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CHAPTER-1
INTRODUCTION










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INTRODUCTION

It is rightly said that finance is the
lifeblood of an enterprise. In our present day economy,
finance is defined as the provision of money at the
time when it is required. Every enterprise whether big,
medium or small needs finance to carry on its
operations and its targets.
Moreover, finance guides and regulates investment
decisions and expenditure. The expenditure decisions
may pertain to recurring expenditure or they may be
capital expenditure programmes. The major task of
finance is to get the maximum of the available funds
and the finance manager should perform this task most
effectively for his success.
Financial management is the managerial activity,
which is concerned with the planning and controlling
the firm‟s financial resources.

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Managing of finance is an important activity that
involves both short-term and long-term planning. The
goal of any enterprise is either profit maximization or
wealth maximization. This is achieved through
management. Thus, due important is given to financial
management so as to achieve the overall goals of the
firm.

There are various methods or techniques
used in analyzing financial statements, such as
comparative statements, trend analysis, common-size
statement, schedule of changes in working capital,
funds flow and cash flow analysis, cost-volume-profit
analysis and ratio analysis.






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CHAPTER-2
PROFILE










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INDUSTRY PROFILE










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INDUSTRY PROFILE
Water is the most important necessity for life. The
drinking-water needs for individuals vary depending on
the climate, physical activity and the body culture. but
for average consumers it is estimated to be about two to
four litres per day. The growing number of cases of
water borne diseases, increasing water pollution,
increasing urbanization, increasing scarcity of pure and
safe water etc. have made the bottled water business just
like other consumer items. Scarcity of potable and
wholesome water at railway stations, tourists spots, and
role of tourism corp. etc. has also added to the growth.
Indians currently spending about $330m a year on
bottled water, analysts estimate. The packaged water
market constitutes 15 per cent of the overall packaged
beverage industry, which has annual sales of at least
$2.6bn, Deepak Jolly, a spokesperson for Coca-Cola
India said.


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Almost all the major international and national brands
water bottles are available in Indian market right from
the malls to railway stations, bus stations, grocery stores
and even at panwala's shop. Before few years bottle
water. was considered as the rich people's choice, but
now it is penetrated even in rural areas. The growth and
status of Indian Bottled Industry in comparison with
Western or Asian market, India is far behind in terms of
quantum, infrastructure, professionalism and standards
implementation. The per capita consumption of mineral
water in India is a mere 0.5-liter compared to 111 liter in
Europe and 45-liter in USA. Also As per UN study
conducted in 122 countries, in connection with water
quality, India's number was dismal 120. In comparison to
global standards India's bottled water segment is largely

unregulated.
Former President Dr. A.P.J. Abdul Kalam has urged
youngsters on July 17, 2010 to be aware of water
conservation techniques to avoid grave water crisis in

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future."It is so sad that today, people are forced to buy
water in plastic bottles. I am told that bottled water
industry is worth nearly 10000 crore rupees and even big
companies like the Coke and Pepsi are involved in this
bottling of water and making money. So, it is imperative
that we ought to save water," he added. Do not be
surprise if today's bottles water industry becomes next
Oil industry by 2025.
Bottled Water Industry in India
Water Shortage and Health Awareness Driving Bottled
Water Consumption in India. The Indian market is
estimated at about Rs 1,000 Crore and is growing at
whopping rate of 40 per cent. By 2010, it will reach Rs
4,000 -5,000 Crore with 33 per cent market for natural
mineral water. According to a national-level study,
there are more than 200 bottled water brands in India and
among them nearly 80 per cent are local brands. In fact,
making bottled water is today a cottage industry in the
country. Leave alone the metros, where a bottled-water
manufacturer can be found even in a one-room shop, in

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every medium and small city and even some prosperous
rural areas there are bottled water manufacturers. While
India ranks in the top 10 largest bottled water consumers
in the world, its per capita per annum consumption of
bottled water is estimated to be five litres which is
comparatively lower than the global average of 24 litres.
Today it is one of India's fastest growing industrial
sectors. Between 1999 and 2004, the Indian bottled water
market grew at a compound annual growth rate (CAGR)
of 25 per cent - the highest in the world. The total annual
bottled water consumption in India had tripled to 5
billion liters in 2004 from 1.5 billion liters in
1999. Global consumption of bottled water was
nearing 200 billion liters in 2006.







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COMPANY PROFILE
Aiswarya Beverages is a private company incorporated
in 2000 with its plant at Thiruvalla in Pathanamthitta
District of Kerala. The company was promoted by Aby
Mathew, an NRI from UAE. The company‟s registered
office is located at Kerala.
.The company bottles and sells natural mineral water
under the brand name Classic, sources its water directly
from an underground aquifer located about 130 metres
below the earth's surface.
The company started its commercial production in April
2000. The company now proposes to expand its retail
distribution network by appointing consignee and
distributors agents in various parts of the country. The
company‟s existing clientele includes 5 Star Hotels,
Airlines, Embassies etc, and tie-ups with „A‟ category

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retail outlets, modern retail (malls), multiplexes,
hypermarts, fine-dine restaurants are also in the offing.
The brand Classic, enjoys an aspirational equity amongst
consumers and has the potential of truly becoming an
international and iconic brand, it is this potential that the
new management proposes to unlock through brand
building and enhanced distribution.
Product range of the company include:
The company‟s principal activity is to manufacture
packaged natural mineral water with in-house facilities to
manufacture PET bottles and caps. It markets its
products under the brand name Classic natural mineral
water is available in four pack sizes namely,25 ltr, 2 ltr,
1.5 ltr, 1 ltr.





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Awards/Achievements
 The company and the product enjoy the certification
of various authorities like HACCP, BIS and ISI in
India.















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OBJECTIVES











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OBJECTIVES OF THE STUDY

The following are the objectives of the study

 To understand the risk involved in capital
market.
 To study and analysis of the market potential.
 To assess the profitability of the “Aiswarya
Beverages
 To assess the financial stability of the capital
market.
 To understand how to hedge the risk in capital
market.







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SCOPE OF THE STUDY











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SCOPE OF THE STUDY

 It examines liquidity, solvency and financial
position during the period of study.
 The study tries to analyses the financial position
of the company.
 The study provides some suggestions and
recommendation for the further improvement of
the financial position.










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METHODOLOGY











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METHODOLOGY

Data Collection

Data place a very important role in any research
program. Source of data are of two types, Primary and
Secondary. The data is used in the study were collected
from the published annual report of relevant period of the
company. The major source is secondary as mentioned.

Secondary data have been collected from
different records of the company, standing rules,
annual reports, web sites and various other
publications, Reference from books, periodicals and
newspapers have also been extensively used.

Period of the study
The period of study started from 2007 to 2011.
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LIMITATIONS OF THE STUDY
 The inexperience makes the study less precise than
professionals.
 The tools used for analysis are limited.
 In depth analysis could not be done due to time
constraint.
 It is very difficult to predict the price movement of
security because of market risk is associated with it.











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CHAPTER-3
THEORETICAL FRAME WORK









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RATIO ANALYSIS

Meaning
Ratio analysis is one of the powerful tools of the
financial analysis. A ratio can be defined as” the
indicated quotient of two mathematical expressions” and
as “the relationship between two or more things”. Ratio
is, thus, the numerical or an arithmetical relationship
between two figures. It is expressed where one figure is
divided by another. A ratio can be used as a yardstick for
evaluating the financial position and performance of a
concern because the absolute accounting data cannot
provide meaningful understanding and interpretation. A
ratio is the relationship between two accounting items
expressed mathematically. Ratio analysis helps the
analyst to make quantitative judgement with regard to
concern‟s financial position and performance.


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IMPORTANCE OF RATIO ANALYSIS
As a tool of financial management, ratios are of
crucial significance. The importance of ratio analysis lies
in the fact that it presents facts on a comparative basis &
enables the drawing of interference regarding the
performance of a firm. Ratio analysis is relevant in
assessing the performance of a firm in respect of the
following aspects:
1] Liquidity position.
2] Long-term solvency.
3] Operating efficiency.
4] Overall profitability.
5] Inter firm comparison.
6] Trend analysis.

1] LIQUIDITY POSITION
With the help of Ratio analysis conclusion can be
drawn regarding the liquidity position of a firm. The
liquidity position of a firm would be satisfactory if it is
able to meet its current obligation when they become
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due. A firm can be said to have the ability to meet its
short-term liabilities if it has sufficient liquid funds to
pay the interest on its short maturing debt usually within
a year as well as to repay the principal. This ability is
reflected in the liquidity ratio of a firm. The liquidity
ratio is particularly useful in credit analysis by bank &
other suppliers of short term loans.

2] LONG TERM SOLVENCY
Ratio analysis is equally useful for assessing the
long-term financial viability of a firm. This respect of the
financial position of a borrower is of concern to the long-
term creditors, security analyst & the present & potential
owners of a business. The long-term solvency is
measured by the leverage/ capital structure &
profitability ratio Ratio analysis s that focus on earning
power & operating efficiency.
Ratio analysis reveals the strength & weaknesses of
a firm in this respect. The leverage ratios, for instance,
will indicate whether a firm has a reasonable proportion
of various sources of finance or if it is heavily loaded
with debt in which case its solvency is exposed to serious
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strain. Similarly the various profitability ratios would
reveal whether or not the firm is able to offer adequate
return to its owners consistent with the risk involved.

3] OPERATING EFFICIENCY
Yet another dimension of the useful of the ratio
analysis, relevant from the viewpoint of management, is
that it throws light on the degree of efficiency in
management & utilization of its assets. The various
activity ratios measure this kind of operational
efficiency. In fact, the solvency of a firm is, in the
ultimate analysis, dependent upon the sales revenues
generated by the use of its assets- total as well as its
components.

4] OVERALL PROFITABILITY
Unlike the outsides parties, which are interested in
one aspect of the financial position of a firm, the
management is constantly concerned about overall
profitability of the enterprise. That is, they are concerned
about the ability of the firm to meets its short term as
well as long term obligations to its creditors, to ensure a
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reasonable return to its owners & secure optimum
utilization of the assets of the firm. This is possible if an
integrated view is taken & all the ratios are considered
together.

5] INTER – FIRM COMPARISON
Ratio analysis not only throws light on the financial
position of firm but also serves as a stepping-stone to
remedial measures. This is made possible due to inter
firm comparison & comparison with the industry
averages. A single figure of a particular ratio is
meaningless unless it is related to some standard or
norm. One of the popular techniques is to compare the
ratios of a firm with the industry average. It should be
reasonably expected that the performance of a firm
should be in broad conformity with that of the industry to
which it belongs. An inter firm comparison would

demonstrate the firms position vice-versa its
competitors. If the results are at variance either with the
industry average or with those of the competitors, the
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firm can seek to identify the probable reasons & in light,
take remedial measures.

6] TREND ANALYSIS
Finally, ratio analysis enables a firm to take the time
dimension into account. In other words, whether the
financial position of a firm is improving or deteriorating
over the years. This is made possible by the use of trend
analysis. The significance of the trend analysis of ratio
lies in the fact that the analysts can know the direction of
movement, that is, whether the movement is favourable
or unfavourable. For example, the ratio may be low as
compared to the norm but the trend may be upward. On
the other hand, though the present level may be
satisfactory but the trend may be a declining one.







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ADVANTAGES OF RATIO ANALYSIS

Financial ratios are essentially concerned with the
identification of significant accounting data relationships,
which give the decision-maker insights into the financial
performance of a company. The advantages of ratio
analysis can be summarized as follows:

 Ratios facilitate conducting trend analysis,
which is important for decision making and
forecasting.
 Ratio analysis helps in the assessment of the
liquidity, operating efficiency, profitability and
solvency of a firm.
 Ratio analysis provides a basis for both intra-
firm as well as inter-firm comparisons.
 The comparison of actual ratios with base year
ratios or standard ratios helps the management
analyze the financial performance of the firm.


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LIMITATIONS OF RATIO ANALYSIS

Ratio analysis has its limitations. These limitations
are described below:

1] Information problems

 Ratios require quantitative information for
analysis but it is not decisive about analytical
output.
 The figures in a set of accounts are likely to be at
least several months out of date, and so might
not give a proper indication of the company‟s
current financial position.
 Where historical cost convention is used, asset
valuations in the balance sheet could be
misleading. Ratios based on this information will
not be very useful for decision-making.




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2] Comparison of performance over time

 When comparing performance over time, there is
need to consider the changes in price. The
movement in performance should be in line with the
changes in price.

 When comparing performance over time, there is
need to consider the changes in technology. The
movement in performance should be in line with the
changes in technology.


 Changes in accounting policy may affect the
comparison of results between different accounting
years as misleading.





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3] Inter-firm comparison

 Companies may have different capital structures and
to make comparison of performance when one is all
equity financed and another is a geared company it
may not be a good analysis.

 Selective application of government incentives to
various companies may also distort intercompany
comparison. comparing the performance of two
enterprises may be misleading.


 Inter-firm comparison may not be useful unless the
firms compared are of the same size and age, and
employ similar production methods and accounting
practices.




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 Even within a company, comparisons can be
distorted by changes in the price level.

 Ratios provide only quantitative information, not
qualitative information.


 Ratios are calculated on the basis of past financial
statements. They do not indicate future trends and
they do not consider economic conditions.










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PURPOSE OF RATIO ANALYSIS:

 To identify aspects of a business performance to aid
decision making.
 Quantitative process – may need to be
supplemented by qualitative Factors to get
a complete picture.
5 main areas:-
 Liquidity – the ability of the firm to pay its way .
 Investment/shareholders – information to enable
decisions to be made on the extent of the risk and
the earning potential business investment.
 Gearing – information on the relationship between
the exposures of the business to loans as opposed to
share capital .
 Profitability – how effective the firm is at
generating profit given sales and or its capital
assets .
 Financial – the rate at which the company sells its
stock and the efficiency with it uses its assets.

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ROLE OF RATIO ANALYSIS

It is true that the technique of ratio analysis is not a
creative technique in the sense that it uses the same
figure & information, which is already appearing in the
financial statement. At the same time, it is true that what
can be achieved by the technique of ratio analysis cannot
be achieved by the mere preparation of financial
statement.

Ratio analysis helps to appraise the firm in terms of
their profitability & efficiency of performance, either
individually or in relation to those of other firms in the
same industry. The process of this appraisal is not
complete until the ratio so computed can be compared
with something, as the ratio all by them do not mean
anything. This comparison may be in the form of intra
firm comparison, inter firm comparison or comparison
with standard ratios. Thus proper comparison of ratios
may reveal where a firm is placed as compared with

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earlier period or in comparison with the other firms in the
same industry.

Ratio analysis is one of the best possible techniques
available to the management to impart the basic
functions like planning & control. As the future is closely
related to the immediate past, ratio calculated on the
basis of historical financial statements may be of good
assistance to predict the future.
Ratio analysis also helps to locate & point out the
various areas,
which need the management attention in order to
improve the situation. As the ratio analysis is concerned
with all the aspect of a firms financial analysis i.e.
liquidity, solvency, activity, profitability & overall
performance, it enables the interested persons to know
the financial & operational characteristics of an
organisation & take the suitable decision.



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TYPES OF RATIO ANALYSIS


LIQUIDITY RATIO

Liquidity refers to the ability of a firm to meet its
short-term (usually up to 1 year) obligations. The ratios,
which indicate the liquidity of a company, are Current
ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios
are discussed below:-

CURRENT RATIO
Meaning:
This ratio compares the current assets with the
current liabilities.
It is also known as „working capital ratio‟ or „solvency
ratio‟. It is expressed in the form of pure ratio.



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Formula:
Current assets
Current ratio = Current liabilities

The current assets of a firm represents those assets
which can be, in the ordinary course of business,
converted into cash within a short period time, normally
not exceeding one year. The current liabilities defined as
liabilities which are short term maturing obligations to be
met, as originally contemplated, with in a year.

Current ratio (CR) is the ratio of total current
assets (CA) to total current liabilities (CL). Current
assets include cash and bank balances; inventory of raw
materials, semi- finished and finished goods; marketable
securities; debtors ( net of provision for bad and
doubtful debts ) ; Bills Receivable; and Prepaid
expenses. Current liabilities consist of trade creditors,
bills payable, bank credit, and provision for taxation,
dividends payable and outstanding expenses. This ratio
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measures the liquidity of the current assets and the ability
of a company to meet its short-term debt obligation.

Current ratio measures the ability of the company to
meet its Current liabilities, i.e., Current assets gets

converted into cash in the operating cycle of the firm and
provide the funds needed to pay for Current liability.
Higher the current ratio, the greater short-term solvency
happens. This compares assets, which will become
liquid within approximately twelve months with
liabilities, which will be due for payment in the same
period and is intended to indicate whether there are
sufficient short-term assets to meet the short- term
liabilities. Recommended current ratio is 2: 1.

Any ratio below indicates that the entity may face
liquidity problem but also Ratio over 2: 1 as above
indicates over trading, that is the entity is under utilizing
its current assets.


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LIQUID RATIO
Meaning:
Liquid ratio is also known as acid test ratio or quick
ratio. Liquid ratio compares the quick assets with the
quick liabilities. It is expressed in the form of pure ratio.
E.g. 1:1.
The term quick assets refer to current assets, which can
be converted into, cash immediately or at a short
notice without diminution of value.

Formula:
Liquid ratio = Quick Assets
Quick Liability

Quick Ratio (QR) is the ratio between quick current
assets (QA) and Current liability. Quick current assets
refer to those current assets that can be converted into



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cash immediately without any value strength. Quick
current assets include cash and bank balances, short-term
marketable securities, and sundry debtors. Inventory and
prepaid expenses are excluded since these cannot be
turned into cash as and when required. Quick Ratio
indicates the extent to which a company can pay its
current liabilities without relying on the sale of
inventory. This is a fairly stringent measure of liquidity
because it is based on those current assets, which are
highly liquid. Inventories are excluded from the
numerator of this ratio because they are deemed the least
liquid component of current assets. Generally, a quick
ratio of 1:1 is considered good. One drawback of the
quick ratio is that it ignores the timing of receipts and
payments.






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CASH RATIO
Meaning:
This is also called as super quick ratio. This ratio
considers only the absolute liquidity available with the
firm.

Formula:
Cash ratio= Cash+ Bank+ Marketable securities
Total current liabilities

Since cash and bank balances and short term
marketable securities are the most liquid assets of a firm,
financial analysts look at the cash ratio. If the super
liquid assets are too much in relation to the current
liabilities then it may affect the profitability of the
firm.




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INVESTMENT / SHAREHOLDER
EARNING PER SHARE
Meaning:
Earnings per Share are calculated to find out overall
profitability of the organization. Earnings per share
represent earning of the company whether or not
dividends are declared. If there is only one class of
shares, the earnings per share are determined by dividing
net profit by the number of equity shares.EPS measures
the profits available to the equity shareholders on each
share held.

Formula:

Earning per share = NPAT
Number of equity share

The higher Earning per share (EPS) will attract
more investors to acquire shares in the company as it

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indicates that the business is more profitable enough to
pay the dividends in time. But remember not all profit
earned is going to be distributed as dividends the
company also retains some profits for the business.

DIVIDEND PER SHARE
Meaning:
Dividend per share (DPS) shows how much is paid
as dividend to the shareholders on each share held.
Formula:

Dividend per Share= Dividend Paid to Ordinary
Shareholders
Number of Ordinary Shares







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DIVIDEND PAYOUT RATIO
Meaning:
Dividend Pay-out Ratio shows the relationship
between the dividends paid to equity shareholders out of
the profit available to the equity shareholders.

Formula:
Dividend Payout ratio = Dividend per share *100
Earning per share
Dividend Payout ratio (D/P ratio) shows the
percentage share of net profits after taxes and after
preference dividend has been paid to the preference
equity holders.

CAPITAL GEARING RATIO
Meaning:
Gearing means the process of increasing the equity
shareholders return through the use of debt. Equity
shareholders earn more when the rate of the return on
total capital is more than the rate of interest on debts.
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This is also known as leverage or trading on equity. The
Capital-gearing ratio shows the relationship between two
types of capital via: - equity capital & preference capital
& long term borrowings. It is expressed as a pure ratio.

Formula:

CGR = Preference capital+ secured loan
Equity capital & reserve & surplus

Capital gearing ratio indicates the proportion of debt
& equity in the financing of assets of a concern.

PROFITABILITY RATIO
These ratios help measure the profitability of a firm.
A firm, which generates a substantial amount of profits
per rupee of sales, can comfortably meet its operating
expenses and provide more returns to its shareholders.
The relationship between profit and sales is measured by

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profitability ratios. There are two types of profitability
ratios:
1. Gross Profit Margin
2. Net Profit Margin.

1. GROSS PROFIT RATIO

Meaning:
This ratio measures the relationship between gross
profit and sales. It is defined as the excess of the net sales
over cost of goods sold or excess of revenue over cost.
This ratio shows the profit that remains after the
manufacturing costs have been met. It measures the
efficiency of production as well as pricing. This ratio
helps to judge how efficient the concern is I managing its
production, purchase, selling & inventory, how good its
control is over the direct cost, how productive the
concern , how much amount is left to meet other
expenses & earn net profit.

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Formula:
Gross profit ratio = Gross profit *100
Net sales

2. NET PROFIT RATIO
Meaning:
Net Profit ratio indicates the relationship between
the net profit & the sales it is usually expressed in the
form of a percentage.

Formula:
Net profit ratio = NPAT * 100
Net sale

This ratio shows the net earnings (to be distributed
to both equity and preference shareholders) as a
percentage of net sales. It measures the overall efficiency
of production, administration, selling, financing, pricing
and tax management. Jointly considered, the gross and
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net profit margin ratios provide an understanding of
the cost and profit structure of a firm.


RETURN ON CAPITAL EMPLOYED RATIO
Meaning:
The profitability of the firm can also be analyzed
from the point of view of the total funds employed in the
firm. The term fund employed or the capital employed
refers to the total long-term source of funds. It means
that the capital employed comprises of shareholder funds
plus long-term debts. Alternatively it can also be defined
as fixed assets plus net working capital. Capital
employed refers to the long-term funds invested by the
creditors and the owners of a firm. It is the sum of long-
term liabilities and owner's equity. Return On Capital
Employed (ROCE) indicates the efficiency with which
the long-term funds of a firm are utilized.



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Formula:
Return on capital employed = NPAT *100
Capital employed


FINANCIAL RATIO
These ratios determine how quickly certain current
assets can be converted into cash. They are also called
efficiency ratios or asset utilization ratios as they
measure the efficiency of a firm in managing assets.
These ratios are based on the relationship between the
level of activity represented by sales

or cost of goods sold and levels of investment in various
assets. The important turnover ratios are debtors turnover
ratio, average collection period, inventory/stock turnover
ratio, fixed assets turnover ratio, and total assets turnover
ratio. These are described below:


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DEBTORS TURNOVER RATIO (DTO)

Meaning:
Debtors Turnover Ratio (DTO) is calculated by
dividing the net credit sales by average debtors
outstanding during the year. It measures the liquidity of a

firm's debts. Net credit sales are the gross credit sales
minus returns, if any, from customers. Average debtors
are the average of debtors at the beginning and at the end
of the year. This ratio shows how rapidly debts are
collected. The higher the DTO, the better it is for the
organization.

Formula:

Debtors turnover ratio = Credit sales
Average debtors


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INVENTORY OR STOCK TURNOVER RATIO
(ITR)

Meaning:
Inventory or stock Turnover Ratio (ITR) refers to
the number of times the inventory is sold and replaced
during the accounting period.

Formula:

Stock Turnover Ratio = COGS
Average stock
Inventory or stock Turnover Ratio (ITR) reflects the
efficiency of inventory management. The higher the
ratio, the more efficient is the management of
inventories, and vice versa. However, a high inventory
turnover may also result from a low level of inventory,
which may lead to frequent stock outs and loss of sales
and customer goodwill. For calculating ITR, the average
of inventories at the beginning and the end of the year is
taken. In general, averages may be used when a flow
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figure (in this case, cost of goods sold) is related to a
stock figure (inventories).

FIXED ASSETS TURNOVER (FAT)

Meaning:
The Fixed Asset Turnover (FAT) ratio measures the
net sales per rupee of investment in fixed assets. \

Formula:

Fixed assets turnover = Net sales
Net fixed assets
This ratio measures the efficiency with which fixed
assets are employed. A high ratio indicates a high degree
of efficiency in asset utilization while a low ratio reflects
an inefficient use of assets. However, this ratio should be
used with caution because when the fixed assets of a firm
are old and substantially depreciated, the fixed assets

Financial analysis of “HANANI RUBBERS”


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turnover ratio tends to be high (because the denominator
of the ratio is very low).

PROPRIETORS RATIO
Meaning:
Proprietary ratio is a test of financial & credit strength of
the business. It relates shareholders fund to total assets.
This ratio determines the long term or ultimate solvency
of the company. In other words, Proprietary ratio
determines as to what extent the owner‟s interest &
expectations are fulfilled from the total investment made
in the business operation. Proprietary ratio compares the
proprietor fund with total liabilities. It is usually
expressed in the form of percentage. Total assets also
know it as net worth.
Formula:

Proprietary ratio = Proprietary fund
Total fund

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STOCK WORKING CAPITAL RATIO
Meaning:
This ratio shows the relationship between the
closing stock & the working capital. It helps to judge the
quantum of inventories in relation to the working capital
of the business. The purpose of this ratio is to show the
extent to which working capital is blocked in inventories.
The ratio highlights the predominance of stocks in the
current financial position of the company. It is expressed
as a percentage.

Formula:

Stock working capital ratio = Stock
Working Capital

Stock working capital ratio is a liquidity ratio. It
indicates the composition & quality of the working
capital. This ratio also helps to study the solvency of a
Financial analysis of “HANANI RUBBERS”


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concern. It is a qualitative test of solvency. It shows the
extent of funds blocked in stock. If investment in stock is
higher it means that the amount of liquid assets is lower.

DEBT EQUITY RATIO
Meaning:
This ratio compares the long-term debts with
shareholders fund. The relationship between borrowed
funds & owners capital is a popular measure of the long
term financial solvency of a firm. This relationship is
shown by debt equity ratio. Alternatively, this ratio
indicates the relative proportion of debt & equity in
financing the assets of the firm. It is usually expressed as
a pure ratio.

Formula:
Debt equity ratio = Total long Term debt
Total shareholders fund


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Debt equity ratio is also called as leverage ratio.
Leverage means the process of the increasing the equity
shareholders return through the use of debt. Leverage is
also known as „gearing‟ or „trading on equity‟. Debt
equity ratio shows the margin of safety for long-term
creditors & the balance between debt & equity.

RETURN ON PROPRIETOR FUND
Meaning:

Return on proprietors fund is also known as „return
on proprietor‟s equity‟ or „return on shareholders‟
investment‟ or „investment ratio‟. This ratio indicates the
relationship between net profits earned & total
proprietor‟s funds. Return on proprietors fund is a
profitability ratio, which the relationship between profit
& investment by the proprietors in the concern. Its
purpose is to measure the rate of return on the total fund
made available by the owners. This ratio helps to judge
how efficient the concern is in managing the owner‟s

Financial analysis of “HANANI RUBBERS”


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Fund at disposal. This ratio is of practical importance to
prospective investors & shareholders.
Formula:
Return on proprietors fund = NPAT * 100
Proprietor’s fund

CREDITORS TURNOVER RATIO
Meaning:
It is same as debtor‟s turnover ratio. It shows the
speed at which payments are made to the supplier for
purchase made from them. It is a relation between net
credit purchase and average creditors
Formula:

Credit turnover ratio = Net credit purchase
Average creditors

Average age of accounts payable = Months in a year
Credit turnover ratio

Financial analysis of “HANANI RUBBERS”


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Both the ratios indicate promptness in payment of
creditor purchases. Higher creditors turnover ratio or a
lower credit period enjoyed signifies that the creditors
are being paid promptly. It enhances credit worthiness of
the company. A very low ratio indicates that the
company is not taking full benefit of the credit period
allowed by the creditors.














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CHAPTER – 4
DATA ANALYSIS AND
INTERPRETATION









Financial analysis of “HANANI RUBBERS”


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Current Ratio
Meaning:
This ratio compares the current assets with the current
liabilities. It is also known as „working capital ratio‟ or „
solvency ratio‟. It is expressed in the form of pure ratio.
Formula:
Current assets
Current ratio = Current liabilities











Financial analysis of “HANANI RUBBERS”


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Current Ratio


Year 2011 2010 2009 2008 2007
A) Curr
ent
Assets
270.53 180.69 88.11 84.37 59.43
B)Current
Liability
94.93 89.31 82.83 69.71 42.01
C)Current
ratio
(A/B)
2.84 2.02 1.06 1.21 1.41

Interpretation;
It is ratio between current assets and current liability. Its
idle ratio is 2:1. The firm satisfies the idle ratio in the
year 2011.



Financial analysis of “HANANI RUBBERS”


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Current Ratio Graph












2.84
2.02
1.06
1.21
1.41
0
0.5
1
1.5
2
2.5
3
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Quick Ratio

Acid – test quick ratio is a
measure of liquidity calculated dividing current assets
minus inventory and prepared expenses by current
liabilities. It is also known as liquid ratio. The acid – test
ratio is the measure of liquidity designed to overcome
defect of the current assets of the firm. As a convention
quick ratio of 1:1 is considered as satisfactory. It
measures the firm‟s capacity to pay off current obligation
immediately.
Quick- Acid –test/Liquid ratio = Liquid Assets
Current Liabilities





Financial analysis of “HANANI RUBBERS”


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Quick Ratio


Year 2011 2010 2009 2008 2007
A) Qu
ick
Assets
142.43 98.53 35.86 43.41 30.99
B)Quick
Liability
94.93 89.31 82.89 69.71 42.01
C)Quick
(A/B)
1.50 1.10 0.43 0.62 0.73

Interpretation;
It is the ratio between Quick assets and Quick liability it
idle ratio is 1:33:1. The above table shows that the firm
satisfies the ratio in the year 2011.



Financial analysis of “HANANI RUBBERS”


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Quick Ratio Graph












1.5
1.1
0.43
0.62
0.73
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Absolute Cash Ratio

Though receivables are generally more liquid
than inventories, there may be debt having doubt
regarding their reliability in time. So to get n idea about
the absolute liquidity of the concern, both inventories
and receivables are excluded from the current asset and
only absolute liquid asset such as cash in hand, cash at
bank and salable securities are taken into account.
Absolute liquidity ratios are calculated as follows


Absolute liquidity ratio = cash at bank + marketable
securities
Current liabilities



Financial analysis of “HANANI RUBBERS”


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Absolute Cash Ratio

Year 2011 2010 2009 2008 2007
A) Cash 5.03 6.56 3.50 3.02 1.30
B)Marketable
securities
- - - - -
C)Current
liability
94.9
3
89.3
1
82.8
9
69.7
1
42.0
1
D) Absolut
e Cash
ratio(a+b)
c
0.05 0.07 0.04 0.04 0.03

Interpretation;
It is ratio between cash plus marketable securities and
current liability. Its idle ratio is .75:1. The above table
shows that in all yours the ratio are not idle.



Financial analysis of “HANANI RUBBERS”


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Absolute Cash Ratio Graph


.









0.05
0.07
0.04 0.04
0.03
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Gross profit ratio

Gross profit ratio expresses relationship between gross
profit and net sales. It is obtained by dividing gross profit
by net sales and expressing this relationship as a
percentage. Gross profit is obtained by deducting cost of
goods sold from net sales. Net sales are basically
determined by deducting sales returns from sales.


Gross profit ratio = Gross profit
Sales







Financial analysis of “HANANI RUBBERS”


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Gross profit ratio

Year 2011 2010 2009 2008 2007
A) G
ross
profit
200
144.1
8
103.2
0
93.79 80.20
B)Sales
764.5
1
479.1
1
340.2
3
299.8
3
234.5
7
C)Gross
profit
ratio
(A/B)
26.16 30.09 30.33 31.28 34.19
Interpretation;
Gross profit ratio shows a decreasing trend from the
initial year to the final year. It will affect the future
running of the business



Financial analysis of “HANANI RUBBERS”


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Gross profit ratio












26.16
30.09 30.33
31.28
34.19
0
5
10
15
20
25
30
35
40
2011 2010 2009 2008 2007
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Net Profit Ratio


It is the ratio between net profit and sale.

Net Profit Ratio = Net Profit *100
Sales












Financial analysis of “HANANI RUBBERS”


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Net Profit Ratio

Year 2011 2010 2009 2008 2007
D) N
et
profit
42.64 25.57 17.35 37.42 1332
E) Sales
764.5
1
479.1
1
340.2
3
299.8
3
234.5
7
F) Net
profit
5.57 5.31 5.09 12.48 5.67

Interpretation;

The net profit ratio shows an increasing trend from 2009
to 2011. So the firm should try to maintain the same
standard in the subsequent years.




Financial analysis of “HANANI RUBBERS”


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Net Profit Ratio













5.57
5.31
5.09
12.48
5.67
0
2
4
6
8
10
12
14
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Operating Profit ratio


This Ratio revels operating Performance of business. It
should be calculated as:-
Operating Profit *100
Sales
Operating Profit
Net profit ***
Add non operating expenses ***
Less non operating Income ***
Operating profit ***








Financial analysis of “HANANI RUBBERS”


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Operating Profit Ratio

Year 2011 2010 2009 2008 2007
A) Oper
ating
Profit
74.19 51.39 32.12 30.71 26.98
B)Sales
764.5
1
479.1
1
340.2
3
299.8
3
234.5
7
C)Operating
profit
ratio
(A/B)
9.70 10.72 9.44 10.24 11.50
Interpretation;
It is the ratio between operating profit and sales. It
indicate the operating performance of business. The
above table shows that the operating performance is vary
from year after year.

Financial analysis of “HANANI RUBBERS”


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Operating Profit Ratio












Financial analysis of “HANANI RUBBERS”


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Debt Service Coverage Ratio

1. In corporate finance, it is the amount of cash flow
available to meet annual interest and principal payments
on debt, including sinking fund payments.
2. In government finance, it is the amount of export
earnings needed to meet annual interest and principal
payments on a country's external debts.
3. In personal finance, it is a ratio used by bank loan
officers in determining income property loans. This ratio
should ideally be over 1. That would mean the property
is generating enough income to pay its debt obligations.
In general, it is calculated by:




Financial analysis of “HANANI RUBBERS”


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Debt Service Coverage Ratio

Year 2011 2010 2009 2008 2007
A) Earni
ng for
debt
service
79.26 52.57 35.40 61.00 32.35
B)Interest
installmen
t
12.22 5.83 5.08 5.10 4.00
C)DSCR
(A/B)
6.48 9.01 6.96 11.96 8.08

Interpretation;
The idle DSCR is 1:33:1 from the above statement it is
clear that the firm may borrow a little portion amount
while comparing their earnings


Financial analysis of “HANANI RUBBERS”


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Debt Service Coverage Ratio graph














6.48
9.01
6.96
11.96
8.08
0
2
4
6
8
10
12
14
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Interest Coverage Ratio

This ratio revels the ability of the firm to meet interest
obligation of the current year. The ideal ratio is more
than 1
It should be calculated as
EBIT
Interest
EBIT - Earnings before interest and tax
EBIT = Earnings after tax ***
Add Interest ***
Add Taxation ***
EBIT ***






Financial analysis of “HANANI RUBBERS”


~ 81 ~


Interest Coverage Ratio

Year 2011 2010 2009 2008 2007
A) Earni
ng for
debt
service
79.26 52.57 35.40 61 32.55
B)Interest
installmen
t
12.22 5.83 5.08 5.10 4.00
C)DSCR
(A/B)
6.48 9.01 6.96 11.96 8.08

Interpretation;
The idle interest coverage ratio is greater than one. So it
means that the firm has the capacity to settle their
liabilities.

Financial analysis of “HANANI RUBBERS”


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Interest Coverage Ratio












6.48
9.01
6.96
11.96
8.08
0
2
4
6
8
10
12
14
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Capital to Total fund Ratio

It is a ratio which reveal
(1) Long term solvency of firm
(2) Extent of own fund used in operation
(3) Mode of financing
It should be calculated as follows
Share holders fund
Total Income

Share holders fund = Equity share capital+Preference
share capital+Reserve and surplus
(-) Accumulated Losses
Total Fund = Debt + Equity






Financial analysis of “HANANI RUBBERS”


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Capital to total fund Ratio

Year 2011 2010 2009 2008 2007
A) Ca
pital
171.9
8
171.3
3
156.3
0
147.6
9
59.8
8
B)Total
Fund
311.7
7
221.9
9
152.7
0
153.7
6
74.2
5
C)Capital
to total
fund
ratio
0.55 0.77 1.02 0.96 0.80

Interpretation;
From total fund owner‟s contribution id reduced year
after year that means the firm will borrow money from
outside source. So proper step is taken to reduce the
same.

Financial analysis of “HANANI RUBBERS”


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Capital to total fund Ratio











Financial analysis of “HANANI RUBBERS”


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Fixed Assets to Long Term Fund Ratio

It is a ratio between fixed assets and long term
fund
Long term fund = Share holders fund + Debt fund

It indicates fixed assets financed by long term loan. Its
ideal ratio is less than one it should be calculated as

Fixed Assets
Long term Fund







Financial analysis of “HANANI RUBBERS”


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Fixed Assets to long term fund.

Year 2011 2010 2009 2008 2007
A) Fi
xed
assets
113.78 112.29 71.28 43.77 37.07
B)Long
term
fund
311.77 221.99 152.70 153.76 74.25
C)Fixed
Assets
to long
term
fund
0.36 0.50 0.46 0.28 0.50
Interpretation;
From the above table it is clear that the ratio shows a
fluctuating trend


Financial analysis of “HANANI RUBBERS”


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Fixed Assets to long term fund.












0.36
0.5
0.46
0.28
0.5
0
0.1
0.2
0.3
0.4
0.5
0.6
2011 2010 2009 2008 2007
Financial analysis of “HANANI RUBBERS”


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Proprietary Ratio

This ratio reveals the amount of owners fund used in
financing the assets
It i s calculated by Proprietary fund
Total Asset

Proprietary fund = Equity share capital + Preference
share capital + Reserve & Surplus - Accumulated losses










Financial analysis of “HANANI RUBBERS”


~ 90 ~



Proprietary Ratio

Year 2011 2010 2009 2008
200
7
A) Capit
al
171.9
8
171.3
3
156.3
0
147.6
9
59.8
8
B)Total Fund
311.7
7
221.9
9
152.7
0
153.7
6
74.2
5
C)Proprietary
Ratio
0.55 0.77 1.02 0.96 0.80

Interpretation;
It indicates the amount of owners fund used in financing
the assets.





Financial analysis of “HANANI RUBBERS”


~ 91 ~



Proprietary Ratio Graph












Financial analysis of “HANANI RUBBERS”


~ 92 ~



Capital to debt Ratio

A measurement of a company's financial leverage,
calculated as the company's Capital divided by its
total Debt. Debt includes all short-term and long-term
obligations. Total capital includes the company's debt
and shareholders' equity, which includes common stock,
preferred stock, minority interest and net debt.


Calculated as:

Capital to Debt ratio = Capital
Debt






Financial analysis of “HANANI RUBBERS”


~ 93 ~



Capital to debt Ratio

Year 2011 2010 2009 2008 2007
A) Ca
pital
171.9
8
171.3
3
156.3
0
147.6
9
59.5
8
B)Debt
139.7
9
80.57 26.25 35.92
36.0
7
C)Capital
to Debt
ratio
0.81 0.47 0.16 0.24 0.60


Interpretation;
Capital to debt ratio shows a decreasing trend from 2007
to 2009 and from 2010 it shows an increasing trend. It
means that the firm was borrowing money from outside
source.


Financial analysis of “HANANI RUBBERS”


~ 94 ~



Capital to debt Ratio Graph












Financial analysis of “HANANI RUBBERS”


~ 95 ~



Capital gearing Ratio

A general term describing a financial ratio that compares
some form of owner's equity (or capital) to borrowed
funds. Gearing is a measure of financial leverage,
demonstrating the degree to which a firm's activities are
funded by owner's funds versus creditor's funds.


Calculated as:

Capital to Debt ratio = Capital
Debt






Financial analysis of “HANANI RUBBERS”


~ 96 ~



Capital to gearing Ratio

Year 2011 2010 2009 2008 2007
A) Ca
pital
171.9
8
171.3
3
156.3
0
147.6
9
59.5
8
B)Debt
139.7
9
80.57 25.25 35.92
36.0
7
C)Capital
gearing
ratio
0.81 0.47 0.16 0.24 0.60

Interpretation;
Capital gearing ratio shows a decreasing trend from 2007
to 2009 and from 2010 it shows an increasing trend.





Financial analysis of “HANANI RUBBERS”


~ 97 ~



Capital gearing Ratio Graph












Financial analysis of “HANANI RUBBERS”


~ 98 ~



Fixed Assets To Turn Over ratio

A financial ratio of net sales to fixed assets. The fixed-
asset turnover ratio measures a company's ability to
generate net sales from fixed-asset investments -
specifically property, plant and equipment (PP&E) -
net of depreciation. A higher fixed-asset turnover ratio
shows that the company has been more effective in using
the investment in fixed assets to generate revenues.


The fixed-asset turnover ratio is calculated as:






Financial analysis of “HANANI RUBBERS”


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Fixed Assets To Turn Over ratio

Year 2011 2010 2009 2008 2007
A) S
ales
764.5
1
479.1
1
340.2
3
299.8
3
234.5
7
B)Fixed
Assets
113.7
8
112.2
9
71.28 43.77 37.07
C)Fixed
Assets
to
turnov
er
Ratio
6.71 4.26 4.77 6.85 6.32

Intrepretation;
Fixed Assets to turnover ratio shows a decreasing trend
from the year 2008 to 2010 and in the year 2011 it shows
an increasing trend

Financial analysis of “HANANI RUBBERS”


~ 100 ~



Fixed Assets To Turn Over ratio Graph












Financial analysis of “HANANI RUBBERS”


~ 101 ~


Capital Turn Over ratio

The capital employed turnover ratio tells us the state of
the relationship between the shareholders' investment in
the business and the turnover that the management of the
business has been able to generate from it.
Capital Employed Turnover =
Sales
Capital










Financial analysis of “HANANI RUBBERS”


~ 102 ~


Capital Turnover ratio

Year 2011 2010 2009 2008 2007
A) Sal
es
764.5
1
479.1
1
340.2
3
299.8
3
234.5
7
B)Capital
employ
ed
171.9
8
171.3
3
156.3
0
147.6
9
59.58
C)capital
turnover
Ratio
4.44 2.79 2.17 2.03 3.93

Intrepretation;
Capital turnover ratio shows an increasing trend from
2008 to 2011





Financial analysis of “HANANI RUBBERS”


~ 103 ~


CapitalTurn Over ratio Graph













Financial analysis of “HANANI RUBBERS”


~ 104 ~


BALANCE SHEET AS ON 31-03-2010
A in ‘0000

SOURCE OF FUNDS
Capital 29.85
Reserves 11.63
Net worth 141.48
Secured loans 70.51
Un secured loans 10.00
Total Debt 80.51
Total Liabilities 221.99
APPLICATION OF FUNDS
Gross Block 137.89
(Less Accum Depreciation) 25.60
Net Block 112.29
Capital Work In progress 2.89
Investments 4.58
Inventories 98.53
Sundry Debtors 75.60
Cash and Bank Balances 6.56
Total Current Assets 180.69
Loans and Advances 10.00
Fixed deposits 0.85
Total CA, Loans & Advances 191.54
(Current Liabilities) 75.89
(Provision) 13.42
(Total CL & Provision) 89.31
Net Current Assets 102.23
Total Assets 221.99
Financial analysis of “HANANI RUBBERS”


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BALANCE SHEET AS ON 31-03-2009
A in ‘0000

SOURCE OF FUNDS
Capital 29.85
Reserves 96.60
Net worth 126.45
Secured loans 26.25
Un secured loans 0.00
Total Debt 26.25
Total Liabilities 152.70
APPLICATION OF FUNDS
Gross Block 90.11
(Less Accum Depreciation) 18.83
Net Block 71.28
Capital Work In progress 25.77
Investments 11.36
Inventories 35.86
Sundry Debtors 48.75
Cash and Bank Balances 3.50
Total Current Assets 88.11
Loans and Advances 38.47
Fixed deposits 0.59
Total CA, Loans & Advances 127.17
(Current Liabilities) 40.62
(Provision) 42.27
(Total CL & Provision) 82.89
Net Current Assets 44.28
Total Assets 152.69
Financial analysis of “HANANI RUBBERS”


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BALANCE SHEET AS ON 31-03-2008

A in ‘0000
SOURCE OF FUNDS
Capital 29.85
Reserves 87.99
Net worth 117.84
Secured loans 35.92
Un secured loans 0.00
Total Debt 35.92
Total Liabilities 153.76
APPLICATION OF FUNDS
Gross Block 59.02
(Less Accum Depreciation) 15.25
Net Block 43.77
Capital Work In progress 15.53
Investments 15.00
Inventories 43.41
Sundry Debtors 37.94
Cash and Bank Balances 3.02
Total Current Assets 84.37
Loans and Advances 29.24
Fixed deposits 35.55
Total CA, Loans & Advances 149.16
(Current Liabilities) 37.30
(Provision) 32.41
(Total CL & Provision) 69.71
Net Current Assets 79.45
Total Assets 153.75

Financial analysis of “HANANI RUBBERS”


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BALANCE SHEET AS ON 31-03-2007
A in ‘0000
SOURCE OF FUNDS
Capital 21.40
Reserves 16.78
Net worth 38.18
Secured loans 36.07
Un secured loans 0.00
Total Debt 36.07
Total Liabilities 72.45
APPLICATION OF FUNDS
Gross Block 48.99
(Less Accum Depreciation) 11.82
Net Block 37.07
Capital Work In progress 2.99
Investments 0.00
Inventories 30.99
Sundry Debtors 27.14
Cash and Bank Balances 1.30
Total Current Assets 59.43
Loans and Advances 16.60
Fixed deposits 0.15
Total CA, Loans & Advances 76.18
(Current Liabilities) 28.98
(Provision) 13.03
(Total CL & Provision) 42.01
Net Current Assets 34.17
Total Assets 74.23


Financial analysis of “HANANI RUBBERS”


~ 108 ~




PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED 31-03-2011
A in ‘0000
INCOME
Sales 764.51
Other Income 5.07
Stock Adjustments 32.28
Total Income 801.86
EXPENDITURE
Raw Materials 552.41
Power And Fuel 2.91
Employee Cost 37.48
Other Manufacturing Expenses 3.99
Selling and Admin Expenses 122.26
Miscellaneous Expenses 3.55
Total Expenses 722.60
Operating Profit 74.19
PBDIT 79.26
Interest 12.22
Financial analysis of “HANANI RUBBERS”


~ 109 ~

PBDT 67.04
Depreciation 7.94
Profit Before tax 59.10
Extra Ordinary items 0.00
PBT (Post Extra Ord Items) 59.10
Tax 16.47
Reported Net profit 42.64















Financial analysis of “HANANI RUBBERS”


~ 110 ~




PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED 31-03-2010
A in ‘0000
INCOME
Sales 479.11
Other Income 1.12
Stock Adjustments 52.00
Total Income 532.23
EXPENDITURE
Raw Materials 354.44
Power And Fuel 2.85
Employee Cost 26.81
Other Manufacturing Expenses 2.83
Selling and Admin Expenses 89.93
Miscellaneous Expenses 2.86
Total Expenses 479.72
Operating Profit 51.39
PBDIT 52.51
Interest 5.83
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PBDT 46.68
Depreciation 7.15
Profit Before tax 39.53
Extra Ordinary items (0.04)
PBT (Post Extra Ord Items) 39.49
Tax 14.00
Reported Net profit 25.47















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PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED 31-03-2009
A in ‘0000
INCOME
Sales 340.23
Other Income 3.28
Stock Adjustments (10.03)
Total Income 333.48
EXPENDITURE
Raw Materials 205.53
Power And Fuel 0.95
Employee Cost 19.06
Other Manufacturing Expenses 1.46
Selling and Admin Expenses 68.96
Miscellaneous Expenses 2.12
Total Expenses 298.08
Operating Profit 32.12
PBDIT 35.40
Interest 5.08
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PBDT 30.32
Depreciation 4.05
Profit Before tax 26.27
Extra Ordinary items 0.00
PBT (Post Extra Ord Items) 26.27
Tax 8.93
Reported Net profit 17.35















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PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED 31-03-2008
A in ‘0000
INCOME
Sales 299.83
Other Income 30.29
Stock Adjustments 12.94
Total Income 343.06
EXPENDITURE
Raw Materials 201.65
Power And Fuel 0.60
Employee Cost 15.43
Other Manufacturing Expenses 1.30
Selling and Admin Expenses 61.34
Miscellaneous Expenses 1.74
Total Expenses 282.06
Operating Profit 30.71
PBDIT 61.00
Interest 5.10
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PBDT 55.90
Depreciation 3.47
Profit Before tax 52.43
Extra Ordinary items 0.00
PBT (Post Extra Ord Items) 52.43
Tax 15.01
Reported Net profit 37.42















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PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED 31-03-2007
A in ‘0000
INCOME
Sales 234.57
Other Income 5.37
Stock Adjustments 9.16
Total Income 249.10
EXPENDITURE
Raw Materials 152.56
Power And Fuel 0.40
Employee Cost 9.85
Other Manufacturing Expenses 0.72
Selling and Admin Expenses 52.13
Miscellaneous Expenses 1.09
Total Expenses 216.75
Operating Profit 26.98
PBDIT 32.35
Interest 4.00
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PBDT 28.35
Depreciation 2.94
Profit Before tax 25.41
Extra Ordinary items 0.03
PBT (Post Extra Ord Items) 25.44
Tax 7.20
Reported Net profit 13.32















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CHAPTER – 5
FINDINGS








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FINDINGS

 current ratio is the ratio between current assets and
current liability. Its idle ratio is 2:1. The firm
satisfies the idle ratio in the year 2011.
 Quick ratio is the ratio between Quick assets and
Quick liability it idle ratio is 1:33:1. The firm
satisfies the idle ratio in the year 2011.
 Absolute cash ratio is the ratio between cash plus
marketable securities and current liability. Its idle
ratio is .75:1. The firm does not satisfy the idle ratio
in any year.
 Gross profit ratio shows a decreasing trend in the
initial year to last year. It will affect the future
running of the firm.
 The net profit ratio shows a increasing trend form
the year 2009 to 2011.
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 Operating profit ratio is the ratio between operating
profit and sales. It indicates the operating


performance of business. Form the study it is found
that the operating performance is vary from year
after year.

The idle interest coverage ratio is greater than one.
So it means that the firm has the capacity to settle
their liabilities.


From total fund owners contribution is reduced
form the year 2010 that means the form is
borrowing money from outside source

 From the study it is clear that the fixed asset to long
term fund ratio shows a fluctuating trend. Which
means the addition of fixed assets is made with the
operating income of business.
 Capital to DEBT ratio shows a decreasing trend
from 2007 to 2009 and from 2010 it shows a
Increasing trend it means the firm is borrowing
money from outside source

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 Fixed assets turn over ratio is increased in last year
It means addition to fixed asset is made with
addition to sales

 Capital turnover ratio shows a increasing trend
from 2008 to 2011.












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CHAPTER – 6
SUGGESTIONS







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SUGGESTION

 Current ratio is the ratio between current assets and
current liability. Its idle ratio is 2:1. The firm
satisfies the idle ratio in the year 2011. Try to
maintain the same.
 Quick ratio is the ratio between Quick assets and
Quick liability it idle ratio is 1:33:1. The firm
satisfies the idle ratio in the year 2011. The firm
should try to maintain the same.
 Absolute cash ratio is the ratio between cash plus
marketable securities and current liability. Its idle
ratio is .75:1. The firm does not satisfy the idle ratio
in any year. So all the steps are taken for
maintaining the idle ratio in the subsequent years.
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 Gross profit ratio shows a decreasing trend in the
initial year to last year. It will affect the future
running of the firm. So the firm should try to


increasing their operating efficiency in the
subsequent years.
 The net profit ratio shows a increasing trend form
the year 2009 to 2011. Try to maintain the same in
the subsequent years.
 Operating profit ratio is the ratio between operating
profit and sales. It indicates the operating
performance of business. Form the study it is found
that the operating performance is vary from year
after year. So the firm should try to increasing their
operating efficiency in the subsequent years

From total fund owners contribution is reduced
form the year 2010 that means the form is
borrowing money from outside source. So the firm
should take all the steps to reduce the borrowings
from out side source.


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.
 Capital to DEBT ratio shows a decreasing trend
from 2007 to 2009 and from 2010 it shows a
increasing trend it means the firm is borrowing
money from outside source. Take all steps to
reduce the borrowing of outside fund.

 Fixed assets turn over ratio is increased in last year
It means addition to fixed asset is made with
addition to sales.the firm should maintain the
increasing trend in the subsiquent years.






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CHAPTER – 7
CONCLUSION






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CONCLUSION

A Hanani rubber is a manufacturing firm
under this study. Analyzed the financial debt of the firm
from the financial year 2007 to 2011. During this period
studied their different financial ratios. By verifying all
the ratios, it is concluded that the firm is financially
sound in all respect. Within a short period of time, the
firm will create 100% of result in their operations.
Therefore, the study concludes that the firm can expand
their all activities at all levels.



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CHAPTER – 8
BIBLIOGRAPHY

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BIBLIOGRAPHY

BOOKS:
Financial Management, K.C. Kapoor, L.R.
Maheshwari, Reliance Publication 13
th
Edition.
Financial Accounting, K.G.C. Nair Chandh,
Publication 9
th
Edition.
Management Accounting, Khan and Jain, Tata
Mc Grow Hill, 3rd Edition.
Research Methodology, C.R. Kothari, 2
nd
Edition,
New Age International (P) Ltd.,

REPORT:
Annual Report of Hanani rubbers , from the
financial year 2007to 2011.
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www.financialanalysis .com