Project on ratios

A
PROJECT REPORT ON
“RATIO ANALYSIS”
AT
“KUNJ ROLLER FLOUR MILLS PRIVATE LIMITED
BHUBANESWAR, ODISHA”
SUBMITTED BY:
NAME: RASWEEN CHOUDHARY
ROLL NO : 56316UT13042
(A report submitted for the partial fulfillment of BBA Programme in D.A.V. School of Business
Management affiliated to Utkal University)
INTERNAL GUIDE: EXTERNAL GUIDE:
Ms. AnjaliPanda CA Ashish Sharma
Faculty, DSBM
COMMITTED TO EXCELLENCE
D.A.V. SCHOOL OF BUSINESS MANAGEMENT
(Recognized by govt. of Odisha and affiliated to Utkal University)
D.A.V. CAMPUS, UNIT-8, NAYAPALLI, BHUBANESWAR-751012, ODISHA

DECLARATION
I, Rasween Choudhary, hereby declare that the project work entitled “Ratio
Analysis at Kunj Roller Flour Mills Private Limited, Bhubaneswar” submitted
to DAV School of Business Management (Affiliated to Utkal University), is a
record of original work done by me under the guidance of Ms. Anjali Panda,
Faculty Member and this project work has not performed the basis for the award
of any Degree or Diploma/ associate ship/ fellowship and similar project, if any.
Date: 09-01-2016
Place: Bhubaneswar Rasween Choudhary
Roll No:56316UT13042

COMMITTED TO EXCELLENCE
DAV SCHOOL OF BUSINESS MANAGEMENT
(Recognized by govt. of Odisha, affiliated to: Utkal University, vanivihar)
DAV Campus, Unit-VIII, Bhubaneswar-751012, Odisha, India Phone no. -+ 91 (0)674 2560539,
E-mail-dsbmbbsr@gmail.comWebsite-www.dsbm8.org
CERTIFICATE OF GUIDE
This is to certify that RasweenChoudhary, a student of BBA, admission batch
2013-2016 (5th semester) of D.A.V School of Business Management bearing
Roll no.-56316UT13042 has completed her summer project titled ‘‘Ratio
Analysis at Kunj RollerFlour Mills Private Limited’’ under my supervision.
The report is of her own independent work and has not been submitted by
anybody earlier.
I wish her all success in life.
Ms. Anjali Panda
Faculty, DSBM

ACKNOWLEDGEMENT
I feel great pleasure for the completion of this project. At the very outset I would express my
sincere thanks and deep sense of gratitude to personnel who helped me during the collection of
data and gave me rare and valuable guidance for the preparation of this report. I am thankful to
my project guide Ms. Anjali Panda for her timely guidance, cooperation and encouragement. I
take opportunity to thanks all my friends and also all those who directly or indirectly concerned
with this project. I also express my gratitude to my parents who give a constant support and love
throughout my life and career.
Date: 09-01-2016 Rasween Choudhary
Place-Bhubaneswar Roll No-56316UT13042

EXECUTIVE SUMMARY
Ratio analysis is one of the oldest methods of financial statements analysis. It was
developed by banks and other lenders to help them chose amongst competing companies
asking for their credit. Two sets of financial statements can be difficult to compare. The
effect of time, of being in different industries and having different styles of conducting
business can make it almost impossible to come up with a conclusion as to which company is
a better investment. Ratio analysis helps creditors solve these issues. Here is how:
What are Financial Ratios ?
 Shortcut: Financial ratios provide a sort of heuristic or thumb rule that investors can
apply to understand the true financial position of a company. There are recommended
values that specific ratios must fall within. Whereas in other cases, the values for
comparison are derived from other companies or the same companies own previous
records. However, instead of undertaking a complete tedious analysis, financial ratios
helps investors shortlist companies that meet their criteria.
 Sneak-Peek: Investors have limited data to make their decisions with. They do not
know what the state of affairs of the company truly is. The financial statements
provide the window for them to look at the internal operations of the company.
Financial ratios make financial analysis simpler. They also help investors compare the
relationships between various income statement and balance sheet items, providing
them with a sneak peek of what truly is happening behind the scenes in the company.
 Connecting the Dots: Over the years investors have realized that financial ratios have
incredible power in revealing the true state of affairs of a company. Analyses like the
DuPont Analysis have brought to the forefront the inter-relationship between ratios
and how they help a company become more profitable.

Sources of Data
Here is where the investors get the data they require for ratio analysis:
 Financial Statements: The financial data published by the company and its
competitors is the prime source of information for ratio analysis.
 Best Practices Reports: There are a wide range of consulting firms that collate and
publish data about various companies. This data is used for operational benchmarking
and can also be used for financial data analysis.
 Market: The data generated by all the activity on the stock exchange is also
important from ratio analysis point of view. There is a whole class of ratios where the
stock price is compared with earnings, cash flow and such other metrics to check if it
is fairly priced.

CONTENTS
i. Declaration (i)
ii. Certificate of External guide (ii)
iii. Certificate of Internal guide (iii)
iv. Acknowledgement (iv)
v. Executive Summary (v)
vi. Contents (vii)
SI NO Contents
PAGE
NO
1 Introduction 1
2 Research Methodology 6
3 Company Profile 10
4 Review of Literature 15
5 Data Collection 33
6 Analysis and interpretations of data 40
7 Findings and Suggestions 54
8 Conclusion 57
Bibliograhy 58
Annexure 59

What is Finance?
Finance is a field that deals with the allocation of assets and liabilities over time under
conditions of certainty and uncertainty. Finance can also be defined as the science of money
management. A key point in finance is the time value of money, which states that purchasing
power of one unit of currency, can vary over time. Finance aims to price assets based on
their risk level and their expected rate of return. Finance can be broken into three different
sub-categories—
1. Public Finance—
Public finance describes finance as related to sovereign states and sub-national entities and
related public entities or agencies. It is covered with—
 Identification of required expenditure of a public sector entity.
 Sources of that entity’s revenue.
 The budgeting process.
 Debt insurance for public works projects.
2. Personal Finance—
Personal finance may involve paying for education, financing durable goods such as real
estate and cars, buying insurance, investing and saving for retirement. It may also involve
paying for a loan, or debt obligation.
The 6 key areas of personal financial planning, as suggested by the Financial Planning
Standards Board, are—
 Financial Position—
It is concerned with understanding the personal resources available by examining net
worth and household cash flow.
 Adequate Protection—
It is the analysis of how to protect a household from unforeseen risks like, liability,
property, death, disability, health, or, long term care.
 Tax Planning—

Managing taxes is not a question of if you will pay taxes, but when and how much.
Government gives incentives in the form of tax deductions and credits, which can be
used to reduce the lifetime tax burden.
 Investment and Accumulation Goals—
It includes how to accumulate money for large purchases and life events like-
purchasing a house or car, starting a business, paying for education expenses, and
saving for retirement.
 Retirement Planning—
It is the process of understanding how much it costs to live at retirement and coming
up with a plan to distribute assets to meet any income shortfall.
 Estate Planning—
It involves planning for the disposition of one’s assets after death.
3. Corporate Finance—
Corporate Finance deals with the sources of funding and the capital structure of
corporations and the actions, that managers take to increase the value of the firm to the
shareholders, as well as the tools and analysis used to allocate financial resources. It
generally involves balancing risk and profitability, while attempting to maximize an entity’s
wealth and the value of its stock, and generally enrails 3 primary areas of capital resources
allocation—
 Capital budgeting
 Sources of Capital
 The dividend Policy
In investment management – in choosing a portfolio- one has to use financial analysis to
determine what, how much and when to invest. To do this, company must—
 Identify relevant objectives and constraints: institution or individual goals, time
horizon, risk aversion and tax considerations.
 Identify the appropriate strategy: active versus passive hedging strategy.
 Measure the portfolio performance.
Finance may be defined as ‘The science that describes the management, creation & study of
money, banking, credit, investments, assets & liabilities. Finance consists of financial
systems, which includes the public, private and Government spaces, and the study of finance
and financial instruments, which can relate to countless assets and liabilities.

What is Financial Analysis?
Financial Analysis, (also referred to as Financial Statement Analysis or Accounting Analysis
or Analysis of Finance), refers to an assessment of the viability, stability and profitability of a
business, sub-business or project. It, the Financial Statement Analysis, is the process of
reviewing and analyzing a competitor’s financial statements to make better economic
decisions. These statements include the income statement, balance sheet, statement of cash
flows, and a statement of retained earnings. Financial Statement Analysis is a method or
process involving specific techniques for evaluating risks, performance, financial health, &
future prospects of an organization.
It is performed by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. These reports are usually
presented to top management as one of their bases in making business decisions.
 Continue or discontinue its main operation or part of its business.
 Make or purchase certain materials in the manufacture of its product.
 Acquire or rent/lease certain machineries and equipment in the production of its goods.
 Issue stocks or negotiate for a bank loan to increase its working capital.
 Make decisions regarding investing or lending capital.
 Other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.
Goals—
Financial analysts often assess the following elements of a firm:
1. Profitability - its ability to earn income and sustain growth in both the short- and long-
term.
2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term.
3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate
obligations;
4. Stability - the firm's ability to remain in business in the long run, without having to sustain
significant losses in the conduct of its business.
Method—
Financial analysts often compare financial ratios

 Past Performance - Across historical time periods for the same firm (the last 5 years
for example),
 Future Performance - Using historical figures and certain mathematical and
statistical techniques, including present and future values. This extrapolation method
is the main source of errors in financial analysis as past statistics can be poor
predictors of future prospects.
 Comparative Performance - Comparison between similar firms.
What is Financial Ratio Analysis?
Financial Ratios are very powerful tools to perform some quick analysis of financial
statements. There are typically analyzed over time and across competitors in an industry.
 Liquidity Ratio
 Profitability Ratio
 Activity Ratio
 Leverage Ratio
What is Ratio Analysis?
Meaning— Ratio Analysis is a tool brought into play by individuals to carry out an
evaluative analysis of information in the financial statements of a company. These ratios are
calculated from current year figures and then compared to past years, other companies, the
industry, and also the company to assess the performance of the company. Besides, ratio
analysis is used predominantly by proponents of financial analysis.

CHAPTER-2
RESEARCH
METHODOLOGY

Research Methodology is a purely and simply the framework or a plans for the study that
guides the collection and analysis of data. Research is the scientific way to solve the
problems and it’s increasingly used to improve market potential. This involves exploring the
possible methods, one by one and arranging at the best solution, considering the resources at
the disposal research.
This study has been done in KUNJ ROLLER FLOUR MILLS PRIVATE LIMITED,
CUTTACK ROAD, BHUBANESWAR
Research Steps
Some of the important research steps are as follows:
i. Study about organization:-
This is the initial step of starting a project. Here we study about the organization and try to
find the various problems in that organization. This helps us to give the topic on which we
have to do our research.
ii. Setting of objectives:-

After studying different problems of the organization we select any one of the problem and
set our objective on the basis of that problem. And try to suggest and recommend different
alternatives through our research. The objective of this research is ratio analysis of the
organization and study the financial position of the organization.
iii. Instrument-design (Ratio analysis):-
In this step we decide which research methodology we would use to resolve the problem. In
this research we have used ratio analysis as our research methodology. This has enabled how
ratios have varied in years and this ratio has helped in budgeting of the organization.
iv. Main study:-
After designing the research methodology, the main study is started. This step includes
collection of various data from different sources. My data has been collected from the
secondary sources with the help of organization accountant.
v. Tabulation and cross tabulation
This data is now tabulated in forms of tables, graphs, pie charts, bar diagrams etc. to have
clear understanding of the data collected. This diagrams help in analysis of the changes in the
recent years.
vi. Analysis and interpretation
After forming tables and graphs from the we analyze this graphs and tables and interpret this
graphs with help of literature review. This interpretations help in forming different new
policies for the company.
vii. Conclusion
After analyzing the interpretations thus formed from the graphs and table help us in
concluding our research in the most efficient manner. This help in finding the correct
alternative of improving financial condition of the company.
viii. Suggestions and recommendation
At the end of the research we suggest the most efficient ways that we found in research to
help the organization. This is the most important step of our research.
Research Design

A research design is a specification of methods and procedure for acquiring the information
needed. It is the over-all operations pattern or framework of the project that stipulates what
information is to be collected from which source by what procedure, it also refers to the blue
print of the research process.
Research Design consists of:
 A clear statement of the research problem.
 Procedure and technique to be used for gathering information.
 The population is to be studied.
 Methods to be used in processing for analyzing the data.
The methodology being adopted for study of various tools, which basically analyze critically
financial position of the organization:
 Common size profit and and loss A/c
 Common size Balance Sheet
 Comparative Profit and Loss A/c
 Comparative Balance Sheet
 Ratio analysis
The above parameters are used for critical analysis of financial position. With the evaluation
of each component, the financial position from different angles is tried to be presented in well
and systematic manner. By critical analysis with the help of different tools, it becomes clear
how the financial manager handles the financial matters in profitable manner in the critical
challenging atmosphere, the recommendation are made which would suggest the organization
in formulation of a healthy and strong position financially with proper management system.
The through the evaluation of various percentage, ratios, and comparative analysis the
organization would be able to conquer its inefficiencies and makes the desired changes.
OBJECTIVE OF THE STUDY:
The major objectives of the resent study are to know about financial strengths and
weakness of Kunj Roller Flour Mills through financial ratio analysis.

The main objectives of resent study aimed as:
 To evaluate the performance of the company by using ratios as a yardstick to
measure the efficiency of the company.
 To understand the liquidity, profitability and efficiency positions of the company
during the study period.
 To evaluate and analyze various facts of the financial performance of the company.
To make comparison between the ratios during different periods.

CHAPTER-3
COMPANY
PROFILE
OVERVIEW
Kunj Roller Flour Mills Private Limited is located at 171, Sector-A, Zone-A, Mancheswar
Industrial Area, Bhubaneswar. The company has incorporated itself under companies’ act
1956 on dated 7th May, 1997. The company has started its commercial production with effect
from 1st April, 2000.
The “Rishta Brand” was launched in the year 2001. Is manufacturer, M/s Kunj Roller Flour
Mills (P) Ltd who was the first introducer of “Chakki Fresh Atta” in the state of Orissa is a

well renowned name in flour milling industry of Orissa, with a turnover of more than Rs 61
crores in 2010-11. The company manufactures them using advanced technology and ensures
superior quality, buyers specification etc, ensures one that can expect the best from “ Rishta
Brand”, always. The company provides the customer with “Right Quality at Right Price”
under an innovative concept “ Ab Taste aur Heath Ka Rishta”.
M/s Kunj Roller Flour Mills Pvt Ltd is a private limited company promoted by Sri Harsh
Mohan Gupta and Smt Rashmi Gupta. All the directors of this company are well qualified
and highly experienced. All of them are very successful in their existing line of business.
Re-branding – The existing product to make it more marketable to a Pan India market
which shall be acceptable to a large consumer segment. The website of the company is
www,rishtafoods.com and the strike line of the company is “Rishta…. Dil Se Hamesha….”.
The unit was designed and commissioned by technical consultant – Dr. Ing. N.K. Gupta,
Technical Consultants Private Limited, Flat no. 207A (2nd Floor), 28-29, Link Road, Lajpath
Nagar – III, New Delhi-24. The plant was commissioned with State - of – the – art wheat
milling technology and equipment’s were procured from the industries leader M/s. Indopol
Food Processing Machinery Private Limited. Some machinery was also imported from,
Neumuhle-1, D-35633 lahnau, Germany and Claus Friedrich, Friedrich – Electronic,
Hoizmuehlerweg 100-D_35457, Germany.
Pollution Control- There is no major problem associated with this industry except for
disposal of waste which has been managing properly. The company has obtained “No
Objection Certificate” from the State Pollution Control Board, Bhubaneswar, Orissa.
Energy Conservation- Only electric power is being used as a source of energy. The power
requirement of unit is 500 hp at 100 capacities. The unit has already having adequate power
connection.
Water Conservation- The requirement of Water for the unit is around 6000 litres per day
which is being mt with the underground sources with the help of well.
Employment- the Company provides direct employment to more than 100 people with in
Orissa. The indirect employment is more than of 200 within the states of Orissa.
PRESENT POLICY OF FOOD CORPORATION OF INDIA

With the surplus wheat stocks and projected wheat crop this year in India , the off take under
Open Market Sale Scheme (OMSS) Offered by Food Corporation of India(FCI) has slowed
down over the last one year. Against an allocation of 2 million tones soft wheat to bulk
consumers FCI has managed to sale only 1.34 million tons during 2010-2011 though the
OMSS has now been extended for 2011-2012.
INTERNATIONAL MARKET
Russia, once the world’s second biggest wheat exporter, will let a grain export ban expired on
July 1. Increasing supply as drought and flooding threaten crops from Europe to the US.
Farmers have shown 10 percent more acres and stock piles exceed six million tones. Wheat
traded in Chicago, a global benchmark, as much as doubled in the past year as drought and
flooding from CANADA, RUSSIA and Europe ruined crops. Russia’s export ban combined
with quotas and shipment imposed by Ukraine, tightened supply and contributed to global
food prices tracked by the United Nations surging to w record in the first quarter. While
extra shipment will help ease supply concerns, extreme weather may curve output elsewhere
and keep prices high.
INPUT OUTPUT ANALYSIS
The capacity of the unit is 30,000MT per annum(Single Shift). The various outputs are
MAIDA, SUJI, ATTA and cattle feed. The mixture of various outputs can be altered
according to choice to make it most profitable. The most profitable and possible mixture of
output are
Name Of The Output
Production Per Annum PERCENTAGE
ATTA 25% 7500.00

SUJI 15% 4500.00
MAIDA 35% 10500.00
CATTLE FEEDS 25% 7500.00
RISHTA PRODUCT LINE

CHAPTER-4
REVIEW OF
LITERATURE

Ratio is the arithmetical expression of relationship between two related items. Ratio when
calculated is the basis of accounting information called as accounting ratios. Ratio is the
process of determining and interpreting numerical relationship between two variables which
are interrelated.
Kennedy and Mc Mullan:
“The relationship of one term to another, expressed in simple mathematical form is known as
ratio.”
R.N Anthony:
“A ratio is simply one number expressed in terms of another. It is found by dividing one
number by another.”
The term "accounting ratios" is used to describe significant relationship between figures
shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any
other part of accounting organization. Accounting ratios thus shows the relationship between
accounting data. An accounting ratio compares two aspects of a financial statement, such as
the relationship or ratio of current assets to current liabilities. The ratios can be used to
evaluate the financial condition of a company, including the company's strengths and
weaknesses. An example of an accounting ratio is the price-to-earnings (P/E) ratio of a stock.
These measures the price paid per share in relation to the profit earned by the company per
share in a given year. Accounting ratios assist in measuring the efficiency and profitability of
a company based on its financial reports. Accounting ratios form the basis of fundamental
analysis.
J.Batty:
“The term accounting ratio is used to describe significant relationship which exist between

figures shown in profit and loss account and balance sheet in a budgetary control system or in
any part of the accounting organization”.
A financial ratio is a relative magnitude of two selected numerical values taken from an
enterprise's financial statements. In standard ratios it is used to try to evaluate the overall
financial condition of a corporation or other organization. Financial ratios may be used by
managers within a firm, by current and potential shareholders (owners) of a firm and by a
company are traded in a financial market, the market price of a firm's creditors. Financial
analysts use financial ratios to compare the strengths and weaknesses in various companies. If
shares in the shares is used in certain financial ratios.
The study of relationships between financial variables is ratio analysis. Ratios of one firm
are often compared with the same ratios of similar firms or of all firms in a single industry.
This comparison indicates if a particular firm's financial statistics are suspect. Similarly, a
particular ratio for a firm may be evaluated over a period of time to determine if any special
trend exists. Ratio analysis is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical performance
and current financial condition can be determined. Ratio Analysis is a tool used by
individuals to conduct a quantitative analysis of information of company's financial
statements. Ratios are calculated from current year numbers and are then compared to
previous years. The companies, industries or the economy use ratio analysis to judge the
performance. Ratio analysis is a fundamental means of examining the health of a company
by studying the relationships of key financial variables. Many analysts believe ratio analysis
is the most important aspect of the analysis process. A firm's ratios are normally compared to
the ratios of other companies in that firm's industry or tracked over time internally in order to
see trends. Ratio analysis is basically a technique of establishing meaningful relationship
between significant variables of financial statements and interpreting the relationship to form
judgement regarding the financial affairs of the unit.
According to Myers “Ratio analysis is a study of relationship among various financial
factors in a business” The usefulness of ratio analysis depends upon identifying:
(a) Objective of analysis
(b) Selection of relevant data
(c) Deciding, appropriate ratios to be calculated

(d) Comparing the calculated ratio with standard norms
(e) Interpretation of the ratios.
Ratio can be used in the form of;
(1) Percentage (20%)
(2) Quotient (say 10) and
(3) Rates. In other words, it can be expressed as a to b; a: b (a is to b) or as a simple fraction,
integer and decimal. A ratio is calculated by dividing one item or figure by another item or
figure.
Analysis or Interpretations of Ratios
The analysis or interpretations in question may be of various types. The following approaches
are usually found to exist:
(a) Interpretation or Analysis of an Individual (or) Single ratio.
(b) Interpretation or Analysis by referring to a group of ratios.
(c) Interpretation or Analysis of ratios by trend.
(d) Interpretations or Analysis by inter-firm comparison.
Principles of Ratio Selection
The following principles should be considered before selecting the ratio:
(1) Ratio should be logically inter-related.
(2) Pseudo ratios should be avoided.
(3) Ratio must measure a material factor of business.
(4) Cost of obtaining information should be borne in mind.
(5) Ratio should be in minimum numbers.
(6) Ratio should be facilities comparable.

SIGNIFICANCE OR OBJECTIVE OF RATIO ANALYSIS:
1. It helps in evaluating the firm’s performance:
With the help of ratio analysis conclusion can be drawn regarding several aspects such as
financial health, profitability and operational efficiency of the undertaking. Ratio points out
the operating efficiency of the firm i.e. whether the management has utilized the firm’s assets
correctly, to increase the investor’s wealth. It ensures a fair return to its owners and secures
optimum utilization of firm’s assets.
2. It helps in inter-firm comparison:
Ratio analysis helps in inter-firm comparison by providing necessary data. An inter firm
comparison indicates relative position. It provides the relevant data for the comparison of the
performance of different departments. If comparison shows a variance, the possible reasons
of variations may be identified and if results are negative, the action may be initiated
immediately to bring them in line.
3.It simplifies financial statement:
The information given in the basic financial statements serves no useful Purpose unless it’s
interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in
the hands of those who want to know something more from the financial statements in the
simplified manner.
4. It helps in determining the financial position of the concern:
Ratio analysis facilitates the management to know whether the firm’s financial position is
improving or deteriorating or is constant over the years by setting a trend with the help of
ratios The analysis with the help of ratio analysis can know the direction of the trend of
strategic ratio may help the management in the task of planning, forecasting and controlling.
5. It is helpful in budgeting and forecasting:

Accounting ratios provide a reliable data, which can be compared, studied and analyzed.
These ratios provide sound footing for future prospectus. The ratios can also serve as a basis
for preparing budgeting future line of action.
6. Liquidity position:
With help of ratio analysis conclusions 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. The ability to meet short term liabilities is reflected in the
liquidity ratio of a firm.
7. Long term solvency:
Ratio analysis is equally for assessing the long term financial ability of the Firm. The long
term solvency as measured by the leverage or capital structure and profitability ratio which
shows the earning power and operating efficiency, Solvency ratio shows relationship between
total liability and total assets.
8. Operating efficiency:
Yet another dimension of usefulness or ratio analysis, relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency.
Advantages of Ratio Analysis
Ratio analysis is necessary to establish the relationship between two accounting figures to
highlight the significant information to the management or users who can analyze the
business situation and to monitor their performance in a meaningful way. The following are
the advantages of ratio analysis:

(1) It facilitates the accounting information to be summarized and simplified in a required
form.
(2) It highlights the inter-relationship between the facts and figures of various segments
of business.
(3) Ratio analysis helps to remove all type of wastages and inefficiencies.
(4) It provides necessary information to the management to take prompt decision relating
to business.
(5) It helps to the management for effectively discharge its functions such as planning,
organizing, controlling, directing and forecasting.
(6) Ratio analysis reveals profitable and unprofitable activities. Thus, the management is
able to concentrate on unprofitable activities and consider improving the efficiency.
(7) Ratio analysis is used as a measuring rod for effective control of performance of
business activities.
Limitations of Ratio Analysis
Ratio analysis is one of the important techniques of determining the performance of financial
strength and weakness of a firm. Though ratio analysis is relevant and useful technique for
the business concern, the analysis is based on the information available in the financial
statements. There are some situations, where ratios are misused; it may lead the management
to wrong direction. The ratio analysis suffers from the following limitations:
1. Ratio analysis is used on the basis of financial statements. Number of limitations of
financial statements may affect the accuracy or quality of ratio analysis.
2. Ratio analysis heavily depends on quantitative facts and figures and it ignores
qualitative data.
3. Therefore this may limit accuracy.
4. Ratio analysis is a poor measure of a firm's performance due to lack of adequate
standards laid for ideal ratios.

5. It is not a substitute for analysis of financial statements. It is merely used as a tool for
measuring the performance of business activities.
6. Ratio analysis clearly has some latitude for window dressing.
CLASSIFICATION OF RATIOS
Accounting Ratios are classified on the basis of the different parties interested in making use
of the ratios. A very large number of accounting ratios are used for the purpose of
determining the financial position of a concern for different purposes. Ratios may be broadly
classified in to:
(1) Classification of Ratios on the basis of Balance Sheet.
(2) Classification of Ratios on the basis of Profit and Loss Account.
(3) Classification of Ratios on the basis of Mixed Statement (or) Balance Sheet and
Profit and Loss Account.
These classifications are discussed here under:
1. Classification of Ratios on the basis of Balance Sheet: Balance sheet ratios which
establish the relationship between two balance sheet items. For example, Current
Ratio, Fixed Asset Ratio, Capital Gearing Ratio and Liquidity Ratio etc.
2. Classification on the basis of Income Statements: These ratios deal with the
relationship between two items or two group of items of the income statement or
profit and loss account. For example, Gross Profit Ratio, Operating Ratio, Operating
Profit Ratio, and Net Profit Ratio etc.
3. Classification on the basis of Mixed Statements: These ratios also known as
Composite or Mixed Ratios or Inter Statement Ratios. The inter statement ratios
which deal with relationship between the item of profit and loss account and item of
balance sheet. For example, return on Investment Ratio, Net Profit to Total Asset
Ratio, Creditor's Turnover Ratio, Earning per Share Ratio and Price Earnings Ratio
etc.

This classification further grouped in to:
I. Liquidity Ratios
II. Profitability Ratios
III. Turnover Ratios
IV. Solvency Ratios
V. Overall Profitability Ratios
1. LIQUIDITY RATIOS
Liquidity Ratios are also termed as Short-Term Solvency Ratios. The term liquidity means
the extent of quick convertibility of assets in to money for paying obligation of short-term
nature. Accordingly, liquidity ratios are useful in obtaining an indication of a firm's ability to
meet its current liabilities, but it does not reveal h0w effectively the cash resources can be
managed. To measure the liquidity of a firm, the following ratios are commonly used:
a. Current Ratio.
b. Quick Ratio (or) Acid Test or Liquid Ratio.
c. Absolute Liquid Ratio (or) Cash Position Ratio.
a) Current Ratio:
Current Ratio establishes the relationship between current Assets and current Liabilities. It
attempts to measure the ability of a firm to meet its current obligations. In order to compute
this ratio, the following formula is used:
CURRENT RATIO=
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺

The two basic components of this ratio are current assets and current liabilities. Current asset
Normally means assets which can be easily converted in to cash within a year's time. On the
other hand, current liabilities represent those liabilities which are payable within a year.
Interpretation:
The ideal current ratio is 2: 1. It indicates that current assets double the current liabilities are
considered to be satisfactory. Higher value of current ratio indicates more liquid of the firm's
ability to pay its current obligation in time. On the other hand, a low value of current ratio
means that the firm may find it difficult to pay its current ratio as one which is generally
recognized as the patriarch among ratios.
b) Acid test ratio or quick ratio:
It is the ratio of quick assets to current liability. It is an indicator of a company's short-term
liquidity. The quick assets are defined as those assets which are quickly convertible into cash.
While calculating quick assets closing stock and prepaid expenses are excluded from current
assets. The quick ratio measures a company's ability to meet its short-term obligations
with its most liquid assets. Higher the quick ratio, better the position of the company. Quick
ratio is viewed as a sign of company's financial strength or weakness (higher number means
stronger, lower number means weaker). It is also known as acid test ratio. It is expressed as:
QUICK RATIO=
𝑸𝒖𝒊𝒄𝒌 𝒂𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Interpretation:
If quick ratio is higher, company may keep too much cash on hand or have a problem
collecting its accounts receivable. Higher quick ratio is needed when the company has
difficulty borrowing on short-term notes. A quick ratio higher than 1:1 indicates that the
business can meet its current financial obligations with the available quick funds on hand.

If a quick ratio is lower than 1:1 it indicates that the company relies too much on inventory or
other assets to pay its short-term liabilities.
Many lenders are interested in this ratio because it does not include inventory, which may or
may not be easily converted into cash.
2. SOLVENCYRATIO:
Solvency ratio is calculated to determine the ability of the business to service its debt in the
long run. The following ratios are normally computed for evaluating solvency of the
business:
(a) Debt equity ratio:
Debt equity ratio measures the relationship between long term debt and equity. If debt
component of the total long term funds employed is small. Outsiders feel more secure. From
security point of view, capital structure with less debt and more equity is considered
favorable as it reduces the chances of bankruptcy. Normally 2:1 debt equity ratio is
considered safe. It is computed as follows:
DEBT EQUITY RATIO =
𝑳𝑶𝑵𝑮 𝑻𝑬𝑹𝑴 𝑫𝑬𝑩𝑻
𝑺𝑯𝑨𝑹𝑬𝑯𝑶𝑳𝑫𝑬𝑹𝑺 𝑭𝑼𝑵𝑫
Interpretation:
The ratio measures the degree of indebtedness of an enterprise and gives an idea to the long
term lender regarding extent of security of the debt. A low debt ratio reflects more security
and high ratio is considered risky as it may put firm into difficulty in meeting its obligations
to outsiders. The prescribed ratio is limited to 2:1. This ratio is also termed as leverage ratio.
(b) Total assets to Debt ratio:
Debt equity ratio refers to proportion of long term debt a company has relative to its assets or
the capital employed. The measure gives an idea to the leverage of the company along with

the potential risks the company faces in terms of its debt-load. Capital employed is equal to
long term debt + shareholders fund. It is computed as follows:
TOTAL ASSETS TO DEBT RATIO=
𝑻𝑶𝑻𝑨𝑳 𝑨𝑺𝑺𝑬𝑻𝑺
𝑳𝑶𝑵𝑮 𝑻𝑬𝑹𝑴 𝑫𝑬𝑩𝑻𝑺
Interpretation:
The higher the ratio, the greater risk will be associated with the firm's operation. In addition,
high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will
lower the firm's financial flexibility. Like all financial ratios, a company's debt ratio should
be compared with their industry average or other competing firms.
Total liabilities divided by total assets. The debt/asset ratio shows the proportion of a
company's assets which are financed through debt. If the ratio is less than 0.5, most of the
company's assets are financed through equity. If the ratio is greater than 0.5, most of the
company's assets are financed through debt. Companies with high debt/asset ratios are said to
be "highly leveraged," not highly liquid as stated above. A company with a high debt ratio
(highly leveraged) could be in danger if creditors start to demand repayment of debt.
Low ratio provides security to creditors and high ratio helps management in trading on
equity.
(c) Proprietary ratio:
Proprietary ratio expresses relationship of proprietor’s (shareholders fund) to net assets. It is
calculated as follows:
PROPRIETARY RATIO=
Interpretation:
Higher proportion of shareholders fund in financing the assets is positive feature as it
provides security to creditors. This ratio can also be computed in relation to total assets in

lead of net assets (capital employed). It may be noted that the total debt ratio and proprietary
ratio will be equal to 1
.
Cautions:
The proprietary ratio is not a clear indicator of whether or not a business is properly
capitalized. For example, an excessively high ratio can mean that management has not taken
advantage of any debt financing, so the company is using nothing but expensive equity to
fund its operations. Instead, there is a balance between too high and too low a ratio, which is
not easy to discern.
Also, the ratio is not necessarily a good indicator of long-term solvency, since it does not
make use of any information on the income statement, which would indicate profitability
or cash flows..
3. ACTIVITY RATIO:
The activity ratio expresses the number of times assets employed or any constitution of assets
is turned into sale during an accounting period. Higher turnover ratio means better utilization
of assets and signifies improved efficiency and profitability, it is also known as efficiency
ratio. The important activity ratio is:
(a) Stock turnover ratio:
Stock turnover ratio is a relationship between the cost of goods sold during a particular period
of time and the cost of average inventory during a particular period. It is expressed in number
of times. Stock turnover ratio/Inventory turnover ratio indicates the number of time the stock
has been turned over during the period and evaluates the efficiency with which a firm is able
to manage its inventory. This ratio indicates whether investment in stock is within proper
limit or not. It is calculated as follows:

STOCK TURNOVER RATIO=
𝑪𝑶𝑺𝑻 𝑶𝑭 𝑮𝑶𝑶𝑫𝑺 𝑺𝑶𝑳𝑫
𝑨𝑽𝑬𝑹𝑨𝑮𝑬 𝑺𝑻𝑶𝑪𝑲
Interpretation:
Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a
high inventory turnover/stock velocity indicates efficient management of inventory because
more frequently the stocks are sold; the lesser amount of money is required to finance the
inventory. A low inventory turnover ratio indicates an inefficient management of inventory.
A low inventory turnover implies over-investment in inventories, dull business, poor quality
of goods, stock accumulation, accumulation of obsolete and slow moving goods and low
profits as compared to total investment. The inventory turnover ratio is also an index of
profitability, where a high ratio signifies more profit; a low ratio signifies low profit.
Sometimes, a high inventory turnover ratio may not be accompanied by relatively high
profits. Similarly a high turnover ratio may be due to under-investment in inventories.
(b) Investment turnover:
The Inventory Turnover Ratio measures how many times in a year a company sells its
inventory. The investment turnover ratio is a measure of how efficiently a company's assets
generate revenue. It measures the number of dollars of revenue generated by one dollar of the
company's assets.
INVESTMENT TURNOVER RATIO=
𝑵𝑬𝑻 𝑺𝑨𝑳𝑬𝑺
𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑬𝑴𝑷𝑳𝑶𝒀𝑬𝑫
Interpretation:

A low asset turnover ratio suggests problems with excess production capacity, poor
inventory management, or lax collection methods. Increases in the asset turnover ratio over
time may indicate a company is "growing into" its capacity (while a decreasing ratio may
indicate the opposite), but remember that asset purchases made in anticipation of coming
growth (or the sale of unnecessary assets in anticipation of declining growth) can suddenly
and somewhat artificially change a company's asset turnover ratio.
Low-margin industries tend to have higher asset turnover ratios than high-margin industries
because low-margin industries must offset lower per-unit profits with higher unit-
sales volume. Additionally, capital-intensive companies will typically have lower asset
turnover ratios than companies using fewer assets. This is why comparison of asset turnover
ratios is generally most meaningful among companies
(c) Fixed assets turnover:
The fixed asset turnover ratio is the ratio of net sales to net fixed assets (also known as
property, plant, and equipment). A high ratio indicates that a company is doing an effective
job of generating sales with a relatively small amount of fixed assets. Conversely, if the ratio
is declining over time, the company has either overinvested in fixed assets or it needs to issue
new products to revive its sales. Another possible effect is for a company to make a large
investment in fixed assets, with a time delay of several months to a year before the new assets
start generating revenues. The concept of the fixed asset ratio is most useful to an outside
observer, who wants to know how well a business is employing its assets to generate sales. It
is computed as follows:
FIXED ASSETS TURNOVER RATIO=
𝑵𝑬𝑻 𝑭𝑰𝑿𝑬𝑫 𝑨𝑺𝑺𝑬𝑻𝑺
Interpretation:
If the fixed asset turnover ratio is low as compared to the industry or past years of data for the
firm, it means that sales are low or the investment in plant and equipment is too high. This
may not be a serious problem if the company has just made an investment in fixed asset to
modernize. If the fixed asset turnover ratio is too high, then the business firm is likely

operating over capacity and needs to either increase its asset base (plant, property,
equipment) to reduce its sale.
4. PROFITABILITY RATIO:
The profitability or financial performance is summarized in income statement. Profitability
ratio is calculated to analyze the earning capacity of the business which is outcome of
utilization of resources employed in the business. The various ratios which are commonly
used are:
(a) Gross profit ratio:
Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales returns. The ratio
thus reflects the margin of profit that a concern is able to earn on its trading and
manufacturing activity. It is the most commonly calculated ratio. It is employed for inter-firm
and inter-firm comparison of trading results. It is computed as follows:
GROSS PROFIT RATIO=
𝑮𝑹𝑶𝑺𝑺 𝑷𝑹𝑶𝑭𝑰𝑻
x 100
Interpretation:
The selling price of the goods has gone up without corresponding increase in the cost of
goods sold. The cost of goods sold has gone down without corresponding decrease in the
selling price of the goods. Purchases might have been omitted or sales figures might have
been inflated. The valuation of the opening stock is lower than what it should be or the
valuation of the closing stock is higher than what it should be. In case, there a decrease in the
rate of gross profit, it may be due to one or more of the following reasons. There may be

decrease in the selling rate of the goods sold without corresponding decrease in the cost of
goods sold. There may be increase in the cost of goods sold without corresponding increase
in the selling price of the goods sold. There may be omission of sales. Stock at the end may
have been under-valued or opening stock may have been over-valued.
(b) Operating ratio:
The operating ratio is determined by comparing the cost of the goods sold and other operating
expenses with net sales. It is computed as follows:
OPERATING RATIO=
(𝑪𝑶𝑺𝑻 𝑶𝑭 𝑺𝑨𝑳𝑬𝑺+𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑵𝑮 𝑬𝑿𝑷𝑬𝑵𝑺𝑬)
x 100
Interpretation:
This ratio is a test of the efficiency of the management in their business operation. It is a
means of operating efficiency. In normal conditions, the operating ratio should be low
enough so as to leave portion of the sales sufficient to give a fair return to the investors.
Operating ratio plus operating profit ratio is 100. The two ratios are obviously interrelated.
For example, if the operating profit ratio is 20%, it means that the operating ratio is 80%. A
rise in the operating ratio indicates a decline in the efficiency. Lower the operating ratio, the
better is the position because greater is the profitability and management efficiency of the
concern. The higher the ratio, the less favourable is the situation, because there will be
smaller margin of profit available for the purpose of payment of dividend and creation of
reserves.
(c) Operating profit ratio:
It is calculated to reveal operating margin. It may be computed as follows:

OPERATING PROFIT RATIO=100 - OPERATING PROFIT
OR
𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑵𝑮 𝑷𝑹𝑶𝑭𝑰𝑻
𝑺𝑨𝑳𝑬𝑺
x 100
Where Operating Profit = Sales - Cost Of Operation.
Interpretation:
Operating margin is used to measure company's pricing strategy and operating efficiency. It
gives an idea of how much a company makes (before interest and taxes) on each dollar of
sales. Operating margin ratio shows whether the fixed costs are too high for the production or
sales volume.
A high or increasing operating margin is preferred because if the operating margin is
increasing, the company is earning more per dollar of sales.
Operating margin can be used to compare a company with its competitors and with its past
performance. It is best to analyse the changes of operating margin over time and to compare
company's figure to those of its competitors.
Operating margin shows the profitability of sales resulting from regular business. Operating
income results from ordinary business operations and excludes other revenue or losses,
extraordinary items, interest on long term liabilities and income taxes.
(d) Net profit ratio:
Net profit ratio expresses the relationship between net profit after taxes and sales. This ratio is
a measure of the overall profitability net profit is arrived at after taking into accounts both the
operating and non-operating items of incomes and expenses. The ratio indicates what portion
of the net sales is left for the owners after all expenses have been met
.
NET PROFIT RATIO=
𝑵𝑬𝑻 𝑷𝑹𝑶𝑭𝑰𝑻
X 100
Interpretation:

Net profit ratio is used to measure the overall profitability and hence it is very useful to
proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be
able to achieve a satisfactory return on its investment. This ratio also indicates the firm's
capacity to face adverse economic conditions such as price competition, low demand, etc.
Obviously, higher the ratio the better is the profitability.
CHAPTER -3
DATA COLLECTION

Data can be defined as the quantitive or qualitative values of a variable. Data is plural of
datum which literally means to give or something given. Data is thought to be lowest unit of
information from which other measurements and analysis can be done. Data can be numbers,
images, words, figures, facts or ideas. Data in itself cannot be understood and to get
information from the data one must interpret it into meaningful information. There are
various methods of interpreting data.
Data collection is the process of gathering and measuring information on variables of
interest, in an established systematic fashion that enables one to answer stated research
questions, test hypotheses, and evaluate outcomes. The data collection component of research
is common to all fields of study including physical and social sciences, humanities, business,
etc. While methods vary by discipline, the emphasis on ensuring accurate and honest
collection remains the same. The goal for all data collection is to capture quality evidence
that then translates to rich data analysis and allows the building of a convincing and credible
answer to questions that have been posed.
Regardless of the field of study or preference for defining data (quantitative, qualitative),
accurate data collection is essential to maintaining the integrity of research. Both the selection
of appropriate data collection instruments (existing, modified, or newly developed) and
clearly delineated instructions for their correct use reduce the likelihood of errors occurring.
A formal data collection process is necessary as it ensures that data gathered are both defined
and accurate and that subsequent decisions based on arguments embodied in the findings are
valid.[2] The process provides both a baseline from which to measure and in certain cases a
target on what to improve.

PURPOSE OF DATA COLLECTION
 To obtain information
 To keep on record
 To make decisions about important issues
 To pass information to others
IMPORTANCE OF DATA AND DATA COLLECTION
Data is one of the most important and vital aspect of any research studies. Researchers
conduct in different fields of study can be different in methodology but every research is
based on data which is analyzed and interpreted to get information. Data is the basic unit in
statistical studies. Statistical information like census, population variables, health statistics
and road accidents records are all developed from data.
DATA COLLECTION TECHNIQUES
There are two sources of data collection techniques. Primary data collection uses surveys,
experiments or direct observations. Secondary data collection may be conducted by
collecting information from a diverse source of documents or electronically stored
information, census and market studies are examples of a common sources of secondary data.
This is also referred to as data mining .

PRIMARY DATA
Primary data means original data that has been collected for the purpose in mind. It means
someone collected data from the original source first hand. Data collected this way is called
primary data.
Primary data has not been published yet and is more reliable, authentic and objective.
Primary data has not been changed or altered by human beings; therefore its validity is
greater than secondary data.
Some of the types of primary data are:-
 Surveys
Survey is most commonly used method in social sciences, management, marketing and
psychology to some extent. Surveys can be conducted in different methods
 Questionnaire
Questionnaire is the most commonly used method in a survey. Questionnaires are a list of
questions either an open ended or close ended for which the respondent give answers.
SOURCES OF
DATA
PRIMARY
DATA
SECONDARY
DATA

Questionnaire can be conducted via telephone, mail, live in a public area or in an institute,
through electronic mail or through fax and other methods.
 Interview
Interview is a face to face conversation with the respondent. It is slow, expensive and they
ace people away from their regular jobs, but they allow in depth questioning and follow up
questions.
 Observations
Observations can be done while letting the observing person know that he is being observed
or without letting him know. Observations can also be made in natural settings as well as in
artificially created environment.
Advantages
 Data interpretation is better.
 Targeted issues are addressed.
 Efficiency spending for information.
 Decency of data.
 Addresses specific research issues.
 Greater control
 Proprietary issues.
Disadvantages
 High cost.
 Time consuming.
 Inaccurate feedbacks
 More number of resources is required.
SECONDARY DATA
Secondary data is the data that has been already collected by and readily available from other
sources. When we use statistical method with primary data from another purpose for our
purpose we refer to it as secondary data. It means that one purpose’s primary data is another

purposes secondary data. So that secondary data is that data is being reused. Such data are
more quickly obtainable tan the primary data.
These secondary data may be obtained from many sources, including literature, industry
surveys, compilations from computerized data bases and information system, and
computerized or mathematical model of environmental processes.
Sources of secondary data:-
 Internal sources
 Sales record
 Marketing activity cost information
 Distributor reports and feedback
 Customer feedback
 External sources
 Journals
 Books
 Magazines
 Newspaper
 Libraries
 The internet
Advantages
 Inexpensive
 Easily accessible
 Immediately available
 Will provide essential background and help to clarify or refine research problem
 Secondary data sources will provide research method alternatives
 It will also alert the researcher to any potential difficulties.
Disadvantages
 Expensive

 Not immediately available
 Not as readily accessible
 Incomplete information
 Quality of research
 Not specific to researcher’s needs
 Not timely
The secondary data are collected from the company’s annual report, balance sheet, books,
internal magazines, websites, newspapers etc .The basic understanding of the subject is
referred from various professional institutes and the valuable guidance of the guide.
Interpretation of various statistics is done through analysis whichever is necessary. The ratio
analysis is done by taking data from balance sheet and conducting survey of the company by
taking ratio of three consecutive years’ i.e.2010-11, 2011-2012, 2012-13 and 2013-14. The
balance sheet, together with the income statement and cash flow statement, make up the
cornerstone of any company's financial statements.
The project is based on
 Balance sheet of Kunj roller flour mills private limited 2010-11
COLLECTION OF DATA:
Data has been collected from various sources like :
 Annual Balance sheets of last four years
 Manual of concerned departments
 Technical personnel of M/s. Kunj Roller Flour Mills Private Limited.
 Accounts department of M/s. Kunj Roller Flour Mills Private Limited.

 Personal visits to various flour milling industry located nearby areas of Bhubaneswar
M/s. Maa Bhuasuni Roller Flour Mills, Jatni and Sri Lalbaba Roller Flour Mills ,
Cuttack
 Internet sites like www.rishtafoods.com etc.
ASSUMPTIONS:
 Year is taken as 365 days.
 All purchases have been taken as credit purchases and all sales have been taken as credit sales
In the absence of relevant data, the data from internet site is taken as relevant information

CHAPTER - 6
ANALYSIS
AND
INTERPRETATION OF
DATA
A. LIQUIDITY RATIOS

1. CURRENT RATIO =
𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺
(In Rs.)
YEAR 2010-11 2011-2012 2012-2013 2013-2014
CURRENT
ASSETS
85432242.95 61053075.77 93371830.79 119196379.10
CURRENT
LIABILITIES
35682203.08 26200247.92 58643076.55 82135615.12
CURRENT
RATIO
2.39 2.33 1.59 1.45
INTERPRETATIONS:-
From the above graph we can conclude that current ratio is decreasing every year. In
2010-11 it is 2.39:1; in 2011-12 it declined to 2.33:1, in 2012-13 it is 1.59 and in
2013-14 it is 1.45:1..
2. QUICK RATIO =
𝑸𝑼𝑰𝑪𝑲 𝑨𝑺𝑺𝑬𝑻𝑺
0
0.5
1
1.5
2
2.5
3
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
QUICK
ASSETS
48823089.88 34631965.27 69874255.04 81637790.90
CURRENT
LIABILITIES
35682203.56 26200247.92 58643076.55 82135615.12
QUICK RATIO 1.36 1.32 1.19 0.99
QUICK ASSETS = CURRENT ASSETS – ( STOCK + PREPAID EXPENSES)
INTERPRETATIONS:-
From the above graph we can conclude that current ratio is decreasing every year. In 2010-11
it is 1.36:1; in 2011-12 it declined to 1.32:1, in 2012-13 it is 1.19:1 and in 2013-14 it is
0.99:1. The ideal ratio is 1:1 for quick ratio , we find that the organization is maintaining the
ideal ratio.
B. SOLVENCY RATIOS
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

1. DEBT-EQUITYRATIO =
𝑺𝑯𝑨𝑹𝑬 𝑯𝑶𝑳𝑫𝑬𝑹𝑺 𝑭𝑼𝑵𝑫
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
LONG TERM
DEBTS
23589463.00 5400000.00 28972054.00 63970781.00
SHARE
HOLDERS
FUND
44220406.25 62766089.60 66570455.82 71371793.87
DEBT EQUITY
RATIO
0.53 0.086 0.43 0.89
INTERPRETATIONS:-
From the above graph we can interpret that the ideal debt equity ratio is 0.5:1. In the past
years that is 2010-11 it is 0.53; in 2011-12 it is 0.086; in 2012-13 it is 0.43 and in 2013-14 it
is 0.89.
2. PROPRIETORYRATIO =
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
SHAREHOLDERS
FUND
44220406.25 62766089.60 66570455.82 71371793.87
TOTAL ASSETS 118492072.81 94366337.52 154185586.37 217478189.99
PROPRIETORY
RATIO
0.37 0.66 0.43 0.32
INTERPRETATIONS:-
. In 2010-11 it was 0.37; it rose to 0.66 in 2011-12; in the year 2012-13 it declined a little to
0.43 and in the succeeding year that is 2013-14 it declined again to 0.32.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

3. TOTAL ASSETS TO DEBT RATIO=
(In Rs.)
INTERPRETATIONS:-
Pure ratio for the above calculated ratio is 2:1, which means total assets should be twice of
the long term debts of the organization. From the above graph we can interpret that in the
year 2010-11 the ratio is5.02:1 ; 2011-12 it is 17.47:1; 2012-13 it is 5.32 : 1and in the year
2013-14 it is 3.39:1.
0
2
4
6
8
10
12
14
16
18
20
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO
YEAR 2010-11 2011-12 2012-13 2013-14
TOTAL
ASSETS
118492072.81 94366337.52 154185586.37 217478189.99
LONG TERM
DEBTS
23589463.00 5400000.00 28972054.00 63970781.00
RATIO 5.02 17.47 5.32 3.39

C. ACTIVITY RATIOS
1. STOCK TURNOVER RATIO=
𝑪𝑶𝑺𝑻 𝑶𝑭 𝑮𝑶𝑶𝑫𝑺 𝑺𝑶𝑳𝑫
𝑨𝑽𝑬𝑹𝑨𝑮𝑬 𝑺𝑻𝑶𝑪𝑲
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
COST OF
GOODS SOLD
542038934.72 546382467.69 655961031.62 1011462864.45
AVERAGE
STOCK
5982939.70 6021739.75 7415746.125 8045975.375
RATIO 90.5 90.7 88.4 125.7
INTERPRETATIONS:-
The above graph shows how many times an inventory moves and generates sales. In the year
2010-11 that stock moves 90.5 times in a year, in 2011-12 it moves 90.7 times in a year, in
2012-13 it moves 88.4 and with an efficient increase in 2013-14 it shows an increase of 125.7
times.
0
20
40
60
80
100
120
140
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

2. WORKING CAPITAL TURNOVER RATIO = 𝑪𝑶𝑺𝑻 𝑶𝑭 𝑮𝑶𝑶𝑫𝑺 𝑺𝑶𝑳𝑫
𝑵𝑬𝑻 𝑾𝑶𝑹𝑲𝑰𝑵𝑮 𝑪𝑨𝑷𝑰𝑻𝑨𝑳
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
COST OF
GOODS SOLD
542038934.72 546382467.69 655961031.62 1011462864.45
NET
WORKING
CAPITAL
49750039.39 34852827.85 34728754.24 37060763.98
RATIO 10.89 15.67 18.88 27.2
INTERPRETATIONS:-
From the above graph we can interpret that working capital management is increasing
efficiently in the organization. In 2010-11 it is 10.89 times, 2011-12 it is 15.67 times, 2012-
13 it is 18.88 times and in 2013-14 it is 27.2 times. This graph shows the increasing trend of
the organization‘s working capital management.
0
5
10
15
20
25
30
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

3. INVESTMENT TURNOVER RATIO =
𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑬𝑴𝑷𝑳𝑶𝒀𝑬𝑫
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
NET SALES 611785285.63 624388028.45 750595506.12 1131595049.77
CAPITAL
EMPLOYED
67809869.25 68166089.60 95542509.82 135342574.87
RATIO 9.02 9.15 7.85 8.36
INTERPRETATIONS:-
From the above graph we can see the fluctuating investment turnover in the past 4 years. In
year 2010-11 it is 9.02 times, in 2011-12 it is 9.15 times, in 2012-13 it is 7.85 times and in
2013-14 it is 8.36 times. The more is the turnover the more efficient the organization is in
recovering return on investment.
7
7.5
8
8.5
9
9.5
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

4. FIXED ASSETS TURNOVER RATIO =
𝑵𝑬𝑻 𝑭𝑰𝑿𝑬𝑫 𝑨𝑺𝑺𝑬𝑻𝑺
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
NET SALES 611785285.63 624388028.45 750595506.12 1131595049.77
NET FIXED
ASSETS
30883669.85 28531895.75 26489483.58 28668223.89
RATIO 19.80 21.88 28.33 39.47
INTERPRETATIONS:-
From the above graph we can interpret that fixed assets are increasing every year. In 2010-11
it was 19.80 times which increased to 21.88 times in 2011-12 , in 2012 – 13 it was 28.33
times and in 2013-14 it is 39.47 times. This graph clearly depicts the increasing trend of the
fixed asset turnover ratio.
0
5
10
15
20
25
30
35
40
45
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

D. PROFITABILITY RATIOS
1. GROSS PROFIT RATIO =
𝑮𝑹𝑶𝑺𝑺 𝑷𝑹𝑶𝑭𝑰𝑻
x 100
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
GROSS
PROFIT
69746350.91 78005560.76 94634474.50 120132185.32
NET SALES 611785285.63 624388028.45 750595506.12 1131595049.77
RATIO (%) 11.4 12.49 12.6 10.6
INTERPRETATIONS:-
From the above graph we can interpret that till 2012-13 there was increase in gross profit that
is 2010-11 it is 11.4% and in 2011-12 it increased to 12.49 % and with this increasing trend
in 2012-13 it is 12.6 %. But in 2013-14 it declined to 10.6%.
9.5
10
10.5
11
11.5
12
12.5
13
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

2. NET PROFIT RATIO =
𝑵𝑬𝑻 𝑷𝑹𝑶𝑭𝑰𝑻
X 100
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
NET PROFIT 2345170.39 3545683.35 3804366.22 4801338.05
SALES 611785285.63 624388028.45 750595506.12 1131595049.77
RATIO(%) 0.38 0.57 0.51 0.42
INTERPRETATIONS:-
It can be depicted from the graph that net profit ratio has been increasing in 2010-11 that is
0.38% to 0.57% in 2011-12. In the succeeding year that is 2012-13 it slightly declined to 0.51%
and the year after this i.e. 2012-13 it again slightly declined to 0.42%. Therefore, we can say that
organization is losing its efficiency in the recent years as higher the ratio the higher efficient the
organization is.
0
0.1
0.2
0.3
0.4
0.5
0.6
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

3. OPERATING RATIO =
(𝑪𝑶𝑺𝑻 𝑶𝑭 𝑺𝑨𝑳𝑬𝑺+𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑵𝑮 𝑬𝑿𝑷𝑬𝑵𝑺𝑬)
x 100
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
COGS+
OPERATING
EXPENSES
554037238.65 561091069.35 669814657.73 1031430684.85
NET SALES 611785285.63 624388028.45 750595506.12 1131595049.77
RATIO(%) 90.56 89.8 89.2 91.1
INTERPRETATIONS:-
From the graph it is interpreted that since 2010-11 the operating ratio is declining at a slow
rate that is in 2010-11 it is 90.56%; in 2011-12 it is 89.8%; in 2012-13 it is 89.2% but in
the year 2013-14 it rose to 91.1%. This shows that organization is increasing its efficiency
in operation expenses.
88
88.5
89
89.5
90
90.5
91
91.5
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

4. OPERATING PROFIT RATIO =
𝑶𝑷𝑬𝑹𝑨𝑻𝑰𝑵𝑮 𝑷𝑹𝑶𝑭𝑰𝑻
x 100
(In Rs.)
YEAR 2010-11 2011-12 2012-13 2013-14
OPERATING
PROFIT
57748046.98 63296959.10 80780848.39 100164364.92
SALES 611785285.63 624388028.45 750595506.12 1131595049.77
RATIO(%) 9.43 10.13 10.76 8.85
INTERPRETATIONS:-
From the above graph it is clear that operating profit ratio has been fluctuating all years. In
2010-11 the ratio is 9.43%; 2011-12 it is 10.13% with a slight increase in 2012-13 it is
10.76% and in the current year is 8.85%.
0
2
4
6
8
10
12
2010-11 2011-12 2012-13 2013-14
RATIO
RATIO

CHAPTER-7
FINDINGS
AND
SUGGESTIONS

FINDINGS:
 The ideal current ratio is 2:1. The organization is maintaining its current near to 2:1
only. So the organization needs not to worry about the short term solvency of the
organization.
 The liquid position of the organization is also in the ideal position.
 The long term debt of the organization is not so efficient. As the ideal debt equity
ratio is 1:2 and the organization is not maintaining its long term solvency ratio
effectively.
 The organization is using very less amount of shareholders fund to get fixed assets.
This we have interpreted from proprietary ratio which is very low.
 The organization is using more of long term debts to get the assets for the
organization. As the ratio of total assets to debt ratio is very high.
 The stock turnover ratio is increasing every year which shows the effectiveness and
efficiency of the organization.
 The working capital turnover ratio is also increasing effectively every year which
shows the effective management of working capital in the organization.
 The investment turnover ratio of the organization is not as effective as it is declining
every succeeding year. This shows increase in capital employed in the organization in
relation to sales.
 Fixed assets turnover ratio is increasing effectively and efficiently. This shows
effective increase in fixed assets due to increase in net sales of the organization.
 The gross profit ratio of the organization is not increasing effectively. This shows
inefficiency in purchase and production expenses.
 The net profit of the organization is also not so effective and efficient.

 The operating ratio of the organization is also increasing which shows the increase in
day to day operating expenses of the organization.
SUGGESTIONS:
 The organization need to see the long term solvency of the organization. As the long
term debts and shareholders fund are not utilized properly to get the assets for the
organization.
 The organization need to allocate its long term debts properly for its effective
utilization.
 The organization need to control its day to day operating expenses. These increasing
expenses are lowering its operating profit ratio.
 The gross profit ratio is also declining every year. This needs to be controlled by
decreasing the production expenses.
 The net profit ratio of the organization is also declining due to increase in operating
expenses of the organization. This needs to be controlled by lowering the operating
expenses.
 The turnover ratios of the organization are increasing effectively every year. This
needs be maintained in the succeeding years.

CHAPTER-8
CONCLUSION
This project on ratio analysis in the production concern is not merely a work of the project.
But a brief knowledge and experience of that how to analyze the financial performance of the
firm. The study undertaken has bought in to the light of the following conclusions. According
to this project I came to know that from the analysis of financial statements it is clear that
Kunj Roller Flour Mills Private Limited is maintaining its stability in last 4 years research
study that I conducted. So to increase more profit and expand the organization the firm
should take more care of both internal and external factors.

BIBLIOGRAPHY
BOOKS:
 Grewal.T.S., Analysis of Financial Statement, Sultan Chand Publishers, 2012 Edition
 Kothari C.R. , Research methodology
 Agrawal, N.P (1983) Analysis of Financial Statements, National Publishing House,
New Delhi.
 Gupta, R.K. (1990), Profitability, Financial Structure and Liquidity,  Jaipur,
Printwell Publishers.
ARTICLES:
 Urmila Singh (2002): Working Capital Management (A comparative study of public
and private sector industries India) Ph.D. Thesis submitted to University of Rajasthan
for Doctor of Philosophy.
 Sur, D. (1999), Liquidity Management; A case Study of Tata Tea Ltd, accepted for
publication in the book edited- by Dr. P Mohana Rao on Various Aspects of Financial
Management.
 Sur, D. Biswas Jo and Ganguly P (2001): Liquidity Management in  Indian Private
Sector Enterprises: A Case study of Indian Primary  Aluminium Producing industry
in Indian Journal of Accounting VOL XXXII June.
INTERNET SITES:
o http://www.rishtafoods.com/Rishta/index.html , retrieved on May 29, 2015.
o http://www.scribd.com/doc/42610615/Ratio-Analysis-Project-Report#scribd ,
retrieved on June 6, 2015.
o http://www.academia.edu/5180572/Financial_Ratio_Analysis_of_Firms_A_Tool_
for_Decision_Making, retieved on June 8, 2015.
o https://www.zionsbank.com/pdfs/biz_resources_book-6.pdf ,
retrieved on June 9, 2015

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