1. INTRODUCTION 1.1 HISTORY Duke is promoted and managed by Shri Prabhubhai Patel, Shri S.N.Patel, Shri D.K.
Patel, and Shri R.P.Patel. All the founders of Duke are quality conscious. Technology serving the nation since 1989 by providing quality pumping solution to pump industry. India’s 2/3 population about 66% is mainly dependent on rain water. Now rapid changing of modernization is experienced in ruler villages are now days becoming changing its ground water. It start up for catering in form of small submersible pumps repairing workshop. Today’s company has sound financial position powerful management skill and motivated staff. It is having production of producing pumps sets per day company is square over 41000 sq. Feet there strong building in 225000 sq. Feet land area. Duke Plasto Technique Pvt. Ltd. synonymous for manufacturing quality consistent and reliable products and as its name Duke itself speaks king in pumping solution industries and winners of national quality award in 2007 from government of India.
1.2 VISION To be eminent global brand providing complete, innovative, invincible quality pumping paraphernalia under one roof. 1.3 MISSION
We are committed to manufacture products complying with the best quality standards of the world. We strive to create an environment that nurtures youth and nourishes the experienced. On the bedrock of ethics, Duke is instituted by amalgamating the best practices and technologies of the world. 1.4 VALUES The values that guide us are trust, ethics, integrity, discipline and performance.
1.5 COMPANY PROFILE Name of Company :
Duke Plasto Technique Pvt. Ltd.
Corporate Office :
401, 4th floor, Ankit Building, Near Shilp, C.G.Road, Navarangpura, Ahmedabad-09 Phone : +91 -79 -26405782 Fax : +91 – 79 – 26403428
N.H.14, Deesa Highway,
Opp. Hotel Green Wood, Badarpura, Palanpur – 385510 (N.Gujarat, India.)
Size of the Unit :
Medium Scale Industry
Form of Organization :
Name of the Product :
1. Submersible Pumps 2. Motors 3. Monoblock Pumps 4. Centrifugal Pumps 5. Pressure Booster Pumps
Existing Management Body :
Managing Director Executive Director Executive Director Executive Director Chief Accountant Bankers
Mr. P.P.Patel Mr. S.N.Patel Mr. D.K.Patel Mr. R.P.Patel Mr. Manubhai Patel (1) Bank of Baroda (2) State Bank of India
HR Manager Managing Partner
Mr. Bharatbhai Joshi Mr. K.B.Solanki
1.6 ORGANIZATION STRUCTURE
Manager Production Department
Manager Marketing Department
Manager HR Department
Manager Finance Department
Ex. Accountants Cash & Bank
Ex. Accountants Sales
Ex. Accountants Purchase
Ex. Accountants Other Works
Approval from GWSSB. 10.1. 7. 12.7 CERTIFICATION
Recognized by the Best Certification
1. 9. 6. Approval from PHED. Supplied to UNISEF & WHO. 11. Applied for BEE Star rating in the year 2008. 5. Received National Quality Award for Quality Product in 2006. and ISO 9001:2000 from ABS in the year 2000. Duke Plato Technique Pvt. CE certification from TUV:SUD for Outsource/Export to European Countries. Approval from Karnataka water Supply Board in the year 2005. South Africa in the year 2004. Ltd. Received ISI certification for ISI 12818. 2. has received ISI certification for IS 4985 in the year 1999. 4. Approval from UP Jal Nigam in the year 2002. Rajasthan in the year 2003. ISO 9001:2000 certification from TUV:SUD South Asia for quality Management System in 2008.
. 13. 8. NSIC-CRISIL rating of “CRISIL SE28” for high Performance Capability certification in year 2008. 3. Gujarat in the year 2001. Received ISI certification for IS 8034 in the year 2008.
Driver Harchand Mafatlal
Sweeper Babubhai Punjabhai Maganbha i
Security Guard Dinesh Sabbir Babubhai Ganpatlal
. & Purchase Shri R.1.8 ORGANIZATION CHART .Patel
PA to MD Thakor Dhanji
Asst. P. Manager HR & System Mr.Dalwadi
Director–Admin. Bharat Joshi
Canteen In charge Ramesh Loh
Receptionist Mrs.HR & ADMIN.M. Executive-HR Shubham Chandel
Managing Director Shri P.
WORKING CAPITAL MANAGEMENT 2. will assure the health of the organization. Working Capital management is concern with short term financial decisions have been relatively neglected in the literature of finance. efficiently and consistently. has recorded their growth.
. Lack of efficient and effective utilization of working capital leads to earn low rate of return on capital employed or even compels to sustain losses.1 Introduction Working Capital management is a significant fact of financial management due to the fact that it plays a pivotal role in keeping the wheels of a business enterprise running. Working Capital to a company is like the blood of human body.2. It is the most vital ingredient of a business. Shortage of funds for working capital has caused many businesses to fail and in many cases. Working Capital management if carried out effectively.
Finished goods are produced further held as inventories and when inventories are sold account receivables are created. This includes creditors for goods purchased. Current assets are those assets. They are cash or nearly converted cash resources. Signifies money required for day-to-day operations of an organization. Inventory. The value represented by these assets circulates among several items. Prepaid expenses. 8
. Cash is used to buy raw materials. Business cannot run without adequate working capital (WC). Temporary Investments.
Circulation of Current Assets
Current Liabilities are the debts of the firm that have to be paid during the current accounting period or within a year.An Executive function of Finance for taking Liquidity decisions. to pay wages and to meet other manufacturing expenses. Requirements of WC may differ from organization to organization.2 Meaning Working Capital management is the administration of the firm’s current assets and the financing needed to support the current assets. Then the collection of account receivables brings cash into the firm and the cycle starts again.
2. Short Term advances. Receivables. which will be converted into cash within the current accounting period or within the next year as a result of the ordinary operation of the business. These include Cash and Bank Balances.
taxes and dividends payable and other liabilities maturing within a year. this in turn can create problems at the time of liquidation.3 Goals of Working Capital Management Manage Firm’s Current Assets And Current Liabilities: Main goal of WCM is to provide cash whenever there arise any liability. then it can create problems for the firm. It is not easy to convert fixed assets into cash quickly so current assets are used for WCM. So to manage current asset according to the current liabilities is very essential for any company.
2. Working Capital is also known as circulation capital. If the firm will maintain low level of current assets then it will not able to meet its current obligations. advances received against sales. If the firm maintains very high level of current assets then it will not able to invest in fixed asset. If firm does not maintain a specific level of working capital.outstanding expenses. fluctuating capital and revolving capital. short term borrowing. Sometimes due to lack of working capital even firm can face solvency or bankruptcy. Working Capital helps to maintain liquidity in the firm.4 Working Capital Cycle
. Not only liquidity but also to pay day-to-day expenses. Trade Off Between Liquidity And Profitability: One of the objectives of working capital management is balancing the “liquidity” and “profitability” criteria while taking into consideration the attitude of management towards risk. Maintain Level Of Working Capital: Working Capital is important for any firm whether big or small.
2. this will tend to high level of block up of cash in current assets and firm will not be able to increase its wealth.
The cheapest and best sources of cash exist as working capital right within business.g. Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm’s total profits. around and out of a business. There are two elements in the business cycle that absorb cash-Inventory (stocks and work-in-progress) and Receivables (debtors owing company’s money). If it doesn’t generate surpluses. Each component of working capital (namely inventory. If a business is operating profitably.Collection of Receivable
Purchase of Raw material
Raw material Inventory
Issue of material production And incurring expenses
Finished Goods Work in process
Cash flows in a cycle into. If company can get money to move faster around the cycle (e. When it comes to managing working capital – “TIME IS MONEY”. will help improve profits and reduce risks. generate cash surpluses. reduce inventory levels relative to sales). The main sources of cash are Payables (company’s creditors) and Equity and Loans. the business will generate more cash or 10
.g. collect payments from debtors more quickly) or reduce the amount of money tied up (e. in theory. The faster a business expands the more cash it will need for working capital and investment. receivables and payables) has two dimensions TIME and MONEY. then it should. It is the business’s lifeblood and every manager’s primary task to help keep it flowing and to use the cash flow to generate profits. the business will eventually run out of cash and expire. Good management of working capital will generate cash.
. company could reduce the cost of bank interest or company will have additional free money available to support additional sales growth or investment. company effectively create free finance to help fund future sales. get longer credit or an increased credit limit. if company can negotiate improved terms with suppliers e. As a consequence.it will need to borrow less money to fund working capital.g. Similarly.
Thus ratio analysis is an important technique of financial analysis as it is a means of judging the financial health of the company. In short. one number expressed in terms of another. Interpretation of ratios can be done either by comparing it with the ideal/past ratios or by taking help of some related ratios or by comparing with the ratios of other firms. it has assumed such an importance that anybody connected with business turns to ratio for measuring the financial strength and earning capacity of the business. its operations and attractiveness as an investment. Originally the bankers used the Current Ratio to judge the capacity of the borrowing business enterprises to repay the loan and make regular interest payments. A ratio is expressed either as a proportion between two figures or in form of percentage or as rates.
. A banker or other creditor will measure the repaying capacity and financial strength on the basis of financial ratios. they can provide useful clues to gauge accurately the financial health and ability of business to make profit. The financial statements as prepared and presented annually are of little use for the guidance of prospective investors. A ratio is thus. It is very interesting to know that the use of ratios has become popular during the last few years only. creditors and even management. business results and situations can understood properly only through ratios. RATIO ANALYSIS 5.5. A supplier of funds in the form of share capital would like to analyze the accounts to ascertain its earning capacity and future prospects. The level and historical trends of these ratios can be used to make inferences about a company’s financial condition. This relationship between two related items of financial statements is known as ratio.1 Introduction to Ratio Analysis Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company’s financial statements. But today. Only calculating ratio is of no use unless it is interpreted so as to be useful to management in making policy decisions. If relationships between various related items in these financial statements are established.
Therefore. idle assets earn nothing.5. Current Ratio establishes relationship between current assets and current liabilities. Total Current Assets 2007-08 91386956 90010454 2249399 12670651 2006-07 17321124 38901280 6406755 3637734 2005-06 15298939 26136734 2413365 2227512 46076550 2004-05 13355265 24394603 654352 3495698 41899918 (Rs. Current Ratio of the firm measures its short-term solvency. which indicates the rupees of current assets available for each rupee of current liability. loss of creditors’ confidence. A firm should ensure that it does not suffer from lack of liquidity. A very high degree of liquidity is also bad. It is generally believed that 2:1 ratio shows a comfortable working capital position. Current Ratio: Meaning & Objective: Current ratio is also known as ‘Working Capital Ratio’ as it is a measure of working capital available at a particular time. or even in legal tangles resulting in the closure of the company. The current ratio represents a margin of safety for creditors.2 Liquidity Ratio Liquidity ratios measure the ability of the firm to meet its current obligations. it is necessary to strike a proper balance between high liquidity and lack of liquidity. and also that it does not have excess liquidity. will result in poor creditworthiness. The failure of a company to meet its obligations due to lack of lack of sufficient liquidity.) 2003-04 13282460 21937665 489525 2100366 37810016
Current liabilities: 13
. 1. Formula: Current Ratio=Current Assets/Current Liabilities
Current assets: Particulars Inventories Debtors Cash / bank balance Loans / Adv.
2.(Rs. without current year.5 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 1. value of ratio should be 2:1 which standard ratio is.5 2 1.In short. greater the margin of safety. Quick Ratio:
.) Particulars Liabilities & Provisions Current Ratio: (Rs.88 2007-08 99489259 2006-07 22984930 2005-06 15812495 2004-05 19328289 2003-04 13121717
3. It means that the company might be able to meet its current obligations by decreasing liability in future also .91 2. Recommendation: Company’s condition is not good and there is need to decrease the liability by using reserve and surplus if the functions are not affected.91 2004-05 41899918 19328289 2. 2. Compared to previous year there is increase in the current liability in the year 2007-08.97 2. Higher the current ratio.97 2006-07 66266893 22984930 2.5 3 2.88 2005-06 46076550 15812495 2.88 2.5 1 0.17 2003-04 37810016 13121717 2.) Particular Current Assets Current Liabilities Ratio(Times) 2007-08 196317460 99489259 1. As per the current ratio.88
Analysis: Here we can see that the current ratio is above 2:1.
) Particulars Total Quick Liabilities 2007-08 99489259 2006-07 22984930 2005-06 15812495 2004-05 19328289 2003-04 13121717 2007-08 196317460 91386956 104930504 2006-07 66266893 17321124 48945769 2005-06 46076550 15298939 30777611 2004-05 41899918 13355265 28544653 2003-04 37810016 13282460 24527556
Quick Ratio: (Rs. From the current assets categories.48 2003-04 24527556 13121717 1. This ratio used to check whether the company has adequate cash or cash equivalent to meet its current obligation without having to liquidate non-cash assets. inventory being least liquid and it normally requires some time for realizing in to cash therefore it is excluded while calculating quick ratio.13 2005-06 30777611 15812495 1. Formula: Quick Ratio = Quick assets/ Total Quick Liabilities (Rs.Meaning & Objective: Quick ratio establishes a relationship between quick assets and quick liabilities.) Particulars Quick assets Quick liabilities Ratio(Times) 2007-08 104930504 99489259 1.05 2006-07 48945769 22984930 2.95 2004-05 28544653 19328289 1.87
.) Particulars Total Current Assets Inventories Quick Assets Quick liabilities: (Rs.
Cash is the most stringent measure of liquidity.
3. In other words we can also say that how much cash a company holds in hand to pay its liabilities. The decrease in the quick ratio shows the weak liquidity strength of the company. Here company’s condition is quiet good as its quick ratio is above 1:1.05 1 0. It generally measures the liquidity of the firm.95 1.5 1.48
2.5 2 1.13
Formula: Cash + Marketable Securities/Current Liabilities
. A high ratio shows the high liquidity of the firm. Cash Ratio: Meaning & Objective: Cash Ratio establishes a relationship between liquid assets and current liabilities. From the graph.87
Analysis: Standard quick ratio is 1:1 & is considered to represent a satisfactory current financial condition. we came to know that in the quick ratio is less than 1 it means that our firm is not capable to pay all its current liabilities.5 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 2. Recommendation: company’s condition is quiet good and there is need to decrease the liability by using reserve and surplus if the functions are not affected.
279 2005-06 2413365 15812495 0.Total Liquid Assets: (Rs.25 0.) Particulars Cash & Bank Bal.023 2006-07 6406755 22984930 0.2 0.) Particulars Cash & Bank Bal. Ratio(Times) 2007-08 2249399 99489259 0. 2007-08 are 17
.) Particulars Provisions Cash Ratio: (Rs. 2007-08 2249399 2006-07 6406755 2005-06 2413365 2004-05 654352 2003-04 489525
Current Liabilities: (Rs. 2006-07.279
From the data we can see cash ratio for the years 2003-04.037 0.023 0.05 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 0.15 0. Total C.L. 2004-05.037 2007-08 99489259 2006-07 22984930 2005-06 15812495 2004-05 19328289 2003-04 13121717
0.1 0.3 0.153 0. 2005-06.034 2003-04 489525 13121717 0.034 0.153 2004-05 654352 19328289 0.
0. ratios are calculated. Debt Ratio: 18
. but mutually dependent and interrelated.
Recommendation: Company should compare the growth rate and inventory rate. or capital structure. types of leverage ratios. Accordingly. These ratios are computed from balance sheet.034.279.
5.037 From the graph we can interpret that in 2006-07 cash ratio is highest and in 2007-08 cash ratio is lowest. 0. are calculated from the profit and loss account.153. Capital structure ratios. popularly called coverage ratios. The leverage ratios may be defined as financial ratios that throw light on the long-term solvency of a firm as reflected in its ability to assure the long-term creditors with regard to Periodic payment of interest during the period of the loan. Repayment of principal on maturity or in predetermined installments at due dates. there are two different. 0. 0.3 Leverage Ratios To judge the long-term financial position of the firm.023. The ratios indicate mix of debt and owner’s equity in financing the firm’s assets. In 2006-07 cash ratio is highest because the portion of cash is good. The inventory is more than required for appropriate growth for the company.0.
1. Ratios that are based on the relationship between borrowed funds and owner’s capital. financial leverage.
771 2005-06 37707933 50570043 0.746 (Rs.68 0.7 0.) Particulars Secured Loans Unsecured Loans Total Debts Capital Employed: (Rs.710 0.78 0.758 2007-08 32475584 122373022 154848606 2006-07 14731306 49659967 64391273 2005-06 12862110 37707933 50570043 2004-05 11743228 28698038 40441266 2003-04 10193415 31869074 42062489 2007-08 82406819 39966203 122373022 2006-07 32673410 16986557 49659967 2005-06 22564754 15143179 37707933 2004-05 18553980 10144058 28698038 2003-04 18455464 13413610 31869074
D e b t R a tio
0. Formula: Total debt/Capital Employed Capital employed = Share Holders’ Funds + Total Debt Total Debts: (Rs.76 0.) Particulars Share Holders’ funds Total Debts Capital Employed Debt Ratio: Particulars TD CE Ratio(Times) 2007-08 122373022 154848606 0.74 0. The firm may be interested in knowing the proportion of the interest-bearing debt (also called funded debt) in the capital structure.771 0.66 2007-08 2006-07 2005-06 Ye a r 2004-05 2003-04 0.746 0.Meaning & Objective: Debt Ratio may be used to analyze the long-term solvency of a firm.71 0.758
.79 0.) 2004-05 2003-04 28698038 31869074 40441266 42062489 0.790 2006-07 49659967 64391273 0.72 0.8 0.
than in that condition company should go for higher debt ratio.Analysis: The ratio is continuously increasing from 2005-06 to 2007-08 because increase in CE more then total debt. Formula: Long term Debt/Shareholders’ funds
Long-Term Debt: (Rs.746 to 0. If company can earn more than paid to debtor.) 20
.790. It reflects the relative claims of creditors and shareholders against the assets of the firm and in other terms it indicates the relative proportion of debt and equity in financing the assets of the firm. Liquidity should be also considered in this matter.) Particulars Secured Loans Unsecured Loans Total 2007-08 82406819 39966203 122373022 2006-07 32673410 16986557 49659967 2005-06 22564754 15143179 37707933 2004-05 18553980 10144058 28698038 2003-04 18455464 13413610 31869074
Shareholders Fund: (Rs. The ratio is increasing from 0.
2. Debt-Equity Ratio: Meaning & Objective: The ratio establishes a relationship between long term debts and shareholders’ funds. Recommendation: The forgone income of the company’s own assets should be considered and than company should decide the level of debts.
77 2006-07 49659967 14731306 3. This indicates that the amount of debt is increasing as compared to the owner’s equity in the company.13
Analysis: This ratio shows the ratio of borrowed to owned funds of the company.37 2.Particulars Share Capital Reserves and Surplus Total
2007-08 31475584 1000000 32475584
2006-07 13731306 1000000 14731306
2005-06 11862110 1000000 12862110
2004-05 10743228 1000000 11743228
2003-04 9193415 1000000 10193415
Debt-Equity Ratio: (Rs. From the above chart it can be seen that over the five years the ratio has increase from 3.77 3.5 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 3.13 to 3.5 3 2.44 3. 21
4 3.44 2003-04 31869074 10193415 3.5 2 1.93 2004-05 28698038 11743228 2.77.) Particulars Total Long-term Debt Total Share holders Fund Ratio(Times) 2007-08 122373022 32475584 3.37 2005-06 37707933 12862110 2.93 2.5 1 0.
Company should try to decrease the level of debts as it can affect the share prices as well as the wealth of share holders. One may want to know: How much funds are being contributed together by lenders and owners for each rupee of the owners’ contribution? Formula: Capital Employed (C.W.E.)/Net worth (N. Capital Employed to Net worth Ratio: Meaning & Objective: There is yet another alternative way of expressing the basic relationship between debt and equity.
3.E.Recommendation: The ratio should not be more than 1 due to decrease the burden level.) Particulars Share Holders’ funds Total Debts C. Net Worth: (Rs.) Capital Employed: (Rs. Company should try to keep the ratio around 1.) Particulars Share Capital Reserves and Surplus Total 2007-08 31475584 1000000 32475584 2006-07 13731306 1000000 14731306 2005-06 11862110 1000000 12862110 2004-05 10743228 1000000 11743228 2003-04 9193415 1000000 10193415 2007-08 32475584 122373022 154848606 2006-07 14731306 49659967 64391273 2005-06 12862110 37707933 50570043 2004-05 11743228 28698038 40441266 2003-04 10193415 31869074 42062489
) Particu lars C.44 in 2004-05.93 2004-05 40441266 11743228 3.93 to 4.77 4. total external contribution is increasing year by year.E.E.13 3. It will reduce the ratio.77 due to increase in C. NW Ratio(Times) 2007-08 154848606 32475584 4. So company should try to decrease the liability. Company should use reserves and surplus rather than expanding liability.13 in 2003-04 and declined to 3.37 2005-06 50570043 12862110 3.13
Capital Employed to Net worth Ratio
6 5 4 3 2 1 0 2007-08 2006-07 2005-06 year 2004-05 2003-04 4.77 2006-07 64391273 14731306 4.93 4.
4. This ratio was 4.44
Analysis: From the above graph. Recommendation: The ratio less than 1 is good for the company.44 2003-04 42062489 10193415 4. Total Liabilities to Total Assets Ratio: 23
. we can say that in the company. The ratio increases after the year by year from 3.Capital Employed to Net worth Ratio: (Rs.37 3.
806 2004-05 48026327 59769554 0.) Particular Fixed Assets Current Assets Total 2007-08 58020404 196317460 254337864 2006-07 21109310 66266893 87376203 2005-06 20305988 46076550 66382538 2004-05 17869636 41899918 59769554 2003-04 17374190 37810016 55184206 2007-08 99489259 82406819 39966203 221862281 2006-07 22984930 32673410 16986557 72644897 2005-06 15812495 22564754 15143179 53520428 2004-05 19328289 18553980 10144058 48026327 2003-04 13121717 18455464 13413610 44990791
Total Liabilities to Total Assets Ratio: (Rs. Formula: Total liabilities (TL)/ Total Assets (TA)
Total Liabilities: (Rs.) Particular Current Liabilities Secured Loans Unsecured Loans Total Total Assets: (Rs.872 2006-07 72644897 87376203 0.831 2005-06 53520428 66382538 0.804 2003-04 44990791 55184206 0. One may like to include them on the ground that they are important determinants of the firm’s financial risk since they represent obligations and expert pressure on the firm and restrict its activities.) Particular TL TA Ratio(Times) 2007-08 221862281 254337864 0.815
.Meaning & Objective: Current liabilities are generally excluded from the computation of leverage ratios.
An activity ratio may.8 0.804 0. the amount of sales is large.815. The greater is the rate of turnover or conversion.
5. Funds of creditors and owners are invested in various assets to generate sales and profits.815 0. Company should also see whether the liquidity is affected or not. the more efficient is the utilization/management. be defined as test of the relationship between sales and the various assets of a firm. Recommendation: Company should try to reduce the ratio by increasing the current assets portion.84 0.78 0.T otal Liabilities to Total Assets R atio
0. For this reason.86 0. The efficiency with which the assets are used would be reflected in the speed and rapidity with which assets are converted into sales. therefore.872
Analysis: In the year 2003-04 the ratio was 0. It is negative and harmful for the firm.88 0. These ratios are also called efficiency ratios or asset utilization ratios. If the management of assets is better. such ratios are designated as turnover ratios. which will further help to the company to expand their business. The ratio increases because of the total liabilities increases compare to total assets.831 0.82 0. Activity ratios are employed to evaluate the efficiency with which the firm managers and utilizes its assets. other things being equal.806 0.4 Activity Ratios Activity ratios are concerned with measuring the efficiency in asset management. it was declining in the year 2004-05 and after that it increase year by year. 25
.76 2007-08 2006-07 2005-06 Ye a r 2004-05 2003-04 0.
Activity ratios. Formula: Cost of Goods sold/ Average inventory Cost of Goods Sold (COGS): (Rs.) Particular Sales Gross Profit COGS Average Inventory: (Rs. Inventory Turnover Ratio: Meaning & Objective: Inventory turnover ratio reflects the efficiency of inventory management. involve a relationship between sales and assets. It indicates the number of times inventory is replaced during the year. The higher ratio.) Particular Opening Stock Closing Stock Average Inventory 2007-08 17321124 91386956 54354040 2006-07 15298939 17321124 16310032 2005-06 13355265 15298939 14327102 2004-05 13282460 2003-04 7284361 2007-08 270972400 7256850 263715550 2006-07 193272131 7197696 186074435 2005-06 157822704 3675383 154147321 2004-05 157171139 3285812 153885327 2003-04 86388513 2531177 83857336
13355265 13282460 13318863 10283411
Inventory Turnover Ratio: 26
. efficient the management of inventory and vice versa in the organization. thus.
1. A proper balance between sales and assets are generally reflects that assets are managed well.
85 2006-07 186074435 16310032 11.) Particular COGS Avg. Debtors Turnover Ratio: Meaning & Objective: Debtor’s turnover indicates the number of times debtor’s turnover each year.(Rs. Generally.
2. Growth rate and inventory rate should be also compared in order to decide the level of inventory.41 times.15
Analysis: The inventory turnover ratio is decreasing in the year 2007-08 which indicates that its performance in terms of generating cash flow is decreasing in this year because the companies’ cash flow has blocked in inventories. which is a positive sign Recommendation: Company should compare the cogs with the net sales and try to reduce the cost as it decreases the profits and net income for the company.55 2003-04 83857336 10283411 8. the more efficient is the management of credit.55 8.85 11. Formula: Credit Sales/ Average Debtors 27
Inventory Turnover Ratio
14 12 10 8 6 4 2 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 4.41 2005-06 154147321 14327102 10. Inventory Ratio(Times) 2007-08 263715550 54354040 4. However. in 2006-07 the ratio increased by 11.76 11. the higher the value of debtor’s turnover.41 10.76 2004-05 153885327 13318863 11.
.) Particulars Credit Sales 2007-08 270972400 2006-07 193272131 2005-06 157822704 2004-05 15717113 9 2003-04 86388513
Average Debtors: (Rs.78 5.Credit Sales: (Rs.18
D eb tors T u rn o ver R atio
8 7 6 5 4 3 2 1 0 2007-08 2006-07 2005-06 Ye a r 2004-05 2003-04 4.94 2005-06 157822704 25265669 6.25 6.78 2003-04 86388513 16691280 5.20 2006-07 193272131 32519007 5.94 6.25 2004-05 157171139 23166134 6.) Particulars Opening Debtors Closing Debtors Average Debtors 2007-08 38901280 90010454 64455867 2006-07 26136734 38901280 32519007 2005-06 24394603 26136734 25265669 2004-05 2003-04
21937665 11444895 24394603 21937665 23166134 16691280
Debtors Turnover Ratio: (Rs.) Particular Credit Sales Average Debtors Ratio(Times) 2007-08 270972400 64455867 4.
78 in 2004-05 and then in 2005-06 it again decreased and reached to 6.18 and next year it was 6. In 2003-04 it was 5. The reason behind this is the company is following a strict collection or credit policy because as compared to increase in sales.
3.) Particulars Fixed Assets Net Current Assets Net Assets Assets Turnover Ratio: (Rs.) Particulars Net Sales Net Assets: (Rs.20 in current year which is lower then the previous years. This indicates that credit management team’s efficiency of the company is reducing. it was 5. Assets Turnover Ratio: Meaning & objective: A firm’s ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. Unutilized assets increase the firm’s need for costly financing as well as expenses for maintenance and upkeep. Formula: Sales/ Net Assets
Sales: (Rs. Recommendation: Now-a-days the competition is tougher. The net assets turnover should be interpreted cautiously.) 29 2007-08 58020404 96828202 154848606 2006-07 21109310 43281963 64391273 2005-06 20305988 30264055 50570043 2004-05 17869636 22571630 40441266 2003-04 17374190 24688299 42062489 2007-08 270972400 2006-07 193272131 2005-06 157822704 2004-05 157171139 2003-04 86388513
. Credit period should be expanded to have more liquidity in business. More credit period can provide the chance to grow for the company.95.25 and than in 2006-07. the increase in debtors is low.Analysis: The debtor turn over ratio is 4.
Recommendation: The ratio should be increase consecutively over the period of the years to have better condition in the company.12. which are deployed to generate production.12 2.5 2 1.00
2005-06 157822704 50570043 3.5 4 3.89 and 2. 2005-06.5 1 0.Particular Sales N. so it is not favorable for the firm.75
2006-07 193272131 64391273 3.05 respectively for 2006-07. Net Assets Turnover Ratio is lower. the higher the efficiency or productivity use of inputs. The sales should be more than net assets of the company. 2004-05 and 2003-04.5 0 3.05
Assets T urn over R atio
2005-06 Ye a r
Analysis: Asset turnover ratio for the year 2007-08 is 1.A. Total Assets Turnover Ratio: Meaning & objective: Total assets turnover ratio indicates productivity ratio.12
2004-05 157171139 40441266 3. which measures the output produced from the given input deployed.89 3 1. Assets are inputs. 3.75 3.
4. 3. Higher the asset turnover ratio.89
2003-04 86388513 42062489 2.5 3 2. Ratio(Times)
2007-08 270972400 154848606 1. The ratios for the previous years are 3.75 lower then the previous years due to increase in net assets than sales of the firm and it is not good for the company. Formula: Sales/Total Assets
) Particulars 2007-08 Fixed Assets 58020404 Current Assets 196317460 Total 254337864 Total Assets Turnover Ratio: Particulars Sales T.38 2004-05 157171139 59769554 2.07 2006-07 21109310 66266893 87376203 2005-06 20305988 46076550 66382538 2004-05 17869636 41899918 59769554 (Rs.63 2003-04 86388513 55184206 1.38 2.57 while in the year 200405 it increase and reaches to 2.5 2 1. we can say that in the year 2003-04 the ratio is 1.5 1 0.) 2006-07 193272131 87376203 2.07 for 1 Rupees Investment in fixed and current assets together.5 0 2007-08 2006-07 2005-06 Ye a r 2004-05 2003-04 1. Generally the total assets turnover ratio stand 1:1 is better.07 2.21 2.57
Analysis: From the above graph.63
1.63 which is due to increase in firm’s sales than the total assets while in year 2005-06 ratio decreases as compared to the year 2004-05 and reaches to 2.Sales: (Rs. Ratio(Times) 2007-08 270972400 254337864 1.38 which is due to increase in total assets more than the sales.): (Rs.A.A.) Particulars Sales Total Assets (T.57 2003-04 17374190 37810016 55184206 2007-08 270972400 2006-07 193272131 2005-06 157822704 2004-05 157171139 2003-04 86388513
To tal Assets T urn over R atio
3 2. So the year 2007-08 our firm’s ratio is 1.21 2005-06 157822704 66382538 2.07 means firms’ sales of Rupees 1.
) Particulars Sales 2007-08 270972400 2006-07 193272131 2005-06 157822704 2004-05 15717113 9 2003-04 86388513
Net Fixed Assets: (Rs. Formula: Sales/Net Fixed Assets Sales: (Rs. manufacturing plants. Fixed Assets Turnover Ratio: Meaning and Objective: Company's effectiveness in generating net sales revenue from investments back into the company.80 2003-04 86388513 17374190 4.Recommendation: company should try to increase consecutively over the period of the years to have better condition in the company. Plant.) Particulars Fixed Assets 2007-08 58020404 2006-07 21109310 2005-06 20305988 2004-05 17869636 2003-04 17374190
Fixed Assets Turnover Ratio: (Rs.77 2004-05 157171139 17869636 8.97
.67 2006-07 193272131 21109310 9. Ratio(Times) 2007-08 270972400 58020404 4. Manufacturing and other industries requiring major-investments will often spend heavily on properties. the Fixed Asset Turnover ratio evaluates only the Net Property.F.) Particulars Sales N. and equipment to push them ahead of the competition. The sales should be more than total assets of the company. and Equipment investments.
5.16 2005-06 157822704 20305988 7. However.A.
6. So our company’s fixed Assets turnover isn’t favorable compared to the general fixed assets turnover ratio. Higher the current assets turnover ratio.97 while in the year 2004-05 it increase and reaches to 8. Formula: Sales / Current Assets Current Assets Turnover: (Rs. and Equipment have become. From the above graph we can say that in the year 2003-04 the ratio was 4. Current Assets Turnover: Meaning & Objective: Current assets turnover ratio indicates productivity ratio. higher the liquidity of the firm. produced from the given input employed.16 7. Company should keep growing sales along with remaining fixed assets. the more effective the company's investments in Net Property. Plant.F ixed Assets T u rn over R atio
10 8 6 4 2 0 2007-08 2006-07 2005-06 Ye a r 2004-05 2003-04 4. Current Assets are inputs.67. which measures the output.97 8.77 4.67 9.) Particulars Sales 2007-08 270972400 2006-07 193272131 2005-06 157822704 2004-05 157171139 2003-04 86388513 33
. which can be converted in to cash quickly. which is bad for the company. Recommendation: Ratio isn’t getting higher.8
Analysis: The higher the Fixed Asset Turnover ratio.80 which is due to increase in firm’s net sales compared to net fixed assets while in year 2007-08 ratio decreases compared to the year 2003-04 and reaches to 4.
5 1 0.A.75
Analysis: From the above graph. So the current Assets turnover is unfavorable for this year.43 3.92 2.5 2 1.43 which is due to increase in firm’s current assets than sales while in year 2006-07 it is again decreased and reaches to 2.38
66266893 2.28 3. we can say that in the year 2004-05 the ratio is 3. A company uses working capital (current assets .
7. Recommendation: Ratio is decreasing which is not good for the company.current liabilities) to fund operations and purchase inventory.5 3 2.
Working Capital Turnover Ratio: Meaning & Objective: The Working Capital Turnover ratio measures the company's Net Sales from the Working Capital generated.75 while in the year 200506 it decreases and reaches to 3.92 and also decreases in 2007-08 which is due to increase in current assets is more than the firms sales.92
41899918 3. These operations and inventory are then converted into sales revenue for 34
.C. Company should find the reasons for decreasing the sales over the period of the year compare to increase in the current assets.5 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 1.28
Current Assets Turnover
4 3. Company should keep growing sales.38 2. Ratio(Times)
The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. Formula: Net Sales/Working Capital Working Capital = total current Assets –total current Liabilities
Net sales: (Rs.96 2003-04 86388513 24688299 3.) Particulars Sales 2007-08 270972400 2006-07 193272131 2005-06 157822704 2004-05 15717113 9 2003-04 86388513
Working capital: (Rs.the company.47 2005-06 157822704 30264055 5.50
.) Particulars Sales Working Capital Ratio(Times) 2007-08 270972400 96828202 2.) Particulars Total Current Assets Total Current Liabilities Working Capital 2007-08 196317460 99489259 96828202 2006-07 66266893 22984930 43281963 2005-06 46076550 15812495 30264055 2004-05 41899918 19328289 22571630 2003-04 37810016 13121717 24688299
Working Capital Turnover Ratio: (Rs.21 2004-05 157171139 22571630 6.80 2006-07 193272131 43281963 4.
5 Profitability Ratios A company should earn profits to survive and grow over a long period of time. The financial manager should continuously evaluate the efficiency of company in term of profits. But the ratio decrease year by year. creditors and owners are also interested in the profitability of the firm. Generally. Recommendation: The sale has increased in given period of time.5 5.Working Capital Turnover Ratio
8 7 6 5 4 3 2 1 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 2.21 6. The profitability ratio is calculated to measure the operating efficiency of the company. Either the company has been able to gain more Net Sales with the same or smaller amount of Working Capital.
5.8 in year 2007-08. showing the company is better able to generate sales from its Working Capital. and 2. or it has been able to reduce its Working Capital while being able to maintain its sales. This is possible only when the company earns enough profits.47 3. Profit is the difference between revenues and expenses over a period of time. two major types of profitability ratios are calculated: 36
. This shows mismanagement to some extent.8 4. Marketing department as well as the financial department should take steps to increase the sales and decrease the working capital. Besides management of the company. but the working capital has increased more than it in the period of four years.96
Analysis: A high or increasing Working Capital Turnover is usually a positive sign.
5 3 2. 37
.72 2.32 2.32 2004-05 3285812 157171139 2. From the above data we get Gross Profit of 2003-04. Cost of good sold include consumption.5 1 0.Profitability in relation to sales.5 2 1. process charges.72 2005-06 3675383 157822704 2.) Particulars Gross Profit Sales Ratio (%) 2007-08 7256850 270972400 2.
Gross Profit Ratio
4 3.09 3.5 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 2. excise duty. Profitability in relation to investment.93
Analysis: Gross profit is the difference between sales and cost of good sold. Formula: Gross Profit * 100/Sales
Gross Profit Ratio: (Rs. Gross Profit Ratio: Meaning & Objective: The gross profit margin reflects the efficiency with which management produces each unit of product.68 2006-07 7197696 193272131 3. This ratio indicates the average spread between the cost of good sold and the sales revenue.68 2.09 2003-04 2531177 86388513 2.
53 2005-06 2875383 157822704 1.
Recommendation: Company should work on cost cutting activity.) Particulars N.68. either increase the margins. gross profit ratio is increase from 2.P.68. 3.82 2004-05 2685812 157171139 1. In 2007-08.09. 2005-06. gross profit ratio decrease from 3. Formula: Net Profit * 100/Sales Net Profit Ratio: (Rs. 2.
2.32 In 2006-07.93.25 2006-07 4887696 193272131 2.2004-05.09 to 2. Net Profit Ratio: Meaning & Objective: It indicates the management’s ability to operate the business with sufficient success not only to recover from revenues of the current period the cost of merchandise or services but also the expenses of compensation to the owners for providing their capital at risk. This ratio shows that the earnings left for shareholders as a percentage of net sales.47
. Sales Ratio (%) 2007-08 6093850 270972400 2. if possible.32 to 3. lean production. 2006-07. In 2005-06 gross profit ratio is increase from 2.72 to 2. or increase the overall sale by proper marketing strategy.72 and 2. 2.32.71 2003-04 2131177 86388513 2. 2007-08 are 2.72.
5 1 0. Recommendation: This shows decrease in profit margins or increase in expenses to some extent.25 in 2007-08. Return on Investment Ratio: Meaning & Objective: Return on investment is a very good performance measure.82 in the year 2005-06. Return on Capital Employed. For year 2007-08.5 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 2.25 1. A high Net Profit Ratio is showing good indication of company’s efficiency at its business and the company is also on the path of growth.Net Profit Ratio
3 2.53 2.
3. ratio isn’t showing good indication of company’s efficiency at its business.71 2. Return on Net Assets etc.5 2 1. Marketing department should take steps to increase the sales and the financial department should try to increase the investing activity and decrease the costs in order to increase the net profit.53 which is due to more increase in profit after tax than the sales.71% as compared to 1.82 1. 39
. There after ratio decrease to the 2. Different companies calculate this return with different formula and call it also with different name like return on invested capital.47
Analysis: By looking the above graph we can say that in the year 2004-05 the ratio was 1. It increase and reaches to 2.
05 0.04 0.) Particulars PAT T.04
Analysis: From the above graph.06 0.97 times from the Current liabilities in the current year .02 0.06 0.we see that current assets is increasing constantly and quick assets is growing more than the other year.05 0.85 Times.02 Recommendation: IN the year 2007-08.A Ratio (Times) 2007-08 6093850 254337864 0.04 times and which was increased in year 2004-05 and reaches to 0.06 due to increase in sales and increase in total assets. the ratio was decreased to 0.04 2004-05 2685812 59769554 0.
.01 0 2007-08 2006-07 2005-06 Year 2004-05 2003-04 0. It is decrease from the last year due to inventory increasing fast from the cost of goods sold. ratio decrease too much.Formula: PAT/Total Assets Return on Investment Ratio: (Rs.04 0.02 2006-07 4887696 87376203 0.04
Return on Investment Ratio
0. This could be because of expansion planning of the company or due to mismanagement to some extent.07 0. Findings
Current assets is 1. But in 2007-08. we can interpret that in year 2003-04 the ratio was 0.05 times.06 2005-06 2875383 66382538 0.03 0. In year 2006-07 ratio was increased to 0.05 2003-04 2131177 55184206 0.02 0. In the year 2007-08 inventory turn over ratio is 4.
7. It is decrease from the last year due to stock increasing fast in the company. Recommendations Working Capital The Company has high internal accruals. Hence it should not go for working capital loan. It should try to reduce it Current Asset.•
In the year 2007-08 cash ratio is 0. It should try to reduce it inventory consumption period and Debtors collection period.023 Times. 41
LIMITATIONS OF THE ANALYSIS
This financial analysis carried out does not consider the effect of the opportunity cost of money. It ignores the present value and the future value of money. Receivable Management The Company has to maintain against schedule in order to keep a proper track of the receivables.Inventory Management The Company should implement inventory management technique efficiently as there working capital amount is mostly blocked in inventory. It would also help the management in taking proper action to recover the payments. If inventory holding is reduce there will be more Working Capital.
8. This schedule helps in finding out the payment which have gone beyond the credit limit.
Moreover at times there exists a confusion to record some of the expenses or financial terms into both different categories. The analysis carried out is based only on the past information.
• • •
No information related to the effects of the external factors on the business conditions and the company policy can be obtained through the analysis. So one cannot be 100% accurate in such analysis. So an overall view of the analysis cannot be brought about through this analysis. No one can successfully predict the future conditions and strategies based on this data. The standards for comparison data of the other companies are not available easily.