The document analyzes various financial ratios of a company over three years. It shows that the current ratio decreased in 2006-2007 but increased in 2007-2008, indicating instability in short-term solvency. The acid test ratio and debt-equity ratio also fluctuated, confirming issues with short-term liquidity and long-term solvency positions. Inventory and debtors turnover ratios increased in 2007-2008 but fell in 2008-2009, suggesting inadequate inventory levels and cash flow problems due to increased credit sales.

2. CURRENT RATIO
Current Assets
Current ratio = -------------------------
Current Liabilities
Year Current Assets Current Liabilities Current Ratio
2006-2007 24678965 21128392 1.16
2007-2008 21588683 11339964 1.90
2008-2009 20683915 25537988 0.80
ANALYSIS
The current ratio decreased to 1.16 in the year 2006-2007 , and again it is increased to
1.90 in 2007-2008, later it is again fallen down to 0.80. This shows that there is no
improvement in the short-term solvency of the company for the year 2008-2009.

3. 2 2006-2007
1.8 2007-2008
1.6 2008-2009
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Current Ratio
INTERPRETATION:
Due to instability in the rate of ratios, it shows that there is no improvement in the
short-term solvency of the company for the year 2008-2009.

4. Liquid Assets
Acid test ratio = ----------------------------
Current liabilities
Year Liquid assets Current liabilities Liquid ratio
2006-2007 23362359 21128392 1.10
2007-2008 15428377 11339964 1.36
2008-2009 16701025 25537988 0.65
ANALYSIS
The liquid ratio is decreased to 1.10 in the year 2006-2007 , and again it is increased to
1.36 in the year 2007-2008. This further confirms that there are fluctuations in the
short-term liquidity .

5. 1.4 2006-2007
2007-2008
1.2 2008-2009
1
0.8
0.6
0.4
0.2
0
Liquid ratio
INTERPRETATION:
This further confirms that there are fluctuations in the short-term liquidity of the
company. This is mainly because of low realization of sundry debtors and an in
increase in quick assets and decrease in cash and bank.

6. DEBT-EQUITY RATIO
Total debts
Debt-Equity ratio = ----------------------
Equity
Year Total debt Equity Debt-Equity Ratio
2006-2007 24812845 28416205 0.87
2007-2008 15626471 28057713 0.56
2008-2009 14358681 30391887 0.47
ANALYSIS
Debt equity ratio is 0.87 in 2006-2007 and it is decreased to 0.56 in the year 2007-
2008 though it was decreased to 0.47 in the year 2008-2009. This shows that there is
improvement in the long-term solvency position of the company.

7. GRAPH SHOWING DEBT-EQUITY RATIO
0.9 2006-2007
0.8 2007-2008
2008-2009
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Debt-Equity Ratio
INTERPRETATION:
It indicates the relative proportions of capital contribution by creditors and
shareholders.

8. Equity
Proprietory Ratio = ----------------------
Total Asset
Year Equity Total Assets Proprietory Ratio
2006-2007 28416205 53229050 0.53
2007-2008 28057713 43684184 0.64
2008-2009 30391887 44750568 0.67
ANALYSIS
This ratio is decreased in the year 2006-2007 to 0.53 when compared to 2005-2006
and further increased to 0.67 in the year 2008-2009 when compared to 2007-2008.
this shows that there is an increase in the long-term solvency of the business.

9. TABLE SHOWING PROPRIETORY RATIO
0.7 2006-2007
0.6 2007-2008
2008-2009
0.5
0.4
0.3
0.2
0.1
0
Proprietory Ratio
INTERPRETATION:
This shows that there is an increase in the long-term solvency of the business.
It shows proprietor have invested their portion to the growth and welfare of
the company.

10. Fixed Assets (After depreciation)
Fixed assets to Net ---------------------------------------------
worth Ratio = Shareholder’s funds
Year Fixed Asset Net worth Fixed assets to
Net worth Ratio
2006-2007 6079307 28416205 0.21
2007-2008 5378748 28057713 0.19
2008-2009 7775901 30391887 0.25
ANALYSIS
The ratio of fixed assets to net worth ratio is found to be fluctuating in the year
2006-2007 and 2007-2008. But it is slightly increased in the year 2008-2009 to 0.25.

11. INVENTORY TURNOVER RATIO
Sales
Stock Turnover Ratio = ----------------
Inventory
Year Sales Inventory Stock turnover
Ratio
2006-2007 483975 21 22444998 2.15
2007-2008 62649553 17500270 3.57
2008-2009 90124231 29520878 3.05
ANALYSIS
Inventory turn over ratio has decreased to 2.15 in the year 2006-2007 when
compared to 2005-2006 and again increased in the year 2007-2008 to 3.57 but in the
year 2008-2009 it shows a fall that is 3.05.

12. GRAPH SHOWING INVENTORY TURNOVER RATIO
4 2006-2007
2007-2008
3.5
2008-2009
3
2.5
2
1.5
1
0.5
0
Stock turnover Ratio
INTERPRETATION:
From the above table, its shown the adequacy of goods available to sell in
comparison to the actual sale order. Running out of stock due to low inventory
(high turnover) may indicate future shortages. It also identifies of poor
management.

13. Credit Sales
Debtors Turnover Ratio = ------------------------
Average Debtors
Year Credit Sales Debtors Debtors
Turnover
Ratio
2006-2007 48397521 11818945 4.09
2007-2008 62649553 4174430 15.0
2008-2009 90124131 5947413 15.15
ANALYSIS
The debtors turn over ratio has decreased to 4.09 in the year 2006-2007 and again
has increased to 15.15 in the year 2008-2009.

14. GRAPH SHOWING DEBTORS TURNOVER RATIO
2006-2007
16
2007-2008
14
2008-2009
12
10
8
6
4
2
0
Debtors Turnover Ratio
INTERPRETATION:
This shows that the company is running out of cash shortage. Since credit
facilities are provided to debtors, it has lead to less avoid of competitors.

15. Debtors
Debt collection period = ---------------- * 365 days
Credit Sales
Year Debtors Credit Sales Debt collection
Ratio
2006-2007 11818945 48397521 89 Days
2007-2008 4174430 62649553 24 Days
2008-2009 5947413 90124131 24 Days
ANALYSIS
The debt collection period ratio remains constant in the 2007-2008 and 2008-2009
but has increased in the year 2006-2007 to 89 days .

16. GRAPH SHOWING DEBT COLLECTION PERIOD RATIO
2006-2007
90
80 2007-2008
70
2008-2009
60
50
40
30
20
10
0
Debt collection Ratio
INTERPRETATION:
The debt collection period ratio has increased to 89 days in the year 2006-2007. but
has remained constant in the future i.e,24 days. Hence it shows that the company
has been extending its credit facilities to customer to avoid competition.

17. credit purchases
Credit Turnover Ratio = -------------------------------------
average creditors
Year Credit purchase Creditors Creditors turn
over Ratio
2006-2007 25501189 12827919 1.98
2007-2008 32984848 7452623 4.42
2008-2009 69718267 20032834 3.48
ANALYSIS
The creditors turnover ratio has decreased to 1.98 in 2006-2007 again it is increased
to 4.42 in 2007-2008 but again there is slight fall in the year 2008-2009 to 3.48.

18. GRAPH SHOWING CREDITORS TURNOVER RATIO
2006-2007
4.5
2007-2008
4
3.5 2008-2009
3
2.5
2
1.5
1
0.5
0
Creditors turn over Ratio
INTERPRETATION:
There has been a decline in creditors turn over ratio in 2006-2007 but a rise in
next year and again a decline in 2008-2009

19. Sales
Fixed assets turnover ratio = ------------------
Fixed Asset
Year Sales Fixed Assets Fixed assets turn
over Ratio
2006-2007 48397521 6079307 7.96
2007-2008 62649553 5378248 11.64
2008-2009 90124131 7775901 11.59
ANALYSIS
Fixed assets turnover ratio is 7.96 in the year 2006-2007 and more or less remains
constant in the years 2007-2008 and 2008-2009 with slight variations standing at
11.64 and 11.59.

20. GRAPH SHOWING FIXED ASSETS TURNOVER RATIO
2006-2007
12
2007-2008
10 2008-2009
8
6
4
2
0
Fixed assets turn over Ratio
INTERPRETATIONS:
There is a an increase in fixed asset turnover ratios from year 2006-2007 and it
remains almost the same for two year 2007 to 2009.

21. GROSS PROFIT RATIO
Gross profit
Gross profit ratio = ------------------ * 100
Sales
Year Gross Sales Gross
profit profit Ratio
2006-2007 ------------- 48397521 --------
2007-2008 3711530 62649553 5.92%
2008-2009 2736963 90124131 3.03%
ANALYSIS
Gross profit ratio has increased in the year 2007-2008 to 5.92% having no profits in
the year 2006-2007 and shows a fall in 2008-2009 to 3.03%.

22. GRAPH SHOWING GROSS PROFIT RATIO
2006-2007
0.06 2007-2008
0.05 2008-2009
0.04
0.03
0.02
0.01
0
Gross profit Ratio
INTERPRETATION:
This shows that the gross profit relate to sales is average and the profit standpoint is
that the firm be able to generate adequate profit on each unit of sales.

23. NET PROFIT RATIO
.
Net profit
Net profit ratio = ------------------- * 100
Sales
Year Net profit Sales Net profit
Ratio
2006-2007 ----------- 48397521 -------
2007-2008 ----------- 62649553 -------
2008-2009 2334174 90124131 2.6%
ANALYSIS
The net profit ratio has decreased in the year 2008-2009 to 0.02% having no profit
in the immediate previous years . This shows there is decline in the profitability of
the company

24. GRAPH SHOWING NET PROFIT RATIO
0.0002 2006-2007
2007-2008
0.00015 2008-2009
0.0001
0.00005
0
Net profit Ratio
INTERPRETATION:
It is shown that net profit ratio is low which would indicate some mismanagement
in the areas ex cluding production. This shows there is decline in the profitable of
the company.

25. OPERATING RATIO
Operating cost
Operating ratio = ------------------------ * 100
Sales
Year Operating Sales Operating
cost Ratio
2006-2007 15647946 48397521 32.33%
2007-2008 11102218 62649553 18%
2008-2009 21072481 90124131 23.38%
ANALYSIS
The operating ratio in the year 2005-2006 increased to 32.33% . But it is increased
in the year 2007-2008 to 23.38% when compared to that of 17.72% in the year 2006-
2007. So this is the reason for decline in the net profit of the company

26. GRAPH SHOWING OPERATING RATIO
2006-2007
35.00%
2007-2008
30.00%
2008-2009
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Operating Ratio
INTERPRETATION:
There was an increase in operating ratio in 2006-2007 and decline in 2007-2008
and a slight increase in 2008-2009.

27. RETURN ON CAPITAL EMPLOYED
Net profit before tax
Return on capital employed = ----------------------------- * 100
capital employed
Year Profit before Capital Return on
tax employed capital employed
2006-2007 -106398 53229050 -------
2007-2008 3711530 43684184 8.5%
2008-2009 2736963 44750568 6.1%
ANALYSIS
The return on capital employed ratio shows nil return on capital employed in the year
2006-2007 because of losses incurred by the company in that year. In the next year it
reaches to 8.5% which is 6.1% more when compared to the one in the year 2008-2009 .

28. GRAPH SHOWING RETURN ON CAPITAL EMPLOYED
2006-2007
0.09
0.08 2007-2008
0.07
2008-2009
0.06
0.05
0.04
0.03
0.02
0.01
0
Return on capital employed
INTERPRETATION:
Capital employed is strong in 2007 & 2008 and its decline in 2008 & 2009

29. Net profit after tax – preference dividend
Earning per share= -------------------------------------------------------------
no. of equity shares
Year Number of Profit after Earnings
equity shares tax per share
2006-2007 15000 ----------- --------
2007-2008 15000 ----------- --------
2008-2009 15000 2334174 156
ANALYSIS:
The earnings per share have increased to 156 in the year 2008-2009 when
compared to all the remaining previous year’s earnings per share.

30. GRAPH SHOWING EARNING PER SHARE (EPS)
160
2006-2007
140
2007-2008
120
2008-2009
100
80
60
40
20
0
Earnings per share
INTERPRETATION:
From the above table, it can easily understood that the company EPS is
steadily progressed. The share capital of the company has increased without
the proportionate increase in the net income.

31. 1.In spite of incurring losses ,it has successfully managed to overcome this by
making profits in future, which is a good sign of prosperity to the company.
2.The long-term solvency position of the company has shown a recurrent increase.
3.The sales of the company has increased in the year 2008-2009 which indicates that
the foreign companies are well satisfied with the company’s product, which is a
good sign to company’s prosperity.
SUGGESTIONS
1.Modern Collections should make proper financial planning so that the available
funds are utilized in more efficient and effective manner.
2.The company must try to maintain its short-term liquidity position, by investing
only in those investments, which are easily convertable into cash
The company should reduce the idle capacity in order to increase the efficiency in
the operations.
3.Modern Collections must take immediate measures to reduce the length of the
Operating cycle