Raj Kamal

A STUDY ON FINANCIAL PERFORMANCE USING RATIO ANALYSIS IN

KHIVRAJ MOTORS PVT LTD

Submitted by

RAJKAMAL. S

(Reg. no: 411711631028)

Of

Department of Management Studies

PRINCE SHRI VENKATESHWARA PADMAVATHY ENGINEERING COLLEGE

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT SCIENCE

In Partial fulfillment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

ANNA UNIVERSITY

CHENNAI-600 025

BONAFIDE CERTIFICATE

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

USING RATIO ANALYSIS IN KHIVRAJ MOTORS PVT LTD” is the bonafide work of

Mr. RAJKAMAL. S, (Reg. no: 411711631028) who carried out the research work under my

supervision. Certified further that to the best of my knowledge, the work reported here in does

not form part of any other project report or dissertation on the basis of which a degree or award

was conferred on an earlier occasion on this or any other candidate.

Signature of Supervisor Signature of HOD

DECLARATION

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

PERFORMANCE USING RATIO ANALYSIS” with reference to “KHIVRAJ MOTORS

PVT LTD” submitted for the M.B.A degree is my original work dissertation has not framed the

basis for the award of any degree, associate ship, fellowship or any other similar title.

Place : Signature of the Student

Date : (S. RAJKAMAL)

ACKNOWLEDGEMENT

It is my privilege to record my sincere thanks to our Chairman, Dr. K.Vasudevan M.A,

B.Ed., Ph.D. of Prince Sheri Venkateshwara Padmavathy Engineering College, and Ponmar for

consecutive motivating words to complete the project report.

I would like to thank Dr.T.SounderrajanM.Tech, Ph.D., Principal of Prince Sheri

Venkateshwara Padmavathy Engineering College, and Ponmar for giving this opportunity to do

this project.

I have a great pleasure in expressing my sincere thanks to Mrs.S.Rathika, B.E, M.B.A, and

M.Phil. Head of Department., Department of Management Studies for her continuous motivation

through the training period.

I would like to thank Mrs. Lecturer, Department of Management studies for her guidance

and support for doing the project successfully.

I express my heartful thanks to Mr. (Manager) and Mrs. Latha (Accounts officer), for their

help and care during my visit to the company.

I am also extremely thankful to my parents for their help and support given to finish the

project.

(S. RAJKAMAL)

TABLE OF CONTENTS

CHAPTER NO PARTICULARS PAGE NO.

CHAPTER - I INTRODUCTION

1.1 Introduction

1.2 Industry profile

1.3 Company profile

1.4 Need for the study

1.5 Objectives of the study

1.6 Scope of the study

1.7 Review of Literature

1.8 Research methodology

1.9 Limitation of the Study

CHAPTER - II DEVELOPMENT OF THE MAIN THEME

2.1 Data analysis and Interpretation

CHAPTER - III RESULT OF THE STUDY

3.1 Summary of Findings

3.2 Suggestions

3.3 Conclusion

LIST OF TABLE

TABLE NO TITLE PAGE NO

2.1.1

2.1.2

2.1.3

2.1.4

2.1.5

2.1.6

2.1.7

2.1.8

2.1.9

2.1.10

2.1.11

2.1.12

2.1.13

2.1.14

2.1.15

2.1.16

2.1.17

LIST OF CHART

CHART NO TITLE PAGE NO

2.1.1(a)

2.1.2(a)

2.1.3(a)

2.1.4(a)

2.1.5(a)

2.1.6(a)

2.1.7(a)

2.1.8(a)

2.1.9(a)

2.1.10(a)

2.1.11(a)

2.1.12(a)

2.1.13(a)

2.1.14(a)

2.1.15(a)

2.1.16(a)

2.1.17(a)

ABSTRACT

1.1 INTRODUCTION

Financial Management is that managerial activity which is concerned with the planning and

controlling of the firm’s financial resources. Though it was a branch of economics till 1890 as a

separate or discipline it is of recent origin.

Financial Management is concerned with the duties of the finance manager in a business

firm. He performs such varied tasks as budgeting, financial forecasting, cash management, credit

administration, investment analysis and funds procurement. The recent trend towards

globalization of business activity has created new demands and opportunities in managerial

finance.

Financial statements are prepared and presented for the external users of accounting

information. As these statements are used by investors and financial analysts to examine the

firm’s performance in order to make investment decisions, they should be prepared very

carefully and contain as much investment decisions, they should be prepared very carefully and

contain as much information as possible. Preparation of the financial statement is the

responsibility of top management. The financial statements are generally prepared from the

accounting records maintained by the firm.

Financial performance is an important aspect which influences the long term stability,

profitability and liquidity of an organization. Usually, financial ratios are said to be the

parameters of the financial performance. The Evaluation of financial performance had been

taken up for the study with “Khivraj Motors Pvt Ltd.” as the project.

Analysis of Financial performances is of greater assistance in locating the weak spots at

the Khivraj Motors Pvt Ltd even though the overall performance may be satisfactory. This

further helps in

Financial forecasting and planning.

Communicate the strength and financial standing of the Khivraj Motors Pvt Ltd.

For effective control of business.

In our present day economy finance is defined as the provision of money at the time

when it is required. Every enterprise whether. Medium or small needs finance to carry on its

target. In fact finance is so indispensable today. It can be rightly said that it is the lifeblood of an

enterprise. Without adequate finance no enterprise can possible accomplish its objectives.

In the early years of its evolution it was treated synonymously with the rising of funds. In

the current literature pertaining to financial management a broader scope so as to include in

addition to procurement of funds efficient use of resources is universally recognized.

Finance was studied as a part of Economics before the turn of the present century. It was

only in early part of the present century when massive consideration movement took place that

finance came to be studied as a corporate discipline. Formation of large size undertaking by

consolidation the smaller one brought before the management is the problem of financing these

giant enterprises. Emphasis was also placed on the study of source and forms of financing the

new industrial giants.

1.2 INDUSTRY PROFILE

The Indian two-wheeler industry has come long way since its humble beginning in 1948

when Bajaj Auto started importing and selling Vespa Scooters in India. Since then, the customer

preferences have changed in favour of motorcycles and gearless scooterettes that score higher on

technology, fuel economy and aesthetic appeal, at the expense of metal-bodied geared scooters

and mopeds. These changes in customer preferences have had an impact on fortunes of the

players. The erstwhile leaders have either perished or have significantly lost market share,

whereas new leaders have emerged.

Rising income levels, reducing excise duties, higher loan tenure and loan-to-value offered

by the financing companies have all fuelled the growth of two-wheeler demand. Besides,

mounting traffic chaos and limited parking space has also increased the demand for two-

wheelers from households that can afford or actually do own a car. Furthermore, with increasing

women working population, changing social philosophy and broad-mindedness, the penetration

of two-wheelers in target population has increased significantly during last one decade especially

in urban areas.

However rural areas and smaller towns still remains considerably underpenetrated market.

The authors foresee rising income levels combined with increase in finance penetration in rural

areas and smaller towns, the demand for two-wheelers will grow swiftly in short to medium term

period. Sighting this huge growth opportunity two-wheeler manufacturers have started launching

models catering to the needs of rural demand.

The authors have developed a statistical model that attempts to forecast the domestic two

wheeler sales on the basis of ownership cost and the target population that includes young

populace that can afford but do not own a two wheeler. Other qualitative factors like macro-

economic outlook, consumer confidence, willingness of vehicle financers to finance TWs, etc.

have also been quantitatively built in demand forecasting model.

After a strong recovery industry posted in FY10, which was continued even in first quarter

of FY10, the authors foresee the high growth levels witnessed currently would stabilise in next 2-

3 year period. Nevertheless the industry would register a healthy growth during FY10-FY15

period. According to this report, rural India would drive the growth, whereas the opportunity in

urban India, especially bigger cities, would become limited in days to come.

In FY10, almost all the manufacturers reported healthy rise in their top-line, driven by

growth in both volumes and realisation. Operating margins also observed improvement owing to

drop in raw material prices. However, the authors foresee that industry would face challenge of

rising input cost and rising competition levels which would strain margins considerably in short

to medium term period.

The domestic two-wheeler industry has been able to recover strongly from the economic

crises of FY08. Rising income levels, ease in liquidity scenario and return of consumer

confidence owing to revival in employment rates were the key drivers for this growth. The

authors foresee the short to medium term outlook of the industry will remain healthy, majorly

driven by rising demand from rural areas and smaller towns.

‘The Indian Two-Wheeler Industry' gives valuable insight of the industry encompassing its

evolution in India, its characteristics, demand drivers, Government regulations, commentary on

industry players and competition and the trends in domestic sales and exports. The trends are

analysed in depth for various vehicle segments, namely motorcycles, scooters, mopeds and

electric two-wheelers, further sub-classified based on the engine capacity. Various segments and

sub-segments are appropriately associated with the relevant products and companies for

enhancing the understanding of the competitive scenario in the industry. The cost analysis

presented in the report will help the reader identify the critical cost items and their trends. The

company section in the report provides detailed profiles of the top three players in the industry,

including information on their financial and operational parameters.

1.3 COMPANY PROFILE

The City of Chennai is the Citadel of South. This City is known for promotion of culture,

tradition and industry. Industrial Development in Automobile Sector is well established in this

city for decades. The House of Khivraj is well known in the Automobile and Real Estate Sectors

in this Metro.

Khivraj Group has spread its activities for Four decades in diversified fields like

Automobile Sector

Real Estates

Renewable Energy Sector (Green Field Operations)

Infrastructural activities

IT Park

The flag ship company of the Group is “KHIVRAJ MOTORS LTD “. This Company was

dealing in the vehicles manufactured by Hindustan Motors Ltd for 35 years. This company was

also dealing in Two and Three Wheelers of Bajaj Auto Ltd for Four decades. Now, the company

has taken Dealership for Maruti Vehicles. The company has established two Car Show-rooms,

one in the arterial road of Anna Salai and the other in the serenial Adyar. Three state-of-the-art

workshops with all modern hi-tech, automated facilities are offered by the company for Cars.

These workshops are ideally located in centre places. The Company is proud to have an

independent Body shop with modern gadgets.

The Company has diverted the Dealership for Bajaj Auto Ltd’s products to its sister

concerns to have clear focus in its operations. These concerns have modern show rooms and

operate speciality ideal workshops for Two and Three Wheelers. The automobile turn over of the

group has crossed billion rupees.

The Company has promoted many Real Estate projects in CHENNAI. The founder of the

Company is considered as a doyen in Real Estate, finance and automobile business. Many land

mark buildings bear the proud name of “KHIVRAJ” in CHENNAI. The Company also owns

considerable commercial space in ANNA SALAI the arterial road and central hub of the city.

The Company has diverted its Real Estate business to one of its subsidiaries

viz.”KHIVRAJ ESTATES LTD” . This company has launched a residential township project in

a plot of 2.5 acres. The Company is building around 100,000 sq.ft in this township.

The Company has erected several Wind Electric Generators to fulfill its social obligations

for environment and green power. The Company’s investment in this sector has crossed Rs.100

millions. A separate infrastructure company is promoted for promoting further Wind Electric

Generators and other infrastructure activities.

The management of the Company vests with Shri AJIT KUMAR CHORDIA who is a

young dynamic technocrat and administrator with admirable skills in different spheres and Shri

BHARAT KUMAR CHORDIA a young administrator who is known for his accumen in several

fields and managerial capacity. They are guided by the Company Chairman Shri

NAVARATANMULL CHORDIA who is groomed by the Founder of the Company Late Shri

KHIVRAJ CHORDIA.

The group companies are well managed by dedicated professionals. The flag ship

company has been granted ISO 9002 Certificate for its Sales, Services and Spares operations.

The group is well known for its financial strength.

The Company is proud to be associated with M/s Ashok Leyland Ltd., M.N.Dastur & Co.

Ltd, Future Software Ltd, SIFY Ltd., Industrial Development Bank of India, Kotak Mahindra

Ltd, ICICI, Citi Bank, Shelters, Citi Corp, and many Government Departments and undertakings

besides many others in its multi-faceted activities.

Now, the Khivraj Group is venturing into “Used Cars Trade” by tying up with Maruti

Udyog Ltd for True Value Outlet wherein we would be dealing in buying and selling of Used

Maruti Cars. The True Value outlet is the First of its kind in Chennai situated at No.1, Whites

Road, Whites India Building, Royapettah, CHENNAI 600 014.

The Company is poised to grow in leaps and bounds under its dynamic and able

management.

1999 - ISO 9002 Certified.

2000 - Pioneered Omni call Taxi in Tamil Nadu

2001 - Exclusive Hi-Tech Bodyshop launched at Guindy.

2002 -Hi-Tech Mechanical workshop launched at Ekkaduthangal.

2003 - First Dealer of TRUE VALUE - Maruti pre-owned car division at Chennai.

Pioneered the FIRST WAGON R CALL TAXI IN THE CITY.

Entered the field of I.T by constructing of an I.T park , “OLYMPIA TECH PARK” in the

heart of the City of Chennai at Guindy in 3 phases.

Khivraj Pvt Ltd

Anna salai

Adyar

Thiruvallur

OMR

Khivraj Automobiles Pvt Ltd

Two Wheeler

Discover

XCD

Platina

Pulsar

Three Wheelers

Pickup-van

Delivery-Van

Gc-1000

Passanger Auto

Khivraj Estates

The group has always been interested in Real Estate both as a business activity and as an

Investment Option. Among the real estate development.

REAL ESTATE AND KHIVRAJ GROUP

The group has always been interested in Real Estate both as a business activity and as an

Investment Option. Among the real estate development work done in the past, they have been

mostly commercial projects and they have built and delivered about 6, 00, 000 Sq. Ft of

commercial space in various locations in the city, out of which mention must be made about the

Khivraj Complex at Nandanam and city center at purasawalkam. Their real estate portfolio

included, among other things, properties in Spencer Plaza etc., which yield them steady rental

incomes.

The Group has identified residential property development as one of the potential areas

for Strategic diversification the group is already in possession of two large tracts of land, one at

Chrompet and other at Saidapet, which will be used to kick start their new ventures.

Khivraj Tech Park

Olympia comes to you from people with established credibility and a consistent record of

superior performance and timely delivery.

Wind Mills

Khivraj Group has gone into Wind Power Sector to meet its Social obligations of

providing Green Power and environmental protections in a big way.The Group is increasing its

presence in this sector year by year.

Khivraj Group has gone into Wind Power Sector to meet its Social obligations of

providing Green Power and environmental protections in a big way. It has been established its

roots in this sectors for the past 10 years. The Group is increasing its presence in this sector year

by year.

It is started in the year 1996 with 0.5 MW Wind Farm at an Investment of Rs.27 millions.

Now the group has installed Wind Farms of 8.5 MW at an Investment of Rs.350 millions.

Annually the Groups Wind Farm generate around 20 million units of electricity thereby saving

considerable amount of fossil fuels, foreign exchange besides reducing environmental pollutions

etc.

INDUSTRY – AUTOMOBILE SALES & SERVICE

M/s. Khivraj Motors (P) Limited is a part of the Khivraj Group of companies dealing in

the Sales & Service of automobiles in the capacity of one of the authorized dealer in CHENNAI

for MARUTI UDYOG LIMITED, New Delhi manufacturers of Maruti range of cars

HISTORY AND BACKGROUND OF THE BUSINESS

M/s. Khivraj motors (P) Ltd was incepted in the year 1961 by Shri Khivraj Chordia. At

the outset, the company dealt in Ambassador Cars, Bed Ford, and Escorts tractors. In 1998

Khivraj acquired the prestigious Maruti Udyog dealership and subsequently got its I S O 9002

certification. To day the company has two hi tech showrooms one located in the heart of the city

in Anna salai the commercial hub of Chennai and the other at Adyar currently the most upmarket

and growing locality in Chennai. The dealership also has two state of the art workshops both

equipped with sophisticated equipments and manned by highly skilled Maruti trained technicians

handling a customer traffic of around 2500 month on month offering a wide range of car care

services including free & paid services running maintenance body refurbishment & painting, spl

services like under chassis painting body polish etc. As part of MARUTI & khivraj philosophy

of continuously striving for offering more and more value additions to our customers the

dealership launched THE MARUTI TRUE VALUE outlet which is primarily involved in buying

and selling of pre owned cars .On an average around 35 customers of ours are availing this

facility and these figures are growing day by day.

The need to retain our customers in our network by offering them the best of services

available in the industry has spurred Khivraj to initiate a CRM activity an unique programme to

integrate all its customer data base and the entire vast data base of the group comprising of car

/two & three wheeler customers. The Group companies includes a BAJAJ authorized dealership

network (one of the oldest & biggest) involved in the selling & servicing of the entire range of

BAJAJ range of two & three wheelers and run a well-defined programme to address these

customers with value offerings loyalty & referral schemes etc. The dealership has taken up this

project with technical help from an international expert in this field aided by sophisticated

software to facilitate this activity.

1.4 NEED FOR THE STUDY

Financial performance refers to the status of the company at any point of time. Financial

analysis helps the firm to make their best use of financial resources and be able to spot the

financial weakness of the firm and to properly establish relationship between the items of the

balance sheet and profit & Loss account. A study on ratio analysis & comparative financial

statements that took place for the last five year will help the company to make better decision in

the future.

1.5 OBJECTIVES OF THE STUDY

Primary Objective:

To study the financial performance using ratio analysis as a tools with reference to

“KHIVRAJ MOTORS PVT LTD.,”.

Secondary Objectives:

To find the liquidity solvency position as well as the turnover position of the company

using ratio analysis.

To understand the profitability position of the firm using income statement.

To assess the factors influencing the financial performance of the organization.

1.6 SCOPE OF THE STUDY

The scope of the study was entitled towards analyzing the financial performance of the

khivraj motors pvt ltd,. To analyze the financial position on the basis of average the holding

period of financial statement based on the company`s experience in the previous year. This

analysis helps to calculate the earnings out of the profit. This study focuses on yearly

improvement of the activities of the company. The performances of the financial tools bring out

the real financial position of the company in the future.

The study of financial performance of Khivraj Motors Private Limited has been

undertaken with certain objectives by highlighting the unique features, functions, working as

well as statutory regulations governing the company.

1.7 REVIEW OF LITERATURE

1.8 RESEARCH METHODOLOGY

Research

Research is a serious academic activity with a set of objectives to explain or analyse or

understand a problem or finding solution for problem adopting a systematic approach in

collecting, organizing and analyzing the information relating to a problem.

Research Methodology

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying now research is done systematically. In that various steps,

those are generally adopted by a researcher in studying his problem along with the logic behind

them.

It is important for research to know not only the research method but also know

methodology. ”The procedures by which researcher go about their work of describing,

explaining and predicting phenomenon are called methodology.”

Methodology is an essential aspect of any project or research. It enables the researcher look at

the problem in a systematic manner.

Methods comprise the procedures used for generating, collecting and evaluating data. All

this means that it is necessary for the researcher to design his methodology for his problem as the

same may differ from problem to problem.

Data collection is important step in any project and success of any project will be largely

depend upon now much accurate you will be able to collect and how much time, money and

effort will be required to collect that necessary data, this is also important step. Data collection

plays an important role in research work. Without proper data available for analysis you cannot

do the research work accurately.

1.8.1 Research Design

”A research design is the arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in procedure.” In

Fact, the research design is the conceptual structure with in which research is conducted. It

constitutes the blueprints for the collection, measurement and analysis of data. The research

design took for the study was ‘Analytical research design’.

1.8.2 Data Collection

Data refers to information or facts. Often, researchers understand by data only numerical

figure. It also includes descriptive facts; non numerical information, qualitative and quantitative

information. There are two types of data collection. They are

Primary data collection

Secondary data collection

Primary data is the first hand information that is collected during the period of research.

Primary data has been collected through discussions held with the staffs in the accounts

department. Some types of information were gathered through oral conversations with the

cashier, taxation officer etc.

Secondary data studies whole company records and company’s balance sheet in which the

project work has been done. In addition, a number of reference books, journals and reports were

also used to formulate the theoretical model for the study. And some information was also drawn

from the websites.

1.8.3 Analytical Tool

Percentage Method

In the case of dichotomous and multiple choice questions percentage calculated as a part of

the analysis of such questions. It refers to the special kind of ratio. Percentages are used in

making comparisons between two or more series of data. Percentages are based on descriptive

relationship. It is used to give a tabulated representation of the respondent’s viewpoint

Formula:

Percentage method= No of respondents x 100

Total no of respondents

Comparative balance sheet

A statement which compares financial data from different periods of time. The

comparative statement lines up a section of the income statement, balance sheet or cash flow

statement with its corresponding section from a previous period. It can also be used to compare

financial data from different companies over time, thus revealing the trend in the financials.

Ratio analysis

There are many ratios that can be calculated from the financial statements pertaining to a

company's performance, activity, financing and liquidity. Some common ratios include the price-

earnings ratio, debt-equity ratio, earnings per share, asset turnover and working capital.

Formulas,

Trend analysis:

Trend analysis is the practice of collecting information and attempting to spot a pattern,

or trend, in the information. In some fields of study, the term “ trend analysis” is often to predict

future events, it could be used to estimate uncertain events in the past, such as how many ancient

kings probably ruled between two dates, based on data such as the average years which other

known kings reigned.

1.9 LIMITATIONS OF THE STUDY

The analysis is based on the secondary data. Hence there is a limitation of doubtful

accuracy.

The ratios are generally calculated from past financial statements and thus are no

indicator of future.

There may be limitations to this study duration is short and it is not possible to

observe every aspect of financial management practices.

Major part of the work is concern with financial data, adequate was not able to

collect because of secrecy maintain by the concern

2.1 DATA ANALYSIS & INTERPRETATION

3.1 SUMMARY OF FINDINGS

3.2 SUGGESTIONS

3.3 CONCLUSION

The study is made on the topic financial performance using ratio analysis with five

years data in Khivraj motors pvt ltd.

The current and liquid ratio indicates the short term financial position of Khivraj motors

pvt ltd. whereas debt equity and proprietary ratios shows the long term financial position.

Similarly, activity ratios and profitability ratios are helpful in evaluating the efficiency of

performance in Khivraj motors pvt ltd.

Financial ratios are essentially concerned with the identification of significant accounting

data relationships, which give the decision-maker insights into the financial performance of a

company.

Ratio analysis has a major significance in analyzing the financial performance of a

company over a period of time. Decisions affecting product prices, per unit cost, volume or

efficiency have an impact on the profit margin or turnover ratios of a company.Indian oversea

bank, has recorded a tremendous growth in their business over the past 5 years particularly the

deposits are on par with the advances indicating a positive note on its total business performance.

BIBLIOGRAPHY

Web sites

Books referred

M Y Khan and P K Jain Financial Management Fourth Edition-2006, Tata

McGraw-Hill Publishing Company Limited, New Delhi.

A. Murthy Management Accounting First Edition-2000, S. Viswanathan (Printers

&Publishers), PVT., LTD

S.M. Maheswari Management Accounting, Sultan Chand & Sons Educational

Publishers, New Delhi.