You are on page 1of 68

# RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

EXECUTIVE
SUMMARY

1
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

EXECUTIVE SUMMARY

The term ratio refers to the mathematical relationship between any two inter related
variable relationship. The term accounting ratio is used to describe significant relationship which
exist between figures shown in balance sheet & profit & loss a/c. In a accounting management.
( J.BATTY)Ratio analysis is a process of identifying financial strength & weaknesses of the firm
by properly establishing relationship between the items of the in balance sheet & profit & loss
a/c (G.FOSTER)
Ratio analysis is an important techniques of financial statement analysis it is
important for jading the companies efficiency in term of its operating ratio analysis also used in
find out location weakness of the company ratio used to analysis the company post financial
performance they can also be used to establish future trends of its financial performance it is
essential for the company to known how well it is performing over the year as compared to the
other firms ratio analysis is useful tool to financial position of the company easily analysis.
Ratio analysis is an effectiveness tool used for measuring the operation result of the
company it facilities overall company accounting information to be summarized & simplified in
a required from the ratio analysis failitedable conducting tread analysis is which is important for
decision making of the company .it also help in the assessment of the liquidity operation
effectiveness it also provide .a basic for both inter-firm as well as inter firm comparison.
Ratio is express by dividing one figure by the other related figure. Thus a ratio is an
expression relating one number to another. It is simply the quotient of two numbers. It can be
expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many
times. As accounting ratio is an expression relating two figures or accounts or two sets of
account heads or group contain in the financial statements.

2
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

OBJECTIVES OF
THE
STUDY

3
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## To study the profitability position of the company.

To study & analysis the financial position & performances of the company.
.

4
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

METHODOLOGY
OF THE STUDY

5
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

RESEARCH METHODOLOGY

The focus of this chapter is on the methodology used for the collection of data for research. Data
constitutes the subject matter of the analyst. The primary sources of the collection of data are
observations, interviews and the questionnaire technique. The secondary sources are collection
of data is from the printed and annually published material.
Primary data:Data that is collected for the specific purpose at hand is called as primary data.
Information relating to the project was collected during formal and informal discussions with the
account officer
Secondary Data:Secondary data highlights the contextual familiarities for primary data collection. It
provides rich insights into the research process.
Secondary data is collected through following sources:
1. Published Sources:
Annual report of Mahindra composite Ltd from the year from 2013-08 to 2014
2.

## Profit and loss accounts statements.

3.

Balance sheet

6
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

LIMITATIONS OF

STUDY
7
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## LIMITATION OF STUDY OF STUDY

The ratio is calculated from past financial statement & is not indicator of future.

## The study was limited to only two year financial data.

8
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

COMPANY

PROFILE

COMPANY PROFILE :
9
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Mahindra Composites Ltd.

Main Activities:
Automotive and Transportation Equipment
Manufacturing
\

COMPANY INFORMATION

Full name

Status: Listed

## Legal Form: Public Limited Company

Operational Status: Operational

Legal Address

## Financial Auditors: Deloitte Haskins & Sells

Maharashtra; 411018

(2012)
Incorporation Date: August 18, 1982

10
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## VISION & MISSION

To become the leading SMC component manufacturer and also be the most advanced
compound manufacturer technologically.

To change the product mix from compound to component for a variety of sectors;
preferably in niche segments.

## To devote energy and attention on innovation & advancement of technology.

11
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

HISTORY :
In 1982 Mahindra and Mahindra Group decided to set up Siro Plast Ltd., a company slated to
provide quality products in the area of engineered plastic composites. Since then, Mahindra
Composites (Formerly Siro Plast) has come a long way. State-of-the-art technology and an inbuilt capacity for customization have helped position the company as a leader in this niche
segment.
A tie-up from 1983-1994 with Menzolit GmbH of Germany, the largest manufacturer of
composites in Europe, brought in advanced technology addressing manufacturing formulations,
manufacturing

processes,

application

engineering

and

mould

design

cycles.

## Today, Mahindra Composites prides itself on its capabilities in implementing flexible

technology solutions to meet customer requirements through:

## The usage of specific types of reinforcements to service individual demands, such as

chopped glass roving, chopped strand mats, continuous roving, woven roving, synthetic
fibers and other such materials

## Customer-specific manufacturing cycles

A continued search for new applications for the company's range of products

12
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Sustaining these efforts through constant interactions with user industries

COMPANY DESCRIPTION

## Mahindra Composites (MAHINCOMP), incorporated on Aug. 18, 1982, is a leading polymer

composite player in India. Established in technical collaboration with Menzolit, Germany, it was
earlier known as Siro Plast and got its present name with effect from Jan. 17, 2007. The
company is part of the Mahindra & Mahindra group, which has business interests in the
automotive, farm equipment, financial services, trade, retail & logistics, infrastructure
development, information technology, systech, after market.

13
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

COMPANY OVERVEIW

In 1982 Mahindra and Mahindra Group decided to set up Siro Plast Ltd., a company slated to
provide quality products in the area of engineered plastic composites. Since then, Mahindra
Composites (Formerly Siro Plast) has come a long way. State-of-the-art technology and an inbuilt capacity for customization have helped position the company as a leader in this niche
segment.
A tie-up from 1983-1994 with Menzolit GmbH of Germany, the largest manufacturer of
composites in Europe, brought in advanced technology addressing manufacturing formulations,
manufacturing processes, application engineering and mould design cycles.
Today, Mahindra Composites prides itself on its capabilities in implementing flexible technology
solutions to meet customer requirements through:

14
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## The usage of specific types of reinforcements to service individual demands, such as

chopped glass roving, chopped strand mats, continuous roving, woven roving, synthetic
fibers and other such materials

## Customer-specific manufacturing cycles

A continued search for new applications for the company's range of products

## Sustaining these efforts through constant interactions with user industries

15
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Mahindra,composites,brand

Since 1945, weve built our company around the core idea that people will succeed if they are
just given the opportunity. Employees across the Group constantly challenge conventional
thinking to create solutions that make a significant difference in the lives of our customers.
Thats why everything we buildbe it a tractor, financial service, solar-powered lamp, or
softwareis designed to empower you to reach your potential.
Internally, we follow three basic tenetsaccepting no limits, thinking alternatively, and driving
positive change in everything we do. These brand pillars guide all our actions and business
decisions from deciding whether or not to enter a new field or planning a portfolio of
services.

16
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## MAHINDRA COMPOSITES PURPOSE AND VALUES

Our motivation to give our best every day comes from our core purpose: we will challenge
conventional thinking and innovatively use all our resources to drive positive change in the lives
of our stakeholders and communities across the world, to enable them to Rise.

Our products and services support our customers ambitions to improve their living standards;
our responsible business practices positively engage the communities we join through
employment, education, and outreach; and our commitment to sustainable business is bringing
green technology and awareness into the mainstream through our products, services, and lightfootprint manufacturing processes.

17
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## This commitment to sustainabilitysocial, economic, and environmentalrests upon a set of

core values. They are an amalgamation of what we have been, what we are, and what we want to
be. These values are the compass that guides our actions, both personal and corporate. They are:

Professionalism
We have always sought the best people for the job and given them the freedom and the
opportunity to grow. We will continue to do so. We will support innovation and well-reasoned
risk taking, but will demand performance.

## Good corporate citizenship

As in the past, we will continue to seek long-term success, which is in alignment
with the needs of the countries we serve. We will do this without compromising
ethical business standards.

Customer first
We exist and prosper only because of the customer.

## changing needs and expectations of our customers speedily, courteously and

effectively.

Quality focus
Quality is the key to delivering value for money to our customers. We will make
quality a driving value in our work, in our products and in our interactions with
others. We will do it 'First Time Right.'
Dignity of the individual We will value individual dignity, uphold the right to
express disagreement and respect the time and efforts of others. Through our
actions, we will nurture fairness, trust, and transparency.
18
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## MAHINDRA COMPOSITES LEADERSHIP:

We have always believed that ethics and good governance coupled with vision and grit are
fundamental to being a successful business, and our leadership team embodies these beliefs.

Youll find many interesting personalities here; people that have helped shape the evolution of
our businesses and continue to guide our destiny. Youll come across achievements and awards
that we believe are merely a by-product of the work that we do.

19
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

THEROTICAL BACKGROUND

Introduction:Meaning of ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is
an expression relating one number to another. It is simply the quotient of two numbers. It can be
expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many
times. As accounting ratio is an expression relating two figures or accounts or two sets of
account heads or group contain in the financial statements.
Meaning of Ratio Analysis:
Ratio analysis is a widely-used tool of financial analysis. It can be used to compare the
risk and return relationship of firms of different sizes. It is defined as the systematic use ratio to
interpret the financial statement so that the strengths and weaknesses of a firm as well as
historical performance and current financial condition can be determined. The term ratio refers to
the numerical or quantitative relationship between two items /variable. This relationship can be
expressed as (i) percentages, say, net profits are 25percent of sales (assuming net profits of Rs
25,000 and sales of Rs. 1, 00,000), (ii) fraction (net profit is one fourth of sales) and (iii)
proportion of numbers (the relationship between net profits and sales is 1:4).these alternative
methods of expressing items which are related to each other are, for purposes of financial
analysis, referred to as ratio analysis. It should be noted that computing the ratios does not add
any information not already inherent in the above figures of profit and sales. What the ratio does
is that they reveal the relationship in a more meaningful way so as to enable equity investors;
management and lenders make better investment and credit decisions.
The rationale of ratio analysis lies in the fact that it makes related information
comparable. A single figure by itself has no meaning but when expressed in terms of a related
figure, it yields significant inferences. For instance, the figure of net profits of a firm amount to,
say, Rs10lakhs throws no light on its adequacy or otherwise. The figure of net profits has to be
considered in relation to other variables. How does it stand in relation to sales? What does it
represent by way of return on total assets used or total capital employed? If, therefore, net profits
20
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

are shown in terms of their relationship with items such as sales, assets, capital employed, equity
capital and so on, meaningful conclusions can be drawn regarding their adequacy. To carry the
above example further assuming the capital employed to be Rs 50lakh and Rs 100lakh, the net
profits are 20 percent and 10 percent respectively. Ratio analysis, thus, as a quantitative tool,
enables analysts to draw quantitative answers to questions such as: are the net profits adequate?
Are the assets being used efficiently? Is the firm solvent? Can the firm meet its current
obligations and so on?
Objectives of Ratio Analysis:

## To identify the financial strengths and weakness of the company.

Through the net profit ratio and other profitability ratio, understand the Profitability
position of the company.

## Evaluating company s performance relating to Financial Statement Analysis.

To know the liquidity position of the company, with the help of Current Ratio.

To find out the utility of financial ratio in credit analysis and determining The financial
capability of the firm.

21
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Forms of Ratio:
Since a ratio is a mathematical relationship between to or more variables / accounting
figures, such relationship can be expressed in different ways as follows
A] As a pure ratio:
For example the equity share capital of a company is Rs. 20,00,000 & the preference
share capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is
20,00,000: 5,00,000 or simply 4:1.
B] As a rate of times:
In the above case the equity share capital may also be described as 4 times that of
preference share capital. Similarly, the cash sales of a firm are
Rs. 12, 00,000 & credit sales are Rs. 30,00,000. so the ratio of credit sales to cash sales can be
described as 2.5 [30,00,000/12,00,000] or simply by saying that the credit sales are 2.5 times
that of cash sales.
C] As a percentage:
In such a case, one item may be expressed as a percentage of some other items. For
example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000,
then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000]

## Steps in Ratio Analysis:

The ratio analysis requires two steps as follows:
1] Calculation of ratio.
2] Comparing the ratio with some predetermined standards.
The standard ratio may be the past ratio of the same firm or industrys average ratio or a
projected ratio or the ratio of the most successful firm in the industry. In interpreting the ratio of
a particular firm, the analyst cannot reach any fruitful conclusion unless the calculated ratio is
22
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

compared with some predetermined standard. The importance of a correct standard is oblivious
as the conclusion is going to be based on the standard itself.
Types of Comparison
The ratio can be compared in three different ways
1] Cross section analysis:
One of the way of comparing the ratio or ratios of the firm is to compare them with the
ratio or ratios of some other selected firm in the same industry at the same point of time. So it
involves the comparison of two or more firms financial ratio at the same point of time. The cross
section analysis helps the analyst to find out as to how a particular firm has performed in relation
to its competitors. The firms performance may be compared with the performance of the leader
in the industry in order to uncover the major operational inefficiencies. The cross section analysis
is easy to be undertaken as most of the data required for this may be available in financial
statement of the firm.
2] Time series analysis:
The analysis is called Time series analysis when the performance of a firm is evaluated
over a period of time. By comparing the present performance of a firm with the performance of
the same firm over the last few years, an assessment can be made about the trend in progress of
the firm, about the direction of progress of the firm. Time series analysis helps to the firm to
assess whether the firm is approaching the long-term goals or not. The Time series analysis looks
for (1) important trends in financial performance (2) shift in trend over the years (3) significant
deviation if any from the other set of data\
3] Combined analysis:
If the cross section & time analysis, both are combined together to study the behavior &
pattern of ratio, then meaningful & comprehensive evaluation of the performance of the firm can
definitely be made. A trend of ratio of a firm compared with the trend of the ratio of the standard
firm can give good results. For example, the ratio of operating expenses to net sales for firm may
be higher than the industry average however, over the years it has been declining for the firm,
whereas the industry average has not shown any significant changes.
23
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

The combined analysis as depicted in the above diagram, which clearly shows that the
ratio of the firm is above the industry average, but it is decreasing over the years & is
approaching the industry average.
Pre-requisites to Ratio Analysis
In order to use the ratio analysis as device to make purposeful conclusions, there are
certain pre-requisites, which must be taken care of. It may be noted that these prerequisites are
not conditions for calculations for meaningful conclusions. The accounting figures are inactive in
them & can be used for any ratio but meaningful & correct interpretation & conclusion can be
arrived at only if the following points are well considered.
1

The dates of different financial statements from where data is taken must be same.

If possible, only audited financial statements should be considered, otherwise there must
be sufficient evidence that the data is correct.

Accounting policies followed by different firms must be same in case of cross section
analysis otherwise the results of the ratio analysis would be distorted.

One ratio may not throw light on any performance of the firm. Therefore, a group of
ratios must be preferred. This will be conductive to counter checks.

Last but not least, the analyst must find out that the two figures being used to calculate a
ratio must be related to each other, otherwise there is no purpose of calculating a ratio.

24
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Classification of ratio:Classification of Ratio

Based on Financial

1] BALANCE SHEET
RATIO
2] REVENUE

Based on Function

1] LIQUIDITY RATIO

SHORT TERM

3] ACTIVITY RATIO

CREDITORS

4] PROFITABILITY

RATIO

RATIO

RATIO

1] RATIOS FOR

2] LEVERAGE RATIO

STATEMENT

3] COMPOSITE

## Based on User Statement

5] COVERAGE

RATIO

2] RATIO FOR
SHAREHOLDER

3] RATIOS FOR

MANAGEMENT

4] RATIO FOR

25
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

LONG TERM
CREDITORS

26
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Based On Financial Statement:

Accounting ratios express the relationship between figures taken from financial
statements. Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of
classification of ratios is based upon the sources from which are taken.
1] Balance sheet ratio:
If the ratios are based on the figures of balance sheet, they are called Balance Sheet
Ratios. E.g. ratio of current assets to current liabilities or ratio of debt to equity. While
calculating these ratios, there is no need to refer to the Revenue statement. These ratios study the
relationship between the assets & the liabilities, of the concern. These ratio help to judge the
liquidity, solvency & capital structure of the concern. Balance sheet ratios are Current ratio,
Liquid ratio, and Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working
capital ratio.

2] Revenue ratio:
Ratio based on the figures from the revenue statement is called revenue statement ratios.
These ratios study the relationship between the profitability & the sales of the concern. Revenue
ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit
ratio, Stock turnover ratio.

3] Composite ratio:
These ratios indicate the relationship between two items, of which one is found in the
balance sheet & other in revenue statement.
There are two types of composite ratios-

27
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Some composite ratios study the relationship between the profits & the investments of the
concern. E.g. return on capital employed, return on proprietors fund, return on equity
capital etc.

Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend
payout ratios, & debt service ratios

28
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Based On Function:

Accounting ratios can also be classified according to their functions in to liquidity ratios,
leverage ratios, activity ratios, profitability ratios & turnover ratios.

1] Liquidity ratios:
It shows the relationship between the current assets & current liabilities of the concern
e.g. liquid ratios & current ratios.
2] Leverage ratios:
It shows the relationship between proprietors funds & debts used in financing the assets
of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietory ratios.
3] Activity ratios:
It shows relationship between the sales & the assets. It is also known as Turnover ratios
& productivity ratios e.g. stock turnover ratios, debtors turnover ratios.
4] Profitability ratios:
a

It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios,
operating net profit ratios, expenses ratios

It shows the relationship between profit & investment e.g. return on investment, return on
equity capital.

5] Coverage ratios:
It shows the relationship between the profit on the one hand & the claims of the outsiders
to be paid out of such profit e.g. dividend payout ratios & debt service ratios.

29
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

BASED ON USER:
1] Ratios for short-term creditors:
Current ratios, liquid ratios, stock working capital ratios
2] Ratios for the shareholders:
Return on proprietors fund, return on equity capital
3] Ratios for management:
Return on capital employed, turnover ratios, operating ratios, expenses ratios
4] Ratios for long-term creditors:
Debt equity ratios, return on capital employed, proprietor ratios.

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 assests with the current liabilities. It is also known as working
capital ratio or solvency ratio. It is expressed in the form of pure ratio.
E.g. 2:1
Formula:
Current assets
Current ratio =
Current liabilities
30
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

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, within 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
measures the liquidity of the current assets and the ability of a company to meet its short-term
debt obligation.
CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash
in the operating cycle of the firm and provides the funds needed to pay for CL. Higher the
current ratio, greater the short-term solvency. 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 shortterm 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.
Quick Ratio:
Meaning:
Quick ratio is also known as acid test ratio or liquid ratio. Quick ratio compare 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:
Quick ratio

## Current assets inventory

31
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Current liabilities

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to
those current assets that can be converted into cash immediately without any value strength. QA
includes 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.
QR 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.
Earnings 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 earning 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:NPAT
Earnings per share =
Number of equity share

The higher EPS will attract more investors to acquire shares in the company as it
indicates that the business is more profitable enough to pay the dividends in time. But remember

32
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

not all profit earned is going to be distributed as dividends the company also retains some profits
for the business

## Dividend per Share:Meaning:

DPS shows how much is paid as dividend to the shareholders on each share held.
Formula:

## Dividend Paid to Ordinary Shareholders

Dividend per Share =
Number of Ordinary Shares

## Dividend Payout Ratio:Meaning:

Dividend Pay-out Ratio shows the relationship between the dividend paid to equity shareholders
out of the profit available to the equity shareholders.
Formula:
Dividend payout ratio =

100

## Earning per share

D/P ratio shows the percentage share of net profits after taxes and after preference dividend has
been paid to the preference equity holders.

33
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Gearing
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. This is also known as leverage or trading on equity. The Capital-gearing ratio
shows the relationship between two types of capital viz: - equity capital & preference capital &
long term borrowings. It is expressed as a pure ratio.
Formula:
Preference capital+ secured loan
Capital gearing ratio =
Equity capital & reserve & surplus
Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a
concern.
Profitability:
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
profitability ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit
Margin.
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
34
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

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.
Formula:
Gross profit
Gross profit ratio

x 100
Net sale

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:
NPAT
Net profit ratio =

x 100
Net sales

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,
35
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

administration, selling, financing, pricing and tax management. Jointly considered, the gross and
net profit margin ratios provide an understanding of the cost and profit structure of a firm.
Return On Capital Employed: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 longterm 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. ROCE indicates the efficiency with
which the long-term funds of a firm are utilized.
Formula:
NPAT
Return on capital employed =

x100
Capital employed

Financial:
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:

36
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Debtors turnover ratio: (DTO)

Meaning:
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:

sale

## Debtors turnover ratio =

Avg. debtors
Stock Turnover Ratio
Meaning:
ITR refers to the number of times the inventory is sold and replaced during the accounting
period.
Formula:
COGS
Stock Turnover Ratio =
Average stock

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 figure (in this
case, cost of goods sold) is related to a stock figure (inventories).

37
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Fixed Assets Turnover (Fat)

The FAT ratio measures the net sales per rupee of investment in fixed assets.
Formula:
Net sales
Fixed assets turnover =
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 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 owners 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 fund
Proprietary ratio

OR
Total fund

38
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## 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:
Closing Stock
Stock working capital ratio =
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 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. E.g. 2:1
Formula:
Total long-term debt
39
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Debt equity ratio =

Total shareholders fund

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 proprietors equity or return on
shareholders investment or investment ratio. This ratio indicates the relationship between net
profits earned & total proprietors 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 owners fund at disposal. This ratio is of
practical importance to prospective investors & shareholders.

Formula:
NPAT
Return on proprietors fund =

x 100
Proprietors fund

## Creditors Turnover Ratio:

40
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

It is same as debtors 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
Net credit purchase
Credit turnover ratio =
Average creditors

365 days
Average age of accounts payable =
Credit turnover ratio

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.

## 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: -

41
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

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 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 ratios are 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 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 measures 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 reasonable return to its owners & secure optimum

42
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

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 the those of the competitors, the 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 favorable or unfavorable. 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.

## 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.

43
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

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.

## 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 companys 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.

## 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.
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.

44
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## 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.
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.

## 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 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
45
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

to know the financial & operational characteristics of an organisation & take the suitable
decision.

## Users of Ratio Analysis

Financial statements are used and analyzed by a different group of parties, these groups consists
of people both inside and outside a business. Generally, these users are:
A. Internal Users: are owners, managers, employees and other parties who are directly
connected with a company:
1. Owners and managers require financial statements to make important business decisions that
affect its continued operations. Financial analysis is then performed on these statements to
provide management with more detailed information. These statements are also used as part of
management's report to its stockholders, and it form part of the Annual Report of the company.
2. Employees also need these reports in making collective bargaining agreements with the
management, in the case of labor unions or for individuals in discussing their compensation,
promotion and rankings.

B. External Users: are potential investors, banks, government agencies and other parties who
are outside the business but need financial information about the business for numbers of
reasons.
1. Prospective investors make use of financial statements to assess the viability of investing in a
business. Financial analyses are often used by investors and is prepared by professionals
(financial analysts), thus providing them with the basis in making investment decisions.
2. Financial institutions (banks and other lending companies) use them to decide whether to
give a company with fresh loans or extend debt securities (such as a long-term bank loan ).
3. Government entities (tax authorities) need financial statements to ascertain the propriety and
accuracy of taxes and duties paid by a company.

46
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

4. Media and the general public are also interested in financial statements of some companies for
a variety of reasons.
Which Ratio for whom:
As before mentioned there are varieties of people interested to know and read these information
and analyses, however different people for different needs. And it is because each of these groups
has different type of questions that could be answered by a specific number and ratio. Therefore
we can say there are different ratios for different groups, these groups with the ratio that suits
them is listed below:
1. Investors: These are people who already have shares in the business or they are willing to be
part of it. So they need to determine whether they should buy shares in the business, hold on to
the shares they already have or sell the shares they already own. They also want to assess the
ability of the business to pay dividends. As a result the Return on Capital Employed Ratio is
the one for this group.
2. Lenders: This group consists of people who have given loans to the company so they want to
be sure that their loans and also the interests will be paid and on the due time. Gearing Ratios
will suit this group.
3. Managers: Managers might need segmental and total information to see how they fit into the
overall picture of the company which they are ruling. And Profitability Ratios can show them
what they need to know.
4. Employees: The employees are always concerned about the ability of the business to provide
remuneration, retirement benefits and employment opportunities for them, therefore these
information must be find out from the stability and profitability of their employers who are
responsible to provide the employees their need. Return on Capital Employed Ratio is the
measurement that can help them.
5. Suppliers and other trade creditors: Businesses supplying goods and materials to other
businesses will definitely read their accounts to see that they don't have problems, after all, any
supplier wants to know if his customers are going to pay them back and they will study the
Liquidity Ratio of the companies.

47
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

6. Customers: Customers are interested to know the Profitability Ratio of the business with
which they are going to have a long term involvement and are dependent on the continuance
of presence of that.
7. Governments and their agencies: They are concerned with the allocation of resources and,
the activities of businesses. To regulate the activities of them, determine taxation policies and as
the basis for national income and similar statistics, they calculate the Profitability Ratio of
businesses.
8. Local community: Financial statements may assist the public by providing information about
the trends and recent developments in the prosperity of the business and the range of its activities
as they affect their area so they are interested in lots of ratios.
9. Financial analysts: They need to know various matters, for example, the accounting concepts
employed for inventories, depreciation, bad debts and so on .therefore they are interested in
possibly all the ratios.
10. Researchers: Researchers' demands cover a very wide range of lines of enquiry ranging
from detailed statistical analysis of the income statement and balance sheet data extending over
many years to the qualitative analysis of the wording of the statements depending on their nature
of research.

48
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

DATA ANALYSIS
AND
INTERPRETATION

49
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Calculation and Interpretation of Ratios

Net profit ratio: -

Net profit

X 100

Net sales
Year
Net profit

2013-14
0.63

Net sales

66.04

0.95%

2012-13
0.21
50.34
0.41%

1.00%
0.90%
0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%

2013-14

2012-13

## NET PROFIT RATIO

INTERPRETATION:
From the above table show that in 2014 the firm net profit improved from
0.41 to 0.95 which is indicate the firm efficiently managed manufacturing&
trading operation as compared to previous year.

50
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Current Ratio:Current ratio: -

Current assets
Current liabilities

Year

2013-14

2012-13

Current assets

27.91

20.85

Current

19.44

12.31

liabilities
Current ratio

1.42

1.69

Current ratio
1.75
1.7
1.65
1.6
1.55
1.5
1.45
1.4
1.35
1.3
1.25

2013-14

2012-13
Current ratio

CURRENT RATIO
INTERPRETATION:
From the above table show that the standard norms for current ratio is 2:1. During the
year2013 the ratio is 1.69 and it has decrease to 1.42 during the year 2014 the ratio is below the
acceptable standard .so the ratio was not satisfactory

51
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Quick Ratio:Quick ratio: -

Quick assets
Quick liabilities

Year

2013-14

2012-13

Quick assets

22.29

15.11

Quick liabilities

17.98

9.93

Quick ratio

1.24

1.52

Quick ratio
1.6
1.4
1.2
1

Quick ratio

0.8
0.6
0.4
0.2
0
2013-14

2012-13

QUICK RATIO
INTERPRETATION:

From the above table show that the standard norms for current ratio is 1:1.quick ratio is
decrease in the year 2014 to 1.52 to 1.24 however the ratio was above the standard norms so the
ratio was satisfactory.
52
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Cost of goods sold

Average inventory

Year

2013-14

2012-13

66.04

50.34

Average stock

5.62

5.74

11.75Times

8.77Times

14
12
10
8
6
4
2
0
2013-14

2012-13

## INVENTORY TURNOVER RATIO

INTERPRETATION:
From the above table show that the Inventory turnover ratio is 8.77times in the year 2013 it is
increased to 11.75 in the year 2014 , inventory turnover ratio increased for year by year that is
company sale increased.

53
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Debt Equity Ratio:Debt equity ratio: -

Long-term debt
Shareholders equity

Year

2013-14

2013-14

Long-term debt

6.98

7.25

Shareholders equity

15.43

14.63

0.45

0.50

0.51
0.5
0.49
0.48

0.47
0.46
0.45
0.44
0.43
0.42
2013-14

2013-14

## DEBT EQUITY RATIO

INTERPRETATION:
From the above table show that the bebt equity ratio for the year 2014 is 0.45 which is less as
compared to debt equity ratio of the year 2013 is 0.50 its due to decrease in long term debt
54
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

Proprietors Fund

X 100

Total assets

Year

2013-14

2012-13

Proprietors fund

15.43

14.63

Total asset

31.96

23.92

Proprietary fund

48%

61%

ratio

## Proprietary fund ratio

70%
60%
50%
Proprietary fund ratio

40%
30%
20%
10%
0%
2013-14

2012-13

## PROPERITER FUND RATIO

INTERPRETATION:

55
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

The proprietary fund position is not satisfactory as required because standard proprietary fund
ratio is within 65% to 75% but from last 2years the ratio is below 65% because the value of total
fixed assets has increased very fast due to expansion and new projects.

Credit sales
Avg. Debtors

Year

2013-14

2012-13

Credit sales

66.04

50.34

Avg. debtor

17.75

14.73

3.72times

3.48 times

3.75
3.7
3.65

3.6
3.55
3.5
3.45
3.4
3.35
2013-14

2012-13

## DEBTORS TURNOVER RATIO

INTERPRETATION:
From the above table show that the debtors turnover ratio A debtor turnover ratio is
increased year by year in 2013 is 3.48 times was increased in 3.72 times it indicate company t
56
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Collection period: -

Debtors turnover

Year

2013-14

2012-13

No. of days

365days

365days

Debtors turnover

3.72

3.48

98days

104days

105
104
103
102
101
100
99
98
97
96
95
2013-14

2012-13

## DEBTORS COLLECTION PERIOD

INTERPRETATION:
From the above table show that the debtors collection period is decrease year by year
debtors collection period for the year 2013 is 104days was it is decrease in 2014 is 98 days

57
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

Return on investment: -

NPBT

X 100

Capital employed
Year

2012-14

2012-13

NPBT

3.76

1.89

Capital employed

15.43

14.63

Return on investment

24.37%

12.92%

Return on investment
25.00%
20.00%
Return on investment

15.00%
10.00%
5.00%
0.00%
2012-14

2012-13

## RETURN ON INVESTMENT RATIO

INTERPRETATION:

58
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

From the above table show that a return on investment 12.92& in 2013 was increased in 2014
is 24.37% it indicate earning capacity of the company is more as compare to previous year.

## Return on Proprietor fund : -

Net profit

X 100

Capital employed
Year

2012-14

2012-13

NET PROFIT

0.95

0.21

Capital employed

15.43

14.63

Return on proprietor

6.16%

1.44%

fund

## Return on properiter fund

7.00%
6.00%
5.00%
Return on properiter
fund

4.00%
3.00%
2.00%
1.00%
0.00%
2012-14

2012-13

## RETURN ON INVESTMENT RATIO

INTERPRETATION:

59
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

From the above table show that the return on proprietor fund is 1.44% in 2013 it is increased in
2014 is 6.16% it is indicate by the increased in the return on proprietor equity.

FINDINGS

The quick ratio indicates the liquid financial position of an company standard quick
ratio 1:1 company quick ratio is more than acceptable standard is 1.24 which is
indicate the company liquidity position is good so company easily meet its
immediate obligation.

The current ratio in 2013 is 1.96 these hardly decline 1.43sboth year current ratio is
below the acceptable standard 2:1 hence company not have enough current assets to

## meet its short term obligation.

The net profit ratio of the company is improved from 0.41% to 0.95% which is
indicate the firm efficiently managed manufacturing & trading operation as
compared to previous year.

Debt equity ratio for the year 2014 is 0.45 which is less as compared to Debt equity
ratio of year 2013 its due to decrease in long term debt
The inventory ratio of the company ratio is 8.77 in 2013 was increase 11.75 in 2014
it indicate company archived higher sale.

A debtor turnover ratio is increased year by year in 2013 is 3.48 times was increased
in 3.72 times it indicate company take proper control on collection & satisfactory

## credit policy as compare to previous year.

A company provide return on proprietor fund in2013 is a 1.44% was increased in
2014 is 6.16% company not provide much more return to their proprietor.

## A return on investment 12.92& in 2013 was increased in 2014 is 24.37% it indicate

earning capacity of the company is more as compare to previous year.
A company proprietor fund position is 48% in 2013 was increased in 2014 is 61%
both year ratio is below the acceptable standard 65% to 75%.

Debtors collection period is decreasing year by year it show that recovery from thre
debtors is rapidly compare to previous year.
60
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

INTERPRETATION

According to MR. R. SUNEEL. Study made in amara raja limited the quick ratio in 2009
is 1.96 was increased in 2010 is 1.99 company maintain high value of quick ratio as
standard ratio 1:1. Quick ratio meets all its quick liabilities without any difficulty. But
According to present study is made in Mahindra composite limited the quick ratio
indicates the liquid financial position of an company standard quick ratio 1:1 company
quick ratio is more than acceptable standard is 1.24 which is indicate the company
liquidity position is good so company easily meet its immediate obligation.

According to MR. R. SUNEEL. Study made in amara raja limited the current ratio in
2009 is 2.67 was increased in 2010 is 2.96 company maintain current ratio more than
acceptable standard 2:1 which is indicate the company ability to meet its current
obligation is more. It shows that company is strong in working fund. According to
present study is made in Mahindra composite limited The current ratio in 2013 is
1.96 these hardly decline 1.43 both year current ratio is below the
acceptable standard 2:1 hence company not have enough current
assets to meet its short term obligation.

According to MR. R. SUNEEL. Study made in amara raja limited the net profit ratio in
2009 is 6.3 was increased in 2010 is 6.99 hence the company maintain good control over
the operating expenses. . According to present study is made in Mahindra composite
limited the net profit ratio of the company is improved from 0.41% to 0.95% which is
indicate the firm efficiently managed manufacturing & trading operation as compared to
previous year.

According to MR. R. SUNEEL. Study made in amara raja limited the debt equity ratio in
2009 is 0.58 was increased in 2010 is 0.95. It indicates company depend the debt fund
increasing. According to present study is made in Mahindra composite limited The Debt

61
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

equity ratio for the year 2014 is 0.45 which is less as compared to Debt equity ratio of
year 2013 its due to decrease in long term debt.

According to MR. R. SUNEEL. Study made in amara raja limited the inventory turnover
ratio in 2009 is 7.13 was increased in 2010 is 6.63 it indicate company production is also
increased subsequently sale also increased. According to present study is made in
Mahindra composite limited The inventory ratio of the company ratio is 8.77
in 2013 was increase 11.75 in 2014 it indicate company archived
higher sale.

According to MR. R. SUNEEL. Study made in amara raja limited the debtors turnover
ratio in 2009 is 6.43 times was increased in 2010 is 7.25 it indicate company maintain
good collection polices as compared to previous year. A debtor turnover ratio is
increased year by year in 2013 is 3.48 times was increased in 3.72
times it indicate company take proper control on collection &
satisfactory credit policy as compare to previous year.

According to MR. R. SUNEEL. Study made in amara raja limited the return on proprietor
fund of the amara raja batteries litd. Is at satisfactory level it increased year by year in
2009 is 19.3& in 2010is 28.33. As per present study A company provide return on
proprietor fund in2013 is a 1.44% was increased in 2014 is 6.16%
company not provide much more return to their proprietor.

According to MR. R. SUNEEL. Study made in amara raja limited the return on
investment is very low in 2009 but in the 2010 is reached to 0.24 due to less earning. but
as per present study A return on investment 12.92& in 2013 was increased
in 2014 is 24.37% it indicate earning capacity of the company is more
as compare to previous year.

According to MR. R. SUNEEL. Study made in amara raja limited the proprietor fund in
2009 is 60% was increased in 2010is 76% proprietors fund position is satisfactory but . as
per present study A company proprietor fund position is 48% in 2013 was
increased in 2014 is 61% both year ratio is below the acceptable
standard 65% to 75%.

62
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

SUGGESTION
o As per the R. SUNEEL study made in the Amara raja batteries limited. he suggest the
company has to increase the profit maximization & has to decreases operating expenses
similarly according to present study made at Mahindra composite limited. The net profit
of the company is increased in during the study period it is not favorable so company
need to take alternative action to maximize profit such as control on all resources.

o As per the R. SUNEEL study made in the Amara raja batteries limited. Similarly
according to present study made at Mahindra composite limited. Company face low
current ratio so company should keep more current asset such as cash , cash at bank to
meet its short term obligation.
o According to the R. SUNEEL study the company most reduce its debtors collection
period but as per present study company need to adopting proper credit policy by
providing discount to the debtors for fatly collection.
o According to the R. SUNEEL study the company return on investment of the company is
but as per present study company has to take proper control on the operating expenses to
the provide higher return on investment.
o As per the present study company need to increase their own fund to maintain long term
solvency.

63
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

CONCLUSION
Here I finally conclude that the profitability position of the company is not very
impressive the net profit ratio does not show good indication regarding profitability of the
company the main reasons behind earning low profit is higher cost of operation expenses.
Company able to pay quick demand of payment of supplier but in case of short terms
obligation company not have enough source to meet short terms obligation .also proprietors fund
is show average increase which means the shareholder have contribution more fund to the asset.

64
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Mahindra composite balance sheet

Particular
sources of fund
Total share capital
Reserve
Revaluation reserves
Net worth
secured loans
unsecured loans
Total debt
Total liabilities
Noncurrent assets
Application of fund
Gross block
Less:Accum depreciation
Net block
capital work in progress
investment
total noncurrent assets
Current assets
inventories
sundary debtors
cash & bank balance
Loans & advances
Total current assets & loans & advance
Current liabilities
Creditors
provision
total current liabilities
working capital
Net assets

Rs in
cror.
14Mar

13Mar

4.42
11.01
0
15.43
4.48
2.5
6.98
22.41

4.41
10.22
0
14.63
2.25
5
7.25
21.88

23.09
14.12
8.97
0.92
0
9.89

21.91
12.42
9.49
0.79
0
10.28

5.62
17.75
2.54
6.05

31.96

5.74
14.73
0.38
3.07
23.92

10.87
7.11
1.46
19.44
12.52
22.41

5.26
4.67
2.38
12.31
11.61
21.89

65
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## Mahindra composite profit loss a/c

Rs in cror.
MarMar14
14

Particular
Income
Sales turnover
excise duty
Net sale
Other income
strock adjusted
Total income

66.04
0
66.04
1.33
0.51
66.86

50.34
0
50.34
0.06
0.9
51.3

Expenditure
Raw material
Powered & fuel cost
Employment cost
Other manufacturing expenses
Miscellaneous expenses
Total expenditure

47.48
1.22
5.5
0
8.9
63.1

36.53
1.14
4.97
0
6.77
49.41

3.76
1.08
2.73
2.03
0.7
0.07
0.63

1.89
1.12
0.77
0.53
0.24
0.03
0.21

PBDIT
Interest
PBDT
Deprecation
Profit before tax
Tax
Net profit

66
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## RATIO ANALYSIS AT MAHINDRA COMPOSITE LIMITED.

BIBLIOGRAPHY

ARVIND A.DHOND, Managements accounting, vipul prakashan 3rd edition, June 2009
page 111to112.
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010,
Page37 to 40
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010,
Page45 to 46
Annual report of Mahindra composite
2012-2013.
2013-2014.
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010,
Page49to 51,
A murthy Managements accounting 1st edition 2000 s.viswanathan publisher pvt ltd
page207,
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010, Page
62
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010, Page
63 to 64
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010, Page
65to 66
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010, Page
67
A study on ratio analysis at amara raja batteries limited R. SUNEEL YEAR 2010,
Page68to 69
Batty. management accountancy ed 1975 page.412
D.H CHOUDHARI. introduction to Managements accounting , sheth prakashan 2rd
edition ,june 2014 page154,167, 176
D.H CHOUDHARI Managements accounting , sheth prakashan 1rd edition ,June 2014
page 201 to 206
G.FOSTER FINANCIAL STATNENT ANALYSIS prentice , hall 1986, page 27,
Helfert erich a techniques of financial analysis, ed 1957 , page,57
J. BATTY, financial analysis published by accounting of industrial companies in 9th feb
1970 , page 47
Kuchnai s.c financial management page60
L.N.Chopde, D.H.Chaudhari. Introduction to Management Accounting T.Y.B.com
Sheth Publishers Pvt. Ltd. Mumbai. Ninth Edition: January 2006.
Page No.201-442

## L. N. HOPDE & Dr D.T. SHINDE. introduction to Managements accounting , sheth

prakashan 1rd edition ,June 2014 page 113to115

67
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD

## L. N. HOPDE & D.H CHOUDHARI. introduction to Managements accounting , sheth

prakashan 1rd edition ,june 2014 page 176to177
PROF.SURESH BHIRUD & PROF. BHASKAR NAPHADE diamond publication 1st
edition aug 2009page 27,29
Money control.com
Mahindra composite.com
M.K. Khan, P.K.Jain Financial Management
Mcraw Hill Financial Analysis Chapter- 6 page 128to 134
T.S. GREWAL K. introduction to accountancy s. chand & company ltd revised edition,
page 774 to777
RAMESH .K. MALIK financial management, vishvabharti publication 1st edition 2009
page 243,249,251.
SANDEEP L. N.CHOPDE Managements accounting , sheth prakashan 1rd edition ,July
2009 page 140to 142
www.google.com
www.wikipedia.com

68
D.G.TATKARE MAHAVIDYALAY MANGAON-RAIGAD