Financial performance ponni sugars

A STUDY ON FINANCIAL PERFORMANCE OF PONNI SUGARS (E RODE) LTD AT

K.S.RANGASAMY COLLEGE OF TECHNOLOGY

(An Autonomous Institution Affiliated to Anna University, Chennai)

FACULTY OF MANAGEMENTS STUDIES

In partial fulfillment of the requirements for the award of the degree

MASTER OF BUSINESS ADMINISTRATION


ERODE

By

THANGESHWARN. S

(Reg.No.1261236)

Of


TIRUCHENGODE – 637 215


A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENTS STUDIES


Of

MASTER OF BUSINESS ADMINISTRATION

July - 2013





BONAFIDE CERTIFICATE

Certified that this project report titled “A STUDY ON FINANCIAL PERFORMANCE OF

PONNI SUGARS (ERODE) LTD AT ERODE” is the bonafide work of

Mr.THANGESHWARN. S, (Reg.No.1261236) 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.

Director

Supervisor

Head of the Institution

Submitted for the viva-voce examination held on …………………

Internal Examiner External Examiner

K.S.RANGASAMY COLLEGE OF TECHOLOGY (Autonoums), TIR UGHENGODE.

MBA Summer Project Work

(Batch 2012-2014)

Title of the project

A study on financial performance of Ponni Sugars (Erode) Ltd

at Erode.

Name of the student

and e-mail address

S.Thangeshwaran

[email protected]

Name of the supervisor(s)

Dr.M.VIJAYKUMAR MBA., M.Phil., Ph.D., Professor, Department

of MBA, K.S.Rangasamy College of Technology.

ABSTRACT

The project entitled “A study on financial performance of Ponni Sugars (Erode) Ltd at Erode”

attempted to analyze and describe of the sugar industry. It is found from the study that the company

was with steady financial positions. From the analysis it is suggested that the company could

maintain an optimum level of inventory to make good financial position. The company has to take

appropriate steps to control the cost, increase the volume of sales, profit in the future years.

DECLARATION

I hereby declare that the project entitled “A STUDY ON FINANCIAL PERFORMANCE OF

PONNI SUGARS (ERODE) LTD AT ERODE” in partial fulfillment of the requirement for the

award of the degree of MASTER OF BUSINESS ADMINISTRATION is a record of original

project work done by me, during my period of study in K.S.RANGASAMY COLLEGE OF

TECHNOLOGY 2012 – 2014 under the guidance of Dr.M.VIJAYKUMAR MBA., M.Phil.,

Ph.D., Professor, Department of MBA, K.S.Rangasamy College of Technology and no part of it

has been submitted for any other Degree or Diploma.

Signature:

Register No : 1261236

Name of the candidate : THANGESHWARAN. S

DATE :

PLACE : TIRUCHENGODE

ACKNOWLEDGEMENT

First and for most I dedicate this project work to my parents, who are responsible for

all the outstanding performance in my life.

I wish to express my sincere gratitude to our Correspondent Lion

Dr.K.S.RANGASAMY M.J.F., K.S.R Educational Institutions, for providing an excellent

environment and infrastructure at K.S.RANGASAMY COLLEGE OF TECHNOLOGY.

I am deeply indebted to Dr. K. THYAGARAJAH M.E., Ph.D., SMIEEE, MISTE,

Principal K.S.R COLLEGE OF TECHNOLOGY, for giving me permission to undertake

this project.

I regard my sincere and heartfelt thanks to our director of the Department

Dr.A.LAKSHMI M.A., M.Phil., MBA., B.Ed., Ph.D., Dir ector, Department of MBA who

has been the key spring of motivation to us throughout the completion of our course and

project work.

I am highly indebted to provide my heart full thanks to my guide

Dr.M.VIJAYKUMAR MBA., M.Phil., Ph.D., Professor, Department of MBA,

K.S.Rangasamy College of Technology for his valuable ideas, encouragement and supportive

guidance throughout the project.

I would like to thank my parents and friends for their valuable support and

contribution to the completion of my project.

CONTENTS

CHAPTER NO

PARTICULARS

PAGE.NO

List of Tables Vii

List of charts viii

1 INTRODUCTION

1.1 Introduction 1

1.2 Statement of the problem 2

1.3 Objectives of the study 2

1.4 Scope of the study 2

1.5 Limitations of the study 3

1.6 Chapterization of the study 3

2 CONCEPTS AND REVIEW

2.1 Concepts of the study 4

2.2 Review of the related literature 5

2.3 Company profile 6

2.4 Product profile 8

3 METHODOLOGY

3.1 Research Design 9

3.2 Data collection Details 10

3.3 Tools of the study 11

4 DATA ANALYSIS AND INTERPRETATION

4.1 Analysis of the data 19

5 RESULTS AND DISCUSSION

5.1 Findings of the study 37

5.2 Suggestions 39

5.3 Conclusion 39

REFERENCES 40

LIST OF TABLES

TABLE NO

PARTICULARS

PAGE NO

4.1.1 Current ratios 20

4.1.2 Quick ratio or acid test ratio 21

4.1.3 Gross profit margin 22

4.1.4 Operating profit margin 23

4.1.5 Net profit margin 24

4.1.6 Return on assets 25

4.1.7 Equity ratio 26

4.1.8 Fixed assets turnover 27

4.1.9 Inventory turnover 28

4.1.10 Total assets turnover 29

4.1.11 Inventory to current assets 30

4.1.12 Inventory to net working capital 31

4.1.13 Over heads 32

4.1.14 Direct materials 33

4.1.15 Direct labour

34

4.1.16 Trend analyses

35

LIST OF CHARTS

TABLE NO

PARTICULARS

PAGE NO

4.1.1 Current ratios 20

4.1.2 Quick ratio or acid test ratio 21

4.1.3 Gross profit margin 22

4.1.4 Operating profit margin 23

4.1.5 Net profit margin 24

4.1.6 Return on assets 25

4.1.7 Equity ratio 26

4.1.8 Fixed assets turnover 27

4.1.9 Inventory turnover 28

4.1.10 Total assets turnover 29

4.1.11 Inventory to current assets 30

4.1.12 Inventory to net working capital 31

4.1.13 Over heads 32

4.1.14 Direct materials 33

4.1.15 Direct labour

34

4.1.16 Trend analyses

36

CHAPTER-1

1. INTRODUCTION

1.1 INTRODUCTION

The word ‘Performance is derived from the word ‘parfourmen’, which means ‘to do’, ‘to

carry out’ or ‘to render’. It refers the act of performing; execution, accomplishment,

fulfillment, etc. In border sense, performance refers to the accomplishment of a given task

measured against preset standards of accuracy, completeness, cost, and speed. In other words,

it refers to the degree to which an achievement is being or has been accomplished. In the

words of Frich Kohlar “The performance is a general term applied to a part or to all the

conducts of activities of an organization over a period of time often with reference to past or

projected cost efficiency, management responsibility or accountability or the like. Thus, not

just the presentation, but the quality of results achieved refers to the performance.

Performance is used to indicate firm’s success, conditions, and compliance.

Financial performance refers to the act of performing financial activity. In broader sense,

financial performance refers to the degree to which financial objectives being or has been

accomplished. It is the process of measuring the results of a firm's policies and operations in

monetary terms. It is used to measure firm's overall financial health over a given period of

time and can also be used to compare similar firms across the same industry or to compare

industries or sectors in aggregation.

The financial performance analysis identifies the financial strengths and weaknesses

of the firm by properly establishing relationships between the items of the balance sheet and

profit and loss account.

1.2 STATEMENT OF THE PROBLEM

Financial performance are prepared to review the state of investment in a business and

result achieved during specific period, financial performance analyses are also of great

importance to the financial lenders. The financial performances are useful and meaningful

only when they are analyzed.

Sugar industries are of the developing industries in our country after liberalization.

The government has opened new opportunities for the century old sugar industry. There is a

vast home market and export potential for sugar industry. The process of consolidation and

rationalization in the industry will continue. This will lead to greater challenges in matching

the right companies and their product making facilities to the right market. On account of

these facts, it is of considerable interest to study the sugar industry.

1.3 OBJECIVES OF THE STUDY

� To analyze the financial position of Ponni Sugars.

� To analyze different costs related to Financial performances.

� To forecast the future sales of Ponni Sugars.

1.4 SCOPE OF THE STUDY

The basis for financial planning and analysis is financial information, financial need

to predict compare and evaluate the forms earning ability. It is also required to aid in

economics decision making, investment and Financial performances or accounting reports.

They should be prepared very carefully and contain as much information as possible because

they are useful to judge the financial efficiency of the company. The data about the sugar

sector, the government policies with respect to the sector, and the information about the

companies are all gathered from secondary sources, available on the websites, annual reports,

data bank of the firm and software used by the firm.

1.5 LIMITATIONS OF THE STUDY

� Though there are many Sugars Mills in Tamil Nadu only one mill has been taken up

for this study.

� The financial performance of the company is analyzed by using five years data alone.

� Ratios of the past are not true indicators of future.

� Financial analysis is based on monetary information and the non monetary

information ignored.

� Any change in the methods or procedures of accounting system limits the utility of

financial performances.

� It does not consider the price level change.

� Despite this, a sincere attempt is made.

1.6 CHAPERIZATION OF THE STUDY

Chapter-1

Introduction of the project work includes introduction, statement of the problem,

objectives of the study, scope of the study, limitations of the study and Chapterization of the

study.

Chapter-2

It deals with the concepts and review used in this project work. It includes concepts of

the study, review of related literature, company profile and product profile.

Chapter-3

It deals with research methodology followed in this project work. It includes research

design, data collection details and tools used for the study.

Chapter-4

It deals with of data analysis and interpretation.

Chapter-5

It deals with results, findings, suggestions, and conclusion of the study.

CHAPTER-2

CONCEPTS AND REVIEW

2.1 CONCEPTS OF THE STUDY

FINANCIAL PERFORMANCE

Finance is the life blood of a business. Finance is one of the basic foundations of all

kinds of economic activities. Like any other functional management in a firm (such as

production, making, sales etc.,) “finance” is a vital functional organization of the firm. If the

finance function does not operate will, the whole organizational activity will be collapsed.

The subject matter of financial management has been defined in many ways depending upon

the study of the subject.

The level of performance of a business over a specified period of time, expressed in terms

of overall profits and losses during that time. Evaluating the financial performance of a

business allows decision-makers to judge the results of business strategies and activities in

objective monetary terms.

Financial performance is prepared primarily for decision making. It plays a dominant role

in setting the frame work of managerial decisions. But the information provided in Financial

performance is not an end in itself as no meaningful conclusions can be drawn from these

statements alone.

2.2 REVIEW OF RELATED LITERATURE

G. Malyadri, and B. Sudheer Kumar (2013) found 15 at Indian sugar industry is

highly stragmented with organize and un organized players. The unorganized players mainly

produce gur and khandsari, the fess refined forms sugar. The sector has a number of

transformational opportunities. These opportunities have remained largely untapped. The

industry has the potential to cater to the large and growing domestic sugar consumption and

emerge as a significant carbon credit and power producer. Further, the industry can improve

its cost competitiveness through higher farm productivity and by managing the domestic

production variation through international trade with a focus on countries in the Indian ocean.

Thus, transformed sector would be fess cyclical with greater alignment between sugar cane

and sugar prices, and will have stable diversified sources of revenue. This study we have used

analysis of Indian Sugar Industry from Ratio’s Port Of View, Profitability Ratio, Turnover

Ratio.

Pany (1991) has sought to identify factors which influence corporate economic

performance. Important industrial characteristics which have been used by industrial

organization researchers as the determinants of financial performance are concentration,

market share, industry growth, research and development expenditure, advertisement

intensity, and size of firms in the industry. These characteristics may allow firms to be in a

better position to implement their strategies successfully and profitability. Consequently,

firms may reflect better performance on account of favorable industrial characteristics.

Attwood, D. W. (1995) found the reasons why cooperative sugar factories in

Maharashtra, India are given: (1) successful are examined. Two contradictory explanations

are generally the cooperative spirit already prevalent in the village communities provided a

sound basis for formal cooperatives; (2) village life is governed by a few wealthy and

powerful leaders who also control the cooperatives. Both explanations are rejected. It is

argued that despite a high level of inequality in the past and the present, informal cooperation

has flourished in the villages. The success of the sugar cooperatives rests on the long-

standing habit forming selective alliances to overcome serious technical obstacles in

production. The large farmers depend on the cane supplied by the small farmers to maintain

full capacity utilization, which enables the factories to pay high cane prices.

2.3 COMPANY PROFILE

Ponni Sugars (Erode) Ltd is an off spring of Ponni Sugars and Chemicals Ltd (PSCL)

under a Demerger Scheme sanctioned by the High Court of Madras on 10th September 2001.

In terms of the Scheme, the company took over the business of Erode Under taking with

concurrent transfer of major part of stakeholders’ interest in PSCL to the company.

The Erode sugar mill was set up with 1250 TCD capacity in 1984 in a record time of 12

months. It achieved full capacity crushing during the very first year of its commercial

operation that enabled declaration of a maiden dividend of 10% in that very first year, a

record in the annals of sugar industry. It was a trendsetter in mobilizing surplus cane during

its infancy stage from neighboring sugar mills and extending crushing season to well above

industry average. Its capacity was expanded to 2500 TCD In 1994.

The Erode sugar mill has successfully implemented an innovative Lift Irrigation Scheme

by bringing in dry lands under cane cultivation, utilizing the effluent discharge of the

neighbouring paper mill. This has helped secure multitudinal benefits – providing a

dependable and perennial source of irrigation to farmers in the neighbourhood, increase of

land value manifold in the region, transforming the livelihood of local rural population,

resolving the raw material needs of sugar and paper mills and addressing ecological coners in

effluent discharge.

Right from its inception, Ponni was structured on the concept of total diversion of

bagasse for paper. Accordingly it installed a coal fired boiler and later added a multi fuel

boiler in place of conventional bagasse fired boilers. It has a bagasse tie up arrangement with

Seshasayee Paper and Boards Ltd for a mutually beneficial and rewarding long term

relationship.

Ponni is an efficient and quality producer of sugar, catering to both domestic and

international markets. It is a venerable partner for villagers growing sugarcane in its

neighbourhood. It enjoys cordial relationship with employees. It firmly believes in

transparent and fair dealings with all its stakeholders by following sound corporate

governance norms both in letter and spirit.

A COMPANY WITH A DIFFERENCE

� Innovative structuring as backward integration to paper.

� First to commit bagasse for paper and derive value addition.

� Pioneered long sugar season.

� Implemented a unique effluent irrigation scheme converting waste to wealth.

� ISO 9001:2008 certified for Quality Management system.

� ISO 14001:2004 certified for Environmental Management system.

VISION

To excel as trusted socially responsible and customer driven organization providing

maximum value to all stakeholders.

MISSION

To manufacture quality products at competitive cost through technology and team

work.

VALUES

� Ethical practices

� Customer Focus

� Commitment and transparent management

� Empowerment and Accountability

� Adaptability to “Change”

� Innovation and Creativity

� Emphasis on human resources development, cost reduction, productivity enhancement

and resource conservation.

FACTORY FACTSHEET

Year of Establishment 1984

Initial Capacity (TCD) 1250

Present Capacity (TCD) 3500

Factory Area (acres) 33.51

Colony Area (acres) 9.10

No of Employees

Regular - 232

Seasonal – 95

327

No. of Employee Quarters

No. of Cultivators

145

7475

Annual Cane Area under

Registration (acres)

21300

2.4 PRODUCT PROFILE

Ponni Sugars (Erode) Limited is an India-based company. The Company is engaged

in the manufacture of sugar and its by-products. The Company’s products include sugar,

bagasse and molasses. During the fiscal year ended March 31, 20012 (fiscal 2012), the

Company crushed 745,644 tons of cane and produced 76464 tons of sugar. The Company’s

plant is located in Namakkal District, Tamil Nadu.

CHAPTER-3

RESEARCH METHODOLOGY

3.1 INRODUCTION

Research is often described as an active, diligent and systematic process of inquiry

aimed at discovering, interpreting and revising facts. This intellectual investigation produces

a greater understanding of events, behaviors or theories and makes practical applications

through laws and theories. The term research is also used to describe a collection of

information about a particular subject, and is usually associated with science and scientific

method.

BASIC RESEARCH

Basic research is also called as fundamental or pure research. Its primary objective is

the advancement of knowledge and the theoretical understanding of the relations among the

variables. It is exploratory and often driven by researcher s curiosity or interest. It is

conducted without any practical end in mind. Basic research often lays down the foundation

for further applied research.

APPLIED RESEARCH

Applied research is done to solve specific, practical questions. Its primary objective is

not to gain knowledge for its own sake. It is usually descriptive in nature. It is almost always

done on the basis of basic research.

3.2 RESEARCH DESIGN

Research design is the arrangement of conditions for collection and analysis of data in

a manner that aims to combine relevance to research purpose with economy in procedure.

Descriptive research

Descriptive research includes surveys and fact-finding enquiries of different kinds. The

major purpose of descriptive research is descriptive of the state of affairs as it exists at

present. In social science and business research we quite often use the term. Example post

facto research for descriptive research studies. The main characteristic of this method is that

the researcher has no control over the variables; he can only report what has happened or

what is happening.

3.3 DATA COLLECTION DETAILS

SECONDARY DATA

Secondary data means data that already available i.e., they refer to the data which

have already been collected and analyzed by someone else. When the researcher utilizes

secondary data, then he has look into various sources from where he can obtain them. In this

case he is certainly not confronted with the problems that are usually associated with the

collection of original data. Secondary data may either be published data or unpublished data.

In this study, the secondary data has been provided wherever required; the secondary

data has been collected from various sources like Books, Journals, Newspapers, Abstract

industries report and internet. The following are the sources of information and methodology

used in this study.

1. Acquiring material from the various reports made available by the company specifically

related to the sugar sector.

2. Acquiring material from the internet

3. Reviewing relevant books and business journals

3.4 TOOLS USED FOR DATA ANALYSIS

� Ratio analysis.

� Inventory ratio.

� Over heads.

� Forecasting the sales.

RATIO ANALYSIS

It is concerned with the calculation of relationships, which after proper identification

& interpretation may provide information about the operations and state of affairs of a

business enterprise. The analysis is used to provide indicators of past performance in terms of

critical success factors of a business. This assistance in decision-making reduces reliance on

guesswork and intuition and establishes a basis for sound judgments.

LIQUIDITY MEASUREMENT RATIOS

Liquidity means the ability of a concern to meet its current obligations as and when

these become due. Thus the liquidity ratios indicate the ability of a concern to meet its short-

term obligations.

CURRENT RATIOS

Current ratio is defined as the relationship between current assets and current

liabilities. Thus the two basic components of current ratio are: current assets and current

liabilities. “Current assets” consist of debtors, bills receivable, inventory, cash in hand, cash

in hand, at bank, pre-paid expenses and short-term investments.

Current ratio = Current assets/ Current liabilities

Higher the ratio, the better it is, however but too high ratio reflects an in-efficient use

of resources & too low ratio leads to insolvency. The ideal ratio is considered to be 2:1

QUICK RATIO OR ACID TEST RATIO

Quick ratio is a more rigorous test of liquidity than the current ratio. It can be

ascertained by comparing the liquid assets to current liabilities. Liquid assets consist in hand

and a bank, debtors less provision for bad and doubtful debts, realizable investment and other

current assets which can be realized immediately.

Quick ratio = liquid assets/ current liabilities

The ideal ratio is 1:1. Another beneficial use is to compare the quick ratio with the

current ratio. If the current ratio is significantly higher, it is a clear indication that the

company's current assets are dependent on inventory.

PROFITABILITY INDICATORS RATIOS

Profitability is the ability of a business to earn profit over a period of time. The

profitability ratios show the combined effects of liquidity, asset management (activity) and

debt management (gearing) on operating results. The overall measure of success of a business

is the profitability which results from the effective use of its resources.

GROSS PROFIT MARGIN

A company's cost of goods sold represents the expense related to labor, raw materials

and manufacturing overhead involved in its production process. This expense is deducted

from the company's net sales/revenue, which results in a company's gross profit. The gross

profit margin is used to analyze how efficiently a company is using its raw materials, labor

and manufacturing related fixed assets to generate profits.

Gross Profit Margin = (Gross Profit/Net Sales)*100

Higher the ratio, the higher is the profit earned on sales.

OPERATING PROFIT MARGIN

By subtracting selling, general and administrative expenses from a company's gross

profit number, we get operating income. Management has much more control over operating

expenses than its cost of sales outlays. It Measures the relative impact of operating expenses.

Operating Profit Margin = (Operating Profit/Net Sal es)*100

Lower the ratio, lower the expense related to the sales.

NET PROFIT MARGIN

Net profit ratio establishes the relationship between net profit and sales. I indicate the

efficiency of the management in manufacturing, selling, administration and other activities of

the concern.

Net Profit Margin= (Operating Profit/Net Sales)*100

Higher the ratio, the more profitable are the sales.

RETURN ON ASSETS

This ratio illustrates how well management is employing the company's total assets to

make a profit.

Return on Assets= Net Income / Average Total Assets

Higher the return, the more efficient management is in utilizing its asset base.

FINANCIAL LEVERAGE/GEARING RATIOS

These ratios indicate the degree to which the activities of a firm are supported by

creditors’ funds as opposed to owners as the relationship of owner’s equity to borrowed funds

is an important indicator of financial strength. The debt requires fixed interest payments and

repayment of the loan and legal action can be taken if any amounts due are not paid at the

appointed time. A relatively high proportion of funds contributed by the owners indicate a

cushion (surplus) which shields creditors against possible losses from default in payment.

EQUITY RATIO

This ratio measures the strength of the financial structure of the company.

Equity Ratio= (Ordinary Shareholder’s Interest / Total assets)*100

A high equity ratio reflects a strong financial structure of the company. A relatively

low equity ratio reflects a more speculative situation because of the effect of high leverage

and the greater possibility of financial difficulty arising from excessive debt burden.

OPERATING PERFORMANCE RATIOS

These ratios look at how well a company turns its assets into revenue as well as how

efficiently a company converts its sales into cash, i.e. how efficiently & effectively a

company is using its resources to generate sales and increase shareholder value. The better

these ratios, the better it is for shareholders.

FIXED ASSETS TURNOVER

This ratio is a rough measure of the productivity of a company's fixed assets with

respect to generating sales.

Fixed Assets Turnover= Sales / Net Fixed Assets

High fixed assets turnovers are preferred since they indicate a better efficiency in

fixed assets utilization.

TOTAL ASSETS TURNOVER

This ratio indicates the efficiency with which the firm uses all its assets to generate

sales.

Total Assets Turnover= Sales / Total Assets

Higher the firm’s total asset turnover, the more efficiently its assets have been utilized.

COST SHEET

Cost Sheets are statements setting out the costs of a product giving details of

all the costs. Presentation of costing information depends upon the method of costing.

A cost sheet can be prepared weekly, monthly, quarterly or annually.

In a cost sheet besides total expenditure incurred, cost per unit of output in

case of each element of cost can be shown in a separate column. The cost sheet should

give cost per unit in the previous period for the purposes of comparison.

INVENTORY TURNOVER

It measures the stock in relation to turnover in order to determine how often the stock

turns over in the business. It indicates the efficiency of the firm in selling its product.

Inventory Turnover= Sales / Average Inventory

High ratio indicates that there is a little chance of the firm holding damaged or obsolete stock.

INVENTORY TO CURRENT ASSETS

It is the relationship between closing inventory and current assets.

Inventory to Current Assets = Closing Inventory / Current Assets

This ratio inventory indicates the amount of investment in inventory per rupee of current asset inventory. The higher the proportion of inventory to current asset the lower the liquidity as compared to other current asset.

INVENTORY TO NET WORKING CAPITAL

It is the relationship between inventory and net working capital.

Inventory to Net Working Capital =Closing inventory/Net Working Capital

This ratio shows the amount of inventory per rupee of equity and long-term financial position of current asset. A high ratio means greats amount of net working capital investment in inventory and a low ratio means a lower amount of net working capital investment in inventory.

OVERHEADS

Overhead is “the aggregate of indirect material cost, indirect wagers (indirect labor

cost) and indirect expenses”.

Over Heads = Total Overheads / Net sales*100

DIRECT MATERIALS

Refers to the cost of materials which become a major part of the finished product.

Such materials can be identified in the product, measured and chargeable to the product. For

example, Plywood, wooden battens, fabric for the seat and the back, nails, screws, glue.

Overhead Rate = production Overhead Expenses (Budgeted) / anticipated Direct

Material Cost*100

DIRECT LABOUR

It is the cost of labour, which is directly engaged in the productive operations. In other

words the worker who works directly with raw materials in converting them into finished

goods represents direct labour. For example,Sawyers, drillers, assemblers, painters, polishers,

upholsterers.

Overhead Rate = production Overhead Expenses / Direct Labour Cost*100

TREND ANALYSIS

This is best method for obtaining the trend values. It provides a convenient basis for

obtaining the line of best fit in a series. Line of the best fit is a line from which the sum of the

deviations of various points on either side is zero. The straight line trend has an equation of

the types: Y=a+bx, where Y represents the estimated values of the trend, X represents the

deviations in the time period: ‘a’ and ‘b’ are estimated by solving the following two normal

equations.

∑ Y=Na+a∑X

∑XY=a∑X+b∑X2

Where N represents number of years for which data is given. The variables X can be

measured from any point of time as origin because the negative values of first half of the

times series will equalize the positive values in the second half of the series which

symbolically gives ∑x=0. When ∑x-0, the two normal equations for finding the constants ’a’

and ‘b’ will be

∑ Y=Na=a=∑Y/N=Y

∑XY=b∑x2=b=∑XY/∑X2

CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

4.1 ANALYSIS OF THE DATA

Analysis of the data means studying the tabulated material in order to determine if he

rent facts or meaning. It involves breaking down existing complex factors into simpler parts

and putting the part together in new arrangement for purpose of interpretation. A plan of

analysis can and should be prepared in advance before the actual collection materials. A

preliminary analysis on the skeleton plan should, as the investigation proceeds, develop in to

a complete, final analysis enlarge and reworked as and when necessary. The process requires

flexible and open mind. No similarities, differences, trends and outstanding should go

unnoticed, large division of materials should be broken down in to smaller unit and

rearranged in new combinations to discover new factors and relationship. Data should studied

from as many angles as possible to find out and news facts.

When the plan of analysis has not been made before hand, there are four helpful

modes to start with the analysis of data:

� To think term of significant tables that the data permit.

� To examine carefully the statement of the problem and the earlier analysis and to

study the original records of the data.

TABLE-4.1.1

LIQUIDITY MEASUREMENT RATIOS

CURRENT RATIOS

Year Current assents Current liabilites Ratio

2013 108.6

53.3

2.037523

2012 79.1

68.41

1.156264

2011 93.65

49.2

1.903455

2010 124.34

65.72

1.891966

2009 66.59

41.36

1.61001

INFERENCE:

The above table reveals that the highest current ratio was recorded (2.037523) in the

year 2013. The lowest current ratio (1.156264) recorded in the year 2012. The current ratio

was fluctuating during the period 2009 to 2013.

CHART-4.1.1

0

0.5

1

1.5

2

2.5

Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09

Current ratios

Current ratios

TABLE-4.1.2

QUICK RATIO OR ACID TEST RATIO

Year

Liquid assets

Current liabilities

Ratio

2013 90.3 53.3

0.652345

2012 66.56 68.41 0.470107

2011 88.41 49.2 0.550203

2010 109.02 65.72 0.527237

2009 62.48 41.36 0.378868

INFERENCE:

The above table indicates that the highest quick ratio was recorded (0.652345) in the

year 2013. The lowest quick ratio (0.378868) recorded in the year 2012. The ratio was

fluctuating trend during the study is from 2009 to 2013.

CHART-4.1.2

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7


Quick Ratio or Acid Test Ratio

Quick Ratio or Acid Test

Ratio


Year Gross profit

2013

2012

2011

2010

2009

INFERENCE:

The above table shows that the highest gross profit

2010. The lowest gross profit ratio (

fluctuating trend. The periods are 2009 to 2013.

0

5

10

15

20

25

30

Mar ' 13 Mar ' 12

TABLE-4.1.3


GROSS PROFIT MARGIN

ross profit Net sales

26.87 212.48

31.69 268.99

15.18 270.69

73.27 245.72

22.87 138.62

shows that the highest gross profit ratio was (29.81849

2010. The lowest gross profit ratio (5.607891) recorded in the year 2011. The trend is


CHART-4.1.3

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09

Gross Profit Margin

Gross Profit Margin

Ratio

12.6459

11.78111

5.607891

29.81849

16.49834

29.81849) in the year

2011. The trend is

Gross Profit Margin


Year Operating profit

2013

2012

2011

2010

2009

INFERENCE:

The above table shows that the highest operating profit

year 2010. The lowest operating profit ratio (

is fluctuating trend. The periods are 2009 to 2013.

0

5

10

15

20

25

30

Mar '

13

Mar '

12

Operating Profit Margin

TABLE-4.1.4


perating profit Net sales

17.67 209.45

29.43 159.82

15.01 112.7

71.31 113.94

20.61 80.38

The above table shows that the highest operating profit ratio was

year 2010. The lowest operating profit ratio (5.545088) recorded in the year 2011. The trend

trend. The periods are 2009 to 2013.

CHART-4.1.4

Mar ' Mar '

11

Mar '

10

Mar '

09



Ratio

8.316077

10.94093

5.545088

29.02084

14.86798

ratio was (29.02084) in the

) recorded in the year 2011. The trend


TABLE-4.1.5

NET PROFIT MARGIN

Year Net sales Sales Ratio

2013 14.09 212.48 6.631212

2012 28.24 268.99 10.49853

2011 13.53 270.69 4.998338

2010 69.52 245.72 1.251711

2009 18.72 138.62 0.512814

INFERENCE:

The above table indicates that the highest net profit ratio was (10.49853) in the year

2012. The lowest net profit ratio (0.512814) recorded in the year 2009. The ratio trend is

decreasing trend. The periods are 2009 to 2013.

CHART-4.1.5

0

2

4

6

8

10

12


Net Profit Margin

Net Profit Margin

TABLE-4.1.6

RETURN ON ASSETS

Year Net Income Average Total Assets

Ratio

2013 17.67 104.725 0.168728

2012 29.43 79.91 0.368289

2011 15.01 56.35 0.266371

2010 71.31 56.97 1.251711

2009 20.61 40.19 0.512814

INFERENCE:

The above table shows that the highest return on to asset ratio was (1.251711) in the

year 2010. The lowest return on asset ratio (0.168728) in the year 2013. The ratio trend is


CHART-4.1.6

0

0.2

0.4

0.6

0.8

1

1.2

1.4


Return on Assets

Return on Assets

TABLE-4.1.7

FINANCIAL LEVERAGE/GEARING RATIOS

EQUITY RATIO

Year Ordinary Shareholder’s Interest

Total assets Ratio

2013 3.58 209.45 1.709238

2012 1.19 159.82 0.744588

2011 1.48 112.7 1.313221

2010 1.79 113.94 1.571002

2009 1.89 80.38 2.351331

INFERENCE:

The above table reveals that the highest equity ratio was (2.351331) in the year 2009.

The lowest equity ratio was (0.744588) in the year 2012. The ratio was fluctuating trend

during the study period 2009 to 2013.

CHART-4.1.7

0

0.5

1

1.5

2

2.5


Equity Ratio

Equity Ratio

TABLE-4.1.8

OPERATING PERFORMANCE RATIOS

FIXED ASSETS TURNOVER

Year Sales Net Fixed Assets Ratio

2013 212.48 133.09 1.596514

2012 268.99 44.17 6.08988

2011 270.69 45.21 5.987392

2010 245.72 47.03 5.22475

2009 138.62 47.71 2.905471

INFERENCE:

The above table reveals that the highest fixed assets turnover ratio was (6.08988) in

the year 2012. The lowest fixed assets turnover ratio (1.596514) in the year 2013. The ratio

trend is fluctuating trend. The periods are 2009 to 2013.

CHART-4.1.8

0

1

2

3

4

5

6

7


Fixed Assets Turnover

Fixed Assets Turnover

TABLE-4.1.9

TOTAL ASSETS TURNOVER

Year Sales Total Assets Ratio

2013 212.48 209.45 1.014466

2012 268.99 159.82 1.683081

2011 270.69 112.7 2.401863

2010 245.72 113.94 2.156574

2009 138.62 80.38 1.724558

INFERENCE:

The above table reveals that the highest total assets turnover ratio was (2.401863) in

the year 2011. The lowest total assets turnover ratio was (1.014466) in the year 2013. The

ratio trend is fluctuating trend from 2009 to 2013.

CHART-4.1.9

0

0.5

1

1.5

2

2.5

3


Total Assets Turnover

Total Assets Turnover

TABLE-4.1.10

INVENTORY TURNOVER

Year Sales Average Inventory Ratio

2013 212.48 36.915 5.755926

2012 268.99 23.47 11.46101

2011 270.69 33.29 8.131271

2010 245.72 44.845 5.479318

2009 138.62 25.46 5.444619

INFERENCE:

The above table reveals that the highest Inventory turnover ratio was (11.46101) in

the year 2012. The lowest Inventory assets turnover ratio was (5.444619) in the year 2009.

The ratio trend is fluctuating trend from 2009 to 2013.

CHART-4.1.10

0

2

4

6

8

10

12

14


Inventory Turnover

Inventory Turnover


Year Closing inventory

2013

2012

2011

2010

2009

INFERENCE:

The above table reveals that the highest

(1.2428292) in the year 2009. The lowest

the year 2013. The ratio trend is fluctuating trend from 2009 to 2013.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Mar ' 13 Mar ' 12

Inventory to Current Assets

TABLE-4.1.11


losing inventory Current asset

51 108.6

47 79.1

113 93.65

125.73 124.34

82.76 66.59

reveals that the highest Inventory to current assets ratio was

the year 2009. The lowest Inventory to current assets ratio was (

the year 2013. The ratio trend is fluctuating trend from 2009 to 2013.

CHART-4.1.11

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09

Inventory to Current Assets

Inventory to current

assets

Ratio

0.4696132

0.5941845

1.2066203

1.0111790

1.2428292

Inventory to current assets ratio was

Inventory to current assets ratio was (0.4696132) in

Inventory to current


Year Closing inventory

2013

2012

2011

2010

2009

INFERENCE:


(1.7687540) in the year 2009. The lowest

(0.3949202) in the year 2013. The ratio trend is fluctuating trend from 2009 to 2013.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Mar '

13

Mar '

12

Inventory to Net Working Capital

TABLE-4.1.12


losing inventory Net working captial

51 129.14

47 111.54

113 96.25

125.73 79.64

82.76 46.79

reveals that the highest Inventory to net working capital ratio was

) in the year 2009. The lowest Inventory to net working capital ratio was

) in the year 2013. The ratio trend is fluctuating trend from 2009 to 2013.

CHART-4.1.12

Mar ' Mar '

11

Mar '

10

Mar '

09


Inventory to net working

capital

Ratio

0.3949202

0.4213734

1.1740259

1.5787292

1.7687540

Inventory to net working capital ratio was

Inventory to net working capital ratio was

) in the year 2013. The ratio trend is fluctuating trend from 2009 to 2013.


Inventory to net working

Year Total overheads

2013

2012

2011

2010

2009

INFERENCE:


2010. The lowest over heads ratio was (

fluctuating trend from 2009 to 2013.

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

Mar ' 13 Mar ' 12

TABLE-4.1.13

OVER HEADS

Total overheads Net sales

2115

21911

2230 27557

2086 28095

1469.72 11951.7

1160.69 14127.87

reveals that the highest over heads ratio was (0.1229716

over heads ratio was (0.0742480) in the year 2011. The ratio trend is

fluctuating trend from 2009 to 2013.

CHART-4.1.13

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09

Over Heads

30.6680472

Ratio

0.0965268

0.0809231

0.0742480

0.1229716

0.0821560

0.1229716) in the year

) in the year 2011. The ratio trend is

30.6680472

Year Production overhead expenses

(budgeted)2013

2012

2011 24657.11

2010 14407.15

2009

INFERENCE:


year 2012. The lowest direct materials ratio was (

is fluctuating trend from 2009 to 2013.

0

1

2

3

4

5

6

Mar ' 13 Mar ' 12

TABLE-4.1.14

DIRECT MATERIALS

roduction overhead expenses

(budgeted)

Anticipated direct material cost

16994 7109

21857 4325

24657.11 6338

14407.15 8670.11

12947.9 4805.17

reveals that the highest direct materials ratio was (

direct materials ratio was (1.6617032) in the year 2010. The ratio trend


CHART-4.1.14

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09

Direct Labour

direct labour

Ratio

2.3904909

5.0536416

3.8903613

1.6617032

2.6945768

direct materials ratio was (5.0536416) in the

) in the year 2010. The ratio trend

direct labour

Year Prodoverhead

2013

2012

2011 24657.11

2010 14407.15

2009

INFERENCE:


year 2011. The lowest direct labour ratio was (


0

5

10

15

20

25

30

35

Mar ' 13 Mar ' 12

TABLE-4.1.15

DIRECT LABOUR

roduction overhead expenses

Direct labour cost

16994 989

21857 893

24657.11 804

14407.15 919.87

12947.9 883.33

reveals that the highest direct labour ratio was (30.6680472

direct labour ratio was (14.6580553) in the year 2009. The ratio trend


CHART-4.1.15

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09

Direct Labour

direct labour

Ratio

17.1830131

24.4759238

30.6680472

15.6621587

14.6580553

30.6680472) in the

) in the year 2009. The ratio trend

direct labour

TABLE-4.1.16

TREND ANALYSES

Year

Sale

x

x2

xy

2009

138.62

-2

4 -277.24

2010

245.72

-1 1 -245.72

2011

270.69

0 0 0

2012

268.99

1 1 268.99

2013

212.48

2 4 424.96

Total

∑Y=1136.5

∑x2=10 ∑xY=170.99

1136.5/5

=227.3

170.99/10

=17.099

TREND VALUES

Year

x Trend values

2014 -2

329.894

2015 -1 346.93

2016 0 365.092

2017 1 381.1991

2018 2 400.29

INFERENCE:

The trend analysis is shows that there is a increase in the sales in year 2018. This

shows there is a good sales position in the company.

0

50

100

150

200

250

300

350

400

450

2014 2015

CHART-4.1.16

2015 2016 2017 2018

TREND VALUES

TREND VALUES

CHAPTER-5

RESULTS AND DISCUSSION

5.1 FINDINDS OF THE STUDY

� The Current assets ratio of the company is highest in (2.03752) in the year 2013.

� The Quick ratio of the company is highest in (0.652345) in the year 2013.

� The Gross profit ratio of the company is highest in (29.81849) in the year 2010.

� The Operating profit margin of the company is highest in (29.02084) in the year 2010.

� The Net profit margin of the company is highest in (10.49853) in the year 2012.

� The Return on assets ratio of the company is highest in (1.251711) in the year 2010.

� The Equity ratio of the company is highest in (2.351331) in the year 2009.

� The Fixed assets turnover of the company is highest in (6.08988) in the year 2012.

� The Total assets turnover of the company is highest in (2.401863) in the year 2011.

� The Inventory turnover of the company is highest in (11.46101) in the year 2012.

� The Inventory to current assets of the company is highest in (1.2428292) in the year

2009.

� The Inventory to net working capital of the company is highest in (1.7687540) in the

year 2009.

� The Overheads of the company is highest in (0.1229716) in the year 2010.

� The Direct materials of the company is highest in (5.0536416) in the year 2009.

� The Direct labour of the company is highest in (30.6680472) in the year 2011.

� The company will attain the maximum sales (400.29) in the year 2018.

5.2 SUGGESTIONS

The company may decrease its inventory turnover on basis of order for sales

and market potential. The company may reduce the variable expenses raw material

consumed, power and fuel, employee expenses, administration and selling expenses

it will leads to more operating profit.

The company may continuously maintain its proper planning and control

techniques in order to regulate and optimize the use of cash balance.

The company may be maintained the current assets properly so that it will lead

to better position of working capital. The company may reduce the creditor’s position

by repaying the loans in short-period for in better position in future.

5.3 CONCLUSION

Financial performance is basic instruments, which provides all information about the

financial position and operational efficiency of the company. The current ratio, quick ratio,

gross profit may increase in this respect. It is concluded that the overall financial performance

was satisfactory as per analysis. The company has to take appropriate steps to control the

cost, increase the volume of sales, profit in the future years.

Ponni Sugars consists of high capital and investment but business performance will be

only being in moderate level. If the firms concentrate more on the financial aspects and

reduce the unwanted costs, will reach the higher profitable position in the near future.

BALANCE SHEET (Rs crores)

Particulars Mar'13 Mar'12 Mar'11 Mar'10

Mar'09

Liabilities

12

Months 12

Months 12

Months 12

Months

12

Months

Share Capital 8.6 8.6 8.6 8.6 8.6

Reserves & Surplus 120.54 102.94 87.65 71.04 38.2

Net Worth 129.14 111.54 96.25 79.64 46.79

Secured Loan 80.31 48.28 16.45 34.3 33.58

Unsecured Loan 0 0 0 0 0

TOTAL LIABILITIES 209.45 159.82 112.7 113.94 80.38

Assets

Gross Block 172.78 73.05 71.68 70.95 69.62

(-) Acc. Depreciation 39.69 28.88 26.47 23.92 21.91

Net Block 133.09 44.17 45.21 47.03 47.71

Capital Work in Progress 0.27 84.17 14.75 0 0.15

Investments 20.79 20.79 8.29 8.29 7.29

Inventories 73.83 46.94 66.58 89.69 50.92

Sundry Debtors 16.89 11.85 3.52 12.27 1.72

Cash and Bank 1.41 0.69 1.72 3.06 2.39

Loans and Advances 16.47 19.62 21.83 19.33 11.56

Total Current Assets 108.6 79.1 93.65 124.34 66.59

Current Liabilities 43.98 56.76 47.2 45.37 36.98

Provisions 9.32 11.65 2 20.35 4.38 Total Current Liabilities 53.3 68.41 49.2 65.72 41.36 NET CURRENT ASSETS 55.3 10.69 44.45 58.62 25.23

Misc. Expenses 0 0 0 0 0 TOTAL ASSETS(A+B+C+D+E) 209.45 159.82 112.7 113.94 80.38

PROFIT AND LOSS ACCOUNT (Rs crores)

Mar'13

Mar'12

Mar'11

Mar'10

Mar'09

Net Sales Turnover 212.48 268.99 270.69 245.72 138.62 Other Income 2.41 1.03 2.92 1.1 0.71 Total Income 214.89 270.02 273.61 246.82 139.33 EXPENSES Stock Adjustments -27.88 20.79 23.45 -39.08 -11.9 Raw Material Consumed 169.87 171.53 197.37 175.14 97.77 Power and Fuel 0 0 0 0 0 Employee Expenses 12.34 11 10.56 9.2 8.83

Administration and Selling Expenses 0 0 0 0 0

Research and Development Expenses 0 0 0 0 0 Expenses Capitalized 0 0 0 0 0 Other Expenses 31.28 33.98 24.13 27.19 21.05 Provisions Made 0 0 0 0 0 TOTAL EXPENSES 185.61 237.3 255.51 172.45 115.75 Operating Profit 26.87 31.69 15.18 73.27 22.87 EBITDA 29.28 32.72 18.1 74.37 23.58 Depreciation 11.61 3.29 3.09 3.06 2.97 EBIT 17.67 29.43 15.01 71.31 20.61 Interest 3.58 1.19 1.48 1.79 1.89 EBT 14.09 28.24 13.53 69.52 18.72 Taxes -6.95 8.33 9.03 18.56 6.46

Profit and Loss for the Year 21.04 19.91 4.5 50.96 12.26

Extraordinary Items 0 0 0 0 0 Prior Year Adjustment 0 0 0 0 0 Other Adjustments 0 0 0 0 0 Reported PAT 19.11 17.79 18.61 36.85 12.26 KEY ITEMS Reserves Written Back 0 0 0 0 0 Equity capital 8.6 8.6 8.6 8.6 8.6 Reserves and Surplus 120.54 102.94 87.65 71.04 38.2 Equity Dividend Rate 0 0 0 0 0

Agg. Non-Promoter Shares(lacks) 44.93 49.18 46.75 47.25 4.73

Agg. Non-Promoter Holding (%) 52.25 57.2 54.37 54.96 54.96

Government Share 0 0 0 0 0 Capital Adequacy Ratio 0 0 0 0 0 EPS (Rs.) 22.22 20.69 21.64 42.86 142.58

REFERENCES

BOOKS:

� Gokul Sinha ,Financial performance Analysis, Published by Asoke K.Ghosh, PHI

learning Private Limited, New Delhi, 2010.

� M.Sarngadharan and S.Rajitha Kumar, Financial Analysis for Management Decisions,

published by Asoke K.Ghosh, PHI learning Private Limited, New Delhi, 2011.

� D.Chandra Bose, Fundamentals of Financial Management, Published by Asoke

K.Ghosh, PHI learning Private Limited, New Delhi, 2012.

� S.P.Jain and K.L.Narang, Cost Accounting, Published by Mrs.Usha Raj kumar for

Kalyani Publishers, New Delhi, 2013.

JOURNAL:

� G. Malyadri, and B. Sudheer Kumar, Indian sugar industry, published by International

Journal of Management and Strategy, 2013.

� Kothari C.R., “Research Methodology – Methods & Techniques,Wishawa Prakashan,

New Delhi, 2003.

� D. W. Attwood, cooperative sugar International Journal of Management and Strategy,

1995.

WEBSITES:

www.ponnisugars.com

www.economictimes.indiatimes.com

www.proquest.com

Financial performance ponni sugars

Technology

autonomous

net working

gross profit

operating

fixed assets

operating

total assets

indian sugar