BBA Project on Working Capital management and finance IIMT COLLEGE OF MANAGEMENT

1. PROJECT REPORT
ON
AN STUDY ON WORKING CAPITAL MANAGEMENT WITH
REFRENCE TO
C & S ELECTRIC PVT. LTD, NOIDA
SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIRMENTS
FOR THE AWARD OF THE DEGREE OF
“BACHELOR OF BUSINESS ADMINISTRATION”
From : IIMT GROUPS OF COLLEGE
IIMT GROUPS OF COLLEGE
Greater Noida
SUBMITTED by
MINQUAD SHADAB
Submitted to:
Neerj kumar
Roll no- 1706131488

2. SUPERVISOR CERTIFICATE
This is to certify that MINQUAD SHADAB a student of Bachelor of Business
Administration, Batch 2017 to 2020 – IIMT GROUPS OF COLLEGE, Greater
Noida, has successfully completed his project under my supervision.
During this period, he worked on the project titled “ working capital management
of c&s electricity pvt. Ltd., noida in partial fulfillment for the award of the degree
of bachelor of Business Administration of chaudhary Charan Singh university
Meerut the best of knowledge project not be submitted university any degree
awarded any degree performance conduct
To the best of my knowledge the project work done by the candidate has not been
submitted to any university for award of any degree. Her performance and conduct
has been good

3. CERTIFICATE OF ORIGINALITY
I,MINQUAD SHADAB, Roll No.1706131488 of BBA batch 2017to 2020 of IIMT
GROUPS OF COLLEGE Greater Noida has undergone a Summer
Signature of the student:
Student Name:
Date:
ACKNOWLEDGEMENT

4. I want to show my sincere gratitude to all those who made this study possible. First of
all I am thankful to the helpful staff and faculty of IIMT GROUPS OF COLLEGE
Greater Noida. Secondly I would like to extend my sincere thanks to my Industry
Guide, _________________, for his untiring cooperation. One of the most important
tasks in every iimt groups of college study is its critical evaluation and feedback
which was performed by my faculty guide _____________j. I am very thankful to my
Faculty as well as Industry guide for investing his precious time to discuss and
criticize this study in depth, and explained the meaning of different concepts and how
to think when it comes to problem discussions and theoretical discussions.
Table of Content

5. CHAPTER NO. CONTENTS PAGE NO.
1 INTRODUCTION 1
2 OBJECTIVES 4
3 SCOPE OF THE STUDY 16
4 RESEARCH METHODOLOGY 19
5 DATA ANALYSIS 39
6 SUGGESTIONS 52
7 CONCLUSION 53
8 BIBLIOGRAPHY 54

6. 1
INTRODUCTION
INDUSTRYPROFILE
The healthy growth in the industrial sector achieved during 2003-04 has continued
during the current year as well with overall industrial growth (measured in terms of
the index of Industrial Production ) growing at a rate of 7.9 percent during the April-
September 2004-05 compared with 6.2 percent achieved during the same last year.
The worldwide electric power industry provides vital services essential to modern life.
It provides the nation with the most prevalent energy form known in history
electricity. It advances the nation’ s economic growth and productivity; promotes
business development and expansion; and provide solid employment opportunities to
workers globally in general and India in particular. It is a robust industry that
contributes to the progress and prosperity of our nation. Today the electric power
industry operates in a hybrid model of competition and regulation. The worldwide
electrical and electronics industry is growing at a fast pace which consist of
manufacturers, suppliers, dealers, electricians, electronic equipment manufacturers.
Power industry restructuring, around the world, has a strong impact on Asian power
industry as well. Indian power industry restructuring with a limited level of
competition, since 1991, has already been introduced at generation level by allowing
participation of independent power producers (IPPs). The new Electricity Act 2003
provides the provision of competition in several sectors. It is felt that the prevailing
condition in the country is good only for wholesale competition and not for the retail
competition at this moment.
As per the recent survey, the global electric & electronic market is worth $1, 03.8
billion, which is forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If
we talk of electric & electronic production statistics, the industry accounted for $
1,025.8 billion in 2006, which is forecasted to reach $1,051.5 billion in future.

7. 2
Size of the Electric/ Electronic Industry
Top three electric and electronic goods manufacturing countries in the world are;
United States of America, Japan and Korea respectively, The United States of
America being the largest producer of electronic products worldwide contributes the
total share of around 21% furthermore; USA is at the forefront to have the largest
market share with around 29% in the global market.
The world’ s electrical market size was $ 1038.8 billion in 2006, since last year an
increase of 10.6% is forecasted to grow even more. The industrial electrical goods
industry size was $ 651.3 billion, contributing around 62.7% of the total. With regard
to electronics parts and components sector, the total market share was around $ 282.7
billion i.e.; 27.2% while home electronics was 104.7 billion. This figure is supposed
to increase in this decade.
Major Production and Export Centers
As electronic manufacturing industry is growing with a fast pace, Western Europe is
developing gradually to contribute this industry. Western Europe comprising of 16
countries is contributing around 22% of the global market. Simultaneously, Eastern
Europe is forecasted to grow about $ 24 billion in 2013 from $ 9 billion in 2006.
If we talk of Asia Pacific region, China, Japan, North & South Korea, Singapore and
India are the top manufacturer of electrical and electronic products. Among these
Asian countries, China is becoming the manufacturing region of electronic products
on the globe.
In United States of America, cities like New York, Atlanta, Colorado, Detroit,
Florida, and New England, San Diego, San Francisco, and Texas can be named as
industrial hubs of electronics industry.
At present, Asia is growing with more speed in comparison to America and Europe.
In 2002, Asia occupied 41% of total electronics market share, which grew up to 56%

8. 3
in 2007. Those days are not far away when Asia will become the market leader
globally.
Future Outlook of Electric & Electronic Industry
Totally, the electrical and electronic industry is experiencing phenomenon and
remarkable changes worldwide. The worldwide electronics industry is distinguished
by fast technological advances and has grown rapidly than most other industries over
the past 30 years.
Products are heading towards new destinations where cost is less than other place with
higher costs involved. These places offer the most long term potential for market
growth. Companies indulged in manufacturing electrical products are investing a lot
on research and development for the best products to meet the demand of the market.
They are manufacturing the products with the best quality at reduced cost due to many
competitors.

9. 4
OBJECTIVES OF RESEARCH
To study about working capital management in the company.
To bring out the liquidity position of the company through ratio analysis.
To study the ratio analysis help in the company.
To study the financial performance of the company for the past 2 years.
To analyse the cash flow statement of C&S Electric Ltd.
To find out the different tools of working capital used in
Finance department.

10. 5
COMPANYPROFILE
C&S Electric Ltd. is amongst the leading suppliers of electrical equipment in India
and is India’ s largest exporter of industrial switchgear. Its wide range of electrical
and electronic products find application in power generation, distribution, control,
protection and final consumption. C&S Electric is amongst the top 4 players in the LV
switchgear business & the market leader in the Power Bus bar Business. In addition
the company also has product offerings for MV switchgear, Energy Efficient Lighting
solutions and Diesel Generating Sets. C&S Electric along with Solar EPC business,
also has an electrical contracting business which performs turnkey solutions for
industrial and commercial electrification, substations and power plants. C&S Electric
was also the 2nd company in India to design and execute a grid connected solar PV
power plant in India.
The business operations of C&S Electric are divided in the following strategic
business units (SBUs)
 LV Switchgear SBU
 Electronics SBU
 Power Busbar SBU
 Lighting & Wiring Accessories SBU
 Electrical EPC SBU
 Solar EPC SBU
C&S employs over 4000 people including 400 engineers, and has 17 state-of-the art
manufacturing plants in India, Belgium & China. It has 20 sales/marketing offices
across India and its products are exported to 80 countries. C&S Electric also has
several joint venture companies.

11. 6
HISTORY
Wuppertal, Germany, 1962
Mr. R N Khanna after graduating from IIT Kharagpur, gets his first taste of the
switchgear business as a Design Engineer in a leading German company.
1966 R N Khanna returns to India after spending 4
years with FANAL as a switchgear design
engineer. Controls & Switchgear Company is
founded in a garage by R N Khanna, who is
soon joined by his younger brother Ashok
Khanna (IIT Madras).
1966
-
1982
The company goes on to become amongst the
largest LV switchboards manufacturer in
India, executing prestigious and challenging
jobs. Enters Busduct business, with technology
from Simelectro France, to build on its strong
relationships with power generation utilities.
1982
-
1985
In a short time enters the switchgear
components business by technology transfer
from Terasaki Japan (Air Circuit Breakers);
ABB Stromberg Finland (Switches and Switch
Fuse Units) and France (Contactors, Overload
Relays and Motor Starters). Thus becomes a
major LV Switchgear Player.
1992
-
1994
Diversities with 3 joint ventures: Wago
(Terminals), RS (Mail Orders) and AVK-SEG
(Alternator and Relays until 2004
restructuring).
1998
-
Second Generation join the business. Big thrust on exports. Entry into Lighting
and Wiring Accessories. Establishment of EOU and SEZ facilities.

12. 7
2007 Acknowledged as India’ s #1 Busbar Company. Growth of almost 40% for
three years in a row 2005 to 2008. JV with Himoinsa of Spain to manufacture
Diesel Generating Sets.
2008 Enters Medium Voltage business through a JV with Efacec of Portugal. Raises
private equity from GE Commercial Finance with intention to grow even more
aggressively through organic and inorganic means. Merges three main
companies into a single entity – C&S Electric Ltd.
Vision
 C&S shall be the most trusted, respected and preferred brand, for
electrical and electronic equipment that finds application in power
generation, distribution, control and final consumption.
 In its major businesses C&S shall not only command a domestic market
share ranging from 12% to 50% or more, but be known widely as the
company “ closest to its customers”
 C&S products shall be used to manage power in India’ s biggest
industries, in its highest buildings, in its most critical infrastructure and
in millions of its homes.
 The C&S name shall be recognized widely as a benchmark, and shall
serve as a role model and an inspiration to other Indian engineering
products companies.
 C&S shall be cited as a company that played an important role in
making “ Made in India” a label that is trusted and respected the world
over.
Mission
 To create a unique alchemy of outstanding products, operational
excellence, path breaking customer service, and compelling marketing.
 To create and relish a vibrant workplace where employees are
empowered, cared for, developed, and most of all, provided unlimited
opportunity to discover their full potential.
 To continuously enhance our core technologies, and develop new world
class technologies and products to expand our offering to customers.
 To consolidate and strengthen our position as India’ s largest exporter
of Industrial power distribution and control equipment.
 To earn a healthy return on investment for the shareholders.
 To everyday experience, the sheer joy of delighting our internal and
external customers, and to relish the thrill of participation in India’ s

13. 8
infrastructure boom
PRODUCTS
Power Distribution Components
- Air Circuit Breakers : 630A ~ 6300A
- Moulded Case Circuit Breakers : 5A ~ 1200A
- Fuses Switch Disconnector : 32A ~ 800A
- Switch Disconnectors : 25A ~ 3150A
- Compact Changeover & Bypass Switches : 63A ~ 3150A
- HRC Fuse Links & Bases : up to 800A
- Power Capacitor : 1~50kVAR
The LV components division of C&S electric supplies a comprehensive range
of switchgear and controlgear components. In the eighties, C&S acquired
sophisticated technology for these high technology products from companies such as
Terasaki of Japan (Air Circuit Breakers), ABB Stromberg of Finland (Switches,
Switch Fuse Units), and a large French multinational (Contactors, Overload Relays).
However, today C&S Electric is a major investor in R&D for new generation circuit
breakers and contactors. It exports these products to 73 countries. A world class
expertise in the field of switchgear and controlgear components has been developed
over the years, and the division is poised to expand its already substantial share of the
domestic market and expand its fast growing exports.
Power Control Components
- Power Contactors : 9A ~ 800A
- Mini Contactors : 9A ~ 16A
- Capacitor Duty Contactors : 10kVAR ~ 60kVAR
- Motor Protection Circuit Breakers : 0.1A ~ 100A
- Control & Signalling Devices
Industrial Plugs & Sockets : 3 Pin & 5 Pin up to 125A, IP 44 & 67
The LV components division of C&S electric supplies a comprehensive range
of switchgear and controlgear components. In the eighties, C&S acquired
sophisticated technology for these high technology products from companies such as
Terasaki of Japan (Air Circuit Breakers), ABB Stromberg of Finland (Switches,

14. 9
Switch Fuse Units), and a large French multinational (Contactors, Overload Relays).
However, today C&S Electric is a major investor in R&D for new generation circuit
breakers and contactors. It exports these products to 73 countries. A world class
expertise in the field of Capacitor Duty Contactors and Power Contactors has been
developed over the years, and the division is poised to expand its already substantial
share of the domestic market and expand its fast growing exports
Final Power Distribution Components
Miniature Circuit Breakers :
- Rating: 0.5 ~ 125A
- Version: 1P, 1P+N, 2P, 3P, 3P+N & 4P
- Breaking Capacity: 10kA (AC) & 4kA (DC)
- Tripping Curves: B, C & D
- Type: AC & DC
- Conforms to IS/IEC60898-1-2002 (AC)
- IS/IEC60898-2-2002 (DC)
Isolator
- Rating: 25 ~ 125A
- Version: 1P, 2P, 3P & 4P
- Conforms to IS/IEC60947-3
MCB Changeover Switch
- Rating: 25 & 40A
- Version: 2P & 4P
- Conforms to IS/IEC60947 – 3:1999
Residual Current Circuit Breakers :
- Rating: 16 ~ 100A
- Sensitivity: 30, 100 & 300mA
- Version: 2P & 4P
- Conforms to IS12640-1-2008
Distribution Boards :
- Wide Range inclusive of SPN/TPN, Single & Double door in all variants i.e.
Horizontal, Vertical, PPI, Phase Selector, VTPN with MCB or MCCB as incomer, 7-
Segment, Flexy (Tier), Acrylic, TV/Telephone, Plug & Socket, Cable End Box
Distribution Boards
- Metal & Plastic Enclosures
The LV components division of C&S electric supplies a comprehensive range of
switchgear and controlgear components. In the eighties, C&S acquired sophisticated

15. 10
technology for these high technology products from companies such as Terasaki of
Japan (Air Circuit Breakers), ABB Stromberg of Finland (Switches, Switch Fuse
Units), and a large French multinational (Contactors, Overload Relays). However,
today C&S Electric is a major investor in R&D for new generation circuit breakers
and contactors. It exports these products to 73 countries. A world class expertise in
the field of Miniature Circuit Breakers,Residual Current Circuit Breakers and
controlgear components has been developed over the years, and the division is
poised to expand its already substantial share of the domestic market and expand its
fast growing exports.
Low Voltage Panels
The switchboards business is our mother business. It was from this that all other
businesses evolved. As an internal customer to the Switchgear Components Division,
this division is a valuable source of application and systems knowledge and hence
contributes to the development of new products. The Switchgear Systems
division itself has a comprehensive R&D and state-of-the -art “ totally bolted”
enclosure system. C&S switchboards have also been exported to the Middle East and
Africa. In future C&S is opening 2 new facilities, in addition to the ones it already has
in Noida and Haridwar. A year on year growth of more than 50% per annum is
expected over the next 3-4 years.
C&S Panels Division is among the top 3 in India. There is practically not a single
major power or petrochemical project in the country where C&S LV Panels will not
be found.
Electronics Division
The most Versatile range of Digital Relays for Power Protection, Control &
Monitoring for Power Plants, for Packaged and Unitised Substation, for Generators &
for Industries.

16. 11
The Division is capable of offering comprehensive range of products to its customers.
This is made possible through a combination of technology transfers in the past,
coupled with its own state of the art R&D unit in the present. In addition to
manufacturing its own digital relays for the LV and MV networks, the
division has tied up with GE Multilin of USA, to integrate multilin products for the
HV applications in transmission networks.
Through the different ranges Protection & Control Relay Division can offer protection
right from 415V distribution to 400KV feeder, from a small generator to a
transmission line. In addition, we are geared up for challenges in offering systems
for C&R Panels and Substation Automation.
Protection, Control & Monitoring Relays For
 Generator Control: Synchronising, Load Sharing & AFM Relays
 Generator Protection: Current, Voltage, Frequency, Reverse Power, Rotor
Earth Fault, Differential, De-Coupling, Negative Sequencing & Over Fluxing
Relays
Combined System Protection Relays
 Substation Protection: Current Voltage, Frequency & Transformer Differential
Relays
 Motor Protection: Basic & Comprehensive Relays
 Distance Protection Relays
Busducts Division
The Company is a market leader in the country for design, manufacture, erection and
commissioning of Isolated, Segregated and Non-Segregated Generator Bus Duct from
60 MW - 660MW power plants and above.

17. 12
The company offers a wide range of natural air cooled Isolated Phase Bus Duct from
1000A to 25,000A. The Company has to its credit the supply of largest number of Bus
Ducts to major power plants in India through the NTPC and other utilities for several
power plants erected and commissioned outside India. The largest proportion of
power generated in India flows through C&S busducts.
Our Bus Ducts have been successfully type tested for highest peak current during
short circuit test and also for temperature rise test at world famous laboratories like
KEMA-Holland and EDF-France, CPRI-Bhopal & Bangalore and at IIT-Roorkee (For
Seismic tests
Lighting & Wiring Accessories Division
Established in 2004, C&S Lighting and Wiring Accessories Division, was set up to
bring cutting edge technologies and trends in the field of lighting and wiring devices
to the Indian market. The division is now an integral part of C&S Electric Ltd., and
has established its reputation in the market for its high quality products and reliable
services.
Our product lines consist of the following:
- State of the Art Modular Wiring Devices
- Indoor & Outdoor Lighting solutions
Our products not only deliver the highest performance and electrical specifications,
but are also designed keeping in mind the highest standards of aesthetics and
functionality. It is for this reason that in a short period of time we have been able to
service some of the most fastidious and discerning customers in India and have
developed a strong reference list of customers and projects.
 Switches, wiring accessories and home automation
 Luminaires for Domestic, Commercial, Street, Industrial and Flood lighting
applications
 LED Luminaires for Domestic, Commercial, Street, Industrial and Flood
lighting applications.

18. 13
New Products
New Changeover Switch
C&S introduces a new series of on-load changeover switches. The new changeover
exhibits an impeccable performance engendered in it by the excellence in design and
engineering.
New Test Position Switch Disconnector Fuse
New test position SDF is the innovative member in the Switch Disconnector Fuse
family. This new test position SDF is available in current rating of 32A and 63A in
DP, TP and TPN configurations with cylindrical type fuses.
WiNtrip Two way Centre OFF Changeover Switch
Features
1. Compact design
2. Double break contacts
3. Shrouded terminal
4. Can be mounted with other products like MCB, RCCB, Isolator in Distribution
board
5. Front operation with three positions I-O-II Mid position OFF
Intelligent Release –
micropro 3.1C&S introduces a new release Micropro 3.1 in its range of
microprocessor based ACB release. Micropro 3.1 has been specifically designed with
LSIG protective functions in a compact unit offering an economical solution for basic
application areas.
AC~DC Mechanical Interlocked rubusta contactor
C&S launched RobusTa Contactor AC1 60 Amps; AC~DC Mechanical & Electrical
interlocked in the same frame size and height meet has been developed to meet the

19. 14
new emerging application requirement in the Integrated Power Management System
(IPMS) for telecom segment. The product developed has met the acceptance &
approval from the major IPMS manufacturers catering to the requirement of Indus
Towers Ltd. & Bharti Telecom.
rubusTa Contactor with Extended Terminals Facility
RobusTa Contactors 3&4 Pole, rating 40 Amps ~ 500 Amps have been re- engineered
with extended terminals for adaptation with aluminum bus-bar to meet market need in
the application of DG set, UPS panels & other similar applications.
Anmol Motor Starters
C&S has introduced Anmol Submersible Pump Motor Starter which have been
designed for rugged Indian tropical condition encountering wide voltage fluctuations
with reliable trouble free long life. Anmol Submersible Pump Motor Starter is
reliable, dependable & easy to maintenance.
Universal AC~DC LED Indication Lamp
22.5mm LED lamps now have availability of Universal voltage 12V~ 240V AC~DC
Universal indication lamps to meet emerging market requirements.
LED Streetlight System
Streetlights are major source of electricity consumption in Public Lighting. To reduce
the consumption costumers are shifting to energy efficient LED based streetlights.
C&S present energy efficient LED streetlight range Uber. Uber is available in
different shapes, design wattage. This new streetlight is available in 12W to 200W
rating with IP65 protection. C&S is offering 3 year warranty on LED streetlights. The
Uber range of LED street light can easily replace existing range of Conventional
luminaire. C&S is supplying these LED streetlights to various upcoming projects
including north India's largest street light project at SIDCUL Uttarakhand.
CSEpro Protection Solution

20. 15
CSEPro-F300 : Feeder Protection Relay/ CSEPro-M200: Motor Protection
Relay/
CSEPro-T170: Transformer Protection Relay
 Digital signal processor based numerical design
 Modular architecture with self CT shorting
CSDPR- V2 : Self Powered Protection Relay for RMU
 Compact numeric design size
 Low VA burden
 Penta power (get energizes from any one: CT, VT, Battery, USB, Solar

21. 16
SCOPE OF THE STUDY
The study covers the financial statements of C&S Electric Ltd (Noida) to know the
financial position of the company. In order to find out the financial position of the
company, I used Cash flow analysis and ratio analysis.

22. 17
METHODOLOGY
Methodology is the systematic method or an activity which is used to collect the
information required to complete this project work.
The data is collected by 2 methods:
1. Primary data
2. Secondary data.
Primary data is collected through information from company officers and my mentor.
Secondary data, which is secondary in nature i.e. already collected information this
secondary data is collected through Company’ s Annual Report.
Interpretation of:
 Balance sheet
 Profit and loss account
 Cash flow statement

23. 18
NEED FOR THE STUDY
There are some questions, which arise from the study of financial statements. These
could be “ Is Company’ s profitability adequate? Why is a profit low in spite of
increased sales? Why is there liquidity problem though profitability is good? Why no
reasons for changes in assets, liabilities and equity between two dates? Why no
dividends are paid though there are good profits? From where have come cash flows
and how they are applied? These and many other questions need answers, which can
be possible when the financial statements are suitably analyzed
Thus financial statement analysis deals with meaningful interpretation of
financial data available in financial statements to serve specific purpose of
organizations of such data for their decision making .this involves identifying the
purpose and selecting suitable means of analysis. Financial statement analysis is
essentially purposive.
LIMITATIONS OF THE STUDY
 The study is confined to secondary data only.

24. 19
RESEARCHAND METHODOLOGY
C&S Electric has a long tradition of indigenous R&D, from the early days when the
company was started in the garage by two IIT educated engineers. C&S possesses
R&D expertise in several disciplines. The key areas are Mechanical, Electrical and
Electronic designs. The highly skilled and experienced full time R&D staff is further
supported by a unique network of best in class international specialist consultants and
niche suppliers for various R&D related products and services. Through this
combination of inhouse skills and innovative use of external resources, C&S is able to
design, develop and launch products at a competitive pace.
The company has designed and developed several models of contactors, overload
relays and circuit breakers which have been proven in the market place. It has
designed and developed India’ s first totally bolted type of enclosure system for LV
switchboards, India’ s first comprehensive range of busbar trunking, and India’ s first
660MV isolated phase bus ducts.
The R&D is totally equipped with state of the art CAD/CAM and CAE systems
(including Finite Element Analysis and Dynamic Motion Simulation software). It has
advanced measuring, computerized data acquisition, and several electrical testing
laboratories. The company also has expertise in embedded hardware and software
design and has developed several microprocessor based electronic protection and
control products.

25. 20
Market Served
Industry
 Power
 Paper
 Petrochemical
 F&B
 Metals
 Others
Buildings
 IT Parks
 Hospitals
 HOTELS
 Group Housing
 Others
Infrastructure
 Railway
 Water
 Telecom
 Airports
 Others
SIX SIGMA TOOLS FOR HIGHER CONSISTENCY
C&S strives for six sigma quality levels. Statistical process control is a way of life at
C&S. Several techniques and tools are used for this process such as the Minitab
software, from which the screenshots below have been reproduced. Process capability
studies, PPAP (Product Part for Approval) documentation, Gauge R&R and other
MSA (Measuring System Analysis) tools ensure quality in components and
manufacturing processes. It is the application of such tools that has allowed C&S to
meet the needs of the most demanding customers and win international quality
awards.
OEMs
 Material Handling
 Lifts
 Compressors
 Telecom Power
Supplies
 Machine Tools
 Others
Homes
 Apartments
 Villas

26. 21
CONCEPTUAL DISCUSSION
The study of financial statement is prepared for the purpose of presenting a
periodical review or report by the management of and deal with the state of
investment in business and result achieved during the period under review. They r
eflect the financial position and operating strengths or weaknesses of the concern by
properly establishing relationship between the items of the balance sheet and remove
statements.
Financial statement analysis can be under taken either by the management of
the firm or by the outside parties. The nature of analysis defers depending upon the
purpose of the analysis. The analyst is able to say how well the firm could utilize the
resource of the society in generating goods and services. Turnover ratios are the best
tools in deciding these aspects.
Hence it is overall responsibility of the management to see that the resource of
the firm is used most efficiently and effectively and that the firm’ s financial position
is good. Financial statement analysis does indicate what can be expected in future
from the firm.
Meaning of Financial Statement
Financial statements refer to such statements which contains financial information
about an enterprise. They report profitability and the financial position of the business
at the end of accounting period. The team financial statement includes at least two
statements which the accountant prepares at the end of an accounting period. The two
statements are: -
 The Balance Sheet
 Profit And Loss Account
They provide some extremely useful information to the extent that balance Sheet
mirrors the financial position on a particular date in terms of the structure of assets,
liabilities and owners equity, and so on and the Profit and Loss account shows the

27. 22
results of operations during a certain period of time in terms of the revenues obtained
and the cost incurred during the year. Thus the financial statement provides a
summarized view of financial position and operations of a firm
Meaning of Financial Analysis
The first task of financial analysis is to select the information relevant to the decision
under consideration to the total information contained in the financial statement. The
second step is to arrange the information in a way to highlight significant relationship.
The final step is interpretation and drawing of inference and conclusions. Financial
statement is the process of selection, relation and evaluation.
Features of Financial Analysis
 To present a complex data contained in the financial statement in simple and
understandable form.
 To classify the items contained in the financial statement inconvenient and
rational groups.
 To make comparison between various groups to draw various
conclusions.
Purpose of Analysis of financial statements
 To know the earning capacity or profitability.
 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest & dividends.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of mgt.
 To provide useful information to mgt

28. 23
Tools of Financial Statement Analysis
Various tools are used to evaluate the significance of financial statement data. Three
commonly used tools are these:
 Ratio Analysis
 Funds Flow Analysis
 Cash Flow Analysis
 Ratio Analysis:
 Fundamental Analysis has a very broad scope. One aspect looks at the general
(qualitative) factors of a company. The other side considers tangible and
measurable factors (quantitative). This means crunching and analyzing
numbers from the financial statements. If used in conjunction with other
methods, quantitative analysis can produce excellent results.
 Ratio analysis isn't just comparing different numbers from the balance sheet,
income statement, and cash flow statement. It's comparing the number against
previous years, other companies, the industry, or even the economy in general.
Ratios look at the relationships between individual values and relate them to
how a company has performed in the past, and might perform in the future.
Meaning of Ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick
that measures the relationship two figures, which are related to each other and
mutually interdependent. Ratio is express by dividing one figure by the other related
figure. Thus a ratio is an expression relating one number to another. It is simply the
quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure
ratio or in absolute figures as “ so many times” . As accounting ratio is an expression
relating two figures or accounts or two sets of account heads or group contain in the
financial statements.

29. 24
Meaning of Ratio Analysis:
Ratio analysis is the method or process by which the relationship of items or group of
items in the financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the
financial health and profitability of business enterprises. Ratio analysis can be used
both in trend and static analysis. There are several ratios at the disposal of an analyst
but their group of ratio he would prefer depends on the purpose and the objective of
analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we
will focus on a technique, which is easy to use. It can provide you with a valuable
investment analysis tool.
This technique is called cross-sectional analysis. Cross-sectional analysis compares
financial ratios of several companies from the same industry. Ratio analysis can
provide valuable information about a company's financial health. A financial ratio
measures a company's performance in a specific area. For example, you could use a
ratio of a company's debt to its equity to measure a company's leverage. By
comparing the leverage ratios of two companies, you can determine which company
uses greater debt in the conduct of its business. A company whose leverage ratio is
higher than a competitor's has more debt per equity. You can use this information to
make a judgment as to which company is a better investment risk.
However, you must be careful not to place too much importance on one ratio. You
obtain a better indication of the direction in which a company is moving when several
ratios are taken as a group.

30. 25
Objective of Ratios:
Ratios are worked out to analyze the following aspects of business organization-
A) Solvency-
1) Long term
2) Short term
3) Immediate
B) Stability
C) Profitability
D) Operational efficiency
E) Credit standing
F) Structural analysis
G) Effective utilization of resources
H) Leverage or external financing
Importance of Ratio Analysis:
As a tool of financial management, ratios are of crucial significance. The importance
of ratio analysis lies in the fact that it presents facts on a comparative basis & enables
the drawing of interference regarding the performance of a firm. Ratio analysis is
relevant in assessing the performance of a firm in respect of the following aspects:
1] Liquidity position
2] Long-term solvency
3] Operating efficiency
4] Overall profitability
5] Inter firm comparison
6] Trend analysis.
1] Liquidity position: -
With the help of Ratio analysis conclusion can be drawn regarding the liquidity
position of a firm. The liquidity position of a firm would be satisfactory if it is able to
meet its current obligation when they become due. A firm can be said to have the

31. 26
ability to meet its short-term liabilities if it has sufficient liquid funds to pay the
interest on its short maturing debt usually within a year as well as to repay the
principal. This ability is reflected in the liquidity ratio of a firm. The liquidity ratio is
particularly useful in credit analysis by bank & other suppliers of short term loans.
2] Long-term solvency: -
Ratio analysis is equally useful for assessing the long-term financial viability of a
firm. This respect of the financial position of a borrower is of concern to the long-
term creditors, security analyst & the present & potential owners of a business. The
long-term solvency is measured by the leverage/ capital structure & profitability ratio
Ratio analysis s that focus on earning power & operating efficiency.
Ratio analysis reveals the strength & weaknesses of a firm in this respect. The
leverage ratios, for instance, will indicate whether a firm has a reasonable proportion
of various sources of finance or if it is heavily loaded with debt in which case its
solvency is exposed to serious strain. Similarly the various profitability ratios would
reveal whether or not the firm is able to offer adequate return to its owners consistent
with the risk involved.
3] Operating efficiency:
Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint
of management, is that it throws light on the degree of efficiency in management &
utilization of its assets. The various activity ratios measure this kind of operational
efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon
the sales revenues generated by the use of its assets- total as well as its components.
4] Overall profitability:
Unlike the outsides parties, which are interested in one aspect of the financial position
of a firm, the management is constantly concerned about overall profitability of the
enterprise. That is, they are concerned about the ability of the firm to meets its short
term as well as long term obligations to its creditors, to ensure a reasonable return to
its owners & secure optimum utilization of the assets of the firm. This is possible if an
integrated view is taken & all the ratios are considered together.

32. 27
5] Inter firm comparison:
Ratio analysis not only throws light on the financial position of firm but also serves as
a stepping-stone to remedial measures. This is made possible due to inter firm
comparison & comparison with the industry averages. A single figure of a particular
ratio is meaningless unless it is related to some standard or norm. One of the popular
techniques is to compare the ratios of a firm with the industry average. It should be
reasonably expected that the performance of a firm should be in broad conformity
with that of the industry to which it belongs. An inter firm comparison would
demonstrate the firms position vice-versa its competitors. If the results are at variance
either with the industry average or with those of the competitors, the firm can seek to
identify the probable reasons & in light, take remedial measures.
6] Trend analysis:
Finally, ratio analysis enables a firm to take the time dimension into account. In other
words, whether the financial position of a firm is improving or deteriorating over the
years. This is made possible by the use of trend analysis. The significance of the
trend analysis of ratio lies in the fact that the analysts can know the direction of
movement, that is, whether the movement is favorable or unfavorable. For example,
the ratio may be low as compared to the norm but the trend may be upward. On the
other hand, though the present level may be satisfactory but the trend may be a
declining one.
Advantages of Ratio Analysis:
Financial ratios are essentially concerned with the identification of significant
accounting data relationships, which give the decision-maker insights into the
financial performance of a company. The advantages of ratio analysis can be
summarized as follows:
 Ratios facilitate conducting trend analysis, which is important for decision
making and forecasting.
 Ratio analysis helps in the assessment of the liquidity, operating
efficiency, profitability and solvency of a firm.

33. 28
 Ratio analysis provides a basis for both intra-firm as well as inter-firm
comparisons.The comparison of actual ratios with base year ratios or standard ratios
helps the management analyze the financial performance of the firm.
Limitations of Ratio Analysis:
Ratio analysis has its limitations. These limitations are described below:
1] Information problems
 Ratios require quantitative information for analysis but it is not decisive
about analytical output.
 The figures in a set of accounts are likely to be at least several months out of
date, and so might not give a proper indication of the company’ s current financial
position.
 Where historical cost convention is used, asset valuations in the balance sheet
could be misleading. Ratios based on this information will not be very useful for
decision-making.
2] Comparison of performance over time
 When comparing performance over time, there is need to consider the changes
in price. The movement in performance should be in line with the changes in price.
 When comparing performance over time, there is need to consider the changes
in technology. The movement in performance should be in line with the changes in
technology.
 Changes in accounting policy may affect the comparison of results between
different accounting years as misleading.
3] Inter-firm comparison
 Companies may have different capital structures and to make comparison of
performance when one is all equity financed and another is a geared company it
may not be a good analysis.

34. 29
 Selective application of government incentives to various companies may also
distort intercompany comparison. Comparing the performance of two enterprises
may be misleading.
 Inter-firm comparison may not be useful unless the firms compared are of the
same size and age, and employ similar production methods and accounting
practices.
 Even within a company, comparisons can be distorted by changes in the price
level.
 Ratios provide only quantitative information, not qualitative information.
 Ratios are calculated on the basis of past financial statements. They do not
indicate future trends and they do not consider economic
conditions.Evaluation of efficiency
 Effective tool
CLASSIFICATIONS OF RATIOS:
The use of ratio analysis is not confined to financial manager only. There are different
parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Various accounting ratios can be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios
1. Traditional Classification
It includes the following.
 Balance sheet (or) position statement ratio: They deal with the relationship
between two balance sheet items, e.g. the ratio of current assets to current
liabilities etc., both the items must, however, pertain to the same balance sheet.

35. 30
 Profit & loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit & loss account items, e.g. the ratio of gross
profit to sales etc.,
 Composite (or) inter statement ratios: These ratios exhibit the relation between
a profit & loss account or income statement item and a balance sheet items,
e.g. stock turnover ratio, or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios
and profitability rat
3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and
secondary ratios. The primary ratio is one, which is of the prime importance to a
concern. The other ratios that support the primary ratio are called secondary ratios.
IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE
1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when
there becomes due. The short term obligations of a firm can be met only when there
are sufficient liquid assets. The short term obligations are met by realizing amounts
from current, floating (or) circulating assets The current assets should either be
calculated liquid (or) near liquidity. They should be convertible into cash for paying
obligations of short term nature. The sufficiency (or) insufficiency of current assets

36. 31
should be assessed by comparing them with short-term current liabilities. If current
assets can pay off current liabilities, then liquidity position will be satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
 Current ratio
 Quick (or) Acid-test (or) Liquid ratio
 Absolute liquid ratio (or) Cash position ratio
(a) CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio also known as Working capital ratio is a measure of general
liquidity and is most widely used to make the analysis of a short-term financial
position (or) liquidity of a firm.
Components of current ratio
(b) QUICK RATIO:
Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the
ability of a firm to pay its short-term obligations as & when they become due. Quick
ratio may be defined as the relationship between quick or liquid assets and current
liabilities. An asset is said to be liquid if it is converted into cash with in a short period
without loss of value.
2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term
obligations. Accordingly, long term solvency ratios indicate firm’ s ability to meet the
fixed interest and costs and repayment schedules associated with its long term
borrowings.
The following ratio serves the purpose of determining the solvency of the concern.

37. 32
 PROPRIETORY RATIO
A variant to the debt-equity ratio is the proprietory ratio which is also known as equity
ratio. This ratio establishes relationship between share holders funds to total assets of
the firm.
3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The
efficiency with which assets are managed directly effect the volume of sales. Activity
ratios measure the efficiency (or) effectiveness with which a firm manages its
resources (or) assets. These ratios are also called “ Turn over ratios” because they
indicate the speed with which assets are converted or turned over into sales.
 Working capital turnover ratio
 Fixed assets turnover ratio
 Capital turnover ratio
 Current assets to fixed assets ratio
(a) WORKING CAPITAL TURNOVER RATIO
Working capital of a concern is directly related to sales.
Working capital = Current assets - Current liabilities
It indicates the velocity of the utilization of net working capital. This indicates the no.
of times the working capital is turned over in the course of a year. A higher ratio
indicates efficient utilization of working capital and a lower ratio indicates inefficient
utilization.
Working capital turnover ratio=cost of goods sold/working capital.

38. 33
(b) FIXED ASSETS TURNOVER RATIO
It is also known as sales to fixed assets ratio. This ratio measures the efficiency and
profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization
of fixed assets. Lower ratio means under-utilization of fixed assets.
Cost of Sales
Fixed assets turnover ratio = Net fixed assets
Cost of Sales = Income from Services
Net Fixed Assets = Fixed Assets - Depreciation
(c) CAPITAL TURNOVER RATIOS
Sometimes the efficiency and effectiveness of the operations are judged by comparing
the cost of sales or sales with amount of capital invested in the business and not with
assets held in the business, though in both cases the same result is expected. Capital
invested in the business may be classified as long-term and short-term capital or fixed
capital and working capital or Owned Capital and Loaned Capital. All Capital
Turnovers are calculated to study the uses of various types of capital.
Cost of goods sold
Capital turnover ratio = Capital employed
(d) CURRENT ASSETS TO FIXED ASSETS RATIO
This ratio differs from industry to industry. The increase in the ratio means that
trading is slack or mechanization has been used. A decline in the ratio means that
debtors and stocks are increased too much or fixed assets are more intensively used. If
current assets increase with the corresponding increase in profit, it will show that the
business is expanding.

39. 34
Current Assets
Current Assets to Fixed Assets Ratio = Fixed Assets
4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is
the engine, that drives the business enterprise.
 Net profit ratio
 Return on total assets
 Reserves and surplus to capital ratio
 Earnings per share
 Operating profit ratio
 Price – earning ratio
 Return on investments
(a) NET PROFIT RATIO
Net profit ratio establishes a relationship between net profit (after tax) and sales and
indicates the efficiency of the management in manufacturing, selling administrative
and other activities of the firm.
Net profit after tax
Net profit ratio= Net sales
It also indicates the firm’ s capacity to face adverse economic conditions such as
price competitors, low demand etc. Obviously higher the ratio, the better is the
profitability.

40. 35
(b) RETURN ON TOTAL ASSETS
Profitability can be measured in terms of relationship between net profit and assets.
This ratio is also known as profit-to-assets ratio. It measures the profitability of
investments. The overall profitability can be known.
Net profit
Return on assets = Total assets
(c) RESERVES AND SURPLUS TO CAPITAL RATIO
It reveals the policy pursued by the company with regard to growth shares. A very
high ratio indicates a conservative dividend policy and increased ploughing back to
profit. Higher the ratio better will be the position.
Reserves& surplus
Reserves & surplus to capital = Capital
(d) EARNINGS PER SHARE
Earnings per share is a small verification of return of equity and is calculated by
dividing the net profits earned by the company and those profits after taxes and
preference dividend by total no. of equity shares.
Net profit after tax
Earnings per share = Number of Equity

41. 36
The Earnings per share is a good measure of profitability when
compared with EPS of similar other components (or) companies, it gives a view of the
comparative earnings of a firm.
(e) OPERATING PROFIT RATIO
Operating ratio establishes the relationship between cost of goods sold and other
operating expenses on the one hand and the sales on the other.
Operating cost
Operation ratio = Net sales
However 75 to 85% may be considered to be a good ratio in case of a manufacturing
under taking.
Operating profit ratio is calculated by dividing operating profit by sales.
Fund Flow Analysis:
Fund may be interpreted in various ways as
(a) Cash,
(b) Total current assets,
(c) Net working capital,
(d) Net current assets.
For the purpose of fund flow statement the term means net working capital. The flow
of fund will occur in a business, when a transaction results in a change i.e., increase or
decrease in the amount of fund.
According to Robert Anthony the funds flow statement describes the sources from
which additional funds were derived and the uses to which these funds were put.
In short, it is a technical device designed to highlight the changes in the financial
condition of a business enterprise between two balance sheets.
Objectives of Fund Flow Statement
The main purposes of FFS are:
 To help to understand the changes in assets and asset sources which are not
readily evident in the income statement or financial statement.

42. 37
 To inform as to how the loans to the business have been used.
Format of Fund Flow Statement
Sources Applications
Fund from operation Fund lost in operations
Non-trading incomes Non-operating expenses
Issue of shares Redemption of redeemable preference share
Issue of debentures Redemption of debentures
Borrowing of loans Repayment of loans
Acceptance of deposits Repayment of deposits
Sale of fixed assets Purchase of fixed assets
Sale of investments (Long Term) Purchase of long term investments
Decrease in working capital Increase in working capital
Cash Flow Statement:
Cash is a life blood of business. It is an important tool of cash planning and control. A
firm receives cash from various sources like sales, debtors, sale of assets investments
etc. Likewise, the firm needs cash to make payment to salaries, rent dividend, interest
etc.
Cash flow statement reveals that inflow and outflow of cash during a particular
period. It is prepared on the basis of historical data showing the inflow and outflow of
cash.
Objectives of Cash Flow Statement
To show the causes of changes in cash balance between the balance sheet dates.
To show the actors contributing to the reduction of cash balance inspire of increasing
of profit or decreasing profit
Uses of Cash Flow Statement
1. It explaining the reasons for low cash balance.
2. It shows the major sources and uses of cash.
3. It helps in short term financial decisions relating to liquidity.
4. From the past year statements projections can be made for the future.

43. 38
5. It helps the management in planning the repayment of loans, credit
arrangements etc.
Usefulness of the Statement of Cash Flows
The information in a statement of cash flows should help investors, creditors, and
others assess the following aspects of the firm’ s financial position.
 The entity’ s ability to generate future cash flows.
By examining relationships between items in the statement of cash flows,
investors and others can make predictions of the amounts, timing, and
uncertainty of future cash flows better than they can from accrual basis data
 The entity’ s ability to pay dividends and meet obligations.
If a company does not have adequate cash, employees cannot be paid, debts
settled, or dividends paid. Employees, creditors, and stockholders should be
particularly interested in this statement, because it alone shows the flows of
cash in a business.
 The cash investing and financing transactions during the period.
By examining a company’ s investing and financing transactions, a financial
statement reader can better understand why assets and liabilities changed
during the period.
Cash Flow Statement
Inflow of Cash Amount Outflow of cash Amount
Opening cash balance ***
Redemption of preference
shares
***
Cash from operation *** Redemption of debentures ***
Sales of assets *** Repayment of loans ***
Issue of debentures *** Payment of dividends ***
Raising of loans *** Pay of tax ***
Collection from debentures *** Cash lost in debentures ***
Refund of tax *** Closing cash balance ***

44. 39
DATA ANALYSIS
Financial statement namely the statement of the profit & loss account and the balance
sheet are indication of two signify-cant factors profitability and financial soundness
analysis of statements means such a treatment of the information contained to afford a
diagnosis of the profitability and financial statements analysis as the process of
methodical classification comparison with other co-rising question and then seeking
answer for them.
Finance is the very typical aspect in course of management. The main objective
behind the study is to get precisely. It also helps us to study the present finance
scenario. The objective is such that company’ s profitability, liquidity and capacity by
such analysis we can interpret the position of the company. So it is very important to
study.
FINANCIAL RESULTS:
( in’ 000)
YEAR 2012 – 13 2011-12
Turnover(Gross) 8,504,038 7,165,819
Profit Before Dep & Tax. 682,579 647,955
Profit After Dep & Tax. 488,613 407,916
TABLE 4.1
Cash flow means inflows that is, sources of cash which are at the disposable at the
firm and outflows of the fire that is the use of the firm.
The difference between inflows and outflows is either net inflow or net outflow. A
cash outflow statement deals with the cash fund flow, which excludes working capital
movements. The Accounting standard (A53) classifies cash flows as under:
1) Cash from operating activities

45. 40
2) Cash from investing activities
3) Cash from financing activities
CASH FLOW STATEMENT
(
in’ 000)
(A) Cash flow from Operating Activities : 2012-13 2011-12
Profit before Tax 540,136 538,688
Adjustments for :
Depreciation 142,443 109,267
Interest Expense 181,592 97,042
Interest Income (16,558) (6,043)
Dividend Income (19,153) (23,534)
Profit on sale of fixed assets (5) (16,780)
Profit on sale of Investments (2,757) -
Provisions for slow moving inventory 8,841 6,051
Liabilities/Provisions no longer required written back (11,234) (2,310)
Provision for trade receivables/bad trade receivable
written off
23,991 18,903
Unrealised foreign exchange loss/(gain) (net) 3,079 (2,095)
Operating profit before Working Capital changes
Changes in Working Capital:
Adjustments for (increase)/decrease in operating
assets:
Inventories (38,428) (407,531)
Trade receivables (1,193,615) (590,482)
Short-term loans and advances 32,565 52,065
Long-term loans and advances (65,421) (8,979)
Other current assets 11906 (17,719)
Other non-current assets (639) (273)
Adjustments for (increase)/decrease in operating
liabilities:
Trade payables 532,110 300,453
Other current liabilities 92,388 26,882
Other long-term liabilities 2,683 2,471
Short-term provisions 16,743 26,391
Long-term provisions 14,748 (22,135)
(594,960) (638,857)
Cash generated from operations 255,415 80,332
Income Taxes Paid (61,298) (132,210)
Net cash flow(used)/from operating activities 194,117 (51,878)

46. 41
(B) Cash flow from Investing Activities :
Purchase of fixed assets (247,299) (400,571)
Sale of fixed Assets 2,689 22,975
Sale of investments 828,411 1,168,450
Purchase of investments (698,154) (1,146,096)
Interest received on deposits 16,558 6,043
Dividend received 19,153 23,534
Share application money (227,966) (2,027)
Net cash from Investing Activities (306,538) (327,692)
(C) Cash flow from Financing Activities :
Repayment of long term borrowings (121,111) (87,135)
Proceeds from Long term borrowings 118,100 251,206
Net increase in working capital borrowings 185,323 576,960
Interest paid (181,592) (97,042)
Dividend paid (11,057) (11,057)
Corporate dividend tax (1,794) (1,836)
Net Cash from Financing Activities (12,131) 631,096
Net Increase / (Decrease) in Cash & Cash
Equivalents(A+B+C)
(124,552) 251,526
Cash and Cash Equivalents as at 1st April (Opening
Balance)
346,367 94,841
Cash and Cash Equivalents as at 31st March (Closing
Balance)
221,815 346,367
TABLE 4.2
Interpretation
Above cash flow of C&S electric ltd. shows that year 2012 – 13 closing balance is
lower than 2011 – 12 and this is not good indication for the company. Although
operating as well as investing activities cash flow describes strong condition from the
previous year cash flow activities, but cash flow from financing activities does not
shows good results for the company.
RATIO ANALYSIS
1) CURRENT RATIO:
This ratio is an indicator of firm’ s commitment to meet its short- term liabilities.
Higher ratio, better the coverage. 2:1 ratio is treated as standard ratio. This ratio is
also called as solvency / working capital ratio.

47. 42
The current ratio is the ratio of the current assets and current liabilities. It
is calculated by dividing current assets by current liabilities.
Formula:
Current Ratio= Current assets
Current liabilities
Year 2011-12 2012-13
Current Assets 4,847,899 5,597,525
Current
Liabilities
3,998,146 3,086,028
Current Ratio 1.21 1.81
TABLE 4.1
Fig 4.1
Interpretation:- The current ratioof twoyearsis lessthanideal ratio2:1, i.e.fluctuating.
Thisindicatesthatfirm’ scommitmenttomeetitsshortliabilitieswasnotsogood.Although
currentratio of 2012-13 isbetterthan 2011-12 & is close toideal ratio.
QUICK / ACID TEST / LIQUID RATIO:

48. 43
Liquidratiois indicationof availabilityof quickassetstohonoritsimmediateclaims.Higher
the ratio bettersthe coverage.Andthe standardratiois1:1.An assetis liquidif iscanbe
convertedintocashimmediatelywithoutlossof value.Hence cash ismostliquidassetsafter
assetswhichare consideredtobe relativelyliquidare;Debtor’ sbalance,marketable
securitiesetc.inventoriesconsideredtobe lessliquidtherefore theyrequiresome time form
relishingintocashandtheirvalue alsohastendencytofluctuate.
Formula:
Quickratio = CurrentAssets- Inventories/CurrentLiabilities
Year 2011-12 2012-13
Quick Assets 3318322 4038361
Current
Liabilities
3,998,146 3,086,028
Quick Ratio 0.82 1.30
TABLE 4.2
Fig 4.2

49. 44
Interpretation: The ideal ratio is 1:1. The quick ratio is also fluctuating. . In 2012-13
the ratio is excellent because it is near to 1 and is satisfactory in 2011-12 (0.82).
Overall the quick ratio is satisfactory, means liquidity position of the company is
good.
CASH RATIO: An asset which converts suddenly without doubtful is called as cash
ratios
Cash Ratio=Cash +Marketable Securities /Current Liabilities
Year 2011-12 2012-13
Cash+
marketable
securities
346347 221,815
Current
Liabilities
3,998,146 3,086,028
Cash Ratio 0.086 0.071
TABLE 4.3
Fig 4.3
Interpretation: In Cash ratiothere isno standardratios formaintainedthe cashbalance
because nowa daysnothingto be worriedaboutthe lackof cash if the companyhas reserve

50. 45
borrowingpowerforitsday to dayactivities.Holdingof Cashinthe year 2011-12 was better
than 2012-13
TURNOVER / ACTIVITY RATIOS OF THE COMPANY
Introduction:
Activity ratios are employed to evaluate the efficiently with which the firm manages
and utilizes its assets. These ratios are also called as turnover ratio. Therefore they
indicate the speed with which assets are being converted / turned over in to sales.
Thus an activity ratio involves relationship between sales and assets. A proper balance
between sales and assets generally reflects that assets are managed well.
In other words, turnover ratio indicates the efficiency with which the capital employed
is rotated in the business.
Higher the ratio of rotation, the greater will be the profitability
DIFFERENT TURNOVER RATIOS:
1) Inventory stock turnover Ratio
2) Debtors (Accounts Receivable) Turnover Ratios.
3) Creditors (Account Payable) Turnover Ratios
4) Fixed Assets turnover Ratio
5) Current Assets turnover Ratio
6) Working capital turnover Ratio
7) Total Assets turnover Ratio
8) Net Assets turnover Ratio
INVENTORY / STOCK TURNOVER RATIO (ITR/STR).
It indicates the efficiency of firm in producing and selling its products. High Ratio is
good from the view point of liquidity and vice versa. A low ratio would signify that
inventory does not sell fast and stably in the warehouse for a longtime.
Formula: Cost of Goods Sold OR Sales
Avg. Inventory Inventory
Year 2011-12 2012-13

51. 46
Sales 7,165,819 8,504,038
Inventory 1,529,577 1,559,164
Inventory
turnover ratio
4.68 5.45
TABLE 4.4
Fig 4.4
Interpretation:- In the above chart, the inventory turnover ratio in 2012-13 is higher than
2011-12.. Usually, a high inventory turnover indicates efficient management of inventory
because more frequently the stocks are sold.
DAYS OF INVENTORY HOLDING:
Formula:
Inventory*360/Sales
Year 2011-12 2012-13
Inventory 1,529,577 1,559,164
Sales 7,165,819 8,504,038
Days of
inventory
holding
76.84 66.00
TABLE 4.5

52. 47
Fig 4.5
Interpretation:- In the year 2012-13 due to increase in sale of inventory, the
inventory holding period is less i.e. the inventory has been disposed off or sold on an
average in 66 days but in 2011-12 the days are more than 2012-13 which is not a good
indicator .
2) DEBTORS TURNOVER RATIO:Debtors constitute an important constituent of
current assets and therefore the quality of debtors to great extent determines that
firm’ s liquidity. There are two ratios. They are:
1) Debtors turnover Ratio
2) Debtors collection period Ratio
Debtors’ turnover ratio:
Formula:
Debtors turnover ratio = Creditor Sales
Debtors
Higher the ratio is better, since it indicate that debts are being collected more
promptly.
Year 2011-12 2012-13
Sales 7,165,819 8,504,038
Debtors 2,349,517 3,419,708
Debtors
turnover
3.04 2.48

53. 48
TABLE 4.6
Fig 4.6
Interpretation:- In bothaccountingyears, payments of debtors are not so prompt. It is less
than standard ratio i.e. 8 times.
Debtors Collection Period:
Formula:
Debtors collection period ratio= Debtor*360/sales
Year 2011-12 2012-13
Debtors 2,349,517 3,419,708
Sales 7,165,819 8,504,038
Debtors
Collection
Period
118 144
TABLE 4.7

54. 49
Fig 4.7
Interpretation: Debtor collection period is more in 2012-13 than 2011-12, so debtor
collection period is weak in recent year.
ASSETS TURN OVER RATIO:
Asset turn over ratio indicates Sales for every one rupee which is invested in fixed
and current asset together. Assets are used to generate sales. A firm should manage its
efficiently to masculine sales.
Formula:
Asset turnover ratio= Sales/ Net Asset
TABLE 4.8
Year 2011-12 2012-13
Sales 7,165,819 8,504,038
Net Asset 4,847,899 5,597,525
Asset turn over
ratio
1.47 1.51

55. 50
Fig 4.8
Interpretation: The total asset turnover ratio is 1.51 times in the year 2012-13 is
good,but it is less in 2011-12 (1.47) which indicates comparatively poor performance
of the company.

56. 51
FINDINGS
1) Cash flow of C&S electric ltd. shows that year 2012 – 13 closing balance is
221,815 while in 2011 – 12 is 346,347.
2) Current ratio is better 1.21 in 2011-12 and in 2012-13 is 1.81.
3) The cash ratio is 0.086 in 2011-12 and in 2012-13 is 0.071 as it is close to the
standard ratio.
4) The inventory ratio is 4.68 in 2011-12 while in 2012-13 is 5.45.
5) Debtors turnover ratio is 3.04 in 2011-12 and in 2012-13 is 2.48
6) Debtors collection period is 144 days in 2012-13 against 118 days in 2011-12.
7) Asset turnover ratio is 1.47 in 2011-12 and in 2012-13 is 1.51

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SUGGESTIONS
Company should try to maintain its current ratio at the standard 2:1.
1) The company should reduce its cost of production through adopting new
technology. It will help to increase the sales.
2) C&S electric has very high average collection period. For avoiding the
company should take major techniques to collect the money from debtors.
3) Company should try to reduce its credit sales through cash discount at the time
of sales. It will help to meet the current obligation.
4) Company is suggested to maintain sufficient amount of cash & bank balance
to pay its quick liabilities, which will increase its credit worthiness &
goodwill.
5) The company is in loss due to heavy interest burden to avoid this company
should plan to adopt share capital in the business.
6) The company should conduct weekly meetings for central planning, material
management department, and production department towards operations of the
company.
7) The company should conduct monthly meetings to knowing its performance.
If the performance is not reached then it will helps to take necessary decisions.

58. 53
CONCLUSION
Financial statements plays very important role in providing facts and figures
for the decision makers. In the same way ratios will act as analysis kit in the hands of
financial analyst. These ratio will help us and in answering the basic question like
why, how, what of these statements.
Now a days financial statement are very much in consideration for decision
making. In deciding what to do and what not to do they are required to analyze the
data as per their requirement. Thus in my project I tried to give brief outline of ratio
analysis (i.e., how to analyze the facts and figures given in the financial statements)
from the angle of all stake holders.
Throughout my project I have analyzed company’ s financial position and pros
and cons of the situation. Inspite of some limitation I tried to analyze and interpret the
facts and figures with accuracy.
Based on the analysis and interpretation I tried to give my findings and
suggestions for the company as per my best knowledge.
Finally this project really helped me in knowing the practical things of the
corporate world. Really I enjoyed this project work in its real spirit.

59. 54
BIBLIOGRAPHY
Books:-
 Brochure, C&S electric Ltd.
 Maheshwari,S.N. Financial Accounting,4th edition,2005,Vikas Publishing
House Pvt. Ltd,New Delhi
 Pandey,I M, Financial Management, 9th edition, 2005, Vikas Publishing
House Pvt. Ltd,New Delhi
WEBSITES:
 http://en.wikipedia.org/wiki/C&Selectric
 http://www.cselectric.co.in/
 http://www.cselectric.co.in/History.html
 http://www.cselectric.co.in/Products.html
 Annual Report of C&S Electric Ltd of year 2012-13