A STUDY ON THE FINANCIAL PERFORMANCE OF ROOTS INDUSTRIES INDIA LIMITED COIMBATORE

SUBMITTED BY S.SATHEESH
(REG. NO. 11CM62202)

The Report is submitted as partial fulfillment of the requirement of MBA Program of

MANONMANIAM SUNDARANAR UNIVERSITY

Under the guidance of

MS.J. RENUKA PETERS

INDIGROW INSTITUTE OF PROFESSIONAL STUDIES EVERONN EDUCATION LIMITED COIMBATORE OCTOBER - 2011

INDIGROW INSTITUTE OF PROFESSIONAL STUDIES EVERONN EDUCATION LIMITED 334, Puliakulam Road, (opp) Carmel Garden School, Coimbatore-641 045

CERTIFICATE
This is to certify that the project titled A STUDY ON THE FINANCIAL

PERFORMANCE

ROOTS INDUSTRIES INDIA LIMITED is submitted to

Manonmaniam Sundaranar University as partial fulfillment of the requirement of MBA Program, is a record of the original work done by S.SATHEESH during the period of his study in Indigrow Institute of Professional Studies, Puliakulam Road, Coimbatore under my supervision and guidance and the report has not formed the basis for the award of any Degree/Associateship/Fellowship or other similar title to any candidate in any university.

______________ Faculty Guide

__________________ Campus Head

Viva voce examination held on _______________________ _________________ Internal Examiner ____________________ External Examiner

DECLARATION I, S.SATHEESH here by declare that the project titled A STUDY ON THE FINANCIAL PERFORMANCE OF ROOTS INDUSTRIES INDIA LIMITED is submitted to Manonmaniam Sundaranar University as partial fulfillment of the requirement of MBA Program, is a record of the original work done by me under the supervision and the guidance of MS.J. RENUKA PETERS. Faculty Member Indigrow Institute of Professional Studies, Puliakulam Road, Coimbatore. I further declare that this report has not been submitted to any other Universities / Institutions / Board for the award of any Degree / Diploma before.

Date: Place:

S.SATHEESH (11CM62202)

INTRODUCTION ABOUT THE STUDY The project work titled the study on financial performance with reference to Roots Industries India Limited. The main objective of study is to find out the financial strength and weakness of the company using financial analysis. Finance is one of the major element is activity the overall growth of economy. Finance is the life blood of economy activity a well-knit financial system directly contributes to the growth of economy. An efficient system calls for the effective performance of financial institutions and financial instruments and financial market. Meaning: A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. Definition: According to Prof. Spring field, Prof. Mass & Merrium, a ratio is defined As The indicated quotient of two mathematical impression and as The Relationship between two (or) more things

Importance of ratio analysis

It helps in evaluating the firms performance: With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firms assets correctly, to increase the investors wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets It helps in inter-firm comparison: Ratio analysis helps in inter-firm comparison by providing necessary data. An interfere comparison indicates relative position. It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be initiated immediately to bring them in line. It simplifies financial statement: The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner. It helps in determining the financial position of the concern:

Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling. It is helpful in budgeting and forecasting: Accounting ratios provide a reliable data, which can be compared, studied and analyzed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action. Liquidity position: With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm. Long term solvency: Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency s measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets. Operating efficiency:

Yet another dimension of usefulness or ratio analysis, relevant from the View point of management is that it throws light on the degree efficiency in the various activity ratios measures this kind of operational efficiency. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers.

Advantages of Ratios Analysis

Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of 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. Help in investment decisions:

It helps in investment decisions in the case of investors and lending decisions in the case of bankers.

Limitations of Ratios Analysis

Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpret and different people may interpret the same ratio in different way. Incomparable:

Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios.

Objectives of the study

1.

To assess the profitability and operating efficiency of Roots Industries India Limited.

2.

To assess the liquidity position of Roots Industries India Limited.

Scope of study This study focuses on the information contained in financial statements with a view to find out the strength and weaknesses of Roots Industries India Limited. Roots Industries India Limited is a manufacturer of horns. They produce, export and supply, automotive electric horns, air horns, halogen lamps, friction products, auto electrical accessories , automotive two wheeler spare parts. The study uses ratio analysis to dissect and establish relationship between the elements of financial statement. The operational profitability and financial position are analyzed with the help of liquidity ratios, profitability ratios and activity ratios. In order to find out the earning power of the company, Du Pont Technique is used. Research methodology The study uses analytical research methodology by collecting information that has been gathered from Roots Industries India Limited and looks at what it shows as trends. Data collection

1. Primary data: The study relies on primary data to interpret financial information which is collected through questionnaire and interviews with officials from finance department. 2. Secondary data: The data for operational and profitability analysis is mainly taken from annual reports. Apart from this, books, magazines, and office documents are also used. Tools applied 1. Ratio analysis 2. Du Pont Technique

Chapterisation 1. Introduction 2. Review of literature 3. Profile of Roots Industries India Limited 4. Data analysis 5. Finding and conclusion Study Plan: Sl No Study Coverage Date:

1. 2. 3.

Title Proposal