Vkc Project

Analysis of financial statements at VKC Pvt Limited

EXECUTIVE SUMMARY

The project report titled “financial statement Analysis” was carried out at VKC

Rubber industry Pvt Ltd. This study was conducted to evaluate the financial performance of

VKC Rubber industry Pvt Ltd. in order to give a better scope to the investors, shareholders,

creditors and the management themselves about the rating of VKC Rubber industry Pvt Ltd

and its performance in the market and thus suggest improvements.

Finance is the life blood of any organization. These statements serve as an important

tools for evaluating and comparing the present earning capacity of the unit and also for

forecasting its future performance and prospects. These statements also provide the basic

information for the purpose of analyzing, planning and taking vital and strategic financial

decisions by the executives of the company.

The project work involved two parts, that is Part A in plant training which involves in

detail study of the organization, Part B the final project involving study of analysis of financial

statement of VKC Rubber industry Pvt Ltd during the past three years from 2007-2010 on the

basis of in order to know the company performance, its financial and cash position.

The data used in this analysis has been obtained from the annual reports i.e., Balance

Sheets and Primary data was collected through Direct interview and personal observations.

From the analysis it was found that the liquidity position, long term solvency and cash position

of the firm is satisfactory.

To improve the financial position, a few measures were suggested which includes

decreasing the liabilities and increasing the income generating assets. The firm should employ

considerable portion of debt in its capital structure. The company has to concentrate much on its

credit policy for faster collections of accounts receivables. The company has to concentrate

much on efficient cash management in financing and investing activities.

With the help of the tools of financial analysis, it can be concluded that VKC Rubber

industry Pvt Ltd is in a good position from the point of view of performance, profitability and

liquidity.

RAJIV GANDHI INSTITUTE OF TECHNOLOGY Page 1


INDUSTRY PROFILE:

HISTORY OF FOOTWEAR:

Spanish cave drawings from more than 15000 years ago show humans with animal

skins or furs wrapped around their feet. The body of a well preserved “ice-man” nearly 5000

years old wears leather foot stuffed with straw. Shoes, in some form or another, have been

around for a very long time. The evolution of foot coverings, from the sandal to present-day

athletic shoes that are marvels of engineering, continues even today as we find new materials

with which to cover our feet.

We are, in fact still wearing sandals- the oldest crafted foot covering known to us.

Moccasins are still readily available in the form of the loafer. In fact, many of the shoes we

wear today can be traced back to another era. The Cuban heel may have been named for the

dance craze of the 1920s, but the shape can be seen long before that time. Soles, which are

one of the most recognizable features of footwear in the 1970s and 1990s, were handed down

to us from 16th century choppiness. Then, high soles were a necessity to keep the feet off of

the dirty streets. Today they are worn strictly for fashion’s sake.

If one can deduce that basic shoe shapes have evolved only so much, it is necessary to

discover why this has happened. It is surely not due to a lack of imagination- the colors and

materials of shoes today demonstrate that. Looking at shoes from different parts of the world,

one can see undeniable similarities. While the venetians were wearing the choppiness, the

Japanese balanced on high-soled wooden shoes called get. Though the shape is slightly

different, the idea remains the same. The venetians had no contacts with the Japanese, so it is

not a case of imitation. Even the mystical Chinese practice of foot binding has been copied in

our culture. Some European women and men of the past bound their feet with tape and

squashed them into too-tight shoes. In fact, a survey from the early 1990s reported that 88%

of American wear shoes that are too small!

As one examines footwear history, both in the west and in other parts of the world, the

similarities are apparent. Though the shoemakers of the past never would have thought to



pair a sandal with a platform sole, our shoe fashions of today are, for the most part,

modernized adaptations of past styles.

PERFORMANCE OF INDIAN FOOTWEAR INDUSTRY

The foot wear industry is a significant segment of the leather industry in India. India

ranks second among the footwear producing countries next to the China.

In 1999, the global import of footwear in terms of value was around US$43278 million

accounting a share of 63.42% in the total global import of leather and leather products out of

this import of leather footwear alone accounted for us$26379 million and non leather foot

wear US$16899million.

India’s exports of leather footwear touched US$331 million in 1999-2000, recording an

increase of 3.29% over the preceding year. India thus holds a share of 1.25% in the global

import of leather footwear. The major markets were the UK, USA, France, Italy, Russia, etc.

In 1999-2000, export of leather footwear from India contributes 21% share of its total

export of leather and its products. Nearly 33 million pairs of various types of leather footwear

were exported during the year. It includes dress shoes, casuals, sport shoes, etc.

INDIAN FOOTWEAR COMPONENTS INDUSTRY

The footwear component industry is a segment of leather industry in India. The

footwear components which are exported from India are leather shoe upper and leather unit

soles. The estimated annual production capacity of leather shoe upper’s is 112 million pairs.

The major production centers are Chennai, Ranipet, Agra, Tamilnadu, etc.

The component industry has enormous opportunities for growth to cater to increasing

production of footwear of various type, both for export and domestic market.

Nearly 75% of total export of footwear component is from the southern region followed

by northern region with a share of 13%.

Nearly 83% of the India’s export of footwear component is from the UK, Germany,

Italy, USA, France and Portugal.



Company profile.

a. Background and inception of the company:

Name of the company : VKC GROUP OF COMPANY

Constitution : small scale industry

Date of establishment : 1984

Sales head quarters : Calicut

Incorporation : 1984

Contacts phone no : 0495-2442225

Authorized capital : Rs.40 lakh

Land and building : 4.5 acres and 1.75 acres

Financial year turnover : Rs.700 million

“VKC group of companies are the leading footwear manufacture especially in southern

region of India. The group established on (August17) 1984 with a nominal capital and few

employees. In 1984 the founder of the group Mr. V.K.C. Mammed Koya started a Hawai Sheet

manufacturing unit with his two brothers. Later on Hawai straps were also inducted to the

production line and in 1986 VKC group launched the first product with its own brand name in

the market viz. VKC Hawai with an initial production of 600 pairs per day. By 1989 the

production increased to 5000 pairs a day and by 1996 it jumped to 17000 pairs.

In between the founder initiated the floating of the first RPVC footwear manufacturing

unit in the Malabar Area of Kerala state with few of his friends. This product also got very good

acceptance in the market. The success of the first unit and the RPVC unit gave a signal to the

business community and the vast potential was seen by the various industrialists. This resulted in

a rapid change in the footwear industry itself. Within a few years the number of Rubber and

RPVC unit grew to more than 80 in this area.



In 1994 the group ventured the first unit in Kerala to manufacture footwear from virgin

PVC. This resulted in a big change and the multinational brands felt competitions from the local

brands. In 1998 the group started the first Micro Cellular PVC footwear in Kerala with imported

plant and machinery. “Quality at low price” made the VKC groups products popular in the

market day by day. It also expanded its market to other southern states.

In 2001 the group started the first Air Injected PVC DIP footwear manufacturing unit

in the South India. In 2003 the group ventured the first Injected EVA manufacturing unit in

South –Central India. In 2006 the group started backward integration to produce EVA compound

for Injection and started the first EVA compounding plant in the South –Central India. The unit

went in 2007 the group started manufacturing of PU DIP footwear.

During this period new bloods with technical, commercial and practical knowledge

were inducted and now the group consists of 20 working Directors and 60 share holders spread

over 19 various units. And have annual group turnover of Rs.700 million. More than 1000

employees are working in these units.

The company had achieved a prominent position in the footwear market of India. The

main markets, which are concentrated by the company, are Kerala, Tamilnadu and

Karnataka.The good quality and variety in models of VKC products help the companies to face

the market competition. The company has been able to maintain the quality of the products by

adopting foreign technologies. The group is now looking for further avenues in the field of

footwear to stretch their hands.

The Head Quarter of VKC group is in CALICUT .And the main plants of VKC group

of companies are situated in Kerala and Tamilnadu. The following are the associate companies

of VKC group.

1. M/s. VEEKESY RUBBER INDUSTRIES PVT.LTD.

2. M/s. VEEKESY ELASTOMERS PVT.LTD.

3. M/s. VEEKESY POLYMERS PVT.LTD.

4. M/s. SANDLON TECHNOLOGIES PVT.LTD.



5. M/s. FORTUNE ELASTOMERS PVT.LTD.

6. M/s. CALTECH POLYMERS PVT.LTD.

7. M/s. EMERALD PLASTOMERS PVT.LTD

8. M/s. SLIPONS INDIA PVT.LTD

9. M/s. DIADORA SHOES PVTLTD.

10. M/s. DIMESCO FOOTCARE INDIA PVT LTD.

11. M/s. VEEKESY PLASTOMERS (INDIA) PVT.LTD.

12. M/s. KOVAI FOOTWEARS PVT.LTD.

13. M/s. FERRARI SHOES (INDIA) PVT.LTD

14. M/s. VEEKESY FOOTCARE (INDIA) PVT. LTD

15. M/s. FERRERO VINYL TECHNOLOGIES PVT.LTD

16. M/s. MORBIDO VINYL PVT.LTD.

17. M/s. SMARTAK FOOTCARE PVT. LTD.

18. M/s. VEEKESY SANDALS (INDIA) PVT. LTD.

VEEKESY RUBBER INDUSTRY PVT.LTD

Veekesy rubber industry pvt ltd is the registered private limited

company situated at Kolathara in Kozhikode district. The objective of the company

is to manufacture the high quality footwear. It got its certificate of registration on

1-1-. 1984 The installed production capacity at the initial period is 21, 60, 000 pairs.

All affairs and day-to-day business administration of the firm is vested

in the hands of Boards of Director. They are in charge of various activities like

Production, Finance & Marketing. The board is assisted by qualified administrative

staffs.

Veekesy rubber industry private limited is a leading rubber

manufacturer in south India. The company’s mission is to maintain and achieve

customer satisfaction through providing quality products at reasonable price. In



order to satisfy customer needs first the company is providing footwear which offers

better style, comfort, elegance, finish, colors and durability.

The product “VKC” has a high brand value in the minds of the

peoples of Kerala because of the quality and the affordable price of the product. The

management gives high priority to the quality of the product. The company assures

the quality of the product through the continuous quality checking in each and every

stages of the production process.

Veekesy rubber industry private limited synonymous with quality

footwear is today busy stepping from a splendid present into a glorious future, it is

energetically in the move to scale never heights in footwear designing and

manufacturing.

b.Nature of business The business carried by VKC is production of footwear. VKC mainly manufacturing

high quality footwear as per the requirement of customers. The company faces many

competitors for the kind of manufacturing. “Consistent quality at affordable price” made

the VKC group products popular in the market day by day. The success in Kerala market

gave morale boost to the group to market their product in the other southern states.

c.Vision, mission and quality policy Vission:

Mission:

To achieve international levels of excellence in technology and quality.

To maintain and achive customer satisfaction through providing quality

products at reasonable price.

To continuously grow in our business and became a significant player in the

world market.



Quality policy:

In order to satisfy customer needs first the company is providing footwear which offer

better style, comfort, elegance, finish, colors and durability. Quality performance demonstrated is

the result of optimization of design, effective process control in manufacturing together with

testing and approval process in the environment of Quality management system.

d.Product profile:

VKC Rubber industry pvt.ltd producing high quality plastic footwear from 100% virgin

rubbers. The company’s VKC Rubber industry pvt.ltd is producing high quality plastic footwear

from quality plastic footwear from 100% virgin micro cellular rubbers. The company’s

manufacturing facilities includes modern equipment and machineries imported from Taiwan,

first of its kind in south including rotary injection modeling machines for improved product

quality. The company has to face stiff competition as there is lots of plastic footwear

manufacturing in Kerala.

e.Area of operation:

Veekesy Rubber industry pvt ltd has operating the business in south India and it has a

long tradition of maintaining the highest quality standards, right from the selection of raw

materials to processing and packaging of the end product

f.Ownership pattern:

Veekesy Rubber industry pvt ltd is a private limited company.



g.Competitors’ information:

Paragon Rubber Industries BANGALORE, India Haritha Hawai Kerala, India Odessey rubber industries, kerala Hawalker rubber industries, kerala Witco India ltd karalla,

h.Infrastructural facilities

a. Security checks:

Any material official/otherwise that is being brought in taken must have appropriate

documentation. Regular security checks are conducted to prevent unauthorized material leaving

entering the organization. Employees required to leave the factory on official/personal work

during working hours are to be submit an authorized gate pass to the security.

b. Medical facilities:

The medical centre is staffed by a resident Doctor and trained attendants and

supported by efficient Ambulance service.

C.Canteen Facilities

Vkc has got a good canteen facility for the employees at project area also.

i.Achievement/ award


http://www.hotfrog.in/Companies/Witco_900882

http://plastics.indiabizclub.com/profile/2001136~haritha+hawai~kerala_india

http://plastics.indiabizclub.com/profile/1899996~paragon+rubber+industries~bangalore_india


j.Work flow mode:

Process flow diagram for manufacturing of Hawai sheets, chappals and straps.


Raw Materials

Mixing with Chemicals in mixing mill

Keep for Maturation

Mixing in mixing mill with blowing agent & Vulcanizing Agent

Vulcanization in Hydraulic Press

Hawai sheets & straps

Cutting & Drilling

Assembling & Packing

Hawai Sheets Hawai Chappals Hawai Straps


k.Future growth and prospects:

To attain market leadership.

Introduction of new trade schemes to increase sales.

Aggressive advertisement and publicity as part of sales promotion.

Reduction in distribution expenses.

Cost-reduction in all areas.

Instant decision making in certain procurement activities.

Timely introduction and implementation of market driven decisions.

Ensuring effective internal control



3.M c Kinsey’s 7S Framework with special reference to the

organization under study

According to Waterman, organization change is not simply a matter of structure,

although structure is significant variable in the management of change. Again it is also not a

simple relationship between strategy and structure, although strategy is also a critical aspect. In

their view effective organizational change may be understood to be a complex relationship

between strategy, structure, system, style, skills & shared values. The first three elements-

strategy, structure &system are considered the “hardware” of success. The next four – style

skills, staff, and shared values are called the “software”. The complex relationship is

diagrammatically presented below;



Origin of 7s framework

The 7s framework was first mentioned in “The art of Japanese management” by Richard

Pascale and Antony Athos in 1981. They had been investigating how Japanese industry had been

so successful. At around the same time that Tom-Peters and Robert Waterman were exploring

what made a company excellent. The 7s model was born at a meeting of these four authors in

1978. It appeared also in “In search of excellence” by Peters and Waterman and was taken up as

a basic tool by the global management consultancy company Mckinsey. Since then it is known as

their Mckinsey’s 7-s model.

Benefits of 7-s Model Diagnostic tool for understanding organization those are ineffective.

Guides organizational change.

Combines rational and hard elements with emotional and soft elements.

Managers must act on all S’s in parallel and all S’s are interrelated.

Description: The 7s framework of is a value based management (VBS) model that describes how one can

holistically and effectively organize a company. Together these factors determine the way in

which a corporation operates. Mckinsey 7-s model is one of the approaches of management

analysis. Mckinsey model consists of 7-s. They are:

Structure-(virtual organization).

Skill-(competencies)

Style-(culture and leadership)

Strategy-(corporate, business, product or market)

System-(process)

Staff-(empowerment)

Shared values-(mission and goals)



According to this model, there are seven basic dimensions, which represent the core of

managerial activities. These are the levels which executives use to influence complex and large

organizations; obviously there was a concerted effort on the part of the originators of the model

to coin the managerial variables with works beginning with the letters so as to increase the

communication power of the model.

"Hard" elements are easier to define or identify and management can directly influence them:

Theses are strategy statements; organization charts and reporting lines; and formal processes and

IT systems.

"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and

more influenced by culture. However, these soft elements are as important as the hard elements

if the organization is going to be successful. The way the model is presented in Figured 1 below

depicts the interdependent of the elements and indicates how a change in one affects all the

others.

Structure: the way the organization is structured and who reports to whom.

Skill: the actual skills and competencies of the employees working for the company.

Style: the style of leadership adopted

Strategy: the plan devised to maintain and build competitive advantage over the competition.

Systems: the daily activities and procedures that staff members engage in to get the job done.

Staff: the employees and their general capabilities.

Shared values: called "super ordinate goals" when the model was first developed, these are the

core values of the company that are evidenced in the corporate culture and the general work

ethic.


EXICUTIVE DIRECTOR

ACCOUNTANTSUPERVISOR

BOARD OF DIRECTORS

MANAGING DIRECTORS

CHAIRMAN

PURCHASE DEPARTMENT

PRODUCTION DEPARTMENT

FINANCE DEPARTMENT

HUMAN RESOURCE

DEPARTMENT

MARKETING DEPARTMENT

OFFICE ASSISTANT

Channel of Distribution

Sales Promotion Advertisement Market Research

Un Skilled Labours

Semi Skilled Labours

Skilled Labours


STRUCTURE

It refers to the more durable organization arrangements and relationships, &

forms the skeleton of the edifice of the organization. It prescribes the formal relationships,

communication channels, roles to perform and rules and procedures.

Structure has 3 important functions

It reduces the external uncertainty by forecasting, research & planning process.

It reduces the internal uncertainty due to variable, unpredictable, random human behavior

by mechanisms.

It helps in coordination of the activities of the organization to enables it to have a focus by

departmentation, specialization, division of labour & delegation of authority

ORGANISATIONAL STRUCTURE



FINANCE DEPARTMENT

VKC maintains a separate finance department under the super vision of finance manager

who is assisted by the assistant manager and his subordinates .The section handles all the

financial aspect of the firm. All transactions are handled through computerized transactions. All

the transactions are done by tally. Finance department involves preparing all the statements like, trading accounts,

profits and loss accounts, balance sheet, bills, notes, letters, other tender call letters, suppliers

list, creditor's information, shareholders' documents, dividend policy.

Functions of finance department

Planning, controlling, rising and administration of funds used in the business

Maintaining liquidity and profitability

Maintain integrity and ensure its' future prospects

Working capital management

To meet day to day expenses

To provide credit facility to customer

To maintain the inventories

MARKETING DEPARTMENT:


Marketing Manager

Advertisement manager

Sales promotion manager

Channel of distribution

manager

Market research manager

Assistant manager

Assistant manager

Assistant manager

Assistant manager

Sales executives


“Marketing is the management process responsible for the identifying,

anticipating and satisfying consumers’ requirements profitably”.

To be the best product in the market company is giving importance to the following.

BRAND NAME : The brand name used for the product is “VKC HAWAI”.

QUALITY : Quality of the products is the main marketing technique that the `

company used.

ADVERTISING : The Company treats the advertising as the main mode of marketing

to improve the sales of their products. But in the case of VKC Hawai, the advertisement is

comparatively less. The brand image helps to sell the product in the market.



SCHEMES : One of the main marketing techniques of the company is the different Schemes for their

customers and dealers.

WHOLSALERS MEET: The Company conducts the Wholesalers Meet at least once in a year.

By this the company provides an opportunity to the wholesalers to interact with the company and

between the dealers. This helps to identify problems, sort out differences, and to formulate plans

for future improvement in the market.

ORDER TAKING & COLLECTION: The Company executives are directly taking the orders

from the wholesalers.

DELIVERY SYSTEM: The Company has very good system for the supply of the products to the

wholesalers. The company had provided door delivery system and they are fixed a weekly chart

for the supply.

THE MARKETING TECHNIQUES USED ARE:

A) CHANNELS OF DISTRIBUTION

B) SALES PROMOTION

C) ADVERTISING

D) MARKET RESEARCH

A) CHANNELS OF DISTRIBUTION:

Channel of distribution is the set of marketing intermediaries through which the goods

flow from the producer to consumer. The company had provided the door delivery system to the

wholesalers for the distribution of products through their owned vehicles and through the

different transporters. The Channel of Distribution followed by the Company is:

The company adopts a two level distribution system consisting of Wholesale dealer and

Retail dealer. The company is satisfied with the existing arrangements.

B) SALES PROMOTION:



Manufacture

Wholesaler

Retailers

Consumers

Sales promotion plays a major role for the success of the VKC products. Sales promotion

influences the customers for buying the products and also helps to meet competition. It

popularizes the product so as to stimulate demand.

Sales promotion tools used are:

CONSUMERS PROMOTION

COUPONS

DEMONSTRATION

CONTEST

PRICE OFFER

DEALER PROMOTION

SALES CONTEST

DEALER GIFT

TURNOVER ALLOWANCE

C) ADVERTISING & SCHEMES:

The VKC’s Advertising covers all activities connected with giving of publicity regarding

goods and services offered for sale. The main Medias for advertising are: Indoor Media &

Outdoor Media

INDOOR MEDIA

TV CHANNELS NEWS PAPERS MAGAZINES CATALOGUES, DANGLERS, CALENDERS, & STICKERS



OUTDOOR MEDIA

NAME BOARDS & A BOARDS HOARDINGS

TV CHANNELS:Advertisements of the products of the company are given in all the major TV channels in

Malayalam. The Brand Ambassadors for the product is Cine Artist and Models “Lakshmi

Rathan, Raji, Aaru Nayar, Baby Sooraj and Silpa”.

SCHEMES:

The company is providing different schemes for customers, retailers and wholesalers

during seasons. This helps the company to gets the good results in sales and publicity. The

company had already undertaken various schemes and contests like:

VKC Sammanotsavam

Mathrubhumi – VKC perdition contest (Football World Cup 2010)

D) MARKET RESEARCH

Market research helps in analyzing the buyer’s habits, popularity of a product, and

effectiveness of advertising media. It also helps to collect information about marketing problems

and opportunities. The continuous marketing research has been conducted by the company which

helps them in planning and executing marketing strategies for the future course of action.

THE PILLARS IN THE PATH OF SUCCESS OF THE FIRM is



1. FOREIGN TECHNOLOGIES:

The main advantage of the company is the implementation of Italian technology used by

them for the injection moulding process. Moulding process is the main activity and the key

process of manufacturing of quality footwear. The Company purchases Footwear Mould from

Ital, Taiwan and China. This will help the company to ensure high quality with accurate size and

good finish to the product.

2. EMPLOYEES OF THE FIRM:

The Company always maintains good employer-employee relationship. The employees

are well satisfied with the attitude of the management towards them and in the facilities provided

to them. So there were no labour strikes, labour absenteeism and labour resignation. The

company provides excellent training programs for the employees to improve the skills and

productivity with in a lesser time. The employees are getting the statutory benefits like Bonus,

ES scheme, Employees Provident Fund, Festival Holiday Allowances from the company.

3. QUALITY OF THE PRODUCT:

Quality can be viewed as a weapon for competitive advantage, as a means of profitability

and a source of value for customers, investment in quality achieves desired business results.

Quality derives the productivity machine and leads the firm to prosperity. Quality of Hawai

product is the combined effort and cooperation of the entire organization. Quality Management

of VKC involves quality planning, quality control and quality improvement which are cross

functional in nature. The company has to face keen competition in the market since there are

numbers of footwear’s manufactures in the country. The main factor, which determines sales, is

the quality of the products. The company produces good quality products and hence they are

capable of competing with others. VKC Rubber Industries PVT. Ltd. Has succeeded in

withstanding stiff competition from the parallel manufactures because of the superior quality of

their products at reasonable price.

4. ADVERTISING & MARKETING:



The advertisement of VKC’s product is of news of information concerning an ideas,

services or products to induce action which is suitable with the intent of the advertiser. The

advertisement given is based on the new trends in the market and which are highly attractive by

the customer. “Marketing is the process of providing the right product of the right quality in the

right quantity in the right place at the right time”.

SKILLS

The term “skills” includes those characteristics, which people use to describe a

company. Organization have strengths in a number of area but their key strengths are dominant

skills are few. These are developed over a period of time of the result of the interaction of a

number of factors performing certain tasks successfully over a period of time, the kind of people

in the organization, the top management style, structure, the management systems, the external

environmental influence etc. Hence when organization makes a strategic shift it becomes

necessary to consciously build new skills.

Classification of skill at VKC is as follows:

1. Top Management Skills:

Top management includes board of directors, secretaries and unit chief. Top

management skills includes balancing, integrating, setting, priorities, developing standards,

conceptualizing, leading, persuasive, and planning process.

2. Supervisory Management Skills:

It includes additional general manager, deputy general manager, senior manager

and manager. Every superior in the unit should have sound technical knowledge of his field to

provide proper instructions and guidance to operatives, accuracy in work, and communication

skill for interaction with the higher management.



3. Technical and Clerical Skills:

Technical skills are required from an individual as per the project requirements.

For technical skills employee should be engineer/diploma holder. For clerical work candidates

should be BCom/ BBM.

Candidates who have passed industrial training institute are engaged scheme under trade

apprentices’ for a year. Besides fulfilling the training requirements under the apprentices act.

STYLE

The company employees share a common way of thinking and behaving. Leaders

establish unity of purpose and direction of the organization. They create and maintain the

internal environment in which people became fully involved in achieving the organization

policy.

Top down style

In VKC management follows the top down decision making at the time of taking

any decision relating to management.

Board of directors and chief executive of the company give decisions about the

management relating problems of the company. The decision taken is flow from top to down, (to

Middle Level and Lower Level Management) in VKC they follow the participative leadership in

case of recruitment.

Participative leadership:

The head of the department takes some decisions there may by consulting the

other employees. In this type of leadership all the level of management participate in taking

decisions. In case recruitment A.M personnel department consult the entire department head to

take decision regarding recruitment of new employees.



STAFF:

It refers to the people working in an organization the company’s people resources and

how they are developed, trained and motivated. The process of staffing includes various

processes like recruitment and selection procedures, training etc. It refers to how the people

are developed, trained, socialized, integrated, motivated and how the employees’ career is

shaped in an organization.

Technical Staff:

These are the staffs they are responsible for the work related to technical

aspect. In this company they are appointing well –qualified and experienced persons as

technical staff. So these staff will have good knowledge about the working environment.

Supervisory Staff:

These are the persons who are in charge with supervising the other employees in the

organization. In this company they are employing experienced staff as supervisor. so they

can observe the fellow workers and guide them as per the companies need. The experienced

supervisors are one of the key assets of this company.

Clerical staff:

Clerical staff required for clerical work, clerical work need for all organization for

clerical staff required B.com/BBM.

STRATEGY



Strategy is a choice of direction and action; the company adopts to achieve its objectives

in a competitive situation. Strategies formulated need to be implemented. Implementation of

strategies is often more difficult than their formulation. Strategic planning is about asking

questions, more than attempting to answer them. Strategy formulation entails a search for a

different frame of reference. It is the quest for a new business paradigm. There are two types of

paradigms that apply to management, namely the business and the organizational or managerial

paradigms. The business paradigms define a company’s position in the market place with respect

to customers, technology and products.

Pricing of VKC:

The name “VKC” itself is the mark of quality for the customer. The company has across

different price terminologies/price strategies. They are as follows:

1. List price

2. Discount

3. Payment periods

4. Credit terms

5. Seasonal pricing

6. Area wise pricing

7. Pricing on demand

SYSTEM:

Identifying, understanding and managing process as a system contribution to the

organization effectiveness and efficiency in achieving its objectives.

A. Inventory Control System:

An effort to achieve and maintain an ecological balance between the cost incurred and cost

solved by holding material in stock is called inventory.

ABC analysis for stock control.

FIFO method for issuing materials

B. Accounting System:



Financial statements are prepared under the historical cost convention on an accrual

basis and comply with the accounting standards refer to sec 211 (3c) of the companies Act 1956.

C. Remuneration System:

1. Piece rate system is followed to employees.

SHARED VALUES:

Values refer to the institutional standards of behavior that strengthen commitment to the

vision, and guide strategy formulation and purposive action. The core values are shaped around

the belief that enterprises exist to serve society. In terms of this belief, profit is a means rather

than an end in itself a compensation to owners of capital linked to the effectiveness of

contribution to society and the essential ingredient to sustain such enlarged societal contribution.

1. Integrity among various department

Various departments in organization are working successfully. Coordination of

all the functional departmental area works together to achieve the stated object of the

company.

2. Team work among the employees

Every person or worker in the organization knows the objectives of the

company. With the proper communication network and corporation among the employees,

synergy is existing in the organization.

3. Customer satisfaction

The status of customer satisfaction is measured through two principles

interventions.

a. Customer satisfactory survey

The customer satisfaction is measured by sending structured questionnaires to major

customers and exacts their opinion about the product being offered reported for internal reviews and

also for reviews at higher level in the organization. The results of these are used to update the quality

management system and procedures.

b. Customer complaint handling system



The calls and complaints from the customers are systematically processed for

timely response and solution right from the branch, maintenance centre or the site itself. The

complaints are continuously monitored and regularly reviewed by the unit chief to ensure speedy

redressal.

4. SWOT ANALYSIS

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,

Opportunities, and Threats involved in a project or in a business venture. It involves specifying

the objective of the business venture or project and identifying the internal and external factors

that are favorable and unfavorable to achieve that objective. The technique is credited to Albert

Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from

Fortune 500 companies

Strengths:

Easy availability of low cost of labour.

Comfortable availability of raw materials and other inputs.

Massive institutional support for technical services, designing, manpower development

and marketing.

Management is very stable, that forms strong foundation of the company.

Employees are being provided with all necessary welfare facilities.

There are highly skilled and committed employees.

Well equipped quality control department for inspecting the quality of incoming of raw

materials and final products

Competitive advantage in cost of production

Wide distribution network

Weaknes s

Due to lack of direct sales, debts with many dealers turning bad.



Lack of human resource.

Cost of production of is high.

Low turnover resulting in low profits.

Defective marketing strategy lacks effective advertising and publicity.

No proper utilization of R&D centre and less importance to R&D.

Opportunities:

The company has the opportunity to expand its production units due to more demand for its

products.

The company has got better tool for better planning and decision-making.

The company can establish more branches across the India.

At present it has good raw material sources to enhance production.

Good export market should tap foreign market vigorously.

At present it has Good raw material sources to enhance production

Threats

Competition from other leaders.

Government interference may reduce growth potential.

Competition from other global leaders like HUL.

Technology advancement at a faster rate.

To protect the financial interest of the company.

Financial statement analysisRATIO ANALYSIS:



The ratio is the most powerful tool of financial analysis. It is the process of

establishing and interpreting various quantitative relationships between the figures and

group of figures. It is with the help of ratio analysis that the financial statement

Can be analyzed more clearly and decision can be made.

SL.NO RATIOS 2009-2010

1 Current ratio 1.52

2 Acid test ratio 0.34

3 Net profit 3.00

4 Net worth ratio 28.76

5 Debt/Equity 1.63

Current ratio;

It expresses the relationship between current assets and current liabilities. The

company’s current ratio is 1.52 in the year 2009-10. The Indian Standard Current ratio is 3:1,

though the ideal ratio is 2:1. Therefore, the company does not meet the standard ratio and does

not enjoy sufficient liquidity and there is shortage of working capital in the year 2009-10

Acid test ratio;

The Acid Test Ratio is the rigorous measures of a firm’s ability to service short

term liabilities. The Acid Test Ratio is superior to the current ratio. Generally an Acid Test Ratio

of 1:1 is considered satisfactory. In the year 2009-10 the Acid Test Ratio is 0.34 which is not

satisfactory.



Net Profit Ratio:

Net Profit Ratio measures the relationship between net profit and sale of the firm. The

Net Profit shows the profit position of the company against sale during the year. The Net Profit

ratio in the year 2009-10 is 3.00. While calculating Net Profit Ratio, the investment or capital of

the firm is only in relation to sales.

Net worth ratio;

Debt/Equity ratio;

LEARNING EXPERIENCE

The learning experience gained by me during the in-plant training was very much



practical oriented. Mostly all the concepts and theories, which I studied in the class, are

applicable practically. I had a great time working on the project, as it gives insights into the working environment

of an organization. The training has exposed me to many facts of an organization and also helped

me to gain practical knowledge, which will go a long way in the horizon of our career. I became

more aware of the soap industry and the role played by VKC RUBBER INDUSTRY PVT LTD.

It is fallowing very good accounting system by wish helps in meeting all its obligations in

time

Structure: I got to know how decisions are communicated, the flow of decision process.

The way in which departments are classifieds on the basis of their functioning. The

functions of each departments and its relevance.

Skills: Through skills, how the training needs are satisfied to the employees of different

grades. The different on-job and off-job training given to the employees.

Style: Through style, I got to know how decisions flow from top to bottom in VKC

RUBBER INDUSTRY PVT LTD. How the production process is planned and worked

out. How self managed teams perform to achieve the targets set by the management.

Strategy: Through strategy, I found how strategies were formulated to overcome the

rigorous competition. Strategy is very much essential for the company to survive in the

market. Supply Chain Management is one of the strategies adopted by VKC RUBBER

INDUSTRY PVT LTD. through which they are able to reduce the cost of production and

increase profitability.

System: System plays an important role of supporting and facilitating various activities

that are carried out within the organization VKC RUBBER INDUSTRY PVT LTD

adopts latest system.

Overall the learning experience was quite satisfactory which enabled me to experience a

slice of the real and ruthless industry.

THEORETICAL CONCEPT OF THE STUDYINTRODUCTION TO FINANCIAL STATEMENT ANALYSIS


Financial statements

Position Statement (or) Balance SheetIncome Statement(or) Profit and Loss

Account

Statement of changesIn Owner’s Equity or

Retained Earnings

Statement of Changes inFinancial Position

Fund Flow statement Cash flow statement


Financial statement is a collection of data in a defined format containing the

monetary figures with regard to business, industry and others generally for a

given period or at given date. Its purpose is to convey an understanding of some

financial aspects of a business firm.

Users of Financial Statements:

Investors

Creditors

Labour Unions

Financial Institutions

Management

Regulatory bodies

Types of Financial Statements :

The analysis of financial statements is a process of evaluating the relationship between

component parts of financial statements to obtain a better understanding of the firm’s position

and performance. In brief financial analysis is the process of selection, relation and

evaluation.


Types of Financial Analysis

On the Basis of Material used On the basis of modus operandi

Internal Analysis Horizontal Analysis Vertical Analysis


Objectives of financial analysis : Ascertain present & Future earning Capacity

Ascertain Operational efficiency as a whole or division wise

Short term and Long term Solvency

Short term and Long term liquidity

Comparative study of one company with other or among divisions

Studying present for future plans of the company

Ascertain financial stability

Compliance with Statutory requirements

Types of Financial Analysis:

Significance and purpose of Financial Statement Analysis: Judging Profitability

Judging Liquidity

Judging Solvency

Judging the efficiency of Management

Inter – firm comparison


External Analysis


Forecasting and Budgeting

Tools, Techniques and methods of financial analysis : The financial analyst can adopt one or more of the following technique or tools of

financial analysis:

Comparative financial statement analysis

Common size financial statement analysis

Comparative trend percentage

Ratio analysis

Fund flow analysis.

Cash flow analysis

Comparative Financial Statement Analysis: Comparative Financial Statement refer to those

statements of the financial affairs of business, which are prepared in such a way as to provide

time perspective to the various elements contained in such statements.

Common-Size Financial Statements Analysis: Common-size Financial Statements are those

statements in which the data or figures reported in the financial statement are converted into

percentages, taking some common base. Common-size financial statements are also known as

component percentages statements or 100 percent statements, because each statement is reduced

to 100% and each individual item is expressed as a percentage of the total of 100.

Funds flow Statement : Funds flow statement is an attempt to report the flow of funds between

various assets and liabilities and owner’s capital during an accounting period. In other words, “

Funds flow statement is prepared to indicate in summary form, changes occurring in items of

financial position between two different balance sheet dates”.

Here, the emphasis is on Ratios and Trend analysis to analyse the financial position of

the company.

INTRODUCTION TO RATIO ANALYSIS



A Ratio is an expression by accounting relationship between two numbers. It may also

be defined as relationship of one amount to another. It is one number from another. Accounting

Ratio are relationships expressed in mathematical terms between figures which are related with

each other. They indicate the quotient of two mathematical expressions.

Ratios may be expressed in percentages or in terms of “Times”. They facilitate better

comparison when compared to absolute figures. Therefore they are used as one of the techniques

of Financial Analysis. They help to understand the financial position and performance of

enterprise in a better manner.


TRADITIONAL FUNCTIONAL

Profit and Loss Ratio

Balance Sheet Ratio

Composite Ratio

LIQUIDITY RATIO

ACTIVITY RATIO PROFITABILITY LEVERAGE & SOLVENCY

Current Ratio Liquid Ratio Absolute Ratio

Stock Turnover Ratio

Debtors Turnover Ratio

Creditor Turnover Ratio

Fixed Assets Turnover Ratio

Capital Turnover Ratio

Gross Profit Ratio

Net Profit Ratio Operating Profit

Ratio Return on

Equity Capital Earning Per

Share

Capital Gearing Ratio

Financial Leverage

Debt Equity Ratio

Proprietary Ratio

TYPES OF RATIOS


I. LIQUIDITY RATIOS [SHORT TERM SOLVENCY RATIOS]:

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

they become due.

The following are the important liquidity Ratios:

1. Current Ratio

It is the ratio of current Assets to current Liabilities. It is also known as Working Capital

Ratio. It helps to understand relationship between total current assets and total current liabilities.

A ratio equal or near to the rule of thumb of 2:1 is considered as a standard for this ratio.

2. Liquid Ratio or Acid Test Ratio:

It is the ratio of liquid assets to liquid liabilities. Liquid Assets usually include all the

current assets except inventories and pre – paid expenses. Liquid liabilities usually refer to

current liabilities less bank overdraft. The standard for this ratio is 1:1

3. Absolute Liquidity Ratio:

This ratio establishes the relationship between the sum of cash

It represents cash in hand, cash at bank and other marketable securities and their

relationship with the liquid assets. This ratio is used as supplement to current ratio to assess

short term financial position of an enterprise.

The standard for this ratio is 0.5:1.

II. ACIVITY AND TURNOVER RATIOS:

1. Receivables or Debtors Turnover Ratio:

This ratio explains the relationship between the net credit sales and the average accounts

receivables. A high ratio indicates efficiency in the collection function and a lower ratio

signifies inefficiency or liberal credit policy.

2. Creditors Turnover Ratio:



This ratio is similar to debtor’s turnover ratio. It signifies credit period enjoyed by the

firm in paying the creditors.

3. Inventory Turnover Ratio:

It indicates the relationship between cost of sales and average inventory at cost. It also

helps to understand whether the investments are within limits or otherwise. It explains the rate at

which inventories are converted into sales and then into cash. A Stock turnover ratio of 8

times in a year is considered to be ideal.

4. Fixed Assets Turnover Ratio

This ratio explains the relationship between the costs of goods sold and fixed assets. It

explains the efficiency with which fixed assets have been used in generating sales and better

profits. The Standard or ideal fixed assets turnover ratio is 5 times

III. PROFITABILITY RATIO:

1. Net Profit Ratio:

It is the ratio of Net Income or Net Profit after taxes to Net Sales. This ratio is expressed

as a percentage. It helps to measure overall profitability of the concern and useful to owners. It

indicates the efficiency as well as profitability.

2. Return on Shareholders investments or Net worth or Proprietors Funds

This ratio explains the relationship between the Net Profit after interest and tax to share

holder’s funds. Share holders funds include equity capital, preference capital, reserves and

surplus, and profit and loss account minus the accumulated losses. The standard or ideal ratio

is about 13%.

3. Return on Equity Capital:

This ratio explains the relationship between Net Profit after interest, tax & Preference

dividend and the Equity share capital. It helps the owners measure the returns on their

investments. This ratio indicates the profits finally available to equity share holders. The

standard or ideal return on capital employed ratio is about 15%.

4. Earning Per Share [EPS]



It is calculated by dividing net profit after tax, interest and preference dividend by the

number of equity shares. It indicates the earning power of company and facilitates comparison

between earning capacity of one company with another company belonging to the same industry.

IV. LEVERAGE RATIOS OR LONG TERM SOLVENCY RATIOS :

Leverage ratios indicate the relative interests of the owners and the creditors in an

enterprise. They measure the state of the creditors as against the owners and they portray the

long - term solvency of the concern.

1. Debt – Equity Ratio :

This ratio is calculated to measure the relative claims of outsiders and the owners against

the firm’s assets. The standard or ideal debt-equity ratio is 2:1

2. Proprietary Ratio or Equity Ratio :

This ratio expresses the relationship between net worth or equity and total assets.

Generally, a ratio of 5:1 is considered to be ideal.

3. Fixed Assets to Net worth Ratio :

The ratio establishes the relationship between fixed assets and shareholder’s funds. The

Standard or ideal fixed assets to net worth ratio for an industrial undertaking is 67%, it

should not constitute more than 67%.

4. Capital gearing Ratio :

Capital gearing ratio is the ratio which expresses the relationship between fixed interest-bearing

securities and fixed dividend-bearing shares and equity capital.

5. Interest Coverage Ratio :

It is the ratio between net profits and fixed charges. Net profit means net profit before

deducting fixed charges and income- tax. Fixed charges mean interests on long-term loans and

deposits and debentures. The standard or ideal fixed charges cover is 6 times..

INTRODUCTION TO TREND ANALYSIS OR TREND PERCENTAGES :

Trend percentages if a technique of studying financial statements of a company over a number of

years. It compares the past data over a period of time with a base year, under this method the



percentages relationship that each financial statement item of each year bears to the same item in

the base year is calculated.

Advantages of trend percentages :

Trend percentages analysis is of immense use in making a comparative analysis over a

series of years.

It is easy to identify changes and interpret the same because percentage figures disclose

more than the absolute figures.

Trend analysis is extremely helpful in budgeting, forecasting etc.

STATEMENT OF THE PROBLEM:

Title of the study:

“Analysis of financial Statement at VKC rubber industries pvt ltd”

The justification of existence of any company is determined by performing as per

expectations. Analysis of overall performance is one of the major requirements for planning.

Performance evaluation is necessary from the point of view of creditors, public, government,

other organizations and the company itself. It is also necessary to bridge the gap between the

current and expected position by taking corrective measures. It acts as a yardstick of measuring

how the company has been able to move forward as per the plan.

The information provided through the analysis and interpretation of financial statements

is of immense help in making decisions. They play a dominant role in setting the framework of

managerial decisions.

The main aim of this study is to evaluate the performance and market standing of VKC

rubber industries pvt ltd in order to give a better scope to the investors, shareholders, creditors

and the management themselves about the rating of VKC rubber industries pvt ltd and its

performance in the market.



This Financial Statement analysis at VKC Pvt Ltd. is on the basis of ratio analysis

and Trend Percentages.

OBJECTIVES OF THE STUDY:

The main objectives of this study are as follows:

To analyze the management efficiency of the concern.

To evaluate the liquidity position and profitability of the company.

To gain insight into long term solvency and leverage position.

To make an overall performance analysis and know the progress of the concern.



To emphasize on changes in the financial and operational data from year to year with the

help of trend percentages.

To know the trends of the business.

To find out the solution to the unfavourable financial condition and financial performance

To help the company to make future projections by analysing its past performance.

To suggest the ways and means to improve the overall financial position.

SCOPE OF THE STUDY:

The study is exclusively conducted for for past 4 financial years.

The trends indicated may differ from year to year based on the pattern of investments,

borrowings etc. The study becomes more meaningful only if it covers a longer period of

10 or more years which is beyond the scope of this project.

The study was aimed at analyzing the financial statements of VKC rubber industries pvt

ltd on the basis of Ratiosis and Trend Percentages in order to know the company’s

financial & cash position and its performance during past four years from 2007 to 2010.



The data used in this analysis has been obtained from the annual reports i.e., Balance

Sheets and Profit & Loss Account.

LIMITATIONS OF THE STUDY : Even though there are so many tools of financial analysis, this study uses only Ratio analysis

and trend analysis.

Limitations of time i.e, the study is carried out for academic purpose for a limited span of 10

weeks. The time constraint did not allow for the in-depth study regarding the performance of

the company.

The findings and analysis of this report is prepared from the information available in the

annual reports and books of accounts.

The information provided in the financial statements is not an end in itself as no meaningful

conclusions can be drawn from these statements alone.

The financial analyses based on the past financial statements are not the indicators of future.

Since some facts and business secrets maintained strictly confidential, it is not possible to

collect all information.

As it is an external study, conclusion and suggestions are not ultimate and are based on

personal judgment and the ability of the researcher to understand the concept.

The study is limited to VKC rubber industries pvt ltd, the findings need not apply to whole

VKC Group and similar firms in the same industry.

RESEARCH DESIGNA poorly defined problem will not yield useful results. It is rightly said that “a problem

well defined is half solved”, poorly defined problems cause confusion and do not allow to

develop a good research design. The question is how we can identify a research problem. Three

categories of symptomatic situation namely, overt difficulties, latent difficulties and unnoticed

opportunities should be studied. The problem should be briefly described and its salient features

brought out.



Research can be defined as -“ The systematic and objective identification, collection, analysis, dissemination and use

of information for the purpose of assisting management in decision making related to the

identification and solution of problems ( and opportunities ). It is a

1) Methodical, unbiased and compete investigation of subject matter to establish principles

2) Investigation of a problem to discuss pertinent information to help solve it.

Research design:“A framework or blueprint for conducting a research project. It specifies the details of

the procedures necessary for obtaining the information needed to structure and or solve research

projects”.

There are three types of research design :

a. Exploratory research design

b. Conclusive research design

- Descriptive research

- Causal Research

a. Exploratory Research :

One type of research design, which has its primary objective the provision of insights into

and comprehension of the problem situation confronting the researcher.

b. Conclusive Research :

Research designed to assist the decision maker in determining, evaluating and selecting the

best course of action to take in a given situation.

- Descriptive Research : A type of conclusive research that has as its major objective the

description of something. The descriptive study is typically concerned with determining the

frequency with which something occurs or how two variables vary together. This study is

typically guided by an initial hypothesis.

Descriptive research is conducted in the following cases:



a. To describe the characteristics of relevant groups

b. To estimate the percentage of units in a specified population exhibiting a certain

behaviour.

c. To determine the degree to which marketing variables are associated

d. To make specific predictions.

- Causal Research : A type of conclusive research where the major objective is to obtain

evidence regarding cause – and – effect ( causal ) relationships.

The study on “Analysis of financial statements” at VKC is based on Descriptive

Research

Research design used in the specific study includes the following:

Identifying the statement of the problem

Collection of the company’s specific literature i.e, annual reports for the study period and

the profile of the company

Scanning through standard books to understand the theory behind the financial

performance evaluation

Collection of information from various journals to understand the industrial background

of the study

Decision regarding the study period in this case it was decided to be 4 years i.e, from

2007-2010.

Identification of financial tools likely to reflect capital adequacy, resources deployed,

assets quality, management quality, earning quality, liquidity, cash position and trends.

In this case, it was decided to use

- Ratio analysis

- Trend Percentages

Calculation of the above financial tools over the study period and analysing it

Forwarding certain recommendation and conclusion to the company.



The term “methodology” refers to carefully planned procedures (should consistently follow the

same procedure ). That will facilitate the comparison of results of similar investigations over a

period of time as that are arrived at by other researchers investigating similar problems in various

parts of the same country or in any corner of the world .

Methodology assumptions :

Definitions used are universal

Selected study period is sufficient

Selected financial ratios, trend percentages and cash flow analysis reflects the financial

performance of the company.

Ultimate financial evaluation of the company is shown in its financial statements.

Sources of Data collection :After going through and weighing pros and cons of different methods of data collection,

it was decided that both primary data and secondary data are suitable for the study but more

emphasis was given on Secondary data. A project of this nature is by and large a desk job and

primary data is of little relevance.

Sources of data:a. Primary data :

It is the first hand information on any happening or event. They are the original sources

from which the researcher directly collects data that have not been previously collected. It was

collected with the administration assistant and other staff members of finance department and

through Direct interview and personal observations.

b. Secondary data :Particularly it is very difficult to collect the entire information through primary sources.

So the researcher has to depend on the secondary data. These are sources containing data which

have been collected and compiled for another purpose.



It was collected through Annual reports of the company for the past 5 years from

2003 – 2007. And from the prospectus, website of the company (VKC.com), textbooks,

journals and magazines.

Tools used for data collection :

a) Schedule

b) Interview

In this study, data is collected through schedules – i.e, data collected from the records, annual

reports and financial statements of VKC rubber industries pvt ltd and Interview of finance

controller and finance officers.

Sampling plan :

As such no sampling plan has been adopted in the above financial analysis.

Field work: As such no fieldwork was involved for the study since this was an In – house desk

research job.

Plan for analysis :

The data collected have been analysed by the use of statistical tools and techniques such

as percentages, averages. Wherever necessary, the data have been presented diagrammatically

using charts and tables etc.

Review of Literature :

The project report presupposes a good knowledge of the subject and the title, which has

been chosen for a detailed analysis. Attempts have been made to acquire the detailed

information on the subject through a detailed literature survey. This requires an extensive survey

of literature available in the form of published articles in business magazines, publication of

institutions, newspapers and Journals.

After deciding about the topic of the project, it was decided to do a detailed literature

survey, to know what type of work was already done in the similar topic. The purpose of doing a



literature survey is to avoid repetition of the same study of the topic and also to understand the

scope of the subject and difficulties which arise during the course of the study.

It helps to study the tools and technique appropriate to suit the requirement of the

company & apply them in the appropriate context and come to meaningful conclusions and find

solutions to the problems faced by the company. The literature survey helped in deciding about

the methodology which is adopted for the collection, analysis and presentation of data.

I. RATIO ANALYSIS

A] Liquidity ratios

1. Current Ratio :

Current AssetsCurrent ratio = --------------------------

Current Liabilities

Current Assets = Inventories + Sundry Debtors + Cash and bank balances + Loans and



Advances Current Liabilities = Current Liabilities and Provisions

Table No. A1: Showing current ratio ( Rs. in thousands)

Year Current Assets Current Liabilities Current Ratio

2007 5441138.20 1563082.2 3.48

2008 9891746.33 3082074.38 3.20

2009 10674918.61 6492715.04 1.64

2010 10422655.64 6852013.77 1.52

Analysis:-

From the above table we can observe that in the year 2007 current ratio is 3.48 & it decreased by

3.20%, 1.64%&1.52 in the year 2008, 2009, & 2010, respectively. It can be analysed from the

above table that current ratio is slightly fluctuating from the year 2007 to 2010.

Graph No.A1: Showing Current Ratio



2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

3.5

Current ratios

Interpretation:-A Ratio equal or near to the rule of thumb of 2:1 i.e., Current assets double the current

liabilities is considered to be satisfactory. This Rule of Thumb implies that for every one rupee

of Current Liabilities, two rupees of Current Assets are available. But a Current Ratio of greater

than 1.50 is normally considered to be satisfactory.

However, it can be inferred from the above table and graph that in all the 4 years the

current ratio its decrease from the first year. Even though it is satisfactory because its more than

the standard. Since the actual ratios are less than the ideal ratios the company may find it difficult

to meet its short term obligations.

2. Liquid Ratio: Quick Assets



Liquid ratio = ------------------------- Current Liabilities

Quick Assets = Sundry Debtors + Cash and bank balances + Loans and Advances

Current Liabilities = Current Liabilities and Provisions

Table No. A2 : Showing Liquid / Quick ratio (Rs. in thousands)

Year Quick Assets Current Liabilities Liquid Ratio

2007 1848322.49 1563082.2 1.18

2008 3310455.55 3082074.38 1.07

2009 4093367.44 6492715.04 0.63

2010 2302407.73 6852013.77 0.33

Analysis :- It is clear form the above table, in the year 2007 the liquid ratio is 1.18 & it gradually

decreased to 1.07, 0.63&,0.33 during the years 2008, 2009,& 2010. Liquid ratio of VKC was

quite fluctuating but it was consistent throughout 4 years.

Graph No.A2: Showing Liquid Ratio



Interpretation:-

An ideal quick ratio of 1:1 is considered not to be Satisfactory. Since, the quick ratio at

VKC is above the ideal quick ratio of 1:1 during the study period in 2007&2008, and it is less

than the ideal quick ratio of 1:1 during the study period 2009&2010.

This high quick ratio at VKC indicates that the firm is having slow – paying debtors & all

debtors cannot be realised so quickly by the firm to meet its short term obligations

B] Long term solvency ratios:


2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

Liquid ratio

-Years-

-Ratios-


1. Debt-equity ratioLong term debt External Equities

Debt-equity ratio = ---------------------------- ( or ) -------------------------Shareholders funds Internal Equities

Long term debt = Loan funds (Finance lease Obligations + Unsecured loans)

Shareholder funds = Equity share capital + Reserves & Surplus

Table No. B1: Showing Debt-equity ratio (Rs. in thousands)

Year Long term debt Shareholders funds Debt-equity ratio

2007 3813712.21 6877975.15 0.55

2008 8628658.88 6221963.59 1.39

2009 5556566.49 5950411.60 0.93

2010 6528483.46 6256863.92 1.04

Analysis:- The above table represents that in the year 2007 the Debt – equity ratio is 0.55% and it

increased to 1.39% in 2008. Again the ratio decreased by 0.93% during 2009 & it increased by

1.04% during 2010.

Graph No. B1: Showing Debt-equity ratio



Interpretation:-

As a general rule, there should be an appropriate mix of owner’s funds and outsider’s

funds in financing the firm’s assets. A ratio of 1:1 may usually be considered to be satisfactory.

At VKC the Debt – equity proportion is low & it is satisfactory from the point of view of

long term creditors, because a high proportion of owner’s funds provide a larger margin of safety

and substantial protection against shrinkage in assets for the outsiders, during the study period on

2008&2010. But In the same way it is not satisfactory from the firm’s point of view of long term

creditors, in t during the the study period on 2007&2009.

On the other hand, a low Debt – equity ratio at VKC is indicating that the shareholders of

the firm are deprived of the benefits of trading on equity to magnify their earnings.


2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

1.4

DEBT-EQUITY RATIO

- Years -

- Ratios -


2. Proprietary or equity ratio:

Shareholders funds (Net worth)Proprietary or equity ratio = --------------------------------------------------

Total Assets

Shareholder funds = Equity share capital + Reserves & Surplus

Total Assets = Fixed Assets + Investments + Current Assets

Table No. B2: Showing proprietary ratio (Rs. in thousands)

Year Shareholder funds Total Assets Proprietary ratio

2007 6877975.15 10696839.39 0.64

2008 6221963.59 14850622.47 0.42

2009 5950411.60 11506978.09 0.52

2010 6256863.92 12785347.38 0.49

Analysis:It can be analysed from the above table, in the year 2007 proprietary ratio is 0.64 & it

decreased by 0.42% in the year 2008. In the year 2009 it increased 0.52 & again it decreased by

0.49 in the year2010.

Graph No. B2: Showing Proprietary Ratio



2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Proprietary Ratio

Interpretation:

The proprietary ratio at VKC is satisfactory in the four year, as shareholders fund

constitute 64%, 42%, 52%&49%in the total assets of the company, to this extent the assets of the

company can be lost without affecting the interest of the creditors of the company.

Proprietary ratio at VKC is satisfactory and it indicates Long term solvency and financial

position of the company is considerably good.

C] TURNOVER RATIOS: -



1. Working Capital Turnover Ratio : -

Cost of goods sold ( Sales )Working Capital Turnover Ratio = ----------------------------------------

Net Working Capital

Cost of goods sold = (Opening stock + Purchases + Direct Expenses – closing stock)

Direct Expenses = Tools & stores, Royalty, Freight & Forwarding, power, fuel & Water

Net Working Capital = Current Assets – Current Liabilities

Table No. C2: Showing Working Capital turnover ratio

Year SALES Net Working Capital

WCT Ratio

2007 29054725.76 3878056

7.49 times

2008 31276972.52 6809671.95

4.59 times

2009 35897227.45 4182203.57

8.58 times

2010 38277892.28 3570641.81

10.72 times

(WCT* = Working Capital Turnover)

Analysis:



The above table represents the working capital turnover ratio is 7.49 times in the year

2007. During 2008 it decreased to 4.59 times. During 2009&2010 the ratio increased to

8.58&10.72 times.

Graph C2: Showing Working Capital Turnover Ratio

2007 2008 2009 20100

2

4

6

8

10

12

Working Capital Turnover Ratio

Interpretation:

The Working Capital Turnover ratio of VKC is satisfactory, once in every 5 to 10 months

working capital is turned over in generating sales. It indicates efficient working capital

management.

3. Debtors Turnover Ratio: -



Credit Sales Total SalesDebtors Turnover Ratio = -------------------------- (or) ------------------

Average Debtors Debtors

Trade Debtors = Gross value of sundry debtors + Bills receivable & accounts

Receivables

Total Sales = Sales & Services

Table No.C3: Showing Debtors Turnover ratio (Rs. in thousands)

Year Sales Debtors DT Ratio

2007 29054725.76 828030 35.08 times

2008 31276972.52 586440 53.33 times

2009 35897227.45 1552097 23.13 times

2010 38277892.28 1618792 23.64 times

(DT* = Debtors Turnover)

Analysis:

The above table represents in the year 2007, 35.08 times receivables are converted into

cash. This turnover rate increased by 53.33 times during 2008 this is due to quick payment by

the customers, then this ratio fell down by 23.13 during 2009 due to delay in collection from

customers & liberal credit policy. Again this ratio increased during 2010 23.64 times.

Graph C3: Showing Debtors Turnover Ratio



2007 2008 2009 20100

10

20

30

40

50

60

Debtors Turnover Ratio

- Years -

- No. of times -

Interpretation:

Considering its nature of business the Debtors turnover ratio at VKC is satisfactory. It is

showing there is greater efficiency of credit management during the year 2007 & 2008 compared

to all other years. Again it’s decreasing in last two years. Its shows efficiency in the collection

period is slow in last two years. Even though its satisfactory.

5. Fixed Assets Turnover Ratio : -



Cost of Sales ( Sales)Fixed Assets Turnover Ratio = --------------------------------

Net Fixed Assets

Cost of goods sold =(Opening stock + Purchases + Direct Expenses – closing stock)

Direct Expenses = Tools & stores, Royalty, Freight & Forwarding, power, fuel & Water

Net Fixed Assets = Fixed Assets - Depreciation

Table No. C5: Showing Fixed Assets Turnover Ratio

(Rs. in thousands)

Year SALES Net Fixed Assets FAT Ratio

2007 29054725.76 6818783.38 4.26 times

2008 31276972.52 8040950.52 3.89 times

2009 35897227.45 7324774.52 4.90 times

2010 38277892.28 7844126.99 4.90 times

(FAT* = Fixed Assets Turnover)

Analysis:It is clear from the above table the fixed assets turnover ratio was 4.26 times in the year

2007; it decreased by 3.89 times during the year 2008. The ratio was significantly consistent

during 2009 & 2010 as it was 4.90 times.

Graph No. C5: Showing Fixed Assets Turnover Ratio



2007 2008 2009 20100

0.51

1.52

2.53

3.54

4.55

Fixed Assets Turnover Ratio

- Years -

- No. of times -

Interpretation:

The standard or ideal Fixed Assets Turnover Ratio is 5 times. Fixed Assets Turnover

ratio at VKC during the year 2007&2008 was not satisfactory when compared to

and2009&2010.As it is indicating excessive investment in fixed assets during the year2007

&2008. During 2009&2010 the ratio was satisfactory and it is indicating efficient utilisation of

fixed assets in generating sales. Overall fixed assets turnover ratio at VKC is satisfactory.

D] PROFITABILITY RATIOS: -



1. Return on Shareholders Investment or Net worth :-

Net Profit ( after interest & taxes )Formula of ROSI or Net worth ratio = --------------------------------------------------- x 100

Shareholders funds

Table No. D2 : Showing ROSI or Net worth ratio ( Rs. in thousands )

Year NPAT* Net Worth Return on Shareholders Investment

2007 2877975.15 6877975.17 42%

2008 1205363.59 6221963.59 33%

2009 1341111.60 5950411.60 23%

2010 1150463.92 6256863.92 12%

( NPAT* = Net Profit After Tax)

Analysis:

It is clear from the above table the ROSI is 42% in the year 2007, it increased to 33%

during 2008, the during year 2009&2010 it decreased by 23% & 12%.

GrapNo.D2: Showing Return on Shareholders:



2007 2008 2009 20100

5

10

15

20

25

30

35

40

45

NET WORTH RATIO

Interpretation:

The Standard or ideal Net worth ratio is about 13%. Return on Net worth at VKC is

satisfactory as on during the study period 2007 to 2009.But it is not satisfactory in the year

2010.But this reveals that the funds of owners are profitably utilised by the firm & its overall

efficiency is good.

2. Earnings Per Share ( EPS ) :



Net Profit after Tax – Preference dividendFormula of Earnings per Share = ----------------------------------------------------------

Number of Equity Shares

Table No. D3: Showing Earnings Per Share (Amount in Rupees)

Year PAT* ( Rs. in thousands)

Number of Equity Shares EPS*

2007 197311.02 400000 Rs. 0.49

2008 1683888.42 400000 Rs. 4.21

2009 4408248.01 400000 Rs 11.02

2010 4970802.32 400000 Rs. 12.43(PAT* = Profit after Tax

EPS* = Earnings per Share)

Analysis: The above table represents that the EPS is Rs. 0.49/- in the year 2007, it increased by

Rs. 4.21/- during 2008 and Rs11.02/- during 2009 and Rs 12.43/- during 2010.

Graph No. D3: Showing Earnings per Share



2007 2008 2009 20100

2

4

6

8

10

12

14

EPS

Interpretation:

VKC’s EPS is much satisfactory as it is showing a trend of above 50% increase from year

to year (2008%2010), it is signifying the profitability of the firm is good and has significantly

improved over the years.

3. Net Profit Ratio: -



Net Profit (after interest & tax)Formula of Net Profit Ratio = ---------------------------------------------- x 100 Net Sales

Table No. D5: Showing Net Profit Ratio (Rs. in thousands)

Year Net Profit ( after interest & Taxes )

Sales N/P Ratio*

2007 2877975.15 29054725.76 9.90%

2008 1205363.59 31276972.52 6.56%

2009 1341111.60 35897227.45 3.37%

2010 1150463.92 38277892.28 3.00%

(N/P* = Net Profit)

Analysis: The above table represents that the N/P ratio is 9.90% in the year 2007; it decreased to

6.56%, 3.37%&3.00 during the 2008, 2009&2010 respectively.

Graph No. D5: Showing Net Profit Ratio

Interpretation:

N/P ratio of VKC is in decreasing trend for the past 3 years except in the year

2007.During the year 2007 it showed a decline trend of 51%. This ratio also reflects that the



company is ensuring not adequate return to the owners. N/P ratio at VKC is not fully

satisfactory.

III . TREND ANALYSIS OR TREND PERCENTAGES

1. Trend Analysis of Sales

Table No. F1: Showing Trend percentages of sales(Base Year 2007 = 100)

( Rs. in thousands )


2007 2008 2009 20100123456789

10

Net Profit Ratio

- Years -

- Percentages -


Year SALESTrend Percentages

2007 29054725.76 100

2008 31276972.52 108

2009 35897227.45 124

2010 38277892.28 132

Analysis:

The trend percentages of sales for the year 2008 is 108, it is 124 and 132 during 2009 and

2010.

Graph No. F1: Showing Trend Percentages of Sales



20072008

20092010

0

20

40

60

80

100

120

140

Trend Per-centages of Sales

- Years -

Per-cent-ages

Interpretation: The above table and graph represents that trend values of sales are at an increasing trend

considering the base year 2007. The growth of sales is a good sign reflecting the growth of the

company is at an upward trend. The company’s key strategic initiatives i.e, exports, higher

operational efficiencies, standard products, range expansion, market penetration, services and

value added projects have resulted in growth of sales from the year 2007 to 2010.

2. Trend Analysis of Net Profit



Table No. F2: Showing Trend percentages of Net Profit (Base Year 2007 = 100)


Year Net Profit Trend Percentages

2007 2877975.15 100

2008 1205363.59 71

2009 1341111.60 41

2010 1150463.92 40

Analysis: The trend percentages of Net Profit decreased by 71,41,&40 in the during year respectively .

Graph No. F2 : Showing trend percentages of Net Profit



2007 2008 2009 20100

20

40

60

80

100

120

Trend Percent-ages of Net Profit

- Years -

Percentages

Interpretation: The above table and graph represents the N/P of VKC is at a decreasing trend, it is not

satisfactory in three years such as 2008, 2009 & 2010 except in the year 2007. During the last

year the rate of decrease in net profit is low compared to remaining 3 years. This decreasing

trend of net profit shows that the firm cannot with stand adverse economic conditions when

selling price is declining, cost of production is rising and demand for the product is falling, this

trend also reflects that the company is ensuring not adequate return to the owners.

3. Trend Analysis of Fixed Assets



Table No. F3: Showing Trend percentages of Fixed Assets(Base Year 2007 = 100)

(Rs. in thousands)

Year Fixed Assets Trend Percentages

2007 6818783.38 100

2008 8040950.52 118

2009 7324774.52 107

2010 7844126.99 115

Analysis: The trend percentages of Fixed Assets during the year 2008 was 118, it is at an down

ward trend showing 107 in the year 2009, and it is upward trend showing 115

during the year 2010.



Graph No.F3: Showing trend percentages of Fixed Assets

2007 2008 2009 201090

95

100

105

110

115

120

Trend Percent-ages of Fixed Assets

- Years -

Percentages

Interpretation:

The above table and graph represents utilisation of Fixed Assets at VKC is satisfactory

during the year 2007 to 2010. The fluctuating trend of fixed assets is indicating there is an

investment in fixed assets from the year 2007 to 2010 is not consistent; it is also indicating there

is an efficient utilisation of fixed assets in generating sales and also satisfactory.



4. Trend Analysis of Current Assets

Table No. F4 : Showing Trend percentages of Current Assets(Base Year 2007 = 100)


Year Current Assets Trend Percentages

2007 5441138.20 100

2008 9891746.33 182

2009 10674918.61 196

2010 10422655.64 192

Analysis :

The trend percentages of Current Assets during the year 2008 was 182, it is at an upward

trend showing 196 in the year 2009, and it is at an down ward trend showing 192 during the year

2010.



Graph No.F4 : Showing trend percentages of Current Assets

2007 2008 2009 20100

50

100

150

200

250

Trend Percentages of Current Assets

- Years -

Percentages

Interpretation :

The above table and graph represents the trend of current assets at VKC is satisfactory in

the past 4 years, since it is showing an upward trend from the year 2007 to 2010. The upward

trend of current assets shows that the firm is capable of meeting short term obligations in time. It

also signifies the liquidity position at VKC is good.



4. Trend Analysis of Current Liabilities

Table No. F6: Showing Trend percentages of Current Liabilities(Base Year 2007 = 100)

(Rs. in thousands)

Year Current Liabilities Trend Percentages

2007 1563082.2 100

2008 3082074.38 197

2009 6492715.04 415

2010 6852013.77 438

Analysis: The trend percentages of Current Liabilities during the year 2004 is 123, it is at an

upward trend showing 180 in the year 2005, 252 and 380 during the year 2006 and 2007.



Graph No.F6: Showing trend percentages of current liabilities

20072008

20092010

050

100150200250300350400450500

Trend percentages of Current Liabilities

- Years -

Percentages

Interpretation: The above table and graph represents the trend percentages of current liabilities shows an

upward trend from the year 2007 to 2010. We can observe from this the current assets and

liabilities are increasing at an equal proportion. This indicates the firm is capable of meeting

short term obligations in time.



FINDINGS The study is made to find out the consistency of financial position of VKC Pvt

limited. Through the use of ratios and trend percentages the following are the summary

of findings :

Considering the convention rule of thumb the overall current ratio of VKC is good, but it

is decreasing trend in all the three years.

The liquidity position of the firm is good in first two years; than its decreasing quick ratio

is fluctuating, its shows that VKC is not having capacity to pay off its immediate

obligations on time in the last two years.

A firm having considerable position in debt and equity , the first two years is low after

that shareholder fund is increasing , its should be maintained in future also..

There is an optimum and efficient utilization of fixed assets at VKC.

The working capital is also efficiently utilized at VKC.

During the year 2007, the firm made excessive investment on fixed assets.

Debtors Turnover Ratio at VKC is good during 2008, considering its nature of business.

Due to delay in collection from the customers & liberal credit policy, this ratio declined

and stabilized between 2009 to 2010. The collection and recovery policy of the company

must be strengthened.

Funds of owners are profitably utilized by the firm since ROSI is an decreasing trend in

each year from 2007 to 2010.

The profitability of VKC is good, since it can be justified with the increase in EPS of the

firm each year. The firm has many future plans, to meet its future prospects the firm has

retained more earnings.



The firm is achieving lower rate of Net profit. Due to operational efficiencies, increase in

sales volume growth, lower overheads and higher operating incomes the firm, but it

cannot able to achieve higher profit.

Sales of VKC is at an upward trend, it is a good sign reflecting the growth of the

company from the year 2007to 2010.

Net profit of VKC is at an down ward trend. This decreasing trend of net profit shows

that the firm cannot withstand adverse economic conditions when selling price is

declining, cost of production is rising and demand for the product is falling, this trend

also reflects that the company is ensuring not adequate return to the owners.

There is an efficient utilization of fixed assets in generating sales at VKC.

The current assets and liabilities of VKC are showing an increasing trend

SUGGESIONS The current ratio of the concern is meeting its standard ideal ratio in first two years,

but next two years its not meeting standard ideal ratio, so the organization needs to

improve its current assets over its current liabilities to meet the standard of 2:1. It is

advised to go for working capital loan so that without affecting the routine operations,

the company can go ahead with its activities.

To improve the Short term solvency position, liabilities must be decreased and the

income generating assets must be increased.

The company has to concentrate much on its credit policy for faster collections of

accounts receivables.

The fixed assets, working capital and Inventory turnover ratio of VKC is satisfactory

and the company should try to maintain the same in future.



The trend percentages of sales, fixed assets, current assets and current liabilities are at

an increasing trend each year, this is a good sign and it is recommended to maintain

the same.

The trend percentage of net profit decreasing trend each year.

CONCLUSION


Vkc Project

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