A

SUMMER TRAINING
PROJECT
ON
“FINANCIAL ANALYSIS & FINANCIAL PLANNING OF
INSECTICIDES INDIA LTD. AS A PROCESS OF
IDENTIFYING CURRENT LIQUIDITY POSITION TO
MAKE AN ANALYSIS ABOUT ITS PROFITABILTY AND
LIQUIDITY ON THE BASIS OF LAST FIVE YEARS
ENDED 31ST MARCH”
SUBMITTED TO

Kurukshetra University, Kurukshetra in the Partial fulfillment for

the Degree of Master in Business Administration
(Session 2009-2011)-MBA-3rd Semester

UNDER THE SUPERVISION OF: SUBMITTED BY:

MS. SHAILI GUPTA SUMIT GARG

FACULTY 1105/09

MBA MBA 3rd SEM

Tilak Raj Chadha Institute of Management Technology (TIMT)

(Affiliated to Kurukshetra University, Kurukshetra and Approved By AICTE)

 MLN College Educational Complex, Yamuna Nagar- 135001 (Haryana)

Ph. 01732-220103, 234110. Fax:+91-1732-220103

DECLARATION

SUMIT GARG, Roll No.1105/09, MBA (3rd Sem) of the Tilak raj chadha
institute of management and technology,yamunanagar hereby
declare that the Summer Training Report entitled “Financial Analysis
of insecticides India Ltd.” is an original work and the same has not
been submitted to any other Institute for the award of any other degree.

(sumit garg)
ACKNOWLEDGEMENT

This work is synergistic product of many minds. I am grateful for the

inspiration of many thinkers and for the hang together sources & roots
of this wisdom. This project report has been made possible through the
direct & indirect co- operation of various people whom I wish to express
my thanks and gratitude’s.

I am sincerely thankful to Dr. Vikas Daryal, Director, Tilak Raj

Chadha Institute of Management and Technology, Yamunanagar for
giving me an opportunity to work at insecticides india ltd and provided
me the guidance and support in the completion of the project.

I would also like to express my thanks to Miss JAYA MALHOTRA,

H.O.D (MBA), TIMT, Yamunanagar for her kind co-operation & valuable
guidance throughout the training.

I would also like to thanks Ms. SAILI GUPTA Faculty MBA, my project
guide for her valuable guidance and supervision in this project. Apart
from this I thanks to, the other Faculty members of the institute and my
friends for their advice and guidance along kindled inspiration in the face
of difficulties encountered in the course of this work and to create this
project report.

Finally, with the blessings of my parents and who had been a source of
strength and inspiration for me in this endeavor.
I would like to express my sincere thanks to Mr. R.S.SAROHA
Finance and Accounts for assigning me the project and guiding me
whenever necessary.

(SUMIT GARG)
PREFACE

Research word in management is extremely important as it gives a close

and depth view of real life business issues. For the student pursuing any

professional course like business studies who is striving to perform

outstanding it is paramount importance that apart from theoretical

knowledge one must also gain practical knowledge.

The main objective of project report is familiarization with the

necessary theoretical inputs and to gain sufficient practical exposure to

establish a distant linkage between the conceptual knowledge acquired

at the college and practicing those concepts.

The project report is concerned with the “Analysis of financial

statement” provided by “INSECTICIDES INDIA LTD.” At new delhi.

During my tenure of project, I studied the various developments tools

and deeply analysed the functions.

Executive Summary

The summer training is an integrated part of MBA course. In this period

of 6 weeks we come to know about the problem and how to solve those

problems. In this we gained practical knowledge about the organizational

work.

I did for 6 weeks in an organization insecticides india ltd LTD. And

undergoing practical on the topic “financial analysis” and how to solve

financial problems. The practical training had provided me the real

scenario of financial analysis. I analysis the financial status of the

organization.
 CONTENTS

1) Introduction

i) Profile of the study(Area/Organization)

ii) Justification of the study

iii) Organizational Structure

2) Objectives of the Study

3) Literature Review

4) Research Methodology and Analytical tools

a. Sampling and Sampling Design

b. Analytical Tools

-Statistical tools

c. Data Collection

d. Hypothesis Testing

e. Limitations of the Study

5) Results and Discussions/ Findings

6) Recommendations
 7) Policy Implications

8) Bibliography

9) Annexure

Insecticides india ltd.

PROFILE OF THE COMPANY

Insecticides (IIL) Company was originally incorporated as Insecticides

(India) Private Limited vide on December 18, 1996 under the Companies
Act 1956 with the Registrar of Companies NCT of Delhi & Haryana. The
company was converted into Public Limited Company on October 29,
2001,

Insecticides (India) has spearheaded the endeavour to bring home

world-class quality new generation products through latest technological
developments. IIL has entered into technical collaboration with global
giants AMVAC, USA for THIMET, which is India's most popular generic
pesticide. Thimet, being the first choice of Indian farmers has helped the
company in further strengthening its base at the grass root level.

Lap after lap, in this marathon success story, they have weakened the
competition to become India’s leading agro-chemical and pesticides
manufacturer. The company will soon be starting pesticide-synthesis at
Bhiwadi plant. This will help the company in bringing out new products at
more competitive prices. Its vision and efforts have ushered in a new era
of success and helped IIL to emerge as a formidable player in the Indian
agro-chemicals sector. IIL has established a dedicated R&D Center,
which is recognized by Department of Scientific & Industrial Research,
Ministry of Science and Technology. It focuses on manufacturing high
value added, complex new molecules for introduction in the generic
market. Though immense efforts have been made, they have far to go.
At IIL R&D, they approach each challenge armed with their knowledge of
Agri-science & motivated by their commitment to increase crop yield per
acre of land.They have taken big steps towards capitalizing on the
revolution in crop protection, which is an integral part of holistic crop
management.

IIL R&D centre has augmented its infrastructure with sophisticated

instruments like HPLC, GLC, AAS, UV and Infrared Spectrophotometer
that are used for standardization of manufacturing processes. For
production of a wide range of agro-chemicals and pesticides, IIL has set
production units at Rajasthan and J&K . These state-of-the-art
production facilities offer an integrated environment to ensure optimum
performance levels and facilitate production of high quality liquid,
granule and powder formulations.

HISTORY AND MAJOR EVENTS

The year wise steps in our corporate progress and growth were:
Year 1996 Incorporation of our company as private limited company
Year 2001 Converted into public limited company Year 2002
Commissioned Formulation plant at Chopanki, Bhiwadi, Rajasthan for
manufacturing wide range of innovative end to end solutions in the areas
of Agrochemicals. Year 2003 Our Company acquired all the brands of
Montari Industries Ltd Year 2004 Our Company commissioned another
Formulation plant at Samba in the state of Jammu & Kashmir. Year 2005
Our Company set up an R&D Laboratory at Chopanki and was granted
ISO 9001-2000 Certification. Year 2006 Our Company acquired the
exclusive right to sell the Thimet brand in India from American Vanguard
Corporation, USA. Obtained ISO 14001-2004 Certification for
environmental protection.
2007
-Insecticides India Ltd has appointed Mr. Navneet Goel as an additional
director in the Board Meeting w.e.f. July 26, 2007.
2008
-Insecticides India Ltd has informed that Mr. Hari Chand Aggarwal,
Director of the Company has been changed designation from
Directorship to Whole-time Director w.e.f. October 01, 2007 and he will
be executive director.

BOARD OF DIRECTORS
Mr. Hari Chand Aggarwal Chairman
Mr. Rajesh Aggarwal Managing Director
Mr. Sanjeev Bansal Whole-time Director
Mr. Rajender Pershad Gupta Director
Mr. Navneet Goel Director
Mr. Gopal Chandra Agarwal Director

WORKS OFFICE
1. E – 442, RIICO Industrial Area,
Chopanki, (Bhiwadi) – 301 707 (Raj.)

2. E – 443 – 444, RIICO Industrial Area,

Chopanki, (Bhiwadi) – 301 707 (Raj.)

3. SIDCO, Industrial Growth Centre,

Post & Dist. Samba (J & K)
COMPANY’S PHILOSOPHY
IIL’s philosophy on Corporate Governance endeavours to achieve
highest levels of transparency, integrity and equity, in all its
operations and in its dealings with all shareholders, including
shareholders, employees, the Government and lenders.

INDUSTRY STRUCTURE AND DEVELOPMENT

Analyzing some of the important happenings in the year 2008,this year
has started with early monsoons. Increase in the food production is
expected and also good prices of farm produce are expected. This has
built a positive sentiment in the farming community and the entire agro
industry. Total contribution to the GDP is more than 20%. The Indian
Pesticides Industry is said to be of 82000 MT of Production (In 2005-06)
and is ranked second in Asia, and twelwth in the world with the total size
of Rs. 68 bn. In 2006. India being the tropical Country, the consumption
pattern is more skewed towards insecticides which accounts for about
67 % of the total Pesticide consumption in FY 06.

OPPORTUNITIES AND OUTLOOK

Hon’ble Prime Minister had indicated that for the growth of the Country,
improving the earnings of the villagers specifically farmers the top
priority. Steps are being taken for development of infrastructure and
Rs.25000 crores are further allocated for irrigation. But the fact cannot
be ignored that India is moving towards becoming an industrial country
from agriculture country. Which clearly indicate that the pressure on land
is increasing which means farmers are moving towards modern
agriculture,which makes prudential use of agro chemicals vital. It is
estimated that India loses approx. loses 18 % of the crop yield Valued at
Rs.900 bn due to pest attack every year.
There is a huge untapped market for Agro Chemical in India as the total
area under cultivation is 147 million hactare, total cultivable waste 27
million hactare and total cotton

FINANCIAL PERFORMANCE VIS – A – VIS OPERATIONAL

PERFORMANCE
Gross turnover at Rs. 22148.34 lacs recorded a growth of 20%. Profit
before tax at Rs. 1676.62 lacs registered a growth of 66%. Net Profit at
Rs. 1426.78 lacs recorded an impressive growth 66.5%. In view of
improving financial results and positive outlook for the near future, your
Company has declared Equity Dividend of 15% for the financial year
2007-08.

CORPORATE SUSTAINABILITY
Realizing its social responsibility, the company has started a social
welfare programme “Agla Kadam” in Punjab and Rajasthan where it has
adopted Villages to offer people the basic needs of life healthcare,
education, women empowerment. It is undertaking various activities for
them such as providing books and study material to children, giving
scholarships and aid for schools, providing vocational education like
stitching, embroidery etc.to girls and ladies for self-employment,
providing technical education to farmers about new and latest
technologies etc to increase their yield and improve their income. The
Company aims to adopt more villages in other parts of the country as
well.
RESEARCH & DEVELOPMENT
To cater to the need of constant innovation, IIL has
established a dedicated R&D Center, which is recognized by
Department of Scientific & Industrial Research, Ministry of
Science and Technology.
It focuses on manufacturing high value added, complex new
molecules for introduction in the generic market.Though
immense efforts have been made, we have far to go. At IIL
R&D, we approach each challenge armed with our knowledge
of Agri-science & motivated by our commitment to increase
crop yield per acre of land.We have taken big steps towards
capitalizing on the revolution in crop protection, which is an
integral part of holistic crop management.
IIL R&D Centre has augmented its infrastructure with
sophisticated instruments like HPLC, GLC, AAS, UV and
Infrared Spectrophotometer that are used for standardization
of manufacturing processes.

OBJECTIVES:

 Maximizing utilization of indigenous raw

materials and imports substitution.
 Development of safety & environment
conservation methods and minimizing
water, air & soil pollution.
 Process and product development for
existing & new products.
 Commercialization and upgradation of
indigenous and foreign technologies.
  Replacement of solvents.

 Optimizing parameters for technical

processes as well as their formulations for
the cost reduction and quality
standardization.

CHAPTER -2

JUSTIFICATION OF THE STUDY

During the Summer Training, in INSECTICIDES INDIA LIMITED .I

analyzed that the co. has to manage finance on daily basis.

And to analyze their Financial Position I choose this project to be

studied in detail & thereby analyzing their financial statements as where
they actually stand in their Profitability, Solvency, and Market Share.

 Project will be helpful to organization to know their actual financial

position.
 Study will be useful for the management students.
 Researchers and scholars can carry on the further study.
 It gives an insight of the actual financial position of IIL
 It analysis the financial framework for its key business areas
 It studies the impact of expenditure on its turnover
 It also gives an insight of the regulatory framework of the IIL
 It studies the profitability
 To find out the cash position of the company.
 ORGANISATION
STRUCTURE
CHAIRMAN

BOARD OF
DIRECTORS
MANAGING DIRECTOR

ASSISTANT GENERAL
MANAGER

DEPUTY EXECUTIVE
MANAGER

REGINAL MANAGER

AREA SALES MANAGER

FIELD SALES REPRESENTATIVE

 OBJECTIVES OF THE SYUDY

As BLOOD is essential for human body to live, the same way

FINANCE is essential for organization to survive. Thus to maintain
proper use of finance in an organization finance department is required.

The finance department is the major department in an organization

as it is concerned with the procurement and efficient utilization of funds
in order to maximize profit and reduce cost of production.

Finance department is not only concerned with their day - to - day

activities but they also give more attention to the area where funds are
indirectly blocked.

Present study is conducted to achieve the following specific objectives:-

1. To know the functioning of the finance department of IIL.

2. To analyze the liquidity position of the organization.
3. To examine profitability position of the management.
4. To find out the weaknesses and to suggest various suggestions.
5. To study the performance of IIL.
6. To know about certain innovations made in the organization as
compared to past.
7. To prepare report on study thus conducted.
 LITERATURE REVIEW

Once the research problem is formulated, the researcher

undertakes an extensive literature survey. The literature

survey conducted here includes the academic books and

websites from internet.

The research to be conducted was “To study financial

position of IIL Co by studying its financial statements

of 5years”

This project has tried to cover almost every area of its

financial statements and has gained an insight on its actual

current financial position by getting in to the financial position

of business with special reference to its taxation scenario.

This project was prepared:-

o Discussing with people in the organization

o Study of Audit Reports & Balance Sheets

o Books& magazines available in organization library

o Other published data

Books:

1. Maheshwari S.N “Management accounting & financial control” the information

regarding the mean of working capital managment. The basic idea to take that
project I have got from this book”(page no134-145).
 2. “Khan M.Y. & Jain P.K. “Financial Management” the information regarding the
ratio analysis ,cash flow statements etc.,”Financial Management”,3th edition(page
no-4.75).
3. Gupta S.P, “Business Statistics”4 : The information regarding the statistical tools
and their limitations in different fields the research is given in this section. This
section explains, why to use correlation and the situations in which correlation can be
used, and meaning of correlation. This section also explains the Trend Analysis
Technique.
4. “Pandey I.M. “Financial Management” 9th edition: The information regarding
concept of working capital has been taken from the book”
5. Goel D.K. , “Management accounting and financial management”10: this text
book helps me out to understand the meaning of different ratios and their meaning.
6. Hooda R.P. , “Statistics for Business and Economics”12:- This text book helps me
to understand the various methods of Calculation of Trend Analysis and its
interpretation.
7. Kothari, C.R, “Quantitative Techniques”2: Knowledge about the quantitative
techniques of scaling the data & different types of research and different types of
research designs
8. Kothari C.R. , “Research methodology methods & techniques”3 : Knowledge
about research process, sample design, research design etc. The information
regarding the basics of research and research methodology, what are the different
types of research designs, problem statement, sources of data collection and
methods of data collection are given in this section.6

WEBSITES :-

www.insecticidesindia/financial/annualreport09.asp

www.insecticidesindia/financial/annualreport08.asp

www.moneycontrol/iil/history.asp

Journals & Magazines:-

 1. June 08, ICFAI University Press, various techniques of
financial analysis
2. Mar,07, financial planning journal, practical issues on
financial analysis, aspects regarding income tax, do & don’ts of financial
planning,
3. May 06, ICFAI Reader pg 21-27 ,Critical analysis of
budget 2006-07

Theorical framework of study

Construct
Financial statement & financial planning as signified process of
defining liquidity position

Variables

Independent variable: -
Sale
Cost of capital
Dividend proportion
Net worth

Dependent variables:-
Liquidity
Profitability

RESEARCH METHODOLOGY

SAMPLING AND SAMPLEING DESIGN

Sampling method is that method in which data is collected from the sample of
items selected from the population and conclusions are drawn from them. The
method of selecting a sample out of a given population is called sampling. In
other words, sampling denotes the selection of a part of the aggregate
statistical material with a view to obtaining information about the whole.
Nowadays, there are various methods of selecting a sample from a population
in accordance with various needs

DATA COLLECTION

After the research problem has been identified and selected the next step is to
gather the requisite data. While deciding about the method of data collection
to be used for the researcher should keep in mind two types of data i.e.
primary and secondary.

TYPES OF DATA

PRIMARY SECONDRY
DATA DATA

Primary Data
The primary data are those, which are collected afresh and for the first time,
and thus happened to be original in character. We can obtain primary data
either through observation or through direct communication with respondent in
one form or another or through personal interview.

METHODS OF PRIMARY DATA

SCHEDULE
OBSERVATION INTERVIEW QUETIONAIRE
METHOD
METHOD METHIOD METHOD

Secondary Data

The secondary data on the other hand, are those which have already
been collected by someone else and which have already been passed
through the statistical processes. When the researcher utilizes secondary data
then he has to look into various sources from where he can obtain them. For
e.g. Books, magazine, newspaper, Internet, publications and reports.

Methods Used In Study

I collected the data through the secondary sources such as.

• Books
• Magazines
• Newspapers
• Internet
 7.3 RESEARCH DESIGN

At the outset may be noted that there are several ways of studying and
tackling a problem. The formidable problem that follows the task of defining
the research problem is the preparation of the design of research project
popularly known as research design.

TYPES OF
RESEARCH

DESCRIPTIVE & EXPERIMENTAL

EXPLORATORY
DIAGNOSTIC RESEARCH
RESEARCH RESEARCH DESIGN DESIGN
DESIGN

EXPLORATORY RESEARCH DESIGN

Exploratory research design is termed as formulating research studies.

The main purpose of study is that of formulating a problem. The major
emphasis in such study is on discovery of new idea’s and insights. As such
the research design appropriate for such studies must be flexible enough to
provide opportunity for considering different aspects of problem.

DESCRIPTIVE AND DIAGNOSTIC RESEARCH DESIGN

Descriptive research designs are those design which are concerned

with describing the characteristics of particular individual or of the
group.Whereas diagnostic research studies determine the frequency with
which something occurs or its association with some else. In descriptive and
diagnostic study the researcher must be able to define clearly what he wants
to measure and must find adequate method for measuring it.

EXPERIMENTAL RESEARCH DESIGN

These are those studies where the researcher tests the hypothesis of
casual relationship between variables. Such study requires procedure that will
not only reduce biasness and increase reliability but will permit drawing
iIALuence about causality. Usually experiments meets this requirement, hence
these research designs are prepared for experiment.

RESEARCH DESIGN IN STUDY

In the study I will apply descriptive research design. As descriptive

research design is the description of state of affairs, as it exists at present. In
this type of research the researcher has no control over the variables; he can
only report what as happened or what is happening.
 Hypothesis
Null hypothesis:

The company liquidity position is strong & solvent in long run

Alternate hypothesis:

The company liquidity position is not strong & solvent in long

run
 INTRODUCTION TO THE TOPIC

ANALYSIS OF FINANCIAL STATEMENT

Financial statements present a mass of complex data in absolute terms

and reveal about the liquidity, solvency and profitability of the business.
Actual the figure given in financial statements do not speak anything
themselves. The process of giving tongue to these mute heaps of figures
is known as financial analysis. The focus of financial analysis is on key
figures in the financial statement and the significant relationship that
exists between them. The analysis of financial statements is a process
of evaluating the relationship between components part of financial
statement to obtain a better understanding of firm’s position and
performance. The first task of financial analysis is to select the
information relevant to the decision under consideration to the total
information contained in the financial statement. The second step is to
arrange the information in a way to highlight significant relationship. The
final step is interpretation and drawing of interferences and conclusions.
Financial statement is the process of selection, relation and evaluation.

PURPOSE OF FINANCIAL STATEMENT ANALYSIS

 To know the earning capacity or profitability.

 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest and dividend.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of management.
Various tools or devices employed for analysing the financial statements
are as follows:

(1) Comparative statements.

(2) Common size statements.
(3) Trend analysis.
(4) Ratios Analysis.

RATIO ANALYSIS

MEANING OF RATIO:- A ratio is assessment of the significant of

one figure in relation to other. It measures the comparative significant of
individual item of income and position statements. Thus it shows the
mathematical relationship between two related items express in
quantitative form.

RATIO ANALYSIS:- Financial Analysis depends to a large extent on

the use of ratio. A direct examination of the magnitude of two related
items is somewhat enlightening but the comparison is greatly facilitated
by expressing the relationship as a ratio.

MEANING OF RATIO ANALYSIS :

An analysis of financial statements with the help of “Ratio”
may be termed as “Ratio analysis”. It implies the process of computing,
determining & presenting the relationship of items of financial
statements. It also involves the comparison & interpretation of these
ratios & use of them for further projections. It is with the help of ratios
that the financial statement can be analyzed more clearly & decisions
made accruable & reliable from such analysis. The judgment of the
Management, seem to be made more easily when they can be
rationalized with the number. Thus the Ratio Analysis is a process of
comparison of figures against another and appraisal of ratios to make
proper analysis about the strengths & weakness of firm’s operations. So
it is a powerful analytical tool for measuring performance of an
organization.10
.

. STEPS INVOLVED IN THE RATIO ANALYSIS

i) Selection of relevant data from the financial statements

depending upon the objective of the analysis.

ii) Calculation of appropriate ratios from the above data.

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

iv) Interpretation of the ratios.

SIGNIFICANCE OF RATIO ANALYSIS

i) Helps in decision making

ii) Helps in financial forecasting and planning

iii) Helps in communicating

iv) Helps in co-ordination

v) Helps in Control

CLASSIFICATION OF RATIOS :
In view of the financial management or according to the tests satisfied,
various ratios have been classified as below:

(a) 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 a concern or the
firm’s ability to meet its current obligations.15

LIQUIDITY RATIO

CURRENT RATIO QUICK RATIO

1. CURRENT RATIO: This ratio explains the relationship between

current assets & current liabilities of a business.

Current ratio= Current assets

Current liabilities

YEAR 2005-06:

Current assets= 573,104,005.39

Current liabilities= 276,348,437.12

Current ratio= 573,104,005.39

276,348,437.12

= 2.074: 1
 YEAR 2006-07:

Current assets= 740,555,128.39

Current liabilities= 383,450,340.25

Current ratio= 740,555,128.39

383,450,340.25

= 1.93: 1

YEAR 2007-08:

Current assets= 1,194,865,799.78

Current liabilities= 627,902,324.01

Current ratio= 1,194,865,799.78

627,902,324.01 =1.9:1

2.5

1.5

1 CURRENT RATIO

0.5

0
2005- 2006- 2007- 2008- 2009-
06 07 08 09 10

INTERPRETATION: This ratio is used to assess the firm’s ability to meet

its short term liabilities on time.

IDEAL CURRENT RATIO: 2:1

The higher the ratio, the better it is, because the firm will be able to pay
its current liabilities more easily.

Here, current ratio is less than the ideal ratio & it has also decreased as
compared to the previous year. It indicates lack of liquidity.

QUICK RATIO OR LIQUID RATIO: It indicates whether the firm is in a

position to pay its current liabilities within a month or immediately.

Quick ratio= liquid assets

Current liabilities

YEAR 2005-06:

Liquid assets= current assets- stock- prepaid expenses

=573,104,005.39- 267,998,643.65- 3,491,972.00

= 301613389.74

Current liabilities= 276,348,437.12

Quick ratio= 301613389.74

276,348,437.12

= 1.09: 1

YEAR 2006-07:

Liquid assets= current assets- stock- prepaid expenses

=740555128.39-329981003.36-10251991.74

= 400322133.29

Current liabilities= 383450340.26

Quick ratio= 400322133.29

383450340.26
 = 1.043:1

YEAR 2007-08:

Liquid assets= current assets- stock- prepaid expenses

= 1194865799.78-60833566.88-853077.83

= 1133179155.07

Current liabilities= 627902324.01

Quick ratio= 1133179155.07

627902324.01

= 1.80: 1

YEAR 2008-09

QUICK RATIO = 0.75

YEAR 2009-10

QUICK RATIO= 0.98

1.8
1.6
1.4
1.2
1
0.8
QUICK RATIO
0.6
0.4
0.2
0
2005- 2006- 2007- 2008- 2009-
06 07 08 09 10

INTERPRETATION: Quick ratio is a more rigorous test of liquidity than

the current ratio.

IDEAL QUICK RATIO: 1: 1

If it is more, it is considered to be better.

Here, by comparing liquid ratio of three years, we conclude that the
liquid ratio in the constant rate. It is greater than the ideal liquid ratio. It
means liquidity position of the firm has increased.

(b) Long-term Solvency and Leverage Ratios : Long-term solvency

ratios convey a firm’s ability to meet the interest costs and repayments
schedules of its long-term obligations e.g. Debit Equity Ratio and
Interest Coverage Ratio. Leverage Ratios.15

LONG TERM
SOLVENCY
RATIO

FIXED ASSETS TO
DEBT EQUITY DEBT TO TOTAL INTEREST
PROPRIETOR
RATIO FUND RATIO COVERAGE RATIO
FUND RATIO

1. DEBT EQUITY RATIO: it indicates the proportion of funds which

are acquired by long term borrowings in comparison to
shareholders funds.

Debt equity ratio= Debt

Equity

YEAR 2005-06:

Debt= secured loans+unsecured loans+deferred tax liability

= 89323646.68+ 24528538+ 4720174

= 118572358.68

Equity= share capital+ reserves & surplus

= 93030000+144627864.40
 = 237657864.4

Debt equity ratio= 118572358.68

237657864.4

= .49: 1

YEAR 2006-07:

Debt= secured loans+unsecured loans+deferred tax liability

= 120150016.44+17747888+581127

= 143719031.44

Equity= share capital+ reserves & surplus

= 94727000+245590473.47

= 340317473.47

Debt equity ratio= 143719031.44

340317473.47

= 0.42: 1

YEAR 2007-08:

Debt= secured loans+unsecured loans+deferred tax liability

= 145620446.89+3973241+10187131

= 159780818.89

Equity= share capital+ reserves & surplus

= 126829660+703088767.79

= 829918427.79

Debt equity ratio= 159780818.89

829918427.79

= 0.19: 1
YEAR 2008-09

DEBT-EQUITY RATIO=0.16

YEAR 2009-10

DEBT-EQUITY RATIO=0.16

0.5

0.4

0.3
DEBT EQUITYRATIO
0.2

0.1

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION: This ratio is calculated to assess the ability of the

firm to meet its long term liabilities.

IDEAL DEBT EQUITY RATIO: 2: 1

The lower the ratio, the better it is for long term lenders because they
are more secure in that case.

Here, although debt equity ratio declined as compared to the last two
year but it is still less than the ideal ratio which is safe for the firm.

2. TOTAL ASSETS TO DEBT RATIO: This ratio is a variation of debt

equity ratio & gives the same indication as debt equity ratio.

Total assets to debt ratio= Debt

Total assets

YEAR 2005-06:

Debt= secured loans+unsecured loans+deferred tax liability

= 89323646.68+2452838+4720174
 = 118572358.68

Total assets= fixed assets +current assets +investments

=76295964.81+573104005.39+0

= 649399970.2

Total assets to debt ratio= 649399970.2

118572358.68

= 54.7%

YEAR 2006-07:

Debt= secured loans+unsecured loans+deferred tax liability

120150016.44+17747888+581127

= 143719031.44

Total assets= fixed assets +current assets + investments

= 125854684.78+994000+740555128.39

= 867403813.17

Total assets to debt ratio= 867403813.17

143719031.44

= 60.3%

YEAR 2007-08

Debt= secured loans+unsecured loans+deferred tax liability

= 145620446.89+3973241+10187131

= 159780818.89

Total assets= fixed assets +current assets + investments

= 2000574733.85+183789121+1194865799.78

=1579229654.63
Total assets to debt ratio=1579229654.63

159780818.89

= 98.8 %

INTERPRETATION:

IDEAL RATIO: less than 50% is satisfactory.

The lower the ratio, the better it is from long term solvency point of view.
Higher ratio indicates risky financial position because it means firm
depends too much upon outside loans & a burden of payment of large
amount of interest charged periodically.

Here, although total assets to debt ratio have increased as compared to

last two year but the position is not satisfactory because it is greater than
50%.

3.PROPRIETARY RATIO: this ratio indicates the proportion of total

funds provided by owners or shareholders.
Proprietary ratio= Equity

Equity+Debt

YEAR 2005-06:

Equity= share capital+ reserves & surplus

=93030000+144627864.40

= 237657864.4

Debt= secured loans+unsecured loans+deferred tax liability

= 89323646.68+ 24528538+ 4720174

= 118572358.68

Equity+debt= 23767864.4+118572358.68=356230223.08

Proprietary ratio=237657864.4
 356230223.08

= 66.7%

YEAR 2006-07:

Debt= secured loans+unsecured loans+deferred tax liability

= 120150016.44+17747888+581127

= 143719031.44

Equity= share capital+ reserves & surplus

= 94727000+245590473.47

= 340317473.47

Equity+debt=143719031.44+340317473.47=484036504.91

Proprietary ratio= 340317473.47

484036504.91

= 69.9%

YEAR 2007-08:

Debt= secured loans+unsecured loans+deferred tax liability

= 145620446.89+3973241+10187131

= 159780818.89

Equity= share capital+ reserves & surplus

= 126829660+703088767.79

= 829918427.79

Equity+debt=159780818.89+829918427.79=9896992456.68

Proprietary ratio= 829918427.79

989699246.68

= 83.8%
Year 2005-06 2006-07 2007-08 2008-09 2009-10
p. ratio 66.7 69.9 83.9 75.5 73.4

90
80
70
60
50
40 p. ratio
30
20
10
0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

IDEAL PROPRIETARY RATIO= 33% or more than that.

A higher proprietary ratio is an indicator of sound financial position. It

means firm is less dependent on external sources of finance. Lower
proprietary ratio is a danger signal for long term lenders as it indicates a
lower margin of safety available to them.

Here, proprietary ratio increased from 66% to 83% as compared to the

past two year indicates that proportion of shareholders funds has
increased. But the position is good as it is more than ideal ratio which is
33% or more.

4. DEBT TO TOTAL FUND RATIO: In this ratio, debt is

expressed in relation to total funds, i.e. both equity and debt.

Debt to total fund ratio= Debt

Debt+ Equity

YEAR 2005-06
Equity= share capital+ reserves & surplus

=93030000+144627864.40

= 237657864.4

Debt= secured loans+unsecured loans+deferred tax liability

= 89323646.68+ 24528538+ 4720174

= 118572358.68

Equity+debt=

23767864.4+118572358.68=356230223.08

Debt to total fund ratio= 118572358.68

356230223.08

= 0.33:1

YEAR 2006-07:

Debt= secured loans+unsecured loans+deferred tax liability

= 120150016.44+17747888+581127

= 143719031.44

Equity= share capital+ reserves & surplus

= 94727000+245590473.47

= 340317473.47

Equity+debt=143719031.44+340317473.47=484036504.91

Debt to total fund ratio= 143719031.44

484036504.91

= 0.29:1

YEAR 2007-08:

Debt= secured loans+unsecured loans+deferred tax liability

 = 145620446.89+3973241+10187131

= 159780818.89

Equity= share capital+ reserves & surplus

= 126829660+703088767.79

= 829918427.79

Equity+debt=159780818.89+829918427.79=989699246.68

Debt to total fund ratio= 159780818.89

989699246.68

= 0.16:1

INTERPRETATION:

IDEAL DEBT TO TOTAL FUND RATIO= 0.67:1

The proportion of long term loans should not be more than 67% of total
funds. A higher ratio than this is generally treated as indicator of risky
financial position from the long term point of view, because it means that
the firm depends too much upon outside loans from its existence.

The lower the ratio, the better it is from the long term solvency point of
view.

Here, although there is slight decrease in the ratio as compared to the

previous two year, but it is good for the firm

C) ACTIVITY RATIOS: these ratios are also known as turnover

ratios as they indicate the rapidity with which the resources
available to the concern are being used to produce sales. In
other words, these ratios measure the efficiency & rapidity of
the resources of the company, like stock; fixed assets, working
capital, debtors etc. these ratios are generally calculated on the
basis of sales or cost of sales.
1. INVENTORY/ STOCK TURNOVER RATIO: this ratio indicates
whether stock has been efficiently used or not. It shows the speed
with which stock is rotated into sales.
Stock turnover ratio= cost of goods sold

Average stock

YEAR 2006-07:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 933619561.11+232210178.43-55930599.92

= 1109899139.62

Average stock= opening stock+ closing stock

= 267998643.65+329981003.36

= 298989823.50

Stock turnover ratio= 1109899139.62

298989823.50

= 3.712 times

YEAR 2007-08:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 1100825386.71+283986912.65-68980164.29

= 1315832135.07

Average stock= opening stock+ closing stock

 2

= 329981003.36+608335566.88

=469158285

Stock turnover ratio= 1315832135.07

469158285.12

= 2.80 times

Year 2005-06 2006-07 2007-08 2008-09 2009-10

s.t. ratio 4.57 3.71 2.80 3.16 3.36

3
s.t. ratio
2

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

Higher the ratio, better it is, since it indicates that stock is selling
quickly. In a business, where stock turnover ratio is high, goods can be
sold at low margin of profit & even then profitability may be quite high.

A low stock turnover ratio indicates that stock does not sell quickly &
remains lying in the godown for quite a long time.

Here, fall in stock turnover ratio as compared to the previous year

indicates that there is slight fall in the efficiency of stock being
converted into cash. Even then, the ratio is satisfactory.
2. DEBTORS TURNOVER RATIO: this ratio indicates the relationship
between credit sales & average debtors during the year. It
indicates the speed with which amount is collected from debtors.

Debtors turnover ratio= Net credit sales

Average debtors+Average B/R

YEAR 2006-07:

Average debtors= opening debtors+ closing debtors

= 204756580.74+258556627.41

= 139515643.07

Net sales= 1840855946

Debtors turnover ratio= 1840855946

139515643.07

= 13.19 times

YEAR 2007-08:

Average debtors= opening debtors+ closing debtors

= 313115662.82 + 258556024.33

= 285835843.75

Net sales= 2214834103.83

Debtors turnover ratio=2214834103.83

 285835843.75

= 7.75 times

Year 2005-06 2006-07 2007-08 2008-09 2009-10

d.t. ratio 7.56 13.19 7.75 8.17 7.82

14
12
10
8
6 d.t. ratio
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

Higher the ratio, the better it is, since it indicates that amount from
debtors is being collected more quickly.

A lower debtors turnover ratio will indicate the inefficient credit sales
policy of the management. It means that credit sales have been made
to customers who do not deserve much credit.

3. WORKING CAPITAL TURNOVER RATIO: this ratio is of particular

importance in non manufacturing concerns where current assets
play a major role in generating sales. It reveals how efficiently
working capital has been utilized in making sales.
Working capital turnover ratio= cost of goods sold

Working capital

YEAR 2005-06:
 Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 670557812.01+ 141930723.09- 42499010.34

= 769989524.76

Working capital= current assets- current liabilities

=29675568.27

Working capital turnover ratio=769989524.76

296755568.27

= 2.59 times

YEAR 2006-07:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 933619561.11+232210178.43- 55930599.92

= 1109899139.62

Working capital= current assets- current liabilities

=357104788.13

Working capital turnover ratio= 1109899139.62

357104788.13

= 3.10 times

YEAR 2007-08
Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 1100825386.71+283986912.65- 68980164.29

= 1315832135.07

Working capital= current assets- current liabilities

=566963475.77

Working capital turnover ratio= 1315832135.07

566963475.77

= 2.32 times

INTERPRETATION:

High working capital turnover ratio shows efficient use of working

capital & quick turnover of current assets like stock & debtors.

Low working capital turnover ratio indicates under- utilization of working

capital.

Here, this ratio has increased from 3.10 times in 2006-07 to 2.32 times
in 2007-08. This indicates that working capital has not utilized more
efficiently than the previous year.

4. FIXED ASSETS TURNOVER RATIO: this ratio indicates the

relationship between cost of goods sold & net fixed assets.

Fixed assets turnover ratio= cost of goods sold

 Net fixed assets

Net fixed assets= Fixed assets – Depreciation

YEAR 2005-06:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 670557812.01+ 141930723.09- 42499010.34

= 769989524.76

Net fixed assets= 87122067.12-10826102.31

=76296964.81

Fixed assets turnover=769989524.76

76296964.81

= 10 times

YEAR 2006-07

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 933619561.11+232210178.43- 55930599.92

= 1109899139.62

Net fixed assets= 140750696.08-14896011.30

=125854684.78

Fixed assets turnover=1109899139.62

 125854684.78

=8.81 times

YEAR 2007-08:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 1100825386.71+283986912.65- 68980164.29

= 1315832135.07

Net fixed assets= 220597107.79-20022373.94

=200574733.85

Fixed assets turnover ratio=1315832135.07

200574733.85

= 6.56 times

Year 2005-06 2006-07 2007-08 2008-09 2009-10

d.t. ratio 10 8.81 6.56 9.70 12.92
 14

12

10

6 d.t. ratio

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

This ratio is of particular importance in manufacturing concerns where

the investment in fixed assets is quite high. This ratio reveals how
efficiently the fixed assets are being utilized.

Compared with previous year, if there is increase in this ratio, it will

indicate that there is better utilization of fixed assets.

Here, decrease in fixed assets turnover ratio as compared to the past

indicates the not better utilization of fixed assets.

5. CURRENT ASSETS TURNOVER RATIO: this ratio indicates the

number of times the current assets are rotated in producing sales
in the course of a year.
Current assets turnover ratio= cost of goods sold

Current assets

YEAR 2005-06

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 670557812.01+ 141930723.09- 42499010.34
= 769989524.76

Current assets= 573,104,005.39

Current assets turnover ratio= 769989524.76

573,104,005.39

=1.34 times

YEAR 2006-07:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 933619561.11+232210178.43- 55930599.92

= 1109899139.62

Current assets= 740,555,128.39

Current assets turnover ratio=1109899139.62

740,555,128.39

=1.49 times

YEAR 2007-08:

Cost of goods sold=

Raw material consumed + manufacturing expenses

- Increase in finished goods stock

= 1100825386.71+283986912.65- 68980164.29

= 1315832135.07

Current assets= 1,194,865,799.78

Current assets turnover ratio=1315832135.07

 1,194,865,799.78

=1.10 times

Year 2005-06 2006-07 2007-08 2008-09 2009-10

C.A.T
ratio 1.34 1.49 1.10 1.23 1.65

1.5

1
C.A.Tratio

0.5

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

This ratio measures the efficiency with which current assets are being
utilized by a firm.

Compared with last two years, ratio changes with the constant rate
then we can conclude company performance is satisfactory

(D)PROFITABILITY RATIOS: the main object of every business

concern is to earn profits. A business must be able to earn adequate
profits in relation to capital invested in it. The efficiency & the success
of a business can be measured with the help of profitability ratios.
The operating efficiency of a firm and the ability to ensure adequate
returns to its shareholders/owners depend ultimately on profit earned
by its profitability ratios. These ratios measure the results of a
business operations or overall performance and effectiveness of the
firm.

1. GROSS PROFIT RATIO: this ratio measures the margin of profit

available on sales.
 Gross profit ratio= Gross profit x 100

Net sales

Net sales= sales – sales return

YEAR 2005-06:

Net sales= 1334470890.92

Gross profit= Net sales – cost of goods sold

= 1334470890.92– 769989524.76

= 564481366.16

Gross profit ratio= 564481366.16 x 100

1334470890.92

= 42.30%

YEAR 2006-07:

Net sales= 1840855946

Gross profit= Net sales – cost of goods sold

= 1840855946 – 1109899139.62

= 730956806.38

Gross profit ratio= 730956806.38 x 100

1840855946

= 39.70%

YEAR 2007-08:

Net sales= 2214834103.83

Gross profit= Net sales – cost of goods sold

= 2214834103.83– 1315832135.07

= 899001968.76
 Gross profit ratio= 730956806.38 x 100

221483103.83

= 40.60%

Year 2005-06 2006-07 2007-08 2008-09 2009-10

gp. ratio 42.30 39.70 40.60 45.30 48.70

50

40

30
g.p ratio
20

10

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The higher the gross profit ratio, the better it is.

No ideal standard is fixed for this ratio, but the gross profit ratio
should be adequate enough not only to cover the operating expenses
but also to provide for depreciation, interest on loans, dividends &
creation of reserves.

Here, gross profit ratio is constant to the previous year which is

satisfactory.

2. NET PROFIT RATIO: this ratio measures the rate of net profit earned
on sales. It establishes the relationship between net profit and sales and
indicates the efficiency of the management in manufacturing, selling,
administrative and other activities of the firm.

Net profit ratio= Net profit x 100

Net sales

YEAR 2005-06:

Net profit= 101799619.79

Net sales= 1334470890.92

Net profit ratio= 101799619.79 x 100

1334470890.92

= 7.62%

YEAR 2006-07:

Net profit= 85689609.07

Net sales= 1840855946

Net profit ratio= 85689609.07 x 100

1840855946

= 4.65%

YEAR 2007-08:

Net profit= 142678018.32

Net sales= 2214834103.83

Net profit ratio= 142678018.32 x 100

2214834103.83

= 6.44%

Year 2005-06 2006-07 2007-08 2008-09 2009-10

NP ratio 7.62 4.65 6.44 7.85 7.45
 8
7
6
5
4
NPratio
3
2
1
0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

A high net profit margin would ensure adequate return to the owners
as well as enable firm to withstand adverse economic conditions
when selling price is declining and cost of production is rising and
demand for the product is falling. A low net profit ratio has the
opposite implications.

Here, net profit ratio has increased as compared to the previous year.
But decrease from last two years So, the firm needs to check its
profitability.

3. RETURN ON CAPITAL EMPLOYED/ RETURN ON INVESTMENT:

This ratio reflects the overall profitability of the business. It is
calculated by comparing the profit earned and the capital employed to
earn it.

Return on investment =Profit before interest & tax x 100

Capital employed

YEAR 2005-06:

Profit before interest & tax= 101500337.93

Capital employed= Fixed assets + working capital

 = 76295964.81 + 29655568.27

= 373051533.08

Return on investment= 101500337.93 x 100

3730515.08

= 27.20%

YEAR 2006-07

Profit before interest & tax= 84886544.74

Capital employed= Fixed assets + working capital

= 125854684.78 + 357104788.13

= 482959472.91

Return on investment=84886544.74 x 100

482959472.91

= 17.57%

YEAR 2007-08

Profit before interest & tax= 146148509.72

Capital employed= Fixed assets + working capital

= 200574733.85 + 566963475.77

= 767538209.62

Return on investment=146148509.72 x 100

767538209.62

= 19.04%

Year 2005-06 2006-07 2007-08 2008-09 2009-10

ratio 27.20 17.57 19.04 24.81 24.02
 30
25
20
15
ROI
10
5
0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

It measures how efficiently the capital employed in the business is being

used. The higher the ratio, the more efficient is the use of capital
employed.

Here, fall in the return on investment as compared to the previous year

indicates that the capital employed in the firm is not used properly.

4. DIVIDEND PER SHARE: this ratio indicates the per share dividend
paid to equity shareholder.

Dividend per share=

Dividend paid to equity shareholders

Number of equity shares

YEAR 2005-06:

Dividend paid to equity shareholders= 14143661

Number of equity shares= 9303000

Dividend per share= 14143661

9303000

= Rs 1.52 per share

YEAR 2007-08:

Dividend paid to equity shareholders= 22257654

Number of equity shares= 126829660

Dividend per share= 22257654

126829660

= Rs 0.17 per share

Year 2005-06 2006-07 2007-08 2008-09 2009-10

ratio 1.52 17.57 0.17 24.81 24.02

25

20

15

10 D.PRATIO

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

Profits remaining after payment of tax and preference dividend are

available to equity shareholders. But all of these are not distributed
among them as dividend. Out of these profits, a portion is retained in the
business and the remaining is distributed among equity shareholders as
dividend. DPS is the dividend distributed to equity shareholders divided
by the number of equity shares.

Here, there is great fall in the dividend per share.

COMPARATIVE STATEMENTS
The comparative financial statements are statements of the
financial position at different periods; of time .The elements of
financial position are shown in a comparative form so as to give
an idea of financial position at two or more periods. From
practical point of view, generally two financial statements are
prepared in a comparative form for financial analysis purposes.
Not only the comparison of the figures of two periods but also
be relationship between balance sheet and income statement
enables an in-depth study of financial position and operative
results. The comparative statements may show:
1. Absolute figures
2. Changes in absolute figures
3. Absolute data in terms of percentages
4. Increase or decrease on terms of percentages

The financial data is comparative only when same accounting

principles are used in preparing these statements.
The two comparative statements are
1. Balance sheet
2. Income statement

Comparative Balance Sheet

The Comparative Balance Sheet as on two or more different
dates can be prepared to show the increase or decrease in
various assets, liabilities and capital. Such a Comparative
Balance Sheet is very useful in studying the trends in a
business enterprise.
 Comparative Balance Sheet of iil Ltd.

as on 31 March 2007 &

2008

Particulars 2007 2008 Increase or decrease %Increase or decrease

over 2007 over 2007

Gross Block 94718125.08 216989220.79 122271095.71 129.08

Less: Depreciation 14896011.30 20022373.94 5126362.64 34.41

Net Block 79822113.78 196966846.85 117144733.07 146.75

Capital Work in Progress 46032571 3607887 (42424684) (92.16)

Net Fixed Assets (A) 125854684.78 200575733.85 74721049.07 59.37

Working Capital :

Current Assets (1) 740555128.39 1194865799.78 454310671.39 61.34

Current Liabilities(2) 383450340.26 627902324.01 244451983.75 63.75

Working Capital(1-2) (B) 357104788.13 566963475.77 209858687.64 58.76

Capital Employed (A+B) 482959472.91 767539209.62 284579736.71 58.92

Less: Loan Fund 137897904.44 149593687.89 11695783.45 8.48

Less : Deferred Tax Liability 5821127.00 10187131 4366004 75

Add : Investment 994000 183789121 182795121 183

Shareholder Fund 340234541.47 791547511.73 451312970.26 132.64

Represented by :

Share Capital 94727000 126829660 32102660 33.88

Add: Reserve & Surplus 245590473.47 703088767.79 457498294.32 186.28

Shareholder Fund 340317473.47 829918427.79 489600954.32 143.86

INTERPRETATION
 1.
There has been an increase in fixed assets by 59.37%i.e. Rs
74721049.07 which shows new fixed assets has been purchased by the
firm.

2. Purchase of fixed assets was financed partly by the issue of equity

shares, addition in the amount of reserves, as well as loan funds.

3.Current short term financial position of I.I.Ltd. has

improved a little bit in 2007-08 as compared to the year 2006-07. The
increase in working capital in 2007-08 as compared to 2006-07 is Rs.
209858687.64 shows that current financial position has improved in
2006-07.

4. Equity share capital has increased by Rs 32102660 i.e. 33.38%

increase. It has made the financial position of the company strong.

5. Reserves has increased by Rs 457498294.32 i.e186.28.% increase

reflects the increase in profits. It has also made the financial position of
the company strong

Comparative Profit & Loss A/c

Profit & Loss account shows the net profit or net loss of a particular year
whereas comparative profit and loss account for a number of years
provides the following information:

(a) Rate of increase or decrease in sales.

(b) Rate of increase or decrease in cost of goods sold.

(c) Rate of increase or decrease in gross profit.

(d) Rate of increase or decrease in operating profit.

(e) Rate of increase or decrease in net profit.

 Comparative Profit & Loss Account
for the Year ended 31st March 2007 & 2008

Particulars 2007 2008 Absolute Percentage

Increase Increase

or Or

Decrease Decrease

Sales 1840855946.00 2214834103.83 373978157.83 20.31

Less : Cost of Goods Sold 1109899139.62 1315832135.07 205932995.45 18.55

Gross Profit (A) 730956806.38 899001968.76 168045162.38 22.98

Less : Operating Expenses :

Finished goods purchased 3717173.20 11019090.96 7301917.76 196.43

Excise duty 160673445.58 240607796.47 79934350.89 49.74

R & D exp. 4251845.00 3140546.83 1111298.17 26.13

Loss on sale of fixed assets 494395.46 1349365.47 854970.01 172.93

Administration Expenses 45663377.41 67456209.69 21792832.28 47.72

Selling & Distribution Expenses 396235481.51 395157207.51 1077974.00 0.27

Financial Charges 16260835.33 21513836.60 5253001.27 32.33

Depreciation 4960394.81 7818043.17 2857648.36 57.60

Preliminary exp. 115658.00 1172591.00 1056933.00 913.84

Total Operating Expenses (B) 632372606.3 749234678.7 116862072.4 1.84

Operating Profit (A-B) 98584200.08 149767290.06 51183089.98 51.91

Add : Other Income

Interest Received 253507.90 17670929.93 17417421.33 68.70

Other Income 2309672.09 224126.33 (20855457.76) 902.96

Total Income (C ) 101147380.07 167662346.32 66514966.25 65.40

Less : Provision For Tax 15457771.00 25353112.00 9895341.00 64.01

Add: excess provision in earlier year 368784.00

Income After Tax 85689609.07 142678018.32 56988409.25 66.50

INTERPRETATION:
1. In the year 2007, Net sales have increased by 20.31% but on the
other hand, cost of goods sold has also increased by 18.55%.

2. This means that increase in sales was relatively cheaper in terms of

purchase & other direct charges.

3. Operating expenses have increased by Rs 116862072.4 i.e. 1.84%.

4. Increase in cost of sales & operating expenses have led to increase
in operating profits by 51.91%.
5. Despite increase in operating profits, total income has increased by
Rs 56988409.25 i.e. 66.50%.

COMMON -SIZE STATEMENT

The common size statements, balance sheet and income statement are
shown in and analytical percentages. The figures are shown as
percentages of total assets, total liabilities and total sales. The total
assets are taken as 100 and different assets are expressed as a
percentage of the total. Similarly, various liabilities are taken as a part of
total liabilities. These statements are known as component percentages
or 100 % statements because every individual item is stated as a
percentage of the total 100.
The common size statements may be prepared in the following way:

1. Total of assets or liabilities are taken as 100

2. The individual assets are expressed as a percentage of total assets

Utility of common size statements

These statements are useful for comparing the profitability and financial
position of two or more businesses. This is because the financial
statements of different firms can be converted into uniform common size
format irrespective of the size of individual items. However, the
comparison will be valid only than the accounting policies used by
various firms are similar.
 COMMON-SIZE BALANCE SHEET OF iil
LTD.

(as on 31st March 2007 and 2008)

Particulars 31st March 2007 31st March 2008

Amount % Amount %

Assets

Fixed Assets:

Net fixed assets 79822113.78 9.20 196966846.85 12.17

Capital Work in Progress 46032571.00 5.30 3607887.00 0.22

Total Fixed Assets (A) 125854684.78 14.50 200574733.85 12.39

Investments (B) 9940000 01.14 183789121 11.36

Current Assets :

Inventories 329,981,003.36 38.03 608,335,566.88 37.60

Sundry Debtors 258,556,024.33 29.80 313,115,662.82 19.35

Cash & Bank Balances 17,497,693.27 00.20 43,047,467.23 2.66

Other current assets 100,019,736.13 11.52 166,238,865.23 10.27

Loans & Advances 34,500,671.30 3.97 64,128,237.62 3.96

Total Current Assets (C ) 740555128.39 85.33 1194865799.78 73.86

Fictitious Assets :

Miscellaneous Expenses Written off 83032 0.01 38371916.06 2.37

Total Fictitious Assets (D) 83032 0.01 38371916.06 2.37

Total Assets (A+B+C+D) 867486845.17 100.00 1617601570.69 100.00

Liabilities & Capital :

Owner's Equity :

Share Capital 94727000 10.92 126829660 7.84

Reserve & Surplus 245590473.47 28.31 703088767.79 43.46

Total Owner's Equity (E) 340317473.47 39.23 829918427.79 51.30

Long Term Borrowings:

Secured Loans 120150016.44 13.85 145620446.89 9.00

Unsecured Loans 17747888.00 02.04 3973241.00 0.24

Total Long Term Borrowings (F) 137897904.44 15.89 149593687.89 9.24

Current Liabilities & Provision

Creditors 234,436,274.81 27.02 373,596,471.40 23.09

Acceptances 1,180,999.33 0.14 852,539.29 0.05

Advances From Customers - - 17,278,216.46 1.06

Expenses Payable 5,227,844.32 0.60 23,627,136.31 1.46

Other Liabilities 117448403.8 13.53 144515164.55 8.93

Provisions 25156818.00 2.99 68032796.00 4.20

INTERPRETATION:
1. A close look at the balance sheet shows that IIL ltd. is well financed
company as it depends on both shareholders funds as well as outsiders’
funds. Its shareholders funds constitute a portion of 39.23% in 2006-07
and 51.30% in 2007-08, where as loans constitute 15.89% in 2006-07
and 9.24% in 2007-08.

2. The investment of the year 2007-08 was increased to

10 % comparing with the previous year 2006-07.

3. Current Assets have decreased in year 2007-08 as compared to

2006-07. In Year 2006-07 current assets were 85.33% of Total Assets
and in year 2007-08 current Assets are 73.86% of Total Assets.

4. Current Liabilities have also decreased to 38.81% in 2007-08 of

Total liabilities from 44.20% in 2006-07.

5. From the above Balance Sheet, we can say that during 2006-07,
14.50% of the company’s total assets were fixed assets & this was
reduced to 12.39% in 2007-08.
 Common size Profit & Loss Account
for the Year ended 31st March 2007 & 2008

Particulars 2007 2008

% %

Sales 1840855946.00 100 2214834103.83 100

Less : Cost of Goods Sold 1109899139.62 60.29 1315832135.07 59.40

Gross Profit (A) 730956806.38 39.71 899001968.76 40.60

Less : Operating Expenses :

Finished goods purchased 3717173.20 0.20 11019090.96 0.49

Excise duty 160673445.58 8.72 240607796.47 10.86

R & D exp. 4251845.00 0.23 3140546.83 0.14

Loss on sale of fixed assets 494395.46 0.02 1349365.47 0.06

Administration Expenses 45663377.41 2.48 67456209.69 3.04

Selling & Distribution Expenses 396235481.51 21.52 395157207.51 17.84

Financial Charges 16260835.33 0.88 21513836.60 0.97

Depreciation 4960394.81 0.26 7818043.17 0.35

Preliminary exp. 115658.00 00.01 1172591.00 0.05

Total Operating Expenses (B) 632372606.3 34.35 749234678.7 33.82

Operating Profit (A-B) 98584200.08 5.35 149767290.06 6.76

Add : Other Income

Interest Received 253507.90 0.02 17670929.93 0.79

Other Income 2309672.09 0.12 224126.33 0.01

Total Income (C ) 101147380.07 5.49 167662346.32 7.57

Less : Provision For Tax 15457771.00 0.84 25353112.00 1.14

Add: excess provision in earlier year 368784.00 0.01

Income After Tax 85689609.07 4.65 142678018.32 6.44

INTERPRETATION:

1. The above Common – Size Statement shows that the Cost of

Goods sold which was 60.29% on sales in 2006-07 has decreased
to 59.40% on sales in 2007-08.

2. The Cost of Goods sold has decreased as a result of which Gross

profit has increased 40.60% in 2007-08 from 39.71% in 2006-07

3. Earning after Tax has increased from 4.65% in 2006-07 to 6.44%

in 2007-08.
TREND ANALYSIS OF SALES

GRAPHICAL PRESENTATION OF SALES:

TREND PERCENTAGE
(Base Year 2005-06)
Year Sales %
Amounts
2005-06 133.48 100
2006-07 184.09 137.91
2007-08 221.48 165.63
2008-09 294.49 220.62
2009-10 396.87 297.32
 400
350
300
250
200
Trend sales
150
percentage
100
50
0
2005- 2006- 2007- 2008- 2009-
06 07 08 09 2010

INTERPRETATION:

Trend Percentages shows the direction of movement over a long period

of time. The above Trend Percentages of Sales of iiL Ltd. Shows that the
sales have an increasing trend. The sales of the company are increasing
tremendously from the year 2005-06. The sales curve of the company is
moving upward and has not shown any downward movement in any
year.

The increase in sales in year 2006-07 was 137.91% while in 2007-08

this increase was 165.63%, in 2008-09 the increase percentage in sales
further rose to 220.63%, followed by 297.32% in 2009-10.

This shows that IIL is a fast growing Company.

TREND ANALYSIS OF PROFIT AFTER TAX

TREND PERCENTAGE
Base Year(2005-06)
Year Profit After Tax
Amount %
2005-06 10.18 100

2006-07 8.57 84.18

2007-08 14.27 140.17
2008-09 20.79 204.22
2009-10 28.22 277.21

GRAPHICAL PRESENTATION OF PROFIT AFTER TAX

300

250

200

150 TREND PROFIT

PERCENTAGE
100

50

0
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:

1. Trend Percentages shows the direction of movement over a long

period of time. The above Trend Percentages of profit after tax of
IIL. Shows that the profit of the company has an increasing trend.

2.The profit of the company are increasing at a very fast pace. The
profits of the company have decreased to 84.18% in the year 2005-06
and have increased to 140.17% in year 2007-08. This upward shift was
followed by an increase of 277.21% in the year 2009-10 which indicates
that IIL is a fast growing and expanding company.

STATISTICAL TOOL
Correlation: Correlation measures the relationship between two
or more than two variables.

When two phenomenon vary in such a way those movements in

other accompany movement6s in one these are said to be
correlated. The statistical tool with the help- of which relationship
between two or more than two variables and degree of relationship
between them can be studied is called correlation.

Correlation between sale and profitability

Correlations

sales profit

sales Pearson Correlation 1 .969**

Sig. (2-tailed) .006

N 5 5

profit Pearson Correlation .969** 1

Sig. (2-tailed) .006

N 5 5

**. Correlation is significant at the 0.01 level (2-tailed).

Interpretation

This table shows that positive relationship between sale and

profitability
Correlation between sale and liquidity

Correlations

sales liquidity

sales Pearson Correlation 1 .988**

Sig. (2-tailed) .002

N 5 5

liquidity Pearson Correlation .988** 1

Sig. (2-tailed) .002

N 5 5

**. Correlation is significant at the 0.01 level (2-tailed).

Interpretation

This table shows that positive relationship between sale and liquidity

Regression

It is the study of the nature of relationship between the variables

so that one may be able to predict the unknown value of on variable

for a known value of another variable.

Sale and profitability

 Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .969a .940 .920 2.30061

a. Predictors: (Constant), sales

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients 95.0% Confidence Interval for B

Model B Std. Error Beta t Sig. Lower Bound Upper Bound

1 (Constant) -2.443 2.941 -.831 .467 -11.804 6.918

Sales .077 .011 .969 6.840 .006 .041 .112

a. Dependent Variable: profit

INTERPRETATION OF REGRRESSION ANALYSIS

Since sales & profitability are correlated and have a significant

correlation but with regression lines we can actually can the nature

of relationship between two, And 1 factor dependent on other will

help us in determining the rate of change & can conclude with the

estimated value of other & say change in sales will effect change in

profitability

Sale and liquidity

 Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .988a .977 .969 4.46486

a. Predictors: (Constant), sales

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients 95.0% Confidence Interval for B

Model B Std. Error Beta t Sig. Lower Bound Upper Bound

1 (Constant) -14.652 5.709 -2.567 .083 -32.819 3.516

Sales .244 .022 .988 11.231 .002 .175 .313

a. Dependent Variable: liquidity

INTERPRETATION OF REGRRESSION ANALYSIS

Since sales & liquidity are positively correlated and have a

significant correlation but with regression lines we can actually can

the nature of relationship between two, And 1 factor dependent on

other will help us in determining the rate of change & can conclude

with the estimated value of other & say change in sales will effect

change in liquidity
 Hypothesis testing

ANOVA:

ANOVA is essentially a procedure for testing the difference among

different groups of data for homogeneity

Let null hypothesis that there is no significant difference

between the variables

Sale and profitability

ANOVA

Profit

Sum of Squares Df Mean Square F Sig.

Between Groups 263.519 4 65.880 . .

Within Groups .000 0 .

Total 263.519 4

Interpretation

The null hypothesis being rejected, that there is no significant

difference between the variables, &but there is a significant

difference between Sales & profitability, because f is more then
table value

Sale and liquidity

 ANOVA

Liquidity

Sum of Squares df Mean Square F Sig.

Between Groups 2574.497 4 643.624 . .

Within Groups .000 0 .

Total 2574.497 4

Interpretation

The null hypothesis being rejected, that there is no significant

difference between the variables, &but there is a significant

difference between Sales &liquidity, because f is more then table
value

T-test

T –test is small sample test .it was developed by William gusset in

1908. For applying t-test, the value of t-test, the value of t-statistics
computed. For this, the following formula is used:

T=deviation from population parameter \standard error of

sample satistic

Sale and profitability

One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

sales 5 246.0820 102.72272 45.93900

profit 5 16.4060 8.11663 3.62987

 One-Sample Test

Test Value = 0

95% Confidence Interval of the

Difference

t df Sig. (2-tailed) Mean Difference Lower Upper

sales 5.357 4 .006 246.08200 118.5349 373.6291

profit 4.520 4 .011 16.40600 6.3279 26.4841

Interpretation

The null hypothesis being rejected, that there is no significant

difference between the variables, &but there is a significant

difference between Sales & profitability, because t is more then
table value

Sale and liquidity

One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

sales 5 246.0820 102.72272 45.93900

liquidity 5 45.4140 25.36975 11.34570

One-Sample Test

Test Value = 0

95% Confidence Interval of the

Difference

T df Sig. (2-tailed) Mean Difference Lower Upper

sales 5.357 4 .006 246.08200 118.5349 373.6291

liquidity 4.003 4 .016 45.41400 13.9133 76.9147

Interpretation

The null hypothesis being rejected, that there is no significant

difference between the variables, &but there is a significant

difference between Sales & liquidity because t is more then table
value

Chi-square –test
Chi –square test enables us to examine whether or note

two attributes are associated or independent of

one another

Sale and profitability

Sales

Observed N Expected N Residual

133.48 1 1.0 .0

184.09 1 1.0 .0

221.48 1 1.0 .0

294.49 1 1.0 .0

396.87 1 1.0 .0

Total 5
 Profit

Observed N Expected N Residual

8.57 1 1.0 .0

10.18 1 1.0 .0

14.27 1 1.0 .0

20.79 1 1.0 .0

28.22 1 1.0 .0

Total 5

Test Statistics

sales Profit

Chi-Square .000a .000a

Df 4 4

Asymp. Sig. 1.000 1.000

a. 5 cells (100.0%) have expected

frequencies less than 5. The minimum
expected cell frequency is 1.0.

Interpretation

The null hypothesis being accepted that there is no significant

difference between the variables, &but there is no significant

difference between Sales & profitability, because chi–square is more
then table value
Sale and liquidity

Sales

Observed N Expected N Residual

133.48 1 1.0 .0

184.09 1 1.0 .0

221.48 1 1.0 .0

294.49 1 1.0 .0

396.87 1 1.0 .0

Total 5

Liquidity

Observed N Expected N Residual

22.47 1 1.0 .0

24.20 1 1.0 .0

40.22 1 1.0 .0

56.80 1 1.0 .0

83.38 1 1.0 .0

Total 5

Test Statistics

Sales liquidity

Chi-Square .000a .000a

Df 4 4

Asymp. Sig. 1.000 1.000

a. 5 cells (100.0%) have expected

frequencies less than 5. The minimum
expected cell frequency is 1.0.
Interpretation

The null hypothesis being accepted that there is no significant

difference between the variables, &but there is no significant

difference between Sales & liquidity because chi–square is more
then table value

FINANCIAL SWOT ANALYSIS

STRENGTHS

 Long-term financial position of the company is sound.

 Long-term solvency of the company is such sound that
shareholder’s have high book value and increasing
return on equity overtimes.
 Dividend per share is constant
 Sale is increasing
  Large investment at their door adds more favorable
way for them.

WEAKNESS

 Low liquidity position since last 4 years.

 Working capital is decreasing.
 Earning per share in minus
 Company suffers from loss
 Less exports then their capabilities.

OPPORTUNITIES

 Increasing market share is increasing their market

capitalization.
 High competitive strength in different businesses
increasing their revenue.
 Opportunities to expand their business by getting
financial support from various lending institutions as
they have sound financial position.

THREATS

 High taxes and excise duties on business.

 Increasing government regulations regarding their
expansion and affects their profitability.
 LIMITATIONS OF STUDY

No study is without limitations, whether it is of any type &

so my study does have certain limitations

TIME CONSTRAINT

Shortage of time was a very big constraint

RESOURCE CONSTRAINT

Availability of data was a constraint, analysis was made only with

data which is available, and also there are some data & information
which was required but not made available due to secret records.

PERIOD OF ANALYSIS

Generally longer period gives us more accurate estimates in this

case period of analysis is only 5 years.

COMPLEX CALCULATIONS

Calculations were typical and in crores that analysis was little

difficult

SECONDARY DATA

All the information available was from secondary sources and data
was very vast to analyze properly & accurately

SECRECY OF INTERNAL DATA

Since no company wants to give their internal information and so
this caused hurdles to the way.

WIDE AREA TO STUDY

Study being conducted was very wide & analysis require expertise
knowledge & skills which was lacking
CONCLUSION
1. INSECTICIDES INDIA Ltd. is growing at a fast pace as it can be
seen through the Increase in sales.

2. The Company is effectively using its resources of men, material

and machinery, which has led to the decrease in cost of goods
sold despite increase in sales.

3. The liquidity position of the firm has shown decreasing trend in

relation to previous year because of greater increase in current
liabilities than current assets but still the liquidity position is
satisfactory which can be seen from the liquidity ratios.

4. The gross profit & net profit is decreasing according to ratios

related to previous years. The firm should adopt some necessary
steps to overcome this problem.

5. Moreover, the company is efficiently using its fixed assets &

working capital for generating sales.

6. INSECTICIDES INDIA Ltd. Is using borrowed funds for financing

its activities rather than owned funds which help in tax savings.

7. There have been decrease in investment amounted to Rs

12065154 related to 2008-09.

8. It can be seen from the comparative statements that the financial

position of IIL. Has improved in relation to previous year.

9. Sales of the company are increasing but the expenses related to

sales are increasing.

10. Management of working capital is fine but there are certain flaws
in case of inventory management as there is fall in the efficiency of
stock being converted into cash.
11. IIL is growing at a very fast pace which can be seen from the
trend percentages as the sales & the earnings of the company are
increasing tremendously from past few years.

12. The Company is into a lot of modernization and expansion for

the growth of the Company and to increase its sales volume.
SUGGESTIONS
1. Firm is largely using outsider’s funds which is undoubtedly a good
policy for tax saving but it leaves lesser scope for the firm to raise
its funds through shares as it increases the risk perception in the
minds of shareholders.

2. The firm is investing funds outside the business to increase its

earnings which is a good sign for the company.

3. The Company is enjoying a good current position. It should take

steps to further improve its position by repositioning the
composition of current assets.

4. Large amounts of funds are blocked in debtors. Company should

use an appropriate and efficient debt collection policy to reduce its
debtors so that the blocked amount is properly utilized.

5. The company should keep more cash for the liquidity position of
the company.