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Financial analysis on EICL, TVM               2007-2010                                  Chapter-1                        ...
Financial analysis on EICL, TVM                                                   2007-2010                               ...
Financial analysis on EICL, TVM                                                       2007-2010   1.2 Statement of the Pro...
Financial analysis on EICL, TVM                                                       2007-2010        2. Due to the limit...
Financial analysis on EICL, TVM                  2007-2010                                  Chapter-2                     ...
Financial analysis on EICL, TVM                                                      2007-2010   2.1 Financial statement  ...
Financial analysis on EICL, TVM                                                    2007-2010factors that affect financial ...
Financial analysis on EICL, TVM                                                    2007-2010It should be comparable, so fi...
Financial analysis on EICL, TVM                                                  2007-20102.6 Objective of Financial Analy...
Financial analysis on EICL, TVM                                                      2007-2010        External analysis of...
Financial analysis on EICL, TVM                                                       2007-2010   Short –term analysis:   ...
Financial analysis on EICL, TVM                                                     2007-2010   out if many years one part...
Financial analysis on EICL, TVM                                                  2007-2010   It is useful for measuring th...
Financial analysis on EICL, TVM                                                    2007-2010b) Cost of goods sold Ratio.c)...
Financial analysis on EICL, TVM                                                      2007-2010Solvency / Leverage / Capita...
Financial analysis on EICL, TVM                                          2007-2010The study is to analyze the ratios for u...
Financial analysis on EICL, TVM               2007-2010                                  Chapter-3                       C...
Financial analysis on EICL, TVM                                                  2007-20103.1 THE COMPANY HISTORY       En...
Financial analysis on EICL, TVM                                                    2007-2010„Hibrite‟ and „BCK‟ in the for...
Financial analysis on EICL, TVM                                                    2007-2010                      Distribu...
Financial analysis on EICL, TVM                                                 2007-2010Vice president corporateFinance a...
Financial analysis on EICL, TVM                                                               2007-20103.7 EMPLOYEE PROFIL...
Financial analysis on EICL, TVM                                                    2007-2010Working pattern of the company...
Financial analysis on EICL, TVM                                                  2007-2010              Fiberglass Grades ...
Financial analysis on EICL, TVM                                                 2007-2010in the world. EICL products offer...
Financial analysis on EICL, TVM               2007-2010                                  Chapter-4                        ...
Financial analysis on EICL, TVM                                                       2007-2010                  DATA ANAL...
Financial analysis on EICL, TVM                                                                2007-2010Current Ratio = Cu...
Financial analysis on EICL, TVM                                                                  2007-2010       2. Quick ...
Financial analysis on EICL, TVM                                                        2007-2010INTERPRETATION: -         ...
Financial analysis on EICL, TVM                                                                   2007-2010               ...
Financial analysis on EICL, TVM                                                                          2007-2010        ...
Financial analysis on EICL, TVM                                                                    2007-2010        2. Pro...
Financial analysis on EICL, TVM                                                   2007-2010INTERPRETATION: -             T...
Financial analysis on EICL, TVM                                                                         2007-2010         ...
Financial analysis on EICL, TVM                                                                        2007-2010          ...
Financial analysis on EICL, TVM                                                                             2007-2010     ...
Financial analysis on EICL, TVM                                                      2007-2010INTERPRETATION: -           ...
Financial analysis on EICL, TVM                                                                      2007-2010            ...
Financial analysis on EICL, TVM                                                        2007-2010                          ...
Financial analysis on EICL, TVM                                                    2007-2010               The above figur...
Financial analysis on EICL, TVM                                                                    2007-2010              ...
Financial analysis on EICL, TVM                                           2007-2010COMPARATIIVE INCOME STATEMENT          ...
Financial analysis on EICL, TVM                                             2007-2010                             COMPARAT...
Financial analysis on EICL, TVM                                 2007-2010Liabilities    31/03/2008   31/03/2009   Increase...
Financial analysis on EICL, TVM                                                2007-2010COMPARATIVE INCOME STATEMENT      ...
Financial analysis on EICL, TVM                                                 2007-2010COMPARATIVE BALANCE SHEET        ...
Financial analysis on EICL, TVM                                                  2007-2010  Liabilities    31/03/2006   31...
Financial analysis on EICL, TVM                                                     2007-2010        From the above analys...
Financial analysis on EICL, TVM                                                 2007-2010CASH FLOW STATEMENT              ...
Financial analysis on EICL, TVM                                                                          2007-2010WORKING ...
Financial analysis on EICL, TVM                                               2007-2010INTERPRETATION          Working cap...
Financial analysis on EICL, TVM               2007-2010                                  Chapter-5                        ...
Financial analysis on EICL, TVM                                                     2007-2010                             ...
Financial analysis on EICL, TVM                                                 2007-2010   Working capital turns over rat...
Financial analysis on EICL, TVM                                                   2007-2010                               ...
Financial analysis on EICL, TVM                                                     2007-2010                             ...
Financial analysis on EICL, TVM            2007-2010                            BIBLIOGRAPHYMTCST, Ayur                   ...
Financial analysis on EICL, TVM                                            2007-2010BIBLIOGRAPHY      Books          1. Ma...
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Financial analysis of eicl

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Financial analysis of eicl

  1. 1. Financial analysis on EICL, TVM 2007-2010 Chapter-1 INTRODUCTIONMTCST, Ayur Page 1
  2. 2. Financial analysis on EICL, TVM 2007-2010 INTRODUCTION Financial Management is that activity is concerned with the planning and controllingof the firm‟s financial resources. Though it was a branch of economics till 1890 as a separateor discipline it is of recent origin. Financial management is concerned with the duties offinance manager in a business firm. He performs such as budgeting, financial forecasting,cash management, credit administration, investment analysis and fund procurement. Therecent trend towards globalization of business activity has created new demands andopportunities in managerial finance. Financial statements are prepared and presented forexternal users of accounting information. As these statements are used by investors andfinancial analysts to examine the firms performance in order to make investment decisions,they should prepare very carefully and contain as much information as possible. The financialstatements of the Company include Trading profit and Loss A/c and Balance sheet. Thegeneral purpose is to analyze the statement to understand the financial performance of thecompany, management of various assets and liabilities and their relation.1.1 Overview of Project The topic of this project is Financial Performance Analysis at English Indian ClaysLimited (E.I.C.L). Financial Performance Analysis constitutes approach to judge theeffectiveness of the financial function of the firm. Finance is needed to promote or establishthe business, acquires fixed assets, make investigations, develop product, meeting day to dayaffairs of the company, encourage manager to make progress and create value. The projectwork during the period of study equips the youngsters with necessary experience andenhances the learner with adequate to the real field. It enables the learner to meet thechallenges of a business world.MTCST, Ayur Page 2
  3. 3. Financial analysis on EICL, TVM 2007-2010 1.2 Statement of the Problem. The financial statements reveal the true and fair view of the financial position of aconcern .A proper analysis and interpretation of these statements enables a person to judgethe profitability and financial strength of the business. The financial statement are prepared on the basis of recorded facts .The facts arerecorded in monetary terms .The statement are prepared for a particular period and thetransact orders .The financial statements are true and fair view of the financial position of theconcern. 1.3 Significance of the Study. Finance is the life blood of every business private as well as public. Therefore properutilization of finance by the public sector enterprise is found necessary as it is financial by thegovernment which is the representative of people. The financial performance of publicenterprise has been a matter of wide interest and concern. The type of relationship to the investigated depend upon the objective and purpose ofevaluation .The purpose of evaluation of financial statement differ among various groups orcreditors, share holders, management, labor union and so on interested in the result andrelationship reported in the financial statement, so ratio analysis is an effect in tool foranalyzing the financial performance of the firm. 1.4 Object of the Study. Following are the objective of the study: i. To evaluate the liquidity position of English Indian clays. ii. To evaluate the long term solvency of the firm. iii. To evaluate the profitability of English Indian clays. 1.5 Methodology The project evaluates the financial performance of the company with the help of themost appropriate tool of financial analysis like ratio analysis and comparative balance sheet .The data is largely depends on primary and secondary sources. Primary data is the first handinformation that is collected during the period of research. Primary data has been collectedthrough discussions held with the staffs in the accounts department. Secondary data studies whole company records and company‟s balance sheet inwhich the project work has been done. In addition, a number of reference books, journalsand reports were also used for the study. 1.6 Limitation of the Study. 1. The study was limited up to 5 years, starting from 2004-05 to 2008-09. Hence the results obtained can be applied for the selected period.MTCST, Ayur Page 3
  4. 4. Financial analysis on EICL, TVM 2007-2010 2. Due to the limitation of time the study converted only financial performance of the company in terms of solvency, liquidity and profitability. 3. The study could not extend the other important area of operational performance analysis of the company. 4. The study was conducted within a short period, so it is not possible to study all aspect in details. 1.7 Period of Study. The study covers the period of 2004-2005 to 2008-2009 in English Indian ClayLimited. 1.8 Study Area. English Indian Clay Limiited, Veli, Trivandrum-695021 1.9 Chapterisation The project report consists of five chapters. In this report the following elements areinvolved. The first chapter is introduction. Its consist of the general introduction of the topic, objective of the study in general and in particular, Statement of the Problem, Significance of study, Objectives, Methodology, Limitations, Period of Study, Study Area Second chapter includes financial statement analysis a theoretical perspective on financial statement analysis. It includes different tool for analysis and its limitation. Third chapter is profile of English Indian Clay Limited. It includes The Company History, Vision of EICL, Mission of EICL, Quality Policy of EICL, Company‟s Philosophy, Corporate Objectives and Employee Profile. Fifth chapter includes data analysis and interpretation. Different methods such as ratio analysis and a comparative analysis of various years are made. Sixth chapter deals with Findings, Suggestion, Conclusion.MTCST, Ayur Page 4
  5. 5. Financial analysis on EICL, TVM 2007-2010 Chapter-2 Theoretical PerspectiveMTCST, Ayur Page 5
  6. 6. Financial analysis on EICL, TVM 2007-2010 2.1 Financial statement Financial statement are those statements which exhibits true financial position of the business on a particular period and also produce the profit earning capacity at the end of a particular period. Financial statements are prepared for the purpose of presenting periodical review of report on the progress by the management and deal with,a) Status of investment in the businessb) The result achieved during a period under view. The statements disposing status of investment is known as Balance sheet and statement showing the result is known as Profit and Loss Account. So the major financial statement are „Balance sheet and Income statement‟ (P/L A/c) Therefore financial statement are affected by three things ie Recorded facts, Accounting convention and personal Judgment. In short financial statement position, profitability or weakness of the concern. Thus we can say that financial statement provide a summary of the accounts of a business enterprise the balance sheet reflecting the assets and liabilities and income statement showing the results of operation during a certain period. 2.2 Nature of Financial Statements The following points reflects nature of financial statement of a business Recorded Facts Accounting conventions Personal Judgment. Recorded Facts Record is made only those facts which can be expressed in monetary terms. It means that in financial statements date are taken from the accounting records. Data which has not been recorded in the financial books are not exhibited in the financial statement. To the amount of cash position, debtors, cost of fixed assets, creditors etc. are recorded facts. Certain MTCST, Ayur Page 6
  7. 7. Financial analysis on EICL, TVM 2007-2010factors that affect financial position of a business are not shown in the accounting records.They are purchase and sales contract claim for refund, guarantee etc appear footnote onbalance sheet.Accounting Convention : Management of the concern are tree to choose certain accounting concern are free tochoose certain accounting convention suited to their concern. Important accountingconventions are valuation stock (Corprice or Market price as well) valuation of fixed asset (atcost less depreciation) creation of provision made for expected loss etc.Personal Judgement: Personal judgement of the accountant plays an important role in preparing financialun important role in taking decisions regarding method and rate of depreciation adopted forvaluation of inventories, provision for bad or doubtful debts, amortisation etc. Postulates,various accounting concepts followed by an accountant while making accounting records aretermed as postulates. The important postulates followed by the accountant are going concernconcept, money measurement concept, business entity concept, matching concept etc.2.3 Characteristics or Features of Financial statement An ideal financial statement mainly exhibits a true picture about the profit earningcapacity and financial position of the concern. A postmortem of financial statement helps aperson to identify the profitability and financial position of the concern. It should have thefollowing characteristics,Financial statement depicts a true and fair view of the profitability and financial position ofthe concern.It should be presented in a simple manner so as to make them understandable even to alayman.It should be prepared in such a way as to attract the reader. So financial statement should beattractive.MTCST, Ayur Page 7
  8. 8. Financial analysis on EICL, TVM 2007-2010It should be comparable, so financial statement should be presented in such a way that it canbe compared with previous years statements.Financial statement will be helpful in analysis and interpretation of data.Its easy preparation enable saving much time in preparing the statement.It should be presented in brief.Finally financial statement should be prepared and presented promptly2.4 Importance of Financial statements The financial statements are very important in the modern business field. Thesestatements are highly useful to the following authorities.Management.Owners.Creditors.Investors.Employees.Government.Consumer.Research scholars.Stock exchanges.Professional Authorities.2.5 Analysis and Interpretation of Financial Statement Financial analysis is the process of determining the significant operating and financialcharacteristics of a firm from accounting data. The analysis of financial statement is anattempt to determine the significance and meaning of the financial statement data do that theforecast may be made of the future prospects for earnings ability to pay interest and debtmaturities (both current and long term) and profitability.MTCST, Ayur Page 8
  9. 9. Financial analysis on EICL, TVM 2007-20102.6 Objective of Financial AnalysisTo estimate the earning capacity of the firm.To judge the financial position and financial performance of the firm.To determine the long-term liquidity of the funds.To judge the Solvency of the firm.To determine the debt capacity of the firm.To decide about the future prospects of the firm.To know the progress of the firm.To measure the efficiency of operations.2.7 Type of Financial Analysis However, we can classify various types of financial analysis into different categoriesdepending upon (i) the material used, and (ii) the method of operation followed in theanalysis or the modus operandi of analysis (iii) objective of analysis Types of Financial Analysis According to material According to modus According to objectives of used operandi analysis External Internal Horizontal Vertical Long term Short term analysis analysis analysis analysis analysis analysisAccording to Material used: On this basis the analysis are of two typesExternal Analysis:MTCST, Ayur Page 9
  10. 10. Financial analysis on EICL, TVM 2007-2010 External analysis of financial statement is made by those who do not have access tobe detailed accounting recording of the company ie, bank, creditors, general public.Internal Analysis Internal analysis is made by the finance and accounting department to help the topmanagement. These people have direct approach to the relevant financial records. Suchanalysis emphasizes on the performance appraisal and assessing the profitability of differentactivates.According to Modus operandi: On this basis analysis can be done asHorizontal analysis When the financial statements for a number of years are reviewed andanalysed the analysis is called “horzontal analysis” The preparation of common sizestatement is an example of horizontal analysis. As it is based on data from year to year, ratherthan on one data or period or time as a whole this is known as „dynamic Analysis‟Vertical analysis: Vertical analysis is also known as “static Analysis”. When ratios are calculated fromthe balance sheet of one year, it is called vertical analysis. It is not very useful for long termplanning as it does not include the trend study for future.According to objectives of analysis:Long term analysis: In the long-term the company must earn a minimum amount sufficient tomaintain a suitable rate of return on the investment to provide for the necessary growth anddevelopment of the company and meet the cost of capital. Thus in the long term analysis thestress is no the stability and earning potentiality of the concern. In long term analysis thefixed assets, long term debt structure and the ownership interest is analysed.MTCST, Ayur Page 10
  11. 11. Financial analysis on EICL, TVM 2007-2010 Short –term analysis: The short-term analysis of financial statement is mainly concerned with the working capital analysis. In the short-term a company must have ample funds leading available to meet its current needs and sufficient borrowing capacity to meet the contingencies. Hence in short term analysis the current assets and the current liabilities are analysed and cash position of the concern is determined. For short term analysis the ratio analysis to useful. 2.8 Tools or Methods of Financial Analysis In the process of Financial Statement analysis various tools or method are used by the financial analysis1. Comparative Financial and Operating Statements It is an important device of financial analysis. In these statements figures of two or more period are placed side by side to facilitate comparison. These statements lender comparison between two period of time and depict financial position and operating result of the firm, with the help of comparative financial statement interfirm comparison is possible. In short statement prepared in a form that reflects financial data for two or more periods are known as comparative statements.2. Common Size Statements In balance sheet items each assets are converted into percentages to total assets and each item of liabilities is connected into percentage of total liabilities. Thus the whole balance sheet is converted into percentage form such converted balance sheet is known as percentage statement. It is useful in vertical financial analysis and comparison of two business enterprise at a certain data.3. Trend Analysis (Detailed Analysis) It is an important tool of horizontal financial analysis. Trend analysis involves the arithmetical relationship with each item of several years to the same item of base year. Thus MTCST, Ayur Page 11
  12. 12. Financial analysis on EICL, TVM 2007-2010 out if many years one particular year is taken as base. Each item of base year is taken as 100 and on that base the percentages of each of the items of each of the years are calculated.4. Average Analysis: It is an improvement over trend analysis method when trend ratio have been determined for the concern these figures are compared with industry averages. Both these trends can be presented on the graph paper. These presentations of facts in the image of pictures make the analysis and comparison.5. Statement of changes in Working Capital Working capital is the excess of current assets over current liabilities. A statement which is prepared to find out changes in working capital position of a concern is termed as statement of changes in working capital changes in working capital may be either increase in working capital or decrease in working capital.6. Fund Flow analysis: Fund Flow Analysis has become and important tool in the analytical kit of financial analysts, credit granting institutions and financial managers. Fund flow analysis reveals the changes in working capital position. It tells about the sources from which the working capital was obtained and the purpose for which it was used.7. Ratio Analysis (In Depth) The most important tool of financial statement analysis is ratio analysis. It is commonly used for quantitative decision making functions. Ratio is simply one number expressed in terms of one another. So it is the arithmetical selection between two figures or two assets. Ratio highlights the arithmetical relationship between various figures in financial statement. Importance It is useful to check the efficiency of the firm. It expresses the relationship between various items in financial statement. It is useful for interfirm comparisons. MTCST, Ayur Page 12
  13. 13. Financial analysis on EICL, TVM 2007-2010 It is useful for measuring the performance of the firm. It is useful for cost control. More over it indicates the profitability solvency liquidity and operational efficiency of the firm. Types of Ratios (Detailed Analysis)1. Liquidity Ratiosa) Current Ratiob) Quick Ratio /Liquid Ratioc) Absolute Liquid Ratio/Cash position Ratio 2. Solvency Ratio/ Leverage Ratioa) Debt-equity Ratio.b) Proprietory Ratio.c) Fixed Asset to Net worth Ratio. Debt-assets Ratio 3. Turnover Ratios/ Activity Ratioa) Inventory Turnover Ratio/Stock Turnover Ratio.b) Fixed asset turnover Ratio.c) Working capital turnover Ratio.d) Total asset Turnover Ratio.e) Current Asset Turnover Ratio.f) Debtors Turnover Ratio.g) Capital turnover Ratio. 4. Profitability Ratioa) Operating Ratio. MTCST, Ayur Page 13
  14. 14. Financial analysis on EICL, TVM 2007-2010b) Cost of goods sold Ratio.c) Administrative expense Ratio Limitations of Ratio Analysis. Ratio analysis gives only a good basis for quantitative analysis of financial problems. But it suffers from qualitative aspects. Ratios are computed from historical accounting records. So they also process those limitations of financial accounting. It is not possible to calculated exact and well accepted absolute standard for comparison. In ratio analysis arithmetical window dressing is possible and firms may be successful in concealing the real position. Ratios are only means of financial analysis, but not an end in them. They can be affected with the personal ability and bias of the analyst. Liquidity Ratios: Liquidity is the ability of a firm to meet its current liabilities. The deficiency of performance of day to day operations is ascertained by way of liquidity ratios. The ratios which indicate the liquidity of a firm are: Net working capital. Current ratios. Acid test/quick ratios. Super quick ratios. Turnover ratios. Defensive interval ratios MTCST, Ayur Page 14
  15. 15. Financial analysis on EICL, TVM 2007-2010Solvency / Leverage / Capital Structure Ratio Solvency ratios are used to measure long term solvency of the firm. The long-termefficiency of the firm to set off its long term debt. The leverage or capital structure ratios maybe defined as financial ratios which throw light on the long-term solvency of a firm asreflected in its ability to assure the long-term creditors with regard to:a) Periodic payment of interest during the period of the loan.b) Repayment of principal on maturity or in pre-determined installments at due dates.The Solvency ratios include:a. Debt-equity ratio.b. Debt-assets ratio.c. Proprietary ratio etc.Turnover ratios / Activity Ratios Activity ratios are concerned with measuring the efficiency in asset management.These ratios are also called efficiency ratios or asset utilization ratios. These ratios expressthe operational efficiency of a concern. The operational efficiency means the speed withwhich assets are being converted into sales. Turnover ratios are expressed in times. Thusturnover ratio can be defined as the test of the relationship between sales (more appropriatelycost of sales) and ratios assets of firm.Profitability Ratios: The management of the firm is naturally eager to measure its operating efficiency.The owners invert their funds in the expectation of reasonable return. The operatingefficiency of a firm and its ability to ensure adequate ratio to its shareholders dependsultimately on the profit earned by it.MTCST, Ayur Page 15
  16. 16. Financial analysis on EICL, TVM 2007-2010The study is to analyze the ratios for understanding the financial performance and acomparative statement analysisMTCST, Ayur Page 16
  17. 17. Financial analysis on EICL, TVM 2007-2010 Chapter-3 COMPANY PROFILEMTCST, Ayur Page 17
  18. 18. Financial analysis on EICL, TVM 2007-20103.1 THE COMPANY HISTORY English Indian Clays Limited (EICL) has two key business segments viz ClayBusiness and Starch Business with strong R&D set-up at all its three manufacturing locations. English Indian Clays Limited was incorporated on 18th November 1963, in technicaland financial collaboration with English China Clays Limited, UK (now known as ECCGroup plc, UK). The collaboration with ECC ceased in the year 1992. EICL has since beenactively engaged in the manufacture and processing of China Clay of different grades for useas a coating agent and filling agent. The Company has its clay manufacturing units at Veli,Thonnakkal and Kollam located in Thiruvananthapuram, Kerala. The installed capacity of theplants was 36,000 MT per annum initially and it has since been increased to 2, 13,600 MTper annum as of date. The Starch business has two manufacturing divisions at Yamunanagar in Haryana andPuducherry. The Starch division at Yamunanagar can trace its origins back to 1937 whenLate Lala Karam Chand Thapar promoted a Company by the name of Indian Starch &Chemicals Limited. The name of this Company was later changed to Bharat Starch Industrieslimited. The Starch Division at Puducherry was set up in 1994-95 to manufacture modifiedstarches for industrial uses. The Divisions have the distinction of being the only StarchCompany in India to have acquired ISO-9002 certification and DSIR recognised R & Dcentre. Current starch producing capacity of the Company is 1,01,040 MT per annum. The Company acquired the starch business of erstwhile Bharat Starch IndustriesLimited (BSIL) with effect from April 1, 2001.Clay Division: The Company manufactures varieties of superior grade China Clay for diversifiedapplications such as pigments, extender, filler and as raw material in different industries.Superior Coating Grade Kaolin is produced under the trade marks „Super coat‟, „Higloss‟,MTCST, Ayur Page 18
  19. 19. Financial analysis on EICL, TVM 2007-2010„Hibrite‟ and „BCK‟ in the form of lumps, powder, and pre-dispersed Spray Dried Powder,Filler and Coating Grade Clay under trade mark „KCG‟ as lumps, powder, and pre-dispersedSpray Dried Powder. Calcined Clay, used as a substitute for Titanium Dioxide in Paints,Paper, Detergents, and other grades, is also manufactured by EICL to cater to niche markets. As pigment and extender, China Clay it is used extensively in the paper and paintsindustry. As filler, it is used in the manufacture of plastics, detergents, rubber goods andpaper; as raw material, it is used by glass and ceramic industries for making fiberglass andporcelain respectively. As additive, it is used by the soap industry and it is also used by thepaper industry for specialty coating purposes as well in order to impart strength and shine andwater repellent characteristics to the paper.3.2 VISION OF EICL “To be a leader in processed china clay market in Asia and to be an employer ofchoice, fostering a culture that values dedication, respect, and continuous improvement.”3.3 MISSION OF EICL “To provide consistently high quality product and materials to our customers in asafe, timely and efficient manner, at the lowest possible cost and to grow with them andensure the growth and development of employees of the company in order to achieve theobjective of the organization and the career goal of the employees.”3.4 QUALITY POLICY OF EICLEICL is committed to processing and supply of value added hydrous and calcined clay, meetcustomer requirements of quality, delivery and application support through continualimprovement of the effectiveness of its quality management system.MTCST, Ayur Page 19
  20. 20. Financial analysis on EICL, TVM 2007-2010 Distribution of Equity Share holding Category No. of shares of Rs.10/- each Percentage Promoters 3760768 84.16 Indian Institutional Investors __ __ Other Bodies Corporate 82333 1.84 Foreign Institutional Investors 508998 11.39 NRIs/OCBs 3337 0.07 Mutual Funds __ __ General Public 84143 1.88 Directors & Relatives 29400 0.66 Total 4468979 1003.5 COMPANY’S PHILOSOPHY The company‟s philosophy on corporate governance is to promote and raise thestandards or system and practices of corporate conduct to attain high levels of accountability,transparency and responsibility in its operation and enhancement of overall long term valueof its share holders, customers, lenders and employees.Chairman : Mr. Karan ThaparDirectors : Mr. S.N. Dua Mr.S.K. toshniwal Mr. S. Padmakumar Mr. J.K. Jain (ICICI Nominee) Mr. Vijay RaiManaging Director : Mr.D. KohliMTCST, Ayur Page 20
  21. 21. Financial analysis on EICL, TVM 2007-2010Vice president corporateFinance accounts &Administration : Mr S.K. JainCompany secretary &Head corporate legal : Mr. P.S. SainiAuditors : M/S Price WaterhouseBankers : Axis Bank Ltd Oriental Bank of Commerce State Bank of India State Bank of IndoreRegistered office : TC-79/4, Veli TVM-695 021, Kerala.Corporate office : Global Business Park, 801-803, Tower-B, 8th floor, Mehrauli-Gurgaon Road Gurgaon- 122 001, HaryanaWorks : TVM (Kerala) Yamunanagar (Haryana) Puducherry (U.T)Shares listed at : Bombay Stock Exchange.3.6 CORPORATE OBJECTIVESCompany‟s corporate objectives are; To procure material of required quality or quantity at most competitive prices for uninterrupted production and maintenance of plant with least possible tie ups in inventories. To develop services and retain customers for the range of products manufactured by the company and to meet customer needs in terms of new products or services. To promote and raise the standard of system and practices of corporate conduct to attain high levels of accountability. To adopt transparency and responsibility in its operation and enhancement of overall long term value of its shareholders, customers, lenders, and employees. To ensure maximum utilisation of available human resources.MTCST, Ayur Page 21
  22. 22. Financial analysis on EICL, TVM 2007-20103.7 EMPLOYEE PROFILE EICL has 291 employees of which 61 are officers, 34 administrative staff, 179workers and 13 mine workers. Employee Profile. Category Number Officers 61 Administrative staff 34 Workers 179 -at SPD 46 Mine workers 13 Total 291 Employee Profile 200 3. workers 180 160 No of employees 140 120 100 80 1.Officers 60 2. Administrative staff 4. workers at 40 mines 20 0 categoryMTCST, Ayur Page 22
  23. 23. Financial analysis on EICL, TVM 2007-2010Working pattern of the companyEICL is a 24 hour working company. The working time is divided into three shifts. General shift isfrom 9 a.m to 5 p.m. For plant officers and staff the time is from 8 am to 5 pm. Working Pattern of the Company A shift 6 a.m to 2 p.m B shift 2 a.m to 10 p.m C shift 10 p.m to 6 a.m2.9 PRODUCT PROFILE The company makes hydrous and calcined clays for application in paper, paint,rubber, fiberglass and other industries. EICL‟s products have been in use in the belowmentioned industries in India, Africa, and the Far East. Its products include hydrous andcalcined clay. The product range is as given below Product Range & Industry Type Industry Very Fine Coating Clays Paper Fine Coating Clays Paper Normal Coating/paint Grade Paint/ Paper/Printer Inks Clays Coating/Filler Grades Paper/Rubber Rubber Grades RubberMTCST, Ayur Page 23
  24. 24. Financial analysis on EICL, TVM 2007-2010 Fiberglass Grades Fiber glass Very Fine Calcined Clays Fiberglass/Paper Coating/Paint/Printer Inks Fine Calcined Clays Fiber glass/Rubber/Soap Normal Coating/paint Grade Paper Coating/Paint/Printer Inks Calcined Clays Coarse Calcined Clay Paint/ Ready Mix Concrete/PVC Compounding Cement grade Calcined Clay Ready Mix Concrete Cement/Ultramarine Industry-wise Market Break-up INDUSTRY PERCENTAGE OF SALES Paint 35 Paper 30 Rubber 20 Fibre Glass 10 Others 52.10 EICL EXPORTS Over the last 10 years, EICL products have established themselves in the internationalmarket. With hydrous and calcined clays of quality comparable with the best grades availableMTCST, Ayur Page 24
  25. 25. Financial analysis on EICL, TVM 2007-2010in the world. EICL products offer distinct techno-commercial advantage in Africa, South EastAsia, and Far East and Middle-East markets due to its geographical location.MTCST, Ayur Page 25
  26. 26. Financial analysis on EICL, TVM 2007-2010 Chapter-4 DATA ANALYSISMTCST, Ayur Page 26
  27. 27. Financial analysis on EICL, TVM 2007-2010 DATA ANALYSIS AND INTERPRETATIONRatio Analysis Ratio Analysis is a powerful tool of Financial Analysis. The relationship between twoaccounting figures, expressed mathematically is known as Financial Ratio. A ratio is used asan index or yardstick for evaluating the financial position and performance o a firm. RatioAnalysis highlights the liquidity, solvency, profitability, capital gearing etc. The techniqueserves as a tool for assessing the current and long term financial soundness of a business. It isalso used to analyze various aspects of operating efficiency and level of profitability. Ratiowas used for the time in 1919 by a German Scholar.Definition :- “Ratio is simply a means of highlighting in arithmetical terms of relationshipbetween figures drawn from financial statements”. 4.1 RATIO ANALYSIS A. LIQUIDITY RATIOS 1. Current ratioCurrent ratio is the most common ratio for measuring liquidity. It represents the ratio ofcurrent asset to current liabilities. The ratio measures the ability of company to discharge itscurrent liabilities. It is also called working capital ratio. It is calculated by dividing currentassets by current liabilities. Current ratio of the firm measures its short term solvency, i.e. theability to meet short term obligations. The current ratio of firm measures its short- termsolvency, i.e. ,its ability to meet short- term obligations. Ina sound business a current of 2:1is considered an ideal one.MTCST, Ayur Page 27
  28. 28. Financial analysis on EICL, TVM 2007-2010Current Ratio = Current Assets / Current liabilities Table No: 4.1 Current Ratio Current Asset Current Year Current Ratio (in crores) Liability(crores) 2004-05 55.29 29.30 1.88 2005-06 84.34 33.13 2.55 2006-07 79.55 47.80 1.66 2007-08 86.05 52.49 1.64 2008-09 79.14 48.92 1.61 Graph No: 4.1 -Current Ratio 2.50 Current Ratio 2.30 2.10 1.90 1.70 1.50 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 YearINTERPRETATION: - The current ratio of English Indian clays is near the standard ratio of 2:1 inalmost all the years. The highest ratio is 2.55 which were in the year 2005-06 and the lowestratio is 1.61 which was in the year 2008-09.MTCST, Ayur Page 28
  29. 29. Financial analysis on EICL, TVM 2007-2010 2. Quick ratioQuick ratio, is also known as acid test ratio, establish the relation between liquid assets andcurrent liabilities. An asset is liquid if it can be converted into cash immediately without lossof value. Inventory normally requires some time for realizing into cash and their value mayfluctuate. An Acid Test Ratio of 1:1 is considered satisfactoryQuick ratio = Quick assets / Current liabilitiesLiquid Asset =Current Asset–Stock & Prepaid Expense Table No: 4.2 Liquid Ratio Year Quick Asset (crores) Current Liabilit(crores) Quick Ratio 2004-05 33.20 29.30 1.13 2005-06 60.19 33.13 1.82 2006-07 44.52 47.80 0.93 2007-08 51.20 52.49 0.98 2008-09 51.39 48.92 1.05 Graph No: 4.2: - Liquid Ratio 1.90 1.70 Liquid ratio 1.50 1.30 1.10 0.90 2004-05 2005-6 2006-07 2007-08 2008-09 YearMTCST, Ayur Page 29
  30. 30. Financial analysis on EICL, TVM 2007-2010INTERPRETATION: - The quick ratio of English Indian clays shows satisfactory level because it ismore than the standard level (accepted level) of 1:1. The ratio had increased in the year 2005-06 with a ratio of 1.82 and the lowest ratio was in the year 2006-07 with a ratio of 0.93. From the above information it is concluded that the trend is increasing exceptin the year 2006-07and2007-08. 3. Absolute liquidity ratio Absolute Liquidity Ratio is obtained by dividing cash and marketable securitiesby current liabilities. It is also known as position ratio. A ratio of 0.75:1 is recommended toensure liquidity. This test is more vigorous measure of a firms liquidity position.Absolute Liquidity Ratio / = (Cash + Marketable securities) Current liabilities Table No: 4.3 Absolute Liquid Ratio Absolute Quick Asset Current Absolute Liquid Year (crores) Liability(crores) Ratio 2004-05 5.10 29.30 0.17 2005-06 14.23 33.13 0.42 2006-07 5.79 47.80 0.12 2007-08 6.93 52.49 0.13 2008-09 5.17 48.92 0.10 2008-09 5.17 48.92 0.10MTCST, Ayur Page 30
  31. 31. Financial analysis on EICL, TVM 2007-2010 Graph No: 4.3- Absolute Liquid Ratio 0.50 Absolute Liquid Ratio 0.40 0.30 0.20 0.10 0.00 2004-05 2005-06 206-07 2007-08 2008-09 YearINTERPRETATION: - Absolute Liquid Ratio was highest in the year 2005-06 having a ratio of 0.42and lowest in the year 2008-09. The Absolute Liquid Ratio of English Indian clays are notnear to the standard ratio which is 0.75:1. The above given graph shows a decreasing trend except in the year 2005-06 in whichthe ratio has been slightly increased. B. LEVERAGE RATIOS 1. Debt-Equity Ratio Debt equity ratio can be computed by dividing total debt by net worth. This ratioindicates the relative proposition of debt and equity in financing assets of a firm. This ratio iscomputed by dividing the total debt of the firm by its net worth. The term debt refers to thetotal outside liabilities. It includes all current liabilities and other outside liabilities like loanand debentures. The term equity refers to net worth or shareholders fund. Debt Equity Ratio = Debt / EquityMTCST, Ayur Page 31
  32. 32. Financial analysis on EICL, TVM 2007-2010 Table No: 4.4 Debt Equity Ratio Year Debt (crores) Equity (crores) Debt Equity Ratio 2004-05 98.72 86.69 1.14 2005-06 135.40 98.12 1.38 2006-07 141.18 127.58 1.11 2007-08 168.56 90.57 1.86 2008-09 175.83 102.42 1.71 Graph No: 4.4- Debt Equity Ratio 2.00 1.90 1.80 Debt Equity Ratio 1.70 1.60 1.50 1.40 1.30 1.20 1.10 2004-05 $2005-06 2006-07 2007-08 2008-09 YearINTERPRETATION: - The Debt Equity Ratio of the company has been fluctuating and showing adecreasing trend over the last five year period. The ratio has declined from 0.37 in the year2001-02 to 0.10 in the year 2004-05. This means owner‟s fund are more employed thancreditor‟s fund. Thus, in times of distress owners will suffer more than the creditors.MTCST, Ayur Page 32
  33. 33. Financial analysis on EICL, TVM 2007-2010 2. Proprietary ratio Proprietary ratio relates to the shareholders funds to total assets. This ratio shows thelong term solvency of the business. It is calculated by dividing shareholders fund by the totalassets. The acceptable norm of this ratio 1:3. A high proprietary ratio will indicate a relativelylittle danger to the creditors etc, in the event of forced reorganisation or winding up of thecompany. A low proprietary ratio indicates greater risk to the creditors as shown in the abovetable. Proprietary Ratio =Shareholders Fund / Total Assets Table No: 4.5 Proprietary Ratio Year Shareholders Funds (croress) Total Assets (crores) Proprietary Ratio 2004-05 86.69 224.46 0.39 2005-06 98.12 286.62 0.34 2006-07 127.58 231.19 0.55 2007-08 90.57 247.19 0.37 2008-09 102.42 281.62 0.36 Graph No: 4.5- Proprietary Ratio 0.60 0.55 Proprietary Ratio 0.50 0.45 0.40 0.35 0.30 2004-05 2005-06 2006-07 2007-08 2008-09 YearMTCST, Ayur Page 33
  34. 34. Financial analysis on EICL, TVM 2007-2010INTERPRETATION: - The above table shows that the Proprietary Ratio varies from 0.36 to 0.55.During the period under study the Proprietary Ratio is found high in the year 2006-07 withthe ratio of 0.55 and lowest in the year 2005-06 with a ratio of 0.34. The above given table shows the decreasing trend of English Indian clays exceptin the case of 2006-07 in which Proprietary Ratio had come up slightly. 3. Fixed Asset to Net worthThe fixed assets ratio help in asserting the long-term solvency of a firm which dependsbasically on whether the firm has adequate resources to meet its long term funds requirement.The fixed assets ratio explains the firm has raised adequate long-tem funds to meet its fixedassets requirements.Fixed Asset Net worth = Fixed Asset / Long term funds or Net Worth TABLE 4.6 Fixed Asset to Net worth Ratio Fixed Asset Net worth Year Ratio (crores) (crores) 2004-05 135.97 86.69 1.57 2005-06 142.09 92.12 1.45 2006-07 151.64 127.58 1.19 2007-08 161.06 90.57 1.78 2008-09 202.47 102.42 1.97MTCST, Ayur Page 34
  35. 35. Financial analysis on EICL, TVM 2007-2010 Graph No: 4.6-Fixed Asset to Net worth Ratio 2.00 Fixed Asset to Net worth 1.90 1.80 1.70 1.60 Ratio 1.50 1.40 1.30 1.20 1.10 2004-05 2005-06 2006-07 2007-08 2008-09 YearINTERPRETATION: - The standard ratio is 50%. In all the year the ratio is more than50%. This means that the position of English Indian clays is satisfactory. The above giventable shows the mixed trend English Indian clays of due to flexibility in the ratio. C. ACTIVITY RATIOS / TURN OVER RATIOS 1. Working Capital Turn Over Ratio The working capital turnover ratio is calculated by comparing sales with Net workingcapital. Net working capital is the excess of current assets over current liabilities. The networking capital obtained shows a positive sign because of increase in the current asset of thecompany. The ratio shows how efficiently the utilization of assets is made. The high turnoverratio implies this efficient utilization resource. A low ratio shows the capacity is not fullyutilizing. It is true in regard to this company.Working Capital Turnover Ratio = Sales / Net Working CapitalMTCST, Ayur Page 35
  36. 36. Financial analysis on EICL, TVM 2007-2010 Table No: 4.7 Working Capital Turnover Net Working Capital Working Capital Year Sales(crores) (crores) Turnover Ratio 2004-05 171.69 25.91 6.57 2005-06 206.38 51.21 4.05 2006-07 243.61 31.75 7.56 2007-08 271.08 33.56 7.99 2008-09 285.35 30.23 9.43 Graph No: 4.7 Working Capital Turnover 10.00 Working Capital Turnover 9.00 8.00 7.00 6.00 5.00 4.00 2004-05 2005-06 2006-07 2007-08 2008-09 YearINTERPRETATION: - Working Capital Turnover Ratio stood at its maximum in the year 2008-09 witha ratio of 9.43 and minimum in the year 2005-06 with a ratio of 4.05. The above given tableshows the mixed trend of English Indian clays due to flexibility in the ratio.MTCST, Ayur Page 36
  37. 37. Financial analysis on EICL, TVM 2007-2010 2. Fixed Asset Turnover RatioFixed Asset Turnover Ratio indicates the extent to which the investments in fixed assetscontribute towards sales. This ratio shows the firm‟s ability in generating sales from allfinancial resources committed to fixed assets.Fixed Asset Turnover Ratio = Net Sales/ Fixed Assets Table No: 4.8 Fixed Assets Turnover Ratio Year Sales (crores) Total Asset (crores) Ratio 2004-05 171.69 237.31 0.72 2005-06 206.38 246.66 0.83 2006-07 243.61 282.21 0.86 2007-08 271.89 273.05 0.99 2008-09 285.35 293.04 0.97 Graph No: 4.8- Fixed Assets Turnover Ratio 1.00 Fixed Assets Turnover Ratio 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 2004-05 2005-06 2006-07 2007-08 2008-09 YearMTCST, Ayur Page 37
  38. 38. Financial analysis on EICL, TVM 2007-2010INTERPRETATION: - The turnover ratio is highest in the year 2007-08 with the ratio of 0.99 andlowest in the year 2004-05 with the ratio of 0.72.The above given table shows the mixedtrend of English Indian clays due to flexibility in the ratio. D. PROFITABILITY RATIOS 1. Gross Profit Ratio The gross profit ratio plays an important role in two management areas. In the area offinancial management, the ratio serves as a valuable indicator of the firms ability to utilize theeffectively outside source of fund. Secondly, this ratio serves as important tool in shaping thepricing policy. Gross Profit Ratio = Gross Profit * 100 / Sales (Gross Profit = Sales – Cost Of Goods Sold) Table No: 4.9 Gross Profit Ratio Year Gross Profit (crores) Net Sales (crores) Gross Profit Ratio 2004-05 25.49 171.69 15.82 2005-06 31.99 206.38 16.32 2006-07 35.92 243.61 14.97 2007-08 39.79 271.08 14.93 2008-09 39.28 285.35 13.76MTCST, Ayur Page 38
  39. 39. Financial analysis on EICL, TVM 2007-2010 Graph No: 4.9- Gross Profit Ratio 16.00 Gross Profit Ratio 15.00 14.00 13.00 2004-05 2005-06 2006-07 2007-08 2008-09 YearINTERPRETATION: - English Indian clays has reasonable gross margin to cover all operating expensesand building up of results. From the analysis it is clear that, Gross Profit Ratio is highest inthe year 2005-06 with a ratio of 16.32 and lowest in the year 2008-09 with a ratio of 13.76. The above given graph shows an decreasing trend from 2006-07 to 2008-09,but the ratio considerably decreased in the year 2008-09. 2. Net Profit Ratio This ratio is also called as the Net Profit to Sales or Net Profitto Margin Ratio. This ratio is used to measure the overall profitability and hence it is veryuseful to firms. It is an index of efficiency and profitability of the business, higher the ratio isbetter the operation efficiency of the concern.Formula: -Net Profit Ratio = Net Profit * 100 / SalesMTCST, Ayur Page 39
  40. 40. Financial analysis on EICL, TVM 2007-2010 Table No: 4.10 Net Profit Ratio Year Net Profit (crores) Net Sales (crores) Net Profit Ratio 2004-05 15.02 171.69 8.43 2005-06 17.66 206.38 8.63 2006-07 18.12 243.61 7.58 2007-08 19.39 271.08 7.40 2008-09 19.01 285.35 6.66 Graph No: 4.10- Net Profit Ratio 9.00 8.50 8.00 7.50 7.00 6.50 6.00 2004-05 2005-06 2006-07 2007-08 2008-09INTERPRETATION: - Net Profit is calculated after deducting non-operating expenses from operatingprofit and adding non-operating income to such profit. Higher the ratio, the better it is,because it gives efficiency to the concern. Net Profit is at its highest in the year 2005-06 witha ratio of 8.36 and lowest in the year 2008-09 with a ratio of 6.6.MTCST, Ayur Page 40
  41. 41. Financial analysis on EICL, TVM 2007-2010 The above figure shows an increasing trend from 2004-05 to 2005-06, butafter that there is a decreasing trend from 2006-07 to 2008-09. 3. Return on Total Assets Profitability can be measured in terms of relationship betweenNet Profit and Total Assets. This ratio is also known as Gross Capital Employed. It measuresthe profitability investments.Formula: -Return on Total Assets = Net Profit * 100 / Total AssetsNote: - Here, Net Profit Stands For Net Profit before Interest, Tax & Dividend. Table No: 4.11 Return on Total Assets Year Net Profit (crores) Net assets(crores) Ratio 2004-05 15.02 237.31 6.32 2005-06 17.66 246.66 7.16 2006-07 18.12 282.21 6.42 2007-08 19.39 273.05 7.10 2008-09 19.01 293.04 6.48MTCST, Ayur Page 41
  42. 42. Financial analysis on EICL, TVM 2007-2010 Graph No: 4.11- Return on Total Assets 10.00 Return on Total Assets 9.50 9.00 8.50 8.00 7.50 7.00 6.50 6.00 5.50 5.00 2004-05 2005-06 2006-07 2007-08 2008-09 YearINTERPRETATION: - The above table shows the Total Assets of the past five year. Total Assetsincludes both Fixed Assets and Current Assets. From the above information it is easilyunderstand that the assets are properly utilized English Indian clays. The ratio is at the best inthe year 2005-06 with a ratio of 7.16 and lowest in the year 2004-05 having a ratio of 6.32MTCST, Ayur Page 42
  43. 43. Financial analysis on EICL, TVM 2007-2010COMPARATIIVE INCOME STATEMENT Table No: 4.12 Comparative Income Statement 2008-2009 2008 2009 Increase / Increase / decrease decrease IN %Net sales 271.89 285.35 13.46 4.95ExpenditureManufacturing expense 176.09 185.06 8.97 5.09Gross profit 95.08 100.29 5.21 5.47Payment to &provision 22.63 26.03 3.4 15.02to employeesAdministration &other 10.94 11.27 0.33 3.01Selling and distribution 9.69 8.65 (1.04) 10.73R&D 1.02 1.10 .08 7.84TOTAL 220.40 232.13 11.73 5.32Profit Before Interest, 51.49 53.22 1.73 3.35Depreciation And TaxInterest 11.70 13.94 2.04 17.43PBDT 39.79 39.27 (0.052) 0.13Depreciation 8.95 10.25 1.3 14.52PBT 30.83 29.02 (1.81) 5.87TAX expense 11.44 10.00 (1.44) 12.58PAT 19.39 19.01 (0.38) 1.95Balance As Per Last 7.32 10.37 3.05 41.66YearAvailable For 26.71 36.38 9.67 36.20AppropriationC/F TO Balance sheet 17.37 18.32 0.95 5.46MTCST, Ayur Page 43
  44. 44. Financial analysis on EICL, TVM 2007-2010 COMPARATIVE BALANCE SHEET Table No: 4.13 Comparative Balance Sheet 2008-2009Assets 31/03/2008 31/03/2009 INCREASE INCREASE /DECREASE /DECREASE IN %Net fixed assets 161.06 202.47 41.41 25.71Capital W.I.P 25.94 11.45 (14.49) 55.85Investments _ _ - -Total 187.00 213.92 26.92 14.40Inventories 34.85 27.75 (7.1) 20.37Debtors 30.80 31.15 1.05 3.40Cash&bank 6.93 5.17 (1.76) 25.40balancesOther current 0.10 .13 0.03 30assetsLoans and 13.36 14.93 1.57 11.75advancesTotal 86.05 79.14 (6.91) 8.03(-)current (33.29) (33.58) 0.29 0.87liabilities()provisions (19.20) (15.34) (3.86) 20.10Total (52.49) (48.92) (3.57) 6.80Misc - -expenditureTOTAL 220.56 244.14 23.58 10.69MTCST, Ayur Page 44
  45. 45. Financial analysis on EICL, TVM 2007-2010Liabilities 31/03/2008 31/03/2009 Increase / Increase / decrease decrease IN %Share 34.47 33.47 (1) 2.90capitalReserves& 56.10 68.95 12.85 22.90Surplus 90.56 102.42 11.86 13.09differed .04 - (.04) 100Govt grantsSecured 105.00 101.88 (3.12) 2.97loanUnsecured 11.06 21.83 10.7 96.74loan 116.0 123.72 7.72 6.66Differed tax 13.87 17.99 4.12 29.70liabilityTOTAL 220.56 244.14 23.57 10.69MTCST, Ayur Page 45
  46. 46. Financial analysis on EICL, TVM 2007-2010COMPARATIVE INCOME STATEMENT Table No: 4.14 Comparative Income Statement 2006-2007 2006 2007 Increase / Increase / decrease decrease IN %Net sales 206.39 243.62 37.23 18.03ExpenditureManufacturing expense 125.75 155.27 29.52 23.47Gross profit 80.64 88.35 7.71 9.56Payment to &provision 16.34 20.14 3.8 23.26to employeesAdministration &other 10.88 10.78 (0.10) 0.9Selling and distribution 10.81 11.00 0.19 1.75R&D 0.79 0.84 .08 10.12TOTAL 164.57 198.02 33.45 20.32Profit Before Interest, 41.82 45.60 3.78 9.03Depreciation And TaxInterest 9.83 9.68 (0.15) 1.53PBDT 32.00 35.93 3.93 12.28Depreciation 7.50 7.83 0.33 4.4PBT 24.49 28.09 3.6 14.7TAX expense 6.82 9.96 3.14 46.04PAT 17.66 18.12 0.46 2.60Balance As Per Last 4.04 5.47 1.43 35.39YearAvailable For 21.70 23.60 1.9 8.75AppropriationC/F TO Balance sheet 5.47 7.36 1.89 34.55MTCST, Ayur Page 46
  47. 47. Financial analysis on EICL, TVM 2007-2010COMPARATIVE BALANCE SHEET Table No: 4.15 Comparative Balance Sheet 2006-2007 Assets 31/03/2006 31/03/2007 INCREASE INCREASE /DECREASE /DECREASE IN % Net fixed assets 142.09 151.64 41.41 25.71 Capital W.I.P 2.38 5.62 (14.49) 55.85 Investments _ _ - - Total 26.92 14.40 Inventories 24.15 35.02 (7.1) 20.37 Debtors 19.87 27.10 1.05 3.40 Cash & bank 14.23 5.79 (1.76) 25.40 balances Other current 0.47 .92 0.03 30 assets Loans and 25.60 11.38 1.57 11.75 advances Total 86.05 79.14 (6.91) 8.03 (-)current (21.54) (31.40) 0.29 0.87 liabilities ()provisions (11.59) (15.69) (3.86) 20.10 Total (52.49) (48.92) (3.57) 6.80 Misc - - expenditure TOTAL 213.60 234.56 23.58 10.69MTCST, Ayur Page 47
  48. 48. Financial analysis on EICL, TVM 2007-2010 Liabilities 31/03/2006 31/03/2007 Increase / Increase / decrease decrease IN % Share 14.47 34.47 20 138.22 capital Reserves& 83.65 93.1 9.45 11.30 Surplus 98.11 127.58 29.47 30.03 differed 0.81 0.06 (0.75) 92.59 Govt grants Secured 90.22 83.32 (6.9) 7.64 loan Unsecured 12.04 10.62 (1.42) 11.79 loan 102.27 93.94 (8.33) 8.15 Differed tax 13.13 13.52 0.39 2.97 liability TOTAL 213.59 234.56 20.97 9.82INTERPRETATION ON COMPARITIVE INCOME STATEMENT1) The sales volume and manufacturing expense have increased by 4.95 and 5.09 respectively during the year ending 31st march 2009 as compared to the last year ending 31st march 2008.2) Gross profit; have increased marginally from 95.08 in 2007-08 to 100.29in 2008-09, but net profit show a decreasing trend as compared with the previous year 2008.MTCST, Ayur Page 48
  49. 49. Financial analysis on EICL, TVM 2007-2010 From the above analysis it is evident that percentage increase in cost was more ascompared to the percentage increase in sales.net profit have decreased in spite of increase inadministrative and payment made to the employees. it is all because of the appreciableincrease in the cost of goods sold. Increase in the cost of goods sold may be because ofincrease in price of materials use or goods purchased and increase in labour rates or othermanufacturing expenses. Management cannot reduce the cost if it is due to the over allincrease in the cost is as a result of in efficiency of input.INTERPRETATION OF COMPARITIVE BALNCESHEET Interpretation of comparative balance sheet shows that long that long term fund likeshare capital and debentures have been raised for acquiring more fixed assets for expandingbusiness. Fixed assets have increased by 25.71% as compared to the last year. This has beenmade possible by decrease in inventories. It is a step in right direction because expansion ofbusiness is possible with increase in fixed assets. Debt equity ratio in lower side so there is ascope for arranging long-term loan for further expansion.MTCST, Ayur Page 49
  50. 50. Financial analysis on EICL, TVM 2007-2010CASH FLOW STATEMENT Table No: 4.16 Cash Flow StatementParticulars Years 2005 2006 2007 2008 2009Cash flow fromoperating activitiesNet profit before tax 18.82 24.49 28.09 30.83 29.02Operating profit 29.02 35.48 43.64 52.29 49.07before workingcapital changesCash generated from 30.19 30.14 34.16 51.90 53.89operationsNet Cash from 26.46 29.36 23.8 39.98 43.72operating activitiesCash flow frominvestmentNet cash used in (108.07) (37.15) (18.07) (42.69) (30.80)investing activitiesCash flow fromfinancing activities :Net cash used in (17.31) (21.93) (5.51) 3.49 (15.18)financing activitiesNet 1.25 .83 .17 .77 (2.26)Increase/(Decrease)in Cash & CashEquivalentsCash and Cash 1.88 3.13 3.95 4.12 4.90equivalents at thebeginning of the yearCash and Cash 3.12 3.95 4.12 4.90 2.63equivalents at theend.MTCST, Ayur Page 50
  51. 51. Financial analysis on EICL, TVM 2007-2010WORKING CAPITAL ANALYSIS Working Capital is the excess of current assets over current liabilities. This ratio iscalculated to study the efficiency with which the working capital is utilized in the businessWorking capital= current assets- current liability Table No: 5.18 Working Capital AnalysisParticulars 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009Current 55.29 84.33 79.55 86.05 79.14assetsCurrent 29.38 33.13 47.80 52.50 48.92liabilityNet working 25.91 51.21 31.80 33.56 30.22capital Graph No: 5.12- Working Capital Analysis 60.00 Working Capital Analysis 55.00 50.00 45.00 40.00 35.00 30.00 25.00 20.00 2004-05 2005-2006 2006-07 2007-08 2008-09 YearMTCST, Ayur Page 51
  52. 52. Financial analysis on EICL, TVM 2007-2010INTERPRETATION Working capital of the company showing a downward trend from the year 2005-06. Working capital is come down from 51.21 in 2005-06 to 30.22 in 2008-09.MTCST, Ayur Page 52
  53. 53. Financial analysis on EICL, TVM 2007-2010 Chapter-5 FINDINGS, SUGGESTIONS & CONCLUSIONMTCST, Ayur Page 53
  54. 54. Financial analysis on EICL, TVM 2007-2010 FINDINGS The current ratio of the firm though not an ideal one (2:1), because the company the attained the satisfactory ratio only in the year 2005-2006.the current ratio shows a satisfactory position in meeting short term obligation. Quick ratio is highly satisfactory; English Indian Clays can attain the satisfactory level of 1:1 almost all the years. quick ratio is very high during the year 2004-05 The super quick ratio shows that the firm has not in a position to borrow from the market. The favorable super quick ratio is 0.75:1.but the company can only attain a high ratio of 0.39 during the year 2004-05, which is not a satisfactory performance of the company. The proprietary ratio is very low which shows relatively high risk to creditors. The company‟s financial position is very bad. Fixed asset to net worth ratio is satisfactory to the whole period, the favorable position is 50% but the company can attain more than 50% in entire five years. In Gross-profit ratio higher the ratio, the better it is. The company can achieve a high ratio of 15.82 during the year 2004-05.but we can see that the ratio is come down in the entire period after that. Net profit ratio explains per rupee profit generating capacity of sales. The amount of net profit and volume of sales increased by year by year but the ratio shown a downward trend.MTCST, Ayur Page 54
  55. 55. Financial analysis on EICL, TVM 2007-2010 Working capital turns over ratio, the higher the ratios, the lower is the investment in working capital and the greater are the profits. During the period of 2008-09 the company can attain a high ratio of 9.43. Fixed Asset turn Ratio shows a fluctuating trend sometimes nearing to the ideal one. Any way the company is in a position to meet the long-term requirement.MTCST, Ayur Page 55
  56. 56. Financial analysis on EICL, TVM 2007-2010 SUGGESTIONS The company should concentrate on the long-term solvency of the business. Company should make effective measures to reduce the total debt. The market condition should be properly analyzed before procurement of material. Liquid and long term solvency is satisfactory and the company should try to keep more liquid assets. Low rate of gross profit is due to the increase in the operating expense. The proprietary ratio is not in a satisfactory level. So the company should give more focus on general financial strength. The company should pay more attention towards the gross profit ratio and net profit ratio because both of these are showing a downward trend. Working capital turn over ratio is satisfactory. The company should give more attention to attain a higher ratio that will increase the profitability. Fixed asset turn over ratio shows a mixed trend so the company should take the necessary steps to meet the higher ratio. Working capital ratio should be improved because low working capital ratio indicates a lower profit.MTCST, Ayur Page 56
  57. 57. Financial analysis on EICL, TVM 2007-2010 CONCLUSION EICL is an epitome of industrial success in the customer state of Kerala. From a verymodest beginning the company has reached its present status of glory. As a clay mining,manufacturing, and processing unit, the company‟s ability to sustain a steady and time boundsupply schedule coupled with its constant striving for excellence has given it that extra edgeover all its competitors in the field. The combined effort of the management and workers hasensured that the company never lost its course. Today the firm is well known for itsconsistent performance and the quality of its products and work force. In a state that isnotorious for its militant trade unionism EICL has succeeded in maintaining a peacefulindustrial climate. The company‟s working capital position shows a positive trend which shows good orsatisfactory existences in current period. But we can see that the amount of sales is increasingat a healthy rate, but the amount of net profit after depreciation and tax going in a decreasingtrend. This is mainly due to the increase in the cost of goods sold and increase in themanufacturing and labour cost. We can also see that an increase in the amount of sharecapital from 14.47 in 2004-07 to 33.47 in 2007-08, this will help to make more and morefund flowing towards the fixed assts and other manufacturing facilities. The project work entitled “Analysis of Financial Statement in English Indian ClaysLtd is the study of the proportion of financial resources in the company and how much it iseffective. Such a study will give practical awareness regarding internal functioning of anorganisation for this reason the study is relevant for students specialising finance.MTCST, Ayur Page 57
  58. 58. Financial analysis on EICL, TVM 2007-2010 BIBLIOGRAPHYMTCST, Ayur Page 58
  59. 59. Financial analysis on EICL, TVM 2007-2010BIBLIOGRAPHY Books 1. Maheshwari S.N (Dr.), Management Accounting And Financial Control, Sultan Chand and sons, thirteenth Edition 2002 2. Jain S.P,Narang K.L, Higher Accountancy, Kalyani Publications, New Delhi, second edition, 2000 3. K. G. C Nair (Dr.), Jayan (Dr.), Higher Accounting, Chand Publications, Pattom, TVM Reports Annual Reports of English Indian clays 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Website www.eicl.comMTCST, Ayur Page 59

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