1 Jay Swaminarayan A Summer Internship Project Report On “Financial Analysis” of Power Build Limited ( Ratio Analysis ) Submitted for the particular fulfillment of Master of Business Administration ( MBA )( 2010-11 ) AT POWER BUILD LIMITED ANAND Prepared by Varin. A. Patel M.B.A-|| (2010-2012) Enrollment No. - 107550592029 Guidance by Mehul shah Sir
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Jay SwaminarayanA Summer Internship Project Report
On“Financial Analysis” of Power Build Limited
( Ratio Analysis )
Submitted for the particular fulfillment of Master of Business Administration ( MBA )( 2010-11 )
AT
POWER BUILD LIMITEDANAND
Prepared byVarin. A. Patel
M.B.A-|| (2010-2012)
Enrollment No. - 107550592029
Guidance byMehul shah Sir
Submitted to
Sardar Patel College of Administration and Management Approved by All India Council for Technical Education ( AICTE )Affiliated with Gujarat Technological UniversityS.P.E.C – Campus, Vidyanagar-Vadtal Road, Bakrol
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July - 2011PREFACE
The Practical training in the industrial units is an inspirable part of the MBA programme
and also it has shown a great, importance in overall development of the students. One aspects of
industrial training is to set up a bridge between the theoretical and practical knowledge in the
company.
After the completion of the second semester the student have to go for training for six to
eight weeks. The student can select specialization subject for training like Finance, Marketing,
HRM.
I have selected Finance as I want to carry out my last two semester in finance
specialization. Finance is the lifeblood of any business unit . Finance management that deals with
financial matter of the company.
I being student of M.B.A programme as a part of my study is required to under go an
industrial training programme for six to eight weeks in Power Build Limited (PBL) which is one
of the leading manufacturers of the machineries.
I have tried my level best to represent all the relevant data and information relating to my
project work & here submitting my detailed report on Finance and specially on “RATIO
ANALYSIS”.
I am also thankful to the “POWER BUILD LIMITED” that gives me the golden
opportunity to carry on my training as such a great organization. I have prepared the detail report
regarding all the important areas of management such as Finance department. I have tried my best
to collect all necessary information relating to the project work.
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ACKNOWLEDGMENT
Industrial training is very helpful in building career. I have a great pleasure and excitement
in presenting the report for industrial & practical training at M.B.A level in Power Build Limited
Vallabh Vidhyanagar. The objective of the training was to acquaint student to industrial
environment and acquire a detailed study of it.
I am very thankful to the authorities of the Power Build Ltd. who have always stood by
and encourage me all the time here until. I would specially like to thank MR.DIPAK P PATEL
the H.R & Administration Manager, MR SUBODH ROA account deo head, Mr DHAVAL
PATEL for providing me valuable support.
I am grateful to our DIRECTOR SIR P.T.Trivedi for giving us the permission for the
training programme. And also to our project guide MR.Mehul Shah for providing me his guidance
throughout the project.
I personally feel that for the development of students IQ and knowledge this type of
training is must and the institute is carefully fulfilling this responsibility so I am also thankful to
Gujarat Technological University.
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Table of Content
Sr No Chapter Particular Page No
01 Chapter – 1 Introduction
02 Chapter – 1.1 Industry Overview 7
03 Chapter – 1.2 Company Overview 11
04 Chapter – 2 Research Methodology 27
05 Chapter – 2.1 Objective of the study 28
06 Chapter – 2.2 Sources of data & Methodology 29
07 Chapter –2.3 Limitation of study 30
08 Chapter – 3 Data Analysis & Interpretation 31
09 Chapter – 3.1 Introduction & Classification of Ratio’s 33
10 Chapter – 3.2 Calculation of ratio’s 42
11 Chapter – 4 Human Resource Department 87
12 Chapter – 5 Summary & findings 93
13 Chapter – 6 Conclusion 95
14 Chapter – 7 Bibliography 96
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List of Tables
Sr No Particular Page No
01 Current Ratio
02 Quick Ratio
03 Net working capital Ratio
04 Inventory turnover Ratio
05 Debtors turnover Ratio
05.1 Average collection Period
06 Fixed Asset turnover Ratio
07 Current Asset turnover Ratio
08 Total Asset turnover Ratio
09 Creditor’s turnover Ratio
09.1 Average Payment Period
10 Debt – Equity Ratio
11 Debt – Asset Ratio
12 Interest coverage Ratio
13 Gross Profit Ratio
14 Net Profit Ratio
15 Return on Capital Employed
16 Earning Per Share
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List of Charts
Sr No Particular Page No
01 Current Ratio
02 Quick Ratio
03 Net working capital Ratio
04 Inventory turnover Ratio
05 Debtors turnover Ratio
06 Fixed Asset turnover Ratio
07 Debt – Equity Ratio
08 Debt – Asset Ratio
09 Gross Profit Ratio
10 Net Profit Ratio
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Chapter – 1.1
Introduction of the Industry
Vithal Udyognagar was established in 1963 at the instance of visionary Late Shri H. M. Patel. The Vithal Udyognagar Industries Association (VUIA) was established in 1970 and has been providing a proactive atmosphere for industries to grow and prosper.
Vithal Udyognagar Industries Association (VUIA) has emerged as an active organization in the Trade and Industry in Vallabh Vidyanagar region. Having established itself as a dynamic and vibrant organization of trade and industry in Gujarat, VUIA plays the role of a catalyst in the success of industries in the estate.
A facilitator, VUIA catalyses change by working closely with government on policy issues, enhancing efficiency, competitiveness and expanding business opportunities for industry through a range of specialized services. Major emphasis is laid on projecting a positive image of the association towards, the government, workers and other organizations.
Mission & Vision
Promote trade, industry and profession so as to achieve sustainable all round economic growth in the region.
Deal with concerns, issues and problems of the business community and effectively resolve the same by opening a dialogue with concerned government or non-governmental authorities. Create a proactive partnership between government (local and state) with our business community.
The Vitthal Udhyognagar Industrial Association (VUIA) works to create and sustain an environment conducive to the growth of industry in the estate. VUIA is a non-government, not-for-profit, industry led and industry managed organization, playing a proactive role in creating a bridge between the industry, regulatory authorities and customers.
Objectives To provide most effective contribution to the cause of Small and Medium Scale Industries. To achieve social harmony and peace amongst entrepreneurs, workers and employees with
collective prosperity through partnership of trust. To participate in policy formulation process and support efforts with the Government of
Gujarat. To attain and sustain acceptable levels of Health, Hygiene, Pollution standards and
Environmental condition for people of this estate.
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Preamble
Vitthal Udyognagar Industries Association (V.U.I.A.) is an Association of Industries located in Vitthal Udyognagar, adjoining to Vallabh Vidyanagar Township in Charotar area of Anand district in Gujarat State.
Charotar and IT’S People
The fertile tract with abundant water resources and green trees between rivers MAHI and VATRAK in Kheda District is know as ‘CHAROTAR’. People of Charotar are hardy and hard working. Their outstanding character is that they possess robust commonsense and are down to earth practical. They are generally bold, enterprising, informal and straightforward. They neither mince words nor hesitate to call spade a spade. Being resourceful and dynamic, they are quick to move with changing times. Being warm-hearted, they easily make friends. In adversity the can be no better friend than the one from Charotar. He can be difficult person too, if you cross swords with him and yet reconciliation with him is always possible since he is generally lion-hearted and inclined to forget and forgive.
Origin of Vitthal Udyognagar
Having observed that youth from rural areas of not only Charotar but all over India migrate to cities in pursuit of higher education, Sardar Vallabhbhai Patel, who hailed from Karasmad village of Charotar inspired late Shri Bhailalbhai Patel, popularly know as “Bhaikaka” and Bhikhabhai Patel to take in hand a project to establish a center of higher education in rural area of Charotar. Thus came into being the educational township of Vallabh Vidyanagar, which is now the seat of Sardar Patel University. Vallabh Vidyanagar, the education township named after Sardar Vallabhbhai Patel, the First Deputy Prime Minister of independent India and the architect of its integration, can today boast of almost every faculty providing education from K. G. to Ph.D. Level. Shri H. M. Patel, I.C.S. Retd. Former Finance Minister of India, Who took over reins of the Educational Institution - Charotar Vidya Mandal from late Shri Bhaikaka in 1958 – 59 realised that youth of Charotar would continue to migrate, albeit few years later on graduation to the cities in search of jobs. He therefore conceived the project of establishing an industrial estate near the educational township of Vallabh Vidyanagar and named it after another illustrious son of Charotar – the first Indian Chairman of the Central Legislative Council during the British regime – Shri Vitthalbhai Patel, the elder brother of Sardar Vallabhbhai Patel.
Shri H. M. Patel invited leading Industrialists of Charotar, who had their industries in Mumbai and elsewhere to come to Vallabh Vidyanagar and establish their units. He promised them al possible help in procuring principal infrastructure facilities such as Land, Power and Water. It was in response to his invitation that large units like Elecon Engineering Company Limited, Gujarat Manufacturing Company Limited, were established in this area. Shri H.M.Patel had initially planned the establishment of a private sector company known as “ Vitthal Udyognagar Industrial Development Company Private Limited”, but after the formation of separate State of Gujarat on 1st May 1960 Gujarat Industrial Development Corporation was formed which took over the work of development of the industrial Estate of Vitthal Udyognagar.
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Formation of VUIA
Within a few years of its establishment, the industrial Estate at V.U.Nagar started expanding. Later when the Karamsad Gram Panchayat, in whose revenue limits V.U.Nagar falls, for the first time clamped heavy Octroi Duty, all large and small industrialist rose untidily in protest and formed the present V.U.I.A. under the leadership of Shri B.I.Patel of Elecon Engg. Co. Ltd., and Shri J.V.Patel of Gujarat Machinery Manufacturers Ltd., to safeguard the industrial interests. The Association has since not looked back and grown into one of the most formidable, forceful, dynamic and vocal Associations of industries in Gujarat undertaking a variety of activities for the benefit of all the industrial Units.
How Does V.U.I.A. Function?
General Body of the members elects the Executive Committee, which in turn elects its office bearers. For each subject, field of its activity there is a sub-committee headed by a Convener who articulates the issue confronting the industrial Units and in co-ordination with the office bearers takes up the issues with the concerned Government, Semi government or Corporate authorities. Besides he also organizes periodical meetings of the concerned authorities with Association members for fruitful exchange of views and expeditious resolution of problems. On major issues the President, Vice President or General Secretary lead delegations of the Association to concerned Government Secretaries or Ministers, represent the problem personally, submit Memoranda and seek speedy solutions.
What has Association accomplished since its inception?
1. Steadily built up a formidable membership consisting of Plus 500 members as on 31.3.2003.
2. Secured exemption from Octroi duty for the units in the industrial Estate.3. Government Notified Area Committee constituted.4. Built an upto date Community Hall providing a variety of service facilities listed above to
members.5. Caused Manual Telephone Exchange to be replaced by an Electronic one in a new plot and
building for it in Vitthal Udyognagar.6. Effectively assisted member units in procuring key Raw Materials in short supply.7. Through an effectively organized agitation forced the State Government and GEB to make
substantial reduction in enhancement made in Industrial Tariff Rates.8. Affiliation of V.U.I.A. in the following Federations and Associations:
o Federation of Industries Association (F.I.A.), Ahmedabad.o Gujarat Chamber of Commerce and Industry (G.C.C.I.), Ahmedabad.o Federation of Association of Small Industries of India, New Delhi (FASII).o Confederation of Indian Industry (C.I.I.), Western Region, Mumbai.o Federation of Gujarat Mills & Industries (F.G.I.), Vadodara.
9. Successfully persuaded GIDC to scale down enhancement made by it in its plot and shed prices as well as rentals and water charges.
10. Successfully prevented extension of application of ESI Scheme to Industrial Units in Vitthal Udyognagar by framing and implementing VUIA’s Voluntary Health Care Scheme in Collaboration with Shree Krishna Hospital of Charutar Arogya Mandal, Karamsad. Built
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a Medical Extension Centre in the Association campus having qualified doctors, nurses and dispensary
11. Actively helped to maintain by and large a steady industrial peace in the area12. Attained a stature and a status for the Association where its voice has to be heard and
cannot easily be ignored. VUIA can, without being immodest claim that it is today one of the most dynamic, forceful and effective Industrial Associations in the State of Gujarat.
13. Running a Balwadi for primary education for the children of industrial workers of this area A new building with complete infrastructure is under construction to be made operational in June ’95.
14. Has been responsible in minimizing industrial sickness by rigorously interacting with financial institutions.
Chapter – 1.2
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COMPANY PROFILE
MISSION
PBL is in the business of design and manufacturing power transmission and
material handling products. Our products are known for their reliability,
performance and competitiveness.
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In pursuit of our vision, we shall:
Upgrade our products to match global benchmarks from time to time.
Use latest technology and efficient methods in manufacturing.
Provide efficient service and support to our customers at all times. By
continually remained focused on our Customer’s needs & expectations.
Ensure operations remain cost effective and profitable.
Bring high growth in our business and an ever-increasing market share.
Continuously upgrade our knowledge with multidimensional skills.
Always remain environment-friendly.
Each and every employee has a role towards the success of vision and mission
of PBL and draws inspiration and energy from the opportunity received through
active contribution.
VISION
PBL, a pioneer, continues to be the leader in Power Transmission and
Material Handling Equipments.
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We provide solutions to the customer, by ensuring high quality of products
and services. We are known and trusted as a reliable organization always working
for customers’ delight.
The high-spirited PBL family has the dynamism and expertise to innovate and
improve products suiting to the ever-changing global needs.
Continuous training and up-gradation of skills enable us in creating an
environment of harmony and joy.
We are proud of our contribution to the society and towards protection of the
environment.
Introduction to POWER BUILD LIMITED
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Power Build Limited is a part of Elecon group of industries and was
established in 1972. It manufactures the wide range of general motor, truck loaders
and Automatic bag filling machine
The excellent performance in the various fields over the years has brought
many states, national and international market, it has collaboration with bran and
lubee, Germany for manufacture of micro processor based weighing system.
Power build is three decade old company engaged in manufacture of a wide
spectrum of products for every application using the italist states of the art
technology under supervision of experience engineers employing the most modern
machinery including CNC Machine of the latest generation and maintaining
uncompromising quality controls.
It is the first Indian company to introduce “Electric weighing and Metal
detecting system”. Power Build Limited is a company representing a fine blend of
specialized skills and high technologies servicing almost all industries.
In the year 2001 the company entered into a technical collaboration agreement
with royal LENOIR FRANCE for manufacturing equipments national wide sales
and services net work are prompt after sales service at short notice.
Power Build ltd. is situated at Anand- Sojitra road Vallabh Vidhyanagar.
ORIGIN ABD GROWTH
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Power build ltd. was incorporated on 15th April, 1972 under the company’s
act 1956, 3 decades ago. Power build ltd. Manufactures mechanical power
transmission equipments and mechanized material handling equipments like gear
motors, truck loaders, metal detector belt weighed, etc. using the latest technology
under the supervision of experienced engineers with the use of most modern
machinery.
PBL started manufacturing helical gear motors under technical collaboration
from German manufacturer Rudolf Muchno KG in 1972. Having established a name
in the market for Helical Geared motors & to meet the growing demand, the
company introduced geared motors with the combination of helical & worm gears as
well as Helical & Bevel gears. To meet with growing demand of the Indian
industrial market, the company added various products. These include automatic
sleighing and bag filling machines, automatic truck and wagon loaders, and
microprocessor based belt weighed and weigh feeders etc.
The company continues its growth to concentrate and consolidate its position
as the most trusted and accepted supplier of quality products by obtaining technical
know-how from industrially developed countries and also in house development of
new products. With a view to have more concentrated & effective capturing of the
already competitive geared motor market, the company introduced new generated,
very efficient and compact drive solutions in the form of ‘M’, ‘C’, ‘F’, and ‘K’
series geared motors which are assembled from a family of modular kits, thus
maximizing availability in October, 2007.
PBL also manufactures helical and spur gears strictly to customer’s
requirement with an accuracy class attainable generally conforming To DIn-6 and
even up to DIN ¾ for precision gears up to diameter 400 mm. In the year 2001, the
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company entered into a technical collaboration agreement with ROYAL LEMOIR
FRANCE for manufacturing Magnetic equipments. During the 3 decades of its
existence, PBL has designed and implemented several landmark projects in India as
well as abroad. Power Build Ltd. Has thus, made its presence felt through consistent
and satisfactory performance of its equipment in core sectors like fertilizer, cement,
coal, power generation, chemical, steel plants etc. Across the country manufacturing
facilities well equipped with latest generation CNC machines backed up by effective
quality management system to produce power transmission and material handling
equipments of high reliability. Moreover, PBL regularly upgrades its workshop
facilities to keep abreast with the latest development. Performing in tandem with the
superior technology is a dedicated team working in various departments.
Power build ltd has workshop area exceeding 10,000 sq. meters equipped with
the latest mazak and excel CNC and NC machines, tools quality control and testing
equipment for production of reliable material handling power transmission
equipment. It is performing in tandem with workforce of 97 employees working in
various departments. First 500 numbers manufacturing Milestone achieved in the
month of august 2007. power build has covered majority of the core sectors through
its supplies of highly sophisticated equipment becoming ample testimony of the
symbolic mark of power build’s unbeatable technology. Nationwide sales and
service network ensure prompt after sales services at short notice. PBL is registered
with registrar of the Gujarat, Ahmadabad. This is a representing affine blend of
specialized skills and high technology serving almost all industries.
Name of the Organisation
Power Build Limited
Register Office
17
Anand-Sojitra Road
Vallabh Vidyanagar -388120
Form of the Organisation
Private Limited
Achievements
29 records have been achieved sine 2001-11-09.
Board of Directors
Shri P.B.PATEL : Chairman
Shri D.M.PATEL : Whole time Director
Shri P.C. Amin : Director
Smt. K.A.PATEL : Director
Bankers
State Bank of India
Chairman
P.B.PATEL
Finance Manager
Shri Subodhbhai. S. Shah
Company Secretary
K. D. Patel
Statutory Auditor
J. D. Zatakia & C0.
Charter Accountant
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Mumbai
Personnel Manager
Mr. Dipakbhai. P. Patel
Main Product
Gears Motors
Truck Loader
Loose Tools
Hoist
Material Handaling Equipments
Fax
+91-2692-236559
Size of the unit and firm of the organization:-
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Power Build Ltd. Is one of the sub companies of Elecon engineering Ltd It has
so many selling branches in all over India wiz, Chennai, Mumbai, Pune, Baroda,
Ahmadabad, New Delhi etc. Its registered office is established at Anand – Sojitra
road, Vallabh Vidhyanagar 388120, Gujarat India.
There are mainly 3 types of industry on the basis size wise classification.
The main three types are:
Small Scale Industry
Medium Scale Industry
Large Scale Industry
Small Scale Industry:-
All industry units whose capital investment plant and machinery is up to 3
corers of rupees are known as small scale industries.
Medium Scale industry:-
All the industry units with the capital investment of more than 3 corer
and up to above 100 corers are known as medium scale industries.
Large scale industry:-
Where the capital requirement to start on industrial unit is enormous
and where labour laws are applicable. It is known as large scale industries.
PBL is medium scale industry and its form of organization
is deemed public ltd.
ISO CERTIFICATE:-
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Standard ISO 9001: 2008
Certificate Register no. 01 100 058592
TUV Rhineland cert GmbH certifies
Certificate holder: Power Build Limited
Post Box No. 28, Anand – Sojitra road,
Vallabh Vidhyanagar – 388120
Gujarat, India
Scope: Design and manufacture of Power Transmission
Products such as geared motors, gear reducers, gear
components & electric wire rope Hoist
An audit was performed, Report No. 058592. Proof has been
finished that the requirements according to ISO 9001 – 2008 are
fulfilled.
The due date for all future audits is 18 – 20 (dd. mm).
Validity: The certificate is valid from 2009–03–17 until 2012–04–16. First
certification 2006
Bangalore: 2009 – 03 - 24
Produts of the Company
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(1) Series M inline geared motors and reducers
Series M inline geared motors and reducers provide a very efficient and compact drive solution to meet most requirements upto 90KW with maximum output torque capacity 11,000 Nm.Units are available with ratios coverage of 1.4:1 to 70:1 in double reduction, upto 250:1 in triple reduction and upto 16200:1 in combined units.
(2) Worm Geared Motors & Reducers
PBL manufactures worm Geared Motors & Reducers with hollow input shaftsand aluminum alloy casings. The units are supplied with factory filled lubricant avoiding frequent oil changes. The worm Geared Motors & Reducers are available in 63S, 80S & 100S models with ratios ranging from 5:1 to 70:1.
(3) Helical Geared Motors, Motor Mount Reducers and Inline Gear Reducers
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PBL also manufactures state-of-the-art Helical Geared Motors, Motor Mount Reducers and Inline Gear Reducers with solid and hollow input shafts, under the license agreement with a renowned Japanese manufacturer Seiki Kogyosho Limited (SKK) (now taken over by Sumitomo Heavy Industries). Foot/flange mounted Geared Motors, solid input shaft inline Gear Reducers and Motor Mount Reducers with Hollow Input Shaft are available in the range of 0.4 kw to 11.0 kw and having ratio from 5:1 to 200:1. The units are suitable to accommodate “IEC” frame 3-phase, 4 pole AC induction motors.
(4) E lectric hoists
PBL electric hoists are designed in accordance with international standards and also as per “Rules for design of serial lifting equipment” issued by Federation of European Hoist Manufactures (FEM). Present manufacturing range includes hoists up to 16 tons lifting capacity.
LOOSE GEARS
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PBL manufactures helical and spur gears strictly to customers’ requirements. Accuracy class attainable generally is conforming to DIN-6 and even up to DIN 3 / 4, for precision gears up to diameter 400 mm.
Helical Gear Wheels and Pinion Shafts with internal as well as external spline (both straight & involutes) can be offered. Hardened and ground Spur and Helical Gears manufactured by PBL are used in Printing Machines, Plastic Extrusion Machines, Textile Machines, Air Compressors, Packing Machines, Gear Pumps, Oil Engines and Mining Equipments.
(1) HELICAL & SPUR GEAR PINIONS
Hardened & ground spur and helical gears manufactured by PBL, used in plastic extrusion machines, textile machines & helical gear reducers.
(2)HALICAL GEARS & PINIONS
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Hardened & ground spur and Helical gears manufactured by PBL, used in Packing machines & Gear Pumps.
(3)Hardened and Ground spur gears manufactured by PBL, used in Oil Engines
(4)Hardened & Ground Helical Gears manufactured by PBL, used in Air Compressors.
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..............................................................................................................................................................................................
.............................................................
(5) Hardened & Ground Spur Gears with Internal Spline manufactured by PBL, used in Mining Equipments .
..............................................................................................................................................................................................
.............................................................
..............................................................................................................................................................................................
.............................................................
CLIENTS OF THE COMPANY
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GSFC
BHARAT HEAVY ELECTRICAL LIMITED
IPCL
HINDUSTAN LIVER LIMITED
L & T
THERMAL POWER STATION
GNFC
FOOD INDUSTRIES
DAIRY INDUSTRIES
COMPETITORS
Bonfiglioli
SFW
Shanti Gears
Nords
Ic-Bauer
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Chapter - 2
RESEARCH METHODOLOGY
The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made.
Sources of secondary data:
(1) Most of the calculations are made on the financial statements of the company provided statements.
(2) Referring standard texts and referred books collected some of the information regarding theoretical aspects.
(3) Method- to assess the performance of he company method of observation of the work in finance department in followed.
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Chapter – 2.1
OBJECTIVE OF THE STUDY
The major objectives of the resent study are to know aboutfinancial strengths and weakness of POWER BUILD LIMITED through FINANCIAL RATIO ANALYSIS .
The main objectives of resent study aimed as :
To evaluate the performance of the company by using ratios as a yardstick to measure the efficiency of the company. To understand the liquidity, profitability and efficiency positions of the company during the study period. To evaluate and analyze various facts of the financial performance of the company. To make comparisons between the ratios during different periods.
OBJECTIVES
(1). To study the present financial system at POWER BUILD LIMITED.
(2). To determine the Profitability, Liquidity Ratios.
(3). To analyze the capital structure of the company with the help of Leverage Ratio.
(4). To offer appropriate suggestions for the better performance of the Organization
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Chapter – 2.2
SOURSES OF DATA AND METHODOLOGY
The data being collected for this study is from the annual reports of the company. I
have deeply study the annual report of last five years of the company to find out the various ratio’s.
The annual report’s of the company is so well prepared that it is very easier for me to understand
the financial position of the company without any difficult. I have also taken the help of account to
understand the accounting method of the company.
The another source of the data collection for my study of financial condition of the
company is website of the Power build limited. The website provides me all the necessary
information for my study.
The methodology I have used for calculating the various ratio’s is according the
reference book like I.M.Pandey and also taken help of internet where I have faced difficulties.
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Chapter 2.3
LIMITATIONS
(1) The study provides an insight into the financial, personnel, marketing And other aspects of POWER BUILD LIMITED. Every study will be bound With certain limitations.
(2) The below mentioned are the constraints under which the study is carried out.
(3) One of the factors of the study was lack of availability of ample Information. Most of the information has been kept confidential and as such as not assed as art of policy of company.
Time is an important limitation. The whole study was conducted in a period of SIX WEEKS, which is not sufficient to carry out proper interpretation and analysis.
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Chapter -3
FINANCIAL DEPARTMENT
Financial Management:- is the specific area of finance dealing with the financial decision corporations make, and the tools and analysis used to make the decisions. The discipline as a whole may be divided between long-term and short-term decisions and techniques. Both share the same goal of enhancing firm value by ensuring that return on capital exceeds cost of capital, without taking excessive financial risks.
Capital investment decisions:- comprise the long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. Short-term corporate finance decisions are called working capital management and deal with balance of current assets and current liabilities by managing cash, inventories, and short-term borrowings and lending (e.g., the credit terms extended to customers). Corporate finance is closely related to managerial finance, which is slightly broader in scope, describing the financial techniques available to all forms of business enterprise, corporate or not.
Role of Financial Managers :
The role of a financial manager can be discussed under thefollowing heads:1. Nature of work2. Working conditions3. Employment4. Training, Other qualifications and Advancement5. Job outlook6. Earnings7. Related occupations
Finance department is like blood vain of the business without adequate finance the
business cannot start nor it can be run properly. All the activities regarding finance
handled by finance department.
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Finance department deals with,
(1) Controlling financial activity
(2) Treasury & taxation
Finance activity includes:
Working capital managmrnt
Costing
Account payable
Account receivable
Invoicing
Bill boking
Finance department is the most important department as it concerned with
some important decision making process of the company. The vital importance of the finance
decision to a firm makes it importance of the finance decision to a firm makes it imperative to set
up a sound and efficient organization for the finance function.
In PBL, the important decision for the firm is taken by the top
management. They give the objectives or goals of the finance function for increasing effectiveness
and efficiency.
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Chapter – 3.1
Ratio Analysis
Financial ratios are calculated from one or more pieces of information from a company's financial statements. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing.
A ratio gains utility by comparison to other data and standards. Taking our example, a gross profit margin for a company of 25% is meaningless by itself. If we know that this company's competitors have profit margins of 10%, we know that it is more profitable than its industry peers which are quite favorable. If we also know that the historical trend is upwards, for example has been increasing steadily for the last few years, this would also be a favorable sign that management is implementing effective business policies and strategies.
Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations.
Meaning
Ratio-analysis is a concept or technique which is as old as accounting concept. Financial analysis is a scientific tool. It has assumed important role as a tool for appraising the real worth of an enterprise, its performance during a period of time and its pit falls. Financial analysis is a vital apparatus for the interpretation of financial statements. It also helps to find out any cross-sectional and time series linkages between various ratios.
Unlike in the past when security was considered to be sufficient consideration for banks and financial institutions to grant loans and advances, nowadays the entire lending is need-based and the emphasis is on the financial viability of a proposal and not only on security alone. Further all business decision contains an element of risk. The risk is more in the case of decisions relating to credits. Ratio analysis and other quantitative techniques facilitate assessment of this risk.
Ratio-analysis means the process of computing, determining and presenting the relationship of related items and groups of items of the financial statements. They provide in a summarized and concise form of fairly good idea about the financial position of a unit. They are important tools for financial analysis.
34
IMPORTANCE OF RATIO ANALYSIS
Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool
Advantages:-
The following points are revealing the merits of ratio analysis.
(1) It simplifiers the understanding of financial statements.
(2) Ratio being out the inter relationship among various financial figures and bring to light theirs financial significance. Ratio analysis is advice to analysis and interprets the financial health of the enterprise.
(3) It gives information about to profitability and performance of the company.
(4) It evaluates the financial position of the company.
(5) Ratio serves as effective control tools. They also facilitate establishment of a standard costing system budgeting control.
(6) It helps is decision making by the statement widely management investors financing institutions etc.
35
Limitations:-
The following limitations are as under
(1) False result:
(2) Limited comparability:
(3) Price level changes affect ratio
(4) Ignoring qualitative factors
(5) No single standard ratio
(6) Impressed by personal bias and ability of the analysis.
36
CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows:
(1). Traditional Classification(2). Functional Classification(3). Significance ratios
1. Traditional Classification
It includes the following. Balance sheet (or) position statement ratio: They deal with the relationship
between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet.
Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,
Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.
37
IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE
(1) . Liquidity ratio(2). Leverage ratio(3). Activity ratio(4). Profitability ratio
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-term current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be Calculated
2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations. Accordingly, long term solvency ratios indicate firm’s ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings.
3. ACTIVITY RATIOS Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly effect the volume of sales. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called “Turn over ratios” because they indicate the speed with which assets are converted or turned over into sales.
4PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise
38
Classification:-
Ratio Analysis
S
Financial ratio can be classified according to the information they provide. The following types of ratio frequently are used:
1. Liquidity Ratio2. Activity Ratio3. Leverage Ratio4. Profitability Ratio
Liquidity Ratio
Activity Ratio
Leverage Ratio
Profitability Ratio
(A) Current Ratio
(B) Quick Ratio
(C) Net working Capital Ratio
(A) Inventory turnover ratio
(B) Debtors turnover ratio
(C) Fixed assets turnover ratio
(D) Current assets turnover ratio
(E) Total assets turnover ratio
(A) Debt equity ratio
(B) Debt assets ratio
(A) Gross profit ratio
(B) Net profit ratio
(C) Return on investment
39
STEPS IN RATIO ANALYSIS
The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.
To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm.
Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action.
BASIS OR STANDARDS OF COMPARISON
Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types.
Past ratios, calculated from past financial statements of the firm.
Competitor’s ratio, of the some most progressive and successful competitor firm at the same point of time.
Industry ratio, the industry ratios to which the firm belongs to
Projected ratios, ratios of the future developed from the projected or pro- forma financial statements
NATURE OF RATIO ANALYSIS
40
Ratio analysis is a technique of analysis and interpretation offinancial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis.
Selection of relevant data from the financial statements depending upon the objective of the analysis.
Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in
the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.
INTERPRETATION OF THE RATIOS
The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them.The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways.
Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS
41
The calculation of ratios may not be a difficult task but their useis not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are
o Accuracy of financial statements
o Objective or purpose of analysis
o Selection of ratios
o Use of standards
o Calibre of the analysis
42
Chapter – 3.2
Calculation of Ratio’s
1. LIQUIDITY RATIO:
Some are the most common ratio which shows the accent of liquidity.
(A) Current Ratio(B) Quick Ratio(C) Net Working Ratio
A ratio of greater than one means that has more than turn out assets than current claims against then. It is obtained by dividing current assets by current liabilities.
( A) CURRENT RATIO: Current ratio may be defined as the relationship betweencurrent assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm.
Current ratio = Current assetsCurrent Liabilities
Years
2005-06 = 40, 84, 67, 432 = 1.78:1 23, 00, 56, 910
2006-07 = 63, 16, 79, 935 = 1.94:1 32, 58, 23, 091
2007-08 = 80, 13, 51, 355 = 1.90:1 42, 13, 72, 397
2008-09 = 60, 96, 40, 315 = 1.75:1 34, 65, 08, 298
2009-10 = 470,287,319 = 1.53:1 307,472,978
43
Table – 1
YearCurrent Assets Current liabilities Current Ratio
2005-06 40, 84, 67, 432 23, 00, 56, 910 1.78:1
2006-07 63, 16, 79, 935 32, 58, 23, 091 1.94:1
2007-08 80, 13, 51, 355 42, 13, 72, 397 1.90:1
2008-09 60, 96, 40, 315 34, 65, 08, 398 1.76:1
2009-10 470,287,319 307,472,978 1.53:1
Chart - 1
44
Interpretation: -
Current ratio measures short term solvency of the firm. It indicates availability at current assets in rupees for every one rupee of current liabilities.
As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position of the firm.
. The PBL has current ratio of 2006-07 is 1.94:1 which is increase of 2005-06 I.e. 1.78:1 and 2007-08 C.R. is decrease from 1.94:1 to 1.90:1. The above ratio shows that PBL is nearest to standard which show that the good position of working capital of PBL.
(B) Quick Ratio: -
Quick Ratio is also known as Acid test ratio. The Quick ratio is an alternative measure of liquidity that does not include inventories in the current assets. The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick assets comprise any cash balance and reading marketable securities only.
Quick AssetsQuick Ratio =
Current liabilities
Current ratio
1.45
1.55
1.65
1.75
1.85
1.95
2.00
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Current ratio
45
Years
2005-06 = 26,82,47,295 = 1.16 :1 23, 00, 56, 910
2006-07 = 43,45,70,597 = 1.33 :1 32, 58, 23, 091
2007-08 = 60,60,90,951 = 1.43 :1 42, 13, 72, 397
2008-09 = 46,73,60,071 = 1.34 :1 34, 65, 08, 298
2009-10 = 36,28,90,055 . = 1.18 :1 30,74,72,978
Table - 2
Year Quick Assets Current Liabilities Quick Ratio
2005-06 26, 82, 47, 295 23, 00, 56, 910 1.16
2006-07 43, 45, 70, 597 32, 58, 23, 091 1.33
2007-08 60, 60, 90, 951 42, 13, 72, 397 1.43
2008-09 46, 73, 60, 071 34, 65, 08, 298 1.34
2009-10 36, 28, 90, 055 30, 74, 72, 978 1.18
Chart – 2
46
Interpretation: -
This is very exacting standard of liability and it is satisfactory of the ratio is 0.50:1.it is indicate the position of business for payment of liquid liabilities as and when they natured.
In PBL quick ratio in the year 2006-07 in 1.33:1 and in the year 2007-08 is 1.43:1.It is increase by 0.10. after that period it has shown the decline for the next two years for 2008-09 & 2009-10 to 1.34 & 1.18 respectively which is not being so good for the company if they have to make an immediate payment.
Although this ratio is good for the company as they are not have to large amount of immediate payment so lesser the investment in quick asset better is the benefit.
(C) Net Working Capital Ratio: -
The difference between current assets and current liabilities excluding short term bank borrowing is called net working capital. NWC is sometimes used as measures of firm’s liquidity. It is concerned that between any two firms. The one having a larger NWC has the greater ability to meet its current obligation.
Net working capital = Net working capital Net assets
Years
Quick ratio
0
1.101.15
1.20
1.25
1.301.35
1.40
1.45
1.50
1.55
2005-06 2006-07 2007-08 2008-09 2009-10
Ye
ar
ratio
47
2005-06 = 17, 84, 10, 522 = 0.57:1 31, 17, 98, 969
2006-07 = 30, 58, 56, 844 = 0.63:1 48, 67, 18, 332
2007-08 = 37, 99, 78, 958 = 0.62:1 61, 65, 25, 185
2008-09 = 26, 31, 32, 017 = 0.40:1 59, 15, 08, 513
2009-10 = 16,28,14,341 . 44,50,23,697 = 0.36 :1
Table - 3
Chart - 3
Year Net working Capital Net assets Net working capital ratio
2005-06 17, 84, 10, 522 31, 17, 98, 969 0.57
2006-07 30, 58, 56, 844 48, 67, 18, 332 0.63
2007-08 37, 99, 78, 958 61, 65, 25, 185 0.62
2008-09 26, 31, 32, 017 59, 15, 08, 513 0.40
2009-10 16, 28 ,14, 341 44, 50, 23, 697 0.36
48
Interpretation: -
In 2006-07 the networking capital ratio is 0.63 and 2007-08 the NWC ratio is decreased by 0.01. After this two year for next two years it has being decline to 0.40 & 0.36 for 2008-09 & 2009-10 respectively. This shows that company has lesser it’s investment in working capital in the last two years. Power build limited is not an retail industry so lesser investment in net working capital will be consider a good idea.
2. ACTIVITY RATIOS: -
Funds of creditors and owners are invested various assets to generate sales and profits. The management of assets, the larger amount of to evaluate the efficiency with which the firm manager and utilizes its assets. These ratios are called turnover ratios because they indicates the speed with which assets are being converted or turned over into sales activity ratios. Thus, involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well several activity ratios can be calculated to judge the effectiveness of assets utilizations.
Following are the activity ratio:
1) Inventory turnover ratio2) Debtors turnover ratio3) Fixed assets turnover ratio4) Current assets turnover ratio5) Total assets turnover ratio
Net working capital ratio
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2005-06 2006-07 2007-08 2008-09 2009-10year
49
6) Creditor’s turnover ratio
(A) Inventory turnover ratio:-
This ratio is also known as stock turnover ratio. It indicates the efficiency of the firm in selling its products. The higher ratio is more efficient the management of inventories. A high turnover ratio may be caused by a low level of inventory which may result in frequent out and loss of sales and customer goodwill.
Inventory turnover ratio = Net sales
Inventory
Years
2005-06 = 504212645 = 3.60 times 140220137
2006-07 = 812039240 = 4.12 times 107109338
2007-08 = 1034232621 = 5.30 times 195260404
2008-09 = 1148956523 = 8.07 times 142280244
2009-10 = 842,469,422 = 7.84 times 107,397,264
Table – 4
YEAR INVENTORY TURNOVER RATIO
2005-06 3.60
2006-07 4.12
2007-08 5.30
2008-09 8.07
20009-10 7.84
50
Chart – 4
Interpretation:-
The inventory turnover ratio is good. In 2005-06 is 3.6 then next year it is increase to 4.12 in the year 2006-07 and 2007-08 is 5.3 times and 2008-09 it is 8.07and in the last year it has being decrease 0.23 to 7.84.
That means this inventory turnover ratio is increase year by year which shows the positive utilization of the inventory in the company for making beteer utilization of inventory for achieving desired result.
(B) Debtors turnover ratio: -
A firm sells good for cash and credit is used as a marketing tool by a numbers of companies when the firm is extends credits to its customers, debtors are created in the firm accounts. Debtors are expected to be converted into cash over a stock short period of therefore, are included in current assets. Debtors turnover indicates the numbers of times debtors turnover each year. Generally the higher value of debtor’s turnover the more efficiency in the management of credit.
Inventory turnover ratio
0
1
2
3
4
5
6
7
8
9
2005-06 2006-07 2007-08 2008-09 2009-10
year
51
Debtors turnover ratio= Sales Debtors
Years
2005-06 = 504212645 = 2.26 times 223263531
2006-07 = 812039240 = 2.36 times 342500324
2007-08 = 1034232621 = 2.13 times 485745281
2008-09 = 1148956523 = 3.60 times 319636536
2009-10 = 842,469,422 = 4.21times 200,099,457
Table - 5
YEAR DEBTORS TURNOVER RATIO
2005-06 2.26
2006-07 2.36
2007-08 2.13
2008-09 3.60
2009-10 4.21
52
Chart - 5
(B)-1 Average collection period/Debtors velocity. Avg collection period = 365 . Debtors t/o
Table – 5.1
YEARS RATIO-DAYS
2005-06 161
2006-07 154
2007-08 171
2008-09 101
2009-10 86
Debtors turnover ratio
0
0.5
1
1.5
2
2.5
3
3.5
4
2005-06 2006-07 2007-08 2008-09 2009-10
year
53
Interpretation:-
The average collection period shows the time that you give to your debtors to make payment to you for the good’s being purchased. The collection period will have to be more days where competition is higher to attract the customer. Power build limited has maintain it’s polisy of collection period over the years.
In PBL Company the debtor’s turnover ratio is not so good. In the year 2005-06 it is being 161 days which is decrease to 154 days in the year 2006-07. But next year it has being increased to 171 days which is unfavorable for company. It is being on positive side for last to years it is being decreasing to 101 days & 86 days for 2008-09 &2009-10 respectively.
Fixed assets turnover ratio measures sales for rupee of investment in That means company is improving the collection terms from customer to lesser the bed-debt possibility and lesser the collection period faster the rotation of cash will flow into the business.
(C)Fixed assets turnover ratio:-
It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.
Fixed assets, the numeration of this ratio is the net sales for the period and the denominator is the balance in the next fixed assets account at the end of the year. It measures the efficiency with which the firm is utilizing its investment in fixed assets. Such as land buildings etc. it is also indicates the adequate of sales in relation to the investment in fixed assets.
Fixed assets turnover ratio = Net sales Net fixed assets
Years
54
2005-06 = 504212645 = 3.78 times 133388447
2006-07 = 103423261 = 4.37 times 236546227
2007-08 = 812039240 = 4.49 times 180861438
2008-09 = 1148956523 = 3.5 times 328376496
2009-10 = 842,469,422 = 2.99 times 282,209,356
Table - 6
Chart - 6
Interpretation:-
Fixed assets are used in the business for producing the goods to be sold. This ratio shows the firm’s ability in generating sales from all financial resources committed to total assets. The ratio indicates the account of one rupee investment in fixed assets.
The income from services is greatly increased in the current year due to the increase in the Operations & Maintenance fee due to the increase in extra invoice and the net fixed assets are reduced because of the increased charge of depreciation. Finally, that effected a huge increase in the ratio compared with the previous year’s ratio.
This ratio shows that the investment in fixed assets is very low. In PBL the fixed assets turnover ratio increase year by year. In 2005-06 it is 3.78 times after two year in 2007-08. It
YEAR FIXED ASSETS TURNOVER RATIO
2005-06 3.78
2006-07 4.37
2007-08 4.49
2008-09 3.50
2009-10 2.99
fixed assets turnover ratio
00.5
11.5
22.5
33.5
44.5
5
2005-06 2006-07 2007-08 2008-09 2009-10
year
55
is 4.49 times after it is decline and in 2008-09 it is 3.50 times turnover and in last year it has decline to 2.99 times.
That means for power build limited sales are higher than fixed assets which is a positive indication for the company
(D) Current assets turnover ratio:-
In current assets turnover ratio total C.A. Assets are compared to sales. The more sales in selection to amount invested in current assets. The more efficient is the use of the current assets, if indicates the higher efficiency current assets.
Current assets turnover ratio = Sales Current assets
Years
2005-06 = 504212645 = 1.23 times 408467432
2006-07 = 812039240 = 1.29 times 631679935
2007-08 = 1034232621 = 1.29 times 8013513355
2008-09 = 1148956823 = 1.88 times 609640315
2009-10 = 842,469,422 = 1.79 times 470,287,319
Table – 7
YEAR CURRENT ASSETS TURNOVER RATIO
2005-06 1.23
2006-07 1.29
2007-08 1.29
2008-09 1.88
2009-10 1.79
56
Interpretation:-
The above ratio indicates that sales are higher than the current assets.
In Table highest firm turnover is in 2008-09 and which is 1.88 times and lowest turnover is in 2005-06 which 1.23 times and in 2006-07 & 2007-08 it has remain constant which is 1.29 times
(E) Total assets turnover ratio:-
Assets are used to generate sales therefore a firm should manage its assets efficiency to maximize sales. The total assets turnover ratio shows the firm’s ability in generating sales from all financial resources committed to total assets.
Total assets turnover ratio = Net sales Total assets
Years
2005-06 = 504212645 = 1.45 times 347433895
2006-07 = 812039240 = 1.55 times 522353256
2007-08 = 1034232621 = 1.59 times 652160109
2008-09 = 1148956823 = 1.94 times 591507513
2009-10 = 842,469,422 = 1.77 times 474958521
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Table - 8
Interpretation:-
In PBL assets turnover ratio increases year by year. We seen in above Tables or dates in 2005-06 is 1.45, in 2006-07 is 1.55,in 2007-08 it is 1.59, and in 2008-09 it is 1.94.
So the total turnover ratio is constantly increased for the company over the year to year. This ratio shows how efficiently & effectively the asset established in the company is being utilized by the company.
(F) CREDITOR TURNOVER
It indicates the number of times sundry creditors have been paid during a year. It is calculated to judge the requirements of cash for paying sundry creditors. It is calculated by dividing the net credit purchases by average creditors.
Creditors turnover ratio = Credit purchase . Creditors
Net credit purchases consist of gross credit purchases minus purchase return
YEAR TOTAL ASSETS TURN OVER RATIO
2005-06 1.45
2006-07 1.55
2007-08 1.59
2008-09 1.94
2009-10 1.77
58
When the information about credit purchases, opening and closing balances of trade creditors is not available then the ratio is calculated by dividing total purchases by the closing balance of trade creditors.
Years
2005-06 = 327232198 = 1.74 times 188236481
2006-07 = 516041224 = 1.97 times 261987695
2007-08 = 625866084 = 2.25 times 278585738
2008-09 = 608710516 = 2.84 times 214627812
2009-10 = 379888893 = 2.27 times 167241721
Table - 9
Years Creditors turnover
2005-06 1.74
2006-07 1.97
2007-08 2.25
2008-09 2.84
2009-10 2.27
(F) -1 Creditors ratio/Credit velocity/Average payment period
59
Creditors ratio = 365 . Creditor turnover
Table – 9.1
YEARS RATIO-DAYS
2005-06 209
2006-07 185
2007-08 162
2008-09 128
2009-10 160
Interpretation
The above ratio indicates the time period of paying to the creditors of the company during the year. the ratio is good for company when average payment period is more than average collection period. The above calculation shows that average collection period for the year 2005-06 is 209 days which is being decreased in 2006-07 to 185 days and further decreased by 162 days in 2007-08 thereafter in the year it further decline to 128 in 2008-09. This is not a positive condition as the company has to make the arrangement in lesser time for creditors for making the payment in a shorter time spam. The positive result is that in the last year 2009-10 the average collection period has increased to 160 days which shows that management has make the improvise in policy for meting the negative situation and positive result has been achieved in the last year
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(D) Leverage ratio:-
Leverage ratios look at the extent that a company has depended upon borrowing to finance its operations. As a result, these ratios are reviewed closely by bankers and investors. Most leverage ratios compare assets or net worth with liabilities. A high leverage ratio may increase a company's exposure to risk and business downturns, but along with this higher risk also comes the potential for higher returns. Some of the major measurements of leverage include:
A. Debt – Equity Ratio:B. Debt – Assets Ratio:C. Interest Coverage Ratio:
(A) Debt - Equity Ratio : -
Debt equity ratio is to indicate the relative mix of the company's investor-supplied capital. A company is generally considered safer if it has a low debt to equity ratio—that is, a higher proportion of owner-supplied
Debt – Equity Ratio = Long Term Debt .Equity shareholder fund
Years
2005-06 = 151254098 = 1.55 times 102490465
2006-07 = 254288527 = 1.57 times 162347032
2007-08 = 348472033 = 1.43 times 243955786
61
2008-09 = 298921369 = 1.07 times 280567293
2009-10 = 153783781 . = 0.52 times 97085526
Table - 10
Chart - 7
Interpretation: -
Debt -assets ratio establishes the relationship total debts and total assets. Here total assets are higher than the total debts. In the year 2005-06 it is 43.54 % and in the year 2006-07 it is increase up to 48.68 % and in the year 2007-08 debt equity ratio is increase up to 53.43 %. In every year ratio is increase by increase.
YEAR DEBT EQUITY RATIO
2005-06 1.55
2006-07 1.57
2007-08 1.43
2008-09 1.07
2009-10 0.52
DEBT EQUITY RATIO
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2005-06 2006-07 2007-08 2008-09 2009-10
year
62
(B) Debt – Assets Ratio :
Several debt ratios may be used to analyze the long term solvency of a firm. The firm may be interested in knowing the proportion of the interest because debt in the capital structure. The debt assets ratio measures the portion of a company's capital that is provided by borrowing. A debt ratio greater than 1.0 means the company has negative net worth. This ratio is similar, and can easily be converted to, the debt to equity ratio.
Total Assets Ratio = Total Debt * 100Total Assets
Years
2005-06 = 151254098 * 100 = 43.53% 347433893
2006-07 = 254288527 * 100 = 48.68% 522353256
2007-08 = 348472033 * 100 = 53.43% 652160109
2008-09 = 298921369 * 100 = 48.10% 621443337
2009-10 = 153783781 * 100 = 32.38 474958521
Table - 11
63
Chart - 8
Interpretation: -
It is clear from the above diagram whether debt equity ratio. PBL have more lenders funds, then owners because lenders contribution is 1.57 times of owner’s contribution in 2006-07. In 2007-08 it is decreased up to 1.43 times.
YEAR DEBT ASSETS RATIO
2005-06 43.53%
2006-07 48.68%
2007-08 53.43%
2008-09 48.10%
2009-10 32.38%
DEBT ASSETS RATIO
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
2005-06 2006-07 2007-08 2008-09 2009-10
year
64
(C ) Interest coverage ratio
Interest coverage ratio shows how efficiently the company is covering the interest rate show that it can be able to fulfill their payment in time without facing any kind of difficulties in any kind of situation. Interest coverage ratio = E.B.I.T . InterestYears
2005-06 = 40815726 = 1.95 Times 20944252
2006-07 = 100578447 = 3.77 Times 26675714
2007-08 = 97926838 = 2.74 Times 35807963
2008-09 = 121796688 = 2.76 Times 44178832
2009-10 = 131924626 = 4.34 Times 30329276
Table - 12
Years INT Coverage Ratio
2005-06 1.95
2006-07 3.77
2007-08 2.74
2008-09 2.76
2009-10 4.34
65
Interpretation
The interest coverage ratio of power build limited in the year 2005-06 is 1.95 and in the very next year it has increased to 3.77 there after in the following two years it has remain constant at 2.74 & 2.76 for the year 2007-08 & 2008-09 respectively. While in the last year 2009-10 it has increased to 4.34.
D) PROFITABILITY RATIO: -
Profitability ratios provide information about management's performance in using the resources of the small business. As Gill noted, most entrepreneurs decide to start their own businesses in order to earn a better return on their money than would be available through a bank or other low-risk investments. If profitability ratios demonstrate that this is not occurring—particularly once a small business has moved beyond the start-up phase—then the entrepreneur should consider selling the business and reinvesting his or her money elsewhere.
However, it is important to note that many factors can influence profitability ratios, including changes in price, volume, or expenses, as well the purchase of assets or the borrowing of money. Some specific profitability ratios follow, along with the means of calculating them and their meaning to a small business owner or manager.
Following are the Profitability Ratio: -
A. Gross Profit RatioB. Net Profit RatioC. Return on Capital EmployedD. Earning Per Share
(A) Gross Profit Ratio: -
Gross profit ratio measures the margin on sales the company is achieving. It can be an indication of manufacturing efficiency or marketing effectiveness.
Its express the relationship between gross profits earned to net sales. If the ratio is low, it indicates that the cost of sales is high that purchasing is inefficient.
It measures the relationship between gross profit and sales. It is calculated by dividing gross profit by sales
Gross profit is the difference between sales and cost of goods sold.
Gross Profit Ratio = Gross Profit * 100 Sales
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Years
2005-06 = 137276259 * 100 = 27.23% 504212695
2006-07 = 222991387 * 100 = 27.46 % 812039240
2007-08 = 258231359 * 100 = 24.97 % 1034232621
2008-09 = 327882963 * 100 = 28.54 % 1148956523
2009-10 = 299338541 *100 = 35.53% 842469422
Table – 13
Chart - 9
YEAR GROSS PROFIT RATIO
2005-06 27.23%
2006-07 27.46%
2007-08 24.97%
2008-09 28.54%
2009-10 35.53%
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Interpretation: -
Power build limited company gross profit ratio has increased year-by-year. Except in the year 2007-08 it has shown the increasing trend of gross profit ratio. which shows the positive side of the power build limited.
The gross profit ratio in the year 2005-06 is 27.23 % which has increased minor to 27.46 %. The next year it has decreased to24.97 %. But it has recovered next year and has increased to 28.54 % and the very next year it has increased tremendously to 35.53 % .
The result of this ratio shows that company is focusing on it’s goal and keeping the continues watch on gross profit so that if any change can be applied to increase the gross profit
(B) Net Profit Ratio : -
Net profit ratio measures the overall profitability of the company, or how much is being brought to the bottom line. Strong gross profitability combined with weak net profitability may indicate a problem with indirect operating expenses or non-operating items, such as interest expense. In general terms, net profitability shows the effectiveness of management. Though the optimal level depends on the type of business, the ratios can be compared for firms in the same industry.
Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm.
It also indicates the firm’s capacity to face adverse economic conditions such as price competitors, low demand etc. Obviously higher the ratio, the better is the profitability
GROSS PROFIT RATIO
22.00.00
24.00%
26.00%
28.00%
30.00%
32.00%
34.00%
36.00%
38.00%
40.00%
2005-06 2006-07 2007-08 2008-09 2009-10
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Net Profit Ratio = Net Profit * 100Net Sales
Years
2005-06 = 11820791 * 100 = 2.34 % 504212695
2006-07 = 46356567 * 100 = 5.71 % 812039240
2007-08 = 42722854 * 100 = 4.13 % 1034232621
2008-09 = 51728276 * 100 = 4.50 % 1148956523
2009-10 = 66783008 *100 = 7.52% 842469422
Table – 14
Chart - 10
YEAR NET PROFIT RATIO
2005-06 2.34 %
2006-07 5.71 %
2007-08 4.13 %
2008-09 4.50 %
2009-10 7.52%
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Interpretation: -
The ratio of Net Profit is shows the net margin on sales. The net profit ratio of the company will be able to dictate it’s profit making capacity.
In the year 2005-06, Net Profit Ratio is 2.34 % and next year 2006-07 increased up to 5.71 % and the next year the ratio is decreased up to 4.13 % in the year 2007-08it being slightly change to 4.50 %. The last year shown the highest profit of last five years 7.52 %.that shows the company is improving their profit ratio by reaming active throughout whole year.
The result we can conclude from the above ratio is that company is making a constant effort for increasing the profit ratio of the company.
(C) Return on Capital Employeed
It is calculated by dividing Earnings Before Interest & Tax (EBIT) by the net capital employed. The term net capital employed in the gross capital in the business minus current liabilities. Thus it represents the long-term funds supplied by creditors and owners of the firm.
R.O.C.E = E.B.I.T *100
Capital Employed
NET PROFIT RATIO
.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
2004-05 2005-06 2006-07 2007-08 2008-09year
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Years
2005-06 = 40815726 *100 = 7.51 %
543175743
2006-07 = 100578447 *100 = 11.86 %
848176347
2007-08 = 97926838 *100 = 9.42 %
1039217446
2008-09 = 121796688 *100 = 12.58 %
967951635
2009-10 = 131924626 *100 = 16.86 %
782431499
Table - 15
Years R.O.C.E
2005-06 7.51 %
2006-07 11.86 %
2007-08 9.42 %
2008-09 12.58 %
2009-10 16.86 %
Interpretation
The ratio return on capital employed shows that how much return you gives to your
creditors and suppliers who has given to you the long term finance on credit basis. Thus in this
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ratio the more percentage you give return to your creditors and suppliers the better the image will
improvise in the market and more the finance the company will be able to gather on credit basis.
this ratio simply applies credit worthiness of the company.
Power build limited has given a better return to their creditors and suppliers in the year it
has given 7.51% return. The very next year it has increased to 11.86% although it has decreased in
the year 2007-08 but in the next year 2008-09 it has increased to12.58%. the last year the company
has given the highest return of 16.86% in 2009-10.
This result shows the power build limited is giving better return to their creditors and
suppliers.
(D) EARNING PER SHARE
Earnings per share is a small verification of return of equity and is calculated by dividing the net profits earned by the company and those profits after taxes and preference dividend by total no. of equity shares.
E.P.S = Net Profit after Tax .
No. of Equity Shares
The Earnings per share is a good measure of profitability when compared with EPS of similar other components (or) companies, it gives a view of the comparative earnings of a firm.
Years
2005-06 = 11820791 = 71.64
165000
72
2006-07 = 46356567 = 154.52
300000
2007-08 = 42722854 = 142.41
300000
2008-09 = 46572635 = 116.00
399551
2009-10 = 66783008 = 16.70
3995510
Table – 16
Years E.P.S
2005-06 71.64
2006-07 154.52
2007-08 142.41
2008-09 116.00
2009-10 16.70
Interpretation
IT measure the profit available to the equity shareholders on a per share basis. The
earning per share of the company is not same for all the years. In the year 2005-06 the earning per
share of the company is 71.64 and in the very next year it doubles at 154.52 for the year2006-
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07.the big reason behind this is no of share increased to 300000 from 165000 in the year 2005-06.
After that it has decrease minor for two years.
But in the year2009-10 it has fallen to Rs 16.70 the reason is company has sub-divided
the face value of equity share of Rs 100 each into Ten equity share of Rs 10 each .
Comparision with other big Company in the industry
The Power Build Limited is said to be one of the big company in the industry. In
the vithhal udoygnagar association the other big Companies are as follows
1- ELECON ENGINEERING COMPANY LIMITED
2- EIMCO ELECON (INDIA) LIMITED
3- ANUPAM INDUSTRIES LIMETED
The three above mentioned companies are said to be as big profit making
companies in the industries among these four big companies three are from same group
i.e. Elecon. The comparison of some of the ratio among this companies is being as
follows
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The Gujarat industrial development corporation(GIDC) is being one of the biggest
industrial area in the Gujarat it is being providing many opportunities of growth of the
Gujarat state. The industries is also being providing state-of-the art facilities in every
region of the field.
Ratio of all the companies for the year 2009-10
Ratios
Elecon
Engineering
limited
Eimco
Elecon
Power
Build
Limited
Anupam
Industries
Limited
Debtors Turnover
Ratio
180 days 120 days 86 days 201 days
Creditor Turnover
Ratio
185 days 117 days 160 days 129 days
Gross Profit
Ratio
25.48 % 34.75 % 35.53 % 34.61 %
Net Profit 6.32 % 7.90 % 7.52 % 15.28 %
75
Ratio
Return on Capital
Employed
10.93 % 11.28 % 16.86 % 25.02 %
Return on Equity
Shareholders fund
43.30 % 15.50 % 44.40 % 59.30 %
Accounting policies
a) BASIS OF ACCOUNTING :-
The accounts have been prepared under the historical costs convention in
accordance with the generally accepted accounting principles and the provisions of the
companies Act, 1956.
b) FIXED ASSETS :-
Fixed assets are started at the cost of acquisition or construction. They are stated as
historical costs less accumulated depreciation.
c) DEPRECIATION:-
Depreciation is provided on written down value method, at the rates specified in
schedule xiv of the Companies Act, 1956.
Depreciation is provided on pro-rata basis:
1. From the date of addition, in case of addition to fixed assets during the year and
2. Up to the date of disposal, in case of disposal of fixed assets during the year.
d) INVENTORIES:-
Items of inventories are valued on the basis given below:-
1. Raw materials, stores and spare parts: - At weighted average cost or market
value whichever is lower.
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2. Work-in-process and finished goods. At cost or net realisable value whichever
is lower. The value of finished goods is inclusive of excise duty.
e) INVESTMENT:-
Investments are stated at cost of acquisition.
f) REVENUE RECOGNITION:-
1. Sales of goods are generally recognised on despatch to customers and are net of
trade discount, VAT tax and excise duty.
2. All the items of expense and income are accounted on accrual basis, except
income on account of refund of VAT tax, dividend income and insurance claims
which are accounted on cash basis.
g) RETIREMENT BENEFITS :-
1. The company has taken group gratuity polices with the Life Insurance Co-
operation of India (LIC) for future payment of gratuities. The gratuity liabilities
are determined based on an actuarial valuation conducted by an independent
actuary.
2. The liability on account of encashment of unveiled accumulated leave of
employees as at the balance sheet date is determined based on an actuarial
valuation conducted by an independent actuary.
3. Liability towards superannuation is funded in accordance with the scheme with
LIC.
4. Employer’s contribution to provision fund is charged to profit and loss a/c.
h) FOREIGN CURRENCY TRANSACTIONS :-
i. INITIAL RECOGNISATION:-
Transactions determined in foreign currencies are recorded at the exchange
rates prevailing on the date of the transaction.
ii. CONVERSION:-
At the year end, monetary items determine in foreign currencies are converted
into rupee equivalent at the year and exchange rates.
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iii. EXCHANGE RATE DIFFERENCES :-
All exchange rate differences arising on settlement and conversion on foreign
currency transaction are recognised as income or an expense in the year in which
they arise.
i) BORROWING COST:-
Cost in connection with borrowing of the funds to the extent related/attributed to the
acquisition/construction of qualifying fixed assets are capitalised up to the date when such
assets are ready for its intended use and other borrowing cost are charged to profit and loss
a/c.
j) IMPAIRMENT OF ASSETS:-
The carrying amount of assets is reviewed at each balance sheet date. If there is an
indication of improvement based on internal/external factor and impairment losses
recognised wherever the carrying amount of an asset exceeds it recoverable amount. The
recoverable amount is the greater of the assets net selling price and value in use. In
assessing value the estimated future cash flows are discounted to their present values.
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DIRECTORS REPORT
(1) FINANCIAL RESULTS:-
31-3-2010RUPEES
31-3-2009RUPEES
79
Profit before interest and depreciationLess: InterestDepreciationProfit before taxationLess: Provision for taxationProvision for fringe benefit taxDeferred tax liability/assetsProfit after taxationAdd:Adjustment of previous yearsBalance brought forward from last yearAmount available for appropriationLess:Dividend on 10% C.R.C preference share capitalTax on dividendAmt. transferred to 10% C.R.C preference share capital redemption reserveAmt. transferred to general reserveBalance of P&L a/c carried forward
Total
19,77,75,154 3,03,29,2766,58,50,528
10,15,95,3504,00,00,000
- (48,55,585)6,64,50,935
3,32,073
46,95,9727,14,78,980
45,00,000
7,64,7754,50,00,000
2,00,00,000 12,14,205
7,14,78,980
19,49,30,8814,41,78,8327,31,34,1937,73,17,8562,60,00,000
4,73,400(6,83,550)
5,18,28,006
99,73082,32,471
5,99,60,747
45,00,000
7,64,775-
5,00,00,00046,95,972
5,99,60,747
2. PERFORMANCE :-
During the year under review, the company has achieved turnover of Rs.8,424.69 lacs (previous year Rs.11489.57 lacs). The net profit stood at Rs.667.83 lacs (previous year 517.28 lacs).
3. DIVIDEND:-
Directors felt it prudent to retain the earnings for the year under review to be ploughed back in business, which shall result in further augmentation of the company’s growth.
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During the year under review, the dividend @10% on 10% cumulative redeemable convertible preference shares has been paid for the year ended 31st March, 2010.
4. SHARE CAPITAL:-
During the year under review, the company has redeemed 4,50,000 10% cumulative redeemable convertible preference shares of Rs.100/- each aggregating to Rs.4,50,00,000/- at par out of the profits of the company which would otherwise be available for the dividend.
The company has transferred equivalent amt. of Rs.4,50,00,000/- to 10% convertible redeemable cumulative preference share capital redemption reserve a/c.
Further during the year under review, the company has sub-divided the face value of equity shares of Rs.100/- each into ten equity shares of Rs. 10/- each.
5. FIXED DEPOSITS:-
As on 31st March, 2010 outstanding balance of fixed deposits is Rs.183.27 lacs as against a sum of Rs.333.27 lacs at the end of previous year. There are no unclaimed deposits as on 31st March, 2010.
6. INSURANCE:-
All the assets of the company are adequately insured.
7. DIRECTORS:-
In accordance with the provision of the Companies Act, 1956 in the article of the association of the company, Smt. Kanisha A Patel, directors retire by rotation at the forth coming annual general meeting of the company an being eligible, offers herself re-appointment.
During the year under review Shri D.M.Patel has been re-appointed as a whole time director for a further period of 3 years with effect from 1st April, 2010.
8. AUDITORS:-
The company’s auditors M/s J.D.Zatakia & Co. Chartered Accountants, Mumbai retires at the ensuing general meeting of the company and being eligible for themselves for re-appointment.
9. DIRECTORS RESPONSIBILITY STATEMENT:-
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Pursuant to section 217(2AA) of the companies (amendment) act, 2000 the directors confirm that:
In the preparation of the annual a/c’s, the applicable accounting standards have been followed.
Appropriate accounting principles and applied consistently, and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March,2010 end of the profit/loss of the company for the period ended on 31st march,2010.
Proper and sufficient care has been taken for the maintenance of the adequate accounting records in the accordance with the provisions of the companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.
The annual a/c’s have been prepared on a ‘Going concern’ basis.
10. PARTICULARS OF EMPLOYEES:-
As required by the provisions of section 217 (2A) of the companies Act, 1956 read with the companies (particulars of employees) Rules,1975 as, the statement covering names and other particulars of the employee is set out in the Annexure -1 to this Report.
11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:-
Information pursuant to the provision of section 217(1) (e) of the companies Act, 1956 read with companies (Disclosure of particulars in the report of Board of directors) Rules, 1988 is as under;
ENERGY CONSERVATION:-
Energy conservation measure taken:Monitoring closely high energy consuming equipmentsOptimum use of compressors and monitoring air losses.Use of step down transformer with stabilizers on entire factory lighting there by achieving overall reduction in energy consumption.Installation of APFC (Automatic power factor correction panels for achieving optimum power factor.Company has started to use variable frequency drives (VFD) in EOT, Goliath and travelling jib crane to reduce starting load of motor.Company has continued to replace number of high voltage consuming lighting system into low voltage consuming FL tubes in the company’s factory sheds and workshop to conserve energy.Installation of a sealed quench furnace powered by natural gas for heat treatment in place of electric power thereby saving the electricity sizably.The continuous and cautious efforts will save energy cost to the company.
82
TECHNOLOGY ABSORPTION, ADAPTION & INNOVATION:-
Efforts made towards technology absorption and innovation;
RESEARCH AND DEVELOPMENT:-
R&D efforts have helped to bring out improvements in process, product design and operating efficiencies
FOREIGN EXCHANGE EARNING AND OUTGO:-
During the year under review, the company has earned foreign exchange of rs.85.31 lacs (previous year rs.713.14 lacs) from the direct export.
Foreign exchange spent by the company during the year amounted to Rs.169.35 lacs (previous year Rs.1196.52 lacs).
12. COMPLIANCE CERTIFICATE:-
In terms of proviso to section 383A(1) of the companies act 1956, read with the companies (compliance certificate) rules, 2001 the company has obtained compliance certificate from Shri Amrish N. Gandhi ,secretary in whole time practice at Ahmadabad, the copy of said certificate is attached with this report.
13. INDUSTRIAL RELATIONS:-During the year under review, harmonious and cordial industrial relations were motioned in
the company.
14. ACKNOWLEDGEMENT:-
Your director place on record their appreciation for the co-operation received from the company. The directors also acknowledge the support and co-operation extended by the bank and financial institutions, share holders, vendors, traders, customers and society at large.
AUDITORS REPORT
1) They have audited the attached balance sheet of PBL As at 31st march, 2010 and the p&l
a/c for the year ended on that date annexed thereto and also the cash flow statement on that date.
83
These financial statements are the responsibilities of the company’s management. Their
responsibility is to express an opinion on this financial statement based on our audit.
2) They conducted their audit in accordance with the auditing standards generally accepted in
India. Those standards require that they plan and perform the audit to obtain reasonable assurance
about the financial statement is free of material statements. An audit includes examining on a test
basis, evidence supporting the amounts and disclosure in financial statements. An audit also
includes assessing the accounting principles used a significant estimates made by management, as
well as evaluating overall financial statement presentation. They believe that their audit provides a
reasonable basis for their opinion.
3) As required by the companies (auditor’s report) order, 2003 issued by the central
government of India on terms of sub section(4a) of section 227 of the Companies Act,1956, they
enclose in the annexure a statement on matters specified in paragraphs 4 and 5 of the said order to
the extent applicable.
4) Further to their comments in the annexure referred to above they report that:
a) They have obtain all the information’s and explanations which to the best of their
knowledge and belief were necessary for the purpose of our audit.
b) In their opinion, proper books of account as required by law have been kept by the
company as far as appears from their examination of those books.
c) The balance sheet, P&L a/c and cash flow statement dealt with by this report are in
agreement with the books of account.
d) In our opinion, the balance sheet, P&L a/c and cash flow statement dealt with by this report
compel with the accounting standards referred to in sub section (3c) of section 211 of the
Companies Act, 1956, to the extent applicable.
e) On the basis of written representation received from directors as on 31 st march 2010 and
taken on record by the board of directors, they report that none of the directors is
disqualified as on 31st march, 2010 from being appointed as an director in terms of
clause(G) of sub section(1) of section 274 of the Companies Act, 1956.
f) In their opinion and to the best of their information and according to the explanations given
to them, they said accounts together with notes their own give the information required by
84
the Companies Act,1956 in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India.
i. In the case of the balance sheet, of the state of the affairs of the company as at 31st
march, 2010,
ii. In the case of the profit and loss account, of the profit of the company for the year
ended on the date and,
iii. In the case of the cash flow statement, of the cash flow for the year ended on the
date.
CASH FLOW STATEMENT
CASH FLOW STATEMENT:-
PARTICULARS AMT. (RS.) AMT. (RS.) AMT. (RS.)
85
INFLOW
Add:
1. Acquisition of company
2. Increase in long term borrowing on
amalgamation
3. Increase in long borrowing for working
capital on amalgamation
4. Issue of share capital on amalgamation
5. Increase in borrowing
OUTFLOW
Less:
1. Demerger of MHE division
2. Transfer of MHE secured loans
3. Decrease in borrowing for working capital
4. Repayment of borrowing-secured loans
5. Repayment of borrowing-unsecured loans
6. Redemption of 10% NCRP shares
7. Interest paid
8. Dividend paid
NET CASH FLOW FRON FINANCIAL
ACTIVITIES(C)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS(A+B+C)
Cash & cash equivalents as at 1/04/2009
Cash & cash equivalents as at 31/03/2010
-
-
-
-
1,434,076
-
-
-
146,571,664
13,009,876
45,000,000
30,329,276
10,529,550
1,434,076
245,440,366
(244,006,290)
2,137,540
12,987,384
15,124,924
63,716,073
19,838,352
4,652,745
9,955,100
-
98,162,270
84,013,312
101,272,359
69,962,292
-
-
-
44,178,832
1,683,002
301,109,797
(202,947,527)
6,144,235
6,843,149
12,987,384
COMMON SIZE STATEMENT
PROFIT & LOSS A/C FOR THE YEAR ENDED 31 ST MARCH, 2010
86
Particulars Current Year
Rupees
Previous Year Rupees
INCOME
Gross Sales 909,531,242 1,282,927,541
Less: Excise Duty 67,061,820 133,971,018
Net Sales 842,469,422 1,148,956,523
Other Income 111,075,759 16,534,831
853,545,181 1,165,491,354
EXPENDITURE
Manufacturing and other expenses
Consumption of Material, Subcontracts 427,004,603 674,132,035
Interest 30,329,276 44,178,832
Depreciation 65,850,528 73,134,193
Administrative, Selling & General Expenses
224,031,654 273,464,368
748,031,654 1,064,909,428
(Increase) / Decrease in Stock 3,918,177
751,949,831 1,087,873,498
PROFIT BEFORE TAXATION 101,595,350 77,617,856
Excess / Short Provision written Back (332,073) 99,730
Provision for taxation 10,000,000 26,000,000
Provision for Fringe Benefit Tax - 473,400
87
Provision for Deferred Tax Liability/ Assets
(4,855,585) (683,550)
PROFIT AFTER TAX 66,783,008 51,728,276
Add: Balance of Profit / (Loss) brought forward
4,695,972 8,232,471
PROFIT AVAILABLE FOR APPROPRIATION
71,478,980 59,960,747
Dividend on 10%C.R.C. Preference Share Capital
4,500,000 4,500,000
Tax on Dividend 764,775 764,775
Transfer to 10% C.R.C preference share redemption reserve
45,000,000 -
Transfer to General Reserve 20,000,000 50,000,000
Balance Profit Carried forward 1,214,205 4,695,972
BALANCE SHEET AS AT 31 ST MARCH, 2010
PARTICULARS RUPEESCURRENT
YEAR RUPEES
PRVIOUS YEAR
RUPEES
SOURCES OF FUNDS
(1) Share Holders Fund
Share Capital 39,955,100 84,955,100
Reserves and Surplus 257,130,426 195,612,193
88
297,085,526 280,567,293
(2) Loans Funds
Secured Loans 153,783,781 298,921,369
Unsecured Loans 21,031,727 34,041,603
174,815,508 332,962,972
(3) Deferred Tax Liability(Net) 3,057,487 7,913,072
Total 474,958,521 621,443,337
APPLICATION OF FUNDS
(1) Fixed Assets
Gross Block 658,888,528 640,123,844
Less: Depreciation 376,679,172 311,747,348
282,209,356 328,376,496
(2) Investment 29,934,824 29,934,824
(3) Current Assets, Loans and Advances
Inventories 107,397,264 142,280,244
Sundry Debtors 200,099,457 319,636,536
Cash and Bank Balance 15,124,924 12,987,384
89
Loans and Advances 147,665,674 134,736,151
470,287,319 609,640,315
Less: Current Liabilities and Provision 307,472,978 346,508,298
Net Current Assets 162,814,341 263,132,017
Total 474,958,521 621,443,337
HUMAN RESOURCE DEPARTMENT
90
ORGANIZATION OF PERSONNEL DEPARTMENT:
INTRODUCTION:
Human recourse management is concerned with “people” dimension in management since
every organization is made up at people acquiring their service developing their skills maturing
them to high levels of performance and ensuring that they continue maintain their commitment to
the organization are essential to achieving organization objectives.
Human resources management is the planning. Controlling organizing and directing of the
procurement, Development maintenance and separation of human resources to the end what
individual organizational and social objectives are accomplished. The human resource department
of the Power Build Limited is different as the company is big in size.
Personnel department, general administration security, civil and excise are the 5 different section
of human resource department of Power Build Ltd.
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Managing Directors
General Manager
Assistant manager
Personnel General Excise Civil Security
Department administration
In Power Build Ltd. H.R. Department is under the managing directors follow by the
G.M. (H.R.Department) assistant managers and the different section heads.
RECRUITMENT, SELECTION AND INDUCTION:-
RECRUITMENT:-
92
Recruitment has been regarded as the most important function of personnel administration.
It is the process of searching for prospective candidates and stimulating & encouraging them to
apply for job in organization. The procedure of recruitment in Power Build Limited in done by
labour officers & managing directors.
When this company requires any person for some were in any of the department or they
wants to fill up the vacancy. They use mostly external sources. In very rear cases they are using
internal sources. In external sources they are using majority following sources:-
1. Advertisement:-
For any supervisor as marginal, post company gives advertisement in local newspapers like
“Gujarat Samachar”, “Sandesh” etc. and also advertiser in some English news papers like “Times
of India.”
2. Trade unions:-
When company needs workers Unions Company informs trade unions about the
requirements of the workers and trade unions provide the workers to the company. This sense of
co-operation helps in developing the better labour relations.
3. Leasing contracts:-
Company some-times go to private an agency which provides the workers on leasing. Thus,
companies also use these sources.
Some other sources requirement source used by this company:-
(A) Waiting list
(B) Employment exchange
(C) Educational institutes
SELECTION:
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The selections procedure in concerned with securing relevant information is secured in
information is secured in a number of steps. At each stage facts may come to light which may lead
to the rejection of the applicants. So this procedure is called negative. This selection uses following
steps in its selections procedure:-
Reception of Applicants:-
Firstly application is to be collected and candidate’s information is known. Information
includes educational qualification, age, sex, birth date etc. from that the decision is to be taken
whether the application is proper or not.
For Workers:-
The workers are not required to pass from selection procedure. They are directly placed as
they required because workers are Power Build Ltd. generally provided by the trade unions in
Power Build Ltd.
Induction:-
Induction is concerned with the problem of introducing or organizing a new employee to
the organization. The new employee may have some difficulty in setting down to his new job and
developing a sense of belonging. It is a welcoming process.
In Power Build Ltd. the process of induction is done Human Resources department. Power
Build Ltd. is always ready to help new comers. They treated them very politely and friendly make
him feel at home generate in him & feeling that His own job. They always give lots of
encouragement to the new comer.
TRAINING AND MANAGEMENT DEVELOPMENT:
Training is short term process utilizing a systematic and organized by which non
managerial personnel learn technical knowledge and skills for a definite purpose. It refers only to
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instruction technical and mechanical operations. It is designed for short terms period for man
manager. It is the training that prepares people to perform their present jobs better.
Training in Power Build Ltd.:-
In Power Build Ltd. Company have different training programmes for new comers. I.e.
trainees like diploma mechanical Electrical, B.S.C., B.B.A, M.B.A and engineers. The company
provide appropriate training to those who have come from outside reference or sources and it is up
to the company to take as a permanent workers or not. The training can be of any period. The
worker of the company is not given tanning. On the job training is popular in Power Build Ltd.
Regular need based programmed are conducted in the company. Power Build Ltd. has its own
pool or manpower in which fresh candidates are getting training continuously on different
functional area, so in future right men can be selected at the right time for right job. Staffs are not
given any type of training.
Types of training in Power Build Ltd.:-
Training methods can be used while the man is engaged in the process of productive work
on the job. Different training methods for the different personnel are used. Shop floor training and
case study methods mostly help trainee to learn how different situation can solve when they are
facing different problems in future.
Apprenticeship: -
Here the trainee has to work in the firm or companies where they are given on the job
knowledge how they should face different problems and how to use different machines and other
technical knowledge is given to them. They are given stipend for it.
Graduate apprenticeship: -
They have 1 year training. They are given then on the job training. If the company has
vacancy then they get job in the company. Generally they receive more stipends then the
apprenticeship trainee’s.
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Internal training programmed:-
Generally in this method mostly training is given on safety self development. Company
also arranges video show. Hoardings, debates to provide knowledge to personnel and reduces the
industrial accidents.
Chapter – 5
SUMMARY & FINDINGS
(1) The current ratio of Power Build Limited has being increased
continuously for first two years at 1.78 to 1.94 after that it has shown a declining trend at 1.90 to 1.76 to 1.53 for 2007-08,2008-09,2009-10 respectively.
(2) The Quick Ratio has shown a Fluctuating trend at 1.16, 1.33,
1.43, 1.34 and 1.18 for the five years. The company’s present liquidity position is satisfactory.
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(3) The Net Working Capital Ratio has shown a declining trend
except in the year 2006-07. The ratio has decreased thereafter to 0.62, 0.40, 0.36 for the last three years.
(4) Inventory turnover Ratio has almost shown a continuously
increasing trend for the last five years at 3.60, 4.12, 5.30, 8.07, 7.48. this shown a good inventory management in the company.
(5) Debtors turnover ratio has also shown almost increasingly trend
for last five years at 2.26, 2.36, 2.13, 3.60, 4.21. this shows the company is managing good collection period from debtors. The collection period is 161, 154, 171, 101 and 86 days for last five years.
(6) The total asset turnover ratio of the company for last five years is
1.45, 1.55, 1.59, 1.94, and 1.77. the company is 96tilizing their asset in an effective manner.
(7) Creditors turnover ratio of PBL is shown a fluctuating trend in the
last five years. The payment period to creditors is 209, 185, 162, 128, and 160 for last five years.
(8) The Debt-Equity Ratio shows the mix of Debt & Equity in the
company’s capital. The ratio has shown a fluctuating trend at 1.55, 1.57, 1.43, 1.07, 0.52 for the last five years in the company’s record.
After the analysis of Financial Statements, the company status is better and show’s the positive features of growth in the future.
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The company profits are huge in the current year at 19,77,75,154 which shows that how the company is being making impact of future performance .
The company is also providing good return to the capital provider
i.e.: Return on Capital Employed of the Company’s Ratio for last year is
7.52 %.
Power Build Limited is also maintains the accounting records in very
good form. The company is being using SAP System for Preparing the
accounts and keeping the accounting records of the company.
Chapter – 6
CONCLUSION:-
Complexity & web a like cause effect relationship are internal elements of corporate
business today. Making the practical study of management practice very interesting. The training
was a good learning experience for me & private me with a better understanding of industrial
processes & procedures in general. The objective of getting an overall grasp of the corporate
environment was more than achieved with my training in ELECON.
Power Build Ltd. Is a highly respected industrial entity. If strategy of exploiting delivered
quality as an appreciating asset is a prudently profitable practice & perhaps the highlight of its
profile. Its pursuit of quality has been duly recorded with an ISO 9001 certificate to its gear
division & of course, admirable customer equity. Systems & Structures which are very much in
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place commitment to quality, well deepened organization structure presence of requisite controls
& a motivated manpower Power Ltd. Has all the elements of corporate entity of potential.
The company Power Build Ltd. Is higher profit making unit & always a step ahead Co. in
Engineering & Manufacturing of conveyers & eliminators? I feel very happy getting enough
information about modern policy & techniques. Actually I have many things deeply which I can’t
find on paper, but only can feel logically. The workers and executives are always sound in cheerful
mood, because of the ambient in the company premises really worth due to the co-operation and
communication among employees.
Chapter – 7
BIBIOGRAPHY
Website: www.pbl.co.in
Other Web-Sites
Last five years ANNUAL REPORT of the Company
FINANACIAL MANAGEMENT BOOK –
I.M.Pandey and Jain khan and Pranshanchandra
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Website: www.net MBA. Com, www.Wikipedia.Com.