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    Manda project1 Manda project1 Document Transcript

    • A PROJECT REPORT ONFINANCIAL ANALYSIS OF RATNAMANI TECHNO-CAST LTD SUBMMITED FORPARTIAL FULFILLEMENT OF THE REQURMENT OF THE TWO YEAR FULL TIME MASTER OF BUSINESS ADMINISTRATION, (M.B.A) SUBMMITED BY MANDAKINI.P.PATEL M.B.A. ACADEMIC YEAR 2010-12 SUBMMITED TO GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD. VJKM INSTITUTE OF MANAGEMENT& COMPUTER STUDIES,VADU. Affiliated With Gujarat Technological University, Ahmedabad. Ta-Kadi, Dist-Mehsana, Pin: 382705(North Gujarat). VJKM Institute of management & computer studies vadu. Page 1
    • PREFACE MBA. is a Two years Degree Course namely a degree in “master ofBusiness Administration”. Candidate from the degree of M.B.A. need to have passed thegraduation conducted by the examination of any university at examine body recognizes asequivalent. Now a day‟s management has got a much wider scope among the manyother different fields. Gujarat state is an industrially developed state. To fulfill this gap at practical knowledge university expects eachstudent to visit a unit where he or she spends some hours. In MBA. each student has to visitany industry and study any one department at that industry. Having full information and details at any one department the studentsmaterialized them in a report, which is of his or her visit. I am also among one of the luckiest student who get an opportunity. Ivisited “Ratnamani Techno-cast ltd” at Chhatral‟‟ in this year. The result of my visit hastaken the shape of a report. VJKM Institute of management & computer studies vadu. Page 2
    • ACKOWLEDGEMENT It would really difficult for me to complete the marketing research projectwithout getting co-operation of certain people. In other words there are so many externalthankful who directly or indirectly helped me in my marketing research project. I as specially thankful to my director DR, B.S.Agrawal sir to give such kind of opportunities to get practical knowledge about marketing research. I would like to express my gratitude to Mr. Chanduji.P.Thakor. Our Headof department who gave me a good opportunity to learn about industrial environment duringindustrial visit. The task would have been difficult for me without guidance of our Professor. Ms. Hetal Joshi We are very thankful to the Manager of Ratnamani Techno-cast ltd. Mr.Ashokbhai who gave me permission to do this Marketing research report in their organizationand helped me by giving all required information. I am also thankful to my friends whohelped me and guided me regarding the source of information related to particular industries.In other words there are so many external thankful who directly or indirectly helped me in mymarketing research project. VJKM Institute of management & computer studies vadu. Page 3
    • EXECUTIVE SUMMARY This is epitomized in Corporate Philosophy: "Excel in whatever you do" and"Prosperity through performance”. This report is based on industrial visit at RATNAMANI TECHNO CAST LTD,Chhatral. Ratnamani Techno cast Ltd., now popularly known as "RATNAMANI", came intoexistence in the year 1985. The genesis of RATNAMANIs birth and growth is:ACCEPTING CHALLENGES. The planned growth has transformed two separate units-onefor welded ss pipes & tubes and the other for seamless SS pipes & tubes- into a multi-product, multi-location public company. RATNAMANI has carved a niche as the preferredsingle-point source for a wide range of casting products like valves and pumps. RATNAMANIs Quality Management System conforms to ISO9001:2000, PED,ADW2, EXPORT HOUSE, BOILER, API5L/2B. More over products undergo variousstringent inspection and testing stages, at the up-to- date in-house facilities, such asHydrostatic, tensile and various other Mechanical Tests, Non Destructive Tests, Chemical &Corrosion Tests before they are released for the customers. This assures high value quality ofProducts.The prices are very competitive in the overseas markets as well and as a resultRATNAMANI is exporting its products to customers in U.S.A., Germany, France, Vietnam,UAE, Kuwait, Switzerland, Netherlands, Malaysia, South Africa, Israel, UK, Indonesia,South Korea, Belgium, Iran, Egypt, Australia. The human resource base of RATNAMANI is dedicated and motivated teamemployees, who are well qualified and trained to ensure quality and timely delivery to meetthe requirements of the Customers. RATNAMANIs goal is to reach sales turnover of Rs.5000 million by 2006-07,by becoming a GLOBAL PLAYER who is committed tosatisfaction of stakeholders. VJKM Institute of management & computer studies vadu. Page 4
    • CONTENTSR No. Particulars Page No. 2 PREFACE 3 ACKNOWLEDGEMENT 4 EXECUTIVE SUMMARY 81 HISTORY OF METAL CASTING INDUSTRY 112 INTRODUCTION ABOUT RTCL 13 2.1 Name & Addresses 15 2.2 Board of Director 17 2.3 Products 20 2.4 Organization Chart 21 2.5 Quality Assurance 22 2.6 Quality Policy 24 2.7 Manufacturing Process 263 FINANCIAL DEPARTMENT 28 3.1 Financial Goal of The Company 29 3.2 Objectives of the financial Analysis 32 3.3 Sources Of Information 34 3.4 Techniques of Financial Statement Analysis 35 3.5 Financial Statement 36 3.6 Common Size Statement 424 Trend Analysis 465 Ratio Analysis VJKM Institute of management & computer studies vadu. Page 5
    • 656 Du Pont analysis 687 Problems in Financial Statement Analysis 708 Findings & Suggestion 739 Limitations of the Analysis 7410 Conclusion 7511 Bibliography 7612 Annexure VJKM Institute of management & computer studies vadu. Page 6
    • VJKM Institute of management & computer studies vadu. Page 7
    • History of Metal Casting The oldest preserved cast parts - weapons and cult objects made of copper - originate from the Middle East and India. They date back to the period around 3.000 BC. It is possible that metal casting technology, using moulds originated in the Middle East. However, there are suggestions that this process may have been developed in India and China. The melting ovens of the early Iron Age can partly be traced back to ceramic burning ovens. The model and mould building was mastered very well from the beginning. Lost moulds made of loam and clay, wax models, single piece-work as well as permanent moulds made of stone and metal for the serial production of casting parts were already used. The production of hollow spaces by using cores, has already been proved by the oldest casting parts discovered.First machines were developed for " line-o-type " printing using Lead alloys.Die casting machines for engineered parts was developed in USA by Doehler. Patented in 1905.First machines were hand operated, often using compressed air directly on the metal, lead or zinc.Modern machines use hydraulics to develop high pressures (several thousand psi ) & very fast filltimes. VJKM Institute of management & computer studies vadu. Page 8
    • Cold chamber machines were developed for high melting point alloys Al, Mg, Brass, Stainless steel & Uranium. Shortly after the dark ages in Europe, the industrious sculptor and goldsmith began to make use of the lost wax method of casting. He learned this process from the writings of the monk Theophilus Presbyter (circa 1100) whose Schedula Divers arum Artium is the earliest known foundry text. In Cellinis autobiography, considered to be one of the classics of literature, he describes in great detail the casting of his famous Perseus and the Head of Medusa. This three and a half ton statue was completed in 1554 and was unveiled at the Loggia dei Lanzi in Florence, Italy, where it stands to this day. During World War II, with urgent military demands overtaxing the machine tool industry, the art of investment casting provided a shortcut for producing near net shape precision parts and allowed the use of specialized alloys which could not be readily shaped by alternative methods. The investment casting process was found practical for many wartime needs--and during the postwar period it expanded into many commercial and industrial applications where complex metal parts were needed. It was in this period that the Hitchiner Manufacturing Company was founded at the Amoskeag Mill yards of Manchester, NH. The solid mold technique was first utilized because a technology to successfully remove the wax patterns from a shell without causing it to collapse, crack or burst had not yet been devised. In the solid mold technique, a wax was placed in a steel casing and surrounded by a setting slurry. The drawbacks of the solid mold technique were extremely long pre-heat, size limitations and poor dimensional tolerances. The first successful shell technology was the Metal cast Process, which used solidified mercury as a pattern material. Mercury patterns were very heavy but extremely VJKM Institute of management & computer studies vadu. Page 9
    • accurate. This was a very difficult process as all pattern production and shell building had tobe done at temperatures below minus 39 degrees Celsius--the melting temperature ofmercury! This process is no longer used due to high costs and the health hazards involved inhandling this toxic element.Over 4,000 years ago, between the Tigrus and Euphrates Rivers in a land known asMesopotamia, ancient artisans produced idols and ornaments using natural beeswax forpatterns, clay for molds and manually operated bellows for stoking furnaces. Today,precision components for spacecraft and jet engines are investment cast using the latestadvances in computer technology, robotics and counter gravity casting techniques VJKM Institute of management & computer studies vadu. Page 10
    • INTRODUCTION OF COMPANY RATNAMANI TECHNO CASTS LTD. (RTCL) is born to a family ofreputed industrial pedigree – RATNAMANI Metal & Tubes Ltd. RTCL is the establish onthe year of the 2001. RTCL is one of the most reputed manufacturers of Stainless Steel Tubes& Pipes and Carbon Steel Pipes. RTCL manufactures Precision Investment Castings through “Lost WaxProcess”. RTCL is equipped with in-house facilities from Design and Manufacturing of Dies/ Tools and Castings, all under one roof. We develop and manufacture castings of specifiedquality level as per customer material specification, drawing, design and technicalrequirements The plant is geared to manufacture investment castings, from few grams to60 Kgs. single piece weight in various grades Carbon Steel, Low Alloy Steel, High AlloySteel, Stainless Steel, Duplex Stainless Steel, Precipitation Hardening Steel; Nickel & Cobaltbase alloys etc We cater to both indigenous and export requirements for various Industries /OEM‟s like Pumps & Valve manufacturers, Automotive, Defense, General Engineering,Aerospace application, Textile, Pipe Fittings, Architectural & Decorative Fittings, Chemicaland Food Processing. We export our castings to countries like USA, U.K., Italy,Switzerland, France, Norway etc. RATNAMANI has carved a niche as the preferred single-point source for a wide range of casting Products. RATNAMANIs Quality Management System conforms to ISO9001:2000,PED, ADW2, EXPORT HOUSE, BOILER, API5L/2B. More over products undergo variousstringent inspection and testing stages, at the up-to- date in-house facilities, such asHydrostatic, tensile and various other Mechanical Tests, Non Destructive Tests, Chemical &Corrosion Tests before they are released for the customers. This assures high value quality ofProducts. VJKM Institute of management & computer studies vadu. Page 11
    • The human resource base of RATNAMANI is dedicated and motivated teamemployees, who are well qualified and trained to ensure quality and timely delivery to meetthe requirements of the Customers. RATNAMANIs goal is to reach sales turnover of Rs. 5000 million by 2006-07,bybecoming a GLOBAL PLAYER who is committed to satisfaction of stakeholders.OUR VALUES: Integrity: Honesty in every action. Commitment: Deliver on the promise. Passion: Energized action Seamlessness: Boundary in letter and spirit Speed: One step ahead always. VJKM Institute of management & computer studies vadu. Page 12
    • NAME OF ENTERPRISE: RATNAMANI TECHNO CAST LIMITEDAddress:- Sstp Division:- Ratnamani Techno Cast Limited Survey No: 769, Ahmadabad – Mehsana Highway Near Chhatral – 382729, Gujarat (India) Phone - +91-2764-232254 / 232263 / 233763; Sp Division:- Plot No: 3306 To 3309 GIDC Estate, Chhatral Phase IV Ahmadabad – Mehsana Highway, Chhatral – 382715, Gujarat (India) Phone - +91-2764-232234 / 233919 / 232409; Mumbai Office:- No. 9 Lion House, Dr. Deshmukh Lale, Nanubhai Desai Road, Mumbai – 400 004 India Phone: +91-22-2380 2591 / 2 / 3 / 4 Regd. & sales office:- 17, ramugat society, Naranpura char Rasta, Ahmadabad – 380013, Gujarat (India) VJKM Institute of management & computer studies vadu. Page 13
    • INFORMATION ABOUT COMPANY Ratnamani Techno Cast limited. As the name it suggests that it is a private limitedcompany. It lies in large scale industry. It was incorporated under company act 1956. Theorganization manufacturing department is located at chhatral GIDC Gujarat (India) andregistered office of company is situated at ramugat society, Naranpura char Rasta,Ahmadabad – 380013, Gujarat (India). The firm was established with the objective to carry on business as buyer, seller,supplier, agent, exporter, importer, manufacturers, developer, distributor, in all kind and typesof pares material and articles including of metals and tubes. The way of performance at Ratnamani is by struggle, trial & error and learning byexperience. They struggled initially to raise financial resources, but have now managed thesame by way of equity of director and share holder. The firm manufactures flexible laminates product, which are totally machinerymade. They are produced according to the specification and requirement of customer thuswith the increase in volume of business. It because necessary for the company to performmarketing externally. VJKM Institute of management & computer studies vadu. Page 14
    • BOARD OF DIRECTORS: Our Directors are experts in the diversified fields of engineering, humanresource development, business strategy, finance and economics. They review all informationrelating to significant business decisions, including strategic and regulatory matters. Everymember of the board, including the non-executive directors, has full access to anyinformation related to the company.Mr. Prakash Sanghvi – (Chairman Managing Director) Mr. Prakash Sanghvi has vast business experience in the metal industry. He leads the core team that is driving the companys growth and transformation from a company predominantly selling Tubes & Pipes to achieving its vision of becoming a technology-led global engineering company. Mr. Sanghvi has played a vital role in the companys evolution. He has been the architect of the companys projects and expansion strategy. He has helped create new platforms of growth for Ratnamani – increasing shareholder and societal value while decreasing the companys environmental footprint.Mr. Jayanti Sanghvi – (Whole Time Director) Mr. Jayanti Sanghvi is one of the key members of the core team responsible for creation and setting up of Development Centre, Resources, Staffing & Training, Facilities & Infrastructure Management and Administration. Mr. Jayanti Sanghvi is constantly focused on process improvements for enhancing productivity VJKM Institute of management & computer studies vadu. Page 15
    • Mr. Shanti Sanghvi – (Whole Time Director) Mr. Shanti Sanghvi is a thought leader on marketing strategy and customer related issues in India, helping organization develop marketing strategies. He is stationed at Mumbai handling marketing activities.Mr. D C Anjaria – (Director) Mr. Anjaria is an independent professional Director on the Board of the company having stupendous experience in the field of international finance and corporate finance. Mr. Anjaria is an IIM – MBA, and has worked with Citibank and UTI.Dr. Vinodkumar Agrawal – (Additional Director) He is an independent non-Executive Director on the Board of the Company..Bankers Dena Bank Punjab National Bank State Bank of India IDBI Bank LimitedAuditor M/S Mehta Lodha & Co. (Chartered accountants) VJKM Institute of management & computer studies vadu. Page 16
    • PRODUCTS:Production / operation management is the process, which combine and transforms variousresources used in production / operation subsystem of the organization into value addedproduct / services in a controlled manner as per the policies of the organization.Maximum Linear Dimension up to 450 MM Maximum weight up to 60 Kgs VJKM Institute of management & computer studies vadu. Page 17
    • Application: Pumps & Valves Components Automotive Parts Defense General Engineering Aerospace Textile Machinery Chemical and Food Processing Pipe fittings Architecture & Decorative FittingsStandard Normal Tolerances Normal linear +0.10mm to +/25mm for . +/- 0.10 mm for each addition of25 mm thereafter Premium tolerances require additional operations. We can achieve veryclose tolerances on functionally important dimensions. The tolerance achieved will depend onthe alloy and configuration of the castings. The same can be determined in consultation withour Engineering Wing. RTCL manufactures Precision Investment Castings through “Lost WaxProcess”. RTCL is equipped with in-house facilities from Design and Manufacturing of Dies/ Tools and Castings, all under one roof. We develop and manufacture castings of specifiedquality level as per customer material specification, drawing, design and technicalrequirements The plant is geared to manufacture investment castings, from few gramsto 60 Kgs. single piece weight in various grades Carbon Steel, Low Alloy Steel, High Alloy VJKM Institute of management & computer studies vadu. Page 18
    • Steel, Stainless Steel, Duplex Stainless Steel, Precipitation Hardening Steel; Nickel & Cobaltbase alloys etc. We cater to both indigenous and export requirements for variousIndustries / OEM‟s like Pumps & Valve manufacturers, Automotive, Defense, GeneralEngineering, Aerospace application, Textile, Pipe Fittings, Architectural & DecorativeFittings, Chemical and Food Processing.We export our castings to countries like USA, U.K., Italy, Switzerland, France, Norway etc. VJKM Institute of management & computer studies vadu. Page 19
    • ORGANISATION CHART Managing director Production manager Accountant clerkAssistant manager Supervisor Packing supervisor Worker VJKM Institute of management & computer studies vadu. Page 20
    • QUALITY ASSUARANCEOur goal is to not only to develop, manufacture and deliver castings of specified quality butalso timely delivery of the castings. Our Quality Management System is accredited to ISO9001:2000, ADW 0 and PED under RWTUV.Chemical Analysis:“BAIRD” make Direct Reading Multi Matrix Spark Emission Spectrometer for instantanalysis of metal composition and melt control back up with complete facilities for WetAnalysis Testing for Ferrous & Non Ferrous base alloys.Mechanical Testing:Universal Testing Machine, Brinell / Brinell & Rockwell Hardness Testers to measuremechanical properties of castings viz. hardness, tensile strength, yield strength, elongation,impact test, bend test.Metallographic Examination: Biotech“Microscope for micro-structure analysisIntergranular Corrosion Tests : As per ASTM A262 practice A, B, C, EMeasuring Instruments: Micrometers, Height Gauges, Digital Verniers, Surface roughnessmeasurement gauge. VJKM Institute of management & computer studies vadu. Page 21
    • Non Destructive Testing: Magnetic Particle Inspection, Dye Penetrant Examination,Ultrasonic Testing and Radiography facilityCORPORATE AFFAIRSRatnamani‟s corporate office is strategically housed in its own modern building atAhmedabad, commercial capital of Gujarat which is one of the most industrialized states ofIndia. Spread over an area of 655 square meter and has an Infrastructure for 60 Professionals Training rooms and conferencing facilities Canteen Facilities Internet - 512 KBPS Inter Unit Connectivity through RFID 15 voice lines The corporate development, finance & accounting, marketing, purchase,administration and company affairs functions operate from the corporate officeQuality PolicyRatnamani aims to consistency supply product to the satisfaction of customer thoughcontinuous improvement in methods, practices, systems and department of human resource.Awarded ISO 9001 : 2000 under LRQA. Recognition as Export House – Issued by Government of India. AD 2000 – merkblatt W 0 Certification Under RWTUV Pressure Equipment Directive [PED] under LRQA. “Well Known Pipe / Tube Maker” – Indian Boiler Regulations, 1950 License for API 5L and API 2B Monogram. VJKM Institute of management & computer studies vadu. Page 22
    • VJKM Institute of management & computer studies vadu. Page 23
    • Manufacturing ProcessWax SectionEquipped with modern & semi automatic hydraulic system Wax Injection machines tohandleproductionofhighvolumewax.Wax Pattern / Assembly shop is fully air-conditioned for controlled environmentCeramic MoldingCentrally air-conditioned and humidity controlled shell room equipped with set of slurryinvestment drums, sand faller machines to stucco the Wax Assemblies, the de-waxing systemand trays for reclaiming the melted wax.Melting SectionTemperature controlled oil-fired shell / moulds firing & pre-heating furnaces; mostsophisticated High Frequency Induction Melting Furnaces having capacity of 200 kgs, 150kgs, 100 kgs and 50 kgs. These different size crucible furnaces enable us to cater the castingsfor high alloy, cobalt and nickel based alloys. VJKM Institute of management & computer studies vadu. Page 24
    • Heat TreatmentTo undertake Annealing, Normalizing, Stress reliving, Hardening, tempering etc. for all typesof metals & Alloys. Heat Treatment furnaces calibrated as per API 6A having maximumattainable Temperature up to 1200oC and are Equipped with time-temp. cycle recorder.Fettling:- Specially designed Knock Out and Cut-off Equipments are used to clean and cutcastings from the tree. Grinding equipments are provided for accurate stock removal ofcasting in-gates and pneumatic tools for finishing.Reason for selecting the location: For reducing the transportation cost of material. Available of raw material, goods, water, electricity & road facility.The mission of the unit: To earn more foreign exchange. To reduced the transportation cost of material receiving. To providing more employment opportunities. To get easy or current information from central point. To have a good surroundings. To supply quality pipes. To the internationals market in bulk. VJKM Institute of management & computer studies vadu. Page 25
    • VJKM Institute of management & computer studies vadu. Page 26
    • FINANCIAL DEPARTMENT Managing director Financial manager Assistant of financial manager StaffVJKM Institute of management & computer studies vadu. Page 27
    • FINANCIAL GOAL The firm‟s investment and financing decision are unavoidable and continuous. In orderto make them rationally, the firm must have a good. It is generally agreed in theory that thefinancial goal of the firm should be the maximization of owner‟s the shareholder‟s wealth byas reflected in the market value of share. VJKM Institute of management & computer studies vadu. Page 28
    • FINANCIAL ANALYSIS INTRODUCTIONThe primary objective of financial reporting is to provide information to present and potentialinvestors and creditors and other in making rational investment, credit and other decisions.Effective decision making requires evaluation of the past performance of companies and usedby investors, creditors, and professional analysis for analyzing and interpreting theinformation contained in financial statements.Any successful business owner is constantly evaluating the performance of his or hercompany, comparing it with the companys historical figures, with its industry competitors,and even with successful businesses from other industries. To complete a thoroughexamination of your companys effectiveness, however, you need to look at more than justeasily attainable numbers like sales, profits, and total assets. You must be able to readbetween the lines of your financial statements and make the seemingly inconsequentialnumbers accessible and comprehensible.OBJECTIVE OF FINANCIAL STATEMENT ANALYSIS Financial statement analysis is the collective name for the tools and techniques that are intended to provide relevant information to decision-makers. The purpose of financial statement analysis is to assess a company‟s financial health and performance. Financial statement analysis consists of comparisons for the same company over period of time and comparisons of different companies either in the same industry or in different industries. Financial statement analysis enables investors and creditors to evaluate past performance and financial position The starting point in the analysis of a company is to look at the record. Information about past performance is useful in judging future performance. For Example, trends of past sales, earning, cash flow, profit margin, and return on investment provide a basis for evaluating the efficiency of a company‟s performance and aid in assessing its prospects. An assessment of current status will show where the company stands at VJKM Institute of management & computer studies vadu. Page 29
    • present, such as the company‟s inventories, borrowings, and cash position. To a large extent, the expectation of investors and creditors about future performance are shaped by their evaluation of past performance and current position.Predication of future performanceInvestors and creditors use information about the past to assess the prospects of a company.Investors expect an adequate return from the company in the form of dividends and marketprice appreciation. Creditors expect the company to pay interest and repay the principal inaccordance with the terms of lending. Therefore, they are interested in predicting the earningpower and debt-paying ability of the company.For example, it is relatively easy to predict the future performance of electricity companythan that of a company that produces movies. Therefore, investors would be willing for arelatively low return from the Electricity Company, while they would want a higher return inthe form of dividends and market price increases from the Movies Company. Loans to theMovie Company would carry a higher interest rate than loans to the Electricity Company.Past Performance of the Company:- It is common for financial analysis to compare measure of performanceof the company over a period of time. Five or ten year summaries of selected financial dataappear in some annual report. Also, financial track records are cited in company prospectusesand advertisements. A look at the past performance will show broadly whether the companyis improving or declining. Also, a study of past ratios and percentage may assist inextrapolating them.However, fundamental changes in the environment of a company, such as changes ingovernment regulation, changes in competition, and changes in the cost structure resultingfrom technological advances, can make it difficult to project past trends into the future.Changes in accounting methods would also affect comparability of the past figures. Further,comparisons, with the company‟s own past can, at times, create an illusion of growth leadingto a sense of complacency. For example, an annual rise of 10 per cent in company‟s sales VJKM Institute of management & computer studies vadu. Page 30
    • may in itself sound good, but would not be considered adequate if the company‟s competitorsare increases.Industry Standards:-The performance of a company can be compared with that of other companies in the industry.Comparisons with industry standard help overcome the limitations of historical comparisons.For example, if a company has a debt-equity ratio of 2.5:1, while the average debt-equityratio in the industry is 1.5:1, the company can be said to have a higher leverage. Industrycomparisons are difficult for diversified companies that operate in several unrelated lines ofbusiness.For example, Hindustan Lever‟s lines of business include soaps, detergents, personalproducts, and food. Comparing the company‟s performance with a firm that operates in soapsor detergents would be highly misleading. Another problem with industry comparisons is thatcompanies often follow different accounting policies. Inventory valuation methods, usefullife estimates for fixed assets, and revenue recognition practices differ across companies. Yetanother difficulty is the lack of uniformity in financial years. Many companies follow thetwelve-month period ending March 31, while a few use other accounting years. VJKM Institute of management & computer studies vadu. Page 31
    •  SOURCE OF INFORMATION Individual investors and creditors must often depend upon published sources ofinformation about a company. The most common sources of information about listedcompanies are company reports, stock exchange, business periodicals, and informationservices.Company Reports:- Every company publishes an annual report, which contains valuablefinancial and other information about the company. Annual reports are the beginning andending points in obtaining information about individual companies.The typical Indian Company includes the following documents in its annual report:Directors‟ reportFinancial statementsSchedules and notes to the financial statementsAuditor‟s reportIn addition, some companies provide financial highlights and a summary of financialperformance for the past five or ten years. The annual report is sent to the shareholders of thecompany, free of charge. Listed companies are also required to publish a quarterly statementof financial results within one month from the end of the quarter. These statements aretypically not audited unlike the annual financial statements and are published in leadingnewspapers.Stock Exchanges:-Listed companies must file copies of their annual reports, as well as additional documentssuch as a statement of distribution of share ownership and the quarterly statement, with thestock exchanges in which they are listed. The Bombay Stock Exchange (BSE) is the oldestwith it. The National Stock Exchange (NSE) is the other leading stock exchange in India.Both BSE and NSE have number publications giving useful financial and other informationabout companies. Listing agreements require that companies keep stock exchanges promptlyinformed of major developments affecting them, such as change of management, bonus anddividend decisions, strikes, and plant closures. VJKM Institute of management & computer studies vadu. Page 32
    • Business Periodicals:- Business newspaper and magazines are important and, often, timely sourcesof financial and business news. The Economic Times is the oldest and the most widely readfinancial daily in the country. Business Line, Business Standard, and Financial Express arethe other leading financial dailies in India. Financial and business magazines such asBusiness India, Business World and Business Today regularly carry studies of companies andindustries.Information Services:- In recent years, a number of information services have sprung up. PeriodicalCompany and industry studies are brought out by CRISIL and ICRA. These studies containcondensed financial statements of companies as well as other information such asmanagement, foreign collaboration, major competitors, and industry overview. Several usefulstudies of financial ratios are also available, notably the ones published by the Center forMonitoring Indian Economy (CMIE).Internet & intranet: Search engines like Google go a long way in providing useful informationfor such projects. Days have gone when you have to wait for hours to gather informationrelated to any particular topic. Information technology and Internet has brought the globalworld at your fingertip. Local area networks are also key source of information now a day.Increasing interdependence among the various sub units of the business has made LANnetworks a future to consider as a useful source of secondary information.The quality of a company’s earnings may be affected by the following:Accounting methods and estimates used.Extraordinary items.Prior period adjustments. VJKM Institute of management & computer studies vadu. Page 33
    • TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS Very few numbers in financial statements are significant in themselves,but meaning inferences can be drawn from their relationship to other amounts or their changefrom one period to another. The tools of financial statement analysis help in establishingsignificant relationships and changes. The most commonly used analytical techniques are:COMMON SIZE STATEMENTTREND ANALYSISRATIO ANALYSISDU PONT ANALYSIS VJKM Institute of management & computer studies vadu. Page 34
    • VJKM Institute of management & computer studies vadu. Page 35
    • The common size statement is a one type of comparative analysis statement. Here hisparticular statement deals with the all the item of profit & loss account of the company.Here in this particular statement the sales is considered as 100% and than all the item arecompared with sales by assuring sales is 100 than what be the percentage of the other items. Common size statement of Balance sheet as on 31st march 2011 Particular 2010-11 2009-10 2008-09 source of funds shareholder‟s funds 15.68 14.67 13.03 Share capital 49.82 49.69 50.29 Reserve & surplus 10.74 13.00 15.00 Secured loan 9.34 8.27 8.42 Unsecured loan 14.42 14.37 13.26 Deferred tax liability 100 100 100 Total Application of funds 70.26 68.90 65.88 Fixed Assets 2.17 1.62 1.28 Capital W-I-P 0.01 0.01 0.01 Investments 48.01 42.11 34.95 Inventories 15.61 25.38 21.76 Sundry debtors 6.99 5.85 7.01 Cash & bank balance 6.89 6.53 6.40 Loan & advances 77.50 79.87 70.12 total current assets -49.93 -50.39 46.84 total current liabilities 27.57 29.48 23.28 Net current assets VJKM Institute of management & computer studies vadu. Page 36
    • 0.01 0 0.001Miscellaneou Expenditure TOTAL 100 100 100 Liabilities Liabilities 2008-09 Share capital Reserve & surplus Secured loan Unsecured loan Deferred tax liability 13% 13% 9% 15% 50% Interpretation:- In the year of the 2008-09 the company share capital is 13%, reserve and surplus is 50%, secured loan is 15%, unsecured loan is 9%, deferred liabilities is 13%. So that time the company is initially good position in the market. VJKM Institute of management & computer studies vadu. Page 37
    • Liabilities 2009-10 Share capital Reserve & surplus Secured loan Unsecured loan Deferred tax liability 14% 15% 8% 13% 50%  Interpretation:-In the year of the 2009-10 the capital would be very good for the company position .Like theshare capital is 15%, secured loan is 13%, deferred tax liabilities are 14%, reserve and surplusis 50%, unsecured loan is also 8%. So that the company position is very better and alsofinancial strength is very good. Liabilities Liabilities 2010-11 Share capital Reserve & surplus Secured loan Unsecured loan Deferred tax liability 14% 16% 9% 11% 50%  Interpretation: In the year of the 2010-11 the company is more growing because of liabilities. share capital of this year is 16%, secured loan is 11%, differed tax VJKM Institute of management & computer studies vadu. Page 38
    • liabilities are 14%, reserve and surplus is 50%,unsecured loan is 9%. So that the company situation is also good this year. Assets Assets 2008-09 Fixed Assets Capital W-I-P Investments Net current assets Miscellaneou Expenditure 0% 26% 0% 1% 73% Interpretation: In the year of the 2008-09 the company financial strength is very well. Totally fixed assets was 73%, capital in work in progress is 1% , net current assets is 0%, investment was not done the company and miscellaneous expenditure is o% for the company. Assets 2009-10 Fixed Assets Capital W-I-P Investments 0% 29% 0% 69% 2% VJKM Institute of management & computer studies vadu. Page 39
    •  Interpretation:- In the year of the 2009-10 total fixed assets will be the 69%, capital work in progress is 0%, investment will be also Neel and company net current assets will be 29%. Assets Assets-2010-11 Fixed Assets Capital W-I-P Investments Net current assets 0% 28% 0% 70% 2%  Interpretation:- In the year of the 2010-11 the financial position of the company is good. Fixed assets are the70%. Capital in work in progress is 2.17,investment is almost 0, but the net current assets isthe company 28%.company is better position in this year. VJKM Institute of management & computer studies vadu. Page 40
    • Common size statement of the Profit and loss account at the year of the 2011. Particular 2010-11 2009-10 2008-09 net: Income from sales &operation 99.14 98.93 99.17 0.84Generation 1.06 0.82 0.01Other income 0.01 0.01 100Total 100 100Expenditure 66.44Material cost 65.09 65.66Emp. Remuneration Andbenefits 4.31 3.73 4.28Financial expense 1.74 2.21 2.14Other expenses 20.94 21.29 19.63 2.60Depreciation 2.61 3.00Total Expenditure 96.02 -94.93 -94.72 3.98Net profit 6.16 5.28 0.63Less: Income 0.47 0.56Less: Deferred tax liability 1.34 -1.76 -1.30Profit after taxation 2.01 3.94 3.42 Interpretation:- In the common size statement of the profit& loss account the year ending of the 31st march 2011 3.94 the company will be become a financial stable growing position and also continuously growing for the above year. VJKM Institute of management & computer studies vadu. Page 41
    • Trend analysis on the balance sheet Particular 2008-09 2009-10 2010-11source of fundsshareholder’s fundsShare capital 100 124.52 155.78Reserve & surplus 100 109.26 128.27Total owned funds 100 112.40 133.93Loan fundsSecured loan 100 95.82 92.70Unsecured loan 100 108.48 143.59Deferred tax liability 100 119.85 140.84 100Total 110.57 129.48Application of fundsFixed AssetsGross Block 100 105.75 124.14Less: Depreciation 100 107.79 122.82Net block 100 104.58 124.89Capital W-I-P 100 126.54 199.20Investments 100 113.04 117.39Current assets, loan &AdvanceInventories 100 120.48 160.86Sundry debtors 100 116.64 84.01Cash & bank balance 100 83.45 116.78Loan & advances 100 102.07 126.10Current liabilities, andprovisionLiabilities 100 107.02 123.86Provision 100 126.94 158.81Net current assets 100 126.65 138.68MiscellaneousExpenditure 100 0.00 271.43 TOTAL 100 110.57 129.48 VJKM Institute of management & computer studies vadu. Page 42
    • SOURCES OF FUND 140 120 100 129.48 80 100 SOURCES OF FUND 60 40 110.57 20 0 2008-2009 2009-2010 2010-2011 Interpretation:- In the above graph we can see that the sources of funds are increasing in the year of 2009-10and also continuously increase the in 2010-11. APPLICATION OF FUND 140 120 100 80 129.48 APPLICATION OF FUND 60 100 110.57 40 20 0 2008-2009 2009-2010 2010 -2011 Interpretation:- in the above graph shows that the application of will be increasing in the continuously for all the year. So that the company become good financial position. VJKM Institute of management & computer studies vadu. Page 43
    • Trend analysis on the profit & loss accountParticular 2008-09 2009-10 2010-11IncomeSales & income fromOperations 100 116.60 151.48Less: Excise Duty 100 126.33 179.31 100 115.42 148.11Income from powerGeneration 100 112.43 186.46Other income 100 115.75 164.57TOTAL 100 115.40 148.43ExpenditureMaterial cost 100 114.06 143.88Employee‟s RemunerationAnd benefits 100 114.75 126.99Financial expense 100 142.02 186.86Other expenses 100 108.18 149.26Depreciation 100 133.28 147.51 100 113.83 145.17Net profit 100 153.17 227.23Less: Income 100 103.62 109.33Less: Deferred tax liability 100 112.05 192.65Profit after taxation 100 195.87 286.80Balance brought forward 100 115.35 237.33 100 158.63 263.92Profit available forAppropriationAppropriationProposed dividend 100 118.23 147.92Dividend tax 100 123.71 154.72Transfer to general 100 118.83 148.67Reserve 100 122.34 98.31Balance carried forward 100 382.47 390.56 100 158.63 151.11 VJKM Institute of management & computer studies vadu. Page 44
    • Earning per share (in Rs.) 100 194.40 249.57 sales &other income 160 140 120 100 80 148.43 sales &other income 100 115.4 60 40 20 0 2008-2009 2009-2010 2010-2011 Interpretation:- In the year of the the 2008-2009 in the 100, also that will be increase in 2009-2010 will 115.4, and also in the year of the 2010-2011 148.43. so that it will be continuously increase for the year to year. profit after tax 300 250 200 150 286.8 profit after tax 195.87 100 50 100 0 2008-2009 2009-2010 2010-2011 Interpretation: in the year of the 2008-09in the 100, in the 2009-10 in to the that will be increase 195.87, 2010-11 continuously growing 286.8.so that the financial strength will be increase. VJKM Institute of management & computer studies vadu. Page 45
    • VJKM Institute of management & computer studies vadu. Page 46
    • RATIO ANALYSISThe relationship of one item to another expressed in simple mathematical form is known asthe ratio. A company keeps fit by ensuring that among another things, its various financialpropositions are kept healthy. Its business performance can be measured the use of ratio. Aratio is quotient of two numbers. It must be interpreted against some standards. In assessingthe financial stability of firm, a management should apart from profitability, be interested inrelative figures rather than in absolute figures. In fact an analysis of financial statements ispossible only when figures are express as percentages or ratios. There is growing body ofevidence that ratio can be directly helpful as basis for making predication. A ratio is amathematical relationship between two quantities. It is of major important for financialanalysis. It engages qualitative measurement and shows precisely how adequate is one keyitem in relation to another. To evaluate the financial condition and purpose of a firm thefinancial analyst need certain yardsticks. The yardsticks frequently used are ratio or an indexrelating to pieces of financial data to each other. Not only those who manage a company butalso its shareholders and creditors are interested in knowing about the financial position orearning capacity of that concern.ADVANTAGES: I. Lee observed that the process of producing financial ratio is essentially concerned with the identification of the significant accounting data relationships, which give the decision makers insights into the company that is assessed. II. A ratio analysis involves the study of total financial picture. By basing conclusions upon thorough understanding of the important of each ratio, the analyst can recommend and indicate positive action with confidence. III. One of the most fruitful areas for the use of traditional financial ratio seems to be that of predication company failures. IV. Ratio are tool which enables management to analysis business situation and to monitor their performance as well as that of their competitors. V. Ratio analysis helps the management to diagnose the situations, monitor the performance and help plan forward. VJKM Institute of management & computer studies vadu. Page 47
    • VI. There are certain priority ratios for chief executives. These are related to key areas, which are common to nearly all businesses and with which top management is seriously concerned. These priority ratios enable the chief executive to understand the relationship between his organization, at one end, and the market, investors, suppliers and employees. He is also in a position to watch how well is the organization using its assets and how well it is providing for the future.VII. There are ratios which help the marketing manager, the purchasing manager, the financial manager and other representing the middle management to know the what positions are like how to make a way in typical situations, from time to time. VJKM Institute of management & computer studies vadu. Page 48
    • Liquidity Ratio:s This ratio measures the firm‟s ability to meet current obligation. A firm ensures that itdoes not surer from lack of liquidity and also does not have excess liquidity. The failure of aco. to meet its obligation due to lack of sufficient liquidity will result in a poor creditworthiness loss of creditor‟s confidence or even in legal tangle resulting in the closure of thecompany.Current ratio: - PARTICULARS 2008-09 2009-2010 2010 -2011 CURRENT ASSETS 4300.75 4898.81 5566.39 CURRENT LIABILITY 2872.95 3090.55 3586.31 CURRENT RATIO 1.49 1.59 1.55 1.6 1.58 1.56 1.54 1.59 1.55 1.52 1.5 1.48 1.49 1.46 1.44 2008-2009 2009-2010 2010-2011 Interpretation: This current ratio measures the firms ability to meet it current obligation. Generally 2:1 ratio is preferable here the current ratio is high because of high current that represent the first high ability to meet it‟s current obligation. In year 2008-09 was 1.49, 2009-2010 and 2010-2011 are 1.59 and 1.55 respectively. VJKM Institute of management & computer studies vadu. Page 49
    • Quick ratio PARTICULARS 2008-2009 2009-2010 2010-2011CURRENT ASSETS 2157.21 2316.18 2118.33CURRENT LIABILITY 2872.95 3090.55 3586.31CURRENT RATIO 0.75 0.75 0.59 Ratio 0.75 0.75 0.8 0.7 0.59 0.6 0.5 0.4 Ratio 0.3 0.2 0.1 0 2008-2009 2009-2010 2010-2011 Interpretation: Quick ratio represents the company ability to meet its immediate obligation. Here the ratio is whole year the ratio excludes the inventory and bank over draft. Here the ratio the year 2008-09, 2009-2010 and 2010-2011 are 0.75, 0.59 and 0.55 respectively. VJKM Institute of management & computer studies vadu. Page 50
    • Net working capital ratio Net working capital means the different between current assets & current liabilities: excluding short term bank borrowing is called net working capital or are as firms liquidity.Net Working Capital: - Current Assets – Current LiabilitiesNet Assets: - Fixed Assets + Current Assets – Current Liabilities PARTICULARS 2008-2009 2009-2010 2010-2011 1427.8 1808.26 1980.08 5547.6 6133.18 7182.60CURRENT RATIO 0.26 0.29 0.28 Ratio 0.29 0.29 0.28 0.28 0.27 0.26 Ratio 0.26 0.25 0.24 2008-2009 2009-2010 2010-2011 Interpretation:- The ratio shows the proportion of the working capital in net assets. If the ratio is high than the more proportion of working capital in total assets. If the ratio is for the higher than the working capital remain idle and the ratio is lower than the it is bad for the company. Here the ratio for year 2008-09, 2009-2010 and 2010-2011 are0.26, 0.29 and 0.28 respectively. VJKM Institute of management & computer studies vadu. Page 51
    • Leverage Ratio To judge the long-term financial position of the firm financial leverage of capital structure ratio are calculated. The process of magnify the share holder return through the use of debt is called “Financial leverage” or “Financial gearing” or “Trading on equity”. Leverage ratio are calculates of measure the financial risk and the firm‟s ability if using debts. Debts equity ratio: TOTAL DEBTS NET WORTHTotal Debts = Secured Loan + unsecured loan + Sundry CreditorNet worth = Share Capital + Reserve & Surplus PARTICULARS 2008-2009 2009-2010 2010-2011TOTAL DEBT 2434.24 2861.20 2563.74NET WORTH 3512.28 3947.66 4704.12DEBT EQUITY RATIO 0.69 0.72 0.54 Ratio 0.8 0.7 0.6 0.72 0.69 0.5 0.4 0.54 Ratio 0.3 0.2 0.1 0 2008-2009 2009-2010 2010-2011 VJKM Institute of management & computer studies vadu. Page 52
    •  Interpretation:- The debt equity ratio describes lenders contribution for each rupee of the owner‟s contribution. Here the debts equity ratio for the year 2008-2009, 2009- 2010 and 2010-2011 are 0.69, 0.72 and 0.54 respectively. Debts ratioThe some type of debts may be used analysis the large term solvency of a firm. The totaldebt will include the short term and long term borrowing from financial justitution,debenture, differed payment agreement for laying capital equipment bank borrowingpublic deposit and other interest-bearing loan. Total debts Debts ratio = Net assets PARTICULARS 2008-2009 2009-2010 2010-2011TOTAL DEBT 2434.24 2861.2 2563.74NET ASSETS 5547.19 6133.18 7182.60DEBTS RATIO 0.44 0.47 0.36 Ratio 0.5 0.4 0.3 0.44 0.47 Ratio 0.2 0.36 0.1 0 2008-2009 2009-2010 2010-2011 VJKM Institute of management & computer studies vadu. Page 53
    •  Interpretation:- Here by looking this figures debts ratio. We that there is gradual change in the level of propriety funds rashers than vendors contribution on year 2008- 2009, 2009-2010 and 2010-2011 the debts ratio of 0.44, 0.47 and 0.36 respectively. Activity ratio The activities ratio are employed to evaluate the efficiency with the firm manager utilize its assets. Their ratio are also called “Term over ratio” the reason is because they indicate the opened with which assets are counter or turn over into sales. Thus this ratio shows the relationship between share assets. Sales Net assets turn ratio = Net assets PARTICULARS 2008-2009 2009-2010 2010-2011SALES 11437.09 13336.07 17325.35NET ASSETS 5547.19 6133.18 7182.60NET ASSETS TURN OVER 2.06 2.17 2.41RATIO Ratio 2.5 2.4 2.3 2.2 Ratio 2.1 2 1.9 1.8 2008-2009 2009-2010 2010-2011 VJKM Institute of management & computer studies vadu. Page 54
    • Interpretation:- Net assets turn over measures the company ability of sales for a given level of assets. A firm‟s ability to produce a large volume of sales for a given amount of net assets is the most important aspects of its operating performance. Here this ratio is high in year2008-2009 i.e.2.06 2009-2010 i.e. 2.17 and in year 2010-2011 i.e. 2.41 respectively. Total assets turn over ratio Total assets turn over ratio is computed on the total assets turn over in addition to or instead of assets turn over. This ratio shows the firm‟s ability in generation sales from all financial resources committed total assets. SalesTotal assets turn over ratio = Total assetsTotal assets = Current assets + Fixed assets PARTICULARS 2008-2009 2009-2010 2010-2011SALES 11437.09 11336.07 17325.35TOTAL ASSETS 8419.7 9223.73 10768.91TOTAL ASSETS 1.36 1.45 1.61TURNOVER RATIO VJKM Institute of management & computer studies vadu. Page 55
    • Ratio 1.65 1.6 1.55 1.5 1.45 Ratio 1.4 1.35 1.3 1.25 1.2 2008-2009 2009-2010 2010-2011 Interpretation:- The ratio indicated the relationship between sales & total assets. This ratio that how much sales in generated by company with given of level of total assets. This ratio for year of 2008-2009, 2009-2010 and 2010-2011 are 1.36, 1.45 and 1.61 respectively. Fixed assets turn over ratio The fixed assets turn over is established relationship between company‟s fixed assets with its sales Sales Fixed assets turnover ratio= Fixed Assets PARTICULARS 2008-2009 2009-2010 2010-2011SALES 11437.09 13336.07 17325.35FIXED ASSETS 4118.95 4324.92 5202.52FIXED ASSETS TURNOVER 2.77 3.08 3.33RATIO VJKM Institute of management & computer studies vadu. Page 56
    • Ratio 3.5 3 2.5 2 Ratio 1.5 1 0.5 0 2008-2009 2009-2010 2010-2011 Interpretation:- The fixed assets turn over shows the sales of accompany for a given level of fixed assets means. How much a sale generated by a company has a good performance. The ratio for year 2008-2009, 2009-2010 and 2010-2011 are 2.77, 3.08 and 3.33 respectively. Debtors turn over ratio Sales Fixed assets turn over ratio = Average debtors Opening stock + Closing stock Average DEBTORS 2 PARTICULARS 2008- 2009-2010 2010-2011 2009SALES 11437.09 13336.07 17325.35AVERAGE DEBTORS 1071.77 1466.79 2376.32FIXED ASSETS TURNOVER RATIO 10.67 9.09 7.29 VJKM Institute of management & computer studies vadu. Page 57
    • Ratio 7.29 10.67 2008-2009 2009-2010 2010-2011 9.09 Interpretation:- Debtors turn over indicator the number of times debtors turn over each year. Debtor‟s turn over is more than more efficient is the management of credit by company. In year 2009-2010, the ratio is more i.e. 9.09 times so the efficiency of management is more in credit management by this company generally this ratio is high in all other year. Current assets turn over ratio The current assets turn over means the relationship firm‟s current assets with the sales Sales Current assets turn over ratio = Current assets PARTICULARS 2008-2009 2009-2010 2010-2011SALES 11437.09 13336.07 17325.35CURRENT ASSETS 4300.75 4898.81 5566.39CURRENT ASSETS 2.65 2.72 3.11TURNOVER RATIO VJKM Institute of management & computer studies vadu. Page 58
    • Ratio 3.2 3 2.8 2.6 Ratio 2.4 2008-2009 2009-2010 2010-2011 Interpretation:- Here by looking the graph of current assets turn over ratio by finding that there is a working or having some sort of increasing decreasing tired in the graph which may clear that the current assets of firm are when increase than sales deviate or when sales increase that current assets decreases. In the above shows the graph in the year 2008-2009 ratio was 2.65, 2009-2010 in the ratio is the 2.72 and also the year 2010-2011 in the ratio is 3.11. The current assets turn over ratio of any firm shows the relationship between the company sales with its. Current assets. Here by looking the figures of current assets turn over ratio we find that there is a continuity of ratio, which may the positive impact of company‟s sales or the maintaining of the company‟s current assets as what the company is required. Profitability ratioin simple language profit means a different between revenues & expenses over a period oftime profit is an ultimate out of company. no future if it is fails to make sufficient profits.Generally two types of profitability ratio.Profitability in relation to sales.Profitability in relation to investment. VJKM Institute of management & computer studies vadu. Page 59
    • Gross profit margin ratio The gross profit margin ratio of firm is the ratio of company gross profit divided by sales. Gross profit = 100 SalesGross profit = Sales – Cost of good soldCost of good sold = opening stock + purchase +purchase Exp – Closing stock PARTICULARS 2008-2009 2009-2010 2010-2011GROSS PROFIT 4460.46 6134.59 9182.64SALES 11437.09 13336.07 17325.75GROSS PROFIT MARGIN RATIO 39 46 53 VJKM Institute of management & computer studies vadu. Page 60
    • Gross Profit Margin Ratio 60 50 40 30 gross profit margin ratio 20 10 0 2008-2009 2009-2010 2010-2011Interpretation:- The gross profit margin ratio reflect the efficiency with whichmanagement product each unit of products. If the ratio is high the management ismore efficiency the low gross profit margin ratio indicates the lower cost of goodssold due to inability of management. In purchasing a raw material and inefficient ofutilization. Gross profit margin ratio is the year of the 2008-2009 in 39,2009-2010 in46and also the 2010-2011 in the 53. VJKM Institute of management & computer studies vadu. Page 61
    • Net profit margin ratio The net profit margin ratio is show the company‟s profit position we derived the formula of net profit margin ratio. Profit after tax = 100 Sales PARTICULARS 2008-2009 2009-2010 2010-2011PROFIT AFTER TAX 207.26 405.97 594.53SALES 11437.09 13336.07 17325.35NET PROFIT MARGIN 1.81 3.04 3.43RATIO Ratio 22% 41% 2008-2009 2009-2010 20010-2011 37% Interpretation:- This ratio expresses the companies over all ability of generation each rupees of profit is a sales. It expresses the company‟s ability of manufacturing, administrating and selling the product. The ratio for 2008-2009 is high income VJKM Institute of management & computer studies vadu. Page 62
    • company has a more profit in relation to sales. The ratio is low year 2008-2009 i.e.1.81 so the company‟s has a more expenses in year. So the net profits decreases. Return on equity:-The return on equity means the rate of return on equity share by the holder of the share.The return on equity is calculated to see the profitability of owner‟s investment Profit after tax = 100 NET WORTH PARTICULARS 2008-2009 2009-2010 2010-2011PROFIT AFTER TAX 207.26 405.97 594.53NET WORTH 385.61 611.70 582.71RETURN ON EQUITY 53.74 66.37 102.02 Ratio 120 100 80 60 40 Ratio 20 0 Ratio 2008-2009 2009-2010 2010-2011 VJKM Institute of management & computer studies vadu. Page 63
    • Interpretation:- Return on equity shows the earning of equity shareholders, this shows that how much rate of return shareholder get. Return on equity is higher in all the year. But somewhat high year 2010 -2011 i.e. 102.02 Rate of return on investment = profit after tax Total assets PARTICULARS 2008-2009 2009-2010 2010-2011PROFIT AFTER TAX 207.26 405.97 594.53TOTAL ASSETS 8419.7 9223.73 10768.91RETURN ON INVESTMENT 24.87% 44.63% 55.43% RATIO 55.43 60 44.63 50 40 24.87 30 RATIO 20 10 0 2008-2009 2009-2010 2010-2011 Interpretation:- in the above data shows that the company rate of return will be in the year of the 2008-09 in the 24.87%, 2009-2010in the 44.63%,2010-2011 in the 55.43%. so that theit will become the good position to the company. VJKM Institute of management & computer studies vadu. Page 64
    • DU PONT ANALYSIS: The Du Pont analysis is carried out for the last year, explanation is described by each and every phase. The du Pont company of the U. S. pioneered a system of financial analysis which has relied wide spread reorganization and acceptances. A useful system of which considering important relationship base on information found in financial statement. It has been adopted many firm‟s in some firms or other. The earning power or the 1201 ratio is a central measure of the over all profitability and operational efficiency of a firm. It‟s shows international of the profitability and activity of ratio. It implies that the performance of a firm can be improved either by generation more sales volume per rupee of investment or by increasing the profit margin per rupee of investment or by increasing in the profit margin per rupee of sales. 2008-2009 Du Pont chart RETURN ON INVESTMENT 24.78% PROFIT MARGIN TOTAL SALES TURNOVER × 6.36% 3.89 times EBIT NET SALES 738.40 ÷ 11437.09 FIXED ASSETS 4040.53 NET WORKING CPTL INVESTMENT 1427.8 0.23 SALES OPERATING EXP. 11437.09 9610.84TOTAL FIXED ASSETS ACCUMULATED DEP CURRENT ASSETS CUR. LIB. + PROV. 6357.65 2317.12 4300.75 2872.95 VJKM Institute of management & computer studies vadu. Page 65
    • 2009-10 RETURN ON INVESTMENT 44.63 % × PROFIT MARGIN TOTAL SALES TURNOVER 9.41% 4.74 times EBIT ÷ NET SALES 983.23 13336.07 FIXED ASSETS NET WORKING CPTL INVESTMENT 4225.69 1808.26 0.26 SALES OPERATING EXP. 13336.07 10888.28TOTAL FIXED ASSETS ACCUMULATED DEP CURRENT ASSETS CUR. LIB. + PROV. 6723.21 2497.52 4898.81 3090.55 VJKM Institute of management & computer studies vadu. Page 66
    • 2010-2011 RETURN ON INVESTMENT 55.43% × PROFIT MARGIN TOTAL SALES TURNOVER 13.22 4.19 times EBIT ÷ NET SALES 1342.41 17325.75 NET WORKING CPTL INVESTMENT FIXED ASSETS 1980.08 0.27 5046.31 SALES OPERATING EXP. 17325.35 13945.53TOTAL FIXED ASSETS ACCUMULATED DEP CURRENT ASSETS CUR. LIB. + PROV. 7892.24 2845.93 5566.39 3586.31 VJKM Institute of management & computer studies vadu. Page 67
    • PROBLEMS IN FINANCIAL STATEMENT ANALYSISFinancial statement analysis can be a very useful tool for understanding a firm‟s performanceand condition. However, there are certain problem and issues encountered in such analysis,which call for care, circumspection, and judgment in such an exercise.HEURISTIC AND INTUTIVE CHARACTER :-Most of the ratios found in the traditionalliterature on financial statement analysis have been proposed in a some what heuristic orintuitive fashion. As Horrigan says: “From a negative viewpoint, the most striking aspect ofratio analysis is the absence of an explicit theoretical structure. Under the dominant approachof „pragmatically empiricism „, the user of ratio is required to rely upon the authority of anauthor‟s experience.DEVELOPMENT OF BANCHMARKS:Many firms, particularly the larger ones, have operations spanning a wide range of industries.Given the diversity of their product lines, it is difficult to find suitable benchmarks forevaluating their financial performance and condition. Hence, it appears that meaningfulbenchmarks may be available only for firms, which have a well-defined industryclassification. Even for such firms, at least in India, the financial analyst may run into adifficulty.WINDOW DRESSING: Firms may resort to window dressing to project a favourablefinancial picture. For example, a firm may prepare its balance sheet at a pint when itsinventory level is very low. As a result, it may appear that the firm has a very comfortableliquidity position and a high turnover of inventories.PRICE LEVEL CHANGES: Financial accounting, as it is currently practiced in India andmost other countries, does not take into account price level changes. As a result, balancesheet figures are distorted and profits misreported. Hence, financial statement analysis can bevitiated.VARIATION IN ACCOUNTING POLICIES: Business firms have some latitude in theaccounting treatment of items like depreciation, valuation of stock s, research and VJKM Institute of management & computer studies vadu. Page 68
    • development expenses, foreign exchange transactions, installment sales, preliminary and pre-operative expenses, provision of reserves, and revaluation of assets. VJKM Institute of management & computer studies vadu. Page 69
    • VJKM Institute of management & computer studies vadu. Page 70
    • FINDINGS:At the end of the financial analysis of the company the following are the variousfindings:The current ratio of the company is quite satisfactory. Although there is a decline butstill the company is maintaining a ratio far greater than the ideal ratio. However insuch case the quality of the current assets is necessary to be analyzed.Considering the liquidity position the major contributors to the company currentassets are the debtors and the inventories. So a high current ratio or quick ratio doesnot mean that the company has sufficient liquidity. The company needs to focus moreon the cash and other current assets.Considering the liquidity position there is a decline in the interval measure byalmost 50 percent which indicates the tight liquidity position of the company.Since the last financial year there appears to be a reduction in the use of the debtfunds in the working capital financing of the company.Considering the capital structure of the company almost 60-70 percent financing ofthe company is carried out through the debt funds while the equity financingcontributes to only 25-30 percent of the financing.The total liabilities of the company constitutes about 60-70 percent of the companytotal assets. However in the present financial year this ratio has decreased due toincrease in the use of equity financing by the company.The company has the ability to match the expenses of interest as well as the fixedcharges well with their earnings. This ratio is quite consistently high for the company.In the last two financial years the inventory holding periods and the debtors collectionperiod for the company has increased which has a direct impact on the current ratio ofthe company. VJKM Institute of management & computer studies vadu. Page 71
    • SUGGESTIONS:The company needs to plan its strategy regarding the current assets utilization.The company needs to manage the inventories well because over the last twofinancial years there is a constant rise in the inventory holding periods. Thiscould lead to reduced profit margins and reduction in the liquidity position.There is also a get-out observed in the debtors‟ collection policy whichindicates that the company needs to collect its debt well. Moreover there is aconstant rise in the debtors‟ quantity which is a matter of concern for thecompany.The company prefers debt financing over equity financing. However thecompany needs to be careful in selecting an optimum mixture of the debt andequity. This can have an effect on the solvency of the firm.There is a constant rise in the operating expenses of the firm. So the companyneeds to plan an effective cost reduction strategy to reduce the operatingexpenses and thereby improve the net profit margins.The company needs to have a closer watch particularly on the additionalexpenses and the manufacturing expenses. In additional expenses also theadministrative expenses seems to be troublesome. VJKM Institute of management & computer studies vadu. Page 72
    • LIMITATIONS OF THE ANALYSIS: This financial analysis carried out does not consider the effect of the opportunity cost of money. It ignores the present value and the future value of money. The standards for comparison data of the other companies are not available easily. So an overall view of the analysis cannot be brought about through this analysis. No information related to the effects of the external factors on the business conditions and the company policy can be obtained through this analysis. The analysis carried out is based only on the past information. No one can successfully predict the future conditions and strategies based on this data. Moreover at times there exists a confusion to record some of the expenses or financial terms into both different categories. So one cannot be 100 percent accurate in such analysis. The do Pont company of the U. S. pioneered a system of financial analysis which has relied wide spread reorganization and acceptances. A useful system of which considering important relationship base on information found in financial statement. It has been adopted many firm‟s in some firms or other. The earning power or the 1201 ratio is a central measure of the over all profitability and operational efficiency of a firm. It‟s shows international of the profitability and activity of ratio. It implies that the performance of a firm can be improved either by generation more sales volume per rupee of investment or by increasing the profit margin per rupee of investment or by increasing in the profit margin per rupee of sales. VJKM Institute of management & computer studies vadu. Page 73
    • At last, I conclude my report that “Ratnamani Techno Cast ltd.” Is a good company in caseof financial. There are some problems taking by it but overall the position of “RatnamaniTechno Cast ltd.” Is good.During my project training I saw that the entire office staff are well-organized responsibility.Thus office management of the company has improved. Also I found during the training that““Ratnamani Techno Cast ltd.” Is welcoming to all the comers in ““Ratnamani Techno Castltd.”.”So, I wish that the company will have delight and bright future for coming year and wish allthe best for solving every problem performing to the company.The most important which I have learn in unit training is “Industrial discipline”. I cardinallythanks to all the officers and member of the unit who assign their precious time to me forproviding the training in aspect. VJKM Institute of management & computer studies vadu. Page 74
    • BOOKS: Marketing Management PHILLIP KOTLER Financial Management I. M. PANDEY Financial Management PRASANNA CHANDRA Financial Management KHAN & JAIN Marketing Research NARESH K MALHOTRAMAGAZINES: Successful Marketing Research: the complete guide to getting and using essential information by Edward i. Hester Marketing Research: text and cases by W. Bruce Wrenn Review of Marketing Research by Naresh K MalhotraWEB SITE www.ratnamanitechnocast.com 1) http://www.ratnamanitechnocasts.com/profile.htm 2) http://www.ratnamanitechnocasts.com/products_view.htm 3) http://www.ratnamanitechnocasts.com/manufacturing_facilities.htm 4) http://www.ratnamanitechnocasts.com/quality_assurance.htmSEARCH ENGINE:- Google VJKM Institute of management & computer studies vadu. Page 75
    • VJKM Institute of management & computer studies vadu. Page 76
    • PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH 2011Particular 2010-2011 2009-2010 2008-09 (Rs. in lakh) (Rs. in lakh)IncomeSales & income fromOperations 17325.35 13336.07 11437.09Less: Excise Duty 2219.21 1563.57 1237.65 15106.14 11772.50 10199.44Income from powerGeneration 161.77 97.54 86.76Other income 2.09 1.47 1.27 TOTAL 15270.00 11871.51 10287.47ExpenditureMaterial cost 9833.24 7795.37 6834.54Employee‟s RemunerationAnd benefits 562.72 508.47 443.13Financial expense 333.88 253.77 178.68Other expenses 3215.69 2330.67 2154.49Depreciation 394.31 356.27 267.31 14339.94 11244.55 9878.15Net profit 930.10 626.96 409.32Less: Income 70.32 66.65 64.32 VJKM Institute of management & computer studies vadu. Page 77
    • Less:Deferred tax liability 265.35 154.34 137.74Profit after taxation 594.43 405.97 207.26Balance brought forward 423.28 205.73 178.35 1017.71 611.70 385.61Profit available forAppropriationAppropriationProposed dividend 112.60 90.00 76.12Dividend tax 14.42 11.53 9.32Transfer to general 127.02 101.53 85.44Reserve 241.08 300.00 245.22Balance carried forward 214.61 210.17 54.95 582.71 611.70 385.61Earning per share (in Rs.) 5.79 4.51 2.32 VJKM Institute of management & computer studies vadu. Page 78
    • Balance sheet as on year ended 31st march 2011Particular 2010-2011 2009-2010 2008-09 (Rs. in lakh) (Rs. in lakh) (Rs. In lakh)source of fundsshareholder’s fundsShare capital 1126.01 900.00 722.8Reserve & surplus 3578.11 3047.66 2789.48 4704.12 3947.66 3512.28Loan fundsSecured loan 771.35 797.36 832.12Unsecured loan 671.05 506.98 467.34 1442.40 1304.34 1299.46Deferred tax liability 1035.78 881.44 735.45 7182.30 6133.44 5547.19 TotalApplication of fundsFixed AssetsGross Block 7892.24 6723.21 6357.65Less: Depreciation 2845.93 2497.52 2317.12Net block 5046.31 4225.69 4040.53Capital W-I-P 156.21 99.23 78.42 5202.52 4324.92 4118.95Investments 0.27 0.26 0.23Current assets, loan &Advance VJKM Institute of management & computer studies vadu. Page 79
    • Inventories 3448.06 2582.63 2143.54Sundry debtors 1121.34 1556.86 1334.78Cash & bank balance 502.38 358.97 430.18Loan & advances 494.61 400.35 392.25 5566.39 4898.81 4300.75Less:Current liabilitiesand ProvisionLiabilities 3459.29 2989.02 2792.97Provision 127.02 101.53 79.98 3586.31 3090.55 2872.95Net current assets 1980.08 1808.26 1427.8MiscellaneousExpenditure 0.57 0.00 0.21 TOTAL 7182.30 6133.44 5547.19 VJKM Institute of management & computer studies vadu. Page 80