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Chapter1

Introduction

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Chapter-IINTRODUCTIONABOUTTHESTUDY

1.1.INTRODUCTIONFinancialManagementisthespecificareaoffinancedealingwiththefinancialdecisioncorporationsmake,andthetoolsandanalysisusedtomakethedecisions.Thedisciplineasawholemaybedividedbetweenlong-termandshort-termdecisionsandtechniques.Bothsharethesamegoalofenhancingfirmvaluebyensuringthatreturnoncapitalexceedscostofcapital,withouttakingexcessivefinancialrisks.Capitalinvestmentdecisionscomprisethelong-termchoicesaboutwhichprojectsreceiveinvestment,whethertofinancethatinvestmentwithequityordebt,andwhenorwhethertopaydividendstoshareholders.Short-termcorporatefinancedecisionsarecalledworkingcapitalmanagementanddealwithbalanceofcurrentassetsandcurrentliabilitiesbymanagingcash,inventories,andshort-termborrowingsandlending(e.g.,thecredittermsextendedtocustomers).Corporatefinanceiscloselyrelatedtomanagerialfinance,whichisslightlybroaderinscope,describingthefinancialtechniquesavailabletoallformsofbusinessenterprise,corporateornot.Oneofthemostimportantlongtermdecisionsforanybusinessrelatestoinvestment.Investmentisthepurchaseorcreationofassetswiththeobjectiveofmakinggainsinthefuture.Typicallyinvestmentinvolvesusingfinancialresourcestopurchaseamachine/buildingorotherasset,whichwillthenyieldreturnstoanorganisationoveraperiodoftime.Ratioanalysisisprimarilyusedtocompareacompany'sfinancialfiguresoveraperiodoftime,amethodsometimescalledtrendanalysis.Throughtrendanalysis,youcanidentifytrends,goodandbad,andadjustyourbusinesspracticesaccordingly.Youcanalsoseehowyourratiosstackupagainstoth

erbusinesses,bothinandoutofyourindustry.

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1.2.OBJECTIVEOFTHESTUDY1.Toappraisefinancialpositionusingtheratioanalysis.2.Todeterminethelevelofprofitgenerated3.Todeterminetheexpenseandinvestmentsofthecompany4.Tostudytheliquiditypositionoftheconcernbyconsideringthepositionofcurrentliabilities.

1.3.

SCOPEFORTHESTUDY

Makingbiginvestmentdecisionsmeansthatwemustallocatesubstantialamountsofmajorresourcesofpeople,time,technology,intellectualcapital,and,ofcourse,money.Ahigh-qualitydecisionprocessrequiresthatourchoicesaredoableandwellformulated,thatconsequencesareunderstoodandwellexplored,thatourpreferencesareincludedwhencomparingthefullarrayofcostsandbenefitsoftheproposeddecisions,andthatanyactionswetakearefocusedongettingresults.

Oneofthemostimportantlongtermdecisionsforanybusinessrelatestoinvestment.Investmentisthepurchaseorcreationofassetswiththeobjectiveofmakinggainsinthefuture.Typicallyinvestmentinvolvesusingfinancialresourcestopurchaseamachine/buildingorotherasset,whichwillthenyieldreturnstoanorganisationoveraperiodoftime.Keyconsiderationsinmakinginvestmentdecisionsare:

1.Whatisthescaleoftheinvestment-canthecompanyaffordit?2.Howlongwillitbebeforetheinvestmentstartstoyieldreturns?3.Howlongwillittaketopaybacktheinvestment?4.Whataretheexpectedprofitsfromtheinvestment?53


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1.4.INDUSTRYOVERVIEW

ConstructionInthefieldsofarchitectureandcivilengineering,constructionisaprocessthatconsistsofthebuildingorassemblingofinfrastructure.Farfrombeingasingleactivity,largescaleconstructionisafeatofhumanmultitasking.Normally,thejobismanagedbyaprojectmanager,andsupervisedbyaconstructionmanager,designengineer,constructionengineerorprojectarchitect.Forthesuccessfulexecutionofaproject,effectiveplanningisessential.involvedwiththedesignandexecutionoftheinfrastructureinquestionmustconsidertheenvironmentalimpactofthejob,thesuccessfulscheduling,budgeting,constructionsitesafety,availabilityofbuildingmaterials,logistics,inconveniencetothepubliccausedbyconstructiondelaysandbidding,etc.

TypesofconstructionprojectsIngeneral,therearetwotypesofconstruction:1.Buildingconstruction2.IndustrialconstructionEachtypeofconstructionprojectrequiresauniqueteamtoplan,design,constructandmaintaintheproject.GAAPhascarvedoutaspecialnicheforconstructioncontractors.WhilethereisnoFASBStatementforthisarea,AICPAAccountingResearchBulletin(ARB)No.45,Long-TermConstruction-TypeContracts,(1955)andAICPAStatementofPosition(SOP)81-1,AccountingforPerformanceofConstruction-TypeandCertainProductionTypeContracts,(1981)addressitspecifically.ThereisalsoanexcellentAICPAAuditandAccountingGuide,ConstructionContractors.

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Becausemostconstructioncontractsbytheirnaturearelong-term,theunderlyingaccountingprincipleknownasmatchingexpensesfollowrevenueswouldbeviolatediftherevenuefromthecontractwererecognizeduponcontractexecutionorsaleoftheservices.Therearetwomethodsofrevenuerecognitionareallowedundertheprecedingpronouncementsforconstructioncontractors.Oneispercentageofcompletion(PC)methodandtheotheriscompletedcontract(CC)method.UnderthePCmethod,theconstructioncontractorrecognizesrevenueoverthelifeoftheconstructioncontractbasedonthedegreeofcompletion:50%completionmeansrecognitionofone-halfofrevenues,costs,andincome.UndertheCCmethod,allrevenues,costs,andincomearerecognizedonlyatcompletionoftheconstructionproject,ordinarilyattheendoftheconstructioncontract.SOP81-1requiresthatthePCmethodbeusedinlieuoftheCCmethodwhenallofthefollowingarepresent:1.Reasonablyreliableestimatescanbemadeofrevenueandcosts;2.Theconstructioncontractspecifiesthepartiesrightsastothegoods,considerationtobepaidandreceived,andtheresultingtermsofpaymentorsettlement;3.Thecontractpurchaserhastheabilityandexpectationtoperformallcontractualduties;and4.Thecontractcontractorhasthesameabilityandexpectationtoperform.TheCCmethodisusedinrarecircumstances,whicharesetforthinSOP81-1tobeanyofthefollowing:1.Thecontractisofashortduration(notdefined),Suchas24monthsorless.Asaresult,therecognizedrevenuewouldnotdifferunderthePCorCCmethods;2.Thecontractviolatesanyoneoftheitems1through4above;or

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3.Thecontractsprojectexhibitsdocumentedextraordinary,nonrecurringbusinessrisks(suchasextinguishingoilwellfiresinacountrywhilehostilitiesarecontinuing).Inapplyingtheserevenuerecognitionmethods,itisimportantthatthefollowingfiveitemsbekeptinmind:Generally,eachconstructioncontractistreatedasaprofitcenter,withitsownrevenues,costs,andincome.Thereare,however,circumstancesinwhichmultiplecontracts,changeorders,oroptions,forexample,createtheissueofwhethertocombinecontractsintooneprofitcenterortosegmentthecontractsintoseparateprofitcenters.SOP81-1setsforththecriteriaforcombiningandsegmentingconstructioncontracts.Asageneralrule,themoreinterrelatedandcohesiveaprojectforexample,throughsubstantialcommoncosts,asinglebuyer,orconcurrentperformanceofstepsintheprojectthemorethescalestipinfavorofcombining.Incontrast,when1)separateprojectcomponentshavebidsdistinctfromtheentireproject;2)thebuyermaychoosetoacceptany,all,ormoreofthebids;and3)thecomponentsoftheprojecthavetheapproximaterevenues,costs,andincomeofastand-aloneproject,thensegmentingthecontractispermissible.Forsuchsegmentation,SOP81-1hasadditionalrequirementsthatshouldbereviewed.GAAPrequiresthattheaccrualmethodbeusedforallreportedbillingsandcostsandlosses.Costallocationisbasedondirectandindirectcostsaswellasconstructionperiodinterest.Assetsarerepresentedbyunderbillings(estimatedcostsandearningsexceedbillings)whereasliabilitiesareshownasoverbillings(billingsexceedestimatedcostsandearnings).

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HistoryThefirsthutsandshelterswereconstructedbyhandorwithsimpletools.AscitiesgrewduringtheBronzeAge,aclassofprofessionalcraftsmen,likebricklayersandcarpenters,appeared.Occasionally,slaveswereusedforconstructionwork.IntheMiddleAges,thesewereorganizedintoguilds.Inthe19thcentury,steam-poweredmachineryappeared,andlaterdiesel-andelectricpoweredvehiclessuchascranes,excavatorsandbulldozers.Modern-dayConstructioninvolvescreatingawesomestructuresthatcanshowthebeautyandcreativityofthehumanintellect.

1.5.

COMPANYOVERVIEW

GraceFieldBuildersandDevelopersPvt.LtdisengagedinconstructionbusinessandmanufacturingofCementProduct.Thecompanywasincorporatedduring2004atRippon,wayanaddistrictlocatedinKerala.Theconstitutionofthecompanyinthebeginningwasapartnership,whichwaslateralimitedcompany.ThefounderchairmanMr.Ashraf.PandManagingDirectorofthecompanyandK.ShihabandKunjaliaretheboardofdirectors.Theyhavebusinessesintextileindustry,Tealeafagencies,wholesaledealerinTeaPowderandRealestate.VISIONThevisionofthecompanyis:Tobecomeaglobalplayercommittedtointernationalquality,standards,efficientpricingandprovideexcellentservice.MISSIONThemissionofthecompanyis:Tooptimizethevaluelikecustomersatisfaction,creating

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PLANTLOCATION

ThefactoryissituatedatRippon,meppadi,wayanaddistrict.TheregisteredofficeissituatedatRealWeddingcentreComplexOottyRoad,vaduvanchal,wayanadDistrict.TheauditorsofthecompanyisT.P.PoulandAssociates,Kalpetta,wayanad.

ThebankersareVijayaBank,SouthIndianBank,IndianBankandStateBankofIndia

OTHERGROUPOFINDUSTRIESRealWeddingCentre-TextileBusinessRealAssociatessuppliersinTeaLeafRealAgencies-wholesaledistributerinTeadust

THEORGANISATIONALSTRUCTURE

TheOrganizationhas5departmentswhichareasfollows.

ProductionDepartmentsMarketingDepartmentsFinanceDepartmentsHumanResourceDepartmentsPurchaseDepartments

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ChapterII

ConceptandReviewliterature

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ChapterIICONCEPTANDREVIEWOFLITERATURE2.1.CONCEPTRATIOANALYSISFINANCIALANALYSISFinancialanalysisistheprocessofidentifyingthefinancialstrengthsandweaknessesofthefirmandestablishingrelationshipbetweentheitemsofthebalancesheetandprofit&lossaccount.Financialratioanalysisisthecalculationandcomparisonofratios,whicharederivedfromtheinformationinacompanysfinancialstatements.Thelevelandhistoricaltrendsoftheseratioscanbeusedtomakeinferencesaboutacompanysfinancialcondition,itsoperationsandattractivenessasaninvestment.TheinformationinthestatementsisusedbyTradecreditors,toidentifythefirmsabilitytomeettheirclaimsi.e.liquiditypositionofthecompany.Investors,toknowaboutthepresentandfutureprofitabilityofthecompanyanditsfinancialstructure.Management,ineveryaspectofthefinancialanalysis.Itistheresponsibilityofthemanagementtomaintainsoundfinancialconditioninthecompany.

RATIOANALYSISThetermRatioreferstothenumericalandquantitativerelationshipbetweentwoitemsorvariables.ThisrelationshipcanbeexposedasPercentagesFractionsProportionofnumbers10


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Ratioanalysisisdefinedasthesystematicuseoftheratiotointerpretthefinancialstatements.Sothatthestrengthsandweaknessesofafirm,aswellasitshistoricalperformanceandcurrentfinancialconditioncanbedetermined.Ratioreflectsaquantitativerelationshiphelpstoformaquantitativejudgment.STEPSINRATIOANALYSISThefirsttaskofthefinancialanalysisistoselecttheinformationrelevanttothedecisionunderconsiderationfromthestatementsandcalculatesappropriateratios.Tocomparethecalculatedratioswiththeratiosofthesamefirmrelatingtothepas6torwiththeindustryratios.Itfacilitatesinassessingsuccessorfailureofthefirm.Thirdstepistointerpretation,drawingofinferencesandreportwritingconclusionsaredrawnaftercomparisonintheshapeofreportorrecommendedcoursesofaction.BASISORSTANDARDSOFCOMPARISONRatiosarerelativefiguresreflectingtherelationbetweenvariables.Theyenableanalysttodrawconclusionsregardingfinancialoperations.Theyuseofratiosasatooloffinancialanalysisinvolvesthecomparisonwithrelatedfacts.Thisisthebasisofratioanalysis.Thebasisofratioanalysisisoffourtypes.Pastratios,calculatedfrompastfinancialstatementsofthefirm.Competitorsratio,ofthesomemostprogressiveandsuccessfulcompetitorfirmatthesamepointoftime.Industryratio,theindustryratiostowhichthefirmbelongstoProjectedratios,ratiosofthefuturedevelopedfromtheprojectedorproformafinancialstatements

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NATUREOFRATIOANALYSISRatioanalysisisatechniqueofanalysisandinterpretationoffinancialstatements.Itistheprocessofestablishingandinterpretingvariousratiosforhelpinginmakingcertaindecisions.Itisonlyameansofunderstandingoffinancialstrengthsandweaknessesofafirm.Thereareanumberofratioswhichcanbecalculatedfromtheinformationgiveninthefinancialstatements,buttheanalysthastoselecttheappropriatedataandcalculateonlyafewappropriateratios.Thefollowingarethefourstepsinvolvedintheratioanalysis.Selectionofrelevantdatafromthefinancialstatementsdependingupontheobjectiveoftheanalysis.Calculationofappropriateratiosfromtheabovedata.Comparisonofthecalculatedratioswiththeratiosofthesamefirminthepast,ortheratiosdevelopedfromprojectedfinancialstatementsortheratiosofsomeotherfirmsorthecomparisonwithratiosoftheindustrytowhichthefirmbelongs.INTERPRETATIONOFTHERATIOSTheinterpretationofratiosisanimportantfactor.Theinherentlimitationsofratioanalysisshouldbekeptinmindwhileinterpretingthem.Theimpactoffactorssuchaspricelevelchanges,changeinaccountingpolicies,windowdressingetc.,shouldalsobekeptinmindwhenattemptingtointerpretratios.Theinterpretationofratioscanbemadeinthefollowingways.SingleabsoluteratioGroupofratiosHistoricalcrisonProjectedratiosInter-firmcomparison

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GUIDELINESORPRECAUTIONSFORUSEOFRATIOSThecalculationofratiosmaynotbeadifficulttaskbuttheiruseisnoteasy.FollowingguidelinesorfactorsmaybekeptinmindwhileinterpretingvariousratiosareAccuracyoffinancialtementsObjectiveorpurposeofanalysisSelectionofratiosUseofstandardsCaliberoftheanalysis

IMPORTANCEOFRATIOANALYSISAidtomeasuregeneralefficiencyAidtonancialsolvencyAidinforecastingandplanningFacilitatedecisionmakingAidincorrectiveactionAidinintra-firmcomparisonActasagoodcommunicationEvaluationofefficiencyEffectivetool

LIMITATIONSOFRATIOANALYSISDifferencesindefinitionsLimitationsofaccountingrecordsLackofproperstandards13


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NoallowancesforpricelevelchangesChangesinaccountingproceduresQuantitativefactorsareignoredLimiteduseofsingleratioBackgroundisoverlookedLimitedusePersonalbias

CLASSIFICATIONSOFRATIOSTheuseofratioanalysisisnotconfinedtofinancialmanageronly.Therearedifferentpartiesinterestedintheratioanalysisforknowingthefinancialpositionofafirmfordifferentpurposes.Variousaccountingratioscanbeclassifiedasfollows:1.TraditionalClassification2.FunctionalClassification3.Significanceratios

1.TraditionalClassificationItincludesthefollowing.Balancesheet(or)positionstatementratio:Theydealwiththerelationshipbetweentwobalancesheetitems,e.g.theratioofcurrentassetstocurrentliabilitiesetc.,boththeitemsmust,however,pertaintothesamebalancesheet.Profit&lossaccount(or)revenuestatementratios:Theseratiosdealwiththerelationshipbetweentwoprofit&lossaccountitems,e.g.theratioofgrossprofittosalesetc.,

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Composite(or)interstatementratios:Theseratiosexhibittherelationbetweenaprofit&lossaccountorincomestatementitemandabalancesheetitems,e.g.stockturnoverratio,ortheratiooftotalassetstosales.

2.FunctionalClassificationTheseincludeliquidityratios,longtermsolvencyandleverageratios,activityratiosandprofitabilityratios.3.SignificanceratiosSomeratiosareimportantthanothersandthefirmmayclassifythemasprimaryandsecondaryratios.Theprimaryratioisone,whichisoftheprimeimportancetoaconcern.Theotherratiosthatsupporttheprimaryratioarecalledsecondaryratios.

INTHEVIEWOFFUNCTIONALCLASSIFICATIONTHERATIOSARE1.Liquidityratio2.Leverageratio3.Activityratio4.Profitabilityratio

1.LIQUIDITYRATIOSLiquidityreferstotheabilityofaconcerntomeetitscurrentobligationsas&whentherebecomesdue.Theshorttermobligationsofafirmcanbemetonlywhentherearesufficientliquidassets.Theshorttermobligationsaremetbyrealizingamountsfromcurrent,floating(or)circulatingassetsThecurrentassetsshouldeitherbecalculatedliquid(or)nearliquidity.Theyshouldbeconvertibleintocashforpayingobligationsofshorttermnature.Thesufficiency(or)insufficiencyofcurrentassetsshouldbeassessedbycomparingthemwithshort-termcurrentliabilities.Ifcurrentassetscanpayoffcur

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TomeasuretheliquidityofafirmthefollowingratioscanbecalculatedCurrentratioQuick(or)Acid-test(or)LiquidratioAbsoluteliquidratio(or)Cashpositionratio

(a)CURRENTRATIO:Currentratiomaybedefinedastherelationshipbetweencurrentassetsandcurrentliabilities.ThisratioalsoknownasWorkingcapitalratioisameasureofgeneralliquidityandismostwidelyusedtomaketheanalysisofashort-termfinancialposition(or)liquidityofafirm.

Componentsofcurrentratio

CURRENTASSETSCashinhandCashatbankBillsreceivableInventoriesWork-in-progressMarketablesecuritiesShort-terminvestmentsSundrydebtorsPrepaidexpenses

CURRENTLIABILITIESOutstandingoraccruedexpensesBankoverdraftBillspayableShort-termadvancesSundrycreditorsDividendpayableIncome-taxpayable

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(b)QUICKRATIOQuickratioisatestofliquiditythanthecurrentratio.Thetermliquidityreferstotheabilityofafirmtopayitsshort-termobligationsas&whentheybecomedue.Quickratiomaybedefinedastherelationshipbetweenquickorliquidassetsandcurrentliabilities.Anassetissaidtobeliquidifitisconvertedintocashwithinashortperiodwithoutlossofvalue.ComponentsofquickorliquidratioQUICKASSETSCashinhandCashatbankBillsreceivableSundrydebtorsMarketablesecuritiesTemporaryinvestmentsCURRENTLIABILITIESOutstandingoraccruedexpensesBankoverdraftBillspayableShort-termadvancesSundrycreditorsDividendpayableIncometaxpayable

(c)ABSOLUTELIQUIDRATIOAlthoughreceivable,debtorsandbillsreceivablearegenerallymoreliquidthaninventories,yettheremaybedoubtsregardingtheirrealizationintocashimmediatelyorintime.Hence,absoluteliquidratioshouldalsobecalculatedtogetherwithcurrentratioandquickratiosoastoexcludeevenreceivablesfromthecurrentassetsandfindouttheabsoluteliquidassets.Absoluteliquidassetsincludecashinhandetc.Theacceptableformsforthisratiois50%(or)0.5:1(or)1:2i.e.,Rs.1worthabsoluteliquidassetsareconsideredtopayRs.2worthcurrentliabilitiesintimeasallthecreditorsarenoracceptedtodemandcashatthesametimeandthencashmayalsoberealizedfromdebtorsandinventories.

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(a)PROPRIETORYRATIOAvarianttothedebt-equityratioistheproprietoryratiowhichisalsoknownasequityratio.Thisratioestablishesrelationshipbetweenshareholdersfundstototalassetsofthefirm.

SHAREHOLDERSFUNDShareCapitalReserves&Surplus

TOTALASSETSFixedAssetsCurrentAssetsCashinhand&atbankBillsreceivableInventoriesMarketablesecuritiesShort-terminvestmentsSundrydebtorsPrepaidExpenses

3.ACTIVITYRATIOSFundsareinvestedinvariousassetsinbusinesstomakesalesandearnprofits.Theefficiencywithwhichassetsaremanageddirectlyeffectthevolumeofsales.Activityratiosmeasuretheefficiency(or)effectivenesswithwhichafirmmanagesitsresources(or)assets.TheseratiosarealsocalledTurnoverratiosbecausetheyindicatethespeedwithwhichassetsareconvertedorturnedoverintosales.WorkingcapitalturnoverratioFixedassetsturnratioCapitalturnoverratioCurrentassetstofixedassetsratio

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(a)WORKINGCAPITALTURNOVERRATIOItindicatesthevelocityoftheutilizationofnetworkingcapital.Thisindicatestheno.oftimestheworkingcapitalisturnedoverinthecourseofayear.Ahigherratioindicatesefficientutilizationofworkingcapitalandalowerratioindicatesinefficientutilization.ComponentsofWorkingCapitalCURRENTASSETSCashinhandCashatbankBillsreceivableInventoriesWork-in-progressMarketablesecuritiesShort-terminvestmentsSundrydebtorsPrepaidexpensesCURRENTLIABILITIESOutstandingoraccruedexpensesBankoverdraftBillspayableShort-termadvancesSundrycreditorsDividendpayableIncome-taxpayable

(b)FIXEDASSETSTURNOVERRATIOItisalsoknownassalestofixedassetsratio.Thisratiomeasurestheefficiencyandprofitearningcapacityofthefirm.Highertheratio,greateristheintensiveutilizationoffixedassets.Lowerratiomeansunder-utilizationoffixedassets.(c)CAPITALTURNOVERRATIOSSometimestheefficiencyandeffectivenessoftheoperationsarejudgedbycomparingthecostofsalesorsaleswithamountofcapitalinvestedinthebusinessandnotwithassetsheldinthebusiness,thoughinbothcasesthesameresultisexpected.Capitalinvestedinthebusinessmaybeclassifiedaslong-termandshort-termcapitalorasfixedcapitalandworkingcapitalorOwnedCapitalandLoanedCapital.AllCapitalTurnoversarecalculatedtostudytheusesofvarioustypesofcapital.

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(d)CURRENTASSETSTOFIXEDASSETSRATIOThisratiodiffersfromindustrytoindustry.Theincreaseintheratiomeansthattradingisslackormechanizationhasbeenused.Adeclineintheratiomeansthatdebtorsandstocksareincreasedtoomuchorfixedassetsaremoreintensivelyused.Ifcurrentassetsincreasewiththecorrespondingincreaseinprofit,itwillshowthatthebusinessisexpanding.ComponentofCurrentAssetstoFixedAssetsRatioCURRENTASSETSCashinhandCashatbankBillsreceivableInventoriesWork-in-progressMarketablesecuritiesShort-terminvestmentsSundrydebtorsPrepaidexpenses4.PROFITABILITYRATIOSTheprimaryobjectivesofbusinessundertakingaretoearnprofits.Becauseprofitistheengine,thatdrivesthebusinessenterprise.NetprofitraurnontotalassetsReservesandsurplustocapitalratioEarningspershareOperatingprofitratioPriceearningratioReturnoninvestments21FIXEDASSETSMachineryBuildingsPlantVehicles


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(a)NETPROFITRATIONetprofitratioestablishesarelationshipbetweennetprofit(aftertax)andsalesandindicatestheefficiencyofthemanagementinmanufacturing,sellingadministrativeandotheractivitiesofthefirm.Italsoindicatesthefirmscapacitytofaceadverseeconomicconditionssuchaspricecompetitors,lowdemandetc.Obviouslyhighertheratio,thebetteristheprofitability.(b)RETURNONTOTALASSETSProfitabilitycanbemeasuredintermsofrelationshipbetweennetprofitandassets.Thisratioisalsoknownasprofit-to-assetsratio.Itmeasurestheprofitabilityofinvestments.Theoverallprofitabilitycanbeknown.(c)RESERVESANDSURPLUSTOCAPITALRATIOItrevealsthepolicypursuedbythecompanywithregardtogrowthshares.Averyhighratioindicatesaconservativedividendpolicyandincreasedploughingbacktoprofit.Highertheratiobetterwillbetheposition.(d)EARNINGSPERSHAREEarningspershareisasmallverificationofreturnofequityandiscalculatedbydividingthenetprofitsearnedbythecompanyandthoseprofitsaftertaxesandpreferencedividendbytotalno.ofequityshares.TheEarningspershareisagoodmeasureofprofitabilitywhencomparedwithEPSofsimilarothercomponents(or)companies,itgivesaviewofthecomparativeearningsofafirm.(e)OPERATINGPROFITRATIOOperatingratioestablishestherelationshipbetweencostofgoodssoldandotheroperatingexpensesontheonehandandthesalesontheother.However75to85%maybeconsideredtobeagoodratioincaseofamanufacturingundertaking.Operatingprofitratioiscalculatedbydividingoperatingprofitbysales.22


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(f)PRICE-EARNINGRATIOPriceearningratioistheratiobetweenmarketpriceperequityshareandearningspershare.Theratioiscalculatedtomakeanestimateofappreciationinthevalueofashareofacompanyandiswidelyusedbyinvestorstodecidewhether(or)nottobuysharesinaparticularcompany.Generally,highertheprice-earningratio,thebetteritis.Ifthepriceearningratiofalls,themanagementshouldlookintothecausesthathaveresultedintothefalloftheratio.(g)RETURNONINVESTMENTSReturnonshareholdersinvestment,popularlyknownasReturnoninvestments(or)returnonshareholdersorproprietorsfundsistherelationshipbetweennetprofit(afterinterestandtax)andtheproprietorsfunds.Theratioisgenerallycalculatedaspercentagesbymultiplyingtheabovewith100.2.2.REVIEWOFLITERATURERatiosareavaluableanalyticaltoolwhenusedaspartofathoroughfinancialanalysis.Theycanshowthestandingofaparticularcompany,withinaparticularindustry.However,ratiosalonecansometimesbemisleading.Ratiosarejustonepieceofthefinancialjigsawpuzzlethatmakesupacompleteanalysis.(LeslieRogers,1997)Financialratiosarewidelyusedtodevelopinsightsintothefinancialperformanceofcompaniesbyboththeevaluatorsandresearchers.Thefirminvolvesmanyinterestedparties,liketheowners,management,personnel,customers,suppliers,competitors,regulatoryagencies,andacademics,eachhavingtheirviewsinapplyingfinancialstatementanalysisintheirevaluations.Evaluatorsusefinancialratios,forinstance,toforecastthefuturesuccessofcompanies,whiletheresearchers'maininteresthasbeentodevelopmodelsexploitingtheseratios.Manydistinctareasofresearchinvolvingfinancialratioscanbedifferentiated.(Barnes,1986)Financialratioscanbedividedintoseveral,sometimesoverlappingcategories.

.Trendanalysisworksbestwiththreetofiveyearsofratios.Thesecondtypeofratioanalysis,cross-sectionalanalysis,comparestheratiosoftwoormorecompaniesinsimilarlinesofbusiness.Oneofthemostpopular23


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ChapterIII

Researchandmethodology

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CHAPTERIIIRESEARCHMETHODOLOGY3.1.RESEARCHMETHODOLOGYThischapterpresentsthebasicmethodologyandrequirementsinresearch.Itincludesthemethodofresearch,sourceofdata,treatmentofdata,andtools,whichwereusedinthestudy.3.2.RESEARCHDESIGNResearchdesigncanbefixedasaframeworkorblueprintforconductingtheresearchproject.Aresearchwithoutresearchdesignwillbejustlikeadoingworkwithoutanyideaaboutit.Soitisverymuchvitalinresearchwork.Thestudyispartiallydescriptiveinnatureandpartiallyanalyticalinnatureaseffortsaretakentodescribeaswelltoanalysesthevariousareasoffunctionsinfinancialaffairsofthecompany.

3.3.RESEARCHINSTRUMENTThisresearchisbasedonsecondarysourceofdataandconsistsofannualreports,articles,websites,andbooks.3.4.SOURCEOFDATACOLLECTIONTherelatedinformationwascollectedfrompublishedannualreportsofGraceFieldBuildersandDevelopersPvt.Ltd.TheannualreportscontaintheresultsofGraceFieldBuildersandDevelopersPvt.Ltd.Theannualreportscontainingtheresultsofpastperformanceisconsideredtobethemostimportant&mostreliable.Datarequiredfortheanalysisistoobtainpurelyfromsecondarysources.Thedatawithrespecttocurrentassets,currentliabilities,sales,Purchasesandotherbalancesheetitemswerecollectedfromthepublishedannualreportsandreportsofthecompany.ThestudyismainlyconductedonthebasissecondarysourcesofdataforwhichareresortedtotheannualreportsofGraceFieldBuildersandDevelopersPvt.Ltd.ThestudywascarriedoutinaccountsDepartmentofGraceFieldBuildersandDevelopersPvt.Ltd.26


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3.5.FINANCIALTOOLSRatioanalysisRatioAnalysisisatechniqueofanalysisandinterpretationoffinancialstatement.ItisaprocessofestablishingandinterpretingvariousratiosforhelpinginmakingcertaindecisionRatioanalysisisnotanendinitself.Accountingratioisusedtodescribesignificantrelationshipwhichexistb/wfigureshowninbalancesheetandprofitandlossaccountinbudgetaryentrycontrolsystemanypartofaccountingorganization.CorrelationCorrelationisastatisticalmeasurementoftherelationshipbetweentwovariables.Possiblecorrelationsrangefrom+1to1.Azerocorrelationindicatesthatthereisnorelationshipbetweenthevariables.Acorrelationof1indicatesaperfectnegativecorrelation,meaningthatasonevariablegoesup,theothergoesdown.Acorrelationof+1indicatesaperfectpositivecorrelation,meaningthatbothvariablesmoveinthesamedirectiontogether.

3.6.HYPOTHESISThefollowinghypothesiswereestablishedtotesttherelationshipbetweendifferentvariablesthroughcorrelationThereisnorelationshipbeenNetsalesVs.NetprofitThereisnorelationshipbetweenNetsalesVs.TotalAssetsThereisnorelationshipbetweenNetsalesVs.GrossProfitThereisnorelationshipbetweenNetsalesVs.currentassetsThereisnorelationshipbetweenNetProfitVs.WorkingCapital

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ChapterIV

Dataanalysis&Interpretation

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CHAPTER-IV4.1.RATIOANALYSIS

LIQUIDITYRATIO4.1.CURRENTRATIOThefollowingtableshowstheratioofcurrentassettothecurrentliabilities.TableNo:4.1CURRENTRATIOCurrentAssets20062007200820092010Average585.74697.65720.21913.281156.42CurrentLiabilities79.04318.84160.65471.17302.66

(Rsin000)Ratio7.412.194.481.943.823.87

InterpretationIntheyearof2006currentratio7.41,in2008theratiois4.48,in2010theratiois3.82,2007theratiois2.19and2009theratiois1.94Asarule,thecurrentratiowith2:1(or)moreisconsideredassatisfactorypositionofthefirm.Thehugeincreaseinsundrydebtorsresultedanincreaseintheratio,whichisabovethebenchmarklevelof2:1whichshowsthecomfortablepositionofthefirm.

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CHARTNO:4.1.CURRENTRATIO

8765RATIOS43210

7.41

4.483.82ratio2.191.94

2006

2007

2008YEAR

2009

2010

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ChartNo.4.2QUICKRATIO

Ratio876Ratios543210200620072008Years200920101.651.94.353.81Ratio7.41

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4.3.

ABOSULTELIQUIDITYRATIO

ThefollowingtableshowsthattheratioofabsoluteliquidassetstocurrentliabilitiesTableNo.4.3ABOSULTELIQUIDITYRATIO000)Year20062007200820092010AverageAbsoluteLiquidAssets310.04108.59394.66538.50356.49CurrentLiabilities79.04318.84160.65471.17302.66Ratio3.920.342.461.141.18

(Rsin

InterpretationIntheyearof2006theabsoluteliquidratiois3.92,2008theabsoluteliquidratiois2.46,2010theabsoluteliquidratiois1.18,in2009theabsoluteliquidratiois1.14andintheyearof2007theabsoluteliquidratiois0.34.Theacceptablenormforthisratiois1:2;thisisabovethebenchmarklevelof1:2whichshowsthecomfortablepositionofthefirm,exceptintheyearof2007.

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ChartNo:4.3ABSOLUTELIQUIDRATIO4.543.53Ratios2.521.510.50200620072008years200920100.341.141.182.463.92

Category1

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LEVERAGERATIOS1.3PROPRIETORYRATIOThefollowingtableshowingthattheproprietoryratio.TableNo.4.4PROPRIETORYRATIOYear20062007200820092010AverageShareHoldersFunds676.79533.01702.31564.73970.60TotalAssets785.72884.38891.581063.851298.05(Rsin000)Ratio0.860.60.790.530.750.71

InterpretationIntheyearof2006theproprietoryratiois0.86,in20080.79,in20100.75,in20070.6,andintheyearof2009theproprietoryratiois0.53Thereisnoincreaseinthecapitalfromtheyear2007.Theshareholdersfundsincludecapitalandreservesandsurplus.Thereservesandsurplusisincreasedduetotheincreaseinbalanceinprofitandlossaccount,whichiscausedbytheincreaseofincomefromsales

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ChartNo:4.4PROPRIETORYRATIO10.90.80.70.6ratios0.50.40.30.20.10200620072008Years20092010ratio0.60.530.860.790.75

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ACTIVITYRATIOS4.5WORKINGCAPITALTURNOVERRATIOThebelowtableshowsthattheworkingcapitalturnoverratiooffiveyears.TableNo:4.5WorkingcapitalturnoverratioYear20062007200820092010AverageInterpretationIntheyearof2007theworkingcapitalturnoverratiois1.42,in20081.31,in20091.26,in20101.13andintheyearof2006theratiois0.72Theaverageworkingcapitalratiooffiveyearsis1.17,whichiscomfortableforthefirmIncomeFromSales363.09538.99727.28555.50966.54WorkingCapital506.70378.80553.55442.11853.75(Rsin0000)Ratio0.721.421.311.261.131.17

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ChartNo:4.5WORKINGCAPITALTURNOVERRATIO1.61.421.41.21Ratios0.80.60.40.20200620072008years200920100.72ratio1.311.261.13

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4.6.

FIXEDASSETSTURNOVERRATIOTableNo:4.6FixedAssetsTurnoverRatio(Rsin000)Ratio1.261.824.243.696.823.57

Thefollowingtableshowsthatthefixedassetsturnoverratiooffiveyears.

Year20062007200820092010Average

Costofsales363.09538.99727.28555.50966.54

NetFixedAssets288.34295.68171.37150.56141.63

InterpretationIntheyearof2010thefixedassetsturnoverratiois6.82,4.24in2008,3.69in2009,1.82in2007and1.26in2006.

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ChartNo:4.6.FixedAssetsTurnoverRatio8765ratios43210200620072008Years200920101.821.264.243.69ratio6.82

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4.7.

CAPITALTURNOVERRATIO

ThefollowingtableshowingtheratioofcostofgoodssoldtocapitalemployedfortheperiodoffiveyearsTableNo:4.7CapitalTurnoverRatioYear20062007200820092010AverageCostofgoodssold363.09538.99727.28555.50966.54CapitalEmployed371.75533.01702.31564.73970.60(Rsin000)Ratio0.981.011.040.980.991.00

InterpretationTheabovetableshowsthat,intheyearof2008thecapitalturnoverratiois1.04,1.01in2007,0.99in2010,0.98in2009and2006

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ChartNo:4.7CAPITALTURNOVERRATIO1.051.041.031.02Ratios1.0110.990.980.970.960.95200620072008Years200920100.980.980.991.011.04

Ratio

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4.8CURRENTASSETSTOFIXEDASSETSRATIOThebelowtableshowingthecurrentassetstofixedassetsratiofortheperiodoffiveyearsTableNo:4.8CurrentassetstofixedassetsRatioYear20062007200820092010AverageCurrentAssets585.24697.65720.21913.281156.42FixedAssets199.98186.72171.37150.56141.63(Rsin000)Ratio2.933.744.206.078.175.02

InterpretationIntheyearof2010thecurrentassetstofixedassetsratiois8.17,in20096.07,in20084.20,in20073.74,in20062.93

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ChartNo:4.8CURRENTASSETSTOFIXEDASSETSRATIO9876.0465ratios43210200620072008years200920102.933.744.2Ratio8.17

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GENERALPROFITABILITYRATIOS

4.9.NETPROFITRATIOThebelowtableshowingthenetprofitratiofortheperiodoffiveyears.TableNo:4.9NetprofitratioYear20062007200820092010AverageNetProfitAfterTax211.23161.25169.29182.59405.86Netsales360.39538.99727.28555.50966.54(Rsin000)Ratio0.590.300.230.330.420.37

InterpretationIntheyearof2006,thenetprofitratiois0.59,in2010theratiois0.42,in2009theratiois0.33,in2007theratiois0.30andintheyearof2008thenetprofitratiois0.23

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ChartNo.4.9NETPROFITRATIO0.70.60.50.42ratios0.40.30.30.20.10200620072008years200920100.230.33Ratios0.59

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4.10.OPERATINGPROFITThebelowtableshowingtheoperatingprofitratiofortheperiodoffiveyears.TableNo:4.10OperatingProfitRatioYear20062007200820092010AverageInterpretationIntheyearof2006theoperatingprofitratiois0.99,in2010theratiois0.70,in2009theratiois0.57,in2007theratiois0.51,intheyearof2008theoperatingprofitratiois0.41.OperatingProfit360.94275.76295.40315.86671.92Netsales363.09538.99727.28555.50966.54(Rsin000)Ratio0.990.510.410.570.700.64

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ChartNo:4.10OPERATINGPROFIT1.210.8Ratios0.60.40.20200620072008years200920100.570.41Ratios0.99

0.70.51

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ChartNo:4.11RETURNONTOTALASSETSRATIO

Ratios0.350.30.25Ratios0.20.150.10.050200620072008Years200920100.180.190.17Ratios0.270.31

.

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4.12.RESERVES&SURPLUSTOCAPITALRATIOThebelowtableshowingthereserveandsurplustocapitalratiofortheperiodoffiveyears.TableNo:4.12ReserveandsurplustocapitalratioYear20062007200820092010AverageInterpretationIntheyearof2006thereserveandsurplustocapitalratiois31.54,intheyearof2010theratiois4.19,intheyearof2008theratiois2.75,in2009theratiois2.02,in2007theratiois1.85Thereserves&surplusisdecreasedintheyear2009,duetothepaymentofdividendsandintheyear2010theprofitisincreased.Butthecapitalisremainingconstantfromtheyear2007.Sotheincreaseinthereserves&surpluscausedagreaterincreaseinthecurrentyearsratiocomparedwiththeolder.Reserves&Surplus655.99345.82515.11377.54783.40Capital20.79187.19187.19187.19187.19(Rs.In000)Ratio31.541.852.752.024.198.47

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ChartNo.4.12RESERVE&SURPLUSTOCAPITALRATIO353025Ratios20151050200620072008Years200920102.754.192.02Ratios31.54

1.85

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4.13.RETURNONINVESTMENTThebelowtableshowingthereturnoninvestmentratiofortheperiodoffiveyearsTableNo:4.13ReturnoninvestmentratioYear20062007200820092010AverageNetProfitAfterTax211.23161.25169.29182.59405.86ShareHoldersFund676.79533.01702.31564.73970.60(Rs.In000)Ratio0.310.30.240.320.420.32

InterpretationIntheyearof2010thereturnoninvestmentratiois0.42,in2009theratiois0.32,in2006theratiois0.31,in2007theratiois0.30,in2008thereturnoninvestmentratiois0.24

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ChartNo:4.13RETURNONINVESTMENT0.450.40.350.3Ratios0.250.20.150.10.050200620072008Years200920100.24Ratios0.310.30.320.42

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4.14GROSSPROFITRATIOThebelowtableshowingthegrossprofitratiofortheperiodoffiveyears.TableNo:4.14GrossprofitRatioYear20062007200820092010Average

(Rs.In000)Ratio0.990.510.410.560.690.63

Grossprofit360.94275.76295.40315.86671.92

Netsales363.09538.99727.28555.50966.54

InterpretationIntheyearof2006thegrossprofitratiois0.99,intheyearof2010theratiois0.69,in2009theratiois0.56,in2007theratiois0.51andintheyearof2008thegrossprofitratiois0.41

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ChartNo:4.14GROSSPROFITRATIO1.210.8Ratios0.60.40.20200620072008Years200920100.560.41Series10.99

0.690.51

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4.15OPERATINGCOSTRATIOThebelowtableshowingthattheoperatingcostRatiofortheperiodoffiveyears.TableNo:4.15OperatingcostRatioYear20062007200820092010AverageOperatingcost181.93234.51253.8026249318.60Netsales363.09538.99727.28555.50966.54Ratio0.500.430.340.470.320.41

(Rs.In000)

InterpretationIntheyearof2006,theoperatingcostratiois0.50,in2009theratiois0.47,in2007theratiois0.43,in2008theratiois0.34andintheyearof2010theoperatingcostratiois0.32

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ChartNo:4.15OperatingcostRatio0.60.50.50.430.4Ratios0.3Ratio0.20.10200620072008Years200920100.340.47

0.32

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ChartNo:4.16RETURNONGROSSCAPITALEMPLOYED0.60.50.410.4Ratios0.30.30.20.10200620072008years200920100.240.32Ratio0.56

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ChartNo:4.17EXPENSERATIO0.60.50.50.430.4Ratios0.3Ratio0.20.10200620072008years200920100.340.47

0.32

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4.18RATIOOFCURRENTLIABILITIESTOPROPRIETORSFUNDThebelowtableshowingthattheratioofcurrentliabilitiestoproprietorsfundfortheperiodoffiveyears.TableNo:4.18RatioofcurrentliabilitiestoproprietorsfundYears20062007200820092010AverageCurrentliabilities79.03318.84160.65471.17302.66Shareholdersfund676.79533.01702.31564.73970.60Ratio0.110.590.220.830.310.41(Rs.In000)

Interpretation

Intheyearof2009thecurrentliabilitiestoproprietorsfundis0.83,in2007theratiois0.59,in2010theratiois0.31,in2008theratiois0.22,in2006theratiois0.11.

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ChartNo:4.18RATIOOFCURRENTLIABILITIESTOPROPRIETORSFUND

0.90.80.70.6Ratios0.50.40.30.20.10200620072008Years0.110.220.59

0.83

0.31

Ratio

2009

2010

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4.19.RATIOOFCURRENTASSETSTOPROPRIETORSFUNDThebelowtableshowingthattheratioofcurrentassetstoproprietorsfundfortheperiodoffiveyears.TableNo:4.19RatioofCurrentAssetstoProprietorsFundYears20062007200820092010AverageCurrentassets585.74697.65720.21913.281156.42Shareholdersfund676.79533.01702.31564.73970.60Ratio0.861.31.021.611.191.2(Rs.In000)

InterpretationIntheyearof2009theratioofcurrentassetstoproprietorsfundis1.6,in2007theratiois1.3,in2010theratiois1.19,in2008theratiois1.02,in2006theratiois0.86.

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ChartNo.4.19RATIOOFCURRENTASSETSTOPROPRIETORSFUND

1.81.611.61.41.2Ratios10.80.60.40.20200620072008Years200920100.86Ratio1.31.191.02

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4.2.CORRELATION4.20.Testingofrelationshipbetweennetprofitvs.Netsales.TherelationshipbetweenNetprofitvs.Netsalesisshowinginthefollowingtable.Ho:ThereisnorelationshipbetweenNetsalesvs.Netprofit.H1:ThereisrelationshipbetweenNetsalesvs.Netprofit.

Year20062007200820092010

Netprofit211234161259169292182596405864

Netsales360398538990727287555506966549

Results:Correlation=0.73INTERPRETATIONBasedontheaboveanalysisthecorrelationresultis0.73therefornullhypothesisisacceptedandalternativehypothesiswasrejected.Hence,ithasproventhattherewillbenosignificantrelationshipbetweenprofitandsales

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4.21.Testingofrelationshipbetweennetsalesvs.TotalassetsTherelationshipbetweennetsalesvs.totalassetsisshowinginthefollowingtable.Ho:thereisnorelationshipbetweennetsalesvs.totalassetsH1:thereisrelationshipbetweenNetsalesVs.TotalAssets

Year20062007200820092010

Netsales360398538990727287555506966549

TotalAssets78572188438189158310638521298051

Results:Correlation=0.83

INTERPRETATIONBasedontheaboveanalysisthecorrelationresultis0.83therefornullhypothesisisacceptedandalternativehypothesiswasrejected.Hence,ithasproventhattherewillbenosignificantrelationshipbetweenassetsandsales

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4.22.Testingofrelationshipbetweennetsalesvs.GrossprofitTherelationshipbetweenNetsalesVs.GrossProfitisshowinginthefollowingtable.Ho:thereisnorelationshipbetweenNetsalesvs.GrossProfitH1:thereisrelationshipbetweenNetsalesVs.GrossProfitYear20062007200820092010NetSales360398538990727287555506966549Grossprofit360948275768295405315867671926


INTERPRETATIONBasedontheaboveanalysisthecorrelationresultis0.72therefornullhypothesisisacceptedandalternativehypothesiswasrejected.Hence,ithasproventhattherewillbenosignificantrelationshipbetweengrossprofitandsales

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4.23.Testingofrelationshipbetweennetsalesvs.CurrentassetsTherelationshipbetweenNetsalesVs.CurrentAssetsisshowinginthefollowingtable.Ho:ThereisnorelationshipbetweenNetsalesVs.CurrentAssets.H1:ThereisrelationshipbetweenNetSalesVs.CurrentAssets

Year20062007200820092010

NetSales360398538990727287555506966549

Currentassets5857416976537202109132821156420

Results:Correlation=0.83INTERPRETATIONBasedontheaboveanalysisthecorrelationresultis0.83therefornullhypothesisisacceptedandalternativehypothesiswasrejected.Hence,ithasproventhattherewillbenosignificantrelationshipbetweencurrentassetsandsales

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4.24.Testingofrelationshipbetweennetprofitvs.WorkingcapitalTherelationshipbetweenNetprofitVs.Workingcapitalisshowinginthefollowingtable.Ho:ThereisnorelationshipbetweenNetprofitVs.WorkingcapitalH1:ThereisrelationshipbetweenNetprofitVs.workingCapital.

Year20062007200820092010

NetProfit211234161259169292182596405864

WorkingCapital506701378807553554442111853754

Results:Correlation=0.94INTERPRETATIONBasedontheaboveanalysisthecorrelationresultis0.94therefornullhypothesisisacceptedandalternativehypothesiswasrejected.Hence,ithasproventhattherewillbenosignificantrelationshipbetweenworkingcapitalandNetProft

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4.25.Testingofrelationshipbetweennetprofitvs.TotalassetsTherelationshipbetweenNetprofitVs.Totalassetsisshowinginthefollowingtable.Ho:ThereisnorelationshipbetweenNetprofitVs.TotalAssetsH1:ThereisrelationshipbetweennetprofitsVs.totalassets

Year20062007200820092010

NetProfit211234161259169292182596405864

TotalAssets78572188438189158310638521298051


INTERPRETATIONBasedontheaboveanalysisthecorrelationresultis0.81therefornullhypothesisisacceptedandalternativehypothesiswasrejected.Hence,ithasproventhattherewillbenosignificantrelationshipbetweennetprofitandtotalassets

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CHAPTERVFINDINGS,SUMMARYANDCONCLUSION5.1FINDINGSOFTHESTUDY

1.Thecurrentratiohasshowninafluctuatingtrendas7.41,2.19,4.48,1.98,and3.82during2006ofwhichindicatesacontinuousincreaseinbothcurrentassetsandcurrentliabilities2.Thequickratioisalsoinafluctuatingtrendthroughouttheperiod200610resultingas7.41,1.65,4.35,1.9,and3.81.Thecompanyspresentliquiditypositionissatisfactory.3.Theabsoluteliquidratiohasbeendecreasedfrom3.92to1.18,from200610.

4.Theproprietoryratiohasshownafluctuatingtrend.Theproprietoryratioisincreasedcomparedwiththelastyear.So,thelongtermsolvencyofthefirmisincreased.5.Theworkingcapitalincreasedfrom0.72to1.13intheyear200610.6.Thefixedassetsturnoverratioisinincreasingtrendfromtheyear200610(1.26,1.82,4.24,3.69,and6.82).Itindicatesthatthecompanyisefficientlyutilizingthefixedassets7.Thecapitalturnoverratioisincreasedform200608(0.98,1.01,and1.04)anddecreasedin2006to0.98.Itincreasedinthecurrentyearas.998.Thecurrentassetstofixedassetsratioisincreasinggraduallyfrom200610as2.93,3.74,4.20,6.07and8.17.Itshowsthatthecurrentassetsareincreasedthanfixedassets.9.Thenetprofitratioisinfluctuationmanner.Itincreasedinthecurrentyearcomparedwiththepreviousyearform0.33to0.42.10.Thenetprofitisincreasedgreaterlyinthecurrentyear.Sothereturnontotalassetsratioisincreasedfrom0.17to0.31.11.TheReservesandSurplustoCapitalratioisincreasedto4.19from2.02.Thecapitalisconstant,butthereservesandsurplusisincreasedinthecurrentyear12.

Theearningspersharewasveryhighintheyear2006i.e.,101.56.Thatisdecreasedinthefollowingyearsbecausenumberofequitysharesareincreased74


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5.2SUMMARY

1.AftertheanalysisofFinancialStatements,thecompanystatusisbetter,becausetheNetworkingcapitalofthecompanyisdoubledfromthelastyearsposition.2.Thecompanyprofitsarehugeinthecurrentyear;itisbettertodeclarethedividendtoshareholders.3.Thecompanyisutilisingthefixedassets,whichmajorlyhelptothegrowthoftheorganisation.Thecompanyshouldmaintainthatperfectly.4.Thecompanyfixeddepositsareraisedfromtheinception,itgivestheotherincomei.e.,Interestonfixeddeposits.

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5.3CONCLUSIONThecompanysoverallpositionisatagoodposition.Particularlythecurrentyearspositioniswellduetoraiseintheprofitlevelfromthelastyearposition.Itisbetterfortheorganizationtodiversifythefundstodifferentsectorsinthepresentmarketscenario.

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98012285 Mba Finance Project

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