A STUDY ON RATIO ANALYSIS WITH REFERENCE TO TAMIL NADU NEWSPRINT AND PAPERS LIMITED. By RAAGINY.N Reg. no.

:1046038 A PROJECT REPORT Submitted to the FACILITY OF MANAGEMENT SCIENCES In Practical fulfillment on the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION IN Financial management

ANNA UNIVERSITY CHENNAI-600 025

August, 2011.

BONOFIDE CERTIFICATE Certified that this project report A STUDY ON RATIO ANALYSIS IN TAMIL NADU NEWSPRINT AND PAPER LIMITED. Is the bonafide work of N.RAAGINY, Reg. no: 1046038 who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

Signature of supervisor

Signature of Head of the Department

DECLARATION I hereby declare that the project report entitled A STUDY ON RATIO ANALYSIS IN TAMIL NADU NEWSPRINT AND PAPERS LIMITED. Submitted for the M.B.A Degree is my original work dissertation has not framed the basis for the award of any degree, associate ship, fellowship or any other similar title.

Place : Date :

Signature of student (N.RAAGINY)

ABSTRACT A study aims to find out the effectiveness of ratio analysis at TNPL. TNPL establish its industry as the paper industry in tamil nadu. It started at the year of 1979 by the government of tamil nadu to manufature papers from bagasse. This is the only paper industry having single large manufacturing unit. TNPL awarded the best paper mill in 2007-2008, green business award. The company fully concentrate on eco-friendly papers. Ratio analysis is the oldest technique of financial analysis. A ratio is a mathematical relationship between two items expressed in quantitative form. The purpose of the study is to evaluate the need by identify the strength and weakness of the financial position between the items of balance sheet and profit and loss account. The objectives is to analysis the past performance of TNPL in terms of financial parameters, to analysis the effectiveness of ratio analysis and to measure the company growth level in turnover, profitability, liquidity position for the past 5 years. The scope of the study is to know the full knowledge of ratio analysis and provide a good decision for the management. The research design used in he study is analytical design with the collection for the study was through reports, internet, journals. The financial and statistical tools used are comparative balance sheet, ratio analysis, correlation analysis. Based on the analysis and interpretation the findings, suggestions and conclusion were drawn.

ACKNOWLEDGEMENT It is my privilege to record my sincere thanks to our chairman, Dr.K.Vasudevan. M.A., B.Ed., Ph.D., of Prince Shri Venkateshwara Padmavathy Engineering College, Ponmar, for consecutive motivation words to complete my project report. I would like to thanks Prof.T.Sounderrajan, M.Tech, Ph.D, and Principal of Prince Shri Venkateshwara Padmavathy Engineering College, Ponmar, Chennai, for giving this opportunity to do this project. I have a great pleasure in expressing my sincere and profound thanks to Mrs.Rathika, B.E., M.B.A., Head of the Department, Department of Management studies for her continuous motivation throughout the training period. I would like to thank Miss.Mahalakshmi.s, M.B.A., lecturer, Department of Management studies, Prince Shri Venkateshwara Padmavathy Engineering College for guidance and support. I express my heartful thanks Mr. SENTHIL VELAN (FINANCE MANAGER) TNPL, for the moral support, encouragement and generous assistance. I am also extremely thankful to my parents, relations and all my infinite friends for their support given to finish the project.

Signature

(N.RAAGINY)

TABLE OF CONTENTS

CHAPTER I

PARTICULARS INTRODUCTION Introduction Industry profile Company profile Review of literature

PAGE NO.

II

DEVELOPMENT OF THE MAIN THEME Need for the study Objectives of the study Scope of the study Limitations of the study Research methodology Data analysis and Interpretation

III

RESULTS OF THE STUDY Findings Suggestions Conclusion Appendix Reference

LIST OF TABLE

TABLE NO. 2.6.1 2.6.2 2.6.3 2.6.4 2.6.5 2.6.6 2.6.7 2.6.8 2.6.9 2.6.10 2.6.11 2.6.12 2.6.13 2.6.14 2.6.15

TITLE Table showing comparative balance sheet for the year 2006-2007 Table showing comparative balance sheet for the year 2007-2008 Table showing comparative balance sheet for the year 2008-2009 Table showing comparative balance sheet for the year 2009-2010 Table showing comparative balance sheet for the year 2010-2011` Table showing current ratio Table showing liquid ratio Table showing debt equity ratio Table showing proprietary ratio Table showing fixed assets ratio Table showing stock turnover ratio Table showing debtors turnover ratio Table showing fixed asset turnover ratio Table showing net profit ratio. Table showing correlation analysis between sales and profit.

PAGE NO.

LIST OF CHARTS TABLE NO. 2.6.6(a) 2.6.7(a) Chart showing current ratio Chart showing liquid ratio PAGE NO.

TITLE

2.6.8(a) 2.6.9(a) 2.6.10(a) 2.6.11(a) 2.6.12(a) 2.6.13(a) 2.6.14(a) 2.6.15(a)

Chart showing debt-equity ratio Chart showing proprietary ratio Chart showing fixed assets ratio Chart showing stock turnover ratio Chart showing debtors turnover ratio Chart showing fixed asset turnover ratio Chart showing net profit ratio Chart showing correlation analysis

CHAPTER I

INTRODUCTION

1.1 INTRODUCTION A study has been carried on Tamil Nadu newsprint and papers limited to identify the solvency and performance of the company by analyzing the various financial ratios of the company. A study had been made with the help of the balance sheet, profit and loss account (income statement) of Tamil Nadu newsprint and paper limited. It is an acknowledged leader in the technology of manufacture of paper from bagasse. The company commenced production in the

year 1984 with an initial capacity of 90000 tones per annum (tpa) over the years, the production capacity has been increased to 400000tpa and the company has emerged as the largest bagasse based paper mill in the world consuming about one million tones of bagasse every year. TNPL exports about 1/5 th of its production to more than 30 countries. The main aim of the study helps to determine the solvency and performance of the company and to identify the growth status of the organization. The growth status of the organization can only determine the companys level in the market. This helps the organization to find out their pulse rate and where the company stands in the market. The need is to identify how easily the company can pay its interest on outstanding debt and it is found that the organization is lighter by debt expense, due to raise in interest coverage. So the company can meet interest expenses easily. The scope of the study is to generate future profits of TNPL maximize corporate value by managing the firms financial risks. The type of research design that is used for the study is analytical research design. The data are collected from the company which is already available. The present study makes use of secondary data in the form of magazines, company websites, records, journals, etc., The return on investment decreased for the year (2010-2011). So the company may concentrate on sales for the improvement. By increasing the mode of investment in productive items the long term solvency of the business can be improved.

1.2 INDUSTRY PROFILE TNPL was established in the year 1979 by the government of Tamil Nadu in Federal India for the manufacturer of paper and newsprint from bagasse, TNPL begun operations in 1985 with an initial capacity of 90000 tpa of newsprint /printing and writing paper. RAW MATERIAL: Millions of trees are cut every day to meet the growing demand for paper, affecting the global eco-system. bagasse represents a suitable alternative. TNPL opted for bagasse as a raw

material as it reconciled industry's needs with that of a clean environment. TNPLs long term win-win barter arrangements involve the procurement of bagasse from seven sugar mills in proximity to its plant and the supply of steam to operate their multi-fuel boilers in return. TNPL's process mastery and intelligent product research translated into a consistent ability to make a wide portfolio of bagasse-based papers of superior quality. DEVELOPMENT OF TNPL: TNPL has harnessed renewable resource to enhance its self-reliance in power. TNPL's 18 mw wind farms in devarkulam and perungudi (southern TN),the source of wind energy, are one of the largest in the capacity generated power is derived from the progressive replacement of fossil with agro-fuels in steam generation. TNPL's status as one of the most power efficient plants in the country has been recognized by the Government of India. TECHNOLOGY AT TNPL: TNPL is the largest and most modern plant in India today the company has two of the fastest, new-generation paper machine in the Indian industry the paper machine(pm-1) supplied by beliot walmstey has an installed capacity of 100000tpa and the paper machine(pm-2) supplied by voith has an installed capacity of 130000 tpa. Together they can produce 750 tonnes of paper and newsprint a day. These machines can deliver a substance range from 40 to 90 grammage. The installation of two of the world's best known automated, on-line sheeting and packing machinery has elevated TNPL's paper conversion facility to internationals standards.

FARM FORESTRY SCHEME: Under farm forestry scheme, the Company motivates and facilitates the marginal and small farmer to take up pulpwood plantation. The salient features of the Scheme are supply of quality planting material at subsidized cost, arranging credit facilities for the needy people through banks, providing timely technical advice through a team of qualified professionals and buy back arrangement with minimum support prices or prevailing market rate at the time of felling, whichever is higher, harvesting and transport of pulpwood from the farmers field to Factor at companys cost.

CAPTIVE PLANTATION SCHEME: In the captive plantation scheme, Captive plantations are raised in the lands belonging to the Company, Government Departments, and Educational institutions and in the large land holdings individuals on a revenue sharing basis or on a lease rental basis. The minimum criteria for captive plantation is that the land should be a block of 25 acres & above in single location where as less than 25 acres is also considered only in the case of adjoining lands of existing captive plantation, provided the adjoining areas should be contiguous to the existing plantation. TNPL enters into a MoU with the owners of such lands for raising Captive Plantation and undertaking the responsibility of land development, establishment of plantations, maintenance of plantation and harvesting the pulpwood at TNPLs expense. The land would be taken either on long term lease spanning over a period of 6 to 30 years lease or on gross revenue sharing basis. In the revenue sharing pattern, if the plantation is raised in a barren land, the produce is shared between TNPL and the landowner on a 70:30 basis and in case of wet lands, the revenue sharing pattern is 60:40. In the case of lease mode, the lease rent for a barren land is Rs.1000/- per acre, whereas for an irrigated land it is Rs.3000/- per acre every year paid to landowner and the entire produce is taken by TNPL.

FORESTRY RESEARCH & DEVELOPMENT The search for the new improved planting materials never ends. Therefore, continuous R & D activities are mandatory for any Organisation. Provisions are made to establish various research programmes in micro and macro propagation of Eucalyptus, Casuarina and other alternative pulpwood species. Various research trials with specific objective are being laid out to improve the pulpwood productivity. Tree breeding mini-orchards are being established in CPRC to carryout breeding and tree improvement works.

Productivity improvement through clonal plantations in the country was the major break through during 90s by dedicated efforts of ITC Plantation which has developed more than 100 clonal varieties to suit various type of soil & climate in the country. Till today almost all the paper mills and the forest corporations are depending on the same old clones in their plantation programme. There is no new improved clones developed by any organisations, which is tolerant to invasive pest like Eucalyptus gall threatening the eucalyptus plantations in large. Almost all the clones were outdated and no clone is tolerant to the pest and diseases of recent times which create fear among the farmers to go in for Eucalyptus cultivation. Apart from this, there is a vast potential in developing new clones with high fibre yield and low lignin content which is the need of the hour for the paper mill to compete with the global market in term of cheaper cost, better quality and environmental friendly paper. Research is the key for the this development and TNPL now has got the team of scientist with background of Breeding, Soil Science, Entomologist, Microbiologist and Environmental sciences to work in this front in association with the leading research organisations like Institute of Forest Genetic and Tree Breeding, Forest College and Research Institute and Tamil Nadu Agricultural University. This would facilitate to develop new improved genetic material for production of preferred, site-specific clones suited to individual operational areas and reduce the cost of clones and emerge as a profitable enterprise to the farmers. Under Forestry Research & Development the following major areas will be taken during this year.

Screening of high yielding short rotation genotypes Breeding and Hybridization for development of new clones with high cellulose & low

lignin pulpwood

Evaluating site specific clones in different regions, by laying multi-location trials Strategy to combat Gall forming insect pest and disease management Reclamation of saline-sodic soils in TEWLIS & low lying area through bio-remediation

Standardization of cultivation practices for paper cane cultivation in different agro-

climatic zones Apart from the production, TNPL also established a biotech research division to develop a high quality clones at the cost of Rs.10 million. The biotech division produces the high quality mother plant by plant tissue culture method and supply to commercial clonal production centre. NAIP TNPL: TNPL is one of the Consortia Partners in the NAIP-ICAR sponsored sub-project titled A value chain on industrial Agro-forestry in Tamil Nadu under production to consumption system. The Forest College & Research Institute (FC & RI), Tamil Nadu Agricultural University, Mettupalayam is the Consortium Leader of this project. This project is being implemented for raising 500 acres of cluster plantation in 10 Taluks covering 5 Districts in Tamil Nadu. Under the scheme, TNPL got allotment of a grant to the tune of Rs.15.86 Lac for developing cluster in 100 acres. Against the allocation, a grant of Rs.5.48 Lac was received in the financial year 2008-09. Cluster plantations of pulpwood species were developed in 100 acres. Two-one day training programmes for farmers was conducted under the project.

1.3 COMPANY PROFILE INTRODUCTION: The company was incorporated on 16.april.1979 with a capacity of manufacture 50000tpa of printing and writing paper. it was promoted by the government of Tamil Nadu for the

manufacture of newsprint and primary and writing papers using bagasse as the primary raw material. it manufactures newsprints, writing and printing paper.

OUR BUSINESS: TNPL were established by the government of Tamil Nadu during early eighties to produce newsprint and printing and writing paper using bagasse, a sugarcane residue, as primary raw material. the company commenced production in the year 1984 with an initial capacity of 90000 tonnes per annum(tpa). Over the years the production capacity has been increased to 400000 tpa and the company has emerged as the largest bagasse based paper mill in the world consuming about one million tonnes of bagasse every year. The company completed a mill expansion plan during December 2010 to increase the mill capacity to 400000 tpa. TNPL exports about 1/5th of its production to move than 30 countries manufacturing of quality paper for the past two and half decades from bagasse is an index of the company's technological competence. A strong record in adopting minimum impact best process technology, responsible waste management, reduced pollution load and commitment to the corporate social responsibility make the company one of the most environmentally compliant paper mill in the world.

QUALITY POLICY: "TNPL is committed to manufacture and supply eco-friendly papers to customers satisfaction with emphasis on continual improvements in quality management system" .TNPL has obtained the ISO 9001-2000 certification from RWTUV of Germany for development, manufacture and supply of newsprint and printing and writing paper.

VISION OF TNPL:

"To be the market leader in the manufacture of world class eco-friendly papers by adopting innovative technologies for sustainable development." MISSION OF TNPL: Attain leadership in paper technology. Promote the usage of bagasse in the manufactures of newsprint and writing papers. Minimize environmental impact and become an environmental friendly organization. TNPL EXPORT NETWORK: TNPL is also exporting about 18% of pwp production to 20 countries around the world. Australia,Singapore,Srilanka,Sundan,Southafrica,Taiwan,Turkey,UAE,UK,Yemen,Egypt,Greece,I ndonesia, Jordan, Kenya, Malaysia, Myanmar, Nepal, Nigeria. TNPL PRODUCTS: TNPL ultra white maplitha Radiant printing Hard bound notebook TNPL offset printing Cream wove Copy crown TNPL copier Students favorites Super print maplitha Perfect copier Ace marvel HIGHLIGHTS:

Board of directors: Chairman: Managing director: Deputy managing director: Directors: Rajeev ranjan IAS T.K.Ramachandran IAS A.Velliangiri R.Thiagarajan, Vikramkapur, V.R.Metha, V.Narayanan, R.R.Bhandari, N.Kumaravelu D.Krishnan. Registered office: Factory: Guindy , Chennai-23. kagithapuram, karur district. Tamilnadu, India. Auditors: P.B.Vijayaraghavan&co CA Nungambakkam, Chennai.

FULL CYCLE OF TNPL:

AWARDS AND ACCOLADES OF TNPL: Green business leadership award. The energy and resources institute (TERI) corporate award Excellence in corporate governance Best paper mill 2001-2002 and 2007_2008 Certificate of excellence. Environment protection. Export award (by ministry of commerce, government of India) Safety award. Energy award. Best corporate citizen in 1999. FUTURE PLAN:

under the mill expansion plan, a state-of-the-art new paper machine of a capacity of 155000tpa will be installed to increase the paper production capacity to 400000tpa.the project already taken up for implementation during the current year will be completed in all respects by June 2010. The time sludge and fly ash generated in the process of manufacturing papers causing environmental problems in the neighborhood will be converted into high-grade cement by installing a 400 tpd mini cement plant with in the factory. When implemented, TNPL would be first paper mill in the country producing high grade cement using lime sludge and fly ash. the project will be taken up for implementation during the current year and completed in all respects by December 2010. TNPL has implemented farm forestry and captive plantation in 37556 acres and 2735 acres respectively up to 31.3.2009. The company has planned to increase the plantation area by about 15000 acres every year with a view to reach the target 1 Lakh acres by the year 2012-2013. Deinked pulp line: TNPL is embarking on a mill expansion plan involving installation of a new paper machine (pm 3) with a capacity of 155000 tpa with the completion of this project, the total paper production will be 400000 mts per annum. Besides the production of CBP and HWP, around 56000 mts of pulp will have to be procured. as the purchased pulp is expensive, TNPL proposes to install a captive. Deinked pulp line of capacity 300 tpd at a capital outlay of rs.14 Crore. The project is expected to be completed by September 2011. Deinking is the process of removing ink and various types of contaminants from waste paper and makes reusable pulp for paper making. The raw material used for the DIP line consists of sorted office waste, mixed office waste and coated book stock.

1.3 LITERATURE REVIEW

FINANCIAL STATEMENT: Financial statement are final result of accounting work done during accounting period. Financial statement normally include trading, profit and loss account and balance sheet. The users of accounting information may not be able to get direct reply to certain questions from the above statements. However, by expressing the items in the financial statements, in relation to each other we can get meaningful information. Financial statement analysis is an important part of the overall financial assessment. The different users look at the business concern from their respective view point and are interested in knowing about its profitability and financial condition is the overall objective of financial statement analysis. Definition: Analysis of financial statement has been defined as a process of evaluating the relationship between the component parts of the financial statement to obtain a better understanding of a firms position and performance Significance of financial statement analysis: Judging the earning capacity or profitability of a business concern. Analyzing the short term and long term solvency of the business concern. Help in making comparative studies between various firms. Assets in preparing budgets.

Limitation of financial statement analysis:

Analysis of financial statement helps to ascertain the strength and weakness of the business concern, but at the same time it suffers from the following limitation. It analyses what has happened till date and does not reflect the future. It ignores price level changes. Financial analysis takes into consideration only monetary matters, qualitative aspects are ignored. The conclusion of the analysis is based on the correctness of the financial statements. Analysis is a means to an end and not the end itself. As there is variation in accounting practices followed by different firms a valid comparison of their financial analysis is not possible. RATIO ANALYSIS: Ratio analysis is an age old technique of financial analysis. It is the process of computing, determining and presenting the relationship of items or groups of items of financial statements. The information provided by the financial statement in absolute form is historical and static, conveying very little meaning to the users. A ratio is worked out by dividing one number by another number. Definition: Ratio analysis may be defined as a relationship expressed in ratio terms between figures which have a cause and effect relationship which is connected with each other in same other manner. According to accountants hand book by wixon, kell and Bedford, a ratio is an expression of the quantitative relationship between two or more items of the financial statements connected with each other. Arithmetically ratio is a comparison of the numerator with the denominator. A ratio is a mathematical relationship between two items expressed in a quantitative form.

Advantages of ratio analysis: The information shown in financial statement does not signify anything individually because the facts shown are inter-related. Hence it is necessary to establish relationships between various items to reveal significant details and throw light on all notable financial and operational aspects. Forecasting: Ratios reveal the trends in cost, sales, profits and other inter-related facts, which will be helpful in forecasting future events. Managerial control: Ratios can be used as instrument of control regarding sales, costs and profit. Facilitates communication: Ratios facilitate the communication function of management as ratios conveys the information relating to the present and future quickly, forcefully and clearly. Measuring efficiency: Ratio help to know operational efficiency by comparison of present ratios with those of the past working and also with those of other firms in the industry. Limitations of ratio analysis: Ratios are precious tools in the hands of management but the utility lies in the proper utilization of ratios. Mishandling or misuse of ratios and using them without proper context may lead the management to a wrong direction. Practical knowledge: The analyst should have thorough knowledge and experience about the firm and industry. Ratios are means: Ratios are not an end in themselves but they are means to achieve a particular purpose or end. Inter-relationship: Ratio is inter-related and therefore a single ratio cannot convey any meaning. It has to be interpreted with reference to other related ratio to draw meaningful conclusions.

Non availability of standards or norms: Ratios will be meaningful if they can be compared with standards or norms. Except for a few financial ratios, other ratio lack standards which are universally recognized. Steps in ratio analysis: Selection of relevant information: The first step in ratio analysis is to select relevant information from financial statements and calculate appropriate ratios required for decision under consideration. Comparison of calculated ratios: In order to assess the relative meaning, the ratios calculated are compared with the past ratios and industry ratios. Interpretation and reporting: The third step in ratio analysis is to interpret the significance of various ratios, draw inferences and to write a report. The report may recommend specific action in the matter of the decision situation or may present alternatives with comparative merits or it may just state the facts and Interpretation. Expression of ratios: Ratios are expressed in three ways: Time: In this type of expression, a quotient obtained by dividing one item by another is taken as unit of expression. For example of this form of expression is cost of sales divided by average stock (say 8), thus 8 times is the ratio between cost of sales and stock.

Percentage:

In this type of expression, a quotient obtained by dividing one item by another is multiplied by one hundred to show the relationship in terms of percentage. For example, the relationship between net profit and sales may be expressed as say 25%. In proportion: In this type of expression the amounts of two items are expressed in a common denominator. An example of this form of expression is the relationship between current assets and current liabilities as 2:1. Tools used for ratio analysis: Ratio analysis is the process of determining and interpreting numerical relationship between figures of the financial statements. An absolute way of ratio analysis measured based on: Financial tools: Comparative balance sheet. The comparative balance sheet showing the different assets and a liability of the firm on different datas to make comparison of balances of balances from one date to another. The comparative balance sheet has two columns for the data of original balance sheets. A third column is used to show change (increase/decrease) in figures. The fourth column may be added for giving percentages of increase or decrease. Ratio Analysis: An analysis of financial statement based on ratios is known as ratio analysis. A ratio is a mathematical relationship between two or more items taken from the financial statement. Ratio analysis is the process of computing, determining, and presenting the relationship of items. It also includes comparison and Interpretation of ratios and using them as basis for the future projections. Ratio analysis is helpful to management and outsiders to diagnose the financial health of a business concern. It helps in measuring the profitability, solvency and activity of a firm. Statistical Tools: Correlation Analysis:

Correlation is a statistical tool which studies the relationship between two variables, and correlation analysis involves various methods and techniques used for studying and measuring the extent of the relationship between two variables. In other words, correlation analysis is a statistical procedure by which we can determine the degree of association or relationship between two or more variables. Various types of ratios: Current ratio: Current ratio is an indicator of the firms ability to meet its short term obligations. It judges, whether current assets are sufficient to meet the current liabilities. Current assets means the assets can easily convertible in money value. The current liabilities mean liabilities payable with in the year. This ratio is also known as working capital ratio and pure ratio. Current ratio = Current assets Current liability

Current assets = cash and bank balances, marketable securities, stock in trade, trade debtors, bills receivable and prepaid expenses. Current liabilities = trade creditors, bills payable, bank overdraft, expenses outstanding, interest due or payable. Liquid ratio: The liquid ratio is also known as acid test ratio or the quick assets ratio or the near money ratio. It supplements the current ratio. It is showing the relationship that exists between the liquid assets and current liabilities. This ratio is calculated by dividing liquid or quick assets (without stock and prepaid expenses) by total current liabilities. Liquid ratio = Liquid assets Current liability

Liquid assets = current assets-(stock + prepaid expenses).

Current liabilities= sundry creditors, bills payable, outstanding, expenses, short term advances, bank overdraft. Debt equity ratio: Debt-equity ratio is calculated to judge effectiveness of the long term financial policy of the business. It also knows as external-internal equity ratio. This ratio relates to the owners stake in the business viz-a-vis that of outsiders. It establishes the relationship between the external equities funds and the internal equities or the share holders funds. Debt equity ratio = Total long term debt Share holders fund

Long term debt = form of mortgages, bills or debentures. Share holders fund = preference share capital, equity share capital, capital reserve, sinking funds, redemption of debentures, etc., Proprietary ratio: Proprietary ratio is also known as owners fund ratio or shareholders equity ratio or equity ratio or net worth ratio. This ratio establishes the relationship between the proprietors funds and tangible assets. Proprietary ratio = Share holder funds Total tangible assets

Proprietors fund = the sum of the paid-up equity share capital + preference share capital + reserves and surplus, both capital and revenue nature, Total tangible assets = fixed assets, current assets but exclude fictitious assets like preliminary expenses, profit and loss account debit balance etc., Fixed assets ratio: Fixed assets ratio is also known as ratio of capital or long term funds to fixed assets. The fixed assets ratio indicates the extent to which the total of fixed assets is financed by long term funds of the firm. i.e. the relationship between the net fixed assets and long term funds.

Fixed assets ratio =

Fixed assets Long term funds

Fixed assets = fixed assets after deducting the amount of depreciation. Long-term funds = equity share capital, preference share capital, reserves, debentures and longterm loans. Inventory or stock turnover ratio: Inventory turnover ratio is computed to find out the speed flow of stock by relating cost of goods sold to average inventory. This ratio indicates whether stock has been efficiency used or not. The purpose being to check up whether only the required minimum has been locked up in stock. Inventory turnover ratio = Cost of good sold ( or ) sales Average inventory

Average inventory = opening stock + closing stock/2 Debtors turnover ratio: Debtors turnover ratio is also called receivable turnover or debtors velocity. It establishes the relationship between net credit sales and average accounts receivable or the relationship between the aggregate of debtors and bills receivable and sales. This ratio is an indication of the number of times debtors turnover on an average in each year.
Debtors turnover ratio =

Net credit sales Average receivables

Sales=cash sales + credit sales. Closing debtors = Debtors at the end of the year. Fixed assets turnover ratio: As the organization employs capital on fixed assets for the purpose of equipping itself with the required manufacturing facilities to produce goods and services which are salable to the customers to earn revenue, it is necessary to measure the degree of success achieved in this

bearing. This fixed assets turnover ratio expresses the relationship between cost of goods sold or sales and fixed assets. Fixed assets turnover ratio = Cost of god sold ( or ) sales Net fixed assets

Fixed asset = Fixed asset after deducting the depreciation. Net profit ratio: Net profit ratio establishes the relationship between the amount of net profit or net income and the amount of sales revenue. This ratio is taking in percentage. Net profit or net income is the gross profit less selling, distribution and financial expenses. Net profit for calculating this ratio is picked up from the profit and loss account. Net profit ratio = Net profit after tax x 100 Net sales

Net profit = Gross profit, operating and non-operating income after deducting operating and nonoperating expenses. CORRELATION ANALYSIS: Correlation is a statistical tool which studies the relationship between two variables, and correlation analysis involves various methods and techniques used for studying and measuring the extent of the relationship between two variables.

r=

dx.dy dx * dy
2

CHAPTER II DEVELOPMENT OF THE MAIN THEME

2.1 NEED OF THE STUDY Ratio analysis plays a vital role with in and out side of the organization. Ratio analysis is the process of identifying the financial strengthen and weakness of the company by properly establishing the relationship between the items of balance sheet and profit and loss account. Ratio

analysis verifies to the assessment of the stability and profitability of a business or organization or project. The study on ratio analysis is conducted in TamilNadu newsprints and paper ltd to analysis the past 5 years performance of the company. This study helps to improve the overall effective present performance knowledge of ratio analysis, profitability, liquidity, solvency, correlation analysis.

2.2 OBJECTIVES OF THE STUDY Primary objectives: To analyze the past performance of TNPL in terms of financial parameters.

To analyze the effectiveness of ratio analysis

Secondary objectives: To measure the companys growth level in terms of turnover and profits for the past 5 years. To find out the liquidity position of TNPL.

2.3 SCOPE OF THE STUDY The study is carried out as the management of the company TAMIL NADU NEWSPRINT AND PAPER LTD which is located in GUINDY, CHENNAI-23. The research

method formulated with the secondary data by provided past 5 years from (2006-2011). This study enables the organizations financial statement, ratio analysis, comparative balance sheet and correlation analysis. The scope of the study is entitled towards analysis the ratio analysis of Tamil Nadu news prints and papers ltd. The forecast helps to ascertain the earning capacity for the future period. With the past data and using analysis, find the area of problem and suggest improving the financial performance. Ratio analysis is needed to know the efficiency of the company and to help the management in the decision making process with in the organization.

2.4 LIMITATION OF THE STUDY

 Ratios are based upon financial statements. Incase, financial statements are incorrect the calculated ratios are also false and defective. The ratio of one firm cannot always be compared with the other firms. The misleading results in the absence of absolute data made under it. Ratio can be useful only when they are computed in sufficiency large numbers. Time provided for completing this project work was major constraints.

RESEARCH METHODOLOGY

2.5 RESEARCH METHODOLOGY Research: Research in common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. Research is an academic activity and as such the term should be used in a technical sense. According to Clifford woody research comprises refining and redefining problems, formulating hypothesis or suggested solutions; collecting organizing and evaluating data; making deductions and reaching conclusions to determine whether they fit the formulating hypothesis. Research methodology: Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. In it we study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them. It is necessary for the researcher to know not only the research methods/ techniques but also research methodology. Research design: A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. In fact, the research design is the conceptual structure with in which research is conducted. It constitutes the blueprint for the collection, measurement and analysis of data. As such the design includes an outline of what the researcher will do from writing the hypothesis and its operational implications to the final analysis of data. Analytical design: The research has to use the factors or information already available and analyze the facts to make a critical evaluation of the material. The design analysis tools provide, in many circumstances, a cost-effective, speedy and practical alternative to experimental investigation. There are a number of analysis techniques available to predict product performance, life, cost failure modes... Etc. Before the prototype

stage. This course is aimed at providing a broad and comprehensive overview of such techniques and their role in the design process. The analytical tools is designed to enhance the participants familiarity with fundamental principles and applications of analytical design techniques and how they can be used to achieve a good, cost-effective and reliable design. It provides state-of-the-art information on a variety of analysis techniques which will be immediately useful on the job. DATA COLLECTION: Primary data: The primary data are those which are collected afresh and for the first time, and thus happen to be original in character. It is an original collection of reports and details. Secondary data: The secondary data are those which have already been collected by someone else and which have already been passed through the statistical and financial process. The secondary data is the nature of data collection work is merely that of compilation. TOOLS AND TECHNIQUES: Financial tools: Comparative Balance Sheet. Ratio analysis. Statistical tools: Correlation analysis.

ANALYSIS AND INTERPRETATION

ANALYSIS AND INTERPRETATION: Analysis and interpretation is the important part of any kind of research. Analysis involves estimating the values of the past data that are given by the company. To analysis the data the financial tools Such as comparative balance sheet, ratios and statistical tools such as correlation analysis are being used. Interpretation refers to the task of drawing inferences from the collected facts after an analytical study. 2.6.1 Comparative Balance Sheet For The Year 2006-2007 INCREASE(+) OR 2006 2007 DECREASE(-) ( Rs. Lakhs. ) ( Rs. Lakhs.) IN 2007 OVER 2006. AMOUNT PERCENTAGE 12154.9 12776.7 2021.49 12680.8 114.05 13.19 143235 72995.9 70239.2 11513.3 121514 15638.4 10533.1 1900.21 8719.3 114.05 6.6 151436 79593.7 71842.7 45951.8 154706 3483.55 -2243.6 -121.28 -637.56 6.6 8201.27 6597.76 1603.51 34438.1 33192.5 28.65 -17.56 -5.99 -5.02 50.04 5.73 9.04 2.28 299.12 27.32

PARTICULARS

Assets: Inventories Sundry Debtors Cash and Bank Balance Loan and Advantages Investments miscellaneous expenses Gross block Less: depreciation Net block Add: capital work in progress TOT AL CURRENT LIABILITIES AND PROVISION: Liabilities Provision deferred tax net loan fund SHARE HOLDERS FUNDS: Share capital Reserves and surplus TOTAL INTERPRETATION:

16513.6 6458.77 15476 30813.4 6937.78 45314 121514

20855.3 4976.87 15284 55939.9 6937.78 50712.3 154706

4341.63 1481.91 192 25126.6 5398.24 33192.5

26.29 22.94 1.24 81.54 11.91 27.32

The comparative balance sheet shows that, there is a percentage increase in inventories, miscellaneous expenses, gross block, net block, capital work in progress, liabilities, provision, deferred tax net, reserves and surplus and the percentage decrease in balance sheet are sundry debtors, cash and bank balance, loan and advances.

2.6.2 Comparative Balance Sheet

For The Year 2007-2008 INCREASE(+) OR 2007 2008 DECREASE(-) ( Rs. Lakhs. ) ( Rs. Lakhs.) IN 2008 OVER 2007. AMOUNT PERCENTAGE 15638.4 10533.1 1900.21 8719.3 114.05 6.6 151436 79593.7 71842.7 45951.8 154706 14726.5 9856.46 2304.42 12164.1 1715.42 186091 86800.3 99290.7 29070.3 169128 -911.95 -676.6 404.21 3444.81 1601.37 6.6 34654.6 7206.64 27448 -16881 14421.8 -5.83 -6.42 21.27 39.5 14.04 100 22.88 9.05 38.2 -36.73 9.32

PARTICULARS

Assets: Inventories Sundry Debtors Cash and Bank Balance Loan and Advantages Investments miscellaneous expenses Gross block Less: depreciation Net block Add: capital work in progress TOT AL CURRENT LIABILITIES AND PROVISION: Liabilities Provision deferred tax net loan fund SHARE HOLDERS FUNDS: Share capital Reserves and surplus TOTAL

20855.3 4976.87 15284 55939.9 6937.78 50712.3 154706

23260.7 7597.32 18835 55433.8 6937.78 57063.2 169128

2405.49 2620.45 3551 -506.21 6350.93 14421.8

11.53 52.65 23.2 -0.91 12.52 9.32

INTERPRETATION:

The comparative balance sheet shows that, there is a percentage increase in cash and bank, loans, investment, gross block, net block, liabilities, provision, miscellaneous expenses, deferred tax net, reserves and surplus and the percentage decrease in balance sheet are sundry debtors, inventories, capital work in progress.

2.6.3 Comparative Balance Sheet

For The Year 2008-2009 INCREASE(+) OR 2008 2009 DECREASE(-) ( Rs. Lakhs. ) ( Rs. Lakhs.) IN 2009 OVER 2008. AMOUNT PERCENTAGE 14726.5 9856.46 2304.42 12164.1 1715.42 186091 86800.3 99290.7 29070.3 169128 19639.2 16973.8 1767.15 14368.9 114.05 217720 95593.8 122126 26269.7 201259 4912.75 7117.37 -537.27 2204.76 -1601.4 31628.6 8793.49 22835.1 -2800.6 32130.8 33.36 72.21 -23.32 18.13 -93.35 17 10.13 23 9.63 18.99

PARTICULARS

Assets: Inventories Sundry Debtors Cash and Bank Balance Loan and Advantages Investments miscellaneous expenses Gross block Less: depreciation Net block Add: capital work in progress TOT AL CURRENT LIABILITIES AND PROVISION: Liabilities Provision deferred tax net loan fund SHARE HOLDERS FUNDS: Share capital Reserves and surplus TOTAL

23260.7 7597.32 18835 55433.8 6937.78 57063.2 169128

22105.7 10091.4 21985 80645.1 6937.78 59493.8 201259

-1155.1 2494.05 3150 -25211.3 2430.55 32130.8

-4.97 32.83 8.88 45.48 4.26 18.99

INTERPRETATION:

The comparative balance sheet shows that, there is a percentage increase in sundry debtors, inventories, loan and advances, gross block, net block, provision, deferred tax net, reserves and surplus and the percentage decrease in balance sheet are liabilities, cash and bank balance, investments, capital work in progress.

2.6.4 Comparative Balance Sheet

For The Year 2009-2010 INCREASE(+) OR 2009 2010 DECREASE(-) ( Rs. Lakhs. ) ( Rs. Lakhs.) IN 2010 OVER 2009. AMOUNT PERCENTAGE 19135.6 16973.8 1767.15 12588.4 114.05 503.62 217720 95593.8 122126 26269.7 199478 16911.3 19956.9 1936.31 20593.9 1139.99 962.41 229878 105469 124409 85250 271159 -2224.3 2983.08 169.16 8005.51 1025.94 458.79 12158 9875.18 228283 58980.3 71681.3 11.62 17.57 9.57 63.59 899.55 91.09 5.58 10.33 1.83 224.51 35.93

PARTICULARS

Assets: Inventories Sundry Debtors Cash and Bank Balance Loan and Advantages Investments Captive Plantation Gross block Less: depreciation Net block Add: capital work in progress TOT AL CURRENT LIABILITIES AND PROVISION: Liabilities Provision deferred tax net loan fund SHARE HOLDERS FUNDS: Share capital Reserves and surplus TOTAL

20325.2 10091.4 21985 80645.1 6937.78 59493.2 199478

22496.7 10908.9 21013 136291 6937.78 73512.4 271159

2171.52 817.52 -972 55645.6 14018.7 71681.3

10.68 8.1 -4.42 69 23.56 35.93

INTERPRETATION:

The comparative balance sheet shows that, there is a percentage increase in sundry debtors, cash and bank, loan and advances, gross block, net block, captive plantation, liabilities, provision, investments, capital work in progress, reserves and surplus and the percentage decrease in balance sheet are deferred tax net, inventories.

2.6.5 Comparative Balance Sheet

For The Year 2010-2011 INCREASE(+) OR 2010 2011 DECREASE(-) ( Rs. Lakhs. ) ( Rs. Lakhs.) IN 2011 OVER 2010. AMOUNT PERCENTAGE 16911.3 19956.9 1936.31 20593.9 1139.99 962.41 229878 105469 124409 85250 271159 20500.2 20585.3 1222 31352.1 114.05 1318.92 336446 117056 219390 13052.2 307535 3588.85 628.43 -714.31 10758.2 -1025.9 356.51 106569 11587.5 94981.3 -72198 36375.1 21.22 3.14 -36.89 52.23 89.99 37.04 46.35 10.98 76.34 -84.68 13.41

PARTICULARS

Assets: Inventories Sundry Debtors Cash and Bank Balance Loan and Advantages Investments Captive Plantation Gross block Less: depreciation Net block Add: capital work in progress TOT AL CURRENT LIABILITIES AND PROVISION: Liabilities Provision deferred tax net loan fund SHARE HOLDERS FUNDS: Share capital Reserves and surplus TOTAL

22496.7 10908.9 21013 136291 6937.78 73512.4 271159

29493.7 12690.9 24961 148810 6937.78 84641.3 307535

6996.92 1782.03 3948 12519.3 11128.8 36375.1

31.1 16.33 18.78 9.18 15.13 13.41

INTERPRETATION:

The comparative balance sheet shows that, there is a percentage increase in inventories, sundry debtors, loan and advances, captive plantation, gross block, depreciation, net block, liabilities, provision, deferred tax net, loan fund, reserves and surplus and the percentage decrease in balance sheet are cash and bank, investments, capital work in progress.

RATIO ANALYSIS

LIQUIDITY RATIO Liquidity ratio measure the firms ability to pay off current dues i.e., repayable within a year. Liquidity ratios are otherwise called as short term solvency ratio. CURRENT RATIO Current ratio is an indicator of the firms ability to meet its short term obligations. It judges, whether current assets are sufficient to meet the current liabilities. Current assets means the assets can easily convertible in money value. Current ratio = Current assets Current liability

2.6.6 Table Showing Current Ratio YEAR

CURRENT ASSETS CURRENT LIABILITIES RATIO

2007 2008 2009 2010 2011

36790.98 39051.45 52749.06 59398.46 73659.58

25832.12 30858.06 32197.02 33405.62 42184.57

1.42 1.27 1.64 1.78 1.75

Interpretation: The current ratio shows that, the lowest current ratio in the year 2007-2008. The highest current ratio is in the year 2009-2010. From the year 2008-2009 there is an incremental in current ratio.

2.6.6 (a) Chart Showing Current Ratio

CURRENT RATIO
1.78 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1.42 1.27 1.64 1.75

TIMES

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

YEAR

LIQUID RATIO

The liquid ratio is also known as acid test ratio or the quick assets ratio or the near money ratio. It supplements the current ratio. It showing the relationship that exists between the liquid assets and current liabilities. Liquid ratio = Liquid assets Current liability

2.6.7 Table Showing Liquid Ratio LIQUID ASSETS 21152.57 24324.99 33109.85 42487.16 52907.18 LIQUID LIABILITIES 25832.12 30858.06 32197.02 33405.62 42184.57

YEAR

RATIO 0.82 0.79 1.03 1.27 1.25

2007 2008 2009 2010 2011

Interpretation: The liquid ratio shows that, the lowest liquid ratio in the year 2007-2008. The highest liquid ratio in the year 2009-2010. The liquid assets should be equal to current liabilities. It indicates the companies liquidity and having incremental in liquid ratio.

2.6.7(a) Chart Showing Liquid Ratio

LIQUID RATIO
1.4 1.27 1.2 1 1.03 0.82 1.25

TIMES

0.8 0.6 0.4 0.2 0

0.79

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

YEAR

SOLVENCY RATIO

Solvency refers to the firms ability to meet its long term indebtness. Solvency ratio studies the firms ability to meet its long term obligations. DEBT EQUITY RATIO Debt-equity ratio is calculated to judge effectiveness of the long term financial policy of the business. It also knows as external-internal equity ratio. This ratio relates to the owners stake in the business viz-a-vis that of outsiders. It establishes the relationship between the external equities funds and the internal equities or the share holders funds. Debt equity ratio = Total long term debt Share holders fund

2.6.8 Table Showing Debt Equity Ratio TOTAL LONG TERM DEBTS

YEAR

SHARE HOLDER'S FUNDS

RATIO

2007 2008 2009 2010 2011

55939.94 55433.02 80645.09 136290.66 148810.00

57650.05 64000.98 66431.53 80450.21 91579.04

0.97 0.87 1.21 1.69 1.62

Interpretation: The debt equity ratio shows that, the lowest debt equity ratio in the year 2007-2008. The highest debt equity ratio in the year 2009-2010. There is a slight changes in the debt equity ratio.

2.6.8 (a) Chart Showing Debt Equity Ratio

DEBT-EQUITY RATIO
1.8 1.6 1.4 1.2 0.97 1.21 1.69 1.62

TIMES

1 0.8 0.6 0.4 0.2 0

0.87

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

YEAR

PROPRIETARY RATIO

Proprietary ratio is also known as owners fund ratio or shareholders equity ratio or equity ratio or net worth ratio. This ratio establishes the relationship between the proprietors funds and tangible assets. Proprietary ratio = Share holder funds Total tangible assets

2.6.9 Table Showing Proprietary Ratio YEAR SHARE HOLDERS FUND 57650.05 64000.98 66431.53 269057.09 91579.04 TOTAL TANGIBLE ASSETS 154585.46 167412.44 201144.59 80450.21 306101.64 RATIO

2007 2008 2009 2010 2011

0.37 0.38 0.33 0.29 0.29

Interpretation: The proprietary ratio table show that, the lowest proprietary ratio in the year 2009-2010 and 2010-2011.the highest proprietary ratio in the year 2007-2008. There is a continues decrease in proprietary ratio.

2.6.9 (a) Chart Showing Proprietary Ratio

PROPRIETARY RATIO
0.4 0.35 0.3 0.25

0.37

0.38 0.33 0.29 0.29

RATIO

0.2 0.15 0.1 0.05 0 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

YEAR

FIXED ASSETS RATIO

Fixed assets ratio is also known as ratio of capital or long term funds to fixed assets. The fixed assets ratio indicates the extent to which the total of fixed assets is financed by long term funds of the firm. i.e. the relationship between the net fixed assets and long term funds.
Fixed assets ratio =

Fixed assets Long term funds

2.6.10 Table Showing Fixed Assets Ratio YEAR FIXED ASSETS LONG TERM FUNDS 113589.99 119434.80 147076.62 185940.02 240389.04

RATIO 0.63 0.83 0.83 0.67 0.91

2007 2008 2009 2010 2011

71842.70 99290.69 122125.79 1244086.62 219389.87

Interpretation: The fixed assets ratio should be equal to the total of the long term funds. The table shows that, the lowest fixed assets ratio in the year 2006-2007. The highest fixed assets ratio in the year 2010-2011. There is a continuous change in ratios. So, it is in low range.

2.6.10(a) Chart Showing Fixed Assets Ratio

FIXED ASSETS RATIO

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 20062007 20072008 20082009 20092010 20102011 0.63 0.83 0.83 0.67

0.91

RATIO

YEAR

ACTIVITY TURNOVER RATIO

Activity ratios indicate the performance of the business. The performance of a business is judged with its sales (turnover) or cost of goods sold. These ratio are thus referred to as turnover ratio. INVENTORY OR STOCK TURNOVER RATIO: Inventory turnover ratio is computed to find out the speed flow of stock by relating cost of goods sold to average inventory. This ratio indicates whether stock has been efficiency used or not. The purpose being to check up whether only the required minimum has been locked up in stock. Inventory turnover ratio = Cost of good sold ( or ) sales Average inventory

2.6.11 Table Showing Stock Turnover Ratio YEAR NET SALES AVERAGE INVENTORY

RATIO

2007 2008 2009 2010 2011

85483.75 93852.71 106646.31 102567.74 118444.52

13896.64 15182.44 17182.84 18023.45 18705.73

6.15 6.18 6.20 5.69 6.33

Interpretation: The stock turnover ratio table shows that, the lowest stock turnover ratio in the year 20082009. The highest stocks turn over ratio in the year 2010-2011. The company stock turnover ratio is in better or in normal range.

2.6.11(a) Chart Showing Stock Turnover Ratio

STOCK TURNOVER RATIO

6.4 6.3 6.2 6.1 6 6.15 6.18 6.2

6.33

TIMES

5.9 5.8 5.7 5.6 5.5 5.4 5.3 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 5.69

YEAR

DEBTORS TURNOVER RATIO:

Debtors turnover ratio is also called receivable turnover or debtors velocity. It establishes the relationship between net credit sales and average accounts receivable or the relationship between the aggregate of debtors and bills receivable and sales. This ratio is an indication of the number of times debtors turnover on an average in each year.
Debtors turnover ratio =

Net credit sales Average receivables

2.6.12 Table Showing Debtors Turnover Ratio YEAR TOTAL SALES CLOSING DEBTORS

RATIO

2007 2008 2009 2010 2011

85483.75 93852.71 106646.31 102567.74 118444.52

11679.34 10194.76 13415.14 18465.37 20271.13

7.31 9.21 7.95 5.55 5.84

Interpretation: The debtors turnover ratio table shows that, the lowest debtors turnover ratio in the year 2009-2010. The highest debtors turnover ratio in the year 2007-2008. Even though there is a decrease in ratios. It is in normal range.

2.6.12(a) Chart Showing Debtors Turnover Ratio

DEBTORS TURNOVER RATIO

10 9 8 7 6 7.31

9.21 7.95

5.55

5.84

TIMES

5 4 3 2 1 0 20062007 20072008 20082009 20092010 20102011

YEAR

FIXED ASSETS TURNOVER RATIO

As the organization employs capital on fixed assets for the purpose of equipping itself with the required manufacturing facilities to produce goods and services which are salable to the customers to earn revenue, it is necessary to measure the degree of success achieved in this bearing. Fixed assets turnover ratio = Cost of god sold ( or ) sales Net fixed assets

2.6.13 Table Showing Fixed Asset Turnover Ratio YEAR NET SALES NET FIXED ASSETS RATIO
2007 2008 2009 2010 2011

85483.75 93852.71 106646.31 102567.74 118444.52

71842.70 99290.69 122125.79 124408.62 219389.87

1.19 0.95 0.87 0.82 0.53

Interpretation: An increase in the ratio is the indicator of the efficiency in work performance. The fixed asset turnover ratio table shows that, the lowest ratio in the year 2010-2011. The highest fixed assets turnover ratio in the year 2006-2007. It has a continuous decrement in the ratios.

2.6.13(a) Chart Showing Fixed Assets Turnover Ratio

FIXED TURNOVER RATIO

1.2

1.19

0.95 0.87 0.82

0.8

TIMES

0.6

0.53

0.4

0.2

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

YEAR

PROFITABILITY RATIO

Efficiency of a business is measured by profitability. Profitability ratio measures the profit earning capacity of the business concern. NET PROFIT RATIO Net profit ratio establishes the relationship between the amount of net profit or net income and the amount of sales revenue. This ratio is taking in percentage. Net profit or net income is the gross profit less selling, distribution and financial expenses. Net profit for calculating this ratio is picked up from the profit and loss account. Net profit ratio = Net profit after tax x 100 Net sales

2.6.14 Table Showing Net Profit Ratio YEAR NET PROFIT NET SALES RATIO
2007 2008 2009 2010 2011

8606.38 11283.00 10738.68 12606.44 14899.65

85483.75 93852.71 106646.31 102567.74 118444.52

10.67 12.02 10.07 12.29 12.60

Interpretation: The net profit ratio table shows that, the lowest net profit ratio is in the year 2008-2009.the highest net profit ratio is in the year 2010-2011. There is a continuous change in the ratios. But there is increment in the current year.

2.6.14(a) Chart Showing Net Profit Ratio

NET PR IT R OF ATIO

14 12 10.67% 10 12.02% 10.07% 12.29% 12.6%

PERCENTAGE

8 6 4 2 0

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

YEAR

CORRELATION ANALYSIS

2.6.15 Table Showing Correlation Analysis between sales and profit SALES (X) (Rs.Lakhs) 2007 2008 2009 2010 2011 TOTAL 85483.7 93852.7 106646.3 102567.7 118444.5 506995.0 PROFIT (Y ) (Rs.Lakhs) 8606.4 11283.0 10738.7 12606.4 14899.7 58134.2 dy 2

YEAR

dx (X- X)
_

dx 2

dy (Y- Y )
_

dx.dy

-15915.3 253295819.2 -7546.3 56946492.8 5247.3 27534262.2 1168.7 1365953.2 17045.5 290549752.1 629692279.5

-3020.5 9123118.2 -343.8 118219.1 -888.2 788810.4 979.6 959635.8 -6727.2 45254950.8 56244734.2

48071277.3 32269377.3 -4662234.9 1144909.4 114668281.2 191491610.2

X = X / n = 506995.01 / 5 = 101399.00 Y = Y / n =58134.15 / 5 = 11626.83 r=

dx.dy dx * dy
2

19149161.02 629692279.5 5644734.18

19149161.02 (25093.67)(7499.64) 19149161.02 188193491.3

= 1.02
Interpretation:

From the above table , it is seen that there is a positive and high correlation between sales and profit. When the sales increase, the profit also increase in the same direction. This shows that the management operational planning is in the right direction.

2.6.15(a) Chart Showing Correlation Analysis

CHAPTER III

5.1 FINDINGS

 During the year 2006-07 the fixed assets and inventories are increased. Thus the company has provided funds for the production. In the year 2007-08 the savings and deposits in the bank and investment are increased. The company has made savings for a necessary use.
The company sundry debtors, loans are increase in the year 2008-2009. It shows the

company problem in providing the fund. In the current year balance sheet the inventories and fixed assets are increased. The company investment in this year is high. The current assets has decreased in the current year when compare to standard ratio of 2:1. The company should increase the current assets. The current year liquidity ratio is in normal range. The company has sufficient liquidity assets. The debt-equity ratio of the company is increased in the year 2009-10. the creditors of the company are insisted to a high risk.
The company has huge decrease in proprietary ratio in the year 2009-10 & 2010-11. Thus

the company may have problem to provide shares for the share holders.
The current year fixed assets of the company nearly reaching the standard ratio of 1:1. So,

the company should increase the investment in fixed assets. The stock turn over of the current year is high compared to the past 5 years. Thus the company stock turnover is speed flow to increase the production.
The highest debtors turnover ratio is in the year 2007-2008. There is a continuous decrease

in the ratio. So, the company should receive the bills quickly.
The turns over of fixed assets are high in the year 2006-07. Thus the company may

increase the usage of equipment in the manufacturing unit.

 The company net profit is high in the current year. So, the company can overcome the expenses and attain the profit.

5.2 SUGGESTIONS The company can increase the saving to meet the expenses attained. The company has better liquidity position. It can be maintained for better cash management. The company can invest more in advanced technology equipments. The company can try to increase the long-term financial policy. The company may take necessary steps regarding to improve the share holders fund. The company should increase the investment in the fixed assets to increase the production level.

5.3 CONCLUSIONS The study was conducted on ratio analysis at TNPL with the major aspects and departments are covered. The main purpose of project is to analysis the ratio analysis and to predict the performance of the company. The details are derived from the past collected datas. The financial and statistical tools which used for prevailing the performance are comparative balance sheet, ratio analysis, correlation analysis. The firm can take necessary action to increase the current assets and reduce the current liabilities to meet the expenses and attain the profit. The study shows the financial performance of TNPL is increased in its consideration.

APPENDIX

REFERANCE

Books Reference : 1. Pandey.I.M. Financial Management, vikas tubiishiy house pvt.ltd. 2. S.N.Maheshwari, management accounting. 3. Reddy and Murthy, management accounting. 4. C.R. Kothari, research methodology. New age international publishers,second revised edition. 5. S. Arora, statistics for management.

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