current year.

58
 Fixed asset turnover shows increase in sales of Rs.118189.37 comparing to the previous
year of Rs. 108277.62 and the firm should maintain this increasing trend in future also.

During the year 2009-2010, the current ratio is 3.02% and it is more when compared with
previous year 2008-2009 is 1.36 %. So the short term liquidity of a concern, comparison
of current assets and current liabilities is inevitable.

The debt equity ratio has shows 3.62% in 2008-2009 and it has been raised to 4.47%
during 2009-2010 which indicates that the company has increased over the years with
increase in shareholder funds as well.

It is found that the shareholders funds had increased by Rs.16368.65 over the percentage
of 14.20 in comparative income statement analysis. It determines the profitability from
the shareholders point of view.

The financial year 2009-2010 depicts the Net Cash from financing activities amount of
Rs.217819.49 shows upward profit in the company.

59
 6.2 SUGGESTIONS

The current ratio is improving rapidly so the company wants to keep an eye on the
current assets flow. The company has been suggested to reduce the expenditure as it increases
every year. Decrease in expenses will increase the profitability.

By over viewing the working capital turnover ratio it is clear that the company
wants to utilize its working capital efficiently that is the excess current assets should be adjusted
according to current scenario. Though the net profit shows it is increased but we found that the
net profit ratio has been decreased. So the company should consider increasing the sales in turn
to increase the actual profit.

The debt equity ratio of the company is also increasing. The company should focus
on the debt and long term funds which are utilized in the company. The excess cash flow should
or can be utilized in any new ventures if the company wishes to do.

60
6.3 CONCLUSION

In the study of Financial Performance of Sundaram Finance Limited Chennai, it is

clear that the companys financial performance is satisfactory. The company has stable growth
and it shows a greater efficiency in all the areas it works.

If the company utilizes its working capital then the company can go heights which it
wanted to achieve. The comparative income statement shows increase in the current year of net
profit and it depict the companies current profit position. To improve the efficiency the company
will strive for better performance and increase the market share the company.

The suggestions provided through the study will help the company to improve the
operational performance efficiently. The suggestions provided through the study will help the
company to improve the operational performance efficiently.

61
REFERENCES

62
REFERENCES

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APPENDICES
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