IN
R.S FASTENERS
(#249/13. G.T ROAD, DORAHA)
In Partial Fulfillment of the requirement for the degree
of BACHELOR OF BUSIN...
PREFACE
Finance is regarded as the lifeblood of a business organization. This
is because the modern money economy, finance...
CERTIFICATE
This project report
Of
Kamaljot Kaur
( University Roll No. 11309000222)
Titled
An Analytical study of Ratio An...
ACKNOWLEDGEMENT
First of all, I would like to thank the alimighty god for his blessings showed
on me during the training p...
DECLARATION
I hereby declared that entitled project report on “RATIO
ANALYSIS” is originally prepared by me In Partial
Ful...
CONTENTS
Chapter
No.
Topic Page
no.
1. INTRODUCTION 1-30
A. INTRODUCTION TO COMPANY 1-13
B. INTRODUCTION TO RATIO
ANALYSIS...
Light that shines through the ever growing, ever evoling group that is R.S
FASTENERS started in 1980. company has gained u...
GENERAL PROFILE
COMPANY NAME : R.S FASTENERS head office
3062, ST.no.12, new janta nagar,
Ludhiana : 141003. ph. O16750781...
NAME OF PARTNERS:
SANJIV KUMAR MAHESHWARI
RAJESH KUMAR MAHESHWARI
AJAY KUMAR MAHESHWARI
PARTNERS OF THE COMPANY
CONTROL
BY...
WORKING OF PARTNERS
MANAGING
PARTNER
PARTNER
WORKS
PRODUCTION
SUPERVISOR
HELPERS
FITTERS
MAINTAINACE
I/C
PURCHASE
EXECUTIV...
LIST OF SOME OF OUR CUSTOMERS
M/S Mahindra & Mahindra limited, Zaherrabad/haridwar.
M/S force Motor LTD, Pune.
M/S QH Tabl...
QUALITY POLICY
WE ARE COMMITED TO MANUFACTURE AND SUPPLY,
PRODUCTS THAT ADHARE TO CONTACTUAL SPECIFICATIONS
AND SPECIFICAT...
PRODUCT PROFILE:
The company is mainly producing fasteners (nuts & bolts) for
automobiles, 2 wheelers, heavy chemical indu...
HEX NUTS
RANGE METRIC-M3 TO M60
INCHES-THRED AVAILABLE-UNF, UNC, BSW, 14” TO
2”MANUFACTURING FACILITIES-HOT FORGE, COLD FO...
RANGE METRIC-M3TOM60
INCHES-14”TO2”
FINISH- PLAIN, BZP, YELLOW PLATED, BLACK, TRIVALENT
MATERIAL-AISI-1010, 1015, 15B25, 1...
PROJECTION SQUARE WELD NUTS:
RANGE METRIC-M4TOM16
INCHES-14” TO12”
FINISH- RUST PREVENTIVE OIL
MATERIAL-AISI-1010, 1015, 1...
RANGE METRIC-M4 TO M16
INCHES-14” TO 12”
FINISH-RUST PREVENTIVE OIL
MATERIAL- AISI1010, 1015, 15B25, 1541
MANUFACTURING FA...
SWOT ANALYSIS
STRENGTH
1. Visitory management with strong focus an growth and
diversification.
2. Established sales networ...
GOVERNING REGULATIONS
Acknowledgement of registration of firms by registrar of firms.
Certificate of Punjab pollution cont...
FINANCE DEPARTMENT OF COMPANY:
As the present day, business activities are predominantly carried on
by company form of org...
3. Increasing profitability: The planning and control of finance
function aims at increasing profitability, sufficient fun...
DEFINITION :
According to Hunt, William and Donaldson, “Ratios are simply a
means of high lighting in the arithmetical ter...
BASIS OR STANDARDS OF COMPARISON
Ratio are relative figures reflecting the relation between variables.
They enable analyst...
INTERPRETATION OF RATIO
Calculation of ratio is comparatively simple, routine clerical in nature
but the interpretation of...
GUIDELINES FOR USE OF RATIO
1) Accuracy Of Financial Statement:- The reliability of ratios is
linked to accuracy of inform...
ADVANTAGES OF RATIO ANALYSIS
Ratio can assist management in its basic functioning like forcasting,
planning and controllin...
USEFULNESS OF RATIO ANALYSIS
1) Usefulness For Short Term Creditors :- Short term creditors,
bills payables, creditors for...
LIMITATIONS OF RATIO ANALYSIS
In spite of many advantages, there are certain limitations of the ratio
analysis techniques ...
convenience to show the financial position of the company in a
better way.
6. Costly Technique: Ratio analysis is a costly...
Composite (or) inter statement ratio: These ratios exhibit the
relation between a profit & loss account or income statemen...
A) CURRENT RATIO:
Current ratio may be defined as relationship between current assets
& current liabilities. This ratio al...
 Shows the liquidity at a particular point of time. The position can
change immediately after that date. So trend of the ...
receivables from the current assets and find out the absolute liquid
assets.
Absolute liquid assets include cash in hand e...
COMPONENTS OF PROPRIETORY RATIO
2. ACTIVITY RATIO :- Funds are invested in various assets in
business to make sales and ea...
Components of working capital
Current assets Current liabilities
Cash in hand Outstanding expenses
Cash at bank Bank overd...
d) CURRENT ASSETS TO FIXED ASSETS RATIO :- This
ratio differs from industry to industry. The increase in the ratio means
t...
3. PROFITABILITY RATIO :- The primary objective of business
is to earn profits because profit is the engine that drives th...
d) OPERATING PROFIT RATIO :- operating ratio establishes the
relationship between cost of goods and other operating expens...
OBJECTIVES OF THE STUDY
1) To study the present financial system of R.S FASTENERS.
2) To determine the profitability, liqu...
RESEARCH METHODOLOGY
Research is an art of scientific investigation advances learner’s
dictionary of current English.
“Res...
Analysis of short term Financial Position or test of
liquidity
A)LIQUIDITY RATIO
(a) CURRENT RATIO = CURRENT ASSETS/CURREN...
(b) QUICK RATIO = QUICK ASSETS /CURRENT LIABILITIES
Particular 2008-2009 2010-2010
Current Assets 103202141.72 307769019.1...
(c)ABSOLUTE LIQUID RATIO = LIQUID RATIO
CURRENT LIABILITIES
Particular 2008-2009 2009-2010
Liquid Assets 97367927.22 29623...
(d)WORKING CAPITAL = CURRENT ASSETS – CURRENT
LIABILITIES
WORKING
CAPITAL RATIO
YEAR 2008-2009 YEAR 2009-2010
Current Asse...
(B)PROFITABILITY RATIO
(a) GROSS PROFIT RATIO = GROSS PROFIT * 100
SALES
GROSS PROFIT RATIO YEAR 2008-2009 Year 2009-2010
...
(b) NET PROFIT RATIO = NET PROFIT AFTER TAX * 100
NET SALES
NET PROFIT RATIO YEAR 2008-2009 YEAR 2009-2010
Net profit afte...
(C) CASH PROFIT RATIO :- CASH PROFIT * 100
NET SALES
CASH PROFIT RATIO YEAR2008-2009 YEAR 2009 -2010
Cash profit
Net profi...
(C) ACTIVITY RATIO :-
(a) INVENTORY TURNOVER RATIO = COGS
AVERAGE STOCK
Interpretation :-
As compared to previous year the...
(B) DEBTOR TURNOVER RATIO :- NET CREDIT SALES
AVERAGE DEBTORS
Interpretation :-
As compared to previous year, debtor turno...
(c) CREDITOR TURNOVER RATIO :- NET CREDIT PURCHASES
AVERAGE CREDITORS
Interpretation :-
As compared to previous year, cred...
(D)WORKING CAPITAL TURNOVER RATIO =
COGS
AVERAGE WORKING STOCK
Interpretation :-
As compared to previous year, working cap...
(D) SOLVENCY RATIO
(a) DEBT EQUITY RATIO = TOTAL LONG TERM DEBTS
SHAREHOLDERS FUND
DEBT EQUITY RATIO YEAR 2008-2009 YEAR 2...
(b) FUNDED DEBT TO TOTAL CAPITALISATION
= TOTAL LONG TERM DEBT * 100
TOTAL CAPITALISATION
FUNDED DEBTED TO
TOTAL
CAPITALIS...
(c) DEBT EQUITY RATIO = SHAREHOLDERS FUND
TOTAL ASSETS
EQUITY RATIO YEAR 2008-2009 YEAR 2009-2010
Shareholders fund 102665...
(d) SOLVENCY RATIO = TOTAL LIABILITIES TO OUTSIDERS
TOTAL ASSETS
SOLVENCY RATIO YEAR 2008-2009 YEAR 2009-2010
Total liabil...
(e ) FIXED ASSETS TO NETWORTH =
FIXED ASSETS AFTER TAX
SHAREHOLDERS FUND
FIXED ASSETS TO
NETWORTH RATIO
YEAR2008-2009 YEAR...
(f) FIXED ASSETS TO LONG TERM FUND = FIXED ASSETS
LONG TERM DEBT
Interpretation :-
As compared to previous year, fixed ass...
(g) CURRENT ASSETS TO SHAREHOLDERS FUND =
CURRENT ASSETS
SHAREHOLDERS FUND
CURRENT ASSETS
TO SHAREHOLDERS
FUND RATIO
YEAR ...
(e)OVERALL PROFITABILITY RATIO
(a) RETURN ON SHAREHOLDER = NET PROFIT AFTER TAX
INVESTMENT SHAREHOLDERS FUND
Interpretatio...
(b) TOTAL ASSETS TURNOVER RATIO =
COST OF GOODS SOLD
TOTAL ASSETS
TOTAL ASSETS
TURNOVER RATIO
YEAR 2008 -2009 YEAR 2009- 2...
(d) RETURN ON EQUITY CAPITAL = NET PROFIT-PREFERENCE
EQUITY SHARE CAPITAL
RETURN ON
EQUITY CAPITAL
YEAR 2008-2009 YEAR 200...
(d)RETURN ON GROSS CAPITAL EMPLOYED =
NET PROFIT AFTER TAX
GROSS CAPITAL EMPLOYED
RETURN ON GROSS
CAPITAL EMPLOYED
YEAR 20...
(e)RETURN ON NET CAPITAL EMPLOYED =
NET PROFIT
NET PROFIT EMPLOYED
Interpretation :-
As compared to previous year, net cap...
FINDING OF THE STUDY
 From the study we find out that the sundry debtors has been
increased by 34.14% in 2010 from 2009.
...
SUGESSTIONS OF THE STUDY
The following suggestions are made on the basis of above
study:
a) As the company does not have e...
LIMITATIONS OF THE STUDY
A. This study is based on annual reports of the company
B. This study is very time consuming.
C. ...
FROM THE STUDY CONCLUDE SOME POINTS WHICH ARE
DESCRIBED AS FOLLOWS:
 The current assets consist of debtors,stock,marketab...
1.Management Accounting and Business Finance ( 2007)
-Gupta Shashi K.
-R.K Sharma
2.Financial Management
- Shashi K. Gupta...
ANNEXURE
TRADING ACCOUNT AS ON 31ST
MARCH2010 OF
R.S FASTENERS
Particular Amount
(Rs.)
Particular Amount(rs.)
To opening
s...
PROFIT & LOSS ACCOUNT AS ON 31ST
MARCH 2010 0F R.S
FASTENERS
PARTICULAR AMOUNT(R
s.)
PARTICU
LAR
AMOUNT
(Rs.)
To AMC charg...
To E.P.F 81506.00
To E.S.I 28457.00
To Electric Repair 96684.00
To Excise Duty
Revised
44141.00
To Electric Load ext.
Char...
To L.W.W 51235.00
To labour charges 5203.00
To legal charges 18000.00
To machinery repair 836992.00
To miscellaneous
expen...
To segration
charges
887.09
To testing
charges
803.00
To traveling
charges(foreign)
295130.00
=43066191.40
To net profit
T...
BALANCE SHEET AS ON 31ST
MARCH 2010 OF R.S FASTENERS
LIABILITIES AMOUNT ( RS.) ASSESTS AMOUNT
(RS.)
Partners capital
accou...
TRADING ACCOUNT AS ON 31ST
MARCH 2009 0F
R.S.FASTENERS
PARTICULAR AMOUNT
(RS.)
PARTICULAR AMOUNT(RS.)
To opening stock 207...
PROFIT & LOSS ACCOUNT AS ON 31ST
MARCH 2009 OF
R.S FASTENERS
Particular Amount
(Rs.)
Particular Amount (Rs.)
To AMC
charge...
To insurance 133921
To interest on car
loan
58559
To interest on late
deposit
249
To interest on bank 9303379
To interest ...
To telephone
expenses
51305
To traveling
expenses
358169
=25601704.18
To net profit 6062418.99
Total =31664123.17 =3166412...
BALANCE SHEET AS ON 31ST
MARCH 2009 OF R.S FASTENERS
LIABILITIES AMOUNT
( RS.)
ASSETS AMOUNT
( RS.)
Partners capital
accon...
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
RATIO ANALYSIS OF R.S FASTENERS
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RATIO ANALYSIS OF R.S FASTENERS

  1. 1. IN R.S FASTENERS (#249/13. G.T ROAD, DORAHA) In Partial Fulfillment of the requirement for the degree of BACHELOR OF BUSINESSADMINISTRATION ( BBA ) Panjab university chandigarh SUBMITTED TO: SUBMITTED BY: Department of Commerce and KAMALJOT KAUR Business administration Univ.R.No.11309000222 Guru Nanak National College Doraha
  2. 2. PREFACE Finance is regarded as the lifeblood of a business organization. This is because the modern money economy, finance is one of the basic foundations of all kind of the economic activities. For any business student, who is striving to perform outstanding it is paramount importance that apart from theoretical knowledge, they must also gain some practical knowledge. The training project deals with providing an opportunity to management student to have the knowledge of real world concept in the depth of its usage. As per the requirement of BBA degree, students are sent to different industrial unities for gaining practical experience. This report is a result of 8 weeks of management summer training in R.S FASTENERS. The project report is concerned with “To study the ratio analysis of R.S FASTENERS”. R.S FASTENERS is dealing with the manufacturing of nuts, bolts, washers, Steel metal components.The main purpose of this report is to give a written account on whatever I have studied about the company. I have tried my best to present the true picture of the company.
  3. 3. CERTIFICATE This project report Of Kamaljot Kaur ( University Roll No. 11309000222) Titled An Analytical study of Ratio Analysis In R.S FASTENERS G.T ROAD DORAHA Is approved and Is acceptable in quality and form Mr. Gursharanjit Singh External Examiner Head of Department of Commerce ( G.N.N College, Doraha )
  4. 4. ACKNOWLEDGEMENT First of all, I would like to thank the alimighty god for his blessings showed on me during the training programmed. I would also like to express my special thanks to Mr. SANJIV KUMAR MAHESHWARI who permits me for doing training in R.S FASTENERS. I am extremely grateful to the Chief Finance Officer Mr. RAM SAROOP for his constant encouragement and valuable suggestions through-out my summer training and project for his cooperation extended to me. It is really a matter of pleasure and sense of gratitude, I especially thank MS. PREETINDER KAUR without whose supervision I would not able to make project report. I also express my sincere gratitude towards DR. NARINDER SINGH SIDHU (Principal of G.N.N college DORAHA) and PROF. GURSHARANJIT SINGH (Head of Department of commerce) and PROF. BALPREET KAUR who has always been source of inspiration. I am thankful to all my teachers who have provided me the guidance, help and whole hearted cooperation during the training. Last but not the least, my parents and friends were always there to give me moral support in difficult situations. KAMALJOT KAUR
  5. 5. DECLARATION I hereby declared that entitled project report on “RATIO ANALYSIS” is originally prepared by me In Partial Fulfillment of the requirement for the degree of BACHELOR OF BUSINESS ADMINISTRATION (BBA) Panjab university chandigarh Kamaljot kaur Uni. Roll no. 11309000222 Place………… Doraha …….....
  6. 6. CONTENTS Chapter No. Topic Page no. 1. INTRODUCTION 1-30 A. INTRODUCTION TO COMPANY 1-13 B. INTRODUCTION TO RATIO ANALYSIS 14-30 2. OBJECTIVES OF THE STUDY 31 3. RESEARCH METHODOLOGY 32 4. DATA ANALYSIS AND INTERPRETATION 33-55 5. FINDINGS 56 6. SUGGESSTIONS 57 7. LIMITATIONS 58 COCLUSION 59 BIBLIOGRAPHY 60 ANNEXURE 61-71
  7. 7. Light that shines through the ever growing, ever evoling group that is R.S FASTENERS started in 1980. company has gained unquestionable supremacy in the wide range of fasteners. RSF, with accreditation of ISO/TS 1649:2002, enjoys the reputation for producing the widest range of critical application fasteners for automobile,2 wheelers ,agricultural tractor,heavy engine- eering equipments, chemical industry, military and customized products. The company’s manufacturing plant spread over 10,000 sq.mts. with production faclilities of 2000 metric tones per annum, manned by a dedicated team of employees working in perfect harmony,supllying over 350 items to about 110 customers. RSF has installed sophisticated and precision machines and instruments to ensure production of superior quality fasteners. Keeping in mind the competitive and growing needs of customer,RSF is always on the look-out for expansion and modernization.
  8. 8. GENERAL PROFILE COMPANY NAME : R.S FASTENERS head office 3062, ST.no.12, new janta nagar, Ludhiana : 141003. ph. O167507814 Works: #249/13. G.T ROAD, DORAHA DISTT : LUDHIANA ( PB ) Ph. 01628256860 Website : www.r.s.fasteners.com Revenue : 124 lac Net worth : 10 lac.(app.) Turnover : 28 lac.(app.)
  9. 9. NAME OF PARTNERS: SANJIV KUMAR MAHESHWARI RAJESH KUMAR MAHESHWARI AJAY KUMAR MAHESHWARI PARTNERS OF THE COMPANY CONTROL BY Sanjiv Kumar Maheshwari (Partner sales) Ajay Kumar Maheshwari ( Partner purchases ) Rajiv Kumar Maheshwari (Partner works)
  10. 10. WORKING OF PARTNERS MANAGING PARTNER PARTNER WORKS PRODUCTION SUPERVISOR HELPERS FITTERS MAINTAINACE I/C PURCHASE EXECUTIVE PARTNER PURCHASE PARTNER SALES MR QC INCHARGE QUALITY CONTROL INSPECTOR INCOMING INSPECTION INPROCESS INSPECTION FINAL INSPECTION ACCOUNTS
  11. 11. LIST OF SOME OF OUR CUSTOMERS M/S Mahindra & Mahindra limited, Zaherrabad/haridwar. M/S force Motor LTD, Pune. M/S QH Tablors Ltd.,Gurgaon/Manesar/Dehradune. M/S Remsons Industuries Ltd., Mumbai/Daman. M/S Mahindra Ugine Steel Co. Ltd,Nasik. M/S Majestic Auto Limited,Ghazibad/Ludhiana. M/S Rane Madras Ltd, Chennai/Mysore/Pondy/panthnaagar M/S Rane TRW Steering system Ltd. Trichy M/S ZF Steering Gear India Limited, Pune. M/S Suprajit Engineering Ltd.,Pune/panthanagar. M/S Dana India Pvt. Ltd., Pune M/S Mahindra & Mahindra Limited, SAS Nagar Mohali M/S Mahindra & Mahindra Limited,IBD,Chandigarh. M/S Mahindra & Mahindra Limited, Chappancherri. M/S Kirlosker Toyoda, Banglore M/S RSB Internatinal Ltd., Pune M/S International Tractors Ltd., Hoshiarpur M/S Sonassomic Lemforder Ltd., Gurgaon. AND MANY MORE
  12. 12. QUALITY POLICY WE ARE COMMITED TO MANUFACTURE AND SUPPLY, PRODUCTS THAT ADHARE TO CONTACTUAL SPECIFICATIONS AND SPECIFICATIONS AND SATISFY CUSTOMERS IN TERMS OF CONSISTENT QUALITY COMPETITIVE PRICE, TIMELY DELIVERY AND COMPANY IS COMMITTED TO COMPLY WITH REQUIREMENTS AND CONTINUALLY IMPROVE THE EFFECTIVENESS OF THE QUALITY MANAGEMENT SYSTEM. Sd/- S. Maheshwari (partner) VISISON/MISSION VISION To be the largest and the most respected domestic company with global footprints mission. MISSION  Be the no.1 company on a global level.  Export to more than 100 countries through supply of nuts and bolts’  Create own brand presence in export and domestic market through market penetration.  Introduce more more products
  13. 13. PRODUCT PROFILE: The company is mainly producing fasteners (nuts & bolts) for automobiles, 2 wheelers, heavy chemical industries, agricultural tractor, military and customized products. The company has gained unquestionable supremacy in the wide range of fasteners. MAIN TYPES OF NUTS: The main types of nuts are as follow MAIN TYPES OF NUTS HEX NUTS NYLOCK NUTS LOCK NUTS WHEEL NUTS PROJECTION SQUARE WELD NUTS FLANGED NUTS HEX WELD NUTS SPECIAL NUTS
  14. 14. HEX NUTS RANGE METRIC-M3 TO M60 INCHES-THRED AVAILABLE-UNF, UNC, BSW, 14” TO 2”MANUFACTURING FACILITIES-HOT FORGE, COLD FORGE, MACHINED MATERIAL- AISI-1010, 1015, 15B25, 1541, as per requirement NYLOCK NUTS: RANGE METRIC-M4 TOM30 INCHES-THRED AVIALABLE- UNF, UNC, BSW, AND AS PER CUSTOMERS REQUIREMENTS 14”TO1” FINISH-PLAIN, YELLOW PLATED, BLACK MANUFACTURING FACILITIES-COLD FORGE, MACHINED LOCK NUTS:
  15. 15. RANGE METRIC-M3TOM60 INCHES-14”TO2” FINISH- PLAIN, BZP, YELLOW PLATED, BLACK, TRIVALENT MATERIAL-AISI-1010, 1015, 15B25, 1541 MANUFACTURING FACILITIES-HOT FORGE, COLD FORGE, MACHINED WHEEL NUTS: RANGE METRIC-M3 TOM35 INCHES-14” TO2” FINISH-PLAIN, BZP, YELLOW PLATED, BLACK MATERIAL-AISI-1010, 1015, 1541, 15B25
  16. 16. PROJECTION SQUARE WELD NUTS: RANGE METRIC-M4TOM16 INCHES-14” TO12” FINISH- RUST PREVENTIVE OIL MATERIAL-AISI-1010, 1015, 15B25, 1541, AS PER REQUIREMENT MANUFACTURING FACILITIES-COLD FORGE FLANGE NUTS: RANGE METRIC- M4 TO M30 INCHES-14” TO12”, AS PER REQUIREMENT FINISH-PLAIN, BZP, YELLOW PLATED, BLACK MANUFACTURING FACILITIES-COLD FORGE, HOT FORGE HEX WELD NUTS:
  17. 17. RANGE METRIC-M4 TO M16 INCHES-14” TO 12” FINISH-RUST PREVENTIVE OIL MATERIAL- AISI1010, 1015, 15B25, 1541 MANUFACTURING FACILITIES- COLD FORGE SPECIAL NUTS: ALL AS PER CUSTOMER REQUIREMENT
  18. 18. SWOT ANALYSIS STRENGTH 1. Visitory management with strong focus an growth and diversification. 2. Established sales network in all major cities of the country. 3. Core competency in manufacturing different type of nuts. 4. Produts are well accepted in the markets. 5. Easy availability of raw material. OPPORTUNITIES 1. Arrival of new technologies. 2. Scope for expansion in international market. 3. good quality offers a very good opportunity to R.S Fasteners in local & international market. 4. R&D centre continuously on improving quality standards introducing new & unique in their product. WEAKNESSES 1. High cost structure. 2. No separate R&D facility. 3. Poor supply chain causes wastages of resources and increases and increase cost. 4. The price of raw material and finished goods move in tandem with international prices, which are,in turn,have positive correlation with the prices of petrochemical products. THREATS 1. Rules & regulations. 2. Arrival of new companies 3. Change in government policies and business cycles. 4. Continuous quality improvement will be the need of the hour for which urgent measures are called for from all shareholders.
  19. 19. GOVERNING REGULATIONS Acknowledgement of registration of firms by registrar of firms. Certificate of Punjab pollution control board for grant consent to operate an industrial plant. Certificate of registration issued under central excise. Importer exporter code issued to director, R.S.Fasteners. Certificate of registration issued under central sales act, 1956.
  20. 20. FINANCE DEPARTMENT OF COMPANY: As the present day, business activities are predominantly carried on by company form of organization, there is need to give the emphasis to the financial practices and problems of the company. To fulfill this need the company has a different department for controlling the finance activities of the company. As the company is a partnership firm all the finance activities are controlled by one of the partner i.e. Sanjiv Maheshwari. All the receipt and payments are made by them and a proper control is established by him. The accounting activities are done by Mr. Ramsaroop and all other functions are done by Miss. Preetinder kaur. OBJECTIVES: The main objectives of the finance department are as follow; 1. Acquiring sufficient funds: The main aim of finance department is to assess the financial needs of the company and finding out suitable sources for raising the funds. The sources should be commensurate with the needs of the business. 2. Proper utilization of funds: Though raising of funds is important but their effective utilization is more important. The funds should be used in such a way that maximum benefit is derived from them.
  21. 21. 3. Increasing profitability: The planning and control of finance function aims at increasing profitability, sufficient funds will have to be invested. 4. Maximizing firm value: Finance function also aims at maximizing the value of firm .Beside profits ,the type of sources used for raising funds ,the cost of funds ,the condition of money market ,the demand for products are some other considerations which also influence a firm value. 5. RATIO ANALYSIS The term “Ratio” refers to the numerical and quantitative relationship between two items or variables. The relationship can be exposed as  Percentages  Fractions  Proportion of numbers Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So, that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determine. Ratio reflects a quantitative relationship helps to form a quantitative judgement. A ratio is only a comparison of the numerator with the denominator. The term ratio refers to the numerical or quantitative relationship between two figures. Ratio is designed to show how one number is related to another. In simple words. Ratio is the numerical relationship between two variables which are connected with each other in same way or the other.
  22. 22. DEFINITION : According to Hunt, William and Donaldson, “Ratios are simply a means of high lighting in the arithmetical terms the relationship between figures drawn financial statements.” According to J. Betty , “The term accounting ratios is used describe significant relationships exits between figures shows on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of the accounting organization.” STEPS IN THE RATIO ANALYSIS A. The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. B. To compare the calculated ratios of the same firm relating to the past or with the industry ratios. It facilitates in assessing success or failure of the firm. C. Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action. IMPORTANCE OF RATIO ANALYSIS Comparison of a firm with its own performance in the past. Comparison of one firm with another firm in the industry. Comparison of one firm with the industry as a whole. Comparison of an achieved performance with predetermined standards. Comparison of one department of a concern with other departments.
  23. 23. BASIS OR STANDARDS OF COMPARISON Ratio are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves us the comparison with related effects. This is the basis of ratio analysis. The basis of ratio analysis is of four types. Past ratios, calculated from past financial statements of the firm at the same point of time. Competitor’s ratio, of the same most progressive and successful competitor firm at the same point of time. Industry ratio, the industry ratios to which the firm belongs to. Projected ratios, ratios of the future developed from the projected of proforma financial statements. NATURE OF RATIO ANALYSIS Ratios analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis. Selection of relevant data from the financial statements depending upon the objective of analysis. Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratio of same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with the ratios of the industry to which the firm belongs.
  24. 24. INTERPRETATION OF RATIO Calculation of ratio is comparatively simple, routine clerical in nature but the interpretation of ratio is highly sophisticated and intricate phenomenon. The benefit of ratio analysis depends a great deal upon the correct interpretation. It needs skills, intelligence, training and intuition of high order on the part of the analyst. The following are different ways in which ratios may be interpreted :- 1. Individual Ratio :- Individual ratio may have significance of its own. For example if the current ratio of one unit continuously falls, It may indicate probable insolvency. But generally single ratio may not convey any sense. However single ratios may be studied with reference to certain popular rules of thumb with can only give approximations. Care must be exercised because such. comparison may be erroneous or unrealistic. 2. Group Ratio :- Ratio may be interpreted by considering groups of several related ratio. Such interpretation may be studied along with liquid ratio. Such interpretation may be more meaningful. For example- current ratio may be studied along with return on investment. 3. Comparisons with projections:- in a business unit where system of budgetary control and forecast is in existence, projected financial statement are usually drawn. Ratios calculated based on such projected financial statements shall be compared. Variances shall be calculated and analysis by reasons and persons. It shall enable to take corrective action wherever required. 4. Inter- firm comparison :- Ratios of one unit may be compared with the ratios of another identical unit. Such comparison is useful for evaluations relatives financial position of the unit or industry. While making such comparisons, care must be taken regarding the difference of accounting methods, policies, procedures and terminology being followed by different units.
  25. 25. GUIDELINES FOR USE OF RATIO 1) Accuracy Of Financial Statement:- The reliability of ratios is linked to accuracy of information of ratios in these statements. Before calculation ratio one should see whether proper concepts and conventions have been used for preparing financial statements or not. This statement should also be properly audited by competent auditors. The precaution will establish the reliability of data given in financial statement. 2) Selection Of Ratios :- Another precaution in ratio analysis is the proper selection of appropriate ratios. The ratio should match the purpose for which these required. Calculation of large number of ratio without determining their need in the present context may confuse the things instead of solving them. Only those ratio should be selected which can throw proper light on the matter to be discussed. 3) Caliber of the Analyst :- The ratio is only the tools of analysis and their interpretation will depend upon the caliber and competence of the analyst. He should be familiar with the various financial statements and the significance of changes etc. A wrong interpretation may create havoc for the concern since wrong conclusions may lead to wrong decisions. The utility of ratio is linked to the expertise of the analyst. 4) Ration Provides Only a Base :- The ratio are only guidelines for the analyst, he should not base his decisions entirely on them. He should study any other relevant information, situation in the concern, general economic environment, etc. before reaching final conclusions. The study of ratios in isolation may not always prove useful. A businessman will not afford single wrong decisions because it may far- reaching consequences. The interpreter should use the ratio as guide and may try to solicit any other relevant information which helps in reaching correct decision.
  26. 26. ADVANTAGES OF RATIO ANALYSIS Ratio can assist management in its basic functioning like forcasting, planning and controlling etc. performances of the various divisions associated with the firms can be calculated with the help of the ratio analysis. Following are the some advantages of ratio analysis :- 1) Simplifies Financial Statements:- Ratio analysis helps in studying the whole story of the change occurring in the financial condition of the business. Thus we can say that ratio analysis simplifies the comprehension of the financial statement. 2) Facilitates Inter Firm Comparison:- Ratio analysis provides sufficient data in order to compare inter firm performance. Ratio highlights the factors associated with successful and unsuccessful firms, strong and weak firms. 3) Helpful In Intra Firm Comparisons:- Ratio analysis is also useful in comparing the results of different divisions of the firm. These ratios decide their efficiency in the past as well as in the future. 4) Helpful In Planning:- As we know that planning and forcasting is the important part of the firm, so ratio analysis helps in deciding the various norms that may indicate future success in failure. Thus, we can say ratio analysis is helpful in various ways and can assist the company to move in the direction of success and helps in culling away the faults or errors.
  27. 27. USEFULNESS OF RATIO ANALYSIS 1) Usefulness For Short Term Creditors :- Short term creditors, bills payables, creditors for expenses etc. they are interested in analyzing the liquidity of unit. They determine the firm ability to meet its current obligations with the help of liquidity ratios such as current ratio and quick ratio. 2) Usefulness For Long Term Creditors :- Long term creditors are financial institutions, debenture holders, mortgage creditors etc. are interested in analyzing the capacity of the unit of reply periodical interest and repayments of loan on schedule. 3) Usefulness To Employees :- Employees are interested in fair wages adequate fringe benefits and bonus linked with productivity. Ratio analysis provides them adequate information regarding efficiency and profitability of the unit. This knowledge helps them to bargain with the management regarding their demands for improving wages, bonus etc. 4) Usefulness To Government:- Government is interestedto know the overall strength of the industry. Various financial statements published by industry units to calculate ratios for determining short term, long term and overall financial positions of the concerns. Profitability indexes can also be prepared with the help of ratios. Government may base its future policies on the basis of industrial information available from various units. 5) Usefulness For Investors :- The investors can determine the magnitude and direction of the movement in firm earnings with the help of profitability ratios such as earning per ratio, dividend per share, etc. After analyzing the relevant ratios the present investors can decide whether to hold, sell or purchase the shares and the prospective investors can decide whether or not to buy the shares.
  28. 28. LIMITATIONS OF RATIO ANALYSIS In spite of many advantages, there are certain limitations of the ratio analysis techniques and they should be kept in mind while using them in interpreting financial statements. The following are the main limitations of accounting ratios: 1. Limited Comparability: Different firms apply different accounting policies. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc. 2. False Results:Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct. 3. Effect of Price Level Changes: Price level changes often make the comparison of figures difficult over a period of time. Changes in price affects the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before any comparison. 4. Qualitative factors are ignored:Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis. 5. Effect of window-dressing:In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the
  29. 29. convenience to show the financial position of the company in a better way. 6. Costly Technique: Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it. 7. Misleading Results: In the absence of absolute data, the result may be misleading. For example, the gross profit of two firms is 25%. Whereas the profit earned by one is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs. 10,00,000 and sales are Rs. 40,00,000. CLASSIFICATION OF RATIOS :- The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various ratios can be classified as follows:- 1) Traditional Ratio 2) Functional Classification 3) Significance Ratios Traditional classification It includes the following: Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratio: these ratios deal with the relationship between two profit & loss account items, e.g. the ratios of gross profit to sales etc.
  30. 30. Composite (or) inter statement ratio: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales. SIGNIFICANCE RATIOS :- Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one which is of the prime importance to a concern. The others ratiosa that support the primary ratio are called secondary ratios. IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE: 1. Liquidity ratio 2. Leverage ratio 3. Activity ratio 4. Profitability ratio 5. Overall profitability ratio LIQUIDITY RATIOS:- Liquidity refers to the ability of a concern to meet its current obligations as & where there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations met by realizing amounts from current, floating or circulating assets. The current assets should either be calculated liquid or near liquidity. They should be convertible into cash for paying obligations of short term nature. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be calculated: 1) Current assets 2) Quick or acid test or liquid ratio 3) Absolute liquid ratio or cash position ratio
  31. 31. A) CURRENT RATIO: Current ratio may be defined as relationship between current assets & current liabilities. This ratio also known as “working capital ratio” is a general measure of liquidity and is most widely used to make the analysis of a short term financial position or liquidity of a firm. It is calculated by following method CURRENT RATIO =Current Assets/Current Liabilities COMPONENTS OF CURRENT RATIO CURRENT ASSETS CURRENT LIABILITIES Cash in hand Outstanding and accured expenses Cash at bank Bank overdraft Bills receivable Bills payable Inventories Short term advances Work-in –progress Sundry creditors Marketable securities Dividend payable Short term investments Income-tax payable Sundry debtors Prepaid expenses  Current Ratio measures short term liquidity of the concern and its ability to meet its short term obligations within a time span of a year.  It shows the liquidity position of the enterprise and its ability to meet current obligations in time.  Higher ratio may be good from the point of view of creditors. In the long run very high current ratio may affect profitability ( e.g. high inventory carrying cost)
  32. 32.  Shows the liquidity at a particular point of time. The position can change immediately after that date. So trend of the current ratio over the years to be analyzed.  Current Ratio is to be studied with the changes of NWC. It is also necessary to look at this ratio along with the Debt-Equity ratio. B) Quick or Acid Test Ratio: Quick ratio, also known as Acid test or Liquid ratio is more rigorous test of liquidity than the current ratio. The term liquidity refers to the liabilities of the firm to pay its short term obligation as and when they become due. Current assets included inventory and prepaid expenses which is not easily convertibles into cash with in a short period not considered in current assets quick ratio may be define as a relationship between quick assets and currents liabilities. An asset is said to be liquid if it is converted into cash with in a short period without loss of value. QUICK RATIO = QUICK ASSETS /CURRENT LIABILITIES COMPONENTS OF QUICK OR LIQUID RATIO QUICK ASSETS CURRENT LIABILITIES Cash in hand Outstanding or accured expenses Cash at bank Bank overdraft Bills receivable Bills payable Sundry debtors Short term advances Marketable securities Sundry creditors Temporary investments Dividend payable Income tax payable C) ABSOLUTE LIQUID RATIO : Although receivables, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding there realization into cash immediately or in time.Hence absolute liquid ratio should also be calculated together with the current ratio and quick ratio so as to exclude even
  33. 33. receivables from the current assets and find out the absolute liquid assets. Absolute liquid assets include cash in hand etc. the acceptable forms for this is 50% (or) 0.50% (or)1:2 i.e.,Rs.=1 worth absolute liquid assets are considered to pay Rs. 2 worth current liabilities in time as all the creditors are nor accepted to demand cash at the same time and then cash may also be realized from debtors and inventories. COMPONENTS OF ABSOLUTE LIQUID RATIO ABSOLUTE LIQUID RATIO CURRENT LIABILITIES Cash in hand Outstanding expenses Cash at bank Bank overdraft Interest on fixed assets Bills payable Short term advance Sundry creditors Dividend payable 2. LEVERAGE RATIO:- The leverage on solvency ratio refers to the ability of a concern to meet its long term obligations.The following ratio serves the purpose of determining the solvency of the concern. (b) PROPRIETORY RATIO :- A variant to the debt equity ratio to the proprietary ratio which is also known as equity ratio. The ratio establishes relationship between shareholder funds to total assets of the firm. Absolute liquid ratio= Absolute liquid ratio/Current liabilities Proprietary Ratio = shareholder fund / Total assets
  34. 34. COMPONENTS OF PROPRIETORY RATIO 2. ACTIVITY RATIO :- Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly effect the volume of sales. Activity ratio measures the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called turnover ratio. A)WORKING CAPITAL TURNOVER RATIO :- It indicates the velocity of the utilization of net working capital. This indicates the no. of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio indicates indicates inefficient utilization. SHAREHOLDER FUND TOTAL ASSETS Share capital Current assets Reserve and surplus Cash in hand and at bank Bills receivable Inventories Sundry debtors Prepaid expenses Marketable securities Working capital turnover ratio= cost of goods sold Working capital = current assets – current liabilities
  35. 35. Components of working capital Current assets Current liabilities Cash in hand Outstanding expenses Cash at bank Bank overdraft Bills receivable Bills payable Inventories Short-term advances Work-in-progress Sundry creditors Marketable securities Dividend payable Short term investments Income-tax payable Sundry debtors Prepaid expenses (b) FIXED ASSETS TURNOVER RATIO:- It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under- utilization of fixed assets. Fixed assets turnover ratio = cost of sales/net fixed assets Cost of sales = Income from services Net fixed assets = Fixed assets – Depreciation c) CAPITAL TURNOVER RATIO:- Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of sales or sales with amount of capital invested in the business and not with assets held in the business,though in both cases the same result is expected. Capital invested in the business may be classified as long-term and short-term capital.
  36. 36. d) CURRENT ASSETS TO FIXED ASSETS RATIO :- This ratio differs from industry to industry. The increase in the ratio means that debtors and stock are increased too much orr fixed assets are more intensively used. If the current assets increase with the corresponding increase in profit, it will show that the business is expanding. COMPONENTS OF CURRENT ASSETS TO FIXED ASSET RATIO Capital turnover ratio = cost of goods sold/capital employed Capital employed = capital+ reserves & surplus CURRENT ASSETS FIXED ASSETS Cash in hand Machinery Cash at bank Building Bills receivable Plant Inventories Vehicles Work-in-progress Marketable securities Sundry debtors Current assets to fixed assets ratio = current assets/fixed assets
  37. 37. 3. PROFITABILITY RATIO :- The primary objective of business is to earn profits because profit is the engine that drives the business enterprise. A) NET PROFIT RATIO:- Net profit ratio establishes a relationship between net profit after tax and sales and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. Net profit ratio = net profit after tax/net sales Net profit after tax = Net profit(-)depreciation(-)interest(-)income tax c) RETURN ON TOTAL ASSETS :- Profitability can be measured in terms of relationship between net profit and assets. This ratio is also known as profit-to assets ratio. It measures the profitability of investment. The overall profitability can be known. Return on assets = Net profit/Total assets Net profit = Earning before interest and tax B) RESERVES AND SURPLUS TO CAPITAL RATIO :- It reveals the policy by the company with regard to growth shares. A very high ratio indicates a conversation dividend policy and increased ploughing back to profit. Higher the ratio better will be the position. Reserves & surplus to capital = Reserves & surplus/ capital Total assets = Fixed assets + Current assets
  38. 38. d) OPERATING PROFIT RATIO :- operating ratio establishes the relationship between cost of goods and other operating expenses on the one hand and the sales on the other. Operating profit ratio is calculated by dividing operating profits by sales. Operating profits = net sales – operating cost Operating profit ratio = operating profit/ sales G) RETURN ON INVESTMENT :- Return on shareholders investment, popularly known as return on investment or return on shareholders or proprietor’s funds is the relationship between net profit after interest and tax and the proprietor’s fund. Operating ratio = operating cost/net sales Return on shareholders investment = net profit after interest and tax/shareholders funds
  39. 39. OBJECTIVES OF THE STUDY 1) To study the present financial system of R.S FASTENERS. 2) To determine the profitability, liquidity ratios. 3) To know the current trend of assets and liabilities. 4) To analyze the liquidity position of the firm. 5) To analyze the capital structure of the company with the help of leverage ratio. 6) To offer appropriate suggestions for the better performance of the organization.
  40. 40. RESEARCH METHODOLOGY Research is an art of scientific investigation advances learner’s dictionary of current English. “Research is a careful investigation or injury especially through search for finding new fact in any branch of knowledge.” The research done during this project was primary and secondary research i.e. the data was collected through direct methods. The systematic designed, collection & analyses of data relevant to a specific marketing situation facing an organization. COLLECTION OF DATA There are several ways of collection the appropriate data which differ considerably in context of money< cost, time and other resourcesat disposable of the researcher. There are two types of data: a) Primary data b) Secondary data PRIMARY DATA :- Primary data are those which are collected afresh and for the first time, thus happen to be original in character. In the case of descriptive research, researcher from survey whether sample survey or census survey it is called primary data. SECONDARY DATA :- secondary data are those which have already been collected by someone else and have already been passed through statically process.
  41. 41. Analysis of short term Financial Position or test of liquidity A)LIQUIDITY RATIO (a) CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES CURRENT RATIO YEAR 2008-2009 YEAR 2009-2010 Current Assets 163607608.17 314374027.31 Current Liabilities 54594268.02 220788892.57 Current Ratio 3.01 1.83 Interpretation :- According to banker’s rule of thumb 2:1 is the ideal ratio of the current ratio as compared to previous year; current ratio has decreased in current year. Because of decrease in current assets. 0 0.5 1 1.5 2 2.5 3 3.5 2009 2010 CurrentAssets Year
  42. 42. (b) QUICK RATIO = QUICK ASSETS /CURRENT LIABILITIES Particular 2008-2009 2010-2010 Current Assets 103202141.72 307769019.16 Current Liabilities 54594268.02 220788892.57 Quick Ratio 1.89 1.39 Interpretation:- According to banker’s rule of thumb 1:1 is the ideal ratio for liquid ratio. As compared to previous year, liquid ratio has decrease in current year. 0 0.5 1 1.5 2 2009 2010 QuickRatio Year
  43. 43. (c)ABSOLUTE LIQUID RATIO = LIQUID RATIO CURRENT LIABILITIES Particular 2008-2009 2009-2010 Liquid Assets 97367927.22 296237680.8 Current Liabilities 54594268.02 220788892.57 Absolute Liquid Ratio 1.78 1.34 Interpretation :- As compared to previous year absolute ratio has decreased in current year because of increase in current liabilities. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2009 2010 AbsoluteliquidRatio Year
  44. 44. (d)WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES WORKING CAPITAL RATIO YEAR 2008-2009 YEAR 2009-2010 Current Assets Inventories Sundry debtors Cash & Bank balance Loan & advances 61272671.45 94701925.98 1698020.24 5801603.50 97786024.15 289315442.38 4688411.65 9648055.36 TOTAL 163474221.17 401437933.54 Current Liabilities 54594268.02 220788892.57 Working capital ratio 108879953.15 180649040.97 Working capital ratio Interpretation :- As compared to previous year has been increased in current year. Because of increased in current liabilities and decreased on current assets. 0 50000000 10000000 15000000 20000000 2008- 2009 2009- 2010 Amount Year
  45. 45. (B)PROFITABILITY RATIO (a) GROSS PROFIT RATIO = GROSS PROFIT * 100 SALES GROSS PROFIT RATIO YEAR 2008-2009 Year 2009-2010 Net sale 236762542.52 401482564.42 Gross profit 31584123.17 52291147.72 Gross profit ratio 13.33 13.02 Interpretation :- As compared to previous year, gross profit ratio has been decreased from 13.33 to 13.02 in the current year. 12.85 12.9 12.95 13 13.05 13.1 13.15 13.2 13.25 13.3 13.35 2008- 2010 2009- 2010 Amount Year
  46. 46. (b) NET PROFIT RATIO = NET PROFIT AFTER TAX * 100 NET SALES NET PROFIT RATIO YEAR 2008-2009 YEAR 2009-2010 Net profit after tax 5782106.85 9536298.09 Net sales 236762542.52 401482564.42 Ratio 2.44 2.37 Interpretation :- As compared to previous year, net profit ratio has decline. 2.32 2.34 2.36 2.38 2.4 2.42 2.44 2009 2010 N.Pratio Year k
  47. 47. (C) CASH PROFIT RATIO :- CASH PROFIT * 100 NET SALES CASH PROFIT RATIO YEAR2008-2009 YEAR 2009 -2010 Cash profit Net profit Add:- depreciation 5782106.35 5680211.86 9536298.09 11339320.80 TOTAL 11462318.21 20875618.84 Net sales 236762542.52 401482564.42 Cash profit ratio 4.8 5.1 Interpretation :- As compared to previous year, cash profit ratio has been increased. 4.6 4.7 4.8 4.9 5 5.1 2008 - 2009 2009- 2010 Amount Year
  48. 48. (C) ACTIVITY RATIO :- (a) INVENTORY TURNOVER RATIO = COGS AVERAGE STOCK Interpretation :- As compared to previous year there is decrease in the ratio of current year. Particular 2008-2009 2009-2010 Cost of goods sold 205178419.35 439761101.50 Average Inventory at cost 61272671.45 97786024.15 Inventory turnover ratio 3.34 3.57 0 0.5 1 1.5 2 2.5 3 3.5 4 2009 2010 Inventory TurnoverRatio Year
  49. 49. (B) DEBTOR TURNOVER RATIO :- NET CREDIT SALES AVERAGE DEBTORS Interpretation :- As compared to previous year, debtor turnover ratio has been decreased due to increase in sales. 0 1 2 3 4 5 6 2009 2010 Debtorsturnoverratio Year DEBTOR TURNOVER RATIO 2008-2009 2009-2010 Net Credit Annual Sales 505180506.02 643473082.10 Average Trade Debtors 94701925.8 89315442.38 Debtors Turnover Ratio 5.33 2.22
  50. 50. (c) CREDITOR TURNOVER RATIO :- NET CREDIT PURCHASES AVERAGE CREDITORS Interpretation :- As compared to previous year, creditors turnover ratio has been decreased in creditors in current year. 0 1 2 3 4 5 6 2009 2010 Creditorsturnoverratio Year CREDITOR TURNOVER RATIO 2008-2009 2009-2010 Net credit annual purchase 268803474 .27 472810230.88 Average trade creditors 52159254. 02 203953820.57 Creditors turnover ratio 5.15 2.31
  51. 51. (D)WORKING CAPITAL TURNOVER RATIO = COGS AVERAGE WORKING STOCK Interpretation :- As compared to previous year, working capital ratio has been increased in the current year. 1.85 1.855 1.86 1.865 1.87 1.875 1.88 2008- 2009 2009- 2010 WorkingcapitalratioWORKING CAPITAL RATIO 2008-2009 2009-2010 Cost of sale 205178419.35 349191416.7 Net working capital 110248620.15 184947617.74 Working capital turnover ratio 1.86 1.88
  52. 52. (D) SOLVENCY RATIO (a) DEBT EQUITY RATIO = TOTAL LONG TERM DEBTS SHAREHOLDERS FUND DEBT EQUITY RATIO YEAR 2008-2009 YEAR 2009-2010 Total long term debt 91415679.04 426750085.30 Shareholders fund 102665219.08 202721427.87 TOTAL 0.89 1.33 Interpretation :- As compared to previous year, debt equity ratio has been decreased due to increase in long debt in current year. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 2008- 2009 2009- 2010 Debtequityratio Year
  53. 53. (b) FUNDED DEBT TO TOTAL CAPITALISATION = TOTAL LONG TERM DEBT * 100 TOTAL CAPITALISATION FUNDED DEBTED TO TOTAL CAPITALISATION YEAR 2008-2009 YEAR2009-2010 Total long term debt 91415679.04 426750085.30 Shareholders fund 102665219.08 202721427.87 TOTAL 0.89 1.33 Interpretation :- As compared to previous year, funded debt to capitalization ratio has been decreased due to increase in long debt in current year. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 2008- 2009 2009- 2010 Amount Year
  54. 54. (c) DEBT EQUITY RATIO = SHAREHOLDERS FUND TOTAL ASSETS EQUITY RATIO YEAR 2008-2009 YEAR 2009-2010 Shareholders fund 102665219.08 202721427.87 Total 102665219.08 202721427.87 Total assets Current assets Fixed assets 164842888.17 29238009.95 405736510.31 68130941.15 Total 194080898.12 473867451.46 Debt equity ratio 0.53 0.43 Interpretation:- As compared to previous year, equity ratio has been decreased due to increase in shareholders fund and total assets in current year. 0 0.1 0.2 0.3 0.4 0.5 0.6 2008- 2009 2009- 2010 Debtequityratio Year
  55. 55. (d) SOLVENCY RATIO = TOTAL LIABILITIES TO OUTSIDERS TOTAL ASSETS SOLVENCY RATIO YEAR 2008-2009 YEAR 2009-2010 Total liabilities to outsiders fund 91415679.04 426750085.30 Total assets Fixed assets Current assets 29238009.95 164842888.17 68130941.15 405736510.31 Total 194080898.12 473867451.46 SOLVANCY RATIO 0.47 0.90 Interpretation :- As compared to previous year, solvency ratio has been increased due to decrease in shareholders fund and total assets in current year. 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 2008- 2009 2009- 2010 Amount Year
  56. 56. (e ) FIXED ASSETS TO NETWORTH = FIXED ASSETS AFTER TAX SHAREHOLDERS FUND FIXED ASSETS TO NETWORTH RATIO YEAR2008-2009 YEAR 2009- 2010 Fixed assets after tax 29238009.95 68130941.15 Shareholders fund 102665219.08 202721427.87 Total 0.28 0.33 Interpretation :- As compared to previous year, fixed assets to net worth ratio has been increased due to increase in shareholders fund and decrease in current assets. 0.25 0.26 0.27 0.28 0.29 0.3 0.31 0.32 0.33 2008- 2009 2009- 2010 Amount Year
  57. 57. (f) FIXED ASSETS TO LONG TERM FUND = FIXED ASSETS LONG TERM DEBT Interpretation :- As compared to previous year, fixed assets long term fund ratio has been increased due to increase in long term funds. 0.32 0.33 0.34 0.35 0.36 0.37 0.38 2008- 2009 2009- 2010 Amount Year FIXED ASSETS TO LONG TERM FUND YEAR 2008-2009 YEAR2009-2010 Fixed assets 29238009.95 68130941.15 Long term funds Secured loans 84326442.82 178780072.52 Total 0.34 0.38
  58. 58. (g) CURRENT ASSETS TO SHAREHOLDERS FUND = CURRENT ASSETS SHAREHOLDERS FUND CURRENT ASSETS TO SHAREHOLDERS FUND RATIO YEAR 2008-2009 YEAR 2009-2010 Current assets Inventories Sundry debtors Cash and bank Loans and advances 61272671.45 94701925.98 1698020.24 5801603.50 97786024.15 289315442.38 4688411.65 9648055.36 Total 163474221.17 401437933.54 Shareholders fund 102665219.08 202721427.87 Ratio 1.59 1.98 Interpretation :- As compared to previous year, current assets to shareholders fund has been increased due to increase in current assets. 0 0.5 1 1.5 2 2008- 2009 2009- 2010 Amount Year
  59. 59. (e)OVERALL PROFITABILITY RATIO (a) RETURN ON SHAREHOLDER = NET PROFIT AFTER TAX INVESTMENT SHAREHOLDERS FUND Interpretation :- As compared to previous year, return on shareholders investment has been decreased due to increased in the profits in current year . 4 4.5 5 5.5 6 2008- 2009 Amount Year RETURN ON SHAREHOLDER INVESTMENT YEAR2008-2009 YEAR 2009- 2010 Net profit after tax 5782106.35 9536298.09 Shareholders fund 102665219.08 202721427.87 Total 5.63 4.70
  60. 60. (b) TOTAL ASSETS TURNOVER RATIO = COST OF GOODS SOLD TOTAL ASSETS TOTAL ASSETS TURNOVER RATIO YEAR 2008 -2009 YEAR 2009- 2010 COGS 205178419.35 439761101.50 TOTAL ASSETS Fixed assets Current assets 29238009.95 164842888.17 68130941.15 473867451.46 TOTAL 1.05 0.92 Interpretation :- Total assets turnover ratio has been decline. 0.85 0.9 0.95 1 1.05 2008- 2009 2009- 2010 Amount Year
  61. 61. (d) RETURN ON EQUITY CAPITAL = NET PROFIT-PREFERENCE EQUITY SHARE CAPITAL RETURN ON EQUITY CAPITAL YEAR 2008-2009 YEAR 2009-2010 Net profit after tax 5782106.35 9536298.09 Equity share capital 18338776.26 23941355.35 Ratio 0.31 0.39 Interpretation :- As compared to previous year, current assets to shareholders fund has been increased due to increase in current assets. 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 2008- 2009 2009- 2010 Amount Year
  62. 62. (d)RETURN ON GROSS CAPITAL EMPLOYED = NET PROFIT AFTER TAX GROSS CAPITAL EMPLOYED RETURN ON GROSS CAPITAL EMPLOYED YEAR 2008-2009 YEAR 2009-2010 NET PROFIT AFTER TAX 5782106.35 9536298.09 GROSS CAPITAL EMPLOYED Inventories Sundry debtors Cash and bank Loans & advances 61272671.45 94701925.98 1698020.24 5801603.50 97786024.15 289315442.38 4688411.65 9648055.36 Total 163474221.17 401437933.54 Ratio 3.53 2.37 Interpretation :- As compared to previous year, return on gross capital employed has been decreased. 0 1 2 3 4 2008- 2009 2009- 2010 Amount Year
  63. 63. (e)RETURN ON NET CAPITAL EMPLOYED = NET PROFIT NET PROFIT EMPLOYED Interpretation :- As compared to previous year, net capital employed has been decreased. 5.25 5.26 5.27 5.28 5.29 5.3 5.31 2008- 2009 2009- 2010 Amount Year RETURN ON NET CAPITAL EMPLOYED YEAR2008-2009 YEAR2009-2010 NET PROFIT AFTER TAX 5782106.35 9536298.09 NET CAPITAL EMPLOYED Inventories Sundry debtors Cash and bank Loans and advances Less:- Current liabilities 61272671.45 94701925.98 1698020,24 5801603.50 54594268.02 97786024.15 289315442.38 4688411.65 9648055.06 220788892.57 Total 108879953.15 180649040.97 Total 5.31 5.27
  64. 64. FINDING OF THE STUDY  From the study we find out that the sundry debtors has been increased by 34.14% in 2010 from 2009.  The working capital has also increased 17.088% as compared to last year.  We have also study that the current assets has been also increased 27.98% in 2010 from the last year 2009.  The current liabilities has been decreased in the current year so the company have need to maintain reserve and surplus and invest them.  Gross profit is increased by 207.55 lakhs.  The fixed assets have been increased by 388.12 lakhs while long term liabilities to outsiders have relatively 3353.26 lakhs. This fact depicts that the policy of the company is to purchase fixed assets from long term sources of finance thereby not affecting the working capital.  The cost of goods sold has increased nearly by 2345.15 lakh from the last year 2009.  Net profits after tax of the company have decline by 0.07%.  The sales has increased in absolute figures in 2010 as compared to 2009.
  65. 65. SUGESSTIONS OF THE STUDY The following suggestions are made on the basis of above study: a) As the company does not have enough cash & bank balance to meet its current liabilities so company is required to increase its cash. b) The company should capitalize its reserves and surplus. c) The company should improve overall profitability. d) The company should raise additional funds through debt because interest on debt is a tax deductible expense. e) The company should use short term funds for meeting fluctuations in working capital.
  66. 66. LIMITATIONS OF THE STUDY A. This study is based on annual reports of the company B. This study is very time consuming. C. Ratios may not prove to be the ideal tool for inter-firm companies. D. The two firms may adopt different accounting policies. So the results may not be comparable. E. Ratios are depends upon the original data base. If the original data base is not correct then the ratios will be misleading. F. Ratios are based on the past data. They can’t reliable guide to future performance, as future is dependent on various aspects of business.
  67. 67. FROM THE STUDY CONCLUDE SOME POINTS WHICH ARE DESCRIBED AS FOLLOWS:  The current assets consist of debtors,stock,marketable securities and loans and advances. Current assets and current liabilities are more than 2009. the current ratio is increased by the previous year but it is satisfactory. Absolute liquid ratio is less than previous year we can say that liquidity position need to be improved and cash must be properly managed.  The equity ratio of the company is less than the previous year so long term solvency position is poor.  The company’s reserve and surplus are more than the previous year and its share capital is same.  The net working capital of the company is increasing.
  68. 68. 1.Management Accounting and Business Finance ( 2007) -Gupta Shashi K. -R.K Sharma 2.Financial Management - Shashi K. Gupta - R.K sharma -Neeti Gupta 3. Management Accounting and Business Finance ( 2010 ) -Gupta Shashi K. -R.K Sharma 4.Internet Site –www. r.s fasteners.com 5. Annual Report of R.S Fasteners ( 2009 ) 6.Annual Report of R.S Fasteners ( 2010 )
  69. 69. ANNEXURE TRADING ACCOUNT AS ON 31ST MARCH2010 OF R.S FASTENERS Particular Amount (Rs.) Particular Amount(rs.) To opening stock 61272671.45 By sale central RD. 60327730.42 To purchases raw material 52420694.25 By sale Punjab RD. 341154834.00 To purchases goods 321070740.00 =401482564.42 To wages 598970.00 By closing stock (valued at cost) 97786024.15 To packing expenses 677154.00 To dies and tools 1630888.00 To consumables stores 6300354.00 To electricity charges 941613.00 To oil and lubricants 1288245.75 To job work 776110.40 446977440. 85 To gross profit (13.02%) 52291147.7 2 Grand total 499268588. 57 499268588.5 7
  70. 70. PROFIT & LOSS ACCOUNT AS ON 31ST MARCH 2010 0F R.S FASTENERS PARTICULAR AMOUNT(R s.) PARTICU LAR AMOUNT (Rs.) To AMC charges 24697.00 By gross profit 52291147.72 To Audit charges 110000.00 By generator rent 96000.00 To Bank Charges 298386.73 By interest income 215341.77 To Bonus 216189.00 To Building Repair 274803.68 To Calibration on Expenses 3300.00 To Car Expenses 332617.00 To Computer Expenses 22603.00 To Depreciation 11339320.80 To Dies & Tools Repair 247508.50 To Diwali Expenses 48780.00 To Donation & Charity 27100.00
  71. 71. To E.P.F 81506.00 To E.S.I 28457.00 To Electric Repair 96684.00 To Excise Duty Revised 44141.00 To Electric Load ext. Charges 327500.00 To Fees & Membership 2000.00 To Fire & Penalty 1400.00 To Freight,Cartage & Octori 2422262.91 To Generator Expenses 262464.00 To Insurance 115034.00 To Interest on Car Loan 42684.00 To Interest on late deposit 8276.00 To Interest on Bank 17117290.60 To Interest on Capital 1845451.00 To Interest on Unsecured loan 1796694.00 To I.S.O Expenses 38000.00 To Labour & Staff Welfare 85370.00 To Lease & Rent 120000.00
  72. 72. To L.W.W 51235.00 To labour charges 5203.00 To legal charges 18000.00 To machinery repair 836992.00 To miscellaneous expenses 42510.48 To office electricity expenses 16617.00 To postage & courier 26628.85 To printing &stationary 89351.00 To processing fees 751087.00 To professional charges 272500.00 To rebate & discount 1020722.27 To rent,rate&taxes 25585.00 To salary &wages 493100.00 To salary to partners 1500000.00 To scooter expenses 27845.00 To service tax 3573.00 To telephone expenses 58351.49
  73. 73. To segration charges 887.09 To testing charges 803.00 To traveling charges(foreign) 295130.00 =43066191.40 To net profit TRF. To capital a/c 9536298.09 Total 52602489.49 Total 52602489.49
  74. 74. BALANCE SHEET AS ON 31ST MARCH 2010 OF R.S FASTENERS LIABILITIES AMOUNT ( RS.) ASSESTS AMOUNT (RS.) Partners capital account 23941355.35 Fixed assets 68130941.15 Secured loan 178780072.52 Unsecured loan 50357131.02 Current assets loan & advances 405736510.31 Current liabilitities 220788892.57 Total =473867451.46 =473867451.46
  75. 75. TRADING ACCOUNT AS ON 31ST MARCH 2009 0F R.S.FASTENERS PARTICULAR AMOUNT (RS.) PARTICULAR AMOUNT(RS.) To opening stock 20706600.00 By sale capital central RD. 41744056.52 To purchases raw material 239661479.00 By sale punjab RD. 195018484.00 To wages 624848.00 By sale punjab export 0.00 To packing expenses 491149.00 By sale trading goods 0.00 To dies and tools 1629587.00 236762542.52 To consumables stores 1199988.00 By closing stock 61272671.45 To electricity charges 805648.00 To oil and lubricants 707398.40 To job work 624393.00 To gross profit (13.34%) 31584123.17 Total 298035213.97 298035213.97
  76. 76. PROFIT & LOSS ACCOUNT AS ON 31ST MARCH 2009 OF R.S FASTENERS Particular Amount (Rs.) Particular Amount (Rs.) To AMC charges 29503 BY gross profit 31584123.17 To advance 5000 By generator rent 80000 To audit fees 65000 To bank charges 878393.33 To bonus 188504.00 To calibration expenses 300 To car expenses 202059 To computer expenses 5091100 To dies & tool repair 73104 To depreciation 5680211.86 To diwali expenses 43490 To donation 21200 To E.P.F 128287 To E.S.I 44774 To electric repair 73649 To fees nd membership 1828 To freight and cartage 1978243 To generator expenses 96300
  77. 77. To insurance 133921 To interest on car loan 58559 To interest on late deposit 249 To interest on bank 9303379 To interest on capital 1518097 To interest on unsecured loan 866272 To I.S.O expenses 147935 To labour and staff welfare 76045 To lease and rent 70000 To L.W.W 40619 To legal charges 33100 To machinery expenses 782575.25 To miscellaneous expenses 119828.46 To postage 33249.28 To printing and stationary 47451 To processing fees 280826 To rebate & discount 240000 To rent,rate & taxes 43223 To salary & wages 317674 To salary to partners 1500000 To scooter expenses 18470
  78. 78. To telephone expenses 51305 To traveling expenses 358169 =25601704.18 To net profit 6062418.99 Total =31664123.17 =31664123.17
  79. 79. BALANCE SHEET AS ON 31ST MARCH 2009 OF R.S FASTENERS LIABILITIES AMOUNT ( RS.) ASSETS AMOUNT ( RS.) Partners capital acconut 18338776.26 Fixed assets 29238009.95 Secured loan 84326442.82 Unsecured loan 36821411.02 Current assets, loans and advances 164842888.17 Current liabilitities 54594268.02 Total 194080898.12 194080898.12

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