INTRODUCTION Industry Profile: Mining is the basic to all other industries and no progress is possible without mineral development.

Minerals are valuable natural resources as they form the basic raw materials for most of the industrial products and are essential for man's progress. Minerals, natural substances got from the earth by mining are the backbone of our industries and hence are of commercial and economic use. Mining industry is playing a vital role in the growth and

development of our national economy. The country is heading towards a stage where larger consumption of mineral will be required to sustain even the minimum growth rate of our economy. The mineral industry comprising mining, geology, mineral

processing, metallurgy and materials is characterized by distinctive and special features and considered as dynamic in nature. It is an industry meeting the basic raw materials requirement of various finished products. It is beyond doubt that the mining industry is fairly big in size encompassing a large industrial workforce. More than 3000 operative mines of small and big are operating in India. The industry is significantly important from the view of export earning and GDP contribution (3.2% approximately) to national income.

Mining industry in India has a distinction of extremely good record of safety despite the fact that it is hazardous by its very nature and growth big in size, in terms of manpower and production in the past. DGMS (The nodal safety agency of Government of India) records reveal that compared to other neighboring mineral

producing countries like China etc, the accident rate is less. The production of metallic and non-metallic major minerals in the country is of the order of 242 million tones. Mining activity in AP is not an exception even though it contributes just 11% of total mineral production in the country by way of producing around 27 million tones of important ores and minerals. APMDC- an agent of government of AP, guide and partner in exploring mineral wealth of AP, entrusted with the objective of exploring and exploiting mineral wealth in a planned and regulated manner with application of higher technology, value addition and marketing offer excellent opportunities for investors in mineral sector. Barytes, which is chemically BaS04, is also known as "Heavy Spar". This is the important mineral produced from the state of AP. Actually; AP is contributing almost 100% of the India production of barites. Barytes has a high specific gravity of 4.2-4.6. It is chemically inert and almost insoluble in water. 2

Presently, total estimated reserves of barites in the country are 87 million tones are located in the state of AP other than small amounts in Himachal Pradesh and Rajasthan. Barytes mining activity in the state and in the country was boosted only after the discovery of the deposit in Mangampeta in Kadapa district. Even now almost 95% of the mineral production comes from

Mangampeta. The Mangampet barites deposit is the largest and thickest among the known barites deposits of the world, having a maximum thickness of 40 meters. In view of the features enumerated, the deposit is indeed unique in the entire world and it is a rare privilege to have such deposit.

USES: Some extra-ordinary physical and chemical properties like high specific gravity, low hardness, chemical inertness and stability etc., collectively make barites a valuable mineral. Major part of the world production of barites finds its way. To the oil well drilling industry where it is used as a weighting agent in drilling fluids. Barytes powder is mixed in suitable proportion with colloidal clay like bentonite and water to form drilling mud

This mud acts As a lubricant and cools the drilling bit. Imparts an inert coating to the walls of the drill hole Brings the drill cuttings to the surface and Counteracts the oil and gas pressure to prevent blowouts.

The three chief products of Barium Minerals are: Ground Barytes Lithopone paint Barium chemicals Mangampeta Barytes being grey in colour is used mostly in oil well drilling and chemical industries. This barites has been divided into four grades namely A, B, C and D grades depending upon its specific gravity as noted below. A- Grade Barytes - 4.20 specific gravity & above B- Grade Barytes - 4.19 - 4.10 specific gravity C- Grade Barytes - 4.09 - 4.00 specific gravity D- Grade Barytes - Less than 4.00 & upto 3.50 specific gravity The A Grade barites are being used in oil well drilling and B grade in chemical units for manufacture of Barium carbonate. The C&D grades of barites are accumulated over a period of time and sold on "as is where is" basis after calling for tenders. The lists of the buyers of different grades are enclosed at the annexure- 4. 4

Occurrence: Occurrence of barites at Mangampeta was known for over one and half decades, but it was only in 1970 that the existence of sizeable potential of barites was prognosticated on the basis of the preliminary geological work. The test drilling commenced in Feb1974 yielded encouraging results. The deposit thus revealed, has become not only an invaluable asset to the nation but also an important commodity for developing international trade and foreign exchange earnings. In the matter of exploration, assessment of reserve and planning of exploitation, Mangampeta can be cited as an example of coordinated action the organizations that were involved in these tasks namely the GSI, APMDC and other organizations. The total known world reserves of barites at this stage are estimated to be around 200 million tones which will last barely for about 40 years, at the present rate of consumption.

PROFILE OF THE APMDC LIMITED Historical perspective The Andhra Pradesh Mineral Development Corporation Limited (APMDC) (formerly The Andhra Pradesh Mining Corporation Limited) was incorporated in the year 1961 as a wholly State Owned Undertaking of Govt. of Andhra Pradesh, having its registered office at 8-3-945, 2nd floor, Pancom Business center, Ameerpet, Hyderabad -500 073 with the main objectives of the development of mineral resources of the state including exploration, exploitation,

conservation, processing, beneficiation, conversion into value added products, promotion of mineral based industries and sale ores mined. The corporation is the largest producer and exporter of barites in India. It contributes 95% of the production in the country. APMDC maintains International standards in barites quality. The Barytes deposit at Mangampeta in Kadapa District is the World's single largest deposit containing about 74 million tones of grey barites. The major applications of barites are for use in oil exploration and manufacture of barium chemicals. APMDC produces about 6 lakh tones per annum and capacities are available for increase in the production. APMDC also established grinding facilities in the vicinity of the mines and catering barites powder requirements of ONGC and Oil India in priority sector. The deposit is

well connected by all weather road and rail to the nearest major port at Chennai. Mangampeta is a small village located on the side of the road leading from Kadapa to Chennai in AP. The village is a shotrium village given to some bramhin families by the matly dynasty kings who ruled the area. Even though all the lands belong to the shotriumdars, other caste people were also living in a co-operative manner by irrigating these fields either as laborers or kouldars. In the year 1970 Geological Survey of India (GSI), the pioneering agency in surveying for minerals conducted a

preliminary survey. Later followed it up by gravity and magnetic surveys in the year 1971-73 and later detailed survey was conducted till 1978. During this survey, the GSI found that the barites deposit occurred in the form of two lensoid bodies of which northern lens is biggest. The extensive surveys and detailed borehole drilling and analysis of data have all confirmed the enormity of the deposit. The GSI at the end of their investigations found that the Mangampet village endowed with about 74 million tones of the World's largest and thickest deposit containing of about 28% of the known Barytes deposits of the world. With this find AP accounted for about 95% of the barites deposits of India. At the time of discovering the huge potentiality of Mangampet deposit the global 7

oil search had reached its pinnacle and the barites being the important constituent of the drilling mud. Mangampet attained world wide recognition for its huge and high quality deposit. The AP Government during the year 1978 took a policy decision to restrict mining at Mangampet only under the aegis of a Government undertaking namely APMDC. Accordingly the whole mineral bearing area slowly started coming into the fold of APMDC and now the entire mineral bearing area is under the control of the Government owned company APMDC. With the advent of APMDC the job opportunities increased many fold with good salary and benefit to locals. To get one ton of barites, six times of the waste/overburden has to be removed. During these years of Mine development, Mangampet and its surrounding villages have also developed economically by getting jobs, contracts and other day today works connected to the mining and allied activities. Huge quantity of water has to be baled out to continue mining operations and to produce to ore continuously without interruption. This water is being utilized by the villagers at on cost. The water is available all round the year thus, facilitating activity in all seasons. There certainly was a marked improvement in the living standards of villagers.

After all these developments, the village is on the verge of losing its very identity. With the huge expansion of mine, the village is facing problems of pollution and are lying in the statutory danger area. Even large areas of agricultural lands are being acquired for mining purposes. Thus, the very existence of Mangampet village in its original shape is in jeopardy. In view of this, the village is being evacuated and rehabilitated at different place. APMDC Ltd., has provided all the basic facilities such as electricity, roads, water etc., at the new site. It is also providing the bus facility for the school going children of the villagers. Hence, APMDC is playing a vital role in the community development also. The Mangampet barites project is being headed by the Project Manager, who in turn is helped regularly by different departmental heads such as Mining, geology .Survey, Accounts, Electrical, Plant etc. in excavation and sale of barites. The departmental heads in turn are helped by their subordinate staff. The Project Manager is the executive from authority Vice who receives and instructions on policy from

decisions

Chairman

Managing

Director

Hyderabad. The chart showing the organizational set up of the Mangampet barites project is shown at annexure-1. The Corporation on its own carried on exploration and exploitation of various minerals like iron ore, barites, asbestos, apatite .quartz, clay, limestone, copper .decorative stones etc., and 9

in joint sector marble, graphite and thus contributed significantly to the development of the State's mineral resources. The industrial policy of Andhra Pradesh, 1995, envisages development of mineral industry with private participation and encourage joint sector operation with APMDC. The role of APMDC is identification of best technology and attract investment for

development of mineral wealth from all over the world for participation in joint sector for development of certain valuable minerals like bauxite, heavy mineral beach sands, barites etc. Consequently the following New Projects have been initiated and the same are under progress. Galaxy Low Grade Iron Ore Semi-precious Stones Silica Sand : : : : Mining and Processing Mining and Beneficiation Exploration and Exploitation Mining and Beneficiation

The Corporation offers the following products/ services: The Corporation offers Barytes lumps and powder of various grades for exports to Oil Well Drilling Companies for making Drilling Muds. The corporation also offers barites powder for domestic consumption to Oil and Natural Gas Corporation and Oil India for making Oil well drilling muds and barites Lumps to barium chemical units for manufacture of Barium Chemicals.

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The corporation identifies mineral potential areas/ mineral deposits exploration and exploitation/ value addition and offers to the parties 'having technical expertise, financial strength, marketing strength and R&B facilities. At present, the corporation is engaged in development of Galaxy Granite, Calcite, Lime Stone and Low Grade Iron Ore with private participation. Galaxy Granite (Bronzite bearing Gabbro) in. Chimakurti area of Prakasam District is considered to be a rare occurrence and used as dimensional stone. As this deposit, being unique in the world, is commanding premium in the World Dimensional Stone Market. APMDC owns 110 hectares of Galaxy Granite bearing area in R.L.Puram (v), Chimakurti (M), Prakasam District. The corporation is intending to exploit these resources in joint Venture with Private Entrepreneurs to cause scientific exploitation and maximization of wealth to the state. The corporation also identifies the mineral deposits and after obtaining mineral concessions, allot the areas on Raising -Gum-Sale Contracts to the successful bidders. At present the Corporation allotted Granite, limestone, and Ball Clay bearing areas on RaisingCum-Sale Contracts.

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The paid Share Capital of the Company is Rs.630.62 lakhs. The financial position of the Corporation for the past six years are as under:

Table 1 Financial position of the organization

(Rs.ln Lakhs)

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Sales 1452.00 1781.63 1205.00 4431.13 3136.90 2095.23 Turnover Operating 566,07 Profit Net Worth 906.27 396.52 160.50 1330.07 758.16 338.92

1020.22 978.68

2020.30 2511.88 2506.27

APMDC

has

corporate

vision

for

providing

excellent

opportunities in mineral development. The structure of the Organization consists of the following Functional Departments: 1) Mining, Production and Planning 2) Exploration, Geology and Planning 12

3) Finance and Accounts 4) Marketing and Sales 5) Human Resources Development 6) Company Law At present these departments are headed by professionals. The HRD Department is headed by Executive Director and is assisted by one Sr. Administrative Office and one Administrative Officer (Personnel) and other supporting staff. The training function is a part of the HRD Department. To develop skills, knowledge and attitudes of the men working in APMDC as a part of Human Resources Development process renamed the Personnel and Administrative Department as "Human Resources Development Department" in the year 1983. A HRD Conference Hall was created under the HRD Department equipped with Air Conditioners, Audio and Visual Equipments. An amount of Rs.3.00 lakhs is provided in the Budjet every year for conducting inhouse Training Programmes, sponsoring to Outside Training

Programmes and contribution to Magazines and Seminars. The Corporation has recognized the importance of men and their contribution for the success of the organization.

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ADMINISTRATIVE (HUMAN RESOURCES) DEPARTMENT Profile of Man Power: The Manpower of the Corporation can be broadly divided in the following categories: Level Senior Management Name of the Post Executive Director General Manager Chief Marketing and Secretary Chief (Finance and Accounts ) Pay Scales Rs: Rs: Rs: Rs: 161 95-27965 16195-27965 161 95-27965 14305-25965

Middle Management

Sr. Mines Manager Gril Sr.Geologist Sr.Accounts Officer Plant Manager

Rs: Rs: Rs: Rs:

12325-24715 12325-24715 12325-24715 10285-2 1835

Junior Management

Administrative Officer Assistant Accounts Officer General Foreman (Mine) Assistant Geologist Executive (Marketing)

Rs:8385-17905 Rs:8385-17905 Rs:8385-17905 Rs:8385-17905 Rs:8385-17905 Rs:6505-14665 Rs:6505-14665 Rs:6505-14665 Rs:4050-9050 Rs:5200-11715 Rs:4050-9050 Rs:3850-8600

Others

Sr. Assistant Sr. Mine Mates Sr. Electrician Samplers Drillers Jr. Assistant Gr.ll Attenders 14

MAN POWER RATIOS:1) The ratio of Technical to Non Technical Workmen (regular staff) 1:1 Ratio of Supervisors to Workmen Ratio of Managers to Workmen Ratio of Employees of Head Office to Branches 1:3 Ratio of Senior Level to other Employees 1:6 1:8 1:10

2) 3) 4) 5)

THE ANDHRA PRADESH MINERAL DEVELOPMENT CORPORATION LIMITED INCORPORATION APMDC incorporated in 1961 as a wholly owned Undertaking of Govt. of Andhra Pradesh. Authorized Capital was initially Rs.50.OOL.akhs (Paid Up Rs. 20.00 lakhs) and increased to Rs.1000 lakhs (Paid Up Rs.630.62 lakhs). OBJECTIVES Development of Mineral resources including Exploration, Exploitation and Beneficiation. Development of Mineral Industry with Private participation. Identification of the best technology and investment for development of Mineral resources.

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FINANCE DEPARTMENT FINANCIAL ACHIEVEMENTS APMDC has been continuously profits since 1991-92 and wiped off accumulated losses in 1993-94. APMDC has not received any budgetary support since 1991-92. APMDC has been paying Dividend continuously from 1994-95 and so far paid Rs. 1236.02 lakhs. 20042005 Authorized Capital Paid up Capital Turnover Profit Dividend 1000 631 3442 667 126 20052006 1000 631 2367 245 101 20062007 1000 631 4025 697 101 20072008 1000 631 4307 1171 101 20082009 1000 631 5204 1871 101 20092010 1000 631 5623 2022 101

EXISTING PROJECTS Andhra Pradesh is endowed with rich mineral wealth. APMDC is entrusted with the task of exploration and exploitation of mineral resources of the state in systematic and scientific manner. APMDC is currently engaged in Commercial Exploitation of Barytes Black Granite and Blue Granite 16

 Ball Clay Lime Stone Development of minerals with private participation Rock Phosphate Galaxy Granite Molding Sand Calcite Service to Government Semi Precious Limestone ' The state has embarked upon an ambitious programme for the mineral resources development. New approaches are being evolved to attract private investment in the sector. Companies with requisite financial strength and expertise are encouraged to forge joint ventures with APMDC. BARYTES Considered to be the World's single largest deposits of Barytes, the Mangampeta 'area in Kadapa District contains an estimated reserve of 74 million tones. Other significant deposits are near Vinjamuru in Nellore district and around Ganjivaripally in Prakasam district. Small and stray deposits are also found in Khammam, Kurnool, Kadapa, Mahabubnagar and Anantapur

districts. While the grey variety of Barytes found in Kadapa district is used in oil well drilling, the snow-white and off white varieties 17

found in all other places are used in paints and chemical industries. Present production of Barytes is around 0.7 million tones per annum, most of which is exported after meeting the requirements of indigenous oil industry. Benification of low grade Barytes, which constitutes 35% of the reserves, can make them suitable for industrial uses. Excellent prospects exit for establishing export oriented industries for Barytes and its value added products like Barium Carbonate .Barium Nitrate, Barium Chloride etc. BAUXITE The Bauxite reserves in India are placed at 3037 million tones. The recoverable reserves of Bauxite in AP are estimated at 546.30 million tones. Almost entire quantity is of metallurgical grade. The deposits are grouped in three clusters viz. Gurtedu (East Godavari district), Chintapalli and Araku Group (Vizag district). GALAXY GRANITE Galaxy Granite is a rare and unique occurrence. The granite rock bearing bronzite give twinkling effect especially when rock surface is polished. This resembles twinkling of stars that is how the name Galaxy Granite. It can yield bigger dimension blocks. The galaxy granite area extends over 135 hec. Containing estimated reserves of 10.3 million cum, known area of bronzite bearing granite. 18

APMDC intends to join with organization having proven experience, financial for strength and in good marketing and share

internationally,

collaboration

quarrying

creating

processing facilities and establishment of world class Granite Park in Andhra Pradesh. LOW GRADE IRON ORE The Iron Ore deposit (Magnetite) near Ongole, Prakasam district occur as small detached hillocks, and are 19 kms, from the east coast. Konijedu -Marlapadu is the single large deposit with 66 million tones of magnetite ore. The Iron Ore occurs in the form of banded Magnetite quartzite along the hill ridges. The high quality concentrate from the ore is found to be suitable for feed as pellets in direct reduction furnaces. BEACH SAND The coastal stretch in AP extends over 940 km, from Donkuru (Orissa border) in the north to Pulicat Lake (Tamilnadu border) in the south. Systematic survey, shallow drilling and sampling all along the coast have led to delineation of the Beach Sand deposits containing Heavy Minerals (HM). Bheemunipatnam sand deposits is estimated to contain 31.591'million-tones of raw sand having heavy mineral content of 19.58% consisting of 2.886 million tones of limonite and other

19

associated minerals such as Rutile Monazite , Sillimanite, Zircon, Garnet etc. Considering the wide range of applications of Heavy Minerals, there is considerable scope for setting up plants for production of synthetic Rutite, Titanium slag, Pigment grade TiO2, Zirconium chemicals, Garnet powder etc. SEMI-PRECIOUS STONES Occurrence of semi-precious stones in the Forest areas of the Eastern Ghats is known from time immemorial. Occasionally finds by tribal are also reported. Variety of semi-precious stones such as Beryl, Tourmaline varieties of garnets and moon stone have been reported from parts of the Forests and plains of the Vizianagaram , Visakhapatnam, East Godavari and Khammam district.

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RATIO ANALYSIS INTRODUCTION TO RATIO ANALYSIS Ratio Analysis is a powerful tool of financial analysis. Alexander Hail first presented it in 1919 in Federal Bulletin. Ratio Analysis is a process of comparison of one figure against another, which make a ratio and, the appraisal of the ratio to make proper analysis about the strengths and weaknesses of the firm's operations. The term ratio refers to the numerical of quantitative relationship between two or more items or variables. A ratio is a statistical yardstick that provides measures of relationship between two accounting figures. Ratio analysis is a very powerful analytical tool for measuring performance of an organization. Ratio analysis of financial statements stands for the process of determining and presenting the relationship of items and group of items in the statements. Ratio analysis can be used both in trend analysis and static analysis. A creditor would like to know the ability of the company, to meet its current obligations and therefore would think of current and liquidity ratio and trend of receivables. Major tools of financial analysis are thus ratio analysis and funds flow analysis. Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly

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establishing relationship between the items of the balance sheet and the profit and loss account. The financial analysis may use ratio in two ways. First he may compare a present ratio with the ratio of the past few years and project the ratio of the next year on so. This will indicate the trend in relation to that particular financial aspect of the enterprise. Another method of using ratio for financial analysis is to comparer a financial ratio for the company with that for industry as whole, or for other, the firm's ability to meets its current obligations. It measures the firm's liquidity the greater the ratio, the greater the firm's liquidity and vice-versa. A ratio can be defined as a numerical relationship between two numbers expressed in terms of (a) proportion (b) rate (c) percentage. It is also defined as a financial tool to determine and interpret numerical relationship that provides a measure of financial statement. It is also defined as a statistical yardstick that provides a measure of relationship between two variables or figures. MEANING AND IMPORTANCE Ratio analysis is a concerned to be one of the important financial tools for appraisal of financial condition, efficiency and profitability of business. Hence ratio analysis is useful from following objects. 1. Short term and long term planning 2. Measurement and evaluation of financial performance 22

3. Study of financial trends 4. Decision making for investments and operations 5. Diagnosis of financial ills 6. Providing valuable insight into firm's financial position or picture ADVANTAGES OF RATIO ANALYSIS The following are the main advantages derived out of Ratio analysis, which are obtained from the financial statements viz. Profit and Loss Account and Balance sheet. a. The analysis helps to grasp the relationship between various items in the financial statements. b. They are useful in pointing out the trends in important items and thus help the management to forecast. c. With the help of ratios, inter-form comparison is made to evolve future market strategies. d. Out of the ratio analysis standard ratios are computed and comparison actual with standards reveal the variances. This helps the management to take

corrective action. e. The communication of what has happened between two accounting dates is revealed effectively by ratios. f. Simple assessment of liquidity, solvency, profitability and efficiency of the firm are indicated by ratio analysis. Ratio makes comparison much more valid. 23

LIMITATIONS OF RATIO ANALYSIS Ratio analysis is quite simple to calculate and easy to understand and such statistical calculations simulate thinking and develop understanding. But there are certain drawbacks and dangers. They are a. There is a tendency to use ratio analysis profusely. b. Accumulation of mass data obscures rather than

clarifies relationship. c. Wrong relationship and calculation can lead to wrong conclusion. 1. In case of inter-firm comparison no two firms are similar in size, age and product unit. (For example: One firm may purchase the asset at lower price with higher return and another firm which purchases the .asset at higher price will have a lower return). 2. Both the inter period and inter-firm

comparison are affected price level changes. A changing price level can affect the validity of ratio calculated for different time periods. 3. Unless various terms like gross profit,

operating profit, net profit current asset, current liability etc., are properly defined, comparison between two variables becomes meaningless. 24

4.

Ratio are simple to understand and easy to calculate. The analyst should not take decisions on a single ratio. He has to take several ratios into consideration.

IMPORTANCE OF RATIO ANALYSIS In the preceding discussions in the form, we have illustrated the compulsion and implications of the important ratios that can be calculated from the balance sheet and profit and loss accounts of a firm. As a tool of a financial management, they are of crucial significance. The importance of ratio analysis lies in the fact and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects. CAUTIONS IN USING RATIOS 1. It is difficult to decide on the proper basis of comparison. 2. The comparison is rendered difficult because of difference in situation of two companies or of one-company for different years. 3. The price level changes make the interpretations of ratios invalid. 4. The difference in the definitions of items in the balance sheet and the profit and loss statement make the interpretation of ratios difficult. 25

5. The ratios calculated at a point of time are less informative and defective as they suffer from short term changes. . 6. The ratios are generally calculated from the past financial statements and thus are no indicators of future.

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CLASSIFICATIONS OF RATIOS 1. Balance sheet ratios. 2. Profit and loss account ratios 3. Balance sheet and profit and loss account ratios

Ratio may also classify from the angle of users. We take RATIO ANALYSIS 1. From share holders point of view 2. From short-term creditors point of view 3. From long-term creditors point of view In recent years Ratio has been used as a prediction of event

A. BALANCE SHEET RATIOS 1. Current ratio or Working capital ratio 2. Liquidity ratio or Quick ratio 3. Property ratio 4. Asset property ratio B. PROFIT AND LOSS ACCOUNT RATIOS: 1. Gross profit ratio 2. Operating ratio 3. Expenses ratio 4. Net profit ratio 5. Stock turn over ratio 27

C. BALANCE SHEET AND PROFIT AND LOSS ACCOUNT RATIOS 1. Return on total resources 2. Return on own funds 3. Turnover of fixed assets 4. Turnover of debtors 5. Earnings per share Several ratios can be calculated from the accounting data contained in the financial statement. These ratios can be grouped into various classes according to the financial activity or function to be evaluated. The important ratios used in this financial analysis can be grouped as follows. 1. LIQUIDITY RATIOS: The ratios measure the firm's ability to meet its maturing short-term obligations. It measures the liquidity position of the firm. The capacity of the firm to meet its current liabilities out of current assets is shown under these items. Examples are Current ratio, Quick ratio, Acid test ratio, and Inventory turnover ratio,

Receivables or Debtors turnover ratio. 2. LEVERAGE RATIOS: The ratios measures the extent, to which the firm has financed by debt, the relative interest of the owners and creditors of the company is shown under the leverage ratios. Examples are Debt to Equity, Fixed assets to Net worth, fixed change coverage. Incase 28

major part of the total capitalization rate of return on total capital employed, the return to the owner will get inflated. 3. ACTIVITY RATIOS: The ratio measures how effectively the firm is using its resources. It means the efficiency with which the company has employed the funds. The activity is measured in terms of or in relation to turnover or sales of the company. This is also called Efficiency ratio. Examples are Inventory turnover, Average collection period, Fixed asset turnover ratio and Total asset turnover ratio. . 4. PROFITABILITY RATIOS: The ratio measures management's effectiveness as shown by the returns generated on sales and improvement. Measures the profit earning capacity of the company. These ratios and the overall efficiency of the business show the effective of business transaction on the profit. Examples are operating profit to sales, operating profits to assets, return on net worth etc. The ratio analysis generally focus on three basic areas of interest namely a. Company's earning power, which is important for those interested in long term growth of the company. b. Company's ability to meet the current liabilities. c. Company's ability to meet the long term obligations and current interest charges. 29

LIST OF RATIOS STUDIED (a) LIQUIDITY RATIOS: 1. Current ratio 2. Quick ratio. 3. Net working capital (b) 1. 2. LEVERAGE RATIOS; Fixed assets ratio Total liabilities to total assets ratio

ACTIVITY RATIOS: 1. Debtors turnover ratio 2. Total assets turnover ratio 3. Inventory turnover ratio 4. Capital employed turnover ratio 5. Working capital turnover ratio

LIQUIDITY RATIOS: The importance of adequate liquidity the ability of a firm to meet current of short term obligations when they become due for payment can hardly be over emphasized. It is extremely essential for a firm to able to meet its obligations as they become due. The liquidity ratios measure the ability of a firm to meet its short term obligations and reflect the short-term obligations and reflect the short-term financial strength or solvency of the firm. 30

The ratios which indicate the liquidity of a firm are: (1) Current ratio (2) Quick ratio (3) Net working capital ratio (1) Current ratio: The current ratio is computed by dividing current assets by current liabilities. Current assets normally include cash, marketable securities, accounts receivables and inventories. Current liabilities consists of accounts payable short-term notes payable current maturates of long term debt, accrued income taxes, sundry creditors, bills payables and other accrued expenses. The current ratio is most commonly used measure of short-term solvency, since it indicates the extent to which the claims of short-term creditors are covered by assets that are expected, to be converted to cash in a period roughly corresponding to the maturity of the claims. Generally a current ratio of 2:1 (current assets twice of current liabilities) is considered to be satisfactory. (2) Quick ratio: The quick ratio is calculated by deducting inventories from current assets and dividing the remainder by current liabilities. Inventories are typically the least liquid of a firm's current assets and assets on which losses are most likely to occur in the event of liquidation. Therefore, this measure of the firm's ability to pay off 31

short-term obligations without relying on the sale of inventories is important. The term quick assets refer to current assets, which can be converted into cash immediately or at a short notice without diminution in value. Included in this category of current assets are Cash and bank balances Short-term marketable securities and Debtors or receivables. The exclusion of inventory is based on the reasoning that it is not easily and readily convertible into cash. Prepaid expenses by their very nature are not available to pay off current debts. Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial condition. A Quick ratio of 1:1 or more does not necessarily imply sound liquidity position. A company with a high value of quick ratio can flounder if it has slow-paying, doubtful and stretched out in age receivables (book debts). On the other hand, a company with a low level of quick ratio may really be prospering and paying its current obligations in time, if it has been managing its inventories very efficiency with a continuous

satiability. Nevertheless, the quick ratio remains an important index of the firm's liquidity. (3) Net Working Capital Ratio:

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The difference between the current assets and current liabilities is called net working capital. The net working capital ratio is calculated by dividing net working capital with net assets or capital employed. Current assets include cash and bank balances, investment, raw materials, advance payments, consumable stores and spares, finished goods, stock in process/semi finished goods, sundry debtors, pre-paid expenses. Current liabilities consists of accounts payable, short-term notes payable, current maturates of long-term debt, accrued income taxes and other accrued expenses. Net assets include networking capital and fixed asserts. The ratio is used as a measure of firm's liquidity. The ratio measures the firm's potential reservoir of funds. LEVERAGE RATIOS. Leverage ratios, which measure the funds applied by the owners as compared with financing provided by the firm's creditors have a number of implications. First, creditors look to the equity, or owner supplied funds to provide a margin of safety. If owners have provided only a small proportion of total financing, the risks of the enterprise are borne mainly by the creditors. Second, by raising funds through debt, the owners gain the benefits of maintaining contra! of the firm with a limited investment. Third, if the firm earns more on the borrowed funds than it pays in interest the return to the owners is magnified. 33

Firms with low leverage ratios have less risk of loss when the economy is in a down turn, but they also have lower competing firms. This provides an insight into the financial performance and condition of the enterprise in comparison with other firms in the industry. Financial analysis can be under taken by management of the firm of by parties outside the firm viz., owners, creditors, investors and others. The nature of analysis will differ depending on the purpose of the analyst. For instance, trade creditors are interested in the fact that the firm should be able to meet their claims over very short period of time. Their analysis will, therefore confine to the evaluation of the firm's liquidity position. The suppliers of long term debt, on the other hand, are interested in the firm in the firm's long term solvency and survival. A ratio helps the analyst make quantitative judgment about the firm's financial position and performance. For instance, consider current ratio. It indicates a quantified relationship between current assets and current liabilities. This relationship is an index or yardstick, which permits a quantitative judgment to be formed about expected returns, when the economy booms. Conversely, firms with high leverage ratios run the risk of large losses but also have a chance of gaining high profits. 34

Leverage is approached in two ways. One approach examines balance sheet ratios and determines the extent to which borrowed funds have been used to finance the firm. The other approach measures the risks of debt by income statement ratios designed to determine the number of times fixed charges are, covered by operating profits. These sets of ratios are complementary and most of the analyst examines both. The ratios, which indicate the liquidity of the firm are: (a) Fixed assets ratio: This ratio will be analysed to interpret the asset values based on historic cost. An increased in the fixed assets may result from the replacement of an asset at an increased price or the purchase of an additional asset intended to increase production capacity. The ratio of the accumulated depreciation provision to the total of fixed assets at cost might be used as an indicator of the average age of the assets, particularly when the depreciation rates are noted in accounts. (b) Total liabilities to total assets ratio:

To assess the proportion of total funds, short-term and long-term provided by outsiders to finance total assets, this ratio may be calculated. Current liabilities are generally excluded from the

computation of leverage ratios. One may like to include them on the 35

grounded that they are important determinants of the firm's financial risk since they represent obligations and exert pressure on the firm and restrict its activities. This ratio is computed by dividing total liabilities by total assets. Total liabilities include long-term as well as current liabilities. Total assets include fixed assets from which miscellaneous

expenditure and loss of the company should be deducted.

ACTIVITY RATIOS: Activity ratios are concerned with measuring the efficiency of asset management. Sometimes, these ratios are also called efficiency ratios. Activity ratios may therefore be defined as the test of the relationship between sales and the various assets; there are various types of activity ratios. They presume that a proper balance should exist between sales and the various assets accountsinventories, accounts receivables, fixed assets and other. These ratios are also called turnover ratios, because they indicate the speed with which assets are being converted to turned over into sales. A proper balance between sales and assets generally reflects that assets are managed well. Several activity ratios can be calculated to judge the effectiveness of asset utilization. The ratios, which indicate the activity of a firm, are: 36

1. Debtors turnover ratio 2. Fixed assets turnover ratio 3. Capital employed turnover ratio 4. Total assets turnover ratio

5. Working capital turnover ratio

(1)

Debtors turnover ratio:

The major activity ratio is the receivables or debtors turnover ratio. Allied and closely related ton this is the average collection period. The debtor' turnover ratio is a test of the liquidity of the debtors of the firm. The liquidity of a firm's receivables can be examined in two ways, Accordingly there are two types of debtors turnover ratio: Debtors/receivables turnover ratio Average collection period. .

The debtors turnover shows the relationship between sales and debtors of a firm. This approach requires two types of data. First, credit sales, which may not be readily available to the analyst. The second type of ratio for measuring the liquidity of a firm's debtors is the average collection period. This ratio is in fact interrelated with the dependent upon, the receivables turnover ratio.

37

The first ratio is debtors (receivables) turnover and found out by dividing credit sales by average debtors. The debtors turnover indicated the number of times on the average the debtors turnover each year. Generally the higher value of the debtors turnover, the more efficient is the management of assets. . . (2) Fixed assets turnover ratio:

The fixed assets turnover ratio measures the efficiency with the firm in utilizing its investment in fixed assets such as land, building, plant and machinery, furniture etc. It is 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. The firms assets turnover ratio should be compared with past and future ratios and also with ratio of similar firms and the industry average. A high fixed assets ratio indicates efficiency utilization of fixed assets in generating sales, while a low ratio indicates inefficient

management and utilization of fixed assets. (3) Capital employed turnover ratio: Capital employed may be defined as non-current liabilities plus owners equity. Thus it pennants the permanent capital or long run funds entrusted to the firm by creditors and owners. In an equivalent way, the term capital employed can be defined as working capital plus non-current assets. The presumption is that the working capital and non-current assets should be financed from the 38

long term sources to examine the effectiveness in utilizing the capital employed turnover ratio. 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 owner's and long term creditors funds. (4) Total assets Turnover Ratio: .

The total assets turnover ratio is a significant ratio, since it shows the firm's ability of generating sales from all the financial resources committed to the firm. 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 total assets base is an important part of the firm's overall performance in terms of profits. As with the fixed asserts, the total assets turnover should be continuously used. In the denominator of this ratio, assets are net of depreciation. Hence, older assets with a lower book value may create a misleading impression of high turnover. (5) Working capital turnover ratio:

Working capital is the difference between the current assets and the current liabilities. This ratio is ascertained by dividing sales with working capital. This ratio indicates the extent of working capital turned over in achieving sales of the firm. PROFITABILITY RATIOS: The profitability ratios are studied with a view to ensure that 39

 The unit is able to earn adequate returns on its investments The unit can comfortably service the loans The units earnings are commensurate with the capital employed as well as the nature and risk of the business. The important profitability ratios are 1. Net profit ratio 2. Return on investment 3. Dividend covers 4. Return on capital employed (1) Net profit ratio: This ratio indicates the earnings out of every 100 rupees of sales and does the unit make a direct measure of the annual profit. Here, the net profit is taken as net profit after-tax.

(2)

Return on investment: Return on investment analysis provides a strong incentive for

optimal utilization of the assets of the company. This encourages managers to obtain assets that will provide a satisfactory return on investment and to dispose of assets that are not providing an acceptable .return. In selecting amongst alternative long-term investment proposals. Return on investment provides a suitable measure for assessment of profitability of each proposal. 40

(3)

Dividend cover: This ratio indicates the number of times the dividends are

covered by net profit. This highlights the amount retained by a company for financing of future operations. (4) Return on capital employed:

This ratio is ascertained by dividing sales which capital employed. This ratio indicated the efficiency in utilization of capital employed in generating the revenue. SUMMARY The project entitled A STUDY ON RATIO ANALYSIS OF THE ANDHRA PRADESH MINERAL DEVELOPMENT CORPORATION LTD" (APMDC), Mangampet branch was completed in the term of two months successfully. I divided this project report into five chapters for a clear view of the study. It is as follows: In chapter 1, introduction the mining activity in the state and the country, the mineral deposits of the state, limitations and methodology of the topic studied. Mineral Development Corporation, which are pillars to the country's economic development are playing a vital role in the present trend in the country. These institutions are exploiting different kinds of minerals and adding to the growth of the country's

41

economy. The mineral corporation is a corporation dealing with the mineral activity. The major limitation was that, detailed study of all the ratios was not possible due to the drawback of time. The ratio analysis was done only for five consecutive years. The methodology used for the study was the primary and secondary data. Primary data is through the consultation with corporation officials and secondary data is through the literature survey related to the organization. In chapter 2 the introduction of the organization was given in which my project work was done that is the ANDHRA PRADESH MINERAL DEVELOPMENT CORPORATION LTD (APMDC), Mangampet branch. The profile of the organization, its historical background and the organization structure was also described in detailed way. The clear picture of the organization, its functioning and various aspects of the organization like the number of employees, their pay scale etc, were also described in a detailed way. In chapter 3 the details of the ratio analysis were given . As we say that with out theory there is no practice and the theory is also the backbone of the practice, theory forms the main theme of the topic. In the theory different studied at present with their exploitations are given in brief as follows: Liquidity ratios: 42

Current corporation.

ratio-

indicates

the

solvency

position

of

the

Quick ratio - measures the ability of the corporation. Net working capital ratio - measures the liquidity of the corporation. Leverage ratios: Fixed assets ratio - interprets the assets values of the corporation. Total Liabilities to Total Assets ratio - shows the relation between the assets and liabilities. .

43

Activity ratios: Debtors Turnover ratio - indicates the turnover of debtors per year on an average. Inventory Turnover ratio - shows how rapidly the inventory is turning to receivables through sales. Capital Employed Turnover ratio - measures the efficiency in the utilization of capital in generating revenue. Working capital turnover - shows the extent of working capital turned over in achieving the sales of the organization. Total Assets Turnover ratio - shows the firm's ability of generating sales from all the financial resources. Profitability Ratios: Net Profit Ratio - indicates the annual earnings of the organization. Return on Investment - measures the optimal utilization of the investment in generating revenue. Dividend Cover - shows the no. of times the dividend covered by net profits. Return on Assets - indicates the efficient utilization of assets. Chapter 4 consists of the analysis of the collected data from the corporation. The data analyzed was collected from the organization and the ratios were calculated with proper interpretation of the ratios to analyze the financial performance of the organization year 44

to

year

comparatively.

The

different

ratio

calculated

was

represented graphically. The main purpose of giving the graphs is to give a clear view at a glance and easy analysis of the increasing or decreasing trend as shown in it. The last but not the least, is the Chapter 5 which deals with the summary of the topic. The summary consists of the brief description of the topic studied from the beginning. The summary also includes the general observation made during the project work. The summary gives the view of the project as a whole at a glance.

45

Research Methodology
NEED FOR THE STUDY Finance is the life blood of any business .So analyzing the financial progress of companies of great importance to understand the growth of the organization. Keeping this in view, I have done the financial analysis of APMDC Limited so as to analyze the financial strength of organization.

46

OBJECTIVES OF THE STUDY 1. To summarize the large quantities of financial data, and analyze the financial performance of the APMDC Limited. 2. To know the profitability position of the APMDC Limited. 3. To know the liquidity position of the company.

47

METHODOLOGY The methodology used for the study was secondary data. Secondary data is obtained from annual reports of Andhra Pradesh Mineral Development Corporation Limited (APMDC) and the data was analyzed and tabulated and presented in the concerned chapters.

48

LIMITATIONS AND SCOPE OF THE STUDY The duration for the study was only for two months where time is a limiting factor. The analysis was confined to APMDC only. Collection of data is a limiting factor because of the confidentiality.

49

ANALYSIS OF DATA:

Liquidity ratios:
Current ratio:

Current ratio =

Current assets ------------------Current liabilities

Year

Current assets Current liabilities Current Rs Rs 582038074 601025120 63602367 862339059 948572965 257020575 247069961 279881991 384601629 423061792 ratio 2.26 2.43 2.27 2.44 2.24

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

50

2.5 2.45 2.4 2.35 2.3 2.25 2.2 2.15 2.1 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2.26 2.27 2.24 2.43 2.44

INTERPRETATION The industrial norm of current assets to current liabilities is 2:1. This ratio measures the solvency of the company in the short term. A current ratio of 2:1 indicates a highly solvent position. This could be due to piling up of inventory, inefficiency in collection of debtors and high balances in cash and bank accounts without proper investment. However, the corporation under study was able to maintain the industrial norm i.e, 2:1 for the years 2006-07, 200708, 200809, 2009-10 with shows its high insolvent position and striking a balance in maintaining the adequate inventory, efficiency in debt collection and making proper investments by keeping adequate cash and bank balance. 51

Quick Ratio Quick ratio = Quick assets ------------------------Current liabilities

Quick assets = current assets inventory Quick liabilities = current liabilities bank overdraft Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Current assets Rs 58203807 4 60102512 0 63602367 86233905 9 94857296 5 Inventor y Rs 54954764 46706065 17709650 22801070 23941124 Quick Current Quick ratio 2.05 2.24 2.21 2.15 2.19

assets Rs liabilities 527083310 25702057 5 554319055 24706996 1 618313617 27988199 1 839537989 38460162 9 924631841 42306179 2

52

2.3 2.25 2.2 2.15 2.1 2.05 2 1.95 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2.05 2.15 2.24 2.21 2.19

INTERPRETATIN: A quick ratio of 1:1 indicates highly solvent position. Quick

ratio is used as a measure of the organizations ability to meet its current liabilities. Since, the bank overdraft is generally secured by inventories, the other current assets must be sufficient to meet other current liabilities. The corporation under study has shown on increasing trend in its quick ratio for the years 2006-07, 2007-08, 2008-09, 2009-10. Hence, we can conclude that the corporation has the ability to meet its current liabilities.

53

Net working capital ratio

Net working capital Net working capital = -------------------------------Net assets Net working capital = current asses current liabilities Net assets = net working capital +Capital Employed

YEAR

Net working capital Rs 325017499 353955159 356141276 477737430 423061792

Net assets Rs 695858492 760777877 770843952 1016234228 5883784687

NWC RATIO 0.47 0.47 0.46 0.47 0.47

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

54

0.472 0.47 0.468 0.466 0.464 0.462 0.46 0.458 0.456 0.454

0.47

0.47

0.47

0.47

0.46

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

INTERPRETATION: This ratio explains about how much of the net working capital has turned over in utilization of investment in assets. From the above analysis of net working capital ratio, it is clear that the corporation is maintaining continuous status of 0.64 for the years 2006-07, 2007- 08 , 2008-09, 2009-10.

55

LEVERAGE RATIO FIXED ASSETS LEARNING RATIO

Sales Net Fixed assets learning ratio = -----------------Net fixed assets

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Sales 377563318 363469752 414676692 597361057 686965216

Net fixed assets 36450325 33115936 30583043 32274734 35502207

Ratio 10.36 10.98 13.56 18.50 19.34

56

25 20 18.5 13.56 10.36 10.98 19.34

Ratios

15 10 5 0 2005-2006 2006-2007

2007-2008 Years

2008-2009

2009-2010

INTERPRETATION: This ratio measures the organizations ability to generate sales revenue in relation to the size of investment in fixed assets. Higher the ratio indicates the overtrading of the fixed assets while, lower the ratio indicates the idle capacity of the fixed assets. From the above analysis, its shows a increasing trend for the yeas 2006-07, 200708, 2008-09, 2009-10. The reason being, there was increasing in the sales volume of the corporation.

57

TOTAL LIBILITIES TO TOTAL ASSETS RATIO

Total Liabilities Total liabilities to total assets ratio = --------------------Total assets

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Total liabilities 257020575 247069761 279881991 3846012629 423061792

Total assets 627861568 653892679 694584667 919491146 965465703

Ratio 0.41 0.38 0.40 0.42 0.44

58

0.45 0.44 0.43 0.42 0.41 0.4 0.39 0.38 0.37 0.36 0.35

0.44 0.42 0.41 0.4 0.38

Ratios

2005-2006

2006-2007

2007-2008 Years

2008-2009

2009-2010

INTERPRETATION: This ration calculated to know the ability of the

organization in meeting its liabilities. It also indicates the solvency position of the organization. The corporation under study has shown a decreasing trend for the years 2006-07, 2007-08, 2008-09, 200910 in the ration of current liabilities to current assets. The analysis show that the companys total assets are more that the total liabilities which gives an impression that the organization is highly solvent and its ability to meets its liabilities.

59

Activity ratio Total assets turn over ratio

Sales Total assets turn over ratio = -------------------------Total assets

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Sales 377563318 363469752 414676692 597361057 686965216

Total assets 627861568 653892679 694584667 919491146 965465703

Ratio 0.60 0.56 0.60 0.65 0.71

60

0.8 0.7 0.6 0.6 0.56 0.6 0.65

0.71

Ratios

0.5 0.4 0.3 0.2 0.1 0 2005-2006 2006-2007 2007-2008 Years 2008-2009 2009-2010

INTERPRETATION: This ratio indicate the number of times the total assets are being turned over in a year. This ratio measures the organizations ability to generate sales revenue in relation to the size of the investment in total assets. Higher the ratio indicates the over trading of the total assets while lower the ratio indicates the idle capacity of the total assets. From, the above analysis, the corporation sales volume has a decreasing trend for the year 2006-07, due to the sudden fall in the sales. However, the corporation has made a come back position in the year 2007-08, 2008-09 by increasing its sales volume.

61

DEBTORS TURN OVER RATIO: Sales Debtors turn over ratio=-----------------------------Avg. Debtors Average debtors = Opening stock+ Closing stock/2 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Sales 377563318 363469752 414676692 597361057 686965216 Debtors 14052630.50 26899172.50 83355585.50 97708557.10 107479413.50 Ratio 26.87 13.51 4.97 6.11 6.39

62

30 25

26.87

Ratios

20 15 10 5 0 2005-2006 2006-2007 2007-2008 Years 2008-2009 2009-2010 4.97 13.51 6.11 6.39

INTERPRETATION This ratio measures weather the amount of sources that are tied up in debtors reasonable and weather the organization has been efficient in realizing the debtors into cash. The higher the ratio, the better is the position of the organization in realizing the debtors. A lower ratio indicates the blocking of funds in debtors and the inefficiency of the organization in the methods followed for realizing the debtors in time. The analysis that the shows the corporation had a very high debtor turn over ratio in the year 2005-06 when it is compared to the years 2006-07 and 2007-08. This had shown a lower capacity in realizing the debtors, leading to low debtors turnover ratio. The corporation could have made some more efforts in realizing the debtors. 63

CAPITAL EMPLOYED TURNOVER RATIO: Sales Capital employed turnover ratio = -------------------------Capital employed

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Sales 377563318 363469752 414676692 597361057 686965216

Capital employed 370840993 406822718 414702676 534859517 588378468

Ratio 1.02 0.89 1.00 1.11 1.16

64

1.4 1.2 1.02 0.89 1.11 1 1.16

Ratios

0.8 0.6 0.4 0.2 0 2005-2006 2006-2007 2007-2008 Years 2008-2009 2009-2010

INTERPRETATION: This ratio is calculated to indicate the efficiency in utilization in capital employed in generating the revenue. Higher the ratio,

more is the utilization of investment in assets and efficiency in generating more revenue, low ratio indicates the idle capacity in utilization of assets. The analysis show the decreasing trend in the ratio for the year 2006-07. The reason being that there was sudden fall in the sales of the corporation when compared to the position in the year 2008-09 by increasing its sales.

65

WORKING CAPITAL TURNOVER RATIO: Sales Working capital turnover ratio = -------------------------Working capital Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Sales 377563318 363469752 414676692 597361057 686965216 Working capital 325017499 353955159 356141276 477737430 525511173 Ratio 1.16 1.03 1.16 1.25 1.31

66

1.4 1.2 1.16 1.03 1.16

1.25

1.31

Ratios

0.8 0.6 0.4 0.2 0 2005-2006 2006-2007 2007-2008 Years 2008-2009 2009-2010

INTERPRETATION: This ratio indicates the extent of the working capital turned over in achieving the sales of the organization. The analysis show that the corporation had turned over more working capital in achieving the sales of the corporation in year 2004-05 and not much in years 2005-2006, 2006-07, 2008-09, 2009-10.

67

PROFITABILITY RATIOS: NET PROFIT RATIO: Net profit (Before interest and tax) Net profit ratio = ---------------------------------------------------- *100 Net sales Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net profit 99054604 35342564 32603934 209805750 230786325 Sales 377563318 363469752 414676692 597361057 686965216 Ratio 26% 9% 8% 35% 33%

40% 35% 30%

35% 26%

33%

Ratios

25% 20% 15% 10% 5% 0% 2005-2006 2006-2007 2007-2008 Years 2008-2009 2009-2010 9% 8%

INTERPRETATION: This ratio reflects the net profit margin of the total sales after deducting all expenses but, before deducting interest and taxation. 68

This

ratio

measures

its

efficiency

of

the

operation

of

the

organization. This ratio could be compared with that of the previous with that of competitors to determine the trend in net profit margins of the organization and its performance in the industry. This ratio depicts the correct trend of performance where there are erratic fluctuations in tax provisions from year to year. From the analysis, the corporation under study has made a very good profit in the year 2008-09 and fall in the ratio during the years 2005-06, 2006-07 and 2007-08. It has made good profit

position in the year 2008-09, 2009-10 due to increase in the sales volume.

RETURN ON ASSETS: Net profit (after tax) Return on assets = ---------------------------------X 100 69

Total assets Year NPAT Total assets Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

79138454 24162413 21982925 131540234 144694257

1040272568 653892679 694584667 919491146 965465703

8% 4% 3% 14% 15%

16% 14% 12%

14%

15%

Ratios

10% 8% 6% 4% 2% 0%

8% 4%

3%

2005-2006

2006-2007

2007-2008 Years

2008-2009

2009-2010

INTERPRETATION: This ratio indicates the efficiency of utilization of assets in generating the revenue. The higher the ratio, the higher the 70

efficiency in utilizing the assets. A low ratio shows the idle capacity. The profitability of the firm is measured in establishing the relation of net profit with the total assets of the organization. The analysis under study has shows a very good return on assets in the year 2008-09. However in the year 2006-07, it had showed fall in the turnover of the organization. How ever, in the year 2007-08, it had showed a worst situation i.e 3% form the previous years due to the decrease in the sales volume.

71

DIVIDEND COVER: Net profit after tax Dividend = -----------------------------------Dividend Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 NPAT 79138454 24162413 219829125 131540234 144694257 Dividend 10089920 10089920 10089920 10089920 10089920 Ratio 7.84 2.39 2.18 13.03 14.3

16 14 12 13.03

14.3

Ratios

10 8 6 4 2 0

7.84

2.39

2.18

2005-2006

2006-2007

2007-2008 Years

2008-2009

2009-2010

INTERPRETATION:

72

This ratio indicates the efficiency of utilization of assets in generating the revenue .The higher the ratio, higher the efficiency in utilizing the assets. A low ratio shows the idle capacity. The

profitability of the firm is measured in establishing the relation of net profit with the total assets of the organization. The analysis under study has shows a very good return on assets in the year 2008-09. How ever in the year 2006-07, it had showed fall in the turnover of the organization and in the year 200708, it had showed a worst situation i.e, 3% from the previous years due to the decrease in the sales volume.

73

RETURN ON INVESTMENT: Net profit Return on investment = -------------------------- X100 Capital employed Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net profit 79138454 24162413 21982925 131540234 144694057 Capital employed 370840993 406822718 414702676 534889517 588378468 Ratio 21% 6% 5% 25% 24%

30% 25% 25% 21% 24%

Ratios

20% 15% 10% 5% 0% 2051-2006 2006-2007 2007-2008 Years 2008-2009 2009-2010 6%

5%

INTERPRETATION:

74

The ratio of return on investment analysis provides a strong incentive for optimal utilization of the assets of the organization. In other words, it encourages the managers to obtain assets that will provide a satisfactory return on investment and to dispose off assets that are not providing an acceptable return. This ratio is

mostly used in selecting the best alternative long term investment proposals. This ratio provides a suitable measure for assessment of profitability of each proposal. The higher the ratio, the better is the utilization of the investment in assets. From the analysis, it shows that the corporation had good return on investment ratio i.e, 21% in the year 2005-06. A worst situation it had in the year 2006-07 and 2007-08 due to heavy fall in the sales volume of the corporation.

RATIO AT A GLANCE S.NO A 1 2 3 B 4 5 NAME OF THE RATIO LIQUIDITY RATIO CURRENT RATIO 2.26 QUICK RATIO 2.05 NET WORKING 0.47 CAPATIL RATIO LEVERAGE RATIO FIXED RATIO TOTAL ASSETS 10.36 10.98 13.56 0.41 75 0.38 0.40 18.50 0.42 19.34 0.44 2.43 2.24 0.47 2.27 2.21 0.46 2.44 2.18 0.47 2.24 2.19 0.47 2006 2007 2008 2009 2010

LIABILITIES TOTAL C 6

TO

ASSETS

RATIO ACTIVITY RATIO DEBTORS 26.87 13.51 4.97 TURNOVER

6.11

6.39

RATIO INVENTORY TURNOVER

10.65 7.50

14.13

34.64

36.21

8 9

RATIO TOTAL

ASSETS 0.60 1.16

0.56 1.03

0.60 1.16

0.65 1.25

0.71 1.30

TURNOVER RATI0 WORKING CAPITAL TURNOVER

10

RATIO CAPITAL EMPLOYED TURNOVER RATIO

1.02

0.89

1.00

1.11

1.16

PROFITABILITY RATIO

76

11

NET RATIO

PROFIT 26%

9%

8%

35%

33%

12

RETURN ASSETS

ON 8%

4%

3%

14%

15%

13

RETURN INVESTMENT

ON 21%

6%

5%

25%

24%

77

SUMMARY The project entitled A STUDY ON RATIO ANALYSIS OF THE ANDHRA PRAESSH MINERAL DEVELOPMENT CORPORATION LTD (APMDC), Mangampet branch was completed in the term of two months successfully. I divided this project report into five chapters for a clear view of the study. It is as follows: In chapter 1, introduction the mining activity in the state and the country, the mineral deposits of the state, limitations and methodology of the topic studied. Mineral Development Corporation, which are pillars to the countrys economic development are playing a vital role in the present trend in the country. These institutions are exploiting

different kinds of minerals and adding to the growth of the countrys economy. The mineral corporation is a corporation dealing with the mineral activity. The major limitation was that, detailed study of all the ratios was not possible due to the drawback of time. The ratio analysis was done only for five consecutive years. The methodology used for the study was the primary and secondary data. Primary data is through the consultation with

corporation officials and secondary data is through the literature survey related to the organization.

78

In chapter 2 the introduction of the organization was given in which my project work was done that is the ANDHRA PRADESH MINERAL DEVELOPMENT CORPORASTION LTD (APMDC), Mangampet branch. The profile of the organization, its historical background

and the organization structure was also described in detailed way. The clear picture of the organization, its functioning and various aspects of the organization like the number of employees, their pay scale etc, were also described in a detailed way. In chapter 3 the details of the ratio analysis were given. As we say that with out theory forms the main theme of the topic. In the theory different studied at present with their exploitations are given in brief as follows. Liquidity ratios: Current ratio- indicates the solvency position of the corporation. Quick ratio measures the ability of the corporation. Net working capital ratio measures the liquidity of the corporation. Leverage ratio: Fixed assets ratio- interprets the assets values of the corporation. Total Liabilities to Total Assets ratio shows the relation between the assets and liabilities.

79

Activity ratio: Debtors Turnover ratio indicates the turnover of debtors per year on an average. Inventory Turnover ratio shows how rapidly the inventory is turning to receivables through sales. Capital Employed Turnover ratio measures the efficiency in the utilization of capital in generating revenue. Working capital turnover shows the extent of working capital turned over in achieving the sales of the organization. Total Assets Turnover ratio shows the firms ability of generating sales from all the financial resources.

Profitability Ratio: Net Profit Ratio indicates the annual earnings of the organization. Return on Investment measures the optimal utilization of the investment in generating revenue. Dividend Cover shows the no. of times dividend covered by net profit. Return on Assets indicates the efficient utilization of assets.

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Chapter 4 consists of the analysis of the collected data from the corporation. The data analyzed was collected from the organization and the ratios were calculated with proper interpretation of the ratios to analyze the financial performance of the organization year to year comparatively. The different ratios calculated were

represented graphically. The main purpose of giving the graphs is to give a clear view at a glance and easy analysis of the increasing or decreasing trend as show in it. The last but not the least, is the chapter 5 which deals with the summary of the topic. The summary consists of the brief

description of the topic studied from the beginning. The summary also include the general observation made during the project work. The summary gives the view of the project as a whole at a glance.

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FINDINGS The current ratio maintained by the company is more then the standard ratio is 2:1. It shows the idle funds are maintained by the company. The quick ratio of the company is higher than the idle level of 1:1 during the period. The company is maintaining high net working capital which shows high liquidity of the firm and at the same time this reduces the profitability of the firm. Total assets turnover ratio is increased in every year (0.600.71). It shows more utilization of the total assets and converted into the sales. Working capital turnover ratio increased in 2006 10 i.e., from 1.16 to 1.31. Net profit come down in the year 2009 10 compared to previous year i.e., 35% to 33%.

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SUGGESTIONS The liquid assets management has to take necessary steps to reach the ideal level of 1:1 the company has to minimize the level of quick assets, as these do not generate any return when kept idle. The company should improve its debtors realizing capacity as it is decreased from 26.87 to 6.39. Net profit is to be increased in the future this can be done by increasing the sales volume and decreasing the cost of production. The operation of the current assets of the company must be improved to obtain the ideal position. The idle working capital (current assets 2:2) should be utilized by increased the operating cycle to a maximum level.

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CONCLUSION

The company is having a good financial position but it is maintaining idle funds, so the company can invest these idle funds in order to gain more profits.

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BIBLIOGRAPHY

1. FINANCIAL MANAGEMENT

-I.M. PANDAY.

2. FINANCIAL MANAGEMENT

-S.N. MAHESWARI.

3. FINANCIAL MANAGEMENT

-M.Y. KHAN & P.K. JAIN.

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