A study on ratio analysis at vst tillers tractors final
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    A study on ratio analysis at vst tillers tractors final A study on ratio analysis at vst tillers tractors final Document Transcript

    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD INTRODUCTIONPART A: ABOUT INDUSTRY:1.1 Introduction about the Tractor Industry The Indian tractor industries were as follows history of the company.1945 to 1960: War suppliers tractors and bulldozers were imported for landreclamation and cultivation in mid 1940`s in 1947 central and state tractorsorganizations were setup to develop and promote the supply and age oftractors in agriculture and unto 1960 the demand met entirely throughimports. There were 8500 tractors in age in1951-20000 is 1955 and 37000by 1960.1961 to 1970: Local production began in 1961 with five manufactures producingtotal of880 units per day by 1965 this had increased to over 5000 unites perpear and the total in use had rise to our 52000 by 1970 annual productionhad exceeded 20000 units over 146000 units working in the country.1971 to 1980 Six new manufactures were established during this period althoughthree companies (Kriloscar tractors, Harshor and Pittie tractors) did notsurvive. Escorts ltd., began location manufacture of ford tractors in 1971 incollection with Ford UK and total production climbed steadily to 33000 in1975 reaching 71000 by1980 credit facilities for farmers continued toimprove and the tractor market expanded the half million mark by 1980.LORVEN EDUCATIONAL CENTRE 1
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD1981 to 1990 A further five manufacture began to production during this period butonly one of these survived in the increasingly competition market place.Annual production exceeded 75000 units by 1985 and reaching 14000 in1990 when the total in use was about 1 to 2 million. The Indian net importerup to the mid seventies become an exporter in the 80`s mainly to countries inAfrica.1991 to 1997 Science 1992 it has not been necessary to obtain an industrial licensefor tractor manufacture in India by 1997 annual production exceeded 255000units and the national tractor park and passed the two million mark. India asemerged as one of the world leaders wheeled tractors production.The Industry Today Tractors manufacture in now firmly established in India and is highlycompetitive with repaid advanced being made in technical design andquality with increasing attention to export markets of the 16 companies thatbegan operation before 1990 six are considering before major manufactures(Eicher, Escorts ltd., HMT, Mahindra and Mahindra, PTC and TAFE). Mahindra and Mahindra have emerged as a larger manufactureproducing68000 unites in 1997 followed TAFE, Escort ltd., and Punjabtractors with 49000, 48000 and 40000 units respectively.LORVEN EDUCATIONAL CENTRE 2
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD The average size of the tractor in the country is currently 35hp whichfollowing trends in other parts of the world, seems likely to increase steadilyto around 45hp by 2020. By which time total tractor population may haveincreased from the present two million with annual production up to3200000.Power Tillers By comparison with other parts of south East Asia demand for powertillers in India has been slow to take off. However the current population ofaround 66000 units with an average size of the 10hp is expected to risesteadily to around production reaching our 50000 units. Tractor is a vehicle intended for drawing, towing, pushing or pullingsomething which cannot propel itself and, often, powering it too. Mostcommonly the word is used to describe a vehicle intended for pulling someother vehicle or object (see traction unit). The word comes from the Latin trahere "to pull". A conflictinghistory of the name suggests that steam tractors were originally referred to astraction engines, with the word "tractor" eventually deriving from acontraction of traction and motor.LORVEN EDUCATIONAL CENTRE 3
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD In Britain, Australia, India, Spain, and Poland the word "tractor"usually means "farm tractor", and the use of the word "tractor" to mean othertypes of vehicles is familiar to the vehicle trade but unfamiliar to much ofthe general public. In Canada and the US the word is also used to refer to aroad tractor .Farm tractor A modern John Deere 8110 Farm Tractor plowing a field using achisel plow. The most common use of the term is for the vehicles used on farms.The farm tractor is used for pulling or pushing agricultural machinery ortrailers, for plowing, tilling, disking, harrowing, planting, and similar tasks.History The first powered farm implements in the early 1800s were portableengines – steam engines on wheels that could be used to drive mechanicalfarm machinery by way of a flexible belt. Around 1850, the first tractionengines were developed from these, and were widely adopted foragricultural use. Where soil conditions permitted, such as the US, steamtractors were used to direct-haul ploughs, but in the UK, ploughing engineswere used for cable-hauled ploughing instead. Steam-powered agriculturalLORVEN EDUCATIONAL CENTRE 4
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDengines remained in use well into the 20th century, until reliable internalcombustion engines had been developed. [2] In 1892, John Froelich built the first practical gasoline-poweredtractor in Clayton County, Ohio. Only two were sold, and it was not until1911, when the Twin City Traction Engine Company developed the design,that it became successful. In Britain, the first recorded tractor sale was the oil-burning Hornsby-Ackroyd Patent Safety Oil Traction engine, in 1897. However, the firstcommercially successful design was Dan Albones three-wheel Ivel tractorof 1902. In 1908, Saundersons of Bedford introduced a four-wheel design,and went on to become the largest tractor manufacturer outside the USA. While unpopular at first, these gasoline-powered machines began tocatch on in the 1910s as they became smaller and more affordable. HenryFord introduced the Fordson, the first mass-produced tractor in 1917. Theywere built in the U.S., Ireland, England and Russia and by 1923, Fordsonhad 77% of the U.S. market. The Fordson dispensed with a frame, using thestrength of the engine block to hold the machine together. By the 1920s,tractors with a gasoline-powered internal combustion engine had become thenorm. The classic farm tractor is a simple open vehicle, with two very largedriving wheels on an axle below and slightly behind a single seat (the seatand steering wheel consequently are in the center), and the engine in front ofthe driver, with two steerable wheels below the engine compartment. Thisbasic design has remained unchanged for a number of years, but enclosedLORVEN EDUCATIONAL CENTRE 5
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDcabs are fitted on almost all modern models, for reasons of operator safetyand comfort. Originally, plows and other equiptment were connected via a draw-bar, or a proporietary connecting system; prior to Harry Ferguson patentingthe three-point hitch. Recently, Bobcats patent on its front loader connectionhas expired; and compact tractors are now being outfitted with quick-connect attachments for their front-end loaders. There are also lawn tractors. Cub Cadet, Husqvarna, John Deere,Massey Ferguson and Toro are some of the better-known brands. Tractor  Ford 75 HP tractor  VST Mitsubishi Shakti MT 180 D Tractor  Swaraj 744 FE  OX –45 Tractor (45 HP)  OX-35 Tractor (35 HP)LORVEN EDUCATIONAL CENTRE 6
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDFord 75 HP tractorSpecifications:-Powerful Engine • 75HP (BS). 4 cylinder engines give the power required to tackle the toughest soil conditions. • Direct injection (DI). • Easy start even in cold conditions • Rated engine rpm-2500 • Bosch Rotary FI pump for high fuel efficiency • Dry type replaceable sleeves – enables the use of standard size piston after replacing the liners.VST Mitsubishi Shakti MT 180 D Tractor • More powerful and fuel efficient ‘Direct Injection’ Diesel Engine • Micron Engine Oil Filter for long life • Rotary changing device for ease and safety • Adjustable tail wheel for superior field operation • Optional wheel carrier for easy field operationCHANNIES TRACTORSLORVEN EDUCATIONAL CENTRE 7
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD Hubei Machinery & Equipment Import & Export Corporation wasestablished as a major machinery and equipment exporter. Today, we areproud to be one of the world¡¯s foremost suppliers of industrial productsespecially in the agricultural machinery and industrial equipment marketssuch as tractors, ATVs, Gocarts, bulldozers, diesel/gasoline generators etc. With our beginnings in the early 1970s, we have since established 24subsidiaries both inside and outside of China. These include 9 subsidiaries inthe provincial cities, 5 enterprises in chinese cities such as Zhuhai,Shengzhen, Guangzhou, Shanghai, Beijing and 4 overseas enterprises in theUSA, UKRAINE, SYRIA and Hongkong. We also have set up 6 jointventures and hundreds of coordinate factories all over China. We havetraded in over 100 countries in the world market providing thousands ofproducts. Our annual product turnover ranks among China¡¯s top 200 largestcompanies. We will be glad to work with the partners’ worldside.HMT TRACTORS Commenced manufacturing Agricultural Tractors in 1972 withtechnology acquired from ZETOR, Czech Republic and continues toupgrade the products. Our Tractor Plants in Pinjore, Mohali and Hyderabad with capacity of20,000 per annum, produces wide range of Tractors from 25 HP to 75 HP tosuit various farming requirements. HMT Tractor manufacturing units haveISO 9001 certification. Our products are reliable, simple to operate with safety features and arewell accepted in the international market. We have exported our Tractors toLORVEN EDUCATIONAL CENTRE 8
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDUSA, Czech Republic, Croatia, Sri Lanka, Bangladesh, South Africa,Senegal, Nigeria, Malaysia, and Liberia etc.The Tractors have: • Powerful, fuel efficient engines. • Roll Over Protective Structure for safety • Hydraulic and Mechanical Disc Brakes • Dual Clutch for travel and PTO operations • Low maintenance and operational cost We also offer Primary & Secondary Tillage Implements, LandShaping, Planting and Harvesting Equipment.MAHINDRA GUJARAT Mahindra Gujarat Tractor Limited was formed in 2001 afterMahindra and Mahindra Limited purchased sixty percent of the remainingshares in Gujarat Tractor Corporation Limited, from the Govt. of Gujarat. Itis based in Vadodara, Gujarat, India. Their tractors, now called Shaktimaanwere originally named Hindustan and are based on the Zetor tractor underlicensing agreements.LORVEN EDUCATIONAL CENTRE 9
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDPART-B: ABOUT SUBJECT FINANCIAL STATEMENTDEFINITION In the words of John .N. Myer “The Financial statements provide asummary of the accounts of a business enterprise, the balance reflectingthe assets, liabilities and capital as on a certain date and the incomestatement showing the results of operations during a certain period”. Financial statements are prepared primarily for decision-making. Theyplay a dominant role in setting the framework of managerial decisions. Butthe information provided in the financial statements is not an end in itself asno meaningful conclusions can be drawn from these statements alone.However, the information provided in the financial statements is of immenseuse in making decisions through analysis and interpretation of financialstatementsMEANING OF FINANCIAL STATEMENTS The term Financial Statement refers to the Two Statements 1. The position statement or the Balance Sheet.LORVEN EDUCATIONAL CENTRE 10
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 2. The Income statements or the Profit and loss account. These statements are used to convey to management and otherinterested outsiders the profitability and financial position of a Firm.FINANCIAL ANALYSIS Financial analysis is “The process of identifying the FinancialStrengths and Weaknesses of the firm by properly establishingrelationship between the items of the balance sheet and the profit andloss account.” There are various methods or techniques used in analyzing financialstatements, such as comparative statements, trend analysis, common sizestatements, schedules of changes in working capital, funds flow statementand cash flow analysis, cost- volume-profit analysis and ratio analysis. The purpose of financial analysis is to diagnose the informationcontained in financial statements so as to judge the profitability and financialsoundness of the firm, a financial analyst analyses the financial statementswith various tools of analysis before commenting upon the financial healthor weaknesses of an enterprise. The analysis and interpretation of financial statements is essential tobring out the mystery behind the figures in financial statements. Financialstatement analysis is an attempt to determine the significance and meaningof the financial statement data so that forecast may be made of the futureLORVEN EDUCATIONAL CENTRE 11
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDearnings, ability to pay interest and debt maturities (both current and longterm) and profitability of a sound dividend policy.The Significance or Importance of Financial Analysis: 1. To know the Present and Future Profitability of their Concern 2. To know the Earning Per Share and the Dividend Per Share, which have an impact on the market prices of their shareholdings. 3. To know the Financial Position of the Concern. 4. To know the stake or risk undertaken by firm. 5. To Analyze the Financial Statements which helps the management to ascertain the profitability of the enterprise. 6. To ascertain the Trend of Progress of the Concern. 7. To forecast future sales, Production, Expenses, Profits etc on the basis of the past data. 8. To ascertain the adequacy of Capital Structure of the Concern. 9. To know whether the Short-term Financial Position of the concern is good to Pay Bonus Increased wages, etc. 10.To have correct assessment of Taxes, such as Excise duties, Sales tax, Income tax etc.LORVEN EDUCATIONAL CENTRE 12
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 11.To regulate the prices of goods produced by the enterprise. 12.To determine it’s Financial Policies.TYPES OF FINANCIAL ANALYSIS 1. ON THE BASIS OF MATERIAL USED A) Externa1 analysis B) Internal analysisA) EXTERNAL ANALYSIS: Outsiders who do not have access to the detailed internal accountingrecords of the business firm do this analysis. These outsiders includeinvestors, potential investors, creditors, potential creditors, governmentagencies, credit agencies and the general public. For financial analysis theseexternal parties to the firms depend almost on the published financialstatements.B) INTERNAL ANALYSIS: The analysis conducted by persons who have access to the internalaccounting records of a business firm is known as internal analysis, such ananalysis can, therefore be performed by executives and employees of theorganization as well as government agencies which have Statutory powersvested in them. Financial analysis for managerial purposes is the internalLORVEN EDUCATIONAL CENTRE 13
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDtype of analysis that can be affected depending upon the purpose to beachieved.2. ON THE BASIS OF MODUS OPERANDI A. Horizontal analysis B. Vertical analysis.A) HORIZONTAL ANALYSIS Horizontal analysis refers to the comparison of financial data of acompany for several years. The figures for this type of analysis are presentedhorizontally over a number of columns. The figures of the various years arecompared with standard or base year. A base year is a year chosen asbeginning point. This type of analysis is also called ‘Dynamic analysis’ as itis based on the data from year to year rather than on data of any one year.Comparative statements and trend percentages are two tools employed inhorizontal analysis.B) VERTICAL ANALYSIS. Vertical analysis refers to the study of relationships of the variousitems in the financial statements of one accounting period. In this type ofanalysis the figures from financial statements of a year are compared with abase selected from the same year’s statement. It is also known as ‘staticanalyses. Common-size financial statements and financial ratio’s are the twotools employed in vertical analysis.PROCEDURE OF FINANCIAL STATEMENT ANALYSISLORVEN EDUCATIONAL CENTRE 14
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD There are three steps involved in the analysis of financial statements.These are 1. Selection 2. Classification and 3. Interpretation. The first involves selection of information (data) relevant to thepurpose of analysis of financial statements. The second step involved is the methodical classification of the dataand the third step includes drawing of intervenes and conclusions.METHODS OR DEVICES OF FINANCIAL ANALYSIS. The analysis and interpretation of financial statements is used todetermine the financial position and results of operations as well. A numberof methods or devices are used to study the relationship between differentstatements.The following methods of analysis are generally used 1. Comparative statements. 2. Trend analysis. 3. Common-size statements. 4. Funds flow analysis. 5. Cash flow analysis. 6. Ratio analysis. 7. Cost-volume-profit analysis.1. COMPARATIVE STATEMENTS.LORVEN EDUCATIONAL CENTRE 15
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD The Comparative Financial statements are statements of the financialposition at different periods of time. The elements of financial position areshown in a comparative form so as to give an idea of financial position attwo or more periods. Two financial statements (balance sheet and incomestatement) are prepared in Comparative form for financial analysis purposes.Not only the comparison of the figures of the two periods but also therelationship between balance sheet and income statement enables an in depthstudy of financial position and operative results. The two Comparative statements are A. Balance sheet. B. Income statement.A. COMPARATIVE BALANCE SHEET. The Comparative balance sheet analysis is the study of the trend of thesame items, group of items and computed items in two or more balancesheets of the same business enterprise on different dates. The changes inperiodic balance sheet items reflect the conduct of a business. The changescan be observed by comparison of the balance sheet at the beginning and atthe end of a period and these changes can help in forming an opinion aboutthe progress of an enterprise.B. COMPARATIVE INCOME STATEMENT. The income statement gives the results of the operations of a business.The Comparative Income statement gives an idea of the progress of abusiness over a period of time. The changes in absolute data in moneyvalues and percentages can be determined to analyze the profitability of thebusiness.LORVEN EDUCATIONAL CENTRE 16
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD2. TREND ANALYSIS. The financial statements may be analyzed by computing trends ofseries of information. This method determines the direction upwards ordownwards and involves the computation of the percentage relationship thateach statement item bears to the same item in base year.3. COMMON SIZE STATEMENT. The common size statements, balance sheet and income statement areshown in analytical percentages. The common size statements may bePrepared in the following way.The Total of Assets or Liabilities is taken as 100, The individual assets areexpressed as a percentage of total assets that is 100 and different liabilitiesare calculated in relation to total liabilities. A. COMMON SIZE BALANCE SHEET. A statement in which balance sheet items are expressed as the ratio ofeach asset to total and ratio of each liability is expressed as a ratio of totalliabilities is called common size balance sheet. The common size balancesheet can be used to compare companies of differing size. The comparisonof figures in different periods is not useful because total figures may beaffected by a number of factors. It is not possible to establish standard normsfor various assets. The trends of figures from year to year may not be studiedand even they may not give proper results. B. COMMON SIZE INCOME STATEMENT.LORVEN EDUCATIONAL CENTRE 17
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD The items in income statement can be shown as percentages of salesto show the relation of each item to sales. A significant relationship can beestablished between items of income statement and volume of sales. Theincrease in sales will certainly increase selling expenses and notadministrative or financial expenses. In case the volume of sales increases toa considerable extent, administrative and financial expenses may go up. Incase the sales are declining, the selling expenses should be reduced at once.So a relationship is established between sales and other items in Incomestatement and their relationship is helpful in evaluating operational activitiesof the enterprise.2. FUNDS FLOW STATEMENT According to ‘SMITH and BROWN Funds flow statement “Is amethod by which we study changes in the financial position of abusiness enterprises between beginning and ending financial statementdates”. Meaning of funds “Funds are usually called as working capital forthe purpose of funds flow statement” It is a statement showing sources and application of funds for aperiod of time. The funds flow statement, which shows the movement offunds and is a report of the financial operation of the business undertaking. Itindicates various means by which funds were obtained during a particularperiod and the ways in which these funds were employed. In simple words,it is a statement of sources and application of funds.Advantages of Funds Flow Statement 1. It helps in providing proper guideline for of available Funds.LORVEN EDUCATIONAL CENTRE 18
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 2. Acts as a basis for financial plan budgeting. 3. It gives early warning for the financial dangers. 4. It helps in borrowing funds from others sources.5. CASH FLOW ANALYSIS. Cash flow statement is a “Statement, which describes the Inflows(sources) and Outflow (uses) of cash and cash equivalent in anenterprise during a specified period of time”.Advantages: 1. Cash flow statement is very useful in the evaluation of cash position of a firm. 2. It helps in planning the repayment of loans, replacement of fixed assets and other similar long term planning of cash. 3. Cash flow statement is more suitable for making comparisons than the funds flow statement, as there is no standard format for the same. 4. Cash flow statement provides information of all activities classified under operating, investing and financing activities.6. RATIO ANALYSIS. The ratio analysis is one of the most powerful tools of financialanalysis. It is the process of establishing and interpreting various ratios(quantitative relationship between figures and groups of figures) it is withthe help of ratios that the financial statements can be analyzed more clearlyand decisions made from such analysis. Ratio analysis is a technique ofanalysis and interpretation of financial statements.LORVEN EDUCATIONAL CENTRE 19
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDAdvantages: 1. It helps in decision-making. 2. It helps in financial forecasting and planning. 3. It helps in communicating. The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios. 4. It helps in co-ordination and control. 5. It use full in inter- firm comparisonTYPES OF RATIOSI). LIQUIDITY RATIO. These are the ratios, which measure the short-term solvency orfinancial position of a firm. These ratios are calculated to comment upon theShort term paying capacity of a concern or the firm’s ability to meet itscurrent obligations. To measure the liquidity of a firm, the following ratios can becalculated.Liquidity Ratios A). Current ratio. B). Quick ratio or acid test or liquid ratio. C). Absolute liquid ratio.A). CURRENT RATIO It is the ratio, which matches current assets with the firm’s currentliabilities Current Assets Current Ratio = Current LiabilitiesLORVEN EDUCATIONAL CENTRE 20
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD This ratio throws good light on the short-term financial position andits policies. It is an indicator of a firm’s ability to promptly meet its short-term liabilities.B). QUICK RATIO OR ACID TEST OR LIQUID RATIO This ratio more severe test of liquidity of a firm. It shows theability of a business to meet its immediate financial commitments. Quick Assets Quick Ratio = Current LiabilitiesC). ABSOLUTE LIQUID RATIO. This also known as super quick ratio Cash Absolute Liquid Ratio = Current LiabilitiesII) ANALYSIS OF LONG-TERM FINANCIAL POSITIONOR TESTS OF SOLVENCY: The term solvency refers to the ability of a concern to meet its long-term obligations. The long-term indebtedness of a firm includes debentureholders, financial institutions providing medium and long-term loans andother creditors selling goods on installment basis. Long-term solvency ratios indicate a firm’s ability to meet the fixedinterest and costs and repayment schedules associated with its long-termborrowings.LORVEN EDUCATIONAL CENTRE 21
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD The following ratios serve the purpose of determining the solvency ofthe concern. A) Debt-equity ratio B) Proprietary ratio or equity ratio C) Fixed assets to net worth or proprietor’s funds ratioA). DEBT-EQUITY RATIO: Debt-equity ratio also known as external-internal equity ratio. It iscalculated to measure the relative claims of outsiders and the owners (that isshare holders) against the firm’s assets. This ratio indicates the relationshipbetween the external equities or the outsider’s funds and the internal equitiesor the shareholders funds. Long Term Debts Debt - Equity Ratio = Shareholders Equity Where outsider’s funds include all debts/Liabilities to outsiderswhether long term or short term or whether in the form of debentures, bonds,mortgages or bills. The shareholders funds consist of equity share capital,preference share capital, capital reserves, revenue reserves and reservesrepresenting accumulated profits and surplus like reserves for contingencies,sinking funds etc The debt- equity ratio is calculated to measure the extent to whichdebt financing has been used in business. The ratio indicates theproportionate claims of owners and the outsiders against the firm’s assets.The purpose is to get an idea of the cushion available to outsiders on theliquidation of the firm. Generally a low ratio (debt being low in comparisonto shareholders funds) is considered as favorable from the long-termcreditor’s point of view because a high proportion of owner’s funds provideLORVEN EDUCATIONAL CENTRE 22
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDa larger margin of safety for them. A high debt equity ratio which indicatesthat the claims of outsiders (creditors) are greater than those of owners, maynot be considered by the creditors because it gives a lesser margin of safetyfor them at the time of liquidation of the firm.B) PROPRIETORY RATIO: A variant to the debt-equity ratio is the proprietary ratio, which is alsoknown as equity ratio or shareholders to total equities ratio or net worth tototal assets ratio. This ratio establishes the relationship betweenshareholder’s funds to total assets of the firm. Shareholdres Funds Proprietory Ratio = Total Assets Where shareholders fund is equity share capital, undistributed profits,reserves and surplus out of this amount, accumulated losses should bededucted. As equity represents the relationship of owner’s funds to total assets,higher the ratio or the share of the shareholders in the total capital of thecompany. This ratio indicates the extent to which the assets of the companycan be lost without affecting the interest of creditors of the company.C). FIXED ASSETS TO NET WORTH RATIO OR FIXEDASSETS TO PROPRIETOR’S FUNDS: This ratio establishes the relationship between fixed assets andshareholder’s funds that is share capital, reserves and surplus and retainedearnings. Fixed Assets Fixed Assets to Networth Raio = NetworthLORVEN EDUCATIONAL CENTRE 23
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDIII) PROFITABILITY RATIOS: The primary objective of a business undertaking is to earn profits.Profit earning is considered essential for the survival of the business. Abusiness needs profits not for its existence but also for expansion anddiversification.Generally, profitability ratios are calculated either in relation to investmentGeneral profitability ratios. A. Gross profit ratio. B. Operating ratio C. Operating profit ratio D. Expenses ratio E. Net profit ratioA) GROSS PROFIT RATIO: Gross profit ratio measures the relationship of gross profit to net salesand is usually represented as a percentage. Gross Profit Gross Profit Ratio = X100 Net Sales The gross profit ratio indicates the extent to which selling prices ofgoods per unit may decline without resulting in losses on operations of aLORVEN EDUCATIONAL CENTRE 24
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDFirm. As the gross profit is found by deducting cost of goods sold from thenet sales, higher the gross profit better the result. A low gross profit ratioindicates high cost of goods sold due to unfavorable purchasing policies,lesser sales, lower selling prices, excessive competition, over- investment inplant and machinery etc A comparison of gross profit ratio overtime or for different firms inthe same industry is a good measure of profitability, yet the gross profit ratiois one of the very important ratios for measuring profitability of a firm.B). OPERATING RATIO: Operating ratio establishes the relationship between the cost ofgoods sold and other operating expenses on the one hand and the sales onthe other. In other words, it measures the cost of operations per rupee of sales. Operating Cost Operating Ratio = X 100 Net SalesC) OPERATING PROFIT RATIO This ratio is calculated by dividing operating profit by sales Operating Profit Operating Profit Ratio = X 100 Net Sales Where operating profit = Net sales –Operating profitD) EXPENSES RATIO: Expenses ratio indicates the relationship of various expenses to netsales. Expenses ratio are calculated by dividing each item of expenses orLORVEN EDUCATIONAL CENTRE 25
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDgroup of expenses with the net sales to analyze the cause of variation if theoperating profit.Expenses ratio can be calculated as follows: Cost of salesa) Total cost to Sales = X 100 Net Sales Administration and Officeb). expenses to Sales Ratio = Adiminsration & Office Expenses X 100 Net Sales Selling and Distributionc). Expenses to SalesRatio = Selling and Distribution expenses X100 Net Sales Non Opertaing Expensesd). Non Operating Expenses to Sales Ratio = X 100 Net SalesE) NET PROFIT RATIO Net profit ratio establishes a relationship between net profit (aftertaxes) and sales and indicates the efficiency of the management inmanufacturing, selling, administrative and other activities of the firm. Thisratio is the overall measure of firm’s profitability and is calculated as. Net Profit After Tax a) Net Profit Ratio = X 100 Net SalesIV OVERALL PROFITABILITY RATIO Profits are the measure of overall efficiency of a business. The higherthe profit, the more efficient is the business considered. Thus, overallprofitability or efficiency of a business can be measured in terms of profitsrelated to investments made in the business.LORVEN EDUCATIONAL CENTRE 26
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD A. Return on shareholder’s investment or net worth ratio. B. Return on equity capital C. Earning per share D. Dividend yield ratio E. Dividend pay-out ratio F. Price earning (earning yield) ratio.A) RETURN ON SHAREHOLDER’S INVESTMENT OR NETWORTH RATIO Return on shareholder’s investment popularly known as return oninvestment or return on shareholder. Proprietor’s fund is the relationshipbetween net profits (after interest and tax) and the proprietor’s funds Net Profit After Interest and Tax Return on Investment = Shareholders FundsB) RETURN ON EQUITY CAPITAL: Ordinary shareholders are the real owners of the company. Theyassume the highest risk in the company. Ordinary shareholders are moreinterested in the profitability of a company and the performance of acompany should be judged on the basis of return on equity capital of acompany. Net Profit After Tax - Preference DividendReturn on Equity Capital = Equity Share CapitalLORVEN EDUCATIONAL CENTRE 27
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDC) EARNING PER SHARE: Earning per share is a small variation of return on equity capital and iscalculated by dividing the net profit after taxes and preference dividend bythe total number of equity shares. Net Profit After Tax - Prefernce DividendEarnings Per Share = No Equity SharesD) RETURN ON CAPITAL EMPLOYED: Return on capital employed establishes the relationship betweenprofits and the capital employed. It is the primary ratio and is most widelyused to measure the overall profitability and efficiency of a business. The term capital employed refers to the total of investments made in abusiness and can be defined in a number of ways. The three most widelyused definition of this term is I. Gross capital employed II. Net capital employed III. Proprietors net capital employedGROSS CAPITAL EMPLOYED: The term gross capital employed usually comprises the total assetsused in a business. Gross capital employed = fixed assets+ current assetsNET CAPITAL EMPLOYED The term net capital employed comprises the total used in a businessless its current liabilities Net capital employed = Total assets- current liabilitiesLORVEN EDUCATIONAL CENTRE 28
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDPROPRIETOR’S NET CAPITAL EMPLOYED: Proprietor’s net capital employed means shareholders funds orinvestment in the business. Proprietors net capital employed = fixed assets = current assets —outside liabilities.D) DIVIDEND YIELD RATIO: Shareholders are the real owners of a company and they are interestedin real sense in the earnings distributed and paid to them as dividends.Therefore, dividend yield ratio is calculated to evaluate the relationshipbetween dividend per share paid and the market value of the share Dividend Per Equity Share Dividend Yeild Ratio = Market Pr ice Per Equity Share Dividend Paid to Shareholders Dividend Per Share = Number of Equity SharesE) DIVIDEND PAY OUT RATIO: Dividend pay out ratio is calculated to find the extent to whichearnings per share have been retained in the business. It is an important ratiobecause Pouching back of profits enables a company to grow and pay moredividends in future. Dividend Per Equity Share Dividend Pay Out Ratio = Earnings Per ShareF) PRICE EARNING RATIO:LORVEN EDUCATIONAL CENTRE 29
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD Price earning ratio is the ratio between market price per equity shareand earnings per share. The ratio is calculated to make an estimate ofappreciation in the value of a share of a company and is widely used byinvestors to decide whether or not to buy shares in a particular company. Market Price Per Share Price Earning Ratio = Earnings Per ShareG) EARNING YIELD RATIO: This ratio is also shows a relationship between earnings per share andmarket value of shares. Earnings Per Share Earnings Yield Ratio = Market Price Per Share7. COST-VOLUME-PROFIT ANALYSIS: Cost-volume-profit analysis is a technique for studying therelationship between cost, volume and profit. The CVP relationship is animportant tool used for the profit planning of a business. The study of cost-volume-profit analysis is often referred to as break-even analysis. The termbreak-even analysis is used in two senses, narrow sense and broad sense. Inits broad sense, break-even analysis refers to the study of relationshipbetween costs, volume and profit at different levels of sales or production. Inits narrow sense, it refers to a technique of determining that levels ofoperations where total revenues equal total expenses that are the point of noprofit no loss.LORVEN EDUCATIONAL CENTRE 30
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD RESEARCH METHODLOGYTITLE OF THE STUDY: PROJECT REPORT ON “A STUDY ON RATIO ANALYSIS OF FINANCIAL WEALTH OF VST TILLERS TRACTORS LTD”.STATEMENT OF THE PROBLEM Financial statements are the reports of stewardship (that is theperformance of management). They are the basis for formulation ofeconomic and financial policies and guide to dividend decision. Financialstatements help to determine the legality of dividend payment. They act asthe basis for granting credit and are very informative to prospectiveinvestors. Financial statements serve as a proper guide to value theinvestments already made in an enterprise and serve as a basis for taxationand act as a basis for price regulation by the government. They serve as anaid to government interference and supervision of a business enterprise. Financial statements are useful to various parties like the owners,prospective investors, management, creditors, employees, government,‘tenera1 public etc. OBJECTIVES OF THE STUDYLORVEN EDUCATIONAL CENTRE 31
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 1. To analyze the financial position of a VST tillers tractors ltd from the financial statement using tools of management accounting. 2. To make detail analysis of each and every component of balance sheet of VST tillers tractors ltd. 3. To Know the Operating Expenses of the VST tillers tractors ltd 4. To assess the Profitability condition of the Company through analyzing the Balance sheet of the Company. 5. To Assess the Rate of return of the CompanySCOPE OF THE STUDY: The study covers the financial analysis of the statement, which isdisclosed by the annual report of the Company. Overall performance of theCompany is assessed.LIMITATIONS OF THE STUDY: 1. Study restricted to2 to 3 years financial statement of the Company. 2. The overall performance of the Company is analyzed and not branch wise. 3. Few tools for analysis are used to analyze the financial statement. 4. In-depth study of items of profit or loss account and balance sheet are not made. 5. They say little about the firm’s prospects in an absolute sense. 6. Their insights about relative performance require a reference point from other time periods or similar firms.LORVEN EDUCATIONAL CENTRE 32
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 7. One ratio holds little meaning. 8. As indicators, ratios can be logically interpreted in at least two ways. One can partially overcome this problem by combining several related ratios to paint a more comprehensive picture of the firm’s performance.METHODOLOGY OF THE STUDY: All information for preparations of project is collected through annualreport of the Company and some information is collected through the booksmaintained by Company and also through the employees of the Companyand some information from the website of the VST tillers tractors ltd.SOURCES OF DATA1. Primary Data- Primary data are the original data which originally collected by directinterview with the Company for the 1 st time, about the statisticalinvestigation & and used by them in statistical analysis are formed asPrimary Data.2. Secondary Data- These are the Data which might be published or unpublished havealready been collected and processed by same agency or person and takeover from some other agency.Example-Balance sheet, Profit & Loss account, Cash Flow Statement.RESEARCH INSTURMENTSLORVEN EDUCATIONAL CENTRE 33
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD The technique used for the Analysis is Ratio Analysis andComparative Balance Sheet etc. It is a most widely used and powerful toolfor Financial Statements Analysis. The ratios used for the study areLiquidity ratio, Profitability Ratios, Solvency Ratios. Which includes Liquidassets to total assets ratio and Liquid assets to total investments?Profitability ratios such as Return on Assets, Return on Equity, Net ProfitRatio etc. Long –term solvency ratios such as Proprietary Ratio etc. COMPANY PROFILE:LORVEN EDUCATIONAL CENTRE 34
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDHistory of the company VST Tiller Tractors Ltd (VTTL) was incorporated in the year 1967 inBangalore India. It was promoted by the VST group, a well-known businesshouse in south India, in technology collaboration and joint venture withMitsubishi Heavy Industries and Mitsubishi; corporation Japan for themanufacture of Tillers and diesel engines. The plant went into production inthe year 1970. In 1970, an additional technical and financial collaboration withMitsubishi Agriculture of 18.5 HP, 4-wheel drive tractor was entered into. The manufacturing plan is located in Whitefield industrial area nearBangalore. It has 75,000 sq. meters, of land and a built up area of 15,000 sq.meters (approx). The company has total personnel strength of about 500employees as on date. The manufacturing capacity of the company is 12,000power tillers, 16,000 engines and 2,500 tractors. Now, the company has come out of collaboration and joint venturepartnership. It has in house design and development section for upgradingand updating the level of technology in line with current requirements. Thecompany is certified to ISO-9001 quality management system. Since Jan1998 our company follows ISO-9001-2000 Quality Systems requirements tosatisfy all out customer needs.LORVEN EDUCATIONAL CENTRE 35
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD The main product of the company namely Power tillers and Tractorsare used in the agriculture sector all over the country. Power Tillers, Tractorsare component parts are exported to countries such as Srilanka, Tanzania,Zambia Ghaha, Cryprus, Europe, Austria, USA, Japan and Thailand. The company has set up a nation wide network of Dealers supportedby sales and service Organization. Adequate supply of spare parts, provisionof service tools and equipment, making available service informationthrough technical literature, instruction manuals etc, and imparting trainingto dealer’s personnel as well as end users namely the farmers, are some ofthe effective steps taken by the company towards customer satisfaction. With this objective, company was formulated its quality policyachievement of an international quality standard is not a single event but anongoing commitment which remains as a continuous obligation and process. The plans set in place are designed to ensure that the continuouscommitment is a part of the operational policy of the company, with the helpof its people. The company will provide the best possible service to thecustomers and strive for excellence in performance. Way back in 1920 the VST Group made a humble start by dealing inpetroleum products. Using this strong base, the Group quickly diversifiedinto automotive marketing and after-sales service. From this activity grewthe network of the organization throughout the southern states of Karnatakaand Tamil Nadu. The tradition and culture of the VST Group continues in this CompanyLORVEN EDUCATIONAL CENTRE 36
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDin spite of it having adopted new management techniques to face globalchallenges. Over the years, VST Tillers Tractors Ltd. has established an extensiveand efficient countrywide sales and after-sales service network backed byeasy availability of spare parts. Periodic training programmes for Dealersand customers are taken up to keep them constantly updated onimprovements on its products.Type: The company is manufacturing sectors. It is located in white fieldroad.Nature: The company is manufacturing the tractors, tillers and diesel engines.The company has produced the goods and gives to dealers and increases thesales.Board of Directors: The board comprises of a Non-Executive Chairman, two whole timeDirectors and six Non-Executives Directors. The constitution of the Board isgiven below. During the year 2005-06, four Meeting of Board Of Directorswere held i.e., on November 2005 and 30th January 2006.Mr. V.P. Mahendra Managing DirectorsMr. A.T. Nahender Directors (Operations)Mr.v.v.Vijayandra Non-executiveMr.v.k. Surendra Non-executiveMr.V.T.Velu Non-executiveMr.A.Hishikawa Non-executiveMr.M.Tanaka Non-executiveMr. R.Subbramanian Non-executive/independentMr.M.V.Bannerjee Non-executive/independentLORVEN EDUCATIONAL CENTRE 37
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDMr.V.Ramachandran Non-executive/independentORGANIZATION CHART: Directors (Operations) Vice President General Manager Manager Officer Junior Officer Supervisor Workers THE COMPANY S VISIONVST Tillers Tractors Ltd. believes that the foundation of its business is toprovideEXCELLENCE in its products through:LORVEN EDUCATIONAL CENTRE 38
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDHigh Quality and Reliability. Economical and Competitive Prices.Efficient Services to the satisfaction of the customers.In order to achieve these goals and attain market leadership,it shall be the objective of every employee to strive to beFuture planes a) Higher horsepower Tractor as a variant to MT180D. b) Aesthetical improvement on power Tiller engines. c) Emission compliance of new series of engines for varied applications.PRODUCT PROFILE Consequent to its long and close association with the MitsubishiGroup of Companies, VST Tillers Tractors Ltd. Has effectively absorbed thelatest technology and work culture. This has resulted in the companysLORVEN EDUCATIONAL CENTRE 39
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDachievement in perfecting every product it manufactures, meeting even themost exacting requirements of the customer. Tillers Tractors Diesel EnginesTillers are classified as follows: Mitsubishi-Shakti VWH-120 PowerVST-Shakti 130 DI Power Tiller TillerTractors are classified as follows:LORVEN EDUCATIONAL CENTRE 40
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD Euro tractors –VST Mitsubishi-Shakti MT180D180 TractorFeatures of Euro tractors: • Compact, Light weight, Four Wheel drive multipurpose tractor. • Fully confirms to safety regulations as specified by the Council of European Communities (EEC) with the following features: - EEC approved Roll Over Protection System (ROPS) for operator’s safety. Options: Regular ROPS - e mark No. e11-0933. Foldable ROPS - e mark No. e4-VI-028. - Independent hand operated brake system for additional safety. - e Marked electrical signaling devices. • Option of two & Four Wheel drives for optimum engine power utilization.LORVEN EDUCATIONAL CENTRE 41
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD • Overriding PTO clutch to facilitate use of high inertia implements. • Live hydraulic system with adjustable implements position, and lowering speed control. • Elegant dash board with all necessary instrumentsDiesel engines are classified as follows: 130 DI AD8V K3C VWH 120LORVEN EDUCATIONAL CENTRE 42
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDFINANCIAL HIGHLIGHTS The financial results are summarized below (Rs.in lakhs) Particulars Year Year 2005-06 2004-05 TURNOVER 1299 11086 OTHER INCOME 165 186 TOTAL INCOME 13164 11272 PROFIT BEFORE DEPRECIATION & 1563 1346INTREST 137 171 INTRESET 271 299 DEPRECIATION 1155 876 PROFIT BEFORE TAX 414 290 INCOME TAX 741 586 PROFIT AFTER TAX 497 575 BALANCE B/F 1238 1161 SURPLUS AVAILABLE FORAPPROPRATION TO: 173 144 DIVIDENT 24 20 TAX ON DIVIDENT 500 500 TRANSFER TO GENERAL RESERVE 541 497 BALANCE CARRIED FORWARDLORVEN EDUCATIONAL CENTRE 43
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDMarket share: The stock exchange or the Securities Exchange Board of India (SEBI) and / or any other statutory authority have not imposed any strictures / penalties on the company on any matters relating to capital market during the last three years Market Price Data: Month Highest Lowest Month Highest Lowest price(Rs). Price(Rs). price(Rs) price(Rs) Apr - 05 71.90 66.15 Oct- 05 122.60 91.85 May - 05 106.25 70.00 Nov- 05 113.05 97.75 Jun - 05 121.6 102.05 Dec- 05 114.10 98.60 Jul - 05 145.2 117.55 Jan- 06 116.60 106.25 Aug- 05 128.95 112.55 Feb- 06 110.60 101.30 Sept- 05 152.05 116.55 Mar- 06 105.30 91.75Competitors: 1. Channies – From China 2. Campco – Kerla 3. Sun Brand 4. HmtFunctional chartLORVEN EDUCATIONAL CENTRE 44
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD MANAGEING DGM- DIRECTOR MKV DIRECTOR GM-MK (OPERATION) VP (BUSINESS DEPATMENT) MKS FIA VP (CHARMAN) GM-FI FIC FII DGM-SPS SPS DGM-MF MFA MFM MFP GM-EN ENE /ENE ENP DGM-QA QAC QAV QAM GM-IM DGM-IM ISC IMC/IMD GM-HR HRD HRW PGD / PDS (HR) PDT CE GAF GA GAA GASGrowths and ProspectLORVEN EDUCATIONAL CENTRE 45
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD During the year under report, your company has been on a consistentupward path in sales, profit and margins. The turnover increased by 17%from Rs.111 crores in 2004-2005 to an all time high of 130 crores. Theoperating profit increased by over 16% to 1563 lakhs due to higherrealization and lower interest cost. The profit after tax was higher by 26%from 586 lakhs to 586 lakhs. Consequently, earnings per share grew fromRs.10.17 to Rs.13.10 for 2005-2006. On the backdrop of the year with agood financial performance your company is presently dept free. The sale ofpower tillers increased to 8489 units as against the previous year sales of7625 units. With respect to Tractors, your company sold 1249 unit as against933 units an increase of 33%. This improvement in sales has been achievedin line with the overall increase in demand complemented by bettergovernment support prices for crops, opening new markets, normalmonsoons and availability of finance to farmers. The last factor plays a keyrole since more then 80% of tractor sales are on credit. The performance of precision components division located continuedto be challenging due to lack of consistency in overseas orders. Due to asudden order cancellation, this division suffered losses on account ofunderutilization of capacity during the year. In addition, the substantialreduction in DEPB benefits on exports and increase in the price of steel andother input material has had an adverse impact on margins. However asubsequent increase in orders for supply of crankshafts and connecting rodsto one of its customers during the year has shored up its revenues therebyachieving optimal production.About VST Group:LORVEN EDUCATIONAL CENTRE 46
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD Way back in 1920 the VST Group made a humble start by dealing inpetroleum products. Using this strong base, the Group quickly diversifiedinto automotive marketing with after sales service. From this activity grewthe network of the Organization throughout the southern states of Karnatakaand Tamil Nadu.The VST Group has over 2000 employees and has a turnover of U.S.$500 million p.a.QUALITY POLICY • The Company will supply reliable products at competitive price with improved technology to the satisfaction of customers. • The Company shall ensure prompt and efficient after sales service backed by quality spare parts. • All employees in every function and level shall strive to achieve high quality of work through continuous improvement Guided by global quality system standards.LORVEN EDUCATIONAL CENTRE 47
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD • Product costs shall be minimized without lowering quality and sustained efforts shall be made to reduce quality costs at all timesSales and service of product: Over the years, VST Tillers Tractors Ltd., has established anextensive and efficient countrywide sales and after-sales service networkbacked by easy availability of spare parts. Periodic training programmes fordealers and customers are taken up to keep them constantly updated onimprovements in its products. Keeping in line with Indias liberalized economic policies and guidedby the conviction that quality products are marketable world wide, VSTTillers Tractors Ltd., has successfully launched global marketing of itsproducts. It is marketing Diesel Engines, Power Tillers and Tractors toregions of Asia, Middle East, Africa, Europe and United States of America.SWOT ANALYSIS STRENGTH • During the year review, the Indian economy witnessed a GDP growth rate of 8% with agriculture contributing around 2.4% and is estimated to grow to 3.2%. • The central and state governments continue to give priority to agriculture through various subsidy schemes. • This apart, Banks have promoted farm mechanization by providing timely finance which has generated good demand for power tillers and your company continues to maintain its lead in the power tiller industry in India by delivering a superior value product.LORVEN EDUCATIONAL CENTRE 48
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD • The performance is even more satisfying when viewed in the light of the competitive pressure from low cost Chinese brand power tillers. WEAKNESS • In the domestic tractor segment, the industry as a whole grew to 262000 units during 2005-2006 from226000 units in the previous year. • The western and southern states of Maharashtra, Gujarat, AP, Karanataka and Kerala primarily contributed to the above growth. • Your company commands a niche market share in Maharashtra and Gujarat in the smaller HP tractor and sales in this segment are expected and sales in this segment are expected to grow in the coming year. • To cater to newer markets, the manufacturing capacities and aesthetics for tractors are being upgraded that will lead to higher revenue streams for the current year. OPPORTUNITIES • The growth of the power tiller and tractor industry could be direly linked to the GDP growth of the Indian economy. • As mentioned above, the country’s GDP grew by a robust 8% making it one of the faster growing large economies in the world. • Easier and cheaper credit availability to farmer and awareness of the benefits to farmer mechanization provided opportunities for higher sales and optimum utilization of capacities. • The government’s policy on agriculture and the introduction of the Bharat Nirman Programme for creating massive rural infrastructure will directly benefit demand for your company’s product.LORVEN EDUCATIONAL CENTRE 49
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD THREATS • Several importers realizing the business potential for power tillers have commenced imports to quickly capitalize on this front. • These tillers are low cost unit and qualify under subsidy schemes that could intensify competition thereby affecting demand in the future various strategies have been planned including a tie up with a Chinese tiller manufacture for marketing power tillers. • Your company is continuing to pursue strategies such as cutting casts, including manufacturing efficiencies, strengthening marketing initiatives and garner greater economies of scale to stay ahead. • During the year, importing duties have been reduced and further reduction in line with WTO obligations may affect demand in this price sensitive may affect demand in this price sensitive market which could bring down price further that may affect the demand pattern.LORVEN EDUCATIONAL CENTRE 50
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD RATIO ANALYSIS AND INTERPRETATION TABLE-1Table showing the Current Ratio of the VST TILLERS TRACTORSLTD for the Years 2003-2004 to 2005-2006 Current Assets Current Ratio = Current liabilities (Rs in Lakhs) Current Year Current liabilities current Ratio Assets 2003-2004 4534.88 2056.55 2.21 2004-2005 5184.93 2094.54 2.48 2005-2006 5088.99 2558.01 1.99ANALYSIS- The Current ratio of the VST TILLERS TRACTORS LTD for theYear 2003-2004 was 2.21 %, for the Year 2004-2005 was 2.48%, and for theYear 2005-2006 was 1.99%.INFERENCE- 2:1 is considered as standard for the ratio. In all three years, it is farabove than the ideal level. The Current Assets of the VST TILLERSTRACTORS LTD for the Year 2004-2005 was 2.48% which much higherwhen compared other two-year 2003-2004, 2005-2006.LORVEN EDUCATIONAL CENTRE 51
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH -1Graph Showing the Current Ratio for the years 2003-2004 to 2005-2006 Current Ratio 3 Ratios 2 1 2.21 2.48 1.99 0 2003-2004 2004-2005 2005-2006 yearsLORVEN EDUCATIONAL CENTRE 52
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD TABLE-2Table showing the Liquid Ratio of the VST TILLERS TRACTORSLTD for the Years 2003-2004 to 2005-2006 Liquid AssetsLiquid Assets to current liabilities Ratio = Current liabilities (Rs in Lakhs) Year Liquid Assets Current liabilities Liquid Ratio 2003-2004 2506.02 2056.55 1.22 2004-2005 3178.15 2094.54 1.52 2005-2006 2926.66 2558.01 1.14ANALYSIS The Liquid Assets of the VST TILLERS TRACTORS LTD for theYear 2003-2004 was 1.22 %, for the Year 2004-2005 was 1.52%, and for theYear 2005-2006 was 1.14%.INFERENCEThe company has maintained its liquidity ratio above the standard level inall the three years 2004-2005 was 1.52% more as compared to the year2003-2004 and 2005-2006.LORVEN EDUCATIONAL CENTRE 53
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH -2Graph Showing the Liquid Assets to Current Liabilities Ratio for theyears 2003-2004 to 2005-2006 Liquid Ratio 1.6 1.4 1.2 1 Ratios 0.8 1.52 0.6 1.22 1.14 0.4 0.2 0 2003-2004 2004-2005 2005-2006 yearsLORVEN EDUCATIONAL CENTRE 54
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD TABLE-3Table showing the Cash Ratio of the VST TILLERS TRACTORS LTDfor the Years 2003-2004 to 2005-2006Cash Ratio = Cash + Marketable Securities Current Liabilities Cash & Bank Balances = Current Liabilities & Provisions [Rupees in lakhs] Year Cash Current liabilities Cash Ratio 2003-2004 363.18 2056.55 0.177 2004-2005 535.18 2094.54 0.255 2005-2006 647.597 2558.01 0.253ANALYSIS:The above table indicates that the Cash ratio in the year 2003-04 was 0.177in the year 2004-05 it was 0..255 and in the year 2005-06 it was 0.253.INFERENCE:The Cash ratio of the firm shows decreasing flow in the year 2003-2004 ascompared to 2004-2005 and increasing from in the year 2004-05 ascompared to 2005-06LORVEN EDUCATIONAL CENTRE 55
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH -3Graph Showing the Cash Ratio for the years 2003-2004 to 2005-2006 Cash Ratio 0.3 0.2 Ratios 0.1 0.255 0.253 0.177 0 2003-2004 2004-2005 2005-2006 yearsLORVEN EDUCATIONAL CENTRE 56
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD TABLE-4Table showing the Liquid Assets to Total Assets Ratio of the VSTTILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006 Liquid AssetsLiquid Assets to Total Assets Ratio = Total Assets (Rs in Lakhs) Liquid Assets to Year Liquid Assets Total Assets Total Assets Ratio (%) 2003-2004 2506.02 7049.85 35.547 2004-2005 3178.15 7991.91 39.767 2005-2006 2926.66 7967.95 36.73ANALYSIS- The Liquid Assets to Total Assets Ratio of the VST TILLERSTRACTORS LTD for the Year 2003-2004 was 35.54%, for the Year 2004-2005 was 39.767%, and for the Year 2005-2006 was 36.73%.INFERENCE- The Liquid Assets to Total Assets Ratio of the VST TILLERSTRACTORS LTD for the Year 2004-2005 was 39.767% which much higherwhen compared other two-year 2003-2004, 2005-2006.LORVEN EDUCATIONAL CENTRE 57
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH -4Graph Showing the Liquid Assets to Total Assets Ratio for the years2003-2004 to 2005-2006 Liquid Assets to Total Assets 42 40 38 36 39.767 34 35.547 36.73 32 2003-2004 2004-2005 2005-2006 yearsLORVEN EDUCATIONAL CENTRE 58
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD TABLE-5Table showing the Liquid Assets to Total Investments Ratio of the VSTTILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006 Liquid AssetsLiquid Assets to Total investments Ratio = Total investments (Rs in Lakhs) Liquid Liquid Assets to Total Year Total investments Assets investments 50.632003-2004 2506.02 49.50 62.602004-2005 3178.15 50.77 35.032005-2006 2926.66 83.54ANALYSIS: The Liquid Assets to Total Investments Ratio of the VST TILLERSTRACTORS LTD for the Year 2003-2004 was 50.63%, for the Year 2004-2005 was 62.60%, and for the Year 2005-2006 was 35.03%.INFERENCE- The Liquid Assets to Total Investments Ratio of the VST TILLERSTRACTORS LTD for the Year 2004-2005 was 62.60% which much higherwhen compared to other two years 2003-2004, 2005-2006.LORVEN EDUCATIONAL CENTRE 59
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-5Graph Showing the Liquid Assets to Total Investments Ratio for theyears 2003-2004 to 2005-2006 Liquid Assets to Total Investments Ratio 100 Ratios 50 50.63 62.6 35.03 0 2003-2004 2004-2005 2005-2006 yearsLORVEN EDUCATIONAL CENTRE 60
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD TABLE-6Table showing the Debt- Equity Ratio of the VST TILLERSTRACTORS LTD for the Years 2003-2004 to 2005-2006 Long Term DebtsDebt - Equity Ratio = Share holders Equity (Rs in Lakhs) Year Debt Equity Debt- Equity Ratio2003-2004 2056.59 3780.86 53.752004-2005 2094.54 4193.33 49.942005-2006 2558.01 4758.72 53.74ANALYSIS:Debt Equity Ratio of VST TILLERS TRACTORS LTD for the Year 2003-2004 was 53.75%, for the Year 2004-2005 was 49.94%, and for the Year 05-06 was 53.74%.INFERENCE: When the Firm’s Debt-Equity Ratio is high it indicates that the firmhas to face difficulty in meeting its fixed obligation. Lower the Ratio it isless difficult to meet its fixed obligation. In the Year 2004-2005 the DebtEquity Ratio of VST TILLERS TRACTORS LTD is 49.94% which muchlower when compared to the other two year 2003-2004, 2005-2006.LORVEN EDUCATIONAL CENTRE 61
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-6Graph Showing the Debt Equity Ratio for the years 2003-2004 to2005-2006 Debt- Equity Ratio 56 54 Ratios 52 50 54.39 53.75 48 49.94 46 2003-2004 2004-2005 2005-2006 years TABLE-7LORVEN EDUCATIONAL CENTRE 62
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing the Proprietary Ratio of the VST TILLERSTRACTORS LTD for the Years 2003-2004 to 2005-2006 Shareholders FundsProprietory Ratio = Total Assets (Rs in Lakhs) Share Holders Proprietary Year Total Assets Funds Ratio (%) 2003-2004 3780.86 7099.89 53.25 2004-2005 4193.33 8020.97 52.27 2005-2006 4758.72 8116.95 58.63ANALYSIS The Proprietary Ratio of the VST TILLERS TRACTORS LTD for theyear 2003-2004 was 53.25% the year 2004-2005 was 52.27%, and for theyear 2005-2006 was 58.63%.INFERENCE Higher the Proprietary Ratio, Greater the Long Term stability for theFirm, the firms Proprietary Ratio in the year 2005-2006 is 58.63% which isHigher when compared to the other two years 2003-2004, 2004-2005.LORVEN EDUCATIONAL CENTRE 63
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-7Graph Showing the Proprietary Ratio for the years 2003-2004 to 2005-2006 propretory ratio 60 55 ratios 58.63 50 53.25 52.28 45 2003-2004 2004-2005 2005-2006 years TABLE-8LORVEN EDUCATIONAL CENTRE 64
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing the Fixed Assets to Net worth Ratio of the VSTTILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006 Fixed Assets Fixed Assets to Networth Ratio = Networth (Rs in Lakhs) Fixed Assets to Year Fixed Assets Net worth Net worth Ratio (%) 2003-2004 2514.98 3780.86 66.52 2004-2005 5184.93 4193.33 123.64 2005-2006 5088.99 4738.72 107.39ANALYSIS – The Fixed Asset to Net worth Ratio of the VST TILLERSTRACTORS LTD for the year 2003-2004 was 66.52%, for the Year 2004-2005 was 123.64%, and for the Year 2005-2006 was 107.39%.INFERENCE- The Fixed Asset to Net worth Ratio of the VST TILLERSTRACTORS LTD for the year 2004-2005 was 123.64%, which is higherwhen compared to other two years 2003-2004, 2005-2006.LORVEN EDUCATIONAL CENTRE 65
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-8Graph Showing the Fixed Assets to Net worth Ratio for the years2003-2004 to 2005-2006 Fixed Assets to Networth Ratio 140 120 100 80 ratios 60 123.64 107.39 40 66.52 20 0 2003-2004 2004-2005 2005-2006 Years TABLE-9LORVEN EDUCATIONAL CENTRE 66
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing the Liquid Asset to Net worth Ratio of the VSTTILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006 Liquid AssetsLiquid Assets to Networth Ratio = Networth (Rs in Lakhs) Liquid Asset to Year Liquid Assets Net worth Net worth Ratio 2003-2004 2506.02 3780.86 .6652 2004-2005 3178.15 4193.33 1.2364 2005-2006 2926.66 4738.72 1.0739ANALYSIS- The Liquid Asset to Net worth Ratio of the VST TILLERSTRACTORS LTD for the year 2003-2004 was .6652 Times, for the Year2004-2005 was 1.2364 Times and for the Year 2005-2006 was 1.0739Times.INFERENCE- The Liquid Asset to Net worth Ratio of the VST TILLERSTRACTORS LTD for the year 2004-2005 was 1.2364 Times which is muchhigher when compared to other two year 2003-2004, 2005-2006.LORVEN EDUCATIONAL CENTRE 67
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-9Graph Showing the Liquid Assets to Net worth Ratio for the years2003-2004 to 2005-2006 Liquid Asset to Networth Ratio 1.4 1.2 1 0.8 ratios 0.6 1.2364 1.0739 0.4 0.6652 0.2 0 2003-2004 2004-2005 2005-2006 Years TABLE-10LORVEN EDUCATIONAL CENTRE 68
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing the Net Profit Ratio of the VST TILLERS TRACTORSLTD for the Years 2003-2004 to 2005-2006 Net Profit Net Profit = *100 Sales (Rs In Lakhs) Net Profit Ratio Year Net Profit Sales (%) 2003-2004 578.56 10313.75 5.60 2004-2005 585.84 11272.43 5.19 2005-2006 741.66 13164.67 5.633ANALYSIS- The Net Profit Ratio of the VST TILLERS TRACTORS LTD for theYear 2003-2004 was 5.60%, for the year 2004-2005 was 5.19%, and for theyear 2005-2006 was 5.633%.INFERENCE-Net Profit ratio indicates the efficiency of the firm’s. Higher the Net Profit itindicates the firm is Positive and in an advantageous position. The Net ProfitRatio of the VST TILLERS TRACTORS LTD during the year 2005-2006was 5.633% which much higher when compared to other two years 2003-2004, 2004-2005.LORVEN EDUCATIONAL CENTRE 69
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-10Graph Showing the Net Profit Ratio for the years 2003-2004 to 2005-2006 Net profit ratio 5.7 5.6 5.5 5.4 ratios 5.3 5.61 5.6 5.2 5.1 5.19 5 4.9 2003-2004 2004-2005 2005-2006 years . TABLE-11LORVEN EDUCATIONAL CENTRE 70
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing the Inventory Ratio of the VST TILLERS TRACTORSLTD for the Years 2003-2004 to 2005-2006 Inventory Inventory Ratio = *100 Current Assets (Rs in Lakhs) Current Inventory Year Inventory Assets Ratio in % 2003-2004 2028.86 4534.88 44.74 2004-2005 2006.77 5184.93 38.7 2005-2006 2162.33 5088.99 42.49ANALYSIS:The above table indicates that the inventory ratio in the year 2003-04 was44.74%, in the year 2004-05 it was 38.70% and in the year 2005-06 it was42.49%.INFERENCE:The ratio shows the up and downfall trend. In the year 2003-04, it isrecorded the highest (44.74%) and lowest (38.7%) in the year 2004-05.LORVEN EDUCATIONAL CENTRE 71
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-11Graph Showing the Inventory Ratio for the years 2003-2004 to 2005-2006 Inventory Ratio 50 Ratios 45 40 44.74 42.49 38.7 35 2003-2004 2004-2005 2005-2006 yearsLORVEN EDUCATIONAL CENTRE 72
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD TABLE-12Table showing Operating Profit Ratio of the VST TILLERSTRACTORS LTD for the Years 2003-2004 to 2005-2006 Gross profitGross Profit Ratio = *100 Sales (Rs in Lakhs) Operating Year Gross profit Sales Profit Ratio (%) 2003-2004 3717.59 10403.92 35.73 2004-2005 3599.35 11272.43 31.93 2005-2006 21709.17 13164.67 164.91ANALYSIS- The Operating Profit Ratio the VST TILLERS TRACTORS LTD forthe year 2003-2004 was 35.73%, for the year 2004-2005 was 31.93%, andfor the year 2005-2006 was 164.91%.INFERENCE The Gross Profit Ratio of the VST TILLERS TRACTORS LTDduring the year 2005-2006 was 164.91% which much higher when comparedto the other two year 2003-2004, 2004-2005.LORVEN EDUCATIONAL CENTRE 73
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-12Graph Showing the Operating Profit Ratio for the years2003-2004 to2005-2006 Gross profit ratio 200 150 Ratios 100 164.91 50 35.73 31.93 0 2003-2004 2004-2005 2005-2006 Years TABLE-13LORVEN EDUCATIONAL CENTRE 74
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing Return on Equity funds Ratio of the VST TILLERSTRACTORS LTD for the Years 2003-2004 to 2005-2006 Profit After Tax Return on Equity Funds = Equity Shareholders fund (Rs in Lakhs) Return on Year Profit After Tax Net worth Equity funds (%) 2003-2004 578.56 3780.86 15.3 2004-2005 585.84 4193.33 13.97 2005-2006 741.66 4738.72 15.65ANALYSIS- The Return on Equity Ratio of the VST TILLERS TRACTORS LTDfor the Year 2003-2004 was 15.3%, for the year 2004-2005 was 13.9%, andfor the year 2005-2006 was 15.65%.INFERENCE- The Return on Equity Ratio shows the profit percentage of the Equityshareholders. The investors favor higher Return on Equity Ratio. The Returnon Equity Ratio of the VST TILLERS TRACTORS LTD for the Year 2005-2006 was 15.65%, which is higher when compared to the other two years2003-2004, 2004-2005.LORVEN EDUCATIONAL CENTRE 75
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-13Graph Showing the Return on Equity funds Ratio for the years2003-2004 to 2005-2006 Return on Equity funds Ratio 16 15.5 15 Ratios 14.5 15.65 15.3 14 13.5 13.97 13 2003-2004 2004-2005 2005-2006 years . TABLE-14LORVEN EDUCATIONAL CENTRE 76
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing Earnings Per Share Ratio of the VST TILLERSTRACTORS LTD for the Years 2003-2004 to 2005-2006 Net Profit After Tax Earnings Per Share = Number of Equity Shares (In Rs) Net Profit After No of Equity Earnings Per Year tax Shares Share Ratio (In Rs) 2003-2004 57855631 5759685 10.04 2004-2005 58583878 5759685 10.17 2005-2006 74166443 5759685 12.88ANALYSIS The Earnings per Share Ratio of the VST TILLERS TRACTORSLTD for the Year 2003-2004 was 10.04 Rs, for the year 2004-2005 was10.17 Rs, for the year 2005-2006 12.88 Rs.INFERENCE- This Ratio measures the Profitability in terms of the Earnings pershare. The earnings per share of the VST TILLERS TRACTORS LTD in theyear 2005-2006 was 12.88 which is higher than the other two years 2003-2004, 2004-2005.LORVEN EDUCATIONAL CENTRE 77
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-14Graph Showing the Earnings per Share Ratio for the years2003-2004 to2005-2006 Earnings Per Share 14 12 10 8 6 12.88 10.04 10.17 4 2 0 2003-2004 2004-2005 2005-2006 TABLE-15LORVEN EDUCATIONAL CENTRE 78
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDTable showing Return on Assets Ratio of the VST TILLERSTRACTORS LTD for the Years 2003-2004 to 2005-2006 Net Profit after TaxReturn on Assets = Total Assets (Rs in Lakhs) Net Profit after Total Assets Return on Year Assets Ratio Tax (%) 2003-2004 578.56 7099.89 8.15 2004-2005 585.84 8020.97 7.30 2005-2006 741.66 8116.95 9.14ANALYSIS- Return on Assets of the VST TILLERS TRACTORS LTD for theYear 2003-2004 was 8.15%, for the Year 2004-2005 was 7.30%, and for theyear 2005-2006 was 9.14%.INFERENCES- The Return on Assets Ratio of the VST TILLERS TRACTORS LTDfor the year 2005-2006 was 9.14% which much higher when compared toother two year 2003-2004, 2004-2005.LORVEN EDUCATIONAL CENTRE 79
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD GRAPH-15Graph Showing the Return on Assets Ratio for the years 2003-2004 to2005-2006 Return on Assets Ratio 10 8 6 9.14 4 8.15 7.3 2 0 2003-2004 2004-2005 2005-2006 YearsSUMMARY OF FINDINGS AND CONCLUSION FINDINGSLORVEN EDUCATIONAL CENTRE 80
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 1. The Current Ratio of the company has fall down in year 2004-2005 compare to previous year 2003-2004 and proceeding year 2005-2006. This indicates that the company has ability to pay its current liabilities without getting into any financial commitments. 2. The quick ratio of the company has decreased when compare to previous year 2003-04 and 2004-2005. This shows that the company meets this emergence requirement through most liquid assets. 3. The liquid assets to the total investment ratio as gradually decreased from 2005-2006 compare to previous year, 2003-2004 and 2004-2005. This indicates that the company’s investors earn less than investments. 4. The debt-equity ratio of the company has decreased from the year to year. The net worth increased for the year 2004-2005 which compare to previous year of the fixed assets of the company assets has decreased gradually for the year to year. This shows the company maximum utilized their fixed assets. They do not provide any funds to the purchase fixed assets. 5. The debt-equity ratio of the company has decreased from the year to year. It indicates that debt has increased as proportion increased to the shareholder funds. 6. The net profit of the company has better for the year 2005-2006 and 2003-2004. The net profit for the year 2004-2005 is very low compare to 2003-2004 and 2005-2006. This indicates the company sales have been increased. 7. The return on shareholders funds ratio the company has increased from the year to year except 2004-2005. It shows more the profit shareholders ratio and return also high. It shows the company has in better condition to pay the return on investment of their shareholders.LORVEN EDUCATIONAL CENTRE 81
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 8. The fixed assets ratio of the company has decreased for the year 2004- 2005, when compare to 2003-2004 and 2005-2006. The fixed assets of the company as used fully and efficiently. 9. Earning per share of the company has increased from year to year. It indicates that dividend of the shareholders will be secured. 10.The liquid assets to net worth ratio of the company has increased for the year 2004-2005 when compare to year 2003-2004 and 2005-2006. The company has not better in net worth position. But sales have increases in good condition. REOMMENDATIONLORVEN EDUCATIONAL CENTRE 82
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD 1. The company should maintain an adequate cash and bank balance in order to meet the emergence requirements. 2. The current ratio of the company has been increased from the last 2year. The current ratio is more the standard levels but the current year has maintained standard level, it has to be maintained in the future also. 3. The sales of the company go on increasing, better to increase to sales for more profit in future. 4. Net profit of the company is high when compare to last year. Better to decrease the unnecessary expenses of the company to increase the profit. 5. The working capital of the company has maintained the standard levels. It must to maintain the same for future years. 6. The loan of the company decrease from the year to year. It shows that the profit was not distributed to the interest, better it must maintain the same. 7. For the smooth of operation of company is must make sure that it is made liquid in the coming year, because right now a lot rests on the operation of the business. CONCLUSIONLORVEN EDUCATIONAL CENTRE 83
    • ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTDThe company has been doing their activity effectively and efficiently. Thecompany has sound long-term solvency. The company can rise fromfinancial crush it is in right now by taking proper steps to increase its salesof production. Already knows there is a thin between profitability andliquidity and the company previous made a profit has low and current yearhas slide increase in profit. This shows the company in a good position andthe management of the company has much as better.LORVEN EDUCATIONAL CENTRE 84