CONTENTS

CHAPTERS PAGE NO.

CHAPTER – I INTRODUCTION

CHAPTER – II COMPANY PROFILE

CHAPTER –III THEORETICAL BACKGROUND

CHAPTER – IV DATA ANALYSIS AND INTERPRETATION

CHAPTER –V

Findings

Suggestions

Conclusion

Bibliography
Annexure
 CHAPTER--I

INTRODUCTION

Ratio Analysis is one of the techniques of financial analysis where ratios are used
as a yardstick for evaluating the financial condition and the performance of a firm.
Analysis and interpretation of various accounting ratios gives a skilled and experienced
analyst a better understanding of the financial condition and performance of the firm than
what he could have obtained only through a perusal of financial statements.

In brief, financial analysis is the process of selection, relation and evaluation,

However, it is to be notice that there is a basic limitation of the traditional financial
statement comprising the balance sheet and the profit and loss account i.e., they do not
give all the information regarding financial operation of the firm. According up to large
extent. Pm instance accounts ratio may indicate not only the financial position and
precautions but also the past polices and actions they have caused.

MEANING:

Ratios are relationships expressed in mathematical terms between figures, which

are connected with each other in some manner. Obviously, no purpose will be served by
comparing two sets of figures are also unfit for comparison.

Ratios can be expressed in two ways :

Time: When one value is divided by another, the unit used to express the quotient is
termed as “Times”.
Percentage: If 100 multiply the quotient obtained, the unit of expression is termed as
“Percentage”.

Accounting ratios are, therefore, mathematical relationships expressed between

inter – connected accounting figures.
OBJECTIVE OF THE STUDY:

 To measure the overall financial position of “REDDY’S LAB”.

 To study the important aspects like liquidity leverage and profitability of the
company.

 To find out the operating efficiency of the company.

 To suggest measures for improving the performance of the company in the light of
the above.

NEED AND IMPORTANCE OF THE STUDY:

 The study has great significance and will provide benefits to various parties whom
directly or interact with the company.

 It is important because its is beneficial to the employees and offer motivation by

showing how actively they are contributing for the company growth.

 It is beneficial to the management of the company as it provides a clear-cut picture

with to liquidity, profitability, leverage and activity ratios.
RESEARCH METHODOLOGY

Source of data:

After going through different methods of data collection it was decided that both
primary and secondary data are suitable for this survey

Primary data:

The primary data was collected mainly with the interaction and discussions with
the company executives.

Secondary data:

Most of the calculations are made on the financial statements of the

company and the company the financial statement for the 6 years

Some of the information regarding the theoretical aspects was collected

By referring textbooks and reference books

Limitations:

Every study is conducted with some limitations. This study is no exception.

The limitations are due to busy schedule of the higher authorities concerned. The
availability of them was difficult in order to hold discussion related to the study.

The study was conducted with in a period of 2 months, so this study may not be in
detail and full pledged.
 CHAPTER—II
COMPANY PROFILE

ACC (ACC Limited) is India's foremost manufacturer of cement and concrete.

ACC's operations are spread throughout the country with 17 modern cement factories,
more than 50 Ready mix concrete plants, 21 sales offices, and several zonal offices. It has
a workforce of about 9,000 persons and a countrywide distribution network of over 9,000
dealers.

Since inception in 1936, the company has been a trendsetter and important benchmark for
the cement industry in many areas of cement and concrete technology. ACC has a unique
track record of innovative research, product development and specialized consultancy
services. The company's various manufacturing units are backed by a central technology
support services centre - the only one of its kind in the Indian cement industry.

ACC has rich experience in mining, being the largest user of limestone. As the largest
cement producer in India, it is one of the biggest customers of the domestic coal industry,
of Indian Railways, and a considerable user of the country’s road transport network
services for inward and outward movement of materials and products.

Among the first companies in India to include commitment to environmental protection

as one of its corporate objectives, the company installed sophisticated pollution control
equipment as far back as 1966, long before pollution control laws came into existence.
Today each of its cement plants has state-of-the art pollution control equipment and
devices.

ACC plants, mines and townships visibly demonstrate successful endeavours in quarry
rehabilitation, water management techniques and ‘greening’ activities. The company
actively promotes the use of alternative fuels and raw materials and offers total solutions
for waste management including testing, suggestions for reuse, recycling and co-
processing.

ACC has taken purposeful steps in knowledge building. We run two institutes that offer
professional technical courses for engineering graduates and diploma holders which are
relevant to manufacturing sectors such as cement. The main beneficiaries are youth from
remote and backward areas of the country.

ACC has made significant contributions to the nation building process by way of quality
products, services and sharing expertise. Its commitment to sustainable development, its
high ethical standards in business dealings and its on-going efforts in community welfare
programmes have won it acclaim as a responsible corporate citizen. ACC’s brand name is
synonymous with cement and enjoys a high level of equity in the Indian market. It was
the first cement company to figure in the list of Consumer SuperBrands of India.
 BOARD OF DIRECTORS
Mr N. S. Sekhsaria
Chairman

Mr Bernard Terver
Deputy Chairman

Mr Harish Badami
Chief Executive Officer & Managing Director

Mr Eric Olsen
Mr Shailesh Haribhakti
Mr Sushil Kumar Roongta
Mr Ashwin Dani
Mr Farrokh K. Kavarana
Mr Vijay Kumar Sharma
Mr Arunkumar Ramanlal Gandhi
Mrs Falguni Nayar

Over the years, ACC has been the proud recipient of some of the country's honours. ACC
became the first recipient of India's first ever CSR award which was the National Award
for outstanding performance in promoting rural and agricultural development activities
instituted by ASSOCHAM in 1976. Over the years, there have been many felicitations for
achievements in Rural and community development, Safety, Health, Tree plantation,
afforestation, Clean mining, Environment awareness and protection.

Awards received by us this year and in preceding years may be seen via links provided
alongside. Here is a sample of some distinguished and coveted awards won by us over the
years conferred by organisations of repute.

Awards & Accolades

 India's Most Admired Companies in the Cement Sector by Fortune India magazine
 and Haygroup India

 CII - ITC Sustainability Prize for large companies.

 Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry

 Outstanding Corporate Vision, Triple Impact - Business Performance Social &

Environmental Action and Globalisation from Federation of Indian Chambers of
Commerce and Industry

 Jamnalal Bajaj UCHIT VYAVAHAR PURASKAR to ACC for 2008 for fair
Business Practices by Council for Fair Business Practices

 National Award for Fly Ash Utilisation - by Ministry of Power, Ministry of

Environment & Forests and Dept of Science & Technology, Govt of India - for
manufacture of Portland Pozzolana Cement.

 Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment and

Forests for "extraordinary work" carried out in the area of afforestation.

 Indira Gandhi Memorial National Award - for excellent performance in prevention

of pollution and ecological development

 FIMI National Award - for valuable contribution in Mining activities from the
Federation of Indian Mineral Industry under the Ministry of Coal.

 National Award for Excellence in Water Management by Confederation of Indian

Industry (CII)

 Award for Excellence in Financial Reporting for Annual Report by Institute of

Chartered Accountants of India (ICAI)

MILESTONES OF ACC LTD

1936 Incorporation of The Associated Cement Companies Limited on August 1, 1936.

1936 First Board Meeting of The Associated Cement Companies Limited held at Esplanade
House, Mumbai on November 10, 1936.

1937 With the transfer of the 10th company to ACC, viz. Dewarkhand Cement Company,
the formation of ACC is complete on October 23, 1937.

1939 Work begins on constructing a new building for the company's head office based on a
design of Ballardie Thompson & Mathews adjudged winner in an all India contest.
When completed, the building - Cement House - is requisitioned by the Royal Air
Force for wartime use and vacated only in 1946.

1944 ACC’s first community development venture near Bombay

1947 India’s first entirely indigenous cement plant established at Chaibasa in Bihar
1952 Village Welfare Scheme launched

1955 Sindri cement works used the waste product calcium carbonate sludge from fertilizer
factory at Sindri.

1956 Bulk Cement Depot established at Okhla, Delhi

1957 Technical training institute established at Kymore, Madhya Pradesh.

1957 Katni Refractories

1961 Blast furnace slag from TISCO used at the Chaibasa Unit to manufacture Portland
Slag Cement for the first time in India.

1961 Manufacture of Accocid Cement, which resists the corrosive action of acids and
chemicals.

1961 Oilwell Cement manufactured at ACC Shahabad Cement Works in Karnataka for
cementation of oilwells upto a depth of 6,000 feet.

1961 Manufacture of Hydrophobic (waterproof) cement at ACC Khalari Cement Works in

Bihar.

1962 Manufacture of Accoproof, a waterproofing additive.

1965 ACC’s Central Research Station (CRS) established at Thane

1965 Manufacture of Portland Pozzolana Cement.

1965 Manufacture of Calundum, a High Alumina Binder; Firecrete, Low Density Alumina
Castables and High Alumina Refractory Cement.

1968 Advent of computers in ACC for data processing and designing management
information and control systems.

1968 ACC supplied and commissioned one-million-tonne iron ore pelletising plant ordered
by TISCO

1971 Manufacture of Whytheat Castables A, K, C and Cal-Al-75

1973 Take-over of The Cement Marketing Company of India (CMI)

1977 ACC receives ASSOCHAM first national award for the year 1976 instituted for
outstanding performance in promoting rural and agricultural development activities.

1978 Introduction of the energy efficient precalcinator technology for the first time in India.
Full scale commercial production based on MFC technology at Wadi in 1979.

1979 ACC wins international contract for operation and management of a new one million
tonne cement plant at Yanbu-Ras Biridi in Saudi Arabia.

1982 Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka.

1984 ACC achieves a breakthrough in import substitution by developing and supplying a

special G type of oil well cement to ONGC.

1987 ACC develops a new binder for use at sub-zero temperatures, which is successfully
 used in the Indian expedition to Antarctica.

1992 Incorporation of Bulk Cement Corporation of India, a joint venture with the
Government of India.

1993 ACC starts the commercial manufacture of Ready Mixed Concrete at Mumbai.

1995 ACC selected as Most Respected Company in India by Business India.

1996 Damodhar Cement & Slag Ltd, Purulia, West Bengal becomes a subsidiary of ACC

1998 Commissioning of the 0.6 MTPA cement grinding unit at Tikaria, Uttar Pradesh.

1999 Commissioning of captive power plants at the Jamul and Kymore plants in Madhya
Pradesh.

1999 Tata group sells 7.2% of its stake in ACC to Ambuja Cement Holdings Ltd, a
subsidiary of Gujarat Ambuja Cements Ltd. (GACL)

2000 Tata Group sells their remaining stake in ACC to the GACL group, who with 14.45%
now emerge as the single largest shareholder of ACC.

2001 Commissioning of the new plant of 2.6 MTPA capacity at Wadi, Karnataka plant, the
largest in the country, and among the largest sized kilns in the world.

2002 ACC wins PHDCCI Good Corporate Citizen Award

2003 IDCOL Cement Ltd becomes a subsidiary of ACC

2004 IDCOL Cement Limited is renamed as Bargarh Cement Limited (BCL).

2004 ACC raises US $ 100 million abroad through Foreign Currency Convertible Bonds
(FCCB’s) for US$ 60 million and Global Depository Shares (GDS’s) for US $ 40 million.
Both offerings are listed on the London Stock Exchange.

2004 ACC named as a Consumer Superbrand by the Superbrands Council of India,

becoming the only cement company to get this status.

2004 GreenTech Safety Gold and Silver Awards awarded to Madukkarai Cement Works and
Katni Refractory Works by Greentech Foundation for outstanding performance in
Safety Management System.

2005 ACC receives the CFBP Jamnalal Bajaj Uchit Vyavahar Puraskar Certificate of Merit –
2004 from Council For Fair Business Practices.

2005 Holcim group of Switzerland enters strategic alliance with Ambuja Group by acquiring
a majority stake in Ambuja Cements India Ltd. (ACIL) which at the time held 13.8 %
of the total equity shares in ACC. Holcim simultaneously makes an open offer to ACC
shareholders, through Holdcem Cement Pvt. Limited and ACIL, to acquire a majority
shareholding in ACC. Pursuant to the open offer, ACIL’s shareholding in ACC increases
to 34.69 % of the Equity share capital of ACC.

2005 Commissioning of Modernisation and Expansion project at Chaibasa in Jharkhand,

replacing old wet process technology with a new 1.2 MTPA clinkering unit, together
with a captive power plant of 15 MW.

2005 Financial accounting year of the company changed to calendar year January-
December
2006 Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement Limited
and Tarmac (India) Limited merged with ACC

2006 ACC announces new Workplace policy for HIV/AIDS

2006 Change of name to ACC Limited with effect from September 1, 2006 from The
Associated Cement Companies Limited.

2006 ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber of
Commerce and Industry

2006 New corporate brand identity and logo adopted from October 15, 2006

2006 ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at Wadi in
Karnataka– the first ever such project by a private sector company in India.

2007 ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu

2007 Sumant Moolgaokar Technical Institute completes 50 years and reopens with new
curriculum

2008 Ready mixed concrete business hived off to a new subsidiary called ACC Concrete
Limited.

2008 ACC Cement Technology Institute formally inaugurated at Jamul on July 7.

2008 First Sustainable Development Report released on June 5.

2008 ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate
Citizen of the year 2008

2008 Project Orchid launched to transform our Corporate Office, Cement House into a
green building.

2009 ACC received the Jamanalal Bajaj "Uchit Vyavahar Puraskar" of Council for Fair
Business Practices

2009 ACC is allotted coal blocks in Madhya Pradesh and West Bengal.

2009 ACC's new Grinding plant of capacity 1.60 million tonnes inaugurated at Thondebhavi
in Karnataka.

2009 Cement House transformed into Green building with Leadership in Energy &
Environmental Design (LEED) Gold certification from Indian Green Building Council.
First project in the country in category major renovation of existing building.

2010 Kudithini Cement Grinding Plant inaugurated in Karnataka on January 4, 2010 with a
capacity of 1.1 MTPA of Portland Slag Cement.

2010 ACC acquires 100 percent of the financial equity of Encore Cements & Additives
Private Limited which is a slag grinding plant in Vishakhapatnam in coastal Andhra
Pradesh. This company became a wholly-owned subsidiary of ACC in January 2010.

2010 ACC enters its platinum jubilee year - the first company in the cement industry to
achieve this status

2010 ACC receives FICCI Award for Outstanding Corporate Vision Triple Impact Business
 Performance Social & Environmental Action & Globalisation for 2009-10 - a unique
award received for the first time

2010 New clinkering line of capacity 7000 tonnes per day commissioned at Chanda in
Maharashtra in November 2010. Fully integrated plant of 3.8 million tonnes per
annum of cement inaugurated in January 2012.

2011 World's largest kiln installed at ACC Cement Plant, Wadi, Karnataka with a capacity of
12,500 tonnes per day creating new landmarks for cement industry

2011 Central Control Room Building at ACC Chanda Plant, Maharashtra set up as a Green
building, the first of its kind in an industrial environment

2011 ACC Secretarial & Share processes received ISO 9001 – 2008 Certification

2012 ACC launches M-100 grade concrete especially designed for the construction of high
intensity towers

2012 Amalgamation of two subsidiary companies ACC Concrete and Encore Cement &
Additives with ACC Limited

2012 First cement company in India to induct use of Radio Frequency Identification Device
(RFID) and Global Positioning System (GPS) tracking to accelerate turnaround time of
trucks

2013 La Residency at Thane, a 45 year old apartment block retrofitted as a modern hostel,
received LEED Platinum certification.

2013 ACC sets up Green Building Material Centres in Maharashtra, Uttar Pradesh, Madhya
Pradesh, and Rajasthan as one stop shops to promote low-cost locally made green
construction materials and expertise to rural and semi-urban India.

2013 ACC wins CII-ITC Sustainability Prize, the highest honour awarded by CII ITC for
2013, as one of India's Most Sustainable Companies.

2013 ACC ranked as India's Most Admired Company in the cement sector by Fortune India
and Hay Group India.

2014 ACC launches its first Waste Heat Recovery System (WHRS) at Gagal in January
2014, marking an important step in energy conservation. The WHRS harnesses waste
heat from exhaust gases discharged in manufacturing and converts it into useful
electrical energy.

2014 ACC sets up a plant in Bardhaman, West Bengal to manufacture EcoBricks which
are eco-friendly and technically superior fly ash based bricks to meet the emerging
needs of the construction industry in a sustainable way.

HUMAN RESOURCES

ACC has a large workforce of about 9,000 people, comprising experts in various
disciplines assisted by a dedicated workforce of skilled persons. ACC employees, referred
to as the ACC Parivar, come from all parts of the country and belonging to a variety of
ethnic, cultural and religious backgrounds. ACC employees display a strong sense of
loyalty to the Company and their special stellar qualities as ‘value-adding’ human capital
are well known in the industry.
.
PRODUCTS

ACC manufactures the following types of cement, in addition to which, it provides Bulk
Cement and Ready Mix Concrete.

Ordinary Portland Cements

43 Grade Cement (OPC 43 Grade)

53 Grade Cement

Blended Cements

Fly-ash based Portland Pozzolana Cement

Portland Slag Cement

 CHAPTER--III

Theoretical background
 INTRODUCTION ON RATIO ANALYSIS

Ratio Analysis is one of the techniques of financial analysis where ratios are used
as a yardstick for evaluating the financial condition and the performance of a firm.
Analysis and interpretation of various accounting ratios gives a skilled and experienced
analyst a better understanding of the financial condition and performance of the firm than
what he could have obtained only through a perusal of financial statements.

In brief, financial analysis is the process of selection, relation and evaluation,

However, it is to be notice that there is a basic limitation of the traditional financial
statement comprising the balance sheet and the profit and loss account i.e., they do not
give all the information regarding financial operation of the firm. According up to large
extent. Pm instance accounts ratio may indicate not only the financial position and
precautions but also the past polices and actions they have caused.

MEANING:

Ratios are relationships expressed in mathematical terms between figures, which

are connected with each other in some manner. Obviously, no purpose will be served by
comparing two sets of figures are also unfit for comparison.

Ratios can be expressed in two ways :

Time: When one value is divided by another, the unit used to express the quotient is
termed as “Times”.
Percentage: If 100 multiply the quotient obtained, the unit of expression is termed as
“Percentage”.

Accounting ratios are, therefore, mathematical relationships expressed between

inter – connected accounting figures.
ADVANTAGES::

Following are some of the advantages of ratio analysis:

Simplifies financial statements :

Ratio Analysis provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firms. They also reveal strong firms
and weak firms, over – valued and undervalued firms.

Makes intra – firm comparison possible :

Ratio Analysis also makes possible comparison of the performance of the
different divisions of the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.
Assessing the operational efficiency:
Accounting ratios help to have an idea of the n working of a concern. The
efficiency of the firm becomes evident when analysis is based on accounting ratios.
Helps in Planning:
Ratio Analysis helps in planning and forecasting. Over a period of time a firm or
industry develops certain norms that may indicate future success of failure. If
relationship.

Changes in firm’s data over different time periods, the ratios may provide clues on
trends and future problems.

Locating the weak sports of the business:

Accounting ratios are of great assistance in locating the weak spots in the business
even though the overall performance may be efficient.

LIMITATIONS:

Accounting ratios are subject to certain limitations. They are given below:
False results if based on incorrect accounting data:

Accounting ratios can be correct only if the data are correct. Sometimes, the
information given in the financial statements is affected by window dressing, i.e.,
showing position better than what actually.

No idea of Probable happenings in future:

Ratios are an attempt to make an analysis of the past financial statements. Now –
a –days keeping in view the complexities of the business, it is important to have an idea
of the probable happenings in future.
Variation in Accounting Methods:
Comparison will become difficult if the two concerns follow the different methods
of providing depreciation or valuing stock. Similarly, if the two firms were following two
different standards and methods, an analysis by reference to the ratios would be
misleading.
Price level Charges:
Financial analysis based on accounting ratios will give misleading results if the
effects of changes in price level are not taken into account.
No fixed Standards:
]
No fixed standards can be laid down for ideal ratios. Because circumstances
differ from concern to concern and the nature of each industry is different.
Different meanings assigned to the same term:
Different firms, in order to calculate ratio may assign different meanings.

CLASSIFICATION OF RATIOS:
Ratios can be classified into different categories depending upon the basis
of classification.

TRADITIONAL CLASSIFICATION:
The Traditional Classification has been on the basis of the financial
statement to which the determinant of a ratio belongs. On this basis the ratios could be
classified as:
1. Profit and Loss Accounting Ratios or Revenue/income
2. Balance Sheet Ratios or position statement Ratios
3. Composite/Mixed Ratios or Inter Statement Ratios.
1. Profit and Loss Accounting Ratios or Revenue/Income
 Gross Profit Ratio
 Operating Ratio
 Operating Profit Ratio
 Net Profit Ratio
 Expense Ratio
 Interest Coverage Ratio

2.Balance Sheet ratios or position statement ratios

 Current Ratio
 Liquid Ratio(Acid Test or Quick Proof)
 Absolute Liquidity Ratio
 Debt Equity Ratio
 Proprietary Ratio
 Capital Gearing Ratio
 Assets – Proprietor Ratio
 Capital Inventory to Working Capital Ratio
 Ratio of Current Assets to Fixed Assets

3.Composite/Mixed Ratios or Inter Statement Ratios

 Stock Turn Over Ratio
 Debtors Turn Over Ratio
 Payable Turn Over Ratio
 Fixed Assets Turn Over Ratio
 Return of Equity
 Return on Shareholders Funds
 Return on Capital Employed
 Capital turn over Ratio
 Working Capital Turn over Ratio
 Return on Total Resources
 Total Assets Turn Over Ratio
FUNCTIONAL CLASSIFICATION:
The above basis of classification has been found to be crude and unsuitable
because analysis of Balance Sheet and Income Statement cannot be done in isolation.
They have to be studied together in order to determine the profitability and solvency of
the business. In order the ratios serve as a tool for financial analysis, they are now
classified as:
1. Profitability Ratios
2. Coverage Ratios
3. Turnover Ratios
4. Financial Ratios
5. Leverage Ratios
1. PROFITABILITY RATIOS:
In Relation to Sales
 Operating Ratio
 Operating Profit Ratio
 Net Profit Ratio
 Expenses Ratio
In Relation to Investment
 Return on Capital Employed
 Return on Equity
 Earning per share
 Price – Earning Ratio
 Return on Total Assets
2. CAVERAGE RATIOS:
 Fixed Interest Cover

3.TURNOVER RATIOS:
 Inventory Turnover Ratio
 Debtors Turnover Ratio
 Fixed Assets Turnover Ratio
 Total Assets Turnover Ratio
 Working Capital Turnover Ratio
4.FINANCIAL RATIOS:
4.1. Liquidity Ratio:
 Current Ratio
 Quick Ratio
 Absolute Quick Ratio
 Ratio of Inventory to Working Capital
4.2. Stability Ratios:
 Fixed Assets Ratio
 Debt-Equity Ratio
 Debt Ratio
 Ratio of Current Assets to Fixed Assets
4.LEVERAGE RATIOS:
 Operating Leverage
 Financial Leverage
1. PROFITABILITY RATIO:
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. A lower profitability may arise due to the lack of control over the
expenses. Bankers, financial institutions and other creditors look at the profitability
ratios as an indicator whether or not the firm earns substantially more than it pay interest
for the use of the borrowed funds and whether the ultimate repayment of their debt
appears reasonably certain. Owners are interested to know the profitability as it
indicates the return, which they can get on their investments. The following are the
important profitability ratios:

In relation to Sales:
1.1 Operating Ratio:
This ratio indicates 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, (i.e.
administration, selling and distribution expenses) which have matching
relationship with sales. It excludes income and expenses, which have e no bearing on
production and sales, i.e., non – operating incomes and expenses as interest and dividend
received on investment, interest paid on long-term loans and debentures, profit or loss on
sale of fixed assets or long – tern investments. It is calculated as follows:

Operating Ratio = Cost of Goods Sold + Operating Expenses X 100

Net Sales
Here,

Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses +

Manufacturing Expenses – Closing Stock or Sales – Gross Profit.

Operating Expenses = Administrative Expenses + Selling and Distribution

Expenses

1.2 Operating Profit Ratio:

This ratio establishes the relationship between operating profit and sales and is
calculated as follows:
Operating Profit
Operating Profit ratio = ___________________  100
Net Sales

Where,
Operating Profit Ratio = Net Profit +Non-operating Income
Or
= Gross Profit –Operating Expenses

Operating Profit ratio can also be calculated with the help of operating ratio as
follows:
Operating Profit Ratio = 100-Operating Ratio.
This ratio indicated the portion remaining out of every rupee worth of sales after all
operating costs and expenses have been met. Higher the ratio, the better it is.

1.3Net Profit Ratio:

This ratio explains per rupee profit generating capacity of sales. If the cost
of sales
Is lower, than the net profit will be higher and then we divide it with the net sales, the
result is the sales efficiency. If lower is the net profit per rupee of sales, lower will be the
sales efficiency. The concerns must try for achieving greater sales.

Net Profit After Tax

Net Profit Ratio = -----------------------------  100
Net Sales

Efficiency for maximizing the RIO. This ratio is very useful to the proprietors and
prospective investors because it reveals the over all profitability of the concern. This is
the ratio of net profit after taxes to net sales and is calculated as follows:

1.4 Expenses Ratio:

These are calculated as ascertain the relationship that exists between

operating expenses and volume of sales one of the ratio are

Administrative Expenses Ratio:

Administration Expenses Ratio

Administrative Expenses Ratio = ---------------------------------------------  100
Net Sales
In relation to Investments:

1.5 Return on Capital Employed:

This ratio is an indicator of the earning capacity of the capital employed in the
business. This ratio is calculated as follows;
Operating Ratio
Return on Capital Employed = ----------------------------  100
Capital Employed
Here
Operating Profit =Profit before interest and tax

Capital Employed = Equity share capita + preference Share Capital + Undistributed

Profit + Reserves and Surplus + long term Liabilities – Fictitious Assets – non –business
Assets .

This ratio considered to be the most important ratio because it reflects the overall
efficiency with which capital is used. This ratio is helpful tool for making capital
budgeting decisions.

1.6. Return on Equity:

Common or ordinary shareholders are entitled to the residual profits the rate of dividend
is not fixed the earning a may be distributed to share holders or retained in the business A return
on shareholders equity calculated to see the profitability of owner’s in vestment
Return on Equity =Profit after tax
ss
Net Worth

1.7 Earning per Share:

This helps in determining the market price of equity shares of the company
and in estimating the company’s capacity to pay dividend to its equity shareholders It is
calculated as follows:
Earning per Share =Net Profit After Tax
No. of Equity Shares
 If earning per share increases, there is a possibility that the company may pay
more dividend or issue bonus shares. In short the market price of the share of a company
with be affected by all these factors. A comparison of earning per share of the company
with another company will also help in deciding whether the equity capital is being
effectively used or not.

1.8 Price-Earning Ratio:

This ratio indicated the market value of every rupee earning in the firm and is
compared with industry average. High ratio indicated the share is overvalued and low
ratio shows that share is undervalued. It is computed by the following formula:

Price Earning Ratio = Market Price per equity share

__________________________

Earning per share

1.9 Return on Total Assets:

This ratio is calculated to measure the profit after tax against the amount invested
in total assets to ascertain whether assets are being utilized properly or not. It is calculated
as under:

2. Coverage Ratios:

These ratios indicate the extent to which the interests of the persons entitled to get
a fixed return (i.e., interest or dividend or scheduled repayments as per agreed term are
safe. The higher the cover, the cover better it is . Under this category the following ratio
are calculated:
2.1.Fixed Interest coverage Ratio:

It really measures the ability of the concern to service the debt. This ratio is very
important from lender’s point of view and indicated whether the business would earn
sufficient profits to pay periodically the interest charges. It is calculated as under :

Net profit before interest and tax

Fixed Interest Coverage Ratio = ___________________________

Interest charges

3.TURNOVER RATIOS:

CHAPTER – III

These ratios are very important for a concern to judge how well facilities at the
disposal of the concern are being used or to measure the effectiveness with which a
concern use its disposal. In short, these will indicate position of assets usage. These ratios
are usually calculated on the basis of sales or cost of sales and are expressed in number of
items rather than as a percents/age. The greater the ratio more will be efficiency of asset
usage. The lower ration will reflect the under utilization of the resources available at the
command of the concern.

The following are the important turnover ratios usually calculated by a concern.

3.1 Inventory Turnover Ratio:

It denotes the speed at which the inventory will be converted into sales, these by
contributing for the profits of the concern. It will be higher when sales are maximum and
the average inventory is minimum. This ratio establishes relationship between cost of
goods sold during a given period and the average amount of inventory held during the
period. This ratio reveals the number of times finished stock is turned over during a given
accounting period. Higher the ratio, the better it is because it shows the finished stock is
rapidly turned-over.

Stock Turnover Ratio = Cost of Goods Sold

__________________

Average Stock
Where,

Cost of goods sold = Opening Stock + Purchases + Manufacturing Expenses

Closing stock.

3.2 . Debtors Turnover Ratio:

A firm sells goods on credit and cash basis. When the firm extends credits to
its customers, book debts (debtors) are created in the firm’s accounts. Debtors Are
expected to be converted into cash over a short period and, therefore, are included in
current assets. The liquidity position of the firm depends on the quality of debtors to great
extent.

Debtors Turnover Ratio = Sales

_____________

Net Debtors

The Debtor’s Turnover Ratio indicates the numbers of times on the average
that debtor’s turnover each year. A high ratio is indicative of shorter time lag between
credit sales and cash collection. A low ratio shows that debts are not being collected
rapidly.

3.3. Fixed Assets Turnover Ratio:

The fixed assets Turnover Ratio measures the efficiency with which the firm is
utilizing its investments is fixed assets, such as land, buildings, plant and machinery
furniture etc. it also indicates the adequacy of sales in relation to the investment in fixed
assets. The fixed assets turnover ratio is sales divided by net fixed assets.

Sales

Fixed Assets Turnover Ratio = __________________

Net Fixed Assets

Generally, a high ratio indicates efficient utilization of fixed assets in

generating sales, while a low ratio indicated inefficient management and utilization of
fixed assets. However, the analyst should be cautious in deriving conclusions from the
fixed turnover ratio.
3.4. Total Assets Turnover Ratio:

This ratio indicates the sales generated per rupee of investment in total assets.
Although fixed assets also contributes to the production and sales activities of the firm.
The Firm must manage its total assets efficiently and should generate maximum sales
though their proper utilization .

Sales
Total Assets Turnover Ratio = __________________

Total Assets

As this ratio increases, there is more revenue generated per rupee of total
investment in assets. The firm’s ability to produce a large volume of sales on a small total
assets base is an important part of the firm’s overall performance in terms of profits.

3.5 Working Capital Turnover Ratio:

This ratio shows the number of times working capital is turned-over is a stated
period. It is calculated as follows:
Sales

Working Capital Turnover Ratio= _____________

Net Working Capital

The higher is the ratio, the lower is the investment in working capital and the greater
are the profits. However, a very high turnover of working capital is a sign of overtrading
and may put the concern into financial difficulties. On the other hand, a low working
capital turnover ratio indicates that working capital is not efficiently utilized.

3.6 Capital Employed Turnover Ratio:

Capital Employed Turnover ratio may be defined as net fixed assets plus working capital.

Sales
Capital Employed Turnover Ratio =______________

Capital Employed
 This ratio indicates the firm’s ability of generating sales per rupee of long-term
investment. The higher the ratio, the more efficient the utilization of owners and long-
term creditors funds.

4.FINANCIAL RATIOS:

Financial Ratios indicate about the financial position of the company. A company
is deemed to be financially sound if it is in a position to carry on its business smoothly
and meet its obligations, both short-term as well as long-term, without strain.

Financial Ratios can be divided into tow broad categories:

1.Liquidity Ratios

2.Stability Ratios

4.1. Liquidity Ratios:

These are the ratios, which measure the short-term solvency or financial position
of a firm. These ratios are calculated to comment upon the short-term paying capacity of
concern or the firm’s ability to meet its current obligations. The various Liquidity ratios
are: Current Ratio, Liquid Ratio and absolute liquid ratio. Further to see the efficiency
with which the liquid resources have been employed by a firm, debtor’s turns over ratios
are calculated.

4.1.1. Current Ratios:

Current Ratio may be defined as the relationship between current assets and
liabilities. This ratio, also known as working capital ratio, is a measure of general
liquidity and is most widely used to make the analysis of a short-term financial position
or liquidity of a firm. It is calculated by dividing the total of current assets by total of the
current liabilities.

Current Assets
Current Ratio = _________________________

Current Liabilities
 Current assets mean assets that will either be used up or converted into cash
within a year’s time. Current liabilities mean liabilities payable within a years or during
The operating cycle. Book debts outstanding for more than 6 months and loose tools
should not be included in current assets. Prepaid expenses should be taken as current
assets.

4.1.2. Quick Ratio:

The Quick Ratio or acid test is a mere measure of the firm’s liquidity. As an asset
is liquid, if it can be converted into cash immediately or reason all soon without a loss of
value. Cash is the most liquid asset. The quick ratio is found out by dividing the total of
the quick assets by total current liabilities. The quick or aid test ratio called “Prepaid
Ratio”. expenses and stock are not taken as liquid assets.

Quick Assets
Quick Ratio= ____________________

Current Liabilities

4.1.3. Absolute Quick Ratio:

Cash ratio is the most liquid assets. Cash ratio is the ratio of cash and its
equivalent to current liabilities. Trade investment or marketable securities are equivalent
of cash. Therefore, they may be included in computation of cash ratio.

Cash Marketable Securities

Absolute Quick Ratio = ____________________________

Current Liabilities

4.1.4. Ratio of Inventory to Working capital:

In order to ascertain that there is no overstocking, the ratio of inventory to

working capital should be calculated. It is worked out as follows

Inventory
Ratio of Inventory to Working Capital = ____________

Working Capital
 Working Capital is the excess of current assets over current liabilities. Increase in
volume of sales requires increase in size of inventory, but from a sound financial point of
view, inventory should not exceed amount of working capital. The desirable ratio is 1:1.

4.2. Stability Ratios:

These ratios help in ascertaining the long term solvency of a firm which depends
on firm’s adequate resources to meet its long term funds requirements, appropriate debt
equity mix to raise long term funds and earnings to pay interest and installment of long
term long in time (i.e., coverage ratios). The following ratios can be calculated for this
purpose:

4.2.1. Fixed Assets Ratio:

This ratio explains whether the firm has raised adequate long term funds to meet
its fixed assets requirements and is calculated as under

Fixed Assets
Fixed Assets Ratio = ______________________________

Capital Employed

This ratio gives an idea as to what part of the capital employed has been used in
purchasing the fixed assets for the concern. If the ratio is less than I it is good for the
concern. The ideal ratio is 0.67.

4.2.2.Debt-Equity Ratio :

The debt equity ratio is determined to ascertain the soundness of the long-term
financial policies of the company. It is also known as “External-Internal” equity ratio. It
may be calculated as follows:

Long Term Debts

Debt Equity Ratio = _________________________

Shareholder’s Equity
4.2.3. Debt Ratio:

Debt ratio is used to analyze the long-term solvency of a firm. It helps in knowing
the proportion of the interest bearing debt in the capital structure. Debt ratio

Is computed by dividing Total Debt by Capital Employed (CE) or Net Assets

(NT). Total debt will include short and long-term borrowings from financial institutions,
debentures/bonds,

Deferred payment arrangements for buying capital equipment, bank borrowings,

public deposits and any other interest-bearing loan. Capital employed will include total
debt and net worth.
Total Debt

Debt Ratio = ______________________

Capital Employed

4.2.4. Ratio of Current Assets to Fixed Assets:

This ratio will differ from industry to industry and, therefore, no standard can be
laid down. A decrease in the ratio may mean that trading is slack or more mechanization
has been put through. An increase in the ration may reveal that inventories and debtors
have unduly increased or fixed assets have been intensively used. An increase in the ratio,
accompanied by increase in profit, indicates the business is expending.

Current Assets
Ratio of Current Assets to Fixed Assets = -------------------------
Fixed Assets

5.LEVERAGE RATIOS:
T
This leverage ratio explains the extent to which the debt is employed in the
capital structure of the concerns. The basic facility of debt funds is that after tax cost of
them. Will be significantly lower and which can be paid back depending upon their terms
of issue. If earnings are more than the fixed cost of the funds, it is called favorable. An
unfavorable leverage exists if the rate of return remains to be lower.
5.1 Operating Leverage Ratio:

Operating Leverages related to the fixed costs of the firms. If the fixed costs of
the firm are relatively large, substantial portion of its contribution margin is appropriated
to cover these fixed costs. The significance of operating leverage lies in the fact that it
tells the finance manager about the impact of change in sales revenue and operating
income. It is tells the finance manager about the impact of change in sales revenue and
operating income. It is calculated by the following formula;

Operating Leverage Ratio = Marginal Contribution

__________________________

Earning’s before interest and tax

5.2. financial Leverage:

When a firm procures debt capital to fiancé its needs, it is said to have
financial leverage. It tells the extent of the change in earnings before tax(EBT) due to
change in operating income(EBIT). It is calculated with the help of the following
formula :

Financial Leverage Ratio = Earning’s before interest and tax

__________________________

Earning’s before tax

It may be favorable unfavorable. If the rate of return on investment(ROI) of

a firm is higher than the cost of debt capital, it is said to have favorable financial leverage.
On the other hand, if the rate of return on investment(ROI) is lower than the cost of debt
capital, the firm is said to have unfavorable financial leverage. Favorable financial
leverage is also referred to trading on equity.
 CHAPTER--IV

DATA ANALYSIS & INTERPRETATION

 Appropriation of
profits/disposal of surplus
 PROFITABLE RATIOS:

A measure of “Profitability” is the overall measure of efficiency. In general

terms efficiency of business is measured by the input – out analysis. By measuring
the output as a proportion of the input and comparing result similar other firm’s or
period the relative change in its profitability can be established.

6.1 GROSS PROFIT RATIO / GROSS MARGIN:

Gross Profit Ratio Express the relationship of gross profit to net sales or
turnover. Gross Profit is the excess of the proceeds of goods sold and services
rendered during a period over their cost, before taking into account administration,
selling and distribution and financing charges, Gross Profit is expressed as follows:

Gross Profit
-----------------------------
Net Sales

This ratio is important to determine general profitability since it is expressed

that the ratio would be quite high so as to cover not only the remaining costs but also
to allow proper returns to owners.

Any fluctuations in the Gross Profit Ratio are the result of a change either in
‘Sales’ or the ‘Cost of Goods Sold’ or both.

GROSS
YEAR SALES RATIO
PROFIT
2009-2010 20353712 98948798 0.206

2010-2011 631858821 280217819 0.114

2011-2012 26934269 304851036 0.088

2012-2013 -262618298 32566211 -8.064

2013-2014 187356905 635788959 0.295

2014-2015 551477436 0.000

 GROSS PROFIT MARGIN RATIO

2.00
0.206 0.114 0.088 0.295 0
0.00
-2.00
Ratios 2009 2010 2011 2012 2013 2014
- 10 – 11 - 12 - 13 – 14 - 15
-4.00 Series1
-6.00
-8.00
-8.064
-10.00
Years

COMMENTS:

 This gross profit margin has increased from 2012 – 13 to 2013 – 14

 In 2012-13the company has shown negative Gross – Profit margin.

 This negative growth is due to the higher the cost of goods sold than
sales.

 The Gross Profit margin stood at 29.47% in 2013-14> in 2009– 10 the

company has shown high gross profit margin.

6.2 OPERATING RATIO:

The ratio of all operating expenses (i.e., materials used, labour, factory
overheads office and selling expenses) to sales in the operating ratio.

A Comparison of the operating ratio would be indicating whether the cost

content is high or low in the figure of sales. If the annual comparisons shows that the
sales has increased, the management would be naturally interested and concerned to
know as to which element of the cost has gone up.

It is not necessary that the management should be concerned only when the
operating ratio goes up. If the operating ration has fallen, though the unit selling
price has remained the same, still the position needs analysis as it may be sum total
of efficiency in certain departments and in efficiency in others.

Cost of Goods Sold + Operating Expenses

Operating Ratio = ----------------------------------------------------
Net Sales

COST OF OPERATING OPERATING

YEAR SALES RATIO
GOODS SOLD EXPENSES COST
2009-2010 7895086 16410514 95005600 98948798 97.0149

2010-2011 248358998 25456292 273815290 280217819 97.7152

2011-2012 277916767 22979942 300896709 304851036 98.7029

2012-2013 295184509 27979346 323163855 32566211 992.3287

2013-2014 580343826 52858188 633172014 635788959 99.5884

2014-2015 448432054 91984697 540416751 551477436 97.9944

OPERATING RATIO

1500.00
Ratios 992.3287
1000.00
500.00 97.014997.7152 98.7029 99.588497.9944
0.00
2009 - 2010 – 2011 - 2012 - 2013 – 2014 -
10 11 12 13 14 15
Years

Series1
COMMENTS:

 The Operating ratio has shown high ratio. That is 992.32 % due to the
increase in cost of goods sold and operating expenses and decrease in
sales.
 Operating ratio is fluctuated throughout the remaining years with a
slight difference.

6.3 NET PROFIT RATIO:

One of the components of Return on Capital Employed is the Net Profit

Ratio.(or Margin on Sales) Calculated as

Operating Profit
Net Profits = ---------------------------------------
Net Sales
It indicates the net margin earned in sale of Rs. 100 /- Net Profit is arrived
from Gross Profit after deducting Administration, Selling & Distribution Expenses.
Non – Operating expenses such as dividends received or ignored, since they do not
effect the efficiency of the operations.

PROFIT AFTER
YEAR SALES RATIO
TAX
2009-2010 343503 98948798 0.0035
2010-2011 281289 280217819 0.0010
2011-2012 599288 304851036 0.0020
2012-2013 637729 32566211 0.0196
2013-2014 837032 635788959 0.0013
2014-2015 930984 551477436 0.0017
 NET PROFIT RATIO

0.03 0.0196
Ratios
0.02
0.02
0.01
0.0035 0.002 0.0013 0.0017
0.01 0.001
0.00
2009 - 2010 – 2011 - 2012 - 2013 – 2014 -
10 11 12 13 14 15
Years

Series1

COMMENTS:

 Net Profit margin for the year 2014– 15. is 0.0017 times or 0.17%

 Net Profit margin for the year 2012 – 13 is 0.019 when compared to
the previous year net profit it has decreased by 94.7 %

6.4 RETUN ON CAPITAL EMPLOYED:

This Ratio is also known as Overall Profitability or Return on Investment,

the Investment. The income (out put) as compared to the capital employed (input)
indicates the return on investment. It shows how much the company is earned on its
investments. This ratio is calculated as follows:

Net operating Profit.

Return on Capital Employed = ------------------------------------------
Capital Employed

Operating Profit means profit before interest and tax. In arriving at the
profit, interest or loans treated as part of profit.

Capital Employed comprises share capital and reserves and surplus, long
term loans minus non operating assets and fictitious assets.

Capital Employed = Share Capital + Reserve & Surplus + Long term

Loans – Non Operating Assets
 CAPITAL
YEAR NET PROFIT RATIO
EMPLOYED
2009-2010 28443595 343503 0.012
2010-2011 91118099 281289 0.003
2011-2012 32715847 599288 0.018
2012-2013 37070986 637729 0.017
2013-2014 40633864 837032 0.021
2014-2015 78412504 930984 0.012

RETURN ON CAPITAL EMPLOYED

0.03 0.021
0.018 0.017
0.02
Ratios
0.02 0.012 0.012
0.01
0.003
0.01
0.00
2009- 2010-11 2011 - 2012 - 2013 – 2014 -
10 12 13 14 15
Years

Series1

COMMENTS:

In the year 2010 – 11 returns on capital employed shown less when compared
with other years, Return on capital employed for the year 2011-12has shown high
that is 0.021 or 2.1% when compared with previous years.

6.5 EARNINGS PER SHARE RATIO:

Earning Per share is a measure to know the profitability of common

shareholders investment. Earnings per share indicate wheather or not the firm’s
earning power on per share basis has changed over a given period. Earning per
share shows the profitability of the firm on ‘Per share’ basis. It does not reflect how
much is paid as dividend and how much is retained in the business. Earning per
share as profitability index is a valuable ratio.
 Profit after tax
Earning Per Share = -------------------------------
No. of Shares

PROFIT AFTER
YEAR NO.OF SHARES RATIO
TAX
2009-2010 343503 50000 6.87
2010-2011 281289 50000 5.63
2011-2012 599288 50000 11.99
2012-2013 637729 50000 12.75
2013-2014 837032 50000 16.74
2014-2015 930984 50000 18.62

EARNINGS PER SHARE RATIO

20.00 16.74 18.62

Ratios
15.00 11.99 12.75
10.00 6.87 5.63
5.00
0.00
2009- 2010 – 2011 - 2012 - 2013 – 2014 -
10 11 12 13 14 15
Years

Series1

COMMENTS:

 Earnings per share have increased by 31.4% in the year 2013 - 14when
compared to previous year; this is due to the increase in profit after tax by
31.25%.

 Earnings Per share has been increasing from 2009 – 10 to 2014-2015, expect
in the year 2009 – 10.
Utilization
of funds
 UTILISATION OF FUNDS

Mere procurement of capital is not for the successful running of any concern but
capital which is procured must be used in a proper manner for better operation of the firm
and it should be used for specific purpose like improving the technology, production
capacity of the firm and satisfying the working need of the firm.is using the procured
capital in various ways

STRUCTURE OF FIXED ASSETS

COMPANY is a manufacturing concern; it is having all required fixed assets,

which is required for a manufacturing company. The company mainly focused on fixed
assets of factory land, factory building, machinery, generation, computers, furniture,
trucks, lorries, procaine’s, tractors and vehicles etc.,
 CATEGORY OF
YEARS
ASSET
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
FACTORY LAND 40,431.00 40,431.00 40,431.00 40,431.00 40,431.00 40,431.00
FACTORY
8,87,656.00 887,656.00 887,656.00 887,656.00 887,656.00 887,656.00
BUILDING
10,115,913.0 10,115,913.0 13,632,728.0 14,148,728.0
MACHINERY 12,518,744 14,148,728.00
0 0 0 0
GENERATOR 4,718,008.00 4,718,008.00 5,462,149.00 5,462,149.00 5,462,149.00 5,462,149.00
COMPUTERS 38,628.00 38,628.00 38,628.00 38,628.00 67,528.00 117,928.00
ELECTRICAL
59,998.00 5,998.00 59,998.00 59,998.00 66,198.00 664,198.00
FITTINGS
CELLULAR
78,130.00 350,583.00
PHONES
TYPE WRITER 14,195.00 14,195.00 14,195.00 14,195.00 14,195.00 14,195.00
TIME CLOCK 9,892.00 9,892.00 9,892.00 9,892.00 9,892.00 9,892.00
FAX 45,000.00 45,000.00 45,000.00 45,000.00 61,200.00 61,200.00
COMPRESSORS 9,600,000.00 38,894,000.00
FURNITURE 19,524.00 19,524.00 19,524.00 19,524.00 19,524.00 19,524.00
TRUCKS 409,238.00 409,238.00
CAR 353,239.00 353,239.00
LORRIES(SMALL-
4,710,066.00 4,710,066.00
10TONS)
LORRIES(SMALL-
2,260,000.00
140TONS)
14,982,000.0 14,982,000.0 14,982,000.0
PROCLAINERS 14,982,00.00 14,982,000.00 25,569,262.00
0 0 0
12,732,900.0 12,732,900.0
VEHCILES 9,057,519.00 12,732,900.00
0 0
11,087,370.0
TRACTORS 594,730.00 11,087,370.00 5,390,000.00 5,390,000.00
0
NEW VEHCILES 10,684,620.00

36,645,279.0 49,397,919.0 47,928,101.0 64,511,770.0 111,400,505.0

TOTAL 54,203,582.00
0 0 0 0 0

10,149,768.0 19,180,595.0 26,003,659.0 30,920,936.0

LESS:DEPRECIATION 26,108,264 44,319,820.00
0 0 0 0

26,495,511.0 30,217,324.0 21,921,442.0 33,590,831.0

GROSS BLOCK 28,095,318.00 67,080,685.00
0 0 0 0

ADD:INVESTMENT
1,780,000.00 1,780,000.00 1,780,000.00 1,780,000.00 1,780,000.00 1,780,000.00
S

NET BLOCK OF 28,275,511.0 31,997,324.0 23,701,442.0 35,370,834.0

29,875,318.00 68,860,685.00
FIXED ASSETS 0 0 0 0
5.1 PROPRIETARY RATIO:
This is ratio shows the relationship between share holders fund and total assets.
This ratio should be 1:3 is considerable. That is 1/3rd of assets should be acquired by
shareholders funds and 2/3rd by outsider’s funds. It is calculated by dividing the
shareholder’s funds by total assets.

The ratio is of a particular important to the creditors who can find out the
proportion of shareholder’s funds in the total assets employed in the business.

Share holder’s Fund

The Proprietary Ratio = ----------------------------------------
Total Assets

YEAR PROPRITARY’S FUND TOTAL SHARES RATIO

2009-2010 13611545 50234564 0.27
2010-2011 23013334 91118099 0.25
2011-2012 16112623 76194250 0.21
2012-2013 18750352 139467686 0.13
2013-2014 19587385 134223861 0.15
2014-2015 20518369 152520634 0.13
 PROPRIETARY RATIO

0.30 0.27
0.25
0.21
Ratios
0.20 0.15
0.13 0.13
0.10

0.00
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Years

Series1

COMMENTS:

 A high Proprietary ratio Will indicate a relatively little danger to creditors viz. A
low proprietary ratio indicates greater risk to the creditors. In this firm past six
financial years the proprietary ratio is not up to the mark, in the firm’s total assets
the proprietary funds have a very little share.

 In this firm the ratio is declining from year 2009-2010to 2014-2015. The rationale
is better in the year 2009-10, where as when it comes to current situation it
becomes worse.

5.2 FIXED ASSETS TO NETWORTH:

This shows the Relationship between fixed assets and shareholder’s funds. This
ratio indicates the extent to which shareholders funds are sunk into the fixed assets. If the
ratio is less than 100% it implies that owners funds are more than that assets. If this ratio
is more than 100% a part of share funds are converted into working capital. The main
purpose of this ratio is to calculate the percentage of the owner’s funds invested in fixed
assets.
This ratio can be calculated with help of the following

Net fixed assets

Fixed assets to Net worth Ratio = -----------------------------
Net worth
YEAR FIXED ASSETS NERWORTH RATIO

2009-2010 28275511 13611545 2.08

2010-2011 31997324 23013334 1.39

2011-2012 29875318 16112623 1.82

2012-2013 23701442 18750352 1.26

2013-2014 35370834 19587385 1.81

2014-2015 68860685 20518369 3.36

FIXED ASSETS TO NETWORTH

4.00 3.36
3.00
Ratios 2.08
1.82 1.81
2.00 1.39 1.26
1.00

0.00
2009-10 2010-2011 2005-2006 2006-2007 2007-2008 2008-2009
Years

Series1

COMMENTS:
  Fixed assets to Net worth ratio shown in the year 2010-2011 is 1.39:1, it is very
less when compared with previous year.

 Fixed assets to Net worth ratio has stood at 3.36 in the year 2014-2015, this is
because due to an increase in the net fixed assets during the year.

 As fat as concern on a average the fixed assets to Net worth is not up the mark in
the Sujala Pipes (Pvt) Lid., In every year the ration far behind the as it should be.
It was good at beginning i.e., in the year 2009-2010. Then after the ratio falling, it
is very poor during the year 2012-2013. Then on it improved and stood at 3.36 in
the year 2014-2015. This is an increase of 95 when compare to the assets.

5.3 FIXED ASSETS TURNOVER RATIO:

This ration measures the efficiency of the assets use. It is also known as sales to
fixed assets ration. This ratio measures the efficiency and profit earning capacity of the
firm. The efficiency use of assets will generate sales per rupee invested in all the assets
of a concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower
ratio means under utilization of fixed assets. The inefficiency use of the assets will result
in low sales volume coupled with higher charges an under utilization of the available
capacity.
Net Sales
Fixed assets Turnover Ratio = -------------------------------------
Net fixed assets
*(Net Fixed assets = Value of assets- Depreciation)

YEAR NET SALES FIXED ASSETS RATIO

2009-2010 98848798 28275511 3.50

2010-2011 280217819 31997324 8.76

2011-2012 304851036 29875318 10.20

2012-2013 32566211 23701442 1.37

 2013-2014 635788959 35370834 17.97

2014-2015 551477436 68860685 8.01

Fixed Assets Turnover Ratio

20 17.97

15
Ratios 10.2
8.76 8.01
10 Series1

5 3.5
1.37
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Years

COMMENTS:

 This is fluctuating throughout the year, but in the year 2013-14the fixed assets
turnover ration shown very negligible turnover due to decrease in sales.

 Fixed turnover ratio shown high turnover I.e., 17.97 due to increase in sales.

5.4 NET WORKING CPITAL RATIO:

Net working capital is the difference between current assets and current liabilities. It
should be noted that while calculating Net working capital is used to measure the firm’s
liquidity. If a firm having a larger net working capital, it is considered to be making
greater current obligatory more efficiently.

Net Working Capital = Current Assets – Current Liabilities

The ration between Net Working capital to its Net Assets is called “Net Working Capital
Ratio”
Net Assets = Fixed Assets +(Current Assets-Current Liabilities
 Net Working Capital
Net Working Capital Ratio = ---------------------------------------
Net Assets

CURRENT NET WORKING

CURRENT
YEAR LIABILITIES CAPITAL
ASSETS
21787330
2009-2010
21955415 168085
2010-2011 59120775 57924877 1195898

2011-2012 46318933 45478403 840530

2012-2013 115766245 102396700 13369545

2013-2014 98853028 93589997 5263031

2014-2015 83659950 74108130 9551820

NETWORKING
FIXED ASSETS RATIO
CAPITAL
168085 28275511 0.0059

1195898 31997324 0.0374

840530 29875318 0.0281

13369545 23701442 0.5641

5263031 35370834 0.1488

9551820 68860685 0.1387

 17722

Net Working Capital Ratio

0.6 0.5641

0.4
Ratios
Series1
0.2 0.1488 0.1387
0.0374 0.0281
0.0059
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Years

COMMENTS:

 Net Working Capital Ratio Stood up at Rs.1,68,085, which is very low when
compared to remaining years due to a little variance between current assets and
current liabilities.

 Net working Capital has been decreased from Rs. 1,95,988 to Rs.8,40,530 in the
year 2004-05, when compared to previous years, due to greater decrease in current
assets than the current liabilities.

5.5 DEBTOR’S TURNOVER RATIO:

Debtor’s turnover ration indicates the number if times Debtors turnover each year
higher than value of debtors turnover,the more efficient the management of credit.

Debtors turnover ratio can be calculated by dividing total sales with the year
ended and Debtors.

sales
Debtors turnover ration = ----------------------
debtors
 ACEGAGE
COLLECTION
YEAR SALES DEBTORS RATIO
PERIOD

98948798 10195516 9.71 37.09

2009-2010
280217819 24350619 11.51 31.28
2010-2011
304851036 34271683 8.90 40.47
2011-2012
32566211 43477991 0.75 480.62
2012-2013
635788959 30998991 20.51 17.55
2013-2014
551477436 31137406 17.71 20.33
2014-2015

COMMENTS:
 Debtors turnover ration shown low, due to huge increase in Debtors but the
increase in sale in the year 2011.
 In the year 2012, the ratio shown very low i.e., 0.75 this is due to decrease in
sales.
 In the year 2012, the ratio shown high i.e., 20.51 when compared with previous
years.

COLLECTION PERIOD:
The average number of day’s for which debtors remain outstanding is called
the average collection period.
Average collection period can be calculated as follows

360
Average collection period= ----------------------
Debtors turnover
COMMENT:
 Average Collection period for the year 2012-2013 is 486.62 Days.

 Average Collection Period for the year 2013-14is 17-56 Days.

5.6 TOTAL ASSETS TURNOVER RATIO:

Total assets turnover ratio is use to known how many time the total assets are
being converted into sales. If sales are not available, cost of goods sold to be considered.
It shows in how many times the total sales are being converted into total assets. Total
assets turnover ratio is calculated by dividing the cost of goods sold as sales by total
assets.

sales
Total turnover = -------------------------
Total assets

YEAR SALES TOTAL ASSETS RATIO

2009-2010 98948798 50234564 1.97

2010-2011 280217819 91118099 3.08

2011-2012 304851036 76194250 4.00

2012-2013 32566211 139467686 0.23

2013-2014 635788959 134223861 4.74

 2014-2015 551477436 152520634 3.62

Total AssetsTurnover Ratio

4.74
5.00
4
4.00 3.62
3.08
Ratio
3.00
1.97 Series1
2.00
1.00 0.23
0.00
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Years

COMMENTS:
 Total Assets Turnover ration has been fluctuating throughout years, this ration has
been increasing from year to year except in the year 2012-2013. This is due to
greater decrease in the sales.

 The total assets turnover ratio has stood at 3.61, which is decreased in the year
2014-2015 due to decrease in the sales.

 Total assets turnover ratio has been increasing since 2009-2010except in the year
2011-2012.
5.7 INVENTORY TURNOVER RATIO:

This Ratio is also known as stock velocity. This ratio is calculated to consider the
adequacy of the quantum of capital and its institution for investing in inventory.

A firm must have reasonable stock in comparison to sales. It is the ratio of cost of sales
and average inventory of. This ratio helps the financial managers to calculate inventory
policy. This ratio reveals the number of times finished stock is turned over during a given
accounting period. The ratio is use for measuring the profitability.These are the various
ways in which stock. Turn over ratio may be calculated.

Net Sales
Inventory Turnover Ratio = ------------------------------
-----
Average inventory at cost

YEAR SALES TOTAL ASSETS RATIO

2009-2010 280217819 7869660 35.61

2010-2011 304851036 7648888 39.86

2011-2012 32566211 7835380 4.16

2012-2013 635788959 11925415 53.31

2013-2014 551477436 11638735 47.98

 Inventory Turnover Ratio

60.00 53.31
47.98
50.00
39.86
40.00 35.61
Ratio
30.00 Series1
20.00
10.00 4.16
0.00
2009-2010 2010-2011 2012-2013 2013-2014 2014-2015
Years

COMMENTS:
 Stocks Turnover is Ratio fluctuated throughout the years.

 Stocks Turnover Ratio has shown very negligible i.e., 4.41 in the year 2013-14due
to decrease in sales.

The ratio has shown high Ratio i.e., 53.31, due to increase in sales, but a slight decrease
has been shown in the year 2013-14due to decrease in sales.

LIQUIDITY RATIO:
5.8 CURRENT RATIO:
 This Ratio is an indicator of the firm’s commitment to meet its short-term
liabilities. It is expressed as follows:
Current assets
Current Ratio = -------------------------------
Current Liabilities
Current Assets mean that will either be used up or converted into cash with in a year’s
time or during the normal operating cycle of the business, whichever is longer. Current
liabilities mean liabilities payable with in a year or during the operating cycle,whichever
is longer, out of the existing current assets or by creation of current liabilities.
An ideal current ratio is 2. The Ratio of 2 is considered as a safe margin of
solvency due to the fact that if the Current Assets are reduced to half i.e., I instead of 2,
then also the creditors will be to get payments in full. A high current Ratio is also not
desirable since it means inefficient use of funds.

CURRENT CURRENT
YEAR RATIO
ASEETS LIABILITIES

2009-2010 21955415 21787330 1.008

2010-2011 59120775 57924877 1.021

2011-2012 46318933 45478403 1.018

2012-2013 115766245 102396700 1.131

2013-2014 98853028 93589997 1.056

2014-2015 83659950 74108130 1.129

 Current Ratio

1.15 1.131 1.129

1.10
1.056
Ratio
1.05 1.021 1.018
1.008 Series1
1.00
0.95
0.90
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Years

COMMENTS:

 The current Ratio has stood up at 1.05 in 2013-14as compared to the previous year
2012-2013

 The increase in the percent of ratio is 7.07%,The reasons for increase are
explained below.

 Sundry Debtors have increase in 2013-14as compared with 2009-2010.

 In Current Assets the value of inventories has gone up.
 The cash in bank balance have decreased.

5.9 QUICH RATIO:

This Ratio is also termed as “Acid test Ratio” or “Liquidity Ratio”. This
Ratio is ascertained by comparing the liquid assets (i.e., assets which are
immediately convertible into cash without much lost) to current liabilities .
Prepaid expenses and stock are not taken as liquid assets.

Liquid Assets
The Ratio may be expressed as = ----------------------------------------
--
 Liquid Liabilities /Current Liabilities

Some Accounts prefer the term “Liquid Liabilities” for “Current

Liabilities” for the purpose of ascertaining this Ratio. The ideal ratio is 1. The
ratio is also an indicator of short-term solvency of the company.

CURRENT CURRENT
YEAR INVENTORY RATIO
ASSETS LIABILITIES
21955415 21787330 9172601 0.587
2009-2010
59120775 57924877 260233338 0.571
2010-2011
46318933 45478403 9886288 0.801
2011-2012
115766245 102396700 61935962 0.5296
2012-2013
98853028 93589997 31232858 0.723
2013-2014
83659950 74108130 10282787 0.990
2014-2015

Quick Ratio

1.2
0.99
1 0.801
0.8 0.723
Ratios 0.587 0.571 0.5296
0.6 Series1
0.4
0.2
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Years
COMMENTS:
 Quick Ratio has stood up at 0.72 in 2013-14, the increase is 35.8 % compared to
the previous year , Due to the decrease in inventories compared to the previous
year.

 Quick Ratio has stood uo at 0.99 in 2014-2015 the increase is 37.5 % compared to
the previous year . This is due to the decrease in Inventories compared to previous
year.

5.10 CASH RATIO /SUPER QUICK RATIO:

This is Variation of Quick Ratio . Cash is the most liquid assets. A financial
analyst examines the cash ratio and its equivalent to current liabilities to know he funds
performance regarding the dealing with cash. Trade investments, debtor and marketable
securities are equivalent to cash.

Cash and Marketable Securities

Super Quick Ratio = ---------------------------------------
Current Liabilities

Thus, debtors are excluded from liquid assets for the purpose of computing super
quick Ratio . Current liabilities and liquid liabilities have the same meaning as explained
above . The Ratio is the most vigorous measure of the firm’s liquidity position . However,
it is not widely used in practice
.
 CURRENT
YEAR CASH RATIO
LIABILITIES
11341475 21787330 0.521
2009-2010
25353318 57924877 0.437
2010-2011
35232693 45478403 0.775
2011-2012
44305760 102396700 0.463
2012-2013
31454846 93589997 0.336
2013-2014
31808378 74108130 0.429
2014-2015

Cash Ratio

1.00
0.775
0.80
Ratios
0.60 0.521
0.437 0.463 0.429
0.336 Series1
0.40
0.20
0.00
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Years

COMMENTS:
 Cash Ratio in the year 2013-14is 0.33
 Cash Ratio in the year 2010-11is 0.43
 When compared to previous year cash ratio in the year 2013-14has decreased
by 22.2%.
 This is due to the decrease in the cash and current liabilities in 2013-14when
compared to previous year ratio in the year 2014-2015 has increased by
30.03%
 This is due to the increase in cash and decrease in current liabilities in 2014-
2015, when compared with previous year.
 CHAPTER—V
FINDINGS
SUGGESSIONS
CONCLUSION
 MAJAOR FINDINGS
 The Operating ratio has shown high ratio. That is 992.32 % due to the increase in
cost of goods sold and operating expenses and decrease in sales.
 This gross profit margin has increased from 2012 – 13 to 2013 – 14

 In 2012-13the company has shown negative Gross – Profit margin The current
Ratio has stood up at 1.05 in 2013-14as compared to the previous year 2012-2013
 Quick Ratio has stood up at 0.72 in 2013-14, the increase is 35.8 % compared to
the previous year , Due to the decrease in inventories compared to the previous
year.
 Cash Ratio in the year 2013-14is 0.33
 Cash Ratio in the year 2010-11is 0.43
 SUGGESTIONS

1. Company don’t maintain current ratio with the standard form. Expect 2012-13,
2014-15 it is problem to the company. So comapany7 to take necessary actions to
meet form

2. Company haring good quick ratio i.e., it is above standard . So should maintain in
future also.

Thus, debtors are excluded from liquid assets for the purpose of computing
super quick Ratio . Current liabilities and liquid liabilities have the same meaning
as explained above . The Ratio is the most vigorous measure of the firm’s
liquidity position . However, it is not widely used in practice
 CONCLUSION

Ratio Analysis provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firms. They also reveal strong firms
and weak firms, over – valued and undervalued firms.
Ratio Analysis also makes possible comparison of the performance of the
different divisions of the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.
Accounting ratios help to have an idea of the n working of a concern. The
efficiency of the firm becomes evident when analysis is based on accounting ratios.
Ratio Analysis helps in planning and forecasting. Over a period of time a firm or
industry develops certain norms that may indicate future success of failure. If
relationship.
BIBLIOGRAPHY
 BIBLIOGRAPHY

FINANCIAL MANAGEMENT - I.M.PANDEY

Vikas Publishing House
New Delhi.

FINANCIAL MANAGEMENT –M.Y.KHAN & P.K.JAIN

Vikas Publishing House
New Delhi.

FINANCIAL MANAGEMENT - PRASANNA CHANDRA

THEORY & PRACTICALS Tata McGraw Hill Publishing
Co., Ltd., New Delhi.