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Apollo Tyres Pvt. Ltd.

Kalamassery

INTRODUCTION

Finance is an important function of any business as money is required to meet the various activities of it. Finance is considered to be the life blood of any business. It is defined as the provision of money at the time it is needed. The cost refers to something that must be sacrificed to obtain a particular thing. Costing is to ascertain the cost of each product, process, department, service or operation. Cost analysis refers to the breakup of total cost into certain elements or subdivisions. Such analysis is essential for the purpose of accounting and control over the costs. The primary objective of every business undertaking is to earn profit. Profit earning is essential for the survival of the business. Profit is the engine that drives the business enterprise. A business needs profit not only for its existence but also for expansion and diversification. Profits are the useful measure of overall efficiency of the business. The cost ± profit relationship is of immense utility to management as it assists in profit learning cost control and decision making. Cost±Profit Analysis is a technique for studying the relationship between cost and profit. Profits of an undertaking depend upon large number of factors. But the most important of these factors are cost of manufacture, the selling prices of the product etc. The cost-profit relationship is an important tool used for the

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profit planning of a business. In this analysis an attempt is made to analyse the relationship between variations in cost with variations in profit. So this study is an ample effort to analyse the cost-profitability of the organization. 1.1 Statement of the Problem The problem of the study is to analyze cost- profitability of Apollo tyres pvt. Ltd (ATL) . The study also aims to correlate the cost- profit. The cost is something that is to be sacrificed to obtain a particular thing. Costing is to ascertain the cost of each product, process, department, service or operation. Cost analysis is essential for the purpose of accounting and control over the costs. Profit earning is the primary objective of every business enterprises. It is essential for the survival of the business. A business needs profit not only for its existence but also for expansion and diversification. Profits are the useful measure of overall efficiency of the business. Cost±Profit Analysis is a technique for studying the relationship between cost and profit. Profits of an undertaking depend upon cost of manufacture, the selling prices of the product etc. The cost-profit relationship is an important tool used for the profit planning of a business. In this analysis an attempt is made to analyse the relationship between variations in cost with variations in profit. In every firm cost, sales and profit are very important. When the cost increases the profit will diminish. As far as ATL is concern,
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the cost and profit is increasing. Here the study emphasis ³Why the profit increases with increase in cost´. 1.2 Theoretical Frame Work

1.2.1 Ratio Analysis Ratio analysis is a concept or technique which is as old as accounting concept. Ratio analysis is a widely ± used tool of financial analysis. It is defined as the systematic use of 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 determined. The term ratio refers to the numerical or quantitative relationship between two items/variables. Ratios reveal the relationship in a more meaningful way so as to enable us to draw conclusions from them. Uses of Ratios  It is useful for inter firm comparison which implies that company compares its performance with that of its industry peers.  It is useful for intra firm comparison which means that company will compare the performance of various departments of the company so as to judge the best department of the company.

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It is useful in simplifying the accounting figures to make them understandable to a layman, because it is easier to understand ratios then plain figures. 

It is also useful in forecasting and planning for the future, also it helps in control by comparing the actual performance with that of forecasted performance and looking for the reason for it. 

It is also used for analysis of financial statements by various interested parties like bankers, creditors, supplier etc«..for taking future decision about the company.

Classification of Ratios Ratios may be classified in a number of ways keeping in view the particular purpose. Ratios indicating profitability are calculated on the basis of the profit and loss account; those indicating financial position are computed on the basis of the balance sheet and those which show operating efficiency or productivity or effective use of resources are calculated on the basis of figures in the profit and loss account and balance sheet. These classifications are rather crude and unsuitable to determine the profitability and financial position of the business. To achieve this purpose effectively, ratios may be classified as:-

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Profitability Ratios Coverage Ratios Turnover Ratios Liquidity Ratios Leverage Ratios

Liquidity Ratios: Liquidity is the ability of the firm to meet its current liabilities as they fall due. Since liquidity is basic to continuous operations of the firm it is necessary to determine the degree of liquidity of the firm. To measure the liquidity of a firm, the following ratios can be calculated:     Current Ratio Quick or Acid Test or Liquid Ratio Absolute liquid Ratio

Current Ratio The current ratio is the ratio of current assets to current liabilities. It is

calculated by dividing current assets by current liabilities. The current ratio of a firm measures its short term solvency, which is the firm¶s liability to meet short term obligations. The higher the current ratio, the larger is the amount of rupees available per rupee of current liability, the more is the firm¶s ability

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to meet current obligations and the greater is the safety of funds of short term creditors. Thus current ratio, in a way, is a measure of margin of safety to the creditors.  Quick Ratio/ Acid Test Ratio The acid test ratio is the ratio between quick assets and current liabilities and is calculated by dividing the quick assets by the current liabilities. The term quick assets refers to current assets which can be converted into cash immediately or at a short notice without diminution of value. It is often referred to as quick ratio because it is a measurement of a firm¶s liability to convert its current assets quickly into cash in order to meet its current liabilities.  Cash Position/ Absolute Liquidity Ratio Cash is the most liquid asset. A financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investment or marketable securities are equivalent to cash. Therefore, they may included in the computation of cash ratio. Profitability Ratios: A business firm is basically a profit earning organization. The income statement of a firm shows the profit earned by the firm during the accounting
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A relatively low gross margin is definitely a danger signal. Ltd. Poor operational performance may indicate poor sales and hence poor profits. The profit figure has. Kundara Page 7 . however different meanings to different parties in interested in financial analysis. This ratio shows the margin left after meeting manufacturing cost. Profitability is an indication of the efficiency with which the operations of the business are carried on. The following are the important profitability ratios:        Gross Profit Ratio Net Profit Ratio Operating Ratio Operating Profit Ratio Cash Profit Ratio Expenses Ratio Gross Profit Ratio Gross profit is defined as the difference between net sales and cost of goods sold.Apollo Tyres Pvt. A firm should have a reasonable gross margin to Institute in Management in Kerala. It measures the efficiency of production as well as pricing. warranting a careful and detailed analysis of the factors responsible for it. Kalamassery year. A high ratio of gross profits to sales is a sign of good management as it implies that the cost of production of the firm is relatively low.

pricing and tax management. goods destroyed by fire and so on.  Net Profit Ratio This ratio shows the earning left for shareholders as a percentage of net sales.  Operating Ratio Operating ratio establish the relationship between the cost of goods sold and other operating expenses. It measures the overall efficiency of production. (d) financial expenses but excludes taxes . selling. (c) selling and distribution expenses. financing. The term µoperating expenses¶ includes (a) cost of goods sold.  Operating Profit Ratio This ratio is calculated by dividing operating profit by sales Institute in Management in Kerala. administration. Ltd. cost of production is rising and demand for the product is falling A low net profit margin has the opposite implications. Kundara Page 8 . Kalamassery ensure adequate coverage for operating expenses of the firm and sufficient return to the owners of the business. (b) administrative expenses. It is computed by dividing operating expenses by sales. A high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declining.Apollo Tyres Pvt. dividends and extraordinary losses due to theft of goods.

This ratio measures the relationship between cash generated from operations and net sales. Kalamassery  Cash Profit Ratio The net profits of the firm are affected by the amount or method of depreciation charged.  Expenses Ratio The following ratios will help in analyzing the expenses ratio: (1) Material consumed Ratio = Material Consumed 100 Net Sales (2) Conversion Cost Ratio = Labour Expenses + Manufacturing Expenses Net Sales (3) Administration expenses Ratio = Administration Expenses 100 Net Sales (4) Selling & Distribution Expenses Ratio = Selling & Distribution Expenses 100 Net Sales 100 Institute in Management in Kerala. Ltd. depreciation being a non cash expense. Further. Kundara Page 9 .Apollo Tyres Pvt. it is better to calculate cash profit ratio.

Ratios are only means of financial analysis and not an end in itself. ratios should be used along with other methods of analysis. Kalamassery Limitations of Ratios:  There are no accepted standards or rules of thumb for all ratios which can be accepted as norms.   Ratios of the past are not necessarily true indicators of the future.2. Therefore to have a comprehensive financial statements.  While making ratio analysis. 1.  Ratio analysis is only a beginning and gives just a fraction of information needed for decision making. Trend signifies tendency. Ratios have to be interpreted and different people may interpret the same ratio in different ways.Apollo Tyres Pvt. This method determines the direction upwards or downwards and involves the computation of the percentage relationship that each statement item bears to the same item in base year. Ltd. Institute in Management in Kerala. It renders interpretation of the ratios difficult. no consideration is to be made to the changes in the price levels and this makes the interpretation of ratios invalid.2 Trend Analysis The financial statements may be analyzed by computing trends of series of information. Kundara Page 10 .

Under this technique of financial analysis. Ltd. It makes data brief and easily understandable. Trend ratios are also an important tool of horizontal financial analysis. The method of trend percentages is a useful analytical device for the management since by substituting percentages for large amounts. Procedures for Calculating Trends 1. Uses of Trend Analysis  It helps in easily knowing the direction of movement of activity of the business. review and appraisal of tendency in accounting variables is simply called as Trend Analysis. Kundara Page 11 .Apollo Tyres Pvt. One year is taken as a base year.    Trend analysis is helpful in forecasting and budgeting.e. Kalamassery Therefore. the ratios of different items for varies periods are calculated and then a comparison is made. the first or the last is taken as base year. the brevity and readability are achieved. Generally. It helps in comparing one period with another period. whether upward or downward. The figures of base year are taken as 100 Institute in Management in Kerala. An analysis of the ratios over the past few years may well suggest the trend or direction in which the concern is going upward or downward. i. 2.

Trend percentages are calculated in relation to base year. The interpretation of trend analysis involves a cautious study. If this increase in current assets is accompanied by an equivalent increase in current liabilities. The base period should be a normal period. The base period should be carefully selected. Each year¶s figure is divided by the base year¶s figure.Apollo Tyres Pvt. then this increase will be unsatisfactory. Ltd. the trend percentage will be less than 100 and it will be more than 100 if figure is more than base year figure.  Trend analysis does not take into consideration the price level changes. Limitations:  Trend analysis becomes incomparable if the same accounting practices are not followed. Institute in Management in Kerala. The price level changes in subsequent years may reduce the utility of trend ratios. If the figure of the base period is very small. Kalamassery 3. then the ratios calculated on this basis may not give a true idea about the financial data. Kundara Page 12 . An increase of 20% in current assets may be treated favorable. If a figure in other year is less than the figure in base year.

otherwise the conclusions may be misleading. The comparative income statement gives an idea of the progress of the business over a period of time. Ltd. The analysis and interpretation of income statement will involve the following steps:  The increase or decrease in sales should be compared with the increase or decrease in cost of goods sold. In comparative statement there have four columns.Apollo Tyres Pvt. Institute in Management in Kerala.2. 1. First two columns give figures of various items for two years. Kalamassery  Trend analysis must always be read with absolute data on which they are based. The changes in absolute data in money values and percentages can be determined to analyze the profitability of the business. The profitability will improve if increase in sales is more than the increase in cost of goods sold.3 Comparative Income Statement Analysis The income statement gives the results of the operations of a business. An increase in sales will not always mean an increase in profit. Third and four columns are used to show increase or decrease in figures in absolute amounts and percentages respectively. The amount of gross profit should be studied in the first step. Kundara Page 13 .

Kundara Page 14 .  An opinion should be formed about profitability of the concern and it should be given at the end. Non operating expenses such as interest paid.. loss from sale of assets. writing off of deferred expenses. A decrease in operating profit may due to an increase in operating expenses or decrease in sales.2. decrease the figure of net profit.Apollo Tyres Pvt. Ltd. An increase in net profit will gave us an idea about the progress of the concern. payment of tax etc. It should be mentioned whether the overall profitability is good or not. selling and distribution expenses should be deducted from gross profit to find out operating profits. The operating expenses such as office and administrative expenses. An increase in operating profit will result from increase in sales position and control of operating expenses. Some non operating incomes may also be there which will increase net profit.4 Cost Sheet Cost sheet is a statement which provides for the assembly of the estimated detailed cost in respect of a cost centre or a cost unit. 1. It is a detailed statement of the elements of cost arranged in a logical order under different Institute in Management in Kerala.  The increase or decrease in net profit will give an idea about the overall profitability of the concern. Kalamassery  The second step of analysis should be the study of operational profits.

It acts as a guide to the management and helps in formulating production policy. To know the profitability (net profit/ net loss) of the organization from its operations. Kundara Page 15 . Kalamassery heads. Advantages:   It discloses the total cost and cost per unit of the units produced. Institute in Management in Kerala.  It is a simple and useful medium of communication of costs to various levels of management.Apollo Tyres Pvt.3 Objectives of the Study General objective: The general objectives of the study are to correlate the Cost-Profitability of Apollo Tyres pvt. It is prepared to show the detailed cost of the total output for a certain period. Specific objectives:   To understand the current liquidity. Ltd. position of Apollo Tyres Pvt Ltd. It is only a memorandum statement and does not form part of the double entry system. Kalamassery. Ltd. It enables a manufacturer to keep a close watch and control over the cost of production. 1.   It helps the management in fixing selling prices.

Apollo Tyres Pvt.1 Tools for Data Analysis    Ratio analysis Trend analysis Comparative financial statement Institute in Management in Kerala.4 Methodology The study aims to analyse the financial performance. to explain the reasons if there is worse performance and also to offer solutions for the same. 1. Kundara Page 16 . To compare the change in profitability of the past five years with regard to the cost. Primary data:   Interaction with the staff of accounts department. Secondary data:     Journals Periodicals Reports 5 years final accounts 1. Kalamassery    To assess the current and future trends. Interaction with the accounts manager. Ltd.4. To analyse the cost-profitability of the company.

It helps to describe the various financial aspects of the company on the basis of Profit and Loss accounts. 2006-2007 to 20092010. Institute in Management in Kerala. i. Only little primary data are used. from the annual reports of Apollo Tyres Ltd as such it is subject to the limitations of the secondary data.5 Cost Sheet Scope of the Study The study gives an opportunity to deal with the financial problem of the organization. Kundara Page 17 . Ltd.  The study is mainly based on the secondary data.  The period of analysis is limited to 5 years. 1.   This study holds significance only in the present situation. The conclusions drawn are subjective to researcher¶s knowledge. Kalamassery  1.6  Limitations of the Study The study is restricted to the registered office of the company at Cochin. It gives an idea about the financial climate of the company.Apollo Tyres Pvt.e. The important areas include cost and profitability of the organization by analyzing the figures in Annual Financial Statements. The study exposes the possibilities of the company against the hard facts of unfavorable financial indices and tries to analyze the problem that led to the present situation in detail and suggests workable situations..

Chapter II Chapter III Chapter IV Chapter V Deals with industry profile. Includes data analysis and interpretations.7 Chapterisation Includes introduction. conclusion and suggestions. Ltd. scope and limitations of the study. Kundara Page 18 . statement objectives of of the problem. Deals with findings. framework. Institute in Management in Kerala. Kalamassery 1. Chapter I Theoretical the Methodology. Tools for data analysis. Includes company profile of Apollo Tyres Pvt. Ltd. study.Apollo Tyres Pvt.

used on carts and wagons. placed on wooden wheels. The first practical pneumatic tyre was made by the Scot. Tire companies were first started in the early 20th century. in 1887 Pneumatic tyres are made of a flexible Elastomeric material. and grew in tandem with the auto industry.Apollo Tyres Pvt.1 History of Tyres The key milestone in the history of tyres was the invention of the wheel by Sumerians 5000 years ago and it has been refined over ages. Kundara Page 19 . Centuries back pieces of rubber placed at four corners of the vehicle were used as tyres. The earliest tires were bands of iron (later steel). Kalamassery TYRE INDUSTRY 2. with reinforcing materials such as fabric and wire. John Boyd Dunlop. The tyre would be heated in a forge fire. But the whole scenario started changing when Charles Goodyear invented vulcanized rubber in 1844 which was later used for the first tyres. over 1 billion tires are produced annually. such as rubber. with the three top tyre makers commanding a 60% global market share Institute in Management in Kerala. Today. placed over the wheel and quenched. in over 400 tire factories. causing the metal to contract and fit tightly on the wheel. Ltd.

2.9% 3.7% 23.2 International Scenario The world tyre industry is worth around US $70 billion. Ltd. 2.1 International Market Share Table 2. Tyre sector is experiencing a rapid improvement with the advent of newer technologies. a milestone in the tyre technology.1% 4. The industry is marked by the presence of around half a dozen major players who together occupy 70% of world market share.4% 16.5% Institute in Management in Kerala.5% 1.9% 3.Apollo Tyres Pvt.2. Kalamassery During the last 20 years tyre has been virtually reinvented with most modern technologies like steel radial tyres. Kundara Page 20 .5% 19.6% 7.1 showing the international market share of companies Company Michelin Bridgestone Good Year Continental Sumittomo Pireli Yokhohamo Kumho Others Market Share 19.

Premier.000 million and earning an income of Rs. The tyre industry in India are classified under three heads:1.Apollo Tyres Pvt. Vibrant. Good Year and Dunlop entered in the market. Good year.1 Salient features of Indian tyre industry      Adaptability and absorption. Kundara . First Generation companies : . CEAT at various locations in the country carried out the domestic production of the tyre. Premier 3.J K Tyres. Third Generation companies : .000 crore per annum for export. Today the tyre industry is growing rapidly and today its turnover is 1.00. Ltd.3.3 Indian Tyre Industry The Indian Tyre industry dates back to1930 when multinationals like Fire Stone. Kalamassery 2.Dunlop and Fire Stone (New Bombay tyres international Ltd) 2. 2.1. Apollo and Modi rubber The first Indian Company Dunlop Rubber Company was incorporated in 1926. CEAT. MRF.MRF. Second Generation companies : . Exports Innovations Indigenous and ready availability Technology progression Page 21 Institute in Management in Kerala.

9. 5. 8.Apollo Tyres Pvt. 6. Kundara Page 22 . 4.000 crore industry.3. MRF Tyres Limited Apollo Tyres Limited JK Tyres Limited CEAT Tyres Limited Modi Rubber Tyres Limited Birla Tyres Limited Good Year India Limited Vikrant Tyres Limited Institute in Management in Kerala. 2.2 Ranking of Indian tyre companies on the basis of production 1.3. 2. Ltd. 3. Kalamassery   Wide product range for diverse use Self sufficiency and vibrant marketing setup 2. The fortune of this industry depends on the agricultural and industrial performance of the economy. the transportation needs and the production of vehicles.3 Highlights   The tyre industry is a Rs. 7.  While the tyre industry is mainly dominated by the organized sector.

2 showing the domestic rank for tyre companies Segment Light Companies Apollo Tyres JK Tyres MRF CEAT Truck 1 2 3 4 Commercial Vehicle 2 4 3 1 Institute in Management in Kerala. Ltd. Kalamassery the unorganized sector holds sway in bicycle tyres.3.40 per cent.4 Domestic Rank Table 2. the industry managed to achieve a compounded annual growth of only 4.  Natural rubber constitutes 25 per cent of the total raw material cost of the tyres. whereas worldwide. Kundara Page 23 .  The ratio of natural rubber content to synthetic rubber content is 80:20 in Indian tyres. However in the last fiscal the industry registered a growth of 7 per cent.Apollo Tyres Pvt. the ratio of natural rubber to synthetic rubber is 30:70 2.  In the last five years (2002-03 to 2008-09).

Ltd.Apollo Tyres Pvt. Kundara Page 24 . Kalamassery Table 2.1 showing the market share of companies MARKET SHARE APOLLO JK TYRES OTHERS MRF GOOD YEAR CEAT 6% 14% 22% 24% 17% 17% Institute in Management in Kerala.3 showing the segment wise market share of tyre companies in India Company Apollo MRF Ceat JK Vikrant Goodyear Truck 28 16 17 12 11 5 Car 10 25 18 14 1 12 Farm 21 24 15 8 7 23 Lcv 19 20 19 15 2 2 Chart 2.

Apollo has come a long way up the corporate gradient. In its constant pursuit for excellence. s and Indian tyre majors dominated the tyre industry.it was 1982 that Apollo Institute in Management in Kerala.s when hardnosed MNC. Kalamassery COMPANY PROFILE 3.1 History of Apollo Tyres Apollo Tyres Ltd. It was formed in 1972. Operation began in 1977 with setting up of the plant to manufacture truck and tractor rear tyre at the annual capacity of 0.the company incurred heavy losses from 1977 to 1781. the management of the company had been handed over to Raunag Singh son onkar s kanwar.Apollo Tyres Pvt. The plant was setting up at Perambra near Kochi in Kerala was with a technical collaboration of general tyre international company.42mm tyres. Kundara Page 25 . Ltd. Kerala plant began its commercial production in the year 1977. ATL is the flagship of the Apollo group. Post restructuring in the group. The company can be traced back to 70. For itself has become synonymous with the brand. where Raunag Singh as the founder and chairman. one of the leading manufacturing companies in India was named after the sun god. the fourth largest company in the world. The history of Apollo tyres. Apollo has created a remarkable identity.

A plant was installed at limda in capacity of 65 lakhs per annum commencing production in September 1977 in the record time of 16 months. The Kerala plant has been besieged but lower problems in the past. Kundara Page 26 . BIFR (Board of Industrial Finance Reconstruction) handed over the premier tyres ltd to ATL on 17th April 1995 with the manufacturing base to emerge as no 1 tyre company in India As a part of further expansion plans. Recently the Institute in Management in Kerala. the commercial production of Ranjangaon near Pune in the state of Maharashtra. the plant faced labor unrest for a prolonged period. In august/september1995 the plant had to be shut down for a period of two weeks following the go slow tactics and disruptive action by the workers. In the financial year 1999 too.68mm tres. In February 2000. Ltd. continental increase in the growth of Germany picked up by 15%stake in the company.ATL is entitled to certain fiscal benefits till the year 2005 on its Baroda plant. the new tube plant has been installed at Ranjangaon near Pune in the state of Maharashtra.ATL put up its second plant in Baroda.Apollo Tyres Pvt. To reduce dependence on the single plant. Kalamassery formulated and put in to action a serious of pragmatic profit generating policies geared lower run around. Gujarat in 1991 at an annual capacity of 0. the commercial production of which began in April 1996.

Years ago. Apollo has always thrived on huge challenges so as to turn them around to its advantage. Kalamassery company recognized itself using profit centre concept for all locations and division. This has been done with a view to enhance the efficiency and effectiveness of the organization by monitoring the profitability of the units. Kundara Page 27 . especially in quality. Believing firmly in philosophy of always looking for new answers. as a corporation. Ltd. today¶s tyre plant Apollo tyre has all along envisioned action that would challenge the conventional wisdom of tyre industry. It has targeted a customer segment for which price was almost a non-issue. 3. Apollo decided to price its brands reasonably higher than its competitors. premium branding lead to the development of a niche that compromised those who looked for the best tyre and not necessarily the best bargain. with a view to position itself in the premier tyre segment.2 Brief History of Premier Tyres The premier tyre were incorporated in 19th October 1959. the prime Institute in Management in Kerala.the foundation stone was laid by none other than Jawaharlal Nehru.Apollo Tyres Pvt. Call it holistic thinking or innovative marketing strategies. The criterion was the product benefit. Apollo tyre has a clear vision to become a leader in tyre industry globally and domestically.

The competition became intense. Apollo tyres initiated their management practices in the company. During the seventies and eighties company was running in a huge profit. Kundara Page 28 . It was declared a sick unit. In 1995 the premier tyres was taken over by the Apollo tyres. Mumbai. But gradually the profit of the company declined.Apollo Tyres Pvt. At that time the share capital of premier tyres was 3.the company was established in collaboration with the Uni Royal Inc. the goods Institute in Management in Kerala. The main reason for this lack of competition was the tyre named ³Lug Master´ was a gigantic success in the market. The government of Kerala requested Apollo tyres to take over the unit and bring it back to form. on 18th January 1960. According to the agreement of lease. Kalamassery minister of India. After the takeover in 1995.USA. Apollo tyres introduced another 10 crores. the production was increased from 35tonnes to 80tonnes (daily production) many measures were taken to increase the production and reduce the cost of production.25 crores. This is the first tyre company owned by the Indian. Ltd. The ultimate aim was to make the company in to a profit making one. More and more players entered in the market. The company was owned by the Desai Group. The company started its commercial production in May 1962 with production capacity of 30 million tons per day. Even with the existing machinery and all.

Apollo takes pride in its manufacturing units spread across the country. The units have the ability to utilize their potential to the optimum and meet the growing and over changing customer needs. TCIL in Calcutta As the county¶s leading tyre-manufacturing company.Apollo Tyres Pvt. Baroda at Gujarat [1991] Premier Tyres. Apollo tyres settled all the loans by 1998 and now the company is going on a profit. This ensures minimum errors and effective quality control that helps to reduce re-manufacturing cost. 3. Kundara Page 29 . In keeping the policy to move with the times and use superior technology all the units are digitalized. The Premier tyres had a debt of 42 crores taken as loan from the outsiders and other financiers. Ltd.3 Manufacturing Units of Apollo Tyres Ltd      Perambra at Kerala [1977] Limda. Kalamassery at Kerala [taken over at 1995] Rangoan at Pune [1996. Kalamassery produced with the machines of premier tyres will be brought in to the market and sold only in the name of Apollo tyres. Institute in Management in Kerala.Manufacturing of tubes] Conversion Facilities. using state-of-art equipment and Cutting edge technology.

70 Crores. Ltd.Apollo Tyres Pvt. The plant has a production capacity of 34 ton 3. Apollo also built a new plant at Ranjangaon at Pune in 1997 to manufacture tyre tubes. safety and design.4 Products manufactured at Kalamassery unit Apollo offers a smart choice for its consumers capturing the essence of luxury style utility and safety product for varying customer needs.  Truck and bus tyres  Light truck tyres  Farm tyres  Retreading materials Institute in Management in Kerala. Currently the plant has a total capacity of 230 tones. which Apollo brand products were manufactured there. Kalamassery Apollo¶s journey began in 1977 when Apollo set up its first manufacturing unit Perambra in Kerala with the production capacity of 188 tones.110 Crores. Fine tunes to meet varying vehicle and customer requirements. Kundara Page 30 . The company plans to increase this capacity from 132 tons per day to 200 tons by 2002 with an investment of Rs. Avilable for its customer needs is a wide range of smart choice tyre. In addition. The existing plant is being modernized with an investment of rs. following. alloy wheels and rethreading material which combine performance. The Limda plant was installed in 1991.

5 Future plans  The main and primary plan of the company is to be an US$2010million company by the year of 2010  The technology journey is moving ahead at full throttle. Kalamassery 3. all efforts are focused on high performance tyres and other niche product.ATL self reliant in technology to become a global player. Kundara Page 31 .6 Objectives of the company   Objectives of the Apollo tyres are: To enhance the company¶s share holders value Institute in Management in Kerala. Its objective is to win the ³demand award within a stipulated time frame´  The application technology journey is working towards giving business a cutting edge.ATL plans to launch a truck radial team which team which will focus on making.Apollo Tyres Pvt. Its initiative will automate business and empower employees with right information to make better decisions. 3. Ltd.  A new performance and career enhancement system will soon be launched  Quality journey goal is to be established at ATL as an organization that is recognized worldwide for the quality processes and practices.

7 About premier unit Taken over by Apollo tyres in April 1995 Location Year of establishment Land area Plant area Power requirement Installed capacity Production : : : : : : : Kalamassery. Cochin 1962 117908sq. Kundara Page 32 . cost effectiveness in all segments     High quality technology and superior products Consistent production through harmonious industrial relation. Ltd. To become a significant global player providing customer delight. 3. To widen the distribution networks and strengthen the field service organization.m 38595sq.Apollo Tyres Pvt. Kalamassery    Employee satisfaction Revenue growth Strengthen supply chain market share.m 6000 KW/day 60MT 86tone/day Institute in Management in Kerala.

8 : : : : : 140 108 797 259 1304 Core Values Of The Company C . Ltd.CARE FOR CUSTOMER R .ALWAYS LEARNING T .ETHICAL PRACTICES Institute in Management in Kerala.RESPECT FOR ASSOCIATES E .EXCELLENCE OF TEAM WORK A . Kundara Page 33 .Apollo Tyres Pvt. Kalamassery Employee strength Management staff General staff Workmen Trainees Total 3.TRUST MUTUALLY E .

10 Quality Policy Apollo tyre limited follows strict quality control measurement to enhance customer quality control measurement to enhance customer delight . 3. It is our policy to design.9 VISION ³A Leader in the Indian tyre industry and a significant player in the global tyre industry and a brand of choice. will create an enterprise committed to quality. Ltd. 3.12 Corporate Goals    Creating Social Responsibility Learning and Development Family Focus Page 34 Institute in Management in Kerala.11 Quality Pledge ³We the people of Apollo tyres ltd.Apollo tyres limited gives much emphasis to retain the quality of the products. manufacture and service our products to provide the level of quality and value that needs every customer need´ We will aim to generate customer enthusiasm through continuous improvements in our products and services. Kalamassery 3. Kundara .Apollo Tyres Pvt. providing customer delight and continuously enhancing stakeholder value´ 3. The company¶s quality policy is concentrates in each state of the tyre manufacturing process and on all the activities related to production.

Apollo Tyres Pvt. Quality: Not only in products. Institute in Management in Kerala. Kundara Page 35 .13 The three pillars of our company: People: Happiness and development among whole 10000 employees and their families. but also in every activity. Technology: Not only in product bases technology but also to incorporate technologies in all our walk of life. Kalamassery   Hygienic Factors Employee Involvement & Cultural Building 3. Ltd.

Kalamassery 3.Apollo Tyres Pvt. Ltd. Ltd.1 Shows the share holding pattern of the Apollo Tyres pvt.14 Share Holding Pattern Chart 3. Public 3. Ltd. Kundara Page 36 . PRODUCT SEGMENT Truck Light Truck PCR 3% 10% 46% 33% 8% Agriculture Others Institute in Management in Kerala.15 Product Segment Chart 3.2 shows the product segment of Apollo Tyres pvt. SHARE HOLDING PATTERN FIIs/NRIs/Foreign Bodies Corporate Fls/Banks/Mutual Funds Govt of Kerala &Others 2% 0% 15% 26% 18% 39% Promoters.

450 crores. Kundara Page 37 . Kalamassery 3.17 Departments in Apollo Tyres  Human Resource Department  Finance Department  Purchase Department  Production Department  Production Planning & Control Department  Engineering Department  Technical Department  Research & Development Department  Quality Assurance Department  Systems Department  Marketing Department Institute in Management in Kerala.Apollo Tyres Pvt. Ltd. The new facility would focus on creation of captures for manufacturing track and bus radial tyres to meet the merging demand for radial tyres in the segments 3.16 Future Focus A formidable distribution network. strong brand equity and the ever increasing demand for its products have encouraged Apollo tyres Ltd to plan a new manufacturing unit with 100 tons per day capacity for manufacturing cross ply radial tyres involving a capacity outlay of Rs.

STORES Institute in Management in Kerala.STORE&PURCH ASE) ASSO. Ltd.3 showing the Organization structure of Finance Department: DIVISIONAL HEAD COMMERCIAL GROUP MANAGER (COMMERCIAL) MANAGER (ACCOUNTS) GROUP MANEGER (ENG.17.Apollo Tyres Pvt./ EXECUTIVE (FGS) EXECUTIVE (COSTING) EXECUTIVE (ACCOUNTS&EX CISE) EXECUTIVE (PAY ROLL) EXECUTIVE (PURCHASE) ENGG. Kalamassery 3.MGR.MANAGER (COSTING) EXECUTIVE (RMS) ASSO.1 Finance Department Chart 3. Kundara Page 38 .

17. Ltd. The budgets are reviewed and deviations are analyzed and necessary corrective action is taken. electricity etc are analyzed and furnished to various level of management for corrective actions. The possible Institute in Management in Kerala.. costing. Under him comes the bill section where the Accounts Officer is assisted by an Assistant. Regular reports are given to the department heads for taking corrective actions where ever necessary which is then submitted to the Chairman and Managing Director..Apollo Tyres Pvt. Kundara Page 39 .O(E). where E stands for established ie. The key budget factor test the availability of power is estimated and rough pictures of anticipated power shortage are drawn up. Under the Deputy Financial Controller-I falls the various assistants who are divided into four major accounts function i. Under Deputy Financial Controller II there is an A. Kalamassery 3. payment of salaries and wages and welfare measures expenses are accounted.e.. marketing. The company has an effective budgetary control system. The internal audit function is carried out in the company by the internal audit section headed by Chartered Accountant. falls the Deputy Manager of costing and his assistant. general accounts and financial accounts. The third division of C5 is the Deputy Financial Contoller I & II. Important variations relating to raw materials.2 Accounts section: The finance department falls under the financial controller. furnace oil. On the other hand..

17.The divisional head controls the functions. The main function of bill section is concerned with passing of bills which is done immediately after checking into quotation. Ltd. salaries.Payments are dispersed through banks or ATM¶s. Kundara Page 40 . is concerned with the planning and controlling of the firm¶s financial resources . The duties include providing information to formulate accounting and costing policies. which is included in the commercial department. The MIS department is handled by the finance department in Apollo under the costing and budgetary control section.3 Payroll section It involves the handling of wages. 3. order and products received and the work achieved. Bills are passed after seeing that the materials received are in conformity with the purchase order. Financial section of the ATL. The company has to maintain records including quantitative details and situation of fixed assets. keeping records of employees including information about their basic allowances. maintaining their attendance etc for the convenience of employee . Institute in Management in Kerala. preparation of financial reports and the direction of internal auditing budgeting. Kalamassery production and the capacity required are taken into account and the source of power is also found out.Apollo Tyres Pvt.

Distribution of payment though is a step also taken under this function . 3.Apollo Tyres Pvt. strong.ATL gives about 2-3 crore excise duty in spite of all these measures.5 or less percentage of scrap. A total of 1.4 Costing The process of costing is based on the financial accounts. wastages scrap and other avoidable expenses . Kundara Page 41 . Ltd. the actual cost involved in making tyres. It maintains the minimum inventory of 6-7 days. 3. The price of a single tyre is determined by taking into consideration.6 Excise This section deals with the duty that is being paid for the tyres reach the market both nationally and internationally . The company follows the rule of having only 0. as this is required for aging time of tyres.For exports no excise duty has to be paid.32 hours is needed to make a tyre.ATL has to pay 16% excise duty for dutiable items for domestic purposes to the Central Government .17.This has helped in reducing manpower security requirements and also other risks to be taken by the company. load resistant etc.5 Control It includes monitoring the electricity charges. make it heat resistant. Kalamassery 3. Institute in Management in Kerala. This helps minimizing loss.17.17.

i.e. Ltd. Institute in Management in Kerala.1 Current Ratio: The current ratio of a firm measures its short term solvency. The higher the current ratio. Kundara Page 42 . the more is the firm¶s ability to meet current obligations and the greater is the safety of funds of short term creditors. It provides a margin of safety to the creditors.Apollo Tyres Pvt. In a sound business a current ratio of 2:1 is considered an ideal one.1 LIQUIDITY ANALYSIS 4. its ability to meet short term obligations. Current Ratio = Current Asset / Current Liability Significance: The current ratio of firm measures its short term solvency. the larger is the amount of rupees available per rupee of current liability.1. which is the firm¶s liability to meet short term obligations. Kalamassery DATA ANALYSIS AND INTERPRETATIONS 4.

It is the normal situation.80 1040.70 1216.63 1125. in crores) 2006 2007 2008 2009 2010 1010. Ltd. Institute in Management in Kerala. Kalamassery Table 4.51 1034.47 Current Liability (Rs. in crores) 415.43 1. Showing the Calculation of Current Ratio Year Current Asset (Rs. From the above chart we can understand that the firm has attained the norms of 2:1 in 2006 &2009 the other three years have ratio nearly to 2. means the firm has more current assets then current liabilities.66 2.91 1. Kundara Page 43 .83 460.76 Current Ratio Source : Annual Report Inference: A Ratio is greater than one.99 2.26 1.20 565.1.12 690. So the current ratio is favourable for the company.72 542.Apollo Tyres Pvt.

The current assets and current liability is moving in the same direction.51 1000 1034. Kundara Page 44 .72 400 542.Apollo Tyres Pvt.63 1125.2 565. Institute in Management in Kerala.12 200 0 2006 2007 CURRENT ASSET 2008 2009 2010 CURRENT LIABILITY Inference: This chart shows that there were adequate current assets to meet the current liabilities in all years.7 800 690. Showing the relationship between Current asset and Current liability 1400 1216.83 460. Ltd.8 1040.47 1200 1010.1.66 600 415. Kalamassery Chart 4.

2 Quick Ratio: The term quick assets refers to current assets which can be converted into cash immediately or at a short notice without diminution of value.83 460.74 0.Apollo Tyres Pvt.93 0.16 421.12 690.in crores) 415.66 0.72 542.03 396. Kundara Page 45 .13 428.20 565. Ltd.98 0. If the ratio is less than1:1.69 0.57 Quick Ratio (Source: Annual Report) Institute in Management in Kerala.6 375. Quick Ratio = Quick Asset / Current Liability Significance: An Acid Test Ratio of 1:1 is considered satisfactory as a firm can easily meet all its current liabilities. Table 4. Showing the calculation of Quick Ratio Year Quick Asset (Rs.1.2. Kalamassery 4.53 Current Liability (Rs. in crores) 2006 2007 2008 2009 2010 406. then the financial position of the concern shall be deemed to be unsound.

From this table we could understand that company¶s liquid position is not satisfactory. Institute in Management in Kerala.16 421. in 2010 the variation between the quick asset and current liability is vast.03 396.66 542.53 690. Kalamassery Inference: The general norm for quick ratio is 1:1. Kundara Page 46 .13 565. Showing the relation between quick asset and current liability 800 700 600 500 406. Apollo tyres has not secured liquid asset to meet current liability. Ltd. Chart 4.2 CURRENT LIABILITY Inference : This figure shows that there is no adequate quick asset to meet the current obligations in any of the years.2.83 460. It means that a firm can meet all its current claims.12 428. As compared to other years.72 400 300 200 100 0 2006 2007 QUICK ASSET 2008 2009 2010 375.Apollo Tyres Pvt.6 415.

12 690.99 0.41 124.20 565.23 0.46 0.Apollo Tyres Pvt. Showing the calculation of Absolute liquid ratio Year 2006 2007 2008 2009 2010 Absolute Liquid Asset (Rs.e.1 worth absolute liquid asset are considered adequate to pay rs.26 Current Liability (Rs.5:1 i. Table 4.66 Absolute Liquidity Ratio 0.2 worth current liabilities in time as all the creditors are not expected to demand cash at the same time and then cash may also be realized from debtors.3.3 Absolute Liquidity Ratio Cash is the most liquid asset.in Crores) 415. Re. Absolute Liquidity Ratio = Absolute liquid asset / Current Liability Significance: Acceptable norm for this ratio is 50% or 0.1.in Crores) 407.70 260.98 0. Kundara Page 47 .52 276.83 460. Ltd. Kalamassery 4.72 542.40 Source : Annual Report Institute in Management in Kerala.28 455. A financial analyst may examine cash ratio and its equivalent to current liabilities.

2 ABSOLUTE LIQUIDITY ASSET Inference: In 2006 and 2009 the absolute liquid asset and current liability are having only slight changes.66 542.83 455.7 100 0 2006 2007 2008 2009 CURRENT LIABILITY 2010 260. In 2008 the two variables are nearby to the ratio 0. showing the relationship of absolute liquid asset and current liability 800 700 600 500 407.40. In 2008 & 2010 ratio is lightly low as it is 0.3.5:1 Institute in Management in Kerala. Kundara Page 48 . Ltd.Apollo Tyres Pvt.72 400 300 200 124.41415.46 & 4. In2007 the firm has only 0.26 565.52460. this ratio shows a fluctuating trend. Kalamassery Inference: Above table shows the liquid cash available to meet its current liability is favourable in 2006 and 2009.28 276.12 690. Chart 4. In 2007 and 2010 there is no sufficient absolute liquid asset to meet its current liability.23 paise to meet its current liability for every one rupee.

2.33 3693. Table 4.36 259. warranting a careful and detailed analysis of the factors responsible for it. Kundara Page 49 .98 Net Sales (Rs.56 6.89 11.in Crores) 2006 2007 2008 2009 2010 173.61 14.40 6.4 Showing the calculation of Gross Profit Ratio YEAR Gross Profit (Rs.17 720.93 4070.1 Gross Profit Ratio: Gross profit is defined as the difference between net sales and cost of goods sold.26 269.65 421.60 7.in Crores) 2625.2 PROFITABILITY ANALYSIS 4. Gross Profit Ratio = (Gross profit / Net Sales) X 100 Significance: A high ratio of gross profits to sales is a sign of good management as it implies that the cost of production of the firm is relatively low.31 Gross Profit Ratio Source : Annual Report Institute in Management in Kerala. Ltd. A relatively low gross margin is definitely a danger signal.44 5036.52 3292.Apollo Tyres Pvt. Kalamassery 4.

98 2010 Inference: This indicates that the gross profit is increasing with the increase in sales.52 3693.93 2000 1000 173.36 0 2006 2007 2008 GROSS PROFIT SALES 2009 259. This may be due to the increase in the manufacturing expenses.56 5000 4070. 2007. But the year 2009 it decreased to 6. 7. the gross profit ratio is increasing in 6.4% respectively.44 4000 3292.17 720. Institute in Management in Kerala.Apollo Tyres Pvt. Kalamassery Inference: The table shows the year 2006.26 269. Therefore the gross profit ratio in all the years is favorable to the firm and also it shows a fluctuating trend. and11.89%. 2008. But in 2009 the profit decreases even if there is increase in sales.61. Ltd.4 Showing the relation between gross profit and net sales 6000 5036.33 3000 2625. In the year 2010 the gross profit increased as compared to previous years.65 421. Kundara Page 50 .6%. Chart 4.

44 5036. It is an index of efficiency and profitability of business.33 3693.2008 the company was able to acquire profit in an increasing trend.66. Ltd. A low net profit margin has the opposite implications. Kalamassery 4.Apollo Tyres Pvt.56 Net Profit Ratio 72.in Crores) 2625.24 .76 3.11 414. In 2009 the ratio declined to 2. Kundara Page 51 Net Sales (Rs. but the firm was able to recover that loss by increasing the net profit to 8.30 108.45 5.2.37 113.5. Net Profit Ratio = (Net Profit after Tax / Net Sales) X 100 Significance: Higher the ratio better is the operational efficiency of the concern. showing the calculation of net profit ratio Year Net Profit (Rs.in Crores) 2006 2007 2008 2009 2010 Source: Annual Report Inference: In the year 2006. Table 4.42 219.93 4070.99 2.94 2.2 Net Profit Ratio: This ratio is used to measure the overall profitability and hence it is very important to proprietors.24 in the year 2010. Institute in Management in Kerala.52 3292.66 8.

showing the net profit and sales 6000 5036.56 5000 4070. This will happen when the cost of sales decreases. Kalamassery Chart 4.5.44 4000 3292. A reverse of this takes place in the year 2009 only.42 219.93 2625.99 72. Kundara Page 52 .11 Inference: This chart shows that net profit increases with the increase in net sales.37 0 2006 2007 2008 NET PROFIT SALES 2009 2010 113.Apollo Tyres Pvt. Institute in Management in Kerala.52 2000 1000 414. Ltd.3 108.33 3000 3693.

56 94.6. Table 4.30 3308. Operating Ratio = (Operating Cost / Net Sales) X 100 Significance: Lower the ratio. This shows that the operating ratio have an fluctuating trend. Institute in Management in Kerala. better it is.24 92.77 89. the less favourable it is because it would have a smaller margin of operating profit for the payment of dividends and the creation of reserves. It is computed by dividing operating expenses by sales.93 4070.But in 2010 it highly declined to 86.66. Showing the calculation of operating ratio Year Operating Cost Rs.in Crores 2625. So it is favorable to the firm.29 3054.33 3693.56 94.68 Net Sales Rs. Ltd.15.52 3292. In the year 2009 it is increased to 94. Kalamassery 4.15 86.28 3832.32 4364.in Crores 2006 2007 2008 2009 2010 2474.3 Operating Ratio: Operating ratio establish the relationship between the cost of goods sold and other operating expenses. Kundara Page 53 .2.66 Operating Ratio Source : Annual Report Inference: The table shows the operating ratio has the declining position up to the year 2008.Apollo Tyres Pvt.44 5036. Higher the ratio.

But the operating cost is having only a change which is likely to be constant.Apollo Tyres Pvt.56 5000 4364.29 3693.44 3832. Kundara Page 54 .6.3 3000 2625.68 4000 3292.32 2000 1000 0 2006 2007 2008 2009 NET SALES 2010 OPERATING COST Inference: This chart shows that the operating cost is increasing with the increase in sales. Showing the relation of operating cost and sales 6000 5036. In 2010 the percentage of increase in net sales is higher than other years.28 4070. Institute in Management in Kerala. Ltd.93 3308. Kalamassery Chart 4.52 2474.33 3054.

Table 4.52 3292.93 4070.4 Operating Profit Ratio: This ratio is calculated by dividing operating profit by sales Operating Profit Ratio = (Operating Profit / Net Sales) X 100 Significance: This ratio indicates the portion remaining out of every rupee worth of sales after all operating costs and expenses have been met.Apollo Tyres Pvt. the better it is. Kundara Page 55 . Ltd.56 Operating Profit Ratio 5.35 Source : Annual Report Institute in Management in Kerala.33 3693.04 385.44 5.23 10. Showing the operating profit ratio Year Operating Profit Rs.44 5036.12 672. Kalamassery 4.85 13.76 7.7.65 238.38 Net Sales Rs.in Crores 2006 2007 2008 2009 2010 151. Higher the ratio.2.23 238.in Crores 2625.

04 385. But in the year 2009 the operating profit is decreased. Kundara Page 56 .12 672. It is a favourable situation. Institute in Management in Kerala.93 2000 1000 151.33 3000 2625.7. Ltd.65 238. This is due to the increase in manufacturing expenses.23 0 2006 2007 2008 2009 SALES 238. Chart 4. Kalamassery Inference: This shows the operating profit is increasing for three years.52 3693.44 4000 3292.56 5000 4070. Showing the relation between operating profit and net sales 6000 5036.Apollo Tyres Pvt. But the firm is able to attain a high profit in the next year as compared to previous year.38 2010 OPERATING PROFIT Inference : The operating profit is increasing with the increase in sales. even there is an increase in sales. and decreased in 2009.

80 307. Ltd.8. Institute in Management in Kerala.11 187.11 279.76 5. Kalamassery 4.in Crores 2006 2007 2008 2009 2010 151. Showing the cash profit ratio Year Cash Profit Rs.52 3292.Apollo Tyres Pvt.29 537. Kundara Page 57 .5 Cash Profit Ratio: This ratio measures the relationship between cash generated from operations and net sales.2.44 5036.70 8.93 4070. and decreased in the year 2009.77 Net Sales Rs.68 Cash Profit Ratio Source : Annual Report Inference: This shows that the cash profit has increased for three years.56 5.in Crores 2625.31 6.86 10. It is a favourable situation. Cash Profit Ratio = (Cash Profit /Net Sales) X 100 Table 4. But the firm is able to increase it in the year 2010 as compared to previous year.33 3693.

But the situation was reversed only in 2009.33 3000 2625.Apollo Tyres Pvt. Showing the relationship between cash profit and net sales 6000 5036. Ltd. Kundara Page 58 .77 151.52 3693.8 307.93 2000 1000 537.8.11 279.11 0 2006 2007 CASH PROFIT 2008 NET SALES 2009 2010 187. Kalamassery Chart 4.56 5000 4070. Institute in Management in Kerala.29 Inference: This chart reveals that cash profit increases with the increase in sales.44 4000 3292.

49 1777.Apollo Tyres Pvt. Table 4.46 155.75 Page 59 Institute in Management in Kerala.98 20.94 50.(B) Less: Interest paid 2225.50 (-)10.88 (+)5.in Crores) Increase/ Decrease Percentage of Increase and decrease Net Sales Less: Cost of goods sold Gross Profit (A) Operating Expenses: Administration expenses Selling Expenses Total Operating Expenses (B) Operating Profit (A).54 (-)16.5 Comparative Income Statement Analysis The comparative income statement gives an idea of the progress of the business over a period of time. Kalamassery 4.85 151.21 42.13 (+)23.03 (+)371. The changes in absolute data in money values and percentages can be determined to analyze the profitability of the business.in Crores) 2006 (Rs.2.47 177.52 2148.32 2625.56 (+)7.13 (+)22.41 165. Kundara .95 148.17 448.62 17.23 1.18 326.9 Showing comparative income statement for the years 2005.88 6.77 127.06 320.94 17.66 14.26 477.26 (+)400.09 (+)28.28 18. Ltd.2006 Particulars 2005 (Rs.

63 28. So it may be concluded that there is a sufficient progresses in the company and the overall profitability of the company is good in the year 2006 compared to 2005. Institute in Management in Kerala. Kundara Page 60 .98% while the cost of goods sold has increased nearly by 20.19 7.88% thereby resulting in an increase in the gross profit of 6.20 72.91 100.37 (+)10. There is an increase in net profit after tax by 7. Ltd.74 63.92 (+)4. Although the operating expenses have increased by 1.77% the increase in gross profit is sufficient to compensate for the increase in operating expenses and hence there has been an overall increase in operational profits.01 Inference: The above comparative income statement reveals that there has been an increase in net sales of 17.28 67.01%.46%.44 17.66 18. Kalamassery Net profit before tax Less: Income tax Net profit after tax Source : Annual Report 84.Apollo Tyres Pvt.57 (+)15.

46 Net Sales Less: Cost of goods sold Gross Profit (A) Operating Expenses: Administration expenses Selling Expenses Total Operating Expenses (B) Operating Profit (A) .18 326.(B) Less:Interest paid Net profit before tax Less: Income tax 2625.94 36.37 154.85 (+)43.28 24.57 28.52 3292.Apollo Tyres Pvt.07 (+)86.23 (+)43.82 (+)87.32 148.09 (+)84.26 2641.53 50.in Crores) Increase/ Decrease (+)666.77 (+)174.40 22.in Crores) 2007 (Rs.97 57.81 (+)492.26 651.42 71.30 177.42 (+)2.23 (+)43.20 72.08 4.57 26. Kalamassery Table 4.37 52.79 Net profit after tax Source : Annual Report Institute in Management in Kerala.10 showing comparative income statement for the years 2006. Kundara Page 61 .13 84.2 (+)41.04 Percentage of Increase /Decrease 25.2007 Particulars 2006 (Rs.33 2148.65 185.95 221.71 151.61 56. Ltd.56 100.13 238.80 113.13 192 413.03 477.1 29.

Although the operating expenses have increased by 26. There is an increase in net profit after tax by 56. Kalamassery Inference: The comparative income statement given above reveals that there has been an increase in net sales of 25.79%. Institute in Management in Kerala. Kundara Page 62 .46%.Apollo Tyres Pvt.71% the increase in gross profit is sufficient to compensate for the increase in operating expenses and hence there has been an overall increase in operational profits. So it may be concluded that there is a sufficient progresses in the company and the overall profitability of the company is good than 2006.40% while the cost of goods sold has increased nearly by 22. Ltd.94% thereby resulting in an increase in the gross profit of 36.

42 258.35 2007 3292.23 238.61 (+)148.33 2641. Ltd. Kundara Page 63 .84 58.88 16.11 Showing comparative income statement for the years 2007.27 (+)77.72 (+)114.22 913.22 385.49 52.27 40. Kalamassery Table 4.42 (-)0.23 192 413.04 333.99 (+)147.30 2008 3693.14 219.19 (+)262.71 (Rs.30 (+)37.83 61.5 269.92 (-)1.85 40.42 71.07 52.72 528.84 93.in Crores) (Rs.Apollo Tyres Pvt.03 (+)42.16 79.80 113.48 27.in Crores) Increase/ Decrease (+)401.41 Percentage Of Increase/Decrease 12.44 114.15 (+)105.03 651.93 2780.20 5.65 185.2008 Particulars Net Sales Less: Cost of goods sold Gross Profit (A) Operating Expenses: Administration expenses Selling Expenses Total Operating Expenses (B) Operating Profit (A) .29 Source : Annual Report Institute in Management in Kerala.6 (+)139.(B) Less: Interest paid Net profit before tax Less: Income tax Net profit after tax 221.

Although the operating expenses have increased by 27.83% the increase in gross profit is sufficient to compensate for the increase in operating expenses and hence there has been an overall increase in operational profits.29%. Kundara Page 64 . Kalamassery Inference : The comparative income statement given above reveals that there has been an increase in net sales of 12.35%.27% thereby resulting in an increase in the gross profit of 40. Ltd.Apollo Tyres Pvt. So it may be concluded that there is a sufficient progresses in the company and the overall profitability of the company is good when compared to 2007. There is an increase in net profit after tax by 93. Institute in Management in Kerala.20% while the cost of goods sold has increased nearly by 5.

19 17.14 219.30 238 66.62 (-)24.71 4070.51 (+)536. Kalamassery Table 4.8 (-)162.Apollo Tyres Pvt.67 (-)44.52 Net Sales Less: Cost of goods sold Gross Profit (A) Operating Expenses: Administration expenses Selling Expenses Total Operating Expenses (B) Operating Profit (A).16 63.12 Showing comparative income statement for the years 2008.30 (-)17.in Crores) 2009 (Rs.04 333.44 (-)48.6 (-)9.44 3316.in Crores) Increase/ Decrease (+)376.62 258.84 121.49 (+)14.39 385. Ltd.72 528. Kundara Page 65 .29 (-)51.44 114.9 (-)12.41 (-)2.12 (-)147.77 (-)50.82 783.04 108.70 Source : Annual Report Institute in Management in Kerala.48 4.5 (+)11.22 234 281.93 2780.(B) Less: Interest paid Net profit before tax Less: Income tax Net profit after tax 3693.2009 Particulars 2008 (Rs.5 269.62 515.26 28.6 (-)160.18 (-)38.22 913.09 Percentage of Increase/Decrease 10.1 (-)111.49 52.

39%.52%. Kalamassery Inference : The comparative income statement given above reveals that there has been an increase in net sales of 10. Kundara Page 66 .Apollo Tyres Pvt. Ltd.19% while the cost of goods sold has increased nearly by 17.30% thereby resulting in an decrease in the gross profit of 17. Institute in Management in Kerala. even if the operating expenses decreased the net profit goes done because of the declining in operating profit and gross profit and also increase in cost of goods sold which is comparatively higher than 2008. The operating expenses have decreased by 2.

04 108.66 (+)223.87 190.52 (+)105.28 738. Ltd.8 (+)657.20 414.14 (+) 434.2010 Particulars 2009 (Rs.16 (+)360.52 387.13 Showing comparative income statement for the years 2009.82 Source : Annual Report Institute in Management in Kerala.(B) Less: Interest paid Net profit before tax Less: Income tax Net profit after tax 4070.64 249.16 73.32 9.94 (+)308. Kundara Page 67 .82 783.62 351.28 238 672.14 182.Apollo Tyres Pvt.61 283.in Crores) Increase/ Decrease Percentage Of Increase/Decrease Net Sales Less: Cost of goods sold Gross Profit (A) Operating Expenses: Administration expenses Selling Expenses Total Operating Expenses (B) Operating Profit (A) .74 3316.in Crores) 2010 (Rs.62 3625.03 10.62 1410.41 66.22 37.95 598.99 (+)120.12 183.31 87.11 (+)427.12 23.19 (+)7.18 50.84 121.44 5036.52 43.8 (+)117.62 515.56 (+)966.22 234 281. Kalamassery Table 4.49 63.

There is an increase in net profit after tax by 283. Institute in Management in Kerala. In 2009 it decreased by 50.01 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 93.31% thereby resulting in an increase in the gross profit of 87.82%.7%.28% the increase in gross profit is sufficient to compensate for the increase in operating expenses and hence there has been an overall increase in operational profits.35 50. But it was able to be recovered in 2010. Although the operating expenses have increased by 43. Kundara Page 68 .79 50 7. Ltd.22%.74% while the cost of goods sold has increased nearly by 9.7 283.9 Showing the percentage of increase/ decrease of net profits for 5 years 300 250 200 150 100 56.82 percentage of increase or decrese in net profit Inference : The net profit of Apollo is increasing from 2006-2008. Kalamassery The comparative income statement given above reveals that there has been an increase in net sales of 23. it may be concluded there is a sufficient progresses in the company and the overall profitability of the company is good.Apollo Tyres Pvt. Chart 4.

Ltd. Material Consumed Ratio = (Material Consumed / Net Sales) X 100 Table 4.02 2804.89 60. Kundara Page 69 .26 3057.3 COST ANALYSIS 4.48 68.in Crores) 2006 2007 2008 2009 2010 1850.78 68.93 4070.90 Net Sales (Rs. Kalamassery 4. Institute in Management in Kerala.34 2264.52 3292.79 64.14 showing the material consumed ratio Year Material Consumed (Rs. This is favourable condition.71 Source : Annual Report Inference: The materials consumed were decreasing in all years except in the year 2009. By analyzing this.Apollo Tyres Pvt. The firm is able to decline it in 2010. the firm could understand the areas where the expenses are increased and can take necessary steps.3.70 2393.33 3693.44 5036.56 Material Consumed Ratio 70.1 Expenses Ratios: The expenses ratios are the ratios which imply the expenses incurred by the firm.in Crores) 2625.

02 2804.26 3693.7 2000 1850. Ltd.Apollo Tyres Pvt. When the material consumed increases the net sales will also increases.33 3057.56 5000 4070.44 4000 3292. Institute in Management in Kerala.10 Showing the relation of material consumed and net sales 6000 5036. Kundara Page 70 .52 2264.9 3000 2625. Kalamassery Chart 4.34 2393.93 1000 0 2006 2007 2008 2009 NET SALES 2010 MATERIAL CONSUMED Inference : The above figure clearly shows a direct relation with material consumed and net sales.

3.15 Showing the conversion cost ratio Year Conversion Cost (Rs.40 87.33 3693.88 94.93 4070.25 Source : Annual Report Inference : The conversion cost were decreasing in all years excepting in the year 2009. Kalamassery 4. This is favourable condition. but this ratio shows a fluctuating trend.Apollo Tyres Pvt.05 91. Institute in Management in Kerala.56 Conversion Cost Ratio 96.58 3096.in Crores) 2625.94 3801.44 5036.22 Net Sales (Rs. Kundara Page 71 .34 3377.2 Conversion Cost Ratio Conversion Cost Ratio = (Labour Expenses + Manufacturing Expenses) /Net sales X 100 Table 4. The firm is able to decrease it in 2010.in Crores) 2006 2007 2008 2009 2010 2544.81 4394. Ltd.52 3292.45 93.

93 3377.44 3801.52 2544.33 3096. Showing the conversion cost & net sales 6000 5036.81 2000 1000 0 2006 2007 2008 SALES 2009 2010 CONVERSION COST Inference: This study shows that when the conversion charges increased the sales also increased.58 3693.22 4000 3292.94 4070.11. Institute in Management in Kerala. Ltd. Kalamassery Chart 4.Apollo Tyres Pvt. Both the conversion cost and the sales are showing an increasing trend.34 3000 2625.56 5000 4394. Kundara Page 72 .

The other three years ratios are 6. Kalamassery 4.78 6.33 3693.44 5036.3.in Crores) 2625.3 Administration Expenses Ratio Administration Expenses Ratio = (Administration Expenses / Net Sales) X 100 Table 4.in Crores) 2006 2007 2008 2009 2010 117. Showing the administration expenses ratio Year Administration Expenses (Rs.50 234 351. Institute in Management in Kerala.78%.72%. Hence the ratio is increased from 2009.75 6.Apollo Tyres Pvt.72 6.95 221.56 Administration Expenses Ratio 6.80% respectively. it is unfavourable situation for the company. 6.52 3292.16. Ltd.52 Net Sales (Rs.23 258.80 5. 6. Kundara Page 73 .98 Source : Annual Report Inference: This shows that the year 2010 is having the highest ratio and 2009 shows the lowest.93 4070.

Ltd. Showing the administration expenses and net sales 6000 5036.52 3693.44 4000 3292.12.23 258.5 234 351.Apollo Tyres Pvt. Institute in Management in Kerala.52 ADMINISTRATION EXPENSES INFRENCE: In this chart the net sales is increasing.93 2000 1000 117. The sales goes on increasing even if there is upward or downward movement in the administration expenses. Kalamassery Chart 4.95 0 2006 2007 2008 2009 NET SALES 2010 221.56 5000 4070. Kundara Page 74 .33 3000 2625.

30 6. which is not favourable for the firm.92 7. Kalamassery 4. Kundara Page 75 . Showing the selling expenses ratio Year Selling & Distribution Expenses (Rs.93 4070.3% to 6.83 7.3.52 3292. From the above table we could understand that the selling expenses ratio tends to increase.92%.33 3693. It shows a fluctuating trend.in Crores) Selling Expenses Ratio Source : Annual Report Inference : This ratio is increasing in all years except in the year 2009 as it decreases from 7.28 2625.56 5. Institute in Management in Kerala.44 5036.69 Net Sales (Rs.in Crores) 2006 2007 2008 2009 2010 148.4 Selling and Distribution Expenses Selling & distribution Expenses Ratio = (Selling Expenses / Net sales) X 100 Table 4.72 281.64 5. Ltd.18 192 269.17.62 387.Apollo Tyres Pvt.

13.44 4000 3292.62 387.93 2000 1000 269.33 3000 2625. Kundara Page 76 . Ltd. Kalamassery Chart 4.72 281. Institute in Management in Kerala.28 148.18 0 2006 192 2007 2008 2009 NET SALES 2010 SELLING EXPENSES RATIO INFERENCE: Here the selling expenses and net sales are increasing which shows that the net sales will increase with the increase in salling expenses. Showing the relation between selling expenses and net sales 6000 5036.Apollo Tyres Pvt.52 3693.56 5000 4070.

95 0.34 24.16 2030.57 29.79 186.18 Cost sheet for the year ending 31 March 2006 PARTICULARS AMOUNT (In Crores) Materials Consumed: Factory Overhead: Stores & spares consumed Power & fuel Repairs & maintenance: Machinery Building Others Rent Insurance Rates & Taxes Add: Opening work in progress Less: Closing work in progress Factory Cost Institute in Management in Kerala. Kundara 1850.50 9. It is prepared to show the detailed cost of the total output for a certain period.82 4. Ltd. Table 4.77 7.75 121.50 Page 77 .97 8.Apollo Tyres Pvt.5 Cost Sheet It is a detailed statement of the elements of cost arranged in a logical order under different heads.41 180. Kalamassery 4.35 209.3.67 7.22 23.

44 24.18 2352.15 5. Kundara Page 78 .20 170. Kalamassery Administration & Office Overhead: Salaries & Bonus Directors sitting fee Postage.66 2204.10 6.33 3.85 43.Apollo Tyres Pvt.95 2208.54 Institute in Management in Kerala.37 2430.62 177.21 62.99 0. Ltd.59 8.88 4.45 87.89 129.98 78.08 148.72 72.77 2375. Telex.89 10. Phone Research & development Bank charges Legal & professional expenses Miscellaneous expenses Cost of production Add: Opening finished goods Purchase of finished goods Less: Closing of finished goods Cost of goods sold Selling & distribution expenses: Travelling conveyance Freight & forward Commission to selling agent Sales promotion expenses Advertisement & publicity Cost of sales Net profit Sales Source : Annual Report 26.

18 respectively. Ltd.95 and 148. The company was able to attain a net profit of 72. the administration and selling cost were 177.45.Apollo Tyres Pvt.89. Kundara Page 79 . The cost of production was 2208.50. The factory cost for this year is 2030.37 from the sales 2430. Kalamassery Inference : The above statement reveals the costs incurred by the firm in the year 2006. Institute in Management in Kerala.

69 9. Ltd. Kalamassery Table 4. Telex.30 1.76 29.19 Cost sheet for the year ending 31 March 2007 PARTICULARS Materials Consumed: Factory Overhead: Stores & spares consumed Power & fuel Repairs & maintenance: Machinery Building Others Rent Insurance Rates & Taxes Add: Opening work in progress Less: Closing work in progress Factory Cost Administration & Office Overhead: Salaries & Bonus Directors sitting fee Postage.21 8.23 2693.13 6.31 204.48 221.24 8.25 5.89 9.68 6.12 2471. Kundara Page 80 .Apollo Tyres Pvt.70 25. Phone Research & development Bank charges Legal & professional expenses Miscellaneous expenses Cost of production AMOUNT (in Crores) 2264.17 27.36 6.05 207.05 Institute in Management in Kerala.94 0.82 163.94 132.71 10.86 30.41 234.

17 2948.44 2736.42 3041. Kalamassery Add: Opening finished goods Purchase of finished goods Less: Closing of finished goods Cost of goods sold Selling & distribution expenses: Travelling conveyance Freight & forward Commission to selling agent Sales promotion expenses Advertisement & publicity Cost of sales Net profit Sales 170.05.23 and 192 respectively.74 51.60 192 2928. Ltd.76 20.88 212.Apollo Tyres Pvt.91 74.42 from the sales 3041. The administration and selling cost were 221.86 Inference: The above statement reveals the costs incurred by the firm in the year 2007.86. Institute in Management in Kerala. The factory cost for this year is 2471.99 9. Kundara Page 81 . The cost of production was 2693.66 85.82. All the costs were increased from 2006.44 113.44 34. The company was able to attain a net profit of 113.

Apollo Tyres Pvt. Ltd. Kalamassery

Table 4.20 Cost sheet for the year ending 31 March 2008 PARTICULARS AMOUNT (in Crores) Materials Consumed: Factory Overhead: Stores & spares consumed Power & fuel Repairs & maintenance: Machinery Building Others Rent Insurance Rates & Taxes Add: Opening work in progress Less: Closing work in progress Factory Cost Administration & Office Overhead: Salaries & Bonus Directors sitting fee Postage, Telex, Phone Research & development Bank charges
Institute in Management in Kerala, Kundara

2393.02 27.08 134.82 6.63 2.10 12.26 9.38 6.56 7.49 206.32 27.05 233.37 24.09 209.28 2602.3 185.58 0.09 6.39 10.74 4.86
Page 82

Apollo Tyres Pvt. Ltd. Kalamassery

Legal & professional expenses Miscellaneous expenses Cost of production Add: Opening finished goods Purchase of finished goods Less: Closing of finished goods Cost of goods sold Selling & distribution expenses: Travelling conveyance Freight & forward Commission to selling agent Sales promotion expenses Advertisement & publicity Cost of sales Net profit Sales Source : Annual Report

6.86 40.72 258.5 2860.79 212.44 103.51 3176.74 266.72 2910.02 39.40 85.12 49.25 71.43 24.52 269.72 3179.74 219.30 3399.04

Inference: The above statement reveals the costs incurred by the firm in the year 2008. The factory cost for this year is 2602.30. The administration and selling cost were 258.50 and 269.72 respectively. The cost of production was 2860.79. The company was able to attain a net profit of 219.30 from the sales 3399.04. All the costs were increased from 2007

Institute in Management in Kerala, Kundara

Page 83

Apollo Tyres Pvt. Ltd. Kalamassery

Table 4.21 Cost sheet for the year ending 31 March 2009 PARTICULARS Materials Consumed: Factory Overhead: Stores & spares consumed Power & fuel Repairs & maintenance: Machinery Building Others Rent Insurance Rates & Taxes Add: Opening work in progress Less: Closing work in progress Factory Cost Administration & Office Overhead: Salaries, Wages & Bonus Directors sitting fee Postage, Telex, Phone Research & development Bank charges Legal & professional expenses Miscellaneous expenses
Institute in Management in Kerala, Kundara

AMOUNT (in Crores) 2804.26 27.17 149.29 5.95 2.76 12.69 10.30 6.03 7.41 221.60 24.09 245.69 28.93 216.76 3021.02 165.43 0.10 6.46 19.58 6.11 14.01 22.31 234
Page 84

Apollo Tyres Pvt. All the costs were increased from 2008 except the administration cost and the net profit decreased. The cost of production was 3255.12 from the sales 3803.79 3255.94 58.02 266. The factory cost for this year is 3021.47 3413.02. Kalamassery Cost of production Add: Opening finished goods Purchase of finished goods Less: Closing of finished goods Cost of goods sold Selling & distribution expenses: Travelling conveyance Freight & forward Commission to selling agent Sales promotion expenses Advertisement & publicity Cost of sales Net profit Sales 43.72 116.62 3695.94 224.09 108.47 281.58 26. Institute in Management in Kerala.02.62 respectively.20 3637.12 3803.21 Inference : The above statement reveals the costs incurred by the firm in the year 2009. The company was able to attain a net profit of 108.91 64. Kundara Page 85 .21.40 87. The administration and selling cost were 234 and 281. Ltd.

32 9.32 13.93 7.93 282.37 163.21 49. Wages & Bonus Directors sitting fee Postage.43 351.90 34.47 7.Apollo Tyres Pvt.88 Institute in Management in Kerala.72 18.22 Cost sheet for the year ending 31 March 2010 PARTICULARS Materials Consumed: Factory Overhead: Stores & spares consumed Power & fuel Repairs & maintenance: Machinery Building Others Rent Insurance Rates & Taxes Add: Opening work in progress Less: Closing work in progress Factory Cost Administration & Office Overhead: Salaries.52 241. Kalamassery Table 4.36 237. Telex.09 254.05 28.46 3299.28 2.98 41.37 26. Ltd.52 3650.09 8. Kundara Page 86 .06 22.48 5.43 0. Phone Research & development Bank charges Legal & professional expenses Miscellaneous expenses Cost of production AMOUNT (in Crores) 3057.

Kalamassery Add: Opening finished goods Purchase of finished goods Less: Closing of finished goods Cost of goods sold Selling & distribution expenses: Travelling conveyance Freight & forward Commission to selling agent Sales promotion expenses Advertisement & publicity Cost of sales Net profit Sales Source : Annual Report 224. Ltd.99 from the sales 4591.Apollo Tyres Pvt.44 75.03 238. Institute in Management in Kerala.12 41.28 4176.28 respectively.25.68 4027.98 45.25 Inference : The above statement reveals the costs incurred by the firm in the year 2010.36. The factory cost for this year is 3299. Kundara Page 87 . The cost of production was 3650.88.26 414.52 and 387.47 151.99 4591.05 3788.03 387. All the costs were increased from 2009. The administration and selling cost were 351.22 113. The company was able to attain a net profit of 414.47 112.

43 Institute in Management in Kerala. Kundara Page 88 .30 108. Ltd. in Crores) 2006 2007 2008 2009 2010 (Base year: 2006) Inference : The profit have increased(upward trend) for three years from 2006-2008. 72.Apollo Tyres Pvt.40 % in 2009.1 Profit Trend Table 4.4.42 219. a percentage increase of 424.03.99 TREND PERCENTAGE 100 156.4.e. But in 2010 it increased to 573. TREND ANALYSIS The financial statements may be analyzed by computing trends of series of information.03 149.12 414.23 Showing the profit trend YEAR PROFIT (Rs.43i. This method determines the direction upwards or downwards and involves the computation of the percentage relationship that each statement item bears to the same item in base year. 4.40 573. There was a drastic decrease (downward trend) by 149. Kalamassery 4.72 303.37 113.

It is expected that the profit will decrease approximately to 435.88 2011 435 Inference : Profit is increasing till 2008 and decreased in 2009. Ltd.54 2009 138.09 2008 280.Apollo Tyres Pvt.31 2010 530. Kalamassery Chart 4. Hence in the year 2010 the firm was able to raise the profit. Thus the profit is showing a fluctuating trend in all the years.14 Showing the expected profit in the year 2011 PROFIT TREND 600 500 400 300 200 100 0 2006 2007 145. Institute in Management in Kerala. Kundara ¤£ ¡ ¡ ¢   FIT T E 100 Page 89 .

Apollo Tyres Pvt.94.2 Cost Trend Table 4.02 3650.05 2860.6. Kalamassery 4. 17.94 129.4.31 Institute in Management in Kerala.79 3255.in Crores) 2208.88 TREND PERCENTAGE 100 121.45 2693.39 165. The percentage in 2010 is 165. 17.85. The percentage of increase in these years were 21.92 respectively. Kundara Page 90 . Hence it shows an upward trend.31 as compared to 100 in 2006. Ltd.24 showing the cost trend YEAR 2006 2007 2008 2009 2010 Base Year (2006) Inference: The cost have increased continuously in all years upto 2010.54 147. COST (Rs. 7.

Kalamassery Chart 4. It is expected that cost will increase to 179 in the year 2011.54 2009 147.31 2011 179 Inference The cost trend is showing an upward trend in all the years.Apollo Tyres Pvt.15 showing the expected cost for the year 2011 COST TREND 200 180 160 140 120 100 80 60 40 20 0 2006 COST TREND 100 2007 121. Ltd.39 2010 165. Kundara Page 91 . Institute in Management in Kerala.94 2008 129.

25 Showing comparision between sales.31 530.54 138. Year Sales trend Profit trend Cost trend 2006 2007 2008 2009 2010 100 125.54 147. Kalamassery Table 4. cost.39 165.57 %. Ltd. Hence this shows an upward trend. profit trends.94 129.40 140.83 100 145.03 191. Institute in Management in Kerala.09 280. Kundara Page 92 .69 155.31 Inference: The sales and cost trend is increasing continuously for all the five years from 2006 to 2010.88 100 121.Apollo Tyres Pvt. But in the case of profit trend it is increasing for three years and shows a downward trend in the year 2009 and moves upward in 2010 by 329.

profit.16 Showing the comparision between sales. Kundara Page 93 . cost trends 600 500 400 300 200 100 0 2006 2007 sales trend 2008 profit trend 2009 cost trend 2010 Institute in Management in Kerala. Ltd. Kalamassery Chart 4.Apollo Tyres Pvt.

37 113.10 48092.64  (928.19 72.93 172216.42 12864.26 Showing the calculation of correlation between cost and profit YEAR X Y XY X2 Y2 2006 2007 2008 2009 2010 Total 2208.79 3255.42 219.69 13328924.19) 2 5 x 250100.2 159825.09  (14668.05 2860. Kundara Page 94 .96 ± 14668.76 4877251.Profit Table4.Cost of goods sold y.77 2969653.2) 2 = 1233255.96 44237969.19 x 928.99 928.42 10595155.Apollo Tyres Pvt.73 637371.02 3650. Ltd.134 = 0.2 5237.30 108.40 7252518.25 351932.53 305445.49 11689.70 1515078. § y Correlation Coefficient = = n § x 2 ( § x ) 2  n § y 2 ( § y ) 2 5 x 2969653.45 2693.85 1531977.09 250100.64 n § xy  § x .5 CORRELATION OF PROFIT AND COST x.30 8184119.81 Institute in Management in Kerala. Kalamassery 4.2 5 x 44237969.88 14668.12 414.

The correlation coefficient between profit and cost is 0.Apollo Tyres Pvt.17 showing the correlation between cost and profit 4000 3500 3000 2500 2000 1500 1000 500 0 2006 2007 cost 2008 profit 2009 2010 Institute in Management in Kerala. So it is having a limited degree of correlation which is positive. Hence when cost increases profit also increases and vice versa.81. Chart 4. Kalamassery Inference: As the limited degree of correlation lies between 0 and 1. Kundara Page 95 . Ltd.

40.e. The analysis reveals that the firm has attained the norms of 2:1 in 2006 &2009 & the other three years have ratio nearly to 2. In2007 the firm has only 0. The firm was able to raise the profit from 5.46 & 4.Apollo Tyres Pvt. a current ratio of 2:1 is satisfactory. Kalamassery FINDINGS  As per the rule of thumb. Kundara Page 96 . the Apollo tyres has not secured liquid asset to meet the current liability.  Absolute liquid ratio of 0. It is the normal situation. but it can be considered as satisfactory.76 to 13. In the case of operating profit it is favourable to the firm. In 2010 the percentage of increase in operating cost is less Institute in Management in Kerala.35.23 rupees of cash available. In other two years i.2008 & 2010 ratio is lightly low because it is 0.  The operating cost is increasing with the increase in sales.5:1 is considered good. The study shows that the immediate cash available to meet its current liability is favourable in 2006 and 2009. And also there is enough current assets to meet the current liabilities  The analysis shows that the quick ratio is lower than the normal standard of 1:1. Therefore.   The gross profit & the net profit of the company is satisfactory. Ltd.

78%.92%. Hence the ratio is increasing from 2009. Ltd.80% respectively. Kalamassery compared with other years. Hence it is not a favourable situation.3% to 6.   The cost sheet reveals that the cost is increasing in all the years. This is favourable for the company to get more profit. The other three years ratios are 6. It reveals a satisfactory situation in the firm.  The cost trend is moving upward.72%. It is expected that cost will increase to 179 in 2011. But the firm is able to increase it in the next year as compared to previous year.  The analysis shows that the administration expenses in the year 2010 are having the highest ratio and 2009 shows the lowest. it is unfavorable situation. The sales trend is moving upward. 6. and decreased in 2009. But the increasing trend in cost is not satisfactory. It is a favourable situation.  The study shows that cash profit is increasing for three years.  Selling expenses ratio is increasing in all years except in the year 2009 as it decreases from 7. Kundara Page 97 . 6.Apollo Tyres Pvt. Institute in Management in Kerala.

Kundara Page 98 . In that year the cost of goods sold is greater than the net sales. But the firm¶s profit increased by 424. Ltd. Kalamassery  Profit trend shows upward trend till 2008 and decreasing trend in2009.  From the comparative statement analysis we could understand that the net profit is increasing in all the years except in the ear 2008-2009. Hence a decrease in the profit by 50.03% in 2010 and is expected to decrease approximately to 435 crores.Apollo Tyres Pvt.e.  While correlating the cost and profit we came to a conclusion that the two variables are positively correlated i. when cost increases profit also increases. Institute in Management in Kerala.. This is because the manufacturing expenses were increased in 2009.70%. Hence the profit trend shows a fluctuating trend.  The reason for increasing profit with the increase in cost is the upward trend in sales of Apollo tyres ltd.

 Apollo tyres have to give a noticeable preference on selling and administration expenses.  Management should take necessary steps to monitor the constant increase in the current liabilities.Apollo Tyres Pvt. These two expenses are increasing which will affect the profit of the firm. Therefore the firm must take effective measures to improve the current ratio. Company must take quick and effective measures to rectify the absolute liquid ratio as early as possible. Kundara Page 99 . Institute in Management in Kerala. so it is not favourable.  Absolute liquidity ratio decreased in 2010 as 0. so the firm must take consideration to control the cost.  Quick ratio is less than the ideal norms. And the profit is expected to decrease by the year 2011. That means the company has to try to keep its liquidity position better in the future.  From the trend analysis we could understand that cost is moving upward. Ltd. Kalamassery SUGGESTIONS  In 2010 the current ratio of Apollo tyres is 1.76 which is less than the standard norm of 2:1.40 which is less than the standard norms.

Apollo Tyres Pvt. Kalamassery  The manufacturing expenses and the cost of goods sold were increasing in all the 5 years. Ltd. Institute in Management in Kerala. Kundara Page 100 . Therefore the firm must take steps to control the increase in these expenses.

Ltd. As in the case of any other field they also have competitors even if there is stiff competition.Apollo Tyres Pvt. The main goal of Apollo tyres is to become number one in the industry and they are well confident. They also introduced Enterprise Resource Planning (ERP) system to integrate all the activities of their units as a whole. It is due to the increasing sales trend. So the firm must try to reduce the cost and increase the sales. Therefore the current position of the firm is good but the profit is expected to decrease in 2011 and the cost is showing an upward trend. So have to take care of the quick and absolute liquid asset. In 2009 the profit has decreased due to the increase in the expenses. Even the company was able to recover it in the next year itself with a high percentage of increase. faster response to customer queries improved customer satisfaction and so on. Ltd. The cost is also showing an upward trend. is one of the leading tyre manufacturers in India. is not strong enough. They have been able to capture the majority of market share in the industry. The profitability of the firm is also satisfactory. This system will help to integrate information for better decision making. Kalamassery CONCLUSION Apollo Tyres pvt. We can expect that every decision taken by the company will help them to be market leader in the tyre manufacturing industry. Kundara Page 101 . The study reveals that the liquidity position of Apollo tyres Ltd. Institute in Management in Kerala. From this study we could understand that the cost and profit of the firm is having limited degree of correlation which is positive.

org Institute in Management in Kerala.  Annual Report of Apollo Tyres. Kalamassery BIBLIOGRAPHY BOOKS:  Gupta K Shashi. Chand Books.  Nair K G C. Sixth edition. Kalyani Publishers. ³Management Accounting´. Sharma R K. ³Financial Management´.  Jain S P.apollotyres. Kundara Page 102 . Kalyani Publishers. 2008.financeindia. Thulasi. Ltd. 2008. Second edition. ³Cost and Management Accounting´. Narang K L. WEBSITES:   www. Dipa.com www.Apollo Tyres Pvt.