You are on page 1of 90

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

CHAPTER–1 INTRODUCTION
INTRODUCTION:FINANCE – A CONCEPT:The great industrialist of modern times Mr. Henry Ford once said “Money is an Arm or a Leg, you either use it or lose it”. This statement though apparently simple, is very meaningful. It brings home the significance of money or finance in modern day world of global business. In modern times finance is the basic foundation upon which all other economic activities are carried on. It is the master key which provides access to all the resources being employed either in manufacturing or merchandising activities. The Sanskrit saying “Arthah Sachivah”, which means Finance reigns supreme”, speaks volume for the importance and significance attached to the finance function in a company. It has rightly been said that “Business needs Money to make more money”. However, it is also true that money begets more money, only when it is properly managed. Hence, efficient management of every business enterprise is closely linked with efficient management of its finances only. In conclusion we can say that: Finance is regarded as “The life line of a business enterprise”. “Finance is the backbone of every business”. Acharya Institute of Graduate Studies

1

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

MEANING OF FINANCE AND BUSINESS FINANCE:Finance is one of the major elements, which acts as a catalyst for the overall growth of the economy. Finance is the lifeblood of the economic activity. Finance refers to the application of skills for manipulated use and control of money. The term Business finance involves Raising of funds and their effective utilization keeping in view the overall objectives of the firm. Business Finance explains the two terms, “Business” and “Finance”. In common parlance the word “Business” refers to merchandising the operation of some sort of a shop or store, large or small. Business Finance refers to that activity which is concerned with the acquisition and application of funds in the process of meeting financial needs and overall objectives of a business enterprise.

DEFINITIONS:According to Bonneville and Dewey, “Financing consists in raising, providing and managing of all the money or funds of any kind used in connection with the business”. According to Prather and Wert, “Business Finance deals primarily with raising, administrating and distributing funds by privately owned business units operating in non-financial fields of industry”. According to H.G. Gathman and H.E. Dougall, “Business Finance can be broadly defined as the activity concerned with planning, raising, controlling and administrating of funds in the business”. Acharya Institute of Graduate Studies
2

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

FUNCTIONS OF BUSINESS FINANCE:Finance functions can be classified into two types and they are:  Recurring Finance Function and  Non-Recurring Finance Function.  Recurring Finance Function Recurring finance function encompasses all such financial activities which are regularly carried out for the efficient conduct of the operations of a firm, such as: a) Planning of funds b) Raising of funds c) Allocation of funds d) Allocation of income e) Control of funds  Non – Recurring Finance Function – This refers to the use of financial activities that a functional activity has to prefer very rarely, preparation of financial plan at the time of promotion of the company or its product for the first time. The financial readjustment is done at the time of liquidity crisis and valuation of the firm at the time of merger. Successful handling of all such problems requires high level of financial skills and understanding of principles and techniques of finance from recurring to non-recurring situation.

Acharya Institute of Graduate Studies

3

e. Financial management also includes – Anticipating Financial Needs. “Financial Management is the operational activity of a business i. “Financial Management is the application of the planning and control functions to the finance function”. which refers to three A‟s of financial management. The significance of this function is not only seen in the „Line‟ but also in the capacity of „Staff‟ in the overall administration of the company. Definitions of Financial Management:According to Joseph and Massie. According to Archer and Ambrosia.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. The management makes use of various financial techniques. responsible for obtaining and effectively utilizing the funds necessary for efficient operation”. methods and devices for administrating the financial assets of the firm in the most effective manner. Acharya Institute of Graduate Studies 4 . Meaning of Financial Management: Financial Management is a specialized function directly associated with the top management. Objectives of Financial Management:The twin objectives of financial management are Profit maximization and Wealth maximization. Acquiring Financial Resources and finally Allocating of Funds in Business.

c) It encourages corrupt practices to increase the profits. e) It attracts investors to invest their savings in different securities from time to time. Acharya Institute of Graduate Studies 5 . c) It ensures to maximize welfare of shareholders. employees and creditors. f) It indicates the efficient use of funds for different purposes. b) Profit is not a clear term. net profit. d) It does not consider the impact of time value of money. Profit is the only means through which the efficiency of a company is measured. b) Profit enables the business to venture into risk taking. mainly capital funds. 1) Profit Maximization: Financial management is concerned with efficient use of resources. profit before tax. d) It increases the confidence of management in expansion and diversification program of the company. gross profit or Earnings per share. Points against Profit Maximization:a) Profit maximization does not consider the elements of risk.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. economic profit. Points in Favour of Profit Maximization:a) Profit is a barometer through which the performance of a business unit can be measured. because it may be accounting profit. Earning Profits (OR) Profit Maximization by a company is a social obligation. profit after tax. “Profit maximization” is a term which denotes the maximum profit to be earned by an organization in a given time period.

management. The goal of financial management should be such that it should be beneficial to all those who are involved in the company such as owners. f) Profit maximization attracts cut-throat competition. Wealth maximization is symbolically expressed as W = NP. e) The true and fair picture of the company is not reflected through profit maximization and there are other parameters which are equally important. 2) Wealth Maximization: Wealth maximization is also called “Value Maximization”. suppliers. h) It is a narrow concept and it affects long-term liquidity of the company. If NPV is negative. which creates wealth to the organization. where as W = Wealth of the firm N = Number of shares owned And P = Price per share in the market. employees.. It is the net present value of a financial decision. Any financial action results in positive NPV.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. etc. Acharya Institute of Graduate Studies 6 . customers. It refers to the gradual growth of the value of assets of the company over a period of time. it reduces the existing wealth to the shareholders. g) Huge profits attract unnecessary government intervention.

Survival Acharya Institute of Graduate Studies 7 . Diversification 3. b) The objective of wealth maximization faces some difficulties between shareholders and management paving the way for conflict of interest. d) It guides the management in framing consistent strong dividend policy to reach maximum returns to the equity shareholders.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Points in Favour of Wealth Maximization:a) It is a clear term and only present value of cash flow is taken into consideration. owners. because. Points against Wealth Maximization:a) The objective of wealth maximization is a prescriptive one and not descriptive one. b) It considers the concept of time value of money. c) The concept of wealth maximization is universally accepted. The present value of cash inflow and outflow helps management to achieve the overall objective of a company. Growth 4. it takes care of interest of financial institutions. employees and society as well. Functions of Financial Management:1. Profitability 2.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Cost Control / Reduction 7. Market Share 6. 5. “Financial statement analysis is largely a study of relationship among the various factors in a business as disclosed by a single set of statement and a study of the trend of these factors as shown in a series of statements”. The most important objective of the analysis and interpretation of financial statements are to understand the significance and meaning of such financial statement data‟s to know the exact strength and weaknesses of a business unit. Definition of Financial Analysis: According to Myres. Acharya Institute of Graduate Studies 8 . which is very meaningful. profit and loss account and other operative data. In a way it establishes strategic relationship between the items of the balance sheet. MEANING OF FINANCIAL ANALYSIS:The most important step of accounting is the analysis and interpretation of the financial statements which results in the presentation of numerous data which in turn helps different categories of people in forming an opinion about the financial position of a business and as well as about its profitability. Managing Competition.

OBJECTIVES OR USES OF FINANCIAL ANALYSIS:Financial analysis is a helpful tool in assessing the exact financial position and profitability of a business. The purpose is to convey an understanding of financial aspects of a business from time to time. or sometimes it reveals a series of activities over a given period of time. a company may also prepare a statement of retained earnings and statement of changes in financial position. such as Profit and Loss account and Balance Sheet. Apart from these two statements. FINANCIAL STATEMENTS:A financial statement is an organized collection of data according to logical. In a way it shows the position at a given point of time as in the case of balance sheet. To identify the reasons for change in the profitability position of the business over a selected period. systematic and consistent accounting procedures. Definition:Financial statement is a schedule or a report which is prepared at the end of financial year by an accountant to reveal the financial positions of the enterprise which shows the result of its recent activities and an analysis of what has been done with earning. as in the case of profit and loss account. The term financial statement generally refers to two basic statements.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. The following are some of the objectives of analysis of financial statements: 1. Acharya Institute of Graduate Studies 9 .

To judge the present and future earning capability or profitability of the business. To assess the short as well as long-term liquidity position of the firm for the benefit of the debenture holders and trade creditors. PROCESS OF FINANCIAL ANALYSIS:The analysis of financial statements is a process of evaluating the relationship between components of financial statements to obtain a better understanding of the businesses position and performance. It provides decision makers a whole lot of information about the business to be used as a tool in decision making. 4. Acharya Institute of Graduate Studies 10 . It also helps in predicting possible bankruptcy and failure. To have a comparative study between different departments or cost centers. 5. 8. establishing relationship and evaluation. 1) The primary task of the financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. To identify the relevant important components of the financial position of the business. 6. It helps in building a database for making future forecast and preparing budgets. The functional analysis is the process of selections. 2. 7. To judge the operational efficiency as a whole and of its various components or departments. 3. 9.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

They do not have access to the detailed information of the company and have to depend mostly on published statements or records. profitability. TYPES OF FINANCIAL ANALYSIS: On the basis of nature of the analysis:a) External analysis – It is made by those persons who are not connected with the business. solvency. 2) The secondary step is to arrange the said information in a highlight. significant enough to establish a relationship. They are a part of the business enterprise. b) Internal analysis – It is made by those persons who have full access to the books of accounts. liquidity. (or) Earning capacity of a business unit. The internal analyst can give more reliable result than the external analyst because of the access to a whole gamut of information available to him. government agencies and research scholars. Analysis of the financial statements and / or other financial data for managerial purposes for internal consumption only. The Acharya Institute of Graduate Studies 11 .A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. credit rating agencies.  On the basis of objectives of analysis:a) Long-term analysis – This study is conducted to assess the long-term financial stability. 3) The final step is interpretation and drawing of inferences and conclusions. Such type of analysis is made by investors.

and expansion of business apart from meeting its cost of capital. growth. It is useful for long-term trend analysis. b) Short-term analysis – This study is conducted to determine short-term solvency. stability. purpose is to know whether in the long run the business entity will be able to earn minimum amount which will be sufficient enough to maintain a reasonable rate of return on the investment so as to provide the requisite funds required for modernization. The following methods of analysis are used: Acharya Institute of Graduate Studies 12 .  On the basis of models operated by analysis:a) Horizontal (or) Dynamic analysis – It is made to review and analyze financial statement of number of years. liquidity and earning capacity of the business. It also helps in short-term financial planning.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. A number of techniques are used to study the relationship between different statements. for example ratio analysis. The purpose of this analysis is to know whether in the short run a business will have adequate funds to meet its short term obligations which are very vital for conducting the day to day operations. b) Vertical (or) Static analysis – It is made to review and analyze the financial statement of one particular year only. TECHNIQUES OF FINANCIAL ANALYSIS:The analysis and interpretation of financial statement is used to determine the financial position and operational status as well. It also helps in long-term financial planning.

in a single balance sheet the emphasis is on present position. with the help of this we can quickly ascertain whether sales have increased or decreased. The absolute changes from one period to another and if required the changes in items of percentages can be seen.  Comparative Income Statements: The income statement discloses net profit or net loss or account of operations. The different elements of financial position are shown in a comparative form. Both the profit and loss account and Balance sheet can be prepared in the form of comparative financial statements. whether cost of sales have increased or decreased etc. it is the change in the comparative balance sheet which attracts attention.  Comparative Financial Statements: The comparative financial statements are statements of the financial position at different periods of time. only a glance of data incorporated in this statement will be helpful to arrive at useful conclusions. Therefore. This type of balance sheet is very helpful in studying the trends in a business concern. so as to facilitate easy comparison. Since the figures for two or more periods are shown side by side.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 13 .  Comparative Balance Sheet: Balance sheet of two or more different dates can be used for comparing assets and liabilities and finding out increase or decrease in those items. Therefore. A comparative income statement will show the absolute figures for two or more periods.

 Trend Percentages: Trend percentages are very much helpful in making a comparative study of the financial statements over a period of several years. Each item of base year is taken as 100 and on that basis the percentages for each of the items of each of the years are calculated. the income statement exhibits each expense item or group of expense items as a percentage of net sales. and net sales are taken at 100 percent.  Common size Financial Statements: Common size financial statements are those in which figures reported are converted into percentage to some common base. When this method is pursued. Common size statements are prepared for one business entity over the years which would highlight the relative changes in each group of expenses. given the fact that absolute figures of two firms of the same industry are not comparable. Statements prepared in this way are referred to as “common size statements”. These percentages can be taken as index number showing the relative changes in the financial data resulting with the passage of time.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 14 . assets and liabilities. These statements can be equally useful for inter-firm comparisons. The way of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. each individual assets and liability classification is shown as a percentage of total assets and liabilities respectively. Similarly.

It takes into account all such transactions which have a direct impact upon cash. monthly. since by substitution of percentages for large amounts. This method is very much useful. Acharya Institute of Graduate Studies 15 . a statement of changes in a financial position of a firm on cash basis is called “cash flow statement”. such as statement of sources and application of funds. The fund flow statement is called by different names. It deals with the inflow and outflow of cash between two balance sheet dates. fortnightly or even weekly. Cash flow statement is prepared to show the impact of financial policies and procedures adopted by the business on the cash position. half yearly. brevity and readability are achieved. statement of changes in working capital. analytical device for the management.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. It may be prepared annually. In short. quarterly. which shows the movement of funds between two balance sheet dates. which indicates the various means by which the funds have been obtained during a certain period and the way in which these funds have been put to use during the same period. In other words. it is the statement.  Fund Flow Statement: Funds flow statement is a financial statement.  Cash Flow Statement: Cash flow statement shows the movement of cash and their causes during the period under consideration.

Financial Leverage 2. In financial management. According to James Horne. Christy and Roden defines “Leverage as the tendency for profits to change at a faster rate than sales.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.  Leverage Ratios: Leverage refers to an increased means of accomplishing some purpose. It can be used as a tool of financial planning by the management. LEVERAGE DEFINITION:Leverage is defined as „the action of a lever. “Leverage is the employment of an asset or funds for which the firm pays a fixed cost or fixed return”. An unfavorable leverage exists if the rate of return remains to be lower. It is a relationship between equity share capital and securities and creates fixed and dividend charges”. and mechanical advantage gained by it‟. TYPES OF LEVERAGES:Leverage types are of 3 types. It may be favorable. it refers to employment of funds to accelerate rate of return to owners. Combined Leverage Acharya Institute of Graduate Studies 16 . Operating Leverage & 3. Leverage is also known as “gearing”. 1.

It tells us the extent of the change in Earning before Tax [EBT] due to change in operating income [EBIT]. When a firm procures debt capital to finance its needs. It is calculated with the help of the following formula:- Financial leverage = Operating Income Taxable Income OR Earnings before interest & tax Earnings after tax Acharya Institute of Graduate Studies 17 . it is said to have financial leverage.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. 1) FINANCIAL LEVERAGE: The use of long-term fixed interest bearing debt and preference share capital along with the equity share capital is called financial leverage or trading on equity. It signifies the relationship between the earning power on equity capital and rate of interest on borrowed capital. Financial leverage is a tool with which a financial manager can maximize the returns to the equity shareholders.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Thus.e. It may be noted carefully that the degree of operating leverages goes on decreasing with every increase in sales volume above the break-even point. relating to fixed costs and breakeven point should be noted about operating leverage. 2) OPERATING LEVERAGE: It occurs when with fixed costs the percentage changes in profits due to change in sales volume. Acharya Institute of Graduate Studies 18 . The magnitude of the operating leverage is related to the fixed costs of the firm. It shows the extent of the change in Earnings before Interest and Tax [EBIT] as a result of change in sales volume. If the fixed costs of the firm are relatively large. substantial portion of its contribution margin is appropriated to cover these fixed costs. Two important points i. As far as possible a firm should avoid operating under conditions of a high degree of operating leverage. all contribution margins become profit of the concern. a firm with high degree of operating leverage will experience much large effect on EBIT because of small change in sales. It will be desirable to operate at sufficiently above the break-even point to avoid the danger of sharp fluctuations in profits because of variation in sales. Once the break-even point is reached. if there is small percentage of increase in earnings. a small drop in sales eliminates the entire earnings near the breakeven point. as it is a high risk situation. It is calculated by the following formulas. It bears fixed cost and variable cost.. The significance of operating leverage lies in the face that it tells the finance manager about the impact of change in sales revenue & operating income. On the other hand.

Repairs and maintenance. (ii) Operating Variable Cost – is that cost which in aggregate tends to vary directly with variations in volume of output. it decreases when production falls. Factory Manager‟s salary.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. etc.g. E.g. (iii) Semi variable/ Semi-fixed Operating Cost – is that cost which is partly fixed and partly variable. Factory rent. Contribution Operating Leverage = EBIT / Operating Profit Percentage change in Income Degree of operating leverage = Percentage change in Sales The total costs of operations of a business may be grouped into 3 categories: (i) Operating Fixed Cost – is the cost which in aggregate tends to be unaffected by variations in volume of output.g. power consumption. E. etc. wages. E. materials. Administrative Staff Salary etc. Such costs increases as the production goes up. The amount of fixed cost tends to remain constant for all volumes of production within the installed capacity of the plant. Acharya Institute of Graduate Studies 19 .

It is the product of both financial leverage & the operating leverage. It is also called as composite leverage. 3) COMBINED LEVERAGE: This leverage shows the relationship between a change in sales & the corresponding variation in taxable income. OR Contribution Combined Leverage = EBIT / Operating Profit Contribution = EBT X EBT EBIT Acharya Institute of Graduate Studies 20 . Combined Leverage = Operational Leverage x Financial Leverage.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. It is calculated by using the following formulas.

he has to apply the methodology as well. A researcher has to design his methodology i. Acharya Institute of Graduate Studies 21 . in addition to the knowledge of methods / techniques.. concepts or symbols for the purpose of generalizing to extend correct or verify knowledge. RESEARCH METHODOLOGY:Research Methodology is a scientific and systematic way to solve research problems.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.Slesinger & M. A Research Design is a logical and systematic plan prepared for directing a research study.e. whether the knowledge aids in construction of theory or in the practice of an art”. CHAPTER–2 RESEARCH DESIGN Meaning: RESEARCH:According to D. RESEARCH DESIGN:According to Claire Selltiz and others “A Research Design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure”.Stephenson in the encyclopedia of Social Sciences define research as “The Manipulation of things. The methodology differs from problem to problem.

balance sheet. Acharya Institute of Graduate Studies 22 . In this the DTL group should be in a position to analyze its financial and leverage factors to take corrective steps well in advance to overcome competitors by doing financial analysis. etc…and the leverage analysis helps in knowing the risk involved carrying on the operations at DTL. Title of the Study:- A study on “Financial Analysis and Leverage at DYNAMATIC TECHNOLOGIES LIMITED”. It involves in analyzing of various financial statements such as profit and loss account.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. The group is facing stiff competition in the market due to existence of other domestic and foreign players who are competing very fiercely. It helps to know the financial position of the DTL group. supplying of aerospace components to aviation industry and manufacturing technology driven items to the defence sector. Bangalore Statement of Problem:M/s Dynamatic Technologies Limited Bangalore and its subsidiary companies are into manufacturing of different products with application in varied industries as wide as hydraulic gear pumps to agricultural tractor industry and agricultural equipment industry.

Acharya Institute of Graduate Studies 23 .  To judge the present and future earning capacity or profitability of the concern through leverage analysis. Objectives of the Study: To study and analyze the financial performance of DYNAMATIC GROUP.  The study also covers the techniques to improve the level of financial performance of DYNAMATIC GROUP. for the purpose of knowing the financial performance and analysis of its performance through leverage ratios.  To know the methodology used by DYNAMATIC GROUP in the profit ratio.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.  To come out with the findings and suggestions.  To find the growth rate of DYNAMATIC GROUP.  To get the knowledge of the financial evaluation techniques and analysis of annual reports in DYNAMATIC GROUP. Scope of the Study: The study is conducted at DYNAMATIC GROUP in Bangalore.  The study also covers to find out the reasons for the fluctuations in the financial analysis.  To highlight the steps that is required to improve the financial performance and efficiency of the DYNAMATIC GROUP.

In short. Debit: .Comparative statements of cost of 2 products. Operational definition of concepts:Finance: . Credit: . raising. We have referred the literatures in academic journals. annual reports and company reports. Financial Statement: . controlling and administering of funds in the business. Ex: . formulas. theories. Acharya Institute of Graduate Studies 24 . first we should make preliminary review prior to problem selection..Means the amount owned to an account for the benefit given by that account in the belief that its value will be returned at a later date. Costs benefit analysis statements of 2 projects.Finance can be broadly defined as the activity concerned with planning. systematic review. findings. etc. The researcher should review and examine all available literature. Review of Literature:The literature survey is connected or concerned with the problem. it means the benefit received by an account. etc.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.Means the amount owned by or due from an account or charged to an account for the benefit received by that account.Those statements which have a financial implication could be broadly termed as financial statement.

The following equation is developed by R. Leverage: .Financial statement provides a summary of the accounts of business enterprises. Types of Leverages:1) Operating Leverage: Operating leverage shows the relationship between the changes in sales and the changes in the fixed operating income.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Contribution Operating Profit (EBIT) Operating Leverage = Acharya Institute of Graduate Studies 25 .Johnson. The status of the company is truly reflected in these statements and is being used by different segments of the society for their own purposes.The Profit & Loss account and the balance sheet of the company reflects the growth and progress made in financial terms with the comparative figures for the previous year. According to John N Myer: . Balance Sheet reflecting assets and liabilities and income statement showing the results of operation during a certain period.W. Operating Leverage has impact mainly on fixed cost and variable cost and also on contribution. Growth Statement: .Is the employment of asset or funds for which the firms pays a fixed cost or fixed return.

The variation in capital composition will have an impact on operating and taxable income of the company.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Contribution Combined Leverage = Taxable Income OR Combined Leverage = Operating Leverage x Financial Leverage Acharya Institute of Graduate Studies 26 . Operating Income Financial Leverage = Taxable Income 3) Combined Leverage: This Leverage exhibits the relationship between a change in sales and in corresponding variation in taxable income. 2) Financial Leverage: The process of variation in capital structure is called Financial Leverage or trade on equity.

one year). examples of current assets are cash in hand. floating or fluctuating assets. prepaid expenses.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.e. closing stock. etc. A financial ratio is the relationship between 2 accounting figures expressed mathematically. These assets undergo changes frequently. short term loans borrowed. bank over draft. Acharya Institute of Graduate Studies 27 . cash at bank. temporary investments. EBT: Earning before Tax is the excess of EBIT over tax is the earning money before deducting the tax but after deducting the interest. etc. incomes received in advance.. EBIT: Earnings before interest & tax is the difference between contribution & fixed cost (or) is the excess of contribution over fixed cost is the earning money before deducting the interest and tax. Current Liabilities: Are those liabilities which are required to be repaid within a short period of one year out of current assets. sundry creditors. bills receivables. So. they are called circulating. outstanding expenses. Ratio: Is an expression of quantitative relationship between two numbers. assets means for conversion into cash within a short period of time say. sundry debtors. Current Assets: Refers to cash and temporarily held assets (i. Example of current liabilities are bills payable. outstanding income.

Primary Data:It was collected on all products manufactured by the firm.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. etc. profile of the company. Contribution: Is the difference between sales & variable cost. Sampling Method: Sampling is simply the process of learning about the population on the basis of the sample drawn from it we have adopted the method of field study. financial statements for respective years apart from information collected by consulting with the Manager and from schedules given by the Accounting Department. books. Acharya Institute of Graduate Studies 28 . Secondary Data:It was collected from company‟s annual reports. C = Sales – Variable Cost C = Fixed Cost + Profit (or) Loss Sales: Refers to the goods which are sold by business organization. personal discussion with executives in the company. Sources of Data Collection: The study is based on both primary data and secondary data. It is the excess of selling price over the variable cost per unit.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Tables and other types of charts has been used.e. the time duration is only 2 months. 6) Some of the details are not provided by DYNAMATIC TECHNOLOGIES LIMITED because of their confidentiality nature. reports. Then the theoretical background has been collected. 5) Data is very relevant. Plan of Analysis:All the data has been collected from the annual reports. 2) The study is based only on the data extracted from the annual reports of the DYNAMATIC GROUP. The plan that has been used is first company profile and other information has been collected. 4) Time constraints posed problem to undertake financial analysis. After these financial In the analysis the standard methods has been used i. Acharya Institute of Graduate Studies 29 . Limitations of the Study:1) The major limitation is that it is a representative study only and not an exhaustive one. so it may even change in future. it is confined to a particular period of time only.. 3) The study is conducted only at DYNAMATIC TECHNOLOGIES LIMITED Bangalore. information is collected for analysis.

Acharya Institute of Graduate Studies 30 .L This highlights the overall profile of the company and its development. sources of data.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. CHAPTER – 2: RESEARCH DESIGN This chapter outlines the statement of problem. CHAPTER SCHEME CHAPTER – 1: INTRODUCTION This chapter consists of a brief introduction of the topic as well as the importance of the topic in the present day scenario it contain short theoretical background to the topic as the related issue that are involved which is connected to the main theme of the study. sampling technique. limitation of the study. CHAPTER – 3: PROFILE OF THE D. research design. objective need. history of the company and present status of the company.T. scope of the study. CHAPTER – 4: ANALYSIS AND INTERPRETATION This chapter provides information regarding the technique used for analysis supported by a descriptive interpretation which simplifies the figures into clear words.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. suggestion and conclusion. Acharya Institute of Graduate Studies 31 . CHAPTER–5: FINDINGS. SUGGESTIONS AND CONCLUSIONS It includes the findings.

present Chairman. Company‟s main manufacturing plant as well as the Head Office is situated at Dynamatic Park. Peenya in Bangalore. With state-of-theart manufacturing facilities. they have now come a long way with ever increasing scale of operations and plans for expansion. They have two plants in Chennai and one plant each in Sweden & United Kingdom. With that start thirty three years ago.K. CHAPTER . and incorporation of the latest process technologies in precision engineering.Malhoutra. it was then known as Dynamatic Hydraulics Limited.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Company‟s product range covers over 2800 varieties of Hydraulic Gear Pumps and Hydraulic Systems. DTL was established with technical collaboration from Dowty Hydraulic Units Limited. thus creating a unique. J. NATURE OF BUSINESS CARRIED:With a proven track record spanning over a quarter of a century.K. they are now the largest producer of Hydraulic Gear Pumps in Asia. they have diversified into a number of related areas like Aerospace and the Automotive Components sector. vertically integrated manufacturing structure. promoted by Mr. In 1984. becoming one of the key players in the hydraulic field in India and worldwide. They also have diversified applications in the Defense and Aerospace Sectors and in Metallurgy. it indigenized the technology and ended their collaboration with Dowty. U.3 COMPANY PROFILE BACKGROUND AND INCEPTION OF THE COMPANY:Dynamatic Technologies Limited (DTL) was incorporated on 8 th March 1973. which is their forte. Acharya Institute of Graduate Studies 32 .

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

In addition to leading the Indian market with a share of 70 percent, company has also made a mark in the international arena as the fourth largest producer world-wide. They are the original equipment manufacturer for all the major tractor and earth moving equipment manufacturers in India like Mahindra & Mahindra, Eicher, Punjab Tractors, TAFE, HMT, BEML, BHEL, Telco, Godrej & Boyee, Bajaj, Larsen & Toubro, Mackneill Engineering, INgersoll Rand, Ashok Leyland, Hindustan Motors, Greaves, etc.

In the recent past they have made inroads into the Aerospace and Defence sectors, expanding their horizons. The Pilotless Target Aircraft

LAKSHYA was a prestigious project for their aerospace division, where they manufactured its wings and rear fuselage. They have also bagged the National Award for Excellence in Indigenization of Defence Equipment awarded by the Ministry of Defence.

VISION, MISSION AND QUALITY POLICY:VISION:Company‟s vision is: Develop products and technologies in line with national priorities.  Achieve global competence.  To operate at the international level, to think global and to be the world‟s largest producer of hydraulic gear pumps.  Transform the organization into a knowledge based organization.

Acharya Institute of Graduate Studies

33

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

MISSION:The company‟s mission statement states that:  It has been Company‟s endeavor to keep abreast of the changes, both technological and societal, while chalking out the growth chart. Be it the ISO or other International Certifications.  9000 certification for quality systems or the ISO 14000 certification for environmental standards, they believe that their role in society is that of a responsible and accountable organization that is actively contributing to the society.  Company‟s value system too reflects the commitment to quality and innovation in a societal context. COMPANY BELIEVES IN: Integrity.  Being a quality driven organization.  Being knowledge based organization.  Raising the standard of living of all employees.  Being non parochial meritocracy.  Conforming to the highest environmental standards. HR policy is an offshoot of this philosophy. It aims to: Work towards a knowledge based organization, which believes in equal opportunities.  Transcend all barriers of dogmatism.  Align personal goals with the goals of the company, community, country and the world.  Improve the standard of living of all the DTL employees. Acharya Institute of Graduate Studies
34

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

QUALITY POLICY:Dynamatic Technologies limited is involved in the design and manufacture of highly engineered components and systems for Hydraulic, Aerospace and Automotive applications.

1. It is the policy to provide creative & innovative solutions to delight the customers at cost-effective prices on a continuous basis.

2. By delivering superior value to the customers they will build a successful business model for themselves, capable of returning high yields to investors and improving the quality of life of all employees.

3. All processes will be eco friendly and be designed to eliminate wastage, and all employees will strive to constantly expand the boundaries of knowledge through imagination and diligence.

4. This policy is implemented through the quality system, which operates in accordance with ISO 9001, the international quality standards.

Acharya Institute of Graduate Studies

35

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

PRODUCT PROFILE

DYNAMATIC HYDRAULICS:DYNAMATIC HYDRAULICS is Asia‟s largest producer of Hydraulic Gear Pumps, and one of the Top Five worldwide manufacturers of a wide range of sophisticated Hydraulic Valves and custom tailored hydraulic solutions extending from simple Hydraulic pumping Units to Sophisticated marine power Packs, Complex Aircraft Ground Support Systems to turnkey industrial installations. All these products are produced at State-of-the-Art manufacturing facilities located at Bangalore, and assembly is done in an air filtered environment to avoid initial contamination in the Applications.

AGRICULTURAL SECTOR:Hydraulic Gear Pumps manufactured by Dynamatic have varied applications including Agricultural Tractors etc. Dynamatic is an original

Equipment Supplier to all tractor manufacturers in India including Mahindra & Mahindra, Eicher Tractors, Punjab Tractors, Same Deutz-Fahr, Escorts Limited, Bajaj Tempo Limited, L & T, John Deere, new Holland India, etc.

APPLICATIONS IN INDUSTRIES:The Company enjoys an overwhelming share of the Industrial Market for Hydraulic Gear Pumps in the country. Dynamatic pumps are used in Machine Tools and various other Fluid Power Systems. The Company‟s customers include BEML, Godrej & Boyee, Macneill Engineering, HMT, BHEL, Telco and Ashok Leyland amongst others. Acharya Institute of Graduate Studies
36

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

APPLICATIONS IN EXPORTS:Dynamatic exports its products to over 30 Countries and its export segment is growing rapidly with the turnover growing strongly over the past few years. Exports are expected to constitute 15 – 20 percent of the company‟s turnover, in the next 2 years.

Dynamatic products are used as Original Equipment in USA, UK, Canada and South Korea. The Company has developed specific products for use as Original Equipment in the tractor markets in USA, Germany, Mexico and Turkey.

DYNAMATIC AEROSPACE:DYNAMATIC AEROSPACE, a division of Dynamatic Technologies Ltd., is a pioneer and a recognized leader in the Indian Private Sector for the development of complex aero structures. Instituted in 1995, this division is currently headed by Air Cmde, (Retd.) Ravish Malhotra, one of India‟s two cosmonauts.

Dynamatic Aerospace is one of the closely partnered Agencies of national importance like Ministry of Defence, Hindustan Aeronautics Limited, and other defence establishments on key projects including the Lakshya, India‟s Pilotless Target Aircraft.

Acharya Institute of Graduate Studies

37

DYNAMETAL:DYNAMETAL. Dynamatic Aerospace has the largest infrastructure in the Indian Private sector for manufacture of exacting Air Frame Structures and Precision Aerospace Components. Dynamatic Aerospace is considered to be one of the most reliable quality vendors to the DRDO and was presented with the „Creative partner‟ Award for the year 1998-99 by DRDO. produces high quality Non-Ferrous Alloy and Castings for Industrial. Vertical & Horizontal Stabilizer. Ailerons Flaps for the wings for the HJT-36 and Fins. This is the first time such capabilities have been built in the Indian Private Sector. Automotive and Aerospace Applications. Acharya Institute of Graduate Studies 38 . Ventral Fins. Slats. a division of Dynamatic Technologies. The Division is now consolidating its position through collaborations with International Aerospace majors on exports initiatives. ADE and ASIEO. The Aircraft division of HAL in Bangalore also presented this division with the „HAL Best Vendor Award‟ for 2002-03. HJT-36 Intermediate Jet Trainer and Sukhoi MK1 30 Fighter Bomber Products include the Wing and Rear Fuselage of the LAKSHYA. Canards and Air Brakes for the Sukhoi 30 MK1 fighter bomber.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

leak testing machines and shot blasting machines. The division is capable of executing Aluminum Gravity Die Cast parts with intricate contours. minimal melting loss and with the effective removal of gas from the metal. Mahindra Scorpio. DYNAMETAL incorporates use of latest metallurgical processes and differs radically from other conventional foundries as its heat treatment processes are designed to ensure castings are made with no inclusions. AUTOMOTIVE:- JKM Dae Rim Automotive Limited. FIAT Palio. a subsidiary of Dynamatic Technologies Limited. impregnation plant. core shooters. etc. Volvo.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. produces high quality ferrous and non-ferrous engine and transmission component for the burgeoning global automobile industry. for the Hyundai Santro and Accent Cars. sand core making facilities. holding furnaces. JKM Dae Rim is the single source supplier of a wide variety of critical engine and transmission parts. To achieve raw castings of high quality. The Company also caters to the requirements of other new generation cars and SUV‟s such as. TATA Indica and Sumo. Acharya Institute of Graduate Studies 39 . DYNAMETAL uses sophisticated machinery like Tiltable gravity die casting machines.

and was then known as Dynamatic Hydraulics Limited.  Secunderabad. J. AREA OF OPERATION Dynamic Technologies Limited has its operations in India as well as in overseas.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. U.K. present Chairman of DTL.Malhoutra.K. a public company was incorporated on 8th March 1973. UK. UK.  Pune. In Acharya Institute of Graduate Studies 40 . NATIONAL NATIONAL BRANCHES:following cities. through its subsidiary Dynamatic Limited.  Chennai. promoted by Mr.  Mumbai. GLOBAL Dynamatic Technologies Limited has acquired the Hydraulic Business Division (Sweden Unit) of Sauer Danfoss Limited.  Coimbatore. It also has technical collaboration from Dowty Hydraulic Units Limited.  Ahmadabad.  New Delhi.  Kolkata. The company has its branches in the OWNERSHIP PATTERN:Dynamatic Technologies Limited (DTL).

1984. becoming one of the key players in the hydraulics field in India and worldwide.L.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Eaton 3. COMPETITORS INFORMATION A few renowned companies which are manufacturing Hydraulic Gear Pumps are:1. Myzak Hydraulics In the Aerospace industry D. 5. is catering more towards the Indian Aerospace industry and its clients are mainly H.T.L.A. 7. is the monopolist as there are no other competitors in Airframe structures and Precision aerospace components and D. Acharya Institute of Graduate Studies 41 . with the majority of them being independent directors. Columbus Hydraulic Company Inc.T. Team Hydraulics 6. Rexorth. it indigenized the technology and ended their collaboration with Dowty. three of whom executive directors and six are non-executive directors including the chairman of the company. Catching Hydraulics Company Ltd.L. Sun Hydraulics 9. 4. The board of Dynamatic comprises of nine directors. Mico 2.

it has to be put up on the notice board. based on the requirement of the department. INTERNAL COMMUNICATION Internal communication is usually through Inter Office Memos. They have three notice boards.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. If the communication is intended for all the people in the company. the manufacturing and testing operations. DTL has cut no corners in establishing comprehensive world-class facilities for its entire range of products. their own personal email id with @dynamatics. the main assembly shops.net address it created within 3 working days. TELEPHONES AND INTERCOM Company has three telephone lines. Normally. which are used to train the employees and trainee students. which are sent to the required person/s/department. one on the Hydraulics Shop Floor. one on the aerospace floor. the other on the first floor landing near the canteen and the third in the Aerospace Machine Shop. All incoming and outgoing calls are sourced through the EPABX at the reception. INFRASTRUCTURAL FACILITIES Aiming to achieve and sustain product excellence. A few departments have direct external lines or can dial „0‟ to access external lines. Acharya Institute of Graduate Studies 42 . DTL has got well equipped class rooms with the facilities of LCD‟s and OHP‟s. E-MAIL Almost all the departments have access to e-mail.

It expects expanding activity in this segment over the next decade.  Dynamatic is the only Indian manufacturer of pumps in this segment and therefore.  In 2001.  Dynamatic exports its products to over 30 countries and to its entire export segment also. The Personnel Department will give the card at the time of joining.  DTL received National Award for Excellence – 2003. ACHIEVEMENTS / AWARDS Company‟s Achievements and awards are: HAL Best Vendor Award for Dynamatic Aerospace – 2003.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Government of India.  LRQU approved DTL‟s Quality Management System – 2000. has a cost advantage over its competitors. Dynamatic was awarded the status of „Recognized In-house R & D Unit‟ by the Department of Scientific and Industrial Research (DSIR). QUALITY POLICY CARDS All employees are required to have one of their quality policy cards at all times within their premises. New Delhi. Acharya Institute of Graduate Studies 43 .

electronic warfare and other avionics systems. Acharya Institute of Graduate Studies 44 .A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. through its subsidiary Dynamatic Limited U. Exports are expected to constitute 15-20 percent of the company‟s turnover. FUTURE GROWTH AND PROSPECTS DTL is growing rapidly with the turnover growing strongly over the past few years.  Dynamatic is the market leader in the field of hydraulics. It is the world-leading provider of advanced military radar. on 15th June 2007.  Dynamatic Aerospace has the largest infrastructure in the Indian Private Sector for manufacture of exacting Air Frame Structures and Precision Aerospace Components. UK.K.  Dynamatic bags maiden order from John Deere. in the next 2 years.  Dynamatic Technologies Limited has acquired the Hydraulic Business Division (Sweden Unit) of Sauer Danfoss Limited. The Company also expects to acquire better technologies to support overall business and gain overall inorganic business growth with a better synergic effect. Germany – 2003. Company looks forward to working closely with Northrop Grumman‟s Electronic Systems sector to help meet the advanced technology requirements in both Aerospace and Defense products / Services identified by the Indian ministry of defense.

introduction of more value added products to enable the company to increase its net profit by 52 percent. SWOT ANALYSIS STRENGTH The company is Asia‟s largest producer of Hydraulic Gear pumps and one of the top five worldwide. which has constantly increased the productivity levels. Acharya Institute of Graduate Studies 45 . Company is now supplying hydraulic gear pumps to all 14 tractor manufacturers in India. The improved overall performance has been leveraged by the company to negotiate substantial reductions in financial costs. to offer additional products which incorporate state-of-the-art features at attractive price levels. Over 85 percent of all agricultural tractors and construction equipment produced in India are powered by pumps produced by Dynamatic Hydraulics. Company has leveraged the long term relationships and large market share built – up over the years with existing customers. The company has relentless drive to eliminate operational inefficiencies.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. The company imparts training to workmen for working on multiple machines along with combination of reengineering of processes.

OPPORTUNITIES The automotive components industry is poised to witness significant change over the next decade. The outsourcing boom in auto component industry offers great opportunities for growth. No funds have been raised on short term basis and these have been used only for long term investment. WEAKNESS Power intensive. dependant on power and any deficiency here results in under-utilization of capacity.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 46 . Requires constant upgradation with changing times in terms of plant and machinery. Variation of share prices of the company in stock market.

JKM global Pvt. Company presently operates predominantly in the heavy vehicle segment which is characterized by high volumes and thin margins. This will open up new revenue streams for the company. to develop a range of cast-iron body pumps. However. with an aim of increasing penetration in this lucrative and growing market. Limited. growth opportunities available in this segment make it very attractive for any business. with the aim of better focusing its efforts on the opportunities in the global market. Company as approved at the last annual general meeting. Nissin and PSA and build high value addition to its existing suppliers by graduating to supply completed assemblies wherever possible rather than only parts. has incorporated a subsidiary during the year.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. With an aim to tap the rapidly growing infrastructure sector. Company wishes to grow rapidly in this segment and counter the pricing pressures by adding global customers like ford. company is putting in serious R & D efforts. based in Singapore. Acharya Institute of Graduate Studies 47 . Company is continuing to develop numerous variants of pumps used in the industrial sector.

the pricing structure may have to be suitably modified to counter expected imports. is a cause of concern.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. in terms of spiraling Aluminum price increases. Cost-push inflation. THREATS Enormous pricing pressures from customers can seriously pressurize margins which appear to be the biggest threat to this industry. With the customs duty levels continuing to drop (and projected to reach WTO levels by 2008-09). Acharya Institute of Graduate Studies 48 .

358 2. Acharya Institute of Graduate Studies 49 .L. The above table shows that the F.536 respectively.536 % on the basis of year 2005-06 100% 99% 101% 185% 199% The owner‟s equity (equity share capital & resources) are used as a basis to raise loans on long term basis to expand the earnings of the stake holders after making the interest payouts. Thus earnings should be sufficient enough to match the earning of the share holders without going for long term debt borrowings.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.’s 1.L. = Earning before interest and tax – interest & preference dividend % of Increase or decrease over the previous year -1 2 84 14 Year 2006 – 07 2007 – 08 2008 – 09 2009 – 10 2010 – 11 ANALYSIS: F. for 2005 . 2.293 2.263 in the next year.263 1. but for the next 3 years it is on the increasing trend to 1.276 1. 1 TABLE SHOWING FINANCIAL LEVERAGES Earnings before interest & tax (EBIT) F.358 and 2.L. CHAPTER – 4 ANALYSIS AND INTERPRETATION Table No.293.276 and decreased to 1.06 was 1.

L is on the increase overall during the 5 years period gradually.L.293 2.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.5 0 2006 – 07 2007 – 08 2008 – 09 2009 – 10 2010 – 11 1.276 1.’s 3 2. GRAPH No.5 2 1. 1 GRAPH SHOWING FINANCIAL LEVERAGES F. This trend shows that the company has been in a position to use the long term debt borrowing and deploy it to gain sufficient income and also pay the interest burden comfortably.536 F.263 1. Acharya Institute of Graduate Studies 50 .5 1 0.’s INTERPRETATION: It is inferred that the F.L.358 2.

2 TABLE SHOWING OPERATING LEVERAGE Contribution O.973 respectively. In view of this O.404 in the next year. 2. = Earnings before interest and taxes Year 2006 – 07 2007 – 08 2008 – 09 2009 – 10 2010 – 11 O.404 2.857 % on the basis of year 2005-06 100% 96% 105% 159% 114% % of the previous year -4 5 59 14 ANALYSIS: The O. stores and spares consumed costs only as variable costs.506 2. The above table shows that the OL for 2005-06 was 2.L.638 and 3.L. In the next 2 years it has increased to 2.857. Table No.L has been computed by taking raw material. sales – variable cost) by EBIT as a matter of standard this differs from company to company and industry to industry and from time to time.973 2.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. power and fuel.e. Acharya Institute of Graduate Studies 51 .506 and decreased to 2. An increasing trend over the period would be healthy for a growing company.L is obtained by dividing the contribution (i. whereas in the last year it has decreased to 2.638 3.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. 2 GRAPH SHOWING OPERATING LEVERAGE INTERPRETATION: It is inferred that the operating leverage was more or less at the same level in the first 3 years and in the last year. It is only during 2008-09 that the OL was very high. GRAPH No. Acharya Institute of Graduate Studies 52 . This can be attributed to the company earning huge profits compared to other years.

182 3. 3 TABLE SHOWING COMBINED LEVERAGE C.368 7.036 in the next year. Table No.410 and 9. Acharya Institute of Graduate Studies 53 . It took a dip in the last year and was at 7. which is high when compared to 2005-06.L.245. but marginally low when compared to 2008-09. The above tables shows the CL for the year 2005-06 stands at 3.182 and decreased marginally to 3.L.368 respectively.245 % on the basis of year 2005-06 100% 95% 107% 294% 228% % of the previous year -5 7 194 128 ANALYSIS: The combined leverage indicates the ability of the company to use the long term debt borrowing as well as the contribution towards paying interest and taxes and still being in a position to earn and grow. But for the next 2 years it gradually increased to 3.410 9. = Financial leverage X Operating Leverage Year 2006 – 07 2007 – 08 2008 – 09 2009 – 10 20010 – 11 C.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.036 3. 3.

GRAPH No. This can be attributed to the company being in a position to earn huge profits even after paying interest and taxes and have sufficient funds.245 2008 – 09 2009 – 10 INTERPRETATION: It is inferred that the combined leverage is stable for the first 3 years and only during 2008-09 and 2009-10 it has seen a substantial increase. The company has the capability to grow further and achieve higher C. Acharya Institute of Graduate Studies 54 .182 3.036 3.41 9.368 7. 3 GRAPH SHOWING COMBINED LEVERAGE 10 9 8 7 6 5 4 3 2 1 0 2005 – 06 2006 – 07 2007 – 08 3.L.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

052 0.Ratio 2006 – 07 6737750 248281899 0.039 ANALYSIS: Absolute liquid ratio refers to absolute liquid assets such as cash in hand / bank and marketable securities which are at the disposal of the company to pay off current liabilities.021 2008 – 09 42390612 2009 – 10 58058000 2010 – 11 27409000 816891159 697609000 698769000 0. 4 TABLE SHOWING ABSOLUTE LIQUIDITY RATIO Absolute liquid assets ALR = Current liability Particulars / years Absolute Liquid asset Current liability A.052 and 0. Table No.083 0. There has been a marginal increase in the next 2 years and is at 0.5:1.L. The acceptable norm for this ratio is 50% or 0.021 respectively.027 and 0.039 in the last year. The ALR has been stable for the first 2 years at 0. Acharya Institute of Graduate Studies 55 .027 2007 – 08 7337977 347068391 0.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.083 and dropped off to 0.

GRAPH No. 4 GRAPH SHOWING ABSOLUTE LIQUIDITY RATIO 0.039 0.01 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 0.09 0.06 0.08 0.083 0.04 0.02 0.021 INTERPRETATION: It is inferred that the ALR is way below the acceptable standards and this is due to the company holding huge amount of current liabilities which have grown to very high levels over the period without any corresponding increase in the absolute liquid assets.052 0.07 0. Acharya Institute of Graduate Studies 56 .03 0.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.05 0.027 0.

It has increased to 1.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.711 during 2008-09 and 2009-10 respectively.787 1.553 1.e. Table No. Acharya Institute of Graduate Studies 57 . 5 TABLE SHOWING CURRENT RATIO Current Assets Current Ratio = Current liability Particulars / years Current asset Current liability Current Ratio 2006 – 07 476194665 2007 – 08 539066033 2008 – 09 2009 – 10 2010 – 11 1056478451 1246805000 1195468000 248281899 347068391 816891159 697609000 698769000 1. During 2005-06 it is marginally less at 1. The current ratio is below the standards during the entire period of study.293 over the next 2 years.918 1..787 and 1. As a matter of thumb rule this ratio should be at 2:1.711 ANALYSIS: The current ratio refers to the ability of the company to meet its current liabilities through its current assets. the current assets should be double the current liabilities and this is considered as satisfactory.918 and has decreased to 1. i.553 and 1.293 1.

Acharya Institute of Graduate Studies 58 .2 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 1.787 1.711 INTERPRETATION: It is inferred that the e company has to improve upon its current assets compared to current liabilities as it is below the standard.2 1 0.918 2 1.4 1.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. The management of current assets needs to be looked into very seriously.4 0.293 1. 5 GRAPH SHOWING CURRENT RATIO 1.6 0. It is somewhat better in the first year only and in the rest of the years the current liabilities have increased more than the current assets. GRAPH No.6 1.8 0.553 1.8 1.

The net profit ratio was at 9.653 and further increased to 13. 6 TABLE SHOWING NET PROFIT RATIO Net profit after tax Net Profit Ratio = X 100 Net sales Particulars Net Profit (after taxation) Net Sales N/P Ratio 2006 – 07 87037518 2007 – 08 99880743 2008 – 09 185767326 2009 – 10 312848000 2010 – 11 390812000 933270356 1114428664 2743490827 2936581000 2977227000 9. other incomes have been excluded even by the company.126 in the last year.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Table No. the higher the better.326 during 2005-06 and decreased to 8.653 13.962 6.962 and 6.126 ANALYSIS: The net profit ratio establishes a relationship between net profit (after taxes) and sales and reflects the efficiency of the management in all the activities of the firm.771 in the next 2 years respectively.771 10. This ratio indicates the overall measure of the company‟s profitability.326 8. During 2008-09 it increased to 10. While computing net profit after tax. Acharya Institute of Graduate Studies 59 .

6 GRAPH SHOWING NET PROFIT RATIO 13.771 2009 – 10 INTERPRETATION: It is inferred that the net profit ratio decreased in 2006-07 and 2007-08 when compared to 2005-06 and this can be attributed to disproportionate increase in the net profit when compared to net sales.653 6. Acharya Institute of Graduate Studies 60 . This indicates that the margin earned has improved and is good for the company. The percentage of profit on the net sales has been good in the last 2 years. GRAPH No.326 10 8 6 4 2 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 8.962 10.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.126 14 12 9.

55. Acharya Institute of Graduate Studies 61 . 7 TABLE SHOWING RETURNS ON SHARE HOLDERS INVESTMENT IN % Net profit after interest & tax ROI= X 100 Share holder investment (ESC.18. Table No. over the next 3 years. It increased marginally to 26. popularly known as ROI is the relationship between net profits after interests and tax and the shareholders funds.18 23. PSC + R&S) Particulars Net Profit (after interest & taxation) Share holders’ investment ROI Ratio 2006 – 07 2007 – 08 2008 – 09 2009 – 10 2010 – 11 87037518 99880743 185767326 312848000 390812000 262967543 337976061 659101674 1348884000 1460685000 33. The ROI ratio was at 33. 28.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.09 29.09 during 2005-06 and decreased to 29.75 in the last year.19.55 28. 23.19 26. The higher the percentage the better for owners of the investment.75 ANALYSIS: Returns on share holders‟ investment.

19 28.55 30 25 20 15 10 5 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 23.75 35 INTERPRETATION: The ROI ratio has been on the declined over the period due to the reason that the share holders investment (capital + reserves) have been on the increase over the period and even though the net profit has increased.09 29.18 26. The portion of dividend declared being very small and a substantial portion has been transferred to reserves and surplus. There has been no major increase in shareholder capital structure.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 62 . GRAPH No. 7 GRAPH SHOWING RETURNS ON SHARE HOLDERS INVESTMENT IN % 33.

The company has a very good return on equity capital over the period and is consistently on the increase starting at 207.76 ANALYSIS: Equity shareholders are the real owners of the company and assume highest risk. 8 TABLE SHOWING RETURNS ON EQUITY CAPITAL Net profit after tax .A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Table No.55 in the 1 st year and ending up at 721.77 721.55 238.preference dividend Return on equity capital = Equity share capital (Paid up) Particulars Net Profit after tax (-) Preference divided Equity share capital (paid up) Returns on equity capital ratio 2006 – 07 2007 – 08 2008 – 09 2009 – 10 2010 – 11 87037518 99880743 185767326 312848000 390812000 41935600 41935600 48107030 54147000 54147000 207.15 577.17 386. This establishes a relationship between profits of a company and its equity capital. they are more interested in the profitability of the company and the performance of the company will be judged on the basis of return on equity capital of the company.76 in the last year. Acharya Institute of Graduate Studies 63 .

it has increased just by 15% only. Acharya Institute of Graduate Studies 64 .17 721.55 238.15 2009 – 10 INTERPRETATION: The equity share capital (paid up) is at a constant level in the first 2 years and has increased marginally third year. However the net profit (after tax) has been on the increase continuously and this has been major factor contributing for such better returns. 8 GRAPH SHOWING RETURNS ON EQUITY CAPITAL 800 700 577. GRAPH No.77 600 500 400 300 200 100 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 207.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. In the year 2008-09 and 2009-10.76 386.

preference dividend E.88 during 2008-09 and climbed back to 19.S = No.98 ANALYSIS: The earnings per share is a small variation of returns on equity capital and is calculated by dividing the net profits after taxes and preferences dividend by the total number of equity shares in the firm. of equity shares Returns on equity capital ratio 2006 – 07 2007 – 08 2008 – 09 2009 – 10 2010 – 11 87037518 99880743 188369553 51382000 108174000 4193560 4193560 4203677 5199000 5414703 20.81 during 2007-08.82 during 2006-07 and increased substantially to 44. Acharya Institute of Graduate Studies 65 .A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.88 19.P. Of equity shares Particulars Net Profit after tax (-) Preference divided No. The higher the EPS it would be better for the equity share holders. Table No.81 9.98 during 2009-10. It nosedived to 9. The EPS was at 20.76 during 2005-06 and increased gradually to 23.82 44. 9 TABLE SHOWING EARNINGS PER SHARE Net profit after tax .76 23.

Acharya Institute of Graduate Studies 66 .81 45 40 35 30 23.76 19.98 9.88 INTERPRETATION: It is inferred that the EPS was better during the first 3 years and fell down very heavily during 2008-09 due to substantial decrease in the net profit. GRAPH No. 9 GRAPH SHOWING EARNINGS PER SHARE 44.82 25 20 15 10 5 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 20.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. the pattern of number of equity share is more or less stable and the fluctuations in the profit is the main culprit for the volatility in the EPS.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 67 .8 2010 – 11 7. It increased to 40% during 2008-09 and marginally decreased to 38% during 09-10.5 19.5 44.76 2007 – 08 5 23. the DPO ratio was at 24% in the beginning and dropped to 21 and 17 in the next 2 years.81 2009 – 10 4 9. The dividend payout ratio has been very volatile due to fluctuations in the EPS over the period even though dividend payments are very stable. Ploughing back of profits enables the company to pay dividend more in future or use it for further expansion.82 2008 – 09 7. Table No.98 24 21 17 40 38 ANALYSIS: Dividend payout ratio is calculated to find out the extent to which earnings per share have been retained in the business by way of transfer to reserves and surplus. 10 TABLE SHOWING DIVIDEND PAYOUT RATIO Dividend per equity share Dividend Payout Ratio = Earnings per share Particulars Dividend per equity EPS DPO Ratio 2006 – 07 5 20.

10 GRAPH SHOWING DIVIDEND PAYOUT RATIO 40 40 35 30 24 25 20 15 10 5 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 21 17 38 INTERPRETATION: It is inferred that DPO ratio is varying very much due to fluctuation in EPS only even though the dividend paid per equity share is constant with marginal increase. The EPS bring dependent on net profit earned by the company and this is bound to be the cause for fluctuation over the period. GRAPH No. Acharya Institute of Graduate Studies 68 .A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

The REC ratio was at 527% during 2005-06. Table No. Acharya Institute of Graduate Studies 69 . higher the ratio generally better is the position of the firm. The ratio indicates that how much profits are generally retained by the firm for future growth.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. 1270. 2391 & 2598% respectively. It has increased over the next 4 years at a very high rate at 706. 11 TABLE SHOWING RATIO OF RESERVES TO EQUITY SHARE CAPITAL Reserves and surplus Ratio of reserves = To Equity share capital X 100 Equity share capital Particulars Reserves and surplus Equity share capital REC Ratio 2006 – 07 221031943 2007 – 08 296040461 2008 – 09 610994644 2009 – 10 2010 – 11 1294737000 1406538000 41935600 41935600 48107030 54147000 54147000 527 706 1270 2391 2598 ANALYSIS: This ratio establishes relationship between reserves and equity share capital.

Acharya Institute of Graduate Studies 70 .A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. GRAPH No. 11 GRAPH SHOWING RATIO OF RESERVES TO EQUITY SHARE CAPITAL 3000 2598 2391 2500 2000 1500 1270 1000 527 500 706 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 INTERPRETATION: It is inferred that a substantially portion of the profits have been retained by the company for future use. which is very good. This indicates the company‟s ability to pay higher dividends in the future and as well as make available the funds for future expansion.

90 during 2008-09 and 2009-10 respectively.42 in the next 2 years.60 2. The DE Ratio during 2005-06 was at 2.19 and 1. Table No.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 71 . 12 TABLE SHOWING DEBT EQUITY RATIO Outsider‟s funds (loan funds + current liabilities) DER = Share holder‟s funds (share capital (ESC + PSC) + RES+ SUR) Particulars Outsider’s funds Share holders’ funds Debt equity Ratio 2006 – 07 684388778 2007 – 08 918774513 2008 – 09 2009 – 10 2010 – 11 2254813993 2957734000 2786790000 262967543 337976061 659101674 1348884000 1460685000 2.71 and 3. Equity ratio is also known as external – internal equity ratio and is calculated to measure the relative claims of outsiders and the owners (share holders) against the firm‟s assets.6 and increased to 2. It decreased to 2.90 ANALYSIS: Debt.42 2.71 3.19 1.

Acharya Institute of Graduate Studies 72 . 12 GRAPH SHOWING DEBT EQUITY RATIO INTERPRETATION: It is inferred that the ratio has gradually increased in first 3 years and dropped down in the last two years. However overall the figures of debt are greater that the shareholder funds which is not a positive trend. This can be attributed to an increase both in the current liability and as well as in the long term debt funds.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. GRAPH No.

Table No.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. During 2008-09 it fell to 68% and fell further to 65% in the last years. This ratio indicates the relationship between the total liabilities to outsiders to total assets of a firm The solvency ratio of the firm was at 70% during 2005-06 and increased to 71 and 76% during the next two years. 13 TABLE SHOWING SOLVENCY RATIO Total liabilities to outsiders Solvency Ratio = Total assets X 100 Particulars Total liabilities to outsiders Total assets Solvency Ratio 2006 – 07 684388778 981483116 2007 – 08 918774513 1300700078 2008 – 09 2009 – 10 2010 – 11 2254813993 2957734000 2786790000 2961286864 4348534000 4282770000 70 71 76 68 65 ANALYSIS: This ratio is a small variant of equity ratio and can be simply calculated as (100 – equity ratio). Acharya Institute of Graduate Studies 73 .

The margin of decline from 2005-06 to 2009-10 it at variant of 5% only which is acceptable. Acharya Institute of Graduate Studies 74 . 13 GRAPH SHOWING SOLVENCY RAITO 76 76 74 71 70 70 68 68 65 72 66 64 62 60 58 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 INTERPRETATION: It is inferred that the overall solvency ratio of the firm is very good and even in the case of closure etc. the company can meet all the liabilities and still have assets to pay off the stake holders. GRAPH No.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

14 TABLE SHOWING PERSONNEL EXPENSES RATIO Personnel Expenses Personnel expenses Ratio = Net sales X 100 Particulars Personnel Expenses Net Sales Personnel expenses ratio 2006 – 07 119704896 933270356 2007 – 08 137910983 1114428664 2008 – 09 296068219 2009 – 10 379800000 2010 – 11 404034000 2743490827 2936581000 2831023000 12. Acharya Institute of Graduate Studies 75 .79%.79 12. For the first 2 years the PE ratio stood at 12.82% and 12.93 14.37% respectively during 2007-08.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. It increased further in the next 2 years to 12.27 ANALYSIS: This ratio refers to the percentage of personnel expenses to the net sales.27% respectively.93% and 14. Table No.82 12. It dropped down to 10. The standard varies from company to company and industry to industry from time to time especially in an inflation economy.37 10. The percentage of such expenses forms a major portion of the costs on the product and to the company. However a percentage between 12 to 15 seems to be accepted as a standard.

The costs are reasonably and being managed very well by the firm within acceptable levels.27 12.93 14 12.37 10. 14 GRAPH SHOWING PERSONNEL EXPENSES RATIO 16 14.79 12 10 8 6 4 2 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 INTERPRETATION: It is inferred that the percentage seems to be stabilized in 1 st two years and dropped is the 3rd year due to huge increase in net sales and stabilized further in the next year and increased only marginally in the last year by a mere 1% . GRAPH No.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 76 .82 12.

It increased to 18.68 ANALYSIS: This expenses ratio refers to other operational expenses incurred by the firm vis-a-vis to net sales. During 2005-06 the % stood at 21. Acharya Institute of Graduate Studies 77 .92 and 15.92 15. 15 TABLE SHOWING OTHER OPERATING EXPENSES RATIO Other operating expenses Other oeprating expenses Ratio = Net sales 2006 – 07 2007– 08 210877515 X 100 Particulars 2008 – 09 429815016 2009 – 10 531720000 2010 – 11 443908000 Net sales other 199933235 operating expenses Net sales Operating expenses ratio 933270356 1114428664 2743490827 2936581000 2831023000 21. This also forms a substantial elements in the operational expenses which could be related and as well as indirect.10% during 2008-09 and dropped to 15.66 respectively.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.68% in the last year.42 18. Table No.42 and dropped down in the next two year to 18.10 15.66 18.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Acharya Institute of Graduate Studies 78 .42 18. 15 GRAPH SHOWING OTHER OPERATING EXPENSES RATIO 25 21. GRAPH No.1 15.92 20 15.66 18.68 15 10 5 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 INTERPRETATION: It is inferred that other operating expenses was relatively high during the first 2 years and more or less stabilized in the last 3 years with net sales increasing and the expenses being kept under control adopting various costing and management techniques.

00 in the next year.90 during 2007-08. It reflects whether inventory has been efficiently used or not with a purpose to determine only minimum funds has been locked in the inventory.90 7. The ITO ratio was at 6. 16 TABLE SHOWING INVENTORY TURNOVER RATIO Net sales Inventory turnover Ratio = Opening stock + closing stock X 100 2 Particulars Net sales Avg. Table No.82 7. Inventory Inventory Turnover ratio 2006 – 07 933270356 136858839 2007 – 08 1114428664 159192566 2008 – 09 2009 – 10 2010 – 11 2743490827 2936581000 2831023000 251567957 371628000 400201000 6.90 7.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. It reverted back to 7.82 during 2005-06 and dropped to 7. It increased to 10. This also refers to the number of items the stock has been turned over during the period of evaluation and the efficiency with which firm is able to manage its inventory. Acharya Institute of Graduate Studies 79 .00 10.07 ANALYSIS: Inventory turnover ratio is normally calculated as sales / average inventory or cost of goods sold / average inventory.9 and 7.07 during the next two years.

07 6 4 2 0 2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 – 10 INTERPRETATION: It is inferred that on an average the inventory turnover ratio has been at 7 times with the exception of 1 year during 2007 -08 where it rose to 10. The firm can only improvise upon this very marginally as the ITO ratio has more or less stabilized during the five year period.9 times due to heavy increase in sales.82 7 7.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.9 8 6. 16 GRAPH SHOWING INVENTORY TURNOVER RATIO 12 10. Acharya Institute of Graduate Studies 80 .9 10 7. GRAPH No. A drop in the average inventory at increased level of production and sales can hasten the process.

by 75% which is very huge. It is observed that the Combined Leverage of DTL is showing an overall increase with wild fluctuations in between. 2. 3. In the last year there is a decrease of the O.L. Acharya Institute of Graduate Studies 81 . The absolute liquid assets available with the company to discharge its current liabilities is showing a fluctuating trend over the 5 years period. It is observed that Financial Leverages at DTL has gradually increased over a period of first 4 years and then taken a dip in the last year only when compared to the fourth year. The Operating Leverages at DTL has started of on a negative note in the first year and has increased gradually over the second and third year only. Overall the FL is very good for the company as a whole. This is due to gradual increase and decrease reflected in both Financial and Operating Leverage. which shows the inability to payoff fully in the event of a decision taken by the management. Chapter – 5 FINDINGS. even though on an overall it is still high. 4. SUGGESTIONS AND CONCLUSIONS Findings: 1.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

8. This shows a trend of fluctuations over the period.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.R. The fluctuations are wild only in the intervening years only. The Earnings per Share over the five year period of study has reached the same level where it started of in the 1st year. taking of well in the first year and taking a hit gradually over the next 2 years. 6. The Net Profit Ratio of DTL has started well and seen a decline in the next two years and has picked up gradually during the last two years. The Current Ratio over the period of 5 years has taken wide fluctuations in the figures available. Acharya Institute of Graduate Studies 82 . 5. 9. The return on Investment Ratio has seen fluctuation over a period with a decline compare to the first year. The ROI looks better overall inspite of expansion of share holder‟s base in the company. It has climbed over the next two years. The C. Return on Equity Capital alone has shown an increasing trend over the period and is very good due to the reason that profitability (after tax) has been increasing over a period and the equity share holder base has remained stable more or less. 7.

The Personnel Expenses Ratio of the company has been on the increase over the period of study. The Debt Equity Ratio has seen wide fluctuations over the five year period of study with gradual increase in the first 3 years and a decline in the last 2 years. The Dividend Payout Ratio has seen wide fluctuations over a period of 5 years in DTL with a declining trend in the second and third year and increase in the 4th and 5th year. 13. 12. The average solvency ratio stands at 30% which is good enough and Shows Company‟s ability to pay off all the liabilities. The overall DER seems to be on a negative note with outsiders funds being double the share holder‟s funds which is not a good sign and should have been the other way round. 14. The company has appropriated substantial portion of its profits to the reserves for meeting future contingencies. Acharya Institute of Graduate Studies 83 . Solvency Ratio of DTL is more or less stable over the period of study. The Reserves to Equity Share Capital ratios has shown an increasing trend in DTL over a period of 5 years of the study. 10. 11. The increase in the cost being very marginal seems to be justified in an inflated economy.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.

A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. There are hardly any changes and wide fluctuations and more or less the company has stabilized its operations over the period.5. Acharya Institute of Graduate Studies 84 . 15. 16. The Other Operating Expenses Ratio has seen wide fluctuations over the period and this could be attributed to uncontrolled expenses incurred over the period even though the sales have been on the increase. The Inventory Turnover Ratio is more or less stable over the five year period of study at an average of 7.

Both the financial and operating cost being very high the company has not been in a position to show better results in first 3 years.L. 4. It would be better if the company increases the profit margin to cover Variable Costs also. The company‟s contribution to get a better O.L is at higher levels. L is very good. As stated above the contributions having very good in 2008-09 and the C. Company can make efforts to reduce the current liabilities to the extent possible so that the ALR shows better figures. 2. was very good only during the year 2008-09. either by increase in sale volume or increasing the margin of profit or reducing the cost trying a maximize the benefit of large scale production 3. This is due to the high level of current liabilities and increasing trend over the period. The ALR of the company is very low compared to the standards of 50% or 0. The company is earning profits sufficient enough and as such. the F.5 : 1. which could hurt its profits. SUGGESTIONS: 1. During the remaining years it has reflected only a marginal increase. This would arrest the spiraling increase in costs. Acharya Institute of Graduate Studies 85 . Care should be taken to reduce the level of risk to ideal conditions upon heavy borrowings.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Efforts should be made to stabilize the various cost of the company at the level at which it is reflected during 2009-10 with effective budgeting control techniques.

The management should make efforts to reduce costs in order to maximize profits at enhanced level of operations. The standard for CR is 2:1 and the company‟s data shows a marginal decrease from the accepted standards and efforts have to be put in by the management to improve the business cycle and exercise control over both trade debtors and trade creditors. which is possible. The ROI can be improved upon further by reducing external borrowing and the payment of interest associated with it. Excess funds in reserve and surplus can be utilized in a phased manner to reduce the debt percentage in the financials of the company. Acharya Institute of Graduate Studies 86 . This would improve its current ratio well above the standards. 6.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. 5. In spite of this there has been a fluctuation in the NPR due to probable increase in the operating expenses over the period and as well as interest payments on heavy long term borrowings. 7. The return to the equity share holders has been very satisfactory with very good returns and as well as better figure under the reserves and surplus. The company has seen an increase in both net profits (after taxation) as well as net sales. 8.

The earnings per share can be improved upon further with cost deduction and reducing the long term debt borrowings with interest gradually.The fluctuation in the dividends payout ratio can be attributed mainly due to variations is the EPS only even though dividends paid per share is more or less stable over the period of 5 years. 10. their long term debts as early as possible to show as improved DER. 9.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. 11. This would have a better market price for the share in the stock market overall. 12. Acharya Institute of Graduate Studies 87 .Even though it is the management decision to appropriate a substantial portion of profits into reserves it might be used for future expansions or diversifications. The management has to make concerted efforts to reduce. 13.The debt equity ratio is in a very precarious status over the period of study and the only positive element being it is at the lowest in the last year. However a portion of that could be used to reduce the company‟s long term debts over a period gradually.The long terms solvency position of the firm is good and the company has sufficient assets to clear outsider‟s liability comfortably and still have funds with it. This can further be improved upon with long term debt reduction gradually over a period. In the last two years the indication are substantial portion of the profit has been retained by the company from its earnings under reserve and surplus which is good.

16.Exercise of strict budgetary control over the other operating expenses is the need of the hour due to high volatility. The variance in expenses should be monitored on monthly basis to have a tighter control of the expenses. 14. 15.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED.With the increase in sales over the period it is only the average inventory that has increased and contributed for its stability To improve this further the management has to make concerted efforts to reduce the inventory levels within the company for better results and effective inventory utilization Acharya Institute of Graduate Studies 88 .The management can look into automization and computerization of as many operations as possible in order to reduce the number of employees and its related expenses.

The management needs to exercise effective monetary control on expenditure adopting techniques like Budgetary Control etc. This would enhance the profit margin to higher levels. CONCLUSION The overall financial performance of DTL seems to be good and showing better performance year after year. The long term debt borrowing has to be settled in order to reduce the interest burden on the company‟s profitability. An effort has only been made to conduct a study of financial analysis and leverages based on the classification of items both in the balance sheet & profit and loss account and other related reports for 5 financial accounting years.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Thus we conclude to say the overall performance of DTL has been satisfactory and only some elements seems to be fluctuating very widely which needs proper monitoring and control using different Managerial Accounting Techniques. Acharya Institute of Graduate Studies 89 .

investopedia. Satya Prasad Business finance By: Shashi K. www. Kulkarni. www. B. Mukund Sharma Cost & financial analysis By: Shashi K. BIBLIOGRAPHY BOOKS: Management accounting By: Appnnaiah Reddy.com.com.Sharma Financial management By: Appannaiaha Reddy.M. Gupta. I.K.com www edia.dynamatics .com Acharya Institute of Graduate Studies 90 . Anu Putney Internet: www. Gupta. R.google.G.A study on Financial Analysis and leverages at DYNAMATIC TECHNOLOGIES LIMITED. Mukund Sharma Financial management theory & practice By: Prasanna Chandra Financial management By. Neethi Gupta. Pandey Financial management By: P.V.