Summer Project 09

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CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

Financial statement analysis is largely a study of relationship among the various

financial business disclosed by a single set of statements .It is a process of evaluating

the relationship between component parts of financial statement to obtain a better

understanding of a firm’s position and performance.Financial statements analysis is

an attempt to determine the significance and meaning of the fianacial statement data

so that forecast may be made of the future earnings,ability to pay interest and debt

maturities and profitability of a sound investment ,sales.A number of methods or

devices are used for the analysis is the balance sheet and income income statements

of the Amman Agency,S.R.Raja Jewellery and S.R.Raja Agency for a period of two

years(2006-07 and 2007-08).The analysis was done by using various financial tools,

statistical tools.The graphs were used accordingly to support the analysis.

NEED OF THE STUDY

The financial statements are mirror which reflects the financial position and strengths

or weakness of the concern .The analysis of financial statements are useful to

Management

Investors

Creditors

Bankers

Financual Institutionn etc..

2

1.2 SCOPE & SIGNIFICANCE OF THE STUDY

The ratio analysis of the financial statements will help the organization in knowing about

the liquidity and also helps in knowing the efficiency with which the firms are managing

their resources and also to understand the profitability of the two companies.

In the study the financial tool such as Ratio analysis , comparative Balance sheet, Trend

analysis are performed to bring out the real financial position of the companies and to

compare the various components of the financial statement in a different angle.

The purpose of the study is to enumerate the various financial opportunities and threats of

the company.But this analysis is done for only three companies, and it is compared for

only two years.Further analysis can be extended by comparing with other players in the

market and also for a longer period

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1.3 STSTEMENT OF THE PROBLEM

This study is to determine the efficient customer of the Indian Overseas Bank ,Tambaram

Branch.It indicates the firm’s utilization of resources,investments,shareholder’s funds and

other facilities provided by the bank.In this syudy to compare the three companies and to

determine the effective customer among the three companies.

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1.4 OBJECTIVES OF THE STUDY

The main objective of the study is to compare the financial performance of three private

customers of the INDIAN OVERSEAS BANK Tambram Branch.

To study the various components of the financial statement in relation to the

profitability of the companies.

To analyse the liquidity and overall performance of the companies.

To study the solvency position of the companies

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1.5 RESEARCH METHDOLOGY

Research Design

This study is analytical in nature.In analytical research that uses the facts or information

already available and analyses to make a critical evaluation of the study.

Data Collection

The study is base on secondary data from Amman Agency,S.R.Raja Jewellery Private

Ltd. , S.R.Raja Agency.

Secondary Data

Secondary data are based on the two years annual report from 2006-07 to 2007-08.It also

consider the available data in the records,prospectus ec.,

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CHAPTER 2

PROFILE

2.1 Industry Profile

History Of Banking Sector In India

Without a sound and effective banking system in India it cannot have a healthy economy.

The banking system of India should not only be hassle free but it should be able to meet

new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements

to its credit. The most striking is its extensive reach. It is no longer confined to only

metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even

to the remote corners of the country. This is one of the main reasons of India's growth

process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with

the nationalisation of 14 major private banks of India.

The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

• New phase of Indian Banking System with the advent of Indian Financial & Banking

Sector Reforms after 1991.

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Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan

and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of

Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency

Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was

established which started as private shareholders banks, mostly Europeans shareholders.

During the first phase the growth was very slow and banks also experienced periodic

failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To

streamline the functioning and activities of commercial banks, the Government of India

came up with The Banking Companies Act, 1949 which was later changed to Banking

Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of

India was vested with extensive powers for the supervision of banking in india as the

Central Banking Authority.

During those day’s public has lesser confidence in the banks. As an aftermath deposit

mobilisation was slow. Abreast of it the savings bank facility provided by the Postal

department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.

In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a

large scale especially in rural and semi-urban areas. It formed State Bank of india to act

as the principal agent of RBI and to handle banking transactions of the Union and State

Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th

July, 1969, major process of nationalisation was carried out. It was the effort of the then

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Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country

was nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980

with seven more banks. This step brought 80% of the banking segment in India under

Government ownership.

Phase III

This phase has introduced many more products and facilities in the banking sector in its

reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was

set up by his name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put

to give a satisfactory service to customers. Phone banking and net banking is introduced.

The entire system became more convenient and swift. Time is given more importance

than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any

crisis triggered by any external macroeconomics shock as other East Asian Countries

suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,

the capital account is not yet fully convertible, and banks and their customers have

limited foreign exchange exposure.

Scheduled Commercial Banks In India

The commercial banking structure in India consists of:

• Scheduled Commercial Banks in India

• Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the Second

Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those

banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the

Act.

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As on 30th June, 1999, there were 300 scheduled banks in India having a total network of

64,918 branches.The scheduled commercial banks in India comprise of State bank of

India and its associates (, nationalised banks (19), foreign banks (45), private sector banks

(32), co-operative banks and regional rural banks.

"Scheduled banks in India" means the State Bank of India constituted under the State

Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of

India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted

under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)

Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank

included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but

does not include a co-operative bank".

"Non-scheduled bank in India" means a banking company as defined in clause (c) of

section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled

bank".

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2.2 COMPANY PROFILE

INDIAN OVERSEAS BANK

Established in 1937, Indian Overseas Bank (IOB) is a leading bank

based in Chennai, India. IOB had the distinction of simultaneously commencing

operations in three branches at Karaikudi, Chennai, and Yangon (Myanmar). Since

IOB aimed to encourage overseas banking and foreign exchange operations, it soon

opened its branches in Penang and Singapore. Today, Indian Overseas Bank boasts of

a vast domain in banking sector with over 1400 domestic branches and 6 branches

overseas.

IOB was the first bank to venture into consumer credit, as it introduced the popular

Personal Loan scheme. In 1964, the Bank started computerization in the areas of

inter-branch reconciliation and provident fund accounts. Indian Overseas Bank was

one of the 14 major banks which were nationalized in 1969. After nationalization, the

Bank emphasized on opening its branches in rural parts of India. In 1979, IOB opened

a Foreign Currency Banking Unit in the free trade zone in Colombo.

In the year 2000, Indian Overseas Band undertook an initial public offering (IPO) that

brought the government's share in the bank's equity down to 75%. The equity shares

of IOB are listed in the Madras Stock Exchange (Regional), Bombay Stock

Exchange, and National Stock Exchange of India Ltd., Mumbai. Since its inception,

IOB has absorbed various banks including the latest — Bharat Overseas Bank — in

2007.

The Bank's IT department has developed software, which is used by its 1200

branches to provide online banking to customers. Indian Overseas Bank also has a

network of about 500 ATMs throughout India. Its International VISA Debit Card is

accepted at all ATMs belonging to the Cash Tree and NFS networks. IOB also offers

Internet Banking; it's one of the banks that the Govt. of India has approved for online

payment of taxes.

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Indian Overseas Bank offers investment options like Mutual Funds and Shares. It

provides a wide range of consumer and commercial banking services, including

Savings Account, Current Account, Depositary Services, VISA Cards, Credit Cards,

Debit Cards, Online Banking, Any Branch Banking, Home Loans, NRI Account,

Agricultural Loans, Payment of Bills / Taxes, Provident Fund Scheme, Forex

Collection Services, Retail Loans, etc.

Indian Overseas Bank (IOB) is a one of the major bank based in Chennai, with over

1,400 domestic branches and 6 branches abroad.

India Overseas Bank was established in 1937 to encourage overseas banking and

foreign exchange operations. The Indian Overseas Bank started simultaneously with

three branches. They are:

Indian Overseas Bank Chennai

Indian Overseas Bank Rangoon

Indian Overseas Bank Singapore

From the begining Indian Overseas Bank served Chettinad, Ceylon (Sri Lanka),

Burma (Myanmar), Malaya, Singapore, Java, Sumatra and Saigon.

In 1960 Indian Overseas Bank absorved five weaker private sector banks including

Kulitali Bank.

In the year 2000 India Overseas Bank India engaged in IPO which brought the

government's share in the bank's equity down to 75%.

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IOB International expansion

1937-38: As mentioned above, IOB was international from its inception with

branches Indian Overseas Bank Rangoon, Indian Overseas Bank Penang, and Indian

Overseas Bank Singapore.

1941: IOB opened a branch in Malaya that presumably closed almost immediately

because of the war.

1946: IOB opened a branch in Ceylon.

1947: IOB opened a branch in Bangkok and re-opened others.

1948: United Commercial Bank (see below) opened a branch in Malaya.

1949: IOB opened a branch in Bangkok.

1963: The Burmese government nationalized IOB's branch in Rangoon.

1973: IOB, Indian Bank and United Commercial Bank established United Asian Bank

Berhad. (Indian Bank had been operating in Malaysia since 1941 and United

Commercial Bank Limited had been operating there since 1948.) The banks set up

United Asian to comply with the Banking Law in Malaysia, which prohibited foreign

government banks from operating in the country. Also, IOB and six Indian private

banks established Bharat Overseas Bank as a Chennai-based private bank to take over

IOB's Bangkok branch. The Baharat Overseas Bank is the only private bank that the

Reserve Bank of India has permitted to have a branch outside India. The ownership

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was: Indian Overseas Bank (30%), Bank of Rajasthan (16%), Vysya Bank (14.66%),

Federal Bank (19.67%), Karur Vysya Bank (10%), South Indian Bank (10%) and

Karnataka Bank (8.67%). Bharat Overseas serves the Indian ethnic community in

Thailand.

1977: IOB opened a branch in Seoul.

1991: Bank of Commerce (BCB), a Malaysian bank, acquired United Asian Bank

(UAB). In 1999 BCB merged with Bank Bumiputra Malaysia to form Bumiputra-

Commerce Bank Berhad.

Indian Overseas Bank Credit Card

Indian Overseas Bank has a credit card with the name CANCARD-VISA. This card is

valid for use in India and Nepal only. Indian Overseas Bank Credit Card is acceptable

in more than 1 lakh member establishments for purchase of goods and services

CONSTITUTION:

Ø The Constitution of the Board of the Bank is governed by “The Nationalized

Banks (Management and Miscellaneous Provisions) Scheme, 1970, formulated by the

Central Government, after consultation with the Reserve Bank of India, in exercise of

the powers conferred by section 9 of “The Banking Companies (Acquisition and

Transfer of Undertakings) Ac, t 1970”.

COMPOSITION:

Ø The Composition of the Board of Directors of a Bank is governed by “The

Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970” read

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with “The Banking Companies (Acquisition and Transfer of Undertakings) and

Financial Institutions Laws (Amendment) Act 2006” and amendment to the vide

Extraordinary Gazette Notification dated 19.02.2007 of the Central Government.

CONTRIBUTION:

Ø In terms of The Banking Companies (Acquisition and Transfer of Undertakings

Act 1970, the General Superintendence, Direction and Management of the affairs and

business of the Bank vests in the Board of Directors which is entitled to exercise all

such powers and do all such acts and things as the Bank is authorized to exercise and

do.

AMMAN AGENCY

The company had started this business in 2004 .The present limit of MCC for

Rs.10lacs on 24.03.2007.At present they have requested for enhancement of limit

Rs.25lacs.

The credit sales increased around 26%.The supplier IOC insisted for keeping one

week stock in the bunk.The stock invoice price also increased .So they required this

enhancement.Mr.B.BaluReddy Mr.B.DurgaPrasad’s father is associated with IOB for

the past 15 years.He is the owner of our branch premises.He also avalled a liquidrent

loan in the name of Archana Associates.

OBSERVATIONS :

Sales : Sales has been increasing over the years.The projection of

10% growth for 2009-2010 is acceptable.

Profitability : Profitability is very low compared to the sales turnover.

S.R.RAJA JEWELLERY PRIVATE LIMITED

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S.R.Raja Jewellery ,a private limited company,incorporated on 13.0502008 is

engaged in trading of gold and silver ornaments/articles.The chief promoter is

Mr.S.R.Raja who is a noted personality in Tambaram ,he is the sitting M.L.A

representing Tambaram constituency.The companyn was originally established on

02.0702004 as a partnership concern to carry on the above business and then

converted into a private limited company.Then they started making gold ornaments

by appointing reputed /skilled gold smiths, in order to improve their profit

margin.Mr.S.R.Raja , the promoter is interested in various business and banking with

us for the past 15 years.We have sanctioned various credit facilities to these firms and

the accounts are being operated satisfactorily.

The company has achived a sales turnover of Rs.145029lacs for the year 2006-2007

and Rs.901.14lacs for the year 2007-2008.Present proposal is to consider adhoc limit

of Rs.40.00lacs along with the existing CC limit of Rs.40.00lacs.

Nature of Activity : Trading in gold and silver jewellery ornaments articles etc.

S.R.RAJA AGENCY

It is a proprietary concern owned by Mr.S.R>Raja alias Rajasekar is engaged in the

wholesale and retail trading of cements manufactured by various companies like

Zuari ,India Cements ,Dalmia,Ultrateck etc,.The subjects meet major demand for cement

in this area.They are banking with IOB for more than 15 years and enjoying credit

facilities from IOB since 27.10.2000.The chief promoter is Mr.S.R.Raja who is a noted

personality in Tambaram and also Ex-Chairman of Tambaram Municipality

Corporation ,presently MLA of Tambaram constituency.Mr.S.R.Raja , the promote is

interested in various business.The firm has achived a sale turnover of Rs.1537.70 lacs for

2007-08.

Nature Of Activity :

Stociest,Dealers,Agents&Distributors of all brands of cements.

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CHAPTER 3

LITERATURE SURVEY

3.1 CONCEPT REVIEW

Financial performance is a term used to measures the performance of the firm in the

financial viewpoint. In the financial performance determine the financial position of the

company through analysis , the available loans usage of investments and shareholder’s

funds.It is used to mearsur the profit maximization and wealth maximization of the

company.It also determine the turnover , investments in particular period ,also determine

the working capital turnover of the three companies.

3.2 RESEARCH REVIEW

A.The financial performance of reverse leveraged buyouts

- Robert W. Holthausen and David F. Larcker

Examine the accounting and market performance of reverse leveraged buyouts (i.e., firms

making their first public offering after previously completing a leveraged buyout). On

average, the accounting performance of these firms is significantly better than their

industries at the time of the initial public offering (IPO) and for at least the following four

years, though there is some evidence of a decline in performance. Cross-sectional

variation in accounting performance subsequent to the IPO is related to changes in the

equity ownership of both operating management and other insiders, and is unrelated to

changes in leverage. Finally, there is no evidence of abnormal common stock

performance after the reverse leveraged buyout.

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Key Words: Reverse leveraged buyouts; Capital structure; Equity ownership; Financial

performance

B.The Financial Performance Of Government Trading Enterprises

- Peter Costello Treasurer

The research paper provides an independent and comprehensive analysis of the financial

performance of various GTEs, most of which are owned by State and Territory

Governments and operate in the electricity, water, transport and forestry sectors.

The Productivity Commission has reported that the overall financial performance of all

sectors generally improved in 2005-06.

However, the Commission has found once again that about half of the monitored GTEs

earned less than the average return on long-term bonds in 2005-06, with an even greater

proportion failing to earn a commercial rate of return (which includes a margin for risk).

In addition the Commission reported that over 2004-05 and 2005-06, GTEs in the

electricity sector paid out around $2.5 billion in dividends to State and Territory

Governments, GTEs in the water sector paid out nearly $2 billion, and GTEs in the rail

and ports sectors paid out over $200 million, respectively (table attached). In the case of

the electricity and water sectors, dividend payouts were well in excess of 50 per cent of

operating profits after tax.

The Commission quite rightly emphasises the importance of GTEs operating efficiently,

given their role as significant providers of infrastructure services that are fundamental to

the wellbeing of Australians.

Timely and effective implementation of COAG’s National Reform Agenda

commitments, agreed between the Australian and State and Territory Governments in

April of this year, will go a long way towards realising the gains from improving

productivity, competitiveness and efficiency in crucial infrastructure sectors.

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These reforms have the potential to boost Australia’s productive capacity at a time when

we should be doing everything possible to capitalise on the favourable global economic

environment.

It is also incumbent upon the States and Territories to ensure that they undertake

sufficient investment in essential transport and other economic and urban infrastructure,

so as to deliver the appropriate level and quality of services to Australian businesses and

households.

C. The Financial Performance of World's Top 10 Dairy Companies

Increasing prices of raw materials, demand for dairy products in emerging markets and

the drive for health and wellness, are putting pressure on dairy manufacturers to develop

innovative but cost effective products. Key growth strategies for many of the top

companies include strengthening brand portfolios and expansion in growth markets such

China and India. The Top 10 Dairy Companies is a report that analyzes the innovation

and growth strategies of the top 10 players in the dairy industry. This report identifies the

product areas that the top 10 players are seeking to develop and also highlights the

respective markets where each individual company is looking to grow. It also examines

the comparative strengths, weaknesses, opportunities and threats facing the world’s

leading dairy companies.

Key findings from this report...

o The global dairy industry is highly fragmented, with the top 10 companies

representing about 22.4% of the total market size in 2006.

o The global dairy market reached $402.5bn in 2006, representing a five-year

CAGR of 3.7% and it is forecast to reach about $487.2bn in 2011, representing

a five-year CAGR of 4.9%.

o The leading dairy companies are focussing innovation on organic and functional

dairy. Other latest developments have included products that are low fat, contain

natural ingredients and no preservatives.

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o Nestlé was the global industry leader with a 5.0% market share in 2006, followed

by Danone (2.5%) and Dean Foods (2.4%).

o Parmalat’s dairy business recorded revenues of R3,546m ($4,861m) for the fiscal

year ended December 2007, an increase of 6.1% over 2006. Higher revenues in

fiscal 2007 were mainly due to higher sales volume in Canada and Italy. The

dairy revenues accounted for 91.8% of its consolidated revenues in 2007.

D. Evaluate the Financial Performance of CyberTAN Technology Inc

DUBLIN, Ireland

Technology Inc.: 2006 Contract Manufacturing Profile to their offering.

CyberTAN Technology Inc. (Taiwan, Republic of China) is a major provider of 10 Mbps

NIC, Networking components/devices/appliances, Networking products: own brand, and

other products. These reports include essential information for OEMs, importers, buyers

and distributors.

This profile covers three main areas:

* General Company Information

* Company Contract Manufacturing Activities

* Company Financial Performance

General company information includes company contact information, a list of product

lines, company brands and brand rank. In addition, each company profile includes analyst

notes on the general state of company performance and future plans. In terms of contract

manufacturing activities, the reports detail company customer relationships, recent

contract manufacturing deals, and sub-contracts, and have a special section devoted to

contract manufacturing activities in China. Further, our reports provide information on

company manufacturing facilities (locations, products and capacities).

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Financial performance data generally includes quarterly and annual data on shipments,

sales, and revenues from 2001 through the current year forecast, gross profit margin, and

product mix. We also provide available data on company shareholders, investments and

acquisitions, distributors and affiliates, and conclude the financial section with analyst

notes on the companys financial state and investment plans. The company profiles are

drawn from a database that is continually growing; the exact data set included in each

profile varies.

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CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

Analysis Part – I

4.1 COMPARATIVE STATEMENT ANALYSIS

A simple method of tracing periodic changes in the financial performance of a

companies is to pepare comparative statements.Comparative financial statements will

contain items at least for two periods.

Changes-increase o decrease in income statements and balance sheet over period can

be shown in two ways :

a.Aggregate Changes,

b.Proportational Changes.

Drawing special columns for aggregate amount or percentages or both of increase and

decrease can indicate aggregate changes.Recording percentages calculated in relation

to a common base in special columns , on the other hand, shows relative or

proportational chamges.This is kind of analysis is called vertical analysis and it

indicates static relationship since relative changes are studied at a specific period.

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Table No : 1

4.1.1 COMPARATIVE ANALYSIS FOR NET PROFIT

Particulars Net Profit Increase Or

Decrease

% Of Change

2007-08 2006-07

Amman

Agency

46,856 3,08,601 -2,61,745 -85

S.R.Raja

Jewellery

1,098,262 1,83,455 9,14,807 499

S.R.Raja

Agency

3,83,019 8,44,968 -4,61,949 -55

Interpretation :

It is inferred from the above table that in general the net profit has increased for S.R.Raja

Jewellery during the project period (2007-08 & 2006-07) .The Net Profit has increased by

499% for S.R.Raja Jewellery.The Net Profit has decreased by -85% for Amman agency ,

-55% for S.R.Raja Agency.The company has net profit than the other companies,because

of their efforts and due to more brokers or agents.

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4.1.1 COMPARATIVE ANALYSIS FOR NET PROFIT

-85

499

-55

-200

-100

0

100

200

300

400

500

600

Amman Agency S.R.RajaJewellery

S.R.RajaAgency

Particulars

% o

f N

et P

rofi

t

24

Table No : 2

4.1.2 COMPARATIVE ANALYSIS FOR GROSS PROFIT

Particulars Gross profit Increase Or

Decrease

% Of Change

2007-08 2006-07

Amman

Agency

24,59,558 29,91,646 -532,088 -17.79

S.R.Raja

Jewellery

1,664,036 295,229 1,368,807 464

S.R.Raja

Agency

64,00,825 64,87,015 -86,190 -1.33

Interpretation :

It is inferred from the above table that in general the gross profit has increased for

S.R.Raja Jewellery during the project period (2007-08 & 2006-07) .The Gross Profit has

increased by 464% for S.R.Raja Jewellery.The Gross Profit has decreased by -17.79% for

Amman agency , -1.3% for S.R.Raja Agency.The company has gross profit than the other

companies,because of their sales is increase than their cost of sales.

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4.1.2 COMPARATIVE ANALYSIS FOR GROSS PROFIT

-17.79

464

-1.33

-1000

100200300400500

Ammanagecny

S.R.RajaJewellery

S.R.Rajaagency

Particulars

% o

f G

ross

Pro

fit

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Table No : 3

4.1.3 COMPARATIVE ANALYSIS FOR NET WORKING CAPITAL

Particulars Net Working Capital Increase Or

Decrease

% Of Change

2007-08 2006-07

Amman

Agency

2,95,369 13,33,366 -10,37,997 -78

S.R.Raja

Jewellery

14,262,414 75,35,868 67,26,273 89

S.R.Raja

Agency

12,297,064 -9,88,189 11,308,875 -13393

Interpretation :

It is inferred from the above table ,the S.R.Raja Jewellery has the positive working

capital because the current assets exceeds the current liabilities.the other two companies

like Amman agency,S.R.Raja Agency have negative net working capital because the

current liabilities exceeds the current assets.

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4.1.3COMPARATIVE ANALYSIS FOR NET WORKING CAPITAL

-78

89

-149

-200

-150

-100

-50

0

50

100

150


S.R.RajaAgency

Particulars

% o

f N

et W

ork

ing

Cap

ital

28

Analysis Part -II

4.2 RATIO ANALYSIS

Ratios are highly important profit tools in financial analysis that help financial

analysts implement plans that improve profitability,liquidity,financial

structure,reordering,leverage and interest coverage.Although ratios report mostly on

past performances,they can be predictive too,and provide lead indications of potential

problem areas.

Ratio analysis is primarily used to compare a company’s financial figures over a

period of time,a method sometimes called trend analysis.Through trend analysis, one

can identify trends,good and bad , and adjust the business practices accordingly.

These are several considerations to be aware of when comparing ratios from one

financial period to another or when comparing the financial ratios of two or more

companies.

I. PROFITABILITY RATIOS

a.Return On Total Assets

This ratio is calculated to measure the productivity of total assets.

Return on Investment = Net Profit After Tax

__________________________ *100

Total Assets

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b.Gross Profit Ratio

This ratio is also known as Gross margin or Trading margin ratio.Gross profit ratio

indicates the difference between sale and direct costs.Gross profit ratio explains the

relationship between gross profit and net sales.

Gross Profit

Gross Profit Ratio = _______________ *100

Net Sales

c.Net Profit Ratio

This ratio is also called net profit to sale ratio.It is a measure of management’s

efficiency in operating the business successfully from the owner’s point of view.It

indicates the return on shareholder’s investments.

Net Profit After Tax

Net Profit Ratio = ---------------------------------- *100

Net Sales

d.Operating Profit Ratio

It is the ratio of profit made from operating sources to the sales , usually shown as a

percentage.It shows the operating efficiency of the firm and is a measure of the

management’sefficiency in running the routine operations of the firm.

Operating Profit

Operating Profit Ratio = ------------------------------- *100

Sales

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e.Administrative Expenses Ratio This ratio is also known as supporting ratio to operating ratio.They indicates the

efficiency with which business as a whole functions.It is better for yhe concerns to

know it is able to save or waste over expenditure in respect of administrative

expenses.

Administrative Expenses

Administrative Expenses Ratio = ---------------------------------- *100

Net Sales

II. TURNOVER RATIOS

a.Stock Turnover Ratio

This ratio is also called stock velocity ratio.It is calculated to ascetain the efficiency

of inventory management in terms of capital investment.It shows the relationship

between the cost of goods sold and the amount of average inventory.Stock turnover

ratio is obtained by dividing the cost of sales by average stock.This ratio is helpful in

evaluating and review of inventory policy.

Cost of goods sold

Stock Turnover Ratio = ------------------------------

Average inventory

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b.Working Capital Turnover Ratio

Working capital ratio measures the effective utilization of working capital.It also

measures the smooth running of business or otherwise.The ratio establishes

relationship between sales or cost of sales and working capital.

Sales/Cost of Sales

Working Capital Turnover Ratio = ----------------------------

Net Working Capital

c.Fixed Assets Turnover Ratio

This ratio determines dfficiency of utilization of fixed assets and profitability of a

business concern.Higher the ratio , more is the efficiency in utilization of fixed

assets.A lower ratio is the indication of under utilization of fixed assets.

Sales

Fixed Assets Turnover Ratio = -------------------------

Net Fixed Assets

d.Capital Turnover Ratio

Managerial efficiency is also calculated by establishing the relationship between cost

of sale or sale with the amount of capital invested in the business.

Cost of Sales/Sales

Capital Turnover Ratio = --------------------------------

Total Capital Employed

32

III.SHORT –TERM SOLVENCY RATIO

a.Current Ratio

The ratio of currnet asets to current liabilities is called “Current Ratio”.In order to

measure the short-term liquidity or solvency of a concern,comparison of current

assets and current liabilities is inevitable.Current ratio indicates the ability of a

concern to meet its current obligations as and when they are due for payment.

Current Assets

Current Ratio = -----------------------------

Current Liabilities

b.Quick Ratio

This ratio is also called “Quick” or “Acid Test” ratio.It is calculated by comparing the

quick assets wiyh current liabilities.

Quick Assets

Quick Ratio = --------------------------

Current Liabilities

c.Cash Position Ratio

This ratio is also called “Absolute Liquidity Ratio” or “SuperQuick Ratio”.This ia a

variation of quick ratio.This ratio is calculated when liquidity is hughly restricted in

terms of cash and cash equivalents.This ratio measures in terms of cash and near cash

items and short-term current liabilities.

Cash and Bank Balance

Cash Position Ratio = -----------------------------------

Current Liabilities

33

I.PROFITABILITY RATIOS

Table No : 4

4.2.1 RETURN ON TOTAL ASSETS RATIO

Particulars Net Profit After Tax Total Assets Ratio

2007-2008 2006-2007 2007-2008 2006-2007 2007-2008 2006-2007

Amman

Agency

46,856 3,08,601 45,94,102 50,13,351 1.02 6.16

S.R.Raja

Jewellery

1,098,262 1,83,456 40,401,557 13,308,955 2.72 1.38

S.R.Raja

Agency

3,83,019 8,44,968 44,200,137 28,057,575 0.87 3.01

Interpretation :

It is inferred from the above table that S.R.Raja Jewellery stands in return on total assets

when comparing the three companies with the ratio of 2.72 in the year 2007-2008.But in

the year 2006-2007 the ratio is only 1.38.There is a increase in return on total assets.This

is because the company is efficiently utilizing its assets and converting into profit.

Amman Agency follows it with a ratio of 1.02 in the year 2007-2008 , When comparing

with the previous year it has decreased by 5.14.S.R.Raja Agency follows it with a ratio of

0.87 on the year 2007-2008 , when comparing with previous year it has decreased by

2.14.The reason for the decrease in the return on total asstes in two companies like

Amman Agency and S.R.Raja Agency is that have not utilisied the assets proprrely.

34

4.2.1 RETURN ON TOTAL ASSETS

1.02

6.16

2.72

1.380.87

3.01

0

1

2

3

4

5

6

7

Return On Total Assets Ratio

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

Particulars

35

Table No : 5

4.2.2 GROSS PROFIT RATIO

Particulars Gross Profit Net Sales Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

24,59,55

8

29,91,646 10,53,60,125 17,72,62,543 2.33 1.69

S.R.Raja

Jewellery

1,664,03

6

295,229 90,097,523 14,549,036 1.85 2.02

S.R.Raja

Agecny

64,00,825 64,87,015 193,596,732 153,773,543 3.31 4.22

Interpretation :

S.R.Raja Agency follows it with a ratio of 3.31 in the year 2007-2008 , When comparing

with the previous year it has decreased by 0.91.Amman Agency follows it with a ratio of

2.33 in the year 2007-2008 , when comparing with previous year it has decreased by

0.64. S.R.Raja Jewellery follows it with a 1.85 in the year 2007-08 when comparing the

previous year it has decreased by 0.17.The higher ratio indicates the profitability of the

company.

36

4.2.2 GROSS PROFIT RATIO

2.331.85

3.31

1.69 2.02

4.22

012345

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

Particulars

Gro

ss P

rofi

t ra

tio

37

Table No : 6

4.2.3 NET PROFIT RATIO

Particulars Net Profit Sales Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

46,856 3,08,601 10,53,60,125 17,72,62,543 0.04 0.17

S.R.Raja

Jewellery

1,098,262 1,83,453 90,097,523 14,549,036 1.22 1.26

S.R.Raja

Agency

3,83,019 8,44,968 193,596,732 153,773,545 0.19 0.53

Interpretation :

It is inferred from the above table that S.R.Raja Jewellery first in Net Profit when

comparing the three companies with the ratio of 1.22 in the year 2007-08, when

comparing the year 2006-07 it has decreased by 0.04.It is followed by Amman Agency

with a ratio of 0.04 in the year 2007-08,when comparing the previous year it has

decreased by 0.13.S.R.Raja Agency follows it with a 0.19 in the year 2007-08,when

comparing the previous year it has decreased by 0.36.

It indicates the return on Sahreholder’s investment.lower the ratio indicates the

operational efficiency of the business concern.

38

4.2.3 NET PROFIT RATIO

0.01

1.22

0.190.17

1.26

0.55

0

0.2

0.4

0.6

0.8

1

1.2

1.4


S.R.RajaAgency

Particulars

Net

Pro

fit

Rat

io

39

Table No : 7

4.2.4 OPERATING PROFIT RATIO

Particulars Operating Profit Sales Ratio

2007-08 2006-07 2007-08 2006-07 2007-

08

2006-

07

Amman

Agency

22,41,349 5,16,923 10,53,60,125 17,72,62,543 2.13 1.42

S.R.Raja

Jewellery

88,417,355 14,253,807 90,097,523 14,549,036 98.14 97.97

S.R.Raja

Agency

64,63,13,971 5,841,390 19,35,96,732 15,37,73,545 353.85 3.80

Interpretation :

It is inferred from the above table the S.R.Raja Agency stands first in the operating

profit.when comparing the three companies with the ratio of 353.85 in the year 2007-

08.But in the year 2006-07 the ratio is only 3080.There is a drastic increase in the

operating profit.It shows the operational efficiency of the firm and is a measure of the

management’s efficiency in running the routine operations of the firm.Amman Agency

follows it with a ratio of 2.13 in the year 2007-08,when comparing the previous year it

has increased by 0.71.S.R.Raja Jewellery follows it with a ratio of 98.14 in the year 2007-

08,when comparing with the previous year it has increased by 0.17.

40

4.2.4 OPERATING PROFIT RATIO

2.131.42

98.1497.97

353.85

3.80

50

100

150

200

250

300

350

400

Operating profit Ratio

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

Particulars

41

Table No : 8

4.2.5 ADMINISTRATIVE EXPENSES RATIO

Particulars Administrative Expenses Net Sale Ratio

2007-08 2006-07 2007-08 2006-07 2007-

06

2006-

07

Amman

Agency

9,39,031 7,82,417 10,53,60,125 17,72,62543 0.89 0.44

S.R.Raja

Jewellery

73,16,055 22,88,689 90,097,523 4,549,036 8.12 15.73

S.R.Raja

Agency

64,63,13,971 56,30,016 19,35,96,732 15,37,73,545 334 3.66

Interpreation :

It is inferred from the above table that S.R.Raja Agency stands first in administrative

expenses , when comparing the three companies with the ratio of 334 in the year 2007-

08.But in the year 2006-07 the ratio is only 3.66.There is a drastic increase in the

administarative expenses.It indicates the efficieny with which business as a whole

functions.It is better for concern to know how it is able to save or wate over expenditure

in respect of different items of expenses.Each aspect of cost of sale and operating

expenses are analysesd.Amman Agency follows it with a ratio of 0.89 in the year

2007-08,when comparing with the previous year it has increased by 0.45.

S.R.Raja Jewellery follows it with a ratio of 8.12 in the year 2007-08,when comparing

with previous year it has decreased by 7.61.

42

4.2.5 ADMINISTRATIVE EXPENSES RATIO

0.890.44 8.1215.73

334

3.660

50

100

150

200

250

300

350

Administartive

Expenses Ratio

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

Particulars

43

II.TUENOVER RATIOS

Table No : 9

4.2.6 STOCK TURNOVER RATIO

Particulars Cost Of Goods Sold Average Inventory Cost Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

102,900,567 174,270,897 4,58,437 32,06,253 70.56 54.35

S.R.Raja

Jewellery

90,097,523 14,549,036 16,984,085 11,025,927 5.30 1.32

S.R.Raja

Agency

187,195,907 147,286,530 15,93,919 17,25,557 117.44 85.36

Interpretation :

It is inferred from the above table that S.R.Raja Agency stands first in stock turnover

ratio,when comparing the three companies with the ratio of 117.44 in the year 2007-

08.But in the year 2006-07 the ratio is 85.36.There is a drastic increase in the stock

turnover.Amman Agency follows it with a ratio of 70.56 in the year 2007-08 , when

comparing the previous year it has increased by 16.21.S.R.Raja Jewellery follows it with

a ratio of 5.30 in the year 2007-08,when comparing with the previous year it has

increased by 3.98.

Stock turnover ratio indicates whether the investment in inventory is optimum.It indicates

the efficiency of stock turnover ratio it should be compared over a period of time.

A high inventory ratio indicate efficient inventory management and efficiency of

business operations.

44

4.2.6 STOCK TURNOVER RATIO

70.56

54.35

5.3 1.32

117.44

85.36

0

20

40

60

80

100

120

Stock Turnover

Ratio

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

Particulars

45

Table No : 10

4.2.7 WORKING CAPITAL TURNOVER RATIO

Particulars Sales Net Working Capital Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

10,53,60,125 17,72,62,543 295,369 13,33,366 356.71 600.14

S.R.Raja

Jewellery

90,097,523 14,549,036 14,262,414 75,35,868 6.32 1.93

S.R.Raja

Agency

15,37,73,545 19,35,96,732 12,297,064 -988,189 12.50 -195.91

Interpretation :

It is inferred from the above table that Amman Agency stands first in working capital

turnover ratio, when comparing the three companies with the ratio of 356.71 in the year

2007-08.But in the year 2006-07 the ratio is 600.14,when comparing the previous year it

has decreased by 253.43.S.R.Raja Jewellery follows it with a ratio of 6.32 in the year

2007-08.when comparing the previous year it has increased by 4.39.S.R.Raja Agency

follows it with a ratio of 12.50 in the year 2007-08.But it had negative ratio of -195.91

on the year 2006-07,when comparing with the ptrevious year it has increased by 208.41.

The higher ratio is the indication of lower investment of working capital and more

profit.It measures the smooth running of business of the concerns.

46

4.2.7 WORKING CAPITAL TURNOVER RATIO

356.71

600.14

6.321.93 12.5

-195.91-200

-100

0

100

200

300

400

500

600

700

Working Capital

Turnover Ratio

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

Particulars

47

Table No : 11

4.2.8 FIXED ASSETS TURNOVER RATIO

Particulars Sales Net Fixed Assets Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

10,53,60,125 17,72,62,543 16,83,605 736,463 62.58 240.69

S.R.Raja

Jewellery

90,097,523 14,549,036 17,005,357 875,537 5.30 16.62

S.R.Raja

Agency

19,35,96,732 15,37,73,545 28,08,243 17,19,619 68.94 89.42

Interpretation :

It is inferred from the above table that S.R.Raja Agency stands first in fixed assets

turnover ratio,when comparing the three companies with the ratio of 68.94 in the year

2007-08.But in the year 2006-07 the ratio is 89.42.There is a decrease in the fixed assets

turnover.Amman Agency follows it with a ratio of 62.58 in the year 2007-08,when

comparing with the previous year it has decreased by 178.11.S.R.Raja Jewellery follows

it with a ratio of 5.30 in the year 2007-08,when comparing with previous year it has

decreased by 11.32.

All the companies have decrease in the year 2007-08 than 2006-07.The reason for the

lower ratio indicates the under utilization of fixed assets.

48

4.2.8 FIXED ASSETS TURNOVER RATIO

62.58

5.3

68.94

240.69

16.62

89.42

0

50

100

150

200

250

300


S.R.RajaAgency

Particulars

Fix

ed A

sset

s T

urn

ove

r R

atio

49

Table No : 12

4.2.9 CAPITAL TURNOVER RATIO

Particulars Sales Total Assets Ratio

2007-08 2006-07 2007-08 2006-07 2007-

08

2006-

07

Amman

Agency

10,53,60,125 17,72,62,543 45,94,102 50,13,351 22.93 35.36

S.R.Raja

Jewellery

90,097,523 14,549,036 40,401,557 13,308,955 2.23 1.09

S.R.Raja

Agency

15,37,73,543 19,35,596,732 44,200,137 28,051,575 3.48 6.90

Interpretation :

It is inferred from the above table that Amma Agency stands first in the capital turnover

when comparing the three companies with the ratio of 22.93 in the year

2007-08.But it has decreased by 13.03.S.R.Raja Jewellery follows it with a ratio of 2.2. in

the year 2007-08,when comparing the previous year it has increased by 1.14.It indicates

the higher efficiency and effective usage of capital in the firm.S.R.Raja agency follows it

with a ratio of 3.48 in the year 2007-08.but it has decreased by 3.42.

The lower ratio obtains in Amma Agency and S.R.Raja Agency comparing with the

previous year ratio.It indicates the ineffective usage of capital.

50

4.2.10 CAPITAL TURNOVER RATIO

22.93

2.23 3.48

35.36

1.09

6.9

0

5

10

15

20

25

30

35

40


S.R.RajaAgency

Particulars

Cap

ital

Tu

rno

ver

Rat

io

51

II.SHORT – TERM SOLVENCY RATIOS

Table No : 13

4.2.11 CURRENT RATIO

Particulars Current Assets Current Liabilities Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

29,10,497 427,688 26,15,128 29,43,522 1.11 1.45

S.R.Raja

Jewellery

22,085,716 12,19,841 78,23,302 46,62,550 2.82 2.62

S.R.Raja

Agency

41,391,894 26,357,956 29,094,830 36,219,850 1.42 7.26

Interpretation :

It is inferred from the above table that S.R.Raja Jewellery has current ratio 2.82 in the

year 2007-08.It has increased by 0.2 ,when comparing with the previous year.the Amman

Agency has low current ratio in the year 2007-08.It has decreased by 0.34.S.R.Raja

Agency has current ratio 1.42 in the year 2007-08.But it has decreased by 5.84 , when

comparing with the previous year.

The higher ratio indicates the ability of a concern to meet its current obligations.

The reason for decrease in the current ratio for Amman Agency and S.R.Raja Jewellery is

that they have invested in current assets proportionamtely to the current liabilities in the

year 2007-08.

52

4.2.11 CURRENT RATIO

1.11

2.82

1.421.45

2.62

7.26

0

1

2

3

4

5

6

7

8


S.R.Raja Agency

Particulars

Cu

rren

t R

atio

53

Table No : 14

4.2.12 QUICK RATIO

Particulars Quick Assets Current Liabilities Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

agency

18,74,979 498,134 26,15,128 29,43,522 0.78 0.17

S.R.Raja

Jewellery

99,44,933 22,87,347 78,23,302 46,62,550 1.27 0.49

S.R.Raja

Agency

38,786,620 25,492,117 29,094,830 36,219,850 1.33 0.70

Interpretation :

It is inferred from the above table that S.R.Raja Agency stands first in the quick ratio,

when comparing the three companies with the ratio of 1.33 in the year 2007-08.But un

the year 2006-07 the ratio is 0.70.There is a increase in the quick ratio.

S.R.Raja Jewellery follows it with a ratio of 1.27 in the year 2007-08, when comparing

with the previous year it has increased by 0.78.

Amman Agency follows it with a ratio of 0.78 in the year 2007-08, when comparing with

the previous year it has increased by 0.61.

54

4.2.12 QUICK RATIO

0.78

1.271.33

0.17

0.49

0.7

0

0.2

0.4

0.6

0.8

1

1.2

1.4


S.R.RajaAgency

Particulars

Qu

ick

Rat

io

55

Table No : 15

4.2.13 CASH POSITION RATIO

Particulars Cash and Bank Balance Current Liabilities Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Amman

Agency

407,008 604,474 26,15,128 29,43,522 0.15 0.20

S.R.Raja

Jewellery

258,330 57,635 78,23,302 46,62,550 0.03 0.01

S.R.Raja

Agency

68,054 602,937 29,094,830 36,219,850 0.002 0.02

Interpretation :

It is inferred from the above table that amman agency stands first in the cash position

ratio, when comparing the three companies.But when comparing with previous year it has

decreased by 0.05.Since they have utilizied cash for investments.But still it has the

highest cash position.Instead of keeping cash it can invest it and get more profit.

S.R.Raja Jewellery follows it with a ratio of 0.03 in the year 2007-08, when comparing

with the previous year it has increased by 0.02.

S.R.Raja agency follows it with a ratio of 0.02 in the year 2007-08, when comparing with

the previous year it has decreased by 0.018.

56

4.2.13 CASH POSITION RATIO

0.15

0.2

0.03

0.010.002

0.02

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

AmmanAgency

S.R.RajaJewellery

S.R.RajaAgency

57

Analysis Part - III

4.3 TREND ANALYSIS

“Trend” signifies a tendency and as such the review and appraisal of tendency in

accounting variables are nothing but trend analysis .Trend analysis is carried out by

calculating trend ratios and/ or by for forecasying and budgeting.Trend analysis

discloses the changes in financial and operating data between specific periods.

Table No : 16

4.3.1 TREND ANALYSIS FOR AMMAN AGENCY

Particulars Stock Cash Net Profit

Rs Trend % Rs. Trend % Rs. Trend %

2006-07 37,78,754 100 604,474 100 3,08,601 100

2007-08 10,35,518 27 407,008 67 46,856 15

Interpretation :

1.Stock have registered a decrease in the year 2207-08.The percentage in 2007-08

is 27 as compared with the 100 in the year 2006-07.The decrease in the stock is

not satisfactory.

2.The cash balances of the company also decrease .The percentage in 2007-08 is

67 as compared the 100 in 2006-07.

3.Net Profit also decreases compared with the percentage in 2007-08 is 15 and

100 in 2006-07.

58

4.3.1 TREND ANALYSIS FOR AMMAN AGENCY

59

Table No : 17

4.3.2 TREND ANALYSIS FOR S.R.RAJA JEWELLERY

Year Stock Cash Net Profit

Rs. Trend % Rs. Trend % Rs. Trend %

2006-07 99,11,071 100 50,691 100 183,455 100

2007-08 12,140,783 122.50 86,234 170.12 10,98,262 598.65

Interpretation :

1.Stock have registered a increase in the current year.The percentage in 2007-08

is 122.50 as compared the 100 in 2006-07.The increse in stock is satisfactory.

2.The figures of cash have also increased from 2007-08.The increases in cash is

more in 2007-08 compared with 2006-07.

3.Net Profit has increased sunstantially.In two years time it has more

doubled.Further the increase in the net profit is more than proportinare to

increase in sales in the year.The overall performance of the S.R.Raja Jewellery

is good.

60

4.3.2 TREND ANALYSIS FOR S.R.RAJA JEWELLERY

61

Table No : 18

4.3.3 TREND ANALYSIS FOR S.R.RAJA AGENCY

Year Stock Cash Net Profit

Rs. Trend % Rs. Trend % Rs. Trend %

2006-07 845,839 100 602,937 100 844,968 100

2007-08 2,605,274 308 68,054 11.29 383,019 45

Interpretation :

1.Stock have registered a increase in the project period.The percentage in 2007-08

is 308 as compared with 100 in 2006-07.The increase in stock is satisfactory.

2.Cash also decreased from 2007-08 ,because it denotes the cash position of the

firm.

3.Net Profit of the company is also decreased.The decreases in 100 2006-07 is

compared to 45 in 2007-08.It indicates the poor performance of the company.

62

4.3.3 TREND ANALYSIS FOR S.R.RAJA AGENCY

63

CHAPTER 5:CONCLUSIONS

5.1 RESULTS AND DISCUSSIONS

From the comparative analysis ,it has been found that the net profit has increased

by large percentage for S.R.Raja Jewellery.

The Profit and Loss also increased for the companies;particularly S.R.Raja

Jewellery and S.R.Raja Agency it has increased by 440% and 24%

The net working capital has increased by 89% for S.R.Raja Jewellery in the year

2007-08.However,Amman Agency,S.R.Raja Agency have decreased net working

capital in the year 2007-08,due to more current liabilities.

From the ratio analysis ,it has been found that the return on total asset decreased

for all the companies except S.R.Raja Jewellery during the project period.

The Net Profit ratio has decreased for all the companies.Because the operational

efficiency of the business concerns is ineffective during the project period.

The Operating Profit ratio has increased for all the companies.It indicates the

operational efficiency of the firms and the routine operations of the firm.

The administrative expenses ratio of the Amman Agency and S.R.Raja Agency is

high.This ratio decreased for S.R.Raja Jewellery durind the project period.

64

The highest ratio indicates the efficiency and whole functions of the concerns;the

lowest ratio indicates the inefficiency of the concerm.

The stock turnover has increased for all the companies .It shows the optimum

inventory of the concens and efficient inventory management ,efficiency of

business operations of the companies.

The working capital turnover has decreased for Amman Agency only.It indicates

the higher investment of working capital and less profit.

The fixed assets turnover has decreased for all the three companies.It indicates the

under utilization of fixed assets during the project period.

The capital turnover has decreased for Amman Agency and S.R.Raja Agency.The

reason foe decreased ratio is ineffective usage of capital of the particular

companies.

The current ratio of Amman Agency and S.R.Raja Agency is low.The current

ratio is increasing for S.R.Raja Jewellery from 2.62 to 2.82.

The cash position ratio is high for S.R.Raja Jewellery.From the cash position ratio

,it has been found that Amman Agency and S.R.Raja Agency have not used

current assets properely.

The quick ratio is high for Amman Agency in the year 2007-08.S.R.Raja

Jewellery has increased from 0.49 to 1.27.S.R.Raja Agency has increased from

0.70 to 1.33.

65

In trend analysis the Amman Agecny have the decreases of the stock ,cash and net

profit trends in 2007-08.I indicates the poor performance of the company.

From the trend analysis,S.R.Raja Jewellery have the drastic increase in the

elements of financial statement.It indicates the good performance of the company.

The S.R.Raja Agency has the increase in trend only in stock.It indicates the

availability of the resources .The cash balance and net profit of the company is

very poor.

66

5.2 LIMITATIONS

The present study is subject to the following limitations:

The study is based only on the secondary data contained in the published

annual reports of Amman Agency,S.R.Raja Jewellery Private Ltd., and

S.R.Raja Agency.

Due to the limited time available the disposal of the researcher the study

has been confined for a period of two years only.

The analysis and interpretation are base on secondary data taken from

financial reports.

Ratio itself will not completely show the company’s good or bad financial

position.

The figures from the financial statements for analysys were historicl in

nature and the time value of money is not considered.

67

5.3 SUGGESTIONS

The companies should efficiently utiise their assets properely.

The companies should increase the return on shareholder’s investment.

The companies should invest more in current assets.The current assets

should be in proporatin to the current liabilitiws.

The companies have got low profit.They should increase the profit by

increasing the number of customers.

They should appoint more agents and brokers.

The companies should increase the operationg sources to

sales.Also ,increase the routine operations of the firm.

The companies also known how it is able to save or waste over

expenditure in respect of different items of expenses.

The companies to judge the efficiency of stock turnover ratio it should be

compared over a period of time.

The companies should increase the inventory level to current position.

The companies should maintain lower investment of working capital and

get more profit.

68

The companies should increase the effrctive utilization of ifxed assets.

To increase the stock level the companies increase the stock

exchanges;and also increase the level of stock.

To increase cash position of the companies to invest and deposit in the

banks is the assets of the companies.

Also increase the profit of the company through their efficient

management system.

69

5.4 CONCLUSION

The main objective of the study is to analyse the financial perfomance of the three

companies for a period of two years 2006-07 and 2007-08.

From the study is concluded that S.R.Rja Jewellery has maintained very good

performance throughout the study period.The growth of S.R.Raja Jewellery is due to

more and more investments in the year of 2007-08 and also it has more return on total

assets,net profit,cash position,trend analysis.

This syudy can be further extended by comparing it with other companies of Indian

Ovearseas Bank.

70

BIBILOGRAPHY

Financial Management –I.M.Pandey,Eigth Edition,Vikas Publishnig

House Private Ltd.

Einancial Management Accounting-T.S.Reddy & Y.Hari Prasad

Reddy,Fourth Edition, Margham Publications.

71

APPENDIXAmman Agency

Trading,Profit And Lloss Account for The Year Ended 31.03.2007Particulars Amount Amount Particulars Amount Amount

To Opening stock :

TambaramKottivakkam

To Purchase:TambaramKottivakkam

To Gross Profit

To SalariesTo Uniform to staffsTo bonus&Ex-GratiaTo Electricity ChargesTo Bank ChargesTo Generator MaintennanceTo rates&TaxesTo Telephone ChargesTo ESI ContributionTo Pump StampingTo Finance ChargesTo Staff welfareTo Conveyance

21,17,216 16,61,538

10,89,75,091 6,41,50,084

37,78,754

17,31,25,895

29,91,646

17,98,96,295

15,52,500

98,350

1,25,000

1,15,850

1,32,000

1,15,950

500

34,600

9,500

45,200

28,956

86,438

By Sales:Tambaram

Kottivakkam

By Closing Stock :TambaramKottivakkam

By Gross profit b/d

11,21,76,646 6,50,85,897

17,72,62,543

26,33,752

Nil

17,98,96,295

29,91,646

72

To Office Maintennance

To printing & stationeryTo DepreciationTo Net Profit

39,435

73,810

58,834 1,66,122

3,08,601

29,91,64629,91,646

Balance Sheet As On 31.03.2007Liabilities Amount Amount Assets Amount Amount

Partner’s Cash in hand 2,96,375

73

Capital A/c :Opening BalanceAdd:Net Profit

OD:IOBSundry Creditors:IOC LtdPrajwal Enterprises

MPL Automobile Car Loan

TOTAL

15,76,348 3,08,601

10,79,984 8,81,650

18,84,949 9,81,888

19,91,634

4,33,330

52,61,801

IOB(Kotti)Cash at Banks(card sales)Closing stockSundry DebtorsIOC depositEB depositSales Tax DepositTelephone DepositStaff Advance

FurnitureLess:Depreciation

GeneratorLess:Depreciation

DensityLess:Depreciation

Car AveoLess:Depreciation

Water Cooler

TOTAL

51,075

5,108

34,510 5,176

10,540

1,581

7,71,284

1,54,257

29,329 2,78,770

26,33,752 10,38,662

2,00,000 32,450 2,500

3,000

10,500

45,967

29,334

8,959

6,17,013

35,190

52,61,801

Sundry Debtors AsOn 31.03.2007

S.No Sundry Debtors Rs.

74

1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.

JCPLCentral ExciseS.K.TransportsMccoy ClothingVaradha ReddySRC TransportMercuryAdvani Arlicon LtdSrinivasa Lorry serviceArumaidoss BorewellSuresh Lorry ServiceNithya CabsDevika CabsSrinivasa TransportState Bank Of IndiaK.V.CabsBala Tours&TravelsG.G.Tours&TravelsShanu Enterprises

97,500 16,667 82,250 74,183 95,260 58,651 39,632 34,856 64,392 63,650 43,963 48,186 48,653 35,186 7,850 83,186 48,123 69,985 26,489

Trading , Profit And Loss Account For The Year Ended 31.03.2008Particulars Amount Particulars Amount

To Opening Stock 10,35,518 By Sale: 10,20,51,459

75

To Purchase:Petrol&DiselLubricantsTo Gross Profit c/d

To Staff SalariesTo Uniforms to StaffsTo Bonus & Ex-GratiaTo Electricity ChargesTo Generator MaintennanceTo Bank Charges&InterestTo Telephone ChargesTo ESI ContibutionTo Car InsuranceTo Interest on car loanTo Stakk WelfareTo Travelling& ConveyanceTo Office MaintennanceTo Pump StampingTo printing & StationeryTo DepreciationTo net Profit

10,04,36,917 33,09,487 24,59,558 10,72,41,480

12,35,600 76,485

82,625

1,19,277

96,436

2,21,490

71,486

8,810 73,814 44,758

1,02,484 36,485

35,284

13,150 23,165

1,92,652 46,856

24,80,857

Petrol&DiselLubricantsBy Closing Stock

By Gross Profit b/dBy Profit on Sale of Aveo Car

33,08,666 18,81,355

_________________ 10,72,41,480

24,59,558 21,299

24,80,857

Balance Sheet As On 31.03.2008

76

Liabilities Amount Amount Assets Amount Amount

B.Durgaprasad’s Capital Account

Opening BalanceAdd :

Add:Net Profit

Less:Drawings

Old Partner Capital A/cOD:IOBIndian Oil CorporationPrajwal EnterprisesVijaya Bank[Skoda Car Loan]

TOTAL

2,39,411 6,50,000 8,89,411 46,856 9,36,267 60,000

8,76,267

57,564

9,04,083 10,67,000

6,44,045

13,11,443

48,60,402

Cash in handCash at bankIDBIICICI

Fixed Assets(as per enclosure)Closing stockSundry debtorsAdvances&DepositsIOC DepositEB DepositSales TaxTelephone DepositStaff Advances

TOTAL

24,988 44,080

3,37,940

69,068

16,83,605

18,81,355 6,22,134

2,00,000 35,320 2,500 3,000 25,480

48,60,402

S.R.RAJA JEWELLERY (P) Ltd

77

Trading ,Profit And Loss Account For The Year Ended 31.03.2008Particulars 31.03.2008

Amount Rs.31.03.2007Amount Rs.

Income : Sales Miscellenous Income

Total

Expenditure : Material Consumed Salary & Bonus Director Remuneration Administrative Expenses Depreciation

Total

Profit Before Tax(Gross Profit)Less: Provisions For Income Tax Provisions For Fringe Benefit Tax

Net Profit For The Year

Add:Balance b/f From Previous YearNet Profit For The Year Carried To B/S

Earning Per Share

90,097,523 16,617

90,114,140

79,088,929 1,202,371 810,000

7,316,055 32,749

88,450,104 1,664,036

545,000

20,774

1,098,262

249,120

1,347,382

1.80

14,549,036 ---------

14,549,036

11,227,118 360,000 378,000

378,000 --------

14,253,807 295,229

99,374

12,400

183,455

65,665

249,120

24.91

Schedules Of Profit And Loss Account For The Year Ended 31.03.2008

78

Particulars 31.03.2008Amount Rs.

31.03.2007Amount Rs.

Rawmaterial Consumption : Opening Stock Add:Purchase

Sub-TotalLess: Closing StockConsumption For The YearAdministrative Expenses: Making Charges Jewel Box Bar Code Ribbon Electricity Charges Rent Insurance Office Maintennance Staff Welfare Printing & Stationery Telephone Petrol Expenses Accounting Charges Audit fees Sales Promotion (Bonus on Chit) General Expenses Advertisement Sales Tax /VAT Tax Commission On Sale Turnover Rebate & Discount Repairs & Maintennance Security Charges Travelling Expenses Office Renovation Bank Interest/Charges

Total

12,140,783 88,775,532

100,916,315 21,827,386 79,088,929

2,014,697 48,464 0 147,832 80,000 16,124 116,840 220,219 52,153 84,307 99,327 27,750 0

132,827 32,251 1,054,738 62,959

1,577,700 16,271

438,044 76,460 301,897 309,120 406,075

7,316,055

9,911,071 13,456,830

23,367,901 12,140,783 11,227,118

805,921 17,900 7,482 136,534 62,400 35,636 32,772 94,751 194,145 21,091 4,697 12,000 16,836

42,775 23,150 163,099 131,229

--------- ---------

--------- --------- --------- --------- 396,371

2,288,689

Balance Sheet As At 31.03.2008

79



Source Of Funds (A): Share Capital P&L Account

Loan funds (B): Secured Loan Unsecured Loan

Total

Application Of Funds(A+B) Fixed AssetsCurrent Assets Loans&Advances: Closing Stock Cash&Bank Balances Loans&Advances

Sub-Total (A)

Less:Current Liabilities&Provisions: Chit Payable Sundry Creditors Provisions

Sub –Total (B)Net Current Assets(A-B)

Total

6,100,000 1,347,382

7,447,382

5,765,6183,792,357

9,557,975

17,005,3572,143,324

21,827,386258,330

1,310,484

23,396,200

3,947,3003,876,002

710,865

8,534,16714,862,03317,005,357

6,100,000 249,120

6,349,120

1,262,772 1,140,645

8,403,417

14,752,537 1,126,760

12,140,783 27,635 235,000

12,433,418

4,015,070 647,480 145,091

4,807,641 8,625,777 14,752,537

Schedules To Balance Sheet As 31.03.2008

80



Share CapitalAuthorised Capital : 900000 equity shares of Rs.10/- each

Issued & Subscribed Capital :610000 equity shares of Rs.10/- each for cash at par fully paid-upShare application money received

Secured loans : From IOB CC Account HDFC Car Loan

Unsecured Loans from Directors : S.Rajasekar Kamaraj R.Nithyakalyani S.Arularasan

Cash&Bank Balances : Cash in handBalances with scheduled banks in current accounts

Loans & Advances : Rent advance Advance I.T paid/TDS Prepaid Expenses Prepaid interest car loan Fringe Benefit Tax Salary advance Amount to be received from customers

9,000,000

6,100,000

0 6,100,000

4,778,618 987,000

5,765,618

1,737,895 90,000 1,102,253 862,209

3,792,357

86,234

172,096

258,330

1,00,000 701,670 53,413

141,167 33,544 52,030

183,375

9,000,000

100,000

6,000,000 6,100,000

1,262,772 Nil

1,262,772

237,895 90,000 430,855 381,895

1,140,645

50,691

6,944

57,635

1,00,000 135,000

81

Arasu Arts Bhavani Flex Clasic adds Poovai Mani R.Kumar R.R.Products Talk Media (P)Ltd Zigma Marketing Electricity Deposit Rajasekaran

Current Liabilities : Chit Payable Sundry Creditors Provisions

Schedules To Current liabilities : Sundry creditors : Ambika Jewellery Jewel Craft Moharld Jewellers N.S.Jewellers Swarna Shilipi Gitanjali Gems Shanthi Jewellery S.P.Jewellery V.L.Jewellery Creditors for expenses

Less Debit Balance in Creditors : Sree Lakshmi Jewellers S.Lakshmipathy

Creditors For Expenses :SRR Pavithra

1,030 1,022 445 1,414 648 1,638 611 680 12,600 25,197

1,310,484

3,947,300 3,876,002 710,865

8,534,167

44,953 47,222 24,730 43,005 32,128 55,816 38,000 73,000 44,000 3,539,158

3,942,012

60,810

5,200

3,876,002

289,185

23,500

4,015,070 647,480

Nil

4,662,550

82

GajendranGuru AchariKesavan AchariKumar AchariA.ParvathyBhagyalakshmiAdvance against orderRamaniSulochanaV.KrishnaveniM.SelvarasuNeelakandan Radha agencies Ramu AchariR.VasuSalary payableSecurity PayableTDSTDS on salaryTDS on advertisementTelephone Charges Payable Duties & Taxes

198,818 286,272 194,705 193,452 625,945 182,988 44,077 185,125 178,975 174,296 222,610 196,957 9,813 195,096 217,088 120,000 3,933 1,229 307,631 7,767 963

2,253

3,539,158

S.R.RAJA AGENCIES

83

Trading,Profit And Loss account for the year ended 31.03.2007Particulars Amount

Rs.Amount

Rs.Particulars Amount

Rs.Amount

Rs.To Opening StockTo PurchaseLess:Discount On Purchase

To Freight on PurchaseTo Gross Profit

To indirect ExpensesTo depreciationTo Net Profit

145,578,263 8,962,721

8,458,839

136,615,542

12,430,423

6,487,015156,378,819

5,630,016

211,374

844,968

6,686,358

By SalesBy Closing stock

By Gross ProfitBy Other income

153,773,545 2,605,274

156,378,819

6,487,015

199,343

6,686,358

Balance Sheet As At 31.03.2007

84

Liabilities AmountRs.

Assets AmountRs.

Goods AccountAssessess capital A/cSecured LoanCurrent Liabilities&Provisions

906 1,713,965 4,050,712 36,219,850

41,985,433

Fixed AssetsLoans,advances&DepositsCash and Bank balancesSundry debtorsStock On hand

1,719,619 13,927,859

602,937

23,129,745 2,605,574

41,985,433

Trading,Profit and Loss Account for the year ended 31.03.2008

85

Particulars AmountRs.

AmountRs.

Particulars AmountRs.

AmountRs.

Opening StockPurchase accounts:Cement purchasesPurchases

Direct Expenses:Cartage expensesLorry freightDiscount allowedTransport charge&loading,unloadingWagesWage on freight

Gross profit c/d

Indirect expensesNet Profit

18,55,87,822.24

27,78,792.31

5,40,874.18 9,27,897.00 16,23,367.70

8,98,833.50 4,76,232.00 1,11,838.79

26,05,274.00

18,83,66,614.55

45,79,043.17

64,00,825.56

20,19,51,757.28

64,63,139.71 3,83,019.37

68,46,159.08

Sales A/cDirect incomesClosing stock:Cement

Gross Profit b/fOther income(own lorry freight income)

19,35,96,732.08 77,72,461.05

5,82,564.15

20,19,51,757.28

64,00,825.56

4,45,333.52

68,46,159.08

Balance Sheet as at 31.03.2008

86

Liabilities AmountRs.

AmountRs.

Assets AmountRs.

AmountRs.

Capital A.cLoans(liability):IOB OD a/cUnsecured LoanHDFC Bank Ltd Eicher loan

Current Liabilities:Duties&taxesProvisionsSundry CreditorsGoods a/c

Profit&Loss A/c:Opening balanceCurrent PeriodLess:Transferred

63,11,591.8562,94,191.00

9,87,429.04

1,71,438.43 5,55,804.002,83,67,166.71

421.69

3,83,019.37

3,83,019.37

15,12,094.37

1,35,93,211.89

2,90,94,830.83

0

4,42,00,137.09

Fixed assets:CellphoneComputerEPBAXFurniture&FittingsGeneratorGodownLand&BulidingMotor cyclePrinterRefrigeratorStabilizerTN22AC 6066 CarTN22AJ190 CarTN22Y1848 EicherTN22AY1863 EicherWeighing machine

Current assets:Stock in handDeposits(assets)Loans&advances(assets)Sundry debtorsCash in handPetty cashS.R.Raja Jewellery(share)Stock in transitUTI Bank

12,121.00 18,353.00 4,577.00 38,361.00 5,147.001,23,534.006,89,744.00 49,611.00 14,788.00 988.00 1,456.004,30,046.001,91,958.006,03,875.006,03,875.00

19,809.00

5,82,564.151,62,72,644.83 12,64,928.00

2,15,21,282.00 68,054.00 34,607.00 3,50,000.00

12,87,597.00 10,217.11

28,08,243.00

4,13,91,894.09

4,42,00,137.09

Summer Project 09

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